Document:

EXECUTION COPY

                                 180,000 Shares

                                DUNE ENERGY, INC.

                10% Senior Redeemable Convertible Preferred Stock

                          REGISTRATION RIGHTS AGREEMENT

                                                                    May 15, 2007

JEFFERIES & COMPANY, INC.
520 Madison Avenue
12th Floor
New York, New York 10022

Ladies and Gentlemen:

      Dune Energy, Inc., a Delaware corporation (the "Company"), proposes to
issue and sell to Jefferies & Company, Inc. (the "Initial Purchaser"), upon the
terms set forth in a purchase agreement, dated May 1, 2007 (the "Purchase
Agreement"), 180,000 shares of its 10% Senior Redeemable Convertible Preferred
Stock, par value $0.001 per share (liquidation preference $1000 per share) (the
"Convertible Preferred Stock"). The Convertible Preferred Stock will be
convertible into shares of Common Stock, par value $0.001 per share, of the
Company (the "Common Stock") at the conversion price set forth in the offering
circular, dated May 1, 2007 (the "Offering Memorandum"), subject to adjustment
in accordance with the Certificate of Designations governing the Convertible
Preferred Stock (the "Certificate of Designations"). The Convertible Preferred
Stock and the Common Stock issuable upon conversion of any shares of the
Convertible Preferred Stock and any shares of Convertible Preferred Stock or
Common Stock issued in lieu of cash dividends on the Convertible Preferred Stock
are collectively referred to as "Securities" and each is referred to singularly
as a "Security" As an inducement to the Initial Purchaser to enter into the
Purchase Agreement, the Company agreed with the Initial Purchaser, for the
benefit of the Initial Purchaser and the holders of the Securities,
(collectively the "Holders"), as follows:

      1. Shelf Registration. So long as any Transfer Restricted Security (as
defined below) exists, the Company shall take the following actions:

            (a) The Company shall, within 90 days after the date on which the
      Initial Purchaser purchases the Convertible Preferred Stock pursuant to
      the Purchase Agreement (the "Closing Date"), file with the Securities and
      Exchange Commission (the "Commission"), and thereafter use its reasonable
      best efforts to cause to be declared effective within 180 days after the
      Closing Date (the "Effective Date"), a registration statement (together
      with all documents incorporated by reference or deemed incorporated by
      reference therein, the "Shelf Registration Statement" and, together with
      the Additional Registration Statement (as defined in Section 10), the
      "Registration Statement") on an appropriate form under the Securities Act
      of 1933 (as amended, the "Securities Act") relating

<PAGE>

      to the offer and sale of the Transfer Restricted Securities by the Holders
      thereof from time to time in accordance with the methods of distribution
      designated by the Holders and set forth in the Shelf Registration
      Statement and Rule 415 under the Securities Act (hereinafter, the "Shelf
      Registration"); provided, however, that no Holder (other than the Initial
      Purchaser) shall be entitled to have the Securities held by it covered by
      such Shelf Registration Statement unless such Holder agrees in writing to
      be bound by all the provisions of this Agreement applicable to such
      Holder. If the Company shall file a post-effective amendment to the Shelf
      Registration Statement, it shall use its reasonable best efforts to cause
      such post-effective amendment to be declared effective as promptly as
      practicable, but in any event within 30 days after the date such
      post-effective amendment is filed. "Transfer Restricted Securities" means
      each Security until (i) the date on which such Security has been
      effectively registered under the Securities Act and disposed of pursuant
      to the Shelf Registration Statement or (ii) the date on which such
      Security is distributed to the public pursuant to Rule 144 under the
      Securities Act or is saleable pursuant to Rule 144(k) under the Securities
      Act.

            (b) The Company shall use its reasonable best efforts to keep the
      Shelf Registration Statement continuously effective, in order to permit
      the prospectus included therein to be lawfully delivered by the Holders of
      the relevant Securities, until such time as all of the Securities covered
      by the Shelf Registration Statement (i) have been sold in the manner
      provided for therein and pursuant thereto, (ii) are eligible to be sold
      under Rule 144(k) under the Securities Act (or any successor rule
      thereof), assuming for this purpose that the Holders thereof are not
      affiliates of the Company or (iii) cease to be outstanding (in any such
      case, such period being called the "Shelf Registration Period"). The
      Company shall be deemed not to have used its reasonable best efforts to
      keep the Shelf Registration Statement effective during the Shelf
      Registration Period if it voluntarily takes any action that would result
      in Holders of Securities covered thereby not being able to offer and sell
      such Securities during that period, unless such action is required by
      applicable law.

            (c) Notwithstanding any other provisions of this Agreement to the
      contrary, the Company shall cause the Shelf Registration Statement and the
      related prospectus and any amendment or supplement thereto, as of the
      effective date of the Shelf Registration Statement, amendment or
      supplement, (i) to comply in all material respects with the applicable
      requirements of the Securities Act and the rules and regulations of the
      Commission and (ii) not to contain any untrue statement of a material fact
      or omit to state a material fact required to be stated therein or
      necessary in order to make the statements therein, in light of the
      circumstances under which they were made, not misleading; provided,
      however, the Company shall have no such obligations or liabilities with
      respect to any written information pertaining to any Holder and furnished
      to the Company by or on behalf of such Holder specifically for inclusion
      therein.

      2. Shelf Registration Procedures. In connection with the Shelf
Registration contemplated by Section 1 hereof, the following provisions shall
apply so long as any Transfer Restricted Security exists:

            (a) The Company shall (i), if requested by the Initial Purchaser,
      furnish, without charge, to the Initial Purchaser, prior to the filing
      thereof with the Commission, a copy of the Shelf Registration Statement
      and each amendment thereof and each supplement, if any, to

                                       2
<PAGE>

      the prospectus included therein and, in the event that the Initial
      Purchaser (with respect to any portion of an unsold allotment from the
      original offering) is participating in the Shelf Registration Statement,
      the Company shall use its best efforts to reflect in each such document,
      when so filed with the Commission, such comments as the Initial Purchaser
      reasonably may propose, (ii) include in each such document the names of
      the Holders who have delivered written notice, and a duly completed
      selling stockholder questionnaire in the form attached as Annex A to the
      Offering Circular (a "Questionnaire") to the Company at least five
      business days prior to the date that the Shelf Registration Statement is
      first declared effective, that they propose to include Transfer Restricted
      Securities in the Shelf Registration Statement as selling securityholders
      and (iii) file pursuant to Rule 424(b) under the Securities Act a
      supplement to the prospectus contained in the Shelf Registration Statement
      or, if required, file a post-effective amendment to the Shelf Registration
      Statement, in each case, to cover new Holders of Securities upon at least
      seven business days prior written notice by such new Holders to such
      effect and the delivery by such new Holder of duly completed
      Questionnaires.

            (b) The Company shall give written notice to the Initial Purchaser
      and, through the Company's transfer agent and registrar for the
      Convertible Preferred Stock and Common Stock, to the Holders of the
      Securities and the Holders of Transfer Restricted Securities included
      within the coverage of the Shelf Registration Statement (which notice
      pursuant to clauses (ii)-(v) hereof shall be accompanied by an instruction
      to suspend the use of the prospectus until the requisite changes have been
      made):

                  (i) when the Shelf Registration Statement or any amendment
            thereto has been filed with the Commission and when the Shelf
            Registration Statement or any post-effective amendment thereto has
            become effective;

                  (ii) of any request by the Commission for amendments or
            supplements to the Shelf Registration Statement or the prospectus
            included therein or for additional information;

                  (iii) of the issuance by the Commission of any stop order
            suspending the effectiveness of the Shelf Registration Statement or
            the initiation of any proceedings for that purpose;

                  (iv) of the receipt by the Company or its legal counsel of any
            notification with respect to the suspension of the qualification of
            the Securities for sale in any jurisdiction or the initiation or
            threatening of any proceeding for such purpose; and

                  (v) of the happening of any event that requires the Company to
            make changes in the Shelf Registration Statement or the prospectus
            in order that the Shelf Registration Statement or the prospectus do
            not contain an untrue statement of a material fact nor omit to state
            a material fact required to be stated therein or necessary to make
            the statements therein, in light of the circumstances under which
            they were made, not misleading.

                                       3
<PAGE>

            (c) The Company shall make every reasonable effort to obtain the
      withdrawal at the earliest possible time, of any order suspending the
      effectiveness of the Shelf Registration Statement.

            (d) The Company shall furnish to each Holder of Transfer Restricted
      Securities included within the coverage of the Shelf Registration
      Statement, without charge, if the Holder so requests in writing, at least
      one copy of the Shelf Registration Statement and any post-effective
      amendment thereto, including, but only if expressly requested by such
      Holder, financial statements and schedules and all exhibits thereto
      (including those, if any, incorporated by reference).

            (e) The Company shall, during the Shelf Registration Period, deliver
      to each Holder of Transfer Restricted Securities included within the
      coverage of the Shelf Registration Statement, without charge, as many
      copies of the prospectus (including each preliminary prospectus, if any)
      included in the Shelf Registration Statement and any amendment or
      supplement thereto as such person may reasonably request. The Company
      consents, subject to the provisions of this Agreement, to the use of the
      prospectus or any amendment or supplement thereto by each of the selling
      Holders in connection with the offering and sale of the Transfer
      Restricted Securities covered by the prospectus, or any amendment or
      supplement thereto, included in the Shelf Registration Statement.

            (f) Prior to any public offering of the Securities pursuant to the
      Shelf Registration Statement, the Company shall register, or qualify or
      cooperate with the Holders of the Transfer Restricted Securities included
      therein and their respective counsel in connection with the registration
      or qualification of, the Securities for offer and sale under the
      securities or "blue sky" laws of such states of the United States as any
      Holder reasonably requests in writing and do any and all other acts or
      things necessary or advisable to enable the offer and sale in such
      jurisdictions of the Securities covered by the Shelf Registration
      Statement; provided, however, that the Company shall not be required to
      (i) qualify generally to do business in any jurisdiction where it is not
      then so qualified or (ii) take any action which would subject it to
      general service of process or to taxation in any jurisdiction where it is
      not then so subject.

            (g) The Company shall cooperate with the Holders of the Transfer
      Restricted Securities to facilitate the timely preparation and delivery of
      certificates representing the Securities to be sold pursuant to the Shelf
      Registration Statement free of any restrictive legends and in such
      denominations and registered in such names as the Holders may request a
      reasonable period of time prior to sales of the Securities pursuant to the
      Shelf Registration Statement, except in such cases where such Transfer
      Restricted Securities are required to be issued only in book-entry form
      pursuant to the terms of the Certificate of Designations.

            (h) Upon the occurrence of any event contemplated by paragraphs (ii)
      through (v) of Section 2(b) above during the Shelf Registration Period,
      the Company shall promptly prepare and file a post-effective amendment to
      the Shelf Registration Statement or a supplement to the related prospectus
      and any other required document so that, as thereafter delivered to
      Holders of the Securities or purchasers of Securities, the prospectus will
      not contain an untrue statement of a material fact or omit to state any
      material fact required to be stated therein or necessary to make the
      statements therein, in light

                                       4
<PAGE>

      of the circumstances under which they were made, not misleading. If the
      Company notifies the Initial Purchaser or the Holders of Transfer
      Restricted Securities included within the coverage of the Shelf
      Registration Statement to suspend the use of the prospectus as a result of
      any of the events described in paragraphs (ii) through (v) of Section 2(b)
      above or as a result of the filing of any post-effective amendment
      pursuant to Section 2(a)(iii), until the requisite changes to the
      prospectus have been made or the post-effective amendment has become
      effective, as the case may be, the Initial Purchaser and the Holders shall
      suspend use of such prospectus.

            (i) [reserved]

            (j) The Company will comply with all rules and regulations of the
      Commission to the extent and so long as they are applicable to the Shelf
      Registration and will make generally available to its security holders (or
      otherwise provide in accordance with Section 11(a) of the Securities Act)
      an earnings statement satisfying the provisions of Section 11(a) of the
      Securities Act, no later than 45 days after the end of a 12-month period
      (or 90 days, if such period is a fiscal year) beginning with the first
      month of the Company's first fiscal quarter commencing after the effective
      date of the Shelf Registration Statement, which statement shall cover such
      12-month period.

            (k) The Company may require each Holder of Securities to be sold
      pursuant to the Shelf Registration Statement to furnish to the Company,
      pursuant to the Questionnaire or otherwise, such information regarding the
      Holder and the distribution of the Securities as the Company may from time
      to time reasonably require for inclusion in the Shelf Registration
      Statement, and the Company may exclude from such registration the
      Securities of any Holder that fails to furnish such information within the
      applicable time period specified in Section 2(a) above.

            (l) The Company shall enter into such customary agreements and take
      all such other action, if any, as any Holder of the Securities shall
      reasonably request in order to facilitate the disposition of the
      Securities pursuant to any Shelf Registration.

            (m) In the case of any Shelf Registration, the Company shall (i)
      make reasonably available for inspection by the Holders of the Securities,
      any underwriter participating in any disposition pursuant to the Shelf
      Registration Statement and any attorney, accountant or other agent
      retained by the Holders of the Securities or any such underwriter all
      relevant financial and other records, pertinent corporate documents and
      properties of the Company and (ii) cause the Company's officers,
      directors, employees, accountants and auditors to supply all relevant
      information reasonably requested by the Holders of the Securities or any
      such underwriter, attorney, accountant or agent in connection with the
      Shelf Registration Statement, in each case, as shall be reasonably
      necessary to enable such persons, to conduct a reasonable investigation
      within the meaning of Section 11 of the Securities Act; provided, however,
      that the foregoing inspection and information gathering shall be
      coordinated on behalf of the Initial Purchaser by you and on behalf of the
      other parties, by one counsel designated by and on behalf of such other
      parties as described in Section 3 hereof.

                                        5
<PAGE>

            (n) In the case of any Shelf Registration, the Company, if requested
      by any Holder of Securities covered thereby in connection with an
      underwritten offering of the Securities pursuant to the Shelf Registration
      Statement, shall cause (i) its counsel (which may include the Company's
      general counsel and/or the Company's outside counsel) to deliver an
      opinion or opinions and updates thereto relating to the Securities in
      customary form addressed to the Managing Underwriters (as defined in
      Section 7) thereof and dated, in the case of the initial opinion, the
      effective date of such Shelf Registration Statement (it being agreed that
      the matters to be covered by such opinion shall include, without
      limitation, the due incorporation and good standing of the Company and its
      subsidiaries; the qualification of the Company and its subsidiaries to
      transact business as foreign corporations; the due authorization,
      execution and delivery of the relevant agreement of the type referred to
      in Section 7 hereof; the due authorization, execution, authentication and
      issuance, and the validity and enforceability, of the applicable
      Securities; the absence of material legal or governmental proceedings
      involving the Company and its subsidiaries; the absence of governmental
      approvals required to be obtained in connection with the Shelf
      Registration Statement, the offering and sale of the applicable
      Securities, or any agreement of the type referred to in Section 7 hereof;
      the compliance as to form of such Shelf Registration Statement and any
      documents incorporated by reference therein with the requirements of the
      Securities Act; and, as of the date of the opinion and as of the effective
      date of the Shelf Registration Statement or most recent post-effective
      amendment thereto, as the case may be, the absence from such Shelf
      Registration Statement and the prospectus included therein, as then
      amended or supplemented, and from any documents incorporated by reference
      therein of an untrue statement of a material fact or the omission to state
      therein a material fact required to be stated therein or necessary to make
      the statements therein not misleading (in the case of any such documents,
      in the light of the circumstances existing at the time that such documents
      were filed with the Commission under the Securities and Exchange Act of
      1934, as amended (the "Exchange Act")); (ii) its officers to execute and
      deliver all customary documents and certificates and updates thereof
      requested by any underwriters of the applicable Securities and (iii) its
      independent public accountants to provide to the underwriter(s) of the
      applicable Securities a comfort letter in customary form and covering
      matters of the type customarily covered in comfort letters in connection
      with primary underwritten offerings, subject to receipt of appropriate
      documentation as contemplated, and only if permitted, by Statement of
      Auditing Standards No. 72.

