Document:

AMENDED AND RESTATED TERM LOAN AGREEMENT

            This AMENDED AND RESTATED TERM LOAN AGREEMENT (the "Agreement") is
made and entered into as of September 26, 2006, between DUNE ENERGY, INC. (the
"Company"), a Delaware corporation, and ITERA HOLDINGS BV (the "Lender"), a
Netherlands company.

                                   BACKGROUND

            The Company and the Lender entered into a term loan agreement as of
November 17, 2005, which was amended and restated on August 31, 2006 and the
Company and the Lender now desire to further amend and restate the Term Loan
Agreement ("Term Loan Agreement") pursuant to the terms and conditions hereof.

            In the Term Loan Agreement prior to this Agreement, the Company
expressed the desire that the Lender extend financing to the Company on the
terms and conditions set forth in the Term Loan Agreement. The Lender expressed
its willingness and continues to express its willingness herein to provide such
financing on the terms and conditions set forth herein.

            NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the Company and the Lender agree as follows:

                                    ARTICLE I

                                  LOAN AND NOTE

            Section 1.01 Term Loan.

            Subject to all of the terms and conditions of this Agreement, on (a)
November 17, 2005, the Company obtained a loan from the Lender in an amount not
to exceed $8,500,000, representing the aggregate principal amount of the
Existing Notes, in which event the Existing Notes were deemed superseded by the
Convertible Subordinated Note and were deemed paid as a result of the issuance
of the Convertible Subordinated Note and are no longer of any force or effect
(b) the First-Tranche Term Loan Funding Date, the Company obtained a loan from
the Lender in an amount not to exceed $12,500,000 (the "First-Tranche
Commitment"); and (c) the Second-Tranche Term Loan Funding Date, the Company
obtained a loan from the Lender in an amount not to exceed the difference of (1)
$25,000,000 and (2) the sum of the aggregate amounts advanced under the Existing
Notes and the amount advanced under clauses (a) and (b) above (the
"Second-Tranche Commitment"; and the Second-Tranche Commitment, together with
the amount set forth in clause (a) above and the First-Tranche Commitment, the
"Commitment"); provided, however, that the aggregate principal amount of the
Commitment shall in no event exceed $25,000,000. Once advanced, amounts drawn
under the loans may not be readvanced, notwithstanding any payments hereunder.

            Such loans hereunder shall be evidenced by an Amended and Restated
Convertible Subordinated Note (the "Note"), payable to the order of the Lender
in the principal amount of the Commitment, dated as of the date that such loan

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is made to the Company, in the form of Exhibit 1.01 attached hereto. The Note
shall be executed by the Company and delivered to the Lender on the date hereof.

            Section 1.02 Use of Proceeds.

            The Company represents, warrants and agrees that the proceeds of the
loans made hereunder will be used solely for the following purposes: (i) funding
for the repayment to the Lender of the existing subordinated promissory notes
(1) in the principal amount of $5,000,000 dated March 30, 2005, (2) in the
principal amount of $1,500,000 dated June 23, 2005 and (3) in the principal
amount of $2,000,000 dated August 12, 2005, in each case plus all accrued
interest thereon (the notes described in this clause (i), the "Existing Notes");
(ii) funding for a portion of the acquisition cost of certain specified oil and
gas properties and related assets from Voyager Partners, Ltd.; (iii) funding for
a development drilling program, the acquisition of ownership interest in three
Pipeline Limited Partnerships in the Barnett Shale and other corporate needs of
the Company; and (iv) funding for the payment of out-of-pocket costs and
expenses (including the Lender's costs and expenses) in connection with the
negotiation, preparation, execution, delivery, and administration of this
Agreement, the Note and any other document required hereunder or thereunder. As
of September 14, 2006, the Company desired that the Lender advance the sum of
$4,500,000, representing the balance of its Commitment. The Lender advanced such
amount, in accordance with the terms of this Agreement, and in accordance with
the terms of the Amended and Restated Convertible Promissory Note.

            Section 1.03 Facility Fee.

            On November 17, 2005, the Company paid to the Lender a Facility Fee
in an amount equal to 1% of the aggregate principal amount of the Commitment.

                                   ARTICLE II

                            ADMINISTRATION OF CREDIT

            Section 2.01 Payments on the Loans.

            The interest rate on the loans will be as set forth in the Note.
Interest on the loans (including from and after the occurrence and during the
continuance of an Event of Default) will be computed in accordance with the
terms of the Note, and Principal and Interest will be due and payable on the
dates and in the amounts as set forth in the Note.

            Section 2.02 Borrowing Procedure.

            The Company will request the loans hereunder by written notice in
the form of Exhibit 2.02, or by telephonic notice (which notice shall be
confirmed in writing if the Lender so requests), which notice will be
irrevocable, to the Lender not later than three Business Days before the
proposed Borrowing Date. In the event of any inconsistency between the
telephonic notice and the written confirmation thereof, the telephonic notice
will control. Such request will be effective upon receipt by the Lender and will
specify (i) the amount of the requested loan (subject to the limitations set
forth in Section 1.01); and (ii) the proposed date of the making of the
applicable loan.

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            Section 2.03 Changes in Law Rendering Loan Unlawful.

            In the event that any Regulatory Change should make it (or, in the
good faith judgment of the Lender, should raise substantial questions as to
whether it is) unlawful for the Lender to make, maintain or fund the loans, (i)
the Lender will promptly notify the Company; and (ii) the obligation of the
Lender to make the loans shall, upon the effectiveness of such event, be
suspended for the duration of such unlawfulness.

            Section 2.04 Increased Costs.

            If any Regulatory Change,

            (a)   shall subject the Lender to any tax, duty or other charge with
                  respect to the loans hereunder, or shall change the basis of
                  taxation of payments to the Lender of the principal or
                  interest on the loans hereunder, or any other amounts due
                  under this Agreement in respect of the loans, or its
                  obligation to make the loans hereunder (except for changes in
                  the rate of tax on the overall net income of the Lender);

            (b)   shall impose, modify or make applicable any reserve
                  (including, without limitation, any reserve imposed by the
                  Board of Governors of the Federal Reserve System), special
                  deposit or similar requirement against assets of, deposits
                  with or for the account of, or credit extended by, the Lender;
                  or

            (c)   shall impose on the Lender any other condition affecting the
                  loans hereunder;

            and the result of any of the foregoing is to increase the cost to
the Lender of making or maintaining the loans hereunder, or to reduce the amount
of any sum received or receivable by the Lender under this Agreement and any
document or instrument related hereto; then upon notice from the Lender (which
notice shall be accompanied by a statement setting forth in reasonable detail
the basis of such increased cost or other effect on the loans), the Company
shall pay directly to the Lender, on demand, such additional amount or amounts
as will compensate the Bank for such increased cost or such reduction.

            Section 2.05 Limitation on Prepayment.

            Only after all of the Senior Obligations have been paid in full and
all commitments under the Senior Credit Facility cancelled, the Company may,
upon five Business Days' prior written notice to the Lender, prepay the
Commitment in whole or in part on any Interest Date, without premium or penalty.
All prepayments shall be accompanied by Interest accrued on the amount prepaid
through the date of prepayment. In the case of prepayment of less than all of
the outstanding Principal amount of the Note, such prepayment shall be in the
minimum amount of $500,000 or a multiple of $100,000 in excess thereof (or a
lesser amount if such amount represents the remaining outstanding principal
amount of the Note).

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            Section 2.06 Funding Losses.

            The Company hereby agrees that upon demand by the Lender (which
demand shall be accompanied by a statement setting forth in reasonable detail
the basis for the calculations of the amount being claimed) the Company will
indemnify the Lender against any loss or expense which the Lender may sustain or
incur (including, without limitation, any net loss or expense incurred by reason
of the liquidation or reemployment of deposits or other funds acquired by the
Lender to fund or maintain the loans and any loss of anticipated return), as
reasonably determined by the Lender, as a result of any payment or prepayment of
the loans on a date other an Interest Date whether or not required by any other
provisions of this Agreement.

            Section 2.07 Taxes.

            (a)   Except as provided in this Section 2.07, any and all payments
                  by the Company to or for the account of the Lender under this
                  Agreement or the Note shall be made free and clear of and
                  without deduction for any and all present or future taxes,
                  duties, levies, imposts, deductions, assessments, fees,
                  withholdings or similar charges, and all liabilities
                  (including additions to tax, penalties and interest) with
                  respect thereto, excluding, in the case of the Lender, taxes
                  imposed on or measured by its net income or overall gross
                  income, and franchise (and similar) taxes imposed on it in
                  lieu of net income taxes, by the jurisdiction (or any
                  political subdivision thereof) under the laws of which the
                  Lender is organized, is (or was, during the relevant period)
                  doing business, and all liabilities (including additions to
                  tax, penalties and interest) with respect thereto (all such
                  non-excluded taxes, duties, levies, imposts, deductions,
                  assessments, fees, withholdings or similar charges, and
                  liabilities, the "Taxes").

            (b)   If the Company shall be required by Applicable Law to deduct
                  any Taxes from or in respect of any sum payable under this
                  Agreement or the Note to the Lender, (i) except to the extent
                  provided in Sections 2.07(e) and (f), the sum payable shall be
                  increased as necessary so that after making all required
                  deductions (including deductions applicable to additional sums
                  payable under this Section 2.07) the Lender receives an amount
                  equal to the sum it would have received had no such deductions
                  been made, (ii) the Company shall make such deductions, (iii)
                  the Company shall pay the full amount deducted to the relevant
                  taxation authority or other authority in accordance with
                  Applicable Law and (iv) within 30 days after the date of such
                  payment, the Company shall furnish to the Lender the original
                  or a certified copy of a receipt evidencing payment thereof to
                  the extent such a receipt is issued therefor, or other written
                  proof of payment thereof that is reasonably satisfactory to
                  the Lender.

            (c)   The Company also agrees to pay any and all present or future
                  stamp, court or documentary taxes and any other excise,
                  property or intangible taxes or charges or similar levies
                  which arise from any payment made under this Agreement or the

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                  Note or from the execution, delivery, performance, enforcement
                  or registration of, or otherwise with respect to, this
                  Agreement or the Note (the "Other Taxes").

            (d)   The Company agrees to indemnify the Lender for (i) the full
                  amount of Taxes and Other Taxes (including any Taxes or Other
                  Taxes imposed or asserted by any jurisdiction on amounts
                  payable under this Section 2.07) paid by the Lender and (ii)
                  any liability (including additions to tax, penalties, interest
                  and expenses) arising therefrom or with respect thereto, in
                  each case whether or not such Taxes or Other Taxes were
                  correctly or legally imposed or asserted by the relevant
                  governmental authority; provided the Lender provides the
                  Company with a written statement thereof setting forth in
                  reasonable detail the basis and calculation of such amounts.
                  Payment under this Section 2.07(d) shall be made within 30
                  days after the date the Lender makes a demand therefor.

            (e)   The Company shall not be required pursuant to this Section
                  2.07 to pay any additional amount to, or to indemnify, the
                  Lender to the extent that the Lender becomes subject to Taxes
                  subsequent to the date hereof as a result of a change in the
                  place of organization of the Lender, except to the extent that
                  any such change is requested or required in writing by the
                  Company (and provided that nothing in this clause (e) shall be
                  construed as relieving the Company from any obligation to make
                  such payments or indemnification in the event of a change in
                  place of organization that precedes a change in Applicable Law
                  to the extent such Taxes result from a change in Applicable
                  Law).

