Document:

This Automatic Reinsurance Agreement
(hereinafter referred to as the "Agreement")

is made between

First Life America Corporation,
a Kansas insurance company

and

Wilton Reassurance Company
a Minnesota insurance company

Effective January 1, 2005

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                                                              Table of Contents

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ARTICLE 1 -                PREAMBLE
                           1.1      Parties to the Agreement

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ARTICLE 2 -                AUTOMATIC REINSURANCE
                           2.1      General Conditions
                           2.2      Retained Amounts

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ARTICLE 3 -                COMMENCEMENT OF LIABILITY
                           3.1      Commencement of Liability
                           3.2      Conditional Receipt or Temporary Insurance

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ARTICLE 4 -                REINSURED RISK AMOUNT
                           4.1      Life

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ARTICLE 5 -                PREMIUM ACCOUNTING
                           5.1      Policy Premiums
                           5.2      Payment of Premiums
                           5.3      Delayed Payment
                           5.4      Failure to Pay Premiums
                           5.5      Premium Rate Guarantee

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ARTICLE 6 -                REDUCTIONS, TERMINATIONS
                           AND CHANGES
                           6.1      Reductions and Terminations
                           6.2      Increases
                           6.3      Risk Classification Changes
                           6.4      Reinstatement
                           6.5      Nonforfeiture Benefits
                           6.6      Cash Surrenders
                           6.7      Policy Loans

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ARTICLE 7 -                CLAIMS
                           7.1      General
                           7.2      Claims Management
                           7.3      Notice
                           7.4      Proofs
                           7.5      Claims Cooperation and Contestable Claims
                           7.6      Form of Payment; Contractual Interest
                           7.7      Claim Expenses
                           7.8      Misrepresentation or Suicide
                           7.9      Misstatement of Age or Sex
                           7.10     Extra-Contractual Damages

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ARTICLE 8-                 RESERVES
                           8.1      Credit for Reinsurance
                           8.2      Reserve Methodology and Reporting

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ARTICLE 9 -                RETENTION LIMIT CHANGES

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ARTICLE 10 -               RECAPTURE
                           10.1     No Recapture Right

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ARTICLE 11 -               GENERAL PROVISIONS
                           11.1     Currency
                           11.2     Premium Tax
                           11.3     Dividends
                           11.4     Minimum Cession
                           11.5     Inspection of Records
                           11.6     Compliance
                           11.7     Certain Representations
                           11.8     Business Continuity
                           11.9     Underwriting Continuity
                           11.10    Interest Rate
                           11.11    Utmost Good Faith
                           11.12    Assignment and Transfer
                           11.13    No Waiver
                           11.14    Survival
                           11.15    Governing Law
                           11.16    Entire Agreement
                           11.17    Severability

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ARTICLE 12 -               DAC TAX

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ARTICLE 13 -               OFFSET

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ARTICLE 14 -               INSOLVENCY
                           14.1     Definition
                           14.2     Insolvency of the Ceding Company
                           14.3     Insolvency of the Reinsurer

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ARTICLE 15 -               ERRORS AND OMISSIONS

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ARTICLE 16 -               DISPUTE RESOLUTION

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ARTICLE 17 -               ARBITRATION

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ARTICLE 18 -               CONFIDENTIALITY
                           18.1     General
                           18.2     Non-Public Personal Information

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ARTICLE 19 -               DURATION OF AGREEMENT

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ARTICLE 20 -               EXECUTION

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                                                                        Exhibits

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A -           RETENTION LIMITS

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B -           PLANS COVERED AND BINDING LIMITS

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C -           POLICY PREMIUMS, EXPENSES AND RATES

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D -           SELF - ADMINISTERED REPORTING

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                                                                       ARTICLE 1
                                                                        Preamble

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PARTIES TO THE AGREEMENT                                                     1.1

This is a  coinsurance  agreement for indemnity  reinsurance  (the  "Agreement")
solely between First Life America  Corporation,  a Kansas life insurance company
(the "Ceding Company"),  and Wilton Reassurance  Company, a Minnesota  insurance
company (the "Reinsurer"), collectively referred to as the "parties."

The  acceptance  of risks  under this  Agreement  will  create no right or legal
relationship between the Reinsurer and the insured,  owner or beneficiary of any
insurance policy or other contract of the Ceding Company.

The  Agreement  will be binding upon the Ceding  Company and the  Reinsurer  and
their respective successors and assigns.

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                                                                       Article 2
                                                           Automatic Reinsurance

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GENERAL CONDITIONS                                                           2.1

On and after the  effective  date of this  Agreement,  the Ceding  Company  will
automatically  cede to the  Reinsurer a portion of the life  insurance  policies
listed in Exhibit B.

The  Reinsurer  will  automatically  accept  its  share of the  above-referenced
policies up to the limits shown in Exhibits B, provided that:

a.   the Ceding  Company  keeps its full  retention as specified in Exhibit A or
     otherwise  holds  its full  retention  on a life  under  previously  issued
     inforce policies. If the Ceding Company is already on risk for its required
     retention   under   previously   issued   policies,   the  Reinsurer   will
     automatically accept reinsurance for newly-issued policies according to the
     Automatic  Binding  Limits set out in Exhibit B provided the Ceding Company
     has applied the same underwriting  standards,  guidelines and procedures to
     such  policies  it would have  applied if the Ceding  Company  were to have
     retained all risks under such policies  without regard to this Agreement or
     other reinsurance;

b.   in rating,  pricing and issuing the policies  ceded  hereunder,  the Ceding
     Company  applies  without  exception or waiver the  published  underwriting
     standards,  rules,  manuals,  guidelines  and  procedures  disclosed to the
     Reinsurer  in  connection  with  the  placement  of this  reinsurance  (the
     "Business  Guidelines").  Unless the  Reinsurer  consents in  writing,  (i)
     underwriting and pricing with respect to the policies  reinsured under this
     Agreement  will be  accomplished  strictly in accordance  with the Business
     Guidelines without exception, modification or waiver and (ii) failure to so
     apply the  Business  Guidelines  will result in exclusion of risks from the
     scope of the reinsurance provided hereunder;

c.   the total of the new  ultimate  amount of  reinsurance  required  including
     contractual increases,  and the amount already reinsured on that life under
     this  Agreement  and all other  agreements  between the  Reinsurer  and the
     Ceding  Company,  does not exceed the Automatic  Binding  Limits set out in
     Exhibit B;

d.   policies  issued  comply  with the maximum  issue age limits and  residency
     requirements, if any, stated in Exhibits B;

e.   the  application is on a life that has not been submitted on a facultative,
     facultative obligatory or initial inquiry basis to any reinsurer within the
     last 5 years,  unless the reason for any prior  facultative  submission was
     solely for capacity that may now be  accommodated  within the terms of this
     Agreement;

f.   each  policy  provides  for the  maximum  normal  periods  of  suicide  and
     contestability protection permitted by applicable law;

g.   business  assumed  by  the  Ceding  Company  acting  in the  capacity  of a
     retrocessionaire,  with the exception of business  assumed from an affilate
     of the  originating  company  (at either the time of issue of the policy or
     subsequent retrocession of the policy), is not covered;

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h.   plans  with  expiration  dates  of 5 years  or less  are not  eligible  for
     automatic coverage under this reinsurance;

i.   in addition to other  conditions  and  limitations of coverage set forth in
     this  Agreement,  this  Agreement  does  not  cover  the  following  unless
     specified elsewhere: (i) noncontractual conversions,  rollovers,  exchanges
     or group  conversions;  (ii)  policies  issued under any program where full
     current evidence of insurability consistent with the amount of insurance is
     not obtained, or where conventional  selection criteria consistent with the
     Business  Guidelines are not applied in underwriting  the risk;  including,
     without limitations, group life, worksite marketing COLI/BOLI/TOLI and FOLI
     coverages;  and (iii) any conversion of a previously issued policy that had
     been reinsured with another reinsurer.

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RETAINED AMOUNTS                                                             2.2

The Ceding  Company  may not  further  reinsure  amounts it has  retained on the
business covered under this Agreement,  on any basis,  without the prior written
consent of the Reinsurer.

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                                                                       ARTICLE 3
                                                       Commencement of Liability

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COMMENCEMENT OF LIABILITY                                                    3.1

The Reinsurer's  liability for any policy accepted in accordance with the terms,
conditions  and  limitations of this Agreement will commence at the same time as
the Ceding Company's contractual liability therefor.

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CONDITIONAL RECEIPT OR TEMPORARY INSURANCE                                   3.2

Reinsurance   coverage  under  a  conditional  receipt  or  temporary  insurance
provision is limited to the Reinsurer's  share of amounts within the Conditional
Receipt or Temporary Insurance Limits specified in Exhibit B. The Reinsurer will
accept  liability  provided  that the Ceding  Company  has  followed  its normal
cash-with-application procedures for such coverage.

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                                                                       ARTICLE 4
                                                           Reinsured Risk Amount

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LIFE                                                                         4.1

The reinsured  net amount at risk is equal to the policy face amount  multiplied
by the  Reinsurer's  share as defined in  Exhibit  B. The  Ceding  Company  will
maintain a quota share retention on each policy, up to the maximum limits of its
retention per life for the insured's issue age, as shown in Exhibit A.

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                                                                       ARTICLE 5
                                                              Premium Accounting

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PREMIUMS                                                                     5.1

The policy premium rates, commissions,  fees and expenses for business reinsured
under this  Agreement are shown in Exhibit C. The Ceding Company will notify the
Reinsurer  of any change in the  premiums,  fees or charges  for the  underlying
policies due to developing experience or otherwise.

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PAYMENT OF PREMIUMS                                                          5.2

The Ceding  Company shall pay to the Reinsurer the  Reinsurer's  share of policy
premiums.  Such reinsurance  premium amounts are payable monthly as collected by
the Ceding Company.  The Ceding Company will calculate the amount of reinsurance
premium due and, within 15 days after the end of each calendar month,  will send
the  Reinsurer  a  statement  containing  the  information  shown in  Exhibit C,
including,  without limitation,  the amount of reinsurance premiums due for that
period,  applicable fees,  commissions,  expenses and taxes. If an amount is due
the  Reinsurer  for such  period,  the Ceding  Company  will  remit that  amount
together  with the  statement.  If an amount is due the Ceding  Company for such
period,  the  Reinsurer  will remit such amount within 45 days of receipt of the
statement.

All payments due under this Agreement shall be made in U.S. dollars.

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DELAYED PAYMENT                                                              5.3

Premium  balances that remain unpaid for more than 60 days after the  Remittance
Date will accrue  interest.  The Remittance Date is defined as 15 days after the
end of the reporting period.

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FAILURE TO PAY PREMIUMS                                                      5.4

Performance of the Ceding Company's obligations to pay reinsurance premiums is a
condition precedent to the liability of the Reinsurer for reinsurance covered by
this Agreement.  In the event that  reinsurance  premiums are not paid within 60
days of the Remittance  Date, the Reinsurer will have the right to terminate the
reinsurance under all policies having  reinsurance  premiums in arrears.  If the
Reinsurer  elects to exercise its right of termination,  it will give the Ceding
Company 15 days' written  notice of its  intention.  Such notice will be sent by
certified mail.

If all  reinsurance  premiums in arrears,  including  any that become in arrears
during the 15 day notice  period,  are not paid  before  the  expiration  of the
notice  period,  the  Reinsurer  will be relieved of all  liability  under those
policies as of the last date to which premiums have been paid for each, less any
cash values or  recapture/reserve  amounts due. Reinsurance on policies on which
reinsurance  premiums  subsequently fall due will automatically  terminate as of
the  last  date to which  premiums  have  been  paid  for  each  policy,  unless
reinsurance  premiums on those  policies are paid on or before their  Remittance
Dates.

Terminated reinsurance may be reinstated,  subject to approval by the Reinsurer,
within 15 days of the date of  termination,  and upon payment of all reinsurance
premiums in arrears  including any interest accrued thereon.  The Reinsurer will
have no liability for any claims  incurred  between the date of termination  and
the  date of the  reinstatement  of the  reinsurance.  The  right

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to terminate  reinsurance  will not prejudice the  Reinsurer's  right to collect
premiums  for the period  during  which  reinsurance  was in force  prior to the
expiration of the 15 days' notice.

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                                                                       ARTICLE 6
                                            Reductions, Terminations and Changes

Whenever a change is made in the status,  plan, amount or other material feature
of a policy reinsured under this Agreement,  the Reinsurer will, upon receipt of
notification of the change,  provide adjusted reinsurance coverage in accordance
with the  provisions  of this  Agreement.  The Ceding  Company  will  notify the
Reinsurer of any such change within thirty (30) days of its effective date.

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REDUCTIONS AND TERMINATIONS                                                  6.1

In the event of the  reduction,  lapse,  or  termination of a policy or policies
reinsured under this Agreement or any other  agreement,  the Ceding Company will
reduce or terminate  reinsurance on that life. The reinsured  amount on the life
with all reinsurers  will be reduced,  effective on the same date, by the amount
required such that the Ceding  Company  maintains its retention as defined under
this Agreement.

The  reinsurance  reduction  will apply  first to the policy or  policies  being
reduced and then, on a chronological  basis, to other reinsured  policies on the
life,  beginning  with the oldest policy.  If a fully retained  policy on a life
that is reinsured  under this  Agreement is  terminated  or reduced,  the Ceding
Company will reduce the  existing  reinsurance  on that life by a  corresponding
amount,  with the  reinsurance on the oldest policy being reduced first.  If the
amount of reduction  exceeds the risk amount  reinsured,  the reinsurance on the
policy or policies will be terminated.

The Reinsurer will refund any unearned  reinsurance  premiums net of allowances.
However,  the  reinsured  portion of any policy fee will be deemed  earned for a
policy year if the policy is reinsured during any portion of that policy year.

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INCREASES                                                                    6.2

Contractual and  noncontractual  increases and decreases are not permitted under
this reinsurance without the Reinsurer's prior written consent.

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RISK CLASSIFICATION CHANGES                                                  6.3

Risk classification changes are not permitted under this reinsurance.

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REINSTATEMENT                                                                6.4

If a policy reinsured on an automatic basis is reinstated in accordance with its
terms and in accordance with Ceding Company rules and procedures,  the Reinsurer
will, upon  notification of reinstatement,  reinstate the reinsurance  coverage.
Upon reinstatement of the reinsurance coverage,  the Ceding Company will pay the
contractual reinsurance premiums plus accrued interest for the period and at the
interest rate which it receives on premiums in arrears.

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NONFORFEITURE BENEFITS                                                       6.5

a.   Extended Term
If the original  policy lapses and extended term  insurance is elected under the
terms of the policy,  reinsurance  will  continue on the same basis as under the
original policy until the expiry of the extended term period.

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b.   Reduced Paid-up
If the original policy lapses and reduced paid-up insurance is elected under the
terms of the policy, the amount reinsured will be reduced.

The amount  reinsured and the amount  retained will be reduced  proportionately.
The  reinsurance  premiums will be calculated in the same manner as  reinsurance
premiums were calculated on the original policy.

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CASH SURRENDERS                                                              6.6

The Reinsurer will reimburse the Ceding Company for its  proportionate  share of
the cash  surrender  amount  payable by the Ceding Company upon surrender of the
policy without consideration of any policy loans.

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POLICY LOANS                                                                 6.7

The  Reinsurer  does  not   participate  in  policy  loans  or  other  forms  of
indebtedness on policies reinsured under this Agreement.

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                                                                       ARTICLE 7
                                                                          Claims

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GENERAL                                                                      7.1

Claims covered under this Agreement include only contractual death claims, which
are those due to the  death of the  insured  on a policy  reinsured  under  this
Agreement and any additional  benefits specified in Exhibit B which are provided
by the underlying  policy and are reinsured under this Agreement.  The Reinsurer
will not  participate in any payments made by the Ceding Company on a gratuitous
or ex-gratia  basis (i.e.,  payments which the Ceding Company is not required to
make under  applicable  policy  terms) and will not be liable for payment of any
additional amounts or damages  attributable to the non-contractual  acceleration
or discount of any benefits,  claims,  losses or other  amounts  relating to the
policies reinsured  hereunder,  whether  liquidated,  unliquidated,  contingent,
non-contingent  or  otherwise  and  whether  arising  by  operation  of  law  or
otherwise.

The total reinsurance  recoverable from all companies will not exceed the Ceding
Company's total  contractual  liability on the policy less the amount  retained.
The maximum  reinsurance  death benefit payable to the Ceding Company under this
Agreement is the risk amount specifically reinsured with the Reinsurer.

Claim amounts are normally credited in the reinsurance accounts for the relevant
accounting  period.  On special request,  however,  the Reinsurer will remit its
share of the claim  immediately  after liability has been admitted by the Ceding
Company after deduction of any balance due to the Reinsurer.  The Ceding Company
shall not deduct claims from the premium statement sent to the Reinsurer without
the Reinsurer's prior written consent.

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CLAIMS MANAGEMENT                                                            7.2

The Ceding Company is responsible  for the settlement of claims in a prudent and
professional  way  in  accordance  with  policy   conditions  and  the  Business
Guidelines and otherwise in accordance with the provisions of this Article 7 and
applicable law. Without limiting the foregoing, in managing claims arising under
the policies  reinsured  hereunder  the Ceding  Company will ensure that (i) the
underlying  policy  was in  force  (any  claim  occurring  prior  to the  policy
documentation being finalized or after the policy has lapsed, however short that
period may be, would be an example of an ex gratia payment if made by the Ceding
Company), (ii) appropriate checks have been made for fraud and misrepresentation
at application and (iii) all required proofs of claim have been received and are
reliable.

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NOTICE                                                                       7.3

The Ceding  Company  will  notify the  Reinsurer  as soon as  possible  after it
receives a claim on a policy reinsured under this Agreement.

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PROOFS                                                                       7.4

The Ceding Company will promptly provide the Reinsurer with proper claim proofs,
including a copy of the proof of payment by the Ceding Company and a copy of the
insured's  death  certificate  in a  mutually-agreed  format.  In  addition,  as
requested by the  Reinsurer,  the Ceding Company will provide to the Reinsurer a
copy of all relevant  documents and other  information  in  connection  with the
claim and the underlying policy as may be reasonably requested by the Reinsurer.

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CLAIMS COOPERATION AND CONTESTABLE CLAIMS                                    7.5

Any  settlement  made by the Ceding Company is binding upon the Reinsurer to the
extent of its liability under the terms of this Agreement.

The Reinsurer shall have the right to audit the claims payment practices and may
prescribe claims notice dollar  thresholds if it reasonably  determines that the
Ceding  Company's  claims  payment   practices  and  procedures  are  materially
inconsistent with the descriptions thereof contained in the Business Guidelines.

After receipt of all required documentation concerning a claim (or any claim for
which the Ceding Company recommends denial,  compromise,  contest or litigation)
and after completing its initial  investigation with respect thereto, the Ceding
Company  will  promptly  notify the  Reinsurer  of its  recommendation  and will
promptly and fully  disclose to the Reinsurer all  information  relating to such
claim and will make all  related  documents  and  information  available  to the
Reinsurer.

The Reinsurer will have ten (10) working days to review information  provided by
the Ceding  Company  with  respect to any such death claim and notify the Ceding
Company in writing of its non-binding  recommendation as well as of its decision
to accept  participation  in any settlement,  denial,  contest,  compromise,  or
litigation as may have been recommended by the Ceding Company. In the absence of
material  misstatements  or omissions in information  provided to the Reinsurer,
the Reinsurer's  decision to accept  participation  in a contest,  compromise or
litigation will be final and binding on the Reinsurer.

If the Reinsurer  affirmatively accepts participation in any denial,  contest or
litigation  proposed  by  the  Ceding  Company,  and  such  denial,  contest  or
litigation, as the case may be, results in a reduction or increase in liability,
the Reinsurer  will share in any such reduction or increase in proportion to its
share of the risk on the  contested  policy.  The Ceding  Company will  promptly
advise the Reinsurer of all significant developments in the claim investigation,
including notification of any legal proceedings against it in response to denial
of the claim.

Subject to  compliance  with the  foregoing  and without  prejudice to its other
rights,  if the Reinsurer does not  affirmatively  accept such  participation or
otherwise  fails  to  reply  with  respect  to a  proposed  denial,  contest  or
litigation  within the required  timeframe,  the Reinsurer will then fulfill its
obligation  fully under this  agreement  as to the claim by paying to the Ceding
Company  its full  share of the  reinsurance  amount,  and will not share in any
subsequent reduction or increase in liability attributable to such contest.

The Ceding  Company  will  promptly  notify the  Reinsurer in the event that any
other  reinsurer  shall notify the Ceding  Company of its  determination  not to
participate in any denial,  contest or litigation proposed by the Ceding Company
or shall indicate for any reason a refusal to pay reinsurance  amounts  asserted
by the Ceding Company to be due with respect to any claim.

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FORM OF PAYMENT; CONTRACTUAL INTEREST                                        7.6

Life benefit  payments  will be made in a single sum,  regardless  of the Ceding
Company's  settlement options. The Reinsurer will pay its proportionate share of
any interest  required under the subject policy to be paid by the Ceding Company
on the death proceeds until the date of settlement.

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CLAIM EXPENSES                                                               7.7

The Reinsurer will pay its share of reasonable out-of-pocket claim investigation
and legal  expenses  connected  with the litigation or settlement of contractual
liability  claims unless the Reinsurer has discharged its liability  pursuant to
Section  7.5 above.  If the  Reinsurer  has so  discharged  its  liability,  the
Reinsurer will not participate in any expenses incurred thereafter.

The  Reinsurer  will not  reimburse  the Ceding  Company for  routine  claim and
administration expenses,  including but not limited to the Ceding Company's home
office expenses,  compensation of salaried  officers and employees and any legal
expenses other than third party expenses  incurred by the Ceding Company.  Claim
investigation expenses do not include expenses incurred by the Ceding Company as
a  result  of a  dispute  or  contest  arising  out  of  conflicting  claims  of
entitlement to policy proceeds or benefits.

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MISREPRESENTATION OR SUICIDE                                                 7.8

If the Ceding  Company  returns  premium to the  policyowner or beneficiary as a
result of misrepresentation or suicide of the insured, the Reinsurer will refund
net reinsurance  premiums received on that policy without interest to the Ceding
Company  in lieu of any other form of  reinsurance  benefit  payable  under this
Agreement.

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MISSTATEMENT OF AGE OR SEX                                                   7.9

In the event of a change in the amount of the Ceding  Company's  liability  on a
reinsured policy due to a misstatement of age or sex, the Reinsurer's  liability
will change  proportionately.  The face amount of the policy  reinsured  will be
adjusted  from the  inception of the policy and any  difference  will be settled
without interest.

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EXTRA-CONTRACTUAL OBLIGATIONS                                               7.10

For  purposes  of  this  Agreement,  "Extra  Contractual  Obligations"  are  any
obligations,   incurred  by  the  Ceding  Company,  its  affiliates,  directors,
officers,  employees,  agents or other  representatives  other than  contractual
obligations  arising under the express  written terms and conditions of a policy
and  include,  but are not  limited to,  punitive  damages,  bad faith  damages,
compensatory  damages,  and other damages or statutory penalties which may arise
from willful and/or negligent acts, errors or omissions by the Ceding Company or
its affiliates, directors, officers, employees agents or other representatives.

The Reinsurer is not liable for Extra Contractual Obligations, including related
expenses,  associated  with the denial or contest of any claim  under any policy
reinsured unless it was an active party, and directed or consented to the act or
course of conduct that led directly to the  imposition of the Extra  Contractual
Obligations.  In these  situations,  the Ceding  Company and the Reinsurer  will
share  in Extra  Contractual  Obligations,  in  equitable  proportions,  but all
factors being equal,  the division of any assessments  would be in proportion to
the total risk accepted by each party for the plan of insurance involved.

Notwithstanding  anything  stated  in this  Article  7.10 to the  contrary,  the
Reinsurer  has not accepted and will not be liable under this  Agreement for any
Extra  Contractual  Obligations or expenses  incurred by the Ceding Company as a
result of any  negligence,  fraud or  wrongful  act,  error or  omission  by any
employee  or officer of the Ceding  Company or an agent or other  representative
representing  the Ceding  Company in  implementing  the

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claims handling action agreed upon by the Ceding Company and the Reinsurer.

                                       17
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                                                                       ARTICLE 8
                                                                        Reserves

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CREDIT FOR REINSURANCE                                                       8.1

If Reinsurer at any time is not licensed or accredited  in the Ceding  Company's
current state of domicile and by virtue  thereof the Ceding  Company is not able
to receive statutory reserve credit for reinsurance in such state, the Reinsurer
and  Ceding  Company  agree  to make  all  reasonable  efforts  to  qualify  the
reinsurance   provided  hereunder  for  statutory  reserve  credit  through  the
provision by the Reinsurer of  appropriate  collateral or other  approaches.  In
such event, the Reinsurer will have the right at its option to substitute one or
more forms of such  collateral  with other  forms as would  qualify  reinsurance
provided  hereunder for statutory  reserve  credit and the Ceding Company agrees
that it will  cooperate with the Reinsurer in such regard,  including,  promptly
taking any such  actions as may be  reasonably  requested  by the  Reinsurer  in
respect of the release of  collateral  in connection  with the  substitution  of
other adequate collateral amounts.

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RESERVE METHODOLOGY AND REPORTING                                            8.2

The Reinsurer will use its own reserve  methodology  for purposes of calculating
any statutory  reserves required to be held for businesses  reinsured under this
Agreement.

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                                                                       ARTICLE 9
                                                         Retention Limit Changes

If the Ceding Company changes its maximum  retention  limits as shown in Exhibit
A, it will provide the  Reinsurer  with written  notice of the intended  changes
thirty (30) days in advance of their effective date.

A change to the Ceding  Company's  maximum  retention limits will not affect the
reinsured  policies in force except as specifically  provided  elsewhere in this
Agreement.  Furthermore,  unless agreed between the parties,  an increase in the
Ceding  Company's  retention  schedule  will not effect an increase in the total
risk amount that it may automatically cede to the Reinsurer.

The Ceding Company's quota share percentage  retained as shown in Exhibit A will
remain  unchanged  for new and  inforce  business  unless  otherwise  negotiated
between the parties.

                                       19
<PAGE>

                                                                      ARTICLE 10
                                                                       Recapture

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NO RECAPTURE RIGHT

Unless otherwise  agreed in writing,  policies  reinsured  hereunder will not be
eligible  for  recapture,  whether due to an  increase  in the Ceding  Company's
retention or otherwise.

                                       20
<PAGE>

                                                                      ARTICLE 11
                                                              General Provisions

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CURRENCY                                                                    11.1

All payments and reporting by both parties under this  Agreement will be made in
United States dollars.

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PREMIUM TAX                                                                 11.2

The Reinsurer  will  reimburse the Ceding  Company for premium taxes pursuant to
Exhibit C.

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DIVIDENDS                                                                   11.3

The  Reinsurer   will  not  reimburse  the  Ceding   Company  for  dividends  to
policyholders.

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MINIMUM CESSION                                                             11.4

The Ceding Company will not cede a policy to the Reinsurer  unless the amount to
be  reinsured  at issue  exceeds the Initial  Minimum  Cession  amount  shown in
Exhibit B.

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INSPECTION OF RECORDS                                                       11.5

The Reinsurer,  or its duly appointed  representatives,  will have access to all
records,  whether  written or electronic,  of the Ceding Company  concerning the
business  reinsured  hereunder  for the  purpose  of  inspecting,  auditing  and
photocopying  those  records.  Such access will be provided at the office of the
Ceding  Company  (or  as to  electronic  records,  at the  Reinsurer's  request,
electronically)  and will be during  reasonable  business  hours.  Assuming  the
Reinsurer has  continued to perform the  undisputed  portion of its  obligations
under this Agreement,  the Ceding Company may not withhold access to information
and records on the grounds  that the  Reinsurer  is in breach.  The  Reinsurer's
right of access as  specified  above will survive  until all of the  Reinsurer's
obligations under this Agreement have terminated or been fully discharged.

--------------------------------------------------------------------------------
COMPLIANCE                                                                  11.6

The Ceding Company will perform underwriting, pricing, claims and administrative
services  with  respect  to the  policies  reinsured  hereunder  (i)  except  as
otherwise provided in this Agreement,  at its own expense and without any rights
to reimbursement  from the Reinsurer;  (ii) with levels of skill,  diligence and
expertise relative to the risks being  underwritten  commensurate with generally
accepted best practices  with respect  thereto;  and (iii) in  conformance  with
applicable law and regulation and the requirements of the subject policies.

This  Agreement  applies only to the issuance of insurance by the Ceding Company
in jurisdictions in which it is properly licensed.

The Ceding  Company  represents  that,  to the best of its  knowledge,  it is in
compliance with all state and federal laws applicable to the business  reinsured
under this Agreement, including, without limitation, the requirements of the USA
Partiot Act and the United States  Department  of Treasury's  officer of Foreign
Asset  Control  ("OFAC") and that the  policies  reinsured  hereunder  have been
issued and delivered  and will be performed

                                       21
<PAGE>

by  the  Ceding  Company  in  accordance  with  applicable  law  and  regulation
(including laws and regulations pertaining to required insurable interests).  In
no event shall the Reinsurer be liable for any reinsurance or reinsurance  claim
with respect to any  underlying  policy or coverage  unless the issuance of such
underlying  policy or coverage by the Ceding  Company  satisfies all  applicable
OFAC regulatory requirements.

It is the  Ceding  Company's  responsibility  to ensure  that its  practice  and
applicable forms are in compliance with current Medical Information Bureau (MIB)
guidelines.

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CERTAIN REPRESENTATIONS                                                     11.7

The Ceding Company has disclosed to the Reinsurer all  information  known to the
Ceding Company which is material to the risks  reinsured  hereunder and provided
documents and materials for use in connection  with its  assessment of the risks
covered  hereunder  (together,  the "Risk  Evaluation  Materials").  The  Ceding
Company warrants that:

     (i)  all factual information contained in the Risk Evaluation Materials was
          to the  best  of the  Ceding  Company's  knowledge,  materially  true,
          complete and accurate as at the time of disclosure  and not materially
          misleading (whether by omission or otherwise); and

     (ii) to the  best of the  Ceding  Company's  knowledge,  there  has been no
          material  change  in  the  Risk  Evaluation   Materials   between  the
          respective  "as of"  dates of the Risk  Evaluation  Materials  and the
          final execution date of this Agreement.

The Ceding  Company will provide to the  Reinsurer all further  information  and
data of which it is aware that is material to the risks assumed by the Reinsurer
under this Agreement.

To the Ceding  Company's best knowledge and other than as specifically set forth
in Exhibit B, premiums due under the terms of the policies  reinsured  hereunder
have not been  financed  or provided  for under the terms of any (a)  charitable
giving or life  insurance  securitization  program,  whether or not  involving a
charitable institution as a direct or indirect beneficiary,  (b) corporate, bank
or  similar  entity-owned  life  insurance  program,  or (c)  other  undertaking
involving in substance premium financing in which the proceeds of death benefits
with respect to the policies are reasonably  expected to be required directly or
indirectly in order to repay the amount of the underlying financing,  whether as
made  available  by or with the  consent of the Ceding  Company,  any  affiliate
thereof,  or any  agent or  representative  of the  Ceding  Company  or any such
affiliate or any third party.

The Ceding  Company  makes no  representations  and  warranties as to the future
experience or profitability  arising from the policies reinsured hereunder.  The
representations and warranties set forth in this Section 12.6 will not terminate
or expire  until all  liabilities  and  obligations  with  respect  to  policies
reinsured hereunder have been discharged or terminated in full.

--------------------------------------------------------------------------------
BUSINESS CONTINUITY                                                         11.8

This  Agreement has been entered into on the basis that the Ceding  Company will
adhere  to  the   marketing   and   distribution,   policyholder   service   and
administration and claims management policies and procedures as described to the
Reinsurer and  referenced in the Business  Guidelines.  The parties  acknowledge
that changes to, or the Ceding  Company's  failure to comply with,  the Business
Guidelines could materially affect the Reinsurer's

                                       22
<PAGE>

experience as to the policies  reinsured  hereunder and  Reinsurer's  reasonable
expectations in entering into this Agreement.

The Ceding Company will make prompt and full  disclosure to the Reinsurer of any
material change in the Business Guidelines  applicable to the policies reinsured
hereunder  and the  Reinsurer  shall have the right to approve any change in the
Business  Guidelines (solely as applied to the policies reinsured  hereunder) as
may be  reasonably  expected to materially  affect the mortality or  persistency
attributes of the business ceded  hereunder.  Depending on the  significance  of
such change,  the Reinsurer may require that appropriate  adjustments be made to
the terms and  conditions  of the  reinsurance  provided  hereunder,  including,
without limitation, the price or scope of risks covered hereunder.

--------------------------------------------------------------------------------
UNDERWRITING CONTINUITY                                                     11.9

The  Ceding  Company  affirms  that true and  complete  copies of the  retention
schedule,  underwriting guidelines,  issue rules, premium rates and policy forms
applicable  to the policies  reinsured  hereunder and in use as of the effective
date have been supplied to the Reinsurer  (the "Policy  Materials").  The Ceding
Company will promptly notify the Reinsurer of any proposed  material  changes in
the Policy Materials and this Agreement will not extend to policies or coverages
issued pursuant to such changes unless the Reinsurer has consented in writing to
accept policies subject to such changes.

--------------------------------------------------------------------------------
INTEREST RATE                                                              11.10

If, under the terms of this Agreement, interest is accrued on amounts due either
party,  such  interest  will  be  calculated  at a rate  equal  to 1% per  month
determined the date the payment  becomes due,  except as specified  elsewhere in
this Agreement.

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UTMOST GOOD FAITH                                                          11.11

All matters  with respect to this  Agreement  require the exercise of the utmost
good faith of each of the parties.

--------------------------------------------------------------------------------
ASSIGNMENT AND TRANSFER                                                    11.12

Neither this  Agreement  nor any new or inforce  reinsurance  covered under this
Agreement,  may be  sold,  assigned  or  transferred  in whole or in part by the
Ceding  Company or the  Reinsurer  without the other  party's  written  consent.
Notwithstanding  the  foregoing,  the  Reinsurer  shall not be  prohibited  from
further  transfer of risks accepted  hereunder on a retrocession or other basis,
provided that any transfer  shall not relieve the  Reinsurer of its  obligations
under the Agreement.

--------------------------------------------------------------------------------
NO WAIVER                                                                  11.13

No waiver by either party of any  violation or default by the other party in the
performance  of any  promise,  term,  or  condition  of this  Agreement  will be
construed to be a waiver of any other or subsequent  default in  performance  of
the same or any other promise, term or condition of this Agreement.

--------------------------------------------------------------------------------
SURVIVAL                                                                   11.14

All  provisions of this  Agreement  will survive its  termination  to the extent
necessary to carry out the purpose of this Agreement or to ascertain and

                                       23
<PAGE>

enforce the parties'  rights and obligations  hereunder  existing at the time of
termination.

--------------------------------------------------------------------------------
GOVERNING LAW                                                              11.15

This  Agreement  will be governed in  accordance  with the internal  laws of the
State of Kansas.

--------------------------------------------------------------------------------
ENTIRE AGREEMENT                                                           11.16

This Agreement constitutes the entire agreement between the parties with respect
to the business  reinsured  hereunder.  There are no understandings  between the
parties other than as expressed in this Agreement. Any change or modification to
this  Agreement will be null and void unless made by amendment to this Agreement
and signed by both parties.

--------------------------------------------------------------------------------
SEVERABILITY                                                               11.17

If any provision of this Agreement is determined to be invalid or unenforceable,
such  determination will not impair or affect the validity or the enforceability
of the remaining provisions of this Agreement.

                                       24
<PAGE>

                                                                      ARTICLE 12
                                                                         DAC Tax

--------------------------------------------------------------------------------
DAC TAX

The parties to this  Agreement  agree to the  following  provisions  pursuant to
Section 1.848-2(g)(8) of the Income Tax Regulations effective December 29, 1992,
under Section 848 of the Internal Revenue Code of 1986, as amended:

a.   The term `party' refers to either the Ceding  Company or the Reinsurer,  as
     appropriate.

b.   The terms used in this  Article  are  defined by  reference  to  Regulation
     Section 1.848-2, effective December 29, 1992.

c.   The party with the net positive  consideration  for this Agreement for each
     taxable year will capitalize  specified  policy  acquisition  expenses with
     respect  to  this  Agreement  without  regard  to  the  general  deductions
     limitation of Section 848(c)(1).

d.   Both parties agree to exchange information  pertaining to the amount of net
     consideration under this Agreement each year to ensure  consistency,  or as
     otherwise required by the Internal Revenue Service.

e.   The Ceding  Company  will submit a schedule to the  Reinsurer by April 1 of
     each year with its calculation of the net  consideration  for the preceding
     calendar  year  in the  form  attached  in  Exhibit  F.  This  schedule  of
     calculations will be accompanied by a statement signed by an officer of the
     Ceding  Company  stating  that the  Ceding  Company  will  report  such net
     consideration  in its tax  return  for the  preceding  calendar  year.  The
     Reinsurer  may  contest  such   calculation  by  providing  an  alternative
     calculation  to the  Ceding  Company  in  writing  within  45  days  of the
     Reinsurer's receipt of the Ceding Company's  calculation.  If the Reinsurer
     does not so notify the Ceding  Company within the required  timeframe,  the
     Reinsurer  will report the net  consideration  as  determined by the Ceding
     Company in the Reinsurer's tax return for the previous calendar year.

f.   If the  Reinsurer  contests  the Ceding  Company's  calculation  of the net
     consideration,  the parties will act in good faith to reach an agreement as
     to the correct  amount  within  thirty (30) days of the date the  Reinsurer
     submits  its  alternative  calculation.  If  the  Ceding  Company  and  the
     Reinsurer reach an agreement on an amount of net consideration,  each party
     will  report the  agreed  upon  amount in its tax  return for the  previous
     calendar year.

g.   Both the Ceding  Company and the Reinsurer  represent and warrant that they
     are subject to United States taxation under either  Subchapter L or Subpart
     F of Part III of  Subchapter  N of the Internal  Revenue  Code of 1986,  as
     amended.

                                       25
<PAGE>

                                                                      ARTICLE 13
                                                                          Offset

--------------------------------------------------------------------------------
OFFSET

The Ceding Company and the Reinsurer will have the right to offset or recoup any
balances,  whether  on  account  of  premiums,  allowances,  credits,  claims or
otherwise  due from one party to the other  under  this  Agreement  or under any
other agreement between the Ceding Company and the Reinsurer.

The right of offset will not be affected or diminished because of the insolvency
of either party.  The rights  provided  under this Article 13 are in addition to
any rights of offset and recoupment that may exist at common law.

The  parties'  offset  and  recoupment  rights  are  valid  and may be  enforced
notwithstanding  any  other  provision  of  this  Agreement  including,  without
limitation,  the  provisions  of Article 10. The  commencement  of any action to
challenge the  enforceability of this Article 13 will constitute a breach of the
terms of this  Agreement  for which the  non-breaching  party may,  upon written
notice to the  breaching  party and in addition to pursuing any other  available
remedies, immediately terminate this Agreement with respect to new business.

                                       26
<PAGE>

                                                                      ARTICLE 14
                                                                      Insolvency

--------------------------------------------------------------------------------
DEFINITION                                                                  14.1

A party to this Agreement will be deemed insolvent when it:
a.   applies for or consents to the  appointment  of a receiver,  rehabilitator,
     conservator, liquidator or statutory successor of its properties or assets;
     or
b.   is adjudicated as bankrupt or insolvent; or
c.   files  or  consents  to the  filing  of a  petition  in  bankruptcy,  seeks
     reorganization  to avoid  insolvency  or makes formal  application  for any
     bankruptcy, dissolution, liquidation or similar law or statute; or
d.   becomes the subject of an order to rehabilitate or an order to liquidate as
     defined by the insurance code of the jurisdiction of the party's domicile.

--------------------------------------------------------------------------------
INSOLVENCY OF THE CEDING COMPANY                                            14.2

In the event of the insolvency of the Ceding Company,  all reinsurance  payments
due  under  this  Agreement  will  be  payable   directly  to  the   liquidator,
rehabilitator,  receiver, or statutory successor of the Ceding Company,  without
diminution  because of the  insolvency,  for those  claims  allowed  against the
Ceding  Company by any court of  competent  jurisdiction  or by the  liquidator,
rehabilitator,  receiver or statutory  successor  having authority to allow such
claims.

In the event of insolvency of the Ceding Company, the liquidator, rehabilitator,
receiver,  or statutory  successor  will give written notice to the Reinsurer of
all pending claims against the Ceding Company on any policies reinsured within a
reasonable time after such claim is filed in the insolvency proceeding.  While a
claim is pending,  the  Reinsurer  may  investigate  and  interpose,  at its own
expense,  in the  proceeding  where the claim is  adjudicated,  any  defense  or
defenses  that it may deem  available to the Ceding  Company or its  liquidator,
rehabilitator, receiver, or statutory successor.

The  expense  incurred by the  Reinsurer  will be  chargeable,  subject to court
approval,  against the Ceding  Company as part of the expense of  liquidation to
the extent of a proportionate share of the benefit that may accrue to the Ceding
Company solely as a result of the defense undertaken by the Reinsurer. Where two
or more  reinsurers  are  participating  in the same  claim  and a  majority  in
interest  elects to  interpose  a defense or  defenses  to any such  claim,  the
expense will be  apportioned  in accordance  with the terms of this Agreement as
though such expense had been incurred by the Ceding Company.

The Reinsurer  will be liable only for the amounts  reinsured and will not be or
become  liable for any amounts or  reserves to be held by the Ceding  Company on
policies reinsured under this Agreement.

                                       27
<PAGE>

--------------------------------------------------------------------------------

INSOLVENCY OF THE REINSURER                                                 14.3

In the event of the  Reinsurer's  insolvency,  the Ceding Company may cancel the
Agreement  for future new business  and will notify the  Reinsurer in writing of
its  intent.  The  parties  agree  to waive  the  notification  period  for this
cancellation,  and the effective date will be no earlier than the effective date
of the Reinsurer's insolvency.

In addition, in the event of the insolvency of the Reinsurer, the Ceding Company
may provide the Reinsurer or its authorized  representative  with written notice
of its intent to recapture all  reinsurance  inforce under this  Agreement.  The
effective  date of a recapture due to insolvency  will be at the election of the
Ceding  Company  but may not be earlier  than the date on which the  Reinsurer's
insolvency is established by the authority  responsible for such  determination.
Any  recapture  fee will be mutually  agreed upon by the Ceding  Company and the
Reinsurer or its authorized representative.

                                       28
<PAGE>

                                                                      ARTICLE 15
                                                            Errors and Omissions

--------------------------------------------------------------------------------
ERRORS AND OMISSIONS

This  Article 15 will apply only to  oversights,  misunderstandings  or clerical
errors relating to the  administration of reinsurance  covered by this Agreement
and not to the  placement or  administration  of the  insurance  provided by the
Ceding  Company  to its  insureds.  Examples  of such  administrative  errors or
oversights may include  miscalculation of a net amount at risk or late reporting
of a policy or termination (other than as specifically addressed below).