            (o) The Company shall use its reasonable best efforts to cause the
      Common Stock included in such Shelf Registration Statement to be, upon
      resale thereunder, listed on each U.S. securities exchange, if any, on
      which any shares of Common Stock are then listed.

            (p) The Company shall use its reasonable best efforts to take all

      other steps necessary to effect the registration of the Transfer
      Restricted Securities covered by the Shelf Registration Statement
      contemplated hereby.

      3. Registration Expenses.

            (a) All fees and expenses incident to the Company's performance of
      and compliance with this Agreement will be borne by the Company,
      regardless of whether any Registration Statement required hereunder is
      ever filed or becomes effective, including without limitation:

                                       6
<PAGE>

                  (i) all registration and filing fees and expenses;

                  (ii) all fees and expenses of compliance with federal
            securities and state "blue sky" or securities laws;

                  (iii) all expenses of printing (including printing
            certificates and printing of prospectuses), messenger and delivery
            services and telephone usage;

                  (iv) all fees and disbursements of counsel for the Company;

                  (v) all application and filing fees in connection with listing
            on a national securities exchange or automated quotation system
            pursuant to the requirements hereof;

                  (vi) all fees and disbursements of independent certified
            public accountants of the Company (including the expenses of any
            special audit and comfort letters required by or incident to such
            performance); and

                  (vii) in connection with each Demand Registration and each
            Piggyback Registration, the Company shall reimburse holders of
            Transfer Restricted Securities for the reasonable fees and expenses
            of one counsel chose by the holders of a majority of the Transfer
            Restricted Securities included in such registration.

      provided that, notwithstanding any provision of this Agreement to the
      contrary, in no event shall the Company bear or be responsible for the
      payment or reimbursement of underwriting discounts, commissions or similar
      compensation in connection with an underwritten offering of the
      Securities.

      The Company will bear its internal expenses (including, without
      limitation, all salaries and expenses of its officers and employees
      performing legal or accounting duties), the expenses of any annual audit
      and the fees and expenses of any person, including special experts,
      retained by the Company.

            (b) In connection with the Shelf Registration Statement, the Company
      will reimburse the Initial Purchaser and the Holders of Transfer
      Restricted Securities who are selling or reselling Securities pursuant to
      the "Plan of Distribution" section contained in the Shelf Registration
      Statement for the reasonable fees and disbursements of not more than one
      counsel, who shall be a nationally recognized firm experienced in
      securities laws matters that is chosen by the Holders of a majority in
      number of shares of the Transfer Restricted Securities for whose benefit
      such Registration Statement is being prepared or, if the Holders do not so
      choose, the Initial Purchaser.

      4. Indemnification.

            (a) The Company agrees to indemnify and hold harmless each Holder
      and each person, if any, who controls any such Holder within the meaning
      of the Securities Act or the Exchange Act and the respective officers,
      directors, partners, employees, representatives and agents of any Holder
      (including any predecessor holder) or any controlling person of a Holder

                                       7
<PAGE>

      (each Holder and such persons are referred to as an "Indemnified Holder")
      from and against any losses, claims, damages or liabilities, joint or
      several, or any actions in respect thereof (including, but not limited to,
      any losses, claims, damages, liabilities or actions relating to purchases
      and sales of the Securities) to which each Indemnified Holder may become
      subject under the Securities Act, the Exchange Act or otherwise, insofar
      as such losses, claims, damages, liabilities or actions arise out of or
      are based upon any untrue statement or alleged untrue statement of a
      material fact contained in the Registration Statement or prospectus or in
      any amendment or supplement thereto or in any preliminary prospectus
      relating to any registration hereunder or any other materials or
      information provided to investors by, or with the written approval of, the
      Company in connection with any offering pursuant to the Registration
      Statement, or arise out of, or are based upon, the omission or alleged
      omission to state therein a material fact required to be stated therein or
      necessary to make the statements therein, in light of the circumstances
      under which they were made, not misleading, and shall reimburse, as
      incurred, the Indemnified Holders for any legal or other expenses
      reasonably incurred by them in connection with investigating or defending
      any such loss, claim, damage, liability or action in respect thereof;
      provided, however, that (i) the Company shall not be liable under this
      Section 4(a) in any such case to the extent that such loss, claim, damage
      or liability arises out of or is based upon any untrue statement or
      alleged untrue statement or omission or alleged omission made in the
      Registration Statement or prospectus or in any amendment or supplement
      thereto or in any preliminary prospectus relating to any registration
      hereunder in reliance upon and in conformity with written information
      pertaining to such Holder and furnished to the Company by or on behalf of
      such Holder specifically for inclusion therein and (ii) with respect to
      any untrue statement or omission or alleged untrue statement or omission
      made in any preliminary prospectus relating to the Registration Statement,
      the indemnity agreement contained in this subsection (a) shall not inure
      to the benefit of any Holder from whom the person asserting any such
      losses, claims, damages or liabilities purchased the Securities concerned,
      to the extent that a prospectus relating to such Securities was required
      to be delivered by such Holder under the Securities Act in connection with
      such purchase and any such loss, claim, damage or liability of such Holder
      results from the fact that there was not sent or given to such person, at
      or prior to the written confirmation of the sale of such Securities to
      such person, a copy of the final prospectus if the Company had previously
      furnished or made available copies thereof to such Holder. This indemnity
      agreement will be in addition to any liability which the Company may
      otherwise have to any Indemnified Holder. The Company shall notify each
      Indemnified Party promptly of this institution, threat or assertion of any
      Claim, proceeding (including any governmental investigation) or litigation
      in connection with the matters addressed by this Agreement that involves
      the Company or such Indemnified Party.

            (b) Each Holder agrees, severally and not jointly, to indemnify and
      hold harmless the Company, its officers and directors and each person, if
      any, who controls the Company, its officers and directors within the
      meaning of the Securities Act or the Exchange Act from and against any
      losses, claims, damages or liabilities or any actions in respect thereof,
      to which the Company or any such person may become subject under the
      Securities Act, the Exchange Act or otherwise, insofar as such losses,
      claims, damages, liabilities or actions arise out of or are based upon any
      untrue statement or alleged untrue statement of a material fact contained
      in a Registration Statement or prospectus or in any amendment or

                                       8
<PAGE>

      supplement thereto or in any preliminary prospectus relating to any
      registration hereunder or any other materials or information provided to
      investors by, or with the written approval of, the Company in connection
      with any offering pursuant to the Registration Statement, or arise out of
      or are based upon the omission or alleged omission to state therein a
      material fact necessary to make the statements therein, in light of the
      circumstances under which they were made, not misleading, but in each case
      only to the extent that the untrue statement or omission or alleged untrue
      statement or omission was made in reliance upon and in conformity with
      written information pertaining to such Holder and furnished to the Company
      by or on behalf of such Holder specifically for inclusion therein. The
      liability of any Holder under this Section 4(b) shall in no event exceed
      the net proceeds received by such Holder from sales of Transfer Restricted
      Securities giving rise to such obligation.

            (c) Promptly after receipt by a party of notice of the commencement
      of any action or proceeding (including a governmental investigation), such
      party (the "Indemnified Person") will, if a claim in respect thereof is to
      be made against any party under this Section 4 (each an "Indemnifying
      Person"), notify the Indemnifying Person of the commencement thereof; but
      the omission so to notify the Indemnifying Person will not, in any event,
      relieve the Indemnifying Person from any obligations to any Indemnified
      Person (including the contribution provision hereof) that the Indemnifying
      Person may have under paragraph (a) or (b) above, except to the extent
      that the Indemnifying Person has been materially prejudiced (through the
      forfeiture of substantive rights or defenses) by such failure, or
      otherwise than under paragraph (a) or (b) above. In case any such action
      is brought against any Indemnified Person, and it notifies the
      Indemnifying Person of the commencement thereof, the Indemnifying Person
      will be entitled to participate therein and, to the extent that it may
      wish, jointly with any other Indemnifying Person similarly notified, to
      assume the defense thereof, with counsel reasonably satisfactory to such
      Indemnified Person (who shall not, except with the consent of the
      Indemnified Person, be counsel to the Indemnifying Person), and after
      notice from the Indemnifying Person to such Indemnified Person of its
      election so to assume the defense thereof the Indemnifying Person will not
      be liable to such Indemnified Person under this Section 4 for any legal or
      other expenses, other than reasonable costs of investigation, subsequently
      incurred by such Indemnified Person in connection with the defense
      thereof. In any such proceeding, any Indemnified Person shall have the
      right to retain its own counsel at its own expense. Notwithstanding the
      foregoing, the Indemnifying Person shall pay as incurred (or within 30
      days of presentation) the fees and expenses of the counsel retained by the
      Indemnified Person in the event (i) the Indemnifying Person and the
      Indemnified Person shall have mutually agreed to the retention of such
      counsel, (ii) the named parties to any such proceeding (including any
      impleaded parties) include both the Indemnifying Person and the
      Indemnified Person and representation of both parties by the same counsel
      would be inappropriate due to actual or potential differing interests
      between them or (iii) the Indemnifying Person shall have failed to assume
      the defense of and employ counsel reasonably acceptable to the Indemnified
      Person within a reasonable period of tune after notice of commencement of
      the action. The Indemnifying Person shall not be liable for any settlement
      of any proceeding effected without its written consent, but if settled
      with such consent or if there be a final judgment for the plaintiff, the
      Indemnifying Person agrees to indemnify the Indemnified Person from and
      against any loss or liability by reason of such settlement or judgment. No
      Indemnifying Person shall, without the prior written consent of the
      Indemnified Person, effect any settlement of any pending or threatened
      action in respect of which any Indemnified Person is or could have been a

                                       9
<PAGE>

      party and indemnity could have been sought hereunder by such Indemnified
      Person unless such settlement (i) includes an unconditional release of
      such Indemnified Person from all liability on any claims that are the
      subject matter of such action, and (ii) does not include a statement as to
      or an admission of fault, culpability or a failure to act by or on behalf
      of any Indemnified Person.

            (d) If the indemnification provided for in this Section 4 is
      unavailable or insufficient to hold harmless an Indemnified Person under
      subsections (a) or (b) above in respect of any losses, claims, damages or
      liabilities (or actions or proceedings in respect thereof) referred to
      therein, except by reason of the exceptions set forth in Section 4(a) or
      (b) or the failure of the Indemnified Person to give notice as required in
      Section 4(c), then each Indemnifying Person shall contribute to the amount
      paid or payable by such Indemnified Person as a result of the losses,
      claims, damages or liabilities (or actions in respect thereof) referred to
      in subsection (a) or (b) above in such proportion as is appropriate to
      reflect the relative fault of the Indemnifying Person or Persons on the
      one hand and the Indemnified Person on the other in connection with the
      statements or omissions that resulted in such losses, claims, damages or
      liabilities (or actions in respect thereof) as well as any other relevant
      equitable considerations. The relative fault of the parties shall be
      determined by reference to, among other things, whether the untrue or
      alleged untrue statement of a material fact or the omission or alleged
      omission to state a material fact relates to information supplied by the
      Company, on the one hand, or such Holder or such other Indemnified Person,
      as the case may be, on the other, and the parties' relative intent,
      knowledge, access to information and opportunity to correct or prevent
      such statement or omission. The amount paid by an Indemnified Person as a
      result of the losses, claims, damages or liabilities referred to in the
      first sentence of this subsection (d) shall be deemed to include any legal
      or other expenses reasonably incurred by such Indemnified Person in
      connection with investigating or defending any action or claim which is
      the subject of this subsection (d). Notwithstanding any other provision of
      this Section 4(d), no Holder shall be required to contribute any amount in
      excess of the amount by which the net proceeds received by such Holder
      from the sale of the Securities pursuant to the Registration Statement
      exceeds the amount of damages which such Holder would have otherwise been
      required to pay by reason of such untrue or alleged untrue statement or
      omission or alleged omission. No person guilty of fraudulent
      misrepresentation (within the meaning of Section 11(f) of the Securities
      Act) shall be entitled to contribution from any person who was not guilty
      of such fraudulent misrepresentation. For purposes of this paragraph (d),
      each person, if any, who controls such Indemnified Person within the
      meaning of the Securities Act or the Exchange Act shall have the same
      rights to contribution as such Indemnified Person and each person, if any,
      who controls the Company within the meaning of the Securities Act or the
      Exchange Act shall have the same rights to contribution as the Company.

            (e) The remedies provided by this Section 4 are not exclusive and
      shall not limit any rights or remedies that may otherwise be available to
      any indemnified party at law or in equity. The agreements contained in
      this Section 4 shall survive the sale of the Securities pursuant to the
      Registration Statement and shall remain in fall force and effect,
      regardless of any termination or cancellation of this Agreement or any
      investigation made by or on behalf of any indemnified party.

                                       10
<PAGE>

      5. Additional Dividends Under Certain Circumstances.

            (a) Additional dividends ("Additional Dividends") with respect to
      the Convertible Preferred Stock shall accrue as follows if any of the
      following events occur (each such event in clauses (i) through (iii) below
      being herein called a "Registration Default"):

                  (i) the Shelf Registration Statement required by this
            Agreement is not filed with the Commission within 90 days after the
            Closing Date;

                  (ii) the Shelf Registration Statement required by this
            Agreement is not declared effective by the Commission within 180
            days after the Closing Date; or

                  (iii) after the Shelf Registration Statement required by this
            Agreement has been declared effective by the Commission (A) such
            Shelf Registration Statement thereafter ceases to be effective or
            (B) the Shelf Registration Statement or the related prospectus
            ceases to be usable in connection with resales of Transfer
            Restricted Securities during the Shelf Registration Period.

      Each of the foregoing will constitute a Registration Default whatever the
      reason for any such event and whether it is voluntary or involuntary or is
      beyond the control of the Company or pursuant to operation of law or as a
      result of any action or inaction by the Commission.

      Additional Dividends shall accrue on the shares of Convertible Preferred
      Stock from and including the date on which any such Registration Default
      shall occur to but excluding the date on which all such Registration
      Defaults have been cured, at a rate of 1.00% per annum, in addition to the
      dividends otherwise accruing on the Convertible Preferred Stock.

            (b) Additional Dividends shall not accrue as a result of any
      Registration Default referred to in Section 5(a)(iii) hereof if (i) such
      Registration Default has occurred solely as a result of (x) the filing of
      a post-effective amendment to the Shelf Registration Statement to
      incorporate annual audited financial information with respect to the
      Company where such post-effective amendment is not yet effective and needs
      to be declared effective to permit Holders to use the related prospectus,
      (y) the filing of a post- effective amendment to the Shelf Registration
      Statement pursuant to Section 2(a)(iii) or (z) other material events with
      respect to the Company that would need to be described in the Shelf
      Registration Statement or the related prospectus and (ii) in the case of
      clauses (x) and (z), the Company is proceeding promptly and in good faith
      to amend or supplement such Shelf Registration Statement and related
      prospectus to describe such events; provided, however, that in the case of
      clauses (x) or (z) if such Registration Default occurs for a continuous
      period in excess of 30 days or for more than 90 days in the aggregate
      during any 365-day period, Additional Dividends shall be payable in
      accordance with the above paragraph from the day such Registration Default
      occurs until such Registration Default is cured.

            (c) Any amounts of Additional Dividends due pursuant to Section 5(a)
      will be payable on the regular dividend payment dates with respect to the
      Convertible Preferred Stock on the same terms and conditions and subject
      to the same limitations as pertain at such time for the payment of regular
      quarterly dividends. The amount of Additional Dividends will be determined
      by multiplying 1.00% by the aggregate liquidation preference of the

                                       11
<PAGE>

      outstanding shares of Convertible Preferred Stock and further multiplied
      by a fraction, the numerator of which is the number of days such
      Additional Dividend rate was applicable during such period, and the
      denominator of which is 360.