            (f)   If the Lender is subject to United States withholding tax at a
                  rate in excess of zero percent on the date hereof, withholding
                  tax at such rate shall be considered excluded from Taxes
                  unless and until the Lender provides the appropriate forms
                  certifying that a lesser rate applies, whereupon withholding
                  tax at such lesser rate only shall be considered excluded from
                  Taxes for periods governed by such forms.

            (g)   If the Lender shall become aware that it is entitled to
                  receive a refund in respect of amounts paid by the Company
                  pursuant to this Section 2.07, which refund in the good faith
                  judgment of the Lender is allocable to such payment, it shall
                  promptly notify the Company of the availability of such refund
                  and shall, within 30 days after the receipt of a request by
                  the Company, apply for such refund; provided that in the sole
                  reasonable judgment of the Lender, applying for such refund
                  would not be disadvantageous to it.

            (h)   If the Lender receives a refund in respect of any Taxes or
                  Other Taxes as to which indemnification or additional amounts
                  have been paid to it by the Company pursuant to this Section
                  2.07, it shall promptly remit such refund (including any
                  interest included in such refund) to the Company (to the
                  extent that it determines that it can do so without prejudice
                  to the retention of the refund), net of all out-of-pocket

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                  expenses of the Lender; provided that the Company, upon the
                  request of the Lender, agrees promptly to return such refund
                  to such party in the event such party is required to repay
                  such refund to the relevant taxing authority. The Lender
                  shall, at the Company's request, provide the Company with a
                  copy of any notice of assessment or other evidence of the
                  requirement to repay such refund received from the relevant
                  taxing authority; provided that the Lender may delete any
                  information therein that the Lender deems confidential.

            (i)   Nothing in this Section 2.07 shall interfere with the right of
                  the Lender to arrange its tax affairs in whatever manner it
                  thinks fit nor oblige the Lender to claim any tax refund or to
                  disclose any information relating to its tax affairs or any
                  computations in respect thereof or require the Lender to do
                  anything that would prejudice its ability to benefit from any
                  other refunds, credits, reliefs, remissions or repayments to
                  which it may be entitled.

            Section 2.08 Conclusiveness of Statements; Survival of Provisions.

            Determinations and statements of the Lender pursuant to Sections
2.03, 2.04, 2.06 and 2.07 shall be rebuttably presumptive evidence of the
correctness of the determinations and statements and shall be conclusive absent
manifest error. The provisions of Sections 2.04, 2.06 and 2.07 shall survive the
obligation of the Lender to extend credit under this Agreement and the repayment
of the loans.

            Section 2.09 Set Off.

            Only after all of the Senior Obligations have been paid in full and
all commitments under the Senior Credit Facility cancelled, if any Event of
Default occurs hereunder, the Lender may offset and apply any indebtedness or
any other payment obligation at any time owing by the Lender to or for the
credit of the account of the Company against any and all of the obligations of
the Company now or hereafter existing under this Agreement or the Note, whether
or not the Lender shall have made any demand under this Agreement and although
such obligations may be unmatured. Promptly after any such offset, the Lender
shall give the Company notice thereof; provided, however, that the failure to
give such notice shall not affect the validity of such offset.

                                   ARTICLE III

                             CONDITIONS OF BORROWING

            Without limiting any of the other terms of this Agreement, the
Lender shall not be required to make the loans to the Company hereunder:

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            Section 3.01 Representations.

            Unless the representations and warranties contained in Article IV
hereof continue to be true and correct on the date of such loan, no Event of
Default hereunder shall have occurred and be continuing, and no condition or
event shall exist or have occurred which with the passage of time, the giving of
notice or both would constitute an Event of Default hereunder.

            Section 3.02 Senior Agreement.

            (a)   Unless the Company shall have delivered to the Lender an
                  executed copy of the Credit Agreement among the Company, D.B.
                  Zwirn Special Opportunities Fund, L.P., as administrative
                  agent (in such capacity, the "Administrative Agent"),
                  Petrobridge Investment Management LLC as sole lead arranger
                  (in such capacity, the "Sole Lead Arranger"), and the lenders
                  party thereto, substantially in the form of Exhibit 3.02 (as
                  amended, restated, supplemented or otherwise modified from
                  time to time as permitted by Section 7.02, the "Senior
                  Agreement") containing such terms and conditions as is
                  acceptable to the Lender; and all other documents constituting
                  the Senior Obligations shall have been duly executed and
                  delivered by the parties thereto. References to the "Senior
                  Agreement" in this Agreement and references to the Credit
                  Agreement in the Note shall be deemed to refer to the same
                  Agreement.

            (b)   Unless the Company shall have satisfied the applicable closing
                  conditions of Article VI of the Senior Agreement, including
                  (i) with respect to the Closing Date Commitment, Section 6.01
                  of the Senior Agreement; (ii) with respect to the
                  First-Tranche Commitment, Section 6.02 of the Senior
                  Agreement; and (iii) with respect to the Second-Tranche
                  Commitment, Section 6.03 of the Senior Agreement.

            Section 3.03 Note.

            Unless the Note shall have executed and delivered by the Company to
the Lender.

            Section 3.04 Opinions.

            (a)   Unless the Lender shall have received from the Company's
                  counsel a satisfactory opinion as to such matters relating to
                  the Company and its Subsidiaries and the validity and
                  enforceability of this Agreement and the Note, the loans to be
                  made hereunder and the other documents required by this
                  Article III as the Lender shall reasonably require. The
                  Company shall execute and/or deliver to the Lender or the
                  Lender's counsel such documents concerning its corporate
                  status and the authorization of such transactions as may be
                  requested.

            (b)   Unless the Lender shall have received from an investment
                  banking firm of nationally recognized standing and mutually
                  acceptable to the Company and the Lender a satisfactory
                  opinion as to such matters relating to the Company, the loan

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                  to be made hereunder (including but not limited to affirming
                  the fairness of such loans) and the other documents required
                  by this Article III as the Lender shall reasonably require.

            Section 3.05 Proceedings Satisfactory.

            Unless all proceedings taken in connection with the transactions
contemplated by this Agreement, and all instruments, authorizations and other
documents applicable thereto, shall be satisfactory in form and substance to the
Lender and its counsel.

            Section 3.06 Shareholder or Other Approval.

            Unless the Company shall have obtained all necessary approvals,
including approvals of its board of directors, its shareholders and the
Principal Market, if required.

            Section 3.07 Existing Notes.

            Unless the Company has paid in full all accrued and outstanding
interest under the Existing Notes.

            Section 3.08 Acquisition Documents.

            Solely with respect to the First-Tranche Commitment and the
Second-Tranche Commitment, unless the transactions contemplated by the Asset
Purchase And Sale Agreement between Voyager Partners, Ltd., a Texas limited
partnership, and the Company dated as of June 13, 2005 (as amended, restated,
supplemented, or otherwise modified from time to time, the "Purchase Agreement")
shall have been consummated in accordance therewith and with any bills of sale,
assignments, agreements, instruments and documents executed and delivered in
connection therewith (it being understood that such transactions shall include,
but not be limited to, the acquisition by the Company of at least $25,000,000 in
assets under the Purchase Agreement).

                                   ARTICLE IV

                         REPRESENTATIONS AND WARRANTIES

            In order to induce the Lender to make the loans as provided herein,
the Company represents and warrants to the Lender as follows:

            Section 4.01 Authority.

            The execution, delivery and performance of this Agreement and the
Note are within the corporate powers of the Company, have been duly authorized
by all necessary corporate action and do not and will not (i) require any
consent or approval of the stockholders of the Company; (ii) violate any
provision of the articles of incorporation or by-laws of the Company or of any
law, rule, regulation, order, writ, judgment, injunction, decree, determination
or award presently in effect having applicability to the Company or any

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Subsidiary; (iii) require the consent or approval of, or filing or registration
with, any governmental body, agency or authority; or (iv) result in a breach of
or constitute a default under, or result in the imposition of any Lien (except
Permitted Liens) upon any property of the Company or any Subsidiary pursuant to,
any indenture or other agreement or instrument under which the Company or any
Subsidiary is a party or by which it or its properties may be bound or affected.
This Agreement constitutes, and the Note and each of the other documents
required by Article III when executed and delivered hereunder will constitute,
the legal, valid and binding obligations of the Company enforceable in
accordance with its terms, except as such enforceability may be limited by
bankruptcy and similar laws affecting the enforceability of creditors' rights
generally.

            Section 4.02 Representations and Warranties Under the Senior
Agreement.

            The Company represents and warrants to the Lender all the matters
set forth in Article VII of the Senior Agreement to the same extent, in all
respects, as if set forth herein and constituting representation and warranties
from the Company to the Lender under which the Lender would occupy the same
position as the Administrative Agent under the Senior Agreement; and the Company
will notify the Lender promptly in writing of all consents, waivers, amendments
and modifications of or with regard to such representations and warranties.

                                    ARTICLE V

                              AFFIRMATIVE COVENANTS

            While any part of the credit granted to the Company is available and
while any part of the Principal of or Interest on the Note remains unpaid, and
unless waived in writing by the Lender, the Company shall:

            Section 5.01 Notice of Default.

            Promptly, and in any event within 10 days, after the Company has
knowledge thereof, deliver a statement of the chief financial officer of the
Company describing: (i) any event which, either of itself or with the lapse of
time or the giving of notice or both, would constitute a default hereunder or
under any other material agreement to which the Company is a party, together
with a statement of the actions which the Company proposes to take with respect
thereto; (ii) any pending or threatened litigation or administrative proceeding
which could reasonably be expected to have a material adverse effect on the
Company; and (iii) any fact or circumstance which is materially adverse to the
property, financial condition or business operations of the Company.

            Section 5.02 Covenants Under Senior Agreement.

            Comply with all of the terms, provisions and covenants of Article
VIII and IX of the Senior Agreement to the same extent, in all respects, as if
set forth herein and constituting agreements between the Company and the Lender
under which the Lender would occupy the same position as the Administrative
Agent under the Senior Agreement; and notify the Lender promptly in writing of
all consents, waivers, amendments and modifications of or with regard to the

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Senior Agreement or the Senior Obligations, which consents, waivers, amendments
and modifications shall be effective hereunder to the same extent as under the
Senior Agreement.

                                   ARTICLE VI

                                    DEFAULTS

            Section 6.01 Defaults.

            The occurrence of any one or more of the Events of Default (under
and as defined in the Note) shall constitute an "Event of Default" hereunder. As
to each Event of Default, the Lender shall have all the remedies for default
provided by the Note.

                                   ARTICLE VII

                                  MISCELLANEOUS

            Section 7.01 Definitions.

            Capitalized terms used and not otherwise defined herein shall have
the meanings assigned to such terms by the Senior Agreement.

            Section 7.02 Modifications of Senior Agreement.

            No consent, waiver, termination, amendment or other modification of
or with respect to the Senior Agreement shall affect the rights of the Lender
under this Agreement.

            Section 7.03 Other Definitions.

            As used herein:

            (a)   the term "Administrative Agent" has the meaning set forth in
                  Section 3.02(a).

            (b)   the term "Agreement" has the meaning set forth in the
                  preamble.

            (c)   the term "Applicable Law" means, as applied to any Person, all
                  provisions of constitutions, statutes, laws, rules,
                  regulations, and orders, decisions and decrees of any
                  governmental authority applicable to such Person, and all
                  orders and decrees of all courts and arbitrators in
                  proceedings or actions to which the Person in question is a
                  party or by which it is bound.

            (d)   the term "Commitment" has the meaning set forth in Section
                  1.01.

            (e)   the term "Company" has the meaning set forth in the preamble.

