Document:

Exhibit 10.210

                                 THE SCHWABPLAN
                     RETIREMENT SAVINGS AND INVESTMENT PLAN

           (Restated to include Amendments through December 22, 1999)

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                                 THE SCHWABPLAN
                     RETIREMENT SAVINGS AND INVESTMENT PLAN

                                Table of Contents

Section                                                              Page Number

1    Introduction and Purpose........................................         1

2    Definitions.....................................................         2

3    Participation...................................................        14

     3.1      Commencement of Participation.
     3.2      Cessation of Participation
     3.3      Readmission After Cessation of Participation
     3.4      Waiver of Participation

4    Employer Contributions..........................................        16

     4.1      Elective Contributions
     4.2      Employer Contributions
     4.3      Allocation of Matching Contributions, Profit Sharing
              Contributions and ESOP Contributions
     4.4      Timing of Employer Contributions.
     4.5      Forfeitures
     4.6      Contribution Percentage Test.
     4.7      Distribution of Excess Aggregate Contributions
     4.8      Aggregate Limit for Contribution Percentage and Actual
              Deferral Percentage.
     4.9      Profit Sharing Contributions.

5    Salary Reduction Agreements and Rollover Contributions..........        24

     5.1      Salary Reduction Agreements.
     5.2      Change or Suspension of Salary Reduction Agreements
     5.3      Actual Deferral Percentage Test.
     5.4      Amendment or Revocation of Salary Reduction Agreement
              by Committee.
     5.5      Distribution of Excess Contributions.
     5.6      Rollover Contributions.
     5.7      Trustee-to-Trustee Transfer of Assets

6    Allocation of Contributions....................................         30

     6.1      Establishment of Cash Contribution Account.
     6.2      Establishment of Subaccounts

7    Special ESOP Provisions.........................................        31

     7.1      Investment of ESOP Accounts
     7.2      Allocation to ESOP Accounts.
     7.3      Suspense Subfund for ESOP Accounts
     7.4      Disposition of Shares Released from Suspense Subfund.
     7.5      Limitations on Allocations to ESOP Accounts
     7.6      Acquisition of Shares.
     7.7      Effect of Change in Plan Sponsor's Capitalization.
     7.8      Trustee and Committee Discretion to Engage in Transactions
              in Shares.
     7.9      Valuation of ESOP Accounts.
     7.10     Role of Purchasing Agent

8    Investment of Contributions, Valuations and Participants' Cash
     Contribution Accounts...........................................        39

     8.1 Delivery of Contributions to Trust Fund
     8.2 Participants' Right to Select Investments
     8.3 Participant  Investment  Election
     8.4 Change in Investment Election for Future Contributions
     8.5 Change in Investment Election for Prior Contributions
     8.6  Valuation of Cash Contribution Accounts.

9    Retirement Dates................................................        41

     9.1      Normal Retirement Date
     9.2      Deferred Retirement Date.

10   Eligibility for Payment of  Accounts and Vested Interests.......        42

     10.1     Participants' Right to Account Upon Termination Due to
              Retirement, Death or Disability.
     10.2     Participants' Right to Account Upon Other Termination
              of Service
     10.3     Vesting Schedule for Determining Vested Interests.
     10.4     Breaks in Service.
     10.5     Participant's Right to Restoration of Account Upon
              Return to Service.
     10.6     Participant's Right to Account Upon Death After
              Termination of Service
     10.7     Amendment of Vesting Schedule.
     10.8     Distribution  Following  Attainment of Age 59-1/2 to
              Former  Participants  of The Hampton Pension Services,
              Inc. 401(k) Retirement Savings Plan

11   Method of Payment of Accounts and Withdrawals...................        46

     11.1     Methods of Payment.
     11.2     Commencement of Payment
     11.3     Special Rules For Distribution of Shares.
     11.4     Payments to Surviving Spouse or Beneficiary
     11.5     Latest Date for Commencement of Benefits.
     11.6     Redirection of Investment of ESOP Account.
     11.7     Hardship Withdrawals.
     11.8     Direct Rollovers to Another Qualified Plan or IRA.
     11.9     Certain Securities Law Restrictions
     11.10    Participant Loans.

12   Maximum Amount of Allocation....................................        58

     12.1     Section 415 Limitations
     12.2     Refund or Forfeiture of Amounts in Excess of Section
              415 Limits.

13   Voting Rights...................................................        61

     13.1     Voting and Tender or Exchange of Shares in General.
     13.2     Voting of Allocated Shares.
     13.3     Mechanics of Voting Allocated Shares
     13.4     Voting of Unallocated Shares
     13.5     Tender or Exchange of Allocated Shares
     13.6     Tender or Exchange of Unallocated Shares.
     13.7     Voting of Deceased Participant's Shares

14   Designation of Beneficiaries....................................        65

     14.1     Designation of Beneficiary
     14.2     Failure to Designate Beneficiary

15   Administration of the Plan......................................        66

     15.1     The Committee.
     15.2     The Trustee.
     15.3     Committee's Responsibility for Entering into Exempt Loans
              and Valuation of Shares
     15.4     Committee's Power to Engage Outside Experts.
     15.5     Composition of Committee.
     15.6     Actions of Committee.
     15.7     Disbursement of Plan Funds.
     15.8     Application for Benefits.
     15.9     Denied Claims for Benefits
     15.10    Indemnification.
     15.11    Agent for Service of Process.

16   Expenses........................................................        71

     16.1     Payment of Plan Expenses
     16.2     Expenses Attributable to Investment of Plan Assets and Taxes.

17   Employer Participation..........................................        72

     17.1     Adoption of Plan by Affiliated Employer
     17.2     Termination of Participation by Participating Employer
     17.3     Effect of Termination of Participation by Participating
              Employer.
     17.4     Limitations on Transfer of Plan Assets to Successor Plan
     17.5     Shares Allocated to Suspense Fund Excluded from Transfer
              of Plan Assets to Successor Plan.

18   Amendment or Termination of the Plan............................        75

     18.1     Amendment, Suspension or Termination of Plan
     18.2     Power to Retroactively Amend, Suspend or Terminate
              Plan Provisions
     18.3     Notice of Amendment, Suspension or Termination
     18.4     Effect of Termination of Plan.
     18.5     Partial Termination of Plan
     18.6     Trust for Exclusive Benefit of Participant

19   Top-Heavy Plan Requirements.....................................        78

     19.1     Top-Heavy Plan - In General
     19.2     Effect of Top-Heavy Status
     19.3     Top-Heavy Vesting Schedule.
     19.4     Definitions.
     19.5     Maintenance of Defined Benefit Plan in Addition to Plan.

20   General Limitations and Provisions..............................        84

     20.1     Exclusive Benefit of Participants and Beneficiaries
     20.2     No Rights to Continued Employment
     20.3     Trust Sole Source of Benefits.
     20.3     Trust Sole Source of Benefits.
     20.4     Risk of Decrease in Assets
     20.5     Incapacity of Participant or Beneficiary.
     20.6     Antialienation; Qualified Domestic Relations Orders
     20.7     Inability to Locate Participant or Beneficiary.
     20.8     Failure to Receive IRS Approval.
     20.9     Contributions Conditioned on Deductibility.
     20.10    Mistake of Fact
     20.11    Communications with Committee.
     20.12    Communications with Participants and Beneficiaries.
     20.13    Prior Service Credit
     20.14    Gender and Number
     20.15    Headings
     20.16    Governing Law.
     20.17    Severability of Provisions
     20.18    Heirs, Assigns and Personal Representatives
     20.19    Reliance on Data and Consents.
     20.20    Qualified Military Service.

21   Application to Puerto Rico Employees............................        93

         21.1     Modifications Applicable to Puerto Rico.

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                                 THE SCHWABPLAN
                     RETIREMENT SAVINGS AND INVESTMENT PLAN

                        as Amended through June 24, 1999

                       SECTION 1. INTRODUCTION AND PURPOSE

         1.1 The Plan Sponsor has  established  and maintains the Plan to enable
each  Participant  to benefit,  in accordance  with the terms of the Plan,  from
contributions  made by the Employer  and from any  increases in the value of the
Plan assets  through  investment of such assets.  The Plan is comprised of three
parts:  (i) a  Section  401(k)  plan,  (ii) a profit  sharing  plan and (iii) an
employee stock  ownership plan. The purpose of the employee stock ownership plan
portion  of the Plan is to align  Employees'  interests  with the  interests  of
shareholders.  It is  anticipated  that Employer  contributions  to the employee
stock  ownership  plan will be invested  primarily  or entirely in Shares of The
Charles Schwab  Corporation,  that the employee stock ownership plan may acquire
such  Shares  of The  Charles  Schwab  Corporation  from  time to time  with the
proceeds of one or more Exempt  Loans,  the repayment of which may be secured in
part by a pledge of the Shares of The Charles Schwab  Corporation  acquired with
those loan  proceeds,  and that  Employer  contributions  to the employee  stock
ownership  plan may be used in full or in  substantial  part to the  payment  of
interest on, and retirement of principal of, such Exempt Loans.
                  This  Plan  is a  restatement  of  the  SchwabPlan  Retirement
Savings and  Investment  Plan,  which was  initially  effective as of October 1,
1983. The effective date of this restatement is December 13, 1996. The rights of
any person who  terminated  employment or who retired on or before the effective
date of  this  restated  Plan  or any  provision  hereof,  including  his or her
eligibility for benefits and the time and form in which  benefits,  if any, will
be paid, shall be determined solely under the terms of the Plan provisions as in
effect on the date of his or her termination of employment or retirement, unless
such person is thereafter reemployed and again becomes a Participant. The rights
of any other person shall be determined  solely under the terms of this restated
Plan, except as may otherwise be required by law.
                  The Plan and Trust are intended to qualify as a plan and trust
which are qualified and exempt from taxation under Sections 401(a) and 501(a) of
the Code.  The Plan is intended to qualify in part as a profit  sharing plan (as
defined in Section 401(a)(27) of the Code) and in part as a stock bonus plan and
an employee stock  ownership plan (as defined by Section  4975(e)(7) of the Code
and Section  407(d)(6)  of the Act)  designed to invest  primarily  in shares of
stock of the  Employer  which meet the  requirements  for  "qualifying  employer
securities"  under Section  4975(e)(8) of the Code and Section  407(d)(5) of the
Act. All provisions of the Plan and Trust shall be construed accordingly.
                  All Trust Fund assets  acquired  under the Plan as a result of
debt  incurred  to purchase  Shares,  Employer  contributions,  income and other
additions to the Trust Fund shall be  administered,  distributed,  forfeited and
otherwise  governed by the provisions of the Plan. It is intended that the Trust
associated with the Plan be exempt from federal income taxation  pursuant to the
provisions of Section  501(a) of the Code.  Subject to the provisions of Section
16 of the Plan,  the  assets of the Plan shall be  applied  exclusively  for the
purposes of providing benefits to Participants and Beneficiaries  under the Plan
and for defraying  expenses  incurred in the  administration of the Plan and its
corresponding Trust.

                             SECTION 2. DEFINITIONS
         When used herein the following terms shall have the following meanings:
         2.1  "Account" means the account or accounts established and maintained
on behalf of a  Participant  pursuant  to (i)  Section  6.1 with  respect to the
Participant's Cash Contribution Account and (ii) Section 7.1 with respect to the
Participant's ESOP Account.
         2.2  "Act" means the Employee  Retirement  Income Security Act of 1974,
as now in effect or as hereafter amended.
         2.3  "Actual  Deferral  Percentage"  means the  average  of the  ratios
(calculated  separately  for each Employee) for each Plan Year of (a) the amount
of Elective  Contributions and Matching  Contributions or Qualified  Nonelective
Contributions (if the Committee  determines to take such Matching  Contributions
or such Qualified Nonelective Contributions into account when calculating Actual
Deferral  Percentage)  on behalf of each  Employee for the relevant Plan Year to
(b)  the   Employee's   compensation   (as   defined  in   Treasury   Regulation
1.415-2(d)(10)  or in such other manner as is prescribed under Section 414(s) of
the Code) while a Participant for the relevant Plan Year.
         2.4  "Affiliated Employer" means any corporation which is included in a
controlled  group of  corporations  (within the meaning of Section 414(b) of the
Code) which  includes the Plan  Sponsor,  any trade or business  (whether or not
incorporated)  which is under common  control with the Plan Sponsor  (within the
meaning of Section 414(c) of the Code),  any  organization  included in the same
affiliated  service group (within the meaning of Section  414(m) of the Code) as
the Plan Sponsor and any other entity  required to be  aggregated  with the Plan
Sponsor  pursuant to the  Regulations  under Section 414(o) of the Code;  except
that for purposes of applying the  provisions of Sections 12 and 19 with respect
to the limitations on contributions, Section 415(h) of the Code shall apply.
         2.5  "Beneficiary"  means  the beneficiary or beneficiaries  designated
by a Participant  pursuant to Section 14 to receive the amount,  if any, payable
under the Plan upon the death of such Participant.
         2.6  "Board  of  Directors"  means  the board  of  directors of Charles
Schwab & Co., Inc.
         2.7  "Break  in  Service"  means  a  Plan  Year  (or  for  purposes  of
determining  membership  in the Plan  pursuant  to  Section  3, the  Computation
Period)  during which an  individual  has not  completed  more than 500 Hours of
Service,  as determined by the Committee in accordance with the  Regulations.  A
Break in Service shall be deemed to have  commenced on the first day of the Plan
Year in which it occurs.  Solely for purposes of determining  whether a Break in
Service has occurred,  an individual shall be credited with the Hours of Service
which such  individual  would have  completed  but for a maternity  or paternity
absence,  as determined by the Committee in accordance with this Section 2.7 and
the Code and Regulations;  provided, however, that the total Hours of Service so
credited  shall not exceed 501 Hours of Service  and that the  individual  shall
timely provide the Committee with such information as it shall require. Hours of
Service credited for a maternity or paternity absence shall be credited at eight
Hours of Service per day and shall be credited  entirely (i) in the Plan Year or
Computation  Period in which the  absence  began if such  Hours of  Service  are
necessary  to  prevent  a Break in  Service  in such Plan  Year,  or (ii) in the
following  Plan Year or  Computation  Period.  For purposes of this Section 2.7,
maternity or paternity  absence shall mean an absence from work by reason of the
individual's pregnancy,  the birth of the individual's child or the placement of
a child with the  individual  in  connection  with adoption of the child by such
individual,  or for  purposes  of caring for a child for the period  immediately
following such birth or adoption.
         2.8  "Cash  Contribution   Account"  means   the  account  or  accounts
established  and  maintained on behalf of a Participant  pursuant to Section 6.1
with   respect   to   the   Participant's   Elective   Contributions,   Matching
Contributions, Profit Sharing Contributions, Qualified Nonelective Contributions
or Rollover Contributions.
         2.9  "Code" means the Internal Revenue Code of 1986,  as now in  effect
or as  hereafter  amended.  All  citations  to  sections of the Code are to such
sections as they may from time to time be amended or renumbered.
         2.10 "Committee"  means  the  Administrative  Committee of the Employer
provided for in Section 15. For  purposes of the Act, the Employer  shall be the
"named  fiduciary"  (with  respect  to  the  matters  for  which  it  is  hereby
responsible  under the Plan) of the Plan,  and the  Employer  shall be the "plan
administrator" of the Plan within the meaning of Section 3(16)(A) of the Act.
         2.11 "Compensation"  means a Participant's W-2 compensation  related to
services rendered to the Employer,  excluding (i) living allowances, (ii) travel
or commuting  allowances,  (iii)  reimbursements  for financial  planning,  (iv)
amounts that are paid as a result of participation  in the Employer's  Long-Term
Incentive Plan, (v) employee  referral  awards,  (vi) special  incentive  awards
(other  than  regular  bonus  programs),  (vii)  reimbursements  for  relocation
expenses,  (viii) commissions (other than "dual commissions",  commissions based
on  trading  results  that  are  paid to  traders  who  are  also  salaried  and
commissions where the  Participant's  only form of remuneration is commissions),
(ix) income items  attributable to the taxable portion of employee  benefits and
any cash  payments  made as a result of an  Employee's  election  not to receive
insured  benefits  pursuant to the  Company's  Pre-Tax  Contribution  Plan,  (x)
amounts paid as short term disability benefits, (xi) any income items reflecting
grants in aid, and (xii)  compensation in excess of $150,000  (adjusted for cost
of  living  to the  extent  permitted  by  Section  401(a)(17)  of the  Code and
Regulations).  For purposes of determining the whole  percentage of Compensation
for which a Participant may make a Salary Reduction  Agreement,  and not for any
other  purposes,  subparagraph  (ix) hereof shall be  disregarded.  Compensation
shall be  determined  prior to reduction for (i) any  contributions  pursuant to
such Participant's election under Section 5.1, (ii) any contributions made by an
Employer on behalf of the Participant in the Plan Year pursuant to a Participant
salary reduction  election that are not includable in the  Participant's  income
under Section 125 of the Code, and (iii) any  contributions  made by an Employer
on behalf of the  Participant in the Plan Year pursuant to a Participant  salary
reduction  election that are not  includable in the  Participant's  income under
Section 132(a)(5) of the Code.
         2.12 "Computation Period" means a 12 consecutive month period beginning
on the day an individual  first performs an Hour of Service or first performs an
Hour of Service following a Break in Service. Thereafter, the Computation Period
shall be the Plan  Year,  commencing  with the Plan Year that  includes  the day
immediately following the last day of the Computation Period determined pursuant
to the first sentence hereof.
         2.13 "Contribution   Percentage"  means   the  average  of  the  ratios
(calculated  separately  for each  Participant  for each  Plan  Year) of  (a)(i)
Matching Contributions,  if any, made by the Employer on behalf of a Participant
and (ii) Elective  Contributions,  (if the Committee elects to take into account
Elective Contributions when calculating the Contribution  Percentage) to (b) the
Employee's compensation (as defined in Section 1.415-2(d)(10) of the Regulations
or in such other manner as is prescribed under Section 414(s) of the Code) while
a Participant for the relevant Plan Year.
         2.14 "Deferred  Retirement  Date"  shall  have the meaning set forth in
Section 9.2.
         2.15 "Disability"  means  the  inability  to engage in any  substantial
gainful  activity   considering  the  Participant's   age,  education  and  work
experience by reason of any medically  determined  physical or mental impairment
that has continued without  interruption for a period of at least six months and
that can be expected  to be of long,  continued  and  indefinite  duration.  The
determination  of the  Committee  as to whether a  Participant  has a Disability
shall be final, binding and conclusive.
         2.16 "Effective Date" means October 1, 1983.
         2.17 "Elective  Contributions"  means  contributions  made to the Trust
Fund  pursuant  to a  Participant's  Salary  Reduction  Agreement  entered  into
pursuant to Section 5.1, and which are  considered  tax deferred  under  Section
401(k) of the Code.
         2.18 "Elective  Contribution  Subaccount" means the account established
and  maintained  on behalf of a  Participant  pursuant  to Section  6.2(a)  with
respect  to  his  or  her  Elective   Contributions  and  Qualified  Nonelective
Contributions.
         2.19 "Employee"  means  any  "regular  employee" of the Employer who is
paid  through  United  States  payroll and for whom the  Employer is required to
withhold United States Federal employment taxes excluding (i) any person covered
by any other pension, profit sharing or retirement plan to which any Employer or
Affiliated  Employer is required to contribute  either  directly or  indirectly,
(ii) any nonresident  alien individual who received no earned income (within the
meaning of Section  911(d)(2)) from the Employer which  constitutes  income from
sources within the United  States,  (iii) any employee who is included in a unit
of employees covered by a negotiated  collective bargaining agreement which does
not provide  for his or her  membership  in the Plan,  (iv) any  individual  who
provides  services  to  the  Employer  pursuant  to  an  independent  contractor
agreement, irrespective of whether such individual is subsequently retroactively
reclassified  as a common law  employee  for periods  during  which the Employer
originally classified such individual as an independent contractor,  and (v) any
individual  who  provides  services to the  Employer  pursuant  to an  agreement
between the Employer and a temporary  agency or other  leasing  organization.  A
director of the Employer is not eligible for  membership in the Plan unless such
director is also an Employee.  A leased employee  (within the meaning of Section
414(n)  of the Code) is not  eligible  for  membership  in the Plan  unless  the
Employer designates such individual as eligible for membership in the Plan.
         2.20 "Employer" means Charles Schwab & Co., Inc. and any  Participating
Employer which  adopts this Plan  subject  to  the  approval  of  the  Board  of
Directors.
         2.21 "ESOP  Account"  means the account  established  and maintained on
behalf of a Participant  pursuant to Section 7.1 with respect to his or her ESOP
Contributions.
         2.22 "ESOP  Contributions"  means the Employer  contributions,  if any,
made to the Plan on behalf of a Participant pursuant to Section 4.2(c).
         2.23 "ESOP Entry Date" means the first day of each calendar month.
         2.24 "Exempt  Loan" means any loan to the Plan or Trust not  prohibited
by Section 4975(c) of the Code and Section 406 of the Act because the loan meets
the requirements set forth in Section  4975(d)(3) of the Code, Section 408(b)(3)
of the Act and the  Regulations  promulgated  thereunder,  the proceeds of which
loan are used within a reasonable  time after receipt by the Trust Fund only for
any or all of the following  purposes:  (a) to acquire Shares;  (b) to repay the
same Exempt Loan; or (c) to repay any previous Exempt Loan.
         2.25 "Highly Compensated Participant" means any Participant who, during
the relevant period, is treated as a highly  compensated  employee under Section
414(q) of the Code.  For  purposes  of  determining  which  Employee is a Highly
Compensated Participant,  the look-back determination shall be made on the basis
of the  calendar  year.  The Plan shall comply with the  procedures  of Treasury
Regulation  1.401(k)-1(f) to the extent applicable.  For purposes of determining
which Employee is a Highly Compensated Participant:
              (a)  Highly  Compensated  Participant   means  a  Participant  who
performs Services during the determination  year and is described in one or more
of the following groups:
                   (1)  An Employee who is a five percent (5%) owner, as defined
in Section 416(i)(1) of the Code, at any time during the  determination  year or
the look-back year.
                   (2)  An Employee who: (a) had  compensation from the Employer
in excess of $80,000  (indexed as referenced  in Section  414(q)(1) of the Code)
during the look-back year and (b) if the Employer elects the application of this
Subsection  2.25(A)(2)  for  such  look-back  year,  such  Employee  was  in the
"top-paid group" for the look-back year.
              (b)  For purposes of this Section:
                   (1)  The  determination  year  is the Plan Year for which the
determination of who is a Highly Compensated Participant is being made.
                   (2)  The look-back year  is the calendar   year  ending  with
or  within  the determination year.
                   (3)  The "top-paid group" consists of the top twenty  percent
(20%) of  Employees  ranked on the basis of  compensation  received  during  the
look-back  year.  For  purposes of  determining  the number of  Employees in the
top-paid  group,  Employees  described in Section  414(q)(5) of the Code and the
Regulations promulgated thereunder are excluded.
                   (4)  For   purposes   of   this   Section   2.25,   the  term
"compensation" means compensation as defined in Section 414(q)(4) of the Code.
                   (5)  Employers  aggregated  under Section  414(b),  (c), (m),
or (o) of the Code are treated as a single employer.
                   (6)  Highly   Compensated   Participants   include  a  former
Employee who had a separation year prior to the determination year and who was a
Highly  Compensated  Participant for either (A) the determination  year in which
the Employee  separated from Service or (B) any determination  year ending on or
after the Employee's  55th  birthday.  With respect to an Employee who separated
from Service  before  January 1, 1987,  an Employee will be included as a Highly
Compensated  Participant  only if the  Employee was a five percent (5%) owner or
received  Compensation in excess of $50,000 during (1) the determination year in
which the Employee separated from Service (or the year preceding such separation
year) or (2) any year ending on or after such  Employee's  55th birthday (or the
last year ending before such Employee's 55th birthday).
         2.26 "Hours of Service" means hours during the  applicable  Computation
Period in which an  individual  performs  Service or is  treated  as  performing
Service and, except in the case of military  service or as otherwise  determined
by the Committee,  for which the Participant is directly or indirectly  entitled
to payment.  Hours of Service  shall be credited  for the  applicable  period in
which  such  Hours  of  Service  accrue  in  accordance  with  Labor  Department
Regulation 29 CFR ss. 2530.200b-2(c), which regulation is incorporated herein by
reference; provided that Hours of Service for reasons other than the performance
of duties shall be credited in accordance  with Labor  Department  Regulation 29
CFR ss. 2530.200b-2(b), which regulation is incorporated herein by reference.
              The  term  "Service"  includes  performance of  duties (or periods
which are  treated as the  performance  of duties)  for the  Employer or for any
Affiliated  Employer  (under  rules  determined  by  the  Committee,   uniformly
applicable to all  individuals  similarly  situated and in  accordance  with the
Regulations)  for  which  an  individual  is  entitled  to  receive  credit  for
"Service", including (i) vacation, (ii) holiday, (iii) absence authorized by the
Employer for sickness or incapacity  (including disability or leave of absence),
(iv) layoff,  (v) jury duty,  (vi) if and to the extent required by the Military
Selective Service Act, as amended or any other federal law, service in the Armed
Forces of the United  States and (vii) an approved  leave of absence  granted by
the Employer to an  individual on or after August 5, 1993 pursuant to the Family
Medical Leave Act, but only if such individual  returns to work for the Employer
at the end of such approved  leave.  Service also  includes  periods of time for
which back pay,  irrespective of mitigation of damages,  is awarded or agreed to
by the  Employer  or any  Affiliated  Employer;  provided  that  such  award  or
agreement is not already  credited as Service  under either of the preceding two
sentences.  Service  shall also include (i) Service with any entity formed under
the laws of a foreign  jurisdiction  if such entity  would have  constituted  an
Affiliated  Employer  had such entity  been formed  under the laws of the United
States,  and (ii) any period of a Participant's  prior employment with any other
organization  upon such terms and  conditions  as the  Committee may approve and
subject to any required IRS approval.  Notwithstanding the foregoing,  (i) Hours
of Service  credited with respect to an  individual's  service with  BankAmerica
Corporation or a related corporation between January 11, 1983 and March 31, 1987
shall be considered Service only if such individual was employed by the Employer
prior to November 24, 1993,  (ii) Hours of Service  credited  with respect to an
individual's service with BankAmerica Corporation or a related corporation prior
to January 11, 1983 shall be considered Service, but only if such individual was
employed by the Employer prior to April 1, 1987, (iii) Hours of Service credited
with  respect to service  with Mayer &  Schweitzer,  Inc.  prior to July 1, 1991
shall be considered  Service,  and (iv) Service  shall include  service with The
Rose Company prior to April 1, 1989, service with Performance Technologies, Inc.
prior to August 31, 1994,  service with TrustMark,  Inc. prior to July 31, 1995,
and service with Hampton Pension Services, Inc. prior to November 6, 1995.
         2.27 "IRS" means the United States Internal Revenue Service.
         2.28 "Labor Department" means the United States Department of Labor.
         2.29 "Matching  Contribution" means any Employer contribution,  if any,
made to the Plan on behalf of a Participant pursuant to Section 4.2(a).
         2.30 "Matching  Contribution  Subaccount" means the account established
and  maintained  on behalf of a  Participant  pursuant  to Section  6.2(b)  with
respect to the Participant's Matching Contributions.
         2.31 "Normal  Retirement  Date"  shall  have the  meaning  set forth in
Section 9.1.
         2.32 "Participant" means any Employee who has satisfied the eligibility
requirements of Section 3 below.
         2.33 "Participating  Employer" means  Charles Schwab & Co., Inc. or any
other Affiliated  Employer,  the board of directors or equivalent governing body
of which shall adopt the Plan and Trust Agreement by appropriate action with the
written  consent of the Board of  Directors.  By its  adoption  of this Plan,  a
Participating  Employer  shall be deemed to appoint  Charles Schwab & Co., Inc.,
the Committee and the Trustee its exclusive  agent to exercise on its behalf all
of the power  and  authority  conferred  by this  Plan  upon the  Employer.  The
authority of Charles Schwab & Co., Inc., the Committee and the Trustee to act as
such agent shall continue  until the Plan is terminated as to the  Participating
Employer and the relevant Trust Fund assets have been distributed by the Trustee
as provided in Section 17 of this Plan.
         2.34 "Plan" means this  SchwabPlan  Retirement  Savings and  Investment
Plan as the same is stated herein and as it may be amended from time to time.
         2.35 "Plan Sponsor" means The Charles Schwab Corporation.
         2.36 "Plan Year" means the calendar year.
         2.37 "Profit Sharing Contribution" means the Employer contribution,  if
any, made to the Plan on behalf of a Participant pursuant to Section 4.2(b)(ii).
         2.38 "Profit  Sharing  Subaccount"  means the account  established  and
maintained on behalf of a Participant pursuant to Section 6.2(c) with respect to
the Participant's Profit Sharing Contributions.
         2.39 "Purchasing  Agent"  means the agent  designated by the Trustee to
enter into certain transactions with respect to Shares hereunder.
         2.40 "Qualified   Nonelective   Contribution"   means   the    Employer
contribution,  if any, made to the Plan on behalf of a  Participant  pursuant to
Section 4.2(b)(i).
         2.41 "Regulations"  means  the applicable  regulations issued under the
Code or the Act by the IRS,  the  Labor  Department  or any  other  governmental
authority and any temporary  rules or releases  promulgated by such  authorities
pending the issuance of such regulations.
         2.42 "Restated Effective Date" shall mean January 1, 1994.
         2.43 "Retirement  Date"  means  the  Participant's  Normal or  Deferred
Retirement Date which has become effective pursuant to Section 9 below.
         2.44 "Rollover Subaccount" means the account established and maintained
on behalf of a  Participant  pursuant  to  Section  6.2(d)  with  respect to the
Participant's Rollover Contributions.
         2.45 "Rollover Contribution" means any contribution made by an Employee
pursuant to Section 5.6.
         2.46 "Salary   Reduction   Agreement"  means  an  agreement  between  a
Participant and the Employer entered into pursuant to Section 5.1.
         2.47 "Shares"  means (i) with respect to Plan assets  acquired with the
proceeds  of an Exempt  Loan,  the common  stock  issued by The  Charles  Schwab
Corporation or any successor  corporation  thereto  meeting the  requirements of
both  Section  4975(e)(8)  of the  Code  and  Section  407(d)(5)  of the Act for
"qualifying  employer  securities,"  and (ii) with  respect to Plan assets other
than those  acquired  with the proceeds of an Exempt  Loan,  stock issued by The
Charles Schwab Corporation or any successor  corporation  thereto,  of any type,
kind or class  meeting  the  requirements  of Section  407(d)(5)  of the Act for
"qualifying  employer  securities".  All valuations of Shares, where such Shares
are not readily  tradable  on an  established  securities  market and where such
valuations relate to activities  carried on by the Plan, shall be made by one or
more   independent   appraisers   retained  by  the  Committee,   who  meet  the
requirements,  if any,  of the Code and  Regulations.  To the  extent and in the
manner required by the Code and Regulations, all independent appraisers, if any,
making  appraisals  pursuant to the foregoing  sentence shall be registered with
the IRS.
         2.48 "Surviving  Spouse"  means the survivor of a  Participant  to whom
such Participant was legally married on the date of the Participant's death.
         2.49 "Suspense  Subfund"  means the subfund  established  under Section
7.3.
         2.50 "Taxable  Compensation"  means  the W-2  compensation  paid  to an
individual for Service during any period under consideration.
         2.51 "Taxable Year" means the calendar year.
         2.52 "Total  Break  in  Service"  means  a   period  of  five  or  more
consecutive  Computation  Periods  in  which a  Participant  incurs  a Break  in
Service,  with respect to a Participant who did not have a nonforfeitable  right
to any portion of his or her Profit Sharing  Subaccount or ESOP Account prior to
the beginning of the first such Computation Period.
         2.53 "Trustee"  means the Trustee  selected by the Employer to hold the
funds  contributed  by the  Employer to provide  benefits  under the Plan or any
successor or substitute.
         2.54 "Trust  Agreement"  means the  SchwabPlan  Retirement  Savings and
Investment  Plan Trust  Agreement,  as it may from time to time be amended,  and
such additional and successor trust agreements as may be executed.
         2.55 "Trust  Fund"  means  the funds  held by the  Trustee  from  which
payments to the Trustee are made to provide benefits under the Plan.
         2.56 "Valuation  Date"  means  the last day  of each  Plan Year or such
interim periods as the Committee may designate from time to time.
         2.57 "Vested  Interest"  means the portion of a  Participant's  Account
which has become nonforfeitable pursuant to Section 10.3 below.
         2.58 "Year of Eligibility  Service"  means a Computation  Period during
which an Employee completes at least 1,000 Hours of Service.
         2.59 "Year of  Service"  means a  Computation  Period  during  which an
individual   completed  at  least  1,000  Hours  of  Service  or  satisfied  any
alternative  requirement,  as determined  by the Committee  from time to time in
accordance with the Regulations.

<PAGE>

                            SECTION 3. PARTICIPATION

         3.1  Commencement of Participation.
              (a)  An Employee who is a Participant as of  the  date immediately
preceding the Restated  Effective Date shall continue to be a Participant of the
Plan as of the Restated Effective Date.
              (b)  An  Employee  who  is  not  a  Participant  on  the  Restated
Effective  Date and who (A) is in Service on the Restated  Effective Date or (B)
commences  Service on or after the Restated  Effective Date shall be eligible to
become a Participant of the Plan for purposes of:
                   (i)  Elective  Contributions,   Matching   Contributions  and
Qualified  Nonelective  Contributions  on the  first  day of  the  fourth  month
following  his or her  commencement  of Service  (or, in the case of an Employee
whose service  commences on the first day of a month, the first day of the third
month following his or her commencement of Service),  provided that the Employee
completes at least one Hour of Service in each such month; and
                   (ii) Profit  Sharing  Contributions and ESOP Contributions on
the first ESOP Entry Date coincident with or next following the date on which he
or she  completes a Year of  Eligibility  Service.
              (c)  An  Employee  who is eligible  to become a  Participant,  but
declines to  participate  in the Plan,  may become a Participant at any time, as
soon as administratively feasible following a request to participate.
              (d)  An  Employee  who  satisfies   the  requirements  of  Section
3.1(b)ii)  for  participation  but  who  terminates  Service prior to becoming a
Participant  in the Plan and  subsequently  becomes an  Employee  again prior to
incurring  a Break in  Service  will  become a  Participant  in the Plan for all
purposes as of the first day on which such individual again becomes an Employee.
         3.2  Cessation  of  Participation.  A  Participant  shall cease to be a
Participant  upon the earliest to occur of (i) the  Participant's  retirement on
his or her Retirement Date, (ii) the Participant's  death or Disability or (iii)
the  Participant's  termination of Service prior to his or her  Retirement  Date
followed by a Break in Service. A Participant who, without any Break in Service,
ceases to be an Employee  for any reason,  shall not cease to be a  Participant,
provided that,  notwithstanding  any other  provision of the Plan, and except as
provided in Section 4.3, no  contribution  shall be made for the benefit of such
Participant,  no  contributions  under  the Plan  shall be  allocated,  added or
otherwise  credited to the Account of such  Participant,  and no  contributions,
forfeitures or Shares released from a Suspense Subfund shall be allocated, added
or otherwise credited to the Account of such Participant on or after the date on
which such Participant  ceases to be an Employee and before the first day of the
Plan  Year  coincident  with or  preceding  the  date,  if any,  on  which  such
Participant again resumes Service as an Employee.
         3.3 Readmission After Cessation of Participation. A Participant who has
incurred a Total Break in Service and  subsequently  returns to Service shall be
treated as a new Employee for all  purposes of the Plan.  In all other cases,  a
former  Participant  who returns to Service  following a Break in Service  shall
again  become a  Participant  as of the first date of such former  Participant's
return  to  Service,  except  that if such  former  Participant  is not  then an
Employee,  such former  Participant  shall again become a Participant  as of the
first day on which such former Participant again becomes an Employee.
         3.4  Waiver of  Participation.  An  individual  who has  satisfied  the
requirements for  participation  set forth in Section 3.1 may permanently  waive
participation in the Plan, but only if such individual is on temporary  transfer
of employment to a  Participating  Employer from an Affiliated  Employer that is
not a Participating Employer.

<PAGE>
                       SECTION 4. EMPLOYER CONTRIBUTIONS

         4.1  Elective  Contributions.   The  Employer  shall,  subject  to  the
limitations  of  Sections 5 and 12,  contribute  to the Trust Fund for each Plan
Year on behalf of all  Participants  the total amount of Elective  Contributions
designated  to be  contributed  pursuant to Salary  Reduction  Agreements  under
Section  5.1.  Such  contributions  shall be paid in cash by the Employer to the
Trustee as soon as practicable, but in no event later than 90 days from the date
on which such amounts  otherwise  would have been payable to the  Participant in
cash.
         4.2  Employer Contributions.
              (a) Subject to the limitations of Section  12, the  Employer shall
contribute   Matching   Contributions  to  the  Trust  Fund  on  behalf  of  all
Participants  for  whom  Elective  Contributions  have  been  made  equal  to  a
percentage of such Elective  Contributions  made for each such Participant.  The
percentage (and, if desired, a maximum dollar amount) of Matching  Contributions
shall be determined from time to time by the Board of Directors and communicated
to the Participants.
              (b)  Subject to the limitations of Section 12, for any Plan  Year,
the  Board  of  Directors  may  designate  (i) a  percentage  of  the  aggregate
Compensation  of all  Participants or a fixed dollar amount to be contributed to
the  Plan  as  Qualified   Nonelective   Contributions   on  behalf  of  certain
Participants who are not Highly Compensated  Participants and may designate (ii)
a percentage of the aggregate Compensation of all Participants or a fixed dollar
amount to be contributed to the Plan as Profit Sharing  Contributions  on behalf
of all Employees who are or would be Participants  but for their election not to
make Elective Contributions.  Provided, however, that effective as of January 1,
1995, no further Profit Sharing Contributions shall be made to the Plan.
              (c)  Subject to the limitations of Section  12, and the provisions
of any applicable loan or contribution agreement,  the Employer shall contribute
to the Trust Fund for each Plan Year as ESOP Contributions such sum as the Board
of Directors may, in its sole discretion,  determine, which sum may be zero. All
or any part of the  contributions  made under this Section 4.2(c) may be applied
to repay any outstanding  Exempt Loan. The Committee may,  subject to any pledge
or similar agreement,  direct or determine the proportions of such contributions
which are  applied  to repay  each such  Exempt  Loan and,  with  respect to any
particular  Exempt Loan,  the proportion of such  contribution  to be applied to
repay principal and interest on such Exempt Loan.
         4.3 Allocation of Matching Contributions,  Profit Sharing Contributions
and ESOP Contributions.  Matching Contributions shall only be allocated to those
Participants  employed  on the  last  day  of  the  Plan  Year.  Profit  Sharing
Contributions and ESOP Contributions shall only be allocated to Participants who
are members of the Allocation  Group for the Plan Year. For purposes of Sections
4 and 7, the term  "Allocation  Group"  means the group  consisting  of (i) each
Participant who completed at least One Thousand  (1,000) Hours of Service during
the Plan Year and is  employed  by the  Employer  as of the last day of the Plan
Year, and (ii) each Participant  whose  employment with the Employer  terminated
during the Plan Year by reason of  Disability,  death or  retirement on or after
the  Participant's  Retirement  Date.  Profit  Sharing  Contributions  and  ESOP
Contributions  shall be  allocated  among the Accounts of  Participants  who are
members of the Allocation  Group for the Plan Year in the same proportion that a
Participant's  Compensation during the Plan Year bears to the total Compensation
during the Plan Year of all Participants who are members of the Allocation Group
for such Plan Year. For purposes of the preceding sentence,  Compensation earned
by a  Participant  prior to the  Participant's  entry into the Plan  pursuant to
Section 3.1(b)(ii) shall not be taken into account.
         4.4  Timing of Employer Contributions.
              (a)  Any   Profit   Sharing    Contributions,    Qualified
Nonelective Contributions and ESOP Contributions shall be deemed made on account
of a Taxable  Year if (i) the Board of Directors  determines  the amount of such
contribution  by  appropriate  action and announces the amount in writing to its
Employees  within 30 days after the end of such Taxable Year,  (ii) the Employer
designates  such amount in writing as payment on account of such Taxable Year or
(iii) the  Employer  claims such amount as a deduction on its federal tax return
for such Taxable Year.
              (b)  Profit  Sharing  Contributions,  Matching Contributions, and,
subject  to the  provisions  of any  Exempt  Loan,  ESOP  Contributions  for any
particular  Taxable Year may be paid to the Trustee in installments,  but in any
event  such  contributions  shall  be paid no  later  than  the due date for the
Employer's  federal  income tax return for such Taxable Year.  The Employer may,
during any Taxable Year, make advance payments toward its contributions for such
Taxable  Year.  Any  income,  earnings  or  appreciation  earned  by any  amount
contributed  by the Employer  prior to the end of the Plan Year shall be treated
as part of the Profit Sharing  Contributions,  Matching  Contributions,  or ESOP
Contributions,  as the case may be, for such Plan Year.  On or about the date of
such payment the  Committee  shall be advised of the amount of such payment upon
which  its  allocation  pursuant  to  Section  4.3  is  to  be  calculated.
         4.5  Forfeitures. Forfeitures of  Profit  Sharing Contributions arising
during the Plan Year  pursuant  to Section 10 shall be used to reduce the amount
of Matching  Contributions  made for such Plan Year pursuant to Section  4.2(a).
Forfeitures of Shares attributable to ESOP Contributions (or ESOP Contributions)
arising during the Plan Year pursuant to Section 10 shall be reallocated as ESOP
Contributions  on the last day of the Plan Year in which such forfeiture  occurs
to  all   Participants   entitled  to  receive  Shares   attributable   to  ESOP
Contributions (or ESOP  Contributions),  in the same proportion as contributions
are allocated pursuant to Sections 4.3 and 7.2.  Provided,  in either case, that
forfeitures  shall first be used to fund adjustments to  Participants'  Accounts
required to correct operational errors, to the extent directed by the Committee,
or to fund any amounts to be recredited to a Participant's  Account  pursuant to
Section 10.5.
         4.6  Contribution Percentage Test.
              (a)  Participant's Contribution Percentages must satisfy at  least
one of the  following tests:
                   (1)  The Contribution  Percentage for the Highly  Compensated
Participants  shall  not  exceed  the  Contribution   Percentage  of  all  other
Participants for the preceding Plan Year multiplied by 1.25; or
                   (2)  (A)  The excess of the  Contribution  Percentage for the
Highly  Compensated  Participants over the Contribution  Percentage of all other
Participants  for the preceding  Plan Year shall not be more than two percentage
points and (B) the Contribution  Percentage for Highly Compensated  Participants
shall not be more than the  Contribution  Percentage for all other  Participants
for the preceding Plan Year multiplied by 2.
              (b)  The Employer may elect to apply the foregoing tests by  using
current Plan Year data rather than utilize data from the preceding Plan Year. If
such an election is made, it may not be changed  except as provided by Secretary
of the Treasury.  Notwithstanding  the  foregoing,  for the 1997 Plan Year,  the
Employer  may rely on the  transitional  relief  set forth in  Internal  Revenue
Service Notice 97-2 to use current Plan Year data to apply the foregoing tests.
              (c)  All Matching Contributions  and  Elective  Contributions that
are made under two or more plans that are  aggregated  for  purposes of Sections
401(a)(4)  and 410(b) of the Code are to be treated as made under a single plan;
and if two or more plans are  permissively  aggregated  such plans shall satisfy
Sections  401(a)(4)  and 410(b) as though they were a single plan in  accordance
with Section 410(m) of the Code and Section 1.401(m)-1 of the Regulations.
              (d)  For purposes of this Section 4.6, Matching  Contributions are
taken  into  account  for a  Plan  Year  only  if (i)  made  on  account  of the
Participant's  Elective  Contributions  for the Plan Year, (ii) allocated to the
Participant's  Account  during  the Plan Year and (iii)  paid to the Trust  Fund
prior to the end of the twelfth month following the close of the Plan Year.
              (e)  In  applying  the  tests  set  forth in this Section 4.6, the
following rules shall apply:
                   (1)  In  the  case  of  an  Employee who receives no Matching
Contributions, the Matching Contributions that are to be included in determining
the Participant's Contribution Percentage are zero;
                   (2) The  availability  of  Matching  Contributions  shall not
discriminate in favor of Highly Compensated Participants.
                   (3) The distribution of excess aggregate  contributions  will
include  the  income  allocable  thereto  and  shall be made on the basis of the
amount of Matching Contributions (and Elective Contributions, if the Regulations
permit and the Committee elects to take into account Elective Contributions when
calculating  the  Contribution  Percentage)  made on behalf of each such  Highly
Compensated   Participant.   The  income   allocable  to  the  excess  aggregate
contributions  includes income for the Plan Year for which the excess  aggregate
contributions were made in accordance with Section  1.401(m)-1(e)(3)(ii)  of the
Regulations.
                   (4)  A Participant shall include any Employee who is directly
or  indirectly eligible  to receive an allocation of Matching  Contributions and
includes (i) an Employee who would be a Participant  but for the failure to make
required  contributions  and (ii) a Participant  whose right to receive Matching
Contributions  has been  suspended  because of an election  (other than  certain
one-time elections) not to participate.
              (f)  For Plan Years commencing after  December  31, 1998 for which
the Employer  uses  Section  410(b)(4)(B)  of the Code to test minimum  coverage
compliance,  the Employer may exclude from consideration all Participants (other
than  Highly  Compensated  Participants)  who have not met the  minimum  age and
service  requirements of Section 410(a)(1)(A) of the Code in determining whether
the tests set forth in  Subsection  4.6(a) are met.
         4.7  Distribution  of Excess Aggregate Contributions.
              (a)  The Committee shall determine as of the end of the Plan Year,
and  at  such  other  time  or  times  in  its  discretion,  whether  one of the
Contribution  Percentages  of Section 4.6 is  satisfied  for such Plan Year.  If
neither of the tests set forth in Section 4.6 is satisfied,  the Committee shall
distribute the excess  aggregate  contributions  in the manner described in this
Section 4.7. For purposes of this Section 4.7, "excess aggregate  contributions"
means,  with respect to any Plan Year and with respect to any  Participant,  the
excess of the aggregate amount of (i) Matching  Contributions  (and any earnings
and  losses  allocable  thereto  prior to  distribution)  and (ii) the  Elective
Contributions  (if the Regulations  permit and the Committee elects to take into
account Elective  Contributions when calculating the Participant's  Contribution
Percentage)  of Highly  Compensated  Participants  for such Plan Year,  over the
maximum  amount  of  such   contributions  that  could  be  made  on  behalf  of
Participants  without  violating the  requirements of Section 4.6. The amount of
each Highly Compensated  Participant's  excess aggregate  contributions shall be
determined  by reducing the  Matching  Contributions  of all Highly  Compensated
Participants whose  Contribution  Percentage as adjusted by this Section 4.7 are
at the  highest  percentage  rate for the Plan  Year on a pro rata  basis by one
hundredth of one percent  (0.01%).  The Committee shall continue to utilize this
procedure until one of the tests of Section 4.6 is satisfied.
              (b)  If the Committee is required to distribute  excess  aggregate
contributions for any Highly Compensated Participant for a Plan Year in order to
satisfy the  requirements  of Section 4.6, then the Committee  shall  distribute
such excess  aggregate  contributions  with  respect to such Highly  Compensated
Participants to the extent  practicable  before April 15th of the Plan Year next
following the Plan Year for which such excess aggregate contributions were made,
but in no event  later than the end of the Plan Year  following  such Plan Year.
For each of such  Participants,  the amounts so distributed shall be made in the
following order of priority:
                   (i)  by  distributing  Matching  Contributions  and  earnings
thereon,  to the extent necessary; and
                   (ii) by distributing Elective Contributions  (to  the  extent
such amounts are included in the Contribution Percentage), and earnings thereon.
              All  such  distributions  shall  be  made  to  Highly  Compensated
Participants   on  the  basis  of  the  respective   portions  of  such  amounts
attributable  to each such Highly  Compensated  Participant.  No spousal consent
shall be  required of any married  Participant  who  receives a refund of excess
aggregate contributions.
         4.8  Aggregate  Limit  for  Contribution Percentage and Actual Deferral
Percentage.
              (a)  The  sum  of  the  Contribution  Percentage  and  the  Actual
Deferral Percentage for Highly Compensated  Participants for the Plan Year shall
not exceed the "aggregate limit" defined in this Section 4.8.
              (b)  The term  "aggregate  limit"  means the greater of (1) or (2)
below:
                   (1)  The sum of  (a)  the  greater  of  the  Actual  Deferral
Percentage for all Participants other than the Highly  Compensated  Participants
or the  Contribution  Percentage  for all  Participants  other  than the  Highly
Compensated  Participants,  for the  Plan  Year  multiplied  by 1.25 and (b) the
lesser of such Actual Deferral Percentage or Contribution Percentage plus 2, but
not greater than 2 multiplied by the lesser of such Actual  Deferral  Percentage
or Contribution Percentage.
                   (2)  The sum  of  (a)  the  lesser  of  the  Actual  Deferral
Percentage for all Participants other than the Highly  Compensated  Participants
or the  Contribution  Percentage  for all  Participants  other  than the  Highly
Compensated  Participants,  for the  Plan  Year  multiplied  by 1.25 and (b) the
greater of such Actual Deferral  Percentage or  Contribution  percentage plus 2,
but not  greater  than 2  multiplied  by the  greater  of such  Actual  Deferral
Percentage or Contribution Percentage.
              (c)  If  the  aggregate  limit is  exceeded,  the Committee  shall
determine whether to: (i) make Qualified Nonelective Contributions to permit the
satisfaction  of the test set forth in  subsection  (a) hereof;  (ii) reduce the
Contribution  Percentage of the Highly Compensated  Participants as set forth in
Section  4.7;  or (iii)  reduce the  Actual  Deferral  Percentage  of the Highly
Compensated Participants as set forth in Section 5.5.
         4.9  Profit  Sharing  Contributions.  Notwithstanding  anything  to the
contrary contained in the Plan, no Profit Sharing contributions shall be made to
the Plan for Plan Years  beginning  after  December  31,  1994.  Effective as of
October 1, 1998,  all Profit  Sharing  balances of  Participants  shall be fully
vested and shall be merged with Participants'  Matching  Contribution  Accounts.
Thereafter,  no forfeitures of Profit Sharing Contributions shall occur, and all
references in the Plan to Profit Sharing Subaccounts shall be deemed to refer to
Matching Contribution Subaccounts.