      6. Rules 144 and 144A. The Company shall file the reports required to be
filed by it under the Securities Act and the Exchange Act in a timely manner
and, if at any time during the Shelf Registration Period the Company is not
required to file such reports, it will, upon the request of any Holder of
Transfer Restricted Securities, make publicly available other information so
long as necessary to permit sales of their Securities pursuant to Rules 144 and
144A. The Company covenants that it will take such further action as any Holder
of Transfer Restricted Securities may reasonably request, all to the extent
required from time to time to enable such Holder to sell Transfer Restricted
Securities without registration under the Securities Act within the limitation
of the exemptions provided by Rules 144 and 144A (including the requirements of
Rule 144A(d)(4)). The Company will provide a copy of this Agreement to
prospective purchasers of Securities identified to the Company by the Initial
Purchaser upon request. Upon the request of any Holder of Transfer Restricted
Securities, the Company shall deliver to such Holder a written statement as to
whether it is subject to and has complied with the reporting requirements
referenced in the first sentence of this Section 6. Notwithstanding the
foregoing, nothing in this Section 6 shall be deemed to require the Company to
register any of its securities or to file periodic, current or other reports
pursuant to the Exchange Act.

      7. Underwritten Registrations. If any of the Transfer Restricted
Securities covered by any registration hereunder are to be sold in an
underwritten offering, (a) the investment banker or investment bankers and
manager or managers that will administer the offering ("Managing Underwriters")
will be selected by the Holders of a majority in number of shares of such
Transfer Restricted Securities to be included in such offering and (b) the
Company shall, if requested, enter into an underwriting agreement in customary
form in connection therewith.

      No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such person's Transfer Restricted
Securities on the basis reasonably provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangements and (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.

      8. Demand Registration.

            (a) Upon receipt of a written request (a "Demand Request") from the
      Holders of not less than 5% of the then outstanding Transfer Restricted
      Securities (the "Requisite Securities"), the Company shall, as promptly as
      practicable prepare and cause to be filed with the Commission pursuant to
      Rule 415 under the Securities Act a registration statement relating to the
      registration for resale of Transfer Restricted Securities filed pursuant
      to the provisions of this Section 8, including the Prospectus (as defined
      below) included therein, all amendments thereto (including post-effective
      amendments) and all exhibits and all material incorporated by reference
      therein (a "Registration Statement") on the appropriate form relating to
      resales of all Transfer Restricted Securities ("Demand Registration").

                                       12
<PAGE>

            (b) No Holder may include any of its Transfer Restricted Securities
      in any Registration Statement pursuant to this Section 8 unless and until
      such Holder furnishes to the Company in writing, within 20 days after
      receipt of a request therefor, the information specified in Item 507 or
      508 of Regulation S-K, as applicable, of the Securities Act for use in
      connection with any Registration Statement or Prospectus or preliminary
      Prospectus included therein. Each selling Holder agrees to promptly
      furnish additional information required to be disclosed in order to make
      the information previously furnished to the Company by such Holder not
      materially misleading.

            (c) The Company shall be required to effect no more than two
      Registrations pursuant to this Section 8. The Company shall be deemed not
      to have used its best efforts to keep the Registration Statement effective
      during the requisite period if it voluntarily takes any action that would
      result in Holders of Transfer Restricted Securities covered thereby not
      being able to offer and sell such Transfer Restricted Securities during
      that period, unless such action is required by applicable law or this
      Agreement.

            (d) If the Company receives a Demand Request during a "lock-up" or
      "black out" period (the "Lock Up Period") imposed on the Company pursuant
      to or in connection with any underwriting or purchase agreement relating
      to a Rule 144A offering or a registered public offering of Common Stock or
      securities convertible into or exchangeable for Common Stock, the Company
      shall not be required to file a Registration Statement prior to the end of
      the Lock Up Period; provided, that such Lock Up Period shall not exceed 60
      days. In such event, the Company shall use its reasonable best efforts to
      cause the Registration Statement to become effective no later than the
      later of (i) 60 days after receipt of the Demand Request and (ii) 60 days
      after the end of the Lock Up Period. The Company shall notify the Holders
      within 10 days of the imposition of any Lock Up Period on the Company.

      9. Piggyback Registrations.

            (a) Whenever the Company proposes to register any of its equity
      securities under the Securities Act (other than (i) pursuant to a Demand
      Registration (which is addressed in Section 8 above rather than this
      Section 9) or (iii) pursuant to a registration on Form S-4 or S-8 or any
      successor or similar forms) and the registration form to be used may be
      used for the registration of Transfer Restricted Securities (a "Piggyback
      Registration"), whether or not for sale for its own account, the Company
      shall give prompt written notice to all holders of Transfer Restricted of
      its intention to effect such a registration and, subject to Sections 2(c)
      and 2(d) below, shall include in such registration all Transfer Restricted
      Securities with respect to which the Company has received written requests
      for inclusion therein within 20 days after the receipt of the Company's
      notice.

            (b) If a Piggyback Registration is an underwritten primary
      registration on behalf of the Company, and the managing underwriters
      advise the Company in writing that in their opinion the number of Transfer
      Restricted Securities and, if permitted hereunder, other securities
      requested to be included in such registration exceeds the number which can
      be sold therein without adversely affecting the marketability of the
      offering, then the Company shall include in such registration (i) first,
      the securities the Company proposes to sell, (ii) second, the Transfer
      Restricted Securities requested to be included in such registration, pro

                                       13
<PAGE>

      rata among the holders of such Transfer Restricted Securities on the basis
      of the number of shares of Transfer Restricted Securities owned by each
      such holder and its Affiliates and (iii) third, the other securities
      requested to be included in such registration pro rata among the holders
      of such securities on the basis of the number of such other securities
      owned by each such holder and its Affiliates.

            (c) If a Piggyback Registration is an underwritten secondary
      registration on behalf of holders of the Company's securities (it being
      understood that secondary registrations on behalf of holders of Transfer
      Restricted Securities are addressed in Section 8 above rather than in this
      Section 8(d)), and the managing underwriters advise the Company in writing
      that in their opinion the number of Transfer Restricted Securities and, if
      permitted hereunder, other securities requested to be included in such
      registration exceeds the number which can be sold therein without
      adversely affecting the marketability of the offering, then the Company
      shall include in such registration (i) first, the securities requested to
      be included therein by the holders requesting such registration, (ii)
      second, the Transfer Restricted Securities requested to be included in
      such registration, pro rata among the holders of such Transfer Restricted
      Securities on the basis of the number of shares owned by each such holder,
      its affiliates, and (iii) third, the other securities requested to be
      included in such registration.

            (d) If, at any time after giving notice of its intention to register
      any of its securities as set forth in Section 8(a) and before the
      effective date of such registration statement filed in connection with
      such registration, the Company shall determine, for any reason, not to
      register such securities, the Company may, in its sole discretion, give
      written notice of such determination to each holder of Transfer Restricted
      Securities and thereupon shall be relieved of its obligation to register
      any Transfer Restricted Securities in connection with such registration
      (but not from its obligation to pay the expenses set forth in Section 3
      above in connection therewith as provided herein).

            (e) If the Company has previously filed a registration statement
      with respect to Transfer Restricted Securities pursuant to this Agreement,
      and if such previous registration has not been withdrawn or abandoned, the
      Company shall not file or cause to be effected any other registration of
      any of its equity securities or securities convertible or exchangeable
      into or exercisable for its equity securities under the Securities Act
      (except on Form S-8 or any successor form), whether on its own behalf or
      at the request of any holder or holders of such securities, until a period
      of at least 180 days has elapsed from the effective date of such previous
      registration.

      10. Demand and Piggyback Registration Procedures. Whenever the holders of
Transfer Restricted Securities have requested that any Transfer Restricted
Securities be registered pursuant to Section 8 or Section 9 of this Agreement,
the Company shall use its best efforts to effect the registration and the sale
of such Transfer Restricted Securities in accordance with the intended method of
disposition thereof, and pursuant thereto the Company shall as expeditiously as
possible:

            (a) prepare and file promptly (and no later than 45 days after
      receipt of the initial request) with the Securities and Exchange
      Commission a registration statement with respect to such Transfer
      Restricted Securities and use its best efforts to cause such registration
      statement to become effective;

                                       14
<PAGE>

            (b) notify each holder of Transfer Restricted Securities of the
      effectiveness of each registration statement filed in as required by
      Section 8 or Section 9 of this Agreement and to the extent necessary to
      ensure that the registration statement of the Company relating to the
      registration for resale of Transfer Restricted Securities under Section 8
      or Section 9 of this Agreement that is filed pursuant to the provisions of
      this Section 10 including the Prospectus (as defined below) included
      therein, all amendments thereto (including pos-effective amendments) and
      all exhibits and all material incorporated by reference therein (the
      "Additional Registration Statement") is available for sales of Transfer
      Restricted Securities by the Holders thereof entitled to the benefit of
      Section 8 or Section 9, the Company shall use its reasonable best efforts
      to keep any Additional Registration Statement required by Section 8 or
      Section 9 continuously effective, supplemented, amended and current as
      required by and subject to the provisions of Section 8 or Section 9 hereof
      and in conformity with the requirements of this Agreement, the Securities
      Act and the rules and regulations of the Commission promulgated thereunder
      from time to time (including (A) preparing and filing with the Commission
      such amendments and post-effective amendments to the Additional
      Registration Statement as may be necessary to keep such Additional
      Registration Statement effective; (B) cause the prospectus included in any
      Additional Registration Statement at the time such Additional Registration
      Statement is declared effective, as supplemented by any prospectus
      supplement and all material incorporated by reference into such prospectus
      (the "Prospectus") to be supplemented by any required Prospectus
      supplement, and as so supplemented to be filed pursuant to Rule 424 under
      the Securities Act, and complying fully with Rules 424, 430A and 462, as
      applicable, under the Securities Act in a timely manner; and (C) comply
      with the provisions of the Securities Act with respect to the disposition
      of all securities covered by such Additional Registration Statement),
      until the second anniversary of the effective date of the Additional
      Registration Statement; provided that such obligation shall expire before
      such date if all the Transfer Restricted Securities covered by the
      Additional Registration Statement (i) have been sold pursuant thereto or
      (ii) are no longer Transfer Restricted Securities;

            (c) furnish to each seller of Transfer Restricted Securities such
      number of copies of such registration statement, each amendment and
      supplement thereto, the prospectus included in such Additional
      Registration Statement (including each preliminary prospectus) and such
      other documents as such seller may reasonably request in order to
      facilitate the disposition of the Transfer Restricted Securities owned by
      such seller;

            (d) use its best efforts to register or qualify such Transfer
      Restricted Securities under such other securities or blue sky laws of such
      jurisdictions as any seller reasonably requests and do any and all other
      acts and things which may be reasonably necessary or advisable to enable
      such seller to consummate the disposition in such jurisdictions of the
      Transfer Restricted Securities owned by such seller (provided that the
      Company shall not be required to (i) qualify generally to do business in
      any jurisdiction where it would not otherwise be required to qualify but
      for this subparagraph, (ii) subject itself to taxation in any such
      jurisdiction or (iii) consent to general service of process in any such
      jurisdiction);

                                       15
<PAGE>

            (e) notify each seller of such Transfer Restricted Securities, at
      any time when a prospectus relating thereto is required to be delivered
      under the Securities Act, of the happening of any event as a result of
      which the prospectus included in such Additional Registration Statement
      contains an untrue statement of a material fact or omits any fact
      necessary to make the statements therein not misleading, and, at the
      request of any such seller, the Company shall prepare a supplement or
      amendment to such prospectus and/or Additional Registration Statement so
      that, as thereafter delivered to the purchasers of such Transfer
      Restricted Securities, such prospectus shall not contain an untrue
      statement of a material fact or omit to state any fact necessary to make
      the statements therein not misleading;

            (f) cause all such Transfer Restricted Securities to be listed on
      each securities exchange on which similar securities issued by the Company
      are then listed and, if not so listed, to be listed on a securities
      exchange or the National Association of Securities Dealers (the "NASD")
      automated quotation system and, if listed on the NASD automated quotation
      system, use its best efforts to secure designation of all such Transfer
      Restricted Securities covered by such Additional Registration Statement as
      a "national market system security" of The Nasdaq Stock Market within the
      meaning of Rule 11 Aa2-1 of the Securities and Exchange Commission or,
      failing that, to secure The Nasdaq Stock Market's authorization for such
      Transfer Restricted Securities and, without limiting the generality of the
      foregoing, to arrange for at least two market makers to register as such
      with respect to such Transfer Restricted Securities with the NASD;

            (g) provide a transfer agent and registrar for all such Transfer
      Restricted Securities not later than the effective date of the first
      Additional Registration Statement relating to Transfer Restricted
      Securities or securities of any class of the Company;

            (h) enter into such customary agreements (including underwriting
      agreements in customary form) and take all such other actions as the
      holders of a majority of such Transfer Restricted Securities being sold or
      the underwriters, if any, reasonably request in order to expedite or
      facilitate the disposition of such Transfer Restricted Securities
      (including, without limitation, effecting a stock split, combination of
      shares, recapitalization or reorganization);

            (i) make available for inspection by any seller of such Transfer
      Restricted Securities, any underwriter participating in any disposition
      pursuant to such Additional Registration Statement and any attorney,
      accountant or other agent retained by any such seller or underwriter, all
      financial and other records, pertinent corporate and business documents
      and properties of the Company, and cause the Company's officers,
      directors, employees, agents, representatives and independent accountants
      to supply all information reasonably requested by any such seller,
      underwriter, attorney, accountant or agent in connection with such
      Additional Registration Statement;

            (j) otherwise use its reasonable best efforts to comply with all
      applicable rules and regulations of the Securities and Exchange
      Commission, and make available to its security holders, as soon as
      reasonably practicable, an earnings statement covering the period of at
      least twelve months beginning with the first day of the Company's first
      full calendar quarter after the effective date of the Additional
      Registration Statement, which earnings statement shall satisfy the
      provisions of Section 11(a) of the Securities Act and Rule 158 thereunder;

                                       16
<PAGE>

                  (k) in the event of the issuance of any stop order suspending
the effectiveness of an Additional Registration Statement, or of any order
suspending or preventing the use of any related Prospectus or suspending the
qualification of any securities included in such Additional Registration
Statement for sale in any jurisdiction, use its best efforts promptly to obtain
the withdrawal of such order;

                  (l) use its reasonable best efforts to cause such Transfer
Restricted Securities covered by such Additional Registration Statement to be
registered with or approved by such other governmental agencies or authorities
as may be necessary to enable the sellers thereof to consummate the disposition
of such Transfer Restricted Securities; provided that the Company shall not be
required, in connection therewith or as a condition thereto, to qualify to do
business or to file a general consent to service of process in any state or
jurisdiction;

                  (m) if the underwriters so request, use its reasonable best
efforts to obtain a cold comfort letter from the Company's independent public
accountants in customary form and covering such matters of the type customarily
covered by cold comfort letters, which letter shall be addressed to the
underwriters; and

                  (n) if the underwriters so request, use its reasonable best
efforts to obtain an opinion from the Company's outside counsel in customary
form and covering such matters of the type customarily covered by such opinions,
which opinion shall be addressed to the underwriters.

      11. Miscellaneous.

            (a) Remedies. The Company acknowledges and agrees that any failure
      by the Company to comply with its obligations under Section 1, Section 8
      or Section 9 hereof may result in material injury to the Initial Purchaser
      or the Holders for which there is no adequate remedy at law, that it will
      not be possible to measure damages for such injuries precisely and that,
      in the event of any such failure and in addition to the Additional
      Dividends or other rights of the Initial Purchaser or any Holder, the
      Initial Purchaser or any Holder may obtain such relief as may be required
      to specifically enforce the Company's obligations under Section 1, Section
      8 or Section 9 hereof. The Company further agrees to waive the defense in
      any action for specific performance that a remedy at law would be
      adequate.

            (b) No Inconsistent Agreements. The Company will not on or after the
      date of this Agreement enter into any agreement with respect to its
      securities that is inconsistent with the rights granted to the Holders in
      this Agreement or otherwise conflicts with the provisions hereof. The
      rights granted to the Holders hereunder do not in any way conflict with
      and are not inconsistent with the rights granted to the holders of the
      Company's securities under any agreement in effect on the date hereof.