Any unintentional or accidental failure to comply with the administrative  terms
of  this  Agreement  which  can be  shown  to be  the  result  of an  oversight,
misunderstanding or clerical error by either the Ceding Company or the Reinsurer
will not be deemed to be a breach of this  Agreement  but in no event  shall the
liability  for the  Reinsurer  under this  Agreement  be  extended  to cover any
excluded risks or exceed the limits specified herein.

For greater  certainty,  the  circumstances to which this Section 16.1 shall not
apply shall include, but not be limited to:

a.   any  failure to arrange for the  required  facultative  cession  under this
     Agreement  due to the Ceding  Company's  practice of  conducting  a limited
     search of its records for other prior in force  insurance or reinsurance on
     the same individual insured;

b.   any errors, omissions,  oversights as a result of non-negotiated waivers of
     regular   requirements  by  either  the  Ceding  Company,   its  agents  or
     representatives  in  the  approval,  issuance  and  administration  of  the
     insurance; and

c.   any error or oversight  discovered  more than seven (7) years following the
     termination or expiry of the last cession under this Agreement.

The Reinsurer  will not be responsible  for negligent or deliberate  acts of the
Ceding Company or for repetitive errors in administration thereby.

Upon  discovery,  the error will be promptly  corrected so that both parties are
restored  to  the  position  they  would  have   occupied  had  the   oversight,
misunderstanding or clerical error not occurred,  including interest.  Should it
not be possible to restore both parties to this position,  the party responsible
for the oversight,  misunderstanding  or clerical error will be responsible  for
any resulting liabilities and expenses.

The  responsible  party will perform a prudent review of its records to identify
other  errors and  omissions  of the same or similar  category.  Failing  prompt
correction or curative  response,  the Reinsurer reserves the right to limit its
liability  to the  policies  reinsured  hereunder  as  have  been  properly  and
correctly reported.

LATE  REPORTED POLICIES:  The Reinsurer will not  automatically  accept any Late
Reported Policies.  A "Late Reported Policy" is any policy first reported to the
Reinsurer that has been issued for more than three years.

LATE REPORTED  TERMINATIONS:  If a policy is  terminated  but is a Late Reported
Termination,  the  Reinsurer  will only refund the last 3 years'  premium.  Late
Reported Terminations are terminations first reported to the Reinsurer more than
three years from the termination date.

                                       29
<PAGE>

                                                                      ARTICLE 16
                                                              Dispute Resolution

--------------------------------------------------------------------------------
DISPUTES

In the event of a dispute  arising  out of or relating  to this  agreement,  the
parties agree to the  following  process of dispute  resolution.  Within 15 days
after the  Reinsurer  or the  Ceding  Company  has first  given the other  party
written notification of a specific dispute, each party will appoint a designated
company  officer to attempt to resolve the dispute.  The officers will meet at a
mutually  agreeable  location as soon as possible and as often as necessary,  in
order to  gather  and  furnish  the  other  with all  appropriate  and  relevant
information  concerning  the dispute.  The officers will discuss the problem and
will  negotiate in good faith  without the  necessity of any formal  arbitration
proceedings. During the negotiation process, all reasonable requests made by one
officer to the other for information  will be honored.  The designated  officers
will decide the specific format for such discussions.

If the  officers  cannot  resolve  the  dispute  within  30 days of their  first
meeting, the dispute will be submitted to formal arbitration, unless the parties
agree in writing to extend the  negotiation  period for up to an  additional  30
days.

                                       30
<PAGE>

                                                                      ARTICLE 17
                                                                     Arbitration

--------------------------------------------------------------------------------
ARBITRATION

If the Ceding Company and Reinsurer are unable to resolve any dispute arising in
any way from this  Agreement,  including  but not  limited to the  formation  or
breach  thereof,  pursuant  to  Article  16,  the  matter  will be  referred  to
arbitration in accordance with the provisions of this Article 17.

Arbitration  shall be  initiated by the  delivery,  by  certified  mail,  return
receipt requested, of a written demand for arbitration by one party to the other
(the "Demand"). The Demand shall set forth the nature of the dispute, the claims
asserted  and the relief  sought.  The  Respondent  shall  respond to the Demand
within  30  days  of  receiving   the  Demand  by  delivering  a  response  (the
"Response"),  by certified mail, return receipt requested, which shall set forth
the Respondent's  statement of the nature of the dispute and its defenses to the
Petitioner's claims asserted,  or the relief sought, in the Demand. The Response
also shall set forth the Respondent's claims against the Petitioner, if any, and
the relief sought by the Respondent.

The  arbitration  shall be held in New  York,  New  York or  other  place as the
parties may mutually  agree.  Except to the extent that they  conflict  with any
term or  provision  of this  Article 17, the  arbitration  shall be conducted in
accordance  with  the  Procedures  for  the  Resolution  of U.S.  Insurance  and
Reinsurance  Disputes of the Insurance and Reinsurance  Dispute Resolutions Task
Force, dated September 1999 (the "Procedures").  Unless otherwise indicated, the
defined terms contained in this Article shall have the meaning  ascribed thereto
in the Procedures.

The arbitration  shall be conducted before a three person Panel comprised of (i)
current  or former  officers  or  directors  of life  insurance  or  reinsurance
companies, or (ii) professionals with no less than twenty years of experience in
or serving the life insurance or reinsurance industries.

Within 60 days of the initiation of the arbitration,  the parties shall (i) each
designate one Disinterested and neutral arbitrator as its party arbitrator,  and
provide the respective  arbitrator's  contact  information  (including  address,
telephone,  fax  and  email  information),  and  (ii)  exchange  a copy  of each
arbitrator's  curriculum vitae and a completed  questionnaire  containing all of
the information sought in the ARIAS US "Umpire  Questionnaire"  form. (If either
party refuses or neglects to appoint an arbitrator within the 60-day period, the
other party may appoint the second  arbitrator.) As soon as practicable,  but no
less than 30 days following their  appointment,  the two party arbitrators shall
appoint  another  Disinterested  and neutral person who shall serve as the third
arbitrator  and  umpire.  The   party-appointed   arbitrators  may  consult,  in
confidence,  with the party who appointed them concerning the appointment of the
umpire.

If the two party-appointed  arbitrators fail to select an umpire within the time
specified  above,  each party  shall  exchange,  within  ten days,  ten names of
persons  chosen from the lists  maintained by ARIAS US for the purpose of umpire
selection.  Within seven days of the exchange of such names, the party-appointed
arbitrators shall send the Umpire  Questionnaire to the umpire candidates with a
joint  request to the  candidates  to return  copies of their  completed  Umpire
Questionnaires  to each party arbitrator within 20 days. If any individual fails
to return a completed  Umpire  Questionnaire  within the required time period or
refuses to serve on the Panel,  then the selection

                                       31
<PAGE>

process shall continue with the remaining  names.  Within ten days of the return
of the Umpire Questionnaires, each party shall select three names from the other
party's  list and notify the other party of such  selection.  Within ten days of
such notice,  each party shall rank the six selected umpire  candidates in order
of preference,  with the number "one" being the most  preferred,  and notify the
other party of such  ranking.  The  individual  with the lowest total  numerical
ranking shall act as umpire.  If the ranking results in a tie, the parties shall
draw lots from among the  candidates  tied for the lowest  numerical  rank.  The
individual chosen by lot shall act as umpire.

As soon as possible after the  appointment of the Panel,  the Panel will conduct
the organizational  meeting in accordance with the Procedures,  at which time it
will establish a pre-hearing  schedule and dates for the hearing. In addition to
the items  identified in the  Procedures,  the  pre-hearing  schedule  shall set
deadlines for (i) any amendment to the Demand or the Response,  for cause shown,
(ii) the exchange of exhibits that each party intends to introduce into evidence
at the hearing,  which  exchange  shall be made no later than 15 days before the
hearing,  and (iii) each party's  submission to the Panel, prior to the hearing,
of its proposed form of order that identifies precisely the nature of the relief
sought from the Panel.

The Panel shall render its  decision and award within 30 days of the  completion
of the  hearing.  Insofar  as not in  conflict  with the  express  terms of this
Agreement,  it is the intention of the parties that customs and practices of the
life and reinsurance  industries may be considered by the Panel in resolving any
ambiguities inherent in this Agreement or its operation.  (In the absence of any
such ambiguity, the express terms of this Agreement will control).

The Panel will award the remedy sought by the party seeking relief to the extent
the remedy is provided for in this Agreement or otherwise reasonably compensates
the damaged  party for the  economic  effect of any  demonstrated  breach.  Such
remedies may include,  but shall not be limited to, awards of monetary  damages,
equitable  revisions  to the terms or  provisions  of the  Agreement,  including
adjustments  to  premiums or  allowances  paid or to be paid  hereunder,  or any
appropriate combination of the foregoing.

The Reinsurer has entered into this  Agreement  relying on the Ceding  Company's
representations  and  warranties  and its agreement to comply with the terms and
provisions  of  this  Agreement,   including  representations,   warranties  and
covenants  concerning the Risk Evaluation Materials and the Business Guidelines.
In any case in which the  Panel  concludes  that the  Reinsurer  has  reasonably
demonstrated a material  breach of the provisions of Article 11.6  (Compliance),
Article 11.7 (Certain  Representations),  Article 11.8 (Business  Continuity) or
Article 11.9 (Underwriting  Continuity) of this Agreement,  then, in lieu of any
other damages or remedy therefore, at its option, the Reinsurer may require that
the  policies  reinsured  hereunder  that are subject to such breach be excluded
from the scope of the reinsurance provided hereby. In any such case, the parties
will make  payments  designated  by the  Panel as  constituting  returns  of net
premiums  and claims  amounts  previously  paid in  connection  with the subject
policies,  provided,  however,  that the Panel shall  determine and designate an
amount that  Reinsurer  will retain as reasonable  compensation  for capital and
administrative  costs  incurred  by the  Reinsurer  in  reinsuring  the  subject
policies  reinsured  hereunder prior to exclusion.  The Panel shall not have the
authority to award punitive or exemplary damages.

Decisions  of the Panel will be final and  binding  upon the  parties  and their
respective successors and assigns and each party hereby consents to the entry

                                       32
<PAGE>

of a judgment  confirming or enforcing  the award in the United States  District
Court  for the  Southern  District  of New York  and/or  in any  other  court of
competent jurisdiction.

Within 20 days after the transmittal of an award, any party,  upon notice to the
other parties, may request the Panel to correct any clerical,  typographical, or
computational  errors in the award. The other parties shall be given ten days to
respond to the request.  The Panel shall  dispose of the request  within 20 days
its receipt of such  request and any  response  thereto.  The Panel shall not be
empowered to redetermine the merits of any claim already decided.

Unless the Panel decides  otherwise,  each party shall (i) bear its own fees and
expenses in connection with the arbitration, including the fees of its appointed
arbitrator  and any outside  counsel and witness fees, and (ii) share equally in
the fees for the umpire and the costs of the arbitration, such as hearing rooms,
court reporters, etc.

                                       33
<PAGE>

                                                                      ARTICLE 18
                                                                 Confidentiality

--------------------------------------------------------------------------------
GENERALLY                                                                   18.1

The Ceding  Company  and the  Reinsurer  agree  that  Customer  and  Proprietary
Information will be treated as confidential.  Customer Information includes, but
is not limited to,  medical,  financial,  and other personal  information  about
proposed,   current,  and  former  policyowners,   insureds,   applicants,   and
beneficiaries of policies issued by the Ceding Company.  Proprietary Information
includes, but is not limited to, business plans and trade secrets, mortality and
lapse studies,  underwriting  manuals and guidelines,  applications and contract
forms, and the specific terms and conditions of this Agreement.

Customer and Proprietary Information will not include information that:

a.   is or becomes available to the general public through no fault of the party
     receiving the Customer or Proprietary Information (the "Recipient");

b.   is independently developed by the Recipient;

c.   is  acquired  by  the  Recipient  from  a  third  party  not  covered  by a
     confidentiality agreement; or

d.   is disclosed under a court order, law or regulation.

The parties will not  disclose  such  information  to any other  parties  unless
agreed to in writing,  except as necessary  for  retrocession  purposes or other
secondary risk transfer, as requested by external auditors, as required by court
order, or as required or allowed by law or regulation.

The Ceding Company acknowledges that the Reinsurer can aggregate data with other
companies  reinsured with the Reinsurer as long as the data cannot be identified
as belonging to the Ceding Company.

--------------------------------------------------------------------------------
NON-PUBLIC PERSONAL INFORMATION                                             18.2

The Reinsurer and its  representatives  and service  providers  will protect the
confidentiality of Non-Public Personal Information, as defined below, by:

a.   holding all Non-Public  Personal  Information  transmitted to them by or on
     behalf of the Ceding Company in strict confidence;

b.   maintaining appropriate measures that are designed to protect the security,
     integrity and confidentiality of Non-Public Personal Information;

c.   using  Non-Public  Personal  Information only in the ordinary course of its
     business to carry out Reinsurer's obligations under this Agreement; and

d.   disclosing  Non-Public  Personal  Information  to  third  parties  only  as
     necessary  to  perform  services  under  the  Agreement,  for  purposes  of
     retrocession or further risk transfer or as may be required or permitted by
     law.

"Non-Public Personal Information" is non-public personally identifiable medical,
financial,  and other personal  information  about proposed,  current and former
applicants,  policy owners, contract holders, insureds,  annuitants,  claimants,
and  beneficiaries  of policies  reinsured  hereunder or contracts

                                       34
<PAGE>

issued by the Ceding Company,  and their  representatives.  Non-Public  Personal
Information  does not include  de-identified  personal  data. The Ceding Company
will obtain, if required by any law, appropriate consent to the collection,  use
and disclosure of Non-Public Personal  Information,  from each insured to enable
the parties to fully exercise their rights and perform their  obligations  under
this Agreement.

                                       35
<PAGE>

                                                                      ARTICLE 19
                                                           Duration of Agreement

--------------------------------------------------------------------------------
DURATION

This Agreement is indefinite as to its duration.

The Reinsurer may terminate this  Agreement  with respect to the  reinsurance of
new  business  by giving 30 days  written  notice of  termination  to the Ceding
Company.  The  first  day of the  notice  period  is  deemed  to be the date the
document is postmarked.

The Ceding Company may terminate this Agreement with respect to the  reinsurance
of new  business  by  giving  365 days  written  notice  of  termination  to the
Reinsurer.  The  first  day of the  notice  period  is deemed to be the date the
document is postmarked but shall not be prior to January 1, 2006.

During the notification period, the Ceding Company will continue to cede and the
Reinsurer  will  continue  to accept  policies  covered  under the terms of this
Agreement.  Reinsurance  coverage on all reinsured policies will remain in force
until  the  termination  or  expiry of the  policies  or until  the  contractual
termination of reinsurance  under the terms of this Agreement,  whichever occurs
first.

This Agreement will  automatically  terminate for new business without notice if
the net premium reinsured hereunder is less than the amount specified in Exhibit
B (Dormant Agreement Termination).

                                       36
<PAGE>

                                                                      ARTICLE 20
                                                                       Execution

--------------------------------------------------------------------------------

This  Agreement is effective as of January 1, 2005,  and applies to all eligible
policies  with  issue  dates on or after  such  date (and to  eligible  policies
applied for on or after such date that were  backdated  for up to six (6) months
to save age).  This Agreement has been made in duplicate and is hereby  executed
by both parties.

     FIRST LIFE AMERICA CORPORATION         WILTON REASSURANCE COMPANY

     By:  /s/ John Van Engelen              By:  /s/ Glenn Engel
         ------------------------------         -------------------------------
     Name: John Van Engelen                 Name: Glenn Engel
     Title: President                       Title:  Vice President
     Date: March 31, 2006                   Date: March 16, 2006
     Location: Topeka, KS                   Location:  Wilton, CT

     Attest:                                Attest:

      /s/ Cindy Peters                       /s/ Dale Predmore
     ----------------------------------     -----------------------------------
     Name: Cindy Peters                     Name:  Dale Predmore
     Title: Accounting Clerk                Title:  Vice President
     Date: March 31, 2006                   Date: March 16, 2006
     Location: Topeka, KS                   Location:  Wilton, CT

                                       37
<PAGE>

                                                                       EXHIBIT A
                                                                Retention Limits

It is understood  that the amount  retained by the Ceding  Company  includes its
retention under any in-force policies without the benefit of other reinsurance.

--------------------------------------------------------------------------------
                                                                             A.1
Life Insurance - Maximum Limits of Retention

    Issue Ages          Company Retention
-------------------- -------------------------

       50-85             $12,500

-------------------- -------------------------

The Ceding  Company  will retain  fifty  percent  (50%) of each policy up to the
maximum dollar  retention limits set forth above and cede fifty percent (50%) to
the  Reinsurer.  No further  reinsurance  of the Company  Retention  without the
Reinsurer's prior written consent.

                                       38
<PAGE>

                                                                       EXHIBIT B
                                                Plans Covered and Binding Limits

The business automatically reinsured under this Agreement is defined as follows.

--------------------------------------------------------------------------------
PLANS                                                                        B.1
Subject  to the other  terms,  conditions  and  limitations  of this  Agreement,
policies issued on plans with effective dates within the applicable period shown
below may qualify for automatic reinsurance under the terms of this Agreement:

Golden Eagle Simplified Issue Whole Life

--------------------------------------------------------------------------------
BASIS                                                                        B.2
The  Reinsurer's  share will be fifty  percent (50%) of the total face amount of
each policy on a first  dollar  quota share  basis.  This share  amount will not
exceed the Reinsurer's  share of the maximum  Automatic Binding Limits specified
in Exhibit B.3.

--------------------------------------------------------------------------------
AUTOMATIC ISSUE LIMITS                                                       B.3

  Issue Ages     Maximum Policy Face Amount
---------------- ----------------------------

     50-85            $25,000
---------------- ----------------------------

The  maximum   automatic  issue  amounts  above  include  the  Ceding  Company's
retention.

--------------------------------------------------------------------------------
MAXIMUM ISSUE AGE                                                            B.4

85 Age Nearest Birthday

--------------------------------------------------------------------------------
RESIDENCY                                                                    B.5

This agreement includes risks in the following  territories:  the United States,
its Territories and Canada.

--------------------------------------------------------------------------------
CONDITIONAL RECEIPT OR TEMPORARY INSURANCE AGREEMENT                         B.6

The amount of such  coverage  provided by the  Reinsurer  will be limited to its
share of the  following  amounts  provided by the Ceding  Company's  Conditional
Receipt or Temporary Insurance Agreement but not to exceed the lesser of (i) the
Reinsurer's  share of $1000 or (ii) the Reinsurer's  share of the amount of life
insurance provided by the Conditional Receipt or Temporary Insurance Agreement.

--------------------------------------------------------------------------------
CESSION LIMITS                                                               B.7

(a)  Minimum Initial Cession: $1,250 per life. See Section 12.3

(b)  Dormant Agreement  Termination Amount: first year reported premiums of less
     than $50,000 for two consecutive calendar quarters. See Section 20.1

                                       39
<PAGE>

                                                                       EXHIBIT C
                                             Policy Premiums, Expenses and Rates

--------------------------------------------------------------------------------
LIFE                                                                         C.1
Plans  covered  under this  Agreement  will be  reinsured on a 50/50 quota share
basis.

--------------------------------------------------------------------------------
POLICY COMMISSIONS, FEES, EXPENSES AND TAXES                                 C.2

Commissions:        The Reinsurer shall pay its share of the actual  commissions
                    paid by the Ceding Company up to a maximum  reimbursement of
                    the following  percentages  applied to the Reinsurer's share
                    of the policy premium:

----------------- -------------- -------------- -------------- --------------
   Issue Age         Year 1        Years 2-3     Years 4-10      Years 11+

----------------- -------------- -------------- -------------- --------------
    50 - 80           110%            8%             8%             2%
----------------- -------------- -------------- -------------- --------------
    81 - 85            65%            8%             8%             2%
----------------- -------------- -------------- -------------- --------------

                    Gross  commissions to be annualized  during the first policy
                    year and will be charged  back on death or lapse  whether or
                    not the Ceding  Company  has been able to  recover  any such
                    commissions  from agents.  For deaths  occurring  during the
                    first 6 months,  50% of the commission paid by the Reinsurer
                    to the Ceding  Company will be  recoverable by the Reinsurer
                    with the recovery  percentage  grading evenly to 0% after 11
                    months.  For a lapse  during the first  twelve  months after
                    policy issuance, 50% of the commission will be recoverable.

                    The Reinsurer will not be responsible for any  uncollectible
                    agent debit  balances.  Reinsurer  consent  required for any
                    affiliate distribution agreement.

                    The Reinsurer  and the Ceding  Company will work together to
                    reprice  the  business   reinsured   hereunder  on  mutually
                    agreeable  terms  with an  expected  effective  date for the
                    repricing  to be January 1, 2006.  However,  the parties are
                    under no  obligation  to agree on  repricing  terms.  If the
                    parties  are  unable  to  agree  on  repricing   terms,  the
                    remaining terms and conditions of this Agreement will remain
                    in effect.  Pending repricing,  aggregate ceded premiums not
                    to exceed $750,000. Policies bound after the aggregate ceded
                    premium cap of $750,000 has been  reached are not  reinsured
                    hereunder.

Policy Fees:        The Ceding Company will pay the Reinsurer its  proportionate
                    share of the policy fee.

Expenses:           The  Reinsurer  will  only   participate  in  the  following
                    expenses and only for the following specified amounts:

                    Policy Issuance: $25.50 per policy (equal to Reinsurer's 50%
                    share of $51.00 per policy issued)

                                       40
<PAGE>

                    Per $1,000 Face Amount  Issued:  $0.45 (equal to Reinsurer's
                    50% share of $0.90 per 1,000 reinsured)

                    1st Year Premium:  14.1% (equal to Reinsurer's  50% share of
                    28.2% of 1st year premium ceded)

                    Policy  Maintenance:  $9.00 per policy (equal to Reinsurer's
                    50% of the expense assumption of $18.00 per policy inforce).

                    There will be no expense inflation adjustment.

--------------------------------------------------------------------------------
RECAPTURE                                                                   C.4
The business reinsured hereunder is not eligible for recapture.

--------------------------------------------------------------------------------
RIDERS AND BENEFITS                                                         C.5
No riders are reinsured hereunder.

                                       41
<PAGE>

--------------------------------------------------------------------------------
POLICY PREMIUM RATES                                                         C.6

                                       42
<PAGE>

                                                                       EXHIBIT D
                                                     Self-Administered Reporting

--------------------------------------------------------------------------------
REPORTING REQUIRED                                                           D.1

The Ceding Company will self-administer all reinsurance reporting.

Timely  and  accurate  reporting  of  treaty-related  information  is a material
element  of  the  Ceding  Company's   responsibilities   under  this  Agreement.
Consistent and material  non-compliance with reporting  requirements,  including
extended delays,  shall constitute a material breach of this Agreement entitling
the Reinsurer to rescind the coverage provided hereby. First time reporting must
be received no later than 12 months after  commencement  of reinsurance  for the
Reinsurer to be considered on the risk

The  Ceding   Company  uses  an  Excel   spreadsheet  to  administer  its  ceded
reinsurance.  The Ceding  Company  will  cooperate  with the  Reinsurer  and its
representatives  in developing  efficient and reliable data  interfaces  for the
regular  reporting of data under this  Agreement  and will apprise the Reinsurer
when it makes material changes to its processing of information hereunder.

The  information and data to be supplied by the Ceding Company will be delivered
in the format specified in this Schedule F and otherwise as mutually agreed. The
Ceding  Company agrees that it will deliver  electronically  to the Reinsurer in
formats to be mutually agreed each of the following reports in the frequency and
by the times  specified below as well as such other  information  concerning the
business and  policies  reinsured as the  Reinsurer  shall  request from time to
time. For electronic files, in the event of delays or significant changes in the
information  provided,  particularly  in file  layouts and in data  vlaues,  the
Reinsurer  must be  informed  at least one month in advance of the  change.  The
expectation  is that the  structure  of these  files is  stable  from  period to
period.  Information must meet the quality standards set out by the Reinsurer in
terms of timeliness, accuracy and consistency.

The   following   specifies  the  reports,   required   frequency  and  detailed
specifications of seriatim policy data file elements:

Periodic Reports
1.   New Business               Monthly, 15 days after month end
2.   First Year                 Monthly, 15 days after month end
     (Other than New Business)
3.   Renewal Year               Monthly, 15 days after month end
4    Changes and Terminations   Monthly, 15 days after month end
5.   In Force                   Quarterly, 15 days after quarter end
     (Listing of each in-force
     policy)
6.   Accounting Information     Monthly, 15 days after month end (see attached
                                form F.2)
7.   Statutory Reserve
     Information                Quarterly, 21 days after quarter end (see
                                attached form F.3)
8.   Policy Exhibit Information Monthly, 15 days after month end (see attached
                                form F.4)
9.   Reserve Certification      Annually, October 31
     (See attached Form F.3)
10.  Tax Reserve Certification  Annually, June 1
     (See attached Form F.4)
11.  DAC Tax Reporting
     (See attached Form F.6)    Annually, April 1
12.  All Board of Director  Materials At the same time that they are provided to
     the Ceding Company's directors.

Specifications
1.   New Business
This report will include new issues only,  the first time the policy is reported
to  the  Reinsurer.  Automatic  and  Facultative  business  will  be  identified
separately.

2.   First Year - Other than New Business
This report will include policies previously reported on the new business detail
and still in their first  duration,  or policies  involved in first year premium
adjustments.

3.   Renewal Year
All policies with renewal dates within the Accounting Period will be listed.

4.   Changes and Terminations

                                       43
<PAGE>

Policies  affected  by a change  during the  current  reporting  period  will be
included in this report. Type of change or termination  activity must be clearly
identified for each policy.

The Ceding Company will identify the following  transactions  either by separate
listing or unique  transaction  codes:  Terminations,  Reinstatements,  Changes,
Conversions,  and  Replacements.  For Conversions and  Replacements,  the Ceding
Company will report the  original  policy  date,  as well as the current  policy
date.

5.   In Force
This is a detailed report of each policy in force.

6.   Accounting Information
Premiums and allowances  will be summarized for Life  coverages,  Benefits,  and
Riders by the following categories: First Year and Renewals.

7.   Statutory Reserve Information
Statutory  reserves will be summarized for Life coverages,  Benefits and Riders.
The Ceding Company will specify the reserve basis used.

8.   Policy Exhibit Information
This  is  a  summary  of  transactions  during  the  current  period  and  on  a
year-to-date basis, reporting the number of policies and reinsured amount.

9.   Reserve Certification
The Ceding Company will provide a reserve  summary for business  reinsured under
this agreement and its X-factors to the Reinsurer on an annual basis, along with
a detailed  description  of its reserving  assumptions  and any changes in these
assumptions  applicable  to each  calendar  year.  This annual  report will also
include  the  Ceding  Company's  Actuarial  Report  in  support  of its X factor
Opinion.

10.  Tax Reserve Certification
The Ceding  Company  will provide a tax reserve  summary for business  reinsured
under this agreement including reserve basis,  table,  interest rate and method.
Accrued DAC Tax reporting per F.6.

11.  Seriatim Policy Data File Elements are listed on form F.5.

12.  Concentrations
The Ceding  Company will notify the  Reinsurer  when it is aware that a group of
individuals is written where the  concentration of the group in a given zip code
and/or postal code is greater than $25 million as measured by the sum of the Net
Amount at Risk to be ceded to the Reinsurer.

13.  Certain Other Reporting Commitments
See the  specific  reporting  obligations  set  forth in  Sections  5.1 and 5.2,
Article 7 (preamble), Article 8, Article 10, Sections 12.6 and 12.7, Article 13.

                                       44
<PAGE>

--------------------------------------------------------------------------------
FORM OF SUMMARY ACCOUNTING REPORT AND POLICY EXHIBIT INFORMATION             D.2

                                    Wilton Re
              SELF ADMINISTERED REINSURANCE SUMMARY REPORTING FORM

Ceding Company                            Reinsurer

Treaty/Account #                          Reporting Period

Coin      YRT      Mod Co      Other      Interest Sensitive: Yes      No
     ---      ---         ---       ---                           ---     ---

Reinsurance Premium Mode:  Monthly      Quarterly      Annual      //
                                  ----           ----        ----
In Advance      In Arrears
          ----            ----

Reinsurance Reporting Mode:   Monthly      Quarterly       Annual
                                     ----            ----         ----

Contact                     Date                 Phone #

<TABLE>
<CAPTION>
<S>        <C>        <C>          <C>           <C>                      <C>          <C>

----------------------------------------------------------------------------------------------------
                             SECTION I - ACCOUNTING
                      --------------------------------------------------- ------------ -------------
                            * * Premiums * *       * * Allowances * *     * *Other * *
                                                                               *
                      --------------------------------------------------- --------------------------
                      ------------ ------------- ---------- -------------------------- -------------
                      First Year   Renewal Year    First           Renewal Year             Net
                                                   Year
                      ------------ ------------- ---------- ------------- ------------ -------------
Life
                      ------------ ------------- ---------- ------------- ------------ -------------
ADB
                      ------------ ------------- ---------- ------------- ------------ -------------
Waiver of Premium
                      ------------ ------------- ---------- ------------- ------------ -------------
TOTAL
----------- --------- ------------ ------------- ---------- ------------- ------------ -------------

----------------------------------------------------------------------------------------------------
                        SECTION II - RESERVE INFORMATION
----------------------------------------------------------------------------------------------------
Amount of Rein (000)                                   Reserves Reinsured

----------- ---------    Issue     ------------- ---------- ------------- ------------ -------------
   Life       ADB        Year          Life         ADB        Waiver       Subst'd     Deficiency
----------- --------- ------------ ------------- ---------- ------------- ------------ -------------

----------- --------- ------------ ------------- ---------- ------------- ------------ -------------

----------- --------- ------------ ------------- ---------- ------------- ------------ -------------

----------- --------- ------------ ------------- ---------- ------------- ------------ -------------

----------------------------------------------------------------------------------------------------
                    SECTION III - POLICY EXHIBIT INFORMATION

                                         Current Period                          Year to Date
                                   ------------- ----------               ------------ -------------
                                      No. of     Amt. of *                    No. of      Amt. of *
                                     Policies      Rein                      Policies     Rein (000)
                                                   (000)
                                   ------------- ----------               ------------ -------------
A. Inforce Beg. of Period                                         A.
                                   ------------- ----------               ------------ -------------
    1. New Business                                               1.
                                   ------------- ----------               ------------ -------------
    2. Conversions/Replacements On                                2.
                                   ------------- ----------               ------------ -------------
    3. Reinstatements                                             3.
                                   ------------- ----------               ------------ -------------
    4. Other Increases                                            4.
                                   ------------- ----------               ------------ -------------
    5. Not Takens                                                 5.
                                   ------------- ----------               ------------ -------------
  a) Total Inc (1+2+3+4-5)                                        a)
                                   ------------- ----------               ------------ -------------
    6. Deaths                                                     6.
                                   ------------- ----------               ------------ -------------
    7. Conversions/Replacements Off                               7.
                                   ------------- ----------               ------------ -------------
    8. Lapses                                                     8.
                                   ------------- ----------               ------------ -------------
    9. Surrenders                                                 9.
                                   ------------- ----------               ------------ -------------
   10. Expiry                                                     10.
                                   ------------- ----------               ------------ -------------
   11. Recaptures                                                 11.
                                   ------------- ----------               ------------ -------------
   12. Other Decreases                                            12.
                                   ------------- ----------               ------------ -------------
 b) Total Dec (6+7+8+9+10+11+12)                                  b)
                                   ------------- ----------               ------------ -------------
B. Inforce End of Period                                          B.
                                   ------------- ----------               ------------ -------------

</TABLE>

                                       45
<PAGE>

--------------------------------------------------------------------------------
FORM OF STATUTORY RESERVE REPORT AND ANNUAL RESERVE CERTIFICATION            D.3

          Valuation Statutory Reserves for Business Ceded to Wilton Re

                                  Company Name
                                Treaty Reference

Inforce and Reserves at:  MM/DD/YYYY

Plan:                                    Type: SM/NSM/AGGR/TOTAL

Inforce Reinsured Amount:

Inforce Number of Policies:

Valuation Reserve at:  MM/DD/YYYY

Type
                                         Reserve Amount         Reserve Basis
                                                                (Table, interest
                                                                rate and method

Active Life Reserve
Unearned Premium Reserve
Disabled Life Reserve
Incurred But Not Reported (IBNR)
Due and Unpaid Claims (D&U)
In Course Of Settlement Claims (ICOS)
Other** (specify)
Total

** If credit for  deficiency  reserves  is being  taken,  please  specify  under
"other"

As the  valuation  actuary  of the  above  named  company  I  certify  that  the
information above is correct as shown. *

Name:
Signature:
Actuarial Designation:
Date:

* Required only for Year-End Valuation Reserves

                                       46
<PAGE>

--------------------------------------------------------------------------------
FORM OF ANNUAL TAX RESERVE CERTIFICATION                                     D.4

            Tax Reserve Certification for Business Ceded to Wilton Re

                                  Company Name
                                Treaty Reference

Inforce and Reserves at:  MM/DD/YYYY

Plan:                                    Type: SM/NSM/AGGR/TOTAL

Inforce Reinsured Amount:

Inforce Number of Policies:

Tax Reserve at:  MM/DD/YYYY

Type

                                             Reserve Amount     Reserve Basis
                                                                (Table, interest
                                                                rate and method)

Active Life Reserve
Unearned Premium Reserve
Disabled Life Reserve
Incurred But Not Reported (IBNR)
Due and Unpaid Claims (D&U)
In Course Of Settlement Claims (ICOS)
Other** (specify)
Total

** If credit for  deficiency  reserves  is being  taken,  please  specify  under
"other"

                                       47
<PAGE>

--------------------------------------------------------------------------------
PERIODIC SERIATIM POLICY FILE DATA ELEMENTS                                  D.5

<TABLE>
<CAPTION>
<S>                                                                    <C>

                   Data                                                           Data Description
         ADB Premium*                                                  Amount of ADB premium
         Benefit Type                                                  Defines the benefit type
         Date of Birth                                                 Insured's date of birth
         Direct Face Amount                                            Amount of direct writer's policy face
         Disability/Waiver Allowance*                                  Amount of Waiver allowance
         Disability/Waiver Premium*                                    Amount of Waiver premium
         Flat Extra Allowance*                                         Amount of flat extra allowance
         Flat Extra Period                                             Duration in years of flat extra
         Flat Extra Premium*                                           Amount of flat extra premium
         Insured's Full Name                                           Last Name, First Name, Middle Name
         Issue Age                                                     Age of insured at policy issue as
                                                                       determined by treaty's age basis
                                                                       method
         Joint Issue Age                                               Insurance Age for a joint case using
                                                                       the Joint Equal Age basis method
         Joint Last Survivor Age Basis                                 Method used for calculating the
                                                                       insurance age(s) for a JLS product
         Joint Life Indicator                                          Whether policy has joint life coverage
         Net Amount At Risk                                            Amount of current net risk (NAR)
         Plan Code                                                     Code associated to plan name
         Plan Name                                                     Client plan name
         Policy Fee*                                                   Amount of policy fee
         Policy Issue Date                                             Month, day and year policy issued
         Policy Number                                                 Unique policy identifier
         Reinsured Face Amount                                         Amount of reinsurance face
         Reporting Date                                                Client billing period
         Residence State                                               Primary state of residence of insured
         Retained Amount                                               Amount of policy face retained by
                                                                       direct writer
         Second Insured's Name (Joint)                                 Last Name, First Name, Middle Name
         Sex                                                           Insured's sex
         Smoker Code                                                   Code identifying the smoker class of the
                                                                       insured indicating the applicable rate
                                                                       table utilized
         Social Security Number                                        Government issued identifier
         Standard Allowance*                                           Amount of standard allowance
         Standard Premium*                                             Amount of standard premium
         Substandard Allowance*                                        Amount of substandard allowance
         Substandard Premium*                                          Amount of substandard premium
         Table Rating                                                  Percentage of standard mortality
                                                                       assigned to a life by the underwriter
         Transaction Code                                              Code assigned by client to identify the
                                                                       specific type of reinsurance transaction
         Treaty Code                                                   Unique code assigned by client to
                                                                       identify the contract or set of rates that
                                                                       the coverage applies to
         Underwriting Risk Classification                              Underwriter's determination of the
                                                                       classification of an insured (i.e. Standard,,
                                                                       Preferred, etc.)
         Zip Code                                                      Postal code of insured

</TABLE>

                                       48
<PAGE>

--------------------------------------------------------------------------------
ANNUAL DAC TAX CERTIFICATION                                                 D.6

                                                      DAC TAX NET CONSIDERATION*
                                                      FOR THE YEAR ENDING [    ]
Type of Business:[ ]Individual Life & Health:[ ]Annuities:[ ] Group Credit/Life

Traety Reference Number:

Treaty Effective Date:[Enter Date]

Reinsurer:[Enter Reinsurer]

--------------------------------------------------------------------------------
DAC TAX CALCULATION

Reinsurance Premiums:                                   [Enter Premium]

Less Deductions from Reinsurance Premiums
Commission and Expense Allowances      [Enter]
Death Claims                           [Enter]
Claim Interest                         [Enter]
Surrender Benefits                     [Enter]
Dividends                              [Enter]
Experience Refunds                     [Enter]
Premium Taxes                          [Enter]
Other #                                [Enter]

               Total Deductions:                        [Enter Deductions]

Net Consideration:                     [Enter]

* To be reported in conformity with Section 848 of the Internal Revenue Code
# Includes items such as modco adjustments,  claim investigation/legal expenses,
waiver of premium claims, etc.

Ceding Company:[Enter Ceding Company]

Signed by:[Enter]

Title:[Enter]

Signature:
           -----------------------------------------

                                       49
<PAGE>EXHIBIT 4.1

================================================================================

                                                               EXECUTION VERSION

                                CREDIT AGREEMENT

                                   dated as of
                                 March 29, 2006

                                      among

                               GASCO ENERGY, INC.,
                                   as Borrower

                        CERTAIN SUBSIDIARIES OF BORROWER,
                                  as Guarantors

                            The Lenders Party Hereto

                           JPMORGAN CHASE BANK, N.A.,
                             as Administrative Agent

                      J.P. MORGAN SECURITIES INC., as Sole
                          Bookrunner and Lead Arranger

              $250,000,000 Senior Secured Revolving Credit Facility

================================================================================

<PAGE>

                                TABLE OF CONTENTS

Article I  Definitions.........................................................1
       Section 1.01.      Defined Terms........................................1
       Section 1.02.      Types of Loans and Borrowings.......................22
       Section 1.03.      Terms Generally.....................................22
       Section 1.04.      Accounting Terms; GAAP..............................22
       Section 1.05.      Oil and Gas Definitions.............................22

Article II  The Credits.......................................................23
       Section 2.01.      Commitments.........................................23
       Section 2.02.      Termination and Reduction of the Aggregate
                            Commitment........................................23
       Section 2.03.      Loans and Borrowings................................24
       Section 2.04.      Requests for Borrowings.............................24
       Section 2.05.      Letters of Credit...................................25
       Section 2.06.      Funding of Borrowings...............................29
       Section 2.07.      Interest Elections..................................30
       Section 2.08.      Repayment of Loans; Evidence of Debt................31
       Section 2.09.      Optional Prepayment of Loans........................32
       Section 2.10.      Mandatory Prepayment of Loans.......................32
       Section 2.11.      Fees................................................33
       Section 2.12.      Interest............................................34
       Section 2.13.      Alternate Rate of Interest..........................35
       Section 2.14.      Increased Costs.....................................35
       Section 2.15.      Break Funding Payments..............................37
       Section 2.16.      Taxes...............................................37
       Section 2.17.      Payments Generally; Pro Rata Treatment; Sharing of
                            Set-offs..........................................38
       Section 2.18.      Mitigation Obligations; Replacement of Lenders......40

Article III  Borrowing Base...................................................41
       Section 3.01.      Reserve Report; Proposed Borrowing Base.............41
       Section 3.02.      Scheduled Redeterminations of the Borrowing Base;
                            Procedures and Standards..........................42
       Section 3.03.      Special Redeterminations............................43
       Section 3.04.      Notice of Redetermination...........................43

Article IV  Representations and Warranties....................................43
       Section 4.01.      Organization; Powers................................43
       Section 4.02.      Authorization; Enforceability.......................44
       Section 4.03.      Governmental Approvals; No Conflicts................44
       Section 4.04.      Financial Condition; No Material Adverse Change.....44
       Section 4.05.      Properties..........................................44
       Section 4.06.      Litigation and Environmental Matters................45

                                       i
<PAGE>

       Section 4.07.      Compliance with Laws and Agreements.................45
       Section 4.08.      Investment Company Status...........................45
       Section 4.09.      Taxes...............................................46
       Section 4.10.      ERISA...............................................46
       Section 4.11.      Disclosure..........................................46
       Section 4.12.      Capitalization; Corporate Information...............46
       Section 4.13.      Margin Stock........................................46
       Section 4.14.      Oil and Gas Interests...............................46
       Section 4.15.      Insurance...........................................47
       Section 4.16.      Solvency............................................47

Article V  Conditions.........................................................48
       Section 5.01.      Effective Date......................................48
       Section 5.02.      Each Credit Event...................................50

Article VI  Affirmative Covenants.............................................51
       Section 6.01.      Financial Statements; Other Information.............51
       Section 6.02.      Notices of Material Events..........................53
       Section 6.03.      Existence; Conduct of Business......................54
       Section 6.04.      Payment of Obligations..............................54
       Section 6.05.      Maintenance of Properties; Insurance................54
       Section 6.06.      Books and Records; Inspection Rights................54
       Section 6.07.      Compliance with Laws................................54
       Section 6.08.      Use of Proceeds and Letters of Credit...............55
       Section 6.09.      Mortgages...........................................55
       Section 6.10.      Title Data..........................................55
       Section 6.11.      Operation of Oil and Gas Interests..................55
       Section 6.12.      Restricted Subsidiaries.............................56
       Section 6.13.      Pledged Equity Interests............................56

Article VII  Negative Covenants...............................................57
       Section 7.01.      Indebtedness........................................57
       Section 7.02.      Liens...............................................58
       Section 7.03.      Fundamental Changes.................................59
       Section 7.04.      Investments, Loans, Advances, Guarantees and
                            Acquisitions......................................60
       Section 7.05.      Swap Agreements.....................................61
       Section 7.06.      Restricted Payments.................................62
       Section 7.07.      Transactions with Affiliates........................62
       Section 7.08.      Restrictive Agreements..............................62
       Section 7.09.      Disqualified Stock..................................63
       Section 7.10.      Amendments to Organizational Documents and JVEA
                            Documents.........................................63
       Section 7.11.      Financial Covenants.................................63
       Section 7.12.      Sale and Leaseback Transactions and other Off-Balance
                            Sheet Liabilities.................................63
       Section 7.13.      Convertible Notes Restrictions......................63

                                       ii
<PAGE>

Article VIII  Guarantee of Obligations........................................64
       Section 8.01.      Guarantee of Payment................................64
       Section 8.02.      Guarantee Absolute..................................64
       Section 8.03.      Guarantee Irrevocable...............................65
       Section 8.04.      Reinstatement.......................................65
       Section 8.05.      Subrogation.........................................65
       Section 8.06.      Subordination.......................................65
       Section 8.07.      Payments Generally..................................66
       Section 8.08.      Setoff..............................................66
       Section 8.09.      Formalities.........................................66
       Section 8.10.      Limitations on Guarantee............................66

Article IX  Events of Default.................................................67

Article X  The Administrative Agent...........................................69

Article XI  Miscellaneous.....................................................71
       Section 11.01.     Notices.............................................71
       Section 11.02.     Waivers; Amendments.................................72
       Section 11.03.     Expenses; Indemnity; Damage Waiver..................73
       Section 11.04.     Successors and Assigns..............................75
       Section 11.05.     Survival............................................78
       Section 11.06.     Counterparts; Integration; Effectiveness............78
       Section 11.07.     Severability........................................79
       Section 11.08.     Right of Setoff.....................................79
       Section 11.09.     GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF
                           PROCESS............................................79
       Section 11.10.     WAIVER OF JURY TRIAL................................80
       Section 11.11.     Headings............................................80
       Section 11.12.     Confidentiality.....................................80
       Section 11.13.     Interest Rate Limitation............................81
       Section 11.14.     USA PATRIOT Act.....................................81

                                       iii
<PAGE>

EXHIBITS:

Exhibit A -- Form of Assignment and Assumption
Exhibit B -- Form of Opinion of Borrower's Counsel
Exhibit C - Form of Counterpart Agreement
Exhibit D - Form of Solvency Certificate

SCHEDULES:

Schedule 2.01 - Applicable Percentages and Initial Commitments Schedule 4.06 --
Disclosed Matters Schedule 4.12 - Capitalization and Corporate Information
Schedule 6.10 - Title Curative Matters Schedule 7.01 -- Existing Indebtedness
Schedule 7.02 -- Existing Liens Schedule 7.07 - Transactions with Affiliates

                                       iv
<PAGE>

CREDIT  AGREEMENT  dated as of March 29,  2006,  among GASCO  ENERGY,  INC.,  as
Borrower,  CERTAIN  SUBSIDIARIES OF BORROWER,  as Guarantors,  the LENDERS party
hereto, and JPMORGAN CHASE BANK, N.A., as Administrative Agent.