<PAGE>

                     SECTION 5. SALARY REDUCTION AGREEMENTS
                           AND ROLLOVER CONTRIBUTIONS

         5.1  Salary Reduction Agreements.
              (a) A Participant may elect to make Elective  Contributions in any
Plan Year by entering into a Salary Reduction Agreement with the Employer.  Each
Salary  Reduction  Agreement  shall provide that a portion of the  Participant's
Compensation  shall be paid  through  payroll  deduction to the Trust Fund as an
Elective  Contribution pursuant to Section 4.1 rather than paid currently to the
Participant.   The  Salary  Reduction   Agreement  shall  provide  for  Elective
Contributions equal to any whole percentage between one percent (1%) and fifteen
percent (15%) of a  Participant's  Compensation  in any payroll  period,  not to
exceed  the  limitation  set  forth in  Section  402(g)  of the  Code  (adjusted
automatically for increases in accordance with the Regulations). Notwithstanding
the foregoing  provisions of this Section 5.1, the Committee  may, but need not,
adopt a procedure to enable Participants to make lump sum Elective Contributions
under the Plan through payroll  deductions.  No Salary Reduction Agreement shall
be effective unless the Participant has made an investment direction pursuant to
Section 8.3.
              (b)  A Salary  Reduction  Agreement will be taken into account for
any Plan Year only if it relates to  Compensation  that would have been received
by the Participant in the Plan Year (but for the deferral election).
              (c)  In  the  event  that   the   aggregate   amount  of  Elective
Contributions  by a Participant  exceeds the limitation  described in subsection
(a) of this Section 5.1, the amount of such excess,  increased by any income and
decreased  by  any  losses  attributable  thereto,  shall  be  refunded  to  the
Participant  no later than the April 15th of the  calendar  year  following  the
calendar year for which the Elective  Contributions  were made. If a Participant
also  participates,  in any  calendar  year,  in any other plans  subject to the
limitations  set  forth in  Section  402(g)  of the  Code  and has  made  excess
deferrals  under this Plan when  combined  with the other plans  subject to such
limits,  to the extent the Participant  designates,  in writing submitted to the
Committee  no later than the March 1 of the  calendar  year next  following  the
calendar  year for which the  Elective  Contributions  were made,  any  Elective
Contributions under this Plan as excess deferrals, the amount of such designated
excess,  increased  by any  income  and  decreased  by any  losses  attributable
thereto,  shall be refunded to the Participant no later than the April 15 of the
calendar  year  next   following  the  calendar  year  for  which  the  Elective
Contributions were made.
         5.2  Change or Suspension of Salary  Reduction  Agreements.  Subject to
Section 5.1, a Participant may enter into or change his or her Salary  Reduction
Agreement at any time,  effective as soon as  practicable,  in  accordance  with
rules  determined by the  Committee.  A Participant  may also suspend his or her
Salary  Reduction  Agreement at any time, in accordance with rules determined by
the Committee.  A Participant who suspends his or her Salary Reduction Agreement
in  accordance  with this  Section  5.2 may enter  into a new  Salary  Reduction
Agreement at any time, effective as soon as administratively feasible.
              A  Participant's  most  recent  Salary  Reduction  Agreement shall
continue  unchanged  from  year to year  unless  the  Participant  notifies  the
Committee  in  writing  of a  change  in  such  Salary  Reduction  Agreement  in
accordance with the rules determined by the Committee.
         5.3  Actual Deferral Percentage Test.
              (a)  Participants' Elective Contributions  must  satisfy  at least
one of the following tests:
                   (1)  The  Actual   Deferral   Percentage   for   the   Highly
Compensated  Participants shall not exceed the Actual Deferral Percentage of all
other Participants for the preceding Plan Year multiplied by 1.25; or
                   (2)  (A) The  excess  of  the  Actual   Deferral   Percentage
for the Highly Compensated  Participants over the Actual Deferral  Percentage of
all other  Participants  for the preceding  Plan Year shall not be more than two
percentage  points,  and (B)  the  Actual  Deferral  Percentage  for the  Highly
Compensated  Participants shall not be more than the Actual Deferral  Percentage
for all other Participants for the preceding Plan Year multiplied by 2.
              (b)  The Employer may elect to apply the foregoing  tests by using
current Plan Year data rather than utilize data from the preceding Plan Year. If
such an election is made, it may not be changed  except as provided by Secretary
of the Treasury.  Notwithstanding  the  foregoing,  for the 1997 Plan Year,  the
Employer  may rely on the  transitional  relief  set forth in  Internal  Revenue
Service Notice 97-2 to use current Plan Year data to apply the foregoing tests.
              (c)  All  Elective  Contributions  that are made under two or more
plans that are aggregated  for purposes of Sections  401(a)(4) and 410(b) of the
Code are to be treated as made under a single plan; and if two or more plans are
permissively aggregated,  such plans shall satisfy Sections 401(a)(4) and 410(b)
as though they were a single plan in accordance  with Section 410(k) of the Code
and Section  1.401(k)-1  of the  Regulations.  For purposes of  calculating  the
Actual  Deferral  Percentage of any Highly  Compensated  Participant all cash or
deferred  arrangements of the Employer or any Affiliated  Employer in which such
Highly  Compensated  Participant  participates  shall be  treated as one cash or
deferred arrangement.
              (d)  In applying  the tests  set  forth  in  this Section 5.3, the
following rules shall apply:
                   (1)  In  the  case  of  a Participant who  makes  no Elective
Contributions, the Elective Contributions that are to be included in determining
the Participant's  Actual  Deferral  Percentage are zero;
                   (2)  The  distribution  of excess contributions  will include
the  income  allocable  thereto  and shall be made on the basis of the amount of
Elective  Contributions on behalf of each such Highly  Compensated  Participant.
The income  allocable to the excess  contributions  includes income for the Plan
Year for which the excess  contributions  were made in  accordance  with Section
1.401(k)-1(f)(4)(ii) of the Regulations.
              (e)  For Plan Years commencing after December  31,  1998 for which
the Employer  uses  Section  410(b)(4)(B)  of the Code to test minimum  coverage
compliance,  the Employer may exclude from consideration all Participants (other
than  Highly  Compensated  Participants)  who have not met the  minimum  age and
service  requirements of Section 410(a)(1)(A) of the Code in determining whether
the tests set forth in Subsection 5.3(a) are met.
         5.4 Amendment or Revocation of Salary Reduction Agreement by Committee.
The Committee  shall determine as of the end of the Plan Year, and at such other
time or times in its discretion,  whether one of the Actual Deferral  Percentage
tests of Section  5.3 will be  satisfied  for such Plan Year.  In the event that
neither of such Actual Deferral Percentage Tests is satisfied, the Committee may
amend or revoke the Salary Reduction Agreement of any Participant at any time if
it  determines  that such an amendment or revocation is necessary to ensure that
at least one of the Actual  Deferral  Percentage  tests of  Section  5.3 will be
satisfied  for any Plan Year.  The  determination  of whether it is necessary to
amend or revoke any Salary Reduction Agreement shall be made pursuant to Section
5.3 and the  procedure  for such  amendment or  revocation  shall be  determined
pursuant to Section 5.5(a).
         5.5  Distribution of Excess Contributions.
              (a)  If  neither  of  the  tests  set  forth  in  Section  5.3 are
satisfied,  the Committee  shall in its  discretion,  to the extent  permissible
under the Code and the  Regulations,  refund  the  excess  contributions  in the
manner  described in Section 5.5(b).  For purposes of this Section 5.5,  "excess
contributions" means, with respect to any Plan Year, the excess of the aggregate
amount of Elective  Contributions (and any earnings and losses allocable thereto
prior to  distribution)  made by Highly  Compensated  Participants for such Plan
Year, over the maximum amount of such Elective  Contributions that could be made
by such Highly  Compensated  Participants  without violating the requirements of
Section 5.3.
              (b)  If  required  in  order  to  comply  with the  provisions  of
Subsection 5.3 and the Code, the Committee shall refund excess contributions for
a Plan Year.  The  distribution  of such excess  contributions  shall be made to
Highly Compensated  Participants,  to the extent  practicable,  before the March
15th of the Plan  Year  next  following  the Plan  Year for  which  such  excess
contributions  were  made,  but in no event  later than the end of the Plan Year
next  following  such Plan  Year.  Any such  distribution  shall be made to each
Highly Compensated  Participant whose Elective Contributions are the highest for
the Plan Year,  until one of the tests of  Section  5.3 is  satisfied.  Matching
Contributions  attributable  to  Elective  Contributions  returned  to a  Highly
Compensated Participant shall be distributed as provided in Section 4.6.
         5.6  Rollover Contributions.
              (a) A Participant may make a Rollover Contribution to the Plan  in
accordance with rules established by the Committee  uniformly applied consisting
of an eligible rollover distribution, as defined in Section 11.8(b), from a plan
qualified under Section 401(a) of the Code or an individual  retirement  account
qualified  under Section 408(a) of the Code (no part of which is attributable to
any source other than an eligible  rollover  distribution  from a qualified plan
under Section 401(a) of the Code);  provided such eligible rollover distribution
is in cash and  contributed  to the Plan on or before the 60th day after the day
in which such Participant  received such eligible  rollover  distribution.  If a
Participant  elects to make a Rollover  Contribution,  the Committee may require
such evidence,  assurances,  opinions and certifications,  including a statement
from the previous plan that such plan was a qualified  plan,  that the Committee
may deem  necessary  to  establish  to its  satisfaction  that the amounts to be
contributed qualify as an eligible rollover distribution and will not affect the
qualification  of the Plan or the tax-exempt  status of the Trust under Sections
401(a) and 501(a) of the Code,  respectively.  Except as otherwise  permitted by
Section 5.7, in no event shall any assets be  transferred  to this Plan from any
profit sharing,  pension or retirement plan that would cause this Plan to become
a "transferee"  plan (within the meaning set forth in Section  401(a)(11)(B)  of
the Code).
              (b)  Any   Rollover  Contribution  shall   be   allocated  to  the
appropriate  Participant's  Rollover  Contribution  Subaccount  which  shall  be
established and separately  accounted for. A Participant shall have at all times
a  nonforfeitable   right  in  the  amount  credited  to  his  or  her  Rollover
Contribution Subaccount.
              (c)  Each   request   by   a   Participant   to  make  a  Rollover
Contribution shall be subject to review by the Committee which shall make a case
by case determination that each Rollover Contribution meets the requirements set
forth in  Section  5.6(a),  and such other  requirements  or  conditions  as the
Committee may, from time to time and in its sole discretion,  impose;  provided,
however,  that any determination  made by the Committee pursuant to this Section
5.6 shall not have the effect of discriminating in favor of Participants who are
officers, shareholders or who are Highly Compensated Participants.
         5.7  Trustee-to-Trustee Transfer of Assets. Notwithstanding anything in
Section 5.6 to the contrary,  in the event of an  acquisition by the Employer or
the Plan  Sponsor  of a  company  which  maintains  a plan and  trust  which are
qualified under Sections 401(a) and 501(a) of the Code, respectively,  the Board
of Directors may (but shall not be required to) authorize a "trustee-to-trustee"
transfer of assets from such  qualified  plan into the Plan and Trust Fund.  The
Trustee may require such  evidence,  assurances,  opinions  and  certifications,
including a statement from the acquired  company's plan that such plan and trust
are qualified  under Sections  401(a) and 501(a) of the Code,  which the Trustee
may deem  necessary  to  establish  to its  satisfaction  that the amounts to be
transferred  will not affect  the  qualification  of the Plan or the  tax-exempt
status of the Trust under Sections 401(a) and 501(a) of the Code, respectively.

<PAGE>

                     SECTION 6. ALLOCATION OF CONTRIBUTIONS

         6.1  Establishment of Cash  Contribution  Account.  The Committee shall
establish and maintain or cause to be established and maintained with respect to
each Participant a Cash  Contribution  Account showing his or her interest under
the Plan and in the Trust Fund and all relevant data  pertaining  thereto.  Each
Participant  shall be  furnished  with a  written  statement  of his or her Cash
Contribution  Account at least once annually and upon any distribution to him or
her. In maintaining the Cash Contribution Accounts under the Plan, the Committee
can conclusively rely on the valuations of the Trust Fund in accordance with the
Plan. The  establishment  and maintenance of, or allocations and credits to, the
Cash  Contribution  Account of any Participant shall not vest in any Participant
any right,  title or interest in and to any Plan assets or  benefits,  except at
the time or times and upon the terms and conditions and to the extent  expressly
set forth in the Plan and in accordance with the terms of the Trust Fund.
         6.2  Establishment of Subaccounts. Each Participant's Cash Contribution
Account shall contain each of the following applicable subaccounts therein:
              (a) All Elective Contributions  on behalf  of a  Participant under
Section 4.1 and Qualified  Nonelective  Contributions on behalf of a Participant
under  Section  4.2(b)(i)  shall  be  credited  to  the  Participant's  Elective
Contribution Subaccount.
              (b)  All Matching Contributions on behalf  of a  Participant under
Section  4.2(a) shall be allocated  and credited to the  Participant's  Matching
Contribution Subaccount.
              (c)  All   Profit   Sharing    Contributions   on   behalf  of   a
Participant  under  Section  4.2(b)(ii)  shall be allocated  and credited to the
Participant's Profit Sharing Subaccount.
              (d)  All Rollover Contributions on behalf  of a  Participant under
Section  5.6 shall be  allocated  and  credited  to the  Participant's  Rollover
Contribution Subaccount.

<PAGE>

                       SECTION 7. SPECIAL ESOP PROVISIONS

         7.1 Investment of ESOP Accounts.  The ESOP Accounts of all Participants
shall be  invested  exclusively  in Shares,  except for cash or cash  equivalent
investments  held (a) for the limited  purpose of making Plan  distributions  to
Participants  and  Beneficiaries,  (b) pending the  investment by the Purchasing
Agent of  contributions  or other cash  receipts  in Shares,  (c) pending use to
repay an Exempt Loan, (d) for purposes of paying,  under the terms  described in
the Plan or Trust Agreement, fees and expenses incurred with respect to the Plan
or Trust and not paid for by the  Participating  Employers or (e) in the form of
de minimis cash balances.  Neither any Participating Employer nor the Purchasing
Agent,  the  Committee or the Trustee shall have any  responsibility  or duty to
time any transaction  involving Shares in order to anticipate  market conditions
or changes in stock value, nor shall any such person have any  responsibility or
duty  to  sell  Shares  held in the  ESOP  Accounts  (or  otherwise  to  provide
investment management for Shares held in the ESOP Accounts) in order to maximize
return or minimize loss.  Participating Employer contributions made in cash, and
other cash  received  by the  Trustee,  may be used by the  Purchasing  Agent to
acquire Shares from shareholders of the Employer or directly from the Employer.
         7.2  Allocation to ESOP Accounts.
              (a)  Subject to the  provisions  of Section 4, the ESOP Account
maintained for each Participant will be credited as of the last day of each Plan
Year with the Participant's allocable share of:
                   (i)   Shares purchased using cash contributed by or on behalf
of the  Participating  Employer  employing such Participant (and any earnings on
any cash contributions made prior to the last day of the Plan Year),
                   (ii)  Shares contributed directly to the Trust Fund;
                   (iii) Dividends  paid to the Trust  Fund  during the
Plan  Year  on any  Shares  that  were  purchased  by the  Purchasing  Agent  or
contributed  directly  to the Trust Fund prior to the last day of the Plan Year;
and
                   (iv)  Shares released  from  the  Suspense   Subfund pursuant
to Section 7.3 and  allocable to the  contribution  made by or on behalf of such
Participating Employer pursuant to Section 7.4.
              (b)  Shares attributable to ESOP Contributions shall be  allocated
among the Accounts of Participants  who are members of the Allocation  Group for
the Plan Year in the same proportion that a  Participant's  Compensation  during
the Plan  Year  bears to the  total  Compensation  during  the Plan  Year of all
Participants  who are members of the  Allocation  Group for such Plan Year.  For
purposes of the preceding  sentence,  Compensation earned by a Participant prior
to the  Participant's  entry into the Plan pursuant to Section  3.1(b)(ii) shall
not be taken into account.
              (c)  Shares contributed directly to the Trust Fund for a Plan Year
shall be allocated  under  Section  7.2(a)(i) in the same  proportion  as Shares
purchased by the Trust Fund and allocated under Section 7.2(b).
         7.3  Suspense  Subfund  for  ESOP  Accounts.  Shares  acquired  by  the
Participants'  ESOP  Accounts  through  an  Exempt  Loan  shall  be added to and
maintained  in the Suspense  Subfund and shall  thereafter  be released from the
Suspense  Subfund and  allocated to  Participants'  ESOP Accounts as provided in
Sections 7.3 and 7.4. Shares acquired for the Trust Fund with the proceeds of an
Exempt Loan shall be released  from the  Suspense  Subfund as the Exempt Loan is
repaid, in accordance with the provisions of this Section 7.3.
              (a)  For each Plan Year until the Exempt Loan is fully repaid, the
number of Shares  released  from the Suspense  Subfund shall equal the number of
unreleased  Shares  immediately  before such  release for the current  Plan Year
multiplied  by the  "Release  Fraction."  As  used  herein,  the  term  "Release
Fraction"  shall  mean a  fraction,  the  numerator  of which is the  amount  of
principal  and  interest  paid on the Exempt Loan for such current Plan Year and
the  denominator  of which is the sum of the  numerator  plus the  principal and
interest to be paid on such Exempt Loan for all future  years during the term of
such Exempt Loan  (determined  without  reference to any possible  extensions or
renewals  thereof).  For purposes of computing  the  denominator  of the Release
Fraction,  if the interest rate on the Exempt Loan is variable,  the interest to
be paid in  subsequent  Plan Years  shall be  calculated  by  assuming  that the
interest  rate in effect as of the end of the  applicable  Plan Year will be the
interest rate in effect for the remainder of the term of the Exempt Loan.
                   Notwithstanding the foregoing,  in the event such Exempt Loan
shall be repaid with the proceeds of a subsequent  Exempt Loan (the  "Substitute
Loan"),  such  repayment  shall not  operate to release  all such  Shares in the
Suspense  Subfund,  but, rather,  such release shall be effected pursuant to the
foregoing  provisions  of this  Section  7.3(a)  on the  basis  of  payments  of
principal and interest on such Substitute Loan.
              (b)  If  required  by  any  pledge  or similar  agreement,  or  if
permitted by such pledge or agreement and required by the Committee  pursuant to
a  one-time,  irrevocable  designation  (which  shall  be  made,  if at all,  in
connection with the making of an Exempt Loan) by the Committee, then, in lieu of
applying the provisions of Section 7.3(a) hereof with respect to an Exempt Loan,
Shares shall be released from the Suspense  Subfund as the  principal  amount of
such Exempt Loan is repaid (without regard to interest  payments),  provided the
following three conditions are satisfied:
                   (i)   The Exempt  Loan shall  provide for annual  payments of
principal  and interest at a cumulative  rate that is not less rapid at any time
than level annual payments of such amounts for ten years;
                   (ii)  The  interest  portion  of   any   payment   shall   be
disregarded  only to the extent it would be treated as interest  under  standard
loan amortization tables; and
                   (iii) If the Exempt Loan is renewed, extended or  refinanced,
the sum of the expired duration of the Exempt Loan and the renewal, extension or
new Exempt Loan period shall not exceed ten years.
              (c)  If  at  any   time   there  is  more  than  one  Exempt  Loan
outstanding,  then  separate  accounts  may be  established  under the  Suspense
Subfund for each such Exempt Loan. Each Exempt Loan for which a separate account
is maintained may be treated separately for purposes of the provisions governing
the  release  of  Shares  from the  Suspense  Subfund  under  this  Section  7.3
(including for purposes of determining  whether Section 7.3(a) or Section 7.3(b)
governs the  release of Shares from any  particular  Suspense  Subfund)  and for
purposes of the provisions  governing the application of Participating  Employer
contributions to repay an Exempt Loan under Section 4.2.
              (d)  All Shares released from the Suspense Subfund during any Plan
Year shall be allocated among Participants as prescribed by Section 7.4.
         7.4  Disposition of Shares Released from Suspense Subfund.
              (a) Shares released from the Suspense  Subfund for a Plan Year  in
accordance  with  Section 7.3 shall be held in the Trust Fund on an  unallocated
basis until  allocated by the Committee as of last day of the Plan Year.  Shares
released  from the  Suspense  Subfund on account of a payment for a Plan Year of
principal  or interest  on an Exempt  Loan,  to the extent  payment is made with
contributions for such Plan Year, shall be allocated under Section 7.2(a)(ii) in
the same proportion as Shares purchased with contributions under Section 7.2(b).
              (b)  (i)  Shares released from the Suspense  Subfund on account of
the  payment for a Plan Year of  principal  or interest on an Exempt Loan to the
extent such  payment is made with  dividends  paid on Shares  allocated  to ESOP
Accounts,  shall be allocated in the same  proportion  as dividends  used to pay
principal  or  interest  on such  Exempt  Loan would have been  allocated  under
Section 7.9(b) had such dividends not been so used; and
                   (ii) Subject  to  Section  4.2,  Shares  released  from   the
Suspense Subfund on account of the payment of principal or interest on an Exempt
Loan, to the extent such payment is made with  dividends on Shares not allocated
to  Accounts,  shall  be  allocated  to  those  ESOP  Accounts  and in the  same
proportion  as Shares  released  pursuant to Section  7.4(b)(i);  provided  that
Shares so released  shall be  otherwise  allocated  if  necessary to satisfy the
requirements  of the  Code  (other  than  Section  404(k))  and any  Regulations
thereunder.
              (c)  All Shares in the Trust  Fund,  other than the Shares held in
the Suspense  Subfund as of the last day of any Plan Year,  must be allocated to
ESOP Accounts as of the last day of any Plan Year.
         7.5  Limitations on Allocations to ESOP Accounts.  Notwithstanding  the
foregoing provisions of this Section 7:
              (a)  If more than  one-third of all ESOP Contributions  for a Plan
Year which are  deductible  only under  Section  404(a)(9)  of the Code would be
allocated,  in the aggregate, to Participants described in Section 414(q) of the
Code,  then the  Committee  may reduce  such  allocations  pro rata in an amount
sufficient  to ensure  that  such ESOP  Contributions  will be  deductible  with
respect to such Plan Year; and
              (b)  Any  contributions  which  are prevented from being allocated
due to the restriction  contained in Section 7.5(a) shall be allocated as of the
last day of the Plan Year  pursuant  to  Sections  7.2 and 7.4 as  though  those
Participants  described in Section 414(q) of the Code did not participate in the
Plan.
         7.6  Acquisition of Shares.
              (a)  Notwithstanding  the foregoing  provisions of this Section 7,
in the event that Shares are acquired in a transaction  to which Section 1042 of
the Code applies,  then, in accordance with the  Regulations,  such Shares shall
not be allocated,  directly or indirectly,  to prohibited individuals as defined
in Section  409(n)(1) of the Code for the duration of the  nonallocation  period
(as defined in Section 409(n)(3)(C) of the Code).
              (b)  If  Shares  are  prevented  from  being  allocated due to the
prohibition  contained in Section 7.6(a), the allocation of Shares  attributable
to ESOP Contributions (or ESOP  Contributions)  otherwise provided under Section
7.2 shall be adjusted to reflect such result.
         7.7  Effect of  Change in Plan  Sponsor's  Capitalization.  Any  Shares
received by the Trustee as a result of a stock split, dividend,  conversion,  or
as a result of a reorganization  or other  recapitalization  of the Plan Sponsor
shall be allocated as of the day on which the Shares are received by the Trustee
in the same  manner  as the  Shares  to which  they  are  attributable  are then
allocated.
         7.8  Trustee and  Committee  Discretion  to Engage in  Transactions  in
Shares.  Neither the Purchasing  Agent,  the Trustee nor the Committee  shall be
required to engage in any transaction,  including, without limitation, directing
the purchase or sale of Shares,  which it determines in its sole  discretion may
subject itself, its Participants,  the Plan, any Participating  Employer, or any
Participant to liability under federal or other state laws.
         7.9  Valuation of ESOP Accounts.
              (a)  Subject  to  the  requirements  of Section  7.9(b),  the fair
market value of the assets of the ESOP  Accounts  shall be determined as of each
Valuation  Date, in accordance  with generally  accepted  valuation  methods and
practices  including,  but not limited to, in the case of Shares, the use of one
or more independent appraisers.
              (b)  The value of a Participant's ESOP Account as of any Valuation
Date shall equal the sum of:
                   (i)  The aggregate value (as determined under Section 7.9(a))
of all Shares and dividends on Shares previously allocated to such Participant's
ESOP Account as of such Valuation Date; and
                   (ii)  Subject  to  Section 7.9(c),  the  aggregate  value (as
determined under Section 7.10(a)) of dividends, if any, received during the Plan
Year on Shares allocated to such Participant's ESOP Account.
                   (iii)  Such Participant's  allocable  portion (determined  in
accordance with the rules set forth in Section 7.4 for determining Participant's
allocable portion of Shares released from the Suspense Subfund) of the earnings,
if any, on all amounts contributed to the Trust Fund for purposes other than the
repayment of an Exempt Loan.
              (c)  Except as provided in Section 7.7, dividends payable, if any,
with  respect to Shares held by the  Participant's  ESOP Account will be, in the
discretion of the  Committee  and in conformity  with the terms of the Shares on
which such  dividends are paid, (i) used for the purpose of repaying one or more
Exempt Loans,  (ii)  distributed  from the Trust Fund to  Participants  or their
Beneficiaries  not later  than 90 days after the close of the Plan Year in which
they are paid to the Trust Fund,  (iii) paid  directly to such  Participants  or
their  Beneficiaries,  (iv) retained in the Trust Fund and allocated pursuant to
Section  7.9(b),  or (v) paid or utilized in a combination  of any or all of the
foregoing four options.
              (d)  The Committee shall establish  accounting  procedures for the
purpose of making the  allocations,  valuations and adjustments to Participant's
ESOP Accounts in accordance  with the provisions of the Plan. From time to time,
the Committee may modify its accounting  procedures for the purpose of achieving
equitable  and   nondiscriminatory   allocations  among  the  ESOP  Accounts  of
Participants in accordance with the provisions of the Plan.
         7.10 Role of Purchasing Agent.
              (a) All  purchases  of Shares made by the Trust Fund shall be made
by the Purchasing  Agent.  The Trustee shall forward to the Purchasing Agent all
amounts  contributed to the employee stock ownership plan, and all amounts to be
invested in Shares pursuant to participant  investment directions given pursuant
to Sections 8.3, 8.4 and 8.5. Amounts to be invested in Shares shall be invested
in Shares in the  amount,  in the  manner  and at the  price  determined  by the
Purchasing Agent in its sole  discretion,  provided such price shall be the fair
market value of such Shares at the time of purchase.  The Purchasing Agent shall
in its sole discretion  select the  broker-dealer  through which the purchase of
such Shares shall be executed.  The Purchasing  Agent shall also invest any cash
dividends  received on any Shares which are allocated to Participants'  Accounts
and  held as part of the  Plan as  provided  in  Section  5.05(c)  of the  Trust
Agreement.
              (b)  The Purchasing Agent shall sell Shares only at the  direction
of the Trustee, which shall issue such instructions only at the direction of the
Committee;  provided that such Committee direction shall not be required for any
of the  following  purposes:  (i) any sales of Shares  required  pursuant to the
participant  investment  directions  given pursuant to Sections 8.3, 8.4 or 8.5;
(ii) any sales of Shares required  pursuant to the provisions of Section 13.5 or
13.6;  (iii)  any  sales of  Shares  required  to fund a  participant  loan or a
distribution to a Participant;  or (iv) any sales of Shares required to maintain
the levels of investment  of Shares and cash  specified by the Committee for the
Company Stock Fund.

<PAGE>

               SECTION 8. INVESTMENT OF CONTRIBUTIONS, VALUATIONS
                  AND PARTICIPANTS' CASH CONTRIBUTION ACCOUNTS

         8.1  Delivery of Contributions to Trust Fund. All monies, securities or
other property contributed to Participants' Cash Contribution  Accounts shall be
delivered  to the  Trustee  under  the  Trust  Fund,  to be  managed,  invested,
reinvested and distributed in accordance with the Plan and the Trust Fund.
         8.2  Participants' Right to Select Investments.  Each Participant shall
have the right to invest his or her Cash Contribution  Account among one or more
investment  funds selected by the Company,  which may include a fund established
for investment in Shares.
         8.3  Participant Investment  Election.  As of any date permitted by the
Committee,  a  Participant  may, in  accordance  with the rules of the Committee
uniformly  applied,  specify  the  percentage  (in minimum  multiples  as may be
determined from time to time by the Committee) of  contributions  which are made
to the  Participant's  Cash  Contribution  Account  that  shall be  invested  in
investment funds selected by the Committee.  An investment  election may be made
separately  with  respect to (i) the  aggregate  of the  Participant's  Elective
Contribution  Subaccount,   Matching  Contribution   Subaccount,   and  Rollover
Contribution Subaccount and (ii) the Participant's Profit Sharing Subaccount.
         8.4  Change  in  Investment  Election  for  Future  Contributions.  Any
investment  direction  specified  by a  Participant  shall  be  deemed  to  be a
continuing  direction  until  changed.  A  Participant  may change an investment
direction as to future  contributions  made by such Participant or on his or her
behalf to the subaccounts of his or her Cash Contribution  Account as of any day
permitted  by the  Committee  in  accordance  with the  rules  of the  Committee
uniformly applied.
         8.5  Change in Investment Election for Prior  Contributions.  As of any
date permitted by the Committee,  a Participant  may change the  percentages (in
minimum  multiples as may be determined  from time to time by the  Committee) in
which the  investment  of the  portion of his or her Cash  Contribution  Account
attributable  to  prior   contributions  shall  be  allocated  among  the  funds
maintained  by the Trustee.  Such changes of investment  allocation  may be made
separately  with  respect to (i) the  aggregate  of the  Participant's  Elective
Contribution  Subaccount,   Matching  Contribution   Subaccount,   and  Rollover
Contribution Subaccount, and (ii) the Participant's Profit Sharing Subaccount.
         8.6  Valuation of Cash Contribution Accounts.
              (a)  As  of  each  Valuation Date, Participants' Cash Contribution
Accounts shall be valued pursuant to the terms of the Plan. Such valuation shall
be conclusive and binding upon all persons having an interest in the Trust Fund.
              (b)  The  Committee  shall  adjust  the  value  of  each  Elective
Contribution  Subaccount,   Matching  Contribution  Subaccount,  Profit  Sharing
Subaccount,  or Rollover Contribution Subaccount, as the case may be, maintained
under  Participants'  Cash  Contribution  Accounts as of each  Valuation Date to
reflect the effect of income  received  and  accrued,  realized  and  unrealized
profits and losses,  and all other  transactions of the preceding  period.  Such
adjustments  shall be made with respect to the period  since the next  preceding
Valuation  Date by (i)  deducting  from  each such  Subaccount  the total of all
payments  made  from such  Subaccount  during  such  period,  (ii)  adding to or
deducting from, as the case may be, each such Subaccount such proportion of each
item of income,  profit or loss as the amount in such  Subaccount as of the next
preceding  Valuation  Date  bears  to the  total of the  amounts  in all of such
Participants'   Elective   Contribution   Subaccount,    Matching   Contribution
Subaccount,  Profit Sharing Subaccount,  or Rollover Contribution Subaccount, as
the  case  may  be,  as  of  the  preceding  Valuation  Date  and  (iii)  adding
contributions   to  each  such  Elective   Contribution   Subaccount,   Matching
Contribution  Subaccount,  Profit Sharing Subaccount,  or Rollover  Contribution
Subaccount,  as the case may be,  pursuant to  Sections 4 and 5 of the Plan.  In
making such  allocations,  the Committee can conclusively rely on the valuations
of the Subaccounts by the Trustee in accordance with the Plan and the Trust.

<PAGE>

                           SECTION 9. RETIREMENT DATES

         9.1 Normal Retirement Date. The Normal Retirement Date of a Participant
shall  be his or her 65th  birthday  or,  if  earlier,  the  date on  which  the
Participant  has  attained  age  fifty  (50) and  completed  seven  (7) Years of
Service.  Upon  attainment of his or her Normal  Retirement  Date, a Participant
shall have a nonforfeitable right to 100% of his or her Account.
         9.2 Deferred  Retirement  Date.  A  Participant  who remains in Service
after his or her Normal Retirement Date may retire on a Deferred Retirement Date
which shall be the first day of the month  coincident with or next following his
or her  termination  of Service or as specified in a written  application to the
Committee.

<PAGE>

                SECTION 10. ELIGIBILITY FOR PAYMENT OF ACCOUNTS
                              AND VESTED INTERESTS

         10.1 Participants' Right to Account Upon Termination Due to Retirement,
Death or Disability.
              (a)  A Participant shall  have a  nonforfeitable  right  to his or
her  Account  upon  the occurrence of any of the following events while employed
by the Employer:
                   (i)   attainment of his or her Retirement Date;
                   (ii)  his or her death; or
                   (iii) his or her Disability.
              (b)  Upon  the  termination  of  Service  of any Participant on or
after his or her Retirement  Date or by reason of his or her death or Disability
("Terminated Participant"),  the Terminated Participant (or, in the event of the
Participant's  death,  his or her  Beneficiary)  shall be  entitled to an amount
equal  to  the  Terminated  Participant's  Account,   including  any  subsequent
contribution  allocated  to the  Terminated  Participant's  Account  pursuant to
Sections 6 or 7 with respect to the Plan Year in which the Participant's Service
is terminated.  The Participant's Account shall be distributable,  in accordance
with the methods and rules of  distribution  described in Section 11, as soon as
practicable following the Participant's termination of Service. The value of the
Participant's  Account shall be determined as of the Valuation  Date  coincident
with or  immediately  preceding the date of  distribution  of the  Participant's
Account.
         10.2  Participants' Right to Account Upon Other Termination of Service.
Upon  the  termination  of  Service  of  any  Participant  prior  to  his or her
Retirement  Date for any reason other than death or  Disability,  the Terminated
Participant  shall be entitled to receive an amount equal to the sum of (i) 100%
of the Participant's  Elective  Contribution  Subaccount,  Matching Contribution
Subaccount,  and Rollover  Contribution  Subaccount  and (ii) the  Participant's
Vested  Interest  in his or her  Profit  Sharing  Subaccount  and ESOP  Account,
including  the  Participant's  Vested  Interest in any  subsequent  contribution
allocated to the Participant's  Account pursuant to Sections 6 or 7 with respect
to  the  Plan  Year  in  which  the  Participant's   Service   terminated.   The
Participant's Account shall be distributable, in accordance with the methods and
rules of distribution  described in Section 11, as soon as practicable following
the Valuation  Date  immediately  following  the  Participant's  termination  of
Service.  The value of the  Participant's  Account shall be determined as of the
Valuation Date coincident with or immediately preceding the date of distribution
of the Participant's  Account. If such Terminated  Participant's Vested Interest
is less than 100 percent,  the non-vested balance of such  Participant's  Profit
Sharing Subaccount and ESOP Account shall be forfeited and reallocated  pursuant
to Section  4.5 as of the last day of the  earlier of (i) the Plan Year in which
the  Participant's  Account is  distributed,  or (ii) the Plan Year in which the
Participant incurs a Total Break in Service.
         10.3  Vesting  Schedule  for  Determining  Vested  Interests.  For  all
purposes  of this Plan,  a  Participant's  Vested  Interest in his or her Profit
Sharing  Subaccount  and ESOP  Account  shall  consist of (i) the  Participant's
percentage of his or her Profit  Sharing  Subaccount  and (ii) the percentage of
the  Participant's  ESOP Account,  both as determined from the following vesting
schedule  on the basis of the number of Years of Service  which the  Participant
has completed as of the date of the Participant's termination of Service.

                          VESTING SCHEDULE

        Years of Service                         Percentage
        ----------------                         ----------
        Less than three years                        0%
        Three years but less than four years        25%
        Four years but less than five years         50%
        Five years or more                         100%

         10.4  Breaks in Service. If a Participant's Service is terminated prior
to his or her Retirement Date for any reason other than the Participant's  death
or Disability prior to completing  three Years of Service,  and such Participant
incurs a Total Break in Service,  such Participant  shall not be entitled to any
benefit  attributable to amounts allocated to the  Participant's  Profit Sharing
Subaccount  or  ESOP  Account  prior  to  such  Total  Break  in  Service.  If a
Participant  returns to Service,  Years of Service  before such return  shall be
counted,  in addition to Years of Service  following such return, in determining
the  Participant's  Vested Interest in the amount credited to the  Participant's
Profit Sharing Subaccount or ESOP Account subsequent to the Participant's return
to Service.  If such Participant does not complete one Year of Service following
his or her  return,  then the  Participant  shall not be entitled to any further
benefit  under  the  Plan  and the  non-vested  balance  of any  Profit  Sharing
Contribution or ESOP Contributions  credited or recredited to such Participant's
Profit Sharing Subaccount or ESOP Account subsequent to the Participant's return
shall  be  forfeited   and   reallocated   pursuant  to  Section  4.5  upon  the
Participant's  termination of Service. All forfeitures shall occur in conformity
with the ordering rules of Section 54.4975-11(d) of the Regulations.
         10.5  Participant's  Right to  Restoration  of Account  Upon  Return to
Service.  If a  Terminated  Participant  who  had  a  vested  interest  in  such
Participant's Profit Sharing Subaccount or ESOP Account returns to Service prior
to incurring a Total Break in Service,  the non-vested balance of the Terminated
Participant's  Account,  if any,  forfeited  pursuant  to Section  10.2 shall be
recredited to such  Participant's  Account,  provided  that,  not later than the
fifth  anniversary of the first date on which the  Participant  is  subsequently
employed,  such Participant  repays the full amount of any distribution  made to
the  Participant  upon his or her prior  termination  of Service.  Any amount so
repaid,  together  with any  non-vested  portion of such  Participant's  Account
recredited  pursuant to this Section 10.5,  shall be invested in the Trust Fund.
If  such  Participant  fails  to make a  repayment  of any  distributed  amounts
pursuant to this Section  10.5,  the  non-vested  portion of such  Participant's
Account, if any, shall not be recredited.
         10.6  Participant's  Right to Account Upon Death After  Termination  of
Service.  Subject to the  provisions of Section 10, if a Terminated  Participant
dies before payment of the full value of his or her Account from the Trust Fund,
an amount equal to the current value of the unpaid portion of the  Participant's
Vested  Interest in his or her Account,  including any  subsequent  contribution
allocated to the Terminated  Participant's  Account  pursuant to Sections 6 or 7
with respect to the Plan Year in which the Participant's  Service is terminated,
shall be distributable, in accordance with the methods and rules of distribution
described  in Section 11, as soon as  practicable  following  the  Participant's
death.  The value of the  Participant's  Account  shall be  determined as of the
Valuation Date coincident with or immediately preceding the date of distribution
of the Participant's Account.
         10.7  Amendment of Vesting Schedule. If the vesting schedule  contained
in Section 10.3 is amended,  each  Participant  who has completed at least three
(3) Years of Service may elect,  during the  election  period  specified in this
Section, to have his or her vested percentage  determined without regard to such
amendment.  For purposes of this Section,  the election period shall begin as of
the date on which the amendment  changing the vesting  schedule is adopted,  and
shall end on the latest of the following  dates:  (i) the date  occurring  sixty
(60) days after the Plan amendment is adopted; (ii) the date which is sixty (60)
days after the day on which the Plan amendment becomes effective; (iii) the date
which is sixty (60) days after the day the  Participant is issued written notice
of the Plan  amendment  by the  Committee;  or (iv)  such  later  date as may be
specified by the Committee.  The election  provided for in this Section shall be
made in writing and shall be irrevocable when made.
         10.8  Distribution   Following  Attainment  of  Age  59-1/2  to  Former
Participants of The Hampton Pension  Services,  Inc. 401(k)  Retirement  Savings
Plan.  A  Participant  who was  employed by Hampton  Pension  Services,  Inc. on
November 6, 1995 shall be entitled to receive,  at any time  following  the date
such Participant attains age 59-1/2, a distribution of all or any portion of the
Participant's  Account,  to the extent  attributable  to any  amounts  that were
transferred  to the Plan from such  Participant's  former account in The Hampton
Pension Services, Inc. 401(k) Retirement Savings Plan.

<PAGE>

                    SECTION 11. METHOD OF PAYMENT OF ACCOUNTS
                                 AND WITHDRAWALS

         11.1  Methods of Payment. Any benefit payable under the Plan, except as
otherwise  provided  in Section  11.2  shall be  payable as soon as  practicable
following  the last day of the  calendar  month in which  falls a  Participant's
termination of Service (or other event requiring a distribution under the Plan),
in one lump sum payment from the Trust Fund,  provided that the  Participant may
elect to direct the Committee to directly  transfer all or any portion of his or
her  "eligible  rollover  distribution"  (as  defined in Section  11.8 below) to
another  tax-qualified  plan  pursuant  to  Section  401(a)(31)  of the Code.  A
Participant  who has no Vested  Interest in his or her  Account  upon his or her
termination  of Service will be deemed to have received a full  distribution  of
his or her Account as of such date.  A  Participant  who elects not to receive a
distribution  at the  time  set  forth  in the  first  sentence  may  receive  a
distribution at any time thereafter upon reasonable notice to the Plan.
               Subject  to  the  provisions  of Section 11.3 with respect to the
distribution  of  Shares,  any  distribution  hereunder  shall  be made in cash;
provided,  however, that pursuant to procedures adopted from time to time by the
Committee,  a  Participant  may elect to receive a  distribution  in the form of
shares  of  the  assets  in  which  such  Participant's   Account  was  invested
immediately  prior to the  distribution,  but only if such  distribution is made
directly to a rollover IRA established with the Employer as custodian.
         11.2  Commencement of Payment.  Notwithstanding  any other provision of
the Plan to the contrary,  (i) if a Participant  has a Vested Interest in his or
her Account with a value of $5,000 or less, it shall be  distributed in one lump
sum as  soon as is  administratively  feasible  following  the  last  day of the
calendar month in which such Participant's termination of employment occurs, and
(ii) if a Participant  has a Vested  Interest in his or her Account with a value
of more than $5,000, it shall not commence to be distributed without the consent
of the Participant before the Participant's Normal Retirement Date.
               In  the  absence  of  receipt of such  consent by the  Committee,
payment of the benefit to such Participant shall commence as soon as practicable
after the  Participant's  attainment of his or her Normal Retirement Date, which
benefit  shall  be  in an  amount  equal  to  the  value  of  the  Participant's
distributable  Account as of the Valuation Date  coincident  with or immediately
following the Participant's  attainment of his or her Normal Retirement Date. In
any case where  distribution of any benefit amount from the  Participant's  Cash
Contribution Account is to be deferred, the Committee shall either (i) establish
or cause to be  established  a special  account  for the  benefit  of the former
Participant,  to be  invested  by the  Trustee  in a  fixed  investment  account
established by the Trustee or (ii) cause all amounts in the  Participant's  Cash
Contribution  Account  deferred  by  the  Participant  to  be  invested  at  the
Participant's  election  in the same  manner  as the  normal  Cash  Contribution
Accounts maintained for Participants under to the Plan.
         11.3  Special Rules For Distribution of Shares.
               (a)  Distribution of a Participant's  Vested Interest from his or
her Account  which is invested in Shares will be made  entirely in whole Shares,
with the value of any fractional interest in Shares paid in cash; provided, that
pursuant to procedures adopted from time to time by the Committee, a Participant
may elect to receive such  distribution  in the form of cash.  Any cash or other
property in a Participant's ESOP Account will be used by the Purchasing Agent to
acquire Shares,  valued as of the last day of the calendar month in which occurs
(i) the  Participant's  election to receive a distribution of his or her Account
pursuant to Section 11.1, (ii) the Participant's  termination of Service, in the
case of a distribution  pursuant to Section 11.2(i),  or (iii) the Participant's
Normal Retirement Date (or the Participant's death, if earlier),  in the case of
a  distribution  pursuant  to Section  11.2(ii) to a  Participant  who failed to
consent to a distribution prior to his or her Normal Retirement Date (the "Share
Conversion  Date").  Notwithstanding  the  foregoing,  if  applicable  corporate
charter or bylaw provisions  restrict ownership of substantially all outstanding
Shares to  Employees or to a plan or trust  described  in Section  401(a) of the
Code,  then  any  distribution  of  a  Participant's   Vested  Interest  in  the
Participant's  ESOP Account shall be in cash.  When a  distribution  consists in
whole or in part of Shares,  and if such Shares  consists of more than one class
of securities,  the  distribution of such Shares shall consist of  substantially
the same  proportion  of each such  class of Shares  as such  classes  of Shares
represent  proportions  of the  Participant's  Account.  If the record  date for
dividends payable with respect to Shares  distributable to a Participant  occurs
following the Share  Conversion  Date,  such  dividends  shall not be considered
attributable to such Shares, but shall be considered as earnings of the Fund and
allocated among Participants' Accounts pursuant to Section 8.6(b).
               (b) Notwithstanding  anything  in  Section  11  to the  contrary,
in the discretion of the Committee, Section 11.1 may not apply to Shares held in
a  Participant's  ESOP  Account  until  the  close of the Plan Year in which any
Exempt Loan used to acquire such Shares is repaid in full.
               (c) If  at  the time of  distribution,  Shares  distributed  from
the Trust Fund that were  acquired  with the  proceeds of an Exempt Loan are not
treated as "readily  tradable on an  established  market"  within the meaning of
Section  409(h) of the Code and  Regulations,  such Shares shall be subject to a
put option in the hands of a Qualified Holder by which such Qualified Holder may
sell all or any part of such  Shares to the Trust.  Should the Trust  decline to
purchase  all or any part of such  Shares,  the Employer  shall  purchase  those
Shares that the Trust  declines to purchase.  The put option shall be subject to
the following conditions:
                   (i)   The term "Qualified Holder" shall mean the  Participant
or Beneficiary  receiving the  distribution  of such Shares,  any other party to
whom the Shares are transferred by gift or reason of death, or any trustee of an
individual  retirement  account (as defined under Code Section 408) to which all
or any portion of the distributed  Shares is transferred  pursuant to a tax-free
"rollover"  transaction  satisfying the  requirements of Sections 402 and 408 of
the Code.
                   (ii)  During the  60-day  period  following any  distribution
of such Shares,  a Qualified Holder shall have the right to require the Trust or
the Employer to purchase all or a portion of the distributed  Shares held by the
Qualified  Holder.  The  purchase  price to be paid for any such Shares shall be
their fair market value  determined as of the Valuation Date  coinciding with or
immediately  preceding  the  exercise  of the  put  option  under  this  Section
11.3(c)(ii),  provided that in the case of a transaction  between the Plan and a
"disqualified person" within the meaning of Section 4975(e)(2) of the Code, such
fair market value shall be determined as of the date of the transaction.
                   (iii) If a Qualified  Holder shall fail to exercise  such put
option, the put option shall temporarily lapse upon the expiration of the 60-day
period. As soon as practicable  following the last day of the Plan Year in which
the 60-day option period  expires,  the Employer  shall notify the  non-electing
Qualified Holder (if he or she is then a shareholder of record) of the valuation
of the Shares as of that date.  During the 60-day period  immediately  following
receipt of such  valuation  notice,  the  Qualified  Holder shall again have the
right to require the Employer to purchase all or any portion of the  distributed
Shares.  The purchase  price to be paid therefor shall be based on the valuation
of the Shares as of the Valuation Date coinciding with or immediately  preceding
the exercise of the option under this Section 11.3(c)(iii), provided that in the
case of a transaction  between the Plan and a  "disqualified  person" within the
meaning of Section  4975(e)(2)  of the Code,  such fair  market  value  shall be
determined as of the date of the transaction.
                   (iv)  The foregoing put options under Section 11.3(c)(ii) and
(iii)  hereof  shall be  effective  solely  against the  Employer  and shall not
obligate the Plan or Trust in any manner.
                   (v)   Except as otherwise  required or permitted by the Code,
the put options under this Section  11.3(c) shall  satisfy the  requirements  of
Section  54.4975-7(b)  of the Treasury  Regulations to the extent,  if any, that
such requirements apply to such put options.
                   If  a  Qualified  Holder  exercises  a  put option under this
Section  11.3(c),  payment for the Shares shall be made in  substantially  equal
annual  payments  over a period  beginning  not  later  than 30 days  after  the
exercise of the put option and not exceeding five years  (provided that adequate
security and reasonable interest are provided with respect to unpaid amounts).
                   Except  as  provided  in  this  Section 11.3(c) or in Section
11.2, no shares acquired with the proceeds of an Exempt Loan may be subject to a
put, call or other option,  or buy-sell or similar  arrangement while held by or
distributed  from the Plan. The rights and protections set forth in this Section
11.3(c) shall be non-terminable.
         11.4  Payments to Surviving Spouse or Beneficiary.  If a Participant or
former Participant dies before the commencement of his or her benefits under the
Plan, such Participant's or former  Participant's  Vested Interest in his or her
Account is payable in full to his or her Surviving  Spouse.  If such Participant
has no  Surviving  Spouse,  he or she may  designate a  Beneficiary  pursuant to
Section  14. A  Participant  may with the  written  consent of his or her spouse
elect to designate a Beneficiary other than or in addition to his or her spouse.
The written  consent of the spouse must  acknowledge the effect of such election
and must be witnessed by a  representative  of the Plan or a notary public.  Any
such election may not be changed  without spousal  consent.  Such an election or
revocation  must be made in  accordance  with the  procedures  developed  by the
Committee in accordance with the Code and Regulations.
         11.5 Latest Date for Commencement of Benefits.
              (a)  Payments  will  commence no later than 60 days  following the
latest of the close of the Plan Year in which:
                   (i)   the  Participant  attains  his or her Normal Retirement
Date,
                   (ii)  occurs  the 10th  anniversary  of the year in which the
Participant commenced participation in the Plan, or
                   (iii) the Participant  terminates his or her Service with the
Employer.
              (b)  Notwithstanding the provisions of the foregoing sentence,  if
the amount  payable  cannot be  ascertained,  or,  subject to the  provisions of
Section 20.6, the  Participant  cannot be located after  reasonable  efforts,  a
payment  retroactive to the date determined under the foregoing  sentence may be
made not later than 60 days after the earliest  date on which the amount of such
payment can be ascertained  under the Plan or the date on which the  Participant
is located (whichever is applicable).
              (c)  Notwithstanding  any  other  provision  of the Plan, benefits
payable to a Participant who is a five percent (5%) owner, as defined in Section
416 of the Code with  respect to the Plan Year  ending in the  calendar  year in
which the Participant attains age 70 1/2, shall commence no later than April 1st
of the  calendar  year  following  the calendar  year in which such  Participant
attains age 70 1/2. Commencing July 1, 1997, to the extent permitted by the Code
and Regulations,  Participants who are not five percent (5%) owners may elect to
commence  distribution  of their  benefits  on April  1st of the  calendar  year
following the later of the calendar year in which such  Participant  attains age
70  1/2  or the  calendar  year  following  the  calendar  year  in  which  such
Participant retires.
              (d)  If  a  Participant  dies  before  benefits   have  commenced,
distributions  to any Surviving  Spouse or Beneficiary  shall be made as soon as
administratively   feasible,   but  not  later  than  five   years   after  such
Participant's  death.  In the event that  payment  is made to the  Participant's
Surviving Spouse,  such  distribution  shall not commence later than the date on
which such Participant  would have had to commence  distributions  under Section
401(a)(9)  of the Code (or,  in either  case,  on any later date  prescribed  by
Regulations).   If  the   Participant's   Surviving   Spouse   dies  after  such
Participant's  death but  before  distribution  has been made to such  Surviving
Spouse,  the Section 11.5(d) shall be applied to require payment of any benefits
as if such Surviving Spouse were the Participant.
              (e)  Pursuant to Regulations, any benefit paid to a child shall be
treated as if paid to a  Participant's  Surviving  Spouse if such  amount  would
become payable to such Surviving Spouse on the child's  attaining  majority,  or
other designated event permitted by Regulations.
         11.6  Redirection of Investment of ESOP Account.
               (a) Upon  both  attaining  age 50  and  completing  five Years of
Service,  a Participant shall be permitted to direct the Plan to transfer all or
any portion of the Vested  Interest  in the  Participant's  ESOP  Account to the
Participant's Cash Contribution Account.
               (b) In addition,  effective as of May 1, 1999, upon completing
the number of Years of Service indicated in the table below, a Participant shall
be permitted to direct the Plan to transfer the  percentage  indicated  below of
the Vested Interest in the Participant's  ESOP Account to the Participant's Cash
Contribution Account.