            (c) Amendments and Waivers. The provisions of this Agreement may not
      be amended, modified or supplemented, and waivers or consents to
      departures from the provisions hereof may not be given, except by the
      Company and the written consent of the Holders of a majority in number of
      the shares of the Transfer Restricted Securities affected by such

                                       17
<PAGE>

      amendment, modification, supplement, waivers or consents (provided that
      Holders of Common Stock issued upon conversion of Convertible Preferred
      Stock shall be deemed to be Holders of the aggregate number of shares of
      Convertible Preferred Stock from which such Common Stock was converted)
      without the consent of each Holder of each share of Convertible Preferred
      Stock then outstanding, including in the case of an amendment,
      modification or supplement of Section 4, any person who was a holder of
      Transfer Restricted Securities disposed of pursuant to the Registration
      Statement (provided that Holders of Common Stock issued upon conversion of
      Convertible Preferred Stock shall be deemed to be Holders of the aggregate
      number of shares of Convertible Preferred stock from which such Common
      Stock was converted). Notwithstanding the foregoing, a waiver or consent
      to depart from the provisions hereof with respect to a matter that relates
      exclusively to the rights of Holders of Transfer Restricted Securities
      whose Securities are being sold pursuant to the Registration Statement and
      that does not directly or indirectly affect, impair, limit or compromise
      the rights of other Holders of Transfer Restricted Securities may be given
      by Holders of at least a majority in number of shares of the Transfer
      Restricted Securities being sold by such Holders pursuant to such
      Registration Statement (provided that Holders of Common Stock issued upon
      conversion of Convertible Preferred Stock shall be deemed to be Holders of
      the aggregate number of shares of Convertible Preferred Stock from which
      such Common Stock was converted). Each Holder of Transfer Restricted
      Securities outstanding at the time of any amendment, modification,
      supplement, waiver, or consent or thereafter shall be bound by any such
      amendment, modification, supplement, waiver, or consent effected pursuant
      to this Section, whether or not any notice of such amendment,
      modification, supplement, waiver, or consent is delivered to such Holder

            (d) Notices. All notices and other communications provided for or
      permitted hereunder shall be made in writing by hand delivery, registered
      first-class mail, facsimile transmission, or courier which guarantees
      overnight delivery:

                  (1) if to the Holders, at the most current address shown for
      the Holders in the records of the Company's transfer agent and registrar
      for the Convertible Preferred Stock and Common Stock, unless the Holder
      shall have provided notice information in a notice and questionnaire
      related to the Registration Statement or any amendment thereto, in which
      case such information shall control:

                  (2)    if to the Initial Purchaser:

                        Jefferies & Company, Inc.
                        909 Fannin Street
                        Suite 3100
                        Houston, Texas 77010
                        Attention: Rich Goldenberg

                  with a copy (which shall not constitute notice) to:

                        Jefferies & Company, Inc.
                        520 Madison Avenue
                        New York, NY 10022
                        Attention: Ashley Geller, Esq.

                                       18
<PAGE>

                  (3)    if to the Company, at its address as follows:

                        Dune Energy, Inc.
                        3050 Post Oak Boulevard
                        Houston, Texas 77056

                        with a copy to:

                        Eaton & Van Winkle LLP
                        3 Park Avenue
                        New York, New York  10016
                        Attention: Matthew S. Cohen, Esq.

                  All such notices and communications shall be deemed to have
      been duly given: at the time delivered by hand, if personally delivered;
      the earlier of the date indicated on the notice of receipt and five
      business days after being deposited in the mail, postage prepaid, if
      mailed; when receipt is acknowledged by recipient's facsimile machine
      operator, if sent by facsimile transmission during normal business hours;
      and on the day delivered, if sent by overnight air courier guaranteeing
      next day delivery.

            (e) Third Party Beneficiaries. The Holders shall be third party
      beneficiaries to the agreements made hereunder between the Company, on the
      one hand, and the Initial Purchaser, on the other hand, and shall have the
      right to enforce such agreements directly to the extent they may deem such
      enforcement necessary or advisable to protect their rights or the rights
      of Holders hereunder.

            (f) Successors and Assigns. This Agreement shall inure to the
      benefit of and be binding upon the successors and assigns of each of the
      parties, including, without the need for an express assignment or any
      consent by the Company thereto, subsequent Holders of Transfer Restricted
      Securities. The Company hereby agrees to extend the benefits of this
      Agreement to any Holder of Transfer Restricted Securities and any such
      Holder may specifically enforce the provisions of this Agreement as if an
      original party hereto.

            (g) Counterparts. This Agreement may be executed in any number of
      counterparts and by the parties hereto in separate counterparts, including
      by facsimile, each of which when so executed shall be deemed to be an
      original and all of which taken together shall constitute one and the same
      agreement.

            (h) Headings. The headings in this Agreement are for convenience of
      reference only and shall not limit or otherwise affect the meaning hereof.

            (i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
      CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT
      REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. EACH OF THE PARTIES HERETO
      AGREES TO SUBMIT TO THE JURISDICTION OF THE FEDERAL AND NEW YORK STATE
      COURTS SITTING IN MANHATTAN, NEW YORK CITY, THE STATE OF NEW YORK, IN ANY
      ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.

                                       19
<PAGE>

            (j) Severability. If any one or more of the provisions contained
      herein, or the application thereof in any circumstance, is held by a court
      of competent jurisdiction to be invalid, illegal or unenforceable, the
      validity, legality and enforceability of any such provision in every other
      respect and of the remaining provisions contained herein shall not be
      affected or impaired thereby, and the parties hereto shall use their best
      efforts to find and employ an alternative means to achieve the same or
      substantially the same result as that contemplated by such term,
      provision, covenant or restriction. It is hereby stipulated and declared
      to be the intention of the parties that they would have executed the
      remaining terms, provisions, covenants and restrictions without including
      any of such that may be hereafter declared invalid, illegal, void or
      unenforceable.

            (k) Securities Held by the Company. Whenever the consent or approval
      of Holders of a specified number of Transfer Restricted Securities is
      required hereunder, Securities held by the Company or its affiliates
      (other than the Initial Purchaser or other Holders of Transfer Restricted
      Securities deemed to be affiliates solely by reason of their holdings of
      such Securities) shall not be counted in determining whether such consent
      or approval was given by the Holders of such required percentage.

            (l) Entire Agreement. This Agreement, together with the Purchase
      Agreement and the Certificate of Designations related to the Convertible
      Preferred Stock, is intended by the parties as a final and exclusive
      statement of the agreement and understanding of the parties hereto in
      respect of the subject matter contained herein and therein and any and all
      prior oral or written agreements, representations, or warranties,
      contracts, understandings, correspondence, conversations and memoranda
      between the Initial Purchaser, on the one hand, and the Company, on the
      other, or between or among any agents, representatives, parents,
      subsidiaries, affiliates, predecessors in interest or successors in
      interest with respect to the subject matter hereof and thereof are merged
      herein and replaced hereby.

                  [Remainder of page intentionally left blank.]

                                       20
<PAGE>

                  If the foregoing is in accordance with your understanding of
      our agreement, please sign and return to the Company a counterpart hereof,
      whereupon this instrument, along with all counterparts, will become a
      binding agreement among the Initial Purchaser and the Company in
      accordance with its terms.

                                Very truly yours,

                                DUNE ENERGY, INC.

                                By: /s/ James A. Watt
                                    --------------------------------------------
                                    Name: James A. Watt
                                    Title: President and Chief Executive Officer

<PAGE>

Accepted and Agreed to:

JEFFERIES & COMPANY, INC.

By: /s/ Richard A. Goldenberg
    -------------------------------
    Name: Richard A. Goldenberg
    Title: Managing DirectorSECURITY AGREEMENT

            This SECURITY AGREEMENT (this "Agreement"), dated as of May 15,
2007, among the Grantors listed on the signature pages hereof and those
additional entities that hereafter become parties hereto by executing the form
of Supplement attached hereto as Annex 1 (collectively, jointly and severally,
the "Grantors" and each, individually a "Grantor"), and THE BANK OF NEW YORK, in
its capacity as collateral agent for the benefit of itself and the ratable
benefit of the Holders (together with its successors and assigns in such
capacity, the "Agent").

                              W I T N E S S E T H:

            WHEREAS, Dune Energy, Inc., a Delaware corporation ("Parent"), has
sold its 10 1/2% Senior Secured Notes due 2012 in the aggregate amount of
$300,000,000 (the "Initial Notes") and has authorized the creation of an issue
of 10 1/2% Senior Secured Exchange Notes due 2012 (together with the Initial
Notes all promissory notes given in replacement or exchange therefor or in
renewal and extension thereof, are herein collectively called the "Notes") to be
exchanged, at par, for Initial Notes;

            WHEREAS, Parent, as issuer, certain subsidiaries of Parent, as
guarantors, and The Bank of New York, as indenture trustee and collateral agent,
have entered into that certain Indenture dated as of May 15, 2007 (as the same
may from time to time be amended, modified, supplemented or restated, the
"Indenture") in connection with the Notes;

            WHEREAS, Agent has agreed to act as agent for the benefit of the
Secured Parties in connection with the transactions contemplated by the
Indenture, this Agreement, and the other Transaction Documents; and

            WHEREAS, in order to induce the initial purchasers of the Notes to
purchase the Initial Notes, Grantors have agreed to grant a continuing security
interest in and to the Collateral in order to secure the prompt and complete
payment, observance and performance of, among other things, their respective
Secured Obligations, and

            NOW, THEREFORE, for and in consideration of the recitals made above
and other good and valuable consideration, the receipt, sufficiency and adequacy
of which are hereby acknowledged, the parties hereto agree as follows:

            1. Defined Terms. All capitalized terms used herein (including in
the preamble and recitals hereof) without definition shall have the meanings
ascribed thereto in the Indenture. Any terms used in this Agreement that are
defined in the Code shall be construed and defined as set forth in the Code
unless otherwise defined herein or in the Indenture; provided, however, that if
the Code is used to define any term used herein and if such term is defined
differently in different Articles of the Code, the definition of such term
contained in Article 9 of the Code shall govern. In addition to those terms
defined elsewhere in this Agreement, as used in this Agreement, the following
terms shall have the following meanings:

            (a) "Account" means an account (as that term is defined in the
Code).

<PAGE>

            (b) "Account Debtor" means an account debtor (as that term is
defined in the Code).

            (c) "Books" means books and records (including each Grantor's
Records indicating, summarizing, or evidencing such Grantor's assets (including
the Collateral) or liabilities, each Grantor's Records relating to such
Grantor's business operations or financial condition, and each Grantor's goods
or General Intangibles related to such information).

            (d) "Cash Equivalents" has the meaning specified therefor in the
Indenture.

            (e) "Chattel Paper" means chattel paper (as that term is defined in
the Code) and includes tangible chattel paper and electronic chattel paper.

            (f) "Code" means the New York Uniform Commercial Code, as in effect
from time to time; provided, however, that in the event that, by reason of
mandatory provisions of law, any or all of the attachment, perfection, priority,
or remedies with respect to Agent's Lien on any Collateral is governed by the
Uniform Commercial Code as enacted and in effect in a jurisdiction other than
the State of New York, the term "Code" shall mean the Uniform Commercial Code as
enacted and in effect in such other jurisdiction solely for purposes of the
provisions thereof relating to such attachment, perfection, priority, or
remedies.

            (g) "Collateral" has the meaning specified therefor in Section 2.

            (h) "Commercial Tort Claims" means commercial tort claims (as that
term is defined in the Code), and includes those commercial tort claims listed
on Schedule 1 attached hereto.

            (i) "Control Agreement" means a control agreement, in form and
substance satisfactory to Agent, executed and delivered by a Grantor, the First
Priority Agent if there are First Priority Claims outstanding and otherwise the
Agent, and the applicable securities intermediary (with respect to a Securities
Account) or bank (with respect to a Deposit Account).

            (j) "Copyrights" means works of authorship (whether or not
published, and whether or not copyrightable), copyrights and copyright
registrations, including the copyright registrations and recordings thereof and
all applications in connection therewith listed on Schedule 2 attached hereto
and made a part hereof, and (i) all reissues, restorations, reversions,
continuations, extensions or renewals thereof, (ii) all income, royalties,
damages and payments now and hereafter due and/or payable under and with respect
thereto, including, payments under all licenses entered into in connection
therewith and damages and payments for past or future infringements or dilutions
thereof, (iii) the right to sue for past, present and future infringements and
dilutions thereof, (iv) the goodwill of each Grantor's business symbolized by
the foregoing and connected therewith, and (v) all of each Grantor's rights
corresponding thereto throughout the world.

            (k) "Copyright Security Agreement" means each Copyright Security
Agreement among Grantors, or any of them, and Agent, for the benefit of itself
and the ratable benefit of the Holders, in substantially the form of Exhibit A
attached hereto, pursuant to which Grantors have granted to Agent, for the
benefit of itself and the ratable benefit of the Holders, a security interest in
all their respective Copyrights.

                                       2
<PAGE>

            (l) "Deposit Account" means a deposit account (as that term is
defined in the Code).

            (m) "Equipment" means equipment (as that term is defined in the
Code).

            (n) "Event of Default" has the meaning specified therefor in the
Indenture.

            (o) "First Priority Claims" has the meaning specified in the
Intercreditor Agreement.

            (p) "First Priority Agent" has the meaning specified therefore in
the Intercreditor Agreement.

            (q) "General Intangibles" means general intangibles (as that term is
defined in the Code) and, in any event, includes, payment intangibles, contract
rights, rights to payment, rights arising under common law, statutes, or
regulations, choses or things in action, goodwill (including the goodwill
associated with any Trademark, Patent, or Copyright), Patents, Trademarks,
Copyrights, URLs and domain names, industrial designs, other industrial or
Intellectual Property or rights therein or applications therefor, whether under
license or otherwise, rights in programs, programming materials, blueprints,
drawings, purchase orders, customer lists, monies due or recoverable from
pension funds, route lists, rights to payment and other rights under any royalty
or licensing agreements, including Intellectual Property Licenses, infringement
claims, rights in computer programs, information contained on computer disks or
tapes, software, literature, reports, catalogs, pension plan refunds, pension
plan refund claims, insurance premium rebates, tax refunds, and tax refund
claims, interests in a partnership or limited liability company which do not
constitute a security under Article 8 of the Code, and any other personal
property other than Commercial Tort Claims, money, Accounts, Chattel Paper,
Deposit Accounts, goods, Investment Related Property, and Negotiable Collateral.

            (r) "Governmental Authority" means any federal, state, local, or
other governmental or administrative body, instrumentality, board, department,
or agency or any court, tribunal, administrative hearing body, arbitration
panel, commission, or other similar dispute-resolving panel or body.

            (s) "Grantor" and "Grantors" have the meanings specified therefor in
the recitals to this Agreement.

            (t) "Guarantee" has the meaning specified therefor in the Indenture.

            (u) "Holders" means all Persons in whose name a Note is registered
on the books of the registrar under the Indenture.

            (v) "Hydrocarbon Interests" means all rights, titles, interests and
estates now owned or hereafter acquired in and to oil and gas leases, oil, gas
and mineral leases, oil, gas and casinghead gas leases, or other liquid or
gaseous hydrocarbon leases, mineral fee or lease interests, farm-outs,

                                       3
<PAGE>

overriding royalty and royalty interests, net profit interests, oil payments,
production payment interests and similar mineral interests, including any
reserved or residual interest of whatever nature.

            (w) "Hydrocarbons" means, collectively, oil, gas, coal seam gas,
casinghead gas, condensate, distillate, liquid hydrocarbons, gaseous
hydrocarbons, all products and byproducts refined, separated, settled and
dehydrated therefrom and all products and byproducts refined therefrom,
including, without limitation, kerosene, liquefied petroleum gas, refined
lubricating oils, diesel fuel, drip gasoline, natural gasoline, helium, sulfur,
geothermal steam, water, carbon dioxide, and all other minerals.

            (x) "Initial Notes" has the meaning specified therefor in the
recitals to this Agreement.

            (y) "Indenture" has the meaning specified therefor in the recitals
to this Agreement.

