SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549



                                    FORM 8-K

                                 CURRENT REPORT


     Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

        Date of Report (Date of earliest event reported): August 7, 1997



                        PIONEER NATURAL RESOURCES COMPANY
             (Exact name of Registrant as specified in its charter)




          Delaware                      333-26951            75-2702753
(State or other jurisdiction of       Registration        (I.R.S. Employer
incorporation or organization)         File Number      Identification Number)




1400 Williams Square West, 5205 N. O'Connor Blvd., Irving, Texas       75039
                     (Address of principal executive offices)        (Zip code)



       Registrant's Telephone Number, including area code : (972) 444-9001


                                 Not applicable
              (Former name, former address and former fiscal year,
                          if changed since last report)




                               Page 1 of 22 pages.

                            Exhibit Index on page 22.


                                        1


<PAGE>



                        PIONEER NATURAL RESOURCES COMPANY

                                TABLE OF CONTENTS

                                                                           Page
                                                                           ----

Item 1.  Change in Control of Registrant..................................    3

Item 2.  Acquisition or Disposition of Assets.............................    3


Item 7.  Financial Statements and Exhibits:...............................    6

           Preliminary Statement..........................................    6

           Unaudited Pro Forma Combined Financial Statements:

             Unaudited Pro Forma Combined Balance Sheet for Pioneer
                Natural Resources Company as of June 30, 1997.............    7
             Unaudited Pro Forma Combined Statement of Operations for
                Pioneer Natural Resources Company for the six months
                ended June 30, 1997.......................................    8
             Unaudited Pro Forma Combined Statement of Operations for
                Pioneer Natural Resources Company for the year ended
                December 31, 1996.........................................    9
             Unaudited Pro Forma Combined Statement of Operations for
                Parker & Parsley Petroleum Company for the year ended
                December 31, 1996.........................................   10
             Unaudited Pro Forma Combined Statement of Operations for
                Mesa Inc. for the year ended December 31, 1996............   11

           Notes to Unaudited Pro Forma Combined Financial Statements.....   12

           Exhibits.......................................................   20

           Signatures.....................................................   21

           Exhibit Index..................................................   22

                                        2


<PAGE>



The information in this document  includes  forward-looking  statements that are
based on  assumptions  that in the future  may prove not to have been  accurate.
Those  statements,   and  Pioneer  Natural  Resources   Company's  business  and
prospects,  are subject to a number of risks including the volatility of oil and
gas prices,  environmental risks,  operating hazards and risks, risks associated
with natural gas processing plants, risks related to exploration and development
drilling,  uncertainties  about estimates of reserves,  competition,  government
regulation,  and the ability of Pioneer Natural  Resources  Company to implement
its business  strategy.  These and other risks are  described in the 1996 Annual
Reports on Form 10-K for Parker & Parsley  Petroleum Company and Mesa Inc. which
are available from the United States Securities and Exchange Commission.


Item 1.      Changes in Control of Registrant

       Pioneer Natural Resources Company  ("Pioneer"),  a Delaware  corporation,
was formed in order to complete  the merger  proposed  by and  between  Parker &
Parsley Petroleum Company ("Parker & Parsley") and Mesa Inc.  ("Mesa").  Pioneer
was  originally   created  as  a  wholly-owned   subsidiary  of  Mesa,  a  Texas
corporation,  the  purpose  of which was to allow Mesa to  reincorporate  into a
Delaware  corporation  and to accomplish the merger with Parker & Parsley.  Both
Parker & Parsley and Mesa are oil and gas  exploration  and production  concerns
with ownership  interests in oil and gas properties  located  principally in the
MidContinent,  Southwestern  and onshore and offshore  Gulf Coast regions of the
United States, and with limited international interests.

       As a  result  of  the  Mergers  described  in  "Item  2.  Acquisition  or
Disposition of Assets",  Parker & Parsley Petroleum Company ("Parker & Parsley")
merged into Pioneer  Natural  Resources USA, Inc., a wholly-owned  subsidiary of
Pioneer  Natural  Resources  Company   ("Pioneer").   Former  Parker  &  Parsley
stockholders  received  approximately  57% of the common  stock of  Pioneer  and
former Mesa Inc. ("Mesa") stockholders received  approximately 43% of the common
stock of Pioneer.  In some  circumstances,  this  transaction  could be deemed a
"change in control of a  registrant".  For a more complete  description of these
transactions, see "Item 2. Acquisition or Disposition of Assets" below.


Item 2.      Acquisition or Disposition of Assets

       As of April 6, 1997,  Parker & Parsley and Mesa  entered  into an Amended
and Restated  Agreement  and Plan of Merger (the "Merger  Agreement")  which was
approved by the  stockholders  of both companies on August 7, 1997 by a majority
vote of 76% by holders of Parker & Parsley  common stock and 71%,  58%, and 100%
by  holders  of Mesa  common  stock,  Mesa  Series A 8%  Cumulative  Convertible
Preferred  Stock  ("Mesa  Series  A  Preferred  Stock")  and  Mesa  Series  B 8%
Cumulative  Convertible  Preferred  Stock  ("Mesa  Series B  Preferred  Stock"),
respectively.  Mesa was a publicly traded  independent oil and gas company based
in Irving,  Texas with  substantial  producing  properties and operations in the
MidContinent  region of the United States. The Merger Agreement provided for (i)
the merger of Mesa with and into Pioneer, a wholly-owned  subsidiary of Mesa, as
a result of which Mesa, a Texas  corporation,  reincorporated  into Delaware and
(ii) the merger of Parker & Parsley with and into Mesa Operating Co. ("MOC"),  a
wholly-owned subsidiary of Mesa (items (i) and (ii) collectively the "Mergers").
In accordance with the Merger Agreement,  (i) holders of Parker & Parsley common
stock  received  one share of Pioneer  common  stock for each share  held;  (ii)
holders of Mesa common  stock  received  one share of Pioneer  common  stock for
every seven shares held; and (iii) holders of Mesa Series A Preferred  Stock and
Mesa Series B Preferred  Stock  received 1.25 shares of Pioneer common stock for
every seven  shares  held.  No  fractional  shares were issued and all  treasury
shares were canceled.

       As a result of the Mergers, former Parker & Parsley stockholders received
approximately  57% of the common stock of Pioneer,  and former Mesa stockholders
received  approximately 43%. Also, as a result of the Mergers,  Parker & Parsley
merged into a  wholly-owned  subsidiary  of Pioneer that is now known as Pioneer
Natural  Resources  USA, Inc. For a complete  description  of the Mergers and of
Pioneer, see Pioneer's  Registration  Statement on Form S-4 (File No. 333-26951)
which is incorporated herein by reference.

       In accordance with the provisions of Accounting  Principles Board No. 16,
"Business Combinations", the merger has been accounted for as a purchase of Mesa
by Parker & Parsley. As a result,  historical  financial  statements for Pioneer
will be those of Parker &  Parsley,  and  Pioneer's  financial  statements  will
present the  addition of Mesa's  assets and  liabilities  as an  acquisition  by

                                        3


<PAGE>



Parker & Parsley.  The aggregate Pioneer purchase  consideration  related to the
assets  and  liabilities  of  Mesa,  including  estimated   nonrecurring  merger
transaction  costs,  is $999.5  million.  See "Item 7. Financial  Statements and
Exhibits" for the preliminary  allocation of the total purchase price of Mesa to
the  acquired  assets and  liabilities  based  upon the  estimated  fair  values
assigned to each of the significant assets acquired and liabilities assumed. Any
future  adjustments to the allocation of the purchase price are not  anticipated
to be material to Pioneer's financial statements.

Description of Properties

       For a complete  description  of the  properties  of Parker & Parsley  and
Mesa,  see  Pioneer's  Registration  Statement on Form S-4 (File No.  333-26951)
which is incorporated herein by reference.

Credit Facility Agreements

       On August 7, 1997,  the  successor  to Parker & Parsley and MOC,  Pioneer
Natural Resources USA, Inc. (the  "Borrower"),  entered into two Credit Facility
Agreements  ("Credit  Facility  Agreements")  with a  syndicate  of  banks  (the
"Banks") that  refinanced the credit  facilities of Parker & Parsley and Mesa as
of the date of merger of the two companies.  One Credit Facility  Agreement (the
"Primary  Facility")  provides for a $1.1 billion credit facility.  The maturity
date for the Primary  Facility  is August 7, 2002.  The second  Credit  Facility
Agreement (the "364-day  Facility")  provides for a $300 million credit facility
with a maturity date of August 5, 1998. The Borrower has the option to renew the
364-day  Facility  for  another  period  of 364 days by  notifying  the Banks in
writing of such  election  not more than 60 days and not less than 45 days prior
to the maturity date.  The prior credit  agreements of Parker & Parsley and Mesa
were  paid in  full  following  the  Mergers  utilizing  proceeds  from  initial
borrowings against the new Primary Facility of $675 million.

       Advances  on  both  Credit  Facility  Agreements  bear  interest,  at the
Borrower's  option,  based on (a) the prime rate of NationsBank of Texas,  N.A.,
(b) a Eurodollar rate (substantially  equal to the London Interbank Offered Rate
("LIBOR")),  adjusted for the reserve  requirement as determined by the Board of
Governors  of the  Federal  Reserve  System  with  respect  to  transactions  in
Eurocurrency liabilities ("LIBOR Rate"), or (c) a competitive bid rate as quoted
by the Banks  electing to  participate  pursuant  to a request by the  Borrower.
Advances that are LIBOR Rate have periodic maturities, at the Borrower's option,
of one, two, three,  six, nine or twelve months.  Maturities of greater than six
months are subject to  availability  of such  deposits in the relevant  markets.
Advances  that  are  competitive  bid  rate  have  periodic  maturities,  at the
Borrower's option, of not less than 15 days nor more than 360 days. The interest
rates on LIBOR Rate advances  vary with  interest  rate margins  ranging from 18
basis points to 45 basis  points.  The interest  rate margin is  determined by a
grid based upon Pioneer's senior unsecured long-term public debt rating.

       The obligations of the Borrower under the Credit Facility  Agreements are
guaranteed by Pioneer and certain of its  subsidiaries  unless and to the extent
any such subsidiary has been designated as an  "Unrestricted  Subsidiary" by the
Borrower pursuant to the Credit Facility Agreements. Certain subsidiaries of the
Borrower which have not been  designated as Unrestricted  Subsidiaries  have not
provided guaranties because either (a) such guaranty would result in adverse tax
consequences  pursuant to Section 956 of the Internal  Revenue Code of 1986,  as
amended, or (b) such subsidiary is prohibited from executing a guaranty pursuant
to  contractual  restrictions.  In these cases,  the Borrower and certain of its
subsidiaries have pledged a portion of the issued and outstanding  capital stock
of such  subsidiaries  as security for the obligations of the Borrower under the
Credit Facility Agreements.

       The Credit Facility Agreements contain various restrictive  covenants and
compliance requirements,  which include (a) minimum financial requirements;  (b)
limits on the  incurrence of additional  indebtedness;  and (c)  limitations  on
mergers.

       Pioneer's  Unaudited Pro Forma Combined Balance Sheet as of June 30, 1997
includes $2.5 million of unamortized  capitalized  issuance fees associated with
Parker & Parsley's  existing bank credit  facility.  As a result of the new $1.4
billion dollar bank credit facility for Pioneer,  such  unamortized fees will be
recognized as noncash charges during the third quarter of 1997.

                                       4



<PAGE>



       After the consummation of the Mergers, Pioneer will have four outstanding
debt issuances in addition to the new credit  facilities  described above.  Such
debt issuances consist of (i) $150 million aggregate  principal amount of 8 7/8%
senior  notes  issued  by Parker &  Parsley  in 1995 and due in 2005,  (ii) $150
million  aggregate  principal  amount of 8 1/4% senior  notes issued by Parker &
Parsley in 1995 and due in 2007, (iii) $325 million  aggregate  principal amount
of 10 5/8%  Senior  Subordinated  Notes  issued by Mesa in 1996 and due 2006 and
(iv) $264  million  aggregate  principal  amount of 11 5/8% Senior  Subordinated
Discount Notes issued by Mesa in 1996 and due 2006.  These four issuances are or
will be  guaranteed  by Pioneer (the parent of Pioneer  Natural  Resources  USA,
Inc.) subsequent to the Mergers.

Vote of Security Holders

       On August 7, 1997,  Parker & Parsley and Mesa each held a Special Meeting
for their  respective  stockholders  in Dallas,  Texas.  At both  meetings,  the
following  three proposals were submitted for vote to the  stockholders:  (i) to
approve and adopt the Merger  Agreement dated as of April 6, 1997 among Parker &
Parsley,  Mesa and its  subsidiaries  Pioneer and MOC,  which  provides  for the
business  combination  of Parker & Parsley and Mesa (as a result of the business
combination,  Mesa, which is a Texas corporation, will reincorporate to Delaware
by  merging  into  Pioneer  and Parker & Parsley  will merge into MOC),  (ii) to
approve  the  adoption  of the  Pioneer  Long-Term  Incentive  Plan and (iii) to
approve the adoption of the Pioneer Employee Stock Purchase Plan.  Additionally,
stockholders of Mesa were asked to consider and vote upon a separate proposal to
approve the adoption of the Mesa 1996 Incentive  Plan. Each of the proposals was
approved by Parker & Parsley's and Mesa's stockholders as follows:

<TABLE>

 Parker & Parsley
<CAPTION>
                                                                                        Broker
 Proposal                                         For        Against       Abstain     Non-Votes
 --------                                     ----------    ----------    ---------    ---------
<S>                                           <C>           <C>           <C>          <C>               
Merger Agreement                              26,837,927       116,119      162,228          -
Long-Term Incentive Plan                      17,625,487     9,206,701      284,086          -
Employee Stock Purchase Plan                  26,254,862       582,103      279,309          -

 Mesa
                                                                                        Broker
 Proposal                                         For        Against       Abstain     Non-Votes
 --------                                     ----------    ---------     ---------    ---------
Merger Agreement
 Common stockholders of Mesa                  45,946,840     1,068,821    2,259,454          -
 Preferred Series A stockholders of Mesa      36,054,385     8,953,770    4,125,626          -
 Preferred Series B stockholders of Mesa      62,424,436           -            -            -

Pioneer Long-Term Incentive Plan
 Common stockholders of Mesa                  39,505,930     6,668,536    3,100,649          -
 Preferred Series A stockholders of Mesa      34,019,452     7,940,429    7,173,900          -
 Preferred Series B stockholders of Mesa      62,424,436           -            -            -

Employee Stock Purchase Plan
 Common stockholders of Mesa                  43,605,373     2,614,233    3,055,509          -
 Preferred Series A stockholders of Mesa      38,146,770     3,797,918    7,189,093          -
 Preferred Series B stockholders of Mesa      62,424,436           -            -            -

Mesa Incentive Plan
 Common stockholders of Mesa                  35,657,052    10,554,566    3,063,497          -
 Preferred Series A stockholders of Mesa      33,186,078     8,762,547    7,185,156          -
 Preferred Series B stockholders of Mesa      62,424,436           -            -            -
</TABLE>


                                        5


<PAGE>



              Unaudited Pro Forma Combined Financial Statements of
                        Pioneer Natural Resources Company



Item 7.        Financial Statements and Exhibits:

Financial Statements of Acquired Entity and Pro Forma Financial Information

       The  unaudited  pro  forma  combined  balance  sheet  and  statements  of
operations  have  been  prepared  to give  effect  to  certain  transactions  as
described below.

       The unaudited pro forma combined  balance sheet of Pioneer as of June 30,
       1997 has been  prepared  to give  effect  to (i) the  Mergers  as if such
       transactions  had  occurred  on June  30,  1997 (in  accordance  with the
       provisions of APB No. 16, "Business Combinations",  the Mergers have been
       accounted  for as a purchase  of Mesa by Parker &  Parsley)  and (ii) the
       conversion  of  Parker  &  Parsley's  6 1/4%  Cumulative  Monthly  Income
       Convertible  Preferred  Shares  ("Preferred  Shares")  to Pioneer  common
       stock.

       The unaudited pro forma combined  statements of operations of Pioneer for
       the six months  ended June 30, 1997 and for the year ended  December  31,
       1996 have been prepared to give effect to the Mergers and certain  events
       described  below for Parker & Parsley and Mesa as if the Mergers and such
       events had occurred on January 1, 1996.

       Pro Forma  Parker & Parsley  has been  prepared to give effect to (i) the
       sale of certain  wholly-owned  Australian  subsidiaries in March 1996 and
       the sale of Bridge Oil Timor Sea,  Inc. in June 1996  (collectively,  the
       "Australasian  Assets  Sold"),  (ii) the aggregate  effect of the sale of
       certain  nonstrategic  domestic  oil  and  gas  properties,  gas  plants,
       contract rights and related assets sold during the period from January 2,
       1996 to December  31, 1996  (collectively,  the "1996  Assets  Sold") and
       (iii) the exchange of Parker & Parsley's 6 1/4% Cumulative Monthly Income
       Convertible Preferred Shares ("Preferred Shares") to Pioneer common stock
       in August 1997.

       Pro Forma Mesa has been prepared to give effect to the  Recapitalization,
       which entailed  issuing $265 million in new preferred equity and repaying
       and refinancing substantially all of Mesa's $1.2 billion of then existing
       long-term  debt, and the acquisition of Greenhill,  including  additional
       borrowings to finance such acquisition.

       The unaudited pro forma combined financial statements included herein are
not  necessarily  indicative  of the results  that might have  occurred  had the
transactions  taken place at the  beginning of the period  specified and are not
intended to be a projection of future results.  In addition,  future results may
vary significantly from the results reflected in the accompanying  unaudited pro
forma  combined  financial  statements  because of normal  production  declines,
changes  in  product  prices,  future  acquisitions  and  divestitures,   future
development and exploration activities, and other factors.

       The following unaudited pro forma combined financial statements should be
read in conjunction  with (i) the  Consolidated  Financial  Statements  (and the
related  notes) of both Parker & Parsley and Mesa  included in their  respective
Annual Reports on Form 10-K and Form 10-K/A for the year ended December 31, 1996
and their respective  Quarterly  Reports on Form 10-Q for the three months ended
March  31,  1997  and for the six  months  ended  June  30,  1997  and  (ii) the
Historical  Financial Statements of Greenhill for the fiscal year ended June 30,
1996 and for the six months ended December 31, 1996  (unaudited) and the related
notes  thereto which are included in Mesa's  Current  Report on Form 8-K/A dated
February 7, 1997.

                                       6


<PAGE>


                        PIONEER NATURAL RESOURCES COMPANY

                   UNAUDITED PRO FORMA COMBINED BALANCE SHEET
                               as of June 30, 1997
                                 (in thousands)

<TABLE>
                                     ASSETS
<CAPTION>
                                                                       Pro Forma
                                            Parker &                    Combined          Pro Forma
                                            Parsley         Mesa       Adjustments        Combined
                                           ----------    ----------    -----------       ----------
<S>                                        <C>           <C>           <C>               <C>
Current assets:
   Cash and cash equivalents               $    9,843    $   20,751        (20,000) (a)  $   10,594
   Restricted cash                              1,723           -                             1,723
   Accounts receivable                         71,010        45,077                         116,087
   Inventories                                  5,581         3,130                           8,711
   Deferred income taxes                        9,300           -                             9,300
   Other current assets                         1,955         1,874                           3,829
                                            ---------     ---------                       ---------
        Total current assets                   99,412        70,832                         150,244
                                            ---------     ---------                       ---------
Property, plant and equipment, at cost:
   Oil and gas properties, using the
      successful efforts method of
      accounting:
        Proved properties                   1,536,665     2,293,133         (2,560) (a)   3,827,238
        Unproved properties                    41,071        44,000                          85,071
   Natural gas processing facilities           50,770           -                            50,770
   Accumulated depletion, depreciation
      and amortization                       (489,143)     (996,687)       996,687  (a)    (489,143)
                                            ---------     ---------                       ---------
                                            1,139,363     1,340,446                       3,473,936
                                            ---------     ---------                       ---------
Other property and equipment, net              28,552        11,286                          39,838
Other assets, net                              16,175        82,894        (35,516) (a)      57,691
                                                                            (5,862) (b)
                                            ---------     ---------                       ---------
                                           $1,283,502    $1,505,458                      $3,721,709
                                            =========     =========                       =========

                      LIABILITIES AND STOCKHOLDERS' EQUITY
                              Current liabilities:
   Current maturities of long-term debt    $    6,064    $    5,305                      $   11,369
   Undistributed unit purchases                 1,723           -                             1,723
   Accounts payable                            64,616        30,209                          94,825
   Domestic and foreign income taxes            2,038           -                             2,038
   Other current liabilities                   14,737        23,436                          38,173
                                            ---------     ---------                       ---------
        Total current liabilities              89,178        58,950                         148,128
                                            ---------     ---------                       ---------
Long-term debt, less current maturities       349,457     1,102,999         83,539  (a)   1,535,995
Other noncurrent liabilities                   27,336        80,032                         107,368
Deferred income taxes                          73,800           -          139,020  (a)     212,820

Preferred stock of subsidiary                 188,820           -         (188,820) (b)         -

Stockholders' equity:
   Preferred stock                                -           1,266         (1,266) (a)         -
   Common stock                                   370           643           (345) (a)         736
                                                                                68  (b)
   Additional paid-in capital                 465,234       667,860        276,911  (a)   1,592,895
                                                                           182,890  (b)
   Treasury stock, at cost                    (34,460)          -           34,460  (a)         -
   Unearned compensation                         (712)          -                              (712)
   Retained earnings (deficit)                124,479      (406,292)       406,292  (a)     124,479
                                            ---------     ---------                       ---------
        Total stockholders' equity            554,911       263,477                       1,717,398
                                            ---------     ---------                       ---------
Commitments and contingencies
                                            ---------     ---------                       ---------
                                           $1,283,502    $1,505,458                      $3,721,709
                                            =========     =========                       =========
</TABLE>

  See accompanying notes to unaudited pro forma combined financial statements.

                                       7

<PAGE>



                        PIONEER NATURAL RESOURCES COMPANY

              UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
                         Six months ended June 30, 1997
                      (in thousands, except per share data)


<TABLE>
<CAPTION>
                                                                                  Pro Forma
                                           Parker &                               Combined      Pro Forma
                                           Parsley       Mesa       Greenhill    Adjustments    Combined
                                          ---------    ---------    ---------    -----------    ---------
<S>                                       <C>          <C>          <C>          <C>            <C>
Revenues:
   Oil and gas                            $ 198,626    $ 165,336    $  17,369                   $ 381,331
   Natural gas processing                    11,819          -            -                        11,819
   Interest and other                         2,833        4,693          147                       7,673
   Gain (loss) on disposition of
      assets, net                             2,637          (23)          41                       2,655
                                           --------     --------     --------                    --------
                                            215,915      170,006       17,557                     403,478
                                           --------     --------     --------                    --------
Cost and expenses:
   Oil and gas production                    55,392       44,457        6,641                     106,490
   Natural gas processing                     6,098          -            -                         6,098
   Depletion, depreciation and
     amortization:
      Oil and gas properties                 54,860       52,503        7,725         37,880(c)   152,968
      Other                                   4,649        4,007          -                         8,656
   Impairment of long-lived assets              -          2,907          -                         2,907
   Exploration and abandonments              18,415        8,067        4,059           (407)(d)   30,134
   General and administrative                14,990        9,277       13,318            407(d)    37,992
   Interest                                  20,154       48,335          -           (6,010)(b)   65,346
                                                                                      (2,562)(e)
                                                                                       5,429(f)
   Other                                        831        2,470          -                         3,301
                                           --------     --------     --------                    --------
                                            175,389      172,023       31,743                     413,892
                                           --------     --------     --------                    --------
Income (loss) from continuing
   operations before income taxes            40,526       (2,017)     (14,186)                    (10,414)
Income tax benefit (provision)              (14,500)         -            -           18,400(g)     3,900
                                           --------     --------     --------                    --------
Income (loss) from continuing
   operations                                26,026       (2,017)     (14,186)                     (6,514)
Dividends on preferred stock                    -        (11,105)         -           11,105(h)       -
                                           --------     --------     --------                    --------
Income (loss) from continuing
   operations attributable to
   common stock                           $  26,026    $ (13,122)   $ (14,186)                  $  (6,514)
                                           ========     ========     ========                    ========
Income (loss) per common share            $     .74    $    (.20)                               $    (.09)
                                           ========     ========                                 ========
Weighted average shares
   outstanding                               35,364       65,499                     (33,632)(i)   73,945
                                                                                       6,714(b)  ========
                                           ========     ========
</TABLE>


  See accompanying notes to unaudited pro forma combined financial statements.

                                       8


<PAGE>



<TABLE>

                        PIONEER NATURAL RESOURCES COMPANY

              UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
                          Year ended December 31, 1996
                      (in thousands, except per share data)


<CAPTION>
                                        Pro Forma                 Pro Forma
                                         Parker &    Pro Forma     Combined        Pro Forma
                                         Parsley       Mesa       Adjustments      Combined
                                        ---------    ---------    -----------      ---------
<S>                                     <C>          <C>          <C>              <C>
Revenues:
   Oil and gas                          $ 374,560    $ 371,280                     $ 745,840
   Natural gas processing                  23,184          -                          23,184
   Interest and other                      17,328       33,824                        51,152
   Gain on disposition of assets, net         -         11,966                        11,966
                                         --------     --------                      --------
                                          415,072      417,070                       832,142
                                         --------     --------                      --------
Cost and expenses:
   Oil and gas production                 101,545       97,617                       199,162
   Natural gas processing                  11,949          -                          11,949
   Depletion, depreciation and
     amortization:
     Oil and gas properties                95,628      130,370       76,933  (c)     302,931
     Other                                  9,001        4,919                        13,920
   Exploration and abandonments            20,187       12,772         (831) (d)      32,128
   General and administrative              26,631       41,016          831  (d)      68,478
   Interest                                28,700      105,266       (4,923) (e)     129,043
   Other                                    2,451        2,340                         4,791
                                         --------     --------                      --------
                                          296,092      394,300                       762,402
                                         --------     --------                      --------
Income from continuing operations
  before income taxes                     118,980       22,770                        69,740
Income tax provision                      (41,600)         -         15,800  (g)     (25,800)
                                         --------     --------                      --------
Income from continuing operations          77,380       22,770                        43,940

Dividends on preferred stock                  -        (21,880)      21,880  (h)         -
                                         --------     --------                      --------
Income from continuing operations
  attributable to common stock          $  77,380    $     890                     $  43,940
                                         ========     ========                      ========
Income per common share                 $    1.82    $     .01                     $     .59
                                         ========     ========                      ========
Weighted average shares
   outstanding                             42,448       64,164      (32,366) (i)      74,246
                                        =========    =========                     =========
</TABLE>


  See accompanying notes to unaudited pro forma combined financial statements.