                  The parties hereto agree as follows:

Article I

                                   Definitions

Section 1.01.     Defined Terms.  As used in this Agreement, the following terms
have the meanings specified below:

                  "ABR", when used in reference to any Loan or Borrowing, refers
to whether such Loan, or the Loans comprising such Borrowing, are bearing
interest at a rate determined by reference to the Alternate Base Rate.

                  "Acquisition" means, the acquisition by the Borrower or any
Restricted Subsidiary, whether by purchase, merger (and, in the case of a merger
with any such Person, with such Person being the surviving corporation) or
otherwise, of all or substantially all of the Equity Interest of, or the
business, property or fixed assets of or business line or unit or a division of,
any other Person primarily engaged in the business of producing oil or natural
gas or the acquisition by such Person of property or assets consisting of Oil
and Gas Interests.

                  "Adjusted LIBO Rate" means, with respect to any Eurodollar
Borrowing for any Interest Period, an interest rate per annum (rounded upwards,
if necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such
Interest Period multiplied by (b) the Statutory Reserve Rate.

                  "Administrative Agent" means JPMorgan Chase Bank, N.A., in its
capacity as contractual representative of the Lenders hereunder pursuant to
Article X and not in its individual capacity as a Lender, and any successor
agent appointed pursuant to Article X.

                  "Administrative Questionnaire" means an Administrative
Questionnaire in a form supplied by the Administrative Agent.

                  "Advance Payment Contract" means any contract whereby any
Credit Party either (a) receives or becomes entitled to receive (either directly
or indirectly) any payment (an "Advance Payment") to be applied toward payment
of the purchase price of Hydrocarbons produced or to be produced from Oil and
Gas Interests owned by any Credit Party and which Advance Payment is, or is to
be, paid in advance of actual delivery of such production to or for the account
of the purchaser regardless of such production, or (b) grants an option or right
of refusal to the purchaser to take delivery of such production in lieu of
payment, and, in either of the foregoing instances, the Advance Payment is, or
is to be, applied as payment in full for such production when sold and delivered

                                       1
<PAGE>

or is, or is to be, applied as payment for a portion only of the purchase price
thereof or of a percentage or share of such production; provided that inclusion
of the standard "take or pay" provision in any gas sales or purchase contract or
any other similar contract shall not, in and of itself, constitute such contract
as an Advance Payment Contract for the purposes hereof.

                  "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.

                  "Aggregate Commitment" means the amount equal to the lesser of
(i) the Maximum Facility Amount and (ii) the Borrowing Base, as such Aggregate
Commitment may be (a) reduced from time to time pursuant to Section 2.02, and
(b) reduced or increased from time to time as a result of a Redetermination of
the Borrowing Base pursuant to Article III.

                  "Aggregate Credit Exposure" means, as of any date of
determination, the sum of the outstanding principal amount of the Loans of all
Lenders as of such date, plus the aggregate LC Exposure of all Lenders as of
such date.

                  "Agreement" means this Credit Agreement, dated as of March 29,
2006 as it may be amended, supplemented or otherwise modified from time to time.

                  "Alternate Base Rate" means, for any day, a rate per annum
equal to the greatest of (a) the Prime Rate in effect on such day and (b) the
Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. Any change in
the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds
Effective Rate shall be effective from and including the effective date of such
change in the Prime Rate or the Federal Funds Effective Rate, respectively.

                  "Applicable Percentage" means, with respect to any Lender, the
percentage of the Aggregate Commitment represented by such Lender's Commitment.
The initial amount of each Lender's Applicable Percentage is as set forth on
Schedule 2.01. If the Aggregate Commitment has terminated or expired, the
Applicable Percentages shall be determined based upon the Aggregate Commitment
most recently in effect, giving effect to any assignments.

                  "Applicable Rate" means, for any day, with respect to any
Eurodollar Loan or ABR Loan, or with respect to the Unused Commitment Fees
payable hereunder, as the case may be, the applicable rate per annum set forth
below under the caption "Eurodollar Spread", "ABR Spread" or "Unused Commitment
Fee Rate", as the case may be, based upon the Borrowing Base Usage applicable on
such date:

                                       2
<PAGE>

--------------------- ------------ ------------- --------------
Borrowing Base Usage  Eurodollar   ABR           Unused
                                   ------------  Commitment
                      Spread       Spread        Fee Rate

--------------------  200 b.p.     75 b.p.       50 b.p.
> 90%

> 75% and < 90%       175 b.p.     50 b.p.       37.5 b.p.
-

 > 50% and < 75%       150 b.p.    25 b.p.       37.5 b.p.
 -

 < 50%                125 b.p.      0 b.p.       30 b.p.
--------------------- ------------ ------------- --------------

Each change in the Applicable Rate shall apply during the period commencing on
the effective date of such change and ending on the date immediately preceding
the effective date of the next change.
                  "Approved Counterparty" means, at any time and from time to
time, (i) any Person engaged in the business of writing Swap Agreements for
commodity, interest rate or currency risk that is acceptable to the
Administrative Agent and has (or the credit support provider of such Person
has), at the time Borrower or any Restricted Subsidiary enters into a Swap
Agreement with such Person, a long term senior unsecured debt credit rating of
BBB or better from S&P or Baal or better by Moody's and (ii) any Lender
Counterparty.

                  "Approved Fund" has the meaning assigned to such term in
Section 11.04.

                  "Approved Petroleum Engineer" means MHA Petroleum Consultants
Inc., Netherland, Sewell and Associates, Inc. or any other reputable firm of
independent petroleum engineers selected by the Borrower and acceptable to the
Administrative Agent and the Required Lenders.

                  "Assignment and Assumption" means an assignment and assumption
entered into by a Lender and an assignee (with the consent of any party whose
consent is required by Section 11.04), and accepted by the Administrative Agent,
in the form of Exhibit A or any other form approved by the Administrative Agent.

                  "Availability Period" means the period from and including the
Effective Date to but excluding the earlier of the Maturity Date and the date of
termination of the Aggregate Commitment.

                  "Board" means the Board of Governors of the Federal Reserve
System of the United States of America.

                  "Borrower" means Gasco Energy, Inc., a Nevada corporation, and
its successors and permitted assigns.

                  "Borrowing" means Loans of the same Type, made, converted or
continued on the same date and, in the case of Eurodollar Loans, as to which a
single Interest Period is in effect.

                                       3
<PAGE>

                  "Borrowing Base" means, at any time an amount equal to the
amount determined in accordance with Section 3.01, as the same may be
redetermined, adjusted or reduced from time to time pursuant to Section 3.02 and
Section 3.03.

                  "Borrowing Base Deficiency" means, as of any date, the amount,
if any, by which the Aggregate Credit Exposure on such date exceeds the
Borrowing Base in effect on such date; provided, that, for purposes of
determining the existence and amount of any Borrowing Base Deficiency,
obligations under any Letter of Credit will not be deemed to be outstanding to
the extent such obligations are secured by cash in the manner contemplated by
Section 2.05(j).

                  "Borrowing Base Properties" means all Oil and Gas Interests of
the Borrower and the Restricted Subsidiaries evaluated by the Lenders for
purposes of establishing the Borrowing Base.

                  "Borrowing Base Usage" means, as of any date and for all
purposes, the quotient, expressed as a percentage, of (i) the Aggregate Credit
Exposure as of such date, divided by (ii) the Borrowing Base in effect on such
date.

                  "Borrowing Request" means a request by the Borrower for a
Borrowing in accordance with Section 2.04.

                  "Bundle" has the meaning assigned to such term in the Joint
Value Enhancement Agreement as in effect on the date hereof or as subsequently
amended, modified or restated as permitted under this Agreement.

                  "Business Day" means any day that is not a Saturday, Sunday or
other day on which commercial banks in Chicago, Illinois are authorized or
required by law to remain closed; provided that, when used in connection with a
Eurodollar Loan, the term "Business Day" shall also exclude any day on which
banks are not open for dealings in dollar deposits in the London interbank
market.

                  "Capital Lease Obligations" of any Person means the
obligations of such Person to pay rent or other amounts under any lease of (or
other arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP,
and the amount of such obligations shall be the capitalized amount thereof
determined in accordance with GAAP.

                  "Change in Law" means (a) the adoption of any law, rule or
regulation after the date of this Agreement, (b) any change in any law, rule or
regulation or in the interpretation or application thereof by any Governmental
Authority after the date of this Agreement or (c) compliance by any Lender or
the Issuing Bank (or, for purposes of Section 2.14(b), by any lending office of
such Lender or by such Lender's or the Issuing Bank's holding company, if any)
with any request, guideline or directive (whether or not having the force of
law) of any Governmental Authority made or issued after the date of this
Agreement.

                  "Change of Control" means at any time, (a) the acquisition of
ownership, directly or indirectly, beneficially or of record, by any Person or

                                       4
<PAGE>

group (within the meaning of the Securities Exchange Act of 1934 and the rules
of the Securities and Exchange Commission thereunder as in effect on the date
hereof) of Equity Interests representing more than 35% of the aggregate ordinary
voting power represented by the issued and outstanding Equity Interests of the
Borrower; (b) occupation of a majority of the seats (other than vacant seats) on
the board of directors of the Borrower by Persons who were neither (i) nominated
by the board of directors of the Borrower nor (ii) appointed by directors so
nominated; or (c) the acquisition of direct or indirect Control of the Borrower
by any Person or group.

                  "Charges" has the meaning assigned to such term in Section
11.13.

                  "Code" means the Internal Revenue Code of 1986, as amended
from time to time.

                  "Commitment" means, with respect to each Lender, the
commitment of such Lender to make Loans and to acquire participations in Letters
of Credit hereunder, expressed as an amount representing the maximum aggregate
amount of such Lender's Credit Exposure hereunder, as such commitment may be (a)
reduced from time to time pursuant to Section 2.02, (b) reduced or increased
from time to time as a result of changes in the Borrowing Base pursuant to
Article III and (c) reduced or increased from time to time pursuant to
assignments by or to such Lender pursuant to Section 11.04. The initial amount
of each Lender's Commitment (which amount is such Lender's Applicable Percentage
of the initial Aggregate Commitment) is set forth in Schedule 2.01, or in the
Assignment and Assumption pursuant to which such Lender shall have assumed its
Commitment, as applicable.

                  "Consolidated Current Assets" means, as of any date of
determination, the total of (i) the consolidated current assets of the Borrower
and the Restricted Subsidiaries determined in accordance with GAAP as of such
date and calculated on a combined basis, plus, all Unused Commitments as of such
date, (ii) less any non-cash assets required to be included in consolidated
current assets of the Borrower and the Restricted Subsidiaries as a result of
the application of FASB Statement 133 as of such date.

                  "Consolidated Current Liabilities" means, as of any date of
determination, the total of (i) consolidated current liabilities of the Borrower
and the Restricted Subsidiaries, as determined in accordance with GAAP as of
such date, (ii) less current maturities of the Loans, (iii) less any non-cash
obligations required to be included in consolidated current liabilities of the
Borrower and the Restricted Subsidiaries as a result of the application of FASB
Statement 133 as of such date.

                  "Consolidated Current Ratio" means, as of any date of
determination, the ratio of Consolidated Current Assets to Consolidated Current
Liabilities as of such date.

                  "Consolidated EBITDAX" means, with respect to the Borrower and
its Consolidated Subsidiaries for any period, Consolidated Net Income for such
period; plus, without duplication and to the extent deducted in the calculation
of Consolidated Net Income for such period, the sum of (a) income or franchise
Taxes paid or accrued; (b) Consolidated Interest Expense; (c) amortization,
depletion and depreciation expense; (d) any non-cash losses or charges on any
Swap Agreement resulting from the requirements of FASB Statement 133 for that
period; (e) oil and gas exploration and development expenses (including all

                                       5
<PAGE>

drilling, completion, gathering, geological and geophysical costs) for such
period; (f) losses from sales or other dispositions of assets (other than
Hydrocarbons produced in the ordinary course of business) and other
extraordinary or non-recurring losses, (g) workover expenses for such period and
(h) other non-cash charges (excluding accruals for cash expenses made in the
ordinary course of business); minus, to the extent included in the calculation
of Consolidated Net Income for such period, (i) the sum of (1) any non-cash
gains on any Swap Agreements resulting from the requirements of FASB Statement
133 for that period; (2) extraordinary or non-recurring gains; and (3) gains
from sales or other dispositions of assets (other than Hydrocarbons produced in
the ordinary course of business); provided that, with respect to the
determination of Borrower's compliance with the leverage ratio set forth in
Section 7.11(b) for any period, Consolidated EBITDAX shall be calculated (which
calculations shall, in all respects, be acceptable to, and approved by the
Administrative Agent) to give effect, on a pro forma basis, to any Acquisitions
and dispositions of Oil and Gas Interests by the Borrower and its Consolidated
Subsidiaries made during such period as if such Acquisitions or dispositions
were made at the beginning of such period.

                  "Consolidated Funded Indebtedness" means, as of any date,
without duplication, Indebtedness of the Borrower and the Consolidated
Subsidiaries of the type described in clauses (a), (b), (c), (d), (e), (f), (g)
or (h) of the definition of Indebtedness.

                  "Consolidated Net Income" means for any period, the
consolidated net income (or loss) of the Borrower and its Consolidated
Subsidiaries, as applicable, determined on a consolidated basis in accordance
with GAAP; provided that there shall be excluded (a) the income (or deficit) of
any Person accrued prior to the date it becomes a Consolidated Subsidiary of the
Borrower, or is merged into or consolidated with the Borrower or any of its
Consolidated Subsidiaries, as applicable, and (b) the undistributed earnings of
any Consolidated Subsidiary of the Borrower, to the extent that the declaration
or payment of dividends or similar distributions by such Consolidated Subsidiary
is not at the time permitted by the terms of any contractual obligation (other
than under any Loan Document) or by any law applicable to such Consolidated
Subsidiary.

                  "Consolidated Interest Expense" means for any period, without
duplication, the aggregate of all interest paid or accrued by the Borrower and
its Consolidated Subsidiaries, on a consolidated basis, in respect of
Indebtedness of any such Person, on a consolidated basis, including all
interest, fees and costs payable with respect to the obligations related to such
Indebtedness (other than fees and costs which may be capitalized as transaction
costs in accordance with GAAP) and the interest component of Capitalized Lease
Obligations, all as determined in accordance with GAAP.

                  "Consolidated Subsidiaries" means, for any Person, any
Subsidiary or other entity the accounts of which would be consolidated with
those of such Person in its consolidated financial statements in accordance with
GAAP.

                  "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.

                                       6
<PAGE>

                  "Convertible Notes" means the 5 1/2 % Senior Convertible Notes
due 2011 of the Borrower issued pursuant to the Convertible Notes Indenture, as
amended, modified, supplemented or restated from time to time as permitted under
this Agreement.

                  "Convertible Notes Indenture" means that certain Indenture
dated as of October 20, 2004, between the Borrower and the Trustee, as amended,
modified, supplemented or restated from time to time as permitted under this
Agreement.

                  "Counterpart Agreement" means a Counterpart Agreement
substantially in the form of Exhibit C delivered by a Guarantor pursuant to
Section 6.12.

                  "Credit Exposure" means, with respect to any Lender at any
time, the sum of the outstanding principal amount of such Lender's Loans and its
LC Exposure at such time.

                  "Credit Parties" means collectively, Borrower, and each
Guarantor and each individually, a "Credit Party".

                  "Crude Oil" means all crude oil and condensate.

                  "Default" means any event or condition which constitutes an
Event of Default or which upon notice, lapse of time or both would, unless cured
or waived, become an Event of Default.

                  "Disclosed Matters" means the actions, suits and proceedings
and the environmental matters disclosed in Schedule 4.06.

                  "Disqualified Stock" means any Equity Interest which, by its
terms (or by the terms of any security into which it is convertible or for which
it is exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the sole option of the holder thereof, in whole or in part, on
or prior to the Maturity Date.

                  "Dollars" or "$" refers to lawful money of the United States
of America.

                  "Domestic Subsidiary" means, with respect to any Person, a
subsidiary of such Person that is incorporated or formed under the laws of the
United States of America, any state thereof or the District of Columbia.

                  "Effective Date" means the date on which the conditions
specified in Section 5.01 are satisfied (or waived in accordance with Section
11.02).

                  "Engineered Value" means, the value attributed to the
Borrowing Base Properties for purposes of the most recent Redetermination of the
Borrowing Base pursuant to Article III (or for purposes of determining the
Initial Borrowing Base in the event no such Redetermination has occurred), based
upon the discounted present value of the estimated net cash flow to be realized
from the production of Hydrocarbons from the Oil and Gas Interests as set forth
in the Reserve Report.

                                       7
<PAGE>

                  "Environmental Laws" means all laws, rules, regulations,
codes, ordinances, orders, decrees, judgments, injunctions, notices or binding
agreements issued, promulgated or entered into by any Governmental Authority,
relating in any way to the environment, preservation or reclamation of natural
resources, the management, release or threatened release of any Hazardous
Material or to health and safety matters.

                  "Environmental Liability" means any liability, contingent or
otherwise (including any liability for damages, costs of environmental
remediation, fines, penalties or indemnities), of any Credit Party directly or
indirectly resulting from or based upon (a) violation of any Environmental Law,
(b) the generation, use, handling, transportation, storage, treatment or
disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials,
(d) the release or threatened release of any Hazardous Materials into the
environment or (e) any contract, agreement or other consensual arrangement
pursuant to which liability is assumed or imposed with respect to any of the
foregoing.

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

                  "ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.

                  "ERISA Affiliate" means any trade or business (whether or not
incorporated) that, together with any Credit Party, is treated as a single
employer under Section 414(b) or (c) of the Code or, solely for purposes of
Section 302 of ERISA and Section 412 of the Code, is treated as a single
employer under Section 414 of the Code.

                  "ERISA Event" means (a) any "reportable event", as defined in
Section 4043 of ERISA or the regulations issued thereunder with respect to a
Plan (other than an event for which the 30-day notice period is waived); (b) the
existence with respect to any Plan of an "accumulated funding deficiency" (as
defined in Section 412 of the Code or Section 302 of ERISA), whether or not
waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d)
of ERISA of an application for a waiver of the minimum funding standard with
respect to any Plan; (d) the incurrence by any Credit Party or any of its ERISA
Affiliates of any liability under Title IV of ERISA with respect to the
termination of any Plan; (e) the receipt by any Credit Party or any ERISA
Affiliate from the PBGC or a plan administrator of any notice relating to an
intention to terminate any Plan or Plans or to appoint a trustee to administer
any Plan; (f) the incurrence by any Credit Party or any of its ERISA Affiliates
of any liability with respect to the withdrawal or partial withdrawal from any
Plan or Multiemployer Plan; or (g) the receipt by any Credit Party or any ERISA
Affiliate of any notice, or the receipt by any Multiemployer Plan from any
Credit Party or any ERISA Affiliate of any notice, concerning the imposition of
Withdrawal Liability or a determination that a Multiemployer Plan is, or is
expected to be, insolvent or in reorganization, within the meaning of Title IV
of ERISA.

                                       8
<PAGE>

                  "Eurodollar", when used in reference to any Loan or Borrowing,
refers to whether such Loan, or the Loans comprising such Borrowing, are bearing
interest at a rate determined by reference to the Adjusted LIBO Rate.

                  "Event of Default" has the meaning assigned to such term in
Article IX.

                  "Excluded Taxes" means, with respect to the Administrative
Agent, any Lender, the Issuing Bank or any other recipient of any payment to be
made by or on account of any obligation of the Borrower hereunder, (a) income or
franchise taxes imposed on (or measured by) its net income by the United States
of America, or by the jurisdiction under the laws of which such recipient is
organized or in which its principal office is located or, in the case of any
Lender, in which its applicable lending office is located, (b) any branch
profits taxes imposed by the United States of America or any similar tax imposed
by any other jurisdiction in which the Borrower is located and (c) in the case
of a Foreign Lender (other than an assignee pursuant to a request by the
Borrower under Section 2.18(b)), any withholding tax that is imposed on amounts
payable to such Foreign Lender at the time such Foreign Lender becomes a party
to this Agreement (or designates a new lending office) or is attributable to
such Foreign Lender's failure to comply with Section 2.16(e), except to the
extent that such Foreign Lender (or its assignor, if any) was entitled, at the
time of designation of a new lending office (or assignment), to receive
additional amounts from the Borrower with respect to such withholding tax
pursuant to Section 2.16(a).

                  "FASB" means Financial Accounting Standards Board.

                  "Federal Funds Effective Rate" means, for any day, the
weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Business Day, the average
(rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for
such day for such transactions received by the Administrative Agent from three
Federal funds brokers of recognized standing selected by it.

                  "Financial Officer" means the chief financial officer,
principal accounting officer, treasurer or controller of any Credit Party.

                  "Foreign Lender" means any Lender that is organized under the
laws of a jurisdiction other than that in which any Credit Party is located. For
purposes of this definition, the United States of America, each State thereof
and the District of Columbia shall be deemed to constitute a single
jurisdiction.

                  "GAAP" means generally accepted accounting principles in the
United States of America.

                  "Gas Balancing Agreement" means any agreement or arrangement
whereby the Borrower or any Restricted Subsidiary, or any other party having an
interest in any Hydrocarbons to be produced from Oil and Gas Interests in which
the Borrower or any Restricted Subsidiary owns an interest, has a right to take
more than its proportionate share of production therefrom.

                                       9
<PAGE>

                  "Gasco Production" means Gasco Production Company, a Delaware
corporation formerly known as Pannonian Energy, Inc., and its successors and
permitted assigns.

                  "Governmental Authority" means the government of the United
States of America, any other nation or any political subdivision thereof,
whether state or local, and any agency, authority, instrumentality, regulatory
body, court, central bank or other entity properly exercising executive,
legislative, judicial, taxing, regulatory or administrative powers or functions
of or pertaining to government.

                  "Guarantee" of or by any Person (in this definition, the
"guarantor") means any obligation, contingent or otherwise, of the guarantor
guaranteeing or having the economic effect of guaranteeing any Indebtedness or
other obligation of any other Person (the "primary obligor") in any manner,
whether directly or indirectly, and including any obligation of the guarantor,
direct or indirect, (a) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Indebtedness or other obligation or to purchase (or
to advance or supply funds for the purchase of) any security for the payment
thereof, (b) to purchase or lease property, securities or services for the
purpose of assuring the owner of such Indebtedness or other obligation of the
payment thereof, (c) to maintain working capital, equity capital or any other
financial statement condition or liquidity of the primary obligor so as to
enable the primary obligor to pay such Indebtedness or other obligation or (d)
as an account party in respect of any letter of credit or letter of guaranty
issued to support such Indebtedness or obligation; provided, that the term
Guarantee shall not include endorsements for collection or deposit in the
ordinary course of business.

                  "Guaranteed Liabilities" has the meaning assigned to such term
in Section 8.01.

                  "Guarantors" means, collectively, Gasco Production, Riverbend,
Myton and each other Restricted Subsidiary that hereafter executes and delivers
to the Administrative Agent and the Lenders, a Counterpart Agreement.

                  "Hazardous Materials" means all explosive or radioactive
substances or wastes and all hazardous or toxic substances, wastes or other
pollutants, including petroleum or petroleum distillates, asbestos or asbestos
containing materials, polychlorinated biphenyls, radon gas, infectious or
medical wastes and all other substances or wastes of any nature regulated
pursuant to any Environmental Law.

                  "Hydrocarbons" means all Crude Oil and Natural Gas produced
from or attributable to the Oil and Gas Interests of the Credit Parties.

                  "Indebtedness" of any Person means, without duplication, (a)
all obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person
upon which interest charges are customarily paid, (d) all obligations of such
Person under conditional sale or other title retention agreements relating to

                                       10
<PAGE>

property acquired by such Person, (e) all obligations of such Person in respect
of the deferred purchase price of property or services (excluding current
accounts payable incurred in the ordinary course of business), (f) all
Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien on
property owned or acquired by such Person, whether or not the Indebtedness
secured thereby has been assumed, (g) all Guarantees by such Person of
Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i)
all obligations, contingent or otherwise, of such Person as an account party in
respect of letters of credit and letters of guaranty and (j) all obligations,
contingent or otherwise, of such Person in respect of bankers' acceptances. The
Indebtedness of any Person shall include the Indebtedness of any other entity
(including any partnership in which such Person is a general partner) to the
extent such Person is liable therefor as a result of such Person's ownership
interest in or other relationship with such entity, except to the extent the
terms of such Indebtedness provide that such Person is not liable therefor.

                  "Indemnified Taxes" means Taxes other than Excluded Taxes.

                  "Indemnitee" has the meaning assigned to such term in Section
11.03.

                  "Information" has the meaning assigned to such term in Section
11.12.

                  "Initial Borrowing Base" has the meaning assigned to such term
in Section 3.01.

                  "Intercreditor Agreement" means the SLB Agreement and any
other Intercreditor Agreement among the Administrative Agent, Gasco Production,
and any other Service Party pursuant to Section 7.02(g), as amended, modified,
supplemented or restated from time to time.

                  "Interest Election Request" means a request by the Borrower to
convert or continue a Borrowing in accordance with Section 2.07.

                  "Interest Payment Date" means (a) with respect to any ABR
Loan, the last day of each calendar month, and (b) with respect to any
Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing
of which such Loan is a part and, in the case of a Eurodollar Borrowing with an
Interest Period of more than three months' duration, each day prior to the last
day of such Interest Period that occurs at intervals of three months' duration
after the first day of such Interest Period.

                  "Interest Period" means with respect to any Eurodollar
Borrowing, the period commencing on the date of such Borrowing and ending on the
numerically corresponding day in the calendar month that is one, two, three or
six months thereafter, as the Borrower may elect; provided, that (i) if any
Interest Period would end on a day other than a Business Day, such Interest
Period shall be extended to the next succeeding Business Day unless, in the case
of a Eurodollar Borrowing only, such next succeeding Business Day would fall in
the next calendar month, in which case such Interest Period shall end on the
next preceding Business Day and (ii) any Interest Period pertaining to a
Eurodollar Borrowing that commences on the last Business Day of a calendar month
(or on a day for which there is no numerically corresponding day in the last
calendar month of such Interest Period) shall end on the last Business Day of
the last calendar month of such Interest Period. For purposes hereof, the date
of a Borrowing initially shall be the date on which such Borrowing is made and
thereafter shall be the effective date of the most recent conversion or
continuation of such Borrowing.

                                       11
<PAGE>

                  "Issuing Bank" means JPMorgan Chase Bank, N.A., in its
capacity as the issuer of Letters of Credit hereunder, and its successors in
such capacity as provided in Section 2.05(i). The Issuing Bank may, in its
discretion, arrange for one or more Letters of Credit to be issued by Affiliates
of the Issuing Bank, in which case the term "Issuing Bank" shall include any
such Affiliate with respect to Letters of Credit issued by such Affiliate.

                  "Joint Value Enhancement Agreement" means the Joint Value
Enhancement Agreement dated January 16, 2004, among Gasco Production and the
Service Parties (other than MBG, LLC and MBGV Partition, LLC), as amended by
First Amendment dated July 31, 2004, and as further amended, supplemented,
restated or otherwise modified from time to time as permitted under this
Agreement.

                  "JVEA Documents" means, collectively, (i) the Joint Value
Enhancement Agreement, (ii) the Net Profits Purchase Agreement dated as of
August 6, 2004 among Gasco Production, Red Oak Capital Management, LLC, MBG, LLC
and MBGV Partition, LLC, as amended by Purchase Supplement dated August 20,
2004, and as further amended, supplemented, restated or otherwise modified from
time to time as permitted under this Agreement, (iii) the Security Agreement and
Financing Statement entered into as of August 20, 2004, among Gasco Production,
Red Oak Capital Management, LLC, MBG, LLC and MBGV Partition, LLC as amended,
supplemented, restated or otherwise modified from time to time as permitted
under this Agreement and (iv) any other agreement or instrument evidencing or
governing the terms of any Indebtedness or other obligations under the JVEA, or
any other agreement referred to in this clause (iii) including any assignment or
conveyance of a net profits interest to any Service Party, as amended,
supplemented, restated or otherwise modified from time to time as permitted
under this Agreement.

                  "LC Disbursement" means a payment made by the Issuing Bank
pursuant to a Letter of Credit.

                  "LC Exposure" means, at any time, the sum of (a) the aggregate
undrawn amount of all outstanding Letters of Credit at such time plus (b) the
aggregate amount of all LC Disbursements that have not yet been reimbursed by or
on behalf of the Borrower at such time. The LC Exposure of any Lender at any
time shall be its Applicable Percentage of the total LC Exposure at such time.

                  "Lender  Counterparty" means any Lender or any Affiliate of a
Lender counterparty to a Swap Agreement with any Credit Party.

                  "Lenders" means the Persons listed on Schedule 2.01 and any
other Person that shall have become a party hereto pursuant to an Assignment and
Assumption, other than any such Person that ceases to be a party hereto pursuant
to an Assignment and Assumption.

                  "Letter of Credit" means any letter of credit issued pursuant
to this Agreement and that certain irrevocable standby letter of credit, dated
December 27, 2005, issued for the account of the Borrower for the benefit of
Nabors Drilling USA, LP and any renewals or extensions of any such letter of
credit.

                                       12
<PAGE>

                  "LIBO Rate" means, with respect to any Eurodollar Borrowing
for any Interest Period, the rate appearing on Page 3750 of the Dow Jones Market
Service (or on any successor or substitute page of such Service, or any
successor to or substitute for such Service, providing rate quotations
comparable to those currently provided on such page of such Service, as
determined by the Administrative Agent from time to time for purposes of
providing quotations of interest rates applicable to dollar deposits in the
London interbank market) at approximately 11:00 a.m., London time, two Business
Days prior to the commencement of such Interest Period, as the rate for dollar
deposits with a maturity comparable to such Interest Period. In the event that
such rate is not available at such time for any reason, then the "LIBO Rate"
with respect to such Eurodollar Borrowing for such Interest Period shall be the
rate at which dollar deposits of $5,000,000 and for a maturity comparable to
such Interest Period are offered by the principal London office of the
Administrative Agent in immediately available funds in the London interbank
market at approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period.

                  "Lien" means, with respect to any asset, (a) any mortgage,
deed of trust, lien, pledge, hypothecation, encumbrance, charge or security
interest in, on or of such asset, (b) the interest of a vendor or a lessor under
any conditional sale agreement, capital lease or title retention agreement (or
any financing lease having substantially the same economic effect as any of the
foregoing) relating to such asset and (c) in the case of securities, any
purchase option, call or similar right of a third party with respect to such
securities.

                  "Loan Documents" means this Agreement, any promissory notes
executed in connection herewith, Security Instruments, the Letters of Credit
(and any applications therefore and reimbursement agreements related thereto),
the Fee Letter, any Intercreditor Agreement and any other agreements executed in
connection with this Agreement.

                  "Loans" means the loans made by the Lenders to the Borrower
pursuant to this Agreement.

                  "Material Adverse Effect" means a material adverse effect on
(a) the business, assets, operations, prospects or condition, financial or
otherwise, of the Borrower and its Restricted Subsidiaries taken as a whole, (b)
the ability of any Credit Party to perform any of its obligations under this
Agreement and the other Loan Documents to which it is a party, or (c) the rights
of or benefits available to the Lenders under this Agreement and the other Loan
Documents.

                  "Material Domestic Subsidiary" means any Domestic Subsidiary
that owns or holds assets, properties or interests (including Oil and Gas
Interests) with an aggregate fair market value, on a consolidated basis, greater
than ten percent (10%) of the aggregate fair market value of all of the assets,
properties and interests (including Oil and Gas Interests) of the Borrower and
the Subsidiaries, on a consolidated basis.

                  "Material Gas Imbalance" means, with respect to all Gas
Balancing Agreements to which Borrower or any Restricted Subsidiary is a party
or by which any Oil and Gas Interests owned by Borrower or a Restricted
Subsidiary is bound, a net overproduced gas imbalance to Borrower and the
Restricted Subsidiaries, taken as a whole, in excess of $1,000,000.

                                       13
<PAGE>

                  "Material Indebtedness" means Indebtedness permitted under
Section 7.01(h) and any other Indebtedness (other than the Loans and Letters of
Credit), or obligations in respect of one or more Swap Agreements, of the
Borrower or any one or more of the Restricted Subsidiaries in an aggregate
principal amount exceeding $1,000,000. For purposes of determining Material
Indebtedness, the "principal amount" of the obligations of the Borrower or any
Guarantor in respect of any Swap Agreement at any time shall be the maximum
aggregate amount (giving effect to any netting agreements) that the Borrower or
such Guarantor would be required to pay if such Swap Agreement were terminated
at such time.

                  "Material Sales Contract" means, as of any date of
determination, any agreement for the sale of Hydrocarbons from the Borrowing
Base Properties to which the Borrower or any Restricted Subsidiary is a party if
the aggregate volume of Hydrocarbons sold pursuant to such agreement during the
twelve months immediately preceding such date equals or exceeds 10% of the
aggregate volume of Hydrocarbons sold by the Borrower and the Restricted
Subsidiaries, on a consolidated basis, from the Borrowing Base Properties during
the twelve months immediately preceding such date.

                  "Maturity Date" means March 29, 2010.

                  "Maximum Facility Amount" means $250,000,000.

                  "Maximum Liability" has the meaning assigned to such term in
Section 8.10.

                  "Maximum Rate" has the meaning assigned to such term in
Section 11.13.

                  "Moody's" means Moody's Investors Service, Inc.

                  "Mortgaged Properties" means the Oil and Gas Interests
described in one or more duly executed, delivered and filed Mortgages evidencing
a first and prior Lien in favor of the Administrative Agent for the benefit of
the Secured Parties and subject only to the Liens permitted pursuant to Section
7.02.

                  "Mortgages" means all mortgages, deeds of trust, amendments to
mortgages, security agreements, assignments of production, pledge agreements,
collateral mortgages, collateral chattel mortgages, collateral assignments,
financing statements and other documents, instruments and agreements evidencing,
creating, perfecting or otherwise establishing the Liens required by Section
6.09. All Mortgages shall be in form and substance satisfactory to
Administrative Agent in its sole discretion

                  "Multiemployer Plan" means a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.

                  "Myton" means Myton  Oilfield  Rentals,  LLC, a Nevada limited
  liability  company and its  successors and permitted assigns.

                  "Natural Gas" means all natural gas, distillate or sulphur,
natural gas liquids and all products recovered in the processing of natural gas
(other than condensate) including, without limitation, natural gasoline, coalbed
methane gas, casinghead gas, iso-butane, normal butane, propane and ethane
(including such methane allowable in commercial ethane).

                                       14
<PAGE>

                  "Net Cash Proceeds" means, with respect to the sale of
Borrowing Base Properties by the Borrower or any Restricted Subsidiary, the
excess, if any, of (a) the sum of cash and cash equivalents received in
connection with such sale, but only as and when so received, over (b) the sum of
(i) the principal amount of any Indebtedness that is secured by such asset and
that is required to be repaid in connection with the sale thereof (other than
the Loans), and (ii) the out-of-pocket expenses incurred by the Borrower or such
Restricted Subsidiary in connection with such sale.

                  "Non-Consenting Lender" has the meaning assigned to such term
in Section 2.18(c).

                  "Obligations" means all obligations of every nature of the
Borrower from time to time owed to the Administrative Agent, the Issuing Bank,
the Lenders or any of them and the Lender Counterparties under any Loan Document
or Swap Agreement (including, with respect to any transaction under any Swap
Agreement, obligations owed under any Swap Agreement to any Person that was a
Lender Counterparty at the time such transaction was entered into), whether for
principal, interest, reimbursement of amounts drawn under any Letter of Credit,
payments for early termination of Swap Agreements, funding indemnification
amounts, fees, expenses, indemnification or otherwise.

                  "Off-Balance Sheet Liability" of a Person means (i) any
repurchase obligation or liability of such Person with respect to accounts or
notes receivable sold by such Person, (ii) any liability under any Sale and
Leaseback Transaction which is not a Capital Lease Obligation, (iii) any
liability under any so-called "synthetic lease" transaction entered into by such
Person, (iv) any Material Gas Imbalance, (v) any Advance Payment Contract, or
(vi) any obligation 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 balance sheets of such Person, but excluding from
the foregoing clauses (iii) through (vi) operating leases and usual and
customary oil, gas and mineral leases.

                  "Oil and Gas Interest(s)" means: (a) direct and indirect
interests in and rights with respect to oil, gas, mineral and related properties
and assets of any kind and nature, direct or indirect, including, without
limitation, working, royalty and overriding royalty interests, mineral
interests, leasehold interests, production payments, operating rights, net
profits interests, other non-working interests, contractual interests,
non-operating interests and rights in any pooled, unitized or communitized
acreage by virtue of such interest being a part thereof; (b) interests in and
rights with respect to Crude Oil, Natural Gas and other minerals or revenues
therefrom and contracts and agreements in connection therewith and claims and
rights thereto (including oil and gas leases, operating agreements, unitization,
communitization and pooling agreements and orders, division orders, transfer
orders, mineral deeds, royalty deeds, oil and gas sales, exchange and processing
contracts and agreements and, in each case, interests thereunder), and surface
interests, fee interests, reversionary interests, reservations and concessions
related to any of the foregoing; (c) easements, rights-of-way, licenses,
permits, leases, and other interests associated with, appurtenant to, or
necessary for the operation of any of the foregoing; (d) interests in oil, gas,

                                       15
<PAGE>

water, disposal and injection wells, equipment and machinery (including well
equipment and machinery), oil and gas production, gathering, transmission,
compression, treating, processing and storage facilities (including tanks, tank
batteries, pipelines and gathering systems), pumps, water plants, electric
plants, gasoline and gas processing plants, refineries and other tangible or
intangible, movable or immovable, real or personal property and fixtures located
on, associated with, appurtenant to, or necessary for the operation of any of
the foregoing; and (e) all seismic, geological, geophysical and engineering
records, data, information, maps, licenses and interpretations.

                  "Organizational Documents" means (a) with respect to any
corporation, its certificate or articles of incorporation or organization, as
amended, and its by-laws, as amended, (b) with respect to any limited
partnership, its certificate of limited partnership, as amended, and its
partnership agreement, as amended, (c) with respect to any general partnership,
its partnership agreement, as amended, and (d) with respect to any limited
liability company, its certificate of formation or articles of organization, as
amended, and its limited liability company agreement or operating agreement, as
amended.

                  "Other Taxes" means any and all present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies arising from any payment made hereunder or from the execution, delivery
or enforcement of, or otherwise with respect to, this Agreement.

                  "Participant" has the meaning assigned to such term in Section
11.04.

                  "Payment Currency" has the meaning assigned to such term in
Section 8.07.

                  "PBGC" means the Pension Benefit Guaranty Corporation referred
to and defined in ERISA and any successor entity performing similar functions.

                  "Percentage" has the meaning assigned to such term in the
Joint Value Enhancement Agreement as in effect on the date hereof or as
subsequently amended, modified or restated as permitted under this Agreement.

                  "Permitted Encumbrances" means:

                  (a) Liens imposed by law for Taxes that are not yet due or are
being contested in compliance with Section 6.04;

                  (b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's and other like Liens imposed by law, and contractual Liens granted
to operators and non-operators under oil and gas operating agreements, in each
case, arising in the ordinary course of business or incident to the exploration,
development, operation and maintenance of Oil and Gas Interests and securing
obligations that are not overdue by more than 30 days or are being contested in
compliance with Section 6.04;

                  (c) pledges and deposits made in the ordinary course of
business in compliance with workers' compensation, unemployment insurance and
other social security laws or regulations;

                                       16
<PAGE>

                  (d) deposits to secure the performance of bids, trade
contracts, leases, statutory obligations, surety and appeal bonds, performance
bonds and other obligations of a like nature, in each case in the ordinary
course of business;

                  (e) judgment liens in respect of judgments that do not
constitute an Event of Default under clause (k) of Article
IX;

                  (f) easements, zoning restrictions, rights-of-way, servitudes,
permits, surface leases, and similar encumbrances on real property imposed by
law or arising in the ordinary course of business that do not secure any
monetary obligations and do not materially detract from the value of the
affected property or interfere with the ordinary conduct of business of any
Credit Party;

                  (g) royalties, overriding royalties, reversionary interests
and similar burdens granted by the Borrower or any Restricted Subsidiary with
respect to the Oil and Gas Interests owned by the Borrower or such Restricted
Subsidiary, as the case may be, if the net cumulative effect of such burdens
does not operate to deprive the Borrower or any Restricted Subsidiary of any
material right in respect of its assets or properties (except for rights
customarily granted with respect to such interests);

                  (h) Liens arising from Uniform Commercial Code financing
statement filings regarding operating leases entered into by the Borrower or any
Restricted Subsidiary in the ordinary course of business covering the property
under the lease; and

                  (i) preferential rights to purchase, and provisions requiring
a third party's consent prior to assignment and similar restraints on
alienation, in each case, granted pursuant to an oil and gas operating agreement
and arising in the ordinary course of business or incident to the exploration,
development, operation and maintenance of Oil and Gas Interests; provided such
right, requirement or restraint does not materially affect the value of such Oil
and Gas Interests;

provided that the term "Permitted Encumbrances" shall not include any Lien
securing Indebtedness (other than contractual Liens described in the foregoing
clause (b) granted to operators and non-operators under oil and gas operating
agreements to the extent the obligations secured by such Liens constitute
Indebtedness).