            (z) "Insolvency Proceeding" means any proceeding commenced by or
against any Person under any provision of Title 11 of the United States Code, as
in effect from time to time, or under any other state or federal bankruptcy or
insolvency law, assignments for the benefit of creditors, formal or informal
moratoria, compositions, extensions generally with creditors, or proceedings
seeking reorganization, arrangement, or other similar relief.

            (aa) "Intellectual Property" means any and all Intellectual Property
Licenses, Patents, Copyrights, Trademarks, the goodwill associated with such
Trademarks, confidential and proprietary information, trade secrets and know-how
(including processes, schematics, databases, formulae, drawings, prototypes,
models, designs, technical data, specifications, customer and supplier lists,
pricing and cost information, and business and marketing plans and proposals),
all computer software, Internet web sites, and all other intellectual property
or proprietary rights and claims or causes of action arising out of or related
to an infringement, misappropriation or other violation of any of the foregoing,
including rights to recover for past, present and future violations thereof.

            (bb) "Intellectual Property Licenses" means all rights under or
interests in any patent, trademark, copyright or other intellectual property,
including software license agreements with any other party, whether the
applicable Grantor is a licensee or licensor under any such license agreement,
including the license agreements listed on Schedule 3 attached hereto and made a
part hereof, and the right to use the foregoing in connection with the
enforcement of Agent's and the Holders' rights under the Transaction Documents,
including the right to prepare for sale and sell any and all Inventory and
Equipment now or hereafter owned by any Grantor and now or hereafter covered by
such licenses.

            (cc) "Intercreditor Agreement" means the Intercreditor Agreement
dated as of May 15, 2007 among Parent, the Subsidiaries of Parent from time to
time party hereto, WELLS FARGO FOOTHILL, INC., as agent for the First Priority
Secured Parties (as defined therein), and Agent.

            (dd) "Inventory" means inventory (as that term is defined in the
Code).

                                       4
<PAGE>

            (ee) "Investment Related Property" means (i) investment property (as
that term is defined in the Code), and (ii) all of the following regardless of
whether classified as investment property under the Code: all Pledged Interests,
Pledged Operating Agreements, and Pledged Partnership Agreements.

            (ff) "Negotiable Collateral" means letters of credit, letter of
credit rights, instruments, promissory notes, drafts and documents (as that term
is defined in the Code) and, in any event, including payment intangibles,
contract rights, rights to payment, rights arising under common law, statutes,
or regulations, choses or things in action, goodwill (including the goodwill
associated with any Trademark, Patent, or Copyright), Patents, Trademarks,
Copyrights, URLs and domain names, industrial designs, other industrial or
Intellectual Property or rights therein or applications therefor, whether under
license or otherwise, programs, programming materials, blueprints, drawings,
purchase orders, customer lists, monies due or recoverable from pension funds,
route lists, rights to payment and other rights under any royalty or licensing
agreements, including Intellectual Property Licenses, infringement claims,
computer programs, information contained on computer disks or tapes, software,
literature, reports, catalogs, pension plan refunds, pension plan refund claims,
insurance premium rebates, tax refunds, and tax refund claims, uncertificated
securities, and any other personal property other than Commercial Tort Claims,
money, Accounts, Chattel Paper, Deposit Accounts, goods, Investment Related
Property, and Negotiable Collateral.

            (gg) "Notes" has the meaning specified therefor in the recitals to
this Agreement.

            (hh) "Obligations" means the Obligations, as defined in the
Indenture, in respect of the Transaction Documents.

            (ii) "Oil and Gas Properties" means all Hydrocarbon Interests;
personal property and/or real property now or hereafter pooled or unitized with
Hydrocarbon Interests; presently existing or future unitization, pooling
agreements and declarations of pooled units and the units created thereby
(including without limitation all units created under orders, regulations and
rules of any Governmental Authority having jurisdiction) which may affect all or
any portion of the Hydrocarbon Interests; pipelines, gathering lines,
compression facilities, tanks and processing plants; oil wells, gas wells, water
wells, injection wells, platforms, spars or other offshore facilities, casings,
rods, tubing, pumping units and engines, Christmas trees, derricks, separators,
gun barrels, flow lines, gas systems (for gathering, treating and compression),
and water systems (for treating, disposal and injection); interests held in
royalty trusts whether presently existing or hereafter created; Hydrocarbons in
and under and which may be produced, saved, processed or attributable to the
Hydrocarbon Interests, the lands covered thereby and all Hydrocarbons in
pipelines, gathering lines, tanks and processing plants and all rents, issues,
profits, proceeds, products, revenues and other incomes from or attributable to
the Hydrocarbon Interests; tenements, hereditaments, appurtenances and personal
property and/or real property in any way appertaining, belonging, affixed or
incidental to the Hydrocarbon Interests, and all rights, titles, interests and
estates described or referred to above, including any and all real property, now
owned or hereafter acquired, used or held for use in connection with the
operating, working or development of any of such Hydrocarbon Interests or
personal property and/or Real Property and including any and all surface leases,
rights-of-way, easements and servitudes together with all additions,

                                       5
<PAGE>

substitutions, replacements, accessions and attachments to any and all of the
foregoing; oil, gas and mineral leasehold, fee and term interests, overriding
royalty interests, mineral interests, royalty interests, net profits interests,
net revenue interests, oil payments, production payments, carried interests,
leases, subleases, farmouts and any and all other interests in Hydrocarbons; in
each case whether now owned or hereafter acquired directly or indirectly.

            (jj) "Patents" means inventions, discoveries and ideas, whether
patentable or not, and all patents, registrations and applications therefor,
including the patents and patent applications listed on Schedule 4 attached
hereto and made a part hereof, and (i) all reissues, continuations,
continuations-in-part, substitutes, extensions or renewals thereof and
improvements thereon, (ii) all income, royalties, damages and payments now and
hereafter due or payable under and with respect thereto, including payments
under all licenses entered into in connection therewith and damages and payments
for past or future infringements or dilutions thereof, (iii) the right to sue
for past, present and future infringements and dilutions thereof, and (iv) all
of each Grantor's rights corresponding thereto throughout the world.

            (kk) "Patent Security Agreement" means each Patent Security
Agreement among Grantors, or any of them, and Agent, for the benefit of itself
and the ratable benefit of the Holders, in substantially the form of Exhibit B
attached hereto, pursuant to which Grantors have granted to Agent, for the
benefit of itself and the ratable benefit of the Holders, a security interest in
all their respective Patents.

            (ll) "Permitted Discretion" means a determination made in the
exercise of reasonable (from the perspective of a secured creditor) business
judgment.

            (mm) "Permitted Liens" has the meaning specified therefor in the
Indenture.

            (nn) "Person" has the meaning specified therefor in the Indenture.

            (oo) "Pledged Companies" means, each Person listed on Schedule 5
hereto as a "Pledged Company", together with each other Person, all or a portion
of whose Stock, is acquired or otherwise owned by a Grantor after the Closing
Date.

            (pp) "Pledged Interests" means all of each Grantor's right, title
and interest in and to all of the Stock now or hereafter owned by such Grantor,
regardless of class or designation, including all substitutions therefor and
replacements thereof, all proceeds thereof and all rights relating thereto, also
including any certificates representing the Stock, the right to request after
the occurrence and during the continuation of an Event of Default that such
Stock be registered in the name of Agent or any of its nominees, the right to
receive any certificates representing any of the Stock and the right to require
that such certificates be delivered to Agent together with undated powers or
assignments of investment securities with respect thereto, duly endorsed in
blank by such Grantor, all warrants, options, share appreciation rights and
other rights, contractual or otherwise, in respect thereof and of all dividends,
distributions of income, profits, surplus, or other compensation by way of
income or liquidating distributions, in cash or in kind, and cash, instruments,
and other property from time to time received, receivable, or otherwise
distributed in respect of or in addition to, in substitution of, on account of,
or in exchange for any or all of the foregoing.

                                       6
<PAGE>

            (qq) "Pledged Interests Addendum" means a Pledged Interests Addendum
substantially in the form of Exhibit C to this Agreement.

            (rr) "Pledged Note Addendum" means a Pledged Note Addendum
substantially in the form of Exhibit E to this Agreement.

            (ss) "Pledged Notes" has the meaning specified therefor in Section
5(h).

            (tt) "Pledged Operating Agreements" means all of each Grantor's
rights, powers, and remedies under the limited liability company operating
agreements of each of the Pledged Companies that are limited liability
companies.

            (uu) "Pledged Partnership Agreements" means all of each Grantor's
rights, powers, and remedies under the partnership agreements of each of the
Pledged Companies that are partnerships.

            (vv) "Proceeds" has the meaning specified therefor in Section 2.

            (ww) "Real Property" means any estates or interests in real property
now owned or hereafter acquired by any Grantor and the improvements thereto.

            (xx) "Records" means information that is inscribed on a tangible
medium or which is stored in an electronic or other medium and is retrievable in
perceivable form.

            (yy) "Security Interest" has the meaning specified therefor in
Section 2.

            (zz) "Secured Obligations" means, (a) with respect to Parent, all of
its present and future Obligations under each and every Note at any time
outstanding pursuant to the Indenture, including all principal thereof, premium,
if any, and interest thereon, (b) with respect to each Grantor other than
Parent, all of its present and future Obligations under its Guarantee, and (c)
with respect to every Grantor, all of its other present and future Obligations
arising from this Agreement, the Indenture, or the other Transaction Documents,
including, in the case of each of clauses (a), (b) and (c), reasonable attorneys
fees and expenses and any interest, fees, or expenses that accrue after the
filing of an Insolvency Proceeding, regardless of whether allowed or allowable
in whole or in part as a claim in any Insolvency Proceeding.

            (aaa) "Securities Account" means a securities account (as that term
is defined in the Code).

            (bbb) "Stock" means all shares, options, warrants, interests,
participations, or other equivalents (regardless of how designated) of or in a
Person, whether voting or nonvoting, including common stock, preferred stock, or
any other "equity security" (as such term is defined in Rule 3a11-1 of the
General Rules and Regulations promulgated by the SEC under the Exchange Act).

                                       7
<PAGE>

            (ccc) "Supporting Obligations" means Supporting Obligations (as such
term is defined in the Code), and includes letters of credit and guaranties
issued in support of Accounts, Chattel Paper, documents, General Intangibles,
instruments, or Investment Related Property.

            (ddd) "Trademarks" means trademarks, trade names, registered
trademarks, trademark applications, service marks, registered service marks and
service mark applications, brand names, certification marks, collective marks,
d/b/a's, Internet domain names, logos, symbols, trade dress, assumed names,
fictitious names, and other indicia of origin, including the trade names,
registered trademarks, trademark applications, registered service marks and
service mark applications listed on Schedule 6 attached hereto and made a part
hereof, and (i) all extensions, modifications and renewals thereof, (ii) all
income, royalties, damages and payments now and hereafter due or payable under
and with respect thereto, including payments under all licenses entered into in
connection therewith and damages and payments for past or future infringements
or dilutions thereof, (iii) the right to sue for past, present and future
infringements and dilutions thereof, (iv) the goodwill of each Grantor's
business symbolized by the foregoing and connected therewith, and (v) all of
each Grantor's rights corresponding thereto throughout the world.

            (eee) "Trademark Security Agreement" means each Trademark Security
Agreement among Grantors, or any of them, and Agent, for the benefit of itself
and the ratable benefit of the Holders, in substantially the form of Exhibit D
attached hereto, pursuant to which Grantors have granted to Agent, for the
benefit of itself and the ratable benefit of the Holders, a security interest in
all their respective Trademarks.

            (fff) "Transaction Document" means the Indenture, the Notes, the
Collateral Agreements (as defined in the Indenture), the Control Agreements and
any other agreement entered into, now or in the future, by Parent or any of its
Subsidiaries in connection with the Indenture, the Notes or this Agreement.

            (ggg) "URL" means "uniform resource locator," an internet web
address.

            2. Grant of Security.

            (a) Each Grantor hereby unconditionally grants, assigns and pledges
to Agent, for the benefit of itself and the ratable benefit of the Holders, a
continuing security interest (hereinafter referred to as the "Security
Interest") in all personal property of such Grantor whether now owned or
hereafter acquired or arising and wherever located, including such Grantor's
right, title, and interest in and to the following, whether now owned or
hereafter acquired or arising and wherever located (the "Collateral"):

                  (i) all of such Grantor's Accounts;

                  (ii) all of such Grantor's Books;

                  (iii) all of such Grantor's Chattel Paper;

                  (iv) all of such Grantor's interest with respect to any
Deposit Account;

                                       8
<PAGE>

                  (v) all of such Grantor's Equipment and fixtures;

                  (vi) all of such Grantor's General Intangibles;

                  (vii) all of such Grantor's Inventory;

                  (viii) all of such Grantor's Investment Related Property;

                  (ix) all of such Grantor's Negotiable Collateral;

                  (x) all of such Grantor's rights in respect of Supporting
Obligations;

                  (xi) all of such Grantor's interest with respect to any
Commercial Tort Claims;

                  (xii) all of such Grantor's money, Cash Equivalents, or other
assets of such Grantor that now or hereafter come into the possession, custody,
or control of Agent (or its agent or designee);

                  (xiii) all of such Grantor's Hydrocarbons and Hydrocarbon
Interests;

                  (xiv) all of such Grantor's Oil and Gas Properties; and

                  (xv) all of the proceeds and products, whether tangible or
intangible, of any of the foregoing, including proceeds of insurance or
commercial tort claims covering or relating to any or all of the foregoing, and
any and all Accounts, Books, Chattel Paper, Commercial Tort Claims, Deposit
Accounts, Equipment, General Intangibles, Inventory, Investment Related
Property, Negotiable Collateral, Supporting Obligations, money, or other
tangible or intangible property resulting from the sale, lease, license,
exchange, collection, or other disposition of any of the foregoing, the proceeds
of any award in condemnation with respect to any of the property of Grantors,
any rebates or refunds, whether for taxes or otherwise, and all proceeds of any
such proceeds, or any portion thereof or interest therein, and the proceeds
thereof, and all proceeds of any loss of, damage to, or destruction of the
above, whether insured or not insured, and, to the extent not otherwise
included, any indemnity, warranty, or Guarantee payable by reason of loss or
damage to, or otherwise with respect to any of the foregoing (the "Proceeds").
Without limiting the generality of the foregoing, the term "Proceeds" includes
whatever is receivable or received when Investment Related Property or proceeds
are sold, exchanged, collected, or otherwise disposed of, whether such
disposition is voluntary or involuntary, and includes proceeds of any indemnity
or Guarantee payable to any Grantor or Agent from time to time with respect to
any of the Investment Related Property.

      Notwithstanding anything herein to the contrary, the term "Collateral"
shall not include, and no Grantor is pledging, nor granting a security interest
hereunder in, any of such Grantor's right, title or interest in (A) any license,
contract or agreement to which such Grantor is a party as of the date hereof or
any of its right, title or interest thereunder to the extent, but only to the
extent, that such a grant would, under the express terms of such license,
contract or agreement on the date hereof result in a breach of the terms of, or
constitute a default under, such license, contract or agreement (other than to
the extent that any such term (i) has been waived or (ii) would be rendered

                                       9
<PAGE>

ineffective pursuant to Sections 9-406, 9-408, 9-409 of the Code or other
applicable provisions of the Uniform Commercial Code of any relevant
jurisdiction or any other applicable law (including the Bankruptcy Code) or
principles of equity); provided, that (x) immediately upon the ineffectiveness,
lapse or termination of any such provision, the Collateral shall include, and
such Grantor shall be deemed to have granted a security interest in, all such
right, title and interest as if such provision had never been in effect and (y)
the foregoing exclusion shall in no way be construed so as to limit, impair or
otherwise affect Agent's unconditional continuing security interest in and liens
upon any rights or interest of a Grantor in or to the proceeds of, or any monies
due or to become due under, any such license, contract or agreement or (B) all
intent-to-use United States trademark applications for which an amendment to
allege use or statement of use has not been filed under 15 U.S.C. ss. 1051(c) or
15 U.S.C. ss. 1051(d), respectively, or if filed, has not been deemed in
conformance with 15 U.S.C. ss. 1051(a) or examined and accepted, respectively,
by the United States Patent and Trademark Office, provided that, upon such
filing and acceptance, such intent-to-use applications shall be included in the
definition of Collateral.