                  Years of Service                   Percentage
                  ----------------                   ----------
                  5                                  50
                  10                                 75
                  15                                 100

               (c) Any  directions  pursuant to  this Section 11.6 shall be made
pursuant to rules prescribed by the Committee, and shall be effective as soon as
administratively  feasible,  but not  later  than 30 days from the date on which
such direction is given.  Any directions given pursuant to subsection (b) hereof
may be given not more than once per Plan  Year.  For  purposes  of this  Section
11.6,  the  number of the  Participant's  Years of Service  shall be  determined
without regard to Hours of Service,  and shall be based on periods of continuous
service from the date the Participant commenced employment with the Company.
               (d) In  the  event  that  the   Participant's  Account  does  not
provide  at  least  three  investment  options  to the  Participant  other  than
investment in Shares, the Committee shall provide diversification options to any
Participant  required to be given such  diversification  options  under  Section
401(a)(28)(B) of the Code in a manner consistent with the Code.  Notwithstanding
the foregoing,  the ability to make transfers may be restricted by the Committee
to the extent  necessary to comply with any applicable  federal  securities laws
(including Rule 144); provided, however, that in no event shall a Participant be
prevented  from   transferring  any  amount  necessary  in  order  to  meet  the
diversification requirements set forth in Section 401(a)(28)(B) of the Code.
         11.7  Hardship Withdrawals.
               (a) A Participant who is an Employee may elect to withdraw all or
any  portion  of the Vested  Interest  in his or her Cash  Contribution  Account
attributable to Elective  Contributions  (but excluding any earnings on Elective
Contributions  accruing after December 31, 1988),  Profit Sharing  Contributions
(if, and only if, the withdrawal is occasioned by a life threatening  illness to
the  Participant)  by giving written notice thereof to the Committee  specifying
such date,  which shall not be less than 30 days  following the date such notice
is given  to the  Committee.  Such  notice  shall  designate  that the  hardship
withdrawal shall be withdrawn from the investment funds in which the Participant
has directed investment of the Participant's Cash Contribution Account.
               (b) The Committee may authorize a hardship  withdrawal  only for:
                   (i)   medical expenses described in  Section  213(d)  of  the
Code incurred or immediately anticipated by the Participant,  the  Participant's
spouse,  or  any  dependents  of  the  Participant (as defined in Section 152 of
the Code);
                   (ii)  the  purchase  (excluding  mortgage  payments)  of   a
principal residence of the Participant;
                   (iii) the payment of tuition and related  educational
fees for the next 12 months of  post-secondary  education for the Participant or
the Participant's spouse, children, or dependents; or
                   (iv)  the need  to prevent  the  eviction of the  Participant
from the Participant's principal residence or foreclosure on the mortgage of the
Participant's principal residence.
              (c)  A  hardship  withdrawal  may be authorized only to the extent
necessary to satisfy the hardship. A distribution will be deemed to be necessary
to satisfy the hardship only if the  distribution is not in excess of the amount
of  the  immediate  and  heavy  financial  need  of  the  Participant  and  such
Participant's  tax obligations as a result of such distribution and the Employee
certifies  in writing  that such a hardship  exists  (and the  Committee  has no
knowledge  to the  contrary);  provided  that  the  Committee  may set  stricter
standards  for making  such  determination  on a  nondiscriminatory  basis;  and
provided  further that the Participant must obtain the written consent of his or
her spouse to the extent  required by law.  The  Committee's  decision  shall be
final and binding on the Participant.
              (d)  In  the  event  that a Participant's  Vested Interest is less
than 100% at the time of making a withdrawal from his Profit Sharing  Subaccount
pursuant to Section  11.7(a),  the  Participant's  Vested Interest in his or her
Profit Sharing  Subaccount at any relevant time thereafter  shall be equal to an
amount ("X")  determined by the following  formula:  X = P [AB + (R x D)] - (R x
D). For purposes of applying the formula: P is the Participant's Vested Interest
at the relevant  time,  AB is the balance of the  Participant's  Profit  Sharing
Subaccount at the relevant time; D is the amount  distributed to the Participant
pursuant  to Section  11.7(a);  and R is the ratio of the  Participant's  Profit
Sharing  Subaccount  balance at the relevant  time to the  Participant's  Profit
Sharing  Subaccount  balance  immediately  after the  distribution  pursuant  to
Section 11.7(a).
         11.8  Direct Rollovers to Another Qualified Plan or IRA.
               (a) This Section 11.8 applies to distributions  made on or  after
January 1, 1993.  Notwithstanding any provision of the Plan to the contrary that
would  otherwise  limit a  distributee's  election  under this  Section  11.8, a
distributee  may  elect,  at  the  time  and  in the  manner  prescribed  by the
Committee,  to have  any  portion  of an  eligible  rollover  distribution  paid
directly to an eligible retirement plan specified by the distributee in a direct
rollover.
               (b) An eligible rollover distribution is any distribution of  all
or any portion of the balance to the credit of the  distributee,  except that an
eligible rollover distribution does not include: any distribution that is one of
a series of  substantially  equal periodic  payments (not less  frequently  than
annually) made for the life (or life expectancy) of the distributee or the joint
lives (or joint life  expectancies)  of the  distributee  and the  distributee's
designated  Beneficiary,  or for a  specified  period of ten years or more;  any
distribution to the extent such distribution is required under Section 401(a)(9)
of the Code; and the portion of any distribution that is not includable in gross
income   (determined   without  regard  to  the  exclusion  for  net  unrealized
appreciation with respect to employer securities).
               (c) An  eligible  retirement  plan  is  an individual  retirement
account  described  in  section  408(a) of the Code,  an  individual  retirement
annuity  described in section  408(b) of the Code, an annuity plan  described in
section 403(a) of the Code or a qualified  trust  described in section 401(a) of
the  Code,  that  accepts  the  distributee's  eligible  rollover  distribution.
However,  in the case of an  eligible  rollover  distribution  to the  surviving
spouse,  an eligible  retirement  plan is an  individual  retirement  account or
individual retirement annuity.
               (d) A distributee includes a  Participant or  former Participant.
In addition, the Participant's or former Participant's  Surviving Spouse and the
Participant's  or  former  Participant's  spouse  or  former  spouse  who is the
alternate  payee  under a  qualified  domestic  relations  order,  as defined in
Section 414(p) of the Code, are distributees  with regard to the interest of the
Surviving Spouse, spouse or former spouse.
               (e) A  direct  rollover  is a payment by the Plan to the eligible
retirement plan specified by the distributee.
               (f) If a distribution is one to which Sections 401(a)(11) and 417
of the Code do not apply, such distribution may commence less than 30 days after
the notice  required under Section  1.411(a)-11(c)  of the Regulations is given,
provided that:
                   (1)  the  Committee  clearly informs the Participant that the
Participant  has a right to a period  of at least 30 days  after  receiving  the
notice to consider the decision of whether or not to elect a distribution  (and,
if applicable, a particular distribution option), and
                   (2)  the    Participant,   after    receiving   the   notice,
affirmatively   elects  a distribution.
         11.9  Certain  Securities Law  Restrictions. Any distribution of Shares
pursuant to this Section 11 shall be subject to all applicable  laws,  rules and
regulations and to such approvals by stock exchanges or governmental agencies as
may  be  deemed  necessary  or  appropriate  by the  Board  of  Directors.  Each
distributee may be required to give the Employer a written  representation  that
such  distributee  will not be  involved  in a  violation  of  state or  federal
securities laws,  including the Securities Act of 1933, as amended;  the form of
such written representation will be prescribed by the Board of Directors.
         11.10  Participant Loans.
               (a) Upon  a  Participant's  written  request  the  Committee  may
direct the Trustee to make a loan to such  Participant  from such  Participant's
Account.  Loans  to  Participants  pursuant  to  this  Section  11.10  shall  be
administered by the Committee and shall be subject to a Participant  Loan Policy
and such other  procedures as may be adopted from time to time by the Committee.
The Company shall not have the  discretion to refuse a loan request,  so long as
the terms of the loan comply with the requirements of this Section 11.10 and the
Participant  Loan  Policy.  The  terms of the loan  shall be  determined  by the
Committee,  subject  to the  limits  set  forth in this  Section,  and  shall be
evidenced  by the  Participant's  promissory  note.  Loans  shall  be  held in a
segregated   Account  of  the  Trust.  An  Employee  who  has  made  a  Rollover
Contribution  shall be  considered a  Participant  for purposes of this Section,
even if such Employee has not yet become a Participant pursuant to Section 3.
               (b) The  aggregate   outstanding  balance   of  all  loans  to  a
Participant  from this  Plan and all other  qualified  plans  maintained  by the
Employer,  when added to any principal  repayments on any participant loans made
within the twelve-month period preceding the date on which the loan is made, may
not exceed the lesser of (i)  $50,000 or (ii) 50% of the vested  interest in the
Participant's Account as of the day of making the loan.
               (c) Principal  and  interest  shall be repaid in level,  periodic
installments  by payroll  deductions  not less  frequent than  quarterly  over a
definite period of time not to exceed five (5) years, provided, however, that in
the case of a loan the proceeds of which are used by the  Participant to acquire
a principal  residence  of the  Participant,  the loan may be  repayable  over a
reasonable  period  of time in excess  of five (5)  years as  determined  by the
Committee.
               (d) All  loans  shall  be secured by a lien on the  Participant's
interest in the trust. The amount of the loan may not exceed fifty percent (50%)
of the value of the Participant's vested Account balance at the time the loan is
made.  The Committee may determine  that any  distribution  made pursuant to the
Plan shall be reduced by an amount up to the outstanding  principal and interest
balance of the loan.
               (e) Any  loan  made  pursuant  to  this  Section  11.10  must not
constitute a prohibited transaction as defined in Section 4975 of the Code.
               (f) Loan repayments will be suspended under the Plan as permitted
under Section  414(u)(4) of the Code.

<PAGE>

                    SECTION 12. MAXIMUM AMOUNT OF ALLOCATION

         12.1  Section 415  Limitations.  Annual  additions  to a  Participant's
Account with respect to any Plan Year may not exceed the  limitations  set forth
in Section 415 of the Code,  which are  incorporated  herein by  reference.  For
these  purposes,  (i)  "annual  additions"  shall have the  meaning set forth in
Section  415(c)(2)  of the  Code,  as  modified  elsewhere  in the  Code and the
Regulations,  (ii) the limitation year shall mean the Plan Year unless any other
twelve  consecutive month period is designated  pursuant to a written resolution
adopted by the Employer,  (iii) "compensation" shall have the meaning elected by
the  Employer  pursuant  to  Section  415(c)(3)  of the Code,  and (iv)  "annual
additions" shall include annual  additions under all other defined  contribution
plans maintained by the Employer or any Affiliated Employer.  Effective for Plan
Years  beginning on or after January 1, 1998,  "compensation"  shall be computed
without reduction for a Participant's elective deferrals under Section 402(g)(3)
of the Code or for  contributions  made by the Employer or the Participant under
Section 125 of the Code. If the  requirements  of Section  7.5(a) are satisfied,
the term  "annual  additions"  shall not  include  any  amounts  credited to the
Participant's  Account (i) resulting  from rollover  contributions,  (ii) due to
Participating  Employer contributions relating to interest payments on an Exempt
Loan deductible under Section 404(a)(9)(B) of the Code, or (iii) attributable to
a forfeiture of Shares acquired with the proceeds of an Exempt Loan.
         Effective for limitation  years commencing prior to January 1, 1999, if
a  Participant  in the Plan also  participates  in any defined  benefit plan (as
defined in Sections 414(j) and 415(k) of the Code) maintained by the Employer or
any  Affiliated  Employer,  in the  event  that in any Plan  Year the sum of the
Participant's  Defined Benefit Fraction (as defined in Section  415(e)(2) of the
Code) and the Participant's Defined Contribution Fraction (as defined in Section
415(e)(3) of the Code) exceed 1.0, the benefit  under such defined  benefit plan
or plans  shall be reduced in  accordance  with the  provisions  of that plan or
those plans,  so that the sum of such fractions with respect to the  Participant
will not exceed 1.0. If this  reduction  does not ensure that the limitation set
forth in Section 12.1 is not exceeded,  then the annual  addition to any defined
contribution  plan, other than the Plan, shall be reduced in accordance with the
provisions  of that plan but only to the extent  necessary  to ensure  that such
limitation is not exceeded.
         12.2  Refund or Forfeiture of Amounts in Excess of Section 415 Limits.
               (a) In  the  event   that   amounts  which   would  otherwise  be
allocated to a Participant's Account under the Plan must be reduced by reason of
the  limitations  of  Section  12.1,  then such  reduction  shall be made in the
following order or priority, but only to the extent necessary:
                   (i)   first the  Participant's  Profit Sharing  Contributions
shall be forfeited and reallocated pursuant to this Section 12.2; and then
                   (ii)  the  Participant's  Matching  Contributions  shall   be
forfeited and reallocated pursuant to this Section 12.2; and then
                   (iii) the  Participant's  Elective  Contributions  shall   be
refunded to the Participant; and then
                   (iv)  Shares   allocated  to   the   Participant's    Account
attributable to ESOP Contributions  shall be forfeited and reallocated  pursuant
to this Section 12.2.
               (b) Forfeitures  arising  under  the  Plan  and allocable to such
Participant in respect of such Plan Year shall be reallocated to the Accounts of
other  Participants  as of the end of the Plan Year for which such  reduction is
made in the manner provided under Section 4.5 above.
               (c) If,  with  respect  to  any  Plan  Year,  there  is an excess
contribution on account of the  limitations  contained in this Section 12.2, and
such excess cannot be fully allocated in accordance with Section 12.2(b) because
of the  limitations  prescribed  in this  Section  12, the amount of such excess
which  cannot be so  allocated  shall be held in suspense  and  allocated in the
succeeding Plan Year prior to any other  contributions  by the Employer for such
Plan Year.

<PAGE>

                SECTION 13. VOTING AND TENDER OR EXCHANGE RIGHTS

         13.1  Voting and Tender or  Exchange  of Shares in  General.  Except as
otherwise  required  by the Act,  the Code and the  Regulations,  all voting and
tender or exchange  rights of Shares  held in  Participants'  Accounts  shall be
exercised by the Purchasing  Agent only as directed by the Participants or their
Beneficiaries or as otherwise provided in accordance with the provisions of this
Section 13.
         13.2  Voting of Allocated Shares.
               (a) If   any  Participating   Employer  has  a  registration-type
class  of  securities  (as  defined  in  Section  409(e)(4)  of the  Code or any
successor  statute  thereto),  then,  with  respect  to  all  corporate  matters
submitted to shareholders, all Shares (including fractional interests in Shares)
allocated  and  credited  to the  Accounts  of  Participants  shall  be voted in
accordance  with the directions of such  Participants as given to the Purchasing
Agent;  provided  that (i) with  regard to Shares  allocated  to ESOP  Accounts,
allocated  Shares for which no directions are received by the  Purchasing  Agent
shall be voted in the same proportion as allocated  Shares for which  directions
are received are voted pursuant to this Section 13.2, and (ii) Shares  allocated
to Accounts other than ESOP Accounts for which no directions are received by the
Purchasing Agent shall not be voted.
               (b) If no Participating  Employer  has  a registration-type class
of  securities  (as defined in Section  409(e)(4)  of the Code or any  successor
statute  thereto),  then, only with respect to corporate  matters  relating to a
corporate   merger   or   consolidation,   recapitalization,   reclassification,
liquidation,  dissolution,  sale of  substantially  all  assets  of a  trade  or
business, or such other similar transaction that Regulations require, all Shares
allocated  and  credited  to the  Accounts  of  Participants  shall  be voted in
accordance  with the directions of such  Participants as given to the Purchasing
Agent;  provided  that (i) with respect to Shares  allocated  to ESOP  Accounts,
allocated  Shares for which no directions are received by the  Purchasing  Agent
shall be voted in the same proportion as allocated  Shares for which  directions
are received are voted pursuant to this Section 13.2, and (ii) Shares  allocated
to Accounts other than ESOP Accounts for which no directions are received by the
Purchasing Agent shall not be voted.
         13.3  Mechanics of Voting Allocated Shares.If Participants are entitled
under Section 13.2 to direct the vote with respect to allocated Shares, then, at
least 30 days  before  each  annual  or  special  shareholders'  meeting  of the
Employer (or, if such  schedule  cannot be met, as early as  practicable  before
such meeting), the Committee shall cause each Participant to be furnished with a
copy of the proxy solicitation material sent generally to shareholders, together
with a form requesting confidential  instructions concerning the manner in which
the Shares allocated to such Participant's  Account are to be voted. Upon timely
receipt of such  instructions,  the Purchasing  Agent (after  combining votes of
fractional   Shares  to  give  effect  to  the  greatest   extent   possible  to
Participants'   instructions)   shall  vote  the  Shares  as   instructed.   The
instructions  received by the Purchasing  Agent from each  Participant  shall be
held by the Purchasing  Agent in strict  confidence and shall not be divulged or
released to any person, including, without limitation, any officers or Employees
of any  Participating  Employer,  or of any other  Employer.  The  Trustee,  the
Employer,  the Purchasing Agent and the Committee shall not make recommendations
to Participants concerning whether to vote or how to vote.
         13.4  Voting of Unallocated  Shares. With respect to unallocated Shares
held in the Trust Fund,  absent specific  instructions from the Trustee or other
fiduciary pursuant to the Trust Agreement,  the Purchasing Agent shall vote such
Shares in the same  proportion  as Shares are voted  pursuant  to Section  13.2;
provided that the Purchasing Agent shall follow any directions of the Trustee or
any other  fiduciary  authorized  to instruct  the Trustee  with  respect to the
voting of such unallocated Shares under the Trust Agreement.
         13.5  Tender  or  Exchange  of  Allocated  Shares.  The Committee shall
notify each  Participant  of each  tender or  exchange  offer for the Shares and
utilize  its best  efforts  to  distribute  or cause to be  distributed  to each
Participant in a timely manner all  information  distributed to  shareholders of
the  Employer  in  connection  with any such  tender  or  exchange  offer.  Each
Participant  shall have the right  from time to time with  respect to the Shares
allocated  to the  Participant's  Account to instruct  the  Purchasing  Agent in
writing as to the manner in which to  respond  to any tender or  exchange  offer
which  shall be pending or which may be made in the future for all Shares or any
portion  thereof.  A  Participant's  instructions  shall  remain in force  until
superseded by the  Participant.  The  Purchasing  Agent shall tender or exchange
whole Shares only as and to the extent so instructed.  If the  Purchasing  Agent
does not  receive  instructions  from a  Participant  regarding  any  tender  or
exchange offer for Shares, the Purchasing Agent shall have no discretion in such
matter and shall not tender or exchange any such Shares in response thereto. For
purposes of responding to such tender or exchange offers, each Participant shall
be the "named  fiduciary"  with  respect to such Shares  allocated to his or her
Account.  Unless and until  Shares are  tendered or  exchanged,  the  individual
instructions received by the Purchasing Agent from Participants shall be held by
the Purchasing Agent in strict  confidence and shall not be divulged or released
to any person, including,  without limitation,  any officers or Employees of any
Participating  Employer, or of any other Employer;  provided,  however, that the
Purchasing  Agent shall advise the Employer,  at any time upon  request,  of the
total number of Shares not subject to instructions to tender or exchange.
         13.6  Tender  or Exchange of  Unallocated   Shares.   Absent   specific
instructions  from  the  Trustee  or  other  fiduciary  pursuant  to  the  Trust
Agreement,  the  Purchasing  Agent shall tender  unallocated  Shares held in the
Trust Fund in proportion to the ratio that (A) the number of Shares with respect
to which  Participant  instructions  favor of the tender or  exchange  have been
received  bears to (b) the number of Shares  with  respect to which  Participant
instructions for or against the tender or exchange have been received;  provided
that the  Purchasing  Agent shall  follow any  directions  of the Trustee or any
other fiduciary authorized to instruct the Trustee with respect to the tender or
exchange of unallocated Shares under the Trust Agreement.
         13.7  Voting  of  Deceased  Participant's  Shares.  If this  Section 13
applies to Shares  allocated  to the  Account of a  deceased  Participant,  such
Participant's  Beneficiary  shall be  entitled  to direct the manner in which to
respond  to any  tender  or  exchange  offer  as if such  Beneficiary  were  the
Participant.

<PAGE>

                    SECTION 14. DESIGNATION OF BENEFICIARIES

         14.1  Designation of Beneficiary. Each Participant  shall file with the
Committee a written  designation of one or more persons as the  Beneficiary  who
shall be entitled to receive the amount, if any, payable under the Plan upon his
or her death.  A  Participant  may from time to time revoke or change his or her
Beneficiary designation without the consent of any prior Beneficiary by filing a
new designation with the Committee.  The last such  designation  received by the
Committee  shall be controlling;  provided,  however,  that no  designation,  or
change  or  revocation  thereof,  shall  be  effective  unless  received  by the
Committee  prior  to the  Participant's  death,  and  in no  event  shall  it be
effective  as of a date  prior  to such  receipt.  A  Participant's  Beneficiary
designation  shall not be effective to the extent that payments to the Surviving
Spouse  are  required  pursuant  to  Section  11,  and in no  event  shall it be
effective as of a date prior to such receipt.
         14.2  Failure  to  Designate  Beneficiary.   If   no  such  Beneficiary
designation  is in  effect  at  the  time  of a  Participant's  death,  or if no
designated  Beneficiary survives the Participant,  the payment of the amount, if
any,  payable  under  the  Plan  upon  his or her  death  shall  be  made to the
Participant's  Surviving  Spouse, if any; or if the Participant has no Surviving
Spouse, then to the Participant's  children,  if any, in equal shares; or if the
Participant  has no children,  to the  Participant's  parents,  if any, in equal
shares; or if the Participant has no parents, to the Participant's  brothers and
sisters, if any, in equal shares. If the Participant has no brothers or sisters,
payment shall be made to the Participant's  estate. If the Committee is in doubt
as to the right of any person to receive such amount,  the  Committee may direct
the Trustee to retain such amount,  without  liability for any interest thereon,
until the rights thereto are determined, or the Committee may direct the Trustee
to pay such amount into any court of appropriate  jurisdiction  and such payment
shall be a complete  discharge  of the  liability of the Plan and the Trust Fund
therefor.

<PAGE>

                     SECTION 15. ADMINISTRATION OF THE PLAN

         15.1  The  Committee.  The Committee shall have general  responsibility
for  the  administration,  interpretation  and  construction  of the  Plan.  The
Committee shall be responsible for  establishing  and maintaining  Plan records,
including  responsibility for compliance with the Actual Deferral Percentage and
Actual Contribution  Percentage tests described in Sections 4.6 and 5.3, and the
Committee  shall be responsible  for complying with the reporting and disclosure
requirements  of the Act. The Committee  shall report to the Board of Directors,
or to a  committee  of the  Board of  Directors  designated  for  that  purpose,
periodically  as shall be specified by the Board of Directors or such designated
committee,  with  regard to the matters  for which it is  responsible  under the
Plan.
         15.2  The Trustee.  Except as otherwise provided in the Trust Agreement
or the Plan, the Trustee may act only as directed by the Committee, the Employer
or any other party, as applicable.  The Trustee shall have responsibility  under
the Plan for the management and control of the assets of the Plan. The Committee
shall  periodically  review the  performance  and  methods of the  Trustee.  The
Employer or the Committee shall have the power to appoint,  remove or change the
Trustee  and, to the extent that the Trust Fund is invested in assets other than
Shares,  shall  have the  power to  appoint  or  remove  one or more  investment
advisers  and to delegate to such adviser  authority  and  discretion  to manage
(including the power to acquire and dispose of) the assets of the Plan, provided
that (i) such adviser with such authority and discretion  shall be either a bank
or a registered  investment  adviser under the Investment  Advisers Act of 1940,
and shall acknowledge in writing that it is a fiduciary with respect to the Plan
and (ii) the Committee shall periodically review the investment  performance and
methods of each  adviser(s)  with such authority and  discretion.  The Committee
shall  establish  investment  standards and policies and communicate the same to
the Trustee.  If annuities  are to be purchased  under the Plan,  the  Committee
shall   determine  what  contracts   should  be  made  available  to  terminated
Participants or purchased by the Trust Fund.
         15.3  Committee's Responsibility for  Entering  into  Exempt  Loans and
Valuation of Shares.  The Committee shall have  responsibility for directing the
Trustee as to whether  and under what terms it shall  enter into an Exempt  Loan
and for  directing  the  Purchasing  Agent whether and under what terms it shall
purchase or otherwise dispose of Shares. In the event that there is no generally
recognized  market for Shares,  the Committee  shall be the named fiduciary with
responsibility  for determining  the fair market value of the Shares,  provided,
that any such determination shall be in accordance with applicable  Regulations,
if any,  and the  Committee  shall,  in  making  such  determination,  retain an
independent  appraiser  to make such  valuation  on behalf of the  Committee  in
accordance with Section 7.9.
         15.4  Committee's Power to Engage Outside  Experts.  The  Committee may
arrange for the  engagement  of such legal  counsel,  who may be counsel for the
Employer,  and make use of such agents and  clerical or other  personnel as they
each shall require or may deem advisable for purposes of the Plan. The Committee
may rely upon the written opinion of such counsel and the accountants engaged by
the Committee and may delegate to any such agent of said Committee its authority
to perform  any act  hereunder,  including  without  limitation,  those  matters
involving the exercise of  discretion,  provided that such  delegation  shall be
subject to  revocation  at any time at the  discretion  of said  Committee.  The
Committee shall engage such certified public accountants, who may be accountants
for the Employer,  as it shall require or may deem advisable for purposes of the
Plan.
         15.5  Composition of Committee. The Committee shall consist of at least
three members, each of whom shall be appointed by, shall remain in office at the
will of, and may be removed,  with or without cause,  by the Board of Directors.
Any member of said Committee may resign at any time. No member of said Committee
shall be entitled to act on or decide any matter  relating  solely to himself or
any of his or her  rights  or  benefits  under  the  Plan.  The  members  of the
Committee  shall not  receive  any  special  compensation  for  serving in their
capacities  as  members  of such  Committee  but  shall  be  reimbursed  for any
reasonable  expenses  incurred  in  connection  therewith.  Except as  otherwise
required by the Act, no bond or other security need be required of the Committee
or any member thereof in any jurisdiction.  Any member of the Committee,  or any
agent to whom said Committee  delegates any  authority,  and any other person or
group of  persons,  may serve in more  than one  fiduciary  capacity  (including
service both as a Trustee and administrator) with respect to the Plan.
         15.6  Actions  of Committee. The Committee shall elect or designate its
own  chairman,  establish  its own  procedures  and the time and  place  for its
meetings and provide for the keeping of minutes of all  meetings.  A majority of
the members of the Committee  shall  constitute a quorum for the  transaction of
business at a meeting of the Committee. Any action of the Committee may be taken
upon the  affirmative  vote of a majority of the members of the  Committee  at a
meeting  or, at the  direction  of its  Chairman,  without a  meeting,  by mail,
telephone or  facsimile,  provided  that all of the members of the Committee are
informed by mail or  telephone of their right to vote on the proposal and of the
outcome of the vote thereon.
         15.7  Disbursement of Plan Funds. The Committee  shall cause to be kept
full and accurate  accounts of receipts  and  disbursements  of the Plan,  shall
cause to be  deposited  all funds of the Plan to the name and credit of the Plan
in such  depositories  as may be designated by the Committee,  shall cause to be
disbursed  the monies and funds of the Plan when so  authorized by the Committee
and shall  generally  perform  such other duties as may be assigned to them from
time to time by the Committee.
         15.8  Application  for  Benefits.   Each  Participant  or   Beneficiary
believing  himself  eligible  for  benefits  under the Plan shall apply for such
benefits by completing and filing with the Committee an application for benefits
on a form supplied by the Committee.  Before the date on which benefit  payments
commence,  each such  application must be supported by such information and data
as the Committee deems relevant and appropriate. Evidence of age, marital status
(and, in the appropriate instances, health, death or disability) and location of
residence  shall be  required of all  applicants  for  benefits.  All claims for
benefits under the Plan shall, within a reasonable period of time, be decided by
one or more persons designated in writing by the chairman of the Committee.
         15.9  Denied  Claims  for  Benefits.  In  the  event that any claim for
benefits is denied in whole or in part, the  Participant  or  Beneficiary  whose
claim has been so denied  shall be  notified  of such  denial in  writing by the
Committee. The notice advising of the denial shall specify the reason or reasons
for denial,  make specific reference to pertinent Plan provisions,  describe any
additional  material or  information  necessary  for the claimant to perfect the
claim  (explaining  why such material or information is needed) and shall advise
the  Participant  or  Beneficiary,  as the case may be, of the procedure for the
appeal of such denial. All appeals shall be made by the following procedure:
               (a) The  Participant or  Beneficiary  whose claim has been denied
shall  file with the  Committee  a notice of desire to appeal the  denial.  Such
notice shall be filed within sixty (60) days of notification by the Committee of
claim denial, shall be made in writing and shall set forth all of the facts upon
which the appeal is based. Appeals not timely filed shall be barred.
               (b) The Committee shall, within thirty (30)  days of  receipt  of
the Participant's or Beneficiary's notice of appeal, establish a hearing date on
which  the  Participant  or  Beneficiary  may make an oral  presentation  to the
Committee in support of his or her appeal.  The Participant or Beneficiary shall
be given not less than ten (10) days' notice of the date set for the hearing.
               (c) The  Committee  shall  consider  the merits of the claimant's
written and oral  presentations,  the merits of any facts or evidence in support
of the  denial  of  benefits  and such  other  facts  and  circumstances  as the
Committee  shall  deem  relevant.  If the  claimant  elects  not to make an oral
presentation,  such  election  shall not be  deemed  adverse  to the  claimant's
interest,  and the Committee  shall proceed as set forth below as though an oral
presentation  of the contents of the claimant's  written  presentation  had been
made.
               (d) The   Committee  shall   render   a  determination  upon  the
appealed claim which  determination  shall be accompanied by a written statement
as to the reasons  therefor.  The  determination so rendered shall be binding on
all parties.
               (e) For all  purposes  under  the Plan,  such decisions on claims
(where  no  review is  requested)  and  decisions  on  review  (where  review is
requested) shall be final,  binding and conclusive on all interested  persons as
to participation and benefit eligibility,  the Employee's amount of Compensation
and any other matter of fact or interpretation relating to the Plan.
         15.10 Indemnification.   To  the  maximum  extent  permitted by law, no
member of the Committee shall be personally  liable by reason of any contract or
other  instrument  executed  by such  member of the  Committee  or on his or her
behalf in the Committee  member's capacity as a member of such Committee nor for
any mistake of judgment made in good faith, and the Employer shall indemnify and
hold  harmless,  directly  from its own assets  (including  the  proceeds of any
insurance policy the premiums of which are paid from the Employer's own assets),
each member of the Committee and each other officer, employee or director of the
Employer  to  whom  any  duty  or  power  relating  to  the   administration  or
interpretation of the Plan or to the management and control of the assets of the
Plan may be  delegated  or  allocated,  against  any cost or expense  (including
counsel fees) or liability (including any sum paid in settlement of a claim with
the  approval  of the  Employer)  arising  out of any act or  omission to act in
connection  with the Plan  unless  arising  out of such  person's  own  fraud or
willful  misconduct.  The Employer shall advance funds for legal expenses to the
extent permitted by the Act.
         15.11 Agent  for Service of Process. The Committee or such other person
as may from time to time be designated  by the Committee  shall be the agent for
service of process under the Plan.

<PAGE>

                              SECTION 16. EXPENSES

         16.1  Payment of Plan Expenses. The expenses incurred in the management
and  administration of the Plan shall be paid from the Trust Fund, except to the
extent the  Employer,  in its sole  discretion,  may choose to pay such expenses
from time to time; provided that any Trustee expenses paid to The Charles Schwab
Trust Company  shall be payable  solely by the  Employer.  Such  expenses  shall
include  (i) the fees and  expenses of any  employee  and of the Trustee for the
performance  of their  duties under the Plan and Trust Fund  (including  but not
limited to  obtaining  investment  advice,  record  keeping  services  and legal
services),  (ii) the  expenses  incurred by the members of the  Committee in the
performance of their duties under the Plan  (including  reasonable  compensation
for any legal counsel, certified public accountants, consultants and agents, and
cost of services  rendered  with respect to the Plan) and (iii) all other proper
charges  and  disbursements  of the  Trustee  or the  members  of the  Committee
(including  settlements  of claims or legal  actions  approved by counsel to the
Plan).
         16.2  Expenses Attributable to  Investment  of Plan  Assets  and Taxes.
Brokerage fees,  transfer taxes and any other expenses  incident to the purchase
or sale of  securities  by the Trustee shall be deemed to be part of the cost of
such securities,  or deducted in computing the proceeds  therefrom,  as the case
may be. Expenses attributable to investments of the Trust Fund shall be paid out
of the Trust Fund,  except to the extent the Employer,  in its sole  discretion,
may  choose  to pay such  expenses  from  time to time;  provided  that  expense
entirely  attributable to any one investment or to any one investment fund shall
be  allocated  pro rata in  accordance  with  Account  balances  among  Accounts
invested in such  investment or investment  fund.  Taxes, if any, of any and all
kinds  whatsoever  which are levied or  assessed  on any  assets  held or income
received by the Trustee shall be paid out of the Trust Fund.

<PAGE>

                       SECTION 17. EMPLOYER PARTICIPATION

         17.1  Adoption  of Plan by Affiliated Employer. Any Affiliated Employer
may adopt the Plan and the Trust Fund by resolution of its board of directors or
equivalent  governing  body  provided  that (i) the Board of  Directors  has not
expressly disallowed participation by such Affiliated Employer in the Plan; (ii)
the Affiliated Employer has not previously  expressly declined to participate in
the Plan; or (iii) the Affiliated  Employer is not precluded from  participating
in  the  Plan  by  a  legally  binding  written  document  that  precludes  such
participation; and provided further that the Board of Directors consents to such
adoption.  Any  Affiliated  Employer which so adopts the Plan shall be deemed to
appoint  Charles Schwab & Co., Inc., the Committee and the Trustee its exclusive
agents to exercise on its behalf all of the power and authority  conferred under
the Plan or the Trust Agreement. This authority shall continue until the Plan is
terminated and the relevant Trust Fund assets have been distributed.
         17.2  Termination of Participation   by   Participating   Employer.   A
Participating Employer may terminate its participation in the Plan by giving the
Committee prior written notice  specifying a termination date which shall be the
last day of a month  at least 60 days  subsequent  to the date  such  notice  is
received  by  the   Committee.   The  Board  of  Directors   may  terminate  any
Participating  Employer's  participation in the Plan, as of any termination date
specified by the  Committee,  for the failure of the  Participating  Employer to
make proper contributions or to comply with any other provision of the Plan.
         17.3  Effect of Termination of Participation by Participating Employer.
Upon  termination  of  the  Plan  as  to  any   Participating   Employer,   such
Participating  Employer shall not make any further  contributions under the Plan
and no amount shall  thereafter  be payable under the Plan to or with respect to
any  Participants  then  employed  by such  Participating  Employer,  except  as
provided in this  Section 17. To the maximum  extent  permitted  by the Act, any
rights of Participants no longer employed by such Participating  Employer and of
former  Participants  and their  Beneficiaries  and Surviving  Spouses and other
eligible  survivors  under the Plan shall be unaffected by such  termination and
any transfer,  distribution  or other  disposition  of the assets of the Plan as
provided  in this  Section  17 shall  constitute  a  complete  discharge  of all
liabilities  under  the  Plan  with  respect  to such  Participating  Employer's
participation   in  the  Plan  and  any   Participant   then  employed  by  such
Participating Employer.
               The  interest  of  each such  Participant  who is in Service with
such  Participating  Employer as of the termination date is the amount,  if any,
credited to his or her Account  after  payment of or provision  for expenses and
charges and appropriate  adjustment of the Accounts of all such Participants for
expenses and charges as described  in Section 16, and all  forfeitures  shall be
nonforfeitable  as of the termination date, and upon receipt by the Committee of
IRS approval of such termination, the full current value of such amount shall be
paid from the Trust Fund in the manner  described in Section 17.4 or transferred
to a successor  employee benefit plan which is qualified under Section 401(a) of
the Code;  provided,  however,  that in the event of any transfer of assets to a
successor  employee  benefit plan the provisions of Section 17.4 will apply.  No
advances  against such payments shall be made prior to such receipt of approval,
but after such receipt the  Committee,  in its sole  discretion,  may direct the
Trustee to make one or more advances in accordance with Section 11.1.
               All  determinations,  approvals  and  notifications  referred  to
above  shall be in form and  substance  and  from a source  satisfactory  to the
Committee.  To the maximum extent  permitted by the Act, the  termination of the
Plan as to any  Participating  Employer  shall not in any way  affect  any other
Participating Employer's participation in the Plan.
         17.4  Limitations on Transfer  of Plan  Assets to  Successor  Plan.  No
transfer of the Plan's assets and  liabilities to a successor  employee  benefit
plan (whether by merger or consolidation  with such successor plan or otherwise)
shall  be made  unless  each  Participant  would,  if  either  the  Plan or such
successor  plan  then  terminated,  receive  a benefit  immediately  after  such
transfer  which (after taking account of any  distributions  or payments to such
Participants  as part of the same  transaction)  is equal to or greater than the
benefit such Participant would have been entitled to receive  immediately before
such  transfer  if the Plan had then been  terminated.  The  Committee  may also
request appropriate  indemnification from the employer or employers  maintaining
such successor plan before making such a transfer.
         17.5  Shares Allocated to Suspense Fund Excluded  from Transfer of Plan
Assets to Successor  Plan.  Notwithstanding  any provision of this Section 17 to
the  contrary,  any  Shares  allocated  to  a  Suspense  Subfund  shall  not  be
transferred  to a  successor  employee  benefit  plan  except as is  required or
permitted by the  Committee in  accordance  with the terms of an Exempt Loan and
the Regulations.

<PAGE>

                SECTION 18. AMENDMENT OR TERMINATION OF THE PLAN

         18.1  Amendment, Suspension or Termination of Plan.
               (a) Subject  to  the   provisions  of  Section  18.1(b)  and  (c)
hereof,  the board of directors  of the Plan  Sponsor  reserves the right at any
time to suspend or terminate  the Plan,  any  contributions  thereunder,  or any
other  agreement or arrangement  forming a part of the Plan, in whole or in part
and for any reason,  and to adopt any  amendment or  modification  thereto,  all
without the consent of any  Participating  Employer,  Participant,  Beneficiary,
Surviving  Spouse or other  eligible  survivor.  Subject  to the  provisions  of
Section 18.1(b) and (c) hereof, the Board of Directors reserves the right at any
time to amend or modify the Plan. Each Participating Employer by its adoption of
the Plan  shall be  deemed  to have  delegated  this  authority  to the Board of
Directors.
               (b) The  Board of  Directors  shall  not  make any  amendment  or
modification  which  would (i)  retroactively  impair any rights to any  benefit
under the Plan which any  Participant,  Beneficiary,  Surviving  Spouse or other
eligible  survivor  would  otherwise  have had at the date of such  amendment by
reason of the  contributions  theretofore  made or (ii) make it possible for any
part of the funds of the Plan (other than such part as is required to pay taxes,
if any, and administration expenses as provided in Section 16) to be used for or
diverted to any purposes  other than for the exclusive  benefit of  Participants
and their Beneficiaries and Surviving Spouses and other eligible survivors under
the Plan prior to the satisfaction of all liabilities with respect thereto.
         18.2  Power   to   Retroactively  Amend,  Suspend  or   Terminate  Plan
Provisions.   Subject  to  the   provisions  of  Section  18.1,  any  amendment,
modification, suspension or termination of any provision of the Plan may be made
retroactively  if necessary or  appropriate to qualify or maintain the Plan as a
plan  meeting  the  requirements  of  Sections  401(a)  of the Code or any other
applicable  provision of law  (including  the Act) as now in effect or hereafter
amended or adopted and the Regulations issued thereunder.
         18.3  Notice of Amendment,  Suspension  or  Termination.  Notice of any
amendment, modification, suspension or termination of the Plan shall be given by
the Board of Directors or the board of  directors  of the Plan  Sponsor,  as the
case may be, to the Trustee and all Participating Employers.
         18.4  Effect of Termination of Plan. Upon  termination  of the Plan, no
Participating  Employer shall make any further  contributions under the Plan and
no amount shall  thereafter  be payable under the Plan to or with respect to any
Participant  except as  provided in this  Section 18, and to the maximum  extent
permitted by the Act,  transfers or  distributions  of the assets of the Plan as
provided  in this  Section  18 shall  constitute  a  complete  discharge  of all
liabilities  under the Plan.  The provisions of the Plan which are necessary for
the operation of the Plan and the  distribution or transfer of the assets of the
Plan shall remain in force.
               Upon   receipt  by   the   Committee  of  IRS  approval  of  such
termination,  the full current value of such adjusted amount, and the full value
of each account described in Sections 6.2 and 7.1 above,  shall be paid from the
Trust Fund to each  Participant and former  Participant (or, in the event of the
death of a  Participant  or  former  Participant,  to the  Surviving  Spouse  or
Beneficiary  thereof)  in any  manner of  distribution  specified  in Section 11
above, including payments which are deferred until the Participant's termination
of Service,  as the Committee shall  determine.  Without limiting the foregoing,
any  such  distribution  may be made in cash or in  property,  or  both,  as the
Committee in its sole discretion may direct.
               All determinations, approvals and notifications referred to above
shall be in form and substance and from a source satisfactory to the Committee.
         18.5  Partial Termination of Plan.  In the event that any  governmental
authority,  including  without  limitation  the IRS,  determines  that a partial
termination (within the meaning of the Act) of the Plan has occurred or if there
is a complete  discontinuance of Employer contributions then (i) the interest of
each   Participant   affected  thereby  in  his  or  her  Account  shall  become
nonforfeitable  as  of  the  date  of  such  partial   termination  or  complete
discontinuance  of contributions  and (ii) the provisions of Sections 18.2, 18.3
and 18.4 above,  which in the opinion of the  Committee  are  necessary  for the
execution of the Plan and the allocation and  distribution  of the assets of the
Plan, shall apply.
         18.6  Trust  for Exclusive  Benefit of  Participant.  In no event shall
any part of the Trust Fund (other than such part as is required to pay taxes, if
any, and administration expenses as provided in Section 16 above) be used for or
diverted to any purposes  other than for the exclusive  benefit of  Participants
and their Beneficiaries and Surviving Spouses under the Plan.

<PAGE>

                     SECTION 19. TOP-HEAVY PLAN REQUIREMENTS

         19.1  Top-Heavy Plan-In General.  For any Plan Year for which this Plan
is  a  Top-Heavy   Plan,   the   provisions  of  this  Section  19  shall  apply
notwithstanding any other provisions of the Plan.
         19.2  Effect of Top-Heavy  Status.  Each  Participant who (i) is a Non-
Key  Employee  and (ii) is employed  on the last day of the Plan Year,  shall be
entitled to have contributions  allocated to his or her Account of not less than
three percent (3%) of the Participant's  Compensation (the "Minimum Contribution
Percentage")  regardless  of (i) whether such Non-Key  Employee has  completed a
Year of Service,  and (ii) the amount of such Non-Key  Employee's  Compensation;
provided,  however,  that the minimum contribution  percentage for any Plan Year
shall not exceed the percentage at which  contributions  are made under the Plan
for the Plan Year for the Key Employee for whom such  percentage  is the highest
for such Plan Year.  For this purpose,  such  percentage  shall be determined by
dividing the  contributions  made for such Key Employee by so much of his or her
Compensation (which solely for this purpose includes Elective Contributions made
by the  Employer  for the Key  Employee)  for the Plan  Year as does not  exceed
$150,000   (adjusted   automatically   for  increases  in  accordance  with  the
Regulations).
               Contributions  taken  into  account under this Section 19.2 shall
include  contributions under this Plan and under all other defined  contribution
plans (as defined in Section  414(i) of the Code)  required to be included in an
Aggregation Group; provided,  however, that such contributions shall not include
(i) contributions to any defined  contribution plan in the required  aggregation
group if such contributions  enable such a defined contribution plan to meet the
requirements  of  Sections  401(a)(4)  or 410 of the Code or (ii)  contributions
under the Social Security Act or any other federal or state law.
         19.3  Top-Heavy Vesting Schedule.
         In the event that the Plan is a Top-Heavy Plan, all contributions shall
be vested according to the following vesting schedule:

       Years of Service                                       Percentage
       ----------------                                       ----------
       Less than two years                                        0%
       At least two years but less than three years              20%
       At least three years but less than four years             50%
       At least four years but less than five years              75%
       Five years or more                                       100%

         19.4  Definitions.
               (a) "Top-Heavy Plan"  means this Plan for any Plan Year if, as of
the  Determination   Date,  (i)  the  present  value  of  the  Accounts  of  all
Participants who are Key Employees  (excluding former Key Employees)  exceeds 60
percent of the present value of all Participants' Accounts (excluding former Key
Employees) or (ii) the Plan is required to be in an Aggregation  Group which for
such Plan Year is a Top-Heavy Group. In determining whether the Plan constitutes
a Top-Heavy Plan, the Committee shall make the following adjustments:
                   (i)   When more than one plan is aggregated,   the  Committee
shall  determine  separately  for each plan as of any  Determination  Date,  the
present value of accrued  benefits of all Participants and the value of Accounts
of all Participants.
                   (ii)  Any such determination shall include the present  value
of  distributions  made  to  former   Participants  under  the  applicable  plan
(including  a  terminated  plan)  during  the  five-year  period  ending  on the
Determination Date, unless reflected in the value of the accrued benefits or the
Accounts of such former Participants as of the Determination Date.
                   (iii) Any  such  determination   shall  include  any Rollover
Contribution from any other plan as follows:
                         (A) If the Rollover  Contribution  is initiated by  the
Employee and made to or from a plan maintained by a corporation  which is not an
Affiliated  Employer,  the plan  providing the  distribution  shall include such
distribution in the value of such accrued benefit or Account.
                         (B) If  the  Rollover  Contribution  is  not  initiated
by the Employee or made from a plan  maintained by an Affiliated  Employer,  the
plan accepting the distribution  shall include such distribution in the value of
such accrued benefit or Account.
               (b) "Determination  Date" means for any Plan Year the last day of
the next preceding Plan Year.
               (c) "Aggregation  Group"  means  all  plans  maintained   by  the
Employer or any  Affiliated  Employer  which are  required to be  aggregated  or
permitted to be aggregated. For purposes of this Section 19.4(c),
                   (i)   The group of plans that are required to  be  aggregated
(the  "required  aggregation  group")  includes each plan of the Employer or any
Affiliated  Employer in which a Key  Employee is a  Participant,  and each other
plan of the Employer or any Affiliated  Employer which enables a plan in which a
Key Employee is a Participant to meet the requirements of Sections  401(a)(4) or
410 of the Code; and
                   (ii)  The group of plans that are  permitted to be aggregated
(the "permissive  aggregation  group") includes the required  aggregation  group
plus one or more plans of the Employer or any  Affiliated  Employer  that is not
part of the  required  aggregation  group and that the  Committee  certifies  as
constituting a plan within the permissive  aggregation group. Such plan or plans
may  be  added  to the  permissive  aggregation  group  only  if the  permissive
aggregation group would continue to meet the requirements of Sections  401(a)(4)
and 410 of the Code.
               (d) "Top Heavy Group" means the  Aggregation  Group, if as of any
Determination  Date, the sum of (i) the present value of the accrued benefits of
all  Participants  who are Key Employees under all defined benefit plans (within
the meaning of Section  414(j) of the Code)  included in the  Aggregation  Group
plus (ii) the aggregate  value of the Accounts of all  Participants  who are Key
Employees  under all defined  contribution  plans (within the meaning of Section
414(i) of the Code) included in the Aggregation  Group exceeds 60 percent of the
sum of (i) the  present  value  of the  accrued  benefits  for all  Participants
(excluding former Key Employees), under all such defined benefit plans plus (ii)
the aggregate value of the Accounts of all  Participants  (excluding  former Key
Employees) under all such defined  contribution  plans. If the Aggregation Group
that is a  Top-Heavy  Group is a required  aggregation  group,  each plan in the
Aggregation  Group will be a Top-Heavy Plan. If the Aggregation  Group that is a
Top-Heavy  Group is a permissive  aggregation  group,  only those plans that are
part of the required  aggregation  group will be treated as a Top-Heavy Plan. If
the Aggregation  Group is not a Top-Heavy Group, no plan within such Aggregation
Group will be a Top-Heavy Plan.
                   For  purposes  of  Section  19.4(a),   the  present  value of
accrued  benefits under any defined benefit plan and the value of Accounts under
any defined  contribution plan shall be determined as of the Valuation Date that
is coincident with the Determination Date in accordance with the Regulations.
               (e) "Key  Employee"  means  any  Employee or former Employee who,
at any time during the Plan Year preceding the Determination  Date or during any
of the four preceding Plan Years, is or was one of the following:
                   (i)   An officer of the Employer or any Affiliated   Employer
having annual  compensation  (within the meaning of Section  414(q)(4))  greater
than 50 percent of the amount in effect under Section  415(b)(1)(A)  of the Code
for any Plan Year (as adjusted for increases in the cost of living in accordance
with the  Regulations).  For purposes of the preceding  sentence  there shall be
treated as officers for any such Plan Year no more than the lesser of:
                         (A) 50 Employees, or
                         (B) the  greater  of three  Employees  or 10 percent of
the Employees of the Employer or any Affiliated Employer;
                   (ii)  One  of  the  ten  Employees  owning  (or considered as
owning  within the meaning of Section 318 of the Code) more than a five  percent
(5%) interest and one of the largest interests in the Employer or any Affiliated
Employer.  An Employee will not be considered such an owner for any Plan Year if
the Employee's  compensation  (within the meaning of Section  414(q)(4)) is less
than $30,000 (as adjusted for increases in the cost of living in accordance with
the  Regulations);  for purposes of  determining  ownership  pursuant to Section
19.4(e)(ii)  the aggregation  rules of Section  414(b),  (c) and (m) of the Code
apply.
                   (iii) Any  person who owns (or  considered  as owning  within
the meaning of Section 318 of the Code) more than a five percent interest in the
Employer;
                   (iv)  Any  person  having  compensation  (within  the meaning
of Section 414(q)(4)) of more than $150,000, and owning (or considered as owning
within the meaning of Section 318 of the Code) more than a one percent  interest
in the Employer.  For purposes of this Section  19.4(e),  a Beneficiary of a Key
Employee shall be treated as a Key Employee and the interests  inherited by such
Beneficiary shall be treated the same as if owned by the Key Employee.
               (f) "Non-Key Employee" means any "Non-Key Employee" as defined in
Section 416(i)(2) of the Code and the Regulations promulgated thereunder.
         19.5  Maintenance of Defined Benefit Plan in Addition to Plan.
         Effective for limitation years commencing  prior to January 1, 2000, in
the event that the Plan is a Top-Heavy  Plan for any Plan Year and the  Employer
also maintains a defined  benefit plan (within the meaning of Section 414 of the
Code) which  provides  benefits on behalf of  Participants,  then one of the two
following provisions shall apply:
               (1) If  the  Plan  is a  Top-Heavy  Plan  for any  Plan  Year but
would  not be a  "Top-Heavy  Plan"  for  the  Plan  Year  if "90  percent"  were
substituted  for "60  percent" in Section  19.4(a),  then  Section 19.2 shall be
applied for such Plan Year by substituting "four percent" for "three percent."
               (2) If  a   Top-Heavy  Plan  would  continue  to be a  "Top-Heavy
Plan" for the Plan Year if "90 percent" were substituted for "60 percent",  then
the  denominator of the defined  contribution  plan fraction shall be calculated
for such Plan Year by substituting "1.0" for "1.25",  except with respect to any
Participant who is not entitled to an allocation of Employer  contributions  and
does not receive any accruals under any defined benefit plan (within the meaning
of Section 414(j) of the Code) maintained by the Employer.
         In  the  event  that  another  defined  contribution  plan or a defined
benefit plan maintained by the Employer  provides  contributions  or benefits on
behalf of Participants, the Committee shall take such other plan into account as
a part of this Plan to the extent  required by the Code and in  accordance  with
the Regulations.