            (f)   the term "Event of Default" has the meaning set forth in
                  Section 6.01.

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            (g)   the term "Existing Notes" has the meaning set forth in Section
                  1.02.

            (h)   the term "First-Tranche Commitment" has the meaning set forth
                  in Section 1.01.

            (i)   the term "First-Tranche Term Loan Funding Date" has the
                  meaning set forth in the Senior Agreement.

            (j)   the term "Interest" has the meaning set forth in the Note.

            (k)   the term "Interest Date" has the meaning set forth in the
                  Note.

            (l)   the term "Lender" has the meaning set forth in the preamble.

            (m)   the term "Lien" has the meaning set forth in the Note.

            (n)   the term "Other Taxes" has the meaning set forth in Section
                  2.07(c).

            (o)   the term "Permitted Lien" has the meaning set forth in the
                  Note.

            (p)   the term "Principal" has the meaning set forth in the Note.

            (q)   the term "Purchase Agreement" has the meaning set forth in
                  Section 3.08.

            (r)   the term "Regulatory Change" means any change enacted or
                  issued after the date of this Agreement of any (or the
                  adoption after the date of this Agreement of any new) federal
                  or state law, regulation, interpretation, direction, policy or
                  guideline, or any court decision, which affects the treatment
                  of any extensions of credit of the Lender.

            (s)   the term "Second-Tranche Commitment" has the meaning set forth
                  in Section 1.01.

            (t)   the term "First-Tranche Term Loan Funding Date" has the
                  meaning set forth in the Senior Agreement.

            (u)   the term "Senior Agreement" has the meaning set forth in
                  Section 3.02(a).

            (v)   the term "Senior Obligations" has the meaning set forth in the
                  Note.

            (w)   the term "Sole Lead Arranger" has the meaning set forth in
                  Section 3.02(a).

            (x)   the term "Taxes" has the meaning set forth in Section 2.07(c).

            Section 7.04 Expenses; Indemnity.

            (a)   The Company shall pay, or reimburse, the Lender for (i) all
                  reasonable out-of-pocket costs and expenses (including,
                  without limitation, reasonable attorneys' fees and expenses)

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                  paid or incurred by the Lender in connection with the
                  negotiation, preparation, execution, delivery, and
                  administration of this Agreement, the Note and any other
                  document required hereunder or thereunder, including without
                  limitation any amendment, supplement, modification or waiver
                  of or to any of the foregoing; (ii) all reasonable
                  out-of-pocket costs and expenses (including, without
                  limitation, reasonable attorneys' fees and expenses) paid or
                  incurred by the Lender before and after judgment in enforcing,
                  protecting or preserving its rights under this Agreement, the
                  Note and any other document required hereunder or thereunder,
                  including without limitation the enforcement of rights
                  against, or realization on, any collateral or security
                  therefor; and (iii) any and all recording and filing fees, if
                  any, which may be payable or determined to be payable in
                  connection with the negotiation, preparation, execution,
                  delivery, administration or enforcement of this Agreement, the
                  Note or any other document required hereunder or thereunder or
                  any amendment, supplement, modification or waiver of or to any
                  of the foregoing, or consummation of any of the transactions
                  contemplated hereby or thereby; it being understood that to
                  the extent the foregoing costs, expenses and fees are incurred
                  (1) prior to the date hereof, such costs, expenses and fees
                  shall be paid by the Company on the date hereof and (2) on or
                  after the date hereof, such costs, expenses and fees shall be
                  paid by the Company through either of the following methods,
                  in the sole discretion of the Lender: (x) in immediately
                  available funds upon the demand of the Lender or (y) by
                  application of any payment by the Company due under the Note.

            (b)   The Company agrees to indemnify the Lender against any and all
                  losses, claims, damages, liabilities and expenses, (including,
                  without limitation, reasonable attorneys' fees and expenses)
                  incurred by the Lender arising out of, in any way connected
                  with, or as a result of (i) any acquisition or attempted
                  acquisition of stock or assets of another Person by the
                  Company or any Subsidiary; (ii) the use of any of the proceeds
                  of the loans made hereunder by the Company or any Subsidiary
                  for the making or furtherance of any such acquisition or
                  attempted acquisition; (iii) the construction or operation of
                  any facility owned or operated by the Company or any
                  Subsidiary, or resulting from any pollution or other
                  environmental condition on the site of, or caused by, any such
                  facility; (iv) the negotiation, preparation, execution,
                  delivery, administration, and enforcement of this Agreement,
                  the Note and any other document required hereunder or
                  thereunder, including without limitation any amendment,
                  supplement, modification or waiver of or to any of the
                  foregoing or the consummation or failure to consummate the
                  transactions contemplated hereby or thereby, or the
                  performance by the Company of its obligations hereunder or
                  thereunder; and (v) any claim, litigation, investigation or

                                     - 12 -
<PAGE>

                  proceedings related to any of the foregoing, whether or not
                  the Lender is a party thereto; provided, however, that such
                  indemnity shall not apply to any such losses, claims, damages,
                  liabilities or related expenses (or portion thereof) arising
                  from (A) any unexcused breach by the Lender of its obligations
                  under this Agreement; (B) any Commitment made by the Lender to
                  a Person other than the Company or any Subsidiary which would
                  be breached by the performance of the Lender's obligations
                  under this Agreement; or (C) the Lender's gross negligence or
                  willful misconduct.

            (c)   The foregoing agreements and indemnities shall remain
                  operative and in full force and effect regardless of
                  termination of this Agreement, the consummation of or failure
                  to consummate either the transactions contemplated by this
                  Agreement or any amendment, supplement, modification or
                  waiver, the repayment of the loans made hereunder, the
                  invalidity or unenforceability of any term or provision of
                  this Agreement or the Note or any other document required
                  hereunder or thereunder, any investigation made by or on
                  behalf of the Lender, the Company or any Subsidiary, or the
                  content or accuracy of any representation or warranty made
                  under this Agreement or any other document required hereunder.

            Section 7.05 Securities Act of 1933.

            The Lender represents that it is acquiring the Note without any
present intention of making a sale or other distribution of the Note, provided
the Lender reserves the right to sell the Note subject to limitations set forth
on the face of the Note.

            Section 7.06 Successors.

            The provisions of this Agreement shall inure to the benefit of any
holder of one or more of the Note, and shall inure to the benefit of and be
binding upon any successor to any of the parties hereto. No delay on the part of
the Lender or any holder of any of the Note in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise of any right, power or privilege hereunder preclude other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein specified are cumulative and are not exclusive of
any rights or remedies which the Lender or the holder of any of the Note would
otherwise have.

            Section 7.07 Survival.

            All agreements, representations and warranties made herein shall
survive the execution of this Agreement, the making of the loans hereunder and
the execution and delivery of the Note.

            Section 7.08 New York Law.

            This Agreement and the Note issued hereunder shall be governed by
and construed in accordance with the internal laws of the State of New York,
except to the extent superseded by federal law.

                                     - 13 -
<PAGE>

            Section 7.09 Counterparts.

            This Agreement may be signed in any number of counterparts with the
same effect as if the signatures thereto and hereto were upon the same
instrument.

            Section 7.10 Notices.

            All communications or notices required under this Agreement shall be
deemed to have been given on the date when delivered to the addressee (a) by an
overnight courier of recognized standing, all fees and charges, prepaid, and
addressed to the party in accordance with Exhibit 7.10 (unless and until any of
the parties advises the others in writing of a change in such address) or (b) by
facsimile transmission, provided that any communication or notice transmitted by
facsimile shall be immediately confirmed by a telephone call to the recipient at
the number specified on Exhibit 7.10 (unless and until any of the parties
advises the others in writing of a change in such facsimile number).

            Section 7.11 Assignments.

            The Company agrees that the Lender may, at its option, sell or
assign its interests in the Note to other Persons and, in connection with and
after each such sale or assignment, disclose to any such Person any financial
information the Lender may have concerning the Company and its Subsidiaries.

            Section 7.12 Entire Agreement; No Agency.

            This Agreement and the other documents referred to herein contain
the entire agreement between the Lender and the Company with respect to the
subject matter hereof, superseding all previous communications and negotiations,
and no representation, undertaking, promise or condition concerning the subject
matter hereof shall be binding upon the Lender unless clearly expressed in this
Agreement or in the other documents referred to herein. Nothing in this
Agreement or in the other documents referred to herein and no action taken
pursuant hereto shall cause the Company to be treated as an agent of the Lender,
or shall be deemed to constitute the Lender and the Company a partnership,
association, joint venture or other entity.

            Section 7.13 Consent to Jurisdiction.

            Each of the Lender and the Company hereby consents to the exclusive
jurisdiction of any state or federal court situated in New York County, New
York, and waives any objection based on lack of personal jurisdiction, improper
venue or forum non conveniens, with regard to any actions, claims, disputes or
proceedings relating to this Agreement, the Note or any other document delivered
hereunder or in connection herewith, or any transaction arising from or
connected to any of the foregoing. Each of the Lender and the Company waives
personal service of any and all process upon it, and consents to all such
service of process made by mail or by messenger directed to it at the address
specified below. Nothing herein shall affect any party's right to serve process
in any manner permitted by law, or limit any party's right to bring proceedings
against any other party or its property or assets in the competent courts of any
other jurisdiction or jurisdictions.

                                     - 14 -
<PAGE>

            Section 7.14 Waiver of Jury Trial.

            The Company and the Lender hereby jointly and severally waive any
and all right to trial by jury in any action or proceeding relating to this
Agreement, the Note or any other document delivered hereunder or in connection
herewith, or any transaction arising from or connected to any of the foregoing.
The Company and the Lender each represent that this waiver is knowingly,
willingly and voluntarily given.

            Section 7.15 Subordination and Other Provisions of the Note.

            Except to the extent otherwise set forth herein, this Agreement is
subject to the terms and conditions (including, but not limited to Section 9) of
the Note.

            Section 7.16 Amendments, Waivers, etc.

            No amendment, modification or waiver of, or consent with respect to,
any provision of this Agreement or the Note shall in any event be effective
unless the same shall be in writing and signed by the Company and the Lender (it
being understood that such amendment, modification, waiver or consent shall not
materially adversely affect the rights of the Senior Lenders, the Administrative
Agent, or the Collateral Agent under or in connection with this Agreement or the
Note).

            Section 7.17 Termination.

            This Agreement and the obligations hereunder shall terminate in
accordance with Section 1 of the Note.

            Section 7.18 Ratification.

            All matters occurring and actions taken pursuant to the Term Loan
Agreement executed as of November 17, 2005 and amended and restated on August
31, 2006, are hereby ratified and confirmed in all respects. Except as amended
by this Amended and Restated Term Loan Agreement, the terms and conditions of
the Term Loan Agreement dated November 17, 2005, as amended on August 31, 2006,
are hereby ratified and affirmed in all respects.

                            [signature page follows]

                                     - 15 -
<PAGE>

                                       DUNE ENERGY, INC.

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

                                       ITERA HOLDINGS BV

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

ACKNOWLEDGED AND AGREED TO BY:

D.B. ZWIRN SPECIAL OPPORTUNITIES FUND, L.P.,
as Administrative Agent under the Senior Agreement

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

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

                                       S-1

<PAGE>

                                  EXHIBIT 1.01

                                  FORM OF NOTE

                                 (See Attached.)