                  "Permitted Investments" means:

                  (a) U.S. Government Securities;

                  (b) investments in commercial paper maturing within 270 days
from the date of acquisition thereof and variable rate preferred securities
maturing within 28 days from the date of acquisition thereof, each having, at
such date of acquisition, the highest credit rating obtainable from S&P or from
Moody's;

                  (c) investments in certificates of deposit, banker's
acceptances and time deposits maturing within 180 days from the date of
acquisition thereof issued or guaranteed by or placed with, and money market
deposit accounts issued or offered by, any domestic office of any commercial

                                       17
<PAGE>

bank organized under the laws of the United States of America or any State
thereof which has a combined capital and surplus and undivided profits of not
less than $500,000,000;

                  (d) fully collateralized repurchase agreements with a term of
not more than 30 days for securities described in clause (a) above and entered
into with a financial institution satisfying the criteria described in clause
(c) above; and

                  (e) money market funds that (i) comply with the criteria set
forth in Securities and Exchange Commission Rule 2a-7 under the Investment
Company Act of 1940, (ii) are rated AAA by S&P or Aaa by Moody's and (iii) have
portfolio assets of at least $5,000,000,000.

                  "Person" means any natural person, corporation, limited
liability company, trust, joint venture, association, company, partnership,
Governmental Authority or other entity.

                  "Plan" means any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code or Section 302 of ERISA, and in respect of which any Credit
Party or any ERISA Affiliate is (or, if such plan were terminated, would under
Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5)
of ERISA.

                  "Pledge Agreement" means a Pledge and Security Agreement in
favor of the Administrative Agent for the benefit of the Secured Parties
covering, among other things, the rights and interests of Borrower or any
Restricted Subsidiary in the Equity Interest of each Restricted Subsidiary and
otherwise in form and substance satisfactory to the Administrative Agent and the
Required Lenders.

                  "Pledged Securities" means the U.S. Government Securities
pledged to the Trustee as security for the exclusive benefit of the holders of
the Convertible Notes as of the date hereof and any reinvestment thereof.

                  "Prime Rate" means the rate of interest per annum publicly
announced from time to time by JPMorgan Chase Bank, N.A. as its prime rate in
effect at its principal office in Chicago, Illinois, each change in the Prime
Rate shall be effective from and including the date such change is publicly
announced as being effective.

                  "Projections" means the Borrower's forecasted (a) balance
sheets, (b) profit and loss statements, and (c) cash flow statements, all
prepared on a basis consistent with the historical financial statements
described in Section 4.04 and after giving effect to the Transactions, together
with appropriate supporting details and a statement of underlying assumptions,
in each case in form and substance satisfactory to the Lenders.

                  "Redetermination" means any Scheduled Redetermination or
Special Redetermination.

                  "Redetermination Date" means (a) with respect to any Scheduled
Redetermination, each May 1 and November 1 of each year, commencing May 1, 2006,
and (b) with respect to any Special Redetermination, the first day of the first
month which is not less than twenty (20) Business Days following the date of a
request for a Special Redetermination.

                                       18
<PAGE>

                  "Register" has the meaning assigned to such term in Section
11.04.

                  "Related Parties" means, with respect to any specified Person,
such Person's Affiliates and the respective directors, officers, employees,
agents and advisors of such Person and such Person's Affiliates.

                  "Required Lenders" means, at any time, Lenders having Credit
Exposures and Unused Commitments representing at least 66-2/3% (or if there are
less than four Lenders, at least 75%) of the sum of the Aggregate Credit
Exposure and all Unused Commitments of all Lenders at such time or, if the
Aggregate Commitment has been terminated, Lenders having Credit Exposures
representing at least 66-2/3% (or if there are less than four Lenders, at least
75%) of the sum of the Aggregate Credit Exposure of all Lenders at such time.

                  "Reserve Report" means an unsuperseded engineering analysis of
the Borrowing Base Properties, in form and substance reasonably acceptable to
the Administrative Agent, prepared in accordance with customary and prudent
practices in the petroleum engineering industry.

                  "Restricted Payment" means any dividend or other distribution
(whether in cash, securities or other property) with respect to any Equity
Interests in any Credit Party, or any payment (whether in cash, securities or
other property), including any sinking fund or similar deposit, on account of
the purchase, redemption, retirement, acquisition, cancellation or termination
of any such Equity Interests in any Credit Party or any option, warrant or other
right to acquire any such Equity Interests in any Credit Party.

                  "Restricted Subsidiary" means any Subsidiary that is not an
Unrestricted Subsidiary.

                  "Riverbend"  means Riverbend Gas Gathering, LLC, a Nevada
limited liability company and its successors and permitted assigns.

                  "S&P" means Standard & Poor's Ratings Group, a division of The
McGraw Hill Corporation.

                  "Sale and Leaseback Transaction" means any sale or other
transfer of any property by any Person with the intent to lease such property as
lessee.

                  "Scheduled Redetermination" means any redetermination of the
Borrowing Base pursuant to Section 3.02.

                  "Schlumberger" means Schlumberger Technology Corporation, a
Texas corporation, and its successors and assigns.

                  "SLB Agreement" means the Agreement by and among the
Administrative Agent, Schlumberger and Gasco Production, dated the date hereof
and in form and substance satisfactory to the Lenders, as amended, modified,
supplemented or restated from time to time.

                                       19
<PAGE>

                  "Secured Party" means the Administrative Agent, any Lender and
any Lender Counterparty and shall include Lenders and Lender Counterparties to
the extent that any Obligations owing to such Persons were incurred while such
Persons were Lenders or Lender Counterparties. Each Secured Party shall be and
it hereby is designated a "Bank Creditor" for purposes of each Intercreditor
Agreement.

                  "Security Instruments" means collectively, all Guarantees of
the Obligations evidenced by the Loan Documents and all mortgages, security
agreements, pledge agreements, collateral assignments and other collateral
documents covering the Oil and Gas Interests of the Borrower and the Restricted
Subsidiaries and the Equity Interests of the Restricted Subsidiaries and other
personal property, equipment, oil and gas inventory and proceeds of the
foregoing, all such documents to be in form and substance reasonably
satisfactory to the Administrative Agent.

                  "Senior Debt" means all Consolidated Funded Indebtedness of
the Borrower and its Restricted Subsidiaries other than the Convertible Notes.

                  "Service Parties" means, collectively, Schlumberger, Nabors
Drilling USA, LP, Pool Well Services Co., M-I, LLC and Red Oak Capital
Management, LLC, MBG, LLC and MBGV Partition, LLC and their respective
successors and assigns.

                  "SLB Agreement" means the Agreement by and among the
Administrative Agent, Schlumberger and Gasco Production, dated the date hereof
and in form and substance satisfactory to the Lenders, as amended, modified,
supplemented or restated from time to time.

                  "Special Redetermination" means any redetermination of the
Borrowing Base made pursuant to Section 3.03.

                  "Statutory Reserve Rate" means a fraction (expressed as a
decimal), the numerator of which is the number one and the denominator of which
is the number one minus the aggregate of the maximum reserve percentages
(including any marginal, special, emergency or supplemental reserves) expressed
as a decimal established by the Board to which the Administrative Agent is
subject, with respect to the Adjusted LIBO Rate, for eurocurrency funding
(currently referred to as "Eurocurrency Liabilities" in Regulation D of the
Board). Such reserve percentages shall include those imposed pursuant to such
Regulation D. Eurodollar Loans shall be deemed to constitute eurocurrency
funding and to be subject to such reserve requirements without benefit of or
credit for proration, exemptions or offsets that may be available from time to
time to any Lender under such Regulation D or any comparable regulation. The
Statutory Reserve Rate shall be adjusted automatically on and as of the
effective date of any change in any reserve percentage.

                  "Subsidiary" means, with respect to any Person (the "parent")
at any date, any corporation, limited liability company, partnership,
association or other entity the accounts of which would be consolidated with
those of the parent in the parent's consolidated financial statements if such
financial statements were prepared in accordance with GAAP as of such date, as
well as any other corporation, limited liability company, partnership,
association or other entity (a) of which securities or other ownership interests
representing more than 50% of the equity or more than 50% of the ordinary voting

                                       20
<PAGE>

power or, in the case of a partnership, more than 50% of the general partnership
interests are, as of such date, owned, controlled or held, or (b) that is, as of
such date, otherwise Controlled, by the parent or one or more subsidiaries of
the parent or by the parent and one or more subsidiaries of the parent any
subsidiary of the Borrower. Unless the context otherwise clearly requires,
references herein to a "Subsidiary" refer to a Subsidiary of the Borrower.

                  "Swap Agreement" means any agreement with respect to any swap,
forward, future or derivative transaction or option or similar agreement
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 Credit Parties shall be a Swap Agreement.

                  "Taxes" means any and all present or future taxes, levies,
imposts, duties, deductions, charges or withholdings imposed by any Governmental
Authority.

                  "Transactions" means the execution, delivery and performance
by the Credit Parties of this Agreement and the Loan Documents, the borrowing of
Loans, the use of the proceeds thereof, and the issuance of Letters of Credit
hereunder.

                  "Trustee" means Wells Fargo Bank, National Association, in its
capacity as trustee under the Convertible Notes Indenture, and its permitted
successors and assigns.

                  "Type", when used in reference to any Loan or Borrowing,
refers to whether the rate of interest on such Loan, or on the Loans comprising
such Borrowing, is determined by reference to the Adjusted LIBO Rate or the
Alternate Base Rate.

                  "Unrestricted Subsidiary" means (a) any Subsidiary that at the
time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors of the Borrower in the manner provided below and (b) any
Subsidiary of an Unrestricted Subsidiary. The Board of Directors of the Borrower
may designate any Subsidiary (including any newly acquired or newly formed
Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary or any of
its Subsidiaries is a Material Domestic Subsidiary or a Subsidiary owning Oil
and Gas Interests included in the Borrowing Base Properties.

                  "Unused Commitment" means, with respect to each Lender at any
time, such Lender's Commitment at such time minus such Lender's Credit Exposure
at such time.

                  "Unused Commitment Fee" has the meaning assigned to such term
in Section 2.11(a).

                  "U.S. Government Securities" means direct obligations of, or
obligations the principal of and interest on which are unconditionally
guaranteed by, the United States of America (or by any agency thereof to the
extent such obligations are backed by the full faith and credit of the United
States of America), in each case maturing within one year from the date of
acquisition thereof.

                                       21
<PAGE>

                  "Withdrawal Liability" means liability to a Multiemployer Plan
as a result of a complete or partial withdrawal from such Multiemployer Plan, as
such terms are defined in Part I of Subtitle E of Title IV of ERISA.

Section 1.02.  Types of Loans and  Borrowings.  For purposes of this  Agreement,
Loans may be classified and referred to by Type (e.g., a "Eurodollar Loan" or an
"ABR Loan") and Borrowings also may be classified and referred to by Type (e.g.,
a "Eurodollar Borrowing" or an "ABR Borrowing").

Section 1.03. Terms Generally. The definitions of terms herein shall apply
equally to the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". The word "will"
shall be construed to have the same meaning and effect as the word "shall."
Unless the context requires otherwise (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person's successors and
assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, (d) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Agreement and (e) the words
"asset" and "property" shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties,
including cash, securities, accounts and contract rights.

Section 1.04. Accounting Terms; GAAP. Except as otherwise expressly provided
herein, all terms of an accounting or financial nature shall be construed in
accordance with GAAP, as in effect from time to time; provided that, if the
Borrower notifies the Administrative Agent that the Borrower request an
amendment to any provision hereof to eliminate the effect of any change
occurring after the date hereof in GAAP or in the application thereof on the
operation of such provision (or if the Administrative Agent notifies the
Borrower that the Required Lenders request an amendment to any provision hereof
for such purpose), regardless of whether any such notice is given before or
after such change in GAAP or in the application thereof, then such provision
shall be interpreted on the basis of GAAP as in effect and applied immediately
before such change shall have become effective until such notice shall have been
withdrawn or such provision amended in accordance herewith.

Section 1.05. Oil and Gas Definitions. For purposes of this Agreement, the terms
"proved reserves," "proved developed reserves," "proved undeveloped reserves,"
"proved developed nonproducing reserves" and "proved developed producing
reserves," have the meaning given such terms from time to time and at the time
in question by the Society of Petroleum Engineers of the American Institute of
Mining Engineers.

                                       22
<PAGE>

                                   Article II

                                   The Credits

Section 2.01. Commitments. Subject to the terms and conditions set forth herein,
each Lender agrees to make Loans to the Borrower from time to time during the
Availability Period in an aggregate principal amount that will not result in (a)
such Lender's Credit Exposure exceeding such Lender's Commitment or (b) the
Aggregate Credit Exposure exceeding the Aggregate Commitment. Within the
foregoing limits and subject to the terms and conditions set forth herein, the
Borrower may borrow, prepay and reborrow Loans.

Section 2.02.     Termination and Reduction of the Aggregate Commitment.
                  ------------------------------------------------------

(a)  Unless previously  terminated,  the Aggregate Commitment shall terminate on
     the Maturity Date.

(b)  The Borrower may at any time  terminate,  or from time to time reduce,  the
     Aggregate  Commitment;  provided  that (i) each  reduction of the Aggregate
     Commitment shall be in an amount that is an integral multiple of $1,000,000
     and not less than  $1,000,000,  (ii) no such  reduction  shall  reduce  the
     Aggregate  Commitment to an amount that is less than the Borrowing Base and
     (iii) the Borrower  shall not terminate or reduce the Aggregate  Commitment
     if,  after  giving  effect  to any  concurrent  prepayment  of the Loans in
     accordance  with  Section  2.09 and  Section  2.10,  the  Aggregate  Credit
     Exposure would exceed the Aggregate Commitment.

(c)  The  Borrower  shall  notify the  Administrative  Agent of any  election to
     terminate or reduce the Aggregate  Commitment  under  paragraph (b) of this
     Section at least three  Business Days prior to the  effective  date of such
     termination or reduction,  specifying  such election and the effective date
     thereof. Promptly following receipt of any notice, the Administrative Agent
     shall advise the Lenders of the contents thereof.  Each notice delivered by
     the Borrower pursuant to this Section shall be irrevocable; provided that a
     notice of termination of the Aggregate Commitment delivered by the Borrower
     may state that such notice is conditioned  upon the  effectiveness of other
     credit facilities, in which case such notice may be revoked by the Borrower
     (by  notice  to the  Administrative  Agent  on or  prior  to the  specified
     effective date) if such condition is not satisfied.  Any termination of the
     Aggregate  Commitment  shall be permanent.  Each reduction of the Aggregate
     Commitment shall be made ratably among the Lenders in accordance with their
     respective Commitment.

(d)  With  respect  to any sale,  transfer  or  disposition  of  Borrowing  Base
     Properties,  the Borrowing Base shall be automatically reduced by an amount
     equal to the  value  assigned  to such  Borrowing  Base  Properties  by the
     Administrative Agent in connection with the most recent  Redetermination of
     the Borrowing Base  preceding the date of such sale (or in connection  with
     the  determination  of the Initial  Borrowing Base with respect to any sale
     occurring prior to the first Redetermination of the Borrowing Base).

                                       23
<PAGE>

Section 2.03.     Loans and Borrowings.
                  --------------------

(a)      Each Loan shall be made as part of a Borrowing consisting of Loans made
         by the Lenders ratably in accordance with their respective Commitments.
         The failure of any Lender to make any Loan required to be made by it
         shall not relieve any other Lender of its obligations hereunder;
         provided that the Commitments of the Lenders are several and no Lender
         shall be responsible for any other Lender's failure to make Loans as
         required.

(b)      Subject to Section 2.13, each Borrowing shall be comprised entirely of
         ABR Loans or Eurodollar Loans as the Borrower may request in accordance
         herewith. Each Lender at its option may make any Eurodollar Loan by
         causing any domestic or foreign branch or Affiliate of such Lender to
         make such Loan; provided that any exercise of such option shall not
         affect the obligation of the Borrower to repay such Loan in accordance
         with the terms of this Agreement.

(c)      At the commencement of each Interest Period for any Eurodollar
         Borrowing, such Borrowing shall be in an aggregate amount that is an
         integral multiple of $1,000,000 and not less than $1,000,000. At the
         time that each ABR Borrowing is made, such Borrowing shall be in an
         aggregate amount that is an integral multiple of $100,000 and not less
         than $100,000; provided that an ABR Borrowing may be in an aggregate
         amount that is equal to the entire unused balance of the Aggregate
         Commitment or that is required to finance the reimbursement of an LC
         Disbursement as contemplated by Section 2.05(e). Borrowings of more
         than one Type may be outstanding at the same time; provided that there
         shall not at any time be more than a total of four (4) Eurodollar
         Borrowings outstanding.

(d)      Notwithstanding any other provision of this Agreement, the Borrower
         shall not be entitled to request, or to elect to convert or continue,
         any Borrowing if the Interest Period requested with respect thereto
         would end after the Maturity Date.

Section 2.04. Requests for Borrowings. To request a Borrowing, the Borrower
shall notify the Administrative Agent of such request by telephone (a) in the
case of a Eurodollar Borrowing, not later than 11:00 a.m., Chicago, Illinois
time, three Business Days before the date of the proposed Borrowing or (b) in
the case of an ABR Borrowing, not later than 11:00 a.m., Chicago, Illinois time,
one Business Day before the date of the proposed Borrowing; provided that any
such notice of an ABR Borrowing to finance the reimbursement of an LC
Disbursement as contemplated by Section 2.05(e) may be given not later than
10:00 a.m., Chicago, Illinois time, on the date of the proposed Borrowing. Each
such telephonic Borrowing Request shall be irrevocable and shall be confirmed
promptly by hand delivery or telecopy to the Administrative Agent of a written
Borrowing Request in a form approved by the Administrative Agent and signed by
the Borrower. Each such telephonic and written Borrowing Request shall specify
the following information in compliance with Section 2.03:

(i)               the aggregate amount of the requested Borrowing;

(ii)              the date of such Borrowing, which shall be a Business Day;

                                       24
<PAGE>

(iii)             whether such Borrowing is to be an ABR Borrowing or a
                  Eurodollar Borrowing;

(iv)              in the case of a Eurodollar Borrowing, the initial Interest
                  Period to be applicable thereto, which shall be a period
                  contemplated by the definition of the term "Interest Period";
                  and

(v)               the location and number of the Borrower's account to which
                  funds are to be disbursed, which shall comply with the
                  requirements of Section 2.06.

                  If no election as to the Type of Borrowing is specified, then
the requested Borrowing shall be an ABR Borrowing. If no Interest Period is
specified with respect to any requested Eurodollar Borrowing, then the Borrower
shall be deemed to have selected an Interest Period of one month's duration.
Promptly following receipt of a Borrowing Request in accordance with this
Section, the Administrative Agent shall advise each Lender of the details
thereof and of the amount of such Lender's Loan to be made as part of the
requested Borrowing.

Section 2.05.     Letters of Credit.

     (a) General.  Subject to the terms and  conditions  set forth  herein,  the
Borrower  may  request  the  issuance  of  Letters  of Credit for its own or the
account of any  Restricted  Subsidiary  in a form  reasonably  acceptable to the
Administrative  Agent and the  Issuing  Bank,  at any time and from time to time
during the Availability  Period. In the event of any  inconsistency  between the
terms and  conditions of this Agreement and the terms and conditions of any form
of letter of credit application or other agreement submitted by the Borrower to,
or entered into by the Borrower with, the Issuing Bank relating to any Letter of
Credit, the terms and conditions of this Agreement shall control.

     (b) Notice of Issuance,  Amendment, Renewal, Extension; Certain Conditions.
To request  the  issuance  of a Letter of Credit (or the  amendment,  renewal or
extension of an outstanding  Letter of Credit),  the Borrower shall hand deliver
or telecopy (or transmit by electronic communication,  if arrangements for doing
so  have  been  approved  by the  Issuing  Bank)  to the  Issuing  Bank  and the
Administrative  Agent  (reasonably in advance of the requested date of issuance,
amendment, renewal or extension) a notice requesting the issuance of a Letter of
Credit, or identifying the Letter of Credit to be amended,  renewed or extended,
and  specifying  the date of issuance,  amendment,  renewal or extension  (which
shall be a Business  Day),  the date on which such Letter of Credit is to expire
(which  shall comply with  paragraph  (c) of this  Section),  the amount of such
Letter of Credit, the name and address of the beneficiary thereof and such other
information as shall be necessary to prepare, amend, renew or extend such Letter
of Credit.  If requested by the Issuing  Bank,  the Borrower also shall submit a
letter of credit  application on the Issuing Bank's  standard form in connection
with any  request  for a Letter of Credit.  A Letter of Credit  shall be issued,
amended, renewed or extended only if (and upon issuance,  amendment,  renewal or
extension of each Letter of Credit the Borrower shall be deemed to represent and
warrant  that),  after giving  effect to such  issuance,  amendment,  renewal or
extension  (i) the LC  Exposure  shall  not  exceed  $10,000,000  and  (ii)  the
Aggregate Credit Exposure shall not exceed the Aggregate Commitment.

                                       25
<PAGE>

     (c) Expiration  Date. Each Letter of Credit shall expire at or prior to the
close of  business on the earlier of (i) the date one year after the date of the
issuance of such  Letter of Credit (or, in the case of any renewal or  extension
thereof,  one year after such  renewal or  extension)  and (ii) the date that is
five Business Days prior to the Maturity Date.

     (d) Participations.  By the issuance of a Letter of Credit (or an amendment
to a Letter of Credit  increasing  the amount  thereof)  and without any further
action on the part of the Issuing Bank or the  Lenders,  the Issuing Bank hereby
grants to each Lender,  and each Lender hereby acquires from the Issuing Bank, a
participation  in such  Letter  of  Credit  equal  to such  Lender's  Applicable
Percentage  of the aggregate  amount  available to be drawn under such Letter of
Credit. In consideration and in furtherance of the foregoing, each Lender hereby
absolutely and  unconditionally  agrees to pay to the Administrative  Agent, for
the account of the Issuing Bank, such Lender's Applicable  Percentage of each LC
Disbursement  made by the Issuing Bank and not reimbursed by the Borrower on the
date due as provided in paragraph (e) of this Section,  or of any  reimbursement
payment  required  to be refunded to the  Borrower  for any reason.  Each Lender
acknowledges and agrees that its obligation to acquire  participations  pursuant
to this paragraph in respect of Letters of Credit is absolute and  unconditional
and  shall  not  be  affected  by any  circumstance  whatsoever,  including  any
amendment,  renewal or extension of any Letter of Credit or the  occurrence  and
continuance   of  a  Default  or  reduction  or  termination  of  the  Aggregate
Commitment,  and that  each  such  payment  shall be made  without  any  offset,
abatement, withholding or reduction whatsoever.

     (e)  Reimbursement.  If the Issuing Bank shall make any LC  Disbursement in
respect of a Letter of Credit, the Borrower shall reimburse such LC Disbursement
by paying to the  Administrative  Agent an amount equal to such LC  Disbursement
not later than 12:00  noon,  Chicago,  Illinois  time,  on the date that such LC
Disbursement  is made,  if the Borrower  shall have  received  notice of such LC
Disbursement prior to 10:00 a.m.,  Chicago,  Illinois time, on such date, or, if
such  notice has not been  received by the  Borrower  prior to such time on such
date,  then not later  than  12:00  noon,  Chicago,  Illinois  time,  on (i) the
Business Day that the Borrower  receives such notice, if such notice is received
prior to 10:00 a.m., Chicago,  Illinois time, on the day of receipt, or (ii) the
Business  Day  immediately  following  the day that the Borrower  receives  such
notice, if such notice is not received prior to such time on the day of receipt;
provided that the Borrower may, subject to the --------  conditions to borrowing
set forth herein,  request in accordance  with Section 2.04 that such payment be
financed  with an ABR  Borrowing in an  equivalent  amount and, to the extent so
financed, the Borrower's obligation to make such payment shall be discharged and
replaced by the  resulting  ABR  Borrowing.  If the Borrower  fails to make such
payment  when due,  the  Administrative  Agent  shall  notify each Lender of the
applicable  LC  Disbursement,  the payment then due from the Borrower in respect
thereof and such Lender's  Applicable  Percentage  thereof.  Promptly  following
receipt of such notice,  each Lender shall pay to the  Administrative  Agent its
Applicable  Percentage  of the payment then due from the  Borrower,  in the same
manner as  provided  in Section  2.06 with  respect to Loans made by such Lender
(and Section 2.06 shall apply,  mutatis mutandis,  to the payment obligations of

                                       26
<PAGE>

the Lenders),  and the  Administrative  Agent shall  promptly pay to the Issuing
Bank the amounts so received by it from the Lenders.  Promptly following receipt
by the  Administrative  Agent of any payment from the Borrower  pursuant to this
paragraph, the Administrative Agent shall distribute such payment to the Issuing
Bank or,  to the  extent  that  Lenders  have  made  payments  pursuant  to this
paragraph to reimburse  the Issuing  Bank,  then to such Lenders and the Issuing
Bank as their  interests  may appear.  Any payment made by a Lender  pursuant to
this paragraph to reimburse the Issuing Bank for any LC Disbursement (other than
the funding of ABR Loans as contemplated  above) shall not constitute a Loan and
shall  not  relieve  the  Borrower  of  its  obligation  to  reimburse  such  LC
Disbursement.

     (f)  Obligations  Absolute.  The  Borrower's  obligation  to  reimburse  LC
Disbursements  as provided in paragraph  (e) of this Section  shall be absolute,
unconditional  and  irrevocable,  and shall be performed  strictly in accordance
with the terms of this Agreement under any and all circumstances  whatsoever and
irrespective  of (i) any lack of  validity  or  enforceability  of any Letter of
Credit or this Agreement,  or any term or provision  therein,  (ii) any draft or
other  document  presented  under a  Letter  of  Credit  proving  to be  forged,
fraudulent  or invalid in any respect or any  statement  therein being untrue or
inaccurate  in any respect,  (iii) payment by the Issuing Bank under a Letter of
Credit  against  presentation  of a draft or other document that does not comply
with the terms of such Letter of Credit, or (iv) any other event or circumstance
whatsoever,  whether or not similar to any of the foregoing, that might, but for
the provisions of this Section, constitute a legal or equitable discharge of, or
provide a right of setoff against, the Borrower's obligations hereunder. Neither
the  Administrative  Agent,  the Lenders nor the Issuing Bank,  nor any of their
Related Parties,  shall have any liability or  responsibility by reason of or in
connection  with the issuance or transfer of any Letter of Credit or any payment
or  failure  to  make  any  payment  thereunder  (irrespective  of  any  of  the
circumstances  referred to in the preceding sentence),  or any error,  omission,
interruption,  loss or delay in transmission or delivery of any draft, notice or
other  communication  under or relating to any Letter of Credit  (including  any
document required to make a drawing thereunder),  any error in interpretation of
technical terms or any consequence arising from causes beyond the control of the
Issuing Bank;  provided that the foregoing  shall not be construed to excuse the
Issuing Bank from  liability to the Borrower to the extent of any direct damages
(as  opposed  to  consequential  damages,  claims in respect of which are hereby
waived by the Borrower to the extent  permitted by  applicable  law) suffered by
the Borrower that are caused by the Issuing Bank's failure to exercise care when
determining  whether  drafts  and other  documents  presented  under a Letter of
Credit comply with the terms thereof.  The parties hereto  expressly agree that,
in the  absence of gross  negligence  or willful  misconduct  on the part of the
Issuing Bank (as finally determined by a court of competent  jurisdiction),  the
Issuing Bank shall be deemed to have exercised care in each such  determination.
In furtherance of the foregoing and without limiting the generality thereof, the
parties agree that,  with respect to documents  presented  which appear on their
face to be in substantial  compliance with the terms of a Letter of Credit,  the
Issuing Bank may, in its sole  discretion,  either  accept and make payment upon
such documents without responsibility for further  investigation,  regardless of
any notice or information to the contrary,  or refuse to accept and make payment
upon such  documents if such  documents  are not in strict  compliance  with the
terms of such Letter of Credit.

                                       27
<PAGE>

     (g) Disbursement Procedures. The Issuing Bank shall, promptly following its
receipt  thereof,  examine all  documents  purporting  to represent a demand for
payment  under a Letter of Credit.  The Issuing Bank shall  promptly  notify the
Administrative  Agent and the Borrower by telephone  (confirmed  by telecopy) of
such demand for payment and whether the Issuing Bank has made or will make an LC
Disbursement  thereunder;  provided  that any failure to give or delay in giving
such notice shall not relieve the Borrower of its  obligation  to reimburse  the
Issuing Bank and the Lenders with respect to any such LC Disbursement.

     (h) Interim  Interest.  If the Issuing Bank shall make any LC Disbursement,
then,  unless the Borrower shall  reimburse such LC  Disbursement in full on the
date  such LC  Disbursement  is made,  the  unpaid  amount  thereof  shall  bear
interest,  for each day from and including the date such LC Disbursement is made
to but excluding the date that the Borrower reimburses such LC Disbursement,  at
the rate per annum then applicable to ABR Loans;  provided that, if the Borrower
fails to reimburse  such LC  Disbursement  when due pursuant to paragraph (e) of
this Section,  then Section 2.12(c) shall apply.  Interest  accrued  pursuant to
this  paragraph  shall be for the  account  of the  Issuing  Bank,  except  that
interest  accrued on and after the date of payment  by any  Lender  pursuant  to
paragraph  (e) of this  Section to  reimburse  the Issuing Bank shall be for the
account of such Lender to the extent of such payment.

     (i)  Replacement  of the Issuing Bank.  The Issuing Bank may be replaced at
any time by written agreement among the Borrower,  the Administrative Agent, the
replaced Issuing Bank and the successor Issuing Bank. The  Administrative  Agent
shall notify the Lenders of any such  replacement  of the Issuing  Bank.  At the
time any such  replacement  shall become  effective,  the Borrower shall pay all
unpaid fees  accrued for the account of the replaced  Issuing  Bank  pursuant to
Section 2.11(b). From and after the effective date of any such replacement,  (i)
the  successor  Issuing  Bank shall have all the rights and  obligations  of the
Issuing Bank under this Agreement with respect to Letters of Credit to be issued
thereafter and (ii) references herein to the term "Issuing Bank" shall be deemed
to refer to such successor or to any previous Issuing Bank, or to such successor
and all  previous  Issuing  Banks,  as the  context  shall  require.  After  the
replacement of an Issuing Bank hereunder, the replaced Issuing Bank shall remain
a party hereto and shall  continue to have all the rights and  obligations of an
Issuing Bank under this Agreement with respect to Letters of Credit issued by it
prior to such replacement, but shall not be required to issue additional Letters
of Credit.

     (j) Cash  Collateralization.  If any Event of  Default  shall  occur and be
continuing,  on the  Business  Day that the  Borrower  receives  notice from the
Administrative  Agent or the Required  Lenders (or, if the maturity of the Loans
has been accelerated, Lenders with LC Exposure representing greater than 66-2/3%
of the total LC Exposure)  demanding the deposit of cash collateral  pursuant to
this paragraph, the Borrower shall deposit in an account with the Administrative
Agent,  in the  name of the  Administrative  Agent  and for the  benefit  of the
Lenders,  an amount in cash  equal to the LC  Exposure  as of such date plus any
accrued and unpaid  interest  thereon;  provided that the  obligation to deposit
such cash collateral shall become effective immediately,  and such deposit shall
become immediately due and payable,  without demand or other notice of any kind,
upon the  occurrence  of any  Event of  Default  with  respect  to the  Borrower
described in clause (h) or (i) of Article IX. Such deposit  shall be held by the
Administrative  Agent as  collateral  for the  payment  and  performance  of the

                                       28
<PAGE>

obligations of the Borrower under this Agreement. The Administrative Agent shall
have  exclusive   dominion  and  control,   including  the  exclusive  right  of
withdrawal,  over such account. Other than any interest earned on the investment
of such  deposits,  which  investments  shall  be made at the  option  and  sole
discretion of the  Administrative  Agent and at the Borrower's risk and expense,
such  deposits  shall not bear  interest.  Interest or profits,  if any, on such
investments  shall  accumulate in such account.  Moneys in such account shall be
applied  by the  Administrative  Agent  to  reimburse  the  Issuing  Bank for LC
Disbursements  for which it has not been  reimbursed  and,  to the extent not so
applied, shall be held for the satisfaction of the reimbursement  obligations of
the  Borrower  for the LC Exposure at such time or, if the maturity of the Loans
has been  accelerated  (but  subject to the consent of Lenders  with LC Exposure
representing  66-2/3% or more of the total LC  Exposure),  be applied to satisfy
other  obligations  of the  Borrower  under this  Agreement.  If the Borrower is
required to provide an amount of cash  collateral  hereunder  as a result of the
occurrence  of an Event of  Default,  such  amount (to the extent not applied as
aforesaid)  shall be returned to the Borrower  within three  Business Days after
all Events of Default have been cured or waived.

Section 2.06.     Funding of Borrowings.
                  ---------------------

     (a) Each  Lender  shall  make each Loan to be made by it  hereunder  on the
proposed date thereof by wire transfer of immediately  available  funds by 12:00
noon,  Chicago,  Illinois time, to the account of the Administrative  Agent most
recently  designated  by it for such  purpose  by  notice  to the  Lenders.  The
Administrative  Agent will make such Loans available to the Borrower by promptly
crediting the amounts so received,  in like funds, to an account of the Borrower
designated by the Borrower in the applicable  Borrowing  Request;  provided that
ABR Loans made to finance the reimbursement of an LC Disbursement as provided in
Section  2.05(e)  shall be remitted by the  Administrative  Agent to the Issuing
Bank.

     (b) Unless the  Administrative  Agent  shall have  received  notice  from a
Lender prior to the  proposed  date of any  Borrowing  that such Lender will not
make  available  to  the  Administrative  Agent  such  Lender's  share  of  such
Borrowing,  the  Administrative  Agent may assume that such Lender has made such
share  available on such date in accordance  with  paragraph (a) of this Section
and may, in reliance  upon such  assumption,  make  available  to the Borrower a
corresponding  amount. In such event, if a Lender has not in fact made its share
of the applicable  Borrowing  available to the  Administrative  Agent,  then the
applicable Lender and the Borrower  severally agree to pay to the Administrative
Agent forthwith on demand such corresponding  amount with interest thereon,  for
each day from and  including  the date  such  amount  is made  available  to the
Borrower to but excluding the date of payment to the  Administrative  Agent,  at
(i) in the case of such Lender,  the greater of the Federal Funds Effective Rate
and a rate  determined by the  Administrative  Agent in accordance  with banking
industry  rules on interbank  compensation  or (ii) in the case of the Borrower,
the interest rate  applicable  to ABR Loans.  If such Lender pays such amount to

                                       29
<PAGE>

the  Administrative  Agent, then such amount shall constitute such Lender's Loan
included in such Borrowing.

Section 2.07.     Interest Elections.

     (a)  Each  Borrowing  initially  shall  be of  the  Type  specified  in the
applicable Borrowing Request and, in the case of a Eurodollar  Borrowing,  shall
have an initial Interest Period as specified in such Borrowing Request; provided
that all Borrowings on the Effective Date shall be ABR  Borrowings.  Thereafter,
the  Borrower  may elect to convert  such  Borrowing  to a different  Type or to
continue such  Borrowing and, in the case of a Eurodollar  Borrowing,  may elect
Interest  Periods  therefor,  all as provided in this Section.  The Borrower may
elect  different  options  with  respect to  different  portions of the affected
Borrowing,  in which case each such portion shall be allocated ratably among the
Lenders holding the Loans  comprising such Borrowing,  and the Loans  comprising
each such portion shall be considered a separate Borrowing.

     (b) To make an election pursuant to this Section, the Borrower shall notify
the  Administrative  Agent of such  election  by  telephone  by the time  that a
Borrowing  Request  would be required  under  Section 2.04 if the Borrower  were
requesting a Borrowing of the Type  resulting  from such  election to be made on
the effective  date of such election.  Each such  telephonic  Interest  Election
Request shall be irrevocable and shall be confirmed promptly by hand delivery or
telecopy to the Administrative Agent of a written Interest Election Request in a
form approved by the Administrative Agent and signed by the Borrower.

     (c) Each telephonic and written Interest Election Request shall specify the
following information in compliance with Section 2.03:

          (i) the Borrowing to which such Interest Election Request applies and,
     if different  options are being elected with respect to different  portions
     thereof,  the portions thereof to be allocated to each resulting  Borrowing
     (in which case the  information  to be specified  pursuant to clauses (iii)
     and (iv) below shall be specified for each resulting Borrowing);

          (ii) the effective date of the election made pursuant to such Interest
     Election Request, which shall be a Business Day;

          (iii) with respect to any Borrowing,  whether the resulting  Borrowing
     is to be an ABR Borrowing or a Eurodollar Borrowing; and

          (iv)  if  the  resulting  Borrowing  is a  Eurodollar  Borrowing,  the
     Interest  Period  to be  applicable  thereto  after  giving  effect to such
     election,  which shall be a period  contemplated  by the  definition of the
     term "Interest Period";  except that the Interest Period for any Eurodollar
     Borrowing  requested  during the 30 day period following the Effective Date
     shall  be of one  month's  duration  unless  otherwise  agreed  upon by the
     Borrower and the Administrative Agent.

                                       30
<PAGE>

If any such Interest  Election Request requests a Eurodollar  Borrowing but does
not  specify  an  Interest  Period,  then the  Borrower  shall be deemed to have
selected an Interest Period of one month's duration.

(d)      Promptly following receipt of an Interest Election Request, the
         Administrative Agent shall advise each Lender of the details thereof
         and of such Lender's portion of each resulting Borrowing.

(e)      If the Borrower fails to deliver a timely Interest Election Request
         with respect to a Eurodollar Borrowing prior to the end of the Interest
         Period applicable thereto, then, unless such Borrowing is repaid as
         provided herein, at the end of such Interest Period such Borrowing
         shall be converted to an ABR Borrowing. Notwithstanding any contrary
         provision hereof, if an Event of Default has occurred and is continuing
         and the Administrative Agent, at the request of the Required Lenders,
         so notifies the Borrower, then, so long as an Event of Default is
         continuing (i) no outstanding Borrowing may be converted to or
         continued as a Eurodollar Borrowing and (ii) unless repaid, each
         Eurodollar Borrowing shall be converted to an ABR Borrowing at the end
         of the Interest Period applicable thereto.

Section 2.08.     Repayment of Loans; Evidence of Debt.

     (a)  The   Borrower   hereby   unconditionally   promises  to  pay  to  the
Administrative  Agent for the account of each  Lender the then unpaid  principal
amount of each Loan on the Maturity Date.

     (b) Each Lender shall  maintain in  accordance  with its usual  practice an
account or accounts  evidencing the  indebtedness of the Borrower to such Lender
resulting from each Loan made by such Lender, including the amounts of principal
and interest payable and paid to such Lender from time to time hereunder.

     (c) The  Administrative  Agent  shall  maintain  accounts in which it shall
record  (i) the amount of each Loan made  hereunder,  the Type  thereof  and the
Interest Period applicable thereto, (ii) the amount of any principal or interest
due and  payable or to become due and payable  from the  Borrower to each Lender
hereunder and (iii) the amount of any sum received by the  Administrative  Agent
hereunder for the account of the Lenders and each Lender's share thereof.

     (d) The entries made in the accounts  maintained  pursuant to paragraph (b)
or (c) of this  Section  shall be prima  facie  evidence  of the  existence  and
amounts of the obligations  recorded  therein;  provided that the failure of any
Lender  or the  Administrative  Agent to  maintain  such  accounts  or any error
therein shall not in any manner  affect the  obligation of the Borrower to repay
the Loans in accordance with the terms of this Agreement.

     (e)  Any  Lender  may  request  that  Loans  made by it be  evidenced  by a
promissory note. In such event, the Borrower shall prepare,  execute and deliver
to such  Lender a  promissory  note  payable to the order of such Lender (or, if
requested by such Lender,  to such Lender and its  registered  assigns) and in a
form approved by the  Administrative  Agent;  provided that any promissory  note

                                       31
<PAGE>

issued to evidence any Lender's  Loans shall be in a stated amount equal to such
Lender's Applicable Percentage of the Maximum Facility Amount.  Thereafter,  the
Loans evidenced by such promissory note and interest  thereon shall at all times
(including after assignment  pursuant to Section 11.04) be represented by one or
more  promissory  notes in such form  payable  to the  order of the payee  named
therein (or, if such promissory note is a registered note, to such payee and its
registered assigns).

Section 2.09.     Optional Prepayment of Loans.

     (a) The Borrower  shall have the right at any time and from time to time to
prepay  any  Borrowing  in whole  and or in part,  subject  to prior  notice  in
accordance with paragraph (b) of this Section.

     (b) The  Borrower  shall  notify  the  Administrative  Agent  by  telephone
(confirmed  by  telecopy)  of  any  prepayment  hereunder  (i) in  the  case  of
prepayment  of a  Eurodollar  Borrowing,  not later  than 11:00  a.m.,  Chicago,
Illinois time, three Business Days before the date of prepayment, or (ii) in the
case of  prepayment  of an ABR  Borrowing,  not later than 11:00 a.m.,  Chicago,
Illinois time, one Business Day before the date of prepayment.  Each such notice
shall be  irrevocable  and shall specify the  prepayment  date and the principal
amount of each Borrowing or portion  thereof to be prepaid;  provided that, if a
notice  of  prepayment  is given in  connection  with a  conditional  notice  of
termination or reduction of the Aggregate  Commitment as contemplated by Section
2.02,  then  such  notice  of  prepayment  may be  revoked  if  such  notice  of
termination  or reduction is revoked in accordance  with Section 2.02.  Promptly
following receipt of any such notice relating to a Borrowing, the Administrative
Agent shall advise the Lenders of the contents thereof.  Each partial prepayment
of any Borrowing shall be in an amount that would be permitted in the case of an
advance  of a  Borrowing  of the same Type as  provided  in Section  2.03.  Each
prepayment of a Borrowing  shall be applied ratably to the Loans included in the
prepaid  Borrowing.  Prepayments shall be accompanied by accrued interest to the
extent required by Section 2.12.

Section 2.10.     Mandatory Prepayment of Loans.

     (a)  Except  as  otherwise  provided  in  Section  2.10(b),  in the event a
Borrowing Base Deficiency  exists,  the Borrower shall,  within thirty (30) days
after  written  notice  from the  Administrative  Agent to the  Borrower of such
Borrowing  Base  Deficiency,  notify  the  Administrative  Agent  which  of  the
following  actions it will take to eliminate such Borrowing Base  Deficiency and
within  sixty (60) days after such notice from the  Administrative  Agent (a) by
instruments  satisfactory in form and substance to the Required Lenders, provide
the Lenders with  additional  security  consisting of Oil and Gas Interests with
value and  quality  satisfactory  to the  Lenders  in their sole  discretion  to
eliminate  such  Borrowing  Base  Deficiency,  (b)  prepay,  without  premium or
penalty,  the principal amount of the Loans in an amount sufficient to eliminate
such  Borrowing  Base  Deficiency  or (c) by a  combination  of such  additional
security and such prepayment eliminate such Borrowing Base Deficiency.