                                       9


<PAGE>



<TABLE>

                       PARKER & PARSLEY PETROLEUM COMPANY

              UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
                          Year ended December 31, 1996
                      (in thousands, except per share data)

<CAPTION>
                                                  Australasian      1996                       Pro Forma
                                     Parker &        Assets        Assets       Pro Forma      Parker &
                                     Parsley          Sold          Sold       Adjustments      Parsley
                                    ---------     -----------     ---------    -----------    ---------
<S>                                   <C>           <C>             <C>          <C>            <C>
Revenues:
   Oil and gas                      $ 396,931     $   (10,591)    $ (11,780)                  $ 374,560
   Natural gas processing              23,814             -            (630)                     23,184
   Interest and other                  17,458            (130)          -                        17,328
   Gain on disposition of assets,
     net                               97,140         (83,260)      (13,880)                         -
                                     --------     -----------      --------                    --------
                                      535,343         (93,981)      (26,290)                    415,072
                                     --------     -----------      --------                    --------
Cost and expenses:
   Oil and gas production             110,334          (3,300)       (5,489)                    101,545
   Natural gas processing              12,528             -            (579)                     11,949
   Depletion, depreciation and
     amortization:
       Oil and gas properties         102,803          (3,917)       (3,258)                     95,628
       Other                            9,331            (300)          (30)                      9,001
   Exploration and abandonments        23,030          (1,435)       (1,408)                     20,187
   General and administrative          28,363          (1,732)          -                        26,631
   Interest                            46,155          (1,100)          -        (12,020) (b)    28,700
                                                                                  (4,335) (j)
   Other                                2,451             -             -                         2,451
                                     --------       ---------      --------                    --------
                                      334,995         (11,784)      (10,764)                    296,092
                                     --------    ------------      --------                    --------
Income (loss) from continuing
   operations before
   income taxes                       200,348         (82,197)      (15,526)                    118,980
Income tax benefit (provision)        (60,100)         16,000         5,400       (2,900) (g)   (41,600)
                                     --------       ---------      --------                    --------
Income (loss) from continuing
   operations                       $ 140,248     $   (66,197)    $ (10,126)                  $  77,380
                                     ========      ==========      ========                    ========
Income per share                    $    3.92                                                 $    1.82
                                     ========                                                  ========
Weighted average shares
   outstanding                         35,734                                      6,714  (b)    42,448
                                    =========                                                  ========
</TABLE>

  See accompanying notes to unaudited pro forma combined financial statements.

                                       10


<PAGE>



<TABLE>
                                    MESA INC.

              UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
                          Year ended December 31, 1996
                      (in thousands, except per share data)

<CAPTION>
                                                                               Pro Forma    Pro Forma
                                     Mesa      Recapitalization   Greenhill   Adjustments      Mesa
                                   ---------   ----------------   ---------   -----------   ----------
<S>                                <C>         <C>                <C>         <C>           <C>
Revenues:
   Oil and gas                     $ 300,336     $     -          $  70,944                 $  371,280
   Natural gas processing                -             -                -                          -
   Interest and other                 33,824           -                -                       33,824
   Gain on disposition of assets,
     net                              11,966           -                -                       11,966
                                    --------      --------         --------                  ---------
                                     346,126           -             70,944                    417,070
                                    --------      --------         --------                  ---------
Cost and expenses:
   Oil and gas production             74,518           -             23,099                     97,617
   Natural gas processing                -             -                -                          -
   Depletion, depreciation and
     amortization:
       Oil and gas properties         98,382           -             29,355        2,633 (c)   130,370
       Other                           4,919           -                -                        4,919
   Exploration and abandonments        5,431           -              7,341                     12,772
   General and administrative         31,473           -              9,543                     41,016
   Interest                          121,135       (34,530)(k)         (729)      19,390 (f)   105,266
   Other                               1,929           -                411                      2,340
                                    --------      --------         --------                  ---------
                                     337,787       (34,530)          69,020                    394,300
                                    --------      --------         --------                  ---------
Income from continuing operations
  before income taxes                  8,339        34,530            1,924                     22,770
Income tax provision                     -             -                -                          -
                                    --------      --------         --------                  ---------
Income from continuing operations      8,339        34,530            1,924                     22,770

Dividends on preferred stock          (9,522)      (12,358)(l)          -                      (21,880)
                                    --------      --------         --------                  ---------
Income (loss) from continuing
   operations attributable to
   common stock                    $  (1,183)    $  22,172        $   1,924                 $      890
                                    ========      ========         ========                  =========
Income (loss) per common share     $    (.02)                                               $      .01
                                    ========                                                 =========
Weighted average shares
   outstanding                        64,164                                                    64,164
                                   =========                                                ==========
</TABLE>

  The accompanying notes to unaudited pro forma combined financial statements.

                                       11


<PAGE>



                        PIONEER NATURAL RESOURCES COMPANY

                      NOTES TO UNAUDITED PRO FORMA COMBINED
                              FINANCIAL STATEMENTS
                       June 30, 1997 and December 31, 1996

  Note 1.   Basis of Presentation

      In accordance with the Merger  Agreement,  (i) holders of Parker & Parsley
  common stock  received one share of Pioneer  common stock for each share held;
  (ii) holders of Mesa common stock  received one share of Pioneer  common stock
  for every  seven  shares  held;  and (iii)  holders of Mesa Series A Preferred
  Stock and Mesa Series B Preferred Stock received 1.25 shares of Pioneer common
  stock for every seven shares held.  No  fractional  shares were issued and all
  treasury shares were canceled.

      The unaudited pro forma  combined  balance sheet of Pioneer as of June 30,
  1997 has been  prepared  to give  effect to the  Mergers  and the  exchange of
  Parker  &  Parsley's  Preferred  Shares  to  Pioneer  common  stock as if such
  transactions  had occurred on June 30, 1997. In accordance with the provisions
  of APB No. 16, "Business Combinations", the Mergers have been accounted for as
  a purchase of Mesa by Parker & Parsley.

      The unaudited pro forma  combined  statements of operations of Pioneer for
  the six months  ended June 30, 1997 and for the year ended  December  31, 1996
  have been prepared to give effect to the Mergers and certain events  described
  below for  Parker & Parsley  and Mesa as if the  Mergers  and such  events had
  occurred on January 1, 1996.

      Pro Forma Parker & Parsley has been prepared to give effect to the sale of
  the Australasian  Assets Sold, the 1996 Assets Sold and the exchange of Parker
  & Parsley's Preferred Shares to Pioneer common stock.

      Pro Forma Mesa has been  prepared to give  effect to the  Recapitalization
  and the acquisition of Greenhill,  including additional  borrowings to finance
  such acquisition.

      The following is a description of the individual columns included in these
  unaudited pro forma combined financial statements:

          Parker & Parsley - Represents the consolidated balance sheet of Parker
          &  Parsley  as of June 30,  1997 and the  consolidated  statements  of
          operations  of Parker & Parsley for the six months ended June 30, 1997
          and for the year ended December 31, 1996.

          Australasian  Assets Sold - Reflects the results of operations for the
          year ended  December 31, 1996 from certain  wholly-owned  subsidiaries
          prior to their  sale in 1996.  On March  28,  1996,  Parker &  Parsley
          completed  the sale of  certain  wholly-owned  subsidiaries  to Santos
          Ltd.,  and on June 20, 1996,  Parker & Parsley  completed  the sale of
          another  wholly-owned  subsidiary,  Bridge  Oil Timor  Sea,  Inc.,  to
          Phillips Petroleum  International  Investment Company. During the year
          ended  December  31,  1996,   Parker  &  Parsley  received   aggregate
          consideration  of $237.5 million for these combined sales.  The assets
          sold to Santos Ltd.  consisted  primarily of properties located in the
          Cooper  Basin in  Central  Australia,  the  Surat  Basin in  Northeast
          Australia, the Carnarvon Basin on the Northwest Shelf off the coast of
          Western  Australia,  the  Otway  Basin  off  the  coast  of  Southeast
          Australia and the Central Sumatra Basin in Indonesia.  At December 31,
          1995, Parker & Parsley's interests in these properties  contained 32.1
          million BOE of proved reserves (consisting of 12.4 million Bbls of oil
          and 118.3 Bcf of gas),  representing  $133.8  million of SEC 10 value.
          Prior to their sale in 1996, these properties produced 249,500 Bbls of
          oil and  1,927,000  Mcf of gas.  Parker & Parsley  received an average
          price of  $19.55  per Bbl of oil and  $1.95  per Mcf of gas from  such
          production  and  incurred  production  costs  per  BOE  of  $4.92  and
          depletion  expense per BOE of $5.84 related to these  properties.  The
          wholly-owned  subsidiary  sold  to  Phillips  Petroleum  International
          Investment  Company,  Bridge Oil Timor Sea,  Inc.,  has a wholly owned
          subsidiary, Bridge Oil Timor Sea Pty Ltd., which owns a 22.5% interest
          in the ZOCA 91-13 permit in the offshore Bonapart Basin in the Zone of
          Cooperation between Australia and Indonesia.

                                       12


<PAGE>


                        PIONEER NATURAL RESOURCES COMPANY

                      NOTES TO UNAUDITED PRO FORMA COMBINED
                              FINANCIAL STATEMENTS
                       June 30, 1997 and December 31, 1996



          1996 Assets Sold - Reflects  the  results of  operations  for the year
          ended  December  31,  1996 from  certain oil and gas  properties,  gas
          plants,  contract  rights and  related  assets  prior to their sale in
          1996.  During the year ended December 31, 1996,  Parker & Parsley sold
          certain domestic  nonstrategic oil and gas properties,  gas plants and
          other related  assets for aggregate  proceeds of  approximately  $58.4
          million.  Prior to their  sale in 1996,  these oil and gas  properties
          produced  274,314  Bbls of oil and  3,196,093  Mcf of  gas.  Parker  &
          Parsley  received an average  price of $19.30 per Bbl of oil and $2.03
          per Mcf of gas from such production and incurred  production costs per
          BOE of $6.80 and  depletion  expense per BOE of $4.04 related to these
          properties.

          Mesa - Represents  the  consolidated  balance sheet of Mesa as of June
          30, 1997 and the consolidated statements of operations of Mesa for the
          six months  ended June 30,  1997 and for the year ended  December  31,
          1996.

          Recapitalization  -  Represents  the effects on Mesa's  unaudited  pro
          forma combined statement of operations from the Recapitalization as if
          it had occurred on January 1, 1996. In August 1996,  Mesa  completed a
          recapitalization  of its  balance  sheet by  issuing  new  equity  and
          repaying  and  refinancing  substantially  all  of its  then  existing
          long-term  debt.  The  Recapitalization  was  undertaken by Mesa in an
          effort to  deleverage  and  recapitalize  Mesa through the issuance of
          additional  equity and through the refinancing of substantially all of
          Mesa's $1.2 billion debt existing prior to the  Recapitalization.  The
          Recapitalization  provided Mesa with an improved  financial  condition
          due to (i) a significant  reduction in total debt outstanding,  (ii) a
          reduction  in  annual  cash  interest  expense  of  approximately  $75
          million,  (iii)  cost  savings  programs  which  reduced  general  and
          administrative  and  other  overhead  expenses  by  approximately  $10
          million  annually,  and (iv) the  extension  of  maturities  on Mesa's
          long-term  debt,  which  eliminated  Mesa's  then  existing  liquidity
          concerns.  The Recapitalization  included (i) the private placement of
          shares  of a new  class of Mesa  Series  B  Preferred  Stock  for $133
          million to DNR - Mesa  Holdings,  Inc.  ("DNR"),  whose  sole  general
          partner is  Rainwater  Inc., a Texas  corporation  owned by Richard E.
          Rainwater, (ii) the sale of $132 million of a new class of Mesa Series
          A  Preferred  Stock to Mesa's  then  existing  stockholders  through a
          rights offering,  (ii) the establishment of a new bank credit facility
          and (iv) the issuance of two new series of senior subordinated notes.

          Greenhill - Represents  the  unaudited  statements  of  operations  of
          Greenhill  prior to its  acquisition by Mesa on April 15, 1997 and for
          the year ended December 31, 1996.

      The unaudited  pro forma  combined  statement of  operations  for the year
  ended  December  31,  1996  presented  herein  does not reflect the results of
  operations from Mesa's  acquisition  from MAPCO Inc. of approximately 11 MMBOE
  in  February  1997 for  approximately  $66  million.  The  acquisition  is not
  presented since it is not considered significant under Rule 3-05 of Regulation
  S-X. The  purchase was funded by  additional  borrowings  under Mesa's  credit
  facility.

                                       13


<PAGE>


                        PIONEER NATURAL RESOURCES COMPANY

                      NOTES TO UNAUDITED PRO FORMA COMBINED
                              FINANCIAL STATEMENTS
                       June 30, 1997 and December 31, 1996


  Note 2.    Acquisition of Mesa

      The  aggregate  Pioneer  common stock  purchase  consideration,  including
  non-recurring  merger  transaction  costs,  is computed in accordance with the
  exchange ratios agreed to in the Merger Agreement as follows:

<TABLE>
<CAPTION>

                                                  Mesa        Mesa Series     Mesa Series
                                                 Common       A Preferred     B Preferred
                                                  Stock          Stock           Stock           Total
                                              ------------    ------------    ------------    ------------
<S>                                           <C>             <C>             <C>             <C>       
    Shares outstanding                          64,279,568      62,884,094      63,672,925
    Exchange ratio for Mesa shares                    1.00            1.25            1.25
                                               -----------     -----------     -----------
                                                64,279,568      78,605,118      79,591,156     222,475,842
    Exchange ratio to Pioneer common stock            7.00            7.00            7.00            7.00
                                               -----------     -----------     -----------     -----------
    Pioneer Shares                               9,182,795      11,229,303      11,370,165      31,782,263
    Value of Pioneer common stock (a)         $      30.82    $      30.82    $      30.82    $      30.82
                                               -----------     -----------     -----------     -----------
    Pioneer common stock consideration        $283,013,742    $346,087,118    $350,428,485     979,529,345
                                               ===========     ===========     ===========
    Cash consideration for nonrecurring
       merger transaction costs                                                                 20,000,000
                                                                                               -----------
    Aggregate purchase consideration                                                          $999,529,345
                                                                                               ===========
  ------------------
</TABLE>

  (a)  Pioneer  Common  Stock is  valued at $30.82  per share  which  represents
       Parker &  Parsley's  seven-day  average  trading  price  surrounding  the
       announcement of the Mergers on April 7, 1997.

      The following  table  represents the  preliminary  allocation of the total
  purchase  price of Mesa to the acquired  assets and  liabilities  of Mesa. The
  allocation  represents  the fair values  assigned  to each of the  significant
  assets  acquired  and  liabilities  assumed.  Any  future  adjustments  to the
  allocation  of the purchase  price are not  anticipated  to be material to the
  unaudited pro forma combined financial statements.
                                                               Allocation of
                                                                 Aggregate
                                                                 Purchase
                                                               Consideration
                                                               -------------
                                                               (in thousands)

     Net working capital                                       $      11,882
     Property, plant and equipment                                 2,334,573
     Other assets                                                     58,664
     Long-term debt                                               (1,186,538)
     Other noncurrent liabilities, including deferred taxes         (219,052)
                                                                ------------
                                                               $     999,529
                                                                ============
     Pioneer Common Stock consideration                        $     979,529
     Cash paid for nonrecurring merger transaction costs              20,000
                                                                ------------
     Aggregate purchase consideration                          $     999,529
                                                                ============


                                       14


<PAGE>


                        PIONEER NATURAL RESOURCES COMPANY

                      NOTES TO UNAUDITED PRO FORMA COMBINED
                              FINANCIAL STATEMENTS
                       June 30, 1997 and December 31, 1996


      The following  table  illustrates  the number of Pioneer  shares that were
  issued  in  accordance  with  the  exchange  ratios  agreed  to in the  Merger
  Agreement.

                                    Shares           New
                                Outstanding at     Pioneer
   Existing Security Type       August 7, 1997    Security      Pioneer Shares
- -----------------------------   --------------   ------------   --------------
Parker & Parsley Common Stock     41,773,238     Common Stock     41,773,238
Mesa Common Stock                 64,279,568     Common Stock      9,182,795
Mesa Series A Preferred Stock     62,884,094     Common Stock     11,229,303
Mesa Series B Preferred Stock     63,672,925     Common Stock     11,370,165
                                                                 -----------
                                                                  73,555,501
                                                                 ===========
  Note 3.    Pro Forma Entries

  (a) To record the acquisition of Mesa using the purchase method of accounting.
      The  allocation  of  the  purchase  price  to  the  acquired   assets  and
      liabilities is preliminary and,  therefore,  subject to change. Any future
      adjustments to the allocation of the purchase price are not anticipated to
      be material to Pioneer's financial statements. (See Note 2 above).

  (b) To (i) reclassify the Preferred  Shares and related  capitalized  issuance
      fees to common stock and additional  paid-in capital as a result of Parker
      &  Parsley's  mandatory  exchange of such  Preferred  Shares for shares of
      Parker & Parsley  common  stock on July 28,  1997 and (ii)  eliminate  the
      interest expense associated with such Preferred Shares and amortization of
      capitalized  issuance fees. On July 28, 1997,  Parker & Parsley  exercised
      its right to require  each  holder of the  3,776,400  Preferred  Shares to
      mandatorily  exchange all  Preferred  Shares for shares of common stock of
      Parker &  Parsley  at a rate of 1.7778  shares of Parker & Parsley  common
      stock for each Preferred Share. As a result of the exchange,  Pioneer will
      no longer incur  interest  expense of  approximately  $12 million per year
      associated with the Preferred Shares.

  (c) To  adjust  depreciation,  depletion  and  amortization  expense  for  the
      additional  basis  allocated  to the oil and gas  properties  acquired and
      accounted for using the successful efforts method of accounting.

  (d) To  reclassify  certain  amounts to conform with the  financial  statement
presentation of Pioneer.

  (e) To  reduce  interest  expense  for (i) the  amortization  of the  premiums
      (utilizing  the  effective  interest  rate  method)  recorded  as  part of
      purchase  accounting  for Mesa's  10-5/8%  Senior  Subordinated  Notes and
      11-5/8% Senior  Subordinated  Discount  Notes and (ii) the  application of
      Parker  &  Parsley's  excess  cash  in  1996 to the  reduction  of  Mesa's
      outstanding  bank  indebtedness  at  Mesa's  1996  pro  forma  incremental
      borrowing interest rate of 7% (see pro forma entry (j) below).

  (f) To adjust  interest  expense  resulting  from the  borrowing  of the funds
      necessary for Mesa's  acquisition  of Greenhill.  Mesa's 1997 and 1996 pro
      forma incremental  borrowing interest rate of 7% was utilized to determine
      the additional pro forma interest expense.

  (g) To adjust income tax expense for each tax jurisdiction.

  (h) To eliminate the preferred stock dividends associated with Mesa's Series A
and Series B Preferred Stock.

                                       15


<PAGE>


                        PIONEER NATURAL RESOURCES COMPANY

                      NOTES TO UNAUDITED PRO FORMA COMBINED
                              FINANCIAL STATEMENTS
                       June 30, 1997 and December 31, 1996


  (i) To adjust the weighted  average shares  outstanding for the acquisition of
      Mesa. This  adjustment  also assumes the conversion of Mesa's  outstanding
      employee stock options into Pioneer employee stock options for purposes of
      computing weighted average shares outstanding.

  (j) To adjust interest expense  resulting from the application of that portion
      of the  sales  proceeds  from the  Australasian  Assets  Sold and the 1996
      Assets  Sold  necessary  to retire  Parker &  Parsley's  outstanding  bank
      indebtedness.   The  proceeds   applied  to  retire   Parker  &  Parsley's
      outstanding  bank  indebtedness of $225 million resulted in a reduction in
      interest  expense of $4.3 million.  The reduction in interest  expense was
      calculated  utilizing Parker & Parsley's weighted average rate on its bank
      indebtedness of 6.22% for the period during 1996 in which Parker & Parsley
      had outstanding bank indebtedness.

  (k) To reduce interest expense as a result of the  Recapitalization.  Interest
      expense  adjustments include the following for the year ended December 31,
      1996:
                                                                     Pro Forma
                                          Historical    Pro Forma    Adjustment
                                          ----------    ---------    ----------
  Interest expense on former debt repaid
   in the Recapitalization:
    Secured Notes                         $   26,231          -      $ (26,231)
    Former Credit Agreement                    2,472          -         (2,472)
    12-3/4% secured discount notes            43,979          -        (43,979)
    13-1/2% subordinated notes                   654          -           (654)

  Interest expense on former debt repaid
   prior to the Recapitalization:
    12-3/4% unsecured discount notes           2,595    $   2,595          -

  Interest expense on new debt issued in
   the Recapitalization:
    10-5/8% Senior Subordinated Notes         17,613       35,418       17,805
    11-5/8% Senior Discount Notes              8,893       18,661        9,768
    New Credit Facility                       15,094       26,327       11,233

  Other interest expense                       3,604        3,604          -
                                           ---------     --------     --------
                                          $  121,135    $  86,605    $ (34,530)
                                           =========     ========     ========

      Other  interest   expense  is  primarily  the  interest   portion  of  the
      administrative   fee  charged  by  Colorado   Interstate  Gas  Company  in
      connection with Mesa's West Panhandle field operations.  The interest rate
      on the New  Credit  Facility  is  approximately  7.73% on the  first  $250
      million due to an interest  rate swap with the balance at a floating  rate
      that during the period outstanding was approximately 7%.

  (l) To record the pro forma  adjustment for an 8% annual  dividend on the Mesa
      Series A and Series B Preferred  Stock  payable  quarterly  in  additional
      shares  of Mesa  Series A and  Series B  Preferred  Stock for at least the
      first  four  years  after  issuance  as if the Mesa  Series A and Series B
      Preferred Stock had been issued January 1, 1996.

  Note 4.   Income Taxes

      Pioneer will account for income taxes in accordance with the provisions of
  SFAS 109. In  accordance  with SFAS 109,  Pioneer  will  prepare  separate tax
  calculations  for each tax  jurisdiction  in which  Pioneer will be subject to
  income taxes.

                                       16


<PAGE>


                        PIONEER NATURAL RESOURCES COMPANY

                      NOTES TO UNAUDITED PRO FORMA COMBINED
                              FINANCIAL STATEMENTS
                       June 30, 1997 and December 31, 1996


  Note 5.   Income from Continuing Operations per Share

      Income  from  continuing  operations  per share is  computed  based on the
  weighted   average   number  of  shares  of  common  stock  and  common  stock
  equivalents,  if more than 3% dilutive,  outstanding during the period.  Fully
  diluted income from  continuing  operations  per share is not presented  since
  dilution is less than 3% on a pro forma combined basis. Income from continuing
  operations  per share  reflects the  exchange of Parker & Parsley's  Preferred
  Shares and the conversion of Mesa's Series A Preferred Stock and Mesa's Series
  B Preferred Stock to Pioneer common stock which increased the weighted average
  number of shares of Pioneer common stock outstanding to 73.6 million at August
  7, 1997.

  Note 6.   Parker & Parsley Stock Options

      Upon the consummation of the Mergers on August 7, 1997, which  constituted
  a "Change of Control" as defined in the Parker & Parsley  Long-term  Incentive
  Plan, each holder of Parker & Parsley options was granted  corresponding stock
  appreciation  rights  unless  such  holder had waived  such right prior to the
  Mergers, and all outstanding stock appreciation rights and options immediately
  became fully vested and  exercisable in full.  Consequently,  during the third
  quarter of 1997, Pioneer will record  compensation  expense in accordance with
  APB No. 25,  "Accounting for Stock Issued to Employees"  equal to the value of
  the stock  appreciation  rights granted of approximately $2.5 million dollars,
  before  income tax  effects,  based on a common  stock  price of $37.69.  This
  expense is associated  with the stock  appreciation  rights granted to certain
  individuals  who are no longer with Pioneer and who elected to not waive their
  right and receive stock appreciation rights. In accordance with SEC guidelines
  concerning the preparation of pro forma financial statements,  this adjustment
  is not reflected in the accompanying Pro Forma Combined Financial Statements.

  Note 7.   General and Administrative Expense Reductions

      Mesa's general and administrative expenses for the year ended December 31,
  1996 includes $9.4 million  associated  with the  elimination  of 86 positions
  from the total of 385 at December 31, 1995,  and a  significant  downsizing of
  Mesa's  natural  gas  vehicle  equipment  business  in  conjunction  with  the
  Recapitalization.  Given the first  quarter  1997  general and  administrative
  expenses  of  $3.8  million,   Mesa's   continuing   costs  are  estimated  at
  approximately $15 million per year ($3.8 million multiplied by four quarters).
  In addition, Greenhill's general and administrative expenses prior to its sale
  to Mesa on April 15, 1997 of $13.3 million  included  severance  costs paid to
  Greenhill  employees  of  approximately  $11  million  as few  of  Greenhill's
  administrative  personnel  were  retained.  As  a  result,  Mesa  considers  a
  continuing   annual   expense   associated   with   Greenhill   properties  of
  approximately $5 million to be reasonable. Given the above, Mesa expects total
  general and  administrative  expenses to approximate $20 million per year. The
  accompanying  Pro Forma  Combined  Statements of Operations for Pioneer do not
  include any  adjustments  related to the expected level of ongoing general and
  administrative expense.

  Note 8.   Parker & Parsley Third Quarter of 1997 Charges

      Pioneer's  Unaudited Pro Forma Combined  Balance Sheet as of June 30, 1997
  includes  certain  unamortized  amounts  which will be  recognized  as noncash
  charges  during the third  quarter of 1997 as a result of the  Mergers.  These
  amounts include $2.5 million (pre-tax) of capitalized issuance fees associated
  with Parker & Parsley's  existing bank credit facility which was replaced by a
  new $1.4 billion bank credit facility for Pioneer and $544 thousand  (pre-tax)
  of unearned  compensation  resulting from certain change of control provisions
  included in Parker & Parsley's existing  Long-term  Incentive Plan whereby the
  vesting requirements of outstanding restricted stock awards were accelerated.

                                       17


<PAGE>


                        PIONEER NATURAL RESOURCES COMPANY

                      NOTES TO UNAUDITED PRO FORMA COMBINED
                              FINANCIAL STATEMENTS
                       June 30, 1997 and December 31, 1996


  Note 9.   Oil and Gas Reserve Data

      The following unaudited pro forma supplemental  information  regarding the
  oil and gas  activities  of Pioneer is  presented  pursuant to the  disclosure
  requirements  promulgated  by the SEC and  Statement of  Financial  Accounting
  Standards No. 69,  "Disclosures About Oil and Gas Producing  Activities".  The
  pro forma  combined  reserve  information  is  presented as if the sale of the
  Australasian  Assets  and 1996  Assets  Sold and the  acquisition  of Mesa and
  Greenhill had occurred on January 1, 1996.

      Management  emphasizes that reserve estimates are inherently imprecise and
  subject to revision and that estimates of new  discoveries  are more imprecise
  than those of producing oil and gas properties. Accordingly, the estimates are
  expected to change as future information becomes available; such changes could
  be significant.

  Quantities of oil and gas reserves

      Set  forth  below  is a pro  forma  summary  of the  changes  in  the  net
  quantities  of oil and natural gas  reserves  for the year ended  December 31,
  1996.
                                               Oil, NGL's and
                                                 Condensate         Gas
                                                   (Bbls)          (Mcf)
                                               --------------    ----------
                                                       (in thousands)

     Balance, January 1, 1996                      267,108        1,984,726
       Revisions of previous estimates              31,475           42,246
       Purchase of minerals-in-place                   300           11,494
       New discoveries and extensions                3,952           31,259
       Production                                  (20,550)        (160,729)
                                                 ---------       ----------
     Balance, December 31, 1996                    282,285        1,908,996
                                                 =========       ==========

  Standardized measure of discounted future net cash flows

      The pro forma combined  standardized measure of discounted future net cash
  flow  is  computed  by  applying   year-end   prices  of  oil  and  gas  (with
  consideration  of price  changes  only to the extent  provided by  contractual
  arrangements) to the estimated future  production of oil and gas reserves less
  estimated  future  expenditures  (based on  year-end  costs) to be incurred in
  developing and producing the proved  reserves,  discounted using a rate of 10%
  per year to reflect the  estimated  timing of the future  cash  flows.  Future
  income taxes are calculated by comparing  discounted  future cash flows to the
  tax basis of oil and gas properties, plus available carryforwards and credits,
  and applying the current tax rate to the difference.