<PAGE>

                 SECTION 20. GENERAL LIMITATIONS AND PROVISIONS

         20.1  Exclusive Benefit of Participants and Beneficiaries.  In no event
shall any part of the funds of the Plan be used for or diverted to any  purposes
other than for the exclusive  benefit of  Participants  and their  Beneficiaries
under the Plan except as permitted  under  Section  403(c) of the Act.  Upon the
transfer by a Participating  Employer of any money to the Trustee,  all interest
of the Participating Employer therein shall cease and terminate.
         20.2  No Rights to Continued Employment. Nothing  contained in the Plan
shall  give any  employee  the right to be  retained  in the  employment  of the
Employer or any  Affiliated  Employer or affect the right of the Employer or any
Affiliated Employer to dismiss any employee. The adoption and maintenance of the
Plan shall not constitute a contract between the Employer and any employee or be
consideration  for, or an inducement  to or condition of, the  employment of any
employee.
         20.3  Trust Sole Source of  Benefits.  The Trust Fund shall be the sole
source of benefits under the Plan and, except as otherwise  required by the Act,
the Employer and the Committee assume no liability or responsibility for payment
for such benefits, and each Participant,  Surviving Spouse, Beneficiary or other
person who shall claim the right to any payment under the Plan shall be entitled
to look only to the Trust  Fund for such  payment  and shall not have any right,
claim or demand therefor against the Employer, the Committee, or any Participant
thereof, or any employee or director of the Employer.
         20.4  Risk of Decrease in Assets.  Each  Participant,  Beneficiary  and
Surviving  Spouse shall assume all risk in  connection  with any decrease in the
value of the assets of the Trust Fund and the Participants'  Accounts or special
accounts  and  neither  the  Employer  nor the  Committee  shall  be  liable  or
responsible therefor.
         20.5  Incapacity of Participant or Beneficiary. If the Committee  shall
find that any person to whom any  amount is payable  under the Plan is unable to
care for his or her affairs  because of illness or accident,  or is a minor,  or
has died, then any payment due such person or his or her estate shall be made to
his or her duly  appointed  legal  representative.  Any such payment  shall be a
complete discharge of the liability of the Plan and the Trust Fund therefor.
         20.6  Antialienation; Qualified Domestic Relations Orders.
               (a) Except  insofar  as  may  otherwise  be  required  by  law or
pursuant to the terms of a Qualified  Domestic  Relations Order, as set forth in
this Section  20.5,  no amount  payable at any time under the Plan and the Trust
Fund  shall be  subject  in any  manner to  alienation  by  anticipation,  sale,
transfer,  assignment,  bankruptcy, pledge, attachment, charge or encumbrance of
any kind nor in any manner be subject to the debts or liabilities of any person,
and any attempt to so alienate or subject any such amount,  whether presently or
thereafter  payable,  shall be void.  If any person shall  attempt to, or shall,
alienate,  sell, transfer,  assign, pledge, attach, charge or otherwise encumber
any amount payable under the Plan and Trust Fund, or any part thereof,  or if by
reason of his or her  bankruptcy or other event  happening at any such time such
amount  would  be made  subject  to his or her  debts  or  liabilities  or would
otherwise not be enjoyed by such person,  then the  Committee,  if it so elects,
may direct that such amount be withheld and that the same or any part thereof be
paid or applied to or for the benefit of such person.
               (b) Upon receipt of notification of any judgment, decree or order
(including  approval of a property  settlement  agreement)  which relates to the
provision of child support,  alimony  payments,  or marital property rights of a
spouse,  former spouse,  child, or other dependent of a Participant and which is
made pursuant to a state domestic  relations law (including a community property
law) (herein referred to as a "domestic  relations order"),  the Committee shall
(i) notify the  Participant  and any  prospective  Alternate  Payee named in the
order of the receipt and date of receipt of such domestic relations order and of
the Plan's procedures for determining the status of the domestic relations order
as a Qualified  Domestic  Relations Order,  and (ii) within a reasonable  period
after  receipt of such  order,  determine  whether it  constitutes  a  Qualified
Domestic Relations Order. The Plan's procedures for the determination of whether
a domestic  relations  order  constitutes a Qualified  Domestic  Relations Order
shall  be set  forth  by  the  Committee  in  writing,  shall  provide  for  the
notification  of each person  specified  in that order as entitled to payment of
benefits  under the Plan (at the  address  included  in the  domestic  relations
order)  of such  procedures  promptly  upon  receipt  by the  Committee  of such
domestic  relations order,  and shall permit the prospective  Alternate Payee to
designate a representative for receipt of copies of notices that are sent to the
prospective Alternate Payee with respect to a domestic relations order.
               (c) During  any  period  in which the issue of whether a domestic
relations order is a Qualified  Domestic Relations Order is being determined (by
the Committee,  by a court of competent jurisdiction,  or otherwise),  including
the period  beginning on the date of the Committee's  receipt of the order,  the
Committee  shall  segregate  in a  separate  account in the Plan or in an escrow
account held by a Trustee the amounts,  if any, which would have been payable to
the  Alternate  Payee  during  such period if the order had been  determined  to
constitute a Qualified  Domestic  Relations Order,  provided that if no payments
would  otherwise  be made  under  the  Plan  to the  Alternate  Payee  or to the
Participant or a Beneficiary of the Participant while the status of the order as
a Qualified Domestic Relations Order is being determined,  no segregation into a
separate or escrow account shall be required.  If a domestic  relations order is
determined  to be a Qualified  Domestic  Relations  Order within  eighteen  (18)
months of the date of its receipt by the Committee (or from the beginning of any
other period during which the issue of its being a Qualified  Domestic Relations
Order is being determined by the Committee) the Committee shall cause to be paid
to the persons  entitled  thereto the amounts,  if any,  held in the separate or
escrow account referred to above in one lump sum. If a domestic  relations order
is determined not be a Qualified  Domestic  Relations Order, or if the status of
the domestic  relations  order as a Qualified  Domestic  Relations  Order is not
finally  resolved  within such eighteen month period,  the Committee shall cause
the separate  account or escrow  account  balance to be returned,  with interest
thereon, to the Participant's  Account or to be paid to the person or persons to
whom  such  amount  would  have  been  paid if there  had been no such  domestic
relations order,  whichever shall apply. Any subsequent  determination that such
domestic  relations  order is a  Qualified  Domestic  Relations  Order  shall be
prospective in effect only.
               (d) (i)   Benefits payable to an Alternate Payee shall be payable
in one lump sum and in no event shall such benefits continue beyond the lifetime
of the Alternate  Payee.  Such payment may be made at the time  specified in the
Qualified  Domestic  Relations Order irrespective of whether the Participant has
attained  the  "earliest   retirement   age"  (within  the  meaning  of  Section
414(p)(4)(B)  of the Code).  In  particular,  no Alternate  Payee shall have the
right with  respect to any  benefit  payable by reason of a  Qualified  Domestic
Relations Order to (A) designate a beneficiary  with respect to amounts becoming
payable under the Plan, (B) elect a method of benefit distribution providing for
benefits   continuing  beyond  the  Alternate  Payee's  lifetime,   (C)  provide
survivorship benefits to a spouse or dependent of such Alternate Payee or to any
other person,  spouse,  dependent or other person,  or (D) transfer rights under
the Qualified Domestic Relations Order by will or by state law of intestacy.
                   (ii)  None of  the  payments,  benefits  or  rights  of   any
Alternate  Payee  shall  be  subject  to any  claim  of any  creditor,  and,  in
particular, to the fullest extent permitted by law, all such payments,  benefits
and rights shall be free from attachment, garnishment, trustee's process, or any
other legal or equitable  process  available  to any creditor of such  Alternate
Payee. No Alternate Payee shall have the right to alienate, anticipate, commute,
pledge,  encumber or assign any of the benefits or payments  which he or she may
expect to receive, contingently or otherwise, under the Plan.
                   (iii) Alternate Payees shall not have any right to (A) borrow
money under any  Participant  loan  provisions  under the Plan, (B) exercise any
Participant  investment  direction  rights or  privileges  under  the Plan,  (C)
exercise  any  other  election,  privilege,  option or  direction  rights of the
Participant  under the Plan except as  specifically  provided  in the  Qualified
Domestic Relations Order, or (D) receive communications with respect to the Plan
except as  specifically  provided by law,  regulation or the Qualified  Domestic
Relations Order.
                   (iv)  Each  Alternate  Payee  shall  advise  the Committee in
writing of each  change of his or her name,  address or marital  status,  and of
each change in the provisions of the Qualified  Domestic  Relations Order or any
circumstance  set forth therein  which may be material to the Alternate  Payee's
entitlement  to benefits  thereunder or the amount  thereof.  Until such written
notice has been  provided to the  Committee,  the  Committee  shall be (A) fully
protected in not complying  with, and in conducting the affairs of the Plan in a
manner  inconsistent  with,  the  information  set forth in the notice,  and (B)
required to act with respect to such notice prospectively only, and then only to
the extent provided for in the Qualified Domestic Relations Order. The Committee
shall  not be  required  to  modify  or  reverse  any  payment,  transaction  or
application of funds occurring  before the receipt of any notice that would have
affected  such  payment,  transaction  or  application  of funds,  nor shall the
Committee  or any other  party be liable for any such  payment,  transaction  or
application of funds.
                   (v)   Except as  specifically  provided  for in the Qualified
Domestic  Relations  Order,  an Alternate Payee shall have no right to interfere
with the exercise by the Participant or by any  Beneficiary of their  respective
rights, privileges and obligations under the Plan.
               (e) For purposes  of this  Plan,  a Qualified  Domestic Relations
Order means any judgment,  decree,  or order  (including  approval of a property
settlement  agreement)  which has been determined by the Committee in accordance
with procedures  established under the Plan, to constitute a qualified  domestic
relations  order  within  the  meaning  of  Section  414(p)(1)  of the  Code and
Alternate  Payee  means any person  entitled  to  current  or future  payment of
benefits under the Plan pursuant to a Qualified Domestic Relations Order.
         20.7  Inability to Locate Participant or Beneficiary.  If the Committee
cannot  ascertain the  whereabouts  of any person to whom a payment is due under
the Plan,  and if,  after five years from the date such payment is due, a notice
of such payment due is mailed to the last known address of such person, as shown
on the records of the Committee or the  Employer,  and within three months after
such mailing such person has not made written claim therefor, the Committee,  if
it so elects,  may direct that such payment and all remaining payments otherwise
due to such person be canceled on the records of the Plan and the amount thereof
applied to reduce the contributions of the Employer, and upon such cancellation,
the Plan and the Trust Fund shall,  to the maximum extent  permitted by the Act,
have no further  liability  therefor except that, in the event such person later
notifies  the  Committee of his or her  whereabouts  and requests the payment or
payments due to such person under the Plan,  the amount so applied shall be paid
to him or her as provided in Section 11. All elections, designations,  requests,
notices,   instructions,   and  other   communications  from  the  Employer,   a
Participant,  Beneficiary,  Surviving  Spouse or other  person to the  Committee
required or permitted under the Plan shall be in such form as is prescribed from
time to time by the Committee,  shall be mailed or delivered to such location as
shall be specified by the Committee,  and shall be deemed to have been given and
delivered only upon actual receipt thereof by the Committee at such location.
         20.8  Failure  to  Receive  IRS Approval.   Notwithstanding  any  other
provision  herein,  if this  Plan  shall  not be  approved  by the IRS under the
provisions of the Code and the Regulations for any reason (including  failure to
comply with any condition for such  approval  imposed by the IRS)  contributions
made  after  the  restatement  of this Plan and  prior to such  denial  shall be
returned, without any liability to any person, within one year after the date of
denial of such approval.
         20.9  Contributions Conditioned on Deductibility.  Notwithstanding  any
other  provision  herein,  all  contributions  to the Trust  Fund are  expressly
conditioned  upon  their  deductibility  under  Section  404 of the Code and the
Regulations, and in the event of the final disallowance of the deduction for any
contribution,  in whole or in part,  then such  contribution  (to the extent the
deduction is disallowed)  shall upon direction of the Committee,  which shall be
given  in  conformity  with the  provisions  of the Act,  be  returned,  without
liability to any person, within one year after such final disallowance.
         20.10 Mistake of Fact. Notwithstanding any other provisions  herein, if
any contribution is made by a mistake of fact, such contribution  shall upon the
direction  of the  Committee,  which  shall  be  given  in  conformity  with the
provisions of the Act, be returned,  without liability to any person, within one
year after the payment of such contribution.
         20.11 Communications with  Committee.   All  elections,   designations,
requests, notices,  instructions,  and other communications from the Employer, a
Participant,  Beneficiary,  Surviving  Spouse or other  person to the  Committee
required or permitted under the Plan shall be in such form as is prescribed from
time to time by such Committee, shall be mailed by first-class mail or delivered
to such location as shall be specified by such Committee, and shall be deemed to
have been given and delivered only upon actual receipt thereof by such Committee
at such location.
         20.12 Communications with Participants and Beneficiaries.  All notices,
statements,  reports and other communications from the Employer or the Committee
to any Employee,  Participant,  Surviving  Spouse,  Beneficiary  or other person
required  or  permitted  under the Plan  shall be deemed to have been duly given
when  delivered  to, or when mailed by  first-class  mail,  postage  prepaid and
addressed to, such Employee, Participant, Surviving Spouse, Beneficiary or other
person at his or her address last appearing on the records of the Committee.
         20.13 Prior Service  Credit.  Upon  such  terms and  conditions  as the
Committee may approve, and subject to any required IRS approval, benefits may be
provided  under the Plan to a  Participant  with  respect  to any  period of the
Participant's  prior employment by any organization,  and such benefits (and any
Service  credited with respect to such period of employment  under Section 2.25)
may be provided  for,  in whole or in part,  by funds  transferred,  directly or
indirectly  (including a rollover from an individual retirement account), to the
Trust Fund from an employee  benefit plan of such  organization  which qualified
under Section 401(a) of the Code.
         20.14 Gender  and  Number.  Except  where  otherwise  required  by  the
context,  whenever used in the Plan the masculine  gender  includes the feminine
and the singular shall include the plural.
         20.15 Headings.  The  captions  preceding the Sections of the Plan have
been inserted  solely as a matter of  convenience  and in no way define or limit
the scope or intent of any provisions of the Plan.
         20.16 Governing  Law.  The  Plan  and all  rights  thereunder  shall be
governed  by and  construed  in  accordance  with the Act and, to the extent not
inconsistent therewith, the laws of the State of California.
         20.17 Severability of Provisions. If any provision of the Plan shall be
held invalid or  unenforceable,  such invalidity or  unenforceability  shall not
affect any other provisions hereof, and the Plan shall be construed and enforced
as if such provisions had not been included.
         20.18 Heirs,  Assigns and Personal  Representatives.  The Plan shall be
binding upon the heirs, executors, administrators, successors and assigns of the
parties, including each Participant and Beneficiary,  present and future and all
persons for whose benefit there exists any QDRO with respect to any  Participant
(except that no successor to the Plan Sponsor shall be considered a Plan Sponsor
unless that successor adopts the Plan).
         20.19 Reliance on  Data and Consents.  The Plan Sponsor,  the Employer,
each participating Employer, the Board of Directors, the Committee, the Trustee,
all  fiduciaries  with  respect to the Plan,  and all other  persons or entities
associated with the operation of the Plan, the management of its assets, and the
provision of benefits thereunder, may reasonably rely on the truth, accuracy and
completeness  of  all  data  provided  by  any  Participant,  Surviving  Spouse,
Beneficiary,  and Alternate  Payee,  including,  without  limitation,  data with
respect to age, health and marital status.  Furthermore,  the Plan Sponsor,  the
Employer,  each participating  Employer, the Board of Directors,  the Committee,
the Trustee, and all fiduciaries with respect to the Plan may reasonably rely on
all consents, elections and designations filed with the Plan or those associated
with the operation of the Plan and its  corresponding  Trust by any Participant,
Surviving  Spouse,  Beneficiary,  Alternate Payee, or any  representative of any
such person,  without duty to inquire into the  genuineness of any such consent,
election  or  designation.  None  of  the  aforementioned  persons  or  entities
associated with the operation of the Plan, its assets and the benefits  provided
under the Plan shall have any duty to  inquire  into any such data,  and all may
rely on such data being current to the date of  reference,  it being the duty of
the  Participants,  Surviving  Spouses,  Beneficiaries  and Alternate  Payees to
advise the appropriate parties of any change in such data.
         20.20 Qualified Military Service. Notwithstanding any provision of this
Plan to the contrary, contributions, benefits and service credit with respect to
qualified military service will be provided in accordance with Section 414(u) of
the Code.

<PAGE>

                SECTION 21. APPLICATION TO PUERTO RICO EMPLOYEES

         21.1  Modifications  Applicable to Puerto Rico.  The provisions of this
Section  shall  govern  the  application  of  the  provisions  of  the  Plan  to
Participants  who  are  employed  by the  Company  in and are  residents  of the
Commonwealth of Puerto Rico ("Puerto Rico Participants"):
               (a) Notwithstanding  Section  2.25,  the  definition  of  "Highly
Compensated  Participant"  shall be a Puerto  Rico  Participant  employed by the
Company who  receives  Compensation  that exceeds the  Compensation  paid to two
thirds of the Puerto Rico  Participants,  as  provided in Section  165(e) of the
Puerto Rico Income Tax Act;
               (b) The following  shall apply in lieu of the second  sentence of
Section 5.1(a) hereof: The Salary Reduction Agreement shall provide for Elective
Contributions  equal to any whole  percentage  between one percent  (1%) and ten
Percent (10%) of a  Participant's  Compensation  in any payroll  period,  not to
exceed $7,500 (reduced by any  contributions  made by the Participant to an IRA)
in any calendar year;
               (c) The Actual Deferral  Percentage Test set forth in Section 5.3
shall be applied  separately  with  respect  to Puerto  Rico  Participants.  For
purposes  of  applying  the  Actual  Deferral  Percentage  Test to  Puerto  Rico
Participants,  the  definition  of  Highly  Compensated  Employee  contained  in
subparagraph (a) hereof shall be used; and
               (d) For  purposes  of  applying subparagraphs (b) and (c) of this
Section 21.1, the definition of Compensation  contained in Section 2.11 shall be
applied without regard to clause (xii) thereof.
               In  all  other  respects,  the  terms of this Plan shall apply to
Puerto Rico Participants.364-DAY CREDIT AGREEMENT

                               $200,000,000 CREDIT
                          AND COMPETITIVE BID FACILITY

                                      AMONG

                               OCEAN ENERGY, INC.,

                           CREDIT SUISSE FIRST BOSTON,
                    Individually and as Administrative Agent,

                           CREDIT SUISSE FIRST BOSTON,
                        as Auction Administrative Agent,

                             BANK OF AMERICA, N.A.,
                     Individually, and as Syndication Agent,

                   CHASE BANK OF TEXAS, NATIONAL ASSOCIATION,
                    Individually, and as Documentation Agent,

                                       AND

                        THE OTHER BANKS SIGNATORY HERETO

                                November 9, 1999

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

                           CREDIT SUISSE FIRST BOSTON,
                     as Lead Arranger and Sole Book Manager

<PAGE>

                                                  TABLE OF CONTENTS

Section 1.          Definitions and Accounting Matters.......................1
         1.1        Certain Defined Terms....................................1
         1.2        Accounting Terms and Determinations.....................18
         1.3        Types of Loans..........................................18
         1.4        Miscellaneous...........................................18

Section 2.          Commitments; Competitive Bid Facility...................18
         2.1        Committed Loans.........................................18
                    (a)    Revolving Loans..................................18
                    (b)    Term Loans.......................................19
         2.2        Extension of Revolving Commitment Termination Date and
                           Revolving Commitments............................19
         2.3        Reductions and Changes of Commitments...................21
         2.4        Fees....................................................22
         2.5        Affiliates; Lending Offices.............................22
         2.6        Several Obligations.....................................22
         2.7        Repayment of Loans; Evidence of Debt....................23
         2.8        Use of Proceeds.........................................23
         2.9        Competitive Bid Procedure...............................23

Section 3.          Borrowings, Prepayments and Selection of
                           Interest Rates...................................25
         3.1        Borrowings..............................................25
         3.2        Prepayments.............................................26
         3.3        Selection of Interest Rates.............................26

Section 4.          Payments of Principal and Interest......................26
         4.1        Repayment of Loans......................................26
         4.2        Interest................................................27

Section 5.          Payments; Pro Rata Treatment; Computations, Etc.........27
         5.1        Payments................................................27
         5.2        Pro Rata Treatment......................................28
         5.3        Computations............................................28
         5.4        Minimum and Maximum Amounts.............................28
         5.5        Certain Actions, Notices, Etc...........................29
         5.6        Non-Receipt of Funds by Administrative Agent............30
         5.7        Sharing of Payments, Etc................................30

Section 6.          Yield Protection and Illegality.........................31
         6.1        Additional Costs........................................31
         6.2        Limitation on Types of Loans............................32
         6.3        Illegality..............................................33
         6.4        Substitute Alternate Base Rate Loans....................33
         6.5        Compensation............................................34
         6.6        [Intentionally omitted].................................34
         6.7        Capital Adequacy........................................34
         6.8        Limitation on Additional Charges; Substitute Banks;
                           Non-Discrimination...............................35

Section 7.          Conditions Precedent....................................35
         7.1        Initial Loans...........................................35
         7.2        Initial and Subsequent Loan.............................37

Section 8.          Representations and Warranties..........................38
         8.1        Corporate Existence.....................................38
         8.2        Corporate Power and Authorization.......................38
         8.3        Binding Obligations.....................................38
         8.4        No Legal Bar or Resultant Lien..........................39
         8.5        No Consent..............................................39
         8.6        Financial Condition.....................................39
         8.7        Investments and Guaranties..............................39
         8.8        Liabilities and Litigation..............................40
         8.9        Taxes and Governmental Charges..........................40
         8.10       Title to Properties.....................................40
         8.11       Defaults................................................40
         8.12       Location of Businesses and Offices......................40
         8.13       Compliance with Law.....................................41
         8.14       Margin Stock............................................41
         8.15       Subsidiaries............................................41
         8.16       ERISA...................................................41
         8.17       Investment Company Act..................................42
         8.18       Public Utility Holding Company Act......................42
         8.19       Environmental Matters...................................42
         8.20       Claims and Liabilities..................................43
         8.21       Solvency................................................43
         8.22       Year 2000...............................................43

Section 9.          Affirmative Covenants...................................43
         9.1        Financial Statements and Reports........................43
         9.2        Officers' Certificates..................................45
         9.3        Taxes and Other Liens...................................45
         9.4        Maintenance.............................................46
         9.5        Further Assurances......................................46
         9.6        Performance of Obligations..............................46
         9.7        Reimbursement of Expenses...............................46
         9.8        Insurance...............................................47
         9.9        Accounts and Records....................................48
         9.10       Notice of Certain Events................................48
         9.11       ERISA Information and Compliance........................49

Section 10.         Negative Covenants......................................50
         10.1       Debts, Guaranties and Other Obligations.................50
         10.2       Liens...................................................53
         10.3       Dividend Payment Restrictions...........................56
         10.4       Mergers and Sales of Assets.............................56
         10.5       Proceeds of Loans.......................................57
         10.6       ERISA Compliance........................................57
         10.7       Total Leverage Ratio....................................57
         10.8       Senior Leverage Ratio...................................57
         10.9       Minimum Net Worth.......................................57
         10.10      Nature of Business......................................57
         10.11      Covenants in Other Agreements...........................58

Section 11.         Defaults................................................58
         11.1       Events of Default.......................................58
         11.2       [Intentionally omitted].................................60
         11.3       [Intentionally omitted].................................60
         11.4       Right of Setoff.........................................60

Section 12.         Agents..................................................61
         12.1       Appointment, Powers and Immunities......................61
         12.2       Reliance by Agents......................................62
         12.3       Defaults................................................62
         12.4       Rights as a Bank........................................62
         12.5       Indemnification.........................................63
         12.6       Non-Reliance on Agents and Other Banks..................63
         12.7       Failure to Act..........................................64
         12.8       Resignation or Removal of Administrative Agent..........64

Section 13.         Miscellaneous...........................................64
         13.1       Waiver..................................................64
         13.2       Notices.................................................65
         13.3       Indemnification.........................................65
         13.4       Amendments, Etc.........................................66
         13.5       Successors and Assigns..................................66
         13.6       Limitation of Interest..................................70
         13.7       Survival................................................71
         13.8       Captions................................................71
         13.9       Counterparts............................................71
         13.10      GOVERNING LAW; FORUM SELECTION; CONSENT TO JURISDICTION.71
         13.11      WAIVER OF JURY TRIAL; PUNITIVE DAMAGES..................72
         13.12      Severability............................................72
         13.13      [Intentionally omitted].................................72
         13.14      Confidential Information................................73
         13.15      Tax Forms...............................................73
         13.16      Entire Agreement........................................74

<PAGE>

EXHIBITS:

Exhibit A           Unrestricted Subsidiaries
Exhibit B           Form of Request for Extension of Credit
Exhibit C           Subsidiaries (with Addresses)
Exhibit D           Form of Compliance Certificate
Exhibit E           Assignment and Acceptance
Exhibit F           Form of Competitive Bid Request
Exhibit G           Form of Notice to Banks of Competitive Bid Request
Exhibit H           Form of Competitive Bid
Exhibit I           Form of Competitive Bid Administrative Questionnaire
Exhibit J           Form of Certificate of Extension
Exhibit K           Form of Guaranty Agreement
Exhibit L           Disclosure Statement
Exhibit M           Commitments

<PAGE>

                            364-DAY CREDIT AGREEMENT

This  364-DAY  CREDIT  AGREEMENT,  dated as of November  9, 1999 (the  Effective
Date"), is by and among OCEAN ENERGY,  INC. ("the Company"),  a corporation duly
organized and validly existing under the laws of the State of Texas, each of the
banks  which  is or which  may  from  time to time  become  a  signatory  hereto
(individually,  a "Bank" and,  collectively,  the "Banks"),  CREDIT SUISSE FIRST
BOSTON  ("CSFB"),  as  Administrative  Agent for the  Banks  (in such  capacity,
together with its successors in such capacity,  "Administrative  Agent"), CREDIT
SUISSE  FIRST  BOSTON,  as Auction  Administrative  Agent for the Banks (in such
capacity, the "Auction  Administrative  Agent"), BANK OF AMERICA, N.A. ("Bank of
America"),   as  Syndication  Agent  for  the  Banks  (in  such  capacity,   the
"Syndication Agent"), and CHASE BANK OF TEXAS,  NATIONAL ASSOCIATION  ("Chase"),
as  Documentation  Agent  for the Banks (in such  capacity,  the  "Documentation
Agent").

The parties hereto agree as follows:

Section 1. Definitions and Accounting Matters.

1.1 Certain  Defined Terms.  As used herein,  the following terms shall have the
following meanings (all terms defined in this Section 1.1 or in other provisions
of this  Agreement  in the singular to have the same  meanings  when used in the
plural and vice versa):

"Accepting Banks" shall have the meaning set forth in Section 2.2(c).

"Additional  Costs" shall have the meaning  ascribed to such term in Section 6.1
hereof.

"Affiliate"  shall mean,  as to any Person,  any other Person which  directly or
indirectly controls,  or is under common control with, or is controlled by, such
Person and, if such Person is an individual,  any member of the immediate family
(including parents,  siblings,  spouse, children,  stepchildren,  grandchildren,
nephews and nieces) of such individual and any trust whose principal beneficiary
is such  individual  or one or more  members  of such  immediate  family and any
Person  who is  controlled  by any  such  member  or  trust.  As  used  in  this
definition, "control" (including, with correlative meanings, "controlled by" and
"under common control with") shall mean possession,  directly or indirectly,  of
power to  direct or cause the  direction  of  management  or  policies  (whether
through ownership of securities or partnership or other ownership interests,  by
contract or otherwise).

"Agents" shall mean the Administrative Agent, the Auction  Administrative Agent,
the Documentation Agent and the Syndication Agent,  together with any successors
in any such capacities.

<PAGE>

"Agreement"  shall mean this 364-Day  Credit  Agreement,  as such agreement from
time to time may be amended,  amended and  restated,  supplemented  or otherwise
modified.

"Alternate  Base Rate"  shall  mean,  for any day, a rate per annum equal to the
higher  of  (a)the  Prime  Rate in  effect on such day or (b) 1/2 of 1% plus the
Federal Funds Rate in effect for such day (rounded upwards, if necessary, to the
nearest 1/16th of 1%). For purposes hereof, "Federal Funds Rate" shall mean, for
any period, a fluctuating interest rate per annum equal for each day during such
period  to the  weighted  average  of  the  rates  on  overnight  Federal  funds
transactions  with  members of the Federal  Reserve  System  arranged by Federal
funds brokers, as published for such day (or, if such day is not a Business Day,
for the next  preceding  Business Day) by the Federal  Reserve Bank of New York,
or, if such rate is not so  published  for any day which is a Business  Day, the
average  of the  quotations  for  such  day on  such  transactions  received  by
Administrative  Agent from three Federal  funds  brokers of recognized  standing
selected by it. For purposes of this Agreement, any change in the Alternate Base
Rate due to a change  in the  Federal  Funds  Rate  shall  be  effective  on the
effective  date of such  change in the  Federal  Funds  Rate.  If for any reason
Administrative  Agent  shall  have  determined  (which  determination  shall  be
conclusive and binding,  absent  manifest  error) that it is unable to ascertain
the  Federal  Funds Rate for any  reason,  including,  without  limitation,  the
inability  or  failure  of  Administrative  Agent to obtain  sufficient  bids or
publications in accordance with the terms hereof,  the Alternate Base Rate shall
be the Prime Rate  until the  circumstances  giving  rise to such  inability  no
longer exist. For the purposes hereof, "Prime Rate" shall mean the prime rate as
announced from time to time by Administrative  Agent, and thereafter  entered in
the minutes of  Administrative  Agent's  Loan and  Discount  Committee.  Without
notice  to the  Company  or any  other  Person,  the  Prime  Rate  shall  change
automatically  from time to time as and in the  amount by which  said prime rate
shall  fluctuate.  The Prime Rate is a reference  rate and does not  necessarily
represent   the  lowest  or  best  rate   actually   charged  to  any  customer.
Administrative  Agent  may make  commercial  loans  or  other  loans at rates of
interest at, above or below the Prime Rate.  For purposes of this  Agreement any
change in the  Alternate  Base Rate due to a change in the Prime  Rate  shall be
effective on the date such change in the Prime Rate is announced.

"Alternate Base Rate Loans" shall mean Loans which bear interest at a rate based
upon the Alternate Base Rate.

"Applicable Lending Office" shall mean, for each Bank and for each Type of Loan,
such office of such Bank (or of an Affiliate of such Bank) as such Bank may from
time to time  specify to  Administrative  Agent and the Company as the office by
which its Loans of such Type are to be made and/or issued and maintained.

"Applicable  Margin" shall mean, on any day, with respect to any Alternate  Base
Rate Loan or Eurodollar  Loan, the applicable per annum  percentage set forth at
the appropriate intersection in the table shown below, based on the Rating as of
the close of business on the preceding Business Day:

<PAGE>
<TABLE>
<CAPTION>

               =============================== ================================ ============================
<S>            <C>                             <C>                              <C>
                                                     Alternate Base Rate              Eurodollar Loan
                          Rating                   Loan Applicable Margin            Applicable Margin
               ------------------------------- -------------------------------- ----------------------------
               ------------------------------- -------------------------------- ----------------------------

               BBB-/Baa3 and higher                        0.000%                         1.075%
               ------------------------------- -------------------------------- ----------------------------
               ------------------------------- -------------------------------- ----------------------------

               BB+/Ba1                                     0.250%                         1.250%
               ------------------------------- -------------------------------- ----------------------------
               ------------------------------- -------------------------------- ----------------------------

               BB/Ba2                                      0.500%                         1.500%
               ------------------------------- -------------------------------- ----------------------------
               ------------------------------- -------------------------------- ----------------------------

               BB-/Ba3 and lower                           0.750%                         1.750%
               =============================== ================================ ============================
</TABLE>

"Assignment and Acceptance" shall have the meaning set forth in Section 13.5(b).

"Bankruptcy Code" shall mean the United States Bankruptcy Code, as amended,  and
any successor statute.

"Business Day" shall mean any day other than a day on which commercial banks are
authorized  or required to close in Houston,  Texas or New York,  New York,  and
where such term is used in the  definition of  "Quarterly  Date" in this Section
1.1 or if such day  relates  to a  borrowing  of, a  payment  or  prepayment  of
principal of or interest on, or an Interest  Period for, a Eurodollar  Loan or a
notice by the Company with respect to any such borrowing, payment, prepayment or
Interest  Period, a day which is also a day on which dealings in Dollar deposits
are carried out in the relevant interbank market.

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

"Certificate  of Extension"  shall mean a certificate of Company,  executed by a
Responsible Officer and delivered to the Administrative  Agent, in substantially
the form of  Exhibit  J,  which  requests  an  extension  of the then  scheduled
Revolving Commitment Termination Date pursuant to Section 2.2.

<PAGE>

"Change of Control" shall mean a change  resulting when any Unrelated  Person or
any Unrelated  Persons acting  together which would  constitute a Group together
with any Affiliates or Related Persons  thereof (in each case also  constituting
Unrelated  Persons) shall at any time either (i)  Beneficially Own more than 35%
of the  aggregate  voting power of all classes of Voting Stock of the Company or
(ii) during any period of two consecutive years ending on or after the Effective
Date,  as  determined  as of the last day of each  calendar  quarter  after  the
Effective Date, the individuals (the "Incumbent Directors") who at the beginning
of such period  constituted  the Board of Directors  of the Company  (other than
additions thereto or removals therefrom from time to time thereafter approved by
a vote of the Board of Directors in accordance with the Company's by-laws) shall
cease for any reason to constitute  51% or more of the Board of Directors of the
Company.  As used  herein  (a) "Beneficially  Own" means  "beneficially  own" as
defined in Rule 13d-3 of the Securities Exchange Act of 1934, as amended, or any
successor  provision  thereto;  provided,  however,  that,  for purposes of this
definition, a Person shall not be deemed to Beneficially Own securities tendered
pursuant  to a tender or  exchange  offer made by or on behalf of such Person or
any of such Person's  Affiliates until such tendered securities are accepted for
purchase or exchange;  (b) "Group" means a "group" for purposes of Section 13(d)
of the Securities Exchange Act of 1934, as amended; (c) "Unrelated Person" means
at any time any Person other than the Company or any  Subsidiary  and other than
any trust for any employee  benefit plan of the Company or any Subsidiary of the
Company;  (d) "Related  Person" of any Person shall mean any other Person owning
(1) 5% or more of the outstanding  common stock of such Person or (2) 5% or more
of the Voting Stock of such Person;  and (e) "Voting  Stock" of any Person shall
mean  capital  stock of such Person  which  ordinarily  has voting power for the
election of directors (or persons  performing similar functions) of such Person,
whether at all times or only so long as no senior class of  securities  has such
voting power by reason of any contingency.

"Chapter 1D" shall mean  Chapter 1D of Article  5069 of the Texas Credit  Title,
Title 79, Vernon's Texas Civil Statutes, as amended (formerly Article 5069-1.04,
Vernon's Texas Civil Statutes, as amended).

"Code"  shall  mean the  Internal  Revenue  Code of  1986,  as  amended,  or any
successor statute,  together with all regulations,  rulings and  interpretations
thereof or thereunder by the Internal Revenue Service.

"Commitment Percentage" shall mean, as to any Bank, the percentage equivalent of
a fraction the  numerator of which is the amount of such Bank's  Commitment  and
the  denominator  of which is the  aggregate  amount of the  Commitments  of all
Banks.

"Commitment"  shall mean, as to any Bank,  such Bank's  Revolving  Commitment or
Term Commitment then in effect, as the case may be.

"Committed Loans" shall mean the Revolving Loans and the Term Loans provided for
in Section 2.1 hereof.

"Competitive  Bid"  shall  mean an  offer by a Bank to make a  Competitive  Loan
pursuant to Section 2.9 hereof.

"Competitive  Bid  Administrative  Questionnaire"  shall  mean  a  questionnaire
substantially in the form of Exhibit I hereto.

<PAGE>

"Competitive  Bid Rate" shall  mean,  as to any  Competitive  Bid made by a Bank
pursuant  to  Section  2.9  hereof,  the fixed rate of  interest,  in each case,
offered by the Bank making such Competitive Bid.

"Competitive  Bid  Request"  shall  have the  meaning  ascribed  to such term in
Section 2.9 hereof.

"Competitive Loans" shall mean loans provided for in Section 2.9 hereof.

"Consolidated   Net  Worth"   means,   with  respect  to  the  Company  and  its
Subsidiaries,  the sum of preferred  stock (if any),  par value of common stock,
capital  in  excess of par value of common  stock and  retained  earnings,  less
treasury  stock (if any),  goodwill,  cost in excess of fair value of net assets
acquired and all other assets that are properly classified as intangible assets,
but plus any expenses associated with the Merger occurring prior to December 31,
1999 and not in  excess  of  $30,000,000  in the  aggregate,  and the  amount of
noncash write downs occurring on or after January 1,  1999 of long-lived  assets
in compliance with GAAP or SEC guidelines,  and excluding any  extraordinary  or
non-recurring  net gains or losses together with any related provision for taxes
on  such  gain or  loss,  realized  in  connection  with  any  extraordinary  or
nonrecurring  gains  or  losses,  and plus or  minus,  as  appropriate,  foreign
currency translation adjustments, all as determined on a consolidated basis.

"Declining Banks" shall have the meaning set forth in Section 2.2(c).

"Default"  shall mean an Event of Default or an event which with notice or lapse
of time or both would, unless cured or waived, become an Event of Default.

"Disclosure   Statement"  shall  mean  the  Disclosure  Statement  delivered  to
Administrative Agent by the Company and attached as Exhibit L hereto.

"Dividend  Payment" shall mean, with respect to any Person,  dividends (in cash,
property or obligations)  on, or other payments or  distributions on account of,
or the  redemption  of, or the  setting  apart of money  for a sinking  or other
analogous fund for the purchase, redemption, retirement or other acquisition of,
any shares of any class of capital  stock of such  Person,  or the  exchange  or
conversion  of any  shares of any class of capital  stock of such  Person for or
into any  obligations  of or shares of any other class of capital  stock of such
Person or any other property,  but excluding dividends to the extent payable in,
or exchanges or conversions  for or into,  shares of common stock of the Company
or options or warrants to purchase common stock of the Company.

"Dollars" and "$' shall mean lawful money of the United States of America.

<PAGE>

"EBITDAX" shall mean net earnings  (excluding material gains and losses on sales
and  retirement  of  assets,   non-cash  write  downs,  charges  resulting  from
accounting  convention  changes and deductions for exploration  expenses) before
deduction for federal and state taxes,  interest expense (including  capitalized
interest),  operating lease rentals or depreciation,  depletion and amortization
expense,  all determined in accordance  with GAAP;  provided,  however,  for the
purpose of any  calculation,  that (i) for the fiscal  quarter  ending March 31,
1998, EBITDAX shall be deemed to equal $159,765,000, (ii) for the fiscal quarter
ending June 30, 1998, EBITDAX shall be deemed to equal  $142,023,000,  (iii) for
the fiscal quarter ending  September 30, 1998,  EBITDAX shall be deemed to equal
$107,171,000,  (iv) for the fiscal quarter  ending  December 31,  1998,  EBITDAX
shall be deemed to equal  $122,134,000,  and (v) for the fiscal  quarter  ending
March 31, 1999, EBITDAX shall be deemed to equal $117,296,000.

"Environmental Claim" means any third party (including Governmental  Authorities
and  employees)  action,  lawsuit,  claim or  proceeding  (including  claims  or
proceedings  at common  law or under the  Occupational  Safety and Health Act or
similar laws  relating to safety of employees)  which seeks to impose  liability
for (i) noise; (ii) pollution or contamination of the air, surface water, ground
water or land or the clean-up of such pollution or  contamination;  (iii) solid,
gaseous or liquid waste generation,  handling,  treatment,  storage, disposal or
transportation;  (iv) exposure to Hazardous Substances; (v) the safety or health
of employees or (vi) the  manufacture,  processing,  distribution in commerce or
use of Hazardous  Substances.  An  "Environmental  Claim"  includes,  but is not
limited to, a common law action,  as well as a  proceeding  to issue,  modify or
terminate an  Environmental  Permit,  or to adopt or amend a  regulation  to the
extent that such a proceeding  attempts to redress  violations  of an applicable
permit, license, or regulation as alleged by any Governmental Authority.

"Environmental   Liabilities"   includes  all   liabilities   arising  from  any
Environmental  Claim,  Environmental  Permit or Requirement of Environmental Law
under  any  theory  of  recovery,  at law or in  equity,  and  whether  based on
negligence,  strict  liability  or  otherwise,  including  but not  limited  to:
remedial,  removal, response,  abatement,  investigative,  monitoring,  personal
injury and damage to property or  injuries  to  persons,  and any other  related
costs, expenses, losses, damages, penalties, fines, liabilities and obligations,
and all costs  and  expenses  necessary  to cause the  issuance,  reissuance  or
renewal of any  Environmental  Permit including  reasonable  attorneys' fees and
court costs.

"Environmental   Permit"   means  any   permit,   license,   approval  or  other
authorization  under any applicable Legal  Requirement  relating to pollution or
protection of health or the  environment,  including laws,  regulations or other
requirements relating to emissions,  discharges, releases or threatened releases
of pollutants, contaminants or hazardous substances or toxic materials or wastes
into ambient air, surface water,  ground water or land, or otherwise relating to
the manufacture,  processing,  distribution,  use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants or Hazardous Substances.

"ERISA"  shall mean the Employee  Retirement  Income  Security  Act of 1974,  as
amended from time to time, and all rules, regulations and interpretations by the
Internal Revenue Service or the Department of Labor thereunder.

<PAGE>

"ERISA Affiliate" shall mean any trade or business (whether or not incorporated)
which is a member of a group of which any Obligor is a member and which is under
common  control within the meaning of the  regulations  under Section 414 of the
Code.

"Eurodollar  Base Rate" shall mean,  with respect to any Interest Period for any
Eurodollar  Loan,  the  lesser  of (A) the  rate  per  annum  determined  by the
Administrative  Agent at approximately 11:00 a.m., London,  England time, on the
date  that is two (2)  Business  Days  prior to the  beginning  of the  relevant
Interest  Period  by  reference  to the  British  Bankers  Association  Interest
Settlement  Rates for  deposits in U.S.  dollars (as set forth by the  Bloomberg
Information  Service or any successor  thereto or any other service  selected by
the  Administrative  Agent  that  has  been  nominated  by the  British  Bankers
Association  as an authorized  information  vendor for the purpose of displaying
such rates) for a period equal to such Interest Period or (B) the Highest Lawful
Rate;  provided  that, to the extent that an interest rate is not  ascertainable
pursuant to the  foregoing  provisions  of this  definition,  LIBOR shall be the
lesser of (A) the interest rate per annum determined by the Administrative Agent
to be the average of the rates per annum at which  deposits in U.S.  dollars are
offered for such relevant Interest Period to major banks in the London interbank
market  in  London,   England  by  the  Administrative  Agent  at  approximately
11:00 a.m.,  London,  England  time,  on the date that is two (2) Business  Days
prior to the beginning of such Interest  Period or (B) the  Highest Lawful Rate.
Each  determination of the Eurodollar Base Rate shall be conclusive and binding,
absent  manifest error,  and may be computed using any reasonable  averaging and
attribution method.

"Eurodollar  Loans" shall mean Loans the interest on which is  determined on the
basis of rates referred to in the  definition of "Eurodollar  Base Rate" in this
Section 1.1.

"Eurodollar Rate" shall mean, for any Interest Period for any Eurodollar Loan, a
rate per annum determined by Administrative  Agent to be equal to the Eurodollar
Base Rate for such Loan for such Interest Period.

"Event of Default" shall have the meaning  assigned to such term in Section 11.1
hereof.

"Facility  Amount" shall mean the  aggregate  amount of the  Commitments  (which
amount shall initially be $200,000,000), as such amount may be reduced from time
to time pursuant to the terms of this Agreement.

<PAGE>

"Facility Fee  Percentage"  shall mean, on any date,  the  applicable  per annum
percentage set forth at the  appropriate  intersection in the table shown below,
based on the Rating as of the close of business on the preceding Business Day:

<TABLE>
                        =================================== =================================
<S>                     <C>                                 <C>
                                     Rating                      Facility Fee Percentage
                        ----------------------------------- ---------------------------------
                        ----------------------------------- ---------------------------------

                        BBB-/Baa3 and higher                             0.175%
                        ----------------------------------- ---------------------------------
                        ----------------------------------- ---------------------------------

                        BB+/Ba1 and lower                                0.250%
                        =================================== =================================
</TABLE>

"Financial  Statements"  shall  mean  the  financial  statement  or  statements,
together  with the notes and  schedules  thereto,  described  or  referred to in
Sections 8.6 and 9.1.

"GAAP" shall mean as to a particular Person, such accounting practice as, in the
opinion of KPMG Peat  Marwick or other  independent  accountants  of  recognized
national  standing retained by such Person and acceptable to the Majority Banks,
conforms at the time to generally accepted accounting  principles,  consistently
applied.  Generally  accepted  accounting  principles means those principles and
practices (a) which are recognized as such by the Financial Accounting Standards
Board,  (b) which are applied for all periods  after the date hereof in a manner
consistent  with the manner in which such  principles and practices were applied
to the most recent audited financial statements of the relevant Person furnished
to the Banks,  except only for such changes in  principles  and  practices  with
which  the  applicable  independent  public  accountants  concur  and  which are
disclosed to the Banks in writing,  and (c) which are  consistently  applied for
all  periods  after the date  hereof so as to  reflect  properly  the  financial
condition and results of operations of such Person.

"Governmental  Authority" shall mean any sovereign governmental  authority,  the
United  States of  America,  any State of the United  States  and any  political
subdivision   of  any  of  the   foregoing,   and  any  central  bank,   agency,
instrumentality,  department,  commission,  board, bureau,  authority,  court or
other tribunal or  quasi-governmental  authority in each case whether executive,
legislative,  judicial,  regulatory or administrative,  having jurisdiction over
the  Company,  any  of  its  Subsidiaries,  any of  their  respective  property,
Administrative Agent or any Bank.

"Granting Bank" shall have the meaning specified in Section 13.5(i).

<PAGE>

"Guarantee" by any Person means any obligation,  contingent or otherwise, of any
such Person directly or indirectly  guaranteeing  any  Indebtedness of any other
Person and,  without  limiting the generality of the foregoing,  any obligation,
direct or indirect,  contingent or otherwise,  of such Person (i) to purchase or
pay  (or  advance  or  supply  funds  for  the  purchase  or  payment  of)  such
Indebtedness  (whether  arising  by  virtue  of  partnership  arrangements,   by
agreement to keep-well,  to purchase assets,  goods,  securities or services, to
take-or-pay,  or to maintain financial statement conditions or otherwise,  other
than agreements to purchase  assets,  goods,  securities or services at an arm's
length  price in the  ordinary  course of business) or (ii) entered into for the
purpose of assuring in any other manner the holder of such  Indebtedness  of the
payment  thereof or to protect such holder  against loss in respect  thereof (in
whole or in  part),  provided  that  the  term  "Guarantee"  shall  not  include
endorsements  for collection or deposit in the ordinary course of business.  The
term "Guarantee" used as a verb has a corresponding meaning.

"Guarantor" shall mean Ocean Energy, Inc., a Louisiana corporation.

"Guaranty Agreement" shall mean the guaranty agreement substantially in the form
of Exhibit K, with  appropriate  insertions  and  deletions,  executed  or to be
executed by the  Guarantor,  as such agreement from time to time may be amended,
amended and restated, supplemented or otherwise modified.

"Havre"  shall mean Havre  Pipeline  Company,  LLC,  a Texas  limited  liability
company.

"Hazardous Substance" shall mean petroleum products,  and any hazardous or toxic
waste or  substance  defined or  regulated as such from time to time by any law,
rule,  regulation  or order  described in the  definition  of  "Requirements  of
Environmental Law".

"Highest  Lawful Rate" shall mean, on any day, the maximum  nonusurious  rate of
interest  permitted for that day by whichever of applicable federal or Texas law
permits the higher  interest rate,  stated as a rate per annum.  On each day, if
any, that Chapter 1D  establishes  the Highest  Lawful Rate,  the Highest Lawful
Rate shall be the "applicable  interest rate ceiling" (as defined in Chapter 1D)
for that day.

"Hydrocarbons"  shall mean oil,  gas,  casinghead  gas, drip  gasoline,  natural
gasoline,  condensate and all other liquid or gaseous  hydrocarbons  and related
minerals, in each case whether in a natural or a processed state.

<PAGE>

"Indebtedness"  shall  mean,  as  to  any  Person,   without  duplication:   (i)
indebtedness  of such Person for borrowed money (whether by loan or the issuance
and sale of debt securities) or for the deferred  purchase or acquisition  price
of property or services, including, without limitation,  obligations payable out
of Hydrocarbon  production;  (ii) obligations,  whether fixed or contingent,  of
such Person in respect of letters of credit,  acceptances or similar instruments
issued or accepted by banks and other financial  institutions for the account of
such Person or any other Person; (iii) Capital Lease Obligations of such Person;
(iv) Redemption  Obligations of such Person and other obligations of such Person
to redeem or  otherwise  retire  shares of capital  stock of such  Person or any
other Person,  in each case to the extent that the redemption  obligations  will
arise  prior to the stated  maturity of the  Obligations;  (v)  indebtedness  of
others of the type described in clause (i), (ii), (iii) or (iv) above secured by
a Lien on the property of such Person,  whether or not the respective obligation
so secured  has been  assumed by such  Person,  to the extent of the fair market
value of such property;  and (vii)  indebtedness of others of the type described
in clause (i),  (ii),  (iii) or (iv) above  Guaranteed  by such  Person,  to the
extent of such Guarantee.

"Interest Period" shall mean:

(a) With respect to any Eurodollar  Loan, the period  commencing on (i) the date
such Loan is made or converted into or continued as a Eurodollar Loan or (ii) in
the case of a roll-over to a  successive  Interest  Period,  the last day of the
immediately   preceding   Interest   Period  and   ending  on  the   numerically
corresponding  day  in  the  first,   second,  third  or  sixth  calendar  month
thereafter,  as the Company may select as provided in Section 5.5 hereof, except
that each such Interest  Period which commences on any day for which there is no
numerically corresponding day in the appropriate subsequent calendar month shall
end on the last Business Day of the appropriate subsequent calendar month.

(b) With respect to any other  Competitive  Loan,  the period  commencing on the
date such Loan is made and ending on the date specified in the  Competitive  Bid
in which the offer to make the Competitive Loan was extended; provided, however,
that each such period shall have a duration of not less than seven calendar days
or more than 180 calendar days.

Notwithstanding  the foregoing:  (i) each Interest  Period which would otherwise
end on a day  which is not a  Business  Day  shall  end on the  next  succeeding
Business Day (or, in the case of an Interest  Period for  Eurodollar  Loans,  if
such next succeeding  Business Day falls in the next succeeding  calendar month,
on the next preceding Business Day); (ii) with respect to each Bank, no Interest
Period  applicable to any Eurodollar Loan or any  Competitive  Loan shall extend
beyond the then scheduled Stated Maturity Date applicable to each such Bank, and
(iii) no  Interest Period for any Eurodollar Loans shall have a duration of less
than one month and, if the Interest Period therefor would otherwise be a shorter
period, such Loans shall not be available hereunder.

"Investments"  shall mean with respect to any Person any advance,  loan or other
extension of credit or capital  contribution (other than prepaid expenses in the
ordinary  course of business) to (by means of transfers of property or assets or
otherwise)  purchase  or own any  stocks,  bonds,  notes,  debentures  or  other
securities  of, or incur  contingent  liability  with respect to (except for the
endorsement  of checks in the  ordinary  course of  business  and except for the
Indebtedness and Liens permitted under this Agreement), any other Person.

"Legal Requirement" shall mean any law, statute, ordinance, decree, requirement,
order,  judgment,  rule,  regulation (or interpretation of any of the foregoing)
of,  and the  terms  of any  license  or  permit  issued  by,  any  Governmental
Authority, now or hereafter in effect.

<PAGE>

"Lien"  shall mean,  with  respect to any asset,  any  mortgage,  lien,  pledge,
charge,  collateral assignment,  security interest or encumbrance of any kind in
respect of such asset.  For the  purposes of this  Agreement,  a Person shall be
deemed to own subject to a Lien any asset which it has acquired or holds subject
to the  interest of a vendor or lessor  under any  conditional  sale  agreement,
capital lease or other title retention agreement relating to such asset.

"Loan  Documents"  shall  mean  this  Agreement,  the  Guaranty  Agreement,  all
instruments,  certificates and agreements now or hereafter executed or delivered
to  Administrative  Agent or any Bank pursuant to any of the foregoing,  and all
amendments,  modifications,  renewals, extensions,  increases and rearrangements
of, and substitutions for, any of the foregoing.

"Loans" shall mean Committed Loans and Competitive Loans.

"Majority  Banks" shall mean (a) prior to the  termination  of the  Commitments,
Banks having greater than 50% of the aggregate amount of the Commitments and (b)
after the termination of the  Commitments,  Banks having greater than 50% of the
aggregate principal amount of the Loans.

"Margin Regulations" shall mean, as applicable, Regulations U and X of the Board
of Governors of the Federal Reserve System, as from time to time in effect.

"Material  Adverse Effect" shall mean a material adverse effect on the business,
condition (financial or otherwise),  operations or properties  (including proven
oil and gas reserves) of the Company and its Subsidiaries,  taken as a whole, or
on the ability of the Company to perform its material obligations under any Loan
Document to which it is a party.

"Merger"  shall mean that  certain  merger  among  Seagull and Old Ocean  Energy
pursuant to that certain Agreement and Plan of Merger,  dated November 24, 1998,
as amended  by  Amendment  No. 1 to  Agreement  and Plan of Merger,  dated as of
December 9, 1998, among such parties.

"Net Cash Proceeds" shall mean the cash or cash equivalent  proceeds received by
the  Company or any  Subsidiary  as a result of any Public Debt  Transaction  of
Company or any Subsidiary, in each case after deducting all of the following, as
applicable, (I) all brokerage commissions, legal fees, accounting fees and other
fees,  costs and expenses  paid,  reimbursed or accrued by the Company or any of
its  Subsidiaries  and  allocable to such  transaction,  and  (ii) any  reserves
maintained by the Company or any of its  Subsidiaries for any indemnity or other
obligations in connection with such transaction.

<PAGE>

"95 Indenture" shall mean that certain Indenture among the Company (as successor
by merger to Old Ocean Energy), as issuer,  Guarantor (as successor by merger to
UMC), as initial subsidiary guarantor,  and U.S. Bank Trust National Association
(formerly known as First Bank of New York,  National  Association),  as trustee,
dated as of October  30,  1995,  providing  for the  issuance  of the  Company's
$150,000,000  10-3/8% Senior  Subordinated Notes due 2005, as amended by (i) the
First  Supplemental  Indenture  thereto  dated as of November 4, 1997,  (ii) the
Second  Supplemental  Indenture thereto dated as of March 27, 1998 and (iii) the
Third  Supplemental  Indenture thereto dated as of March 30, 1999, and all notes
or  securities  issued under any of the  foregoing,  any  subsidiary  guarantees
issued  pursuant to the terms of any of the  foregoing,  and all  amendments and
supplements to the foregoing permitted hereunder.

"96 Indenture" shall mean that certain indenture dated as of September 26, 1996"
among the Company (as successor by merger to Old Ocean Energy),  as issuer,  the
subsidiary  guarantor named therein, and State Street Bank and Trust Company, as
trustee,  providing for the issuance of the Company's $160,000,000 9-3/4% Senior
Subordinated Notes due 2006, as amended by (i) the First Supplemental  Indenture
thereto  dated as of March 27, 1998 and (ii) the Second  Supplemental  Indenture
thereto dated as of March 30, 1999, and all notes or securities issued under any
of the foregoing,  any subsidiary guarantees issued pursuant to the terms of any
of the foregoing,  and all amendments and supplements to the foregoing permitted
hereunder.

"97 Indenture" shall mean that certain  Indenture dated as of July 2, 1997 among
the  Company  (as  successor  by merger to Old Ocean  Energy),  as  issuer,  the
subsidiary  guarantor named therein, and State Street Bank and Trust Company, as
trustee,  providing for the issuance of the Company's $200,000,000 8-7/8% Senior
Subordinated Notes due 2007, as amended by (i) the First Supplemental  Indenture
thereto  dated as of March 27, 1998 and (ii) the Second  Supplemental  Indenture
thereto dated as of March 30, 1999, and all notes or securities issued under any
of the foregoing,  any subsidiary guarantees issued pursuant to the terms of any
of the foregoing,  and all amendments and supplements to the foregoing permitted
hereunder.

"98 Senior Subordinated Indenture" shall mean that certain Indenture dated as of
July 8, 1998 among the Company (as successor by merger to Old Ocean Energy),  as
issuer,  the  subsidiary  guarantor  named  therein,  U.S.  Bank Trust  National
Association,   as  trustee,   providing   for  the  issuance  of  the  Company's
$250,000,000  8-3/8% Senior Subordinated Notes due 2008, as amended by the First
Supplemental  Indenture  thereto  dated as of March 30,  1999,  and all notes or
securities issued under any of the foregoing,  any subsidiary  guarantees issued
pursuant  to the  terms  of  any  of  the  foregoing,  and  all  amendments  and
supplements to the foregoing permitted hereunder.

"Obligations"  shall mean, as at any date of determination  thereof,  the sum of
the following: (i) the aggregate principal amount of Loans outstanding hereunder
plus (ii) all other  liabilities,  obligations and  indebtedness of the Company,
any Subsidiary of the Company or any other Obligor under any Loan Document.

"Obligor" shall mean the Company and the Guarantor.

"Offer to Purchase" shall have the meaning set forth in Section 7.1(j).

"Offer Agreement" shall have the meaning set forth in Section 7.1(j).

"Old Ocean Energy" shall mean Ocean Energy, Inc., a Delaware corporation.

<PAGE>

"Organizational  Documents"  shall  mean,  with  respect to a  corporation,  the
certificate  of  incorporation,  articles  of  incorporation  and bylaws of such
corporation;   with  respect  to  a  partnership,   the  partnership   agreement
establishing  such  partnership;  with  respect  to a joint  venture,  the joint
venture  agreement  establishing  such joint venture;  with respect to a limited
liability  company,  the  certificate  of formation and operating  agreement (or
comparable  documents) of such limited liability company;  and with respect to a
trust,  the instrument  establishing  such trust; in each case including any and
all modifications thereof.

"Original Revolving Commitment Termination Date" means November 7, 2000.

"PBGC"  shall  mean the  Pension  Benefit  Guaranty  Corporation  or any  entity
succeeding to any or all of its functions under ERISA.

"Person" shall mean an individual, a corporation, a company, a bank, a voluntary
association,  a  partnership,  a  trust,  an  unincorporated  organization,  any
Governmental Authority or any other entity.

"Plan" shall mean an employee  pension benefit plan which is covered by Title IV
of ERISA or subject to the minimum funding  standards  under  Section 412 of the
Code and is either  (a) maintained  by the  Company or any ERISA  Affiliate  for
employees of the Company or any ERISA Affiliate or (b) maintained  pursuant to a
collective  bargaining  agreement or any other arrangement under which more than
one employer makes contributions and to which the Company or any ERISA Affiliate
is then making or accruing an obligation to make contributions or has within the
preceding five plan years made contributions.