                                       32
<PAGE>

     (b) If the  Borrower  or any  Restricted  Subsidiary  sells,  transfers  or
otherwise disposes of any Borrowing Base Properties at any time a Borrowing Base
Deficiency  exists or would exist after giving effect to such sale,  transfer or
disposition, the Borrower shall prepay the Borrowings in an amount equal to such
Borrowing Base Deficiency  using the Net Cash Proceeds  received from such sale,
transfer  or  other  disposition  on the  date it or any  Restricted  Subsidiary
receives  such  Net Cash  Proceeds;  provided,  however  if the  amount  of such
Borrowing  Base  Deficiency  is  greater  than  such  Net  Cash  Proceeds,  such
prepayment  shall be in an  amount  equal  to 100% of such  Net  Cash  Proceeds;
provided  further,  however,  that amounts  applied to the payment of Borrowings
pursuant to this Section may be reborrowed subject to and in accordance with the
terms  of this  Agreement.  Amounts  applied  to the  prepayment  of  Borrowings
pursuant to this Section shall be first applied  ratably to ABR Borrowings  then
outstanding and, upon payment in full of all outstanding ABR Borrowings, second,
to  Eurodollar  Borrowings  then  outstanding,  and if more than one  Eurodollar
Borrowing is then outstanding,  to each such Eurodollar Borrowing beginning with
the Eurodollar Borrowing with the least number of days remaining in the Interest
Period applicable thereto and ending with the Eurodollar Borrowing with the most
number of days remaining in the Interest Period applicable  thereto,  subject to
the payment of any funding  indemnification amounts required by Section 2.15 but
without penalty or premium.

Section 2.11.     Fees.
                  -----

     (a) The Borrower agrees to pay to the Administrative Agent, for the account
of  each  Lender,  an  unused  commitment  fee  (the  "Unused  Commitment  Fee")
equivalent  to the  Applicable  Rate  times  the  daily  average  of the  Unused
Commitment.  Such Unused  Commitment  Fee shall be  calculated on the basis of a
year  consisting  of 360 days.  The  Unused  Commitment  Fee shall be payable in
arrears on the last day of March,  June,  September  and  December of each year,
commencing  with the first such date to occur after the Effective  Date,  and on
the Maturity Date for any period then ending for which the Unused Commitment Fee
shall not have been  theretofore  paid.  In the event the  Aggregate  Commitment
terminates  on any date other  than the last day of March,  June,  September  or
December of any year, the Borrower  agrees to pay to the  Administrative  Agent,
for the  account  of each  Lender,  on the date of such  termination,  the total
Unused  Commitment  Fee due for the period from the last day of the  immediately
preceding March,  June,  September or December,  as the case may be, to the date
such termination occurs.

     (b) The  Borrower  agrees  to pay (i) to the  Administrative  Agent for the
account of each Lender a participation fee with respect to its participations in
Letters  of  Credit,  which  shall  accrue at the same  Applicable  Rate used to
determine the interest rate applicable to Eurodollar  Loans on the average daily
amount of such Lender's LC Exposure (excluding any portion thereof  attributable
to  unreimbursed  LC  Disbursements)  during the period from and  including  the
Effective  Date to but  excluding  the later of the date on which such  Lender's
Commitment  terminates  and the date on which such Lender  ceases to have any LC
Exposure, and (ii) to the Issuing Bank a fronting fee, which shall accrue at the
rate of  0.125%  per  annum  on the  average  daily  amount  of the LC  Exposure
(excluding any portion thereof  attributable  to unreimbursed LC  Disbursements)
during the period from and  including  the  Effective  Date to but excluding the
later of the date of  termination  of the Aggregate  Commitment  and the date on
which there ceases to be any LC Exposure, as well as the Issuing Bank's standard
fees with respect to the issuance, amendment, renewal or extension of any Letter
of Credit or processing of drawings thereunder;  provided, however, that no such

                                       33
<PAGE>

fronting fee shall be payable during any period in which the Issuing Bank is the
only Lender.  Participation fees and fronting fees accrued through and including
the last day of March,  June,  September  and  December  of each  year  shall be
payable on the third  Business Day  following  such last day,  commencing on the
first such date to occur after the Effective  Date;  provided that all such fees
shall be payable on the date on which the Aggregate  Commitment  terminates  and
any  such  fees  accruing  after  the  date on which  the  Aggregate  Commitment
terminates  shall be payable on demand.  Any other fees  payable to the  Issuing
Bank pursuant to this  paragraph  shall be payable  within 10 days after demand.
All  participation  fees and  fronting  fees shall be computed on the basis of a
year of 360 days and shall be  payable  for the  actual  number of days  elapsed
(including the first day but excluding the last day).

     (c) The Borrower  agrees to pay to the  Administrative  Agent,  for its own
account,  fees  payable in the amounts and at the times  separately  agreed upon
between the Borrower and the Administrative Agent.

     (d)  All  fees  payable  hereunder  shall  be  paid on the  dates  due,  in
immediately  available  funds,  to the  Administrative  Agent (or to the Issuing
Bank, in the case of fees payable to it) for distribution, in the case of Unused
Commitment Fees and participation  fees, to the Lenders.  Fees paid shall not be
refundable under any circumstances.

Section 2.12.     Interest.

     (a) The Loans  comprising  each ABR  Borrowing  shall bear  interest at the
Alternate Base Rate plus the Applicable Rate.

     (b) The Loans  comprising each Eurodollar  Borrowing shall bear interest at
the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus
the Applicable Rate.

     (c) Notwithstanding  the foregoing,  if any principal of or interest on any
Loan or any fee or other amount  payable by the  Borrower  hereunder is not paid
when due,  whether at stated  maturity,  upon  acceleration  or otherwise,  such
overdue amount shall bear interest,  after as well as before judgment, at a rate
per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the
rate otherwise  applicable to such Loan as provided in the preceding  paragraphs
of this  Section  or (ii) in the  case of any  other  amount,  2% plus  the rate
applicable to ABR Loans as provided in paragraph (a) of this Section.

     (d)  Accrued  interest  on each Loan  shall be  payable  in arrears on each
Interest  Payment  Date  for  such  Loan,  upon  termination  of  the  Aggregate
Commitment and on the Maturity Date; provided that (i) interest accrued pursuant
to paragraph (c) of this Section  shall be payable on demand,  (ii) in the event
of any  repayment or  prepayment  of any Loan (other than a prepayment of an ABR
Loan  prior to the end of the  Availability  Period at a time when no  Borrowing

                                       34
<PAGE>

Base  Deficiency  exists),  accrued  interest on the principal  amount repaid or
prepaid shall be payable on the date of such  repayment or prepayment  and (iii)
in the event of any  conversion of any  Eurodollar  Loan prior to the end of the
current Interest Period therefor, accrued interest on such Loan shall be payable
on the effective date of such conversion.

     (e) All interest  hereunder shall be computed on the basis of a year of 360
days,  except that interest  computed by reference to the Alternate Base Rate at
times when the Alternate  Base Rate is based on the Prime Rate shall be computed
on the  basis of a year of 365 days  (or 366 days in a leap  year),  and in each
case shall be payable for the actual number of days elapsed (including the first
day but excluding the last day).  The applicable  Alternate Base Rate,  Adjusted
LIBO Rate or LIBO Rate shall be determined by the Administrative Agent, and such
determination shall be conclusive absent manifest error.

Section 2.13. Alternate Rate of Interest. If prior to the commencement of any
Interest Period for a Eurodollar Borrowing:

     (a) the  Administrative  Agent  determines  (which  determination  shall be
conclusive  absent  manifest  error) that adequate and  reasonable  means do not
exist for  ascertaining  the Adjusted LIBO Rate or the LIBO Rate, as applicable,
for such Interest Period; or

     (b) the  Administrative  Agent is advised by the Required  Lenders that the
Adjusted LIBO Rate or the LIBO Rate,  as  applicable,  for such Interest  Period
will not  adequately  and fairly reflect the cost to such Lenders (or Lender) of
making or  maintaining  their Loans (or its Loan) included in such Borrowing for
such Interest Period;

then the Administrative Agent shall give notice thereof to the Borrower and the
Lenders by telephone or telecopy as promptly as practicable thereafter and,
until the Administrative Agent notifies the Borrower and the Lenders that the
circumstances giving rise to such notice no longer exist, (i) any Interest
Election Request that requests the conversion of any Borrowing to, or
continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective,
and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such
Borrowing shall be made as an ABR Borrowing.

Section 2.14.     Increased Costs.

(a)               If any Change in Law shall:

          (i) impose, modify or deem applicable any reserve,  special deposit or
     similar requirement against assets of, deposits with or for the account of,
     or credit  extended  by, any Lender  (except any such  reserve  requirement
     reflected in the Adjusted LIBO Rate) or the Issuing Bank; or

                                       35
<PAGE>

          (ii) impose on any Lender or the Issuing Bank or the London  interbank
     market any other  condition  affecting this  Agreement or Eurodollar  Loans
     made by such Lender or any Letter of Credit or participation therein;

and the result of any of the  foregoing  shall be to  increase  the cost to such
Lender of making or  maintaining  any  Eurodollar  Loan (or of  maintaining  its
obligation  to make any such Loan) or to increase the cost to such Lender or the
Issuing Bank of participating in, issuing or maintaining any Letter of Credit or
to reduce the amount of any sum  received  or  receivable  by such Lender or the
Issuing Bank hereunder (whether of principal,  interest or otherwise),  then the
Borrower  will pay to such Lender or the Issuing  Bank, as the case may be, such
additional amount or amounts as will compensate such Lender or the Issuing Bank,
as the case may be, for such additional costs incurred or reduction suffered.

     (b) If any Lender or the  Issuing  Bank  determines  that any Change in Law
regarding capital requirements has or would have the effect of reducing the rate
of return on such  Lender's or the Issuing  Bank's  capital or on the capital of
such Lender's or the Issuing Bank's holding company, if any, as a consequence of
this Agreement or the Loans made by, or participations in Letters of Credit held
by, such Lender, or the Letters of Credit issued by the Issuing Bank, to a level
below that which such Lender or the Issuing Bank or such Lender's or the Issuing
Bank's  holding  company  could have achieved but for such Change in Law (taking
into consideration such Lender's or the Issuing Bank's policies and the policies
of such Lender's or the Issuing Bank's  holding  company with respect to capital
adequacy),  then from time to time the  Borrower  will pay to such Lender or the
Issuing  Bank,  as the case may be,  such  additional  amount or amounts as will
compensate  such  Lender or the  Issuing  Bank or such  Lender's  or the Issuing
Bank's holding company for any such reduction suffered.

     (c) A certificate  of a Lender or the Issuing Bank setting forth the amount
or amounts  necessary  to  compensate  such  Lender or the  Issuing  Bank or its
holding  company,  as the case may be, as specified  in paragraph  (a) or (b) of
this Section,  shall be delivered to the  Borrower.  Such  certificate  shall be
conclusive  absent  manifest  error.  The Borrower  shall pay such Lender or the
Issuing  Bank,  as the  case  may  be,  the  amount  shown  as  due on any  such
certificate within 10 days after receipt thereof.

     (d)  Failure  or delay on the part of any  Lender  or the  Issuing  Bank to
demand  compensation  pursuant to this Section shall not  constitute a waiver of
such Lender's or the Issuing Bank's right to demand such compensation;  provided
that the  Borrower  shall not be required to  compensate a Lender or the Issuing
Bank  pursuant to this Section for any increased  costs or  reductions  incurred
more than 270 days prior to the date that such  Lender or the Issuing  Bank,  as
the case may be,  notifies the Borrower of the Change in Law giving rise to such
increased  costs  or  reductions  and of such  Lender's  or the  Issuing  Bank's
intention to claim compensation  therefor;  provided further that, if the Change
in Law giving rise to such increased  costs or reductions is  retroactive,  then
the 270-day period  referred to above shall be extended to include the period of
retroactive effect thereof.

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<PAGE>

Section 2.15. Break Funding Payments. In the event of (a) the payment of any
principal of any Eurodollar Loan other than on the last day of an Interest
Period applicable thereto (including as a result of an Event of Default), (b)
the conversion of any Eurodollar Loan other than on the last day of the Interest
Period applicable thereto, (c) the failure to borrow, convert, continue or
prepay any Eurodollar Loan on the date specified in any notice delivered
pursuant hereto (regardless of whether such notice may be revoked under Section
2.09(b) and is revoked in accordance therewith), (d) the assignment of any
Eurodollar Loan other than on the last day of the Interest Period applicable
thereto as a result of a request by the Borrower pursuant to Section 2.18, then,
in any such event, the Borrower shall compensate each Lender for the loss, cost
and expense attributable to such event. In the case of a Eurodollar Loan, such
loss, cost or expense to any Lender shall be deemed to include an amount
determined by such Lender to be the excess, if any, of (i) the amount of
interest which would have accrued on the principal amount of such Loan had such
event not occurred, at the Adjusted LIBO Rate that would have been applicable to
such Loan, for the period from the date of such event to the last day of the
then current Interest Period therefor (or, in the case of a failure to borrow,
convert or continue, for the period that would have been the Interest Period for
such Loan), over (ii) the amount of interest which would accrue on such
principal amount for such period at the interest rate which such Lender would
bid were it to bid, at the commencement of such period, for dollar deposits of a
comparable amount and period from other banks in the eurodollar market. A
certificate of any Lender setting forth any amount or amounts that such Lender
is entitled to receive pursuant to this Section shall be delivered to the
Borrower and shall be conclusive absent manifest error. The Borrower shall pay
such Lender the amount shown as due on any such certificate within 10 days after
receipt thereof.

Section 2.16.     Taxes.
                  ------

     (a) Any and all payments by or on account of any obligation of the Borrower
hereunder  shall  be made  free  and  clear  of and  without  deduction  for any
Indemnified  Taxes  or  Other  Taxes;  provided  that if the  Borrower  shall be
required to deduct any Indemnified Taxes or Other Taxes from such payments, then
(i) 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) the  Administrative  Agent,  Lender or Issuing Bank (as the
case may be) receives an amount  equal to the sum it would have  received had no
such  deductions  been made,  (ii) the Borrower  shall make such  deductions and
(iii)  the  Borrower  shall  pay  the  full  amount  deducted  to  the  relevant
Governmental Authority in accordance with applicable law.

     (b) In  addition,  the  Borrower  shall pay any Other Taxes to the relevant
Governmental Authority in accordance with applicable law.

     (c) The Borrower shall indemnify the Administrative  Agent, each Lender and
the Issuing Bank,  within 10 days after written  demand  therefor,  for the full
amount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent,
such Lender or the Issuing  Bank,  as the case may be, on or with respect to any
payment by or on account of any obligation of the Borrower hereunder  (including
Indemnified  Taxes or Other  Taxes  imposed or asserted  on or  attributable  to
amounts  payable under this Section) and any penalties,  interest and reasonable
expenses  arising  therefrom  or  with  respect  thereto,  whether  or not  such
Indemnified  Taxes or Other Taxes were correctly or legally  imposed or asserted
by the relevant Governmental  Authority.  A certificate as to the amount of such
payment or liability  delivered to the Borrower by a Lender or the Issuing Bank,
or by the Administrative Agent on its own behalf or on behalf of a Lender or the
Issuing Bank, shall be conclusive absent manifest error.

                                       37
<PAGE>

     (d) As soon as practicable  after any payment of Indemnified Taxes or Other
Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to
the Administrative Agent the original or a certified copy of a receipt issued by
such  Governmental  Authority  evidencing  such  payment,  a copy of the  return
reporting such payment or other evidence of such payment reasonably satisfactory
to the Administrative Agent.

     (e) Any Foreign  Lender that is entitled to an exemption  from or reduction
of withholding  tax under the law of the  jurisdiction  in which the Borrower is
located,  or any treaty to which such  jurisdiction is a party,  with respect to
payments under this Agreement  shall deliver to the Borrower (with a copy to the
Administrative  Agent),  at the time or times prescribed by applicable law, such
properly  completed and executed  documentation  prescribed by applicable law or
reasonably  requested  by the  Borrower as will permit such  payments to be made
without withholding or at a reduced rate.

     (f) If  the  Administrative  Agent  or a  Lender  determines,  in its  sole
discretion,  that it has  received  a refund of any  Taxes or Other  Taxes as to
which it has been  indemnified  by the  Borrower  or with  respect  to which the
Borrower has paid additional amounts pursuant to this Section 2.16, it shall pay
over such refund to the Borrower  (but only to the extent of indemnity  payments
made, or additional  amounts paid, by the Borrower  under this Section 2.16 with
respect to the Taxes or Other  Taxes  giving  rise to such  refund),  net of all
out-of-pocket  expenses of the  Administrative  Agent or such Lender and without
interest  (other than any interest paid by the relevant  Governmental  Authority
with respect to such refund);  provided,  that the Borrower, upon the request of
the Administrative Agent or such Lender, agrees to repay the amount paid over to
the  Borrower  (plus any  penalties,  interest or other  charges  imposed by the
relevant  Governmental  Authority) to the Administrative Agent or such Lender in
the event the  Administrative  Agent or such  Lender is  required  to repay such
refund to such  Governmental  Authority.  This Section shall not be construed to
require the Administrative Agent or any Lender to make available its tax returns
(or any other information  relating to its taxes which it deems confidential) to
the Borrower or any other Person.

Section 2.17.     Payments Generally; Pro Rata Treatment; Sharing of Set-offs.

     (a)  The  Borrower  shall  make  each  payment  required  to be  made by it
hereunder  (whether  of  principal,   interest,  fees  or  reimbursement  of  LC
Disbursements, or of amounts payable under Section 2.14, Section 2.15 or Section
2.16, or otherwise)  prior to 12:00 noon,  Chicago,  Illinois  time, on the date
when due, in immediately  available funds, without set-off or counterclaim.  Any

                                       38
<PAGE>

amounts  received  after  such time on any date may,  in the  discretion  of the
Administrative  Agent,  be deemed to have been  received on the next  succeeding
Business Day for purposes of  calculating  interest  thereon.  All such payments
shall be made to the Administrative  Agent at its offices at Mail Code IL1-0634,
21 South Clark Street, Chicago, Illinois, except payments to be made directly to
the Issuing Bank as expressly  provided herein and except that payments pursuant
to Section  2.14,  Section  2.15,  Section 2.16 and Section  11.03 shall be made
directly  to the  Persons  entitled  thereto.  The  Administrative  Agent  shall
distribute any such payments  received by it for the account of any other Person
to the appropriate  recipient promptly following receipt thereof. If any payment
hereunder shall be due on a day that is not a Business Day, the date for payment
shall be extended to the next  succeeding  Business Day, and, in the case of any
payment accruing  interest,  interest thereon shall be payable for the period of
such extension. All payments hereunder shall be made in Dollars.

     (b) If at any time insufficient  funds are received by and available to the
Administrative  Agent to pay fully all  amounts of  principal,  unreimbursed  LC
Disbursements, interest and fees then due hereunder, such funds shall be applied
(i) first,  towards  payment of interest  and fees then due  hereunder,  ratably
among the parties  entitled  thereto in accordance  with the amounts of interest
and fees then due to such parties, and (ii) second, towards payment of principal
and unreimbursed LC Disbursements then due hereunder,  ratably among the parties
entitled thereto in accordance with the amounts of principal and unreimbursed LC
Disbursements  then due to such  parties;  provided that in the event such funds
are received by and are available to the Administrative Agent as a result of the
exercise of any rights and  remedies  with respect to any  collateral  under the
Security  Instruments,  the parties  entitled  to a ratable  share of such funds
pursuant to the  foregoing  clause (ii) and the  determination  of each parties'
ratable share shall include,  on a pari passu basis,  the Lender  Counterparties
and the actual aggregate amounts then due and owing to each Lender  Counterparty
by the  Borrower or any  Guarantor as a result of the early  termination  of any
transactions under any Swap Agreements included in the Obligations (after giving
effect to any netting agreements).

     (c) If any Lender shall, by exercising any right of set-off or counterclaim
or otherwise,  obtain  payment in respect of any principal of or interest on any
of its Loans or  participations  in LC  Disbursements  resulting  in such Lender
receiving  payment of a greater  proportion of the aggregate amount of its Loans
and  participations  in LC  Disbursements  and accrued interest thereon than the
proportion  received by any other Lender, then the Lender receiving such greater
proportion shall purchase (for cash at face value)  participations  in the Loans
and  participations in LC Disbursements of other Lenders to the extent necessary
so that the benefit of all such payments shall be shared by the Lenders  ratably
in accordance with the aggregate  amount of principal of and accrued interest on
their respective Loans and participations in LC Disbursements; provided that (i)
if any such  participations  are purchased and all or any portion of the payment
giving rise thereto is recovered, such participations shall be rescinded and the
purchase price restored to the extent of such recovery,  without  interest,  and
(ii) the  provisions  of this  paragraph  shall not be construed to apply to any
payment  made by the  Borrower  pursuant to and in  accordance  with the express
terms of this Agreement or any payment obtained by a Lender as consideration for
the  assignment  of  or  sale  of  a  participation  in  any  of  its  Loans  or
participations in LC Disbursements to any assignee or participant, other than to

                                       39
<PAGE>

the Borrower or any Subsidiary or Affiliate  thereof (as to which the provisions
of this  paragraph  shall  apply).  The Borrower  consents to the  foregoing and
agrees,  to the extent it may  effectively do so under  applicable law, that any
Lender  acquiring a  participation  pursuant to the foregoing  arrangements  may
exercise against the Borrower rights of set-off and counterclaim with respect to
such  participation  as fully as if such  Lender  were a direct  creditor of the
Borrower in the amount of such participation.

     (d) Unless the  Administrative  Agent shall have  received  notice from the
Borrower  prior to the date on which any  payment  is due to the  Administrative
Agent for the  account of the  Lenders or the Issuing  Bank  hereunder  that the
Borrower will not make such payment,  the  Administrative  Agent may assume that
the Borrower has made such payment on such date in accordance  herewith and may,
in reliance upon such assumption, distribute to the Lenders or the Issuing Bank,
as the case may be, the amount due. In such event,  if the  Borrower  has not in
fact made such  payment,  then each of the Lenders or the Issuing  Bank,  as the
case may be, severally agrees to repay to the Administrative  Agent forthwith on
demand the amount so  distributed  to such Lender or Issuing Bank with  interest
thereon,  for each day from and including the date such amount is distributed to
it to but  excluding  the date of payment to the  Administrative  Agent,  at the
greater  of the  Federal  Funds  Effective  Rate  and a rate  determined  by the
Administrative  Agent in  accordance  with banking  industry  rules on interbank
compensation.

     (e) If any Lender shall fail to make any payment  required to be made by it
pursuant to Section 2.05(d) or Section 2.05(e), Section 2.06(b), Section 2.17(d)
or  Section  11.03(c),  then the  Administrative  Agent may,  in its  discretion
(notwithstanding  any contrary provision  hereof),  apply any amounts thereafter
received by the  Administrative  Agent for the account of such Lender to satisfy
such  Lender's  obligations  under  such  Sections  until  all such  unsatisfied
obligations are fully paid.

Section 2.18.     Mitigation Obligations; Replacement of Lenders.

     (a) If any Lender  requests  compensation  under  Section  2.14,  or if the
Borrower  is  required  to  pay  any  additional  amount  to any  Lender  or any
Governmental  Authority for the account of any Lender  pursuant to Section 2.16,
then such Lender shall use reasonable  efforts to designate a different  lending
office for  funding or booking its Loans  hereunder  or to assign its rights and
obligations hereunder to another of its offices, branches or affiliates,  if, in
the judgment of such Lender,  such designation or assignment (i) would eliminate
or reduce amounts payable  pursuant to Section 2.14 or Section 2.16, as the case
may be, in the future and (ii) would not subject such Lender to any unreimbursed
cost or expense and would not otherwise be  disadvantageous  to such Lender. The
Borrower hereby agrees to pay all reasonable costs and expenses  incurred by any
Lender in connection with any such designation or assignment.

     (b) If any Lender  requests  compensation  under  Section  2.14,  or if the
Borrower  is  required  to  pay  any  additional  amount  to any  Lender  or any
Governmental  Authority for the account of any Lender  pursuant to Section 2.16,
or if any Lender  defaults in its obligation to fund Loans  hereunder,  then the
Borrower may, at its sole expense and effort, upon notice to such Lender and the
Administrative  Agent,  require  such  Lender to assign  and  delegate,  without

                                       40
<PAGE>

recourse  (in  accordance  with and  subject to the  restrictions  contained  in
Section 11.04),  all its interests,  rights and obligations under this Agreement
to an assignee that shall assume such obligations (which assignee may be another
Lender,  if a Lender  accepts such  assignment);  provided that (i) the Borrower
shall have received the prior written consent of the  Administrative  Agent (and
if a Commitment is being  assigned,  the Issuing Bank),  which consent shall not
unreasonably  be withheld,  (ii) such Lender shall have  received  payment of an
amount equal to the outstanding  principal of its Loans and participations in LC
Disbursements,  accrued  interest  thereon,  accrued fees and all other  amounts
payable to it  hereunder,  from the assignee (to the extent of such  outstanding
principal  and accrued  interest  and fees) or the  Borrower (in the case of all
other  amounts) and (iii) in the case of any such  assignment  resulting  from a
claim for  compensation  under  Section  2.14 or  payments  required  to be made
pursuant to Section  2.16,  such  assignment  will result in a reduction in such
compensation  or  payments.  A Lender  shall  not be  required  to make any such
assignment and  delegation  if, prior  thereto,  as a result of a waiver by such
Lender or otherwise,  the  circumstances  entitling the Borrower to require such
assignment and delegation cease to apply.

     (c)  If  in   connection   with  any  proposed   amendment,   modification,
termination,  waiver or consent  with respect to any of the  provisions  of this
Agreement  or any other Loan  Document as  contemplated  by Section  11.02,  the
consent of Required  Lenders  shall have been obtained but the consent of one or
more of such other Lenders  (each a  "Non-Consenting  Lender")  whose consent is
required  has not been  obtained;  then,  the Borrower may elect to replace such
Non-Consenting Lender as a Lender party to this Agreement in accordance with and
subject to the  restrictions  contained  in, and  consents  required  by Section
11.04;  provided  that (i) the Borrower  shall have  received the prior  written
consent of the Administrative Agent (and if a Commitment is being assigned,  the
Issuing  Bank),  which consent  shall not  unreasonably  be withheld,  (ii) such
Lender  shall  have  received  payment  of an  amount  equal to the  outstanding
principal of its Loans and participations in LC Disbursements,  accrued interest
thereon,  accrued fees and all other amounts  payable to it hereunder,  from the
assignee (to the extent of such  outstanding  principal and accrued interest and
fees) or the Borrower  (in the case of all other  amounts) and (iii) in the case
of any such  assignment  resulting from a claim for  compensation  under Section
2.14 or payments  required to be made pursuant to Section 2.16,  such assignment
will result in a reduction in such compensation or payments.  A Lender shall not
be required to make any such  assignment and delegation if, prior thereto,  as a
result of a waiver by such Lender or otherwise,  the circumstances entitling the
Borrower to require such assignment and delegation cease to apply.

Article III

                                 Borrowing Base

Section 3.01. Reserve Report; Proposed Borrowing Base. During the period from
the Effective Date until the first Redetermination after the Effective Date, the
Borrowing Base shall be $17,000,000 (the "Initial Borrowing Base"). As soon as

                                       41
<PAGE>

available and in any event by April 1 and September 1 of each year, beginning
April 1, 2006, the Borrower shall deliver to the Administrative Agent and each
Lender a Reserve Report, prepared as of the immediately preceding December 31
and June 30, respectively, in form and substance reasonably satisfactory to the
Administrative Agent and prepared by an Approved Petroleum Engineer (or, in the
case of the Reserve Report due on September 1 of each year, by petroleum
engineers employed by the Borrower or the Restricted Subsidiaries), said Reserve
Report to utilize economic and pricing parameters established from time to time
by the Administrative Agent, together with such other information, reports and
data concerning the value of the Borrowing Base Properties as the Administrative
Agent shall deem reasonably necessary to determine the value of such Borrowing
Base Properties. Simultaneously with the delivery to the Administrative Agent
and the Lenders of each Reserve Report, the Borrower shall submit to the
Administrative Agent and each Lender the Borrower's requested amount of the
Borrowing Base as of the next Redetermination Date. Promptly after the receipt
by the Administrative Agent of such Reserve Report and Borrower's requested
amount for the Borrowing Base, the Administrative Agent shall submit to the
Lenders a recommended amount of the Borrowing Base.

Section 3.02. Scheduled Redeterminations of the Borrowing Base; Procedures and
Standards. Based in part on the Reserve Reports made available to the
Administrative Agent and the Lenders pursuant to Section 3.01, the Lenders shall
redetermine the Borrowing Base on or prior to the next Redetermination Date (or
such date promptly thereafter as reasonably possible based on the engineering
and other information available to the Lenders). Any Borrowing Base which
becomes effective as a result of any Redetermination shall be subject to the
following restrictions: (a) such Borrowing Base shall not exceed the Maximum
Facility Amount, (b) to the extent such Borrowing Base represents an increase in
the Borrowing Base in effect prior to such Redetermination, such Borrowing Base
must be approved by all Lenders, and (c) to the extent such Borrowing Base
represents a decrease in the Borrowing Base in effect prior to such
Redetermination or a reaffirmation of such prior Borrowing Base, such Borrowing
Base must be approved by the Administrative Agent and Required Lenders. If a
redetermined Borrowing Base is not approved by the Administrative Agent and
Required Lenders within twenty (20) days after the submission to the Lenders by
the Administrative Agent of its recommended Borrowing Base pursuant to Section
3.01, or by all Lenders within such twenty (20) day period in the case of any
increase in the Borrowing Base, the Administrative Agent shall notify each
Lender that the recommended Borrowing Base has not been approved and request
that each Lender submit to the Administrative Agent within ten (10) days
thereafter its proposed Borrowing Base. Promptly following the 10th day after
the Administrative Agent's request for each Lender's proposed Borrowing Base,
the Administrative Agent shall determine the Borrowing Base for such
Redetermination by calculating the highest Borrowing Base then acceptable to the
Administrative Agent and a number of Lenders sufficient to constitute Required
Lenders (or all Lenders in the case of an increase in the Borrowing Base). Each
Redetermination shall be made by the Lenders in their sole discretion, but based
on the Administrative Agent's and such Lender's usual and customary procedures
for evaluating Oil and Gas Interests as such exist at the time of such
Redetermination, and including adjustments to reflect the effect of any Swap
Agreements of the Borrower and the Restricted Subsidiaries as such exist at the

                                       42
<PAGE>

time of such Redetermination. The Borrower acknowledges and agrees that each
Redetermination shall be based upon the loan collateral value which each Agent
and each Lender in its sole discretion (using such methodology, assumptions and
discount rates as the Administrative Agent and such Lender customarily uses in
assigning collateral value to Oil and Gas Interests) to the Borrowing Base
Properties at the time in question and based upon such other credit factors
consistently applied (including, without limitation, the assets, liabilities,
cash flow, business, properties, prospects, management and ownership of the
Credit Parties) as the Administrative Agent and such Lender customarily
considers in evaluating similar oil and gas credits. It is expressly understood
that the Administrative Agent and Lenders have no obligation to designate the
Borrowing Base at any particular amounts, except in the exercise of their
discretion, whether in relation to the Aggregate Commitment or otherwise. If the
Borrower does not furnish all information, reports and data required to be
delivered by any date specified in this Article III, unless such failure is not
the fault of the Borrower, the Administrative Agent and Lenders may nonetheless
designate the Borrowing Base at any amounts which the Administrative Agent and
Lenders in their reasonable discretion determine and may redesignate the
Borrowing Base from time to time thereafter until the Administrative Agent and
Lenders receive all such information, reports and data, whereupon the
Administrative Agent and Lenders shall designate a new Borrowing Base, as
described above.

Section 3.03. Special Redeterminations. In addition to Scheduled
Redeterminations, the Borrower shall be permitted to request a Special
Redetermination of the Borrowing Base once between each Scheduled
Redetermination and the Required Lenders shall be permitted to request a Special
Redetermination once between each Scheduled Redetermination. Any request by
Borrower pursuant to this Section 3.03 shall be submitted to the Administrative
Agent and each Lender and at the time of such request Borrower shall notify the
Administrative Agent and each Lender of the Borrowing Base requested by Borrower
in connection with such Special Redetermination and within twenty (20) days
thereafter deliver to the Administrative Agent and each Lender a Reserve Report
prepared as of a date prior to the date of such request that is reasonably
acceptable to the Administrative Agent and such other information which the
Administrative Agent shall reasonably request. Any request by Required Lenders
pursuant to this Section 3.03 shall be submitted to the Administrative Agent and
the Borrower. Any Special Redetermination shall be made by the Administrative
Agent and Lenders in accordance with the procedures and standards set forth in
Section 3.02; provided that no Reserve Report is required to be delivered to the
Administrative Agent or the Lenders in connection with any Special
Redetermination requested by the Required Lenders pursuant to this Section 3.03.

Section 3.04. Notice of Redetermination. Promptly following any Redetermination
of the Borrowing Base, the Administrative Agent shall notify the Borrower of the
amount of the redetermined Borrowing Base, which Borrowing Base shall be
effective as of the date specified in such notice, and such Borrowing Base shall
remain in effect for all purposes of this Agreement until the next
Redetermination.

Article IV

                         Representations and Warranties

         Each Credit Party represents and warrants to the Lenders that:

Section 4.01. Organization; Powers. Each Credit Party is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, has all requisite power and authority to carry on its business as
now conducted and, except where the failure to do so, individually or in the

                                       43
<PAGE>

aggregate, could not reasonably be expected to result in a Material Adverse
Effect, is qualified to do business in, and is in good standing in, every
jurisdiction where such qualification is required.

Section 4.02. Authorization; Enforceability. The Transactions are within each
Credit Party's corporate, limited liability company or partnership powers and
have been duly authorized by all necessary corporate, limited liability company
or partnership and, if required, stockholder action. This Agreement and each of
the other Loan Documents have been duly executed and delivered by each Credit
Party a party thereto and each such Loan Document constitutes a legal, valid and
binding obligation of each Credit Party a party thereto, enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors' rights generally
and subject to general principles of equity, regardless of whether considered in
a proceeding in equity or at law.

Section 4.03. Governmental Approvals; No Conflicts. The Transactions (a) do not
require any consent or approval of, registration or filing with, or any other
action by, any Governmental Authority, except such as have been obtained or made
and are in full force and effect, the filing of the Mortgages in the appropriate
filing offices and, after the Effective Date, the filing of the Credit Agreement
and related Loan Documents by the Borrower with the Securities and Exchange
Commission pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, (b) will not violate any applicable law or regulation or the
charter, by-laws or other Organizational Documents of the Borrower or any
Restricted Subsidiary or any order of any Governmental Authority, (c) will not
violate or result in a default under any indenture, agreement or other
instrument evidencing Material Indebtedness, any Material Sales Contract binding
upon the Borrower or any Restricted Subsidiary or any of their respective
assets, or any JVEA Documents (other than violations or defaults that have been
waived to the satisfaction of the Administrative Agent and the Lenders) or give
rise to a right thereunder to require any payment to be made by the Borrower or
any Restricted Subsidiary, and (d) will not result in the creation or imposition
of any Lien on any asset of the Borrower or any Restricted Subsidiary other than
Liens permitted under Section 7.02.

Section 4.04.     Financial Condition; No Material Adverse Change.

(a)      The Borrower has heretofore furnished to the Lenders its consolidated
         balance sheet and related statements of income, stockholders equity and
         cash flows as of and for the fiscal year ended December 31, 2005,
         reported on by Hein & Associates LLP, independent public accountants.
         Such financial statements present fairly, in all material respects, the
         financial position and results of operations and cash flows of the
         Borrower and its Consolidated Subsidiaries as of such dates and for
         such periods in accordance with GAAP.

(b)      Since December 31, 2005, there has been no material adverse change in
         the business, assets, operations, prospects or condition, financial or
         otherwise, of the Borrower and its Subsidiaries, taken as a whole.

Section 4.05.     Properties.
                  -----------

                                       44
<PAGE>

(a)      Except as otherwise provided in Section 4.14 with respect to Oil and
         Gas Interests, the Borrower and each Restricted Subsidiary has good
         title to, or valid leasehold interests in, all such real and personal
         property material to its business, except for minor defects in title
         that do not interfere with its ability to conduct its business as
         currently conducted or to utilize such properties for their intended
         purposes.

(b)      The Borrower and each Restricted Subsidiary owns, or is licensed to
         use, all trademarks, tradenames, copyrights, patents and other
         intellectual property material to its business, and the use thereof by
         the Borrower and such Restricted Subsidiaries, as the case may be, does
         not infringe upon the rights of any other Person, except for any such
         infringements that, individually or in the aggregate, could not
         reasonably be expected to result in a Material Adverse Effect.

Section 4.06.     Litigation and Environmental Matters.

(a)      There are no actions, suits or proceedings by or before any arbitrator
         or Governmental Authority pending against or, to the knowledge of the
         Borrower, threatened against or affecting the Borrower or any
         Restricted Subsidiary, (i) as to which there is a reasonable
         possibility of an adverse determination and that, if adversely
         determined, could reasonably be expected, individually or in the
         aggregate, to result in a Material Adverse Effect (other than the
         Disclosed Matters) or (ii) that involve this Agreement or the
         Transactions.

(b)      Except for the Disclosed Matters and except with respect to any other
         matters that, individually or in the aggregate, could not reasonably be
         expected to result in a Material Adverse Effect, neither the Borrower
         nor any Restricted Subsidiary (i) has failed to comply with any
         Environmental Law or to obtain, maintain or comply with any permit,
         license or other approval required under any Environmental Law, (ii)
         has become subject to any Environmental Liability, (iii) has received
         notice of any claim with respect to any Environmental Liability or (iv)
         knows of any basis for any Environmental Liability.

(c)      Since the date of this Agreement, there has been no change in the
         status of the Disclosed Matters that, individually or in the aggregate,
         has resulted in, or materially increased the likelihood of, a Material
         Adverse Effect.

Section 4.07. Compliance with Laws and Agreements. The Borrower and each
Restricted Subsidiary is in compliance with all laws, regulations and orders of
any Governmental Authority applicable to it or its property and all indentures,
agreements and other instruments binding upon it or its property, except where
the failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect. No Default has occurred and is
continuing.

Section 4.08. Investment Company Status. Neither the Borrower nor any Restricted
Subsidiary is an "investment company" as defined in, or subject to regulation
under, the Investment Company Act of 1940.

                                       45
<PAGE>

Section 4.09. Taxes. The Borrower and each Restricted Subsidiary has timely
filed or caused to be filed all Tax returns and reports required to have been
filed and has paid or caused to be paid all Taxes required to have been paid by
it, except (a) Taxes that are being contested in good faith by appropriate
proceedings and for which the Borrower or such Restricted Subsidiary, as
applicable, has set aside on its books adequate reserves or (b) to the extent
that the failure to do so could not reasonably be expected to result in a
Material Adverse Effect.

Section 4.10. ERISA. No ERISA Event has occurred or is reasonably expected to
occur that, when taken together with all other such ERISA Events for which
liability is reasonably expected to occur, could reasonably be expected to
result in a Material Adverse Effect. The present value of all accumulated
benefit obligations under each Plan (based on the assumptions used for purposes
of FASB Statement 87) did not, as of the date of the most recent financial
statements reflecting such amounts, exceed by more than $1,000,000 the fair
market value of the assets of such Plan, and the present value of all
accumulated benefit obligations of all underfunded Plans (based on the
assumptions used for purposes of FASB Statement 87) did not, as of the date of
the most recent financial statements reflecting such amounts, exceed by more
than $1,000,000 the fair market value of the assets of all such underfunded
Plans.

Section 4.11. Disclosure. The Borrower has disclosed to the Lenders all
agreements, instruments and corporate or other restrictions to which it or any
Restricted Subsidiary is subject, and all other matters known to it, that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect. None of the other reports, financial statements,
certificates or other information furnished by or on behalf of the Borrower or
any Restricted Subsidiary to the Administrative Agent or any Lender in
connection with the negotiation of this Agreement or delivered hereunder (as
modified or supplemented by other information so furnished) contains any
material misstatement of fact or omits to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; provided that, with respect to the Projections, the
Borrower represents only that such information was prepared in good faith based
on assumptions believed to be reasonable at the time.

Section 4.12. Capitalization; Corporate Information. Schedule 4.12 lists, for
each Credit Party, its full legal name, its jurisdiction of organization and its
federal tax identification number and, with respect to each Restricted
Subsidiary, the number of shares of capital stock or other Equity Interests
outstanding and the owner(s) of such shares or Equity Interests.

Section 4.13. Margin Stock. Neither the Borrower nor any Restricted Subsidiary
is engaged principally, or as one of its important activities, in the business
of extending credit for the purpose of purchasing or carrying margin stock
(within the meaning of Regulation U or X of the Board), and no part of the
proceeds of any Loan will be used to purchase or carry any margin stock in
violation of said Regulation U or X or to extend credit to others for the
purpose of purchasing or carrying margin stock in violation of said Regulation U
or X.

Section 4.14. Oil and Gas Interests. Each Credit Party has good and defensible
title to all proved reserves included in the Oil and Gas Interests (for purposes
of this Section 4.14, "proved Oil and Gas Interests") described in the most
recent Reserve Report provided to the Administrative Agent, free and clear of
all Liens except Liens permitted pursuant to Section 7.02. All such proved Oil

                                       46
<PAGE>

and Gas Interests are valid, subsisting, and in full force and effect, and all
rentals, royalties, and other amounts due and payable in respect thereof have
been duly paid. Without regard to any consent or non-consent provisions of any
joint operating agreement covering any Credit Party's proved Oil and Gas
Interests but after giving effect to any net profits interest or similar
interest of any Secured Party, including Schlumberger, under the JVEA Documents,
such Credit Party's share of (a) the costs for each proved Oil and Gas Interest
described in the Reserve Report is not materially greater than the decimal
fraction set forth in the Reserve Report, before and after payout, as the case
may be, and described therein by the respective designations "working
interests," "WI," "gross working interest," "GWI," or similar terms (except in
such cases where there is a corresponding increase in the net revenue interest),
and (b) production from, allocated to, or attributed to each such proved Oil and
Gas Interest is not materially less than the decimal fraction set forth in the
Reserve Report, before and after payout, as the case may be, and described
therein by the designations "net revenue interest," "NRI," or similar terms.
Each well drilled in respect of proved producing Oil and Gas Interests described
in the Reserve Report (1) is capable of, and is presently, either producing
Hydrocarbons in commercially profitable quantities or in the process of being
worked over or enhanced, and the Credit Party that owns such proved producing
Oil and Gas Interests is currently receiving payments for its share of
production, with no funds in respect of any thereof being presently held in
suspense, other than any such funds being held in suspense pending delivery of
appropriate division orders, and (2) has been drilled, bottomed, completed, and
operated in compliance with all applicable laws, in the case of clauses (1) and
(2), except where any failure to satisfy clause (1) or to comply with clause (2)
would not have a Material Adverse Effect, and no such well which is currently
producing Hydrocarbons is subject to any penalty in production by reason of such
well having produced in excess of its allowable production.