                                             December 31, 1996
                                             -----------------
                                              (in thousands)

  Oil and gas producing activities:
    Future cash inflows                       $  14,015,758
    Future production costs                      (3,978,622)
    Future development costs                       (394,157)
    Future income tax expense                    (2,679,935)
                                               ------------
                                                  6,963,044
    10% annual discount factor                   (3,247,780)
                                               ------------
    Standardized measure of discounted
      future net cash flows                   $   3,715,264
                                               ============

                                       18


<PAGE>


                        PIONEER NATURAL RESOURCES COMPANY

                      NOTES TO UNAUDITED PRO FORMA COMBINED
                              FINANCIAL STATEMENTS
                       June 30, 1997 and December 31, 1996


Changes relating to the standardized measure of discounted future net cash flows

     The principal sources of the change in the pro forma combined  standardized
  measure of  discounted  future net cash flows for the year ended  December 31,
  1996 are as follows (in thousands):

     Oil and gas sales, net of production costs                $   (546,678)
     Net changes in prices and production costs                   1,979,347
     Extensions and discoveries                                      94,936
     Purchases of minerals-in-place                                  20,606
     Revisions of estimated future development costs                (83,116)
     Revisions of previous quantity estimates                       364,334
     Accretion of discount                                          253,122
     Changes in production rates, timing and other                 (132,538)
                                                                -----------
     Change in present value of future net revenues               1,950,013
     Net change in present value of future income taxes            (566,915)
                                                                -----------
                                                                  1,383,098
     Balance, beginning of year                                   2,332,166
                                                                -----------
     Balance, end of year                                      $  3,715,264
                                                                ===========
                                       19


<PAGE>



                       PARKER & PARSLEY PETROLEUM COMPANY






  Exhibits

2.1  Amended  and  Restated  Agreement  and Plan of Merger  dated as of April 6,
     1997,  by  and  between   among  Mesa  Inc.,   Mesa   Operating   Co.,  MXP
     Reincorporation  Corp. and Parker & Parsley Petroleum Company (incorporated
     by  reference  to Exhibit 2.1 to  Pioneer's  Form S-4 dated June 27,  1997,
     Registration No. 333-26951).

10.1* Credit  Facility  Agreement (Primary  Facility) dated as of August 7, 1997
     between Pioneer Natural  Resources USA, Inc. as Borrower and NationsBank of
     Texas,  N.A., as Administrative  Agent, CIBC Inc., as Documentation  Agent,
     Morgan Guaranty Trust Company of New York, as  Documentation  Agent and The
     Chase Manhattan Bank, as Syndication  Agent;  Bank of America Natural Trust
     and Savings  Association,  The Bank of New York,  The Bank of Nova  Scotia,
     Royal  Bank of  Canada,  Union  Bank of  California,  N.A.,  The Fuji Bank,
     Limited  -Houston  Agency and Wells Fargo Bank,  N.A.,  as  Co-Agents;  and
     certain  other  lenders.

10.2* Credit  Facility  Agreement (364 Day Facility)  dated as of August 7, 1997
     between Pioneer Natural  Resources USA, Inc. as Borrower and NationsBank of
     Texas,  N.A., as Administrative  Agent, CIBC Inc., as Documentation  Agent,
     Morgan Guaranty Trust Company of New York, as  Documentation  Agent and The
     Chase Manhattan Bank, as Syndication  Agent;  Bank of America Natural Trust
     and Savings  Association,  The Bank of New York,  The Bank of Nova  Scotia,
     Royal  Bank of  Canada,  Union  Bank of  California,  N.A.,  The Fuji Bank,
     Limited  -Houston  Agency and Wells Fargo Bank,  N.A.,  as  Co-Agents;  and
     certain  other  lenders.
 



                                       20


  *  Filed herewith.





<PAGE>



                        PIONEER NATURAL RESOURCES COMPANY



                               S I G N A T U R E S


  Pursuant to the  requirements  of the  Securities  Exchange  Act of 1934,  the
  Registrant  has duly  caused  this  report to be  signed on its  behalf by the
  undersigned hereunto duly authorized.

                                      PIONEER NATURAL RESOURCES COMPANY






  Date:     August 21, 1997       By:     /s/ Garrett Smith
                                      -------------------------------------
                                          M. Garrett Smith
                                          Senior Vice President, Finance


                                       21


<PAGE>


  Exhibit Index                                                         Page


  2.1     Amended and Restated Agreement and Plan of Merger dated as
          of April 6, 1997, by and between  among  Mesa  Inc.,  Mesa
          Operating Co.,  MXP  Reincorporation  Corp.  and  Parker &
          Parsley  Petroleum Company  (incorporated  by reference to
          Exhibit 2.1  to Pioneer's  Form S-4  dated June 27,  1997,
          Registration No. 333-26951).

 10.1*    Credit Facility  Agreement (Primary  Facility) dated as of
          August 7, 1997  between  Pioneer  Natural  Resources  USA,
          Inc.  as  Borrower  and  NationsBank  of  Texas,  N.A., as
          Administrative  Agent,  CIBC Inc., as Documentation Agent,
          Morgan   Guaranty   Trust   Company   of   New   York,  as
          Documentation  Agent  and The  Chase  Manhattan  Bank,  as
          Syndication  Agent;  Bank  of  America  Natural  Trust and
          Savings Association,  The  Bank of  New York,  The Bank of
          Nova  Scotia,   Royal  Bank  of  Canada,   Union  Bank  of
          California, N.A., The Fuji Bank, Limited  - Houston Agency
          and  Wells  Fargo  Bank,  N.A.,  as Co-Agents; and certain
          other lenders.

 10.2*    Credit  Facility Agreement (364 Day Facility)  dated as of
          August 7,  1997  between  Pioneer  Natural  Resources USA,
          Inc.  as  Borrower  and  NationsBank  of  Texas,  N.A., as
          Administrative  Agent, CIBC Inc., as Documentation  Agent,
          Morgan   Guaranty   Trust   Company   of   New   York,  as
          Documentation  Agent  and The  Chase  Manhattan  Bank,  as
          Syndication  Agent;  Bank  of  America  Natural  Trust and
          Savings Association,  The  Bank of  New York,  The Bank of
          Nova  Scotia,   Royal  Bank  of  Canada,   Union  Bank  of
          California, N.A., The Fuji Bank,  Limited - Houston Agency
          and  Wells  Fargo Bank,  N.A.,  as Co-Agents;  and certain
          other lenders.

  * Filed herewith.



                                       22


<PAGE>








                                                                  EXHIBIT 10.1
                               [PRIMARY FACILITY]



                            CREDIT FACILITY AGREEMENT


                      PIONEER NATURAL RESOURCES USA, INC.,
                                  as Borrower,

                                       and

                           NATIONSBANK OF TEXAS, N.A.,
                            as Administrative Agent,

                                       and

                                   CIBC INC.,
                             as Documentation Agent,

                                       and

                   MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
                             as Documentation Agent,

                                       and

                            THE CHASE MANHATTAN BANK,
                              as Syndication Agent,

                         THE CO-AGENTS SIGNATORY HERETO,

                                       and

                       THE OTHER LENDERS SIGNATORY HERETO


as of August 7, 1997                                            $1,100,000,000
             






<PAGE>



                                TABLE OF CONTENTS

                                                                        Page

ARTICLE 1                  DEFINITIONS AND REFERENCES.....................1
         Section 1.1       Defined Terms..................................1
         Section 1.2       Exhibits and Schedules........................18
         Section 1.3       Amendment of Defined Instruments..............18
         Section 1.4       References and Titles.........................18
         Section 1.5       Calculations and Determinations...............18

ARTICLE 2                  LOANS AND LETTERS OF CREDIT...................19
         Section 2.1       Making the Loans..............................19
         Section 2.2       Requests for Revolving Loan Advances..........19
         Section 2.3       Rate Elections................................20
         Section 2.4       Swing Line Borrowings.........................22
         Section 2.5       Procedure for Swing Line Advances.............22
         Section 2.6       Swing Line Advances...........................24
         Section 2.7       Facility Fee..................................25
         Section 2.8       Managing Agents' Fees.........................25
         Section 2.9       Termination and Reduction of Commitments......25
         Section 2.10      Optional Prepayments..........................26
         Section 2.11      Payments to Lenders...........................26
         Section 2.12      Letters of Credit.............................27
         Section 2.13      Requesting Letters of
 Credit..................28
         Section 2.14      Reimbursement of Letters of Credit............28
         Section 2.15      Letter of Credit Fees.........................31
         Section 2.16      Capital Reimbursement.........................31
         Section 2.17      Increased Cost of Eurodollar Portions.........32
         Section 2.18      Availability..................................33
         Section 2.19      Funding Losses................................33
         Section 2.20      Taxes.........................................35
         Section 2.21      Make-Whole Qualifications.....................36
         Section 2.22      Competitive Bid Advances......................38

ARTICLE 3                  CONDITIONS PRECEDENT TO LENDING...............42
         Section 3.1       Initial Conditions Precedent..................42
         Section 3.2       Additional Conditions Precedent...............44

ARTICLE 4                  REPRESENTATIONS AND WARRANTIES................45
         Section 4.1       Borrower's Representations and Warranties.....45
         Section 4.2       Representation by Lenders.....................49


                                        i


<PAGE>


                                TABLE OF CONTENTS
                                   (continued)
                                                                        Page

ARTICLE 5                  COVENANTS OF BORROWER.........................49
         Section 5.1       Affirmative Covenants.........................49
         Section 5.2       Negative Covenants............................54
         Section 5.3       Financial Covenants...........................57

ARTICLE 6                  EVENTS OF DEFAULT AND REMEDIES................57
         Section 6.1       Events of Default.............................57
         Section 6.2       Remedies......................................62
         Section 6.3       Annulment of Acceleration.....................62
         Section 6.4       Indemnity.....................................62

ARTICLE 7                  AGENTS........................................64
         Section 7.1       Appointment and Authority.....................64
         Section 7.2       Agent's Reliance..............................65
         Section 7.3       Lenders' Credit Decisions.....................66
         Section 7.4       Indemnification...............................66
         Section 7.5       Rights as Lender..............................67
         Section 7.6       Sharing of Set-Offs and Other Payments........67
         Section 7.7       Investments...................................68
         Section 7.8       Benefit of Article 7..........................68
         Section 7.9       Resignation and Removal.......................68

ARTICLE 8                  MISCELLANEOUS.................................69
         Section 8.1       Waivers and Amendments........................69
         Section 8.2       Survival of Agreements; Cumulative Nature.....70
         Section 8.3       Notices.......................................71
         Section 8.4       Parties in Interest...........................71
         Section 8.5       Governing Law.................................71
         Section 8.6       Limitation on Interest........................72
         Section 8.7       Termination; Limited Survival.................73
         Section 8.8       Assignments; Participations...................74
         Section 8.9       Confidentiality...............................76
         Section 8.10      Severability..................................76
         Section 8.11      Counterparts..................................76
         Section 8.12      Waiver of Jury Trial, Punitive Damages........76
         Section 8.13      Several Obligations...........................77
         Section 8.14      Nonliability of Lenders.......................77
         Section 8.15      Setoff........................................77
         Section 8.16      Release of Liens..............................77
         Section 8.17      Forum Selection and Consent to Jurisdiction...77
         Section 8.18      Renewal, Extension or Rearrangement...........78
         Section 8.19      Entire Agreement..............................78

                                       ii


<PAGE>



                             EXHIBITS AND SCHEDULES

Exhibits:

Exhibit A-1       -       Form of Loan Note
Exhibit A-2       -       Form of Swing Line Note
Exhibit A-3       -       Form of Competitive Bid Note
Exhibit B-1       -       Form of Guaranty
Exhibit B-2       -       Form of Parent Guaranty
Exhibit C         -       Form of Request for Advance
Exhibit D         -       Form of Rate Election
Exhibit E         -       Form of Request for Swing Line Bid
Exhibit F         -       Form of Swing Line Bid
Exhibit G         -       Form of Acceptance Notice
Exhibit H         -       Form of Opinion of Parent's, Borrower's and
                          Restricted Subsidiaries' Counsel
Exhibit I         -       Organization Chart of Parent and its Subsidiaries
Exhibit J         -       Form of Designated Officer's Certificate
Exhibit K-1       -       Form of Election to Convert
Exhibit K-2       -       Form of Release
Exhibit L         -       Form of Agreement to be Bound
Exhibit M         -       Form of Pledge Agreement
Exhibit N         -       Form of Request for Competitive Bid Offer
Exhibit O         -       Form of Competitive Bid Offer
Exhibit P         -       Form of Bid Acceptance


Schedules:

Schedule 1        -       Schedule of Lenders' Commitments and Percentage Share
Schedule 2        -       Disclosure Schedule
Schedule 3        -       Schedule of Restricted Subsidiaries
Schedule 4        -       Schedule of Insurance
Schedule 5        -       Schedule of Security Instruments
Schedule 6        -       Continuing Letters of Credit

                                       iii


<PAGE>




                            CREDIT FACILITY AGREEMENT

         THIS CREDIT  FACILITY  AGREEMENT is made as of August 7, 1997 (together
with all amendments,  renewals, extensions and other modifications, if any, from
time  to time  hereafter  made  hereto,  the  "Agreement"  or  "Credit  Facility
Agreement"),  by and among  PIONEER  NATURAL  RESOURCES  USA,  INC.,  a Delaware
corporation  and  wholly-owned  subsidiary of the Parent (the  "Borrower"),  and
NATIONSBANK  OF TEXAS,  N.A.,  CIBC INC.,  MORGAN  GUARANTY TRUST COMPANY OF NEW
YORK,  THE CHASE  MANHATTAN  BANK,  in the  capacities  herein  identified,  the
Co-Agents party hereto, and the other Lenders from time to time parties hereto.

         The parties hereto agree as follows:

                                    ARTICLE 1

                           DEFINITIONS AND REFERENCES

         Section  1.1  Defined  Terms.  As used in this  Agreement,  each of the
following  terms has the meaning given it in this Section or in the sections and
subsections referred to below:

         "Acceptance Notice" has the meaning given it in Section 2.5(f).

         "Adjusted  Eurodollar  Rate"  means,  with  respect to each  particular
Eurodollar  Portion and the associated  Eurodollar Rate and Reserve  Percentage,
the rate per annum determined hereunder by Administrative Agent on a daily basis
pursuant to the following formula:

                   AER     =       ER      + EM
                                ---------
                                1.00 - RP

                   AER     =   Adjusted Eurodollar Rate
                   ER      =   Eurodollar Rate
                   RP      =   Reserve Percentage
                   EM      =   Eurodollar Margin

The Adjusted  Eurodollar  Rate shall change as and when the  associated  Reserve
Percentage and Eurodollar Margin change.

         "Administrative   Agent"  means   NationsBank   of  Texas,   N.A.,   as
Administrative Agent hereunder and its successors and assigns in such capacity.

         "Advance" means any Revolving Loan Advance,  Competitive Bid Advance or
Swing Line Advance.
                                        1


<PAGE>



         "Affiliate" means, as to any Person, each other Person that directly or
indirectly  (through  one or more  intermediaries  or  otherwise)  controls,  is
controlled by, or is under common control with, such Person.

         "Agent"  means  any of the  Managing  Agents  or the  Collateral  Agent
hereunder,  solely in such capacities and not in their respective  capacities as
Lenders.

         "Agreement"  means  this  Credit  Facility  Agreement,  as this  Credit
Facility  Agreement  may be  amended,  modified  or  restated  from time to time
hereafter.

         "Applicable  Rating  Level"  means  the  level  set  forth  below  that
corresponds  to the  highest of ratings  issued from time to time by Moody's and
S&P, as applicable to Borrower's senior unsecured long-term debt:

                        Moody's                S&P
                 --------------------   --------------------
Level I          greater than    Baa1   greater than    BBB+
Level II                         Baa1                   BBB+
Level III                        Baa2                   BBB
Level IV                         Baa3                   BBB-
Level V             less than    Baa3      less than    BBB-

For example,  if the Moody's  rating is Baa1 and the S&P rating is BBB, Level II
shall apply.

         For purposes of the  foregoing,  (i) "greater than" means a rating more
favorable than;  "less than" means a rating less favorable than; (ii) if ratings
for the Company's  senior  unsecured  long-term debt shall not be available from
S&P or Moody's,  Level V shall be deemed applicable;  (iii) if any of the Rating
Agencies shall change its ratings nomenclature prior to the date all Obligations
have been paid and the  Commitments  canceled,  Borrower  and the Lenders  shall
negotiate  in good faith to amend the  references  to  specific  ratings in this
definition to reflect such change, and pending such amendment, if an appropriate
Applicable  Rating Level is otherwise not determinable  based upon the foregoing
grid,  the last  Applicable  Rating  Level in effect at the time of such  change
shall continue to apply.

         "Base Rate" means the  fluctuating per annum rate of interest from time
to time in effect  equal to the higher of (a) the rate of  interest  as publicly
announced by  Administrative  Agent as its "Prime Rate" or (b) the Federal Funds
Rate plus  one-half  of one percent  (1/2 of 1%),  whether or not  Borrower  has
notice thereof.  Such rate is set by  Administrative  Agent as a general rate of
interest,  taking into  account such  factors as  Administrative  Agent may deem
appropriate,  it being understood that many of Administrative Agent's commercial
or other loans are priced in relation to such rate,  that it is not  necessarily
the lowest or best rate actually charged to any customer and that Administrative
Agent may make various  commercial or other loans at rates of interest having no
relationship to such rate. If  Administrative  Agent's Prime Rate or the Federal
Funds Rate changes after the date hereof,  the Base Rate shall be  automatically

                                        2


<PAGE>



increased or  decreased,  as the case may be,  without  prior notice to Borrower
from time to time as of the  effective  time of each  change  in  Administrative
Agent's Prime Rate or the Federal  Funds Rate.  The  Administrative  Agent shall
promptly thereafter notify Borrower of such change in the Base Rate.

         "Base Rate Portion" means that portion of the unpaid principal  balance
of a Loan which is not made up of  Eurodollar  Portions,  Swing Line Advances or
Competitive Bid Advances.

         "Bid  Acceptance"  means a Bid Acceptance  substantially in the form of
Exhibit P hereto with appropriate insertions.

         "Borrower" is defined in the Preamble hereto.

         "Business  Day"  means a day on  which  commercial  banks  are open for
business  with the  public in the State of Texas.  Any  Business  Day in any way
relating to Eurodollar  Portions (such as the day on which a Eurodollar Interest
Period  begins or ends)  must also be a day on which,  in the  reasonable,  good
faith judgment of Administrative Agent,  significant transactions in dollars are
carried out in the interbank eurocurrency market.

         "Cash Collateral" has the meaning given it in Section 2.14(d).

         "Co-Agent"  means each of  Bank of America  National Trust  and Savings
Association,  The Bank of New  York,  The  Bank of Nova  Scotia,  Royal  Bank of
Canada, Union Bank of California,  N.A., the Fuji Bank, Limited - Houston Agency
and Wells Fargo Bank, N.A., as Co-Agents,  and their  respective  successors and
assigns in such capacity.

         "Collateral  Agent" means  NationsBank  of Texas,  N.A.,  as collateral
agent under the  Security  Instruments  and its  successors  and assigns in such
capacity.

         "Commitment"  means,  with respect to each Lender,  such  Lender's Loan
Commitment.

         "Competitive Bid Advances" has the meaning given it in Section 2.22.

         "Competitive Bid Note" has the meaning given it in Section 2.22.

         "Competitive  Bid  Obligations"   means,  at  the  particular  time  in
question, the sum of all outstanding Competitive Bid Advances.

         "Competitive Bid Offer" has the meaning given it in Section 2.22.

         "Competitive Bid Rate" has the meaning given it in Section 2.22.

         "Consolidated" refers to the consolidation of any Person, in accordance
with GAAP, with its properly consolidated  Subsidiaries.  References herein to a
Person's  Consolidated  financial  statements,   financial  position,  financial

                                        3


<PAGE>



condition  or  liabilities  refer  to  the  consolidated  financial  statements,
financial position,  financial condition or liabilities,  as the case may be, of
such Person and its properly consolidated Subsidiaries.

         "Consolidated Interest Expense" is defined in Section 5.3(a).

         "Credit Facility  Agreement" means this Credit Facility  Agreement,  as
this Credit Facility Agreement may be amended, modified or restated from time to
time hereafter.

         "Debt" of any Person means, without duplication:

(a)  indebtedness of such Person for borrowed money;

(b)  indebtedness of such Person  constituting an obligation to pay the deferred
     purchase price of property or services (other than customary  payment terms
     taken in the ordinary course of such Person's business);

(c)  indebtedness of such Person evidenced by a bond, debenture, note or similar
     instrument;

(d)  principal  obligations  under leases  capitalized  in accordance  with GAAP
     under which such Person is the lessee;

(e)  indebtedness,  contingent  or  otherwise,  of such Person  with  respect to
     bankers'   acceptances   or  the  face  amount  of  letters  of  credit  or
     applications or reimbursement agreements therefor;

(f)  guaranties  of such  Person  of  indebtedness  or  obligations  of the type
     described in clauses (a), (b), (c), (d) or (e) above of any other Person or
     obligations  to  purchase  or acquire or to  otherwise  protect or insure a
     creditor against loss in respect of indebtedness or obligations of the type
     described in clauses (a),  (b),  (c), (d) or (e) above of any other Person,
     but excluding endorsements in the ordinary course of business of negotiable
     instruments in the course of collection;

(g)  indebtedness or obligations of the type described in clauses (a), (b), (c),
     (d) or (e) above, which are secured by a Lien on any property owned by such
     Person,  whether or not such  indebtedness or obligations have been assumed
     by such  Person  (limited  however  to the  lesser of (1) the amount of its
     liability or (2) the value of such property); and

(h)  the undischarged  balance of any production  payment created by such Person
     or for the creation of which such Person  directly or  indirectly  received
     payment;

provided,  however,  Debt shall not include (1) accounts payable incurred in the
ordinary course of such Person's business,  or (2) any obligations in respect of

                                        4


<PAGE>



(i) exchange,  forward,  future,  swap,  hedging or similar  agreements and (ii)
prepayments for gas or oil production or gas or oil imbalances.

         "Default"  means  any  Event  of  Default  and any  default,  event  or
condition which would,  with the giving of any requisite notices and the passage
of any requisite periods of time, constitute an Event of Default.

         "Default Rate" means, at the particular  time in question,  two percent
(2%) per annum plus the Base Rate then in effect;  provided,  that, with respect
to any Eurodollar  Portion with an Eurodollar  Interest Period  extending beyond
the date such Eurodollar  Portion becomes due and payable,  "Default Rate" shall
mean,  during such Eurodollar  Interest Period,  two percent (2%) per annum plus
the related Eurodollar Rate and plus the applicable Eurodollar Margin.

         "Designated   Officer"  means  any  Executive   Officer  or  any  other
individual  duly  elected  to and  holding  one or more of the  offices  of vice
president,   managing  director,  executive  director,  secretary  or  assistant
secretary  of an  Obligor,  or any other  Person  authorized  in  writing by any
Obligor to execute any Loan Document,  in each case designated by an Obligor and
acceptable to Required Lenders.

         "Disclosure Schedule" means (a) Schedule 2 hereto and (b) any documents
listed on such schedule and expressly  incorporated  therein by reference,  true
and correct  copies of which shall have been  delivered  to Managing  Agents and
each other Lender prior to the date hereof.  Insofar as any  representations and
warranties made herein are incorporated by reference or otherwise remade in Loan
Documents  delivered  as of a date after the date hereof,  the term  "Disclosure
Schedule"  shall in such  representations  and  warranties be deemed to refer as
well to all other  documents  indicated by Borrower to be part of the Disclosure
Schedule and which Borrower has at the particular time in question  delivered to
the Managing Agents, the Co-Agents and each other Lender and which have not been
promptly objected to in writing by or on behalf of the Required Lenders.

         "Documentation Agent" means each of CIBC Inc. and Morgan Guaranty Trust
Company of New York, as Documentation  Agents,  and their respective  successors
and assigns in such capacity.

         "EBITDAX" is defined in Section 5.3(a).

         "Effective  Date" means the date the parties hereto shall have executed
and delivered  counterparts  hereof to Administrative  Agent and  Administrative
Agent shall have notified the parties  hereto that the Effective Date shall have
occurred.

         "Environmental Law" means any federal, state, or local statute, or rule
or regulation  promulgated  thereunder,  any judicial or administrative order or
judgment to which Borrower,  or any of its  Subsidiaries is a party or which are
applicable  to Borrower or any of its  Subsidiaries  or its or their  respective
properties  (whether or not by consent),  and any  provision or condition of any

                                        5


<PAGE>



permit,  license or other  governmental  operating  authorization,  relating  to
protection  of the  environment,  persons or the public  welfare  from actual or
potential  exposure  or  the  effects of  exposure  to any  actual or  potential
release, discharge, spill or emission (whether past or present) of, or regarding
the manufacture, processing, production, gathering, transportation, importation,
use, treatment,  storage or disposal of, any chemical, raw material,  pollutant,
contaminant or toxic or hazardous substance or waste.

         "ERISA" means the Employee  Retirement  Income Security Act of 1974, as
amended from time to time,  together with all rules and regulations  promulgated
with respect thereto.

         "ERISA  Plan" means any  pension  benefit  plan  subject to Title IV of
ERISA  maintained by any Obligor or any Affiliate  thereof with respect to which
any Obligor has a fixed or contingent liability.

         "Eurodollar  Interest  Period" means,  with respect to each  particular
Eurodollar  Portion,  a period of one (1), two (2), three (3) or six (6) months,
or,  subject to  Section  2.3, a period of nine (9) or twelve  (12)  months,  as
specified in the Rate Election  applicable  thereto,  beginning on and including
the date  specified in such Rate Election  (which must be a Business  Day),  and
ending on but not  including  the same day of the  relevant  month as the day on
which it began (e.g., a period beginning on the third day of one month shall end
on but not  include  the third day of  another  month),  or if such month has no
numerically  corresponding  day, on the last  Business  Day of such  month,  and
provided that each Eurodollar Interest Period which would otherwise end on a day
which is not a  Business  Day  shall  end on the next  succeeding  Business  Day
(unless  such  next  succeeding  Business  Day is the  first  Business  Day of a
calendar month,  in which case such Eurodollar  Interest Period shall end on the
immediately  preceding  Business  Day).  No  Eurodollar  Interest  Period may be
elected for any Eurodollar  Portion which would extend past the Maturity Date of
the Loan of which the Eurodollar Portion is a part.

         "Eurodollar Margin" means, on any date, with respect to each Eurodollar
Portion of a  Revolving  Loan,  the  number of basis  points per annum set forth
below based on the Applicable Rating Level on such date:

                   Applicable                   Eurodollar
                  Rating Level                    Margin
                  ------------                  ----------
                    Level I                      18.0 b.p.
                    Level II                     20.0 b.p.
                    Level III                    23.0 b.p.
                    Level IV                     28.0 b.p.
                    Level V                      45.0 b.p.

                                        6


<PAGE>



Changes in the Eurodollar Margin will occur automatically  without prior notice.
Administrative  Agent will give notice  promptly to Borrower  and the Lenders of
changes in the Eurodollar Margin.

         "Eurodollar Portion" means the unpaid principal balance of a Loan which
Borrower designates as such in a Rate Election.

         "Eurodollar  Rate" means,  with respect to each  particular  Eurodollar
Portion  within a Tranche and with  respect to the related  Eurodollar  Interest
Period,  the rate of interest per annum (stated to the nearest  10,000ths of 1%)
determined  by  Administrative  Agent in accordance  with its customary  general
practices to be  representative of the rates (stated to the nearest 10,000ths of
1%) at  which  deposits  of  dollars  are  offered  to  Administrative  Agent at
approximately  10:00 a.m.,  Dallas,  Texas time,  two Business Days prior to the
first day of such  Eurodollar  Interest  Period by prime banks in the  interbank
eurocurrency  market  which  have  been  selected  by  Administrative  Agent  in
accordance with its customary general practices for delivery on the first day of
such  Eurodollar  Interest Period in an amount equal or comparable to the amount
of  Administrative  Agent's  Eurodollar  Portion  within such  Tranche and for a
period of time equal or  comparable  to the length of such  Eurodollar  Interest
Period. The Eurodollar Rate determined by Administrative Agent with respect to a
particular  Eurodollar  Portion  shall be fixed at such rate for the duration of
the associated  Eurodollar Interest Period. If Administrative Agent is unable so
to determine the Eurodollar Rate for any Eurodollar  Portion,  Borrower shall be
deemed not to have elected such Eurodollar Portion.