"Post-Default  Rate" shall mean,  in respect of any principal of any Loan or any
other  amount  payable by the  Company  under this  Agreement  or any other Loan
Document  which  is  not  paid  when  due  (whether  at  stated   maturity,   by
acceleration,  or otherwise),  a rate per annum during the period  commencing on
the due date  until  such  amount is paid in full equal to the lesser of (a) the
sum of (x) with respect to Eurodollar  Loans,  2% per annum plus the  applicable
Eurodollar Rate then in effect plus the Applicable  Margin for Eurodollar  Loans
until the  expiration of the  applicable  Interest  Period,  (y) with respect to
Competitive  Loans,  2% per annum plus the applicable  fixed rate offered by the
applicable  Bank and  accepted by the  Company in  accordance  with  Section 2.9
hereof,  and (z) with respect to  Alternate  Base Rate Loans and with respect to
Eurodollar  Loans after the  expiration of the applicable  Interest  Period (and
also with respect to indebtedness  other than Loans), 2% plus the Alternate Base
Rate as in effect  from time to time plus the  Applicable  Margin for  Alternate
Base Rate Loans or (b) the Highest Lawful Rate.

"Principal  Office" shall mean the  principal  office of  Administrative  Agent,
presently  located  at 11  Madison  Avenue,  20th  Floor,  New  York,  New  York
10010-3629,  Attention:  Julia  Kingsbury,  Phone:  (212)  325-9937,  Fax: (212)
325-8304.

<PAGE>

"Public  Debt  Transaction"   shall  have  the  meaning  set  forth  in  Section
2.3(a)(ii).

"Quarterly  Dates"  shall mean the last day of each March,  June,  September and
December,  provided  that,  if any such  date is not a  Business  Day,  then the
relevant Quarterly Date shall be the next succeeding Business Day.

"Rating" shall mean the senior  unsecured  debt rating for the Company  publicly
announced by Standard & Poor's Ratings Group or Moody's Investors Service, Inc.,
or their respective successors. In the event the ratings are not equivalent, the
higher rating shall be treated as the "rating" hereunder; provided, that if such
ratings  differ by more than one (1)  level,  the Rating  shall be the  average,
rounded  upwards,  of the two  ratings.  In the  event  that  there is no Rating
published  by  either  Standard  & Poor's  Ratings  Group or  Moody's  Investors
Service, Inc. or their respective successors, then the Rating shall be deemed to
be BB-/Ba3.

"Redemption  Obligations"  shall mean with  respect to any Person all  mandatory
redemption  obligations of such Person with respect to preferred  stock or other
equity  securities issued by such Person or put rights in favor of the holder of
such  preferred  stock or other  equity  securities,  to the  extent  that  such
redemption  obligations or put rights will arise prior to the stated maturity of
the Obligations. Notwithstanding the foregoing, customary redemption obligations
and put rights  associated  with a Change of Control or sale of assets shall not
constitute Redemption Obligations.

Reference  Banks"  shall mean CSFB and such other Banks (up to a maximum of two
(2) additional Banks) as the Company,  with the approval of Administrative Agent
(which  approval  shall  not be  unreasonably  withheld),  may from time to time
designate.

"Register" shall have the meaning set forth in Section 13.5(d).

"Regulation D" shall mean  Regulation D of the Board of Governors of the Federal
Reserve System as the same may be amended or supplemented  from time to time and
any successor or other regulation relating to reserve requirements.

"Regulatory Change" shall mean, with respect to any Bank, any change on or after
the date of this Agreement in Legal Requirements (including Regulation D) or the
adoption  or making on or after such date of any  interpretation,  directive  or
request  applying  to a class of banks  including  such  Bank  under  any  Legal
Requirements  (whether  or not  having  the  force  of law) by any  Governmental
Authority.

"Relevant  Party" shall mean the Company and each other party to any of the Loan
Documents other than (a) the Banks and (b) the Agents.

"Replacement Banks" shall have the meaning set forth in Section 2.2(c)(ii).

<PAGE>

"Request for  Extension of Credit"  shall mean a request for extension of credit
duly executed by any Responsible Officer of the Company, appropriately completed
and substantially in the form of Exhibit B attached hereto.

"Requirements  of Environmental  Law" means all requirements  imposed by any law
(including  for example and without  limitation  The Resource  Conservation  and
Recovery Act and The Comprehensive  Environmental  Response,  Compensation,  and
Liability  Act),  rule,  regulation,  or  order of any  federal,  state or local
executive, legislative,  judicial, regulatory or administrative agency, board or
authority  in effect at the  applicable  time which  relate to (i)  noise;  (ii)
pollution,  protection or clean-up of the air,  surface  water,  ground water or
land;  (iii) solid,  gaseous or liquid  waste  generation,  treatment,  storage,
disposal or  transportation;  (iv) exposure  to  Hazardous  Substances;  (v) the
safety or health of employees or (vi) regulation of the manufacture, processing,
distribution in commerce, use, discharge or storage of Hazardous Substances.

"Reserve  Requirement"  shall mean,  for any  Eurodollar  Loan for any  Interest
Period  therefor,  the  stated  maximum  rate for all  reserves  (including  any
marginal,  supplemental or emergency  reserves) required to be maintained during
such  Interest  Period  under  Regulation  D by any member  bank of the  Federal
Reserve System or any Bank against  "Eurocurrency  liabilities" (as such term is
used in Regulation D). Without limiting the effect of the foregoing, the Reserve
Requirement  shall  reflect  and  include  any  other  reserves  required  to be
maintained by such member banks by reason of any  Regulatory  Change against (i)
any category of liabilities  which  includes  deposits by reference to which the
Eurodollar Rate is to be determined as provided in the definition of "Eurodollar
Base Rate" in this Section 1.1 or (ii) any category of  extensions  of credit or
other assets which include Eurodollar Loans. Any determination by Administrative
Agent  of the  Reserve  Requirement  shall be  conclusive  and  binding,  absent
manifest error,  and may be made using any reasonable  averaging and attribution
method.

"Responsible  Officer" shall mean the chairman of the board, the president,  any
executive vice president, the vice president of finance and administration,  the
chief executive officer or the chief operating officer or any equivalent officer
(regardless of title) and in the case of the Company,  any other vice president,
and in respect of financial or accounting matters,  shall also include the chief
financial  officer,  the treasurer and the controller or any equivalent  officer
(regardless of title).

<PAGE>

"Restricted  Subsidiary"  shall mean each Subsidiary of the Company that, at the
particular time in question, (i) owns directly or indirectly any material assets
or any interest in any other Restricted  Subsidiary and (ii) has been designated
as a  Restricted  Subsidiary  by the  Company or has not been  designated  as an
Unrestricted  Subsidiary by the Company either (a) on Exhibit A attached  hereto
or (b) in  accordance  with the  terms and  provisions  of this  Agreement.  The
Unrestricted Subsidiaries on the Effective Date are listed on Exhibit A attached
hereto and each other  Subsidiary of Company as of the Effective Date shall be a
Restricted Subsidiary.  A Restricted Subsidiary shall remain such (even if it no
longer owns directly or indirectly any interest in any of the material assets or
any  interest  in  any  other  Restricted  Subsidiary)  until  designated  as an
Unrestricted  Subsidiary  in  accordance  with the terms and  provisions of this
Agreement.

"Revolving  Commitment"  shall mean, as to any Bank, the obligation,  if any, of
such Bank to make Revolving  Loans in an aggregate  principal  amount at any one
time outstanding up to but not exceeding the amount,  if any, set forth opposite
such Bank's name on Exhibit M under the caption "Commitment" (as the same may be
reduced from time to time pursuant to Sections 2.2(c), 2.3 and 6.8(c)).

"Revolving Commitment Termination Date" shall mean the earliest of:

(a) the Original Revolving Commitment Termination Date, or such other later date
as may result from any  extension  requested by Company and  consented to by the
Banks pursuant to Section 2.2;

(b) the date on which all of the  Commitments  are terminated in full or reduced
to zero pursuant to Section 2.3; and

(c) the date on which  the  Commitments  otherwise  are  terminated  in full and
reduced to zero pursuant to the terms of Section 11.1.

Upon the  occurrence of any event  described in clause (b) or (c), the Revolving
Commitments shall terminate automatically and without any further action.

"Revolving Credit Agreement" shall mean that certain Revolving Credit Agreement,
dated as of March 30, 1999, by and among the Company, each of the banks which is
or which may from  time to time  become a  signatory  thereto,  Bank of  America
National Trust and Savings Association, as Documentation Agent, Bank One, Texas,
N.A., as  Syndication  Agent,  Societe  Generale,  Southwest  Agency and Bank of
Montreal, as Managing Agents for the Banks, The Chase Manhattan Bank, as Auction
Administrative  Agent  for  the  Banks,  and  Chase  Bank  of  Texas,   National
Association, as Administrative Agent, as such agreement from time to time may be
amended, amended and restated, supplemented or otherwise modified.

"Revolving Loans" shall mean the loans provided for in Section 2.1(a) hereof.

"Seagull" shall mean Seagull Energy Corporation, a Texas corporation.

"Senior Debt" shall mean Total Debt, other than Subordinated Indebtedness.

"Senior  Leverage  Ratio" shall mean the ratio of (a) Senior Debt to (b) EBITDAX
of the Company and its Restricted  Subsidiaries on a consolidated  basis for the
last four rolling fiscal quarters.

<PAGE>

"SPC" shall have the meaning specified in Section 13.5(i).

'Stated  Maturity  Date" shall mean the date  occurring  364 days after the Term
Commitment Termination Date.

"Subordinated Indebtedness" shall mean all unsecured Indebtedness of the Company
which  is  subordinated  in  right  of  payment  to the  payment  in full of all
Obligations.

"Subsidiary"  shall mean,  with  respect to any Person (the  "parent"),  (a) any
corporation  of which at least a  majority  of the  outstanding  shares of stock
having by the terms  thereof  ordinary  voting  power to elect a majority of the
board of directors of such  corporation  (irrespective  of whether or not at the
time stock of any other class or classes of such corporation shall have or might
have voting power by reason of the happening of any  contingency) is at the time
directly or  indirectly  owned or controlled by the parent or one or more of the
Subsidiaries of the parent or by the parent and one or more of the  Subsidiaries
of the parent, and (b) any partnership,  limited  partnership,  joint venture or
other form of entity, the majority of the legal or beneficial ownership of which
is at the time directly or  indirectly  owned or controlled by the parent or one
or more of the  Subsidiaries  of the  parent or by the parent and one or more of
the Subsidiaries of the parent.

"Tangible  Net  Worth"  shall  mean with  respect  to any  Person the sum of the
redemption  price of  preferred  stock,  par value of common  stock,  capital in
excess of par value of common stock  (additional  paid-in  capital) and retained
earnings, less treasury stock, goodwill, deferred development costs, franchises,
licenses,  patents,  trademarks  and  copyrights  and all other assets which are
properly  classified  as  intangible  assets  in  accordance  with  GAAP and any
Redemption Obligations.

"Term  Commitment"  shall mean, as to any Bank,  such Bank's  obligation to make
Term  Loans  pursuant  to  Section  2.1(b)  of this  Agreement  in an  aggregate
principal  amount  equal to the  lesser  of (i) the  aggregate  Revolving  Loans
outstanding to all Banks as of the Revolving Commitment Termination Date or (ii)
the Revolving  Commitments in effect as of the Revolving Commitment  Termination
Date.

"Term Commitment Termination Date" shall mean the earlier of

(a) the Business Day after the Revolving Commitment Termination Date; and

(b) the date on which  the  Commitments  otherwise  are  terminated  in full and
reduced to zero pursuant to the terms of Section 11.1.

Upon the occurrence of any event  described in clause (b), the Term  Commitments
shall terminate automatically and without any further action.

<PAGE>

"Term Loans" shall mean the loans provided for in Section 2.1(b) hereof.

"Total  Debt" shall mean all  Indebtedness  of the  Company  and its  Restricted
Subsidiaries  on a consolidated  basis,  but excluding (i)  Indebtedness  of the
Company or any  Restricted  Subsidiary  of the types  described in Section 10.1,
part (i), clauses (c) through (g), (j), (k) and (l), (ii) fifty percent (50%) of
the  amount of (A)  obligations  in  respect  of  letters  of credit or  similar
instruments not supporting  indebtedness  for borrowed money and (B) obligations
in  connection  with  bank  guarantees,  bonds,  surety or  similar  obligations
required or requested by  Governmental  Authorities in connection with the usual
and  customary  operation of and the  obtaining of oil and gas  properties,  and
(iii) Indebtedness  of the  Company or any  Restricted  Subsidiary  of the types
described in  Section 10.1,  part (i), clause (h), up to an aggregate  amount of
$10,000,000.

"Total  Leverage Ratio" shall mean the ratio of (a) Total Debt to (b) EBITDAX of
the Company and its Restricted Subsidiaries on a consolidated basis for the last
four rolling fiscal quarters.

"Type" shall have the meaning assigned to such term in Section 1.3 hereof.

"Unfunded  Liabilities"  shall mean,  with respect to any Plan, at any time, the
amount (if any) by which (a) the present  value of all benefits  under such Plan
exceeds (b) the fair market value of all Plan assets allocable to such benefits,
all determined as of the then most recent  actuarial  valuation  report for such
Plan, but only to the extent that such excess  represents a potential  liability
of any ERISA Affiliate to the PBGC or a Plan under Title IV of ERISA.

"United  States" or "U.S."  shall mean the United  States of America,  its fifty
states and the District of Columbia.

"Unrestricted  Subsidiary"  shall mean each  Subsidiary  of the Company which is
(i) designated  as an  Unrestricted  Subsidiary on Exhibit A  attached hereto or
(ii) designated as an  Unrestricted  Subsidiary by the Company at any time after
the Effective  Date and either (A) such  Subsidiary  has a Tangible Net Worth of
less than  $25,000,000 or (B) with the consent of the  Administrative  Agent and
the  Majority  Banks.  An  Unrestricted   Subsidiary  shall  remain  such  until
designated  as  a  Restricted  Subsidiary  in  accordance  with  the  terms  and
provisions of this Agreement.

<PAGE>

1.2 Accounting Terms and Determinations.  Unless otherwise specified herein, all
accounting  terms used herein  shall be  interpreted,  all  determinations  with
respect  to  accounting  matters  hereunder  shall  be made,  and all  financial
statements and certificates  and reports as to financial  matters required to be
delivered  hereunder  shall be prepared,  in accordance with GAAP. To enable the
ready  determination of compliance with the provisions  hereof, the Company will
not change from December 31 in each year the date on which its fiscal year ends,
nor from March 31, June 30 and  September  30 the dates on which the first three
fiscal quarters in each fiscal year end.

1.3 Types of Loans. Loans hereunder are distinguished by "Type". The "Type" of a
Loan refers to the  determination  whether  such Loan is a  Eurodollar  Loan,  a
Competitive Loan or an Alternate Base Rate Loan.

1.4  Miscellaneous.  The words  "hereof",  "herein" and "hereunder" and words of
similar  import when used in this  Agreement  shall refer to this Agreement as a
whole and not to any particular  provision of this  Agreement.  Any reference to
Sections shall refer to Sections of this Agreement.

Section 2. Commitments; Competitive Bid Facility.

2.1 Committed Loans.  From time to time on or after the date hereof on the terms
and subject to the conditions of this Agreement,  each Bank shall make Committed
Loans described in this Section 2.1.

(a) Revolving Loans.  From time to time on or after the date hereof and prior to
the Revolving Commitment  Termination Date, each Bank shall make Revolving Loans
under this  Section to the Company in an aggregate  principal  amount at any one
time  outstanding up to but not exceeding such Bank's  Commitment  Percentage of
the amount by which the Facility Amount exceeds the aggregate  unpaid  principal
balance of all Competitive Loans from time to time  outstanding.  Subject to the
conditions  herein,  any such  Revolving  Loan  repaid  prior  to the  Revolving
Commitment  Termination  Date may be  reborrowed  pursuant  to the terms of this
Agreement.

(b) Term Loans. On the Revolving  Commitment  Termination Date (unless such date
shall occur as a result of clause (c) of the definition thereof), each Bank will
make one Term Loan to the Company equal to such Bank's Commitment  Percentage of
the Term  Commitment.  No amounts  paid or prepaid with respect to the Term Loan
may be reborrowed. Eurodollar Loans and Competitive Loans for which the Interest
Period shall not have terminated as of the Revolving Commitment Termination Date
shall be continued as Eurodollar Loans or Competitive Loans, as the case may be,
for the  applicable  Interest  Period and  Alternate  Base Rate  Loans  shall be
continued  as  Alternate   Base  Rate  Loans  after  the  Revolving   Commitment
Termination Date, unless the Company shall have elected otherwise by delivery of
a Request for  Extension of Credit.  Any  principal  repayments  received on the
Revolving  Commitment  Termination  Date for Revolving  Loans not converted into
Term  Loans  shall be applied  first to  Alternate  Base Rate  Loans and,  after
Alternate Base Rate Loans have been paid in full, to either Eurodollar Loans and
Competitive  Loans,  unless the  Company  shall have  otherwise  instructed  the
Administrative  Agent in writing.  Upon a Bank  making such Term Loan,  its Term
Commitment  shall  terminate  and it shall  have no further  Commitment  to make
Loans.

<PAGE>

2.2   Extension  of  Revolving   Commitment   Termination   Date  and  Revolving
Commitments.

(a) Subject to the other provisions of this Agreement, the Revolving Commitments
shall be  effective  for an initial  period from the date hereof to the Original
Revolving  Commitment  Termination Date; provided that the Revolving  Commitment
Termination Date, and concomitantly the Revolving  Commitments,  may be extended
for successive  364 day periods  expiring on the date which is 364 days from the
then scheduled Revolving  Commitment  Termination Date. If Company shall request
in a Certificate  of Extension  delivered to the  Administrative  Agent not more
than 60 days  and not  less  than 45  days  prior  to the  Revolving  Commitment
Termination Date that the Revolving Commitment  Termination Date be extended for
364 days from the then scheduled  Revolving  Credit  Termination  Date, then the
Administrative  Agent shall  promptly  notify each Bank of such request and each
Bank shall notify the  Administrative  Agent, no later than 30 days prior to the
Revolving  Credit  Termination  Date,  whether such Bank, in the exercise of its
sole discretion,  will extend the Revolving Commitment Termination Date for such
364 day period. Any Bank which shall not timely notify the Administrative  Agent
whether it will extend the Revolving Commitment Termination Date shall be deemed
to not have agreed to extend the Revolving Commitment  Termination Date. No Bank
shall have any obligation whatsoever to agree to extend the Revolving Commitment
Termination Date. Any agreement to extend the Revolving  Commitment  Termination
Date by any Bank shall be irrevocable,  except as provided in clause (c) of this
Section.

(b) If all Banks notify the Administrative  Agent pursuant to clause (a) of this
Section of their agreement to extend the Revolving Commitment  Termination Date,
then the  Administrative  Agent shall so notify each Bank and Company,  and such
extension shall be effective without other or further action by any party hereto
for such additional 364 day period.

(c) If Banks  constituting  at least the Majority Banks approve the extension of
the then scheduled Revolving Commitment Termination Date (such Banks agreeing to
extend the Revolving  Commitment  Termination  Date herein called the "Accepting
Banks")  and if one or more Banks  shall  notify,  or be deemed to  notify,  the
Administrative  Agent  pursuant to clause (a) of this Section that they will not
extend the then  scheduled  Revolving  Commitment  Termination  Date (such Banks
herein called the "Declining  Banks"),  then (A) the Administrative  Agent shall
promptly so notify  Company and the Accepting  Banks,  (B) the  Accepting  Banks
shall, upon Company's election to extend the then scheduled Revolving Commitment
Termination  Date in accordance  with clause (i) or (ii) below,  extend the then
scheduled Revolving Commitment  Termination Date and (C) Company shall, pursuant
to a notice delivered to the  Administrative  Agent, the Accepting Banks and the
Declining  Banks, no later than the tenth (10th) day following the date by which
each Bank is  required,  pursuant to clause (a) of this  Section,  to approve or
disapprove the requested extension of the Revolving Commitment Termination Date,
either:

<PAGE>

(i) elect to extend the Revolving  Commitment  Termination  Date with respect to
the Accepting  Banks and direct the Declining Banks to terminate their Revolving
Commitments,  which  termination  shall become effective on the date which would
have been the Revolving Commitment  Termination Date except for the operation of
this  Section.  On  such  date,  (x)  Company  shall  deliver  a  notice  of the
effectiveness of the termination of the Revolving  Commitments of such Declining
Banks to the  Declining  Banks with a copy to the  Administrative  Agent and (y)
Company  shall  request  a Term  Loan  from such  Declining  Banks  (other  than
Declining  Banks that are replaced by  Replacement  Banks  pursuant to paragraph
(ii)  below)  pursuant to the terms of Section  2.1(b) (and each such  Declining
Bank shall make such Term Loan), and (z) upon the payment in full in immediately
available  funds of all  Obligations of Company owing to such Declining Banks in
connection  with such Term  Loans on the Stated  Maturity  Date in effect at the
time each such  Declining  Bank made its election to be a Declining  Bank (i.e.,
364 days  after the date of such Term  Loan),  including  any  amounts  required
pursuant  to  Section 6,  the  Declining  Banks  shall  each  cease  to be Banks
hereunder  for all  purposes,  other than for purposes of Sections 6 and 13, and
shall cease to have any obligations or any Commitment  hereunder,  other than to
the Agents pursuant to Section 12, and the  Administrative  Agent shall promptly
notify  the  Accepting  Banks  and  Company  of  the  new  Revolving  Commitment
Termination Date applicable to such Accepting Banks; or

<PAGE>

(ii) elect to extend the Revolving  Commitment  Termination Date with respect to
the Accepting Banks and, prior to or no later than the then scheduled  Revolving
Commitment  Termination  Date, (A) to replace one or more of the Declining Banks
with another lender or lenders reasonably acceptable to the Administrative Agent
(such lenders herein called the  "Replacement  Banks") and (B) Company shall pay
in full in immediately  available  funds all Obligations of Company owing to any
Declining Bank that is not being replaced pursuant to this paragraph (other than
Obligations  being  purchased by the Replacement  Banks);  provided that (x) the
Replacement Bank or Replacement Banks shall purchase,  and the Declining Bank or
Declining Banks shall sell, the Declining  Bank's or Declining Banks' rights and
obligations  hereunder  without  recourse or expense  to, or  warranty  by, such
Declining  Bank or Declining  Banks being replaced for a purchase price equal to
the aggregate  outstanding  principal amount of the Obligations  payable to such
Declining Bank or Declining  Banks plus any accrued but unpaid  interest on such
Obligations  and accrued but unpaid  fees or other  amounts  owing in respect of
such Declining Bank's or Declining Banks' Loans and Commitments  hereunder,  and
(y) upon the payment of such amounts referred to in clause (x) and the execution
of an Assignment and Acceptance agreement by the Replacement Bank or Replacement
Banks and the Declining Bank or Declining  Banks (which each such Declining Bank
agrees to execute  promptly),  the Replacement  Bank or Replacement  Banks shall
each constitute a Bank hereunder and the Declining Bank or Declining Banks being
so  replaced  shall no longer  constitute  a Bank  (other  than for  purposes of
Sections 6 and 13), and shall no longer have any  obligations  hereunder,  other
than to the Agents pursuant to Section 12; or

(iii) elect to revoke and cancel the extension  request in such  Certificate  of
Extension  by  giving  notice  of  such  revocation  and   cancellation  to  the
Administrative  Agent (which shall  promptly  notify the Banks thereof) no later
than the tenth  (10th) day  following  the date by which each Bank is  required,
pursuant to clause (a) of this Section,  to approve or disapprove  the requested
extension of the Revolving  Commitment  Termination  Date, and concomitantly the
total Revolving Commitments.

If Company  fails to timely  provide  the  election  notice  referred to in this
clause (c),  Company  shall be deemed to have revoked and canceled the extension
request in the  Certificate  of Extension  and to have elected not to extend the
Revolving Commitment Termination Date.

<PAGE>

2.3 Reductions and Changes of Commitments.

(a) Mandatory.

(i) On the Stated  Maturity Date, all  Commitments  shall be terminated in their
entirety unless terminated at an earlier date pursuant to Section 11.1.

(ii) Upon the  consummation  of any  offering of debt  securities  pursuant to a
registered  offering  or an  exempt  offering  under  Rule  144A  ("Public  Debt
Transaction")  of the  Company  or any of its  Subsidiaries,  (i) the  Revolving
Commitment or the Term Commitment, as applicable,  automatically and permanently
shall be reduced  by, and (ii) the  Commitment  of each Bank  automatically  and
permanently shall be reduced on a pro-rata basis by, an amount equal to Net Cash
Proceeds in the  aggregate  for such Public  Debt  Transaction,  and the Company
shall make  mandatory  prepayments on the Loans on or within ten (10) days after
receipt of such Net Cash  Proceeds to the extent  necessary so that after giving
effect to such mandatory prepayments the sum of all Loans (including any Loan to
be made  but not yet  made  pursuant  to a  Request  for  Extension  of  Credit)
outstanding at any time would not exceed the total Commitments.

(b) Optional. The Company shall have the right to terminate or reduce the unused
portion of the Commitments at any time or from time to time,  provided that: (i)
the  Company  shall  give  notice  of each  such  termination  or  reduction  to
Administrative  Agent as  provided  in  Section 5.5  hereof  and (ii)  each such
partial  reduction  shall be permanent  and in an  aggregate  amount equal to an
integral multiple of $1,000,000 which equals or exceeds $5,000,000.

(c) No Reinstatement. Any reduction in or termination of the Commitments may not
be reinstated  without the approval of  Administrative  Agent and any Bank whose
Commitment (or the applicable part thereof) is to be so reinstated.

<PAGE>

2.4 Fees.

(a) The Company shall pay to Administrative Agent for the account of each Bank a
facility fee accruing from the Effective  Date,  computed for each day at a rate
per annum equal to the Facility Fee Percentage  times such Bank's pro rata share
(based on its respective  Commitment)  of the Facility  Amount on such day. Such
facility fees shall be payable on the Quarterly  Dates and on the earlier of the
date the  Commitments  are terminated in their  entirety or the Stated  Maturity
Date.

(b) The Company  agrees to pay to  Administrative  Agent for the account of each
Bank the fees  provided for in the  separate  letter  agreement  executed by and
between Administrative Agent and the Company.

2.5 Affiliates; Lending Offices.

(a) Any Bank may, if it so elects,  fulfill any  obligation to make a Eurodollar
Loan or Competitive Loan by causing a branch, foreign or otherwise, or Affiliate
of such Bank to make such Loan and may  transfer  and carry  such Loan at, to or
for the account of any branch office or Affiliate of such Bank;  provided  that,
in such event for the  purposes of this  Agreement  such Loan shall be deemed to
have been made by such Bank and the obligation of the Company to repay such Loan
shall  nevertheless  be to such Bank and shall be deemed to be held by such Bank
and,  to the  extent of such  Loan,  to have been made for the  account  of such
branch or Affiliate.

(b) Notwithstanding  any provision of this Agreement to the contrary,  each Bank
shall be  entitled  to fund and  maintain  its funding of all or any part of its
Loans hereunder in any manner it sees fit, it being  understood,  however,  that
for the purposes of this Agreement all determinations hereunder shall be made as
if such Bank had actually funded and maintained each Eurodollar Loan during each
Interest Period through the purchase of deposits having a maturity corresponding
to such  Interest  Period and bearing an interest  rate equal to the  Eurodollar
Rate for such Interest Period.

2.6 Several Obligations.  The failure of any Bank to make any Loan to be made by
it on the date  specified  therefor  shall not  relieve  any  other  Bank of its
obligation to make its Loan on such date, but neither  Administrative  Agent nor
any Bank shall be  responsible  for the failure of any other Bank to make a Loan
to be made by such other Bank.

2.7 Repayment of Loans; Evidence of Debt.

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

<PAGE>

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

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

(d) Any Bank may  request  that Loans made by it be  evidenced  by a  promissory
note.  In such event,  Company shall  prepare,  execute and deliver to such Bank
promissory  notes  payable to the order of such Bank (or, if  requested  by such
Bank,  to such  Bank  and  its  registered  assigns  and in a form  approved  by
Administrative Agent).  Thereafter, the Loans evidenced by such promissory notes
and interest thereon may (including  after assignment  pursuant to Section 13.5)
be represented by one or more promissory notes in such form payable to the order
of the payee named therein.

2.8 Use of  Proceeds.  The  proceeds  of the  Loans  shall be used  for  general
corporate purposes.

2.9 Competitive Bid Procedure.

<PAGE>

(a) In order to request Competitive Bids, the Company shall hand deliver,  telex
or  telecopy  to  Auction   Administrative   Agent  a  duly  completed   request
substantially in the form of Exhibit F, with the blanks appropriately  completed
(a "Competitive Bid Request"),  to be received by Auction  Administrative  Agent
not later than noon, New York, New York time,  five (5) Business Days before the
date  specified for a proposed  Competitive  Loan.  No Alternate  Base Rate Loan
shall be requested  in, or,  except  pursuant to Section 6, made  pursuant to, a
Competitive  Bid  Request.  A  Competitive  Bid  Request  that does not  conform
substantially   to  the  format  of  Exhibit  F  may  be   rejected  at  Auction
Administrative  Agent's sole discretion,  and Auction Administrative Agent shall
promptly  notify the Company of such rejection by telecopier.  Each  Competitive
Bid Request shall in each case refer to this  Agreement and specify (x) the date
of such  Competitive  Loans  (which shall be a Business  Day) and the  aggregate
principal  amount thereof  (which shall not be less than  $25,000,000 or greater
than the  unused  portion  of the  Facility  Amount on such date and shall be an
integral  multiple of  $5,000,000)  and (y) the  Interest  Period  with  respect
thereto (which may not end after the  termination  of the then scheduled  Stated
Maturity Date).  Promptly after its receipt of a Competitive Bid Request that is
not  rejected  as  aforesaid,  Auction  Administrative  Agent  shall  invite  by
telecopier (in  substantially  the form set forth in Exhibit G hereto) the Banks
to bid, on the terms and conditions of this Agreement, to make Competitive Loans
pursuant to such Competitive Bid Request. Notwithstanding the foregoing, Auction
Administrative  Agent  shall  have no  obligation  to invite  any Bank to make a
Competitive  Bid  pursuant  to this  Section  until  such Bank has  delivered  a
properly  completed  Competitive  Bid  Administrative  Questionnaire  to Auction
Administrative Agent.

(b) Each Bank may, in its sole discretion,  make one or more Competitive Bids to
the Company responsive to each Competitive Bid Request.  Each Competitive Bid by
a Bank must be received by Auction  Administrative Agent via telecopier,  in the
form of Exhibit H hereto, not later than noon, New York, New York time, four (4)
Business  Days  before  the date  specified  for a  proposed  Competitive  Loan.
Competitive  Bids that do not conform  substantially  to the format of Exhibit H
may be rejected by Auction  Administrative Agent after conferring with, and upon
the instruction of, the Company,  and Auction  Administrative Agent shall notify
the Bank of such rejection as soon as  practicable.  Each  Competitive Bid shall
refer to this Agreement and (x) specify the principal  amount (which shall be in
a  minimum  principal  amount  of  $5,000,000  and in an  integral  multiple  of
$1,000,000  and which may equal the  entire  aggregate  principal  amount of the
Competitive Loan requested by the Company) of the Competitive Loan that the Bank
is willing to make to the Company, (y) specify the Competitive Bid Rate at which
the Bank is prepared to make the  Competitive  Loan and (z) confirm the Interest
Period with  respect  thereto  specified by the Company in its  Competitive  Bid
Request.  A Competitive  Bid submitted by a Bank pursuant to this  paragraph (b)
shall be irrevocable.

(c Auction  Administrative  Agent shall,  by 3:00 p.m., New York, New York time,
four (4)  Business  Days before the date  specified  for a proposed  Competitive
Loan,  notify the Company by telecopier of all the  Competitive  Bids made,  the
Competitive Bid Rate and the maximum  principal  amount of each Competitive Loan
in respect of which a Competitive Bid was made and the identity of the Bank that
made each bid. Auction Administrative Agent shall send a copy of all Competitive
Bids to the Company for its records as soon as practicable  after  completion of
the bidding process set forth in this Section 2.9.

<PAGE>

(d The  Company may in its sole and  absolute  discretion,  subject  only to the
provisions of this Section 2.9(d), accept or reject any Competitive Bid referred
to in  Section  2.9(c);  provided,  however,  that the  aggregate  amount of the
Competitive  Bids so accepted by the Company may not exceed the principal amount
of the  Competitive  Loan  requested  by the Company.  The Company  shall notify
Auction  Administrative  Agent by  telecopier  whether and to what extent it has
decided  to accept  or  reject  any or all of the bids  referred  to in  Section
2.9(c),  not later than noon, New York,  New York time,  three (3) Business Days
before the date specified for a proposed  Competitive Loan;  provided,  however,
that (w) the failure by the Company to give such notice  shall be deemed to be a
rejection of all the bids referred to in Section  2.9(c) and (x) no bid shall be
accepted for a  Competitive  Loan unless such  Competitive  Loan is in a minimum
principal  amount  of  $5,000,000  and  an  integral   multiple  of  $1,000,000.
Notwithstanding the foregoing,  if the Company accepts more than one bid made in
response to a  Competitive  Bid Request and the  available  principal  amount of
Competitive  Loans to be allocated  among the Banks is not  sufficient to enable
Competitive  Loans to be allocated to each Bank in a minimum principal amount of
$5,000,000  and in integral  multiples  of  $1,000,000,  then the Company  shall
select  the  Banks to be  allocated  such  Competitive  Loans  and  shall  round
allocations  up or down to the next higher or lower multiple of $1,000,000 as it
shall deem  appropriate.  In addition,  the Company shall be permitted under the
foregoing  procedures to accept a bid or bids in a principal amount of less than
$5,000,000  (i) in order to enable the  Company to accept bids equal to (but not
in excess of) the  principal  amount of the  Competitive  Loan  requested by the
Company or (ii) in order to enable the Company to accept all remaining  bids, or
all  remaining  bids at a  particular  Competitive  Bid Rate.  A notice given by
Company pursuant to this paragraph (d) shall be irrevocable.

(e Auction  Administrative Agent shall promptly notify each bidding Bank whether
or not its  Competitive  Bid has been accepted (and if so, in what amount and at
what Competitive Bid Rate) by telex or telecopier sent by Auction Administrative
Agent, and each successful  bidder will thereupon  become bound,  subject to the
other applicable  conditions  hereof, to make the Competitive Loan in respect of
which its bid has been accepted.  After completing the notifications referred to
in the immediately  preceding sentence,  Auction  Administrative Agent shall (i)
notify Administrative Agent of each Competitive Bid that has been accepted,  the
amount thereof and the  Competitive  Bid Rate therefor and (ii) notify each Bank
of the aggregate principal amount of all Competitive Bids accepted.

(f No  Competitive  Loan shall be made within five (5) Business Days of the date
of any other  Competitive  Loan,  unless the Company and Auction  Administrative
Agent shall mutually agree otherwise.

(g If  Administrative  Agent shall at any time have a Commitment  hereunder  and
shall elect to submit a  Competitive  Bid in its  capacity  as a Bank,  it shall
submit such bid  directly to the Company one quarter of an hour earlier than the
latest  time at which  the other  Banks are  required  to submit  their  bids to
Auction Administrative Agent pursuant to paragraph (b) above.

(h All notices  required by this  Section 2.9 shall be made in  accordance  with
Section 13.2 and the Competitive Bid Administrative  Questionnaire most recently
placed on file by each Bank with Auction Administrative Agent.

Section 3. Borrowings, Prepayments and Selection of Interest Rates.

<PAGE>

3.1  Borrowings.  The Company  shall give  Administrative  Agent  notice of each
borrowing to be made  hereunder as provided in Sections 2.9 and 5.5 hereof.  Not
later than 3:00 p.m. New York, New York time on the date specified for each such
borrowing  hereunder,  each Bank shall make available the amount of the Loan, if
any, to be made by it on such date to  Administrative  Agent,  at its  Principal
Office,  in immediately  available  funds,  for the account of the Company.  The
amount so  received  by  Administrative  Agent  shall,  subject to the terms and
conditions of this Agreement, be made available to the Company by depositing the
same, in immediately available funds, in an account designated in writing by the
Company.

3.2 Prepayments.

(a Optional Prepayments.  Subject to the provisions of Sections 4,  5 and 6, the
Company  shall have the right to prepay,  on any  Business  Day,  in whole or in
part,  without the payment of any penalty or fee, Loans at any time or from time
to time,  provided that, the Company shall give  Administrative  Agent notice of
each such prepayment as provided in Section 5.5 hereof. Neither Eurodollar Loans
nor Competitive  Loans may be otherwise prepaid unless prepayment is accompanied
by payment of all compensation required by Section 6.

(b Mandatory Prepayments.  Subject to Section 2.3(a)(ii), the Company shall from
time to time on demand by Administrative  Agent prepay the Loans in such amounts
as shall be necessary so that at all times the aggregate  outstanding  principal
amount of all  Loans  shall  not be in  excess  of the  aggregate  amount of the
Commitments, as reduced from time to time pursuant to Section 2.3 hereof.

3.3  Selection of Interest  Rates.  Subject to the terms and  provisions of this
Agreement, the Company shall have the right either to convert any Loan (in whole
or in part) into a Loan of another Type  (provided  that no such  conversion  of
Eurodollar Loans or Competitive  Loans shall be permitted other than on the last
day of an Interest Period applicable thereto) or to continue such Loan (in whole
or in part) as a Loan of the same  Type.  In the event the  Company  fails to so
give such notice prior to the end of the applicable Interest Period with respect
to any Eurodollar Loan or Competitive  Loan, such Loan shall become an Alternate
Base  Rate Loan on the last day of such  Interest  Period.  Notwithstanding  any
other  provision  of this  Agreement,  if a Default  shall have  occurred and be
continuing on the last day of an Interest Period applicable to a Eurodollar Loan
or Competitive Loan, such Loan shall  automatically be converted to an Alternate
Base Rate Loan.

Section 4. Payments of Principal and Interest.

4.1 Repayment of Loans.  The Company hereby  unconditionally  promises to pay to
Administrative  Agent for the  account of each Bank (a) each Loan in full at the
end of the Interest Period applicable to such Loan unless such Loan is continued
or  converted  in  accordance  with the terms  hereof,  and (b) the  then unpaid
principal amount of all outstanding  Loans on the then scheduled Stated Maturity
Date.

4.2 Interest.

<PAGE>

(a Subject to Section 13.6  hereof, the Company will pay to Administrative Agent
for the  account of each Bank  interest on the unpaid  principal  amount of each
Loan made by such Bank for the period commencing on the date of such Loan to but
excluding  the date such Loan  shall be paid in full,  at the  lesser of (I) the
following rates per annum:

(i0 if such Loan is an Alternate  Base Rate Loan,  the Alternate  Base Rate plus
the Applicable Margin,

(ii0 if such Loan is a Eurodollar Loan, the applicable  Eurodollar Rate plus the
Applicable Margin, and

(iii0 if such Loan is a Competitive  Loan, the applicable  fixed rate offered by
the applicable  Bank and accepted by the Company in accordance  with Section 2.9
hereof,

or (II) the Highest Lawful Rate.

(b Notwithstanding  any of the foregoing but subject to Section 13.6 hereof, the
Company will pay to  Administrative  Agent for the account of each Bank interest
at the  applicable  Post-Default  Rate on any principal of any Loan made by such
Bank and on any other  amount  payable by the  Company  hereunder  to or for the
account  of such Bank  (but,  if such  amount is  interest,  only to the  extent
legally  allowed),  which shall not be paid in full when due  (whether at stated
maturity,  by acceleration or otherwise),  for the period  commencing on the due
date thereof until the same is paid in full.

(c Accrued  interest on each  Alternate  Base Rate Loan shall be payable on each
Quarterly Date. Accrued interest on each Eurodollar Loan or Competitive Bid Loan
shall be payable on the last day of each Interest  Period for such Loan (and, if
such Interest  Period  exceeds three months'  duration,  on the last day of each
three month  period,  commencing  on the first three month  anniversary  of such
Interest Period). Notwithstanding the foregoing, (i) accrued interest payable at
the  Post-Default  Rate shall be due and payable  from time to time on demand of
Administrative  Agent or the Majority Banks (through  Administrative  Agent) and
(ii) accrued  interest on any amount prepaid or converted  pursuant to Section 6
hereof shall be paid on the amount so prepaid or converted.
<PAGE>

Section 5. Payments; Pro Rata Treatment; Computations, Etc.

5.1 Payments.

(a Except to the extent otherwise  provided  herein,  all payments of principal,
interest  and other  amounts  to be made by the  Company  or any  other  Obligor
hereunder  shall  be  made  in  Dollars,  in  immediately  available  funds,  to
Administrative  Agent at the  Principal  Office  (or in the case of a  successor
Administrative  Agent, at the principal office of such successor  Administrative
Agent in the United States), not later than noon, New York, New York time on the
date on which such  payment  shall become due (each such payment made after such
time on such due date to be  deemed  to have  been  made on the next  succeeding
Business Day).

<PAGE>

(b The Company or such other Obligor  shall,  at the time of making each payment
hereunder, specify to Administrative Agent the Loans or other amounts payable by
the Company or such Obligor  hereunder or thereunder to which such payment is to
be applied. Each payment received by Administrative Agent hereunder or any other
Loan  Document for the account of a Bank shall be paid promptly to such Bank, in
immediately  available funds for the account of such Bank's  Applicable  Lending
Office.

(c If the due date of any payment  hereunder or any other Loan Document falls on
a day which is not a Business Day, the due date for such payment (subject to the
definition of Interest Period) shall be extended to the next succeeding Business
Day and interest  shall be payable for any  principal so extended for the period
of such extension.

5.2 Pro Rata Treatment. Except to the extent otherwise provided herein: (a) each
borrowing from the Banks under Section 2.1 hereof shall be made ratably from the
Banks  on the  basis  of  their  respective  Commitments  and  each  payment  of
commitment or facility fees shall be made for the account of the Banks, and each
termination  or  reduction  of the  Commitments  of the Banks under  Section 2.3
hereof  shall  be  applied,   pro  rata,  according  to  the  Banks'  respective
Commitments;  and (b) each payment by the Company of principal of or interest on
Loans of a particular Type shall be made to Administrative Agent for the account
of the Banks pro rata in accordance with the respective unpaid principal amounts
of such Loans held by the Banks.

5.3  Computations.  Interest  on  Competitive  Loans and  interest  based on the
Eurodollar  Base Rate or the Federal Funds Rate will be computed on the basis of
a year of 360  days  and  actual  days  elapsed  (including  the  first  day but
excluding  the last day)  occurring  in the period for which  such  interest  is
payable,  unless  the  effect  of so  computing  shall be to  cause  the rate of
interest to exceed the Highest  Lawful  Rate,  in which case  interest  shall be
calculated  on the basis of the actual number of days elapsed in a year composed
of 365 or 366 days,  as the case may be.  All other  interest  and fees shall be
computed  on the basis of a year of 365 (or 366) days and  actual  days  elapsed
(including the first day but excluding the last day) occurring in the period for
which payable.

<PAGE>

5.4 Minimum and Maximum Amounts. Except for prepayments made pursuant to Section
3.2(b) hereof,  and subject to the provisions of Section 2.9 hereof with respect
to Competitive  Loans,  each borrowing and repayment of principal of Loans, each
termination  or reduction of  Commitments,  each  optional  prepayment  and each
conversion of Type shall be in an aggregate  principal  amount at least equal to
(a) in the case of  Eurodollar  Loans and  Competitive  Loans,  $5,000,000,  and
(b) in  the  case of  Alternate  Base  Rate  Loans,  $1,000,000  (borrowings  or
prepayments of Loans of different Types or, in the case of Eurodollar  Loans and
Competitive Loans,  having different Interest Periods at the same time hereunder
to be deemed separate  borrowings and prepayments for purposes of the foregoing,
one for each Type or Interest Period).  Upon any mandatory prepayment that would
reduce  Eurodollar  Loans or Competitive  Loans,  respectively,  having the same
Interest  Period to less than  $5,000,000  such  Loans  shall  automatically  be
converted  into  Alternate  Base  Rate  Loans on the last day of the  applicable
Interest  Period.  Notwithstanding  anything to the  contrary  contained in this
Agreement,  there  shall not be, at any one time,  more than eight (8)  Interest
Periods in effect with respect to Eurodollar Loans or Competitive  Loans, in the
aggregate.

5.5  Certain  Actions,  Notices,  Etc.  Notices to  Administrative  Agent of any
termination  or  reduction  of  Commitments,   of  borrowings  and  prepayments,
conversions and  continuations  of Loans and of the duration of Interest Periods
shall be irrevocable  and shall be effective only if received by  Administrative
Agent not later than  noon,  New York,  New York time on the number of  Business
Days prior to the date of the relevant termination,  reduction, borrowing and/or
prepayment, conversion or continuance specified below:

<TABLE>

           ================================================ =======================================
<S>        <C>                                              <C>
                              Notice                             Number of Business Days Prior
           ------------------------------------------------ ---------------------------------------

           Termination or Reduction of Commitments                             2
           ------------------------------------------------ ---------------------------------------

           Borrowing or prepayment of or conversion into                   same day
           Alternate Base Rate Loans
           ------------------------------------------------ ---------------------------------------

           Borrowing or prepayment of or conversion into                       3
           or continuance of Eurodollar Loans
           ================================================ =======================================
</TABLE>

<PAGE>

Each such notice of  termination  or reduction  shall  specify the amount of the
Commitments  to be  terminated  or  reduced.  Each such notice of  borrowing  or
prepayment  shall  specify  the amount and Type of the Loans to be  borrowed  or
prepaid  (subject to Sections  3.2(a) and 5.4 hereof),  the date of borrowing or
prepayment (which shall be a Business Day) and, in the case of Eurodollar Loans,
the duration of the  Interest  Period  therefor  (subject to the  definition  of
"Interest  Period").  Each such  notice of  conversion  of a Loan into a Loan of
another Type shall identify such Loan (or portion  thereof) being  converted and
specify  the Type of Loan into which such Loan is being  converted  (subject  to
Section 5.4 hereof) and the date for conversion  (which shall be a Business Day)
and,  unless such Loan is being  converted into an Alternate Base Rate Loan, the
duration (subject to the definition of "Interest Period") of the Interest Period
therefor  which is to commence as of the last day of the then  current  Interest
Period therefor (or the date of conversion, if such Loan is being converted from
an Alternate  Base Rate Loan).  Each such notice of  continuation  of a Loan (or
portion  thereof) as the same Type of Loan shall  identify such Loan (or portion
thereof)  being  continued  (subject to Section  5.4  hereof)  and the  duration
(subject to the definition of "Interest Period") of the Interest Period therefor
which is to  commence  as of the last day of the then  current  Interest  Period
therefor.  Administrative  Agent shall promptly notify the affected Banks of the
contents of each such notice.  Notice of any prepayment  having been given,  the
principal amount specified in such notice, together with interest thereon to the
date of prepayment,  shall be due and payable on such prepayment  date.  Section
2.9 hereof shall control the time periods applicable to Competitive Loans.

5.6 Non-Receipt of Funds by Administrative  Agent. Unless  Administrative  Agent
shall have been  notified by a Bank or the Company  (the  "Payor")  prior to the
date on  which  such  Bank is to make  payment  to  Administrative  Agent of the
proceeds  of a Loan to be  made  by it  hereunder  or the  Company  is to make a
payment to Administrative  Agent for the account of one or more of the Banks, as
the case may be (such payment being herein called the "Required Payment"), which
notice shall be effective  upon receipt,  that the Payor does not intend to make
the Required Payment to Administrative  Agent,  Administrative  Agent may assume
that  the  Required  Payment  has  been  made and may,  in  reliance  upon  such
assumption (but shall not be required to), make the amount thereof  available to
the  intended  recipient on such date and, if the Payor has not in fact made the
Required Payment to  Administrative  Agent on or before such date, the recipient
of such payment shall, on demand,  pay to  Administrative  Agent the amount made
available  to it  together  with  interest  thereon  in  respect  of the  period
commencing on the date such amount was so made available by Administrative Agent
until the date  Administrative  Agent  recovers  such amount at a rate per annum
equal to the Federal Funds Rate for such period.

5.7 Sharing of Payments, Etc. If a Bank shall obtain payment of any principal of
or  interest  on any  Loan  made by it under  this  Agreement,  or on any  other
obligation then due to such Bank hereunder, through the exercise of any right of
set-off,  banker's lien,  counterclaim or similar right, or otherwise,  it shall
promptly  purchase  from the other Banks  participations  in the Loans made,  or
other obligations held, by the other Banks in such amounts,  and make such other
adjustments  from  time to time as  shall be  equitable  to the end that all the
Banks shall share the benefit of such payment (net of any expenses  which may be
incurred by such Bank in  obtaining  or  preserving  such  benefit)  pro rata in
accordance with the unpaid principal and interest on the Obligations then due to
each of them (provided,  however, that the foregoing shall not apply to payments
of Competitive Loans made prior to the termination of the Commitments  following
the  occurrence  of an Event of  Default).  To such end all the Banks shall make
appropriate  adjustments among themselves (by the resale of participations  sold
or  otherwise) if such payment is rescinded or must  otherwise be restored.  The
Company agrees,  to the fullest extent it may effectively do so under applicable
law,  that any Bank so  purchasing a  participation  in the Loans made, or other
obligations  held,  by other Banks may exercise all rights of set-off,  bankers'
lien, counterclaim or similar rights with respect to such participation as fully
as if such Bank were a direct  holder  of Loans  and  other  obligations  in the
amount of such participation. Nothing contained herein shall require any Bank to
exercise any such right or shall  affect the right of any Bank to exercise,  and
retain the  benefits  of  exercising,  any such right with  respect to any other
Indebtedness or obligation of any Obligor.

<PAGE>

Section 6. Yield Protection and Illegality.

6.1 Additional Costs.

(a Subject to Section 13.6, the Company shall pay to  Administrative  Agent,  on
demand for the account of each Bank from time to time such  amounts as such Bank
may determine to be necessary to  compensate  it for any costs  incurred by such
Bank which such Bank determines are attributable to its making or maintaining of
any Eurodollar Loan or any Competitive  Loan hereunder or its obligation to make
any such Loan hereunder,  or any reduction in any amount receivable by such Bank
hereunder in respect of any of such Loans or such obligation  (such increases in
costs and  reductions  in amounts  receivable  being herein  called  "Additional
Costs"), in each case resulting from any Regulatory Change which:

(i0 subjects  such Bank (or makes it apparent  that such Bank is subject) to any
tax (including without limitation any United States interest  equalization tax),
levy, impost, duty, charge or fee (collectively,  "Taxes"),  or any deduction or
withholding  for any Taxes on or from the payment due under any Eurodollar  Loan
or any  Competitive  Loan or other amounts due hereunder,  other than income and
franchise taxes of each jurisdiction (or any subdivision  thereof) in which such
Bank has an office or its Applicable Lending Office; or

(ii0  changes the basis of  taxation  of any amounts  payable to such Bank under
this  Agreement in respect of any of such Loans (other than changes which affect
taxes  measured by or imposed on the overall  net income or  franchise  taxes of
such Bank or of its  Applicable  Lending  Office  for any of such  Loans by each
jurisdiction  (or any  subdivision  thereof) in which such Bank has an office or
such Applicable Lending Office); or

(iii0 imposes or modifies or increases or deems applicable any reserve,  special
deposit  or  similar  requirements  (including,  without  limitation,  any  such
requirement  imposed by the Board of  Governors of the Federal  Reserve  System)
relating to any extensions of credit or other assets of, or any deposits with or
other liabilities of, such Bank or loans made by such Bank, or against any other
funds,  obligations or other property owned or held by such Bank  (including any
of such Loans or any deposits  referred to in the definition of "Eurodollar Base
Rate" in Section  1.1  hereof);  provided  that such Bank  actually  incurs such
additional costs.

<PAGE>

Each Bank (if so requested  by the Company  through  Administrative  Agent) will
designate a different  available  Applicable  Lending  Office for the Eurodollar
Loans or the  Competitive  Loans of such Bank or take such  other  action as the
Company  may request if such  designation  or action will avoid the need for, or
reduce the amount of, such  compensation  and will not,  in the sole  opinion of
such Bank  exercised in good faith,  be  disadvantageous  to such Bank (provided
that such Bank shall have no obligation  so to designate an  Applicable  Lending
Office for Eurodollar Loans located in the United States of America).  Each Bank
will furnish the Company with a statement  setting forth the basis and amount of
each request by such Bank for compensation under this Section 6.1(a); subject to
Section 6.8,  such certificate  shall be conclusive,  absent manifest error, and
may be prepared using any reasonable averaging and attribution methods.

(b Without limiting the effect of the foregoing  provisions of this Section 6.1,
in the event  that,  by reason of any  Regulatory  Change,  any Bank  either (i)
incurs  Additional  Costs based on or  measured by the excess  above a specified
level of the amount of a category of deposits or other  liabilities of such Bank
which  includes  deposits by reference to which the interest  rate on Eurodollar
Loans is determined as provided in this Agreement or a category of extensions of
credit  or  other  assets  of such  Bank  which  includes  Eurodollar  Loans  or
Competitive  Loans or (ii) becomes subject to restrictions on the amount of such
a category of  liabilities  or assets which it may hold,  then,  if such Bank so
elects by notice  to the  Company  (with a copy to  Administrative  Agent),  the
obligation of such Bank to make  Eurodollar  Loans or Competitive  Loans, as the
case may be, hereunder shall be suspended until the date such Regulatory  Change
ceases to be in effect (in which case the provisions of Section 6.4 hereof shall
be applicable).