                              Exhibit 1.01 - Page 1
<PAGE>

                                  EXHIBIT 2.02

                                  LOAN REQUEST

                                                          _______________, _____

Itera Holdings BV
c/o Itera International Energy Corporation
9995 Gate Parkway North
Suite 400
Jacksonville, FL 32246
Attention: Chief Financial Officer

      Re:   Amended and Restated Term Loan Agreement dated as of September __,
            2006 (the "Agreement")

Gentlemen:

            The undersigned hereby applies to you for a loan under the Agreement
to be made on ____________, _____ in the principal amount of $_______________.

            The undersigned hereby certifies as follows:

            (a)   All of the representations and warranties set forth in Article
                  IV of the Agreement continue to be true on the date hereof.

            (b)   At the date hereof, no Default or Event of Default under the
                  Agreement has occurred and is continuing.

            (c)   There has been no material adverse change in the business
                  operations or financial condition of the undersigned and its
                  Subsidiaries, taken as a whole, since ________________, _____.

            Capitalized definitional terms used and not otherwise defined herein
shall have the meanings ascribed to them in the Agreement.

                                                Very truly yours,

                                                DUNE ENERGY, INC.

                                                Name:
                                                      --------------------------

                                                Title:
                                                      --------------------------

                              Exhibit 2.02 - Page 1
<PAGE>

                                  EXHIBIT 3.02

                                SENIOR AGREEMENT

                                 (See Attached.)

                              Exhibit 3.02 - Page 1
<PAGE>

                                  EXHIBIT 7.10

                                NOTICE ADDRESSES

If to the Company:
     Dune Energy, Inc.
     3050 Post Oak Boulevard
     Suite 695
     Houston, TX 77056
     Attention: Mr. Hugh Idstein, Chief Financial Officer
     Telephone: 713-888-0895
     Facsimile: 713-888-0899

If to the Lender:
     Itera Holdings BV
     c/o Itera International Energy Corporation
     9995 Gate Parkway North
     Suite 400
     Jacksonville, FL 32246
     Attention: Chief Financial Officer
     Telephone: 904-996-8800
     Facsimile: 904-996-8805

                              Exhibit 7.10 - Page 1AMENDED AND RESTATED CONVERTIBLE SUBORDINATED NOTE

NEITHER THE ISSUANCE AND SALE OF THE SECURITY REPRESENTED BY THIS NOTE NOR THE
SECURITIES INTO WHICH THIS NOTE IS CONVERTIBLE HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE
ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL, IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS
SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE
FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES. ANY
TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE,
INCLUDING SECTIONS 3(c)(iii) AND 13(a) HEREOF. THE PRINCIPAL AMOUNT REPRESENTED
BY THIS NOTE AND, ACCORDINGLY, THE SECURITIES ISSUABLE UPON CONVERSION HEREOF
MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT TO SECTION
3(c)(iii) OF THIS NOTE.

                          CONVERTIBLE SUBORDINATED NOTE

Issuance Date: November 17, 2005                     Principal: U.S. $25,000,000
Amended and Restated Date: September 26, 2006

      FOR VALUE RECEIVED, DUNE ENERGY, INC., a Delaware corporation (the
"Company"), hereby promises to pay to the order of ITERA HOLDINGS BV, a
Netherlands company, or registered assigns ("Holder") the amount set out above
as the Principal (as reduced pursuant to the terms hereof pursuant to
conversion, the "Principal"), as shall have been advanced from time to time from
the Holder to the Company (as may be set forth in Schedule A to this Note), when
due, whether upon the Maturity Date (as defined below), acceleration or
otherwise (in each case in accordance with the terms hereof) and to pay interest
("Interest") on any outstanding Principal at the rate set forth in Section 2
(the "Interest Rate"), from the date set out above as the Issuance Date (the
"Issuance Date") until the same becomes due and payable, whether upon an
Interest Date (as defined below), the Maturity Date, acceleration, conversion or
otherwise (in each case in accordance with the terms hereof). This Convertible
Subordinated Note (this "Note"), including all Convertible Subordinated Notes
issued in exchange, transfer or replacement hereof, and convertible subordinated
notes issued in connection with the payment of Interest as provided in Section 2
are, collectively, the "Notes". Reference to this "Note" and the "Notes" shall
be used interchangeably in this Note where applicable. Certain capitalized terms
are defined in Section 23.

      1. MATURITY. On the later of the Maturity Date or the date on which all of
the Senior Obligations have been paid in full and all commitments under the
Senior Credit Facility cancelled , the Holder shall surrender this Note to the

<PAGE>

Company and the Company shall pay to the Holder an amount in cash representing
all outstanding Principal, accrued and unpaid Interest and accrued and unpaid
Late Charges, if any. The Maturity Date shall be November 17, 2009 (the
"Maturity Date").

      2. INTEREST; INTEREST RATE.

            (a) The Interest Rate shall be as follows: (a) commencing on the
Issuance Date and continuing to (but not including) the first anniversary
thereof, the rate per annum equal to eleven and one-half percent (11-1/2%); (b)
with respect to the period commencing on the first anniversary of the Issuance
Date and continuing to (but not including) the second anniversary date thereof,
the rate per annum equal to twelve percent (12%); and (c) thereafter until the
Term Loan of the holder of the Senior Credit Facility is paid in full at the
rate per annum equal to twelve and one-half percent (12-1/2%). From the time the
Term Loan of the holder of the Senior Credit Facility is paid in full until the
Maturity Date, the rate per annum shall be equal to the Prime Rate plus five
percent (5%) (but not to exceed the maximum rate of twelve percent (12%) per
annum).

            (b) Interest on this Note shall commence accruing on the Issuance
Date and shall be computed on the basis of a 365-day year and actual days
elapsed and shall be payable in arrears on the first day of each Calendar
Quarter and on the Maturity Date during the period beginning on the Issuance
Date and ending on, and including, the Maturity Date (each, an "Interest Date").
So long as there is no Default or Event of Default as defined in the Senior
Credit Facility and provided the payment of Interest as provided herein would
not cause a Default or Event of Default as defined in the Senior Credit
Facility, and at such time as the Company is in compliance with Section 10.01
and Section 10.06 of the Credit Agreement, Interest shall be payable on each
Interest Date as follows: (1) fifty percent (50%) of the Interest shall be paid
in cash and (2) fifty percent (50%) shall be paid in convertible subordinated
notes each having the same terms and conditions of this Note except that the
principal amount of such convertible subordinated notes shall be the amount of
Interest which is the subject thereof and all payments of Interest in cash
thereas defined in shall be deferred until the Maturity Date. In the event there
is a Default or Event of Default as defined in the Senior Credit Facility or the
payment of Interest as provided herein would cause a Default or an Event of
Default as defined in the Senior Credit Facility, or until such time as the
Company is in compliance with Section 10.01 and Section 10.06 of the Credit
Agreement, Interest shall be payable on each Interest Date in convertible
subordinated notes, each having the same terms and conditions of this Note
except that the principal amount of such convertible subordinate notes shall be
the amount of Interest which is the subject thereof and all payments of cash
thereunder shall be deferred until the Maturity Date, except that payments of
Interest thereon may be made by additional convertible subordinated notes. Prior
to the payment of Interest on an Interest Date, Interest on this Note shall
accrue at the Interest Rate and be payable by way of inclusion of the Interest
in the Conversion Amount in accordance with Section 3(b)(i). From and after the

                                       2
<PAGE>

occurrence of an Event of Default, the Interest Rate shall be 14%. In the event
that such Event of Default is subsequently cured, the adjustment referred to in
the preceding sentence shall cease to be effective as of the date of such cure;
provided that the Interest as calculated at such increased rate during the
continuance of such Event of Default shall continue to apply to the extent
relating to the days after the occurrence of such Event of Default through and
including the date of cure of such Event of Default.

      3. CONVERSION OF NOTES. This Note and any Notes issued for the payment of
Interest shall be convertible into shares of the Company's common stock, par
value $0.001 per share (the "Common Stock"), on the terms and conditions set
forth in this Section 3.

            (a) Conversion Right. Subject to the provisions of Section 3(d), at
any time or times on or after the Issuance Date, the Holder shall be entitled to
convert any portion of the outstanding and unpaid Conversion Amount (as defined
below) in increments of at least $100,000 of Principal (or such lesser amount if
such amount represents the remaining Principal amount) into fully paid and
nonassessable shares of Common Stock in accordance with Section 3(c), at the
Conversion Rate (as defined below). The Company shall not issue any fraction of
a share of Common Stock upon any conversion. If the issuance would result in the
issuance of a fraction of a share of Common Stock, the Company shall round such
fraction of a share of Common Stock up to the nearest whole share. The Company
shall pay any and all taxes that may be payable with respect to the issuance and
delivery of Common Stock upon conversion of any Conversion Amount.

            (b) Conversion Rate. The number of shares of Common Stock issuable
upon conversion of any Conversion Amount pursuant to Section 3(a) shall be
determined by dividing (x) such Conversion Amount by (y) the Conversion Price
(as defined below) (the "Conversion Rate").

                  (i) "Conversion Amount" means the sum of (A) the portion of
            the Principal to be converted or otherwise with respect to which
            this determination is being made, (B) accrued and unpaid Interest
            with respect to such Principal and (C) accrued and unpaid Late
            Charges with respect to such Principal and Interest.

                  (ii) "Conversion Price" means, as of any Conversion Date (as
            defined below) or other date of determination, and subject to
            adjustment as provided herein, the lesser of (X) $2.65 or (Y) the
            price per share of any Equity Interests (including, but not limited
            to, Common Stock or equity convertible into Common Stock) sold by
            the Debtor in its next offering of such Equity Interests after the
            Amended and Restated Date. Notwithstanding the foregoing, in the
            event that Debtor bundles or attaches options or warrants in
            connection with the sale of Equity Interests, and such options or
            warrants are not the principal security sold by the Debtor in such
            offering, then the strike price of such options or warrants shall be
            ignored for purposes of this Section 3(b)(ii).

            (c) Mechanics of Conversion.

                                       3
<PAGE>

                  (i) Optional Conversion. To convert any Conversion Amount into
            shares of Common Stock on any date (a "Conversion Date"), the Holder
            shall (A) transmit by facsimile (or otherwise deliver), for receipt
            on or prior to 11:59 p.m., Eastern Standard Time, on such date, a
            copy of an executed notice of conversion in the form attached hereto
            as Exhibit I (the "Conversion Notice") to the Company and (B) if
            required by Section 3(c)(iii), surrender this Note to a common
            carrier for delivery to the Company as soon as practicable on or
            following such date (or an indemnification undertaking with respect
            to this Note in the case of its loss, theft or destruction). On or
            before the first Business Day following the date of receipt of a
            Conversion Notice, the Company shall transmit by facsimile a
            confirmation of receipt pursuant to the form attached hereto as
            Exhibit II (the "Acknowledgement") of such Conversion Notice to the
            Holder and the Company's transfer agent (the "Transfer Agent"). On
            or before the second Business Day following the date of receipt of a
            Conversion Notice (the "Share Delivery Date"), the Company shall (X)
            credit such aggregate number of shares of Common Stock to which the
            Holder shall be entitled to the Holder's or its designee's balance
            account with Depository Trust Company ("DTC") through its Deposit
            Withdrawal Agent Commission system or (Y) if the Transfer Agent is
            not participating in DTC Fast Automated Securities Transfer Program,
            issue and deliver to the address as specified in the Conversion
            Notice, a certificate, registered in the name of the Holder or its
            designee, for the number of shares of Common Stock to which the
            Holder shall be entitled. If the Note(s) is physically surrendered
            for conversion as required by Section 3(c)(iii) and the outstanding
            Principal of the Note(s) is greater than the Principal portion of
            the Conversion Amount being converted, then the Company shall as
            soon as practicable and in no event later than three Business Days
            after receipt of the Note(s) and at its own expense, issue and
            deliver to the holder a new Note (in accordance with Section 19(d))
            representing the outstanding Principal not converted. The Person or
            Persons entitled to receive the shares of Common Stock issuable upon
            a conversion of the Note(s) shall be treated for all purposes as the
            record holder or holders of such shares of Common Stock on the
            Conversion Date.