         "Eurodollars" is defined in Section 2.18.

         "Event of Default" has the meaning given it in Section 6.1.

         "Executive Officer"  means any  individual duly  elected to and holding
one or more of the following  offices of Borrower:  President,  Chief  Executive
Officer,  Chief  Financial  Officer,  Executive  Vice  President  or Senior Vice
President.

         "Existing Mesa Credit Facility"  means  that certain  Credit  Agreement
dated July 2, 1996, as amended and restated  through April 15, 1997,  among Mesa
Operating,  the Lenders  therein named,  Bankers Trust  Company,  as Syndication
Agent, Societe Generale, Southwest Agency, as Documentation Agent, and The Chase
Manhattan  Bank,  as  Administrative  Agent for the Lenders,  as may be amended,
restated or modified from time to time.

                                        7


<PAGE>



         "Existing  Petroleum  Credit  Facility"  means that certain Amended and
Restated Credit Facility Agreement,  dated as of July 31, 1996, among Petroleum,
NationsBank of Texas, N.A., as Administrative Agent, CIBC Inc., as Documentation
Agent,  Bank of  America  National  Trust  and  Savings  Association,  The Chase
Manhattan  Bank,  First Union National Bank of North  Carolina,  Morgan Guaranty
Trust Company of New York and Wells Fargo Bank, N.A., each as Co-Agent,  and the
Lenders signatory thereto, as amended by that certain First Amendment to Amended
and Restated Credit Facility Agreement, dated as of May 15, 1997.

         "Facility Amount" means the aggregate amount of the Commitments  (which
amount shall  initially be  $1,100,000,000),  as such amount may be reduced from
time to time pursuant to the terms of this Agreement.

         "Facility  Fee  Rate"  means,  on any date that a  facility  fee is due
pursuant to Section  2.7,  the number of basis  points per annum set forth below
based on the Applicable Rating Level on such date:

                   Applicable                 Facility Fee Rate
                  Rating Level                      Margin
                  ------------                -----------------
                   Level I                         9.0 b.p.
                   Level II                       10.0 b.p.
                   Level III                      12.0 b.p.
                   Level IV                       14.0 b.p.
                   Level V                        20.0 b.p.

Changes in the Facility Fee Rate will occur automatically  without prior notice.
Administrative  Agent will give notice  promptly to Borrower  and the Lenders of
changes in the Facility Fee Rate.

         "Federal  Funds Rate" means,  for any day, the rate per annum  (rounded
upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average
of the rates on overnight Federal funds transactions with members of the Federal
Reserve  System  arranged by Federal  funds brokers on such day, as published by
the Federal  Reserve Bank of New York on the Business Day next  succeeding  such
day, provided that (a) if such day is not a Business Day, the Federal Funds Rate
for  such day  shall be such  rate on such  transactions  on the next  preceding
Business Day, as so published on the next succeeding Business Day, and (b) if no
such rate is so  published  on such next  succeeding  Business  Day, the Federal
Funds Rate for such day shall be the average rate quoted to Administrative Agent
on such day on such transactions as determined by Administrative Agent.

         "Fiscal  Quarter"  means a three-month  period ending on March 31, June
30, September 30 or December 31 of each year.

                                        8


<PAGE>



         "Fiscal Year" means a twelve-month period ending on December 31 of each
 year.

         "Foreign Restricted  Subsidiary" means any Restricted Subsidiary of the
Borrower  organized  under the laws of any  jurisdiction  other  than the United
States or any state thereof.

         "GAAP"  means  those  generally  accepted  accounting   principles  and
practices  which are  recognized as such by the Financial  Accounting  Standards
Board (or any generally recognized  successor) and which, in the case of Parent,
Borrower and their Consolidated Subsidiaries,  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 Updated  Financial  Statements  (except for
changes   concurred   with  by  Parent's  or   Borrower's   independent   public
accountants).  If any change in any accounting principle or practice is required
by the Financial Accounting Standards Board (or any such successor) in order for
such  principle  or practice to  continue  as a  generally  accepted  accounting
principle or practice,  all reports and financial  statements required hereunder
with respect to Parent or Borrower or with respect to Parent, Borrower and their
Consolidated  Subsidiaries  must be prepared in accordance with such change.  In
the event any  changes in GAAP  materially  affect the  calculation  of Parent's
EBITDAX to Consolidated Interest Expense Ratio or Consolidated Total Funded Debt
to Total  Capitalization  as defined and  described in Sections 5.3 (a) and (b),
respectively,  Parent,  Borrower  and  Lenders  agree to enter  into good  faith
negotiations  for an  agreement  to revise such tests to take into  account such
changes in GAAP;  until Parent,  Borrower and Majority Lenders have entered into
such an  agreement,  such  financial  calculation  shall  continue to be made in
accordance with GAAP as in effect immediately preceding the date of such change.

         "Governmental Authority" means any national, state, county or municipal
government,  domestic or foreign, any agency, board, bureau, commission,  court,
department or other instrumentality of any such government, or any arbitrator in
any  case  which  has  jurisdiction  over  any of  the  Lenders,  Borrower,  its
Subsidiaries or any properties of Borrower or its Subsidiaries.

         "Guaranty" means (i) any guaranty  substantially in the form of Exhibit
B-1, with  appropriate  insertions and deletions,  executed or to be executed by
any  Restricted  Subsidiary,  as  from  time  to  time  amended,   modified,  or
supplemented, (ii) the Parent Guaranty, or (iii) any Guaranty delivered pursuant
to Section 3.1(a)(1) of the Agreement as from time to time amended, modified, or
supplemented, as the case may be.

         "Incumbent Directors" has the meaning given in Section 6.1(i).

         "Issuing Bank" means any Lender which in its sole discretion  agrees to
be and is  designated  by Borrower and accepted by the  Administrative  Agent to
issue one or more  Letters of Credit in its  capacity as an issuer of Letters of
Credit hereunder, and its successors and assigns in such capacity.

         "LC Application" means any application for a Letter of Credit hereafter
made by Borrower to an Issuing Bank.

                                        9


<PAGE>



         "LC Conditions" has the meaning given it in Section 2.12.

         "LC Obligations" means, at the particular time in question,  the sum of
the Matured LC Obligations plus the aggregate  amounts which any Issuing Bank or
Lender  might be called upon to advance  under all then  outstanding  Letters of
Credit.

         "Letter of Credit"  means (i) any letter of credit issued by an Issuing
Bank upon the application of Borrower and (ii) each letter of credit outstanding
on the  Effective  Date listed on Schedule 6 hereto which letters of credit will
be deemed to be issued and outstanding  under this Agreement as of the Effective
Date.  Each  Letter  of  Credit  shall  be  classified  by  Issuing  Bank  as  a
"Commercial"  Letter of Credit or a "Standby"  Letter of Credit,  in  accordance
with the laws and  regulations  applicable to Issuing Bank from time to time and
in  accordance  with  Issuing  Bank's  customary  practices  at such  times  for
reporting to regulatory authorities.

         "Lenders"  means each party hereto  (other than  Borrower),  including,
without  limitation,  NationsBank  of Texas,  N.A.  in its  capacity as a Lender
hereunder rather than as Administrative  Agent or Collateral Agent, CIBC Inc. in
its capacity as a Lender hereunder rather than as  Documentation  Agent,  Morgan
Guaranty Trust Company of New York in its capacity as a Lender  hereunder rather
than as  Documentation  Agent,  The Chase  Manhattan  Bank in its  capacity as a
Lender  hereunder  rather than as  Syndication  Agent,  the  Co-Agents  in their
capacity as Lenders  hereunder rather than as Co-Agents,  and the successors and
assigns of each as holder of a Note.

         "Lien" means, any lien, mortgage,  security interest,  pledge, deposit,
production payment, encumbrance, rights of a vendor under any title retention or
conditional  sale  agreement  or  lease  or  other   arrangement   substantially
equivalent thereto.

         "Loan" means any of a Revolving Loan,  Competitive Bid Advance or Swing
Line Advance, as the context requires.

         "Loan Commitment"  means,  with respect to each Lender,  the amount set
forth as such Lender's Loan  Commitment  opposite the name of such Lender in the
column  headed "New  Commitment"  or otherwise  indicated on Schedule 1 attached
hereto (or, if such Lender is an assignee, the amount of its Loan Commitment set
forth in the assignment pursuant to which it became a Lender) as such amount may
be reduced or increased from time to time pursuant to any assignment to which it
is a party or otherwise pursuant to the terms of this Agreement.

         "Loan  Commitment  Period" means the period from and including the date
hereof until and including  the Maturity Date (or, if earlier,  the day on which
the Loan Notes first become due and payable in full or the Loan  Commitments are
terminated upon notice by  Administrative  Agent to Borrower pursuant to Section
6.1).

         "Loan Documents" means this Credit Facility Agreement,  as the same may
have been or may be  amended  from time to time  hereafter,  the  Notes,  the LC
Applications, the Letters of Credit,  the Swing Line Bids accepted by  Borrower,

                                       10


<PAGE>



the Bid  Acceptances,  the Acceptance  Notices,  the Guaranties,  the Disclosure
Schedule,  the Security  Instruments,  the agreements  with the Managing  Agents
referred to in Section  2.8, any  amendments  to any of the  foregoing,  and all
other agreements,  certificates, notices and disclosures at any time executed or
certified by a Designated  Officer of and on behalf of an Obligor and  delivered
by such Obligor or such Designated  Officer in connection  herewith or therewith
(exclusive  of term  sheets,  commitment  letters,  correspondence  and  similar
documents used in the negotiation hereof or thereof).

         "Loan Note" has the meaning given it in Section 2.1(c).

         "Majority  Lenders"  means Lenders whose  aggregate  Percentage  Shares
exceed 50%.

         "Managing Agents" means Administrative  Agent, each Documentation Agent
and the  Syndication  Agent  hereunder and their  successors and assigns in such
capacities.

         "Margin  Regulations"  means, as applicable,  Regulations G, 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 (a)
the  financial  condition of Parent,  Borrower and its  Subsidiaries  taken as a
whole, or, prior to the Effective Date of this Agreement, Mesa or Petroleum, (b)
the ability of Parent, Borrower and its Subsidiaries taken as a whole to operate
their respective businesses, (c) the ability of Borrower to meet its obligations
under the Loan  Documents on a timely basis or (d) the ability of Obligors taken
as a whole to meet their obligations under the Loan Documents on a timely basis;
provided,  however,  that a  material  adverse  effect  that  is  limited  to an
Unrestricted  Subsidiary  shall not (i) be a Material  Adverse Effect or (ii) be
included in the  determination  of whether a Material  Adverse Effect shall have
occurred or shall be expected to occur.

         "Matured LC Obligations"  means all amounts paid by Issuing Bank or any
Lender on drafts or demands for payment drawn or made under any Letter of Credit
(or under or in connection with any LC  Application)  which have not been repaid
to the Issuing Bank or Lender (with the proceeds of a Revolving  Loan Advance or
otherwise).

         "Maturity Date"  means the earlier of  (a) August 7,  2002 and  (b) the
date  on  which  the  Loan  Commitment of  each  Lender  is reduced  to  zero or
terminated.

         "Maximum Lawful Rate" has the meaning given it in Section 8.6.

         "Merger Agreement" has the meaning given it in Section 3.1(e).

         "Mergers" has the meaning given it in Section 3.1(e).

         "Mesa" means Mesa, Inc., a Delaware corporation.

                                       11


<PAGE>



         "Mesa Operating" means Mesa Operating Co., a Delaware corporation.

         "Moody's"  means  Moody's  Investors Service,  Inc.  and  any successor
thereto that is a nationally-recognized rating agency.

         "Note" means any Loan Note, Swing Line Note or Competitive Bid Note.

         "Notice Period" has the meaning given it in Section 6.4.

         "Obligations" means all Debt from time to time owing by any of Obligors
to any  Agent or any  Lender  under or  pursuant  to any of the Loan  Documents,
including,  without limitation,  all LC Obligations,  Swing Line Obligations and
Competitive Bid Obligations. "Obligation" means any part of the Obligations.

         "Obligor"   means  Parent,   Borrower   and  each   of  the  Restricted
 Subsidiaries.

         "Parent"   means   Pioneer  Natural   Resources  Company,   a  Delaware
corporation.

         "Parent Guaranty" means a guaranty substantially in the form of Exhibit
B-2, with  appropriate  insertions and deletions,  executed or to be executed by
the Parent, as from time to time amended, modified, or supplemented, as the case
may be.

         "Percentage  Share" means,  with respect to any Lender (a) when used in
Section 2.1 or 2.3,  in any  Request  for  Advance or when no Loans  (other than
Swing Line Advances or Competitive Bid Advances,  if applicable) are outstanding
hereunder, the percentage set forth opposite such Lender's name on Schedule 1 to
this Agreement,  or in documents  of assignment  delivered  pursuant  to Section

                                       12


<PAGE>



8.8, as such  percentage  may be adjusted  from time to time by such  assignment
documents  and (b) when  used  otherwise,  the  percentage  equal to the  unpaid
principal  balance of such  Lender's  Loans,  other than Swing Line Advances and
Competitive  Bid Advances,  at the  particular  time in question  divided by the
aggregate unpaid principal balance of all Loans of all Lenders, other than Swing
Line Advances and Competitive Bid Advances, at such time.

         "Permitted  Liens"  means  (a) Liens for  taxes,  assessments  or other
governmental  charges or levies if the same shall not at the particular  time in
question be due and  delinquent  or (if  foreclosure,  distraint,  sale or other
similar  proceedings shall not have been commenced or, if commenced,  shall have
been stayed) are being  contested in good faith and by appropriate  proceedings,
and if the  subject  Borrower  or Parent  shall have set aside on its books such
reserves  (segregated to the extent required by sound  accounting  practices) as
may be required by GAAP or  otherwise  determined  by the Board of  Directors of
Borrower or Parent to be adequate with respect  thereto;  (b) Liens of carriers,
warehousemen, mechanics, laborers, materialmen, landlords, vendors, workmen, and
operators  arising by  operation  of law in the  ordinary  course of business or
incident to the exploration, development, operations and maintenance of oil, gas
and other hydrocarbon properties and related facilities and assets, for sums not
yet due or being  contested  in good faith and by  appropriate  proceedings,  if
Borrower or Parent shall have set aside on its books such  reserves  (segregated
to the extent required by sound accounting practices) as may be required by GAAP
or  otherwise  determined  by the Board of Directors of Borrower or Parent to be
adequate  with respect  thereto;  (c) Liens  incurred in the ordinary  course of
Obligors'  respective  businesses  in  connection  with  worker's  compensation,
unemployment insurance and other social security legislation (other than ERISA);
(d) Liens incurred in the ordinary course of Obligors'  businesses to secure the
performance  of  bids,  tenders,  trade  contracts,   leases  (statutory  only),
statutory obligations,  surety and appeal bonds, performance and return-of-money
bonds  and  other   obligations  of  a  like  nature;   (e)  Liens,   easements,
rights-of-way  restrictions,   servitudes,   permits,   conditions,   covenants,
exceptions, reservations and other similar encumbrances incurred in the ordinary
course of Obligors'  businesses or existing on property and not in the aggregate
materially  interfering with the ordinary conduct of Obligors'  businesses;  (f)
legal or equitable  encumbrances  deemed to exist by reason of negative  pledges
such as in Section 5.2 of this  Agreement or the existence of any  litigation or
other  legal  proceeding  and any  related lis  pendens  filing  (excluding  any
attachment  prior  to  judgment,  judgment  lien  or  attachment  lien in aid of
execution  on a  judgment);  (g)  rights of a common  owner of any  interest  in
property held by any Obligor as such common owner; (h) farmout,  carried working
interest, joint operating,  unitization,  royalty, overriding royalty, sales and
similar agreements  relating to the exploration or development of, or production
from, oil and gas properties  incurred in the ordinary  course of business,  (i)
Liens arising pursuant to Section 9.319 of the Texas Uniform  Commercial Code or
other  similar  statutory  provisions of other states with respect to production
purchased from others;  (j)  Liens represented by capital leases permitted under

                                       13


<PAGE>



this  Agreement;  (k) any defects,  irregularities,  or deficiencies in title to
easements,  rights-of-way or other properties which do not in the aggregate have
a  Material  Adverse  Effect;  (l)  Liens  existing  pursuant  to  the  Security
Instruments;  (m) Liens  existing in favor of Agents and Lenders  under the Loan
Documents; (n) Liens on assets of a Subsidiary of Parent or Borrower in favor of
Parent, Borrower or another Restricted Subsidiary;  (o) Liens on any property or
assets  owned or leased by Parent,  Borrower or any  Subsidiary  existing at the
time such  property or asset was acquired  (or at the time such Person  became a
Subsidiary);  provided that (1) in the case of the  acquisition of a Subsidiary,
such lien only encumbers property or assets of such Subsidiary immediately prior
to or at the time of acquisition by Borrower of such Subsidiary and (2) Borrower
and Parent  will use their  best  efforts  to  eliminate  such Liens in a timely
manner;  (p) purchase money Liens, so long as such Liens only encumber  property
or assets (including any improvements  thereon,  accessions  thereto or proceeds
thereof) acquired with the proceeds of purchase money  indebtedness  incurred in
connection with such Lien; (q) Liens on the stock or other ownership interest of
or in any Unrestricted  Subsidiary;  (r) Liens in renewal or extension of any of
the  foregoing  permitted  Liens,  so long as limited to the  property or assets
encumbered  and the amount of  indebtedness  secured  immediately  prior to such
renewal or extension;  and (s) Liens  approved in writing by or on behalf of the
Required Lenders.

         "Petroleum"  means  Parker &  Parsley  Petroleum  Company,  a  Delaware
corporation.

         "Pledge  Agreement" means a Pledge Agreement  substantially in the form
of Exhibit M hereto,  or other form of pledge agreement or deed of mortgage,  in
form and substance  satisfactory to the Managing Agents and the subject Obligor,
pledging an interest in the capital  shares or stock of,  partnership  interests
in, or other ownership interest in, a Restricted Subsidiary as from time to time
amended, modified and supplemented.

         "Primary  Facility"  means the  facility  for loans and the issuance of
Letters of Credit established pursuant to this Agreement.

         "Rate Election" has the meaning given it in Section 2.3.

         "Rating Agencies" means any or all of S&P or Moody's.

         "Regulation  D" means  Regulation  D of the Board of  Governors  of the
Federal Reserve System, as from time to time in effect.

         "Request  for  Advance"  means a written or  telephonic  request,  or a
written confirmation, made by a Borrower which meets the requirements of Section
2.2.

         "Request for Competitive Bid Offer" has the meaning given it in Section
2.22.

         "Request  for  Swing  Line  Bid"  has the  meaning  given it in Section
2.5(a).

                                       14


<PAGE>



         "Required  Lenders"  means Lenders whose  aggregate  Percentage  Shares
exceed 66 2/3%.

         "Reserve  Percentage" means, on any day with respect to each particular
Eurodollar Portion in a Tranche, the maximum reserve requirement,  as determined
by Administrative  Agent (including without limitation any basic,  supplemental,
marginal, emergency or similar reserves),  expressed as a percentage and rounded
to the nearest  1/100th of 1%,  which would then apply to  Administrative  Agent
under  Regulation  D or  successor  regulations  issued from time to time by the
Board of Governors of the Federal  Reserve System with respect to  "Eurocurrency
liabilities"  (as such  term is  defined  in  Regulation  D) equal in  amount to
Administrative  Agent's Eurodollar Portion in such Tranche,  were Administrative
Agent to have any such  Eurocurrency  liabilities.  If such reserve  requirement
shall  change  after  the  date  hereof,   the  Reserve   Percentage   shall  be
automatically  increased or decreased,  as the case may be, from time to time as
of the effective time of each such change in such reserve requirement.

         "Restricted Payment" means any investment, contribution,  distribution,
loan or advance of cash to a Person  other than a Restricted  Subsidiary,  other
than:

(a)  prudent short-term investments;

(b)  investments,  contributions,  distributions, loans or advances disclosed in
     the  Updated  Financial  Statements  or in the  Disclosure  Schedule  or in
     disclosures  made subsequent to the date hereof and consented to in writing
     by or on behalf of the  Majority  Lenders or  otherwise  made to effect the
     Mergers  and the  subsequent  restructuring  of certain  of the  Restricted
     Subsidiaries, as described in the Merger Agreement;

(c)  investments,  contributions,  loans or advances  made by any Obligor in the
     ordinary course of its business; or

(d)  contributions made by Borrower to any of its Subsidiaries arising out of or
     in respect of Letters of Credit  issued  hereunder and used for the general
     corporate  purposes of such  Subsidiary (i) so long as no amounts have been
     drawn under any such  Letter of Credit or (ii) to the extent that  Borrower
     has been  reimbursed  by such  Subsidiary  for amounts drawn under any such
     Letter of Credit;

provided,  however,  that any  loan,  advance,  contribution  or  investment  by
Borrower or any Restricted  Subsidiary to any Restricted Subsidiary which is not
a guarantor of Borrower's obligations shall be a Restricted Payment.

         "Restricted  Subsidiary"  means each  Subsidiary  of Borrower or Parent
that,  at the  particular  time in question,  owns  directly or  indirectly  any
material  assets or any interest in any other  Restricted  Subsidiary or has not
been designated as an Unrestricted  Subsidiary.  The Restricted  Subsidiaries on
the  Effective  Date are listed on  Schedule  3  attached  hereto and each other
Subsidiary  of  Borrower  as of the  Effective  Date  shall  be an  Unrestricted
Subsidiary. A Restricted Subsidiary shall remain such (even if it no longer owns

                                       15


<PAGE>



directly or  indirectly  any interest  in any  of  the  material  assets)  until
designated  as an  Unrestricted Subsidiary pursuant to Section 5.2(i).

         "Revolving Loan" has the meaning given it in Section 2.1(c).

         "Revolving Loan Advance" has the meaning given it in Section 2.1(a).

         "ss.956" has the meaning given it in Section 6.1(k).

         "S&P" means Standard & Poor's  Ratings Group and any successor  thereto
that is a nationally-recognized rating agency.

         "Security   Instruments"  shall  mean  the  agreements  or  instruments
described or referred to in Schedule 5, the  Guaranties,  the Pledge  Agreement,
and any and all other  agreements or instruments  now or hereafter  executed and
delivered by any Obligor or any other Person in connection  with, or as security
for the payment or performance of, the Notes, LC Obligations,  this Agreement or
the  Guaranties,  as any  such  instrument  or  agreement  may be  supplemented,
amended, renewed, extended or restated from time to time.

         "Stock  Pledge  Release  Date"  has the meaning given to it  in Section
8.16.

         "Subsidiary" means, with respect to any Person, any corporation,  which
is directly or indirectly (through one or more intermediaries)  controlled by or
with respect to which fifty percent  (50%) or more of the stock having  ordinary
voting power to elect the board of  directors  is owned by such  Person,  or any
association, partnership, joint venture, or other non-corporate business entity,
enterprise or organization which is directly or indirectly  (through one or more
intermediaries)  controlled  by, or owned one  hundred  percent  (100%) by, such
Person,  provided that associations,  joint ventures or other  relationships (a)
which are established pursuant to an operating agreement or similar agreement or
which are  partnerships  for purposes of federal income taxation only, (b) which
are  not  partnerships  (or  subject  to  the  Uniform  Partnership  Act)  under
applicable  state law, and (c) whose  businesses are limited to the exploration,
development and operation of oil, gas or mineral  properties and interests owned
directly by the parties in such  associations,  joint ventures or relationships,
shall not be deemed to be "Subsidiaries" of such Person.

         "Swing Line Advances" has the meaning given it in Section 2.4.

         "Swing Line Bid" has the meaning given it in Section 2.5(a).

         "Swing Line Note" has the meaning given it in Section 2.6(d).

         "Swing Line Obligations" means, at the particular time in question, the
sum of all outstanding Swing Line Advances.

                                       16


<PAGE>



         "Swing Line Rate" has the meaning given it in Section 2.5(b).

         "Syndication  Agent" means The Chase  Manhattan  Bank,  as  Syndication
Agent hereunder and its successors and assigns in such capacity.

         "Taxes" has the meaning given it in Section 2.20.

         "Termination  Event" means (a) the occurrence with respect to any ERISA
Plan of (1) a reportable event described in Sections  4043(b)(5) or (6) of ERISA
or (2) any other  reportable  event  described in Section 4043(b) of ERISA other
than a reportable  event not subject to the  provision  for 30-day notice to the
Pension Benefit  Guaranty  Corporation  pursuant to a waiver by such corporation
under Section  4043(a) of ERISA,  or (b) the withdrawal of any Obligor or of any
Affiliate of any Obligor from an ERISA Plan during a plan year in which it was a
"substantial  employer" as defined in Section  4001(a)(2)  of ERISA,  or (c) the
filing of a notice of intent to terminate any ERISA Plan or the treatment of any
ERISA Plan  amendment as a termination  under Section 4041 of ERISA,  or (d) the
institution of  proceedings  to terminate any ERISA Plan by the Pension  Benefit
Guaranty  Corporation  under  Section  4042 of ERISA,  or (e) any other event or
condition  which might  constitute  grounds  under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any ERISA Plan.

         "364 Day Facility" means that certain Credit Facility Agreement,  dated
as of August 7, 1997,  among Pioneer Natural  Resources  USA, Inc., as Borrower,
NationsBank of Texas, N.A., as Administrative Agent, CIBC Inc., as Documentation
Agent,  Morgan Guaranty Trust Company of New York, as  Documentation  Agent, The
Chase Manhattan Bank, as Syndication Agent, the Co-Agents party thereto, and the
Lenders party thereto,  as such  agreement may be amended,  modified or restated
from time to time.

         "Total  Capitalization"  means  the sum  (without  duplication)  of (i)
Consolidated  Total  Funded Debt of the Parent and its  Subsidiaries,  plus (ii)
Consolidated shareholder's equity of the Parent and its Subsidiaries.

         "Total  Funded Debt" means all Debt of the type  referred to in clauses
(a), (b), (c), (d), (g) (excluding Debt of the type referred to in clause (e) of
the definition of "Debt") and (h) of the definition of "Debt".

         "Tranche" has the meaning given it in Section 2.3.

         "Unrestricted  Subsidiary"  means each  Subsidiary of Borrower which is
not  designated as a Restricted  Subsidiary on Schedule 3 attached  hereto or is
designated by Borrower as an Unrestricted Subsidiary pursuant to Section 5.2(i).

         "Updated   Financial   Statements"   means  (a)  the   audited   annual
Consolidated  financial  statements of Petroleum  and Mesa and their  respective
Consolidated  Subsidiaries  dated as of December 31, 1996, and (b) the unaudited
Consolidated financial statements and unaudited consolidating balance sheets and

                                       17


<PAGE>



statements of operations of Petroleum and Mesa and their respective Consolidated
Subsidiaries prepared  in reasonable detail in accordance with GAAP and dated as
of March 31, 1997.

         Section 1.2   Exhibits  and  Schedules.   All  Exhibits  and  Schedules
attached to this Agreement are a part hereof for all purposes.

         Section 1.3   Amendment  of Defined  Instruments.  Unless  the  context
otherwise  requires or unless otherwise  provided  herein,  the terms defined in
this  Agreement  which refer to a particular  agreement,  instrument or document
also refer to and include all renewals,  extensions,  modifications,  amendments
and  restatements  of such  agreement,  instrument  or document,  provided  that
nothing contained in this Section shall be construed to authorize or require any
such renewal, extension, modification, amendment or restatement.