Section 4.15. Insurance. The certificate signed by the Financial Officer that
attests to the existence and adequacy of, and summarizes, the property and
casualty insurance program maintained by the Credit Parties that has been
furnished by the Borrower to the Administrative Agent and the Lenders as of the
Effective Date, is complete and accurate in all material respects as of the
Effective Date and demonstrates the Borrower's and the Restricted Subsidiaries'
compliance with Section 6.05.

Section 4.16.     Solvency.

     (a) Immediately  after the consummation of the Transactions and immediately
following the making of the initial  Borrowing  made on the  Effective  Date and
after giving effect to the  application  of the proceeds  thereof,  (1) the fair
value of the assets of the Credit  Parties on a  consolidated  basis,  at a fair
valuation,  will exceed the debts and liabilities,  subordinated,  contingent or
otherwise,  of the Credit Parties on a consolidated  basis; (2) the present fair
saleable  value of the real and  personal  property  of the Credit  Parties on a
consolidated  basis will be greater than the amount that will be required to pay
the probable  liability of the Credit Parties on a  consolidated  basis on their
debts and other  liabilities,  subordinated,  contingent or  otherwise,  as such
debts and other liabilities become absolute and matured;  (3) the Credit Parties
on a  consolidated  basis  will be  able to pay  their  debts  and  liabilities,
subordinated,  contingent or  otherwise,  as such debts and  liabilities  become

                                       47
<PAGE>

absolute and matured;  and (4) the Credit Parties on a  consolidated  basis will
not have  unreasonably  small  capital with which to conduct the  businesses  in
which they are engaged as such  businesses are now conducted and are proposed to
be conducted after the date hereof.

     (b) The Credit Parties do not intend to, and do not believe that they will,
incur debts beyond their  ability to pay such debts as they mature,  taking into
account the timing of and amounts of cash to be received by it and the timing of
the amounts of cash to be payable on or in respect of its Indebtedness.

Article V

                                   Conditions

Section 5.01. Effective Date. The obligations of the Lenders to make Loans and
of the Issuing Bank to issue Letters of Credit hereunder shall not become
effective until the date on which each of the following conditions is satisfied
(or waived in accordance with Section 11.02):

(a)      The Administrative Agent (or its counsel) shall have received from each
         party hereto either (i) a counterpart of this Agreement signed on
         behalf of such party or (ii) written evidence satisfactory to the
         Administrative Agent (which may include telecopy transmission of a
         signed signature page of this Agreement) that such party has signed a
         counterpart of this Agreement.

(b)      The Administrative Agent shall have received a favorable written
         opinions (addressed to the Administrative Agent and the Lenders and
         dated the Effective Date) of Dill, Dill, Carr, Stonbraker & Hutchings,
         P.C., Vinson & Elkins L.L.P., and Pruitt Gushee, counsel for the Credit
         Parties, substantially in the form of Exhibits B-1, B-2 and B-3,
         respectively, and covering such other matters relating to the Credit
         Parties, this Agreement or the Transactions as the Required Lenders
         shall reasonably request.

(c)      The Administrative Agent shall have received such documents and
         certificates as the Administrative Agent or its counsel may reasonably
         request relating to the organization, existence and good standing of
         each Credit Party, the authorization of the Transactions and any other
         legal matters relating to the Credit Parties, this Agreement or the
         Transactions, all in form and substance satisfactory to the
         Administrative Agent and its counsel.

(d)      The Administrative Agent shall have received a certificate, dated the
         Effective Date and signed by the President, a Vice President or a
         Financial Officer of the Borrower, confirming that the Credit Parties
         have (i) complied with the conditions set forth in paragraphs (a) and
         (b) of Section 5.02, and (ii) complied with the covenants set forth in
         Section 6.05 (and demonstrating such compliance by the attachment of an
         insurance summary and insurance certificates evidencing the coverage
         described in such summary).

(e)      The Administrative Agent, the Lenders and the Lead Arranger shall have
         received all fees and other amounts due and payable on or prior to the
         Effective Date, and, to the extent invoiced, reimbursement or payment
         of all out-of-pocket expenses required to be reimbursed or paid by the

                                       48
<PAGE>

         Borrower hereunder, including all fees, expenses and disbursements of
         counsel for the Administrative Agent to the extent invoiced on or prior
         to the Effective Date, together with such additional amounts as shall
         constitute such counsel's reasonable written estimate of expenses and
         disbursements to be incurred by such counsel in connection with the
         recording and filing of Mortgages and financing statements; provided,
         that, such estimate shall not thereafter preclude further settling of
         accounts between the Borrower and the Administrative Agent.

(f)      The Administrative Agent shall have received the Mortgages to be
         executed on the Effective Date pursuant to Section 6.09 of this
         Agreement, duly executed and delivered by the appropriate Credit Party,
         together with such other assignments, conveyances, amendments,
         agreements and other writings, including, without limitation, UCC-1
         financing statements, tax affidavits and applicable department of
         revenue documentation, creating first and prior Liens, subject to
         Permitted Encumbrances, in Oil and Gas Interests having an Engineered
         Value equal to or greater than the Engineered Value required under
         Section 6.09.

(g)      The Administrative Agent shall have received the title information and
         opinions with respect to the Mortgaged Properties required by Section
         6.10 on the Effective Date.

(h)      The Administrative Agent shall have received the Pledge Agreement to be
         executed on the Effective Date pursuant to Section 6.13 of this
         Agreement, duly executed and delivered by the appropriate Credit Party,
         together with such other assignments, conveyances, amendments,
         agreements and other writings, including, without limitation, UCC-1
         financing statements and control agreements, creating first and prior
         Liens, subject to the Liens permitted under Section 7.02, in all Equity
         Interests of each Restricted Subsidiary now or hereafter owned by
         Borrower or any Restricted Subsidiary.

(i)      The Administrative Agent shall have received such financing statements
         (including, without limitation, the financing statements referenced in
         subclause (f) and (h) above) as Administrative Agent shall specify to
         fully evidence and perfect all Liens (to the extent the filing of a
         financing statement can be effective to perfect such Liens)
         contemplated by the Loan Documents, all of which shall be filed of
         record in such jurisdictions as the Administrative Agent shall require
         in its sole discretion.

(j)      The Administrative Agent shall have received reports and other
         information, in form, scope and substance satisfactory to the
         Administrative Agent, regarding environmental matters relating to the
         Borrowing Base Properties.

(k)      The Administrative Agent shall have received a Solvency Certificate in
         the form attached hereto as Exhibit D, dated the Effective Date, and
         signed by the Chief Financial Officer of the Borrower.

(l)      The Lenders shall have received from the Borrower (i) the financial
         statements described in Section 4.04, (ii) a pro forma consolidated
         balance sheet of the Borrower and its Consolidated Subsidiaries as at
         the Effective Date, and reflecting the consummation of the
         Transactions, the related financings and other transactions

                                       49
<PAGE>

         contemplated by the Loan Documents to occur on or prior to the
         Effective Date, which pro forma balance sheet shall be prepared
         consistent in all respects with the information previously provided by
         the Borrower to the Administrative Agent and the Lenders and otherwise
         in form and substance satisfactory to the Administrative Agent and
         (iii) the Projections.

(m)      The Administrative Agent, Schlumberger and Gasco Production shall have
         executed and delivered the SLB Agreement.

(n)      The Administrative Agent shall have received from the Service Parties a
         written consent (addressed to Gasco Production and in form, scope and
         substance satisfactory to the Administrative Agent) to the execution,
         delivery and performance by Gasco Production of the Mortgages to be
         filed in Carbon, Duchesne and Uintah Counties, Utah, and the Liens to
         secure the Obligations contemplated thereby, including the filing of
         such Mortgages and related UCC-1 financing statements in the
         appropriate filing offices.

(o)      The Administrative Agent shall have received satisfactory evidence that
         Schlumberger has complied, or promptly after the Effective Date will
         comply, with the legend requirement set forth in the SLB Agreement with
         respect to the security instruments evidencing the Liens securing the
         obligations of Gasco Production to Schlumberger under the JVEA
         Documents.

(p)      There shall not exist any action, suit, investigation, litigation or
         proceeding or other legal or regulatory developments, pending or
         threatened in any court or before any arbitrator or Governmental
         Authority that, in the reasonable opinion of Administrative Agent,
         singly or in the aggregate, materially impairs the Transactions or any
         of the other transactions contemplated by the Loan Documents or that
         could have a Material Adverse Effect.

(q)      All partnership, corporate and other proceedings taken or to be taken
         in connection with the Transactions and all documents incidental
         thereto shall be satisfactory in form and substance to Administrative
         Agent and its counsel, and Administrative Agent and such counsel shall
         have received all such counterpart originals or certified copies of
         such documents as Administrative Agent may reasonably request.

The Administrative Agent shall notify the Borrower and the Lenders of the
Effective Date, and such notice shall be conclusive and binding. Notwithstanding
the foregoing, the obligations of the Lenders to make Loans and of the Issuing
Bank to issue Letters of Credit hereunder shall not become effective unless each
of the foregoing conditions is satisfied (or waived pursuant to Section 11.02)
at or prior to 3:00 p.m., Chicago, Illinois time, on March 29, 2006 (and, in the
event such conditions are not so satisfied or waived, the Aggregate Commitment
shall terminate at such time).

Section 5.02. Each Credit Event. The obligation of each Lender to make a Loan on
the occasion of any Borrowing, and of the Issuing Bank to issue, amend, renew or
extend any Letter of Credit, is subject to the satisfaction of the following
conditions:

                                       50
<PAGE>

(a)      The representations and warranties of each Credit Party set forth in
         this Agreement shall be true and correct on and as of the date of such
         Borrowing or the date of issuance, amendment, renewal or extension of
         such Letter of Credit, as applicable except to the extent that such
         representations and warranties specifically refer to an earlier date,
         in which case they shall be true and correct as of such earlier date.

(b)      At the time of and immediately after giving effect to such Borrowing or
         the issuance, amendment, renewal or extension of such Letter of Credit,
         as applicable, no Default shall have occurred and be continuing.

(c)      At the time of and immediately after giving effect to such Borrowing or
         the issuance, amendment, renewal or extension of such Letter of Credit,
         as applicable, no Borrowing Base Deficiency exists or would be caused
         thereby.

Each Borrowing and each issuance, amendment, renewal or extension of a Letter of
Credit shall be deemed to constitute a representation and warranty by the
Borrower on the date thereof as to the matters specified in paragraphs (a), (b)
and (c) of this Section.

Article VI

                              Affirmative Covenants

                  Until the Aggregate Commitment has expired or been terminated
and the principal of and interest on each Loan and all fees payable hereunder
shall have been paid in full and all Letters of Credit shall have expired or
terminated and all LC Disbursements shall have been reimbursed, each Credit
Party covenants and agrees with the Lenders that:

Section 6.01. Financial Statements; Other Information. The Borrower will furnish
to the Administrative Agent and each Lender known to the Borrower:

     (a) within 90 days after the end of each fiscal year of the  Borrower,  the
audited  consolidated  balance  sheet  and  related  statements  of  operations,
stockholders'  equity  and  cash  flows  of the  Borrower  and its  Consolidated
Subsidiaries  as of the end of and for such year,  setting forth in each case in
comparative  form the figures for the previous fiscal year, all reported on by a
firm of independent public accountants  reasonably  acceptable to Administrative
Agent (without a "going concern" or like  qualification or exception and without
any qualification or exception as to the scope of such audit) to the effect that
such consolidated and consolidating  financial  statements present fairly in all
material  respects the  financial  condition  and results of  operations  of the
Borrower and its Consolidated  Subsidiaries on a consolidated and  consolidating
basis in accordance with GAAP consistently applied;

     (b) within 45 days after the end of each  fiscal  quarter of the  Borrower,
the consolidated  balance sheet and related  statements of operations,  and cash
flows of the Borrower and its Consolidated Subsidiaries as of the end of and for
such fiscal  quarter and the then elapsed  portion of the fiscal  year,  setting
forth in each case in comparative form the figures for the corresponding  period
or  periods  of (or,  in the case of the  balance  sheet,  as of the end of) the
previous  fiscal  year,  all  certified  by  one of its  Financial  Officers  as

                                       51
<PAGE>

presenting fairly in all material  respects the financial  condition and results
of  operations  of  the  Borrower  and  its   Consolidated   Subsidiaries  on  a
consolidated  basis in accordance  with GAAP  consistently  applied,  subject to
normal year-end audit adjustments and the absence of footnotes;

     (c) following any delivery of financial  statements under clause (a) or (b)
above,  but  within  the time  periods  specified  in clause  (a) or (b) for the
delivery of such financial  statements,  as applicable,  a certificate in a form
reasonably  acceptable  to  Administrative  Agent signed by the chief  financial
officer of the Borrower (i) certifying as to whether a Default has occurred and,
if a Default has occurred,  specifying the details  thereof and any action taken
or proposed to be taken with respect thereto,  and (ii) setting forth reasonably
detailed calculations demonstrating compliance with Section 7.11;

     (d) following any delivery of financial  statements under clause (a) above,
but within 90 days after the end of the preceding  fiscal year, a certificate of
the accounting firm that reported on such financial  statements  stating whether
they obtained knowledge during the course of their examination of such financial
statements  of any  Default  (which  certificate  may be  limited  to the extent
required by accounting rules or guidelines);

     (e) as soon as  available,  and in any  event  no  later  than  April 1 and
September 1 of each year, the Reserve Reports required on such dates pursuant to
Section 3.01;

     (f) together with the Reserve Reports  required under clause (e) above, (i)
a report,  in  reasonable  detail,  setting  forth the Swap  Agreements  then in
effect,  the notional  volumes of and prices for, on a monthly  basis and in the
aggregate,  the Crude Oil and Natural Gas for each such Swap  Agreement  and the
term of each  such  Swap  Agreement;  (ii) a true and  correct  schedule  of the
Mortgaged  Properties,  (iii)  the  percentage  of the  Engineered  Value of the
Borrowing Base that the Mortgaged Properties represent and (iv) a description of
the  additional  Oil and Gas  Interests,  if any, to be  mortgaged by the Credit
Parties to comply with Section 6.09 and the Engineered Value thereof;

     (g)  together  with the Reserve  Reports  required  under clause (e) above,
Projections for the forthcoming  three fiscal years,  year by year , and for the
forthcoming fiscal year, quarter by quarter; and

     (h)  promptly  following  any  request  therefor,  such  other  information
regarding the operations, business affairs and financial condition of any Credit
Party,  or compliance with the terms of this  Agreement,  as the  Administrative
Agent or any Lender may reasonably request.

         Any financial statements and other information meeting the criteria of
Section 6.01(a) or 6.01(b) that are filed by the Borrower with the Securities
and Exchange Commission, or any Governmental Authority succeeding to any or all
the functions of said Commission, shall be deemed to be delivered to the
Administrative Agent and each Lender at the time of each such filing in
satisfaction of the requirements of Section 6.01(a) or 6.01 (b), as applicable;
provided each Lender then known to the Borrower is notified by the Borrower that
such information has been filed with the Securities and Exchange Commission, or
such successor Governmental Authority. In addition, the Borrower shall notify

                                       52
<PAGE>

each Lender promptly after the same becomes publicly available, of the filing by
the Borrower or any Subsidiary of any other reports, proxy statements and other
materials with the Securities and Exchange Commission, or such successor
Governmental Authority.

Section  6.02.  Notices of Material  Events.  The  Borrower  will furnish to the
Administrative Agent and each Lender prompt written notice of the following:

(a)      the occurrence of any Default;

(b)      the filing or commencement of any action, suit or proceeding by or
         before any arbitrator or Governmental Authority against or affecting
         any Credit Party or any Affiliate thereof that, if adversely
         determined, could reasonably be expected to result in a Material
         Adverse Effect;

(c)      the occurrence of any ERISA Event that, alone or together with any
         other ERISA Events that have occurred, could reasonably be expected to
         result in liability of the Borrower and the Restricted Subsidiaries in
         an aggregate amount exceeding $1,000,000;

(d)      any written notice or written claim to the effect that any Credit Party
         is or may be liable to any Person as a result of the release by any
         Credit Party, or any other Person of any Hazardous Materials into the
         environment, which could reasonably be expected to have a Material
         Adverse Effect;

(e)      any notice alleging any violation of any Environmental Law by any
         Credit Party, which could reasonably be expected to have a Material
         Adverse Effect;

(f)      the occurrence of any material breach or default under, or repudiation
         or termination of, any Material Sales Contract that results in, or
         could reasonably be expected to result in, a Material Adverse Effect;

(g)      the occurrence of any material breach or default under, or repudiation
         or termination of, any JVEA Document prior to its stated termination or
         maturity date.

(h)      the receipt by the Borrower or any Restricted Subsidiary of any
         management letter or comparable analysis prepared by the auditors for
         the Borrower or any such Restricted Subsidiary; and

(i)      any other development that results in, or could reasonably be expected
         to result in, a Material Adverse Effect.

Each notice delivered under this Section shall be accompanied by a statement of
a Financial Officer or other executive officer of the Borrower setting forth the
details of the event or development requiring such notice and any action taken
or proposed to be taken with respect thereto.

                                       53
<PAGE>

Section 6.03. Existence; Conduct of Business. The Borrower will, and will cause
each Restricted Subsidiary to, do or cause to be done all things necessary to
preserve, renew and keep in full force and effect its legal existence and the
rights, licenses, permits, privileges and franchises material to the conduct of
its business; provided that the foregoing shall not prohibit any merger,
consolidation, liquidation or dissolution permitted under Section 7.03.

Section 6.04. Payment of Obligations. The Borrower will, and will cause each
Restricted Subsidiary to, pay its obligations, including Tax liabilities, that,
if not paid, could result in a Material Adverse Effect before the same shall
become delinquent or in default, except where (a) the validity or amount thereof
is being contested in good faith by appropriate proceedings, (b) the Borrower or
such Restricted Subsidiary has set aside on its books adequate reserves with
respect thereto in accordance with GAAP and (c) the failure to make payment
pending such contest could not reasonably be expected to result in a Material
Adverse Effect.

Section 6.05. Maintenance of Properties; Insurance. The Borrower will, and will
cause each Restricted Subsidiary and use commercially reasonable efforts to
cause each operator of Borrowing Base Properties to, (a) keep and maintain all
property material to the conduct of its business in good working order and
condition, ordinary wear and tear excepted, and (b) maintain, with financially
sound and reputable insurance companies, insurance in such amounts and against
such risks as are customarily maintained by companies engaged in the same or
similar businesses operating in the same or similar locations, to the extent
that such insurance is commercially available. On or prior to the Effective Date
and thereafter, upon request of the Administrative Agent, the Borrower will
furnish or cause to be furnished to the Administrative Agent from time to time a
summary of the respective insurance coverage of the Borrower and its Restricted
Subsidiaries in form and substance reasonably satisfactory to the Administrative
Agent, and, if requested, will furnish the Administrative Agent copies of the
applicable policies. Upon demand by Administrative Agent, the Borrower will
cause any insurance policies covering any such property to be endorsed (a) to
provide that such policies may not be cancelled, reduced or affected in any
manner for any reason without fifteen (15) days prior notice to Administrative
Agent, and (b) to provide for such other matters as the Lenders may reasonably
require.

Section 6.06. Books and Records; Inspection Rights. The Borrower will, and will
cause each Restricted Subsidiary to, keep proper books of record and account in
which full, true and correct entries are made of all dealings and transactions
in relation to its business and activities. The Borrower will, and will cause
each Restricted Subsidiary to, permit any representatives designated by the
Administrative Agent or any Lender, upon reasonable prior notice, to visit and
inspect its properties, to examine and make extracts from its books and records,
and to discuss its affairs, finances and condition with its officers and its
independent accountants, all at such reasonable times and as often as reasonably
requested.

Section 6.07. Compliance with Laws. The Borrower will, and will cause each
Restricted Subsidiary to, comply with all laws, rules, regulations and orders of
any Governmental Authority applicable to it or its property, except where the
failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.

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Section 6.08. Use of Proceeds and Letters of Credit. The proceeds of the Loans
will be used only to (a) pay the fees, expenses and transaction costs of the
Transactions and (b) finance the working capital needs of the Borrower,
including capital expenditures, and for general corporate purposes of the
Borrower and the Guarantors, in the ordinary course of business, including the
exploration, acquisition and development of Oil and Gas Interests. No part of
the proceeds of any Loan will be used, whether directly or indirectly, for any
purpose that entails a violation of any of the regulations of the Board,
including Regulations U and X. Letters of Credit will be issued only to support
general corporate purposes of the Borrower and the Restricted Subsidiaries.

Section 6.09. Mortgages. The Borrower will, and will cause each Guarantor that
is an owner of Borrowing Base Properties to, execute and deliver to the
Administrative Agent, for the benefit of the Secured Parties, Mortgages in form
and substance acceptable to the Administrative Agent together with such other
assignments, conveyances, amendments, agreements and other writings, including,
without limitation, UCC-1 financing statements (each duly authorized and
executed, as applicable) as the Administrative Agent shall deem necessary or
appropriate to grant, evidence and perfect Liens in not less than eighty percent
(80%) of the Engineered Value of the Borrowing Base Properties of the Borrower
and such Guarantors taken as a whole subject only to Liens in the Borrowing Base
Properties permitted under Section 7.02.

Section 6.10. Title Data. The Borrower will, and will cause each Guarantor that
is an owner of Mortgaged Properties to, deliver to the Administrative Agent such
opinions of counsel and other evidence of title as the Administrative Agent
shall deem reasonably necessary or appropriate to verify (i) the Borrower's and
such Guarantor's title to not less (80%) of the Engineered Value of the
Mortgaged Properties taken as a whole and after giving effect to the Borrower's
and the Restricted Subsidiaries' compliance with the last sentence of this
Section 6.10, and (ii) the validity, perfection and priority of the Liens
created by such Mortgages and such other matters regarding such Mortgages as
Administrative Agent shall reasonably request. Within sixty (60) days after the
Effective Date, the Borrower will and will cause each Restricted Subsidiary to
cure the title defects described on Schedule 6.10 by taking the curative actions
described on Schedule 6.10.

Section 6.11.     Operation of Oil and Gas Interests.

(a)      The Borrower will, and will cause each Restricted Subsidiary to,
         maintain, develop and operate (to the extent it is the operator) its
         Oil and Gas Interests in a good and workmanlike manner, and observe and
         comply with all of the terms and provisions, express or implied, of all
         oil and gas leases relating to such Oil and Gas Interests so long as
         such Oil and Gas Interests are capable of producing Hydrocarbons and
         accompanying elements in paying quantities, except where such failure
         to comply could not reasonably be expected to have a Material Adverse
         Effect.

(b)      The Borrower will, and will cause each Restricted Subsidiary to, comply
         in all respects with all contracts and agreements applicable to or
         relating to its Oil and Gas Interests or the production and sale of
         Hydrocarbons and accompanying elements therefrom, except to the extent
         a failure to so comply could not reasonably be expected to have a
         Material Adverse Effect.

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<PAGE>

Section 6.12. Restricted Subsidiaries. In the event any Person is or becomes a
Restricted Subsidiary, Borrower will (a) promptly take all action necessary to
comply with Section 6.13, (b) promptly take all such action and execute and
deliver, or cause to be executed and delivered, to the Administrative Agent all
such documents, opinions, instruments, agreements, and certificates similar to
those described in Section 5.01(b) and Section 5.01(c) that the Administrative
Agent may request, and (c) promptly cause such Restricted Subsidiary to (i)
become a party to this Agreement and Guarantee the Obligations by executing and
delivering to the Administrative Agent a Counterpart Agreement in the form of
Exhibit C, and (ii) to the extent required to comply with Section 6.09, grant to
the Administrative Agent, for the benefit of the Lenders, a security interest in
all of such Restricted Subsidiary's Oil and Gas Interests to secure the
Obligations. Upon delivery of any such Counterpart Agreement to the
Administrative Agent, notice of which is hereby waived by each Credit Party,
such Restricted Subsidiary shall be a Guarantor and shall be as fully a party
hereto as if such Restricted Subsidiary were an original signatory hereto. Each
Credit Party expressly agrees that its obligations arising hereunder shall not
be affected or diminished by the addition or release of any other Credit Party
hereunder. This Agreement shall be fully effective as to any Credit Party that
is or becomes a party hereto regardless of whether any other Person becomes or
fails to become or ceases to be a Credit Party hereunder. With respect to each
such Restricted Subsidiary, the Borrower shall promptly send to the
Administrative Agent written notice setting forth with respect to such Person
the date on which such Person became a Restricted Subsidiary of the Borrower,
and supplement the data required to be set forth in the Schedules to this
Agreement as a result of the acquisition or creation of such Restricted
Subsidiary; provided that such supplemental data must be reasonably acceptable
to the Administrative Agent and Required Lenders.

Section 6.13. Pledged Equity Interests. On the date hereof and at the time
hereafter that any Restricted Subsidiary of the Borrower is created or acquired
or any Unrestricted Subsidiary becomes a Restricted Subsidiary, the Borrower and
the Subsidiaries (as applicable) shall execute and deliver to the Administrative
Agent for the benefit of the Secured Parties, a Pledge Agreement, in form and
substance acceptable to the Administrative Agent, from the Borrower and/or the
Subsidiaries (as applicable) covering all Equity Interests owned by the Borrower
or such Restricted Subsidiaries in such Restricted Subsidiaries, together with
all certificates (or other evidence acceptable to Administrative Agent)
evidencing the issued and outstanding Equity Interests of each such Restricted
Subsidiary of every class owned by such Credit Party (as applicable) which, if
certificated, shall be duly endorsed or accompanied by stock powers executed in
blank (as applicable), as Administrative Agent shall deem necessary or
appropriate to grant, evidence and perfect a first priority security interest in
the issued and outstanding Equity Interests owned by Borrower or any Restricted
Subsidiary in each Restricted Subsidiary.

Section 6.14. JVEA Documents. Promptly after the execution and delivery by any
Credit Party of any amendments, modifications, supplements or restatements of
any JVEA Document or any additional agreements, instruments, conveyances or
assignments, as collateral or otherwise, pursuant to or in connection with any
JVEA Document, the Borrower shall, and shall cause Gasco Production to, deliver
to the Administrative Agent and its counsel true and correct copies of any such
amendment, modification, supplement, restatement, agreement, instrument,
conveyance or assignment.

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                                  Article VII

                               Negative Covenants

                  Until the Aggregate Commitment has expired or terminated and
the principal of and interest on each Loan and all fees payable hereunder have
been paid in full and all Letters of Credit have expired or terminated and all
LC Disbursements shall have been reimbursed, each Credit Party covenants and
agrees with the Lenders that:

Section 7.01. Indebtedness. The Borrower will not, nor will it permit any of its
Restricted  Subsidiaries  to,  create,  incur,  assume  or  permit  to exist any
Indebtedness, except:

(a)      The Obligations;

(b)      Indebtedness existing on the date hereof and set forth in Schedule 7.01
         and extensions, renewals and replacements of any such Indebtedness that
         do not increase the outstanding principal amount thereof;

(c)      Indebtedness of the Borrower to any Guarantor and of any Guarantor to
         the Borrower or any other Guarantor; provided, that (i) all such
         Indebtedness shall be unsecured and subordinated in right of payment to
         the payment in full of all of the Obligations in a manner and on terms
         and conditions reasonably satisfactory to the Administrative Agent and
         (ii) all such Indebtedness is evidenced by promissory notes in form and
         substance reasonably satisfactory to the Administrative Agent, and such
         promissory notes are subject to a first priority security interest in
         favor of the Administrative Agent for the benefit of the Secured
         Parties on terms and conditions reasonably satisfactory to the
         Administrative Agent.

(d)      Guarantees of the Obligations.

(e)      Indebtedness of the Borrower and the Restricted Subsidiaries incurred
         to finance the acquisition, construction or improvement of any fixed or
         capital assets, including Capital Lease Obligations and any
         Indebtedness assumed in connection with the acquisition of any such
         assets or secured by a Lien on any such assets prior to the acquisition
         thereof, and extensions, renewals and replacements of any such
         Indebtedness that do not increase the outstanding principal amount
         thereof; provided that (i) such Indebtedness is incurred prior to or
         within 90 days after such acquisition or the completion of such
         construction or improvement and (ii) the aggregate principal amount of
         Indebtedness permitted by this clause (e) shall not exceed $1,000,000
         at any time outstanding;

(f)      Indebtedness incurred or deposits made by the Borrower and the
         Restricted Subsidiaries (i) under worker's compensation laws,
         unemployment insurance laws or similar legislation, or (ii) in
         connection with bids, tenders, contracts (other than for the payment of
         Indebtedness) or leases to which such Credit Party is a party, (iii) to
         secure public or statutory obligations of such Credit Party, and (iv)
         of cash or U.S. Government Securities made to secure the performance of

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<PAGE>

         statutory obligations, surety, stay, customs and appeal bonds to which
         such Credit Party is a party in connection with the operation of the
         Oil and Gas Interests, in each case in the ordinary course of business;

(g)      Indebtedness under Swap Agreements to the extent permitted under
         Section 7.05;

(h)      Indebtedness of the Borrower under the Convertible  Notes in an
         aggregate  principal  amount not exceeding  $65,000,000 at any
         time outstanding;

(i)      Indebtedness of Gasco Production to Schlumberger under the JVEA
         Documents; and

(j)      Other  unsecured  Indebtedness  of the Credit Parties in an aggregate
         principal  amount not exceeding  $1,000,000 at any time outstanding.

Section 7.02. Liens. The Borrower will not, nor will it permit any of its
Restricted Subsidiaries to, create, incur, assume or permit to exist any Lien on
any property or asset now owned or hereafter acquired by it, or assign or sell
any income or revenues (including accounts receivable) or rights in respect of
any thereof, except:

     (a)  Any  Lien  created   pursuant  to  this   Agreement  or  the  Security
Instruments;

     (b) Permitted Encumbrances;

     (c) Any Lien on any  property or asset of the  Borrower  or any  Restricted
Subsidiary  existing on the date hereof and set forth in Schedule 7.02; provided
that  (i) such  Lien  shall  not  apply to any  other  property  or asset of the
Borrower or any other Restricted Subsidiary and (ii) such Lien shall secure only
those obligations  which it secures on the date hereof and extensions,  renewals
and replacements  thereof that do not increase the outstanding  principal amount
thereof;

     (d) Any Lien  existing on any  property  or asset prior to the  acquisition
thereof by the Borrower or any Restricted Subsidiary or existing on any property
or asset of any  Person  that  becomes a  Restricted  Subsidiary  after the date
hereof prior to the time such Person becomes a Restricted  Subsidiary;  provided
that (i) such Lien secures Indebtedness  permitted under Section 7.01, (ii) such
Lien is not created in  contemplation  of or in connection with such acquisition
or such Person becoming a Restricted Subsidiary,  as the case may be, (iii) such
Lien  shall not apply to any other  property  or assets of the  Borrower  or any
other  Restricted  Subsidiary  and  (iv)  such  Lien  shall  secure  only  those
obligations  which it secures on the date of such  acquisition  or the date such
Person  becomes  a  Restricted  Subsidiary,  as the case may be and  extensions,
renewals and replacements thereof that do not increase the outstanding principal
amount thereof;

     (e) Liens on fixed or capital assets  acquired,  constructed or improved by
the Borrower or any Restricted Subsidiary;  provided that (i) such Liens, secure
Indebtedness  permitted by Section 7.01(e), (ii) such security interests and the
Indebtedness  secured thereby are incurred prior to or within 90 days after such
acquisition or the completion of such  construction  or  improvement,  (iii) the
Indebtedness secured thereby does not exceed the cost of acquiring, constructing

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<PAGE>

or improving such fixed or capital assets and (iv) such security interests shall
not  apply  to any  other  property  or  assets  of the  Borrower  or any  other
Restricted Subsidiaries;

     (f) Liens on the Pledged Securities to secure  Indebtedness of the Borrower
under the Convertible Notes; provided that (i) such Liens shall not apply to any
other property or assets of the Borrower or any  Restricted  Subsidiary and (ii)
no  additional  property  or assets  (other  than  reinvestments  of proceeds of
Pledged Securities) shall be pledged to secure such Indebtedness;

     (g) Subject to the SLB  Agreement,  Liens securing  Indebtedness  permitted
under Section  7.01(i) and Liens securing other  Indebtedness,  obligations  and
liabilities,  including net profits interests,  of the Service Parties under the
JVEA  Documents;  provided that, (i) to the extent any such other  Indebtedness,
obligations,  liabilities  or net profits  interests  of any  Service  Party are
secured by, or purported to be secured by, Liens on any Bundle in excess of such
Service  Party's  Percentage  of  such  Bundle,  such  Lien  is  subject  to  an
Intercreditor Agreement in form and substance satisfactory to the Administrative
Agent and the Lenders or otherwise  expressly  limited to such  Service  Party's
Percentage on terms and conditions  satisfactory to the Administrative Agent and
the Lenders and (ii) any assets of any Credit Party  securing such  Indebtedness
are also subject to a Lien securing the Obligations; and

     (h)  Liens on  properties  or  assets  of the  Borrower  or any  Restricted
Subsidiary  (other than Borrowing Base  Properties)  that are not subject to, or
required by any Loan Document to be subject to, Liens  created  pursuant to this
Agreement or the Security Instruments.

Section 7.03.     Fundamental Changes.

     (a) The  Borrower  will  not,  nor  will it  permit  any of its  Restricted
Subsidiaries to, merge into or consolidate with any other Person,  or permit any
other Person to merge into or consolidate with it, or sell,  transfer,  lease or
otherwise  dispose of (in one transaction or in a series of transactions) all or
any substantial  part of its assets,  or any of its Borrowing Base Properties or
any of the Equity Interests of any Restricted  Subsidiary (in each case, whether
now owned or hereafter  acquired),  or liquidate or dissolve,  except that,  the
Borrower or any Restricted  Subsidiary may sell  Hydrocarbons  produced from its
Oil and Gas  Interests  in the ordinary  course of business  and, if at the time
thereof  and  immediately  after  giving  effect  thereto no Default  shall have
occurred  and be  continuing,  (i) any Person may merge into the  Borrower  in a
transaction  in which the  Borrower  is the  surviving  entity,  (ii) any Person
(other  than the  Borrower)  may  merge  into  any  Restricted  Subsidiary  in a
transaction in which the surviving entity is a Restricted Subsidiary,  (iii) any
Restricted  Subsidiary  may sell,  transfer,  lease or otherwise  dispose of its
assets to the Borrower or to another Restricted Subsidiary,  (iv) any Restricted
Subsidiary  may  liquidate or dissolve if the Borrower  determines in good faith
that such  liquidation  or  dissolution is in the best interests of the Borrower
and is not materially  disadvantageous  to the Lenders,  (v) the Borrower or any
Restricted  Subsidiary  may  sell,  transfer,  lease  or  otherwise  dispose  of
equipment  and  related  items in the  ordinary  course  of  business,  that are

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<PAGE>

obsolete or no longer  necessary  in the  business of the Borrower or any of its
Restricted  Subsidiaries  or that is being  replaced by equipment of  comparable
value and  utility,  (vi)  subject  to  Section  2.10(b),  the  Borrower  or any
Restricted Subsidiary may sell, transfer, lease, exchange,  abandon or otherwise
dispose  of  Borrowing  Base  Properties  with a  value  not  exceeding,  in the
aggregate for the Borrower and its Restricted  Subsidiaries taken as a whole, 5%
of the Borrowing  Base between  Scheduled  Redeterminations,  and (vii) with the
prior written consent of Required  Lenders and subject to Section  2.10(b),  the
Borrower or any  Restricted  Subsidiary  may sell,  transfer,  lease,  exchange,
abandon  or  otherwise  dispose  of  Borrowing  Base  Properties  not  otherwise
permitted  pursuant to the foregoing  clause (vi). For purposes of the foregoing
clause (vi),  the value of any Oil and Gas  Interests  included in the Borrowing
Base Properties  shall be the Engineered Value of such Oil and Gas Interests and
the value of all other Oil and Gas  Interests  shall be the value which would be
assigned to such Oil and Gas Interests using the same  methodology,  assumptions
and discount rates used to determine the Engineered  Value of the Borrowing Base
Properties as of the most recent  Redetermination.  In addition, for purposes of
determining  compliance  with clause (vi) of this  Section  with  respect to any
exchange of Oil and Gas  Interests,  the value of such exchange shall be the net
reduction, if any, in Engineered Value realized or resulting from such exchange.

     (b) The  Borrower  will  not,  nor  will it  permit  any of its  Restricted
Subsidiaries  to,  engage to any  material  extent in any  business  other  than
businesses of the type conducted by the Borrower and its Restricted Subsidiaries
on the date of  execution  of this  Agreement  and  after  giving  effect to the
Transactions and businesses reasonably related thereto.

Section 7.04. Investments, Loans, Advances, Guarantees and Acquisitions. The
Borrower will not, nor will it permit any of its Restricted Subsidiaries to,
purchase, hold or acquire (including pursuant to any merger with any Person that
was not a wholly owned Restricted Subsidiary prior to such merger) any capital
stock, evidences of Indebtedness or other securities (including any option,
warrant or other right to acquire any of the foregoing) of, make or permit to
exist any loans or advances to, Guarantee any Indebtedness of, or make or permit
to exist any investment or any other interest in, any other Person, or purchase
or otherwise acquire (in one transaction or a series of transactions) any assets
of any other Person constituting a business unit, except:

     (a) Permitted Investments;

     (b)  investments by the Borrower in the Equity  Interests of any Restricted
Subsidiary;

     (c)  investments by the Borrower or a Guarantor  consisting of intercompany
Indebtedness permitted under Section 7.01(c)

     (d) Guarantees constituting Indebtedness permitted by Section 7.01;

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<PAGE>

     (e)  investments by the Borrower and its Restricted  Subsidiaries  that are
(1)  customary in the oil and gas business,  (2) made in the ordinary  course of
the Borrower's or such  Restricted  Subsidiary's  business,  and (3) made in the
form of, or pursuant  to, oil,  gas and mineral  leases,  operating  agreements,
farm-in agreements,  farm-out agreements,  development  agreements,  unitization
agreements,  joint  bidding  agreements,  services  contracts  and other similar
agreements  that a reasonable and prudent oil and gas industry owner or operator
would find acceptable;

     (f) investments consisting of Swap Agreements to the extent permitted under
Section 7.05; and

     (g) other investments by the Borrower and the Restricted Subsidiaries in an
aggregate principal amount not exceeding $1,000,000 at any time.

Section 7.05. Swap Agreements. The Borrower will not, nor will it permit any of
its Restricted Subsidiaries to, enter into or maintain any Swap Agreement,
except Swap Agreements entered into in the ordinary course of business and not
for speculative purposes to (a) hedge or mitigate Crude Oil and Natural Gas
price risks to which the Borrower or any Restricted Subsidiary has actual
exposure, and (b) effectively cap, collar or exchange interest rates (from fixed
to floating rates, from one floating rate to another floating rate or otherwise)
with respect to any interest-bearing liability or investment of any Credit
Party; provided that such Swap Agreements (at the time each transaction under
such Swap Agreement is entered into) would not cause the aggregate notional
amount of Crude Oil and Natural Gas under all Swap Agreements then in effect to
exceed eighty percent (80%) of the "forecasted production from proved producing
reserves" (as defined below) of the Borrower and the Restricted Subsidiaries for
the forthcoming five year period. As used in this clause, "forecasted production
from proved producing reserves" means the forecasted production of Crude Oil and
Natural Gas as reflected in the most recent Reserve Report delivered to the
Administrative Agent pursuant to Section 6.01, after giving effect to any pro
forma adjustments for the consummation of any Acquisitions or dispositions since
the effective date of such Reserve Report. Once the Borrower or any Restricted
Subsidiaries enters into a Swap Agreement or any hedge transaction pursuant to
any Swap Agreement, the terms and conditions of such Swap Agreement and such
hedge transaction may not be amended or modified, nor may such Swap Agreement or
hedge transaction be cancelled, assigned, sold or transferred without the prior
written consent of Required Lenders. Upon the request of the Required Lenders,
Borrower will, and will cause each Restricted Subsidiary to, take all actions
necessary to cause all of its right, title and interest in each Swap Agreement
to which it is a party and the hedge transactions related thereto to be
collaterally assigned to the Administrative Agent, for the benefit of the
Secured Parties, and shall, if requested by the Administrative Agent or the
Required Lenders, use its commercially reasonable efforts to cause each such
agreement or contract to (a) expressly permit such assignment and (b) upon the
occurrence of any default or event of default under such agreement or contract,
(i) to permit the Lenders to cure such default or event of default and assume
the obligations of such Credit Party under such agreement or contract and (ii)
to prohibit the termination of such agreement or contract by the counterparty
thereto if the Lenders assume the obligations of such Credit Party under such
agreement or contract and the Lenders take the actions required under the

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<PAGE>

foregoing clause (i). Upon the request of the Administrative Agent, the Borrower
shall, within thirty (30) days of such request, provide to the Administrative
Agent and each Lender copies of all agreements, documents and instruments
evidencing the Swap Agreements not previously delivered to the Administrative
Agent and Lenders, certified as true and correct by a Financial Officer of the
Borrower, and such other information regarding such Swap Agreements as the
Administrative Agent and Lenders may reasonably request

Section 7.06. Restricted Payments. The Borrower will not, nor will it permit any
of its Restricted Subsidiaries to, declare or make, or agree to pay or make,
directly or indirectly, any Restricted Payment, except that (a) the Borrower may
declare and pay dividends with respect to its Equity Interests payable solely in
additional shares of its common stock, (b) the Borrower may make Restricted
Payments pursuant to and in accordance with stock option plans or other benefit
plans for management or employees of the Borrower and its Restricted
Subsidiaries in an aggregate amount not to exceed $1,000,000 in any fiscal year,
(c) any Restricted Subsidiary may make Restricted Payments to the Borrower or
any Guarantor, and (d) so long as no Default shall have occurred and be
continuing or would result from the making of such Restricted Payment,
Restricted Payments by the Borrower to fund the repurchase, redemption or other
acquisition or retirement for value of Equity Interests of the Borrower upon the
termination of employment, death, permanent disability or retirement of any
officer or employee of the Borrower or any of its Subsidiaries; provided that,
the aggregate amount of such Restricted Payments pursuant to this clause (d)
shall not exceed $1,000,000 in the aggregate.

Section 7.07. Transactions with Affiliates. The Borrower will not, nor will it
permit any of its Restricted Subsidiaries to, sell, lease or otherwise transfer
any property or assets to, or purchase, lease or otherwise acquire any property
or assets from, or otherwise engage in any other transactions with, any of its
Affiliates, except (a) in the ordinary course of business at prices and on terms
and conditions not less favorable to the Borrower or such Restricted Subsidiary
than could be obtained on an arm's-length basis from unrelated third parties,
(b) transactions between or among the Borrower and its Restricted Subsidiaries
not involving any other Affiliate, (c) transactions described on Schedule 7.07,
and (d) any Restricted Payment permitted by Section 7.06.