                  (ii) Company's Failure to Timely Convert. If the Company shall
            fail to issue a certificate to the Holder or credit the Holder's
            balance account with DTC for the number of shares of Common Stock to
            which the Holder is entitled upon conversion of any Conversion
            Amount on or prior to the date which is five Business Days after the
            Conversion Date (a "Conversion Failure"), then (A) the Company shall
            pay damages to the Holder for each date of such Conversion Failure
            in an amount equal to 1.0% of the product of (I) the sum of the
            number of shares of Common Stock not issued to the Holder on or
            prior to the Share Delivery Date and to which the Holder is
            entitled, and (II) the Closing Sale Price of the Common Stock on the
            Share Delivery Date and (B) the Holder, upon written notice to the
            Company, may void its Conversion Notice with respect to, and retain

                                       4
<PAGE>

            or have returned, as the case may be, any portion of the Note(s)
            that has not been converted pursuant to such Conversion Notice;
            provided that the voiding of a Conversion Notice shall not affect
            the Company's obligations to make any payments which have accrued
            prior to the date of such notice pursuant to this Section 3(c)(ii)
            or otherwise.

                  (iii) Book-Entry. Notwithstanding anything to the contrary set
            forth herein, upon conversion of any portion of the Note(s) in
            accordance with the terms hereof, the Holder shall not be required
            to physically surrender the Note(s) to the Company unless (A) the
            full Conversion Amount represented by the Note(s) is being converted
            or (B) the Holder has provided the Company with prior written notice
            (which notice may be included in a Conversion Notice) requesting
            physical surrender and reissue of the Note(s). The Holder and the
            Company shall maintain records showing the Principal, Interest and
            Late Charges converted and the dates of such conversions or shall
            use such other method, reasonably satisfactory to the Holder and the
            Company, so as not to require physical surrender of the Note(s) upon
            conversion.

      4. RIGHTS UPON EVENT OF DEFAULT.

            Event of Default. Each of the following events shall constitute an
"Event of Default":

            (a) in the event the Senior Obligations have been paid in full and
all commitments under the Senior Credit Facility cancelled,, then the suspension
from trading or failure of the Common Stock to be listed on the Principal Market
for a period of five consecutive Trading Days or for more than an aggregate of
seven Trading Days in any 365-day period;

            (b) the Company's (A) failure to cure a Conversion Failure by
delivery of the required number of shares of Common Stock within twenty (20)
Business Days after the applicable Conversion Date or (B) notice, written or
oral, to any holder of the Notes, including by way of public announcement or
through any of its agents, at any time, of its intention not to comply with a
request for conversion of any Notes into shares of Common Stock that is tendered
in accordance with the provisions of the Notes;

            (c) the Company's failure to pay to the Holder any amount of
Principal, Interest, Late Charges or other amounts when and as due under the
Notes, the Term Loan Agreement or any other agreement, document, certificate or
other instrument delivered in connection with the transactions contemplated
hereby and thereby to which the Holder is a party, except, in the case of a
failure to pay Interest and Late Charges when and as due, in which case only if
such failure continues for a period of at least five Business Days;

            (d) the Company or any of its Subsidiaries, pursuant to or within
the meaning of Title 11, U.S. Code, or any similar Federal or state law for the
relief of debtors (collectively, "Bankruptcy Law"), (A) commences a voluntary

                                       5
<PAGE>

case, (B) consents to the entry of an order for relief against it in an
involuntary case, (C) consents to the appointment of a receiver, trustee,
assignee, liquidator or similar official (a "Custodian"), (D) makes a general
assignment for the benefit of its creditors or (E) admits in writing that it is
generally unable to pay its debts as they become due;

            (e) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that (A) is for relief against the Company or any of
its Subsidiaries in an involuntary case, (B) appoints a Custodian of the Company
or any of its Subsidiaries or (C) orders the liquidation of the Company or any
of its Subsidiaries;

            (f) in the event the Senior Obligations have been paid in full and
all commitments under the Senior Credit Facility cancelled, then a final
judgment or judgments for the payment of money aggregating in excess of $500,000
are rendered against the Company or any of its Subsidiaries and which judgments
are not, within 60 days after the entry thereof, bonded, discharged or stayed
pending appeal, or are not discharged within 60 days after the expiration of
such stay; provided, however, that any judgment which is covered by insurance or
an indemnity from a credit worthy party shall not be included in calculating the
$500,000 amount set forth above so long as the Company provides the Holder a
written statement from such insurer or indemnity provider (which written
statement shall be reasonably satisfactory to the Holder) to the effect that
such judgment is covered by insurance or an indemnity and the Company will
receive the proceeds of such insurance or indemnity within 30 days of the
issuance of such judgment;

            (g) any representation or warranty made or deemed made by or on
behalf of the Company or in connection with this Note, the Notes related to the
payment of Interest, the Term Loan Agreement, or any other agreement, document,
certificate or other instrument delivered in connection with the transactions
contemplated thereby and hereby, shall prove to have been materially incorrect
when made or deemed made;

            (h) any event or condition occurs that results in the Senior
Obligations becoming due prior to its scheduled maturity or that enables or
permits the holder or holders of the Senior Obligations or any trustee or agent
on its or their behalf (with or without the giving of notice, the lapse of time
or both) to cause all of the Senior Obligations to become due, or to require the
Redemption (as defined in the Credit Agreement) of all of the Senior Obligations
or any offer to Redeem (as defined in the Credit Agreement) to be made in
respect of all of the Senior Obligations, prior to its scheduled maturity or
require the Company to make an offer in respect thereof; provided that to the
extent that any such event or condition is cured or waived under the Senior
Credit Facility, then such event or condition shall not constitute and Event of
Default under this Note (in the event the Senior Obligations have been paid in
full and all commitments under the Senior Credit Facility cancelled, the terms
and conditions set forth in the Credit Agreement shall continue to be applicable
and deemed incorporated herein by reference as if the Senior Obligations were
still outstanding); or

                                       6
<PAGE>

            (i) the Company shall fail to observe or perform any covenant,
condition or agreement contained in Sections 5 (so long as the Senior
Obligations have been paid in full and all commitments under the Senior Credit
Facility cancelled), 6, 7 and 8 of this Note or any other provision of this Note
not otherwise encompassed by Section 4 hereof, the Notes related to the payment
of Interest, the Term Loan Agreement, or any other agreement, document,
certificate or other instrument delivered in connection with the transactions
contemplated thereby and hereby to which the Holder is a party, except, in the
case of a breach of a covenant or other term or condition which is curable, only
if such breach continues for a period of at least twenty (20) consecutive
Business Days.

      5. RIGHTS UPON CHANGE OF CONTROL.

In the event the Senior Obligations have been paid in full and all commitments
under the Senior Credit Facility cancelled, then the following shall apply:

            (a) Change of Control. Each of the following events shall constitute
a "Change of Control":

                  (i) the consolidation, merger or other business combination
            (including, without limitation, a reorganization or
            recapitalization) of the Company with or into another Person (other
            than (A) a consolidation, merger or other business combination
            (including, without limitation, reorganization or recapitalization)
            in which holders of the Company's voting power immediately prior to
            the transaction continue after the transaction to hold, directly or
            indirectly, the voting power of the surviving entity or entities
            necessary to elect a majority of the members of the board of
            directors (or their equivalent if other than a corporation) of such
            entity or entities, or (B) pursuant to a merger effected solely for
            the purpose of changing the jurisdiction of incorporation of the
            Company);

                  (ii) the sale or transfer of all or substantially all of the
            Company's assets; or

                  (iii) a purchase, tender or exchange offer made to and
            accepted by the holders of more than the 50% of the outstanding
            shares of Common Stock.

No sooner than 15 days nor later than 10 days prior to the consummation of a
Change of Control, but not prior to the public announcement of such Change of
Control, the Company shall deliver written notice thereof via facsimile and
overnight courier to the Holder (a "Change of Control Notice").

            (b) Assumption. Prior to the consummation of any Change of Control,
the Company will secure from any Person purchasing the Company's assets or
Common Stock or any successor resulting from such Change of Control (in each
case, an "Acquiring Entity") a written agreement (in form and substance
satisfactory to the holders of Notes representing at least a majority of the
aggregate principal amount of the Notes then outstanding) to deliver to each

                                       7
<PAGE>

Holder of Notes in exchange for such Notes, a security of the Acquiring Entity
evidenced by a written instrument substantially similar in form and substance to
the Notes, including, without limitation, having a principal amount and interest
rate equal to the principal amounts and the interest rates of the Notes held by
such holder, and satisfactory to the holders of Notes representing at least a
majority of the principal amount of the Notes then outstanding. In the event
that an Acquiring Entity is directly or indirectly controlled by a company or
entity whose common stock or similar equity interest is listed, designated or
quoted on a securities exchange or trading market, the Holders of Notes
representing at least a majority of the aggregate principal amount of the Notes
then outstanding may elect to treat such Person as the Acquiring Entity for
purposes of this Section 5(b).

            (c) Mandatory Prepayment Option. At any time during the period
beginning after the Holder's receipt of a Change of Control Notice and ending on
the date of the consummation of such Change of Control (or, in the event a
Change of Control Notice is not delivered at least 10 days prior to a Change of
Control, at any time on or after the date which is 10 days prior to a Change of
Control and ending 10 days after the consummation of such Change of Control),
the Holder may require the Company to pay the outstanding Principal and all
accrued Interest and Late Charges in full.

      6. RIGHTS UPON OTHER CORPORATE EVENTS.

      Prior to the consummation of any recapitalization, reorganization,
consolidation, merger, spin-off or other business combination (other than a
Change of Control which shall be applicable in the event the Senior Obligations
have been paid in full and all commitments under the Senior Credit Facility
cancelled) pursuant to which holders of Common Stock are entitled to receive
securities or other assets with respect to or in exchange for Common Stock (a
"Corporate Event"), the Company shall make appropriate provision to insure that
the Holder will thereafter have the right to receive upon a conversion of this
Note, (i) in addition to the shares of Common Stock receivable upon such
conversion, such securities or other assets to which the Holder would have been
entitled with respect to such shares of Common Stock had such shares of Common
Stock been held by the Holder upon the consummation of such Corporate Event or
(ii) in lieu of the shares of Common Stock otherwise receivable upon such
conversion, such securities or other assets received by the holders of Common
Stock in connection with the consummation of such Corporate Event in such
amounts as the Holder would have been entitled to receive had this Note
initially been issued with conversion rights for the form of such consideration
(as opposed to shares of Common Stock) at a conversion rate for such
consideration commensurate with the Conversion Rate. Provision made pursuant to
the preceding sentence shall be in a form and substance satisfactory to the
Holders of Notes representing at least a majority of the aggregate principal
amount of the Notes then outstanding.

      7. NONCIRCUMVENTION. The Company hereby covenants and agrees that the
Company will not, by amendment of its Certificate of Incorporation or Bylaws or
through any reorganization, transfer of assets, consolidation, merger,

                                       8
<PAGE>

dissolution, issue or sale of securities, or any other voluntary action, avoid
or seek to avoid the observance or performance of any of the terms of this Note,
and will at all times in good faith carry out all of the provisions of this Note
and take all action as may be required to protect the rights of the Holder of
this Note.