         Section 1.4   References and Titles.   All references in this Agreement
to Exhibits, Schedules, articles,  sections,  subsections and other subdivisions
refer to the Exhibits,  Schedules,  articles,  sections,  subsections  and other
subdivisions  of this Agreement  unless  expressly  provided  otherwise.  Titles
appearing at the beginning of any  subdivisions  are for convenience only and do
not  constitute  any  part of such  subdivisions  and  shall be  disregarded  in
construing  the  language  contained  in  such  subdivisions.  The  words  "this
Agreement",  "this Primary  Facility",  "Primary  Facility",  "this instrument",
"herein", "hereof",  "hereby",  "hereunder" and words of similar import refer to
this Agreement as a whole and not to any particular subdivision unless expressly
so limited. The phrases "this section" and "this subsection" and similar phrases
refer only to the sections or  subsections  hereof in which such phrases  occur.
The word "or" is not exclusive,  and the word "including" (in its various forms)
means "including without limitation". Pronouns in masculine, feminine and neuter
genders  shall be  construed  to  include  any  other  gender,  and words in the
singular  form shall be construed  to include the plural and vice versa,  unless
the context otherwise requires.

         Section 1.5   Calculations and Determinations.   All calculations under
the Loan Documents  of interest chargeable  with respect to Eurodollar  Portions
and Competitive Bid Advances shall be made on the  basis of actual days  elapsed
(including  the  first  day but  excluding  the  last)  and a year of 360  days,
subject,  however, to the limitations set forth in Section 8.6 hereof. All other
calculations of interest and fees made under the Loan Documents shall be made on
the basis of actual days  elapsed  (including  the first day but  excluding  the
last) and a year of 365 or 366 days, as appropriate.  Unless otherwise expressly
provided  herein or unless Required  Lenders  otherwise  consent,  all financial
statements  and reports  furnished to  Administrative  Agent or any other Lender
hereunder shall be prepared and all financial  computations  and  determinations
pursuant hereto shall be made in accordance with GAAP.

                                       18


<PAGE>



                                    ARTICLE 2

                           LOANS AND LETTERS OF CREDIT

         Section 2.1   Making the Loans.

(a)  Subject to the terms and  conditions  hereof,  each  Lender  agrees to make
     advances  on a revolving  basis  (herein a  "Revolving  Loan  Advance")  to
     Borrower  from time to time on any Business Day during the Loan  Commitment
     Period,  equal to such Lender's Percentage Share of the aggregate amount of
     Revolving  Loan  Advances  requested by Borrower to be made on such day, so
     long as the aggregate  amount of (i) all Lenders'  Revolving  Loan Advances
     (including any Revolving Loan Advances to be made but not yet made pursuant
     to a  Request  for  Advance)  outstanding  at any  time  plus  (ii)  the LC
     Obligations  of all Lenders at such time plus (iii) all Lenders' Swing Line
     Advances  to  Borrower  plus (iv) all  Lenders'  Competitive  Bid  Advances
     outstanding at such time, does not exceed the Facility  Amount.  Subject to
     the terms and conditions  hereof,  Borrower may borrow,  repay and reborrow
     Revolving Loan Advances.

(b)  No Lender shall be permitted or required to make any Revolving Loan Advance
     under this  Agreement  unless the aggregate of (1) such Lender's  Revolving
     Loan Advances under this  Agreement  (including any Revolving Loan Advances
     to be made but not yet made pursuant to a Request for Advance)  outstanding
     at any time plus (2) such Lender's  share of LC Obligations at such time is
     less than or equal to the least of (i) such  Lender's  Loan  Commitment  or
     (ii) such Lender's Percentage Share of the Facility Amount.

(c)  The  aggregate  amount of all  Revolving  Loan  Advances  requested  of all
     Lenders  in any  Request  for  Advance  must  be an  integral  multiple  of
     $1,000,000  which equals or exceeds  $10,000,000 or must equal the least of
     the unadvanced  portion of the aggregate Loan Commitments of all Lenders or
     the unadvanced  portion of the Facility Amount.  The obligation of Borrower
     to repay to each Lender the aggregate amount of all Revolving Loan Advances
     made by such Lender to Borrower  (herein  called such  Lender's  "Revolving
     Loan"),  together with interest accruing in connection therewith,  shall be
     evidenced by a single  promissory  note (herein  called such Lender's "Loan
     Note") made by Borrower  payable to the order of such Lender in the form of
     Exhibit A-1 with appropriate  insertions.  The amount of principal owing on
     any Lender's Loan Note at any given time shall be the  aggregate  amount of
     all  Revolving  Loan  Advances  theretofore  made by such Lender  minus all
     payments  of  principal  theretofore  received  by such Lender on such Loan
     Note.  Interest  on each Loan Note shall  accrue and be due and  payable as
     provided herein and therein.

         Section 2.2   Requests for Revolving Loan Advances.  Borrower must give
to Administrative Agent not later than 11:00 a.m.,  Dallas, Texas time, for same
day funding, and not later than 1:00 p.m., Dallas, Texas time, for next Business
Day funding, written notice, or telephonic notice promptly confirmed in writing,

                                       19


<PAGE>



of any requested Revolving Loan Advances, after which Administrative Agent shall
give each other Lender  prompt  notice  thereof.  Each such  written  request or
confirmation  must be made in the form  and  substance  of  Exhibit  C  attached
hereto,  duly  completed  (herein  called a "Request  for  Advance").  Each such
telephonic  request shall be deemed a representation,  warranty,  acknowledgment
and  agreement by Borrower as to the matters which are required to be set out in
such written  confirmation.  If all  conditions  precedent  to a Revolving  Loan
Advance have been met, each Lender will on the date requested  remit,  not later
than 1:00 p.m.,  Dallas,  Texas time,  for same day funding,  and not later than
11:00 a.m., Dallas, Texas time, the following Business Day for next Business Day
funding,  to Administrative  Agent at  Administrative  Agent's office in Dallas,
Texas, or to such other office as Administrative  Agent may specify from time to
time by notice to Lenders, the amount of such Lender's Revolving Loan Advance in
immediately  available  funds,  and upon  receipt of such  funds,  unless to its
actual  knowledge any conditions  precedent to such Revolving Loan Advances have
been  neither  met nor waived as  provided  herein,  Administrative  Agent shall
promptly make the Revolving  Loan Advances  available to Borrower.  Each Request
for Advance shall be irrevocable and binding on Borrower.  Unless Administrative
Agent shall have received  prompt notice from a Lender that such Lender will not
make  available to  Administrative  Agent such Lender's  Revolving Loan Advance,
Administrative Agent may in its discretion assume that such Lender has made such
Revolving Loan Advance available to Administrative Agent in accordance with this
Section  and  Administrative  Agent may if it  chooses,  in  reliance  upon such
assumption,  make such Revolving Loan Advance  available to Borrower.  If and to
the extent such Lender shall not so make its Revolving Loan Advance available to
Administrative  Agent, such Lender and Borrower  severally agree to pay or repay
to  Administrative  Agent on demand the amount of such  Revolving  Loan  Advance
together with interest  thereon,  for each day from the date such amount is made
available  to  Borrower  until  the  date  such  amount  is  paid or  repaid  to
Administrative  Agent,  (i) if paid or repaid by Borrower at the  interest  rate
applicable at the time to the other Revolving Loan Advances made on such date of
such  Revolving  Loan Advance and (ii) if paid or repaid by such Lender,  at the
Federal Funds Rate. The failure of any Lender to make any Revolving Loan Advance
to be made by it hereunder  shall not relieve any other Lender of its obligation
hereunder,  if any, to make its Revolving  Loan Advance,  but no Lender shall be
responsible  for the  failure  of any other  Lender to make any  Revolving  Loan
Advance to be made by such other Lender.

         Section 2.3   Rate Elections.  Borrower may from time to time designate
all or any portions of the Loans  (including  any yet to be made  Revolving Loan
Advances  which are to be made prior to or at the  beginning  of the  designated
Eurodollar  Interest  Period but  excluding  any portions of the Loans which are
required to be repaid  prior to the end of the  designated  Eurodollar  Interest
Period and excluding any  Competitive Bid Advance and any Swing Line Advance) as
a "Tranche",  which term refers to a set of Eurodollar Portions of the same type
with identical Eurodollar Interest Periods and with each Lender participating in
such Tranche in accordance  with its  Percentage  Share.  Without the consent of
Required Lenders, Borrower may not make such election,  and Administrative Agent

                                       20


<PAGE>



and Lenders  shall not be required to give effect to such  election,  during the
continuance  of a Default and Borrower may make such an election with respect to
already existing  Eurodollar  Portions only if such election will take effect at
or after the termination of the Eurodollar  Interest Period applicable  thereto.
Each election by Borrower of a Tranche shall:

(a)  Be made in writing in the form and substance of Exhibit D attached  hereto,
     duly completed, herein called a "Rate Election";

(b)  Specify  the  aggregate  amount  of the Loans  which  Borrower  desires  to
     designate as such Tranche,  the first day of the Eurodollar Interest Period
     which is to apply  thereto,  and the  length  of such  Eurodollar  Interest
     Period; and

(c)  Be received  by  Administrative  Agent not later than 10:00  a.m.,  Dallas,
     Texas  time,  on the  third  Business  Day  preceding  the first day of the
     specified Eurodollar Interest Period.

         Promptly  after  receiving  any such  Rate  Election  which  meets  the
requirements  of this  Section,  Administrative  Agent shall  notify each Lender
thereof. Each Rate Election shall be irrevocable. Borrower may not make any Rate
Election which does not specify an Eurodollar Interest Period complying with the
definition  of  "Eurodollar  Interest  Period" in Section 1.1, and the aggregate
amount of the Tranche  elected in any Rate  Election  must be  $10,000,000  or a
higher integral multiple of $1,000,000.  Upon the termination of each Eurodollar
Interest  Period the  portion of each Loan  within the  related  Tranche  shall,
unless the  subject of a new Rate  Election  then taking  effect,  automatically
become a part of the Base Rate  Portion of such Loan and  become  subject to all
provisions of the Loan  Documents  governing  such Base Rate  Portion.  Borrower
shall have no more than fifteen (15) Tranches in effect at any time.

         If requested to do so by Borrower through Administrative Agent at least
two (2) Business Days before the delivery  date of any proposed  Rate  Election,
each Lender will advise  Administrative  Agent before 10:00 a.m., Dallas,  Texas
time,  on the Business Day following  receipt of such request as to whether,  if
Borrower selects a specified  duration of nine (9) or twelve (12) months for the
Eurodollar  Interest  Period  applicable to such proposed  Rate  Election,  such
Lender  expects  that  deposits  in dollars  with a  corresponding  term will be
available  to it in the  relevant  market on the  first  day of such  Eurodollar
Interest  Period in the amount  required to fund the  Eurodollar  Portion of its
Loan to which such  Eurodollar  Interest  Period  would  apply.  Unless a Lender
responds  by such time to the  effect  that it  expects  such  deposits  will be
available to it, Borrower shall not be entitled to select such proposed duration
for such Eurodollar Interest Period.

         Each Lender may, if it so elects,  fulfill its  obligation  to fund any
Eurodollar  Portion by causing one of its foreign  branches or Affiliates (or an
international  banking facility created by such Lender) to fund or continue such
Eurodollar  Portion;  provided,  however,  that such Eurodollar Portion shall be
deemed to have  been made  and held by  such Lender,  and the obligations of the

                                       21


<PAGE>



subject Borrower to repay such Eurodollar  Portion shall nevertheless be to such
Lender for the account of such branch,  or Affiliate (or  international  banking
facility).  In addition,  Borrower hereby consents and agrees that, for purposes
of any  determination  to be made for purposes of Sections 2.17,  2.18, 2.19 and
2.20,  it shall be  conclusively  assumed  that such Lender  elected to fund all
Eurodollar  Portions by purchasing  Dollar deposits in the interbank  eurodollar
market of its designated office.

         Section 2.4   Swing Line Borrowings. In addition to borrowings pursuant
to Section 2.1(a) or Section 2.22, Borrower may request each Lender severally to
submit offers to make advances to Borrower on any Business Day (unless  Borrower
and  Administrative  Agent agree  otherwise and notify  Lenders) during the Loan
Commitment Period as provided in Sections 2.5 and 2.6 (herein called "Swing Line
Advances");  provided,  however,  that (a) each  Lender  may,  but shall have no
obligation to, submit such offers and Borrower may, but shall have no obligation
to,  accept  any such  offers,  (b) at no time shall the  outstanding  aggregate
principal  amount of all Swing  Line  Advances  made by all  Lenders  under this
Agreement  plus all "Swing Line  Advances" (as defined in the 364 Day Facility),
if any, outstanding under the 364 Day Facility exceed $50,000,000, and (c) at no
time  shall the sum of (1) the  outstanding  aggregate  principal  amount of all
Swing  Line  Advances  made by all  Lenders  to  Borrower,  (2) the  outstanding
aggregate principal amount of the Revolving Loans, (3) the outstanding aggregate
principal amount of LC Obligations and (4) the outstanding  aggregate  principal
amount of all Competitive Bid Advances, exceed the Facility Amount.

         Section 2.5   Procedure for Swing Line Advances.

(a)  No later than 11:00 a.m.,  Dallas,  Texas time,  on each  Business Day that
     Borrower  desires the  submission of an offer to make a Swing Line Advance,
     Borrower shall transmit to each Lender (which has indicated to Borrower its
     interest in making a Swing Line  Advance)  and to  Administrative  Agent by
     telecopy a notice in  substantially  the form of Exhibit E attached  hereto
     (herein called a "Request for Swing Line Bid"),  requesting  each Lender in
     its sole  discretion  to submit an offer to make a Swing  Line  Advance  by
     transmitting to Borrower and  Administrative  Agent by telecopy a notice in
     substantially  the same form as Exhibit F attached  hereto (herein called a
     "Swing Line Bid"). Each Swing Line Bid must comply with the requirements of
     this Section and must be received by  Administrative  Agent and Borrower by
     telecopy at their respective  offices by no later than 12:00 noon,  Dallas,
     Texas time, on the date of the Request for Swing Line Bid.

(b)  Each  Swing  Line Bid must  specify  the Lender and the amount of the Swing
     Line Advance that such Lender is  committed,  subject to acceptance of such
     Swing Line Bid by Borrower pursuant to Section 2.5(f) and the provisions of
     Sections  2.5(c) and (d), to lend to Borrower on such date. Each Swing Line
     Bid must  specify  the rate of  interest  per annum which will be the fixed
     rate of interest to be charged for such Swing Line Advance  until  maturity
     (herein called the "Swing Line Rate").


                                       22


<PAGE>



     Unless  Borrower  notifies  the Lenders  otherwise in its Request for Swing
     Line Bid and  Administrative  Agent does not  promptly  oppose such notice,
     each Swing Line  Advance  shall  mature on the next  Business  Day and each
     Swing Line Bid shall  specify such  maturity  date;  provided that no Swing
     Line Advance may have a term of more than fourteen (14) Business  Days, and
     no Swing Line Advance shall mature after the Maturity Date.

(c)  Any  Swing  Line Bid  shall be  disregarded,  and may not be  accepted,  by
     Borrower if such Swing Line Bid:

     (1)   is not substantially in conformity with Exhibit F or does not specify
           all of the information required by Section 2.5(b);

     (2)   contains qualifying, conditional or similar language;

     (3)   proposes  terms  other  than  or in  addition  to those set  forth in
           Section 2.5(b); or

     (4)   is received by Borrower after the time set forth in Section 2.5(a).

(d)  Borrower  may accept any Swing  Line  Bid(s) in whole or in part;  provided
     that:

     (1)   the  aggregate  principal  amount  of  all  Swing  Line  Advances  to
           Borrower  under this  Agreement  plus all "Swing  Line  Advances" (as
           defined  in the 364 Day Facility), if any, outstanding under  the 364
           Day Facility may not exceed $50,000,000;

     (2)   the sum of (i) the aggregate principal amount of the Revolving  Loans
           outstanding at such time,  (ii) the aggregate principal amount  of LC
           Obligations outstanding  at such time,  (iii) the aggregate principal
           amount of Swing Line Advances  outstanding at such time, and (iv) the
           aggregate principal amount of Competitive Bid Advances outstanding at
           such time, does not exceed the Facility Amount;

     (3)   the principal amount of each  Swing Line Advance must be in a minimum
           of $1,000,000 and multiples of $100,000 in excess thereof; and

     (4)   Borrower  may  not  accept  any  Swing Line  Bid that is described in
           Section  2.5(c)  or   that  otherwise   fails   to  comply  with  the
           requirements of this Agreement.

(e)  Borrower  shall not be required  to accept  Swing Line Bids on the basis of
     the lowest Swing Line Rate offered,  but may in its sole discretion  accept
     any of the Swing  Line Bids  regardless  of the  Swing  Line Rate  offered.
     Notwithstanding  the  procedure  set forth in  this Section,  Borrower  may

                                       23


<PAGE>



     request and accept Swing Line  Advances  from any Lender with terms greater
     than one (1) Business  Day,  (but not greater than  fourteen  (14) Business
     Days,  and  maturing on or before the Maturity  Date),  and Borrower is not
     required to make such  requests to all of the Lenders,  provided  that such
     procedure is otherwise in compliance with Sections 2.4, 2.6 and 2.5(f); and

(f)  Borrower  shall  confirm  its  acceptance  or  rejection  of the Swing Line
     Advances offered to it by telecopying to  Administrative  Agent a notice in
     substantially  the form of  Exhibit G  attached  hereto  (herein  called an
     "Acceptance  Notice")  which  shall set forth the Lenders and the amount of
     each Lender's  Swing Line Advances  accepted by Borrower and the Swing Line
     Rate. Such Acceptance Notice must be received by Administrative Agent by no
     later than 12:15 p.m., Dallas, Texas time, on the date of request for Swing
     Line Bid.  Administrative  Agent shall notify the Lenders that  submitted a
     Swing Line Bid for such Business Day of Borrower's  decision by telecopying
     to each such Lender a copy of the Acceptance  Notice by no later than 12:30
     p.m., Dallas, Texas time, on the date of request for Swing Line Bid, unless
     a later time is agreed to by a Lender in respect of the  Acceptance  Notice
     to be received by such Lender.

         Section 2.6   Swing Line Advances.

(a)  Each Lender  whose Swing Line Bid is accepted by Borrower on a timely basis
     pursuant to the  Acceptance  Notice shall wire the amount of its Swing Line
     Advance in immediately  available funds by no later than 1:00 p.m., Dallas,
     Texas  time on the date of  request  for  Swing  Line  Bid,  on such day to
     Administrative  Agent,  which  shall  deposit  such  funds  to  an  account
     designated by Borrower by no later than 1:15 p.m. on the same day.

(b)  Borrower  shall repay each such Swing Line  Advance on or before 1:00 p.m.,
     Dallas, Texas time, on the following Business Day or at such other maturity
     (such date of maturity being no more than fourteen (14) Business Days after
     the date of the Swing Line Advance and no later than the Maturity  Date) as
     is agreed to by Borrower, Administrative Agent and the funding Lenders. The
     repayment plus accrued  interest  shall be paid by Borrower  (which payment
     may be in the form of a Swing Line  Advance  advanced  to  Borrower on that
     day)  to   Administrative   Agent  in  immediately   available  funds  with
     instructions by telecopy to Administrative Agent specifying the amounts and
     the Lenders receiving  application of such proceeds.  If any Lender makes a
     Swing Line  Advance on a day on which  Borrower is to repay all or any part
     of an  outstanding  Swing Line Advance  from such  Lender,  if requested by
     Borrower,  such  Lender  shall  apply the  proceeds  of its new Swing  Line
     Advance to make such repayment and, in such instance,  only an amount equal
     to the difference (if any) between the amount being borrowed and the amount

                                       24


<PAGE>



     being repaid shall be made available by such Lender to Administrative Agent
     as provided in Section  2.6(a),  or remitted by Borrower to  Administrative
     Agent as provided in this Section, as the case may be.

(c)  Interest  on the Swing Line  Advances  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 and
     shall not exceed Maximum  Lawful Rate.  Past due principal and interest (to
     the extent allowed by law) shall bear interest at the lesser of the Default
     Rate or the Maximum Lawful Rate and shall be payable on demand.

(d)  The Swing Line  Advances made by each Lender shall be evidenced by a single
     promissory  note of  Borrower  payable  to the order of such  Lender in the
     amount of $50,000,000 and in substantially the form of Exhibit A-2 attached
     hereto,  with appropriate  insertions  (herein called a "Swing Line Note").
     The date,  amount,  Swing Line Rate and maturity of each Swing Line Advance
     made by a Lender to  Borrower,  and each  payment  made on  account  of the
     principal thereof, shall be recorded by such Lender on its books.

(e)  The Swing Line Advances will be used by Borrower to provide working capital
     for the  operations  of  Borrower  and  its  Subsidiaries  and for  general
     business purposes.  No Swing Line Advances shall be used for the purpose of
     purchasing  or  carrying  any  Margin  Stock  in  violation  of the  Margin
     Regulations.

(f)  The  obligation  of Lenders to make each Swing Line  Advance  after  timely
     acceptance by Borrower is further  subject to the  conditions  contained in
     Article 3.

         Section 2.7   Facility  Fee.    In  consideration   of  each   Lender's
commitment to make Revolving Loan Advances,  Swing Line Advances and Competitive
Bid Advances,  Borrower will pay, or cause the payment, to Administrative  Agent
for the  account of each  Lender an annual  facility  fee payable to each Lender
determined by applying the Facility Fee Rate to such Lender's  Percentage  Share
of the  Facility  Amount  as of the date of such  payment,  payable  in  arrears
quarterly  until  the  Maturity  Date,  with the  first  payment  thereof  to be
September 30, 1997 and  subsequent  payments on the last day of each  successive
calendar  quarter ending on each  September,  December,  March and June, and the
final payment thereof on the Maturity Date.

         Section 2.8   Managing Agents' Fees.   In addition to all other amounts
due to the Managing Agents  under  the Loan  Documents,  Borrower will  pay  the
non-refundable annual fees set forth in those certain Fee Letters dated June 25,
1997.
         Section 2.9   Termination and Reduction of Commitments.

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

(b)  Borrower  may at any  time  terminate,  or from  time to time  reduce,  the
     Commitments;  provided that (i) each reduction of the Commitments  shall be

                                       25



<PAGE>



     in an amount that is an integral  multiple of $1,000,000  and not less than
     $5,000,000 and (ii) Borrower shall not terminate or reduce the  Commitments
     if,  after  giving  effect  to any  concurrent  prepayment  of the Loans in
     accordance  with Section 2.10,  the sum of (i) all Lenders'  Revolving Loan
     Advances (including any Revolving Loan Advances to be made but not yet made
     pursuant to a Request for Advance) outstanding at any time plus (ii) the LC
     Obligations  of all Lenders at such time plus (iii) all Lenders' Swing Line
     Advances  to  Borrower  plus (iv) all  Lenders'  Competitive  Bid  Advances
     outstanding at such time, would exceed the total Commitments.

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

         Section 2.10   Optional Prepayments.  Borrower may, upon notice to each
Lender  identical to that required for related  borrowings under this Agreement,
from time to time and without premium or penalty,  prepay its Notes, in whole or
in  part,  so  long as the  aggregate  amounts  of all  partial  prepayments  of
principal  concurrently  paid on such  Notes  equals  $5,000,000  or any  higher
integral  multiple of  $1,000,000 or the  aggregate  outstanding  balance of the
Loans,  and so long as  Borrower  does not prepay any  Revolving  Loan  Advance,
Competitive Bid Advance or Swing Line Advance except in accordance herewith. Any
amounts  prepaid  pursuant to this  Section  shall be in addition to, and not in
lieu of, all payments  otherwise required to be paid under the Loan Documents at
the time of such prepayment.

         Section  2.11   Payments to Lenders. Except as  expressly  set forth in
Section  2.6(b) with  respect to  repayment  of Swing Line  Advances and Section
2.22(b) with respect to repayment of  Competitive  Bid  Advances,  Borrower will
make each payment which it owes under the Loan Documents to Administrative Agent
at its principal  banking  office in Dallas,  Texas,  or to such other office as
Administrative Agent may specify from time to time by notice to Borrower for the
account of each Lender to whom such payment is owed,  without the application of
any setoff,  deduction  or  counterclaim.  Each such payment must be received by
Administrative  Agent not later than 1:00 p.m., Dallas,  Texas time, on the date
such payment  becomes due and payable,  in lawful money of the United  States of
America  and  in  immediately   available   funds.   Any  payment   received  by
Administrative  Agent  after  such  time will be deemed to have been made on the
next Business Day. Should any such payment become due and payable on a day other
than a Business  Day, the maturity of such payment shall be extended to the next

                                       26


<PAGE>



succeeding Business Day (except,  with respect to any Eurodollar Portion, as may
be otherwise required by the definition of Eurodollar Interest Period),  and, in
the case of a payment of principal or past due interest,  interest  shall accrue
and be payable  thereon for the period of such extension as provided in the Loan
Document under which such payment is due.

         All  payments  applied to  principal  or  interest on any Note shall be
applied first to any interest then due and payable,  then to principal  then due
and payable,  and last to any prepayment of principal and interest in compliance
with Section 2.10.  Unless  otherwise  expressly  provided,  all payments by any
Obligor  pursuant to this  Agreement or any other Loan Document shall be made by
such Obligor to Administrative  Agent for account of Agents and Lenders pro rata
among  Obligations  of the  same  type  and,  if  applicable,  having  the  same
Eurodollar Interest Period or, in the case of Swing Line Advances or Competitive
Bid Advances, the same maturity date.

         Section 2.12   Letters of Credit.  Subject to the terms and  conditions
hereof,  Borrower  may  request  Issuing  Bank to issue one or more  Letters  of
Credit, provided that, after taking such Letter of Credit into account:

(a)  the  sum  of  (1)  the  aggregate   principal  amount  of  Revolving  Loans
     outstanding  at  such  time,  (2)  the  aggregate  principal  amount  of LC
     Obligations outstanding at such time, (3) the aggregate principal amount of
     outstanding Swing Line Advances to Borrower and (4) the aggregate principal
     amount of outstanding Competitive Bid Advances to Borrower, does not exceed
     the least of (i) the  aggregate of all Lenders'  Loan  Commitments  at such
     time or (ii) the Facility Amount;

(b)  the  aggregate  amount of LC  Obligations  outstanding  at such time  after
     giving effect to such request does not exceed $50,000,000;

(c)  the expiration date of such Letter of Credit is prior to the Maturity Date,
     unless otherwise agreed to by all of the Lenders and the Issuing Bank;

(d)  such  Letter of  Credit is to be used for  general  corporate  purposes  of
     Borrower  or any of its  Subsidiaries,  subject  to  paragraph  (e) of this
     Section;

(e)  the terms of such Letter of Credit are  acceptable  to Issuing  Bank in the
     reasonable exercise of its discretion; and

(f)  all other  conditions  in this  Agreement to the issuance of such Letter of
     Credit have been satisfied.

Issuing Bank will honor any such request if the foregoing conditions (a) through
(g) (herein called the "LC Conditions") have been met as of the date of issuance
of such  Letter of Credit.  Nothing  herein  shall be  interpreted  or deemed to
obligate any Agent, other than Administrative  Agent, or any Lender to issue any
Letter of Credit hereunder, and the obligation of Administrative Agent to act as
Issuing  Bank is subject to  paragraphs  (a) through (g) of this  Section and to
satisfaction of the conditions set forth in Article 3.

                                       27


<PAGE>



         Section 2.13   Requesting Letters of Credit. Borrower must make written
application  pursuant  to an LC  Application  for any  Letter of Credit at least
three (3)  Business  Days before the date on which  Issuing Bank is requested to
issue such Letter of Credit.  By making any such  written  application  Borrower
shall be deemed to have represented and warranted that the LC Conditions and the
conditions  precedent  set  forth in  Section  3.2 will be met as of the date of
issuance of such Letter of Credit. Each such LC Application must be made in such
form as may mutually be agreed upon by Issuing Bank and  Borrower.  No more than
two (2) Business Days after the LC  Conditions  for a Letter of Credit have been
met as described in Section 2.12,  Issuing Bank will issue such Letter of Credit
at  Issuing  Bank's  office in Dallas,  Texas or at such  other  office of which
Issuing  Bank shall give  Borrower written  notice.   In the event of a conflict
between any provision contained in this Agreement and any provision contained in
any LC Application, the provision contained in this Agreement shall control.