Section 7.08. Restrictive Agreements. The Borrower will not, nor will it permit
any of its Restricted Subsidiaries to, directly or indirectly, enter into, incur
or permit to exist any agreement or other arrangement that prohibits, restricts
or imposes any condition upon (a) the ability of the Borrower or any Restricted
Subsidiary to create, incur or permit to exist any Lien upon any of property or
assets that are, or are required by any Loan Document to be, subject to Liens
created by this Agreement or the Security Instruments hereunder, or (b) the
ability of any Restricted Subsidiary to pay dividends or other distributions
with respect to any of its Equity Interests or to make or repay loans or
advances to the Borrower or any Restricted Subsidiary or to Guarantee
Indebtedness of the Borrower or any Restricted Subsidiary; provided that (i) the
foregoing shall not apply to restrictions and conditions imposed by law or by
this Agreement, (ii) the foregoing shall not apply to restrictions and
conditions existing on the date hereof pursuant to the JVEA Documents (but shall
apply to any extension or renewal of, or any amendment or modification expanding
the scope of, any such restriction or condition), (iii) clause (a) of the
foregoing shall not apply to restrictions or conditions imposed by any agreement
relating to secured Indebtedness permitted by this Agreement if such
restrictions or conditions apply only to the property or assets securing such

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Indebtedness and (iv) clause (a) of the foregoing shall not apply to customary
provisions in leases (other than oil and gas leases) and other contracts
restricting the assignment thereof.

Section 7.09. Disqualified Stock. The Borrower will not, nor will it permit any
of its Restricted Subsidiaries to, issue any Disqualified Stock.

Section 7.10. Amendments to Organizational Documents and JVEA Documents. The
Borrower will not, nor will it permit any of its Restricted Subsidiaries to,
enter into or permit any material modification or amendment of, or waive any
material right or obligation of any Person under its Organizational Documents
that would adversely affect the Lenders in any material respect. The Borrower
will not, nor will it permit any of its Restricted Subsidiaries to, enter into
or permit any modification or amendment of, or waive any material right or
obligation of any Person under any JVEA Document that would (i) cause the
representations and warranties set forth in Section 4.14 with respect to the
"working interest", "gross working interest" or "net revenue interest" in
respect of the proved producing Oil and Gas Interests described in the Reserve
Report to be incorrect in any material respect, or (ii) otherwise adversely
affect the Secured Parties, including the Lenders, or the Liens securing the
Obligations in any material respect. The Borrower will not, nor will it permit
any Restricted Subsidiary other than Gasco Production to, be a party to any JVEA
Document.

Section 7.11.     Financial Covenants.

(a)      Consolidated Current Ratio. The Borrower will not permit the
         Consolidated Current Ratio as of the end of any fiscal quarter ending
         on or after March 31, 2006 to be less than 1.00 to 1.00.

(b)      Leverage Ratio. The Borrower will not permit the ratio, determined as
         of the end of any fiscal quarter ending on or after March 31, 2006, of
         (i) Senior Debt as of the end of such fiscal quarter, to (ii)
         Consolidated EBITDAX for such fiscal quarter multiplied by four (4) to
         be greater than 3.50 to 1.0.

Section 7.12. Sale and Leaseback Transactions and other Off-Balance Sheet
Liabilities. The Borrower will not, nor will it permit any Restricted Subsidiary
to, enter into or suffer to exist any (i) Sale and Leaseback Transaction or (ii)
any other transaction pursuant to which it incurs or has incurred Off-Balance
Sheet Liabilities, except for Swap Agreements permitted under the terms of
Section 7.05 and Advance Payment Contracts; provided, that the aggregate amount
of all Advance Payments received by any Credit Party that have not been
satisfied by delivery of production at any time does not exceed, in the
aggregate $1,000,000.

Section 7.13. Convertible Notes Restrictions. Prior to the termination of all
Commitments and the payment and performance in full of the Obligations, the
Borrower will not, nor will it permit any Restricted Subsidiary to, (a) except
for the regularly scheduled payments of interest required under the Convertible

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Notes and payments made solely with the proceeds of Pledged Securities or shares
of Borrower's common stock, directly or indirectly, retire, redeem, defease,
repurchase or prepay prior to the scheduled due date thereof any part of the
principal of, or interest on, the Convertible Notes, or (b) enter into or permit
any modification or amendment of, or waive any material right or obligation of
any Person under any Convertible Notes if the effect of any such modification or
amendment is to (i) increase the maximum principal amount of the Indebtedness
evidenced by the Convertible Notes or the rate of interest on any such
Indebtedness (other than as a result of the imposition of a default rate of
interest in accordance with the terms of the Convertible Notes), (ii) change or
add any event of default or any covenant with respect to the Indebtedness
evidenced by the Convertible Notes if the effect of such change or addition is
to cause any one or more of the Convertible Notes to be more restrictive on any
Credit Party than such Convertible Notes were prior to such change or addition,
(iii) change the dates upon which payments of principal or interest on the
Indebtedness evidenced by the Convertible Notes are due, (iv) change any
redemption or prepayment provisions of the Indebtedness evidenced by the
Convertible Notes, (v) grant any Liens in any assets or properties of any Credit
Party to secure the Convertible Notes other than the Pledged Securities, or (vi)
cause any Restricted Subsidiary to become an obligor on the Convertible Notes by
Guarantee or otherwise.

                                  Article VIII

                            Guarantee of Obligations

Section 8.01. Guarantee of Payment. Each Guarantor unconditionally and
irrevocably guarantees to the Administrative Agent for the benefit of the
Lenders and the Lender Counterparties, the punctual payment of all Obligations
now or which may in the future be owing by the Borrower under the Loan Documents
and all Obligations which may now or which may in the future be owing by the
Borrower or any other Guarantor to any Lender Counterparty under any Swap
Agreement (the "Guaranteed Liabilities"). This Guarantee is a guaranty of
payment and not of collection only. The Administrative Agent shall not be
required to exhaust any right or remedy or take any action against the Borrower
or any other Person or any collateral. The Guaranteed Liabilities include
interest accruing after the commencement of a proceeding under bankruptcy,
insolvency or similar laws of any jurisdiction at the rate or rates provided in
the Loan Documents, or the Swap Agreements between any Credit Party and any
Lender Counterparty, as the case may be, regardless of whether such interest is
an allowed claim. Each Guarantor agrees that, as between the Guarantor and the
Administrative Agent, the Guaranteed Liabilities may be declared to be due and
payable for the purposes of this Guarantee notwithstanding any stay, injunction
or other prohibition which may prevent, delay or vitiate any declaration as
regards the Borrower or any other Guarantor and that in the event of a
declaration or attempted declaration, the Guaranteed Liabilities shall
immediately become due and payable by each Guarantor for the purposes of this
Guarantee.

Section 8.02. Guarantee Absolute. Each Guarantor guarantees that the Guaranteed
Liabilities shall be paid strictly in accordance with the terms of this
Agreement and the Swap Agreements to which any Lender Counterparty is a party.
The liability of each Guarantor hereunder is absolute and unconditional
irrespective of: (a) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Loan Documents or the Guaranteed
Liabilities, or any other amendment or waiver of or any consent to departure
from any of the terms of any Loan Document or Guaranteed Liability, including
any increase or decrease in the rate of interest thereon; (b) any release or
amendment or waiver of, or consent to departure from, any other guaranty or
support document, or any exchange, release or non-perfection of any collateral,
for all or any of the Loan Documents or Guaranteed Liabilities; (c) any present

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or future law, regulation or order of any jurisdiction (whether of right or in
fact) or of any agency thereof purporting to reduce, amend, restructure or
otherwise affect any term of any Loan Document or Guaranteed Liability; (d)
without being limited by the foregoing, any lack of validity or enforceability
of any Loan Document or Guaranteed Liability; and (e) any other setoff, defense
or counterclaim whatsoever (in any case, whether based on contract, tort or any
other theory) with respect to the Loan Documents or the transactions
contemplated thereby which might constitute a legal or equitable defense
available to, or discharge of, the Borrower or a Guarantor.

Section 8.03. Guarantee Irrevocable. This Guarantee is a continuing guaranty of
the payment of all Guaranteed Liabilities now or hereafter existing under this
Agreement and such Swap Agreements to which any Lender Counterparty is a party
and shall remain in full force and effect until payment in full of all
Guaranteed Liabilities and other amounts payable hereunder and until this
Agreement and the Swap Agreements are no longer in effect or, if earlier, when
the Guarantor has given the Administrative Agent written notice that this
Guarantee has been revoked; provided that any notice under this Section shall
not release the revoking Guarantor from any Guaranteed Liability, absolute or
contingent, existing prior to the Administrative Agent's actual receipt of the
notice at its branches or departments responsible for this Agreement and such
Swap Agreements and reasonable opportunity to act upon such notice.

Section 8.04. Reinstatement. This Guarantee shall continue to be effective or be
reinstated, as the case may be, if at any time any payment of any of the
Guaranteed Liabilities is rescinded or must otherwise be returned by the
Administrative Agent, any Lender or any Lender Counterparty on the insolvency,
bankruptcy or reorganization of the Borrower, or any other Credit Party, or
otherwise, all as though the payment had not been made.

Section 8.05. Subrogation. No Guarantor shall exercise any rights which it may
acquire by way of subrogation, by any payment made under this Guarantee or
otherwise, until all the Guaranteed Liabilities have been paid in full and this
Agreement and the Swap Agreements to which any Lender Counterparty is a party
are no longer in effect. If any amount is paid to the Guarantor on account of
subrogation rights under this Guarantee at any time when all the Guaranteed
Liabilities have not been paid in full, the amount shall be held in trust for
the benefit of the Lenders and the Lender Counterparties and shall be promptly
paid to the Administrative Agent to be credited and applied to the Guaranteed
Liabilities, whether matured or unmatured or absolute or contingent, in
accordance with the terms of this Agreement and such Swap Agreements. If any
Guarantor makes payment to the Administrative Agent, Lenders, or any Lender
Counterparties of all or any part of the Guaranteed Liabilities and all the
Guaranteed Liabilities are paid in full and this Agreement and such Swap
Agreements are no longer in effect, the Administrative Agent, Lenders and Lender
Counterparties shall, at such Guarantor's request, execute and deliver to such
Guarantor appropriate documents, without recourse and without representation or
warranty, necessary to evidence the transfer by subrogation to such Guarantor of
an interest in the Guaranteed Liabilities resulting from the payment.

Section 8.06. Subordination. Without limiting the rights of the Administrative
Agent, the Lenders and the Lender Counterparties under any other agreement, any
liabilities owed by the Borrower to any Guarantor in connection with any
extension of credit or financial accommodation by any Guarantor to or for the
account of the Borrower, including but not limited to interest accruing at the
agreed contract rate after the commencement of a bankruptcy or similar
proceeding, are hereby subordinated to the Guaranteed Liabilities, and such
liabilities of the Borrower to such Guarantor, if the Administrative Agent so

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requests, shall be collected, enforced and received by any Guarantor as trustee
for the Administrative Agent and shall be paid over to the Administrative Agent
on account of the Guaranteed Liabilities but without reducing or affecting in
any manner the liability of the Guarantor under the other provisions of this
Guarantee.

Section 8.07. Payments Generally. All payments by the Guarantors shall be made
in the manner, at the place and in the currency (the "Payment Currency")
required by the Loan Documents and the Swap Agreement to which any Lender
Counterparty is a party, as the case may be; provided, however, that (if the
Payment Currency is other than Dollars) any Guarantor may, at its option (or, if
for any reason whatsoever any Guarantor is unable to effect payments in the
foregoing manner, such Guarantor shall be obligated to) pay to the
Administrative Agent at its principal office the equivalent amount in Dollars
computed at the selling rate of the Administrative Agent or a selling rate
chosen by the Administrative Agent, most recently in effect on or prior to the
date the Guaranteed Liability becomes due, for cable transfers of the Payment
Currency to the place where the Guaranteed Liability is payable. In any case in
which any Guarantor makes or is obligated to make payment in Dollars, the
Guarantor shall hold the Administrative Agent, the Lenders and the Lender
Counterparties harmless from any loss incurred by the Administrative Agent, any
Lender or any Lender Counterparty arising from any change in the value of
Dollars in relation to the Payment Currency between the date the Guaranteed
Liability becomes due and the date the Administrative Agent, such Lender or such
Lender Counterparty is actually able, following the conversion of the Dollars
paid by such Guarantor into the Payment Currency and remittance of such Payment
Currency to the place where such Guaranteed Liability is payable, to apply such
Payment Currency to such Guaranteed Liability.

Section 8.08. Setoff. Each Guarantor agrees that, in addition to (and without
limitation of) any right of setoff, banker's lien or counterclaim the
Administrative Agent, any Lender or any Lender Counterparty may otherwise have,
the Administrative Agent, such Lender or such Lender Counterparty shall be
entitled, at its option, to offset balances (general or special, time or demand,
provisional or final) held by it for the account of any Guarantor at any office
of the Administrative Agent, such Lender or such Lender Counterparty, in Dollars
or in any other currency, against any amount payable by such Guarantor under
this Guarantee which is not paid when due (regardless of whether such balances
are then due to such Guarantor), in which case it shall promptly notify such
Guarantor thereof; provided that the failure of the Administrative Agent, such
Lender, or such Lender Counterparty to give such notice shall not affect the
validity thereof.

Section 8.09. Formalities. Each Guarantor waives presentment, notice of
dishonor, protest, notice of acceptance of this Guarantee or incurrence of any
Guaranteed Liability and any other formality with respect to any of the
Guaranteed Liabilities or this Guarantee.

Section 8.10. Limitations on Guarantee. The provisions of the Guarantee under
this Article VIII are severable, and in any action or proceeding involving any
state corporate law, or any state, federal or foreign bankruptcy, insolvency,
reorganization or other law affecting the rights of creditors generally, if the
obligations of any Guarantor under this Guarantee would otherwise be held or
determined to be avoidable, invalid or unenforceable on account of the amount of
such Guarantor's liability under this Guarantee, then, notwithstanding any other
provision of this Guarantee to the contrary, the amount of such liability shall,
without any further action by the Guarantors, the Administrative Agent, any
Lender or any Lender Counterparty, be automatically limited and reduced to the
highest amount that is valid and enforceable as determined in such action or
proceeding (such highest amount determined hereunder being the relevant

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Guarantor's "Maximum Liability"). This Section 8.10 with respect to the Maximum
Liability of the Guarantors is intended solely to preserve the rights of the
Administrative Agent, Lenders and Lender Counterparties hereunder to the maximum
extent not subject to avoidance under applicable law, and no Guarantor nor any
other Person shall have any right or claim under this Section 8.10 with respect
to the Maximum Liability, except to the extent necessary so that none of the
obligations of any Guarantor hereunder shall not be rendered voidable under
applicable law.

                                   Article IX

                                Events of Default

                  If any of the following events ("Events of Default") shall
occur:

          (a) the  Borrower  shall fail to pay any  principal of any Loan or any
     reimbursement  obligation in respect of any LC Disbursement when and as the
     same shall become due and payable,  whether at the due date thereof or at a
     date fixed for prepayment thereof or otherwise;

          (b) the Borrower shall fail to pay any interest on any Loan or any fee
     or any other amount (other than an amount referred to in clause (a) of this
     Article)  payable under this  Agreement,  when and as the same shall become
     due and payable, and such failure shall continue unremedied for a period of
     three days;

          (c) any representation or warranty made or deemed made by or on behalf
     of the Borrower or any Restricted  Subsidiary in or in connection with this
     Agreement or any amendment or modification  hereof or waiver hereunder,  or
     in any report, certificate, financial statement or other document furnished
     pursuant  to or in  connection  with this  Agreement  or any  amendment  or
     modification  hereof or waiver hereunder or in any Loan Document  furnished
     pursuant  to or in  connection  with this  Agreement  or any  amendment  or
     modification  thereof  or  waiver  hereunder,  shall  prove  to  have  been
     incorrect in any material respect when made or deemed made;

          (d) the Borrower or any Restricted Subsidiary shall fail to observe or
     perform any  covenant,  condition or agreement  contained in Section  6.02,
     Section 6.03 (with respect to the Borrower or any  Restricted  Subsidiary's
     existence),  Section 6.05 (with respect to insurance),  Section 6.08, or in
     Article VII;

          (e) the Borrower or any Restricted Subsidiary shall fail to observe or
     perform any covenant,  condition or agreement  contained in this  Agreement
     (other than those  specified in clause (a), (b) or (d) of this  Article) or
     any Loan Document,  and such failure shall continue unremedied for a period
     of 30 days  after  notice  thereof  from  the  Administrative  Agent to the
     Borrower (which notice will be given at the request of any Lender);

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          (f) the Borrower or any Restricted  Subsidiary  shall fail to make any
     payment  (whether of  principal or interest  and  regardless  of amount) in
     respect of any Material Indebtedness, when and as the same shall become due
     and payable,  and such failure shall  continue  after the grace period,  if
     any, applicable to such Material Indebtedness;

          (g) any  event  or  condition  occurs  that  results  in any  Material
     Indebtedness  becoming due prior to its scheduled  maturity or that enables
     or  permits  (with or without  the  giving of notice,  the lapse of time or
     both) the holder or holders of any Material  Indebtedness or any trustee or
     agent on its or their behalf to cause any Material  Indebtedness  to become
     due, or to require the  prepayment,  repurchase,  redemption  or defeasance
     thereof,  prior to its  scheduled  maturity;  provided that this clause (g)
     shall not apply to secured Indebtedness that becomes due as a result of the
     voluntary  sale  or  transfer  of the  property  or  assets  securing  such
     Indebtedness;

          (h) an  involuntary  proceeding  shall be commenced or an  involuntary
     petition shall be filed seeking (i)  liquidation,  reorganization  or other
     relief in respect  of the  Borrower  or any  Restricted  Subsidiary  or its
     debts, or of a substantial part of its assets, under any Federal,  state or
     foreign  bankruptcy,  insolvency,   receivership  or  similar  law  now  or
     hereafter  in  effect  or (ii)  the  appointment  of a  receiver,  trustee,
     custodian,  sequestrator,  conservator or similar official for the Borrower
     or any Restricted  Subsidiary or for a substantial part of its assets, and,
     in any such case,  such  proceeding or petition shall continue  undismissed
     for 60  days  or an  order  or  decree  approving  or  ordering  any of the
     foregoing shall be entered;

          (i) the Borrower or any Restricted  Subsidiary  shall (i)  voluntarily
     commence  any  proceeding  or  file  any  petition   seeking   liquidation,
     reorganization  or  other  relief  under  any  Federal,  state  or  foreign
     bankruptcy,  insolvency,  receivership  or similar law now or  hereafter in
     effect,  (ii) consent to the institution of, or fail to contest in a timely
     and appropriate  manner, any proceeding or petition described in clause (h)
     of this  Article,  (iii)  apply  for or  consent  to the  appointment  of a
     receiver, trustee, custodian, sequestrator, conservator or similar official
     for the Borrower or any Restricted  Subsidiary or for a substantial part of
     its assets,  (iv) file an answer  admitting the material  allegations  of a
     petition  filed  against  it in any such  proceeding,  (v)  make a  general
     assignment  for the  benefit of  creditors  or (vi) take any action for the
     purpose of effecting any of the foregoing;

          (j) the Borrower or any  Restricted  Subsidiary  shall become  unable,
     admit in writing its  inability or fail  generally to pay its debts as they
     become due;

          (k) one or more  judgments  for the  payment of money in an  aggregate
     amount in excess of  $1,000,000  shall be rendered  against the Borrower or
     any  Restricted  Subsidiary or any  combination  thereof and the same shall
     remain  undischarged  for a period  of 30  consecutive  days  during  which
     execution shall not be effectively  stayed,  or any action shall be legally
     taken by a  judgment  creditor  to attach  or levy  upon any  assets of the
     Borrower or any Restricted Subsidiary to enforce any such judgment;

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<PAGE>

          (l) an ERISA Event  shall have  occurred  that,  in the opinion of the
     Required Lenders, when taken together with all other ERISA Events that have
     occurred,  could  reasonably  be expected  to result in a Material  Adverse
     Effect;

          (m) the  delivery  by any  Guarantor  to the  Administrative  Agent of
     written  notice that its  Guarantee  under Article VIII has been revoked or
     any Guarantee of the Obligations is declared invalid or unenforceable;

          (n) a Change of Control shall occur;

          (o) a "Change of  Control"  under and as  defined  in the  Convertible
     Notes Indenture shall occur;

          (p) Gasco  Production  shall fail to make one or more  payments  in an
     aggregate  amount in excess of $1,000,000 in respect of any JVEA  Document,
     when and as the same shall become due and payable,  and such failure  shall
     continue  after any  applicable  grace  period,  or any event or  condition
     occurs that results in any Service Party notifying Gasco  Production or any
     other Credit Party, in writing,  that Gasco  Production or any other Credit
     Party is in  default  or  breach  of any  terms or  conditions  of any JVEA
     Document unless such payment or such default or breach, as the case may be,
     is being  contested by Gasco  Production  in good faith and the Borrower or
     Gasco Production has set aside on its books adequate  reserves with respect
     to such payment, default or breach.

then, and in every such event (other than an event with respect to the Borrower
or any Restricted Subsidiary described in clause (h) or (i) of this Article),
and at any time thereafter during the continuance of such event, the
Administrative Agent may, and at the request of the Required Lenders shall, by
notice to the Borrower, take either or both of the following actions, at the
same or different times: (i) terminate the Aggregate Commitment, and thereupon
the Aggregate Commitment shall terminate immediately, and (ii) declare the Loans
then outstanding to be due and payable in whole (or in part, in which case any
principal not so declared to be due and payable may thereafter be declared to be
due and payable), and thereupon the principal of the Loans so declared to be due
and payable, together with accrued interest thereon and all fees and other
obligations of the Borrower accrued hereunder, shall become due and payable
immediately, without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Borrower; and in case of any event with
respect to the Borrower described in clause (h) or (i) of this Article, the
Aggregate Commitment shall automatically terminate and the principal of the
Loans then outstanding, together with accrued interest thereon and all fees and
other obligations of the Borrower accrued hereunder, shall automatically become
due and payable, without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by the Borrower.

                                   Article X

                            The Administrative Agent

                  Each of the Lenders and the Issuing Bank hereby irrevocably
appoints the Administrative Agent as its agent and authorizes the Administrative

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Agent to take such actions on its behalf and to exercise such powers as are
delegated to the Administrative Agent by the terms hereof, together with such
actions and powers as are reasonably incidental thereto.

                  The bank serving as the Administrative Agent hereunder shall
have the same rights and powers in its capacity as a Lender as any other Lender
and may exercise the same as though it were not the Administrative Agent, and
such bank and its Affiliates may accept deposits from, lend money to and
generally engage in any kind of business with any Credit Party or other
Affiliate thereof as if it were not the Administrative Agent hereunder.

                  The Administrative Agent shall not have any duties or
obligations except those expressly set forth herein. Without limiting the
generality of the foregoing, (a) the Administrative Agent shall not be subject
to any fiduciary or other implied duties, regardless of whether a Default has
occurred and is continuing, (b) the Administrative Agent shall not have any duty
to take any discretionary action or exercise any discretionary powers, except
discretionary rights and powers expressly contemplated hereby that the
Administrative Agent is required to exercise in writing as directed by the
Required Lenders (or such other number or percentage of the Lenders as shall be
necessary under the circumstances as provided in Section 11.02), and (c) except
as expressly set forth herein, the Administrative Agent shall not have any duty
to disclose, and shall not be liable for the failure to disclose, any
information relating to any Credit Party that is communicated to or obtained by
the bank serving as Administrative Agent or any of its Affiliates in any
capacity. The Administrative Agent shall not be liable for any action taken or
not taken by it with the consent or at the request of the Required Lenders (or
such other number or percentage of the Lenders as shall be necessary under the
circumstances as provided in Section 11.02) or in the absence of its own gross
negligence or willful misconduct. The Administrative Agent shall be deemed not
to have knowledge of any Default unless and until written notice thereof is
given to the Administrative Agent by the Borrower or a Lender, and the
Administrative Agent shall not be responsible for or have any duty to ascertain
or inquire into (i) any statement, warranty or representation made in or in
connection with this Agreement, (ii) the contents of any certificate, report or
other document delivered hereunder or in connection herewith, (iii) the
performance or observance of any of the covenants, agreements or other terms or
conditions set forth herein, (iv) the validity, enforceability, effectiveness or
genuineness of this Agreement or any other agreement, instrument or document, or
(v) the satisfaction of any condition set forth in Article V or elsewhere
herein, other than to confirm receipt of items expressly required to be
delivered to the Administrative Agent.

                  The Administrative Agent shall be entitled to rely upon, and
shall not incur any liability for relying upon, any notice, request,
certificate, consent, statement, instrument, document or other writing believed
by it to be genuine and to have been signed or sent by the proper Person. The
Administrative Agent also may rely upon any statement made to it orally or by
telephone and believed by it to be made by the proper Person, and shall not
incur any liability for relying thereon. The Administrative Agent may consult
with legal counsel (who may be counsel for the Borrower), independent
accountants and other experts selected by it, and shall not be liable for any
action taken or not taken by it in accordance with the advice of any such
counsel, accountants or experts.

                  The Administrative Agent may perform any and all its duties
and exercise its rights and powers by or through any one or more sub-agents

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appointed by the Administrative Agent. The Administrative Agent and any such
sub-agent may perform any and all its duties and exercise its rights and powers
through their respective Related Parties. The exculpatory provisions of the
preceding paragraphs shall apply to any such sub-agent and to the Related
Parties of the Administrative Agent and any such sub-agent, and shall apply to
their respective activities in connection with the syndication of the credit
facilities provided for herein as well as activities as Administrative Agent.

                  Subject to the appointment and acceptance of a successor
Administrative Agent as provided in this paragraph, the Administrative Agent may
resign at any time by notifying the Lenders, the Issuing Bank and the Borrower.
Upon any such resignation, the Required Lenders shall have the right, in
consultation with the Borrower, to appoint a successor. If no successor shall
have been so appointed by the Required Lenders and shall have accepted such
appointment within 30 days after the retiring Administrative Agent gives notice
of its resignation, then the retiring Administrative Agent may, on behalf of the
Lenders and the Issuing Bank, appoint a successor Administrative Agent which
shall be a bank with an office in Chicago, Illinois or New York, New York, or an
Affiliate of any such bank. Upon the acceptance of its appointment as
Administrative Agent hereunder by a successor, such successor shall succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring Administrative Agent, and the retiring Administrative Agent shall be
discharged from its duties and obligations hereunder. The fees payable by the
Borrower to a successor Administrative Agent shall be the same as those payable
to its predecessor unless otherwise agreed between the Borrower and such
successor. After the Administrative Agent's resignation hereunder, the
provisions of this Article and Section 11.03 shall continue in effect for the
benefit of such retiring Administrative Agent, its sub-agents and their
respective Related Parties in respect of any actions taken or omitted to be
taken by any of them while it was acting as Administrative Agent.

                  Each Lender acknowledges that it has, independently and
without reliance upon the Administrative Agent or any other Lender and based on
such documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the
Administrative Agent or any other Lender and based on such documents and
information as it shall from time to time deem appropriate, continue to make its
own decisions in taking or not taking action under or based upon this Agreement,
any related agreement or any document furnished hereunder or thereunder.

                                   Article XI

                                  Miscellaneous

Section 11.01.    Notices.

          (a) Except in the case of notices and other  communications  expressly
     permitted  to be given by telephone  (and subject to paragraph  (b) below),
     all  notices  and other  communications  provided  for  herein  shall be in
     writing and shall be delivered by hand or overnight courier service, mailed
     by certified or registered mail or sent by telecopy, as follows:

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               (i) if to the Borrower,  to Gasco Energy, Inc., 8 Inverness Drive
          East, Suite 100, Englewood,  Colorado 80112, Attention: W. King Grant,
          Chief Financial Officer,  Telecopy No.: (303) 483-0011, with a copy to
          Vinson & Elkins  L.L.P.,  2300 First City Tower,  1001 Fannin  Street,
          Houston, Texas 77002-6760, Attention: Philip T. Warman, Esq., Telecopy
          No.: (713) 615-5615.

               (ii) if to the Administrative  Agent or Issuing Bank, to JPMorgan
          Chase Bank, N.A., Mail Code IL1-0010,  10 South Dearborn  Street,  5th
          Floor,   Chicago,   Illinois  60603,  Telecopy  No.:  (312)  385-7095,
          Attention:  Victor Perez,  with a copy to JPMorgan  Chase Bank,  N.A.,
          1717 Main Street,  TX1-2448,  Dallas, Texas 75201,  Telecopy No. (214)
          290-2332, Attention: J. Scott Fowler, Vice President;

               (iii) if to any other  Lender,  to it at its address (or telecopy
          number) set forth in its Administrative Questionnaire.

     (b)  Notices  and other  communications  to the  Lenders  hereunder  may be
delivered or  furnished  by  electronic  communications  pursuant to  procedures
approved by the  Administrative  Agent;  provided that the  foregoing  shall not
apply  to  notices  pursuant  to  Article  II  unless  otherwise  agreed  by the
Administrative  Agent and the applicable Lender. The Administrative Agent or the
Borrower  may,  in  their   discretion,   agree  to  accept  notices  and  other
communications  to  it  hereunder  by  electronic   communications  pursuant  to
procedures  approved by it;  provided  that approval of such  procedures  may be
limited to particular notices or communications.

     (c) Any party hereto may change its address or telecopy  number for notices
and other  communications  hereunder by notice to the other parties hereto.  All
notices and other  communications  given to any party hereto in accordance  with
the provisions of this Agreement  shall be deemed to have been given on the date
of receipt.

Section 11.02.    Waivers; Amendments.

     (a) No failure or delay by the  Administrative  Agent,  the Issuing Bank or
any Lender in exercising any right or power  hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any  abandonment  or  discontinuance  of steps to enforce such a right or power,
preclude  any other or further  exercise  thereof or the  exercise  of any other
right or power. The rights and remedies of the Administrative Agent, the Issuing
Bank and the Lenders  hereunder  are  cumulative  and are not  exclusive  of any
rights or remedies that they would otherwise have. No waiver of any provision of
this  Agreement or consent to any departure by the Borrower  therefrom  shall in
any event be effective  unless the same shall be  permitted by paragraph  (b) of
this  Section,  and then such waiver or consent  shall be effective  only in the
specific  instance  and for the purpose for which  given.  Without  limiting the
generality  of the  foregoing,  the making of a Loan or  issuance of a Letter of
Credit shall not be construed as a waiver of any Default,  regardless of whether
the Administrative  Agent, any Lender or the Issuing Bank may have had notice or
knowledge of such Default at the time.

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     (b) Neither this Agreement nor any provision hereof may be waived,  amended
or modified  except  pursuant to an agreement or agreements  in writing  entered
into by the Credit Parties and the Required Lenders or by the Credit Parties and
the Administrative Agent with the consent of the Required Lenders; provided that
no such  agreement  shall (1) increase the Borrowing Base without the consent of
each  Lender,  (2)  increase  the  Applicable  Percentage  of any  Lender or the
Aggregate  Commitment  above the  Maximum  Facility  Amount  without the written
consent  of such  Lender,  (3)  reduce  the  principal  amount of any Loan or LC
Disbursement or reduce the rate of interest thereon,  or reduce any fees payable
hereunder,  without the written  consent of each Lender  affected  thereby,  (4)
postpone the scheduled date of payment of the principal amount of any Loan or LC
Disbursement,  or any interest thereon, or any fees payable hereunder, or reduce
the amount of, waive or excuse any such payment,  or postpone the scheduled date
of expiration of any of the Aggregate Commitment, without the written consent of
each Lender affected thereby, (5) change Section 2.17(b) or Section 2.17(c) in a
manner  that would  alter the pro rata  sharing of  payments  required  thereby,
without the written  consent of each  Lender,  (6) release any Credit Party from
its  obligations  under the Loan  Documents or,  except in  connection  with any
sales,  transfers,  leases or other  dispositions  permitted  in  Section  7.03,
release any of the Collateral  without the consent of each Lender, or (7) change
any of the provisions of this Section or the definition of "Required Lenders" or
any other  provision  hereof  specifying  the  number or  percentage  of Lenders
required  to  waive,   amend  or  modify  any  rights   hereunder  or  make  any
determination  or grant any consent  hereunder,  without the written  consent of
each Lender;  provided  further that no such  agreement  shall amend,  modify or
--------  -------  otherwise  affect the rights or duties of the  Administrative
Agent or the Issuing Bank  hereunder  without the prior  written  consent of the
Administrative Agent or the Issuing Bank, as the case may be.

Section 11.03.    Expenses; Indemnity; Damage Waiver.

     (a)  The  Borrower  shall  pay (i) all  reasonable  out-of-pocket  expenses
incurred  by  the  Administrative  Agent  and  its  Affiliates,   including  the
reasonable fees,  charges and  disbursements  of counsel for the  Administrative
Agent, in connection with the syndication of the credit facilities  provided for
herein,  the preparation and administration of this Agreement and the other Loan
Documents or any amendments,  modifications or waivers of the provisions  hereof
(whether  or not the  transactions  contemplated  hereby  or  thereby  shall  be
consummated), (ii) all reasonable out-of-pocket expenses incurred by the Issuing
Bank in  connection  with the issuance,  amendment,  renewal or extension of any
Letter  of  Credit  or  any  demand  for  payment   thereunder   and  (iii)  all
out-of-pocket expenses incurred by the Administrative Agent, the Issuing Bank or
any Lender, including the fees, charges and disbursements of any counsel for the
Administrative  Agent,  the Issuing Bank or any Lender,  in connection  with the
enforcement  or protection of its rights in connection  with this  Agreement and
the other Loan  Documents,  including  its  rights  under  this  Section,  or in
connection with the Loans made or Letters of Credit issued hereunder,  including
all such  out-of-pocket  expenses incurred during any workout,  restructuring or
negotiations in respect of such Loans or Letters of Credit.

     (b) THE CREDIT  PARTIES  SHALL  INDEMNIFY  THE  ADMINISTRATIVE  AGENT,  THE
ISSUING BANK AND EACH LENDER,  AND EACH  RELATED  PARTY OF ANY OF THE  FOREGOING
PERSONS (EACH SUCH PERSON BEING CALLED AN "INDEMNITEE")  AGAINST,  AND HOLD EACH

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INDEMNITEE HARMLESS FROM, ANY AND ALL LOSSES, CLAIMS,  DAMAGES,  LIABILITIES AND
RELATED EXPENSES,  INCLUDING THE FEES,  CHARGES AND DISBURSEMENTS OF ANY COUNSEL
FOR ANY INDEMNITEE,  INCURRED BY OR ASSERTED AGAINST ANY INDEMNITEE  ARISING OUT
OF, IN CONNECTION  WITH, OR AS A RESULT OF (I) THE EXECUTION OR DELIVERY OF THIS
AGREEMENT OR ANY AGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY, THE PERFORMANCE BY
THE PARTIES HERETO OF THEIR RESPECTIVE OBLIGATIONS HEREUNDER OR THE CONSUMMATION
OF THE TRANSACTIONS OR ANY OTHER TRANSACTIONS CONTEMPLATED HEREBY, (II) ANY LOAN
OR LETTER OF CREDIT OR THE USE OF THE PROCEEDS THEREFROM  (INCLUDING ANY REFUSAL
BY THE ISSUING  BANK TO HONOR A DEMAND FOR  PAYMENT  UNDER A LETTER OF CREDIT IF
THE DOCUMENTS  PRESENTED IN CONNECTION  WITH SUCH DEMAND DO NOT STRICTLY  COMPLY
WITH THE TERMS OF SUCH LETTER OF CREDIT),  (III) ANY ACTUAL OR ALLEGED  PRESENCE
OR RELEASE OF HAZARDOUS  MATERIALS ON OR FROM ANY PROPERTY  OWNED OR OPERATED BY
THE BORROWER OR ANY SUBSIDIARY,  OR ANY  ENVIRONMENTAL  LIABILITY RELATED IN ANY
WAY TO THE BORROWER OR ANY SUBSIDIARY,  OR (IV) ANY ACTUAL OR PROSPECTIVE CLAIM,
LITIGATION,  INVESTIGATION  OR  PROCEEDING  RELATING  TO ANY  OF THE  FOREGOING,
WHETHER  BASED ON CONTRACT,  TORT OR ANY OTHER THEORY AND  REGARDLESS OF WHETHER
ANY INDEMNITEE IS A PARTY THERETO; PROVIDED THAT SUCH INDEMNITY SHALL NOT, AS TO
ANY INDEMNITEE,  BE AVAILABLE TO THE EXTENT THAT SUCH LOSSES,  CLAIMS,  DAMAGES,
LIABILITIES  OR  RELATED  EXPENSES  ARE  DETERMINED  BY  A  COURT  OF  COMPETENT
JURISDICTION BY FINAL AND NONAPPEALABLE JUDGMENT TO HAVE RESULTED FROM THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNITEE.

     (c) To the extent that any Credit Party fails to pay any amount required to
be paid by it to the  Administrative  Agent or the Issuing Bank under  paragraph
(a)  or  (b)  of  this  Section,  each  Lender  severally  agrees  to pay to the
Administrative  Agent or the Issuing  Bank,  as the case may be,  such  Lender's
Applicable  Percentage  (in  each  case,  determined  as of the  time  that  the
applicable  unreimbursed  expense or indemnity payment is sought) of such unpaid
amount;  provided that the  unreimbursed  expense or  indemnified  loss,  claim,
damage,  liability  or related  expense,  as the case may be, was incurred by or
asserted against the Administrative Agent or the Issuing Bank in its capacity as
such.

     (d) To the extent permitted by applicable law, the Credit Parties shall not
assert,  and hereby waive,  any claim against any  Indemnitee,  on any theory of
liability, for special, indirect,  consequential or punitive damages (as opposed
to direct or actual damages)  arising out of, in connection with, or as a result

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of, this  Agreement or any  agreement or  instrument  contemplated  hereby,  the
Transactions, any Loan or Letter of Credit or the use of the proceeds thereof.

     (e) All amounts due under this  Section  shall be payable not later than 10
days after written demand therefor.

Section 11.04.    Successors and Assigns.

     (a) The provisions of this Agreement shall be binding upon and inure to the
benefit  of the  parties  hereto and their  respective  successors  and  assigns
permitted  hereby  (including  any Affiliate of the Issuing Bank that issues any
Letter of  Credit),  except  that (i) no Credit  Party may  assign or  otherwise
transfer any of its rights or  obligations  hereunder  without the prior written
consent of each Lender (and any attempted  assignment or transfer by such Credit
Party without such consent shall be null and void) and (ii) no Lender may assign
or otherwise  transfer its rights or obligations  hereunder except in accordance
with this Section.  Nothing in this  Agreement,  expressed or implied,  shall be
construed  to confer  upon any Person  (other  than the  parties  hereto,  their
respective  successors and assigns  permitted hereby (including any Affiliate of
the Issuing Bank that issues any Letter of Credit),  Participants (to the extent
provided  in  paragraph  (c) of  this  Section)  and,  to the  extent  expressly
contemplated  hereby, the Related Parties of each of the  Administrative  Agent,
the Issuing Bank and the Lenders) any legal or equitable right,  remedy or claim
under or by reason of this Agreement.

    (b)

          (i) Subject to the  conditions  set forth in paragraph  (b)(ii) below,
     any  Lender  may  assign to one or more  assignees  all or a portion of its
     rights and obligations under this Agreement  (including all or a portion of
     its  Commitment  and the  Loans  at the time  owing  to it) with the  prior
     written consent (such consent not to be unreasonably withheld) of:

               (A) the Borrower,  provided that no consent of the Borrower shall
          be required for an assignment to a Lender, an Affiliate of a Lender, a
          Federal  Reserve Bank, an Approved Fund or, if an Event of Default has
          occurred and is continuing, any other assignee; and

               (B) the  Administrative  Agent,  provided  that no consent of the
          Administrative  Agent  shall  be  required  for an  assignment  of any
          Commitment  to  an  assignee  that  is  a  Lender  with  a  Commitment
          immediately prior to giving effect to such assignment;

               (C) the Issuing Bank.

          (ii)  Assignments  shall  be  subject  to  the  following   additional
     conditions:

               (A) except in the case of an assignment to a Lender, an Affiliate
          of a Lender, an Approved Fund or an assignment of the entire remaining

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          amount of the assigning  Lender's  Commitment or Loans,  the amount of
          the  Commitment or Loans of the assigning  Lender subject to each such
          assignment  (determined  as of the date the  Assignment and Assumption
          with respect to such  assignment  is  delivered to the  Administrative
          Agent) shall not be less than  $5,000,000  unless each of the Borrower
          and the Administrative Agent otherwise consent,  provided that no such
          consent of the  Borrower  shall be required if an Event of Default has
          occurred and is continuing;

               (B) each partial  assignment  shall be made as an assignment of a
          proportionate   part  of  all  the  assigning   Lender's   rights  and
          obligations  in respect of such Lender's  Commitment and such Lender's
          Loans under this Agreement;

               (C) the parties to each  assignment  shall execute and deliver to
          the Administrative Agent an Assignment and Assumption, together with a
          processing and recordation fee of $3,500; and

               (D) the assignee,  if it shall not be a Lender,  shall deliver to
          the Administrative Agent an Administrative Questionnaire.

         For the purposes of this Section 11.04(b), the term "Approved Fund" has
the following meaning:

                  "Approved Fund" means any Person (other than a natural person)
that is engaged in making, purchasing, holding or investing in bank loans and
similar extensions of credit in the ordinary course of its business and that is
administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an
entity or an Affiliate of an entity that administers or manages a Lender.

               (iii) Subject to acceptance  and  recording  thereof  pursuant to
          paragraph  (b)(iv) of this Section,  from and after the effective date
          specified in each  Assignment and  Assumption the assignee  thereunder
          shall be a party hereto and, to the extent of the interest assigned by
          such Assignment and  Assumption,  have the rights and obligations of a
          Lender  under this  Agreement,  and the  assigning  Lender  thereunder
          shall,  to the extent of the interest  assigned by such Assignment and
          Assumption,  be released  from its  obligations  under this  Agreement
          (and, in the case of an Assignment and Assumption  covering all of the
          assigning  Lender's rights and obligations under this Agreement,  such
          Lender  shall  cease to be a party  hereto  but shall  continue  to be
          entitled to the benefits of Section 2.14,  Section 2.15,  Section 2.16
          and Section  11.03).  Any assignment or transfer by a Lender of rights
          or  obligations  under this  Agreement  that does not comply with this
          Section  11.04 shall be treated for  purposes of this  Agreement  as a
          sale by such Lender of a participation  in such rights and obligations
          in  accordance  with  paragraph  (c) of this  Section  except that any
          attempted  assignment  or  transfer by any Lender that does not comply
          with clause (C) of Section 11.04(b)(ii) shall be null and void.

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               (iv) The  Administrative  Agent,  acting  for this  purpose as an
          agent of the Borrower,  shall maintain at one of its offices a copy of
          each Assignment and Assumption  delivered to it and a register for the
          recordation  of the  names  and  addresses  of the  Lenders,  and  the
          Commitment and Applicable  Percentage of, and principal  amount of the
          Loans and LC Disbursements owing to, each Lender pursuant to the terms
          hereof from time to time (the "Register"). The entries in the Register
          shall be conclusive, and the Credit Parties, the Administrative Agent,
          the Issuing  Bank and the Lenders may treat each Person  whose name is
          recorded  in the  Register  pursuant  to the terms  hereof as a Lender
          hereunder for all purposes of this Agreement,  notwithstanding  notice
          to the contrary. The Register shall be available for inspection by the
          Credit  Parties,  the Issuing Bank and any Lender,  at any  reasonable
          time and from time to time upon reasonable prior notice.