(c Good faith  determinations  and  allocations by any Bank for purposes of this
Section .1 of the effect of any  Regulatory  Change on its costs of maintaining
its  obligations to make Loans or of making or  maintaining  Loans or on amounts
receivable by it in respect of Loans, and of the additional  amounts required to
compensate  such Bank in respect of any Additional  Costs,  shall be conclusive,
absent manifest error.

(d) The  Company's  obligation to pay  Additional  Costs and  compensation  with
regard  to  each  Eurodollar  Loan  and  each  Competitive  Loan  shall  survive
termination of this Agreement.

6.2   Limitation   on  Types  of  Loans.   Anything   herein  to  the   contrary
notwithstanding, if, with respect to any Eurodollar Loans:

(a Administrative  Agent determines in good faith (which  determination shall be
conclusive) that quotations of interest rates for the relevant deposits referred
to in the  definition  of  "Eurodollar  Base Rate" in Section 1.1 hereof are not
being  provided  by the  Reference  Banks  in the  relevant  amounts  or for the
relevant  maturities for purposes of  determining  the rate of interest for such
Loans for Interest Periods therefor as provided in this Agreement; or

(b the Majority  Banks  determine in good faith  (which  determination  shall be
conclusive) and notify  Administrative Agent that the relevant rates of interest
referred to in the  definition of  "Eurodollar  Base Rate" in Section 1.1 hereof
upon  the  basis of  which  the  rates of  interest  for  such  Loans  are to be
determined  do not  accurately  reflect  the  cost to such  Banks of  making  or
maintaining such Loans for Interest Periods therefor; or

<PAGE>

(c Administrative  Agent determines in good faith (which  determination shall be
conclusive)  that by reason of  circumstances  affecting  the  interbank  Dollar
market  generally,  deposits in United States dollars in the relevant  interbank
Dollar market are not being offered for the applicable Interest Period and in an
amount equal to the amount of the Eurodollar Loan requested by the Company;

then  Administrative  Agent  shall  promptly  notify the  Company  and each Bank
thereof,  and, so long as such condition  remains in effect,  the Banks shall be
under no obligation to make  Eurodollar  Loans (but shall maintain until the end
of the Interest Period then in effect the Eurodollar Loans then outstanding).

6.3  Illegality.  Notwithstanding  any other  provision of this Agreement to the
contrary,  if (x) by reason of the adoption of any applicable Legal  Requirement
or any change in any applicable Legal  Requirement or in the  interpretation  or
administration  thereof by any Governmental  Authority or compliance by any Bank
with any  request or  directive  (whether or not having the force of law) of any
central bank or other Governmental Authority or (y) circumstances  affecting the
relevant  interbank Dollar market or the position of a Bank therein shall at any
time  make  it  unlawful  or  impracticable  in the  sole  discretion  of a Bank
exercised in good faith for such Bank or its  Applicable  Lending  Office to (a)
honor its obligation to make Eurodollar Loans or Competitive Loans hereunder, or
(b) maintain  Eurodollar Loans or Competitive  Loans  hereunder,  then such Bank
shall promptly notify the Company thereof through  Administrative Agent and such
Bank's obligation to make or maintain  Eurodollar Loans or Competitive Loans, as
the case may be,  hereunder  shall be suspended until such time as such Bank may
again make and maintain  Eurodollar Loans or Competitive  Loans, as the case may
be (in  which  case the  provisions  of  Sections  6.4 and 6.8  hereof  shall be
applicable).  Before giving such notice  pursuant to this Section 6.3, such Bank
will  designate  a  different  available   Applicable  Lending  Office  for  the
Eurodollar  Loans or the Competitive  Loans, as the case may be, of such Bank or
take such other action as the Company may request if such  designation or action
will avoid the need to suspend such Bank's  obligation to make Eurodollar  Loans
or Competitive  Loans,  as the case may be,  hereunder and will not, in the sole
opinion of such Bank exercised in good faith,  be  disadvantageous  to such Bank
(provided, that such Bank shall have no obligation so to designate an Applicable
Lending Office for Eurodollar Loans located in the United States of America).

<PAGE>

6.4 Substitute  Alternate Base Rate Loans. If the obligation of any Bank to make
or maintain  Eurodollar Loans or Competitive Loans, as the case may be, shall be
suspended  pursuant to Section  6.1,  6.2 or 6.3  hereof,  all Loans which would
otherwise be made by such Bank as Eurodollar Loans or Competitive  Loans, as the
case may be,  shall be made  instead as  Alternate  Base Rate Loans (and,  if an
event  referred to in Section 6.1(b) or 6.3 hereof has occurred and such Bank so
requests  by notice to the Company  with a copy to  Administrative  Agent,  each
Eurodollar Loan or each Competitive  Loan, as the case may be, of such Bank then
outstanding shall be automatically converted into an Alternate Base Rate Loan on
the  date  specified  by such  Bank in such  notice)  and,  to the  extent  that
Eurodollar  Loans or Competitive  Loans,  as the case may be, are so made as (or
converted into) Alternate Base Rate Loans, all payments of principal which would
otherwise be applied to such Eurodollar Loans or such Competitive  Loans, as the
case may be, shall be applied instead to such Alternate Base Rate Loans.

6.5  Compensation.  Subject to Section  13.6  hereof,  the Company  shall pay to
Administrative Agent for the account of each Bank, within four (4) Business Days
after demand therefor by such Bank through  Administrative Agent, such amount or
amounts  as shall be  sufficient  (in the  reasonable  opinion  of such Bank) to
compensate it for any loss, cost or expense  actually  incurred by it (exclusive
of any lost profits or opportunity costs) as a result of:

(a any payment,  prepayment or conversion of a Eurodollar  Loan or a Competitive
Loan made by such Bank on a date other than the last day of an  Interest  Period
for such Loan; or

(b any failure by the Company to borrow a Eurodollar Loan or a Competitive  Loan
to be made by such Bank on the date for such borrowing specified in the relevant
notice of borrowing under Section 5.5 or Section 2.9 hereof;

such compensation to include,  without limitation,  any loss or expense actually
incurred  (exclusive of any lost profits or opportunity  costs) by reason of the
liquidation  or  reemployment  of  deposits  or  other  funds  acquired  by  the
applicable  Bank  to  fund  or  maintain  its  share  of any  Loan.  Subject  to
Section 6.8,  each  determination  of the amount of such  compensation by a Bank
shall be conclusive  and binding,  absent  manifest  error,  and may be computed
using any reasonable averaging and attribution method.

6.6 [Intentionally omitted].

<PAGE>

6.7 Capital Adequacy. If any Bank shall have determined that a Regulatory Change
resulting in the adoption after the date hereof or effectiveness  after the date
hereof  (whether or not  previously  announced)  of any  applicable  law,  rule,
regulation or treaty regarding capital adequacy, or any change therein after the
date hereof, or any change in the interpretation or administration thereof after
the date hereof by any Governmental Authority charged with the interpretation or
administration  thereof,  or compliance by any Bank (or its  Applicable  Lending
Office) with any request or directive  after the date hereof  regarding  capital
adequacy  (whether  or not  having  the  force of law) of any such  Governmental
Authority  has or would have the effect of  reducing  the rate of return on such
Bank's capital as a consequence of such Bank's  obligations  hereunder and under
the Loans made by it to a level  below that which such Bank could have  achieved
but for such  adoption,  change or compliance  (taking into  consideration  such
Bank's  policies  with respect to capital  adequacy) by an amount deemed by such
Bank to be material, then from time to time, upon satisfaction of the conditions
precedent  set forth in this Section 6.7,  upon demand by such Bank (with a copy
to Administrative Agent), the Company (subject to Section 13.6 hereof) shall pay
to such Bank such additional  amount or amounts as will compensate such Bank for
such reduction.  A certificate as to such amounts,  submitted to the Company and
Administrative  Agent by such  Bank,  setting  forth the  basis for such  Bank's
determination  of such amounts,  shall constitute a demand therefor and shall be
conclusive  and binding for all purposes,  absent  manifest  error.  The Company
shall  pay the  amount  shown as due on any  such  certificate  within  four (4)
Business Days after delivery of such  certificate.  Subject to  Section 6.8,  in
preparing such  certificate,  a Bank may employ such assumptions and allocations
of costs and expenses as it shall in good faith deem  reasonable and may use any
reasonable averaging and attribution method.

6.8  Limitation on Additional  Charges;  Substitute  Banks;  Non-Discrimination.
Anything in this Section 6 notwithstanding:

(a) the  Company  shall not be required  to pay to any Bank  reimbursement  with
regard to any costs or expenses,  unless such Bank  notifies the Company of such
costs or expenses within 90 days after the date paid or incurred;

(b) none of the Banks shall be permitted to pass through to the Company  charges
and costs under this Section 6 on a  discriminatory  basis (i.e.,  which are not
also  passed  through  by such Bank to other  customers  of such Bank  similarly
situated  where such  customer is subject to documents  providing  for such pass
through); and

(c) if any Bank elects to pass  through to the Company  any  material  charge or
cost under this Section 6 or elects to terminate the  availability of Eurodollar
Loans for any material period of time, the Company may, within 60 days after the
date of  such  event  and so  long as no  Default  shall  have  occurred  and be
continuing, elect to terminate such Bank as a party to this Agreement;  provided
that, concurrently with such termination the Company shall (i) if Administrative
Agent and each of the other Banks shall  consent,  pay that Bank all  principal,
interest  and fees and  other  amounts  owed to such Bank  through  such date of
termination or (ii) have arranged for another financial  institution approved by
Administrative Agent (such approval not to be unreasonably  withheld) as of such
date, to become a substitute  Bank for all purposes  under this Agreement in the
manner provided in Section 13.5;  provided  further that,  prior to substitution
for any Bank,  the Company  shall have given  written  notice to  Administrative
Agent of such intention and the Banks shall have the option,  but no obligation,
for a  period  of 60 days  after  receipt  of such  notice,  to  increase  their
Commitments in order to replace the affected Bank in lieu of such substitution.

Section 7. Conditions Precedent.

7.1 Initial  Loans.  The obligation of each Bank to make its initial Loans on or
after the date hereof is subject to the following conditions precedent,  each of
which  shall  have  been  fulfilled  or  waived  to  the   satisfaction  of  the
Administrative Agent:

<PAGE>

(a Corporate  Action and Status.  Administrative  Agent shall have received from
the appropriate  Governmental Authorities certified copies of the Organizational
Documents  (other than  bylaws) of the Company and the  Guarantor,  and evidence
satisfactory  to  Administrative  Agent  of all  corporate  action  taken by the
Company and the Guarantor authorizing the execution, delivery and performance of
the Loan Documents and all other documents related to this Agreement to which it
is a party  (including,  without  limitation,  a certificate of the secretary of
each  such  party  setting  forth  the  resolutions  of its  Board of  Directors
authorizing the  transactions  contemplated  thereby and attaching a copy of its
bylaws),  together with such  certificates  as may be appropriate to demonstrate
the  qualification  and good standing of and payment of taxes by the Company and
the Guarantor in Texas and Louisiana, as applicable.

(b  Incumbency.  The Company,  the Guarantor and each other Relevant Party shall
have delivered to Administrative  Agent a certificate in respect of the name and
signature of each of the officers  (i) who is  authorized  to sign on its behalf
the  applicable  Loan  Documents  related  to any Loan and (ii) who will,  until
replaced by another officer or officers duly authorized for that purpose, act as
its  representative for the purposes of signing documents and giving notices and
other communications in connection with any Loan.  Administrative Agent and each
Bank may  conclusively  rely on such  certificates  until they receive notice in
writing from the Company, the Guarantor or the appropriate Relevant Party to the
contrary.

(c [Intentionally omitted].

(d Loan  Documents.  The Company and each other  Relevant  Party shall have duly
executed and delivered the other Loan  Documents to which it is a party (in such
number of copies as  Administrative  Agent shall have  requested)  and each such
Loan Document shall be in form  satisfactory to the  Administrative  Agent. Each
such Loan Document  shall be in  substantially  the form  furnished to the Banks
prior to their execution of this  Agreement,  together with such changes therein
as the Administrative Agent may approve.

(e Fees and Expenses.  The Company shall have paid to  Administrative  Agent for
the account of each Bank all  accrued and unpaid fees in the amounts  previously
agreed upon in writing  among the Company and  Administrative  Agent;  and shall
have in  addition  paid to each  Agent all  amounts  payable  under  the  letter
agreements referred to in Section 2.4(b)  hereof and under Section 9.7 hereof on
or before the date of this Agreement.

(f Opinions of Counsel.  Administrative  Agent shall have received an opinion of
Vinson & Elkins L.L.P.,  counsel to the Company and the  Guarantor,  in form and
substance reasonably satisfactory to the Agents.

(g  Execution  by Banks and Agents.  Administrative  Agent  shall have  received
counterparts of this Agreement executed and delivered by or on behalf of each of
the Banks and the Agents or  Administrative  Agent shall have received  evidence
satisfactory to it of the execution and delivery by each of the Banks and Agents
of a counterpart hereof.

<PAGE>

(h Consents.  Administrative Agent shall have received evidence  satisfactory to
it that, except as disclosed in the Disclosure Statement,  all material consents
of each  Governmental  Authority  and of each other Person,  if any,  reasonably
required in connection with (a) the Loans,  and (b) the execution,  delivery and
performance   of  this   Agreement  and  the  other  Loan  Documents  have  been
satisfactorily obtained.

(i Margin  Regulations.  After giving effect to such Loan, the Company and Banks
shall be in compliance with the Margin Regulations.

(j  Consummation  of Offer to  Purchase.  The offer to  purchase  (the "Offer to
Purchase") shall have been consummated (including the payment for all such notes
tendered  thereunder) as  contemplated  by and pursuant to that certain Offer to
Purchase and Consent Solicitation  Statement of Company which offers to purchase
for cash all of the Company's  outstanding 10.375% Senior Subordinated Notes due
2005 (CUSIP No. 674812AD4, originally issued by United Meridian Corporation) and
9.75% Senior Subordinated Notes due 2006 (CUSIP No. 34039CAB3, originally issued
by Flores & Rucks, Inc.) (the "Offer Agreement"), and Administrative Agent shall
have  received  (i)  satisfactory  evidence of the  consummation  (at least with
respect  to the  10.375%  Senior  Subordinated  Notes due 2005) of such Offer to
Purchase  and (ii) a  certificate  from a  Responsible  Officer  of the  Company
certifying  that such  Offer to  Purchase  has been  consummated  (at least with
respect to the 10.375% Senior Subordinated Notes due 2005).

(k Financial Reports;  Filings.  Administrative Agent shall have received copies
of all financial  statements,  reports,  notices and proxy statements either (A)
requested by the Administrative  Agent or any Bank or (B) sent by the Company to
its stockholders.

(l  Other  Documents.  Administrative  Agent  shall  have  received  such  other
documents  consistent  with the  terms of this  Agreement  and  relating  to the
transactions contemplated hereby as Administrative Agent may reasonably request.

All  provisions  and  payments  required by this  Section 7.1 are subject to the
provisions of Section 13.6.

7.2 Initial and Subsequent  Loans.  The obligation of each Bank to make any Loan
(including,  without  limitation,  its initial  Loan) to be made by it hereunder
(excluding  conversions of Loans to Alternate Base Rate Loans or Term Loans made
pursuant to Section  2.1(b),  in each case as to which no  conditions  precedent
exist) is subject to the additional conditions precedent that (i)Administrative
Agent  shall have  received  a Request  for  Extension  of Credit and such other
certifications as Administrative Agent may reasonably require,  (ii) in the case
of  Competitive  Loans,  the Company shall have complied with the  provisions of
Section  2.9  hereof  and (iii) as of the date of such  Loan,  and after  giving
effect thereto:

(a no Default shall have occurred and be continuing;

<PAGE>

(b except for facts timely disclosed to  Administrative  Agent from time to time
in writing,  which facts (i) are not materially  more adverse to the Company and
its  Subsidiaries  or any other  Obligor,  (ii) do not  materially  decrease the
ability of the Banks to collect the  Obligations as and when due and payable and
(iii) do not materially increase the liability of any Agent or any of the Banks,
in each  case  compared  to those  facts  existing  on the date  hereof  and the
material  details  of which  have  been set  forth in the  Financial  Statements
delivered to Administrative  Agent prior to the date hereof or in the Disclosure
Statement,  and except for the  representations  set forth in the Loan Documents
which, by their terms,  are expressly (or by means of similar  phrasing) made as
of the Effective  Date or as of the date hereof,  as the case may be, only,  the
representations  and  warranties  made in each Loan  Document  shall be true and
correct  in all  material  respects  on and as of the date of the making of such
Loan, with the same force and effect as if made on and as of such date;

(c) the making of such Loan shall not violate any Legal  Requirement  applicable
to any Bank; and

(d) no event or  condition  shall have  occurred  since  December 31, 1998 which
reasonably could be expected to result in a Material Adverse Effect.

Each Request for  Extension of Credit by the Company  hereunder  shall include a
representation  and  warranty  by  the  Company  to  the  effect  set  forth  in
Subsections  7.2(a) and (b) (both as of the date of such notice and,  unless the
Company  otherwise  notifies  Administrative  Agent  prior  to the  date of such
borrowing, as of the date of such borrowing).

Section 8.  Representations  and  Warranties.  To induce the Banks to enter into
this Agreement and to make the Loans, the Company  represents and warrants (such
representations  and warranties to survive any  investigation  and the making of
the Loans) to the Banks and the Agents as follows:

8.1 Corporate  Existence.  The Company, the Guarantor and each Subsidiary of the
Company are duly organized, legally existing and in good standing under the laws
of the respective jurisdictions in which they are formed, and are duly qualified
in all  jurisdictions  wherein the property owned or the business  transacted by
them makes such  qualification  necessary  and the  failure to so qualify  could
reasonably be expected to result in a Material Adverse Effect.

<PAGE>

8.2 Corporate Power and  Authorization.  Each of the Company,  the Guarantor and
each  Subsidiary  of the Company is duly  authorized  and  empowered to execute,
deliver,  and perform this Agreement and the other Loan Documents to which it is
a party;  and all corporate  action on the Company's part and on the part of the
Guarantor and each  Subsidiary of the Company for the due  execution,  delivery,
and  performance of this Agreement and the other Loan Documents to which each of
the Company, the Guarantor and each such Subsidiary is a party has been duly and
effectively taken.

8.3 Binding Obligations.  This Agreement and the other Loan Documents constitute
legal, valid and binding obligations of the Company and its Subsidiaries and the
Guarantor,  to the  extent  each is a party  thereto,  enforceable  against  the
Company and its  Subsidiaries  and the Guarantor,  to the extent each is a party
thereto,  in accordance with their respective terms, except as may be limited by
any  bankruptcy,  insolvency,  moratorium  or  other  similar  laws or  judicial
decisions affecting creditors' rights generally and general principles of equity
whether considered at law or in equity.

8.4 No Legal Bar or Resultant Lien. The Company's and each of its  Subsidiaries'
and the Guarantor's creation, issuance,  execution,  delivery and performance of
this  Agreement  and the other Loan  Documents,  to the extent  they are parties
thereto,  do not and will  not  violate  any  provisions  of the  Organizational
Documents of the Company,  the Guarantor or any Subsidiary of the Company or any
Legal  Requirement to which the Company,  the Guarantor or any Subsidiary of the
Company  is  subject  or by  which  its  property  may  be  presently  bound  or
encumbered,  or  result  in the  creation  or  imposition  of any Lien  upon any
properties of the Company, the Guarantor or any Subsidiary of the Company, other
than those permitted by this Agreement.

8.5 No Consent.  The Company's and each of its Subsidiaries' and the Guarantor's
execution,  delivery,  and  performance  of this  Agreement  and the other  Loan
Documents  to which they are  parties do not and will not require the consent or
approval of any Person other than such consents and/or approvals obtained by the
Company  contemporaneously  with or prior to the  execution  of this  Agreement,
including,  without limitation,  any Governmental Authorities,  other than those
consents the failure to obtain which could not be reasonably  expected to have a
Material Adverse Effect.

8.6 Financial Condition.

(a The  audited  consolidated  annual  financial  statements  of Seagull and its
Subsidiaries for the year ended December 31, 1998,  which have been delivered to
the Banks,  have been prepared in accordance with GAAP, and present  fairly,  in
all material respects,  the financial condition and results of the operations of
Seagull  and its  Subsidiaries  for the period or periods  stated.  The  audited
consolidated   annual   financial   statements  of  Old  Ocean  Energy  and  its
Subsidiaries for the year ended December 31, 1998,  which have been delivered to
the Banks,  have been prepared in accordance with GAAP, and present  fairly,  in
all material respects,  the financial condition and results of the operations of
Old Ocean  Energy and its  Subsidiaries  for the period or  periods  stated.  No
Material  Adverse  Effect  has  occurred  since  December  31,  1998,  except as
disclosed to the Banks in the Disclosure Statement.

<PAGE>

(b The  unaudited  pro forma  consolidated  annual  financial  statements of the
Company and its  Subsidiaries for the year ended  December 31, 1998,  which have
been  delivered to the Banks,  have been  prepared in  accordance  with GAAP. No
material  adverse change,  either in any case or in the aggregate,  has occurred
since  December  31,  1998  in the  assets,  liabilities,  financial  condition,
business,   operations,   affairs  or  circumstances  of  the  Company  and  its
Subsidiaries  taken  as a  whole,  except  as  disclosed  to  the  Banks  in the
Disclosure Statement.

8.7 Investments  and Guaranties.  As of the Effective Date, no Subsidiary of the
Company had made  Investments in or advances to, and neither the Company nor any
Subsidiary of any of them had made Guarantees of, the obligations of any Person,
except as (a)  disclosed  to the Banks in the  Disclosure  Statement  or (b) not
prohibited by applicable provisions of Section 10.

8.8 Liabilities  and  Litigation.  Neither the Company nor any Subsidiary of the
Company has any material (individually or in the aggregate) liabilities,  direct
or  contingent,  except  as  (a) disclosed  or  referred  to  in  the  Financial
Statements,  (b)  disclosed  to the  Banks  in  the  Disclosure  Statement,  (c)
disclosed in a notice to  Administrative  Agent pursuant to  Section 9.10  with
respect to such as could  reasonably  be  expected  to have a  Material  Adverse
Effect or (d) not prohibited by applicable  provisions of Section 10.  Except as
(a) described in the Financial Statements,  (b) otherwise disclosed to the Banks
in the Disclosure  Statement,  (c) disclosed in a notice to Administrative Agent
pursuant to Section 9.10 with respect to such as could reasonably be expected to
have a Material Adverse Effect or (d) not prohibited by applicable provisions of
Section 10,  no  litigation,   legal,  administrative  or  arbitral  proceeding,
investigation,  or other action of any nature exists or (to the knowledge of the
Company) is threatened against or affecting the Company or any Subsidiary of the
Company which could reasonably be expected to result in any judgment which could
reasonably be expected to have a Material Adverse Effect, or which in any manner
challenges or may challenge or draw into question the validity of this Agreement
or any other  Loan  Document,  or enjoins or  threatens  to enjoin or  otherwise
restrain any of the transactions contemplated by any of them.

8.9 Taxes and Governmental Charges. The Company and its Subsidiaries have filed,
or obtained  extensions  with respect to the filing of, all material tax returns
and reports required to be filed and have paid all material taxes,  assessments,
fees and other governmental charges levied upon any of them or upon any of their
respective  properties or income which are due and payable,  including  interest
and penalties, or have provided adequate reserves for the payment thereof.

8.10 Title to  Properties.  The Company and its  Subsidiaries  and the Guarantor
have  good  and  defensible  title to their  respective  properties  (including,
without  limitation,  all fee and  leasehold  interests),  free and clear of all
Liens except (a) those referred to in the Financial Statements, (b) as disclosed
to the Banks in the Disclosure Statement or (c) as permitted by Section 10.2.

<PAGE>

8.11  Defaults.  Neither  the Company  nor any  Subsidiary  of the Company is in
default,  which default could  reasonably be expected to have a Material Adverse
Effect,  under  any  indenture,  mortgage,  deed of  trust,  agreement  or other
instrument  to which the Company or any  Subsidiary of the Company is a party or
by which the Company or any  Subsidiary  of the  Company or the  property of the
Company or any  Subsidiary  of the Company is bound,  except as (a) disclosed to
the  Banks  in  the  Disclosure   Statement,   (b)  disclosed  in  a  notice  to
Administrative  Agent  pursuant to  Section 9.10  with  respect to such as could
reasonably  be expected to have a Material  Adverse  Effect or (c)  specifically
permitted  by  applicable  provisions  of  Section 10.  No  Default  under  this
Agreement or any other Loan Document has occurred and is continuing.

8.12   Location  of   Businesses   and  Offices.   Except  to  the  extent  that
Administrative  Agent has been  furnished  written  notice to the contrary or of
additional locations, pursuant to Section 9.10, the Company s principal place of
business and chief  executive  offices are located at the address  stated on the
signature page hereof and the principal  places of business and chief  executive
offices of the  Guarantor and each other  Subsidiary  are described on Exhibit C
hereto.

8.13 Compliance with Law.  Neither the Company nor any Subsidiary of the Company
(except as (a) disclosed to the Banks in the Disclosure Statement, (b) disclosed
in a notice to  Administrative  Agent pursuant to  Section 9.10  with respect to
such as could  reasonably be expected to have a Material  Adverse  Effect or (c)
not prohibited by applicable provisions of Section 10):

(a) is in violation of any Legal Requirement; or

(b) has failed to obtain any license,  permit,  franchise or other  governmental
authorization  necessary to the ownership of any of their respective  properties
or the conduct of their respective business;

which  violation  or failure  could  reasonably  be  expected to have a Material
Adverse Effect.

<PAGE>

8.14  Margin  Stock.  None of the  proceeds  of the  Loans  will be used for the
purpose of, and neither the Company,  the  Guarantor  nor any  Subsidiary of the
Company is engaged in the  business of  extending  credit for the purpose of (a)
purchasing  or carrying  any "margin  stock" as defined in  Regulation  U of the
Board of Governors  of the Federal  Reserve  System (12 C.F.R.  Part 221) or (b)
reducing or retiring any indebtedness which was originally  incurred to purchase
or carry  margin  stock,  if such  purpose  under  either (a) or (b) above would
constitute  this  transaction  a "purpose  credit"  within  the  meaning of said
Regulation U, or for any other purpose which would constitute this transaction a
"purpose credit".  Neither the Company,  the Guarantor nor any Subsidiary of the
Company is engaged principally,  or as one of its important  activities,  in the
business of extending  credit for the purpose of purchasing  or carrying  margin
stocks. Neither the Company, the Guarantor nor any Subsidiary of the Company nor
any Person acting on behalf of the Company,  the Guarantor or any  Subsidiary of
the Company has taken or will take any action  which might cause any of the Loan
Documents,  including  this  Agreement,  to  violate  Regulation U  or any other
regulation  of the Board of  Governors  of the  Federal  Reserve  System,  or to
violate any similar provision of the Securities Exchange Act of 1934 or any rule
or regulation under any such provision thereof.

8.15  Subsidiaries.  The  Company  has no  Subsidiaries  as of the  date of this
Agreement except those shown in Exhibit C hereto.

8.16 ERISA. With respect to each Plan, the Company and each ERISA Affiliate have
fulfilled their  obligations,  including  obligations  under the minimum funding
standards of ERISA and the Code, and are in compliance in all material  respects
with the  provisions of ERISA and the Code.  The Company has no knowledge of any
event which could result in a liability of the Company or any ERISA Affiliate to
the PBGC or a Plan (other than to make  contributions  in the ordinary  course).
Since the effective  date of Title IV of ERISA,  there have not been any nor are
there now existing any events or  conditions  that would cause the Lien provided
under  Section  4068 of ERISA to attach to any  property  of the  Company or any
ERISA Affiliate.  There are no Unfunded Liabilities with respect to any Plan. No
"prohibited transaction" has occurred with respect to any Plan.

8.17 Investment  Company Act. Neither the Company nor any of its Subsidiaries is
an investment  company within the meaning of the Investment Company Act of 1940,
as amended, or, directly or indirectly, controlled by or acting on behalf of any
Person which is an investment company, within the meaning of said Act.

8.18 Public  Utility  Holding  Company  Act.  Neither the Company nor any of its
Subsidiaries  (i) is subject to  regulation  under the  Public  Utility  Holding
Company Act of 1935, as amended (the "PUHC Act"),  except as to Section  9(a)(2)
thereof  (15  U.S.C.A.  Section 79(i)(a)(2))or(ii)is in violation of any of the
provisions, rules, regulations or orders of or under the PUHC Act. Further, none
of  the  transactions  contemplated  under  this  Agreement,  including  without
limitation,  the making of the Loans,  shall cause or  constitute a violation of
any of the provisions, rules, regulations or orders of or under the PUHC Act and
the  PUHC  Act  does  not  in  any  manner  impair  the  legality,  validity  or
enforceability of this Agreement.

<PAGE>

8.19 Environmental Matters. Except as disclosed in the Disclosure Statement, (i)
the Company and its  Subsidiaries  have  obtained and  maintained  in effect all
Environmental  Permits (or has  initiated  the  necessary  steps to transfer the
Environmental  Permits  into its  name),  the  failure  to  obtain  which  could
reasonably be expected to have a Material  Adverse Effect,  (ii) the Company and
its Subsidiaries and their properties, assets, business and operations have been
and are in compliance with all applicable  Requirements of Environmental Law and
Environmental  Permits failure to comply with which could reasonably be expected
to have a Material  Adverse Effect,  (iii) the Company and its  Subsidiaries and
their  properties,  assets,  business and  operations are not subject to any (A)
Environmental Claims or (B) Environmental Liabilities,  in either case direct or
contingent,  and whether  known or unknown,  arising from or based upon any act,
omission,  event, condition or circumstance occurring or existing on or prior to
the date hereof which could  reasonably  be expected to have a Material  Adverse
Effect,  and  (iv)  no  Responsible  Officer  of  the  Company  or  any  of  its
Subsidiaries  has received any notice of any  violation or alleged  violation of
any   Requirements  of  Environmental   Law  or  Environmental   Permit  or  any
Environmental  Claim in  connection  with its  assets,  properties,  business or
operations which could reasonably be expected to have a Material Adverse Effect.
The liability (including without limitation any Environmental  Liability and any
other  damage  to  persons  or  property),  if  any,  of  the  Company  and  its
Subsidiaries  and  with  respect  to  their  properties,  assets,  business  and
operations which is reasonably expected to arise in connection with Requirements
of  Environmental  Laws  currently  in effect  and other  environmental  matters
presently known by a Responsible Officer of the Company will not have a Material
Adverse  Effect.  No  Responsible  Officer of the Company  knows of any event or
condition  with  respect to  Environmental  Matters  with  respect to any of its
properties or the properties of any of its  Subsidiaries  which could reasonably
be expected to have a Material  Adverse  Effect.  For  purposes of this  Section
8.19,  "Environmental  Matters"  shall mean  matters  relating to  pollution  or
protection  of  the  environment,   including,  without  limitation,  emissions,
discharges,  releases or threatened  releases of Hazardous  Substances  into the
environment (including, without limitation, ambient air, surface water or ground
water, or land surface or subsurface), or otherwise relating to the manufacture,
processing,  distribution,  use,  treatment,  storage,  disposal,  transport  or
handling of Hazardous Substances.

8.20  Claims  and  Liabilities.  Except as  disclosed  to the Banks in  writing,
neither the Company or any of its Subsidiaries nor the Guarantor has accrued any
liabilities under gas purchase  contracts for gas not taken, but for which it is
liable to pay if not made up and  which,  if not  paid,  would  have a  Material
Adverse  Effect.  Except as disclosed  to the Banks in writing,  no claims exist
against the Company or its  Subsidiaries  or the  Guarantor  for gas  imbalances
which claims if adversely  determined would have a Material  Adverse Effect.  No
purchaser of product  supplied by the Company or any of its  Subsidiaries or the
Guarantor  has any claim  against  the  Company or any of its  Subsidiaries  for
product  paid for,  but for which  delivery  was not taken as and when paid for,
which claim if adversely determined would have a Material Adverse Effect.

8.21  Solvency.  Neither  the  Company,  the  Guarantor  nor the Company and its
Subsidiaries,  on a consolidated basis, is "insolvent", as such term is used and
defined  in (i) the  Bankruptcy  Code  and  (ii) the  Texas  Uniform  Fraudulent
Transfer Act, Tex. Bus. & Com. Code Ann. Section 24.001 et seq.

<PAGE>

8.22 Year 2000. Any reprogramming required to permit the proper functioning,  in
and following the year 2000, of (i) the computer  systems of the Company and its
Subsidiaries  and  (ii) equipment   containing  embedded  microchips  (including
systems and equipment  supplied by others or with which the systems interface of
the  Company  and its  Subsidiaries)  and the  testing of all such  systems  and
equipment, as so reprogrammed,  has been completed in all material respects. The
cost to the Company and its Subsidiaries of such  reprogramming  and testing and
of the reasonably  foreseeable  consequences of year 2000 to the Company and its
Subsidiaries  (including,  without  limitation,  reprogramming  errors  and  the
failure  of  others'  systems  or  equipment)  will not result in a Default or a
Material Adverse Effect. Except for such of the reprogramming referred to in the
preceding sentence as may be necessary,  the computer and management information
systems of the  Company  and its  Subsidiaries  are and,  with  ordinary  course
upgrading and  maintenance,  will continue for the term of this Agreement to be,
sufficient  to permit the  Company  to conduct  its  business  without  Material
Adverse Effect.

Section 9.  Affirmative  Covenants.  A  deviation  from the  provisions  of this
Section 9  will not  constitute a Default under this Agreement if such deviation
is  consented  to in writing by the Majority  Banks.  Without the prior  written
consent of the Majority Banks,  the Company agrees with the Banks and the Agents
that, so long as any of the  Commitments  is in effect and until payment in full
of all Obligations:

9.1 Financial  Statements and Reports.  The Company will promptly furnish to any
Bank from time to time upon request such information  regarding the business and
affairs and  financial  condition  of the Company and its  Subsidiaries  and the
Guarantor as such Bank may  reasonably  request,  and will furnish to the Agents
and each of the Banks:

(a) Annual Reports - promptly  after becoming  available and in any event within
100 days after the close of each fiscal year of the Company:

(i) the audited  consolidated  balance sheet of the Company and its Subsidiaries
as of the end of such year;

(ii) the  audited  consolidated  statement  of  earnings  of the Company and its
Subsidiaries for such year;

(iii) the audited  consolidated  statement  of cash flows of the Company and its
Subsidiaries for such year;

setting forth in each case in comparative form the corresponding figures for the
preceding  fiscal year,  and, in the case of the audited  Financial  Statements,
audited and  accompanied  by the related  opinion of KPMG Peat  Marwick or other
independent   certified  public  accountants  of  recognized  national  standing
acceptable  to the Majority  Banks,  which opinion shall state that such audited
balance  sheets  and  statements  have been  prepared  in  accordance  with GAAP
consistently followed throughout the period indicated and fairly present, in all
material  respects,   the  consolidated   financial  condition  and  results  of
operations  of the  applicable  Persons as at the end of, and for,  such  fiscal
year; and

(b)  Quarterly  Reports - as soon as  available  and in any event within 50 days
after the end of each of the first three  quarterly  periods in each fiscal year
of the Company:

(i) the unaudited consolidated balance sheet of the Company and its Subsidiaries
as of the end of such quarter;

<PAGE>

(ii) the  unaudited  consolidated  statement  of earnings of the Company and its
Subsidiaries  for such  quarter  and for the period  from the  beginning  of the
fiscal year to the close of such quarter;

(iii) the unaudited  consolidated statement of cash flows of the Company and its
Subsidiaries  for such  quarter  and for the period  from the  beginning  of the
fiscal year to the close of such quarter;

all of  items  (i)  through  (iii)  above  prepared  on  substantially  the same
accounting basis as the annual reports described in  Subsection 9.1(a),  subject
to normal changes resulting from year-end adjustments; and

(c) [Intentionally omitted]; and

(d) SEC and Other Reports - promptly upon their becoming publicly available, one
copy of each financial statement,  report,  notice or definitive proxy statement
sent by the Company or any  Subsidiary to  shareholders  generally,  and of each
regular or periodic report and any registration statement, prospectus or written
communication  (other than transmittal  letters) in respect thereof filed by the
Company or any of its  Subsidiaries  with,  or received by the Company or any of
its  Subsidiaries in connection  therewith from, any securities  exchange or the
Securities and Exchange Commission or any successor agency.

All of the balance  sheets and other  financial  statements  referred to in this
Section 9.1  will be in such detail as any Bank may reasonably  request and will
conform  to GAAP  applied  on a basis  consistent  with  those of the  Financial
Statements  as of  December 31, 1998.  In  addition,  if GAAP shall  change with
respect  to any  matter  relative  to  determination  of  compliance  with  this
Agreement, the Company will also provide financial information necessary for the
Banks to determine compliance with this Agreement.

9.2 Officers' Certificates.

(a) Concurrently with the furnishing of the annual financial statements pursuant
to  Subsection 9.1(a),  commencing with the annual financial statements required
to be  delivered  in 2000,  the Company will furnish or cause to be furnished to
Administrative Agent certificates of compliance, as follows:

(i) a certificate  signed by the principal  financial  officer of the Company in
the form of Exhibit D; and

(ii) a certificate from the independent  public  accountants  stating that their
audit has not  disclosed  the  existence of any  condition  which  constitutes a
Default,  or if their audit has disclosed  the existence of any such  condition,
specifying the nature and period of existence.

<PAGE>

(b)  Concurrently  with the  furnishing  of the quarterly  financial  statements
pursuant to Subsection 9.1(b),  the Company will furnish to Administrative Agent
a principal financial officer's certificate in the form of Exhibit D.

9.3 Taxes and Other Liens.  The Company will and will cause each  Subsidiary  of
the  Company  to  pay  and  discharge   promptly  all  taxes,   assessments  and
governmental  charges or levies imposed upon the Company or such Subsidiary,  or
upon the income or any  property of the Company or such  Subsidiary,  as well as
all claims of any kind (including claims for labor,  materials,  supplies,  rent
and  payment of proceeds  attributable  to  Hydrocarbon  production)  which,  if
unpaid,  might result in or become a Lien upon any or all of the property of the
Company or such Subsidiary; provided, however, that neither the Company nor such
Subsidiary  will be required to pay any such tax,  assessment,  charge,  levy or
claims if the  amount,  applicability  or validity  thereof  will  currently  be
contested in good faith by appropriate  proceedings  diligently conducted and if
the Company or such Subsidiary will have set up reserves therefor adequate under
GAAP.

9.4  Maintenance.  Except as referred to in Sections 8.1  and 8.13 and except as
permitted  under Section 10.4 the Company will and will cause each Subsidiary of
the Company to: (i) maintain its corporate  existence;  (ii) maintain its rights
and franchises,  except for any mergers or consolidations otherwise permitted by
this  Agreement  and except to the extent  failure to so maintain the same would
not have a Material Adverse Effect; (iii) observe and comply (to the extent that
any  failure  would  have a  Material  Adverse  Effect)  with  all  valid  Legal
Requirements  (including without limitation  Requirements of Environmental Law);
and (iv)  maintain  (except to the extent  failure to so maintain the same would
not have a Material Adverse Effect) its properties (and any properties leased by
or consigned to it or held under title retention or conditional sales contracts)
consistent with the standards of a reasonably  prudent operator at all times and
make all repairs, replacements,  additions,  betterments and improvements to its
properties consistent with the standards of a reasonably prudent operator.

9.5 Further Assurances.  The Company will, and will cause each Subsidiary of the
Company to, cure  promptly any defects in the execution and delivery of the Loan
Documents,  including this  Agreement.  The Company at its expense will promptly
execute  and  deliver to  Administrative  Agent upon  request all such other and
further documents,  agreements and instruments (or cause any of its Subsidiaries
to take such action) in compliance with or  accomplishment  of the covenants and
agreements  of the  Company or any of its  Subsidiaries  in the Loan  Documents,
including this Agreement,  or to correct any omissions in the Loan Documents, or
to make any recordings,  to file any notices, or obtain any consents, all as may
be necessary or appropriate in connection therewith.

<PAGE>

9.6 Performance of Obligations.  The Company will pay the Loans according to the
reading, tenor and effect of this Agreement; and the Company will do and perform
every act and  discharge  all of the  obligations  provided to be performed  and
discharged by the Company under this  Agreement and the other Loan  Documents at
the  time  or  times  and  in  the  manner  specified,  and  cause  each  of its
Subsidiaries  to take  such  action  with  respect  to their  obligations  to be
performed and discharged under the Loan Documents to which they respectively are
parties.

9.7 Reimbursement of Expenses. Whether or not any Loan is ever made, the Company
agrees to pay or reimburse  Administrative  Agent for paying the reasonable fees
and expenses of Mayer,  Brown & Platt,  special counsel to the Agents,  together
with the reasonable fees and expenses of local counsel engaged by the Agents, in
connection with the  negotiation of the terms and structure of the  Obligations,
the  preparation,  execution  and delivery of this  Agreement and the other Loan
Documents and the making of the Loans  hereunder,  as well as any  modification,
supplement  or waiver of any of the terms of this  Agreement  and the other Loan
Documents.  The Company  will  promptly  upon request and in any event within 30
days  from  the  date of  receipt  by the  Company  of a copy of a bill for such
amounts,  reimburse any Bank or any Agent for all amounts  reasonably  expended,
advanced or incurred by such Bank or such Agent to satisfy any obligation of the
Company  under  this  Agreement  or any other  Loan  Document,  to  protect  the
properties  or business  of the Company or any  Subsidiary  of the  Company,  to
collect  the  Obligations,  or to enforce  the rights of such Bank or such Agent
under this  Agreement  or any other Loan  Document,  which  amounts will include
without limitation all court costs, attorneys' fees (but not including allocated
costs of in-house counsel), any engineering fees and expenses, fees of auditors,
accountants  and  appraisers,   investigation  expenses,  all  transfer,  stamp,
documentary or similar taxes,  assessments or charges levied by any Governmental
Authority in respect of any of the Loan Documents or any other document referred
to therein, all costs, expenses,  taxes,  assessments and other charges incurred
in connection with any filing, registration, recording or perfection of any Lien
contemplated  by any of the Loan Documents or any document  referred to therein,
fees and expenses  incurred in connection  with such Bank's  participation  as a
member of a creditors'  committee in a case commenced  under the Bankruptcy Code
or other  similar  law of the  United  States  or any  state  thereof,  fees and
expenses  incurred in connection  with lifting the automatic stay  prescribed in
Section 362 Title 11 of the United States Code,  and fees and expenses  incurred
in  connection  with any action  pursuant to Section 1129 Title 11 of the United
States Code and all other customary out-of-pocket expenses incurred by such Bank
or such Agent in connection with such matters,  together with interest after the
expiration  of the 30-day  period  stated  above in this  Section if no Event of
Default has occurred and is  continuing,  or from the date of the request to the
Company if an Event of Default has occurred and is continuing, at either (i) the
Post-Default  Rate on each such amount until the date of  reimbursement  to such
Bank or such Agent,  or (ii) if no Event of Default  will have  occurred  and be
continuing,  the  Alternate  Base Rate plus the  highest  Applicable  Margin for
Alternate  Base Rate Loans (not to exceed the Highest  Lawful Rate) on each such
amount until the date of the Company's  receipt of written  demand or request by
such Bank or such Agent for the  reimbursement  of same,  and  thereafter at the
applicable  Post-Default  Rate until the date of  reimbursement  to such Bank or
such Agent.  The obligations of the Company under this Section are  compensatory
in nature,  shall be deemed  liquidated as to amount upon receipt by the Company
of a copy of any invoice therefor,  and will survive the  non-assumption of this
Agreement in a case commenced  under the Bankruptcy Code or other similar law of
the United States or any state  thereof,  and will remain binding on the Company
and any trustee,  receiver,  or liquidator of the Company  appointed in any such
case.

9.8 Insurance.  The Company and its Subsidiaries will maintain, with financially
sound  and  reputable  insurers,  insurance  with  respect  to their  respective
properties  and  business  against  such  liabilities,   casualties,  risks  and
contingencies  and in such  types and  amounts  as is  customary  in the case of
corporations  engaged in the same or similar businesses and similarly  situated.
Upon the  request  of  Administrative  Agent  acting at the  instruction  of the
Majority  Banks,   the  Company  will  furnish  or  cause  to  be  furnished  to
Administrative  Agent from time to time a summary of the  insurance  coverage of
the Company  and its  Subsidiaries  in form and  substance  satisfactory  to the
Majority  Banks in their  reasonable  judgment,  and if  requested  will furnish
Administrative Agent copies of the applicable policies. In the case of any fire,
accident  or other  casualty  causing  loss or damage to any  properties  of the
Company or any of its  Subsidiaries,  the proceeds of such policies will be used
(i) to repair or replace the damaged  property,  (ii) to prepay the Obligations,
or (iii) so long as no Default  has  occurred  and is  continuing,  for  general
corporate purposes, at the election of the Company.

9.9 Accounts and Records.  The Company will keep and will cause each  Subsidiary
of the  Company to keep books of record and  account  which  fairly  reflect all
dealings  or  transactions  in  relation  to  their  respective  businesses  and
activities,  in accordance with GAAP,  which books of record and account will be
maintained,  to the extent necessary to enable compliance with all provisions of
this  Agreement,  separately  for each  such  Subsidiary,  the  Company  and any
division of the Company.

9.10 Notice of Certain Events.  The Company will promptly notify  Administrative
Agent  (and  Administrative  Agent  will then  notify all of the Banks and other
Agents) if a Responsible  Officer of the Company learns of the occurrence of, or
if the Company causes or intends to cause, as the case may be:

(i) any event which constitutes a Default, together with a detailed statement by
a Responsible Officer of the Company of the steps being taken to cure the effect
of such Default; or

(ii) the receipt of any notice  from,  or the taking of any other action by, the
holder of any promissory  note,  debenture or other evidence of  indebtedness of
the Company or any  Subsidiary  of the Company or of any security (as defined in
the  Securities Act of 1933, as amended) of the Company or any Subsidiary of the
Company with respect to a claimed default, together with a detailed statement by
a Responsible Officer of the Company specifying the notice given or other action
taken by such holder and the nature of the  claimed  default and what action the
Company or such  Subsidiary is taking or proposes to take with respect  thereto;
or

<PAGE>

(iii) any legal, judicial or regulatory proceedings affecting the Company or any
Subsidiary  of  the  Company  or any of the  properties  of the  Company  or any
Subsidiary of the Company in which the amount involved is materially  adverse to
the  Company  and its  Subsidiaries  taken as a  whole,  and is not  covered  by
insurance  or which,  if  adversely  determined,  would have a Material  Adverse
Effect; or

(iv) any dispute  between the Company or any  Subsidiary  of the Company and any
Governmental Authority or any other Person which, if adversely determined, could
reasonably be expected to have a Material Adverse Effect; or

(v) the  occurrence  of a default  or event of  default  by the  Company  or any
Subsidiary  of the  Company  under any other  agreement  to which it is a party,
which  default  or event of  default  could  reasonably  be  expected  to have a
Material Adverse Effect; or

(vi) any change in the accuracy of the  representations  and  warranties  of the
Company  or any  Subsidiary  contained  in  this  Agreement  or any  other  Loan
Document; or

(vii) any material  violation or alleged material  violation of any Requirements
of Environmental Law or Environmental  Permit or any Environmental  Claim or any
Environmental Liability; or

(viii) any tariff and rate cases and other material reports filed by the Company
or any of its Subsidiaries with any Governmental Authority and any notice to the
Company or any of its Subsidiaries  from any Governmental  Authority  concerning
noncompliance with any applicable Legal Requirement; or

(ix) within 10 days after the date on which a Responsible Officer of the Company
has actual knowledge thereof, the receipt of any notice by the Company or any of
its  Subsidiaries  of any claim of  nonpayment  of, or any attempt to collect or
enforce,  accounts payable of the Company or any of its Subsidiaries  exceeding,
in the case of any one account payable at one time  outstanding,  $5,000,000 and
in  the  case  of all  accounts  payable  in  the  aggregate  at  any  one  time
outstanding, $10,000,000; or

(x) any requirement for the payment of all or any portion of any Indebtedness of
the  Company or any of its  Subsidiaries  prior to the stated  maturity  thereof
(whether  by  acceleration  or  otherwise)  or as the  result of any  failure to
maintain or the  reaching of any  threshold  amount  provided in any  promissory
note,  bond,  debenture,  or other evidence of  Indebtedness or under any credit
agreement, loan agreement, indenture or similar agreement executed in connection
with any of the foregoing; or

(xi) any notice from the Securities and Exchange  Commission with respect to any
Application (as defined in Section 8.18 hereof).

<PAGE>

9.11 ERISA  Information  and  Compliance.  The Company will promptly  furnish to
Administrative  Agent (i)  immediately  upon  receipt,  a copy of any  notice of
complete or partial withdrawal  liability under Title IV of ERISA and any notice
from the PBGC  under  Title IV of ERISA of an intent to  terminate  or appoint a
trustee to  administer  any Plan,  (ii) if  requested by  Administrative  Agent,
acting on the  instruction  of the  Majority  Banks,  promptly  after the filing
thereof  with the United  States  Secretary of Labor or the PBGC or the Internal
Revenue  Service,  copies of each annual and other  report with  respect to each
Plan or any trust created thereunder,  (iii) immediately  upon becoming aware of
the  occurrence of any  "reportable  event",  as such term is defined in Section
4043  of  ERISA,   for  which  the   disclosure   requirements   of   Regulation
Section 2615.3  promulgated  by  the  PBGC  have  not  been  waived,  or of  any
"prohibited  transaction",  as such term is defined in Section 4975 of the Code,
in connection  with any Plan or any trust created  thereunder,  a written notice
signed by the President or the principal financial officer of the Company or the
applicable  ERISA  Affiliate  specifying  the nature  thereof,  what  action the
Company or the  applicable  ERISA  Affiliate  is taking or proposes to take with
respect  thereto,  and, when known,  any action taken by the PBGC,  the Internal
Revenue Service or the Department of Labor with respect  thereto,  (iv) promptly
after the filing or receiving  thereof by the Company or any ERISA  Affiliate of
any notice of the  institution  of any  proceedings  or other  actions which may
result in the  termination  of any Plan,  and (v) each request for waiver of the
funding standards or extension of the amortization  periods required by Sections
303 and 304 of ERISA or Section  412 of the Code  promptly  after the request is
submitted  by the  Company  or any  ERISA  Affiliate  to  the  Secretary  of the
Treasury,  the Department of Labor or the Internal Revenue Service,  as the case
may be. To the extent required under applicable statutory funding  requirements,
the Company will fund, or will cause each ERISA  Affiliate to fund,  all current
service  pension  liabilities  as they are incurred  under the provisions of all
Plans from time to time in effect, and comply with all applicable  provisions of
ERISA, except to the extent that any such failure to comply could not reasonably
be expected to have a Material  Adverse  Effect.  The Company  covenants that it
shall and shall cause each ERISA  Affiliate  to (1) make  contributions  to each
Plan  in a  timely  manner  and in an  amount  sufficient  to  comply  with  the
contribution  obligations  under  such Plan and the  minimum  funding  standards
requirements  of ERISA;  (2) prepare and file in a timely manner all notices and
reports  required  under the terms of ERISA  including but not limited to annual
reports;  and (3) pay in a timely  manner all required  PBGC  premiums,  in each
case, to the extent failure to do so would have a Material Adverse Effect.