         Section 2.14   Reimbursement of Letters of Credit.

(a)  Reimbursement  by  Borrower.  Each payment of a draft or demand for payment
     honored by Issuing Bank under a Letter of Credit shall constitute a loan to
     and  obligation  of Borrower.  Promptly  upon receipt of written  notice of
     Issuing Bank's honoring of a Letter of Credit,  Borrower promises to pay to
     Issuing Bank, or to Issuing  Bank's order at such Issuing  Bank's office or
     at such other  office of which  Issuing  Bank shall give  Borrower  written
     notice, on demand, in legal tender of the United States of America, any and
     all amounts paid by Issuing Bank under any Letter of Credit,  together with
     interest on any such  amounts from the date payment is made by Issuing Bank
     under  such  Letter  of  Credit  until  but not  including  the date of the
     repayment of such amounts to Issuing Bank, at the Base Rate;  provided that
     if any such payment or reimbursement shall be reimbursed to Issuing Bank on
     the date Issuing Bank makes such payment or disbursement, interest shall be
     payable  on the  reimbursable  amount at such rate for one (1) day.  In the
     event that Borrower fails to pay when due any Matured LC Obligation owed by
     it to Issuing Bank,  Administrative  Agent may, at its option,  and without
     any notice or further authorization from Borrower, make, pro rata on behalf
     of the Lenders,  a Revolving  Loan Advance under this Agreement to Borrower
     in the amount of such  unpaid  Matured LC  Obligation  (whether or not such
     amount is less than the minimum  Revolving  Loan Advance or would result in
     the  outstanding  Obligations  being  greater than or equal to the Facility
     Amount),  and apply the  proceeds  of such  Revolving  Loan  Advance to the
     payment of such Matured LC Obligation.  Borrower hereby expressly  requests
     and irrevocably authorizes Administrative Agent to do all of the foregoing.
     Revolving Loan Advances used to refinance Matured LC Obligations shall bear
     interest  as  provided in this  Agreement  and in the Loan Notes.  Borrower
     hereby  promises to pay,  when and as due,  all present and future  levies,
     costs and charges  whatsoever  imposed,  assessed,  levied or collected on,
     under or in respect of this  Agreement with respect to any Letter of Credit
     and any  payments of  principal,  interest or other  amounts  made on or in
     respect of any thereof  (excluding,  however,  any such  levies,  costs and

                                       28

<PAGE>



     charges  imposed on or  measured  by the net income or  receipts of Issuing
     Bank).  Borrower  promises  to  indemnify  Issuing  Bank  against,  and  to
     reimburse Issuing Bank on demand for, any of the foregoing levies, costs or
     charges  paid by Issuing  Bank and any loss,  liability,  claim or expense,
     including  interest,  penalties and legal fees, that Issuing Bank may incur
     because of or in  connection  with the failure of Borrower to make any such
     payment  of  levies,  costs or  charges  when and as due or any  payment of
     Matured LC Obligations when and as due.

     Borrower's obligation to reimburse Issuing Bank under this paragraph (a) of
     this Section for payments and disbursements  made by Issuing Bank under any
     Letter of Credit  issued  pursuant to this  Section  shall be absolute  and
     unconditional  under  any and all  circumstances  and  irrespective  of any
     setoff,  counterclaim or defense to payment which Borrower may have or have
     had against Issuing Bank or any Lender, including,  without limitation, any
     defense based on the failure of the demand for payment under such Letter of
     Credit to  conform to the terms of such  Letter of Credit or the  legality,
     validity,  regularity or enforceability of such Letter of Credit; provided,
     however, that Borrower shall not be obligated to reimburse Issuing Bank for
     any wrongful payment or disbursement  made by Issuing Bank under any Letter
     of Credit as a result of acts or omissions constituting gross negligence or
     willful  misconduct  on the part of  Issuing  Bank or any of its  officers,
     employees or agents.

(b)  Reimbursement  by Lenders.  Issuing  Bank  irrevocably  agrees to grant and
     grant and hereby grants to each Lender, and, each Lender irrevocably agrees
     to accept and purchase and hereby  accepts and purchases from Issuing Bank,
     on the terms and  conditions  hereinafter  stated,  for such  Lender's  own
     account and risk an undivided  interest  equal to such Lender's  Percentage
     Share of Issuing Bank's  obligations and rights under each Letter of Credit
     issued  hereunder  and the  amount  of each  draft  paid  by  Issuing  Bank
     thereunder.  In the event that Borrower  should fail to pay Issuing Bank on
     demand the amount of any draft or other  request for payment  drawn under a
     Letter of Credit as provided in paragraph (a) of this Section,  each Lender
     shall,  before 2:00 p.m.,  Dallas,  Texas time, on the Business Day Issuing
     Bank  shall have given  notice to Lenders of  Borrower's  failure to so pay
     Issuing Bank, if such notice is given by 10:00 a.m., Dallas, Texas time (or
     on the Business  Day  immediately  succeeding  the day such notice is given
     after 10:00  a.m.,  Dallas,  Texas  time),  pay to Issuing  Bank at Issuing
     Bank's  offices,  or at such other office of which  Issuing Bank shall have
     given  Lenders  written  notice,  in legal  tender of the United  States of
     America, in same day funds, such Lender's Percentage Share of the amount of
     such draft or other request for payment from Borrower plus interest on such
     amount from the date Issuing Bank shall have paid such draft or request for
     payment to the date of such  payment by such  Lender at the  Federal  Funds
     Rate.  Each Lender's  obligation to reimburse  Issuing Bank pursuant to the
     terms of this Section is irrevocable and unconditional; provided,  however,

                                       29


<PAGE>



     that  Lenders  shall not be  obligated  to  reimburse  Issuing Bank for any
     wrongful  payment or disbursement  made by Issuing Bank under any Letter of
     Credit as a result of acts or omissions  constituting  gross  negligence or
     willful  misconduct  on the part of  Issuing  Bank or any of its  officers,
     employees,  Affiliates or agents.  Whenever, at any time after Issuing Bank
     has made  payment  under any Letter of Credit,  and has  received  from any
     Lender  its  Percentage  Share of such  payment  in  accordance  with  this
     subsection,  Issuing Bank  receives  any payment  related to such Letter of
     Credit (whether directly from Borrower or otherwise,  including proceeds of
     collateral  applied thereto by Issuing Bank), or any payment of interest on
     account thereof, Issuing Bank will distribute to such Lender its Percentage
     Share thereof;  provided,  however, that in the event that any such payment
     received by Issuing Bank shall be required to be returned by Issuing  Bank,
     such Lender  shall return to Issuing  Bank the portion  thereof  previously
     distributed  by Issuing  Bank to it. Each Lender shall  indemnify  and hold
     Issuing  Bank  harmless  from and against  any and all losses,  liabilities
     (including, without limitation, liabilities for penalties), actions, suits,
     judgments,  demands,  damages,  costs  and  expenses  (including,   without
     limitation, attorneys' fees and expenses) resulting from any failure on the
     part of such  Lender  to  provide,  or from  any  delay  in  providing,  in
     accordance  with this  paragraph to Issuing Bank such  Lender's  Percentage
     Share of the amount of any payment or disbursement  made by Issuing Bank to
     settle its obligations under any draft drawn under any Letter of Credit.

(c)  Cash Collateral  Upon Event of Default.  Upon the occurrence of any Default
     or Event of Default and the  acceleration  of the maturity of the Loans, an
     amount equal to the amount of the aggregate contingent liability of Issuing
     Bank and  Lenders in  connection  with each Letter of Credit then in effect
     shall be deemed (as  between  Lenders  and  Borrower)  to have been paid or
     disbursed  by  Issuing  Bank  and  Lenders  under  such  Letter  of  Credit
     (notwithstanding  that  such  amount  may not in fact  have been so paid or
     disbursed),   and  Borrower  shall  be  immediately  obligated  to  pay  to
     Administrative Agent for the pro rata benefit of Lenders in accordance with
     their respective  Percentage  Shares,  the amount so deemed to have been so
     paid  or  disbursed,  which  payment  shall  be  made  by  depositing  Cash
     Collateral with  Administrative  Agent in accordance with the provisions of
     paragraph (e) of this Section.

(d)  Procedures  for  Depositing  and  Returning  of Cash  Collateral.  Any cash
     collateral  amounts  received  by  Administrative  Agent  pursuant  to  the
     provisions of paragraph (c) of this Section (the "Cash  Collateral")  shall
     be  deposited  in a  separate  interest  bearing  cash  collateral  account
     maintained  at the  offices  of  Administrative  Agent  or  another  Lender
     designated by  Administrative  Agent under the sole dominion and control of
     Administrative  Agent and shall be retained by Administrative Agent for the
     pro rata benefit of Lenders in accordance with their  respective  Loans and
     LC  Obligations as collateral  security for, and Borrower  hereby grants to
     Administrative Agent for the benefit of the Lenders a security  interest in

                                       30


<PAGE>



     such Cash  Collateral  including  all  interest  accruing  thereon  and the
     proceeds  thereof  to  secure,  first the  payment  of the  Obligations  of
     Borrower  under or in connection  with its Letters of Credit,  and then the
     other  Obligations of Borrower under and in connection  with this Agreement
     and the other Loan  Documents,  including all Obligations of Borrower under
     its  Notes  pro  rata to each  Lender  in  accordance  with its  Loans  and
     Percentage  Share of all LC Obligations.  All Cash Collateral  delivered to
     Administrative  Agent may be applied by  Administrative  Agent from time to
     time against any of Borrower's  reimbursement  Obligations  with respect to
     any Letter of Credit as to which a draw is made.  If and to the extent that
     the Default or Event of Default giving rise to the Required Lenders' demand
     for Cash  Collateral  has  been  cured to the  reasonable  satisfaction  of
     Required  Lenders and the  acceleration of the Loans has been rescinded and
     annulled  pursuant to Section 6.3 or (a) all  Obligations  of Borrower have
     been fully paid and satisfied,  (b) no Letters of Credit remain outstanding
     and (c) Lenders'  Commitments have terminated,  Administrative  Agent shall
     promptly return to Borrower,  upon Borrower's request therefor, all amounts
     previously paid to  Administrative  Agent pursuant to paragraph (c) of this
     Section and not theretofore returned by Administrative Agent to Borrower or
     applied by  Administrative  Agent to reduce amounts  payable by Borrower to
     Lenders under or with respect to the Letters of Credit or other amounts due
     to Lenders or Agents hereunder or under the other Loan Documents.

         Section 2.15   Letter of  Credit Fees.   In  consideration  of  Issuing
Bank's issuance  of any  Letter of  Credit  and each other Lender's agreement to
purchase a risk participation therein,  Borrower agrees to pay to Administrative
Agent:

(a)  a letter of credit  fronting  fee for the account of the Issuing  Bank with
     respect to such Letter of Credit upon  issuance of each Letter of Credit in
     an amount equal to the greater of (x) $500 or (y) one-eighth of one percent
     (1/8 of 1%) per annum calculated on the face amount thereof; and

(b)  a letter of credit fee for the account of  Lenders,  to be  distributed  to
     Lenders ratably in accordance with their Percentage  Shares,  calculated on
     the face  amount of each  Letter of Credit in the amount of the  applicable
     Eurodollar  Margin,  payable  quarterly in arrears and at the expiration or
     termination of each Letter of Credit.

         Section 2.16   Capital Reimbursement. If either (a) the introduction or
implementation  of,  or  the  compliance  with,  or  any  change  in,  or in the
interpretation  of, any law,  rule or  regulation,  or (b) the  introduction  or
implementation  of or the  compliance  with any request,  directive or guideline
from any central bank or Governmental Authority (whether or not having the force
of law) affects or would affect the amount of capital  required to be maintained
by any Lender or any corporation  controlling  any Lender,  then, upon demand by
such Lender,  Borrower  will  immediately  pay to  Administrative  Agent for the

                                       31


<PAGE>



benefit of such Lender,  from time to time as  specified  by such  Lender,  such
additional  amount  which such  Lender  shall  determine  to be  appropriate  to
compensate  such Lender or any corporation  controlling  such Lender in light of
such circumstances,  to the extent that such Lender reasonably  determines that,
because of the existence of such  circumstances,  the amount of any such capital
would be increased  or the rate of return on any such capital  would be reduced,
in whole or in part,  by or as a  consequence  of the existence of such Lender's
Commitments,  its Loans, its Percentage  Share of LC Obligations,  and its other
commitments  under this  Agreement to  Borrower,  subject to the  provisions  of
Section 2.21.

         Section 2.17   Increased Cost of Eurodollar Portions. If any applicable
domestic or foreign law, treaty,  rule,  directive or regulation (whether now in
effect or hereinafter  enacted or  promulgated,  including  Regulation D) or any
interpretation or administration  thereof by any Governmental  Authority charged
with the  interpretation  or  administration  thereof (whether or not having the
force of law):

(a)  shall  change  the  basis of  taxation  of  payments  to any  Lender of any
     principal,  interest,  or  other  amounts  attributable  to any  Eurodollar
     Portion of its Loans,  its Percentage  Share of LC Obligations or its Swing
     Line  Advances or  Competitive  Bid  Advances or  otherwise  due under this
     Agreement  in respect of any  Eurodollar  Portion of its Loans or its Swing
     Line Advances or Competitive  Bid Advances (other than taxes imposed on the
     overall net income of such  Lender or any lending  office of such Lender by
     any  jurisdiction  in which  such  Lender  or any such  lending  office  is
     located);

(b)  shall change, impose, modify, apply or deem applicable any reserve, special
     deposit or similar requirements in respect of any Eurodollar Portion of any
     Lender (excluding those for which such Lender is fully compensated pursuant
     to  adjustments  made in the  definition  of Adjusted  Eurodollar  Rate) or
     against assets of,  deposits with or for the account of, or credit extended
     by, such Lender; or

(c)  shall  impose on any  Lender,  the  certificate  of  deposit  market or the
     interbank  eurocurrency  deposit market any other  condition  affecting any
     Eurodollar Portion;

and the result of any of the  foregoing  (a) through (c) is to (1)  increase the
cost to any Lender of funding or maintaining any Eurodollar Portion,  Swing Line
Advance or  Competitive  Bid  Advance,  as the case may be, or (2) to reduce the
amount of any sum receivable by any Lender in respect of any Eurodollar Portion,
Swing Line Advance or Competitive Bid Advance,  as the case may be, by an amount
reasonably  deemed by such Lender to be  material;  then (i) such  Lender  shall
promptly notify Administrative Agent and Borrower in writing of the happening of
such event,  (ii) Borrower shall  thereafter  upon demand pay to  Administrative
Agent for the account of such Lender such  additional  amount or amounts as will
compensate  such Lender for such  additional  cost or reduction,  subject to the
provisions of Sections 2.21 and 2.19, and (iii) Borrower may elect, by giving to
Administrative Agent and  Lender not less than three  (3) Business Day's notice,

                                       32


<PAGE>



to convert all  (but not less than all)  of any such  Eurodollar  Portion into a
part of the Base Rate Portion.

         Section 2.18   Availability.  If (a) any  change  in  applicable  laws,
treaties,  rules  or  regulations  or in the  interpretation  or  administration
thereof in any  jurisdiction  whatsoever,  domestic  or  foreign,  shall make it
unlawful  or  impracticable  for  any  Lender  to fund  or  maintain  Eurodollar
Portions,  or shall materially  restrict the authority of any Lender to purchase
or take  offshore  deposits of dollars  ("Eurodollars"),  or to issue Letters of
Credit  or fund  its  Percentage  Share  of LC  Obligations,  or (b) any  Lender
determines that matching deposits appropriate to fund or maintain any Eurodollar
Portion are not available to it, or (c) any Lender  determines  that the formula
for calculating the Adjusted Eurodollar Rate does not fairly reflect the cost to
such  Lender of making or  maintaining  loans based on such  rates,  then,  upon
notice by such Lender to Administrative Agent and to Borrower,  Borrower's right
to elect  Eurodollar  Portions  or to  apply  for  Letters  of  Credit  shall be
suspended   to  the   extent   and  for  the   duration   of  such   illegality,
impracticability,  restriction  or condition,  and all  Eurodollar  Portions (or
portions thereof) which are then outstanding or are then the subject of any Rate
Election and which cannot  lawfully or practicably be maintained or funded shall
immediately  become or remain part of the Base Rate  Portions  of such  Lender's
Loan,  subject to the provisions of Sections 2.21 and 2.19.  Borrower  agrees to
indemnify Administrative Agent and each Lender and hold Administrative Agent and
each Lender harmless against all costs, expenses, claims, penalties, liabilities
and  damages  which  may  result  from any such  change  in law,  treaty,  rule,
regulation,  interpretation  or  administration,  subject to the  provisions  of
Section 2.21.

         Section 2.19   Funding  Losses.  In addition  to its other  obligations
hereunder,  subject to the provisions of Section 2.21,  Borrower shall indemnify
each Lender  against,  and  reimburse  each  Lender on demand  for,  any loss or
expense  incurred or sustained by such  Lender,  determined  as provided in this
Section,  as a result of (a) any payment or  prepayment  (whether  authorized or
required  hereunder or otherwise) of all or a portion of a Eurodollar Portion of
Borrower on a day other than the day on which the applicable Eurodollar Interest
Period  ends,  (b) any payment or  prepayment,  whether  required  hereunder  or
otherwise,  of a Loan of  Borrower  made  after the  delivery,  but  before  the
effective date, of a Rate Election,  if such payment or prepayment prevents such
Rate Election from becoming  fully  effective,  (c) the failure of any Revolving
Loan  Advance or Swing Line  Advance or  Competitive  Bid  Advance to be made to
Borrower or of any Rate  Election of  Borrower  to become  effective  due to any
condition  precedent  to a  Revolving  Loan  Advance  or Swing  Line  Advance or
Competitive  Bid  Advance  not  being   satisfied,   due  to  the  inability  of
Administrative  Agent (acting reasonably and in accordance with Section 2.18) to
determine a Eurodollar  Rate for a Eurodollar  Portion of Borrower or due to any
other action or inaction of any Obligor,  (d) any conversion (whether authorized
or required  hereunder  or  otherwise)  of all or any portion of any  Eurodollar
Portion of  Borrower  into a Base Rate  Portion or into a  different  Eurodollar
Portion on a day other than the day on which the applicable  Eurodollar Interest
Period ends,  (e) any payment or  prepayment of all or a portion of a Swing Line
Advance to  Borrower on a day other than the  maturity  date for such Swing Line

                                       33


<PAGE>



Advance or (f) any payment or  prepayment  of all or a portion of a  Competitive
Bid  Advance  on a day other than the  maturity  date for such  Competitive  Bid
Advance.

         Upon the occurrence of an event as described in subsections (a) through
(f) of this Section,  the method to be used by each Lender to calculate the loss
or expense  incurred by reason of the liquidation or reemployment of deposits or
other funds required by such Lender to fund or maintain  Eurodollar  Portions of
Revolving Loan Advances, Swing Line Advances or Competitive Bid Advances, as the
case may be, is as follows:

    Funding Loss = P x (F-R) x D/360

         P      =      principal  amount  of  payment,  prepayment,  conversion,
                       non-borrowing or non-effective Rate Election
         F      =      Eurodollar  Rate or  Swing  Line Rate or  Competitive Bid
                       Rate,   as  the  case  may  be   (adjusted  for   Reserve
                       Percentage),   utilized  in   the   calculations  of  the
                       Eurodollar  Rate  or  Swing Line  Rate or Competitive Bid
                       Rate, as  the case may be,  on  the Eurodollar Portion or
                       Swing Line  Advance  or  Competitive Bid Advance which is
                       being  paid,  prepaid,  converted,  not  borrowed  or not
                       subject to effective Rate Election
         R      =      reinvestment rate (as hereinafter defined)
         D      =      number of days from the date of the payment,  prepayment,
                       conversion,  non-borrowing or non-effectiveness until the
                       day  on  which  the  Eurodollar  Interest  Period  of the
                       Eurodollar  Portion  ends  or the Swing  Line  Advance or
                       Competitive Bid Advance matures

Reinvestment  rate as it is used  herein will be equal to the  Eurodollar  Rate,
adjusted for the Reserve  Percentage  quoted to such  Lender,  or the Swing Line
Rate or  Competitive  Bid Rate that would be quoted by such Lender,  as the case
may be,  effective  for the date on which the payment,  prepayment,  conversion,
non-borrowing  or  non-effectiveness  occurs.  For purposes of  determining  the
reinvestment rate for purposes of this Section,  the Eurodollar Rate will be the
quote for  either one (1)  month,  two (2)  months,  three (3)  months,  six (6)
months,  nine (9) months or twelve (12) months, the Competitive Bid Rate will be
the quote for a number of days  between  seven (7) and 360,  and the Swing  Line
Rate will be the quote for a number of days between one (1) and  fourteen  (14),
whichever  most closely  approximates  (but which may contain more or fewer days
than) the number of days from the date of the payment,  prepayment,  conversion,
non-borrowing or non-effectiveness until the last day of the relevant Eurodollar
Interest Period or the scheduled maturity, as the case may be, of the Eurodollar
Portion,  Competitive Bid Advance or Swing Line Advance,  as the case may be, in
respect  of  which  the  payment,  prepayment,   conversion,   non-borrowing  or
non-effectiveness  occurs;  provided that if such number of days in respect of a
Eurodollar Rate is the midpoint between two such periods,  such rate will be the
lower of the two rates for such periods.

                                       34


<PAGE>



         Section 2.20   Taxes.  All payments by  Borrower of  principal  of, and
interest  on,  the  Loans,  the LC  Obligations  and all other  amounts  payable
hereunder shall be made free and clear of and without  deduction for any present
or future  income,  excise,  stamp,  or franchise  taxes and other taxes,  fees,
duties,  withholdings or other  charges of any nature  whatsoever imposed by any
taxing authority, but excluding franchise taxes and taxes imposed on or measured
by any Lender's  net income or receipts  (such  non-excluded  items being called
"Taxes").  In the event that any withholding or deduction from any payment to be
made by Borrower  hereunder is required in respect of any Taxes  pursuant to any
applicable law, rule or regulation,  then,  subject to the provisions of Section
2.21, Borrower will:

(a)  pay directly to the relevant  authority  the full amount  required to be so
     withheld or deducted;

(b)  promptly  forward  to  Administrative  Agent an  official  receipt or other
     documentation  satisfactory to Administrative Agent evidencing such payment
     to such authority; and

(c)  pay to  Administrative  Agent for the account of the  applicable  Lender(s)
     such  additional  amount(s)  as is  necessary to ensure that the net amount
     actually  received  by each  Lender  will equal the full amount such Lender
     would have received had no such  withholding or deduction been required and
     Borrower hereby  acknowledges  that it is not entitled to and will not seek
     recovery or  restitution  of any amount due to any of the Lenders or Agents
     and paid by  Borrower  pursuant  to this clause (c) or pursuant to the next
     sentence.

If any Taxes are directly  asserted against any Agent or any Lender with respect
to any payment  received by such Agent or such Lender  hereunder,  such Agent or
such  Lender  may pay such  Taxes  and,  if paid in good  faith,  Borrower  will
promptly pay such additional amounts to Administrative  Agent for the account of
such Lender or Agent  (including  any  penalties,  interest or  expenses)  as is
necessary in order that the net amount received by such person after the payment
of such Taxes  (including any taxes on such  additional  amount) shall equal the
amount such person would have received had no such Taxes been asserted,  subject
to the provisions of Section 2.21.

         Borrower  shall pay all stamp,  transaction,  registration  and similar
taxes  (including  financial  institutions'  duties,  debit taxes or other taxes
payable  by  return  and  taxes  passed  on to any  Lender or Agent by a bank or
financial institution (collectively "Stamp Taxes") and, if Borrower fails to pay
any such charges or taxes after reasonable notice from any such Lender or Agent,
fines and  penalties)  which may be  payable  or  determined  to be  payable  in
relation  to  the  execution,  delivery,  performance  or  enforcement  of  this
Agreement or any Loan Document or any other transaction contemplated by any Loan
Document to which Borrower is a party.  Borrower hereby  indemnifies each Lender
and Agent  against any  liability  resulting  from delay or omission to pay such
charges or taxes except to the extent the liability  results from failure by the
relevant  Lender or Agent to pay any such tax after having been delivered  funds

                                       35


<PAGE>



to do so by Borrower or to the extent such  liability is for fines and penalties
resulting from such Lender's or Agent's failure to provide  reasonable notice to
Borrower as provided herein.

         If  Borrower  fails to  pay  any Taxes  or Stamp  Taxes when due to the
appropriate taxing authority or fails to remit to Administrative Agent,  for the
account of the respective Lenders,   the required  receipts  or  other  required
documentary evidence,  Borrower shall indemnify Lenders for any Taxes,  interest
or penalties  that may  become  payable  by  any Lender  as a result of any such
failure,  subject to the  provisions of  Section  2.21.  For  purposes  of  this
Section,  a distribution hereunder  by  Administrative Agent or any Lender to or
for the  account of any Lender or Agent shall be deemed a payment by the subject
Borrower.

         Borrower  waives any  statutory  right to recover from any Agent or any
Lender any amount  due to any such  Agent or Lender and paid by  Borrower  under
this Section.

         On or prior to the first  date on which  interest  or fees are  payable
hereunder for the account of any Lender, each Lender that is organized under the
laws of a jurisdiction other than the United States shall execute and deliver to
Administrative  Agent, three (3) or more (as Administrative Agent may reasonably
request) United States Internal Revenue Service Forms 1001 or 4224 or such other
forms or documents (or successor forms or documents),  appropriately  completed,
as may be applicable to establish the extent, if any, to which a payment to such
Lender is exempt from  withholding  or deduction of Taxes.  Each Lender which so
delivers a Form 1001 or 4224  further  undertakes  to deliver to  Administrative
Agent  three (3)  additional  copies of such  form (or a  successor  form) on or
before  the date  that  such  form  expires  or  becomes  obsolete  or after the
occurrence of any event  requiring a change in the most recent form so delivered
by it, and such amendments  thereto or extensions or renewals  thereof as may be
reasonably requested by Administrative  Agent, in each case certifying that such
Lender is entitled to receive  payments from Borrower  under this  Agreement and
the Notes without  deduction or  withholding of any United States federal income
taxes,  unless an event (including  without limitation any change in treaty, law
or  regulation)  has occurred prior to the date on which any such delivery would
otherwise  be  required  which  renders  all such  forms of the type  previously
delivered  inapplicable  or which would prevent such Lender from duly completing
and   delivering   such  form  with  respect  to  it  and  such  Lender  advises
Administrative  Agent that it is not capable of receiving  such  payments on the
basis  reflected in such  previously  delivered  form  without any  deduction or
withholding  of United States  federal  income tax.  Administrative  Agent shall
provide one (1) copy of each of such forms or  documents so provided to Borrower
and Documentation Agent.