      8. RESERVATION OF AUTHORIZED SHARES.

            (a) Reservation. The Company shall initially reserve out of its
authorized and unissued Common Stock a number of shares of Common Stock for each
of the Notes equal to 125% of the Conversion Rate with respect to the Conversion
Amount of each such Note as of the Issuance Date. Thereafter, the Company, so
long as any of the Notes are outstanding, shall take all action necessary to
reserve and keep available out of its authorized and unissued Common Stock,
solely for the purpose of effecting the conversion of the Notes, 110% of the
number of shares of Common Stock as shall from time to time be necessary to
effect the conversion of all of the Notes then outstanding; provided that at no
time shall the number of shares of Common Stock so reserved be less than the
number of shares required to be reserved by the previous sentence (without
regard to any limitations on conversions) (the "Required Reserve Amount"). The
initial number of shares of Common Stock reserved for conversions of the Notes
and each increase in the number of shares so reserved shall be allocated pro
rata among the Holders of the Notes based on the principal amount of the Notes
held by each Holder at the time of Issuance Date or increase in the number of
reserved shares, as the case may be (the "Authorized Share Allocation"). In the
event that a holder shall sell or otherwise transfer any of such holder's Notes,
each transferee shall be allocated a pro rata portion of such holder's
Authorized Share Allocation. Any shares of Common Stock reserved and allocated
to any Person which ceases to hold any Notes shall be allocated to the remaining
holders of Notes, pro rata based on the principal amount of the Notes then held
by such holders.

            (b) Insufficient Authorized Shares. If at any time while any of the
Notes remain outstanding the Company does not have a sufficient number of
authorized and unreserved shares of Common Stock to satisfy its obligation to
reserve for issuance upon conversion of the Notes at least a number of shares of
Common Stock equal to the Required Reserve Amount (an "Authorized Share
Failure"), then the Company shall as soon as practicable take all action
reasonably necessary to increase the Company's authorized shares of Common Stock
to an amount sufficient to allow the Company to reserve the Required Reserve
Amount for the Notes then outstanding. Without limiting the generality of the
foregoing sentence, as soon as practicable after the date of the occurrence of
an Authorized Share Failure, but in no event later than 60 days after the
occurrence of such Authorized Share Failure, the Company shall hold a meeting of
its stockholders for the approval of an increase in the number of authorized
shares of Common Stock. In connection with such meeting, the Company shall
provide each stockholder with a proxy statement and shall use its best efforts
to solicit its stockholders' approval of such increase in authorized shares of
Common Stock and to cause its board of directors to recommend to the
stockholders that they approve such proposal.

                                       9
<PAGE>

      9. SUBORDINATION TO SENIOR OBLIGATIONS.

            (a) The Company covenants and agrees, and the Holder likewise
covenants and agrees, that this Note shall be issued subject to the provisions
of this Section 9 and to the extent and in the manner hereinafter set forth in
this Section 9, the indebtedness represented by this Note and the payment of the
Principal and Interest and Late Charges thereon, fees, expenses or any other
amounts in respect of this Note and the payment of the other obligations of the
Company under the Term Loan Agreement ("Other Obligations") are hereby expressly
made subordinate and junior and subject in right of payment to the prior payment
in full or other satisfaction of the Senior Obligations of the Company now
outstanding.

            (b) No Payment if Default in Senior Credit Facility. No payment on
account of Interest (other than Interest payable under Section 2(b)(2) which may
be paid at all times) on this Note and no other payment payable with respect to
this Note (other than Principal which shall be governed by Section 9(d)) and no
payment with respect to the Other Obligations shall be made by the Company, if
at the time of such payment or immediately after giving effect thereto, a
default or event of default exists in respect of the Senior Credit Facility (a
"Senior Credit Facility Default"), unless and until such Senior Credit Facility
Default shall have been cured or waived or shall have ceased to exist. The
Company shall resume payments of Interest in respect of this Note (in addition
to Interest payable under Section 2(b)(2) which may be paid at all times),
including any past scheduled payments of Interest on this Note to which the
Holder would have been entitled but for the provisions of this Section 9 in the
case of a Senior Credit Facility Default, and any payment with respect to the
Other Obligations within five (5) Business Days of the date upon which such
Senior Credit Facility Default is cured or waived or ceases to exist (and if
payment is made within such time period, any Event of Default with respect to
such nonpayment shall be cured).

            (c) Payment upon Dissolution, Etc.

            In the event of any bankruptcy, insolvency, reorganization,
receivership, composition, assignment for benefit of creditors or other similar
proceeding initiated by or against the Company or any dissolution or winding up
or total or partial liquidation or reorganization of the Company (being
hereinafter referred to as a "Proceeding"), the Holder agrees that such Holder
shall, upon request of the Senior Lender, and at such Senior Lender's own
expense, take all reasonable actions (including but not limited to the execution
and filing of documents and the giving of testimony in any Proceeding, whether
or not such testimony could have been compelled by process) necessary to prove
the full amount of all its claims in any Proceeding, and the Holder shall not
waive any claim in any Proceeding without the written consent of such Senior
Lender. If the Holder does not file a proper proof of claim or proof of debt in
the form required in any Proceeding at least thirty (30) days before the
expiration of the time to file such claim, the Senior Lender is hereby
authorized to file an appropriate claim for and on behalf of the Holder.

                                       10
<PAGE>

The Holder shall retain the right to vote and otherwise act with respect to the
claims under the Note(s) (including, without limitation, the right to vote to
accept or reject any plan of partial or complete liquidation, reorganization,
arrangement, composition or extension); provided that the Holder shall not vote
with respect to any such plan or take any other action in any way so as to (i)
contest the validity of the Senior Obligations or any collateral therefor or
guaranties thereof, (ii) contest the relative rights and duties of any of the
lenders under the Senior Obligations established in any instruments or agreement
creating or evidencing the Senior Obligations with respect to any of such
collateral or guaranties, or (iii) contest the Holders' obligations and
agreements set forth in this Section 9.

Upon payment or distribution to creditors in a Proceeding of assets of the
Company of any kind or character, whether in cash, property or securities, all
principal and interest due upon the Senior Obligations shall first be paid in
full in cash before the Holder shall be entitled to receive or, if received, to
retain any payment on account of the Note(s), and upon any such Proceeding, any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, to which the Holder would be entitled
except for the provisions of this Section 9 shall be paid by the Company or by
any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person
making such payment or distribution, or by the Holder who shall have received
such payment or distribution, directly to the Senior Lender (or its
Administrative Agent) to the extent necessary to pay or otherwise satisfy the
Senior Obligations in full after giving effect to any concurrent payment or
distribution to or for the Senior Lender, before any payment or distribution is
made to the Holder or any holders of the Notes.

            (d) Payments on Notes.

            Until all of the Senior Obligations have been paid in full and all
commitments under the Senior Credit Facility cancelled, the Company shall not
make any payments of Principal on the Note(s). Subject to Section 9(c) and the
payments to be made pursuant to Section 2(b)(2) at all times, the Company may
make regularly scheduled payments of any interest on the Note(s) and payments of
any Other Obligations that are due and owing, if at the time of payment, and
immediately after giving effect thereto, (i) there exists no Senior Credit
Facility Default and (ii) the Company is not precluded from making payments
under Section 9(c).

            (e) Certain Rights.

            Nothing contained in this Section 9 or elsewhere in this Note is
intended to or shall impair, as among the Company, its creditors, including the
Senior Lender and the Holder, the right, which is absolute and unconditional, of
the Holder to convert or transfer this Note in accordance herewith.

            (f) Subrogation.

                                       11
<PAGE>

            Subject to payment in full in cash of the Senior Obligations, the
rights of the Holder shall be subrogated to the rights of the Senior Lender to
receive payments or distributions of the assets of the Company made on the
Senior Obligations until all Principal and Interest on the Note(s) shall be paid
in full in cash; and for purposes of such subrogation, no payments to the Senior
Lender of any cash, property or securities to which the Holder would be entitled
except for the subordination provisions of this Section 9 shall, as between the
Holder and the Company and/or its creditors other than the Senior Lender, be
deemed to be a payment on account of the Senior Obligations.

            (g) Rights of Holders Unimpaired.

            The provisions of this Section 9 are and are intended solely for the
purposes of defining the relative rights of the Holder and the Senior Lender and
nothing in this Section 9 shall impair, as between the Company and the Holder,
the obligation of the Company, which is unconditional and absolute, to pay to
the Holder the Principal thereof (and premium, if any) and Interest and Late
Charges thereon, in accordance with the terms of the Note(s) and the Other
Obligations in accordance with the terms of the Term Loan Agreement.

            (h) Holders of Senior Obligations.

            These provisions regarding subordination will constitute a
continuing offer to all Persons who, in reliance upon such provisions, become
holders of, or continue to hold, the Senior Obligations; such provisions are
made for the benefit of the Senior Lender, and such holders are hereby made
obligees under such provisions to the same extent as if they were named therein,
and they or any of them may proceed to enforce such subordination and no
amendment or modification of the provisions contained herein shall diminish the
rights of such holders unless such holders have agreed in writing thereto. The
holders of the Senior Obligations may, at any time and from time to time,
without the consent of or notice to the Holder, without incurring responsibility
to the Holder and without impairing or releasing the subordination provisions of
this Section 9, (i) subject to the limitations set forth herein, increase the
amount of, change the manner, terms or place of payment of, or renew or alter,
the Senior Obligations, or otherwise amend, modify, restate or supplement the
same, (ii) sell, exchange or release any collateral mortgaged, pledged or
otherwise securing the Senior Obligations, (iii) release any Person liable in
any manner for the Senior Obligations and (iv) exercise or refrain from
exercising any rights against the Company or any other Person. All rights of
each Senior Lender hereunder, and all agreements and obligations of each of the
Holder, and the Company hereunder, shall remain in full force and effect
irrespective of: (i) any lack of validity or enforceability of any Senior Credit
Document and (ii) any other circumstances that otherwise might constitute a
defense available to, or a discharge of, the Company in respect of the Senior
Obligations, or the Holder or the Company, to the extent applicable, in respect
of this Agreement.

                                       12
<PAGE>

            (i) Proceeds Held in Trust.

            In the event that notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities (including, without limitation, by way of setoff or
otherwise) prohibited by the provisions hereof shall be received by the Holder
before the Senior Obligations are paid in full in cash, such payment or
distribution shall be held in trust for the benefit of and shall be paid over or
delivered to the holders of the, as their respective interests may appear, as
calculated by the Company, for application to, or to be held as collateral for,
the payment of the Senior Obligations remaining unpaid to the extent necessary
to pay the Senior Obligations in full in cash after giving effect to any
concurrent payment or distribution to or for the holders of such Senior
Obligations.

            (j) Blockage of Remedies.

            The Holder will not commence or join with any creditor of the
Company in asserting or commencing any proceedings to collect or enforce its
rights hereunder or take any action to foreclose or realize upon the
indebtedness hereunder (i) for a period beginning on the date of such Event of
Default and ending on the date that is 180 days following the date that the
Senior Lender is notified of such Event of Default or (ii) for a period during
which the Senior Credit Facility has been accelerated or matured and remains
unpaid, and the remedies of the Senior Lender for a default under the Senior
Credit Facility are pursued by the Senior Lender during such period; provided,
however, that until all of the Senior Obligations shall have been paid in full
in cash, any payments, distributions or proceeds received by the Holder
resulting from the exercise of any action to collect or enforce any right or
remedy available to the Holder shall be subject to the terms of this Note;
provided further that the foregoing provisions of this Section 9(j) shall not
prevent or limit the Holder in any manner from pursuing any action or
proceeding, for specific performance in connection with the circumstances giving
rise to the Event of Default set forth in Section 4(b) hereof.