      Notwithstanding anything herein to the contrary, the term "Collateral"
shall not include (A) in the case of a first tier foreign Subsidiary, more than
65% (or such greater percentage that, due to a change in applicable law after
the date hereof, (i) would not reasonably be expected to cause the undistributed
earnings of such foreign Subsidiary as determined for United States federal
income tax purposes to be treated as a deemed dividend to such foreign
Subsidiary's United States parent and (ii) would not reasonably be expected to
cause any adverse tax consequences) of the issued and outstanding shares of
Stock entitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2))
(it being understood and agreed that the Collateral shall include 100% of the
issued and outstanding shares of Stock not entitled to vote (within the meaning
of Treas. Reg. Section 1.956-2(c)(2)) or other equity interest of such foreign
Subsidiary) or (B) in the case of all other foreign Subsidiaries, any of the
issued and outstanding shares of Stock.

      The Grantors agree that the pledge of the shares of Stock of any
Subsidiary of a Grantor that is a foreign Subsidiary may be supplemented by one
or more separate pledge agreements, deeds of pledge, share charges, or other
similar agreements or instruments, executed and delivered by the relevant
Grantors in favor of Agent, which pledge agreements will provide for the pledge
of such shares of Stock in accordance with the laws of the applicable foreign
jurisdiction subject to the limitations set forth above regarding the pledge of
Stock securing the payment and performance of the Secured Obligations of such
Grantor. With respect to such shares of Stock, Agent may, at any time and from
time to time, in its sole discretion, take actions in such foreign jurisdictions
that will result in the perfection of the Lien created in such shares of Stock.

            3. Security for Obligations. This Agreement and the Security
Interest created hereby by each Grantor secures the payment and performance of
all the Secured Obligations of such Grantor, whether now existing or arising
hereafter. Without limiting the generality of the foregoing, this Agreement
secures the payment of all amounts which constitute part of such Secured
Obligations and would be owed by Grantors, or any of them, to Agent, the Holders
or any of them, but for the fact that they are unenforceable or not allowable
due to the existence of an Insolvency Proceeding involving any Grantor.

                                       10
<PAGE>

            4. Grantors Remain Liable. Anything herein to the contrary
notwithstanding, (a) each of the Grantors shall remain liable under the
contracts and agreements included in the Collateral, including the Pledged
Operating Agreements and the Pledged Partnership Agreements, to perform all of
the duties and obligations thereunder to the same extent as if this Agreement
had not been executed, (b) the exercise by Agent or any Holder of any of the
rights hereunder shall not release any Grantor from any of its duties or
obligations under such contracts and agreements included in the Collateral, and
(c) neither Agent nor any Holder shall have any obligation or liability under
such contracts and agreements included in the Collateral by reason of this
Agreement, nor shall either Agent or any Holder be obligated to perform any of
the obligations or duties of any Grantor thereunder or to take any action to
collect or enforce any claim for payment assigned hereunder. Until an Event of
Default shall occur and be continuing, except as otherwise provided in this
Agreement, the Indenture, or any other Transaction Document, Grantors shall have
the right to possession and enjoyment of the Collateral for the purpose of
conducting the ordinary course of their respective businesses, subject to and
upon the terms hereof and of the Indenture and the other Transaction Documents.
Without limiting the generality of the foregoing, it is the intention of the
parties hereto that record and beneficial ownership of the Pledged Interests,
including all voting, consensual, and dividend rights, shall remain in the
applicable Grantor until the occurrence of an Event of Default and until Agent
shall notify the applicable Grantor of Agent's exercise of voting, consensual,
or dividend rights with respect to the Pledged Interests pursuant to Section 15
hereof.

            5. Representations and Warranties. Each Grantor hereby represents
and warrants as follows:

            (a) The exact legal name of each of the Grantors is set forth on the
signature pages of this Agreement or a supplemental indenture provided to Agent
pursuant to Section 4j.14 of the Indenture.

            (b) Schedule 7 attached hereto sets forth all Real Property (other
than Oil and Gas Properties) owned by Grantors as of the Closing Date.

            (c) Such Grantor is the sole legal and beneficial owner, or
exclusive or non-exclusive licensee, of all Intellectual Property rights that
are necessary or desirable to the conduct of its business as currently
conducted. As of the Closing Date, (i) such Grantor has no ownership interest
in, or title to, any Copyrights, Patents or Trademarks that are registered or
the subject of pending applications for registrations, except as set forth on
Schedules 2(a), 4(a) and 6(a), respectively, attached hereto; (ii) such Grantor
has no ownership interest in, or title to, any Copyrights, Patents or Trademarks
that are material to such Grantor's businesses as currently conducted and that
are not registered or the subject of pending applications for registrations,
except as set forth in Schedules 2(b), 4(b) and 6(b), respectively, attached
hereto; and (iii) such Grantor is not a party to any Intellectual Property
Licenses, except as set forth on Schedule 3 attached hereto. This Agreement is
effective to create a valid and continuing Lien on such Grantor's Copyrights,
Patents and Trademarks and all of its rights and interests in and to any
Intellectual Property Licenses. Upon the filing of the Copyright Security
Agreement with the United States Copyright Office and the filing of the Patent
Security Agreement and the Trademark Security Agreement with the United States
Patent and Trademark Office, and the filing of appropriate financing statements
in the jurisdictions listed on Schedule 8 hereto, all action necessary or

                                       11
<PAGE>

desirable to protect and perfect the Security Interest in and to each Grantor's
Patents, Trademarks, or Copyrights has been taken and such perfected Security
Interests are enforceable as such as against any and all creditors of and
purchasers from any Grantor. No Grantor has any interest in any Copyright that
is necessary in connection with the operation of such Grantor's business, except
for those Copyrights identified on Schedule 2(a) attached hereto which have been
registered with the United States Copyright Office.

            (d) This Agreement creates a valid security interest in the
Collateral of each Grantor, to the extent a security interest therein can be
created under the Code, securing the payment and performance of the Secured
Obligations of such Grantor. Except to the extent a security interest in the
Collateral cannot be perfected by the filing of a financing statement under the
Code, all filings and other actions necessary or desirable to perfect and
protect such security interest have been duly taken or will have been taken upon
the filing of financing statements listing each applicable Grantor, as a debtor,
and Agent, as secured party, in the jurisdictions listed next to such Grantor's
name on Schedule 8 attached hereto. Upon the making of such filings, Agent shall
have a first priority perfected security interest, subject to First Priority
Claims, in the Collateral of each Grantor to the extent such security interest
can be perfected by the filing of a financing statement. All action by any
Grantor necessary to protect and perfect such security interest on each item of
Collateral has been duly taken.

            (e) (i) Except for the Security Interest created hereby, each
Grantor is and will at all times be the sole holder of record and the legal and
beneficial owner, free and clear of all Liens other than Permitted Liens, of the
Pledged Interests indicated on Schedule 5 as being owned by such Grantor and,
when acquired by such Grantor, any Pledged Interests acquired after the Closing
Date; (ii) all of the Pledged Interests are duly authorized, validly issued,
fully paid and nonassessable and the Pledged Interests constitute or will
constitute the percentage of the issued and outstanding Stock of the Pledged
Companies of such Grantor identified on Schedule 5 hereto as supplemented or
modified by any Pledged Interests Addendum or any Supplement to this Agreement;
(iii) such Grantor has the right and requisite authority to pledge, the
Investment Related Property pledged by such Grantor to Agent as provided herein;
(iv) all actions necessary or desirable to perfect, establish the first priority
(subject to First Priority Claims) of, or otherwise protect, Agent's Liens in
the Investment Related Property, and the proceeds thereof, shall have been duly
taken, (A) upon the execution and delivery of this Agreement; (B) upon the
taking of possession by Agent (or its agent (including the First Priority Agent)
or designee) of any certificates constituting the Pledged Interests, to the
extent such Pledged Interests are represented by certificates, together with
undated powers endorsed in blank by the applicable Grantor; (C) upon the filing
of financing statements in the applicable jurisdiction set forth on Schedule 8
attached hereto for such Grantor with respect to the Pledged Interests of such
Grantor that are not represented by certificates, and (D) with respect to any
Securities Accounts, upon the delivery of Control Agreements with respect
thereto; and (v) each Grantor has delivered to and deposited with First Priority
Agent (or, with respect to any Pledged Interests created or obtained after the
Closing Date, will deliver and deposit in accordance with Sections 6(a) and 8
hereof) all certificates representing the Pledged Interests owned by such
Grantor to the extent such Pledged Interests are represented by certificates,
and undated powers endorsed in blank with respect to such certificates. None of
the Pledged Interests owned or held by such Grantor has been issued or
transferred in violation of any securities registration, securities disclosure
or similar laws of any jurisdiction to which such issuance or transfer may be
subject.

                                       12
<PAGE>

            (f) No consent, approval, authorization, or other order or other
action by, and no notice to or filing with, any Governmental Authority or any
other Person is required (i) for the grant of a Security Interest by such
Grantor in and to the Collateral pursuant to this Agreement or for the
execution, delivery, or performance of this Agreement by such Grantor, or (ii)
for the exercise by Agent of the voting or other rights provided for in this
Agreement with respect to the Investment Related Property or the remedies in
respect of the Collateral pursuant to this Agreement, except as may be required
in connection with such disposition of Investment Related Property by laws
affecting the offering and sale of securities generally.

            (g) Schedule 9 attached hereto sets forth all motor vehicles owned
by Grantors as of the Closing Date, by model, model year and vehicle
identification number ("VIN").

            (h) There is no default, breach, violation or event of acceleration
existing under any promissory note (as defined in the Code) constituting
Collateral and pledged hereunder (the "Pledged Notes") and no event has occurred
or circumstance exists which, with the passage of time or the giving of notice,
or both, would constitute a default, breach, violation or event of acceleration
under the Pledged Notes. Such Grantor, if it is an obligee under a Pledged Note,
has not waived any default, breach, violation or event of acceleration under
such Pledged Notes. The proceeds of the loans evidenced by the Pledged Notes
have been fully disbursed and such Grantor has no obligation to make any future
advances or other disbursements under or in respect of the Pledged Notes. A
true, correct and complete list of the Pledged Notes is set forth on Schedule
10.

            (i) Each Grantor has made in good faith and in accordance with the
procedures and regulations of the United States Copyright Office and the United
States Patent and Trademark Office, as applicable, all payments, filings and
recordations necessary to protect and maintain its interest in the Intellectual
Property rights identified on Schedules 2(a), 4(a) and 6(a) in the United States
in a manner sufficient to claim in the public record such Grantor's ownership
thereof, including (i) making all necessary registration, maintenance, and
renewal fee payments; and (ii) filing all necessary documents, including all
applications for registration of such Intellectual Property rights.

            (j) Except as set forth on Schedules 2, 4 or 6, no claim has been
made in writing and is continuing or, to the best of each Grantor's knowledge,
threatened that the use by any Grantor of any Intellectual Property rights that
are material to the conduct of its business does or may violate the Intellectual
Property rights of any Person. To the best of each Grantor's knowledge, there is
currently no infringement or unauthorized use of any item of Intellectual
Property rights contained on Schedules 2, 4 or 6.

            6. Covenants. Each Grantor, jointly and severally, covenants and
agrees with Agent and the other Secured Parties that from and after the date of
this Agreement and until the date of termination of this Agreement in accordance
with Section 22 hereof:

            (a) Possession of Collateral. In the event that any Collateral,
including proceeds, is evidenced by or consists of Negotiable Collateral,
Investment Related Property, or Chattel Paper, and if and to the extent that
perfection or priority of Agent's Security Interest is dependent on possession,

                                       13
<PAGE>

the applicable Grantor, immediately upon the request of Agent and in accordance
with Section 8 hereof, shall execute such other documents and instruments as
shall be requested by Agent or, if applicable, endorse and deliver physical
possession of such Negotiable Collateral, Investment Related Property, or
Chattel Paper to the First Priority Agent if there are First Priority Claims
outstanding and otherwise to Agent, together with such undated powers endorsed
in blank as shall be requested by Agent.

(b) Chattel Paper.

                  (i) Each Grantor shall take all steps reasonably necessary to
grant Agent control of all electronic Chattel Paper in accordance with the Code
and all "transferable records" as that term is defined in Section 16 of the
Uniform Electronic Transaction Act and Section 201 of the federal Electronic
Signatures in Global and National Commerce Act as in effect in any relevant
jurisdiction; and

                  (ii) If any Grantor retains possession of any Chattel Paper or
instruments (which retention of possession shall be subject to the extent
permitted hereby and by the Indenture), promptly upon the request of Agent, such
Chattel Paper and instruments shall be marked with the following legend: "This
writing and the obligations evidenced or secured hereby are subject to the
Security Interest of The Bank of New Trust Company, N.A. as Agent for the
benefit of itself and the ratable benefit of the holders of Dune Energy, Inc.'s
10 1/2% Senior Secured Notes due 2012 and 10 1/2% Senior Secured Exchange Notes
due 2012".

(c) Control Agreements.

                  (i) Except to the extent otherwise permitted by the Indenture,
each Grantor shall obtain an authenticated Control Agreement, from each bank
maintaining a Deposit Account for such Grantor; and

                  (ii) Except to the extent otherwise permitted by the
Indenture, each Grantor shall obtain authenticated Control Agreements, from each
issuer of uncertificated securities, securities intermediary, or commodities
intermediary issuing or holding any financial assets or commodities to or for
any Grantor.

            (d) Letter of Credit Rights. Each Grantor that is or becomes the
beneficiary of a letter of credit shall promptly (and in any event within 5
Business Days after becoming a beneficiary), notify Agent thereof and, upon the
request by Agent, enter into a tri-party agreement with Agent and the issuer or
confirmation bank with respect to letter-of-credit rights (as that term is
defined in the Code) assigning such letter-of-credit rights to Agent and
directing all payments thereunder to Agent's Account, all in form and substance
satisfactory to Agent.

            (e) Commercial Tort Claims. Each Grantor shall promptly (and in any
event within 5 Business Days of receipt thereof), notify Agent in writing upon
incurring or otherwise obtaining a Commercial Tort Claim after the date hereof
and, upon request of Agent, promptly amend Schedule 1 to this Agreement to
describe such after-acquired Commercial Tort Claim in a manner that reasonably
identifies such Commercial Tort Claim, and hereby authorizes the filing of
additional financing statements or amendments to existing financial statements
describing such Commercial Tort Claims, and agrees to do such other acts or
things deemed necessary or desirable by Agent to give Agent a first priority,
perfected security interest in any such Commercial Tort Claim.

                                       14
<PAGE>

            (f) Government Contracts. If any Account or Chattel Paper arises out
of a contract or contracts with the United States of America or any department,
agency, or instrumentality thereof, Grantors shall promptly (and in any event
within 5 Business Days of the creation thereof) notify Agent thereof in writing
and execute any instruments or take any steps reasonably required by Agent in
order that all moneys due or to become due under such contract or contracts
shall be assigned to Agent, for itself and the ratable benefit of the Holders,
and shall provide written notice thereof under the Assignment of Claims Act or
other applicable law.

            (g) Intellectual Property.