         Section 2.21   Make-Whole  Qualifications.  Each  Lender's  claims  for
reimbursements,  payments,  indemnities or otherwise under Sections 2.16,  2.17,
2.18,  2.19 and 2.20 and Borrower's  obligation with respect  thereto,  shall be
limited and qualified by and subject to the following:

                                       36


<PAGE>



(a)  Borrower's  obligation  to pay,  satisfy or  recognize  such claim shall be
     limited to costs or losses incurred within one (1) year  immediately  prior
     to any demand or request therefor upon Borrower;

(b)  each Lender's demand for reimbursement,  payment or indemnity from Borrower
     must be  limited to that  which is being  generally  applied at the time by
     such  Lender  for  comparable  borrowers  and  credits  subject  to  credit
     agreements  similar to  this Agreement,  but  without regard to  provisions
     similar to this Section;

(c)  each  Lender  which  asserts its rights  with  respect  thereto or which is
     seeking or imposing such reimbursement,  payment or indemnity shall provide
     evidence  regarding  the  basis  of  such  claim  and the  calculation  and
     application  thereof in reasonable  detail and, in determining such amount,
     each Lender may use reasonable methods of attribution and averaging;

(d)  each Lender which is seeking payment or  reimbursement  pursuant to Section
     2.20 shall, if so requested by Borrower, use reasonable efforts (subject to
     the overall policy  considerations of such Lender) to designate a different
     lending office hereunder if to do so will avoid the need for, or reduce the
     amount of, any such payment or reimbursement;  provided that, Lender would,
     in its sole but  reasonable  determination,  suffer no  material  economic,
     legal or regulatory disadvantage or burden;

(e)  Borrower  may,  in  its  sole  discretion,  elect,  unless  and  until  the
     applicable  Lender  notifies  Borrower that the  circumstances  giving rise
     thereto no longer apply to such Lender, that, to the extent that a Lender's
     claims for such  reimbursements,  payments or indemnities  would be reduced
     thereby,  that  subject to Section  2.19,  (1) all Loans to Borrower  which
     would otherwise be made by such Lender as Eurodollar Portions shall be made
     instead as Base Rate Portions (all of which interest and principal shall be
     payable as provided herein with respect to the related Eurodollar  Portions
     of the Lenders), and (2) after each Eurodollar Portion has been repaid, all
     payments of principal  which would otherwise would be applied to repay such
     Eurodollar  Portion shall be applied to repay Base Rate  Portions  instead;
     and

(f)  Borrower may designate a  replacement  Lender (which may be one (1) or more
     of the then  existing  Lenders  hereunder  and  which  shall be  reasonably
     satisfactory to Administrative  Agent) to purchase the Notes and Percentage
     Share of LC  Obligations,  in each case  without  recourse,  and assume the
     Commitments  and all other  obligations  hereunder  of any Lender  that has
     suspended the availability of Eurodollar  Portions pursuant to Section 2.18
     or that has demanded  reimbursement,  payment or indemnity  under  Sections
     2.16, 2.17, 2.18, 2.19 or 2.20, and such Lender shall be obligated to sell,
     transfer  and  deliver  all  of  its  Notes,  and  Percentage  Share  of LC
     Obligations to such replacement Lender for the outstanding principal amount
     of such Notes,  plus Lender's  Percentage Share of LC Obligations,  plus in
     each case,  accrued  interest  thereon and such Lender's portion of accrued
     but  unpaid  fees  through  the  date of such  purchase,  and  permit  such

                                       37


<PAGE>



     replacement  lender to assume its Commitments.  Borrower shall be obligated
     to pay all additional  amounts due to the Lender being replaced pursuant to
     Sections 2.16,  2.17, 2.18, 2.19 and 2.20 through the date of such purchase
     and assumption;  provided, that if the replacement Lender fails to purchase
     all  such  rights  and  interests  and assume all such  Commitments  on the
     specified  date  in  accordance  herewith,  Borrower  shall  continue to be
     obligated to  pay  such  amounts  to such  Lender  which was  to have  been
     replaced  and  provided further that Borrower  shall pay any Taxes or Stamp
     Taxes, if any, as a result of such transfer.

         Section 2.22   Competitive Bid Advances.

(a)  In  addition  to  borrowings  pursuant  to Section  2.1(a) or Section  2.4,
     Borrower may request each Lender  severally to submit offers (herein called
     a "Competitive Bid Offer") to make advances to Borrower on any Business Day
     during the Loan  Commitment  Period as  provided  in this  Section  (herein
     called "Competitive Bid Advances"); provided, however, that each Lender may
     in its sole discretion,  but shall have no obligation  whatsoever to submit
     such offers,  and Borrower may, but shall have no obligation to, accept any
     such offers.

(b)  Procedure for Competitive Bid Advances.

     (i)   Borrower may request Competitive Bid Advances by delivering a request
           for a Competitive Bid Advance to each Lender  (which has indicated to
           Borrower  its  interest  in  making  a  Competitive  Bid Advance) and
           Administrative  Agent not later than 9:00 a.m.,  Dallas,  Texas time,
           one  (1)  Business  Day prior to the proposed  borrowing  date.  Each
           request for a Competitive Bid Advance shall be in  substantially  the
           form of  Exhibit N hereto  (herein called a  "Request for Competitive
           Bid Offer") and may solicit bids  for Competitive Bid Advances having
           not  more   than  three  (3)  alternative   maturity  dates  and  for
           Competitive  Bid Advances in any respective principal amount equal to
           $10,000,000 or  an integral  multiple of $1,000,000 in excess thereof
           for  each  maturity  date  requested.  The  maturity  date  for  each
           Competitive  Bid Advance shall be not less than fifteen (15) days nor
           more  than  360 days  after the  borrowing  date therefor (and in any
           event not after the  Maturity Date). 

     (ii)  Upon receipt of a Request for Competitive Bid Offer,  any Lender that
           elects,  in its sole discretion, to do so, shall irrevocably offer to
           make  one (1) or more  Competitive Bid  Advances  at a fixed  rate of
           interest  determined by  such Lender  in its sole discretion for each
           such Competitive Bid Advance.  Any such  irrevocable  offer  shall be
           made by  delivering a Competitive  Bid Offer to  Administrative Agent
           and to Borrower,  before 9:00 a.m.,  Dallas,  Texas time  (or, in the
           case of a Competitive Bid Offer by Administrative Agent,  before 8:45
           a.m., Dallas,  Texas time),  on the proposed borrowing date,  setting
           forth  the  maximum  amount of  Competitive  Bid  Advances  for  each
           maturity date,  and the aggregate  maximum  amount for  all  maturity
           dates, which such Lender would be willing to make  (which amounts may
           exceed such  Lender's  Percentage  Share of the Commitments)  and the

                                       38


<PAGE>



           fixed rate of  interest at which  such Lender is willing to make each
           such Competitive Bid Advance, which fixed rate of interest may or may
           not be,  in such Lender's  discretion, different for each Competitive
           Bid Advance (respectively herein a "Competitive Bid Rate").  Borrower
           shall pay  to Administrative  Agent a fee of $500 on  each  day  that
           Borrower accepts a Competitive Bid Offer.

     (iii) The Competitive  Bid Offer  delivered by each Lender in response to a
           Request for  Competitive Bid Offer shall set forth an amount proposed
           to  be  loaned by  such Lender  for each maturity  date  requested by
           Borrower  that  is  equal to $10,000,000  or an  integral multiple of
           $1,000,000 in excess thereof. Any Competitive Bid Offer by any Lender
           that:  (A) does  not substantially  conform to the  form of Exhibit O
           hereto, (B) contains qualifying, conditional or similar language, (C)
           proposes terms other than  or in addition  to those set  forth in the
           applicable Request  for Competitive  Bid Offer or  (D) is received by
           Borrower after  the applicable  time specified  in  this  subsection,
           shall  be  rejected  by   Borrower  and  Administrative  Agent   (and
           Administrative  Agent  shall  notify  the  relevant  Lender  of  such
           rejection for one or more of the  matters described in  the foregoing
           (A)  through  (D) by telephone and  telecopy as  soon as  practicable
           thereafter).

     (iv)  Borrower shall before 10:00 a.m., Dallas, Texas time, on the proposed
           borrowing date either, in its absolute discretion:

           (A)  withdraw  such  Request  for Competitive  Bid  Offer  by  giving
                telephonic notice to that effect;

           (B)  accept one  (1) or more of the Competitive Bid Offers  by giving
                telephonic notice to Administrative Agent (immediately confirmed
                by delivery to Administrative Agent by facsimile transmission of
                a Bid Acceptance)  of the amount  of Competitive  Bid Advance(s)
                for  each  relevant maturity  date to be  made by  the  relevant
                Lender(s) (which amount for  each such  maturity date  shall  be
                equal to or less than the maximum amount for such  maturity date
                specified in  the Competitive Bid  Offer of such Lender(s),  and
                for all maturity dates  included in such  Competitive Bid  Offer
                shall  be equal  to or less  than the  aggregate  maximum amount
                specified in such Request for Competitive Bid Offer for all such
                maturity  dates)  and  reject  any  Competitive Bid  Offers  not
                accepted   by   Borrower   by   giving   telephonic   notice  to
                Administrative Agent of such rejection; provided,  however, that
                (1)  Borrower  may not  accept  Competitive Bid  Offers  for any
                maturity date in  an aggregate principal amount in excess of the
                maximum  principal amount  requested  in the related Request for

                                       39


<PAGE>



                Competitive Bid Offer (and Competitive Bid Advances allocated to
                a Lender on a  borrowing date  for each  relevant  maturity date
                shall  be in  a principal  amount  equal  to  $10,000,000  or an
                integral multiple of  $1,000,000  in excess  thereof);   and (2)
                Administrative Agent shall notify  the Lender  that  submitted a
                Competitive   Bid  Offer  for  such  Business  Day of Borrower's
                decision by telecopying  to each  such  Lender a copy of the Bid
                Acceptance by no later than 12:00  noon,  Dallas, Texas time, on
                the borrowing  date specified in the Request for Competitive Bid
                Offer; or

           (C)  Borrower may  accept or reject  any Competitive  Bid Offer(s) in
                whole or in part;  provided that after giving effect to any such
                accepted Competitive Bid Offer(s),  the sum of (i) the aggregate
                principal amount of the  Revolving Loans and Swing Line Advances
                outstanding at such time, (ii) the aggregate principal amount of
                LC Obligations outstanding at such time, and (iii) the aggregate
                principal amount of Competitive Bid Advances outstanding at such
                time, does not exceed the Facility Amount.

     (v)   If  Borrower  notifies  Administrative   Agent  that  a  Request  for
           Competitive  Bid  Offer  is  withdrawn pursuant to clause (iv) above,
           the Competitive Bid Advance requested thereby shall not be made.

     (vi)  Each Lender which is to make a Competitive Bid  Advance shall, before
           1:00 p.m., Dallas, Texas time, on the borrowing date specified in the
           Request for Competitive Bid Offer applicable thereto,  make available
           to Administrative Agent in immediately available  funds the amount of
           each   Competitive   Bid   Advance   to   be  made  by  such  Lender.
           Administrative  Agent  shall   deposit   such  funds  to  an  account
           designated  by  Borrower  by no later than 1:15 p.m.,  Dallas,  Texas
           time, on such date.

     (vii) Borrower shall repay to Administrative Agent, for the account of each
           Lender which has made a Competitive Bid Advance, on the maturity date
           of  each  Competitive  Bid  Advance  (such  maturity  date being that
           specified by  Borrower for repayment of such Competitive Bid  Advance
           in the  related Request for  Competitive Bid  Offer) the  then unpaid
           principal amount of such Competitive Bid Advance.  Borrower shall not
           have the right to prepay any principal  amount of any Competitive Bid
           Advance.  If any Lender  makes a Competitive Bid  Advance on a day on
           which  Borrower  is  to  repay  all  or  any  part  of an outstanding
           Competitive Bid Advance from such Lender,  if requested  by Borrower,
           such  Lender shall  apply the  proceeds  of its new  Competitive  Bid
           Advance to make such repayment and,  in such instance, only an amount
           equal to the difference  (if any)  between the  amount being borrowed

                                       40


<PAGE>



           and the amount being repaid shall be made available by such Lender to
           Administrative Agent as provided in Section 2.22(b)(vi), or  remitted
           by Borrower to  Administrative  Agent  as  provided  in this  Section
           2.22(b)(vii), as the case may be.

    (viii) Borrower shall  pay interest on  the unpaid  principal amount of each
           Competitive  Bid  Advance  from the  borrowing  date  to  the  stated
           maturity date thereof, at the rate of interest determined pursuant to
           clause (b) (ii) above  (calculated on the basis of a 360 day year for
           actual days elapsed including the first but excluding the last),  but
           not  in excess  of the Maximum Lawful Rate,  payable on the  maturity
           date  with  respect to  such  Competitive  Bid  Advance  and, if such
           maturity date is  more than  90 days  after the date  of making  such
           Competitive Bid Advance, on such ninetieth day and each ninetieth day
           occurring after such ninetieth day until the maturity date. If all or
           a portion of  the principal  of or  interest  on any  Competitive Bid
           Advance shall not be  paid when  due (whether at the stated maturity,
           by acceleration  or  otherwise), without limiting  any rights  of any
           Lender under this Agreement,  (i) such overdue principal amount shall
           bear interest from the date on which such payment was due (other than
           on the scheduled  maturity date with respect thereto)  at the Default
           Rate,  but not in  excess of the  Maximum Lawful Rate,  until paid in
           full  (as well  as after  as before  judgment)  and (ii) such overdue
           interest shall bear interest  from the date  on which payment was due
           at the  Default Rate,  but not in  excess of the Maximum Lawful Rate,
           until paid in full (as well as after as before judgment).

(c)  The  Competitive  Bid Advances  made by each Lender shall be evidenced by a
     single  promissory  note of  Borrower  payable to the order of such  Lender
     substantially in the form of Exhibit A-3 attached hereto,  with appropriate
     insertions  (herein called a  "Competitive  Bid Note").  The date,  amount,
     Competitive Bid Rate and maturity date of each Competitive Bid Advance made
     by a Lender to Borrower,  and each payment made on account of the principal
     thereof, shall be recorded by such Lender on its books.

(d)  The  Competitive  Bid Advances will be used by Borrower to provide  working
     capital  and  for  the  general  business  purposes  of  Borrower  and  its
     Subsidiaries.  No Competitive Bid Advances shall be used for the purpose of
     purchasing  or  carrying  any  Margin  Stock  in  violation  of the  Margin
     Regulations.

(e)  The obligation of Lenders to make each Competitive Bid Advance after timely
     acceptance by Borrower is further  subject to the  conditions  contained in
     Article 3.

(f)  Borrower  shall not be  required  to accept  Competitive  Bid Offers on the
     basis  of the  lowest  Competitive  Bid Rate  offered,  but may in its sole
     discretion  accept any  Competitive Bid Offer regardless of the Competitive
     Bid Rate(s) offered.
                                       41


<PAGE>



                                    ARTICLE 3

                         CONDITIONS PRECEDENT TO LENDING

         Section 3.1   Initial  Conditions   Precedent.    No  Lender   has  any
obligation  to make its first  Revolving  Loan  Advance,  Swing Line  Advance or
Competitive  Bid Advance and Issuing Bank has no  obligation  to issue the first
Letter of Credit (whether or not otherwise agreed to by Issuing Bank) unless:

(a)  Administrative  Agent shall have received all of the following  with copies
     for each Lender, at Administrative Agent's office in Midland, Texas:

     (1)    This Agreement, the Notes, those Security Instruments and Guaranties
            listed  on  Schedule 5  hereto,  any  other  documents  required  in
            connection herewith, each duly executed and  delivered  and in form,
            substance and date satisfactory to Managing Agents.

     (2)    The following certificates:

            (i)    an  "Omnibus  Certificate"  of the  Secretary or an Assistant
                   Secretary and of  a Designated Officer,  which  shall contain
                   the  names   and  signatures  of  the  officers  of  Borrower
                   authorized to execute Loan Documents and  which shall certify
                   to the truth,  correctness  and completeness of the following
                   exhibits attached  thereto:  (A) a copy of  resolutions  duly
                   adopted  by the  Board of  Directors of  Borrower and in full
                   force and  effect at the time this Agreement is entered into,
                   authorizing  the execution  of this  Agreement and  the other
                   Loan  Documents  delivered or to be  delivered  in connection
                   herewith   and   the   consummation   of   the   transactions
                   contemplated  herein and therein,  (B) a copy  of the charter
                   documents of Borrower  and all amendments thereto,  certified
                   by the  appropriate  official of  Borrower's  jurisdiction of
                   organization,  and  (C)  a  copy  of  the  bylaws  or similar
                   governing documents of Borrower (provided that, to the extent
                   Borrower   has   previously  provided   Administrative  Agent
                   certified copies of  the  documents  described in (B) and (C)
                   above, such Omnibus Certificate may omit such documents,  but
                   shall include  a statement  that such documents have not been
                   modified  in any  respect since  the date last so provided to
                   Administrative Agent,  except as may be specifically noted in
                   such Omnibus Certificate with appropriate attachments); and

                                       42


<PAGE>



            (ii)   a  "Compliance  Certificate"   of  a  Designated  Officer  of
                   Borrower,  of  even  date with such Revolving  Loan  Advance,
                   Swing Line Advance or Competitive  Bid Advance or issuance of
                   a Letter of Credit,  in which such officer certifies  to  the
                   satisfaction of  the conditions set out in Section 3.2(a) and
                   (b) and that all conditions hereunder have been satisfied.

     (3)   A certificate (or certificates) of the due formation, valid existence
           and good  standing of Borrower in its jurisdiction  of  organization,
           issued by the appropriate authorities of such jurisdiction.

     (4)   The  favorable  opinion  of  counsel  for  Borrower,  Parent  and the
           Restricted  Subsidiaries,   given  upon  their  express  instructions
           substantially  in the form set forth as Exhibit H attached hereto.

     (5)   Documents similar  to those  specified  in  Section  3.1(a)(2)(i) and
           3.1(a)(3)  with  respect  to  (i)  Parent  and  (ii)  each Restricted
           Subsidiary  which is  or will be  party  to a Security  Instrument or
           Guaranty on the date hereof.

     (6)   A certificate of a  Designated  Officer of Borrower  as to  insurance
           concerning  the  material  assets  of Obligors.  Lenders  agree  that
           Obligors' insurance coverage disclosed on Schedule 4 is acceptable at
           the date hereof.

(b)  Except as disclosed to the Lenders in the Disclosure  Schedule or otherwise
     in writing  prior to the  execution  hereof and not objected to by Required
     Lenders,  there  shall be no pending or  threatened  litigation,  action or
     proceeding  against  Borrower,  Parent,  Petroleum  or Mesa or any of their
     respective Subsidiaries which, if adversely determined, could reasonably be
     expected to have a Material Adverse Effect.

(c)  No event or condition shall have occurred since December 31, 1996, which is
     reasonably expected to result in a Material Adverse Effect.

(d)  After  giving  effect to such  Revolving  Loan  Advances,  Competitive  Bid
     Advances  and Swing Line  Advances  and  Letters of  Credit,  Borrower  and
     Lenders shall be in compliance with the Margin Regulations.

(e)  The  mergers  among  Petroleum,   Mesa,  Mesa  Operating  and  Parent  (the
     "Mergers")  shall have been  consummated as contemplated by and pursuant to
     that certain Amended and Restated  Agreement and Plan of Merger dated April
     6, 1997 (the "Merger  Agreement"),  among such parties,  and Administrative
     Agent shall have received (i) satisfactory  evidence of the consummation of
     such Mergers and (ii) a certificate  from a Designated  Officer of Borrower
     certifying that the Mergers have been consummated.

                                       43


<PAGE>



(f)  A certificate of a Designated  Officer of Borrower  certifying that (i) all
     representations and warranties made by any Obligor in this Agreement or any
     other Loan Document are true and correct as of the Effective  Date and (ii)
     that all  conditions  precedent  to the initial  Advance  contained in this
     Agreement  or  any  other  Loan  Document  have  been  satisfied  as of the
     Effective Date.

(g)  All  requisite  Governmental  Authorities  and  third  parties  shall  have
     approved  or  consented  to  the  Mergers  and  all  related  transactions,
     including,  without limitation,  the issuance,  closing and funding of this
     Agreement  and the  facilities  thereunder,  to the  extent  required.  All
     applicable  appeal  periods  shall have  expired and there shall be, in the
     judgment of the Managing Agents, in their sole discretion,  no governmental
     or  judicial  action,  actual or  threatened,  restraining,  preventing  or
     imposing burdensome conditions on the Mergers and all related transactions,
     including,  without limitation,  the issuance,  closing and funding of this
     Agreement and the facilities thereunder.

(h)  Administrative  Agent shall have received  documentation  of the release of
     all Liens  associated  with the  Existing  Mesa  Facility  and the Existing
     Petroleum Facility,  in form and substance acceptable to the Administrative
     Agent, in its sole discretion.

(i)  Managing  Agents shall have received  copies of all  financial  statements,
     reports,  notices and proxy  statements sent by Parent to its  stockholders
     and all SEC filings concerning the Mergers.

(j)  No  litigation  or  administrative  proceeding or other legal or regulatory
     developments prohibiting or enjoining the consummation of the Mergers shall
     exist.

(k)  Exclusive of the Mergers, no "Event of Default" (as defined in the Existing
     Petroleum  Credit Facility) for Petroleum or "Event of Default" (as defined
     in the Existing  Mesa Credit  Facility) for Mesa shall have occurred and be
     continuing.

         Section  3.2  Additional  Conditions  Precedent.   No  Lender  has  any
obligation to make any Revolving Loan Advance,  Competitive Bid Advance or Swing
Line Advance  (including its initial Advance) and Issuing Bank has no obligation
to issue  any  Letter of Credit  (including  the  first)  unless  the  following
conditions precedent have been satisfied:

                                       44



<PAGE>


(a)  All representations and warranties made by any Obligor in any Loan Document
     shall be true on and as of the date of such Revolving  Loan Advance,  Swing
     Line Advance, Competitive Bid Advance or issuance of Letter of Credit as if
     such  representations  and  warranties had been made as of the date of such
     Revolving Loan Advance,  Swing Line Advance or  Competitive  Bid Advance or
     issuance of such  Letter of Credit  (unless  stated to relate  solely to an
     earlier date, in which case such  representations  and warranties  shall be
     true and correct as of such earlier date).

(b)  In the case of the first  Revolving  Loan  Advance,  Swing Line  Advance or
     Competitive Bid Advance or issuance of the first Letter of Credit, no Event
     of Default, and in the case of any other Revolving Loan Advance, Swing Line
     Advance or  Competitive  Bid Advance or issuance of a Letter of Credit,  no
     Default shall exist at the date of such Revolving Loan Advance,  Swing Line
     Advance or Competitive  Bid Advance or issuance of Letter of Credit or will
     occur as a result of the making of the  requested  Revolving  Loan Advance,
     Swing Line  Advance or  Competitive  Bid  Advance  or the  issuance  of the
     requested Letter of Credit.


                                    ARTICLE 4

                         REPRESENTATIONS AND WARRANTIES

         Section 4.1   Borrower's  Representations  and Warranties.  To  confirm
each Lender's understanding  concerning Borrower and its businesses,  properties
and  obligations,  and to induce Managing  Agents,  Co-Agents and each Lender to
enter  into  this  Agreement  and to make the  Loans to  Borrower,  except as to
matters disclosed herein or in the Disclosure Schedule,  Borrower represents and
warrants to Managing Agents, Co-Agents and each Lender that:

(a)  No  Default.  No Obligor is in  default  in the  performance  of any of the
     covenants and agreements contained herein or under any other Loan Document.
     No event or circumstance has occurred and is continuing which constitutes a
     Default.

(b)  Organization,  Existence and Good Standing.  Each Obligor is duly organized
     or  incorporated,  validly  existing and in good standing under the laws of
     its jurisdiction of organization or incorporation,  having all corporate or
     partnership  powers  required to enter into and carry out the  transactions
     contemplated hereby. Each Obligor is duly qualified,  in good standing, and
     authorized  to do  business  in all other  jurisdictions  within the United
     States of America and the  Commonwealth of Australia  wherein the character
     of the  properties  owned  or  held  by it or the  nature  of the  business
     transacted by it makes such qualification necessary, except for any lack of
     qualification,  good standing or authorization that could not reasonably be
     expected  to have a Material  Adverse  Effect.  Each  Obligor has taken all
     actions  customarily taken in order to enter, for the purpose of conducting
     business or owning property,  each  jurisdiction  outside the United States
     wherein the character of the properties owned or held  by it or the  nature

                                       45


<PAGE>



     of the  business  transacted by it makes such actions desirable, except for
     any failure or other matter that could not reasonably be expected to have a
     Material Adverse Effect.

(c)  Authorization.  Each Obligor has duly taken all  corporate  or  partnership
     action  necessary to authorize the execution and delivery by it of the Loan
     Documents to which it is a party and to authorize the  consummation  of the
     transactions  contemplated  thereby and the  performance of its obligations
     thereunder. Borrower is duly authorized to borrow funds hereunder.

(d)  No Conflicts or Consents. The execution and delivery by each Obligor of the
     Loan Documents to which it is a party,  the  performance by each Obligor of
     its  obligations  under such Loan  Documents,  and the  consummation of the
     transactions contemplated by the various Loan Documents, including, without
     limitation,  the  consummation  of the  Mergers,  do not and  will  not (1)
     conflict   with  any   provision   of  the  articles  or   certificate   of
     incorporation,  bylaws,  charter,  partnership  agreement or certificate or
     other governing document of such Obligor,  or (2) except as to matters that
     could not reasonably be expected to have a Material Adverse Effect,  result
     in the acceleration of any Debt owed by such Obligor,  or conflict with any
     law, statute, rule, regulation, or material agreement,  judgment,  license,
     order or permit applicable to or binding upon such Obligor,  or require the
     consent, approval,  authorization or order of, or notice to or filing with,
     any  Governmental  Authority  or third  party,  or result in or require the
     creation  of any Lien  upon  any  material  assets  or  properties  of such
     Obligor, except (i) as permitted in the Loan Documents and (ii) for filings
     and recordings of the Security Instruments.

(e)  Enforceable  Obligations.  This  Agreement is, and the other Loan Documents
     when  duly  executed  and  delivered  will be,  legal,  valid  and  binding
     obligations of each Obligor which is a party hereto or thereto, enforceable
     in accordance with their terms except as such enforcement may be limited by
     bankruptcy,  insolvency or similar laws of general application  relating to
     the enforcement of creditors' rights generally and by general principles of
     equity.

(f)  Financial  Statements.

     (i)  The Updated Financial Statements fairly present Mesa's and Petroleum's
          financial position at the  respective dates thereof and the results of
          Mesa's and Petroleum's  operations and cash  flows for  the respective
          periods  thereof.  From  the  date of  the  audited  Updated Financial
          Statements to the Effective Date no change has occurred  in Mesa's and
          Petroleum's Consolidated financial condition which could reasonably be
          expected to  result in a Material  Adverse Effect, except as reflected
          in the Disclosure  Schedule.  All Updated  Financial  Statements  were
          prepared in accordance with GAAP as in effect on the date thereof.


                                       46



<PAGE>



     (ii) The Unaudited Pro Forma Financial Statements of Parent for the periods
          ending  December 31, 1996 and  March 31,  1997  contained in the Proxy
          Statement,  dated  June 27,  1997,  fairly present  Parent's pro forma
          financial position at the respective dates  thereof and the results of
          Parent's  pro forma  operations  and  cash  flows  for  the respective
          periods thereof.  From the date of such  financial  statements  to the
          Effective Date  no  change  has  occurred  in  Mesa's  or  Petroleum's
          Consolidated financial condition which could reasonably be expected to
          result in a Material Adverse Effect on Parent's Pro Forma Consolidated
          Financial Condition, except as reflected  in the Disclosure  Schedule.
          All such financial statements were prepared in accordance with GAAP as
          in effect on the date thereof.

(g)  Other  Obligations.  As of the Effective Date,  neither Borrower nor any of
     its  Consolidated  Subsidiaries  has any outstanding  Debt which is, in the
     aggregate,  material  to  either  Petroleum  or Mesa and  their  respective
     Consolidated   Subsidiaries   and  not  shown  in  the  Updated   Financial
     Statements.