               (v)  Upon  its  receipt  of  a  duly  completed   Assignment  and
          Assumption  executed  by an  assigning  Lender  and an  assignee,  the
          assignee's completed Administrative Questionnaire (unless the assignee
          shall already be a Lender  hereunder),  the processing and recordation
          fee referred to in paragraph  (b) of this Section any written  consent
          to such  assignment  required by paragraph  (b) of this  Section,  the
          Administrative  Agent shall accept such  Assignment and Assumption and
          record the  information  contained  therein in the Register;  provided
          that if either the assigning  Lender or the assignee shall have failed
          to make any  payment  required  to be made by it  pursuant  to Section
          2.05(d) or Section 2.05(e),  Section 2.06,  Section 2.17(d) or Section
          11.03(c),  the Administrative Agent shall have no obligation to accept
          such Assignment and Assumption and record the  information  therein in
          the  Register  unless and until such  payment  shall have been made in
          full,  together with all accrued interest thereon. No assignment shall
          be  effective  for  purposes  of this  Agreement  unless  it has  been
          recorded in the Register as provided in this paragraph.

         (c)

               (i) Any Lender  may,  without the  consent of the  Borrower,  the
          Administrative  Agent or the Issuing Bank, sell  participations to one
          or more banks or other entities (a  "Participant") in all or a portion
          of  such  Lender's  rights  and   obligations   under  this  Agreement
          (including  all or a portion of its  Commitment and the Loans owing to
          it); provided that (A) such Lender's  obligations under this Agreement
          shall  remain   unchanged,   (B)  such  Lender  shall  remain   solely
          responsible  to the other parties  hereto for the  performance of such
          obligations  and (C)  the  Borrower,  the  Administrative  Agent,  the
          Issuing Bank and the other Lenders  shall  continue to deal solely and
          directly with such Lender in connection  with such Lender's rights and
          obligations under this Agreement. Any agreement or instrument pursuant
          to which a Lender sells such a  participation  shall provide that such
          Lender shall retain the sole right to enforce  this  Agreement  and to
          approve any amendment, modification or waiver of any provision of this
          Agreement; provided that such agreement or instrument may provide that
          such Lender will not, without the consent of the Participant, agree to
          any amendment,  modification or waiver  described in the first proviso
          to  Section  11.02(b)  that  affects  such  Participant.   Subject  to

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          paragraph  (c)(ii) of this  Section,  the  Borrower  agrees  that each
          Participant shall be entitled to the benefits of Section 2.14, Section
          2.15 and  Section  2.16 to the same  extent as if it were a Lender and
          had acquired its interest by  assignment  pursuant to paragraph (b) of
          this Section.  To the extent  permitted by law, each  Participant also
          shall be entitled to the benefits of Section 11.08 as though it were a
          Lender,  provided  such  Participant  agrees to be  subject to Section
          2.17(c) as though it were a Lender.

               (ii) A  Participant  shall not be entitled to receive any greater
          payment under Section 2.14 or Section 2.16 than the applicable  Lender
          would have been entitled to receive with respect to the  participation
          sold to such Participant, unless the sale of the participation to such
          Participant is made with the prior written consent of the Borrower.  A
          Participant  that would be a Foreign  Lender if it were a Lender shall
          not be entitled to the benefits of Section 2.16 unless the Borrower is
          notified  of the  participation  sold to  such  Participant  and  such
          Participant  agrees,  for the benefit of the Borrower,  to comply with
          Section 2.16(e) as though it were a Lender.

          (d) Any Lender may at any time pledge or assign a security interest in
     all or any portion of its rights under this Agreement to secure obligations
     of such Lender,  including  without  limitation any pledge or assignment to
     secure  obligations  to a Federal  Reserve Bank, and this Section shall not
     apply to any such pledge or  assignment  of a security  interest;  provided
     that no such pledge or  assignment of a security  interest  shall release a
     Lender from any of its obligations hereunder or substitute any such pledgee
     or assignee for such Lender as a party hereto.

Section 11.05. Survival. All covenants, agreements, representations and
warranties made by the Credit Parties herein and in the certificates or other
instruments delivered in connection with or pursuant to this Agreement shall be
considered to have been relied upon by the other parties hereto and shall
survive the execution and delivery of this Agreement and the making of any Loans
and issuance of any Letters of Credit, regardless of any investigation made by
any such other party or on its behalf and notwithstanding that the
Administrative Agent, the Issuing Bank or any Lender may have had notice or
knowledge of any Default or incorrect representation or warranty at the time any
credit is extended hereunder, and shall continue in full force and effect as
long as the principal of or any accrued interest on any Loan or any fee or any
other amount payable under this Agreement is outstanding and unpaid or any
Letter of Credit is outstanding and so long as the Aggregate Commitment has not
expired or terminated. The provisions of Section 2.14, Section 2.15, Section
2.16 and Section 11.03 and Article X shall survive and remain in full force and
effect regardless of the consummation of the transactions contemplated hereby,
the repayment of the Loans, the expiration or termination of the Letters of
Credit and the Aggregate Commitment or the termination of this Agreement or any
provision hereof.

Section 11.06. Counterparts; Integration; Effectiveness. This Agreement may be
executed in counterparts (and by different parties hereto on different
counterparts), each of which shall constitute an original, but all of which when

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taken together shall constitute a single contract. This Agreement and any
separate letter agreements with respect to fees payable to the Administrative
Agent constitute the entire contract among the parties relating to the subject
matter hereof and supersede any and all previous agreements and understandings,
oral or written, relating to the subject matter hereof. THIS WRITTEN CREDIT AND
GUARANTY AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. Except as provided in Section
5.01, this Agreement shall become effective when it shall have been executed by
the Administrative Agent and when the Administrative Agent shall have received
counterparts hereof which, when taken together, bear the signatures of each of
the other parties hereto, and thereafter shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
Delivery of an executed counterpart of a signature page of this Agreement by
telecopy shall be effective as delivery of a manually executed counterpart of
this Agreement.

Section 11.07. Severability. Any provision of this Agreement held to be invalid,
illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability
without affecting the validity, legality and enforceability of the remaining
provisions hereof; and the invalidity of a particular provision in a particular
jurisdiction shall not invalidate such provision in any other jurisdiction.

Section 11.08. Right of Setoff. If an Event of Default shall have occurred and
be continuing, each Lender and each of its Affiliates is hereby authorized at
any time and from time to time, to the fullest extent permitted by law, to set
off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other obligations at any time owing
by such Lender or Affiliate to or for the credit or the account of the Borrower
against any of and all the obligations of any Credit Party now or hereafter
existing under this Agreement held by such Lender, irrespective of whether or
not such Lender shall have made any demand under this Agreement and although
such obligations may be unmatured. The rights of each Lender under this Section
and Section 8.08 are in addition to other rights and remedies (including other
rights of setoff) which such Lender may have.

Section 11.09.    GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS.

          (a) THIS AGREEMENT  SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED
     BY THE LAW OF THE STATE OF TEXAS.

          (b) EACH CREDIT PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY  SUBMITS,
     FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF ANY UNITED
     STATES FEDERAL OR TEXAS STATE COURT SITTING IN DALLAS,  TEXAS IN ANY ACTION
     OR  PROCEEDING  ARISING  OUT  OF OR  RELATING  TO  THIS  AGREEMENT,  OR FOR
     RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT,  AND EACH OF THE PARTIES HERETO
     HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF
     ANY SUCH ACTION OR  PROCEEDING  MAY BE HEARD AND  DETERMINED  IN SUCH TEXAS
     STATE OR, TO THE EXTENT  PERMITTED BY LAW, IN SUCH FEDERAL  COURT.  EACH OF
     THE  PARTIES  HERETO  AGREES  THAT A FINAL  JUDGMENT  IN ANY SUCH ACTION OR
     PROCEEDING  SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER  JURISDICTIONS
     BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.  NOTHING IN

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<PAGE>

     THIS AGREEMENT SHALL AFFECT ANY RIGHT THAT THE  ADMINISTRATIVE  AGENT,  THE
     ISSUING  BANK OR ANY  LENDER  MAY  OTHERWISE  HAVE TO BRING  ANY  ACTION OR
     PROCEEDING  RELATING  TO THIS  AGREEMENT  AGAINST  ANY CREDIT  PARTY OR ITS
     PROPERTIES IN THE COURTS OF ANY JURISDICTION.

          (c) EACH CREDIT PARTY HEREBY IRREVOCABLY AND  UNCONDITIONALLY  WAIVES,
     TO THE FULLEST  EXTENT IT MAY LEGALLY AND  EFFECTIVELY DO SO, ANY OBJECTION
     WHICH IT MAY NOW OR  HEREAFTER  HAVE TO THE  LAYING  OF VENUE OF ANY  SUIT,
     ACTION OR  PROCEEDING  ARISING OUT OF OR RELATING TO THIS  AGREEMENT IN ANY
     COURT  REFERRED TO IN PARAGRAPH  (B) OF THIS  SECTION.  EACH OF THE PARTIES
     HERETO HEREBY  IRREVOCABLY  WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW,
     THE DEFENSE OF AN  INCONVENIENT  FORUM TO THE MAINTENANCE OF SUCH ACTION OR
     PROCEEDING IN ANY SUCH COURT.

          (d) EACH PARTY TO THIS  AGREEMENT  IRREVOCABLY  CONSENTS TO SERVICE OF
     PROCESS IN THE MANNER  PROVIDED  FOR NOTICES IN Section  11.01.  NOTHING IN
     THIS  AGREEMENT  WILL  AFFECT THE RIGHT OF ANY PARTY TO THIS  AGREEMENT  TO
     SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.

Section 11.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

Section 11.11. Headings. Article and Section headings and the Table of Contents
used herein are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.

Section 11.12. Confidentiality. Each of the Administrative Agent, the Issuing
Bank and the Lenders agrees to maintain the confidentiality of the Information
(as defined below), except that Information may be disclosed (a) to its and its
Affiliates' directors, officers, employees and agents, including accountants,
legal counsel and other advisors (it being understood that the Persons to whom

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such disclosure is made will be informed of the confidential nature of such
Information and instructed to keep such Information confidential), (b) to the
extent requested by any regulatory authority, (c) to the extent required by
applicable laws or regulations or by any subpoena or similar legal process, (d)
to any other party to this Agreement, (e) in connection with the exercise of any
remedies hereunder or any suit, action or proceeding relating to this Agreement
or the enforcement of rights hereunder, (f) subject to an agreement containing
provisions substantially the same as those of this Section, to (i) any assignee
of or Participant in, or any prospective assignee of or Participant in, any of
its rights or obligations under this Agreement or (ii) any actual or prospective
counterparty (or its advisors) to any swap or derivative transaction relating to
the Credit Parties and their obligations, (g) with the consent of the Borrower
or (h) to the extent such Information (i) becomes publicly available other than
as a result of a breach of this Section or (ii) becomes available to the
Administrative Agent, the Issuing Bank or any Lender on a nonconfidential basis
from a source other than a Credit Party. For the purposes of this Section,
"Information" means all information received from any Credit Party relating to
any Credit Party or its business, other than any such information that is
available to the Administrative Agent, the Issuing Bank or any Lender on a
nonconfidential basis prior to disclosure by any Credit Party; provided that, in
the case of information received from any Credit Party after the date hereof,
such information is clearly identified at the time of delivery as confidential.
Any Person required to maintain the confidentiality of Information as provided
in this Section shall be considered to have complied with its obligation to do
so if such Person has exercised the same degree of care to maintain the
confidentiality of such Information as such Person would accord to its own
confidential information.

Section 11.13. Interest Rate Limitation. Notwithstanding anything herein to the
contrary, if at any time the interest rate applicable to any Loan, together with
all fees, charges and other amounts which are treated as interest on such Loan
under applicable law (collectively the "Charges"), shall exceed the maximum
lawful rate (the "Maximum Rate") which may be contracted for, charged, taken,
received or reserved by the Lender holding such Loan in accordance with
applicable law, the rate of interest payable in respect of such Loan hereunder,
together with all Charges payable in respect thereof, shall be limited to the
Maximum Rate and, to the extent lawful, the interest and Charges that would have
been payable in respect of such Loan but were not payable as a result of the
operation of this Section shall be cumulated and the interest and Charges
payable to such Lender in respect of other Loans or periods shall be increased
(but not above the Maximum Rate therefor) until such cumulated amount, together
with interest thereon at the Federal Funds Effective Rate to the date of
repayment, shall have been received by such Lender. Chapter 346 of the Texas
Finance Code (which regulates certain revolving credit accounts (formerly Tex.
Rev. Civ. Stat. Ann. Art. 5069, Ch. 15)) shall not apply to this Agreement or to
any Loan, nor shall this Agreement or any Loan be governed by or be subject to
the provisions of such Chapter 346 in any manner whatsoever.

Section 11.14. USA PATRIOT Act. Each Lender that is subject to the requirements
of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26,
2001)) (the "Act") hereby notifies each Credit Party that pursuant to the
requirements of the Act, it is required to obtain, verify and record information
that identifies each Credit Party, which information includes the name and
address of each Credit Party and other information that will allow such Lender
to identify each Credit Party in accordance with the Act.

                                       81
<PAGE>

                            (Signature Pages Follow)

                                       82
<PAGE>

GASCO REVOLVING CREDIT AGREEMENT-  SIGNATURE PAGE
DALLAS 1585582
                  IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.

                      BORROWER:

                      GASCO ENERGY, INC.

                      By:      /s/ W. King Grant
                               -------------------------------------------------
                               Name:    W. King Grant
                               Title:   Executive Vice President and Chief
                                        Financial Officer

                      GUARANTORS:

                      GASCO PRODUCTION COMPANY

                      By:       /s/ W. King Grant
                               ------------------------------------------------
                               Name:    W. King Grant
                               Title:   Executive Vice President and Chief
                                        Financial Officer

                     RIVERBEND GAS GATHERING, LLC

                      By: Gasco Energy, Inc.
                          Its Managing Member

                      By:      /s/ W. King Grant
                               -------------------------------------------------
                               Name:    W. King Grant
                               Title:   Executive Vice President and Chief
                                        Financial Officer

                                       83
<PAGE>

                           MYTON OILFIELD RENTALS, LLC

                           By: Gasco Energy, Inc.
                               Its Managing Member

                           By:  /s/ W. King Grant
                               ----------------------------------------------
                                Name:    W. King Grant
                                Title:   Executive Vice President and Chief
                                         Financial Officer

                                       84
<PAGE>

            JPMORGAN CHASE BANK, N.A., individually and as Administrative Agent,

            By:/s/ J. Scott Fowler
               -----------------------------------------------
               Name: J. Scott Fowler
               Title: Vice President

                                       85
<PAGE>

                                    EXHIBIT A
                            ASSIGNMENT AND ASSUMPTION

                  This Assignment and Assumption (the "Assignment and
Assumption") is dated as of the Effective Date set forth below and is entered
into by and between [Insert name of Assignor] (the "Assignor") and [Insert name
of Assignee] (the "Assignee"). Capitalized terms used but not defined herein
shall have the meanings given to them in the Credit Agreement identified below
(as amended, the "Credit Agreement"), receipt of a copy of which is hereby
acknowledged by the Assignee. The Standard Terms and Conditions set forth in
Annex 1 attached hereto are hereby agreed to and incorporated herein by
reference and made a part of this Assignment and Assumption as if set forth
herein in full.

                  For an agreed consideration, the Assignor hereby irrevocably
sells and assigns to the Assignee, and the Assignee hereby irrevocably purchases
and assumes from the Assignor, subject to and in accordance with the Standard
Terms and Conditions and the Credit Agreement, as of the Effective Date inserted
by the Administrative Agent as contemplated below (i) all of the Assignor's
rights and obligations in its capacity as a Lender under the Credit Agreement
and any other documents or instruments delivered pursuant thereto to the extent
related to the amount and percentage interest identified below of all of such
outstanding rights and obligations of the Assignor under the respective
facilities identified below (including any letters of credit and guarantees
included in such facilities) and (ii) to the extent permitted to be assigned
under applicable law, all claims, suits, causes of action and any other right of
the Assignor (in its capacity as a Lender) against any Person, whether known or
unknown, arising under or in connection with the Credit Agreement, any other
documents or instruments delivered pursuant thereto or the loan transactions
governed thereby or in any way based on or related to any of the foregoing,
including contract claims, tort claims, malpractice claims, statutory claims and
all other claims at law or in equity related to the rights and obligations sold
and assigned pursuant to clause (i) above (the rights and obligations sold and
assigned pursuant to clauses (i) and (ii) above being referred to herein
collectively as the "Assigned Interest"). Such sale and assignment is without
recourse to the Assignor and, except as expressly provided in this Assignment
and Assumption, without representation or warranty by the Assignor.

1.       Assignor:                  ______________________________

2.       Assignee:                  ______________________________
                                    [and is an Affiliate/Approved Fund of
                                      [identify Lender]]

3.       Borrower(s):               ______________________________

4.                                  Administrative Agent: JPMorgan Chase Bank,
                                    N.A., as the administrative agent under the
                                    Credit Agreement

                                       86
<PAGE>

5.                                  Credit Agreement: Credit Agreement dated as
                                    of March 29, 2006, among Gasco Energy, Inc.,
                                    as Borrower, certain Subsidiaries of the
                                    Borrower, as Guarantors, the Lenders parties
                                    thereto, and JPMorgan Chase Bank, N.A., as
                                    Administrative Agent

6.                                  Assigned Interest:
<TABLE>
<CAPTION>

------------------------------ ----------------------------- ----------------------------- ---------------------------
<S>                            <C>                           <C>                         <C>
      Facility Assigned            Aggregate Amount of        Amount of Commitment/Loans    Applicable Percentage of
                                 Commitment/Loans for all              Assigned            Commitment/Loans Assigned
                                         Lenders
------------------------------ ----------------------------- ----------------------------- ---------------------------
------------------------------ ----------------------------- ----------------------------- ---------------------------
Revolving Commitment           $                             $                                               %
------------------------------ ----------------------------- ----------------------------- ---------------------------
------------------------------ ----------------------------- ----------------------------- ---------------------------
                               $                             $                                               %
------------------------------ ----------------------------- ----------------------------- ---------------------------
------------------------------ ----------------------------- ----------------------------- ---------------------------
                               $                             $                                               %
------------------------------ ----------------------------- ----------------------------- ---------------------------
</TABLE>

Effective Date:   _____________ ___, 20___

         The terms set forth in this Assignment and Assumption are hereby agreed
to:

                                                     ASSIGNOR

                                                     [NAME OF ASSIGNOR]

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

                                                     ASSIGNEE

                                                     [NAME OF ASSIGNEE]

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

                                       87
<PAGE>

[Consented to and] Accepted:

JPMORGAN CHASE BANK, N.A.
as Administrative Agent

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

[Consented to:]

GASCO ENERGY, INC.

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

                                       88
<PAGE>

                                                                         ANNEX 1

Credit  Agreement  dated as of March 29,  2006,  among Gasco  Energy,  Inc.,  as
Borrower,  Certain  Subsidiaries of Borrower,  as Guarantors,  the Lenders party
thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent.

                        STANDARD TERMS AND CONDITIONS FOR
                            ASSIGNMENT AND ASSUMPTION

                  1. Representations and Warranties.

                  1.1 Assignor. The Assignor (a) represents and warrants that
(i) it is the legal and beneficial owner of the Assigned Interest, (ii) the
Assigned Interest is free and clear of any lien, encumbrance or other adverse
claim and (iii) it has full power and authority, and has taken all action
necessary, to execute and deliver this Assignment and Assumption and to
consummate the transactions contemplated hereby; and (b) assumes no
responsibility with respect to (i) any statements, warranties or representations
made in or in connection with the Credit Agreement or any other Loan Document,
(ii) the execution, legality, validity, enforceability, genuineness, sufficiency
or value of the Loan Documents or any collateral thereunder, (iii) the financial
condition of the Borrower, any Subsidiary or Affiliates or any other Person
obligated in respect of any Loan Document or (iv) the performance or observance
by the Borrower, any Subsidiary or Affiliates or any other Person of any of
their respective obligations under any Loan Document.

                  1.2. Assignee. The Assignee (a) represents and warrants that
(i) it has full power and authority, and has taken all action necessary, to
execute and deliver this Assignment and Assumption and to consummate the
transactions contemplated hereby and to become a Lender under the Credit
Agreement, (ii) it satisfies the requirements, if any, specified in the Credit
Agreement that are required to be satisfied by it in order to acquire the
Assigned Interest and become a Lender, (iii) from and after the Effective Date,
it shall be bound by the provisions of the Credit Agreement as a Lender
thereunder and, to the extent of the Assigned Interest, shall have the
obligations of a Lender thereunder, (iv) it has received a copy of the Credit
Agreement, together with copies of the most recent financial statements
delivered pursuant to Section 6.01 thereof, as applicable, and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Assignment and Assumption and to
purchase the Assigned Interest on the basis of which it has made such analysis
and decision independently and without reliance on the Administrative Agent or
any other Lender, and (v) if it is a Foreign Lender, attached to the Assignment
and Assumption is any documentation required to be delivered by it pursuant to
the terms of the Credit Agreement, duly completed and executed by the Assignee;
and (b) agrees that (i) it will, independently and without reliance on the
Administrative Agent, the Assignor or any other Lender, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under the Loan
Documents, and (ii) it will perform in accordance with their terms all of the
obligations which by the terms of the Loan Documents are required to be
performed by it as a Lender.

                                       89
<PAGE>

                  2. Payments. From and after the Effective Date, the
Administrative Agent shall make all payments in respect of the Assigned Interest
(including payments of principal, interest, fees and other amounts) to the
Assignor for amounts which have accrued to but excluding the Effective Date and
to the Assignee for amounts which have accrued from and after the Effective
Date.

                  3. General Provisions. This Assignment and Assumption shall be
binding upon, and inure to the benefit of, the parties hereto and their
respective successors and assigns. This Assignment and Assumption may be
executed in any number of counterparts, which together shall constitute one
instrument. Delivery of an executed counterpart of a signature page of this
Assignment and Assumption by telecopy shall be effective as delivery of a
manually executed counterpart of this Assignment and Assumption. This Assignment
and Assumption shall be governed by, and construed in accordance with, the law
of the State of Texas.

                                       90
<PAGE>

                                                                     EXHIBIT B-1

                 FORM OF OPINION OF COUNSEL OF DILL, DILL, CARR,
                          STONBRAKER & HUTCHINGS, P.C.

         The closing opinion of Dill, Dill, Carr Stonbraker & Hutchings, P.C.,
counsel for the Borrower and the Guarantors, which is called for by Section
5.01(b) of the Agreement, shall be dated the Effective Date and addressed to the
Administrative Agent and the Lenders, shall be reasonably satisfactory in scope
and form to Lenders and shall be to the effect that

         1. The Borrower (a) is a corporation duly organized, validly existing
and in good standing under the laws of Nevada, (b) has all requisite power and
authority to carry on its business as now conducted and (c) except where the
failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect, is qualified to do business in,
and is in good standing in, every jurisdiction where such qualification is
required.

         2. Each Guarantor (a) is a corporation/limited liability
company/limited partnership duly organized, validly existing and in good
standing under the laws of the state of its organization, (b) has all requisite
power and authority to carry on its business as now conducted and (c) except
where the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect, is qualified to
do business in, and is in good standing in, every jurisdiction where such
qualification is required

         3. The Transactions are within each Credit Parties' corporate/limited
liability company/partnership powers and have been duly authorized by all
necessary corporate and, if required, stockholder action. The Credit Agreement
has been duly executed and delivered by the Credit Parties.

         4. The Transactions (a) will not violate any applicable law or
regulation or the charter, by-laws or other Organizational Documents of any
Credit Party or, to such counsel's knowledge, any order of any Governmental
Authority, or (b) to such counsel's knowledge will not violate or result in a
default (other than violations and defaults that have been waived) under any
indenture, agreement or other instrument binding upon any Credit Party or any
Credit Party's assets, or give rise to a right thereunder to require any payment
to be made by any Credit Party or result in the creation or imposition of any
Lien on any asset of any Credit Party other than the Liens securing the
Obligations.

         5. Such counsel is not aware of any actions, suits or proceedings by or
before any arbitrator or Governmental Authority pending against or threatened
against or affecting the Credit Parties (a) as to which there is a reasonable
possibility of an adverse determination and that, if adversely determined, could
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect (other than the Disclosed Matters) or (b) that involve the Credit
Agreement or the Transactions.

                                       91
<PAGE>

         6. Except such as have been obtained or made and are in full force and
effect, the filing of the Mortgages in appropriate filing offices and, after the
Effective Date, the filing of the Credit Agreement and related Loan Documents by
the Borrower with the Securities and Exchange Commission pursuant to the
requirements of the Securities Exchange Act of 1934, as amended, no
authorization, consent, approval, exemption, franchise, permit or license of, or
filing with any Governmental Authority or, to such counsel's knowledge, any
other Person is required to authorize or is otherwise required in connection
with the valid execution and delivery by the Borrower of the Loan Documents or
any instrument contemplated thereby, or the payment or performance by the
Borrower of the Indebtedness.

         Such counsel's opinion shall be limited to the laws of the States of
Nevada, Colorado and Delaware.

                                       92
<PAGE>

                                                                     EXHIBIT B-2

              FORM OF OPINION OF COUNSEL OF VINSON & ELKINS L.L.P.

The closing opinion of Vinson & Elkins L.L.P., counsel for the Borrower and the
Guarantors, which is called for by Section 5.01(b) of the Agreement, shall be
dated the Effective Date and addressed to the Administrative Agent and the
Lenders, shall be reasonably satisfactory in scope and form to Lenders and shall
be to the effect that

         1. Assuming due authorization, execution and delivery of the Credit
Agreement by the Credit Parties, the Credit Agreement constitutes a legal, valid
and binding obligation of the Credit Parties, enforceable in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
or other laws affecting creditors' rights generally and subject to general
principles of equity, regardless of whether considered in a proceeding in equity
or at law.

         2. The Transactions (a) will not violate any applicable law or
regulation or, to such counsel's knowledge, any order of any Governmental
Authority, or (b) to such counsel's knowledge, will not violate or result in a
default (other than violations or defaults that have been waived) under any
indenture, agreement or other instrument binding upon any Credit Party or any
Credit Party's assets, or give rise to a right thereunder to require any payment
to be made by any Credit Party or result in the creation or imposition of any
Lien on any asset of any Credit Party other than the Liens securing the
Obligations.

         3. Such counsel is not aware of any actions, suits or proceedings by or
before any arbitrator or Governmental Authority pending against or threatened
against or affecting the Credit Parties (a) as to which there is a reasonable
possibility of an adverse determination and that, if adversely determined, could
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect (other than the Disclosed Matters) or (b) that involve the Credit
Agreement or the Transactions.

         4. None of the Credit Parties is an "investment company" as defined in,
or subject to regulation under, the Investment Company Act of 1940.

         5. The Pledge Agreement creates valid security interests in favor of
the Administrative Agent in the Collateral (as defined in the Pledge Agreement),
to the extent the Uniform Commercial Code of the State of Texas (the "Code") is
applicable thereto as security for payment of the Obligations.

         6. Except such as have been obtained or made and are in full force and
effect, the filing of the Mortgages in appropriate filing offices and, after the
Effective Date, the filing of the Credit Agreement and related Loan Documents by
the Borrower with the Securities and Exchange Commission pursuant to the
requirements of the Securities Exchange Act of 1934, as amended, no
authorization, consent, approval, exemption, franchise, permit or license of, or
filing with, any Governmental Authority or, to such counsel's knowledge, any

                                       93
<PAGE>

other Person is required to authorize or is otherwise required in connection
with the valid execution and delivery by the Borrower of the Loan Documents or
any instrument contemplated thereby, or the payment or performance by the
Borrower of the Indebtedness.

Such counsel's opinion shall be limited to federal laws and the laws of the
States of Texas and Delaware.

                                       94
<PAGE>

                                                                     EXHIBIT B-3

               FORM OF FORM OF OPINION OF COUNSEL OF PRUITT GUSHEE

The closing opinion of Pruitt Gushee, counsel for the Borrower and the
Guarantors, which is called for by Section 5.01(b) of the Agreement, shall be
dated the Effective Date and addressed to the Administrative Agent and the
Lenders, shall be reasonably satisfactory in scope and form to Lenders and shall
be to the effect that

         1. The Mortgage is a valid and binding obligation of Gasco Production
enforceable against it in accordance with the terms thereof.

         2. The Mortgage complies with all applicable laws of the State of Utah,
including without limitation all applicable recording, filing and registration
laws and regulations. The Mortgage creates, to secure the present and future
obligations under the Credit Agreement, the Notes, the Letters of Credit and
other Loan Documents described in such Mortgage, (a) a lien on the Mortgaged
Properties that are real properties located in the State of Utah and (b) a
security interest in the Collateral (as defined in the Mortgage) in favor of
Agent and the Lenders, to the extent that the Collateral is personal property
with respect to which a security interest can be granted under the Uniform
Commercial Code as presently in effect in the State of Utah (the "UCC").

         3. A fully executed counterpart of the Mortgage is required to be filed
and recorded in the appropriate real estate records of the offices of the County
Recorders of Uintah and Duchesne Counties, Utah, the counties in which the real
properties described in the Mortgage are located. Once the Mortgage is so filed
and recorded, no further or subsequent filing or refiling will be necessary in
order to continue the existence or perfection of the lien referred to in
Paragraph 2 above except that in the event any indebtedness secured by the
Mortgage has not been paid before the expiration of 6 years from the earlier of
the maturity date provided for therein or in the Notes, as appropriate, for
payment of such indebtedness, an extension agreement with respect to the
Mortgage, providing for the renewal or extension of such indebtedness, should be
entered into and filed and recorded in the records of the office of the County
Recorder in Uintah and Duchesne Counties, Utah prior to the expiration of such
6-year period.

         4. The financing statement covering the Collateral reviewed by us is in
proper form for filing with the office of the Secretary of State of Delaware.
Such financing statement, when duly filed in the offices of the Secretary of
State of Delaware, and the Mortgage, when duly recorded in Uintah and Duchesne
Counties, Utah, will have been duly filed in all places where filing is
necessary to perfect Agent's and the Lenders' security interest in that portion
of the Collateral which constitutes personal property, fixtures, or
"as-extracted collateral" (as defined in the UCC) and that is capable of being
perfected by filing a financing statement under the UCC. No further or
subsequent filing, refiling, recording, rerecording, registration or
re-registration, other than continuation statements as required by the UCC (and
amendments in the event that Gasco Production's name or structure changes), will
be necessary in the State of Utah or under any applicable federal law or
regulation in order to continue the perfection of such security interest.

                                       95
<PAGE>

         5. The acceptance of the Mortgage by Agent and the Lenders, its
possession and retention of its rights thereunder, and its presentation of such
instruments for filing and recording as described herein will not, in and of
themselves, require Agent or any Lender to pay or otherwise subject Agent or any
Lender to any tax, fee or other charge except the customary fee charged by each
filing or recording officer on a per-page, per-property description or
per-instrument basis. Neither Agent nor any Lender is required to qualify to do
business in the State of Utah or to otherwise register or make any filing (other
than those described herein) with any state of local official in the State of
Utah solely as a result of its acceptance of such instruments, its possession
and retention of its liens thereunder, or the filing or recording thereof.

Such counsel's opinion shall be limited to laws of the State of Utah.

                                       96
<PAGE>

                                                                       EXHIBIT C

                              COUNTERPART AGREEMENT

         This COUNTERPART AGREEMENT, dated [ ] (this "Counterpart Agreement") is
delivered pursuant to that certain Credit Agreement, dated as of March 29, 2006
(as it may be amended, supplemented or otherwise modified, the "Credit
Agreement"; the terms defined therein and not otherwise defined herein being
used herein as therein defined), by and among GASCO ENERGY, INC., as Borrower,
CERTAIN SUBSIDIARIES OF BORROWER, as Guarantors, the LENDERS party thereto, and
JPMORGAN CHASE BANK, N.A., as Administrative Agent (the "Administrative Agent").

         Section 1. Pursuant to Section 6.12 of the Credit Agreement, the
undersigned hereby:

                  (a) agrees that this Counterpart Agreement may be attached to
the Credit Agreement and that by the execution and delivery hereof, the
undersigned becomes a Guarantor under the Credit Agreement and agrees to be
bound by all of the terms thereof;

                  (b) represents and warrants that each of the representations
and warranties set forth in the Credit Agreement and each other Loan Document
and applicable to the undersigned is true and correct both before and after
giving effect to this Counterpart Agreement, except to the extent that any such
representation and warranty relates solely to any earlier date, in which case
such representation and warranty is true and correct as of such earlier date;

                  (c) no event has occurred or is continuing as of the date
hereof, or will result from the transactions contemplated hereby on the date
hereof, that would constitute an Event of Default or a Default;

                  (d) agrees to irrevocably and unconditionally guaranty the due
and punctual payment in full of all Obligations when the same shall become due,
whether at stated maturity, by required prepayment, declaration, acceleration,
demand or otherwise (including amounts that would become due but for the
operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11
U.S.C. ss. 362(a)) and in accordance with Section 8 of the Credit Agreement; and

                  (e) the undersigned hereby (i) agrees that this counterpart
may also be attached to the Pledge Agreement, (ii) agrees that the undersigned
will comply with all the terms and conditions of the Pledge Agreement as if it
were an original signatory thereto, (iii) grants to Secured Party (as such term
is defined in the Pledge Agreement) a security interest in all of the
undersigned's right, title and interest in and to all "Collateral" (as such term
is defined in the Pledge Agreement) of the undersigned, in each case whether now
or hereafter existing or in which the undersigned now has or hereafter acquires
an interest and wherever the same may be located and (iv) delivers to Agent
supplements to all schedules attached to the Pledge Agreement. All such
Collateral shall be deemed to be part of the "Collateral" and hereafter subject
to each of the terms and conditions of the Pledge Agreement.

                                       97
<PAGE>

                  Section 2. The undersigned agrees from time to time, upon
request of Administrative Agent, to take such additional actions and to execute
and deliver such additional documents and instruments as Administrative Agent
may request to effect the transactions contemplated by, and to carry out the
intent of, this Agreement. Neither this Agreement nor any term hereof may be
changed, waived, discharged or terminated, except by an instrument in writing
signed by the party (including, if applicable, any party required to evidence
its consent to or acceptance of this Agreement) against whom enforcement of such
change, waiver, discharge or termination is sought. Any notice or other
communication herein required or permitted to be given shall be given in
pursuant to Section 11.01 of the Credit Agreement, and all for purposes thereof,
the notice address of the undersigned shall be the address as set forth on the
signature page hereof. In case any provision in or obligation under this
Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.

         THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF TEXAS, WITHOUT
REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF.

                                       98
<PAGE>

         IN WITNESS WHEREOF, the undersigned has caused this Counterpart
Agreement to be duly executed and delivered by its duly authorized officer as of
the date above first written.

                                            [NAME OF SUBSIDIARY]

                                            By:______________________
                                                  Name:
                                                  Title:

Address for Notices:

         --------------
         --------------
         Attention:
         Telecopier

with a copy to:

         --------------
         --------------
         Attention:
         Telecopier

ACKNOWLEDGED AND ACCEPTED, as of the date above first written:

JPMORGAN CHASE BANK, N.A.,
as Administrative Agent

By:_____________________
      Name:
      Title:

                                       99
<PAGE>

                                                                       EXHIBIT D

                         CERTIFICATE REGARDING SOLVENCY

         The undersigned, as Chief Financial Officer of Gasco Energy, Inc., a
Nevada corporation (the "Borrower"), hereby gives this Certificate Regarding
Solvency to induce JPMorgan Chase Bank, N.A., as Administrative Agent for the
Lenders (defined below) (the "Administrative Agent") to consummate certain
financial accommodations pursuant to the terms and conditions of that certain
Credit Agreement dated the date hereof (the "Credit Agreement") among the
Borrower, certain Subsidiaries of the Borrower, as Guarantors, the lenders
signatory thereto ("Lenders"), and Agent. Capitalized terms used in this
certificate are defined in the Credit Agreement, unless otherwise stated.

         The undersigned hereby certifies to the Administrative Agent that:

1. The undersigned is familiar with the business and financial affairs of the
Borrower, including, without limitation, the Transactions and the matters
hereinafter described.

2. The undersigned has reviewed the pro-forma balance sheet of the Borrower, as
of the date thereof (the "Pro-Forma Balance Sheet"), and the Projections, both
of which are attached hereto as Exhibit "A" and Exhibit "B", respectively, and
incorporated herein by reference for all purposes. The undersigned is familiar
with the process through which the Pro-Forma Balance Sheet and the Projections
were generated.

3. The Pro-Forma Balance Sheet fairly presents in all material respects the
financial position of the Borrower as of the date thereof after giving effect to
the Transactions. There have been no material adverse changes in the assets or
liabilities of the Borrower and its Subsidiaries since December 31, 2005. The
Projections are reasonable projections of the balance sheet, income statement
and source and application of funds for the periods covered thereby, based upon
the assumptions set forth therein. The Borrower believes that such assumptions
set forth therein are reasonable in light of current business conditions
existing at the time of preparation thereof. The Projections represent the
Borrower's good faith estimate as of the date thereof of the Borrower's future
financial performance, it being recognized by the Administrative Agent that such
financial information as it relates to future events is not to be viewed as fact
and that actual results during the period or periods covered thereby may differ
from the projected results set forth therein.

4. Immediately following the consummation of, and after giving effect to, the
transactions contemplated by the Loan Documents and the application of the
proceeds from the fundings being made on the Effective Date, the Borrower is
solvent.

5. The Borrower does not intend to incur, or believe it will incur, debts beyond
its ability to pay as they mature.

                                      100
<PAGE>

                               DATED: March 29, 2006

                               GASCO ENERGY, INC.,
                               a Nevada corporation

                               By: /s/ W. King Grant
                                 --------------------------------------
                                  W. King Grant
                                  Chief Financial Officer

                                      101
<PAGE>

                                   EXHIBIT "A"
                             Pro-Forma Balance Sheet
                                 (see attached)

                                      102
<PAGE>

                                   EXHIBIT "B"
                                   Projections
                                 (see attached)

                                      103
<PAGE>

                                  SCHEDULE 2.01
                 Applicable Percentages and Initial Commitments

<TABLE>

-------------------------------------------- ---------------------------- -------------------- --------------------
                                                                              Applicable       Initial Commitment
                  Lender                                Title                 Percentage
-------------------------------------------- ---------------------------- -------------------- --------------------
-------------------------------------------- ---------------------------- -------------------- --------------------
<S>                                       <C>                                    <C>           <C>
JPMorgan Chase Bank , N.A.                   Administrative Agent                100%          $17,000,000
Mail Code IL1-0010
10 South Dearborn Street
5th Floor
Chicago, Illinois 60603
Attention:  Victor Perez
Telephone:  (312) 385-7066
Facsimile:  (312) 385-7095
victor.perez@jpmchase.com

With a copy to:

JPMorgan Chase Bank, N.A.
Mail Code TX1-2448
1717 Main Street
Dallas, TX 75201
Attention: J. Scott Fowler
Telephone: (214) 290-2162
Facsimile: (214) 290-2332
scott.fowler@chase.com
-------------------------------------------- ---------------------------- -------------------- --------------------
-------------------------------------------- ---------------------------- -------------------- --------------------

-------------------------------------------- ---------------------------- -------------------- --------------------
-------------------------------------------- ---------------------------- -------------------- --------------------

-------------------------------------------- ---------------------------- -------------------- --------------------
-------------------------------------------- ---------------------------- -------------------- --------------------

TOTAL                                                                     100.00000%           $17,000,000

-------------------------------------------- ---------------------------- -------------------- --------------------

</TABLE>

                                      104
<PAGE>

                                  SCHEDULE 4.06

                                DISCLOSED MATTERS

None.

                                      105
<PAGE>

                                  SCHEDULE 4.12

                    CAPITALIZATION AND CORPORATE INFORMATION

<TABLE>

---------------------------------------- -------------------------------------- --------------------------------------
                Entity                       Jurisdiction of Organization               Federal Tax ID Number
---------------------------------------- -------------------------------------- --------------------------------------
---------------------------------------- -------------------------------------- --------------------------------------
<S>                                     <C>                                    <C>
Gasco Energy, Inc.                       Nevada                                 98-0204105
---------------------------------------- -------------------------------------- --------------------------------------
---------------------------------------- -------------------------------------- --------------------------------------
Gasco Production Company                 Delaware                               84-1461816
---------------------------------------- -------------------------------------- --------------------------------------
---------------------------------------- -------------------------------------- --------------------------------------
Riverbend Gas Gathering, LLC             Nevada                                 43-2049794
---------------------------------------- -------------------------------------- --------------------------------------
---------------------------------------- -------------------------------------- --------------------------------------
Myton Oilfield Rentals, LLC              Nevada                                 20-1202389
---------------------------------------- -------------------------------------- --------------------------------------

------------------------------- ---------------------------- ---------------------------- ----------------------------
    Restricted Subsidiary             Type of Entity           Outstanding Shares or        Owner(s) of Shares or
                                                               Other Equity Interests          Equity Interests
------------------------------- ---------------------------- ---------------------------- ----------------------------
------------------------------- ---------------------------- ---------------------------- ----------------------------
Gasco Production Company (fka   Corporation                  7,925,000                    Gasco Energy Inc.
Pannonian Energy Inc.)
------------------------------- ---------------------------- ---------------------------- ----------------------------
------------------------------- ---------------------------- ---------------------------- ----------------------------
Riverbend Gas Gathering, LLC    Limited Liability Company    N/A                          Gasco Energy Inc.-100%
------------------------------- ---------------------------- ---------------------------- ----------------------------
------------------------------- ---------------------------- ---------------------------- ----------------------------
Myton Oilfield Rentals, LLC     Limited Liability Company    N/A                          Gasco Energy Inc.-100%
------------------------------- ---------------------------- ---------------------------- ----------------------------

</TABLE>

                                      106
<PAGE>

                                  SCHEDULE 6.10

                             TITLE CURATIVE MATTERS

1.                Wilkin Ridge Federal 34-17-10-17, SWSE Section 17, Township 10
                  South, Range 17 East, located on United States of America BLM
                  Lease #U-75082, dated February 26, 1996. Operating Rights
                  currently owned as follows: Gasco Production Company 50%, QEP
                  Uinta Basin, Inc. 21.875% and III Exploration Company 28.125%;
                  Gasco represents ownership of 100% of the Operating Rights.

a.                Provide Administrative Agent's counsel with copies of
                  Transfers of 50% Operating Rights to Gasco Production Company
                  from QEP Uinta Basin, Inc. and III Exploration Company
                  approved by BLM and recorded in Duchesne County, Utah.

                                      107
<PAGE>

                                  SCHEDULE 7.01

                              EXISTING INDEBTEDNESS

None.

                                      108
<PAGE>

                                  SCHEDULE 7.02

                                 EXISTING LIENS

None.

                                      109
<PAGE>

                                  SCHEDULE 7.07

                          TRANSACTIONS WITH AFFILIATES

None.

                                      110
<PAGE>

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00101-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00101-of-00352.parquet"}]]