      10. VOTING RIGHTS. The Holder shall have no voting rights as the holder of
this Note, except as required by law, including but not limited to the Delaware
General Corporation Law, and as expressly provided in this Note.

      11. RANK; ADDITIONAL INDEBTEDNESS; LIENS.

            (a) Rank. All payments due under this Note (a) shall be subordinate
in right of payment to the prior payment of the Senior Obligations as set forth
in this Note and (b) shall be of equal rank to all other Indebtedness of the
Company and its Subsidiaries, other than the Senior Obligations. In the event
the Senior Obligations have been paid in full and all commitments under the
Senior Credit Facility cancelled, this Note and all Notes issued as payment of
Interest shall become Senior in rank to all other Indebtedness of the Company.

            (b) Incurrence of Senior Obligations. So long as this Note is
outstanding, the Company shall not, and the Company shall not permit any of its
Subsidiaries to, directly or indirectly, incur or guarantee, assume or suffer to

                                       13
<PAGE>

exist any Indebtedness which shall rank senior to the Notes other than the
Senior Obligations.

            (c) Existence of Liens. In the event the Senior Obligations have
been paid in full and all commitments under the Senior Credit Facility cancelled
and so long as this Note is outstanding, the Company will not, and will not
permit any Subsidiary to, create, incur, assume or permit to exist any Lien on
any of its Properties (now owned or hereafter acquired), except (a) Liens the
payment of any Indebtedness and the Secured Hedge Obligations and (b) Excepted
Liens. All terms used in this Paragraph shall be as defined in the Credit
Agreement, which terms are incorporated herein.

            (d) Restricted Payments. The Company shall not, and the Company
shall not permit any of its Subsidiaries to, directly or indirectly, redeem,
defease, repurchase, repay or make any payments in respect of, by the payment of
cash or cash equivalents (in whole or in part, whether by way of open market
purchases, tender offers, private transactions or otherwise), all or any portion
of any Indebtedness, other than the Senior Obligations, whether by way of
payment in respect of principal of (or premium, if any) or interest on, such
Indebtedness if at the time such payment is due or is otherwise made or, after
giving effect to such payment, an event constituting, or that with the passage
of time and without being cured would constitute, an Event of Default has
occurred and is continuing.

      12. TRANSFER. This Note may be offered, sold, assigned or transferred by
the Holder without the consent of the Company or the Senior Lender.

      13. REISSUANCE OF THIS NOTE.

            (a) Transfer. If this Note is to be transferred, the Holder shall
surrender this Note to the Company, whereupon the Company will forthwith issue
and deliver upon the order of the Holder a new Note (in accordance with Section
13(d)), registered as the Holder may request, representing the outstanding
Principal being transferred by the Holder and, if less then the entire
outstanding Principal is being transferred, a new Note (in accordance with
Section 13(d)) to the Holder representing the outstanding Principal not being
transferred. The Holder and any assignee, by acceptance of this Note,
acknowledge and agree that, by reason of the provisions of Section 3(c)(iii) and
this Section 13(a), following conversion of any portion of this Note, the
outstanding Principal represented by this Note may be less than the Principal
stated on the face of this Note.

            (b) Lost, Stolen or Mutilated Note. Upon receipt by the Company of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of this Note, and, in the case of loss, theft or destruction, of
any indemnification undertaking by the Holder to the Company in customary form
and, in the case of mutilation, upon surrender and cancellation of this Note,
the Company shall execute and deliver to the Holder a new Note (in accordance
with Section 13(d)) representing the outstanding Principal.

                                       14
<PAGE>

            (c) Note Exchangeable for Different Denominations. This Note is
exchangeable, upon the surrender hereof by the Holder at the principal office of
the Company, for a new Note or Notes (in accordance with Section 13(d) and in
principal amounts of at least $100,000) representing in the aggregate the
outstanding Principal of this Note, and each such new Note will represent such
portion of such outstanding Principal as is designated by the Holder at the time
of such surrender.

            (d) Issuance of New Notes. Whenever the Company is required to issue
a new Note pursuant to the terms of this Note, such new Note (i) shall be of
like tenor with this Note, (ii) shall represent, as indicated on the face of
such new Note, the Principal remaining outstanding (or in the case of a new Note
being issued pursuant to Section 13(a) or Section 13(c), the Principal
designated by the Holder which, when added to the principal represented by the
other new Notes issued in connection with such issuance, does not exceed the
Principal remaining outstanding under this Note immediately prior to such
issuance of new Notes), (iii) shall have an issuance date, as indicated on the
face of such new Note, which is the same as the Issuance Date of this Note, (iv)
shall have the same rights and conditions as this Note, and (v) shall represent
accrued Interest and Late Charges on the Principal and Interest of this Note,
from the Issuance Date.

      14. REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND
INJUNCTIVE RELIEF.

            (a) In the case of an Event of Default, and any time thereafter
during the continuance of such Event of Default, the Holder may, by notice to
the Company, declare this Note and the Notes related to the payment of Interest
to be due and payable in whole, and thereupon the Principal so declared to be
due and payable, together with accrued Interest thereon and all fees and other
obligations of the Company accrued hereunder and under the Notes related to the
payment of Interest and under the Term Loan Agreement, or any other agreement,
document, certificate or other instrument delivered in connection with the
transactions contemplated thereby and hereby to which the Holder is a party,
shall become due and payable immediately, without presentment, demand, protest,
notice of intent to accelerate, notice of acceleration or other notice of any
kind, all of which are hereby waived by the Company.

            (b) The remedies provided in this Note shall be cumulative and in
addition to all other remedies available under this Note, at law or in equity
(including a decree of specific performance and/or other injunctive relief), and
nothing herein shall limit the Holder's right to pursue actual and consequential
damages for any failure by the Company to comply with the terms of this Note.
Amounts set forth or provided for herein with respect to payments, conversion
and the like (and the computation thereof) shall be the amounts to be received
by the Holder and shall not, except as expressly provided herein, be subject to
any other obligation of the Company (or the performance thereof). The Company
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Holder and that the remedy at law for any such breach

                                       15
<PAGE>

may be inadequate. The Company therefore agrees that, in the event of any such
breach or threatened breach, the Holder shall be entitled, in addition to all
other available remedies, to an injunction restraining any breach, without the
necessity of showing economic loss and without any bond or other security being
required.

      15. PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Note
is placed in the hands of an attorney for collection or enforcement or is
collected or enforced through any legal proceeding or the Holder otherwise takes
action to collect amounts due under this Note or to enforce the provisions of
this Note or (b) there occurs any bankruptcy, reorganization, receivership of
the Company or other proceedings affecting Company creditors' rights and
involving a claim under this Note, then the Company shall pay the costs incurred
by the Holder for such collection, enforcement or action or in connection with
such bankruptcy, reorganization, receivership or other proceeding, including,
but not limited to, attorneys' fees and disbursements.

      16. CONSTRUCTION; HEADINGS. This Note shall be deemed to be jointly
drafted by the Company and the Holder and shall not be construed against any
person as the drafter hereof. The headings of this Note are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Note.

      17. FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of
the Holder in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other right, power or privilege.

      18. DISPUTE RESOLUTION. In the case of a dispute as to the arithmetic
calculation of the Conversion Rate, the Company shall submit the disputed
arithmetic calculations via facsimile within one Business Day of receipt of the
Conversion Notice or other event giving rise to such dispute, as the case may
be, to the Holder. If the Holder and the Company are unable to agree upon such
calculation within one Business Day of such disputed arithmetic calculation
being submitted to the Holder, then the Company shall, within one Business Day
submit via facsimile (a) the disputed arithmetic calculation of the Conversion
Rate to the Company's independent, outside accountant. The Company, at the
Company's expense, shall cause the accountant to perform the calculations and
notify the Company and the Holder of the results no later than five Business
Days from the time it receives the disputed calculations. Such accountant's
calculation shall be binding upon all parties absent demonstrable error.

      19. NOTICES; PAYMENTS.

            (a) Notices. Whenever notice is required to be given under this
Note, unless otherwise provided herein, such notice shall be given in accordance
with Section 7.10 of the Term Loan Agreement. The Company shall provide the
Holder with prompt written notice of all actions taken pursuant to this Note,
including in reasonable detail a description of such action and the reason
therefor. Without limiting the generality of the foregoing, the Company will
give written notice to the Holder (i) immediately upon any adjustment of the
Conversion Price, setting forth in reasonable detail, and certifying, the

                                       16
<PAGE>

calculation of such adjustment and (ii) at least twenty days prior to the date
on which the Company closes its books or takes a record (A) with respect to any
dividend or distribution upon the Common Stock, (B) with respect to any pro rata
subscription offer to holders of Common Stock or (C) for determining rights to
vote with respect to any Change of Control, dissolution or liquidation, provided
in each case that such information shall be made known to the public prior to or
in conjunction with such notice being provided to the Holder.

            (b) Payments. Whenever any payment of cash is to be made by the
Company to any Person pursuant to this Note, such payment shall be made in
lawful money of the United States of America by a check drawn on the account of
the Company and sent via overnight courier service to such Person at such
address as previously provided to the Company in writing; provided that the
Holder may elect to receive a payment of cash via wire transfer of immediately
available funds by providing the Company with prior written notice setting out
such request and the Holder's wire transfer instructions. Whenever any amount
expressed to be due by the terms of this Note is due on any day which is not a
Business Day, the same shall instead be due on the next succeeding day which is
a Business Day and, in the case of any Interest Date which is not the date on
which this Note is paid in full, the extension of the due date thereof shall not
be taken into account for purposes of determining the amount of Interest due on
such date. Any amount of Principal or Interest or other amounts due under the
Notes or the Term Loan Agreement which is not paid when due shall result in a
late charge being incurred and payable by the Company in an amount equal to
interest on such amount at the rate of 14% per annum from the date such amount
was due until the same is paid in full ("Late Charge").

      20. CANCELLATION. After all Principal, accrued Interest and other amounts
at any time owed on this Note and the Notes issued in connection with the
payment of Interest have been paid in full, the Notes shall automatically be
deemed canceled, shall be surrendered to the Company for cancellation and shall
not be reissued.

      21. WAIVER OF NOTICE. To the extent permitted by law, the Company hereby
waives demand, notice, protest and all other demands and notices in connection
with the delivery, acceptance, performance, default or enforcement of the Notes
and the Term Loan Agreement.

      22. GOVERNING LAW. The Notes shall be construed and enforced in accordance
with, and all questions concerning the construction, validity, interpretation
and performance of this Note shall be governed by, the internal laws of the
State of New York, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of New York or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than the
State of New York.

      23. CERTAIN DEFINITIONS. For purposes of this Note, the following terms
shall have the following meanings:

                                       17
<PAGE>

            (a) "Administrative Agent" means D.B. Zwirn Special Opportunities
Fund, L.P., as Administrative Agent for the Lenders as defined in the Credit
Agreement, together with its successors in such capacity.

            (b) "Affiliate" means, with respect to a specified Person, another
Person that directly, or indirectly through one or more intermediaries, Controls
or is Controlled by or is under common Control with the Person specified.

            (c) "Amended and Restated Date" means September __, 2006.