                  (i) Upon request of Agent, in order to facilitate filings with
the United States Patent and Trademark Office and the United States Copyright
Office, each Grantor shall execute and deliver to Agent one or more Copyright
Security Agreements, Trademark Security Agreements, or Patent Security
Agreements to further evidence Agent's Lien on such Grantor's Patents,
Trademarks, or Copyrights, and the General Intangibles of such Grantor relating
thereto or represented thereby;

                  (ii) Each Grantor shall have the duty, to the extent material
to or economically desirable in the operation of such Grantor's business, (A) to
promptly sue for infringement, misappropriation, or dilution and to recover any
and all damages for such infringement, misappropriation, or dilution, (B) to
prosecute diligently any trademark application or service mark application that
is part of the Trademarks pending as of the date hereof or hereafter until the
termination of this Agreement, (C) to prosecute diligently any patent
application that is part of the Patents pending as of the date hereof or
hereafter until the termination of this Agreement, and (D) to take reasonable
and necessary action to preserve and maintain all of such Grantor's Trademarks,
Patents, Copyrights, Intellectual Property Licenses, and its rights therein,
including the filing of applications for renewal, affidavits of use, affidavits
of noncontestability and opposition and interference and cancellation
proceedings. Each Grantor shall promptly file an application with the United
States Copyright Office for any Copyright that has not been registered with the
United States Copyright Office if such Copyright is necessary in connection with
the operation of such Grantor's business. Any expenses incurred in connection
with the foregoing shall be borne by the appropriate Grantor. Each Grantor
further agrees not to abandon any Trademark, Patent, Copyright, or Intellectual
Property License that is material or economically desirable to the operation of
such Grantor's business without the prior written consent of Agent;

                  (iii) Grantors acknowledge and agree that neither Agent nor
any Holder shall have any duties with respect to the Trademarks, Patents,
Copyrights, or Intellectual Property Licenses. Without limiting the generality
of this Section 6(g), Grantors acknowledge and agree that neither Agent nor any
Holder shall be under any obligation to take any steps necessary to preserve
rights in the Trademarks, Patents, Copyrights, or Intellectual Property Licenses
against any other Person, but Agent may do so at its option from and after the
occurrence and during the continuance of an Event of Default, and all expenses
incurred in connection therewith (including reasonable fees and expenses of
attorneys and other professionals) shall be for the sole account of Borrowers
and shall be chargeable to the Loan Account;

                                       15
<PAGE>

                  (iv) In no event shall any Grantor, either itself or through
any agent, employee, licensee, or designee, file an application for the
registration of any Patent, Trademark, or Copyright with the United States
Patent and Trademark Office, the United States Copyright Office or any similar
office or agency without giving Agent prior written notice thereof. Promptly
upon any such filing, each Grantor shall comply with Section 6(g)(i) hereof; and

                  (v) With respect to the Intellectual Property rights that are
material to the conduct of Grantors' businesses, each Grantor agrees to take all
necessary steps to protect each such Intellectual Property right. Each Grantor
hereby agrees to take corresponding steps with respect to each new or acquired
Intellectual Property right to which it or any of its Subsidiaries is now or
later becomes entitled that are material to the conduct of their businesses. Any
expenses incurred in connection with such activities shall be borne solely by
such Grantor.

(h) Investment Related Property.

                  (i) If any Grantor shall receive or become entitled to receive
any Pledged Interests after the Closing Date, it shall promptly (and in any
event within 2 Business Days of receipt thereof) deliver to Agent a duly
executed Pledged Interests Addendum identifying such Pledged Interests;

                  (ii) All sums of money and property paid or distributed in
respect of the Investment Related Property which are received by any Grantor
shall be held by such Grantor in trust for the benefit of Agent segregated from
such Grantor's other property, and such Grantor shall promptly deliver it
forthwith to Agent's in the exact form received;

                  (iii) Each Grantor shall promptly deliver to Agent a copy of
each notice or other communication received by it in respect of any Pledged
Interests;

                  (iv) No Grantor shall make or consent to any amendment or
other modification or waiver with respect to any Pledged Interests, Pledged
Operating Agreement, or Pledged Partnership Agreement, or enter into any
agreement or permit to exist any restriction with respect to any Pledged
Interests other than pursuant to the Transaction Documents;

                  (v) Each Grantor agrees that it will cooperate with Agent in
obtaining all necessary approvals and making all necessary filings under
federal, state, local, or foreign law in connection with the Security Interest
in the Investment Related Property or any sale or transfer thereof; and

                  (vi) As to all limited liability company or partnership
interests, issued under any Pledged Operating Agreement or Pledged Partnership
Agreement, each Grantor hereby represents, warrants and covenants that the
Pledged Interests issued pursuant to any such agreement (A) are not and shall
not be dealt in or traded on securities exchanges or in securities markets, (B)
do not and will not constitute investment company securities, and (C) are not
and will not be held by such Grantor in a securities account. In addition, none
of the Pledged Operating Agreements, the Pledged Partnership Agreements, or any

                                       16
<PAGE>

other agreements governing any of the Pledged Interests issued under any Pledged
Operating Agreement or Pledged Partnership Agreement, provide or shall provide
that such Pledged Interests are securities governed by Article 8 of the Uniform
Commercial Code as in effect in any relevant jurisdiction.

            (i) [Reserved]

            (j) Transfers and Other Liens. Grantors shall not (i) sell, assign
(by operation of law or otherwise) or otherwise dispose of, or grant any option
with respect to, any of the Collateral, except as expressly permitted by the
Indenture, or (ii) create or permit to exist any Lien upon or with respect to
any of the Collateral, except for Permitted Liens. The inclusion of Proceeds in
the Collateral shall not be deemed to constitute Agent's consent to any sale or
other disposition of any of the Collateral except as expressly permitted in this
Agreement or the other Transaction Documents.

            (k) Other Actions as to Any and All Collateral. Each Grantor shall
promptly (and in any event within 2 Business Days of acquiring or obtaining such
Collateral) notify Agent in writing upon (i) acquiring or otherwise obtaining
any Collateral after the date hereof consisting of Trademarks, Patents,
Copyrights, Intellectual Property Licenses, Investment Related Property, Chattel
Paper (electronic, tangible or otherwise), documents (as defined in Article 9 of
the Code), promissory notes (as defined in the Code), or instruments (as defined
in the Code) or (ii) any amount payable under or in connection with any of the
Collateral being or becoming evidenced after the date hereof by any Chattel
Paper, documents, promissory notes, or instruments and, in each such case upon
the request of Agent and in accordance with Section 8 hereof, promptly execute
such other documents and instruments, or if applicable, deliver such Chattel
Paper, other documents, promissory notes, instruments or certificates evidencing
any Investment Related Property in accordance with Section 6 hereof and do such
other acts or things deemed necessary or desirable by Agent to protect Agent's
Security Interest therein.

            (l) Pledged Notes.

                  (i) If any Grantor shall receive or become entitled to receive
any Pledged Note after the Closing Date, it shall promptly (and in any event
within 2 Business Days of receipt thereof) deliver to Agent a duly executed
Pledged Note Addendum identifying such Pledged Note;

                  (ii) No Grantor will waive or release any obligation of any
party to the Pledged Notes without the prior consent of Agent;

                  (iii) No Grantor will take or omit to take any action or
suffer or permit any action to be omitted or taken, the taking or omission of
which would result in any right of offset against sums payable under the Pledged
Notes;

                  (iv) Each Grantor shall give Agent copies of all notices
(including notices of default) given or received with respect to the Pledged
Notes promptly after giving or receiving such notice; and

                                       17
<PAGE>

                  (v) Without Agent's prior written consent, each Grantor shall
not, and shall not agree to, assign or surrender its rights and interests under
the Pledged Notes nor terminate, cancel, modify, change, supplement or amend the
Pledged Notes.

            (m) Motor Vehicles. Upon request of Agent, with respect to all motor
vehicles owned by any Grantor, Grantor shall deliver to Agent, a certificate of
title for all such motor vehicles and shall cause those title certificates to be
filed (with Agent's Lien noted thereon) in the appropriate state motor vehicle
filing office.

            7. Relation to Other Security Documents. The provisions of this
Agreement shall be read and construed with the other Transaction Documents
referred to below in the manner so indicated.

            (a) Indenture. In the event of any conflict between any provision in
this Agreement and a provision in the Indenture, such provision of the Indenture
shall control.

            (b) Patent, Trademark, Copyright Security Agreements. The provisions
of the Copyright Security Agreements, Trademark Security Agreements, and Patent
Security Agreements are supplemental to the provisions of this Agreement, and
nothing contained in the Copyright Security Agreements, Trademark Security
Agreements, or the Patent Security Agreements shall limit any of the rights or
remedies of Agent hereunder.

            8. Further Assurances.

            (a) Each Grantor agrees that from time to time, at its own expense,
such Grantor will promptly execute and deliver all further instruments and
documents, and take all further action, that may be necessary or that Agent may
reasonably request, in order to perfect and protect any Security Interest
granted or purported to be granted hereby or to enable Agent to exercise and
enforce its rights and remedies hereunder with respect to any of the Collateral.

            (b) Each Grantor hereby authorizes the filing by Agent of financing
or continuation statements, or amendments thereto, and such Grantor will execute
and deliver to Agent such other instruments or notices, as may be necessary or
as Agent may reasonably request, in order to perfect and preserve the Security
Interest granted or purported to be granted hereby.

            (c) Each Grantor hereby authorizes Agent at any time and from time
to time to file, transmit, or communicate, as applicable, financing statements
and amendments (i) describing the Collateral as "all personal property of
debtor" or "all assets of debtor" or words of similar effect, (ii) describing
the Collateral as being of equal or lesser scope or with greater detail, or
(iii) that contain any information required by part 5 of Article 9 of the Code
for the sufficiency or filing office acceptance. Each Grantor also hereby
ratifies any and all financing statements or amendments previously filed by
Agent in any jurisdiction.

            (d) Each Grantor acknowledges that it is not authorized to file any
financing statement or amendment or termination statement with respect to any
financing statement filed in connection with this Agreement without the prior
written consent of Agent, subject to such Grantor's rights under Section
9-509(d)(2) of the Code.

                                       18
<PAGE>

            9. Agent's Right to Perform Contracts, Exercise Rights, etc.. Upon
the occurrence and during the continuance of an Event of Default, Agent (or its
designee) (a) may proceed to perform any and all of the obligations of any
Grantor contained in any contract, lease, or other agreement and exercise any
and all rights of any Grantor therein contained as fully as such Grantor itself
could, (b) shall have the right to use any Grantor's rights under Intellectual
Property Licenses in connection with the enforcement of Agent's rights
hereunder, including the right to prepare for sale and sell any and all
Inventory and Equipment now or hereafter owned by any Grantor and now or
hereafter covered by such licenses, and (c) shall have the right to request that
any Stock is pledged hereunder be registered in the name of Agent or any of its
nominees.

            10. Agent Appointed Attorney-in-Fact. Each Grantor hereby
irrevocably appoints Agent its attorney-in-fact, with full authority in the
place and stead of such Grantor and in the name of such Grantor or otherwise, at
such time as an Event of Default has occurred and is continuing under the
Indenture, to take any action and to execute any instrument which Agent may
reasonably deem necessary or advisable to accomplish the purposes of this
Agreement, including:

            (a) to ask, demand, collect, sue for, recover, compromise, receive
and give acquittance and receipts for moneys due and to become due under or in
connection with the Accounts or any other Collateral of such Grantor;

            (b) to receive and open all mail addressed to such Grantor and to
notify postal authorities to change the address for the delivery of mail to such
Grantor to that of Agent;

            (c) to receive, endorse, and collect any drafts or other
instruments, documents, Negotiable Collateral or Chattel Paper;

            (d) to file any claims or take any action or institute any
proceedings which Agent may deem necessary or desirable for the collection of
any of the Collateral of such Grantor or otherwise to enforce the rights of
Agent with respect to any of the Collateral;

            (e) to repair, alter, or supply goods, if any, necessary to fulfill
in whole or in part the purchase order of any Person obligated to such Grantor
in respect of any Account of such Grantor;

            (f) to use any labels, Patents, Trademarks, trade names, URLs,
domain names, industrial designs, Copyrights, advertising matter or other
industrial or intellectual property rights, in advertising for sale and selling
Inventory and other Collateral and to collect any amounts due under Accounts,
contracts or Negotiable Collateral of such Grantor; and

            (g) Agent on behalf of the Holders shall have the right, but shall
not be obligated, to bring suit in its own name to enforce the Trademarks,
Patents, Copyrights and Intellectual Property Licenses and, if Agent shall
commence any such suit, the appropriate Grantor shall, at the request of Agent,
do any and all lawful acts and execute any and all proper documents reasonably
required by Agent in aid of such enforcement.

                                       19
<PAGE>

      To the extent permitted by law, each Grantor hereby ratifies all that such
attorney-in-fact shall lawfully do or cause to be done by virtue hereof. This
power of attorney is coupled with an interest and shall be irrevocable until
this Agreement is terminated.

            11. Agent May Perform. If any Grantor fails to perform any agreement
contained herein, Agent may itself perform, or cause performance of, such
agreement, and the reasonable expenses of Agent incurred in connection therewith
shall be payable, jointly and severally, by Grantors.

            12. Agent's Duties. The powers conferred on Agent hereunder are
solely to protect Agent's interest in the Collateral, for the benefit of itself
and the ratable benefit of the Holders, and shall not impose any duty upon Agent
to exercise any such powers. Except for the safe custody of any Collateral in
its actual possession and the accounting for moneys actually received by it
hereunder, Agent shall have no duty as to any Collateral or as to the taking of
any necessary steps to preserve rights against prior parties or any other rights
pertaining to any Collateral. The Agent shall not be responsible for filing any
financing or continuation statements or recording any documents or instruments
in any public office at any time or times or otherwise perfecting or maintaining
the perfection of any security interest in the Collateral. The Agent shall be
deemed to have exercised reasonable care in the custody of the Collateral in its
possession if the Collateral is accorded treatment substantially equal to that
which it accords its own property and shall not be liable or responsible for any
loss or diminution in the value of any of the Collateral, by reason of the act
or omission of any carrier, forwarding agency or other agent or bailee selected
by the Agent in good faith. The Agent shall not be responsible for the
existence, genuineness or value of any of the Collateral or for the validity,
perfection, priority or enforceability of the Liens in any of the Collateral,
whether impaired by operation of law or by reason of any of any action or
omission to act on its part hereunder, except to the extent such action or
omission constitutes gross negligence, bad faith or willful misconduct on the
part of the Agent, for the validity or sufficiency of the Collateral or any
agreement or assignment contained therein, for the validity of the title of the
Company to the Collateral, for insuring the Collateral or for the payment of
taxes, charges, assessments or Liens upon the Collateral or otherwise as to the
maintenance of the Collateral.

            13. Collection of Accounts, General Intangibles and Negotiable
Collateral. At any time upon the occurrence and during the continuation of an
Event of Default, Agent or Agent's designee may (a) notify Account Debtors of
any Grantor that such Grantor's Accounts, General Intangibles, Chattel Paper or
Negotiable Collateral have been assigned to Agent, for the benefit of the itself
and the ratable benefit of the Holders, or that Agent has a security interest
therein, and (b) collect such Grantor's Accounts, General Intangibles and
Negotiable Collateral directly, and any collection costs and expenses shall
constitute part of such Grantor's Secured Obligations under the Transaction
Documents.

            14. Disposition of Pledged Interests by Agent. None of the Pledged
Interests existing as of the date of this Agreement are, and none of the Pledged
Interests hereafter acquired on the date of acquisition thereof will be,
registered or qualified under the various federal or state securities laws of
the United States and disposition thereof after an Event of Default may be
restricted to one or more private (instead of public) sales in view of the lack
of such registration. Each Grantor understands that in connection with such
disposition, Agent may approach only a restricted number of potential purchasers

                                       20
<PAGE>

and further understands that a sale under such circumstances may yield a lower
price for the Pledged Interests than if the Pledged Interests were registered
and qualified pursuant to federal and state securities laws and sold on the open
market. Each Grantor, therefore, agrees that: (a) if Agent shall, pursuant to
the terms of this Agreement, sell or cause the Pledged Interests or any portion
thereof to be sold at a private sale, Agent shall have the right to rely upon
the advice and opinion of any nationally recognized brokerage or investment firm
(but shall not be obligated to seek such advice and the failure to do so shall
not be considered in determining the commercial reasonableness of such action)
as to the best manner in which to offer the Pledged Interest or any portion
thereof for sale and as to the best price reasonably obtainable at the private
sale thereof; and (b) such reliance shall be conclusive evidence that Agent has
handled the disposition in a commercially reasonable manner.