Section  10.  Negative  Covenants.  A  deviation  from  the  provisions  of this
Section 10  will not constitute a Default under this Agreement if such deviation
is consented to in writing by the Majority  Banks.  The Company  agrees with the
Banks and the Agents that,  so long as any of the  Commitments  is in effect and
until payment in full of all Obligations:

10.1 Debts, Guaranties and Other Obligations.

<PAGE>

(i)  Of  Restricted  Subsidiaries.  The  Company  will  not  permit  any  of its
Restricted  Subsidiaries to incur, create,  assume or in any manner become or be
liable in respect of any Indebtedness  (including obligations for the payment of
rentals); and the Company will not permit any of its Restricted  Subsidiaries to
Guarantee or otherwise in any way become or be  responsible  for  obligations of
any other Person, whether by agreement to purchase the Indebtedness of any other
Person or agreement for the  furnishing of funds to any other Person through the
purchase or lease of goods,  supplies or services (or by way of stock  purchase,
capital contribution,  advance or loan) for the purpose of paying or discharging
the  Indebtedness of any other Person,  or otherwise,  except that the foregoing
restrictions will not apply to:

(a) Indebtedness pursuant to the Loan Documents;

(b)  Indebtedness  of any  Restricted  Subsidiary  existing  on the date of this
Agreement which is described in the Disclosure  Statement,  and (A) with respect
to any such Indebtedness which constitutes Senior Debt, any extensions, renewals
or  replacements  of  such  Indebtedness  upon  terms  no more  onerous  to such
Restricted  Subsidiary  than the  terms of this  Agreement  or the  terms of the
instruments  evidencing  such  Senior  Debt  as of the  effective  date  of this
Agreement,  and  (B) with  respect to any such  Indebtedness  which  constitutes
Subordinated  Indebtedness,  any  extensions,  renewals or  replacements of such
Indebtedness  which  (I)  remains  Subordinated  Indebtedness  and (II) does not
require principal repayment of such Subordinated  Indebtedness prior to the then
scheduled Stated Maturity Date;

(c) endorsements of negotiable or similar  instruments for collection or deposit
in the ordinary course of business;

(d)  trade  payables,  lease  acquisition  and  lease  maintenance  obligations,
extensions  of credit from  suppliers or  contractors,  liabilities  incurred in
exploration,  development and operation of any Restricted  Subsidiary's  oil and
gas properties or similar obligations from time to time incurred in the ordinary
course of business, other than for borrowed money, which are paid within 90 days
after the invoice date (inclusive of applicable  grace periods) or (i) are being
contested  in good  faith,  if such  reserve as  required  by GAAP has been made
therefor or (ii) trade  accounts  payable of any Restricted  Subsidiaries  (with
respect to which no legal  proceeding to enforce  collection  has been commenced
or, to the knowledge of any Responsible Officer of the Company,  threatened) not
exceeding, in the aggregate at any time outstanding, $50,000,000;

(e) taxes,  assessments or other government charges which are not yet due or are
being  contested in good faith by  appropriate  action  promptly  initiated  and
diligently conducted, if such reserve as will be required by GAAP will have been
made therefor;

(f) intercompany  Indebtedness owed to the Company by any Restricted  Subsidiary
and  intercompany  Indebtedness  owed to any Restricted  Subsidiary by any other
Restricted Subsidiary;

<PAGE>

(g) any  Guarantee  existing  on the  date  of  this  Agreement  of  payment  or
performance  by any  Person  under  any  agreement  so  long  as the  obligation
guaranteed does not constitute Indebtedness for borrowed money;

(h) obligations of any Restricted Subsidiary under oil or gas purchase contracts
for oil or gas not taken,  as to which such  Restricted  Subsidiary is liable to
pay if not made up;

(i)  obligations  of any Restricted  Subsidiary  under any contract for sale for
future  delivery  of oil or gas  (whether or not the subject oil or gas is to be
delivered) or other similar agreement;

(j) obligations of any Restricted Subsidiary under any hedging contract, forward
contract, swap agreement, futures contract or other similar agreement;

(k) obligations of any Restricted Subsidiary under any interest rate or currency
swap agreement,  or any contract implementing any interest rate or currency cap,
collar or floor, or any similar interest rate or currency hedging contract;

(l) obligations in connection with gas imbalances arising in the ordinary course
of business;

(m)  Guarantees of  obligations of Havre by Guarantor in an amount not exceeding
$20,000,000 in the aggregate in connection with Indebtedness of Havre;

(n) liabilities under capital leases and lease agreements which do not cover oil
and gas  properties  to the  extent (i) the  incurrence  and  existence  of such
liabilities  will still  enable each  Restricted  Subsidiary  to comply with all
requirements  of this Agreement and (ii) not exceeding,  in the aggregate at any
time outstanding, $35,000,000;

(o) until  such time as the  Guaranty  Agreement  is no  longer in  effect,  any
Guarantee by Guarantor of the payment or performance of the Company with respect
to Indebtedness of Company permitted by Section 10.1(iii);

(p) obligations in connection  with bank  guarantees,  bonds,  surety or similar
obligations required or requested by Governmental Authorities in connection with
the  usual  and  customary  operation  of  and  the  obtaining  of oil  and  gas
properties; and

(q) in  addition  to  Indebtedness  permitted  by clauses (a) through (p) above,
Indebtedness of any Restricted  Subsidiary in an aggregate  principal amount not
exceeding $10,000,000 at any time outstanding.

<PAGE>

(ii) Of  Unrestricted  Subsidiaries.  The  Company  will not  permit  any of its
Unrestricted  Subsidiaries to (a) incur, create,  assume or in any manner become
or be liable in  respect  of any  Indebtedness  (including  obligations  for the
payment of  rentals),  or (b)  Guarantee  or  otherwise  in any way become or be
responsible  for  obligations  of any other  Person,  whether  by  agreement  to
purchase the Indebtedness of any other Person or agreement for the furnishing of
funds to any other Person  through the  purchase or lease of goods,  supplies or
services (or by way of stock purchase,  capital  contribution,  advance or loan)
for the purpose of paying or discharging  the  Indebtedness of any other Person,
or  otherwise,  except  that the  foregoing  restrictions  will not apply to any
Indebtedness  not exceeding  $200,000,000 in the aggregate for all  Unrestricted
Subsidiaries.

(iii) Of the Company. The Company may incur Indebtedness for borrowed money only
if such  Indebtedness  is at  prevailing  market  rates of interest and contains
covenants,  conditions and events of default not materially  more onerous to the
Company than the covenants,  conditions and event of default set forth in one or
more of the  various  indentures  and other debt  instruments  of the Company in
existence on the Effective Date.

10.2  Liens.  The  Company  will not and will not permit  any of its  Restricted
Subsidiaries to create,  incur, assume or permit to exist any Lien on any of its
or their properties (now owned or hereafter acquired), except:

(a) Liens securing (i) the Loans or other  obligations under the Loan Documents,
and  (ii)  the  obligations  under  any  debt  facility  permitted  pursuant  to
Section 10.1(iii)  of this Agreement  which by its terms requires that such debt
facility  be  secured  on a  ratable  basis  with  other  Senior  Debt  upon the
incurrence  of Liens  generally,  provided that such Liens (A) are for the equal
and ratable benefit of the Agents and the Banks under each of this Agreement and
such debt facilities and (B) cover the same collateral,

(b) Liens for taxes, assessments or other governmental charges or levies not yet
due or which are being  contested in good faith by appropriate  action  promptly
initiated and diligently conducted,  if such reserve as will be required by GAAP
will have been made therefor;

(c)  Liens  of  landlords,  vendors,  contractors,   subcontractors,   carriers,
warehousemen,  mechanics, laborers or materialmen or other like Liens arising by
law or contract in the ordinary course of business for sums not yet due or being
contested in good faith by appropriate  action promptly initiated and diligently
conducted,  if such  reserve  as will be  required  by GAAP  will have been made
therefor;

<PAGE>

(d) Liens  existing  on property  owned by the Company or any of its  Restricted
Subsidiaries  on the date of this  Agreement  which have been  disclosed  to the
Banks in the  Disclosure  Statement,  together  with any  renewals,  extensions,
amendments,  refinancings,   rearrangements,   modifications,   restatements  or
supplements, but not increases, thereof from time to time;

(e) pledges or deposits  made in the ordinary  course of business in  connection
with worker's compensation,  unemployment  insurance,  social security and other
like laws;

(f) inchoate liens arising under ERISA to secure the contingent liability of the
Company permitted by Section 9.11;

(g) Liens in the  ordinary  course of business,  not to exceed in the  aggregate
$25,000,000  as to the Company and its  Restricted  Subsidiaries  at any time in
effect,  regarding (i) the performance of bids,  tenders,  contracts (other than
for the repayment of borrowed  money or the deferred  purchase price of property
or services) or leases, (ii) statutory obligations, (iii) surety appeal bonds or
(iv) Liens to secure progress or partial  payments made to the Company or any of
its Restricted Subsidiaries and other Liens of like nature;

(h)  covenants,   restrictions,   easements,  servitudes,  permits,  conditions,
exceptions, reservations, minor rights, minor encumbrances, minor irregularities
in title or conventional  rights of reassignment  prior to abandonment  which do
not materially  interfere with the occupation,  use and enjoyment by the Company
or any Restricted  Subsidiary of its  respective  assets in the normal course of
business as presently conducted,  or materially impair the value thereof for the
purpose of such business;

(i) Liens of operators under joint operating  agreements or similar  contractual
arrangements  with respect to the relevant entity's  proportionate  share of the
expense of  exploration,  development  and  operation  of oil,  gas and  mineral
leasehold or fee interests  owned  jointly with others,  to the extent that same
relate  to sums  not yet due or  which  are  being  contested  in good  faith by
appropriate action promptly initiated and diligently conducted,  if such reserve
as will be required by GAAP will have been made therefor;

(j) Liens  created  pursuant  to the  creation  of trusts or other  arrangements
funded solely with cash,  cash  equivalents or other  marketable  investments or
securities of the type  customarily  subject to such  arrangements  in customary
financial  practice with respect to long-term or  medium-term  indebtedness  for
borrowed  money,  the  sole  purpose  of  which  is to  make  provision  for the
retirement or defeasance,  without prepayment,  of Indebtedness  permitted under
Section 10.1;

(k) [Intentionally omitted];

<PAGE>

(l) Liens securing  purchase  money  Indebtedness  or Capital Lease  Obligations
incurred in compliance with Section 10.1 of this Agreement;

(m) Liens on the capital  stock or other  equity  interest  of any  Unrestricted
Subsidiary securing obligations of such Unrestricted Subsidiary;

(n) any Lien existing on any real or personal property of any Person at the time
it becomes a Restricted Subsidiary, or existing prior to the time of acquisition
upon  any  real or  personal  property  acquired  by the  Company  or any of its
Restricted Subsidiaries;

(o) legal or equitable  encumbrances  deemed to exist by reason of the existence
of any  litigation  or other  legal  proceeding  or arising out of a judgment or
award  with  respect  to which an appeal is being  prosecuted  in good  faith by
appropriate action promptly initiated and diligently conducted,  if such reserve
as will be required by GAAP will have been made therefor;

(p) any Liens  securing  Indebtedness  neither  assumed  nor  guaranteed  by the
Company or any of its Restricted  Subsidiaries  nor on which it customarily pays
interest,  existing  upon real  estate or rights in or  relating  to real estate
acquired by the Company or any of its Restricted  Subsidiaries  for  substation,
metering station,  pump station,  storage,  gathering line,  transmission  line,
transportation line,  distribution line or right-of-way  purposes, and any Liens
reserved in leases for rent and full  compliance with the terms of the leases in
the case of leasehold  estates,  to the extent that any such Lien referred to in
this clause arises in the normal  course of business as presently  conducted and
does not materially  impair the use of the property covered by such Lien for the
purposes  for which  such  property  is held by the  Company  or its  applicable
Restricted Subsidiary;

(q) rights reserved to or vested in any municipality or governmental,  statutory
or public authority by the terms of any right, power, franchise,  grant, license
or  permit,  or by any  provision  of  law,  to  terminate  such  right,  power,
franchise,  grant,  license or permit or to purchase,  condemn,  expropriate  or
recapture  or to  designate a purchaser of any of the property of the Company or
any of its Restricted Subsidiaries;

(r) rights reserved to or vested in any municipality or governmental,  statutory
or public authority to control or regulate any property of the Company or any of
its Restricted Subsidiaries,  or to use such property in a manner which does not
materially impair the use of such property for the purposes for which it is held
by the Company or its applicable Restricted Subsidiary;

<PAGE>

(s) any  obligations  or duties  affecting the property of the Company or any of
its Restricted  Subsidiaries  to any  municipality,  governmental,  statutory or
public authority with respect to any franchise, grant, license or permit;

(t) rights of a common owner of any interest in real  estate,  rights-of-way  or
easements  held by the Company or any of its  Restricted  Subsidiaries  and such
common owner as tenants in common or through other common ownership;

(u) as to assets  located in Canada,  reservations,  limitations,  provisos  and
conditions in any original grant from the Crown or freehold lessor of any of the
properties of the Company or its Subsidiaries;

(v)  other  Liens  securing  Indebtedness  not  exceeding,   in  the  aggregate,
$10,000,000 at any one time outstanding;

(w) Liens covering cash collateral accounts relating to obligations  pursuant to
Letters of Credit issued in connection with the Revolving Credit Agreement;

(x) Liens securing  Indebtedness of the Company or any Restricted  Subsidiary of
the types described in Section 10.1(i)(p) covering the oil and gas properties to
which such Indebtedness relates,  provided that the aggregate amount of all such
Indebtedness so secured under this Section 10.2(x)  shall not exceed $50,000,000
in the aggregate at any one time outstanding; and

(y)  Liens  (i)  granted  to or  existing  in favor of third  parties  on margin
accounts  of the  Company  or any of its  Restricted  Subsidiaries  relating  to
exchange traded  contracts for the delivery of natural gas pursuant to which the
Company or any such  Restricted  Subsidiary  intends to take actual  delivery of
such  natural  gas  within  forty  (40) days from the then  current  date in the
ordinary course of business and not for speculative purposes, and (ii) on margin
accounts  of the  Company  or any of its  Restricted  Subsidiaries  relating  to
exchange traded  contracts for the delivery of natural gas,  provided,  however,
the aggregate  balance of the margin accounts  subject to the Liens permitted by
this clause (ii) shall not exceed from time to time $10,000,000.

10.3  Dividend  Payment  Restrictions.  The Company will not declare or make any
Dividend  Payment  if any  Default  or  Event of  Default  has  occurred  and is
continuing or would result therefrom.

<PAGE>

10.4 Mergers and Sales of Assets.  The Company will not (a) merge or consolidate
with, or sell, assign, lease or otherwise dispose of, whether in one transaction
or in a series of transactions, more than (i) ten percent (10%) in the aggregate
of the  Company's and its  Restricted  Subsidiaries'  consolidated  total assets
(whether  now owned or hereafter  acquired) to any Person or Persons  during any
twelve month period occurring after the date hereof or (ii) twenty-five  percent
(25%)  in the  aggregate  of the  Company's  and  its  Restricted  Subsidiaries'
consolidated  total assets as of the date hereof to any Person or Persons  prior
to the Stated Maturity Date, or permit any Restricted Subsidiary to do so (other
than to the  Company or another  Restricted  Subsidiary  or the  issuance by any
Restricted  Subsidiary  of  any  stock  to the  Company  or  another  Restricted
Subsidiary),  or (b) sell, assign, lease or otherwise dispose of, whether in one
transaction or in a series of  transactions,  any other  properties if receiving
therefor   consideration  other  than  cash  or  other   consideration   readily
convertible  to cash or which is less than the fair market value of the relevant
properties,  or permit any  Restricted  Subsidiary  to do so;  provided that the
Company or any Restricted  Subsidiary  may merge or  consolidate  with any other
Person  and any  Restricted  Subsidiary  may  transfer  properties  to any other
Restricted  Subsidiary  or to  the  Company  so  long  as,  in  each  case,  (i)
immediately  thereafter  and giving effect  thereto,  no event will occur and be
continuing which  constitutes a Default,  (ii) in the case of any such merger or
consolidation  to which the  Company is a party,  the  Company is the  surviving
Person,  (iii) in the case of any such  merger  or  consolidation  to which  any
Restricted  Subsidiary is a party (but not the Company),  after giving effect to
all transactions closing concurrently  relating to such merger or consolidation,
the surviving  Person is a Restricted  Subsidiary and (iv) the surviving  Person
ratifies each applicable Loan Document and provided  further that any Restricted
Subsidiary may merge or consolidate with any other Restricted Subsidiary so long
as, in each case (i) immediately  thereafter and giving effect thereto, no event
will occur and be continuing which  constitutes a Default and (ii) the surviving
Person ratifies each applicable Loan Document.

10.5 Proceeds of Loans. The Company will not permit the proceeds of the Loans to
be used for any purpose other than those permitted by this Agreement.

10.6  ERISA  Compliance.  The  Company  will  not at any  time  permit  any Plan
maintained by it or any Restricted Subsidiary to:

(a) engage in any  "prohibited  transaction"  as such term is defined in Section
4975 of the Code;

(b) incur any  "accumulated  funding  deficiency"  as such  term is  defined  in
Section 302 of ERISA; or

(c) terminate or be terminated in a manner which could result in the  imposition
of a Lien on the property of the Company or any Restricted  Subsidiary  pursuant
to Section 4068 of ERISA,

in each  case,  to the  extent  that  permitting  the Plan to do so would have a
Material Adverse Effect.

<PAGE>

10.7 Total Leverage Ratio.  The Company will not permit its Total Leverage Ratio
to be (i) at any time through  March 31, 2001,  more than 4.25 to 1.00,  (ii) at
any time from  April 1, 2001  through  March 31,  2002,  more than 4.00 to 1.00,
(iii) at any time on or after April 1, 2002, more than 3.75 to 1.00.

10.8 Senior  Leverage  Ratio.  The Company  will not permit its Senior  Leverage
Ratio to be at any time more than 3.00 to 1.00.

10.9 Minimum Net Worth.  The Company will not permit its  Consolidated Net Worth
as of the end of any  fiscal  quarter  to be  less  than  (i)$770,000,000  plus
(ii) an  amount  equal  to 50% of the sum of the  Company's  and its  Restricted
Subsidiaries'  consolidated net income for each calendar quarter, beginning with
the calendar quarter ending March 31, 1999,  during which such  consolidated net
income is  greater  than $0 plus  (iii) an  amount  equal to 50% of the net cash
proceeds  received  by the  Company  and its  Restricted  Subsidiaries  from the
issuance of any common stock,  preferred stock or other equity for each calendar
quarter, beginning with the calendar quarter ending March 31, 1999.

10.10  Nature of  Business.  The Company will not engage in, and will not permit
any  Restricted  Subsidiary  to engage  in,  businesses  other  than oil and gas
exploration  and  production,   gas  processing,   transmission,   distribution,
marketing and storage and gas and liquids  pipeline  operations  and  activities
related or ancillary thereto; provided, that if the Company acquires one or more
Restricted Subsidiaries in transactions otherwise permitted by the terms hereof,
any such  Restricted  Subsidiary  may be engaged in businesses  other than those
listed in this  Section  so long as the assets of such  Restricted  Subsidiaries
which are used in the conduct of such other  businesses do not  constitute  more
than  five  percent  (5%)  of the  consolidated  total  assets  of  the  Company
(inclusive of the assets of the Restricted Subsidiary so acquired).

10.11  Covenants in Other  Agreements.  The Company will not and will not permit
any of its Restricted  Subsidiaries  to become a party to or to agree that it or
any of its  property is bound by any  agreement,  indenture,  mortgage,  deed of
trust or any other instrument  directly or indirectly (i) restricting any loans,
advances or any other  Investments to or in the Company by any of its Restricted
Subsidiaries,  (ii) restricting the ability of any Restricted Subsidiary to make
tax payments or management fee payments to the Company, or (iii) restricting the
ability or capacity of any  Restricted  Subsidiary to make Dividend  Payments to
the Company,  except for (a) instruments in existence on the date hereof and (b)
instruments  entered  into after the date  hereof  containing  restrictions  not
materially more  restrictive  than the  restrictions  permitted under clause (a)
above.

Section 11. Defaults.

11.1 Events of Default.  If one or more of the following  events  (herein called
"Events of Default") shall occur and be continuing:

<PAGE>

(a)  Payments - (i) the  Company or any other  Relevant  Party fails to make any
payment or prepayment of any installment of principal on the Loans payable under
this  Agreement or the other Loan  Documents when due or (ii) the Company or any
other  Relevant  Party fails to make any payment or  prepayment of interest with
respect to the Loans or any other fee, amount or Obligation under this Agreement
or the other Loan  Documents and such failure to pay continues  unremedied for a
period of five (5) Business Days; or

(b)  Representations and Warranties - any representation or warranty made by the
Company  or any other  Relevant  Party in this  Agreement  or in any other  Loan
Document or in any  instrument  executed  in  connection  herewith or  therewith
proves to have been incorrect in any material respect as of the date thereof; or
any representation,  statement (including Financial Statements),  certificate or
data  furnished  or made by the  Company  or any  other  Relevant  Party (or any
officer of the Company or any other Relevant  Party) under or in connection with
this Agreement or any other Loan Document,  including without  limitation in the
Disclosure Statement,  proves to have been untrue in any material respect, as of
the date as of which the facts therein set forth were stated or certified; or

(c)  Affirmative  Covenants - (i) default shall be made in the due observance or
performance of any of the covenants or agreements contained in Sections 9.10 (or
in  Section 9.6  to the extent such  default is  considered  an Event of Default
under the other Subsections of this Section 11.1) or (ii) default is made in the
due  observance  or  performance  of any of the other  covenants  or  agreements
contained in Section 9 of this  Agreement or any other  affirmative  covenant of
the Company or any other Relevant Party contained in this Agreement or any other
Loan  Document and such  default  continues  unremedied  for a period of 30 days
after (x) notice thereof is given by Administrative  Agent to the Company or (y)
such default otherwise becomes known to the Company, whichever is earlier; or

(d) Negative Covenants - default is made in the due observance or performance by
the Company of any of the  covenants or  agreements  contained in  Section 10 of
this  Agreement  or of any other  negative  covenant of the Company or any other
Relevant Party contained in this Agreement or any other Loan Document; or

(e) Other  Obligations - default is made in the due observance or performance by
the Company or any of its Restricted  Subsidiaries (as principal or guarantor or
other  surety) of any of the  covenants  or  agreements  contained  in any bond,
debenture,  note or other  evidence  of  Indebtedness  in excess of  $25,000,000
(singly or aggregating several such bonds,  debentures,  notes or other evidence
of  Indebtedness)  which default  gives the holder the right to  accelerate  the
maturity  of such  Indebtedness,  other  than the Loan  Documents,  or under any
credit  agreement,  loan  agreement,   indenture,  promissory  note  or  similar
agreement or instrument  executed in connection  with any of the  foregoing,  to
which it  (respectively)  is a party and such  default is unwaived or  continues
unremedied  beyond the  expiration of any  applicable  grace period which may be
expressly allowed under such instrument or agreement; or

<PAGE>

(f)   Involuntary   Bankruptcy  or   Receivership   Proceedings  -  a  receiver,
conservator, liquidator or trustee of the Company, the Guarantor, any Restricted
Subsidiary  or of any of their  property is  appointed by the order or decree of
any court or agency  or  supervisory  authority  having  jurisdiction,  and such
decree or order  remains in effect for more than 60 days;  or the  Company,  the
Guarantor or any Restricted Subsidiary is adjudicated bankrupt or insolvent;  or
any of its  property is  sequestered  by court  order and such order  remains in
effect for more than 60 days;  or a petition is filed  against the Company,  the
Guarantor or any Restricted  Subsidiary  under any state or federal  bankruptcy,
reorganization,  arrangement,  insolvency,  readjustment  of debt,  dissolution,
liquidation or receivership law of any jurisdiction, whether now or hereafter in
effect, and is not dismissed within 60 days after such filing; or

(g)  Voluntary  Petitions  or  Consents  - the  Company,  the  Guarantor  or any
Restricted  Subsidiary  commences a voluntary case or other  proceeding  seeking
liquidation,  reorganization,  arrangement,  insolvency,  readjustment  of debt,
dissolution,  liquidation  or other relief with respect to itself or its debt or
other liabilities  under any bankruptcy,  insolvency or other similar law nor or
hereafter  in  effect  or  seeking  the  appointment  of  a  trustee,  receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property,  or consents to any such relief or to the appointment of or taking
possession  by any such  official  in an  involuntary  case or other  proceeding
commenced against it, or fails generally to, or cannot,  pay its debts generally
as they become due or takes any  corporate  action to authorize or effect any of
the foregoing; or

(h)  Assignments  for Benefit of Creditors  or  Admissions  of  Insolvency - the
Company, the Guarantor or any Restricted  Subsidiary makes an assignment for the
benefit of its  creditors,  or admits in writing its  inability to pay its debts
generally  as they become due,  or  consents to the  appointment  of a receiver,
trustee, or liquidator of the Company, the Guarantor,  any Restricted Subsidiary
or of all or any part of their property; or

(i)  Undischarged  Judgments - judgments  (individually or in the aggregate) for
the payment of money in excess of  $10,000,000  in excess of insurance  coverage
are rendered by any court or other  governmental body against the Company or any
of its  Restricted  Subsidiaries  or the  Guarantor  and  the  Company  or  such
Restricted  Subsidiary or the  Guarantor  does not discharge the same or provide
for its discharge in accordance  with its terms,  or procure a stay of execution
thereof within 60 days from the date of entry thereof, and within said period of
60 days  from the date of entry  thereof  or such  longer  period  during  which
execution of such judgment will have been stayed,  the Company,  such Restricted
Subsidiary  or the Guarantor  fails to appeal  therefrom and cause the execution
thereof to be stayed during such appeal while  providing such reserves  therefor
as may be required under GAAP; or

(j)  Subsidiary  Defaults - the  Guarantor or any  Restricted  Subsidiary of the
Company  takes,  suffers,  or permits  to exist any of the events or  conditions
referred to in Subsections 11.1(f), (g) or (h); or

<PAGE>

(k) Change in Control - there should occur any Change of Control.

THEREUPON:  Administrative  Agent may (and,  if directed by the Majority  Banks,
shall) (a) declare the Commitments  terminated  (whereupon the Commitments shall
be terminated)  and/or (b) declare the principal  amount then outstanding of and
the accrued  interest on the Loans and all fees and all other  Obligations to be
forthwith  due  and  payable,   whereupon  such  amounts  shall  be  and  become
immediately due and payable, without notice (including without limitation notice
of  acceleration  and  notice  of intent to  accelerate),  presentment,  demand,
protest or other  formalities  of any kind,  all of which are  hereby  expressly
waived by the Company;  provided that in the case of the  occurrence of an Event
of Default with respect to the Company  referred to in clause (f) or (g) of this
Section 11.1 or in  clause (j) of this  Section 11.1  to the extent it refers to
clauses (f) or (g), the Commitments  shall be  automatically  terminated and the
principal  amount then  outstanding of and the accrued interest on the Loans and
all  fees and all  other  Obligations  payable  hereunder  shall  be and  become
automatically and immediately due and payable, without notice (including but not
limited  to notice  of intent to  accelerate  and  notice of  acceleration)  and
without  presentment,  demand,  protest or other formalities of any kind, all of
which are hereby expressly waived by the Company and/or (d) exercise any and all
other rights available to it under the Loan Documents, at law or in equity.

11.2 [Intentionally omitted].

11.3 [Intentionally omitted].

<PAGE>

11.4 Right of Setoff.  Upon (i) the occurrence and during the continuance of any
Event of Default referred to in clauses (f), (g) or (h) of  Section 11.1,  or in
clause (j) of  Section 11.1  to the extent it refers to clauses (f), (g) or (h),
or upon (ii) the  occurrence  and  continuance of any other Event of Default and
upon  the  making  of  the  notice   specified  in   Section 11.1  to  authorize
Administrative  Agent to  declare  the Loans  due and  payable  pursuant  to the
provisions of this Agreement, or if (iii) the Company or any of its Subsidiaries
becomes  insolvent,  however  evidenced,  the Banks are hereby authorized at any
time  and  from  time to  time,  without  notice  to the  Company  or any of its
Subsidiaries  (any such  notice  being  expressly  waived by the Company and its
Subsidiaries),  to setoff and apply any and all  deposits  (general  or special,
time or demand,  provisional or final, whether or not such setoff results in any
loss of  interest  or  other  penalty,  and  including  without  limitation  all
certificates  of deposit)  at any time held,  and any other funds or property at
any time held,  and other  Indebtedness  at any time owing by any Bank to or for
the credit or the account of the Company  against any and all of the Obligations
irrespective  of whether  or not such Bank will have made any demand  under this
Agreement and although such  obligations  may be unmatured.  Should the right of
any Bank to realize funds in any manner set forth  hereinabove be challenged and
any application of such funds be reversed,  whether by court order or otherwise,
the Banks shall make restitution or refund to the Company pro rata in accordance
with their  Commitments.  The Banks  agree  promptly  to notify the  Company and
Administrative  Agent after any such setoff and  application,  provided that the
failure to give such  notice  will not affect the  validity  of such  setoff and
application.  The rights of the Agents and the Banks  under this  Section are in
addition to other rights and remedies (including without limitation other rights
of setoff) which the Agents or the Banks may have.

Section 12. Agents.

12.1 Appointment,  Powers and Immunities.  Each Bank hereby irrevocably appoints
and authorizes each Agent to act as its agent hereunder and under the other Loan
Documents  with such powers as are  specifically  delegated to such Agent by the
terms hereof and  thereof,  together  with such other  powers as are  reasonably
incidental  thereto.  Each Agent  (which  term as used in this  Section 12 shall
include reference to its Affiliates and its own and their Affiliates'  officers,
directors,   employees   and   agents)   shall  not  (a)  have  any   duties  or
responsibilities  except those  expressly  set forth in this  Agreement  and the
other Loan  Documents,  or shall by reason of this  Agreement  or any other Loan
Document be a trustee or fiduciary for any Bank;  (b) be responsible to any Bank
for any recitals,  statements,  representations or warranties  contained in this
Agreement or any other Loan  Document,  or in any  certificate or other document
referred to or provided for in, or received by any of them under, this Agreement
or  any  other  Loan  Document,  or  for  the  value,  validity,  effectiveness,
genuineness,  enforceability  or sufficiency of this Agreement or any other Loan
Document or any other document  referred to or provided for herein or therein or
any property  covered  thereby or for any failure by any  Relevant  Party or any
other Person to perform any of its obligations  hereunder or thereunder;  (c) be
required  to  initiate  or conduct  any  litigation  or  collection  proceedings
hereunder  or any other  Loan  Document  except to the  extent  such Agent is so
requested by the Majority  Banks,  or (d) be responsible for any action taken or
omitted  to be taken by it  hereunder  or any other Loan  Document  or any other
document  or  instrument  referred  to or  provided  for herein or therein or in
connection herewith or therewith,  INCLUDING,  WITHOUT  LIMITATION,  PURSUANT TO
THEIR OWN NEGLIGENCE, except for its own gross negligence or willful misconduct.
Each Agent may employ agents and  attorneys-in-fact and shall not be responsible
for the  negligence  or  misconduct  of any  such  agents  or  attorneys-in-fact
selected by it with reasonable  care. In any foreclosure  proceeding  concerning
any  collateral  for the Loans,  each  holder of a Loan if  bidding  for its own
account or for its own  account and the  accounts  of other Banks is  prohibited
from  including  in the  amount of its bid an amount to be  applied  as a credit
against  Obligations  owing to such Bank or the  Obligations  owing to the other
Banks;  instead, such holder must bid in cash only; provided that this provision
is for the sole  benefit  of the Agents and the Banks and shall not inure to the
benefit  of  the  Company  or  any of its  Subsidiaries.  However,  in any  such
foreclosure proceeding, Administrative Agent may (but shall not be obligated to)
submit a bid for all Banks  (including  itself) in the form of a credit  against
the Obligations of all of the Banks,  and  Administrative  Agent or its designee
may (but shall not be obligated to) accept title to such  collateral  for and on
behalf of all Banks.

<PAGE>

12.2  Reliance  by  Agents.  Each  Agent  shall  be  entitled  to rely  upon any
certification,   notice  or  other  communication   (including  any  thereof  by
telephone,  telex,  telegram or cable)  believed by it to be genuine and correct
and to have been signed or sent by or on behalf of the proper Person or Persons,
and upon advice and  statements of legal  counsel  (which may be counsel for the
Company),  independent  accountants and other experts selected by such Agent. As
to any matters not  expressly  provided for by this  Agreement or any other Loan
Document,  each Agent  shall in all cases be fully  protected  in acting,  or in
refraining from acting, hereunder and thereunder in accordance with instructions
of the  Majority  Banks (or,  where  unanimous  consent is required by the terms
hereof or of the other Loan Documents,  all of the Banks),  and any action taken
or  failure  to act  pursuant  thereto  shall be  binding  on all of the  Banks.
Pursuant to instructions of the Majority Banks (except as otherwise  provided in
Section 13.4 hereof),  Administrative  Agent shall have the authority to execute
releases of security documents on behalf of the Banks without the joinder of any
Bank.  The  Company  and any  third-party  may  conclusively  rely upon any such
release  delivered by Administrative  Agent without  investigation as to whether
such release has been approved by the Majority Banks.

12.3 Defaults. Administrative Agent shall not be deemed to have knowledge of the
occurrence of a Default (other than the  non-payment of principal of or interest
on Loans)  unless it has received  notice from a Bank or the Company  specifying
such Default and stating that such notice is a "Notice of Default". In the event
that Administrative Agent receives such a notice of the occurrence of a Default,
Administrative  Agent shall give prompt  notice  thereof to the Banks (and shall
give each Bank prompt  notice of each such  non-payment).  Administrative  Agent
shall  (subject to Section  12.7  hereof)  take such action with respect to such
Default as shall be directed by the  Majority  Banks and within its rights under
the Loan  Documents  and at law or in equity,  provided  that,  unless and until
Administrative  Agent shall have received such directions,  Administrative Agent
may (but shall not be  obligated  to) take such  action,  or refrain from taking
such  action,  permitted  hereby with  respect to such  Default as it shall deem
advisable  in the best  interests  of the Banks and within its rights  under the
Loan Documents, at law or in equity.

12.4 Rights as a Bank. With respect to its Commitments and the Loans made, CSFB,
Chase  and  Bank  of  America,  respectively,  each  in its  capacity  as a Bank
hereunder, shall have the same rights and powers hereunder as any other Bank and
may  exercise  the same as  though  it were not  acting as an Agent and the term
"Bank" or "Banks" shall, unless the context otherwise  indicates,  include CSFB,
Chase  and  Bank of  America,  respectively,  each in its  individual  capacity.
Administrative Agent may (without having to account therefor to any Bank) accept
deposits from, lend money to and generally engage in any kind of banking, trust,
letter of credit,  agency or other  business  with the  Company  (and any of its
Affiliates) as if it were not acting as Administrative Agent, and Administrative
Agent  may  accept  fees  and  other  consideration  from  the  Company  and its
Affiliates (in addition to the fees heretofore agreed to between the Company and
Administrative  Agent)  for  services  in  connection  with  this  Agreement  or
otherwise without having to account for the same to the Banks.

<PAGE>

12.5 Indemnification. The Banks agree to indemnify each Agent (to the extent not
reimbursed  under Section 9.7 or Section 13.3 hereof,  but without  limiting the
obligations  of the  Company  under  said  Sections  9.7 and  13.3),  ratably in
accordance  with  their  respective  Commitments,  for any and all  liabilities,
obligations,  losses,  damages,  penalties,  actions,  judgments,  suits, costs,
expenses or disbursements of any kind and nature whatsoever (INCLUDING,  BUT NOT
LIMITED TO, THE  CONSEQUENCES  OF THE  NEGLIGENCE  OF SUCH  AGENT)  which may be
imposed on, incurred by or asserted against such Agent in any way relating to or
arising out of this Agreement or any other Loan Document or any other  documents
contemplated   by  or  referred  to  herein  or  therein  or  the   transactions
contemplated  hereby or thereby (including,  without  limitation,  the costs and
expenses  which the  Company is  obligated  to pay under  Sections  9.7 and 13.3
hereof but excluding,  unless a Default has occurred and is  continuing,  normal
administrative   costs  and  expenses  incident  to  the  performance  of  their
respective  agency  duties  hereunder)  or the  enforcement  of any of the terms
hereof or thereof or of any such other documents, provided that no Bank shall be
liable  for any of the  foregoing  to the  extent  they  arise  from  the  gross
negligence or willful misconduct of the party to be indemnified. The obligations
of the Banks  under this  Section  12.5 shall  survive the  termination  of this
Agreement and the repayment of the Obligations.

12.6  Non-Reliance  on Agents  and Other  Banks.  Each Bank  agrees  that it has
received  current  financial  information  with  respect to the  Company and its
Subsidiaries and that it has, independently and without reliance on any Agent or
any other  Bank and based on such  documents  and  information  as it has deemed
appropriate,  made its own credit  analysis of the Company and its  Subsidiaries
and decision to enter into this  Agreement and that it will,  independently  and
without  reliance upon any Agent or any other Bank,  and based on such documents
and information as it shall deem  appropriate at the time,  continue to make its
own analysis and decisions in taking or not taking  action under this  Agreement
or any of the other Loan  Documents.  Each Agent  shall not be  required to keep
itself  informed as to the  performance  or observance by any Relevant  Party of
this Agreement or any of the other Loan Documents or any other document referred
to or provided  for herein or therein or to inspect the  properties  or books of
the  Company or any  Relevant  Party.  Except  for  notices,  reports  and other
documents  and  information  expressly  required to be furnished to the Banks by
Administrative Agent hereunder, under the other Loan Documents, the Agents shall
not have any duty or responsibility to provide any Bank with any credit or other
information  concerning  the  affairs,  financial  condition  or business of the
Company or any other Relevant Party (or any of their  Affiliates) which may come
into the possession of such Agent.

12.7  Failure to Act.  Except for action  expressly  required of  Administrative
Agent hereunder and under the other Loan Documents,  Administrative  Agent shall
in all cases be fully  justified  in failing or  refusing to act  hereunder  and
thereunder unless it shall receive further assurances to its satisfaction by the
Banks of their indemnification obligations under Section 12.5 hereof against any
and all liability and expense which may be incurred by it by reason of taking or
continuing to take any such action.

<PAGE>

12.8 Resignation or Removal of Administrative  Agent. Subject to the appointment
and  acceptance  of  a  successor   Administrative   Agent  as  provided  below,
Administrative  Agent may  resign at any time by giving  notice  thereof  to the
Banks and the Company,  and Administrative Agent may be removed at any time with
or without cause by the Majority  Banks.  Upon any such  resignation or removal,
the  Majority  Banks shall have the right to appoint a successor  Administrative
Agent  (subject  to the  consent  of the  Company,  which  consent  shall not be
unreasonably withheld),  provided deposits with a successor Administrative Agent
shall be insured by the Federal Deposit Insurance  Corporation or its successor.
If no  successor  Administrative  Agent  shall  have  been so  appointed  by the
Majority Banks and shall have accepted such appointment within 30 days after the
retiring  Administrative Agent's giving of notice of resignation or the Majority
Banks'  removal  of  the  retiring   Administrative  Agent,  then  the  retiring
Administrative   Agent  may,  on  behalf  of  the  Banks,  appoint  a  successor
Administrative Agent (subject to the consent of the Company, which consent shall
not be unreasonably  withheld).  Any successor  Administrative  Agent shall be a
bank which has an office in the United States and a combined capital and surplus
of  at  least  $1,000,000,000.   Upon  the  acceptance  of  any  appointment  as
Administrative  Agent  hereunder  by  a  successor  Administrative  Agent,  such
successor Administrative Agent shall thereupon 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.  A successor  Administrative  Agent shall  promptly
specify by notice to the Company and the Banks its Principal  Office referred to
in Sections 3.1 and 5.1. After any retiring  Administrative  Agent's resignation
or removal hereunder as Administrative  Agent, the provisions of this Section 12
shall  continue  in effect for its  benefit in respect of any  actions  taken or
omitted to be taken by it while it was acting as an Administrative Agent.

Section 13. Miscellaneous.

13.1 Waiver. No waiver of any Default shall be a waiver of any other Default. No
failure  on the  part of any  Agent  or any  Bank to  exercise  and no  delay in
exercising,  and no course of dealing  with  respect  to,  any  right,  power or
privilege under any Loan Document shall operate as a waiver  thereof,  nor shall
any  single or partial  exercise  of any right,  power or  privilege  thereunder
preclude  any other or further  exercise  thereof or the  exercise  of any other
right,  power or  privilege.  The remedies  provided in the Loan  Documents  are
cumulative and not exclusive of any remedies provided by law or in equity.

13.2  Notices.  All  notices  and  other  communications   provided  for  herein
(including,  without  limitation,  any  modifications of, or waivers or consents
under,  this  Agreement)  shall be given or made by telex,  telegraph,  telecopy
(confirmed  by mail),  cable,  mail or other  writing and  telexed,  telecopied,
telegraphed,  cabled,  mailed or  delivered  to the  intended  recipient  at the
"Address for Notices"  specified  below its name on the signature  pages hereof;
or, as to any party,  at such other address as shall be designated by such party
in a notice to the Company and  Administrative  Agent given in  accordance  with
this Section  13.2.  Except as otherwise  provided in this  Agreement,  all such
communications  shall be deemed to have been duly received when  transmitted  by
telex or telecopier during regular business hours, delivered to the telegraph or
cable office or personally  delivered or, in the case of a mailed notice,  three
(3) days after deposit in the United States mails,  postage  prepaid,  certified
mail with return receipt requested (or upon actual receipt, if earlier), in each
case given or addressed as aforesaid.

<PAGE>

13.3  Indemnification.  The Company shall indemnify the Agents,  the Banks,  and
each Affiliate thereof and their respective directors,  officers,  employees and
agents  from,  and  hold  each of them  harmless  against,  any and all  losses,
liabilities,  claims  or  damages  to  which  any of  them  may  become  subject
(REGARDLESS  OF WHETHER CAUSED IN WHOLE OR IN PART BY THE SIMPLE (BUT NOT GROSS)
NEGLIGENCE  OF THE PERSON  INDEMNIFIED),  insofar as such  losses,  liabilities,
claims or damages arise out of or result from any  (i) actual or proposed use by
the Company of the proceeds of any  extension  of credit by any Bank  hereunder,
(ii) breach  by the  Company  of this  Agreement  or any  other  Loan  Document,
(iii) violation  by  the  Company  or  any of  its  Subsidiaries  of  any  Legal
Requirement,   including  but  not  limited  to  those   relating  to  Hazardous
Substances,  (iv) Liens or security interests previously or hereafter granted on
any real or  personal  property,  to the  extent  resulting  from any  Hazardous
Substance located in, on or under any such property,  (v) ownership by the Banks
or the Agents of any real or personal  property  following  foreclosure,  to the
extent such losses,  liabilities,  claims or damages arise out of or result from
any  Hazardous  Substance  located  in, on or under  such  property,  including,
without  limitation,  losses,  liabilities,  claims or damages which are imposed
upon Persons under laws relating to or regulating Hazardous Substances solely by
virtue of ownership, (vi) Bank's or Agent's being deemed an operator of any such
real or  personal  property  by a court or other  regulatory  or  administrative
agency or tribunal in  circumstances  in which neither any of the Agents nor any
of the Banks is generally  operating or generally  exercising  control over such
property, to the extent such losses, liabilities, claims or damages arise out of
or result from any Hazardous  Substance  located in, on or under such  property,
(vii) investigation,  litigation or other  proceeding  (including any threatened
investigation or proceeding)  relating to any of the foregoing,  and the Company
shall  reimburse each Agent,  each Bank,  and each  Affiliate  thereof and their
respective  directors,  officers,  employees  and agents,  upon demand,  for any
expenses   (including   legal  fees)  incurred  in  connection   with  any  such
investigation  or  proceeding  or  (viii)  taxes  (excluding  income  taxes  and
franchise  taxes)  payable or ruled  payable by any  Governmental  Authority  in
respect of any Loan  Document,  together  with interest and  penalties,  if any;
provided,  however,  that the Company shall not have any obligations pursuant to
this Section 13.3 with respect to any losses,  liabilities,  claims,  damages or
expenses  (a)  arising  from  or  relating  solely  to  events,   conditions  or
circumstances  which,  as to clauses  (iv),  (v) or (vi) above,  first came into
existence or which first  occurred after the date on which the Company or any of
its  Subsidiaries  conveyed to an unrelated  third party all of the Company's or
the applicable  Subsidiary's rights, titles and interests to the applicable real
or personal property (whether by deed,  deed-in-lieu,  foreclosure or otherwise)
other than a conveyance made in violation of any Loan Document,  (b) incurred by
the Person seeking  indemnification by reason of the gross negligence or willful
misconduct of such Person, or (c) asserted by one or more indemnified parties or
stockholders  thereof against one or more  indemnified  parties.  If the Company
ever disputes a good faith claim for indemnification  under this Section 13.3 on
the basis of the proviso set forth in the preceding sentence, the full amount of
indemnification  provided  for  shall  nonetheless  be  paid,  subject  to later
adjustment  or  reimbursement  at such  time (if  any) as a court  of  competent
jurisdiction  enters  a  final  judgment  as to the  applicability  of any  such
exceptions or an agreement is reached with respect thereto.

<PAGE>

13.4 Amendments,  Etc. No amendment or waiver of any provision of this Agreement
or any other Loan  Document,  nor any consent to any departure by the Company or
any Obligor therefrom,  shall in any event be effective unless the same shall be
agreed or  consented to by the  Majority  Banks and the  Company,  and each such
waiver or consent shall be effective  only in the specific  instance and for the
specific purpose for which given; provided, that no amendment, waiver or consent
shall, unless in writing and signed by each Bank affected thereby, do any of the
following:  (a) increase the Commitment of such Bank (it being  understood  that
the waiver of any reduction in the Commitments or any mandatory  repayment other
than (x) the  repayment  of all Loans on the  Stated  Maturity  Date and (y) the
mandatory  reductions of the Commitments  provided for in Section 2.3(a) and (z)
the mandatory prepayments required by the terms of Section 3.2(b),  shall not be
deemed  to be an  increase  in any  Commitment)  or  subject  the  Banks  to any
additional obligation;  (b) reduce the principal of, or interest on, any Loan or
fee  hereunder;  (c) postpone  any  scheduled  date  fixed  for any  payment  or
mandatory prepayment of principal of, or interest on, any Loan, fee or other sum
to be paid hereunder;  (d) change the percentage of any of the Commitments or of
the  aggregate  unpaid  principal  amount of any of the Loans,  or the number of
Banks,  which shall be required  for the Banks or any of them to take any action
under this Agreement; (e) change any provision contained in Sections 9.7 or 13.3
hereof  or this  Section  13.4 or  Section 6.7  hereof,  or  (f) release  all or
substantially  all of any security for the obligations of the Company under this
Agreement or all or substantially  all of the personal  liability of any obligor
created  under any of the Loan  Documents.  Anything in this Section 13.4 to the
contrary, no amendment,  waiver or consent shall be made with respect to Section
12 without the consent of Administrative Agent.

13.5 Successors and Assigns.

(a)  This  Agreement  shall be  binding  upon and  inure to the  benefit  of the
Company,  the Agents and the Banks and their respective  successors and assigns.
The  Company  may not  assign  or  transfer  any of its  rights  or  obligations
hereunder  without the prior written consent of all of the Banks.  Each Bank may
sell  participations to any Person in all or part of any Loan, or all or part of
its Commitments,  in which event, without limiting the foregoing, the provisions
of Section 6 shall inure to the benefit of each purchaser of a participation and
the pro rata  treatment  of payments,  as  described  in Section  5.2,  shall be
determined  as if such  Bank had not sold such  participation.  In the event any
Bank shall  sell any  participation,  such Bank shall  retain the sole right and
responsibility  to enforce the obligations of the Company relating to the Loans,
including, without limitation, the right to approve any amendment,  modification
or waiver of any provision of this  Agreement or any other Loan  Document  other
than  amendments,  modifications or waivers with respect to (i) any fees payable
hereunder  to the Banks and (ii) the amount of principal or the rate of interest
payable on, or the dates fixed for the scheduled  repayment of principal of, the
Loans.

<PAGE>

(b) Each Bank may  assign  to one or more  Banks or any  other  Person  all or a
portion of its interests, rights and obligations under this Agreement, provided,
however,  that (i) other than in the case of an  assignment to another Bank that
is, at the time of such assignment, a party hereto or an Affiliate of such Bank,
the Company  must give its prior  written  consent,  which  consent  will not be
unreasonably withheld,  (ii) the aggregate amount of the Commitment and/or Loans
of the assigning Bank subject to each such assignment (determined as of the date
the Assignment and Acceptance (as defined below) with respect to such assignment
is delivered to Administrative Agent) shall in no event be less than $10,000,000
(or $5,000,000 in the case of an assignment to an Affiliate of a Bank or between
Banks)  unless  either  (A) if Bank's  Commitment  is less than  $10,000,000  or
$5,000,000, as applicable, such amount is equal to all of such Bank's Commitment
under this  Agreement  or (B) each of the Company and the  Administrative  Agent
otherwise  consents,  (iii)  notwithstanding any other term or provision of this
Agreement,  unless the Company shall have  otherwise  consented in writing (such
consent not to be unreasonably withheld), each such assignment shall be pro rata
with  respect to the Loans and the  Commitment  of the  assignor,  and  (iv) the
parties to each such  assignment  shall  execute and  deliver to  Administrative
Agent,  for its acceptance and recording in the Register (as defined below),  an
Assignment and  Acceptance in the form of Exhibit E  hereto (each an "Assignment
and Acceptance") with blanks appropriately completed,  together with any note or
notes subject to such  assignment and a processing and recordation fee of $2,500
paid by the assignee (for which the Company shall have no liability).  Upon such
execution, delivery, acceptance and recording, from and after the effective date
specified in each  Assignment and  Acceptance,  which effective date shall be at
least  five  Business  Days  after  the  execution  thereof,  (A)  the  assignee
thereunder  shall  be a  party  hereto  and,  to the  extent  provided  in  such
Assignment and  Acceptance,  have the rights and obligations of a Bank hereunder
and (B) the Bank thereunder shall, to the extent provided in such Assignment and
Acceptance, be released from its obligations under this Agreement.

<PAGE>

(c) By executing and delivering an Assignment and Acceptance,  the Bank assignor
thereunder and the assignee  thereunder confirm to and agree with each other and
the other  parties  hereto as  follows:  (i) other than the  representation  and
warranty  that it is the  legal  and  beneficial  owner  of the  interest  being
assigned  thereby free and clear of any adverse claim,  such Bank assignor makes
no representation or warranty and assumes no responsibility  with respect to any
statements,  warranties or  representations  made in or in connection  with this
Agreement  or  any of the  other  Loan  Documents  or the  execution,  legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement or
any of the other Loan  Documents or any other  instrument or document  furnished
pursuant  thereto;  (ii) such Bank assignor makes no  representation or warranty
and assumes no  responsibility  with respect to the  financial  condition of the
Company and its Subsidiaries or the performance or observance by the Company and
its  Subsidiaries of any of its  obligations  under this Agreement or any of the
other Loan  Documents or any other  instrument  or document  furnished  pursuant
hereto;  (iii)  such  assignee  confirms  that  it has  received  a copy of this
Agreement,  together  with  copies of the  financial  statements  referred to in
Sections 8.6 and 9.1 and such other  documents and  information as it has deemed
appropriate  to make its own credit  analysis  and  decision  to enter into such
Assignment and Acceptance;  (iv) such assignee will,  independently  and without
reliance upon any Agent,  such Bank assignor or any other Bank 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  this
Agreement  and  the  other  Loan  Documents;  (v)  such  assignee  appoints  and
authorizes each Agent to take such action as agent on its behalf and to exercise
such powers under this  Agreement and the other Loan  Documents as are delegated
to such Agent by the terms hereof,  together with such powers as are  reasonably
incidental  thereto;  and (vi) such  assignee  agrees  that it will  perform  in
accordance with their terms all obligations  that by the terms of this Agreement
and the other Loan Documents are required to be performed by it as a Bank.

(d) Administrative  Agent shall maintain at its office a copy of each Assignment
and Acceptance  delivered to it and a register for the  recordation of the names
and addresses of the Banks and the Commitments  of, and principal  amount of the
Loans owing to, each Bank from time to time (the "Register"). The entries in the
Register shall be conclusive, in the absence of manifest error, and the Company,
the Agents and the Banks may treat each  Person the name of which is recorded in
the  Register as a Bank  hereunder  for all purposes of this  Agreement  and the
other Loan  Documents.  The Register  shall be available  for  inspection by the
Company or any Bank at any reasonable time and from time to time upon reasonable
prior notice.

(e) Upon its receipt of an Assignment  and  Acceptance  executed by an assigning
Bank and the assignee thereunder together with any note or notes subject to such
assignment,  the written consent to such assignment  executed by the Company and
the  fee  payable  in  respect  thereto,  Administrative  Agent  shall,  if such
Assignment and Acceptance has been completed with blanks  appropriately  filled,
(i) accept such Assignment and Acceptance, (ii) record the information contained
therein in the Register and (iii) give prompt notice thereof to the Company.  If
applicable,  within five (5) Business Days after receipt of notice, the Company,
at its own  expense,  shall  execute  and  deliver  to  Administrative  Agent in
exchange for the surrendered notes new notes to the order of such assignee in an
amount  equal to the  Commitments  and/or  Loans  assumed by it pursuant to such
Assignment  and Acceptance  and, if the assigning Bank has retained  Commitments
and/or  Loans  hereunder,  new  notes to the order of the  assigning  Bank in an
amount equal to the Commitment  and/or Loans retained by it hereunder.  Such new
notes shall be in an aggregate principal amount equal to the aggregate principal
amount of such  surrendered  notes,  shall be dated the  effective  date of such
Assignment and Acceptance and shall  otherwise be in  substantially  the form of
the respective note. Thereafter, such surrendered notes, if any, shall be marked
renewed and substituted and the originals delivered to the Company (with copies,
certified  by the  Company as true,  correct  and  complete,  to be  retained by
Administrative Agent).

<PAGE>

(f) Any Bank may, in connection with any assignment or participation or proposed
assignment  or  participation  pursuant to this  Section  13.5,  disclose to the
assignee or participant or proposed  assignee or  participant,  any  information
relating to the Company  furnished  to such Bank by or on behalf of the Company;
provided,  however,  that, prior to any such disclosure,  the Company shall have
consented thereto,  which consent shall not be unreasonably  withheld,  and each
such assignee or participant, or proposed assignee or participant, shall execute
an agreement  whereby such assignee or  participant  shall agree to preserve the
confidentiality  of any Confidential  Information  (defined in Section 3.14) on
terms substantially the same as those provided in Section 13.14.

(g) The  Company  will have the right to consent to any  material  intercreditor
arrangements in connection with an assignment by any Bank of any interest, right
or  obligation  under this  Agreement  which is not pro rata with respect to the
Loans and the Commitment of the assignor and the Company may deny its consent to
any such arrangements which, in the reasonable  judgement of the Company,  would
adversely affect the Company in a material respect.

(h) The  provisions of this Section shall not apply to the assignment and pledge
of a Bank's rights  hereunder or under any note to any Federal  Reserve Bank for
collateral  purposes  pursuant to  Regulation A of the Board of Governors of the
Federal Reserve System and any Operating Circular issued by such Federal Reserve
Bank;  provided that such  assignment  and pledge shall not relieve such Bank of
any of its obligations hereunder.