            (d) "Business Day" means any day other than Saturday, Sunday or
other day on which commercial banks in the City of New York are authorized or
required by law to remain closed.

            (e) "Calendar Quarter" means each of: the period beginning on and
including January 1 and ending on and including March 31; the period beginning
on and including April 1 and ending on and including June 30; the period
beginning on and including July 1 and ending on and including September 30; and
the period beginning on and including October 1 and ending on and including
December 31.

            (f) "Contingent Obligation" means, as to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the primary
effect thereof, is to provide assurance to the obligee of such liability that
such liability will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect thereto.

            (g) "Control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
Person, whether through the ability to exercise voting power, by contract or
otherwise. "Controlling" and "Controlled" have meanings correlative thereto.

            (h) "Credit Agreement" means the Amended and Restated Credit
Agreement dated as of September __, 2006, among Dune Energy, Inc., D.B. Zwirn
Special Opportunities Fund, L.P., as Administrative Agent, Petrobridge
Investment Management, LLC, Sole Lead Arranger for the lenders described
therein, and the Lenders party thereto, as amended, supplemented, increased,
restated, replaced or otherwise modified from time to time.

            (i) "Equity Interest" means shares of capital stock, partnership
interests, membership interests in a limited liability company, beneficial
interest in a trust or other equity ownership interest in a Person, and any
warrants, options or other rights entitling the holder thereof to purchase or
acquire any such Equity Interest.

                                       18
<PAGE>

            (j) "Hedging Obligations" means any Swap Agreement that is between
the Company or any Subsidiary and any Secured Swap Provider.

            (k) "Indebtedness" of any Person means, without duplication (A) all
indebtedness for borrowed money, (B) all obligations issued, undertaken or
assumed as the deferred purchase price of property or services (other than trade
payables entered into in the ordinary course of business), (C) all reimbursement
or payment obligations with respect to letters of credit, surety bonds and other
similar instruments, (D) all obligations evidenced by notes, bonds, debentures
or similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses, (E) all
indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with respect to
any property or assets acquired with the proceeds of such indebtedness (even
though the rights and remedies of the seller or bank under such agreement in the
event of default are limited to repossession or sale of such property), (F) all
monetary obligations under any leasing or similar arrangement which, in
connection with generally accepted accounting principles, consistently applied
for the periods covered thereby, is classified as a capital lease, (G)
off-balance sheet liabilities retained in connection with asset securitization
programs, synthetic leases, sale and leaseback transactions or other similar
obligations arising with respect to any other transaction which is the
functional equivalent of or takes the place of borrowing but which does not
constitute a liability on the consolidated balance sheet of such Person and its
subsidiaries, and (H) all indebtedness referred to in clauses (A) through (G)
above secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any mortgage, lien, pledge,
charge, security interest or other encumbrance upon or in any property or assets
(including accounts and contract rights) owned by any Person, even though the
Person which owns such assets or property has not assumed or become liable for
the payment of such indebtedness, and (I) all Contingent Obligations in respect
of indebtedness or obligations of others of the kinds referred to in clauses (A)
through (H) above.

            (l) "Issuance Date" means November 17, 2005.

            (m) "Person" means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization, any other entity and a government or any department or agency
thereof.

            (n) "Post-Petition Interest" means interest accruing at any
post-default rate and interest accruing after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, whether or not a claim for post-filing or post-petition interest is
allowed in such proceeding

            (o) "Prime Rate" means the rate per annum publicly announced by JP
Morgan Chase, N.A. (and in the absence of such a rate announced by JP Morgan
Chase, N.A., that announced by CitiBank, N.A.) at its principal office in New
York City as its "Prime Rate" for lending to substantial commercial borrowers in
the United States, which rate shall change when and as such announced "Prime
Rate" shall change.

                                       19
<PAGE>

            (p) "Principal Market" means the American Stock Exchange.

            (q) "Secured Swap Provider" means any Person that (a) is a Senior
Lender or any Affiliate of any Senior Lender, (b) becomes a party to a Swap
Agreement with the Company or any of its Subsidiaries while such Person (or such
Person's Affiliate) is a Senior Lender and (c) continues to be a Senior Lender
while such Swap Agreement is in effect (e.g., except as provided below, a Senior
Lender or its Affiliate, as applicable, ceases to be a Secured Swap Provider if
such Senior Lender or Affiliate, as applicable, ceases to be a Senior Lender
under the Senior Credit Facility), provided, however, that the requirement in
this part (c) shall not apply to any Senior Lender (or Affiliate of a Senior
Lender) that otherwise satisfies the requirements set forth in parts (a) and (b)
of this definition, and such Senior Lender or Affiliate shall continue to be a
Secured Swap Provider, if such Senior Lender or Affiliate, as applicable, is no
longer a Senior Lender as a result of the purchase by Holder or its successors
or assigns of the Indebtedness created under the Senior Credit Facility pursuant
to that certain letter agreement, dated as of the date hereof, among Holder, the
Administrative Agent and the Collateral Agent, as the same may be amended,
restated or replaced from time to time.

            (r) "Senior Credit Documents" any document evidencing, securing or
governing the Senior Obligations.

            (s) "Senior Credit Facility" means (i) the Credit Agreement, and
(ii) any other credit agreement, loan agreement, note agreement, promissory
note, indenture or other agreement or instrument evidencing or governing the
terms of any indebtedness or other financial accommodation that extends,
replaces, increases, refinances or refunds in whole or in part the indebtedness
and other obligations outstanding under the Credit Agreement or any other
agreement, note, indenture or instrument referred to in this clause (ii) unless
(A) such agreement, note, indenture or instrument expressly provides that it is
not intended to be and is not a Senior Credit Facility hereunder or (B) such
agreement, note, indenture or instrument or any of the indebtedness or
obligations evidenced thereby or created thereunder constitutes indebtedness
evidenced by this Note. Any reference to the Senior Credit Facility hereunder
shall be deemed a reference to any Senior Credit Facility then extant.

            (t) "Senior Obligations" means (i) all principal of and interest
(including without limitation any Post-Petition Interest) and premium (if any)
on all loans made pursuant to each Senior Credit Facility, (ii) all
reimbursement obligations (if any) and interest thereon (including without
limitation any Post-Petition Interest) with respect to any letter of credit or
similar instruments issued pursuant to the Senior Credit Facility, (iii) all
Hedging Obligations of the Company or any Subsidiary, (iv) all fees, expenses,
costs and other amounts payable from time to time pursuant to the Senior Credit
Facility including, but not limited to, fees, reimbursement obligations,
guaranty obligations, penalties, indemnities, legal and other fees, charges and
expenses, and amounts advanced by and expenses incurred in order to preserve any
collateral or security interest, whether due after acceleration or otherwise.

                                       20
<PAGE>

            (u) "Senior Lender" means the lenders and holders described in the
Senior Credit Facility, together with their successors and assigns in such
capacity.

            (v) "Subsidiary" means (a) any Person of which at least a majority
of the outstanding Common Stock or other Equity Interest having by the terms
thereof ordinary voting power to elect a majority of the board of directors,
manager or other governing body of such Person (irrespective of whether or not
at the time the Common Stock or other Equity Interest of any other class or
classes of such Person shall have or might have voting power by reason of the
happening of any contingency) is at the time directly or indirectly owned or
controlled by the Company or one or more of its Subsidiaries or by the Company
and one or more of its Subsidiaries and (b) any partnership of which the Company
or any of its Subsidiaries is a general partner. Unless otherwise indicated
herein, each reference to the term "Subsidiary' shall mean a subsidiary of the
Company.

            (w) "Swap Agreement" means any agreement with respect to any swap,
forward, future or derivative transaction or option or similar agreement,
whether exchange traded, "over-the-counter" or otherwise, involving, or settled
by reference to, one or more rates, currencies, commodities, equity or debt
instruments or securities, or economic, financial or pricing indices or measures
of economic, financial or pricing risk or value or any similar transaction or
any combination of these transactions; provided that no phantom stock or similar
plan providing for payments only on account of services provided by current or
former directors, officers, employees or consultants of the Company or the
Subsidiaries shall be a Swap Agreement.

            (x) "Term Loan Agreement" means the Amended and Restated Term Loan
Agreement dated as of September __, 2006, between Dune Energy, Inc., and the
Holder.

            (y) "Trading Day" means any day on which the Common Stock is traded
on the Principal Market, or, if the Principal Market is not the principal
trading market for the Common Stock, then on the principal securities exchange
or securities market on which the Common Stock is then traded; provided that
"Trading Day" shall not include any day on which the Common Stock is scheduled
to trade on such exchange or market for less than 4.5 hours or any day that the
Common Stock is suspended from trading during the final hour of trading on such
exchange or market (or if such exchange or market does not designate in advance
the closing time of trading on such exchange or market, then during the hour
ending at 4:00 p.m., New York Time).

      24. RATIFICATION. The Company hereby ratifies all acts and occurrences
related to the convertible subordinated note executed by the Company as of
November 17, 2005 and as amended and restated by this Amended and Restated

                                       21
<PAGE>

Convertible Subordinated Note. All references in this Note or in the exhibits
hereto, to the Convertible Subordinated Note shall also mean to this Amended and
Restated Convertible Subordinated Note.

                            [Signature Page Follows]

                                       22
<PAGE>

      IN WITNESS WHEREOF, the Company has caused this Note to be duly executed
on the Amended and Restated Date set out above.

                                        DUNE ENERGY, INC.

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

                                       23
<PAGE>

                                                                       EXHIBIT I

                                DUNE ENERGY, INC.
                                CONVERSION NOTICE

Reference is made to the Convertible Subordinated Note (the "Note") issued to
the undersigned by Dune Energy, Inc. (the "Company"). In accordance with and
pursuant to the Note, the undersigned hereby elects to convert the Conversion
Amount (as defined in the Note) of the Note indicated below into shares of
Common Stock, par value $0.001 per share (the "Common Stock"), of the Company as
of the date specified below.

      Date of Conversion:_______________________________________________________

      Aggregate Conversion Amount to be converted:______________________________

Please confirm the following information:

      Conversion Price:_________________________________________________________

      Number of shares of Common Stock to be issued:____________________________

Please issue the Common Stock into which the Note is being converted in the
following name and to the following address:

      Issue to:_________________________________________________________________

               _________________________________________________________________

               _________________________________________________________________

      Facsimile Number:_________________________________________________________

      Authorization:____________________________________________________________

            By:_________________________________________________________________

                                                 Title:_________________________

Dated:__________________________________________________________________________

      Account Number:___________________________________________________________
       (if electronic book entry transfer)

      Transaction Code Number:__________________________________________________
       (if electronic book entry transfer)

<PAGE>

                                                                      EXHIBIT II

                                 ACKNOWLEDGMENT

      The Company hereby acknowledges this Conversion Notice and hereby directs
Transfer Agent to issue the above indicated number of shares of Common Stock in
accordance with the Conversion Notice dated ____________________ from the
Company.

                                            DUNE ENERGY, INC.

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

<PAGE>

                                   SCHEDULE A

                         SCHEDULE OF PRINCIPAL ADVANCES

                      Advance Date            Principal Amount
                      ------------            ----------------

                      March 30, 2005            $ 5,000,000
                      June 23, 2005             $ 1,500,000
                      August 12, 2005           $ 2,000,000
                      December 13, 2005         $12,000,000
                      September 14, 2006        $ 4,500,000
                      ______________            ____________
                      ______________            ____________

The Holder may (but shall not be obligated to) fill in the blanks as Principal
is advanced and the Company shall be bound by the accurateness thereof.

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