            15. Voting Rights.

            (a) Upon the occurrence and during the continuation of an Event of
Default, (i) Agent may, at its option, and with prior notice to any Grantor, and
in addition to all rights and remedies available to Agent under any other
agreement, at law, in equity, or otherwise, exercise all voting rights, and all
other ownership or consensual rights in respect of the Pledged Interests owned
by such Grantor, but under no circumstances is Agent obligated by the terms of
this Agreement to exercise such rights, and (ii) if Agent duly exercises its
right to vote any of such Pledged Interests, each Grantor hereby appoints Agent,
such Grantor's true and lawful attorney-in-fact and IRREVOCABLE PROXY to vote
such Pledged Interests in any manner Agent deems advisable for or against all
matters submitted or which may be submitted to a vote of shareholders, partners
or members, as the case may be. The power-of-attorney granted hereby is coupled
with an interest and shall be irrevocable.

            (b) For so long as any Grantor shall have the right to vote the
Pledged Interests owned by it, such Grantor covenants and agrees that it will
not, without the prior written consent of Agent, vote or take any consensual
action with respect to such Pledged Interests which would adversely affect the
rights of Agent or any Holder or the value of the Pledged Interests.

            16. Remedies. Upon the occurrence and during the continuance of an
Event of Default:

            (a) Agent may exercise in respect of the Collateral, in addition to
other rights and remedies provided for herein, in the other Transaction
Documents, or otherwise available to it, all the rights and remedies of a
secured party on default under the Code or any other applicable law. Without
limiting the generality of the foregoing, each Grantor expressly agrees that, in
any such event, Agent, without demand of performance or other demand,
advertisement or notice of any kind (except a notice specified below of time and
place of public or private sale) to or upon any of Grantors or any other Person
(all and each of which demands, advertisements and notices are hereby expressly
waived to the maximum extent permitted by the Code or any other applicable law),
may take immediate possession of all or any portion of the Collateral and (i)
require Grantors to, and each Grantor hereby agrees that it will at its own
expense and upon request of Agent forthwith, assemble all or part of the
Collateral as directed by Agent and make it available to Agent at one or more
locations where such Grantor regularly maintains Inventory, and (ii) without

                                       21
<PAGE>

notice except as specified below, sell the Collateral or any part thereof in one
or more parcels at public or private sale, at any of Agent's offices or
elsewhere, for cash, on credit, and upon such other terms as Agent may deem
commercially reasonable. Each Grantor agrees that, to the extent notice of sale
shall be required by law, at least 10 days notice to any of Grantors of the time
and place of any public sale or the time after which any private sale is to be
made shall constitute reasonable notification and specifically such notice shall
constitute a reasonable "authenticated notification of disposition" within the
meaning of Section 9-611 of the Code. Agent shall not be obligated to make any
sale of Collateral regardless of notice of sale having been given. Agent may
adjourn any public or private sale from time to time by announcement at the time
and place fixed therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned.

            (b) Agent is hereby granted a license or other right to use, without
liability for royalties or any other charge, each Grantor's labels, Patents,
Copyrights, rights of use of any name, trade secrets, trade names, Trademarks,
service marks and advertising matter, URLs, domain names, industrial designs,
other industrial or intellectual property or any property of a similar nature,
whether owned or licensable by any of Grantors or with respect to which any of
Grantors have sublicensable rights under license, sublicense, or other
agreements, as it pertains to the Collateral, in preparing for sale, advertising
for sale and selling any Collateral, and each Grantor's rights under all
licenses and all franchise agreements shall inure to the benefit of Agent.

            (c) Any cash held by Agent as Collateral and all cash proceeds
received by Agent in respect of any sale of, collection from, or other
realization upon all or any part of the Collateral shall be applied against the
Secured Obligations in the order set forth in Section 6.10 of the Indenture,
subject to the Intercreditor Agreement. In the event the proceeds of Collateral
are insufficient to satisfy all of the Secured Obligations of each Grantor in
full, each Grantor shall remain liable for any such deficiency in its Secured
Obligations.

            (d) Each Grantor hereby acknowledges that the Secured Obligations
arose out of a commercial transaction, and agrees that if an Event of Default
shall occur and be continuing Agent shall have the right to an immediate writ of
possession without notice of a hearing. Agent shall have the right to the
appointment of a receiver for the properties and assets of each Grantor, and
each Grantor hereby consents to such rights and such appointment and hereby
waives any objection such Grantor may have thereto or the right to have a bond
or other security posted by Agent.

            17. Remedies Cumulative. Each right, power, and remedy of Agent as
provided for in this Agreement or in the other Transaction Documents or now or
hereafter existing at law or in equity or by statute or otherwise shall be
cumulative and concurrent and shall be in addition to every other right, power,
or remedy provided for in this Agreement or in the other Transaction Documents
or now or hereafter existing at law or in equity or by statute or otherwise, and
the exercise or beginning of the exercise by Agent, of any one or more of such
rights, powers, or remedies shall not preclude the simultaneous or later
exercise by Agent of any or all such other rights, powers, or remedies.

                                       22
<PAGE>

            18. Marshaling. Agent shall not be required to marshal any present
or future collateral security (including but not limited to the Collateral) for,
or other assurances of payment of, the Secured Obligations or any of them or to
resort to such collateral security or other assurances of payment in any
particular order, and all of its rights and remedies hereunder and in respect of
such collateral security and other assurances of payment shall be cumulative and
in addition to all other rights and remedies, however existing or arising. To
the extent that it lawfully may, each Grantor hereby agrees that it will not
invoke any law relating to the marshaling of collateral which might cause delay
in or impede the enforcement of Agent's rights and remedies under this Agreement
or under any other instrument creating or evidencing any of the Secured
Obligations or under which any of the Secured Obligations is outstanding or by
which any of the Secured Obligations is secured or payment thereof is otherwise
assured, and, to the extent that it lawfully may, each Grantor hereby
irrevocably waives the benefits of all such laws.

            19. Indemnity and Expenses.

            (a) Each Grantor agrees to indemnify Agent and the Holders from and
against all claims, lawsuits and liabilities (including reasonable attorneys
fees) growing out of or resulting from this Agreement (including enforcement of
this Agreement) or any other Transaction Document to which such Grantor is a
party, except claims, losses or liabilities resulting from the gross negligence
or willful misconduct of the party seeking indemnification as determined by a
final non-appealable order of a court of competent jurisdiction. This provision
shall survive the termination of this Agreement and the Indenture and the
repayment of the Secured Obligations.

            (b) Grantors, jointly and severally, shall, upon demand, pay to
Agent (or Agent, may charge to the Loan Account) all the expenses which Agent
may incur in connection with (i) the administration of this Agreement, (ii) the
custody, preservation, use or operation of, or, upon an Event of Default, the
sale of, collection from, or other realization upon, any of the Collateral in
accordance with this Agreement and the other Transaction Documents, (iii) the
exercise or enforcement of any of the rights of Agent hereunder or (iv) the
failure by any of Grantors to perform or observe any of the provisions hereof.

            20. Merger, Amendments; Etc. THIS AGREEMENT, TOGETHER WITH THE OTHER
TRANSACTION DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN AGREEMENTS BETWEEN THE
PARTIES. No waiver of any provision of this Agreement, and no consent to any
departure by any of Grantors herefrom, shall in any event be effective unless
the same shall be in writing and signed by Agent, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given. No amendment of any provision of this Agreement shall
be effective unless the same shall be in writing and signed by Agent and each of
Grantors to which such amendment applies.

            21. Addresses for Notices. All notices and other communications
provided for hereunder shall be given in the form and manner and delivered to
Agent at its address specified in the Indenture and to any of the Grantors at

                                       23
<PAGE>

their respective addresses specified in the Indenture or a supplemental
indenture, as applicable, or, as to any party, at such other address as shall be
designated by such party in a written notice to the other party.

            22. Continuing Security Interest: Assignments of the Notes. This
Agreement shall create a continuing security interest in the Collateral and
shall (a) remain in full force and effect until the Obligations have been paid
in full in cash in accordance with the provisions of the Transaction Documents,
(b) be binding upon each Grantor, and their respective successors and assigns,
and (c) inure to the benefit of, and be enforceable by, Agent and its
successors, transferees and assigns. Without limiting the generality of the
foregoing clause (c), any Holder may, in accordance with the provisions of the
Indenture, assign or otherwise transfer all or any portion of the Notes held by
it to any other Person, and such other Person shall thereupon become vested with
all the benefits in respect thereof granted to such Lender herein or otherwise.
Upon payment in full in cash of the Obligations in accordance with the
provisions of the Transaction Documents, the Security Interest granted hereby
shall terminate and all rights to the Collateral shall revert to Grantors or any
other Person entitled thereto. At such time, Agent will file or authorize the
filing of appropriate termination statements provided to it to terminate such
Security Interest. No transfer or renewal, extension, assignment, or termination
of this Agreement or of the Indenture, any other Transaction Document, or any
other instrument or document executed and delivered by any Grantor to Agent nor
any additional Advances or other loans made by any Lender to Borrowers, nor the
taking of further security, nor the retaking or re-delivery of the Collateral to
Grantors, or any of them, by Agent, nor any other act of the Holders, or any of
them, shall release any of Grantors from any obligation, except a release or
discharge executed in writing by Agent in accordance with the provisions of the
Indenture. Agent shall not by any act, delay, omission or otherwise, be deemed
to have waived any of its rights or remedies hereunder, unless such waiver is in
writing and signed by Agent and then only to the extent therein set forth. A
waiver by Agent of any right or remedy on any occasion shall not be construed as
a bar to the exercise of any such right or remedy which Agent would otherwise
have had on any other occasion.

            23. Governing Law. THE VALIDITY OF THIS AGREEMENT, THE CONSTRUCTION,
INTERPRETATION, AND ENFORCEMENT HEREOF, AND THE RIGHTS OF THE PARTIES HERETO
WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO
SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.

            24. New Subsidiaries. Pursuant to Section 4.14 of the Indenture, any
new direct or indirect Subsidiary (whether by acquisition or creation) of any
Borrower or any other Grantor is required to enter into this Agreement by
executing and delivering in favor of Agent a supplement to this Agreement in the
form of Annex 1 attached hereto. Upon the execution and delivery of Annex 1 by
such new Subsidiary, such Subsidiary shall become a Grantor hereunder with the
same force and effect as if originally named as a Grantor herein. The execution
and delivery of any instrument adding an additional Grantor as a party to this
Agreement shall not require the consent of any Grantor hereunder. The rights and
obligations of each Grantor hereunder shall remain in full force and effect
notwithstanding the addition of any new Grantor hereunder.

                                       24
<PAGE>

            25. Agent. Each reference herein to any right granted to, benefit
conferred upon or power exercisable by the "Agent" shall be a reference to
Agent, for the benefit of itself and the ratable benefit of the Holders.

            26. Miscellaneous.

            (a) This Agreement may be executed in any number of counterparts and
by different parties on separate counterparts, each of which, when executed and
delivered, shall be deemed to be an original, and all of which, when taken
together, shall constitute but one and the same Agreement. Delivery of an
executed counterpart of this Agreement by telefacsimile or other electronic
method of transmission shall be equally as effective as delivery of an original
executed counterpart of this Agreement. Any party delivering an executed
counterpart of this Agreement by telefacsimile or other electronic method of
transmission also shall deliver an original executed counterpart of this
Agreement but the failure to deliver an original executed counterpart shall not
affect the validity, enforceability, and binding effect of this Agreement. The
foregoing shall apply to each other Transaction Document mutatis mutandis.

            (b) Any provision of this Agreement which is prohibited or
unenforceable shall be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof in that
jurisdiction or affecting the validity or enforceability of such provision in
any other jurisdiction.

            (c) Headings used in this Agreement are for convenience only and
shall not be used in connection with the interpretation of any provision hereof.

            (d) The pronouns used herein shall include, when appropriate, either
gender and both singular and plural, and the grammatical construction of
sentences shall conform thereto.

            (e) Unless the context of this Agreement or any other Transaction
Document clearly requires otherwise, references to the plural include the
singular, references to the singular include the plural, the terms "includes"
and "including" are not limiting, and the term "or" has, except where otherwise
indicated, the inclusive meaning represented by the phrase "and/or." The words
"hereof," "herein," "hereby," "hereunder," and similar terms in this Agreement
or any other Transaction Document refer to this Agreement or such other
Transaction Document, as the case may be, as a whole and not to any particular
provision of this Agreement or such other Transaction Document, as the case may
be. Section, subsection, clause, schedule, and exhibit references herein are to
this Agreement unless otherwise specified. Any reference in this Agreement or in
any other Transaction Document to any agreement, instrument, or document shall
include all alterations, amendments, changes, extensions, modifications,
renewals, replacements, substitutions, joinders, and supplements, thereto and
thereof, as applicable (subject to any restrictions on such alterations,
amendments, changes, extensions, modifications, renewals, replacements,
substitutions, joinders, and supplements set forth herein). Any reference herein
or in any other Transaction Document to the satisfaction or repayment in full of
the Obligations shall mean the repayment in full in cash (or cash
collateralization in accordance with the terms hereof) of all Obligations other
than unasserted contingent indemnification Obligations. Any reference herein to

                                       25
<PAGE>

any Person shall be construed to include such Person's successors and assigns.
Any requirement of a writing contained herein or in any other Transaction
Document shall be satisfied by the transmission of a Record and any Record so
transmitted shall constitute a representation and warranty as to the accuracy
and completeness of the information contained therein.

            (f) In connection with its execution and acting hereunder, Agent is
entitled to all rights, privileges, protections, immunities, benefits and
indemnities provided to it as Trustee under the Indenture.

      27. REFERENCE IS MADE TO THE INTERCREDITOR AGREEMENT. NOTWITHSTANDING
ANYTHING HEREIN TO THE CONTRARY, THE LIEN AND SECURITY INTEREST GRANTED TO THE
AGENT, FOR THE BENEFIT OF ITSELF AND THE HOLDERS, PURSUANT TO THIS AGREEMENT AND
THE EXERCISE OF ANY RIGHT OR REMEDY BY THE AGENT AND THE OTHER SECURED PARTIES
HEREUNDER ARE SUBJECT TO THE PROVISIONS OF THE INTERCREDITOR AGREEMENT. IN THE
EVENT OF ANY CONFLICT OR INCONSISTENCY BETWEEN THE PROVISIONS OF THE
INTERCREDITOR AGREEMENT AND THE PROVISIONS OF THIS AGREEMENT, THE PROVISIONS OF
THE INTERCREDITOR AGREEMENT SHALL CONTROL.

                [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

                                       26
<PAGE>

            IN WITNESS WHEREOF, the undersigned parties hereto have executed
this Agreement by and through their duly authorized officers, as of the day and
year first above written.

         GRANTORS:                     DUNE ENERGY, INC., a Delaware corporation

                                       By: /s/ Frank T. Smith, Jr.
                                           -------------------------------------
                                       Name: Frank T. Smith, Jr.
                                       Title: Chief Financial Officer

                                       GOLDKING OPERATING COMPANY, a Texas
                                       corporation

                                       By: /s/ Frank T. Smith, Jr.
                                           -------------------------------------
                                       Name: Frank T. Smith, Jr.
                                       Title: Treasurer

                                       VAQUERO PARTNERS LLC, a Texas limited
                                       liability company

                                       By: /s/ Amiel David
                                           -------------------------------------
                                       Name: Amiel David
                                       Title: President

                                       DUNE OPERATING COMPANY, a Texas
                                       corporation

                                       By: /s/ Amiel David
                                           -------------------------------------
                                       Name: Amiel David
                                       Title: President

                                       GOLDKING ENERGY CORPORATION, a
                                       Delaware corporation

                                       By: /s/ Frank T. Smith, Jr.
                                           -------------------------------------
                                       Name: Frank T. Smith, Jr.
                                       Title: Treasurer

<PAGE>

         AGENT:                        THE BANK OF NEW YORK, as Agent

                                       By: /s/ Remo J. Reale
                                           -------------------------------------
                                       Name: Remo J. Reale
                                       Title: Vice-President

                                        2

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00123-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00123-of-00352.parquet"}]]