(i)  Notwithstanding  anything to the  contrary  contained  herein,  any Bank (a
"Granting  Bank")  may grant to a special  purpose  funding  vehicle  (a "SPC"),
identified  as such in  writing  from time to time by the  Granting  Bank to the
Administrative  Agent and the Company,  the option to provide to the Company all
or any part of any Loan that such Granting Bank would  otherwise be obligated to
make to the Company pursuant to this Agreement; provided that (i) nothing herein
shall  constitute a commitment  by any SPC to make any Loan,  and (ii) if an SPC
elects not to exercise such option or otherwise fails to provide all or any part
of such Loan, the Granting Bank shall be obligated to make such Loan pursuant to
the terms  hereof.  The making of a Loan by an SPC  hereunder  shall utilize the
Commitment  of the Granting  Bank to the same extent,  and as if, such Loan were
made by such Granting Bank. Each party hereto hereby agrees that no SPC shall be
liable for any indemnity or similar payment obligation under this Agreement (all
liability for which shall remain with the Granting  Bank). In furtherance of the
foregoing,  each party hereto hereby agrees (which  agreement  shall survive the
termination of this Agreement)  that, prior to the date that is one year and one
day after  the  payment  in full of all  outstanding  commercial  paper or other
senior indebtedness of any SPC, it will not institute against, or join any other
person  in  instituting   against  such  SPC  any  bankruptcy,   reorganization,
arrangement,  insolvency or liquidation proceedings under the laws of the United
States  or any State  thereof.  In  addition,  notwithstanding  anything  to the
contrary contained in this Section,  any SPC may (i) with notice to, but without
the prior  written  consent  of, the Company  and the  Administrative  Agent and
without  paying  any  processing  fee  therefor,  assign all or a portion of its
interests  in any Loan to the  Granting  Bank or to any  financial  institutions
(consented  to by the Company and  Administrative  Agent),  providing  liquidity
and/or  credit  support to or for the account of such SPC to support the funding
or  maintenance  of Loan and (ii) provided that the recipient  conforms with the
requirements of Section 13.14, disclose on a confidential basis any Confidential
Information relating to its Loans to any rating agency,  commercial paper dealer
or provider of any surety,  guarantee or credit or liquidity enhancement to such
SPC. This section may not be amended without the written consent of the SPC.

<PAGE>

13.6  Limitation  of Interest.  The Company,  the Agents and the Banks intend to
strictly  comply with all  applicable  laws,  including  applicable  usury laws.
Accordingly,  the provisions of this Section 13.6  shall govern and control over
every  other  provision  of this  Agreement  or any other  Loan  Document  which
conflicts or is inconsistent with this Section,  even if such provision declares
that it controls.  As used in this  Section,  the term  "interest"  includes the
aggregate of all charges,  fees, benefits or other compensation which constitute
interest under applicable law, provided that, to the maximum extent permitted by
applicable  law, (a) any  non-principal  payment  shall be  characterized  as an
expense or as  compensation  for something  other than the use,  forbearance  or
detention  of  money  and not as  interest,  and (b) all  interest  at any  time
contracted  for,  reserved,  charged or received  shall be amortized,  prorated,
allocated and spread, in equal parts during the full term of the Obligations. In
no event shall the Company or any other  Person be obligated to pay, or any Bank
have any right or privilege to contract for, charge, reserve, receive or retain,
(a) any  interest  in  excess of the  maximum  amount  of  nonusurious  interest
permitted  under the laws of the State of Texas or the applicable  laws (if any)
of the United States or of any other applicable  state, or (b) total interest in
excess of the  amount  which  such Bank  could  lawfully  have  contracted  for,
reserved, received, retained or charged had the interest been calculated for the
full term of the  Obligations  at the Highest  Lawful Rate. On each day, if any,
that the interest rate (the "Stated  Rate")  called for under this  Agreement or
any other Loan  Document  exceeds the  Highest  Lawful  Rate,  the rate at which
interest shall accrue shall automatically be fixed by operation of this sentence
at the Highest  Lawful Rate for that day,  and shall remain fixed at the Highest
Lawful Rate for each day thereafter  until the total amount of interest  accrued
equals the total  amount of interest  which would have  accrued if there were no
such ceiling rate as is imposed by this  sentence.  Thereafter,  interest  shall
accrue at the Stated  Rate  unless and until the Stated  Rate again  exceeds the
Highest Lawful Rate when the provisions of the  immediately  preceding  sentence
shall again automatically  operate to limit the interest accrual rate. The daily
interest  rates to be used in  calculating  interest at the Highest  Lawful Rate
shall be determined by dividing the applicable  Highest Lawful Rate per annum by
the  number of days in the  calendar  year for which such  calculation  is being
made.  None of the terms and  provisions  contained in this  Agreement or in any
other Loan Document which  directly or indirectly  relate to interest shall ever
be construed without reference to this Section 13.6, or be construed to create a
contract to pay for the use,  forbearance  or  detention of money at an interest
rate in excess of the Highest  Lawful  Rate.  If the term of any  Obligation  is
shortened by reason of acceleration of maturity as a result of any Default or by
any other cause,  or by reason of any required or permitted  prepayment,  and if
for that (or any other)  reason any Bank at any time,  including but not limited
to, the stated maturity,  is owed or receives (and/or has received)  interest in
excess of interest  calculated at the Highest Lawful Rate,  then and in any such
event all of any such excess interest shall be canceled  automatically as of the
date of such acceleration,  prepayment or other event which produces the excess,
and, if such excess  interest  has been paid to such Bank,  it shall be credited
pro tanto  against  the  then-outstanding  principal  balance  of the  Company's
obligations  to such  Bank,  effective  as of the date or dates  when the  event
occurs which causes it to be excess interest,  until such excess is exhausted or
all of such principal has been fully paid and satisfied, whichever occurs first,
and any  remaining  balance of such  excess  shall be  promptly  refunded to its
payor.  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.

13.7  Survival.  The  obligations  of the Company under Sections 6, 9.7 and 13.3
hereof and the  obligations  of the Banks under  Sections  13.6 and 13.14 hereof
shall survive the repayment of the Loans and the termination of the Commitments.

13.8  Captions.  Captions  and section  headings  appearing  herein are included
solely  for  convenience  of  reference  and  are not  intended  to  affect  the
interpretation of any provision of this Agreement.

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

<PAGE>

13.10 GOVERNING LAW; FORUM SELECTION;  CONSENT TO  JURISDICTION.  THIS AGREEMENT
AND (EXCEPT AS THEREIN  PROVIDED) THE OTHER LOAN  DOCUMENTS ARE  PERFORMABLE  IN
HARRIS COUNTY,  TEXAS,  WHICH SHALL BE A PROPER PLACE OF VENUE FOR SUIT ON OR IN
RESPECT  THEREOF.  THE COMPANY  IRREVOCABLY  AGREES THAT ANY LEGAL PROCEEDING IN
RESPECT OF THIS  AGREEMENT OR THE OTHER LOAN  DOCUMENTS  SHALL BE BROUGHT IN THE
DISTRICT COURTS OF HARRIS COUNTY,  TEXAS OR THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF TEXAS, HOUSTON DIVISION  (COLLECTIVELY,  THE "SPECIFIED
COURTS").   THE  COMPANY  HEREBY   IRREVOCABLY   SUBMITS  TO  THE   NONEXCLUSIVE
JURISDICTION OF THE STATE AND FEDERAL COURTS OF THE STATE OF TEXAS.  THE COMPANY
HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, 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 ANY LOAN  DOCUMENT  BROUGHT  IN ANY
SPECIFIED COURT, AND HEREBY FURTHER  IRREVOCABLY WAIVES ANY CLAIMS THAT ANY SUCH
SUIT,  ACTION OR  PROCEEDING  BROUGHT IN ANY SUCH  COURT HAS BEEN  BROUGHT IN AN
INCONVENIENT  FORUM. THE COMPANY FURTHER (1) AGREES TO DESIGNATE AND MAINTAIN AN
AGENT FOR SERVICE OF PROCESS IN THE CITY OF HOUSTON,  TEXAS,  IN CONNECTION WITH
ANY SUCH SUIT,  ACTION OR  PROCEEDING  AND TO DELIVER  TO  ADMINISTRATIVE  AGENT
EVIDENCE  THEREOF AND (2) IRREVOCABLY  CONSENTS TO THE SERVICE OF PROCESS OUT OF
ANY OF THE  SPECIFIED  COURTS  IN ANY SUCH  SUIT,  ACTION OR  PROCEEDING  BY THE
MAILING OF COPIES THEREOF BY CERTIFIED MAIL, RETURN RECEIPT  REQUESTED,  POSTAGE
PREPAID,  TO THE  COMPANY AT ITS ADDRESS AS  PROVIDED  IN THIS  AGREEMENT  OR AS
OTHERWISE  PROVIDED BY TEXAS LAW.  NOTHING  HEREIN SHALL AFFECT THE RIGHT OF ANY
AGENT OR ANY BANK TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE
COMPANY IN ANY  JURISDICTION  OR TO SERVE  PROCESS IN ANY  MANNER  PERMITTED  BY
APPLICABLE  LAW. THE COMPANY  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. THIS AGREEMENT AND
(EXCEPT AS THEREIN  PROVIDED) THE OTHER LOAN DOCUMENTS  SHALL BE GOVERNED BY AND
CONSTRUED IN  ACCORDANCE  WITH THE  APPLICABLE  LAWS (OTHER THAN THE CONFLICT OF
LAWS RULES) OF THE STATE OF TEXAS AND THE UNITED  STATES OF AMERICA FROM TIME TO
TIME IN EFFECT.

13.11 WAIVER OF JURY TRIAL;  PUNITIVE DAMAGES. THE COMPANY,  EACH AGENT AND EACH
BANK HEREBY (I) IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW,
ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY  LITIGATION  DIRECTLY
OR INDIRECTLY  AT ANY TIME ARISING OUT OF, UNDER OR IN CONNECTION  WITH THE LOAN
DOCUMENTS  OR ANY  TRANSACTION  CONTEMPLATED  HEREBY OR  THEREBY  OR  ASSOCIATED
THEREWITH,  BEFORE OR AFTER MATURITY;  (II) IRREVOCABLY  WAIVES,  TO THE MAXIMUM
EXTENT NOT  PROHIBITED  BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY
SUCH  LITIGATION  ANY  EXEMPLARY,   PUNITIVE  OR  CONSEQUENTIAL  DAMAGES;  (III)
CERTIFIES  THAT NO PARTY HERETO NOR ANY  REPRESENTATIVE  OR AGENT OR COUNSEL FOR
ANY PARTY HERETO HAS REPRESENTED,  EXPRESSLY OR OTHERWISE,  OR IMPLIED THAT SUCH
PARTY  WOULD NOT,  IN THE EVENT OF  LITIGATION,  SEEK TO ENFORCE  THE  FOREGOING
WAIVERS;  AND  (IV) ACKNOWLEDGES  THAT IT HAS BEEN  INDUCED  TO ENTER  INTO THIS
AGREEMENT, THE OTHER LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND
THEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS  CONTAINED
IN THIS SECTION.

13.12  Severability.  Whenever  possible,  each  provision of the Loan Documents
shall  be  interpreted  in  such  manner  as to be  effective  and  valid  under
applicable law. If any provision of any Loan Document shall be invalid,  illegal
or unenforceable in any respect under any applicable law, the validity, legality
and  enforceability of the remaining  provisions of such Loan Document shall not
be affected or impaired thereby.

13.13 [Intentionally omitted].

<PAGE>

13.14 Confidential Information. Each Agent and each Bank separately agrees that:

(a)  As  used  herein,  the  term   "Confidential   Information"  means  written
information  about the Company or any of its  Subsidiaries  or the  transactions
contemplated  herein  furnished  by the  Company to the Agents  and/or the Banks
which is specifically  designated as  confidential by the Company;  Confidential
Information, however, shall not include information which (i) was publicly known
or available, or otherwise available on a non-confidential basis to any Bank, at
the time of disclosure from a source other than the Company,  (ii)  subsequently
becomes  publicly known through no act or omission by such Bank, (iii) otherwise
becomes  available  on a  non-confidential  basis to any Bank other than through
disclosure  by the Company or (iv) has been in the  possession of any Bank for a
period of more than two years from the date on which such information originally
was  furnished  to such Bank by the  Company,  unless  the  Company  shall  have
requested the Agents and the Banks in writing, at least 30 days prior to the end
of such two-year period, to maintain the confidentiality of such information for
another two (2) year period (or for successive  two (2) year periods);  provided
that the Company shall not  unreasonably  withhold its consent to a request made
after  the  initial  two  (2)  year  period  to   eliminate   information   from
"Confidential Information".

(b) Each Agent and each Bank  agrees  that it will take  normal  and  reasonable
precautions  to maintain the  confidentiality  of any  Confidential  Information
furnished  to such  Person;  provided,  however,  that such Person may  disclose
Confidential  Information (i) upon the Company's consent;  (ii) to its auditors;
(iii)  when  required  by any  Legal  Requirement;  (iv) as may be  required  or
appropriate in any report,  statement or testimony submitted to any Governmental
Authority having or claiming to have  jurisdiction over it; (v) to such Person's
and its Subsidiaries' or Affiliates'  officers,  directors,  employees,  agents,
representatives  and professional  consultants in connection with this Agreement
or administration  of the Loans; (vi) as may be required or appropriate,  should
such Bank elect to assign or grant  participations  in any of the Obligations in
connection  with (1) the enforcement of the Obligations by any such Person under
any of the Loan Documents or related  agreements,  or (2) any potential transfer
pursuant to this  Agreement of any  Obligation  owned by any Bank  (provided any
potential  transferee  has been  approved  by the  Company if  required  by this
Agreement,  which approval shall not be unreasonably withheld, and has agreed in
writing to be bound by substantially the same provisions regarding  Confidential
Information contained in this Section);  (vii) as may be required or appropriate
in response to any summons or subpoena or in connection  with any  litigation or
administrative  proceeding;  (viii)  to any  other  Bank;  (ix)  to  the  extent
reasonably  required in connection with the exercise of any remedy  hereunder or
under  the other  Loan  Documents;  or (x) to  correct  any false or  misleading
information which may become public concerning such Person's relationship to the
Company.

<PAGE>

13.15 Tax Forms.  With respect to each Bank which is organized under the laws of
a jurisdiction  outside the United States,  on the day of the initial  borrowing
hereunder  and from time to time  thereafter  if  requested  by the  Company  or
Administrative  Agent,  such Bank  shall  provide  Administrative  Agent and the
Company with the forms  prescribed by the Internal Revenue Service of the United
States certifying as to such Bank's status for purposes of determining exemption
from United States  withholding taxes with respect to all payments to be made to
such Bank hereunder or other Loan  Documents or indicating  that all payments to
be made to such Bank  hereunder  are subject to such tax at a rate reduced by an
applicable tax treaty.  Unless the Company and  Administrative  Agent shall have
received such forms or such documents indicating that payments hereunder are not
subject to United  States  withholding  tax or are subject to such tax at a rate
reduced by an applicable tax treaty,  the Company or Administrative  Agent shall
withhold taxes from such payments at the  applicable  statutory rate in the case
of  payments  to or for any Bank  organized  under  the  laws of a  jurisdiction
outside the United States.

13.16 Entire  Agreement.  THIS WRITTEN  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.

                                   [SIGNATURES BEGIN ON FOLLOWING PAGE]

<PAGE>

                                    [SIGNATURE PAGE TO 364-DAY CREDIT AGREEMENT]

                                                       S - 4

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

                           OCEAN ENERGY, INC., a Texas corporation

                           By:
                           Name:    Stephen A. Thorington
                           Title:   Senior Vice President, Finance, Treasury
                                      and Corporate Development

                           Address for Notices:
                                    1001 Fannin, Suite 1700
                                    Houston, Texas  77002
                                    Attention: Stephen A. Thorington
                                    Phone:(713) 265-6190
                                    Fax:  (713) 265-8024

<PAGE>

                       CREDIT SUISSE FIRST BOSTON, as a Bank and as
                       Administrative Agent and Auction Administrative
                       Agent

                       By:
                       Name:
                       Title:

                       By:
                       Name:
                       Title:

                       Address for Notices:

                         11 Madison Avenue, 20th Floor
                         New York, New York 10010-3629
                         Attention:  Douglas E. Maher
                         Phone:(212) 325-3641
                         Fax:  (212) 325-8615

                       with further notice to:

                          600 Travis Street, 30th Floor
                          Houston, Texas 77002
                          Attention: R. Scott Brown
                          Phone:(713)220-6774
                          Fax:  (713)237-0325

<PAGE>

                       BANK OF AMERICA, N.A., as a Bank and as Syndication
                       Agent

                       By:
                       Name:
                       Title:

                      Address for Notices:
                        700 Louisiana, 8th Floor
                        Houston, Texas 77002
                        Attention:Mr. Paul Squires
                        Phone:(713) 247-6952
                        Fax:  (713) 247-6568

<PAGE>

                     CHASE BANK OF TEXAS, NATIONAL ASSOCIATION, as a
                     Bank and as Documentation Agent

                     By:
                     Name:
                     Title:

                     Address for Notices:

                       1 Chase Manhattan Plaza, 8th Floor
                       New York, New York 10081
                       Attention: Ms. Debbie Rockower
                       Phone:(212) 552-7446
                       Fax:  (212) 552-5700

                     with a copy to:

                       Chase Bank of Texas, National Association
                       712 Main Street
                       Houston, Texas  77002
                       Attention: Manager, Energy Division

<PAGE>

                                  Exhibit A - 1

                                    Exhibit A

                            Unrestricted Subsidiaries

1.       Seagull UK Ltd.
2.       SGO Isle of Man Ltd.
3.       Seagull Energy International, Inc.
4.       Seagull Egypt Company
5.       Seagull Ireland Ltd.
6.       GNR International (Argentina), Inc.
7.       Seagull (Malaysia) Ltd.
8.       Texneft Inc.
9.       GNR International (Turkey), Inc.
10.      Havre Pipeline Company, LLC
11.      Lion GPL, S.A.
12.      Ocean Yemen Corporation
13.      Thousand Oaks Dev. Corp. J.V.
14.      UMC Angola Corporation
15.      Ocean Bangladesh Corporation
16.      Ocean Pakistan Corporation

<PAGE>

                                  Exhibit B - 3

                                    Exhibit B

                     Form of Request for Extension of Credit

                         [OCEAN ENERGY, INC. LETTERHEAD]

                         REQUEST FOR EXTENSION OF CREDIT

                             ________________, _____

Credit Suisse First Boston, as Administrative Agent
11 Madison Avenue, 20th Floor
New York, New York 10010-3629
Attention:        Ms. Julia Kingsbury

Gentlemen:

The undersigned  hereby certifies that he is the of OCEAN ENERGY,  INC., a Texas
corporation (the  "Company"),  and that as such he is authorized to execute this
Request  for  Extension  of Credit  (the  "Request")  on  behalf of the  Company
pursuant to the 364-Day Credit Agreement (as it may be amended,  supplemented or
restated from time to time,  the  "Agreement")  dated as of November 9, 1999, by
and among the Company,  CREDIT SUISSE FIRST BOSTON, as Administrative  Agent for
the Banks  ("Administrative  Agent"),  CREDIT  SUISSE FIRST  BOSTON,  as Auction
Administrative Agent for the Banks, BANK OF AMERICA,  N.A., as Syndication Agent
for the Banks, and CHASE BANK OF TEXAS, NATIONAL  ASSOCIATION,  as Documentation
Agent for the Banks,  and the Banks  therein  named.  The Loan  being  requested
hereby is to be in the amount set forth in (b) below and is requested to be made
on ________________,  _______, which is a Business Day. The Loan is to be (check
one) [___] a Eurodollar  Loan [___] an Alternate  Base Rate Loan. If the Loan is
to be a Eurodollar  Loan, the Interest  Period is to be (check one) [__] 1, [__]
2, [__] 3 or [__] 6 months.  On behalf of the Company,  the undersigned  further
certifies,  represents  and warrants  that to his  knowledge,  after due inquiry
(each  capitalized  term used herein  having the same meaning given to it in the
Agreement unless otherwise specified herein):

(a) As of the date hereof:

(1)  The  Facility  Amount   [COMPLETE  WITH  THE  AGGREGATE   COMMITMENTS)  is:
$__________

(2) Aggregate outstanding amount of Loans is: $__________

<PAGE>

(3) Amount  currently  available under the Agreement (the amount in (a)(1) above
minus the amount in (a)(2) above) is: $__________

(b) If and only if the  amount  shown in Line  (a)(3)  above  is  positive,  the
Company  hereby  requests under this Request a Loan in the amount of $__________
(which is no more than the positive amount set forth in Line (a)(3) above).

(c) Except for the facts  heretofore  disclosed to the  Administrative  Agent in
writing,  which facts (I) are not materially more adverse to the Company and its
Subsidiaries or any other Obligor,  (II) do not materially  decrease the ability
of the Banks to collect the Obligations as and when due and payable and (III) do
not materially  increase the liability of any Agent or any of the Banks, in each
case  compared  to those  facts  existing  on the date  hereof and the  material
details of which have been set forth in the  Financial  Statements  delivered to
the  Administrative  Agent  prior  to  the  date  hereof  or in  the  Disclosure
Statement,  and except for the  representations  set forth in the Loan Documents
which, by their terms,  are expressly (or by means of similar  phrasing) made as
of the date of the Agreement,  only, the  representations and warranties made in
each Loan  Document are true and correct in all  material  respects on and as of
the time of delivery hereof, with the same force and effect as if made on and as
of the time of delivery hereof.

(d) The  interest  rate and  Interest  Period  selected  above  comply  with all
applicable provisions of the Agreement.

(e) No Default has occurred and is continuing.

(f) No event or condition shall have occurred since December 31, 1998,  which is
reasonably expected to result in a Material Adverse Effect.

[Items (c), (d) and (f) above may be omitted at the discretion of the Company if
appropriate in the case of the  conversion of  Competitive  Loan or a Eurodollar
Loan to an  Alternate  Base  Rate  Loan.  In the  event  of the  occurrence  and
continuation of a Default,  Item (e) may be replaced with a statement  regarding
the existence of such Default.]

<PAGE>

Thank you for your attention to this matter.

                              Very truly yours,

                              OCEAN ENERGY, INC., a Texas corporation

                              By:
                              Name:
                              Title:

<PAGE>

                                  Exhibit C - 3

                                    Exhibit C

                          Subsidiaries (with Addresses)

1.      Seagull Energy E&P Inc.
2.      Seagull UK Ltd.
3.      SGO Isle of Man Ltd.
4.      Seagull Energy International, Inc.
5.      Seagull Egypt Company
6.      Seagull Ireland Ltd.
7.      Seagull International Holdings Ltd.
8.      Seagull East Zeit Petroleum Ltd.
9.      Global Natural Resources Inc.
10.     Global Natural Resources Corporation of Nevada
11.     Seagull (Cote D'Ivoire) Ltd.
12.     Seagull (Cote D'Ivoire) CI-12 Ltd.
13.     Seagull (Cote D'Ivoire) CI-104 Ltd
14.     Seagull (Egypt) Ltd.
15.     Seagull (Egypt) Darag, Ltd.
16.     Seagull (Egypt) East Beni Suef, Ltd.
17.     GNR International (Argentina), Inc.
18.     Seagull (Malaysia) Ltd.
19.     Texneft Inc.
20.     GNR Eastern
21.     GNR International (Turkey), Inc.
22.     Thousand Oaks Development Corporation
23.     Seagull Pipeline & Marketing Company
24.     Seagull Marketing Services, Inc.
25.     Seagull Power Services Inc.
26.     Seagull Products Pipeline Corporation
27.     Seagull Field Services Company
28.     Seagull Pipeline Company
29.     Seagull WAG Petroleum Ltd.
30.     Ocean Energy, Inc. (a Louisiana corporation)
31.     UMC Pipeline Corporation
32.     Ocean International Ltd.
33.     Ocean Energy Cote d'lvoire Corporation
34.     Ocean (C1-01) Corporation
35.     Ocean (C1-02) Corporation
36.     Ocean (C1-12) Corporation
37.     Ocean (C1-105) Corporation
38.     UMC Angola Corporation
39.     Ocean Bangladesh Corporation

<PAGE>

40.     Ocean Pakistan Corporation
41.     Ocean Ghana Corporation
42.     Ocean Energy Qatar Corporation (a Cayman Islands corporation)
43.     Ocean Exploration, Inc. (100% of the capital stock is owned by
        OEI-Louisiana).
44.     Ocean Energy Resources, Inc.,1670 Broadway, Suite 2800,
        Denver, Colorado 80202.
45.     Ocean Equatorial Guinea Corporation
46.     Big Sky Gas Marketing Corporation
47.     UMC Colorado LLC (a Colorado limited liability company),
        410 17th Street, Suite 1400, Denver, Colorado 80202
48.     Ocean Yemen Corporation, Ugland House, George Town, Grand Cayman,
        BWI c/o Adrian Pope, Maples & Calder.
49.     Havre Pipeline Company, LLC, 410 17th Street,
        Suite 1400, Denver, Colorado 80202
50.     Lion GPL, SA, BP 827, Abidjan 04, Republic of Cote d'Ivoire
51.     Buckeye Geostratic
52.     Equitable 79 II
53.     Kingfisher Partners, Ltd.
54.     Kingfisher Partners, Ltd. 1979 - I
55.     MWJ 78-2.  Ltd.  Drilling Program
56.     Mewbourne Oil, Ltd., 1978 - A
57.     Petroleum Discovery Partners, Ltd. - I
58.     Petroleum Discovery Partners, Ltd. - IV
59.     Rankin Oil & Gas Lease
60.     Ricks Drilling Program 1975
61.     Ricks Drilling Program 1976 -1
62.     Ricks Drilling Program 1976 - 2
63.     Ricks Drilling Program 1977 - 1
64.     Ricks Drilling Program 1977 - 2
65.     Ricks 1978 Private Drilling Program 1978 - 1
66.     Ricks Drilling Program 1978 - 2
67.     Ricks Drilling Program 1979 - 1
68.     Ricks 1979 Private Drilling - 2
69.     Seneca Exploration Ltd.
70.     Smith Petroleum 1978 - A Ltd.
71.     Struthers 1978 - A Oil & Gas Program
72.     Struthers 1978 - B Oil & Gas Program
73.     Joseph I. O'Neill, Jr. - Anadarko Gas Program: 1974 A
74.     Joseph I. O'Neill, Jr. - Anadarko Gas Program: 1974 B
75.     1969 Oil & Gas Program (Adams Resources)
76.     1970 Oil & Gas Program
77.     1971 Oil & Gas Program
78.     Wil-Mc 1975 Fund Ltd.
79.     Foxco Energy Limited Partnership 1986
80.     JMI 1983

<PAGE>

81.     Taurus 1991
82.     Taurus 1993
83.     Taurus 1994
84.     Taurus 1996
85.     Dominion 1987
86.     Dominion (CDN)
87.     Fidelity 86/87 (Lincoln Road, McCullen Bluff)
88.     Fidelity 1989
89.     Fidelity 1989 (CDN)
90.     Fidelity 1991
91.     Fidelity 1991 (CDN)
92.     Fidelity 1993
93.     Fidelity 1993 (CDN)
94.     Fidelity 1994
95.     Fidelity 1994 (CDN)
96.     Fidelity 1996

        In each case (unless otherwise noted), the address for notice is:

        c/o Ocean Energy, Inc.
        1001 Fannin, Suite 1700
        Houston, Texas  77002

<PAGE>

                                  Exhibit D - 4

                                    Exhibit D

                                     Form of

                             Compliance Certificate

The  undersigned,  the  ___________________  of  OCEAN  ENERGY,  INC.,  a  Texas
corporation (the  "Company"),  hereby certifies that he is authorized to execute
this  certificate  on behalf of the  Company,  pursuant  to the  364-Day  Credit
Agreement (the "Credit  Agreement"),  dated as of November 9, 1999, by and among
the Company,  CREDIT SUISSE FIRST BOSTON, as Administrative  Agent for the Banks
("Administrative  Agent"), CREDIT SUISSE FIRST BOSTON, as Auction Administrative
Agent for the Banks, BANK OF AMERICA,  N.A., as Syndication Agent for the Banks,
and CHASE BANK OF TEXAS,  NATIONAL  ASSOCIATION,  as Documentation Agent for the
Banks, and the Banks therein named, as amended; and that a review of the Company
and  its  Subsidiaries  has  been  made  under  his  supervision  with a view to
determining whether the Company and its Subsidiaries have fulfilled all of their
respective  obligations under the Credit Agreement and the other Loan Documents;
and on behalf of the Company further certifies,  represents and warrants that to
his knowledge,  after due inquiry (each  capitalized term used herein having the
same meaning given to it in the Credit Agreement unless otherwise specified):

As of   , ______:

(a) The Company and its Subsidiaries have fulfilled their respective obligations
under the Credit  Agreement  and the other Loan  Documents as each applies after
giving effect to any  amendments,  consents and/or waivers that may be in effect
from time to time.

(b) Except for the facts heretofore  disclosed to the Administrative Agent under
the Credit Agreement in writing, which facts (I) are not materially more adverse
to the Company and its Subsidiaries or any other Obligor, (II) do not materially
decrease the ability of the Banks to collect the Obligations as and when due and
payable and (III) do not materially  increase the liability of the Agents or any
of the Banks,  in each case compared to those facts  existing on the date hereof
and the  material  details  of  which  have  been  set  forth  in the  Financial
Statements  delivered  to the  Administrative  Agent under the Credit  Agreement
prior to the date hereof or in the  Disclosure  Statements  provided  for in the
Credit  Agreement,  and  except  for the  representations  set forth in the Loan
Documents which, by their terms, are expressly (or by means of similar phrasing)
made as of the date of the  Credit  Agreement,  only,  the  representations  and
warranties  made in each Loan  Document  are true and  correct  in all  material
respects  on and as of the time of  delivery  hereof,  with the same  force  and
effect as if made on and as of the time of delivery hereof.

<PAGE>

(c) The Financial  Statements  delivered to the  Administrative  Agent under the
Credit  Agreement  concurrently  with  this  Compliance  Certificate  have  been
prepared in accordance  with GAAP  consistently  followed  throughout the period
indicated  and  fairly  present,  in all  material  respects,  the  consolidated
financial  condition and results of operations of the  applicable  Persons as at
the end of, and for,  the period  indicated  (subject,  in the case of quarterly
Financial Statements, to normal changes resulting from year-end adjustments).

(d) No Default has occurred  and is  continuing.  In this regard the  compliance
with the provisions of Sections 10.7,  10.8 and 10.9 of the Credit  Agreement is
as follows:

(i) Section 10.7 of the Credit Agreement - Total Leverage Ratio

                              Total Debt               (1)    $_________
                              EBITDAX                  (2)    $_________

                              Total Leverage Ratio (1)/(2)     _________
Note: Must be no greater than amount specified in Section 10.7.

(ii)     Section 10.8 of the Credit Agreement - Senior Leverage Ratio

                              Total Debt                      $__________
                              Less: Subordinated Indebtedness $__________

                              Senior Debt                 (1) $__________
                              EBITDAX                     (2) $__________

                              Senior Leverage Ratio (1)/(2)    __________

                       Note: Must be no greater than 3.00 to 1.00.

(iii)    Section 10.9 of the Credit Agreement - Minimum Consolidated Net Worth

Preferred  stock (if any),  par value of common stock,  capital in excess of par
value of common stock and retained  earnings of Company and its Subsidiaries

                                                           (1) $__________

Less  treasury  stock (if any),  goodwill,  cost in excess of fair  value of net
assets acquired and all other assets that are properly classified
<PAGE>

as intangible assets of Company and its Subsidiaries       (2) $__________

Plus any expenses  associated  with the Merger  occurring  prior to December 31,
1999 and not in  excess  of  $30,000,000  in the  aggregate,  and the  amount of
noncash  write  downs  of  long-lived  assets  in  compliance  with  GAAP or SEC
guidelines                                                 (3) $__________

Plus or minus, as appropriate,  any  extraordinary or non-recurring net gains or
losses  together  with any  related  provision  for  taxes on such gain or loss,
realized in connection with any  extraordinary  or nonrecurring  gains or losses
                                                           (4) $__________

Plus  or  minus,  as  appropriate,   foreign  currency  translation  adjustments
applicable to Company and its Subsidiaries                 (5) $__________

Consolidated Net Worth       [(1) - (2) + (3) +/- (4) +/- (5)] $__________

Consolidated Net Worth Requirement Initial Amount (i) $770,000,000

Plus 50% of the sum of Company's and its  Restricted  Subsidiaries  consolidated
net income for each fiscal quarter  beginning  with the calendar  quarter ending
March 31, 1999                                            (ii) $__________

Plus 50% of the net cash  proceeds  received by the  Company and its  Restricted
Subsidiaries  from the issuance of any common  stock,  preferred  stock or other
equity for each fiscal quarter  beginning with the calendar quarter ending March
31, 1999.                                                (iii) $__________

                  Total CNW Requirement [(i) + (ii) + (iii)]   $__________

                  Note: Consolidated Net Worth must be equal to or greater than
                        the Total CNW Requirement

(f) There has  occurred no Material  Adverse  Effect  since the date of the most
recent Financial Statements delivered to the Banks.

(g) The following Letters of Credit are issued and currently outstanding:

                  Issuer:
                  Beneficiary:
                  L/C No.:
                  Amount:
                  Date of Issue:

<PAGE>

                  Expiration:

DATED as of ____________________, ____.

                            OCEAN ENERGY, INC.

                            By:
                            Name:
                            Title:

                                  Exhibit E - 6

                                    Exhibit E

                                     Form of

                            Assignment and Acceptance

                          Dated: _______________, _____

Reference is made to the 364-Day Credit  Agreement  dated as of November 9, 1999
(as restated,  amended, modified,  supplemented and in effect from time to time,
the "Credit  Agreement"),  among OCEAN ENERGY,  INC., a Texas  corporation  (the
"Company"),  CREDIT SUISSE FIRST BOSTON, as  Administrative  Agent for the Banks
("Administrative  Agent"), CREDIT SUISSE FIRST BOSTON, as Auction Administrative
Agent for the Banks, BANK OF AMERICA,  N.A., as Syndication Agent for the Banks,
and CHASE BANK OF TEXAS,  NATIONAL  ASSOCIATION,  as Documentation Agent for the
Banks,  and the Banks  therein  named.  Capitalized  terms  used  herein and not
otherwise  defined shall have the meanings  assigned to such terms in the Credit
Agreement. This Assignment and Acceptance,  between the Assignor (as defined and
set forth on  Schedule I hereto and made a part  hereof)  and the  Assignee  (as
defined and set forth on  Schedule I hereto and made a part  hereof) is dated as
of the  Effective  Date (as set  forth  on  Schedule  I  hereto  and made a part
hereof).

1. The Assignor  hereby  irrevocably  sells and assigns to the Assignee  without
recourse to the  Assignor,  and the Assignee  hereby  irrevocably  purchases and
assumes from the Assignor without recourse to the Assignor,  as of the Effective
Date,  an  undivided  interest  (the  "Assigned  Interest")  in and  to all  the
Assignor's rights and obligations  under the Credit Agreement  respecting those,
and only those,  credit facilities  contained in the Credit Agreement as are set
forth on Schedule 1 (collectively,  the "Assigned Facilities," individually,  an
"Assigned Facilities"),  in a principal amount for each Assigned Facility as set
forth on Schedule I.

<PAGE>

2.  The  Assignor  (i)  makes no  representation  or  warranty  and  assumes  no
responsibility  with respect to any  statements,  warranties or  representations
made in or in connection with the Credit Agreement or any other Loan Document or
the execution, legality, validity, enforceability,  genuineness,  sufficiency or
value of the Credit  Agreement,  any other Loan Document or any other instrument
or  document  furnished  pursuant  thereto,  other than that it is the legal and
beneficial  owner of the interest  being  assigned by it hereunder and that such
interest is free and clear of any adverse claim; (ii) makes no representation or
warranty and assumes no responsibility  with respect to the financial  condition
of the Company or its  Subsidiaries  or the  performance  or  observance  by the
Company  or its  Subsidiaries  of any of its  respective  obligations  under the
Credit  Agreement,  any other Loan Document or any other  instrument or document
furnished pursuant thereto; and (iii) if  applicable,  attaches the note(s) held
by it evidencing the Assigned  Facility or  Facilities,  as the case may be, and
requests that the  Administrative  Agent exchange such note(s) for a new note or
notes  payable to the Assignor (if the Assignor has retained any interest in the
Assigned Facility or Facilities) and a new note or notes payable to the Assignee
in the respective  amounts which reflect the  assignment  being made hereby (and
after giving effect to any other  assignments which have become effective on the
Effective Date).

3. The Assignee (i)  represents  and warrants  that it is legally  authorized to
enter into this  Assignment and  Acceptance and that it is a permitted  assignee
under Section 13.5 of the Credit Agreement; (ii)confirms that it has received a
copy of the Credit Agreement,  together with copies of the financial  statements
referred to in Section 8.6, or if later,  the most recent  financial  statements
delivered  pursuant  to  Section  9.1  thereof,  and such  other  documents  and
information as it has deemed appropriate to make its own credit analysis;  (iii)
agrees that it will,  independently and without reliance upon the Administrative
Agent,  the  Assignor  or any  other  Bank  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 Credit  Agreement and
the Loan  Documents;  (iv) appoints  and  authorizes the each Agent to take such
action as agent on its  behalf  and to  exercise  such  powers  under the Credit
Agreement as are  delegated to such Agent by the terms  thereof,  together  with
such powers as are  reasonably  incidental  thereto;  (v) agrees that it will be
bound by the  provisions of the Credit  Agreement and will perform in accordance
with its terms all the  obligations  which by the terms of the Credit  Agreement
are required to be performed by it as a Bank;  (vi) if the Assignee is organized
under the laws of a jurisdiction  outside the United States,  attaches the forms
prescribed by the Internal Revenue Service of the United States certifying as to
the Assignee's  exemption from United States  withholding  taxes with respect to
all payments to be made to the Assignee under the Credit Agreement or such other
documents  as are  necessary to indicate  that all such  payments are subject to
such tax at a rate reduced by an applicable  tax treaty,  and (vii) has supplied
the information requested on the administrative questionnaire attached hereto as
Exhibit A.

4.  Following  the  execution  of this  Assignment  and  Acceptance,  it will be
delivered to the  Administrative  Agent for acceptance by it and the Company and
recording by the Administrative  Agent pursuant to Section 13.5(e) of the Credit
Agreement,  effective  as of the  Effective  Date (which  Effective  Date shall,
unless  otherwise  agreed  to by the  Administrative  Agent,  be at  least  five
Business Days after the execution of this Assignment and Acceptance).

5. Upon such  acceptance and recording,  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
Assignee,  whether  such amounts have  accrued  prior to the  Effective  Date or
accrue  subsequent to the Effective  Date.  The Assignor and Assignee shall make
all appropriate  adjustments in payments for periods prior to the Effective Date
by the  Administrative  Agent or with  respect to the making of this  assignment
directly between themselves.

<PAGE>

6. From and after the Effective  Date,  (i) the Assignee shall be a party to the
Credit  Agreement and, to the extent provided in this Assignment and Acceptance,
have the rights and  obligations  of a Bank  thereunder,  and (ii) the  Assignor
shall, to the extent provided in this Assignment and Acceptance,  relinquish its
rights and be released from its obligations under the Credit Agreement.

7. THIS  ASSIGNMENT  AND  ACCEPTANCE  SHALL BE  GOVERNED  BY, AND  CONSTRUED  IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.

IN  WITNESS  WHEREOF,  the  parties  hereto  have  caused  this  Assignment  and
Acceptance  to be  executed  by their  respective  duly  authorized  officers on
Schedule I hereto.

<PAGE>

                     Schedule I to Assignment and Acceptance

Legal Name of Assignor:

Legal Name of Assignee:

Effective Date of Assignment:                    , ______

||

                                   Percentage Assigned of Each
                                     Facility (to at least 8
                                     decimals) (Shown as a
                                    percentage of aggregate

     Assigned              Principal           original principal amount
    Facilities           Amount Assigned              of all Banks
------------------- ------------------------- ----------------------------
------------------- ------------------------- ----------------------------

Committed Loans: $_______________    __________%
------------------- -------------------------- ---------------------------
------------------- -------------------------- ---------------------------

Competitive Loans:$_______________
------------------- -------------------------- ---------------------------
||

Accepted:

CREDIT SUISSE FIRST BOSTON,
 as Administrative Agent                as Assignor

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

<PAGE>

OCEAN ENERGY, INC.
                                     as Assignee

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

<PAGE>

                                    EXHIBIT A

                          Administrative Questionnaire

                                 Primary Contact

Bank Name:
Address:

Primary Contact:
Title:
Department:
Telephone Number:
Telecopier Number:

                                Alternate Contact

Alternate Contact:
Title:
Department:
Telephone Number:
Telecopier Number:

<PAGE>

                                  Exhibit F - 2

                                    Exhibit F

                                     Form of

                             Competitive Bid Request

                             _______________, _____

Credit Suisse First Boston,
as Auction Administrative Agent
11 Madison Avenue, 20th Floor
New York, New York 10010-3629
Attention: Ms. Julia Kingsbury

Dear Sirs:

Reference is made to the 364-Day Credit  Agreement dated as of November 9, 1999,
as modified and amended (the "Credit  Agreement"),  among the  undersigned,  the
Banks named therein, CREDIT SUISSE FIRST BOSTON, as Administrative Agent for the
Banks  ("Administrative   Agent"),   CREDIT  SUISSE  FIRST  BOSTON,  as  Auction
Administrative Agent for the Banks, BANK OF AMERICA,  N.A., as Syndication Agent
for the Banks, and CHASE BANK OF TEXAS, NATIONAL  ASSOCIATION,  as Documentation
Agent for the Banks.  Capitalized  terms used herein and not  otherwise  defined
herein shall have the meanings assigned to such terms in the Credit Agreement.

The  undersigned  hereby gives you notice  pursuant to Section 2.9 of the Credit
Agreement that it requests a Competitive Loan under the Credit Agreement, and in
that  connection  sets forth below the terms on which such  Competitive  Loan is
requested to be made:

(A)      Borrowing Date of Competitive Loan
         (which is a Business Day)

(B)      Principal Amount of Competitive Loan1

<PAGE>

(C) Interest Period and the last day thereof 2

By each of the delivery of this Request for Competitive  Bids and the acceptance
of any or all of the Loans offered by the Banks in response to this  Competitive
Bid  Request,  the  undersigned  represents  and  warrants  that the  applicable
conditions to lending specified in the Credit Agreement have been satisfied with
respect to the Competitive Loan requested hereby.

                                 Very truly yours,

                                 OCEAN ENERGY, INC.

                                 By:
                                 Name:
                                 Title:

<PAGE>

                                  Exhibit G - 2

                                    Exhibit G

                                     Form of

                   Notice to Banks of Competitive Bid Request

[Name of Bank]
[Address of Bank]

Attention:  _______________, _____

Dear Sirs:

Reference is made to the 364-Day Credit  Agreement dated as of November 9, 1999,
as modified and amended (the "Credit Agreement"),  among OCEAN ENERGY, INC. (the
"Company"),   the  Banks  named   therein,   CREDIT  SUISSE  FIRST  BOSTON,   as
Administrative Agent for the Banks ("Administrative Agent"), CREDIT SUISSE FIRST
BOSTON, as Auction Administrative Agent for the Banks, BANK OF AMERICA, N.A., as
Syndication Agent for the Banks, and CHASE BANK OF TEXAS,  NATIONAL ASSOCIATION,
as  Documentation  Agent for the Banks.  Capitalized  terms used  herein and not
otherwise  defined herein shall have the meanings  assigned to such terms in the
Credit Agreement.

The Company  delivered a Request for  Competitive  Bid by [Date]  /Time].1  Your
Competitive  Bid must comply with  Section 2.9  of the Credit  Agreement and the
terms set forth below on which the Notice of Competitive Loan was made:

(A) Date of Competitive Loan

(B) Principal Amount of Competitive Loan

<PAGE>

(C) Interest Period and the last day thereof

                             Very truly yours,

                             CREDIT SUISSE FIRST BOSTON, as Auction
                                Administrative Agent

                             By:
                             Name:
                             Title:

<PAGE>

                                  Exhibit H - 3

                                    Exhibit H

                                     Form of

                                 Competitive Bid

Credit Suisse First Boston,
as Auction Administrative Agent
11 Madison Avenue, 20th Floor
New York, New York 10010-3629
Attention: Ms. Julia Kingsbury                             _________, ______

Dear Sirs:

The  undersigned,  [Name of Bank],  referred to in the 364-Day Credit  Agreement
dated as of November 9, 1999, as modified and amended (the "Credit  Agreement"),
among OCEAN ENERGY, INC. (the "Company"), the Banks named therein, CREDIT SUISSE
FIRST BOSTON, as Administrative  Agent for the Banks  ("Administrative  Agent"),
CREDIT SUISSE FIRST BOSTON, as Auction  Administrative Agent for the Banks, BANK
OF AMERICA,  N.A., as Syndication  Agent for the Banks, and CHASE BANK OF TEXAS,
NATIONAL  ASSOCIATION,  as Documentation Agent for the Banks.  Capitalized terms
used herein and not otherwise defined herein shall have the meanings assigned to
such terms in the Credit Agreement.

The  undersigned  hereby makes a Competitive  Bid pursuant to Section 2.9 of the
Credit  Agreement,  in  response  to  the  Request  for  Competitive  Bids  (the
"Competitive Bid Request") made by the Company on _______________, _____, and in
that  connection  sets forth  below the terms on which such  Competitive  Bid is
made:

(A) Principal Amount 1

(B) Competitive Bid Rate 2

<PAGE>

(C) Interest Period and the last day thereof 3

The  undersigned  hereby  confirms  that it is prepared to extend  credit to the
Company upon  acceptance by the Company of this bid in  accordance  with Section
2.9 of the Credit Agreement.

                         Very truly yours,

                         [NAME OF BANK]

                          By:
                          Name:
                          Title:

<PAGE>

                                  Exhibit I - 1

                                    Exhibit I

                                     Form of

                  Competitive Bid Administrative Questionnaire

                                 Primary Contact
                              Competitive Auctions

Bank Name:
Address:
Primary Contact:
Title:
Department:
Telephone Number:
Telecopier Number:

                                Alternate Contact
                              Competitive Auctions

Alternate Contact:
Title:
Department:
Telephone Number:
Telecopier Number:

<PAGE>

                                  Exhibit J - 3

                                    Exhibit J

                                    [Form of]

                            Certificate of Extension

                                                            ,

Credit Suisse First Boston,
as Administrative Agent
11 Madison Avenue, 20th Floor
New York, New York 10010-3629
Attention:Ms. Julia Kingsbury

Re:  Extension  of  Revolving  Commitment  Termination  Date  - 364  Day  Credit
Agreement

Dear Sirs:

Reference is made to the 364-Day Credit  Agreement dated as of November 9, 1999,
as modified and amended (the "Credit  Agreement"),  among the  undersigned,  the
Banks named therein, CREDIT SUISSE FIRST BOSTON, as Administrative Agent for the
Banks  ("Administrative   Agent"),   CREDIT  SUISSE  FIRST  BOSTON,  as  Auction
Administrative Agent for the Banks, BANK OF AMERICA,  N.A., as Syndication Agent
for the Banks, and CHASE BANK OF TEXAS, NATIONAL  ASSOCIATION,  as Documentation
Agent for the Banks.  Capitalized  terms used herein and not  otherwise  defined
herein shall have the meanings assigned to such terms in the Credit Agreement.

Pursuant to the terms of Section  2.2 of the Credit  Agreement,  Company  hereby
requests an extension of the  Revolving  Commitment  Termination  Date under the
Credit Agreement for a period of 364 days from the current Revolving  Commitment
Termination Date.

To induce Banks to make such an extension  of the current  Revolving  Commitment
Termination Date, Company hereby represents,  warrants, acknowledges, and agrees
to and with each Agent and each Bank that:

(a) The  Responsible  Officer  of  Company  signing  this  instrument  is a duly
elected,  qualified and acting officer of Company,  holding the office indicated
below such officer's  signature hereto and having all necessary authority to act
for Company in making and delivering this Certificate of Extension.

<PAGE>

(b) Except for the facts heretofore  disclosed to the Administrative Agent under
the Credit Agreement in writing, which facts (I) are not materially more adverse
to the Company and its Subsidiaries or any other Obligor, (II) do not materially
decrease the ability of the Banks to collect the Obligations as and when due and
payable and (III) do not materially  increase the liability of the Agents or any
of the Banks,  in each case compared to those facts  existing on the date hereof
and the  material  details  of  which  have  been  set  forth  in the  Financial
Statements  delivered  to the  Administrative  Agent under the Credit  Agreement
prior to the date hereof or in the  Disclosure  Statements  provided  for in the
Credit  Agreement,  and  except  for the  representations  set forth in the Loan
Documents which, by their terms, are expressly (or by means of similar phrasing)
made as of the date of the  Credit  Agreement,  only,  the  representations  and
warranties  made in each Loan  Document  are true and  correct  in all  material
respects  on and as of the time of  delivery  hereof,  with the same  force  and
effect as if made on and as of the time of delivery hereof.

(c)  There  does not  exist on the date  hereof  any  condition  or event  which
constitutes  a Default  which has not been  waived in  writing  as  provided  in
Section 13.1 of the Credit Agreement.

(d) Except to the extent  waived in writing as provided  in Section  13.1 of the
Credit  Agreement,  Company has performed and complied with all  agreements  and
conditions in the Credit Agreement  required to be performed or complied with by
Company on or prior to the date hereof.

(e) The Loan Documents have not been modified,  amended or  supplemented  by any
unwritten representations or promises, by any course of dealing, or by any other
means not  provided  for in  Section  13.4 of the Credit  Agreement.  The Credit
Agreement  and the other Loan  Documents  are  hereby  ratified,  approved,  and
confirmed in all respects.

Company  agrees  that  if,  prior to the time of the  extension  of the  current
Revolving Commitment  Termination Date requested hereby, any matter certified to
herein by it will not be true and correct at such time as if then made,  it will
immediately so notify  Administrative Agent. Except to the extent, if any, that,
prior  to  the  time  of  the  extension  of the  current  Revolving  Commitment
Termination  Date  requested  hereby,  Administrative  Agent shall have received
written notice from Company to the contrary,  each matter certified herein shall
be deemed once again to be  certified as true and correct as of the date of such
extension as if then made.

The  Responsible  Officer of Company signing this  instrument  hereby  certifies
that,  to the best of his  knowledge,  the  above  representations,  warranties,
acknowledgments and agreements of Company are true, correct and complete.

                                OCEAN ENERGY, INC.

                                By:
                                Name:

                                Title:

<PAGE>

                                  Exhibit K - 1

                                    Exhibit K

                                    [Form of]

                               GUARANTY AGREEMENT

<PAGE>

                                  Exhibit L - 1

                                    Exhibit L

                              DISCLOSURE STATEMENT

I.  Indebtedness  of any  Restricted  Subsidiary  existing  on the  date of this
Agreement per Section 10.1(i)(b):

Guarantee of "95 Indenture" as defined in the Agreement

Guarantee of "96 Indenture" as defined in the Agreement

Guarantee of "97 Indenture" as defined in the Agreement

Guarantee of "98 Senior Subordinated Indenture" as defined in the Agreement

Guarantee  of Ocean  Energy,  Inc.  $125,000,000  13 1/2%  Senior  Notes  issued
December 1, 1994 due 2004

Guarantee of Ocean Energy, Inc.  $125,000,000 7 5/8% Senior Notes issued July 8,
1998 due 2005

Guarantee of Ocean Energy, Inc.  $125,000,000 8 1/4% Senior Notes issued July 8,
1998 due 2018

Guarantee of Seagull Energy Corporation  $100,000,000 7 7/8% Senior Notes issued
July 1993 due August 1, 2003

Guarantee of Seagull Energy Corporation  $150,000,000 8 5/8% Senior Subordinated
Notes issued July 1993 due August 1, 2005

Guarantee of Seagull Energy Corporation  $150,000,000 7 1/2% Senior Notes issued
September 30, 1997 due September 15, 2027

Guarantee of obligations of Havre (as defined in the Agreement) in an amount not
exceeding $20,000,000 in the aggregate in connection with Indebtedness of Havre

<PAGE>

                                  Exhibit M - 1

                                    Exhibit M

                                   Commitments

--------------------------------- ---------------------------------------
     Name of Bank                              Commitment
--------------------------------- ---------------------------------------
--------------------------------- ---------------------------------------

Credit Suisse First Boston                 $100,000,000
--------------------------------- ---------------------------------------
--------------------------------- ---------------------------------------

Chase Bank of Texas, National Association   $50,000,000
--------------------------------- ---------------------------------------
--------------------------------- ---------------------------------------

Bank of America, N.A.                       $50,000,000
--------------------------------- ---------------------------------------
--------------------------------- ---------------------------------------

Total:                                     $200,000,000
--------------------------------- ---------------------------------------

1/ Not less than  $25,000,000 or greater than the unused Total Commitment and in
integral multiples of $5,000,000.

2/ Which,  subject to the Credit  Agreement,  shall have a duration of not less
than seven  calendar days nor more than 180 calendar  days,  and which shall end
not later than the Termination Date.

1/ The Competitive Bid must be received by the Auction  Administrative Agent not
later than noon, New York, New York time,  four Business Days before the date of
the proposed  Competitive Loan. 1/ Not less than $25,000,000 or greater than the
available  Total  Commitment and in integral  multiples of $5,000,000.  Multiple
bids will be accepted by the Auction  Administrative  Agent.  2/  Expressed as a
percentage 3/ The Interest Period must be the Interest  Period  specified in the
Competitive Bid Request.

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