(h)  Full Disclosure.  No certificate,  statement or other information delivered
     herewith or heretofore by any  Designated  Officer of any Obligor to either
     of  Managing  Agents,  Co-Agents  or any  Lender  in  connection  with  the
     negotiation  of  this  Agreement  or in  connection  with  any  transaction
     contemplated  hereby  contains  any untrue  statement of a fact or omits to
     state  any fact  known to  Petroleum,  Mesa,  or any  Obligor  (other  than
     industry-wide  risks  normally  associated  with the  types  of  businesses
     conducted by Petroleum,  Mesa or Obligors) necessary to make the statements
     contained  herein or therein not  misleading  as of the date made or deemed
     made,  except to the extent that any untrue statement or omission could not
     reasonably be expected to have a Material Adverse Effect.

(i)  Litigation.  Except as disclosed in the Updated Financial  Statements or in
     the  Disclosure  Schedule:  (1)  there  are no  actions,  suits  or  legal,
     equitable,  arbitrative or administrative  proceedings  pending, or, to the
     knowledge  of  Borrower,   threatened,   against  any  Obligor  before  any
     Governmental Authority that could reasonably be expected to have a Material
     Adverse Effect,  and (2) there are no outstanding  judgments,  injunctions,
     writs,  rulings  or  orders  by any  such  Governmental  Authority  against
     Borrower,  Petroleum  or  Mesa  or any  of  their  respective  Consolidated
     Subsidiaries  which could reasonably be expected to have a Material Adverse
     Effect.

(j)  Environmental  Matters.  The  liabilities  and  costs of  Borrower  and its
     Consolidated   Subsidiaries   related   to   compliance   with   applicable
     Environmental  Laws (as in effect on the date on which this  representation
     is made or deemed made) could not reasonably be expected to have a Material
     Adverse Effect.


                                       47



<PAGE>



(k)  Title to Properties.  Each Obligor has good and defensible  title to all of
     its material  properties  and assets,  except any failure,  defect or other
     matter that could not, in the  aggregate,  reasonably be expected to have a
     Material Adverse Effect.

(l)  Investment  Company  Act.  Neither  Parent  or  Borrower  nor  any of their
     respective  Subsidiaries  is   an   "investment  company"  or  a   "company
     controlled"  by   an  "investment  company",  within  the  meaning  of  the
     Investment Company Act of 1940, as amended.

(m)  Public Utility Holding  Company Act.  Neither Parent or Borrower nor any of
     their  respective  Subsidiaries  is a "holding  company",  or a "subsidiary
     company" of a "holding  company",  or an "affiliate" of a "holding company"
     or of a "subsidiary company" of a "holding company",  or a "public utility"
     within the meaning of the Public  Utility  Holding  Company Act of 1935, as
     amended.

(n)  Principal  Business  Offices.  As of the  Effective  Date,  each  Obligor's
     principal  place of business and chief  executive  office is located at the
     place described in the Disclosure Schedule.

(o)  Solvency. Each Obligor is solvent and will continue to be solvent after the
     making and  guarantying  of the Loans and the  issuance  of the  Letters of
     Credit.

(p)  Organization.  As of the Effective Date, the organization  chart of Parent,
     Borrower and their  respective  Subsidiaries set forth on Exhibit I is true
     and correct in all material respects. As of the Effective Date, Borrower or
     a  Restricted  Subsidiary  owns all of the issued and  outstanding  capital
     stock  of  each  Restricted  Subsidiary.  As  of  the  Effective  Date,  no
     Restricted Subsidiary has issued any securities  convertible into shares of
     its stock or any options (except as set forth in the Disclosure  Schedule),
     warrants or other rights to acquire such shares or  securities  convertible
     into such shares and the  outstanding  capital stock and securities of each
     Restricted Subsidiary is owned by Borrower or another Restricted Subsidiary
     free and clear of all Liens,  warrants,  options or rights of others of any
     kind whatsoever, except for Permitted Liens.

(q)  Use of Proceeds;  Margin Stock. Borrower and its Subsidiaries shall use (i)
     the  initial  Revolving  Loan  Advance  (1) to  discharge  all  outstanding
     obligations  under  the  Existing  Petroleum  Credit  Facility  and  (2) to
     discharge  all  outstanding  obligations  under the  Existing  Mesa  Credit
     Facility,  and  (ii)  all  Revolving  Loan  Advances,  Letters  of  Credit,
     Competitive  Bid  Advances  and  Swing  Line  Advances  for its  and  their
     respective general corporate purposes. In no event shall the funds from any
     Revolving  Loan  Advance,  Swing Line Advance,  Competitive  Bid Advance or
     Letter  of  Credit  be used  directly  or  indirectly  by any  Persons  for
     personal,  family,  household or agricultural  purposes or for the purpose,
     whether  immediate,  incidental or ultimate,  of  purchasing,  acquiring or
     carrying any "margin stock" or any "margin  securities"  (as such terms are
     defined in the Margin Regulations)  in violation of the Margin Regulations,

                                       48


<PAGE>



     or for  the  purpose  of reducing  or retiring  any indebtedness  which was
     originally  incurred  to  purchase  or  carry  "margin  stock"  or  "margin
     securities" in violation of the Margin Regulations, or to extend  credit to
     others directly or indirectly for the purpose of purchasing or carrying any
     such  margin  stock  or  margin  securities  in  violation  of  the  Margin
     Regulations.  Borrower is not engaged principally,  or as one of Borrower's
     important activities, in the business of extending credit to others for the
     purpose of  purchasing or carrying such margin stock or  margin securities.
     Neither any  Obligor  nor  any Person  acting on behalf  of any Obligor has
     taken or will take any action which might cause this Agreement,  the Notes,
     or  any  Guaranty,  any  Loan  Document  or any Loan or Letter of Credit to
     violate the  Margin  Regulations or  to violate Section 7 of the Securities
     Exchange  Act of 1934,  or any rule or regulation thereunder,  in each case
     as now or hereafter in effect.

(r)  Liens Under the Security  Instruments.  Upon the  execution and delivery of
     the Security Instruments in accordance herewith,  and where appropriate the
     filing and  recordation  thereof with the  appropriate  filing or recording
     officers in each of the necessary  jurisdictions,  the Liens granted and to
     be granted by any  Obligor to Lenders or the  Trustee (as defined in any of
     the Security  Instruments)  on behalf of Lenders in such  Obligor's  assets
     pursuant to the Security Instruments will be validly created, perfected and
     first priority Liens, subject only to Permitted Liens.

         Section 4.2   Representation by Lenders.  Each Lender hereby represents
that it will acquire its Notes for its own account in the ordinary course of its
commercial lending business; however, such Lender may sell or otherwise transfer
its Notes, any participation  interest or other interest in its Notes, or any of
its other  rights and  obligations  under the Loan  Documents  as  permitted  by
Section 8.8.


                                    ARTICLE 5

                              COVENANTS OF BORROWER

         Section  5.1   Affirmative Covenants.  To  conform  with the  terms and
conditions  under  which each Lender is willing to have  credit  outstanding  to
Borrower, and to induce Managing Agents, Co-Agents and each Lender to enter into
this  Agreement  and make the Loans to Borrower and to issue  Letters of Credit,
unless  Required  Lenders  shall have  previously  agreed  otherwise in writing,
Borrower and, as applicable,  Parent,  severally for itself and their respective
Subsidiaries covenants and agrees that:

(a)  Payment and  Performance.  Borrower  will pay all amounts due from it under
     the Loan  Documents in accordance  with the terms thereof and will observe,
     perform and comply with every covenant, term and condition expressed in the
     Loan  Documents,  and will  cause each  Obligor  which is a  Subsidiary  of
     Borrower  to perform  and comply with every  covenant,  term and  condition
     expressed in the Loan Documents and applicable to such Obligor.

                                       49


<PAGE>



(b)  Books,  Financial  Statements and Reports.  Parent and Borrower will at all
     times maintain full and  materially  accurate books of account and records.
     Parent  and  Borrower  will  maintain  and  will  cause  their   respective
     Subsidiaries to maintain a standard system of accounting and will cause the
     following  statements  and reports to be delivered  to Managing  Agents and
     each Lender at Borrower's expense:

     (1)    As soon as available, and in any event within 120 days after the end
            of  each  Fiscal  Year,  complete   audited  Consolidated  financial
            statements   of   Parent   and   its   Subsidiaries   and  unaudited
            consolidating balance  sheets and statements of operations of Parent
            and its  Subsidiaries,  prepared in reasonable detail  in accordance
            with GAAP;  such audited statements to be accompanied by an opinion,
            by KPMG  Peat Marwick,  or such other  independent certified  public
            accountants  of nationally  recognized  standing selected by Parent,
            stating  that such  Consolidated financial  statements  have been so
            prepared.  Parent will, together with  each  set of  such  financial
            statements delivered pursuant to this Section, furnish a certificate
            in the form of Exhibit J signed by a Designated  Officer of Borrower
            stating that, to the  best  of  his  knowledge,  (i) such  financial
            statements  are accurate and complete,  and (ii) no Default or Event
            of Default exists at  the end of such  Fiscal Quarter or at the time
            of such certificate or specifying the nature and period of existence
            of any  such  Default or  Event of Default.  Such  certificate shall
            contain  calculations  showing  compliance (or noncompliance) at the
            end of such Fiscal Quarter with the requirements of  Sections 5.3(a)
            and (b).

     (2)    As soon as available, and in any event within 60 days  after the end
            of the first  three Fiscal  Quarters in each Fiscal Year,  unaudited
            Consolidated financial statements of Parent and its Subsidiaries and
            unaudited  consolidating balance sheet and statements of  operations
            of Parent and its Subsidiaries as of the end of such Fiscal Quarter,
            all in  reasonable  detail and  prepared in  accordance  with  GAAP,
            subject to changes resulting from year-end adjustments. Parent will,
            together  with each  set  of  such  financial  statements  delivered
            pursuant  to  this  Section,  furnish a  certificate  in the form of
            Exhibit J signed by  a Designated  Officer of Borrower stating that,
            to  the best  of his  knowledge,  (i) such financial statements  are
            accurate  and  complete,  and  (ii)  no  Default or Event of Default
            exists  at the end  of such  Fiscal  Quarter or  at the time of such
            certificate or specifying  the nature and period of existence of any
            such  Default or Event of Default.   Such  certificate shall contain
            calculations  showing  compliance  (or noncompliance)  at the end of
            such  Fiscal Quarter with  the  requirements  of Sections 5.3(a) and
            (b).


                                       50



<PAGE>


                           

     (3)    Promptly  after  transmittal  or  filing,  copies of  all  financial
            statements, reports,  notices and proxy statements sent by Parent to
            its stockholders and all registration  statements,  periodic reports
            and other statements  and  schedules  filed by Parent  or any of its
            its Subsidiaries  with any securities exchange,  the Securities  and
            Exchange Commission or any similar Governmental Authority.

(c)  Other  Information  and  Inspections.  Parent and Borrower  will furnish to
     Managing Agents and each Lender any information which Administrative Agent,
     on  behalf  of any  Lender,  may from time to time  reasonably  request  in
     writing  concerning  any  covenant,  provision  or  condition  of the  Loan
     Documents or any matter in connection  with  Parent's,  Borrower's  and its
     Subsidiaries'  businesses and  operations.  Parent and Borrower will permit
     and  will  cause   each  of  their   respective   Subsidiaries   to  permit
     representatives of Agents and Lenders (including  independent  accountants,
     agents and attorneys), at the expense and risk of the applicable Lender, to
     visit and inspect,  during normal business hours and upon reasonable notice
     any of Parent's or Borrower's or such Subsidiaries' property, including its
     books of account,  other books and  records,  and any  facilities  or other
     business  assets,  and to make extra copies  therefrom and  photocopies and
     photographs  thereof,  and to write down and record  any  information  such
     representatives obtain, and Parent and Borrower shall permit and will cause
     each of their  respective  Subsidiaries to permit Agents and the Lenders or
     their  representatives,  to  investigate  and  verify the  accuracy  of the
     information  furnished to Administrative  Agent or any Lender in connection
     with the Loan  Documents and to discuss all such matters with its officers,
     employees  and  representatives;  provided,  however,  that any such visit,
     inspection,  investigation  or  verification  or discussion with respect to
     Parent or Borrower  taking place at a time when  Borrower has been notified
     in  writing by  Administrative  Agent of the  existence  of a Default or an
     Event  of  Default  applicable  to  Borrower  which  has  occurred  and  is
     continuing  shall be at the cost and expense of Borrower,  and that neither
     Managing Agents, Co-Agents nor Lenders shall have any obligation to pay any
     costs or  expenses  of Parent or  Borrower  or any other  Obligor or any of
     their   officers,   employees  or   representatives   in  respect   thereof
     irrespective of the existence of any Default or Event of Default.

(d)  Notice of  Material  Events.  Borrower  will  promptly  upon its  awareness
     thereof notify  Administrative  Agent and each Lender (1) of the occurrence
     of any Default or any other event,  which has or may reasonably be expected
     to have, a Material Adverse Effect, (2) of the acceleration of the maturity
     of any Debt owed by any  Obligor or any  default by any  Obligor  under any
     instrument  evidencing or governing  Debt, if such  acceleration or default
     has a Material  Adverse  Effect,  (3) of the occurrence of any  Termination
     Event which may reasonably be expected to have a Material  Adverse  Effect,
     and (4) of the filing of any  litigation or proceeding in which any Obligor
     is a party or of any material  developments in existing litigation in which
     any  Obligor  is a party in which an adverse  decision  may  reasonably  be
     expected to have a Material Adverse Effect.

                                       51



<PAGE>




(e)  Maintenance of Existence and Qualifications.  Parent and Borrower will, and
     will cause  each  Restricted  Subsidiary  to,  maintain  and  preserve  its
     existence as a corporation or  partnership,  as the case may be. Parent and
     Borrower will, and will cause each  Restricted  Subsidiary to, maintain and
     preserve its good standing and its rights and  franchises in full force and
     effect and qualify to do business as a foreign corporation in all states or
     jurisdictions  where required by applicable  law, except for any failure to
     maintain,  preserve  and qualify that could not  reasonably  be expected to
     have a Material Adverse Effect.  Nothing in this Section shall prohibit (i)
     a merger or consolidation permitted by Section 5.2(c) or (ii) a termination
     of such  existence,  good standing,  rights or franchises of any Restricted
     Subsidiary  if  Parent  or  Borrower  determines  in good  faith  that such
     termination  is in the best  interest of the Parent and  Borrower and could
     not reasonably be expected to have a Material Adverse Effect.

(f)  Payment of Taxes and Trade Debt.  Borrower will, and will cause each of its
     Subsidiaries  to,  except for any  failure or other  matter  that could not
     reasonably be expected to have a Material  Adverse Effect,  (1) timely file
     all required tax returns, (2) timely pay all taxes, assessments,  and other
     governmental charges or levies imposed upon it or upon its income,  profits
     or property, and (3) timely pay all trade debt. Borrower and its respective
     Subsidiaries  may,  however,  delay paying or  discharging  any such taxes,
     assessments,  charges,  debts or levies so long as the validity  thereof is
     contested in good faith by appropriate  proceedings  and adequate  reserves
     therefor in accordance  with GAAP have been set aside and  reflected  among
     the books and records of Borrower and its Subsidiaries.

(g)  Insurance.  Borrower will, and will cause each of its  Subsidiaries  to, at
     all times maintain insurance in such amounts and covering such risks as are
     in  accordance  with normal  industry  practice  for  companies  engaged in
     similar  businesses and owning similar  properties in the same general area
     in which Borrower and its Subsidiaries  conduct  business,  which insurance
     (other than prudent self-insurance  programs) shall be by financially sound
     and reputable insurers.

(h)  Payment of Expenses.  Whether or not the transactions  contemplated by this
     Agreement are consummated,  Borrower will promptly pay all reasonable costs
     and  expenses  (including  reasonable  attorneys'  fees)  incurred by or on
     behalf of (1) the Documentation  Agents in connection with the negotiation,
     preparation,   execution  and  delivery  of  the  Loan  Documents  and  any
     amendment,  modification or restatement  thereof, and any and all consents,
     waivers or other documents or instruments,  including  commitment  letters,
     term sheets and any  memorandum  relating  thereto  (provided that Borrower
     shall be obligated to pay only the attorneys'  fees of a common counsel for
     the Documentation  Agents,  Mayer, Brown & Platt), (2) Agents in connection
     with due diligence,  syndication,  travel and  advertising  related to this
     Agreement and the transactions contemplated thereby, and (3) Administrative
     Agent or any Lender in connection with enforcement of the Loan Documents or

                                       52



<PAGE>



     the  defense of  Administrative  Agent's or any  Lender's  exercise  of its
     rights   thereunder.   The  selection  of  Managing   Agents'  counsel  and
     consultants  in  connection  with the matters  described  in the  preceding
     sentence shall be subject to the approval of Borrower, which approval shall
     not be  unreasonably withheld.  Attorneys'  fees reimbursed by Borrower for
     any amendment,  modification  or  restatement of any Loan Document shall be
     estimated and approved by Borrower prior  to incurrence,  such approval not
     to be  unreasonably  withheld.  Attorneys'  fees  reimbursed by Borrower in
     connection with  the enforcement of  the Loan Documents  or the defense  of
     Administrative  Agent's or  any Lenders'  exercise of  its rights hereunder
     shall be  for a single  law firm  per country  (unless conflicts (including
     conflicts between  Managing Agents  and the  other Lenders as determined in
     the reasonable discretion of  the Required Lenders) otherwise  prohibit the
     engagement of a single law firm).

(i)  Compliance  with  Agreements  and Law.  Borrower and Parent will,  and will
     cause each of their  respective  Subsidiaries  to (1) perform all  material
     obligations  it is  required  to perform  under the terms of each  material
     agreement,  contract or other  instrument  or  obligation  to which it is a
     party or by which it or any of its material properties is bound, except for
     any non-performance  that will not have or reasonably be expected to have a
     Material  Adverse  Effect;  and (2)  conduct  its  business  and affairs in
     material  compliance  with all laws,  regulations,  and  orders  applicable
     thereto (including without  limitation  Environmental  Laws) except for any
     non-compliance  that could not  reasonably  be  expected to have a Material
     Adverse Effect.

(j)  Maintenance  of Business.  Borrower  will,  and will cause each  Restricted
     Subsidiary to, maintain as its primary business the exploration, production
     and  development  of  oil,   natural  gas  and  other  liquid  and  gaseous
     hydrocarbons and the gathering,  processing,  transmission and marketing of
     hydrocarbons and activities related or ancillary thereto.

(k)  Operations.  Borrower will, and will cause each  Restricted  Subsidiary to,
     cause all material  properties  to be regularly  operated,  maintained  and
     developed in a good and workmanlike manner, as would a prudent operator and
     in accordance with all applicable federal,  state and local laws, rules and
     regulations,  except for any  failure to so operate,  maintain  and develop
     that could not reasonably be expected to have a Material Adverse Effect.

                                       53



<PAGE>




         Section 5.2   Negative  Covenants.   To  conform  with  the  terms  and
conditions  under  which each Lender is willing to have  credit  outstanding  to
Borrower,  and to induce  Managing  Agents  and each  Lender to enter  into this
Agreement and make the Loans to Borrower and to issue Letters of Credit,  unless
Required  Lenders shall have previously  agreed  otherwise in writing,  Borrower
and,  as  applicable,   Parent,   severally  for  itself  and  their  respective
Subsidiaries covenants and agrees that:

(a)  Limitation  on Debt.  Parent and Borrower will not, and will not permit any
     Restricted Subsidiary to, in any manner owe or be liable for Debt except:

     (1)    the Obligations;

     (2)    Debt pursuant to the 364 Day Facility;

     (3)    unsecured Debt among Obligors;

     (4)    Debt arising under capital  leases which  does not  in the aggregate
            for  Parent,   Borrower  and  all  Restricted   Subsidiaries  exceed
            $20,000,000 at any one time outstanding;

     (5)    Debt, other than Debt otherwise permitted by another subparagraph of
            this Section 5.2(a),  which, at the time incurred,  is at prevailing
            market rates of interest and contains  covenants and  conditions and
            events of default no more onerous to Obligors than the terms of this
            Agreement; provided, that no Default or Event of Default will result
            from the incurrence of such Debt and be continuing;

     (6)    guaranties of Debt which is the primary obligation of an Obligor and
            permitted under this Section 5.2(a); and

     (7)    Debt  arising  (whether by  contract  or  as a  result of  statutory
            liability  of a general  partner) by  virtue of any Obligor  being a
            general  partner  of a general or limited  partnership  pursuant  to
            agreements in  effect  on the  Effective  Date not in  excess of the
            aggregate  amounts  permitted  to  be   incurred  pursuant  to  such
            agreements on  the Effective  Date for all  such Debt and other such
            Debt otherwise permitted pursuant to the other subparagraphs of this
            Section 5.2(a);

     (8)    Debt existing on the  Effective Date  which  is disclosed (i) in the
            Updated Financial Statements or (ii) in the Disclosure  Schedule and
            any extensions, renewals or replacements  thereof upon terms no more
            onerous to Borrower than the terms of this Agreement or the terms of
            the  instruments  evidencing  such  Debt  as  of  the  date  of this
            Agreement;

                                       54




<PAGE>



(b)  Negative  Pledge.  Borrower and Parent will not, and will not permit any of
     their respective  Restricted  Subsidiaries to, create,  assume or permit to
     exist  any Lien  upon any of their  respective  material  property,  except
     Permitted Liens.

(c)  Limitation  on Mergers.  Except as  expressly  provided in this  paragraph,
     Borrower and Parent will not,  and will not permit any of their  Restricted
     Subsidiaries  to,  merge or  consolidate  with or into any  other  business
     entity,  except  (1)  Parent  or  Borrower  may be  party  to a  merger  or
     consolidation  so long as the surviving entity is Parent or Borrower and no
     Default will exist and the  Obligations  do not exceed the Facility  Amount
     after giving  effect  thereto and (2) any  Restricted  Subsidiary  may be a
     party to any merger or  consolidation  so long as the surviving entity is a
     Restricted  Subsidiary  and any Guaranty of, or Pledge  Agreement  by, such
     Restricted  Subsidiary  continues as to such surviving  entity,  no Default
     will exist,  and the  Obligations  do not exceed the Facility  Amount after
     giving effect thereto.

(d)  Limitation on  Disposition  of Capital  Stock of  Restricted  Subsidiaries.
     Borrower will not, and will not permit any Restricted  Subsidiary to, sell,
     transfer  or  otherwise   dispose  of  capital  stock  of  any   Restricted
     Subsidiary,  except that Borrower and any  Restricted  Subsidiary may sell,
     issue, transfer or otherwise dispose of the capital stock of any Restricted
     Subsidiary to Parent, Borrower or to another Restricted Subsidiary.

(e)  Limitation on Restricted  Payments.  Parent and Borrower will not, and will
     not permit any Restricted Subsidiary to, make Restricted Payments in excess
     of  $50,000,000 in the aggregate for the duration of this Agreement for all
     such Restricted  Payments;  provided,  however,  that in the event that any
     Unrestricted  Subsidiary  of  Borrower  is  determined  to be a  Restricted
     Subsidiary of Borrower for purposes of this Agreement, then for purposes of
     determining  compliance with this Section,  all Restricted Payments made to
     such Unrestricted  Subsidiary shall be deducted from the aggregate total of
     all Restricted  Payments  made  for  the  duration  of this  Agreement.  No
     Restricted  Payment  may be  made (1) if the  Obligations shall  exceed the
     Facility Amount  or (2)  if  any Default or  Event of  Default  shall  have
     occurred and be continuing, or (3) if as a result  thereof,  any Default or
     Event of Default shall have occurred and be continuing.

                                       55




<PAGE>



(f)  Transactions  with  Affiliates.  Parent and Borrower will not, and will not
     permit  any of its  Restricted  Subsidiaries  to,  engage  in any  material
     transaction  with any of  Borrower's  Affiliates  on terms  which  are less
     favorable  than  those  which  would  have been  obtainable  at the time in
     arm's-length  dealing with Persons  other than such  Affiliates,  provided,
     however that such  restriction  shall not apply to  transactions  (i) among
     Borrower  and  its  Restricted   Subsidiaries and  (ii)  among   Restricted
     Subsidiaries.

(g)  Limitations on Restricted Subsidiaries. Parent and Borrower will not permit
     any Restricted Subsidiary to become subject to covenants which:

     (1)    restrict dividends or dividend capacity;

     (2)    restrict loans and advances to Borrower;

     (3)    restrict the ability to make tax payments or management payments to
            Borrower; or

     (4)    restrict the capitalization structure of any Restricted Subsidiary.

(h)  Limitation   on   Sale/Leasebacks.   Obligors   will  not  enter  into  any
     arrangement,  directly or  indirectly,  with any Person whereby any Obligor
     shall sell or transfer any material  asset,  and whereby any Obligor  shall
     then or  immediately  thereafter  rent or lease as lessee such asset or any
     part thereof.

(i)  Conversion of Restricted Subsidiary to Unrestricted Subsidiary.  Parent and
     Borrower  may  convert  any  Restricted   Subsidiary  to  an   Unrestricted
     Subsidiary by giving  Administrative Agent at least five (5) Business Days'
     notice of such  conversion  in the form of  Exhibit  K-1  attached  hereto;
     provided that (1) no Restricted Subsidiary shall be so converted so long as
     it owns or will thereafter own, directly or indirectly, any interest in any
     material asset or in another Restricted Subsidiary unless the value of such
     material  assets,  together with the aggregate of all  Restricted  Payments
     made and the value of any other material assets  determined as aforesaid of
     any Restricted  Subsidiaries converted to Unrestricted  Subsidiaries do not
     exceed in the aggregate the limitation on Restricted  Payments contained in
     Section 5.2(e) hereof,  and (2) no such  conversion  shall be made if after
     giving effect to such  conversion,  any Default would exist.  Upon any such
     conversion of a Restricted Subsidiary to an Unrestricted  Subsidiary,  such
     Subsidiary shall be released from its obligations  under its Guaranty,  and
     Managing   Agents  and  Lenders   shall   execute  and  deliver  a  release
     substantially in the form of Exhibit K-2 hereto.

                                       56


<PAGE>




(j)  Margin  Securities.  Proceeds  of the Loans will not be used to purchase or
     carry Margin Stock except in compliance with the Margin Regulations.

         Section 5.3   Financial  Covenants.  To  conform  with  the  terms  and
conditions  under  which each Lender is willing to have  credit  outstanding  to
Borrower,  and to induce  Managing  Agents  and each  Lender to enter  into this
Agreement and make the Loans to Borrower and to issue Letters of Credit,  unless
Required  Lenders shall have previously  agreed  otherwise in writing,  Borrower
and,  as  applicable,   Parent,   severally  for  itself  and  their  respective
Subsidiaries covenants and agrees that:

(a)  EBITDAX to  Consolidated  Interest  Expense  Ratio.  The ratio of  Parent's
     "EBITDAX"  to  "Consolidated  Interest  Expense"  for the last four rolling
     Fiscal Quarters will not be less than 3.75 to 1.0; provided,  however, that
     the  EBITDAX  to  Consolidated   Interest  Expense  Ratio  shall  first  be
     calculated on December 31, 1997;  provided further that for the periods for
     calculation  ending on or before September 30, 1998, each reference to "for
     the last four rolling Fiscal Quarters" shall be deemed to be a reference to
     the period from  October 1, 1997 through the date of such  calculation.  As
     used in this paragraph,  the term "Consolidated Interest Expense" means for
     any period,  total interest  expense,  whether paid or accrued,  of Parent,
     Borrower  and  their  respective  Subsidiaries  on  a  Consolidated  basis,
     including,  without limitation,  all commissions,  discounts and other fees
     and  charges  owed with  respect  to  Letters  of  Credit.  As used in this
     paragraph,  the term "EBITDAX"  means for any period the sum of the amounts
     for such period of Consolidated net income,  Consolidated Interest Expense,
     depreciation expense, depletion expense,  amortization expense, federal and
     state income taxes,  exploration and abandonment expense and other non-cash
     charges and expenses, all as determined on a Consolidated basis for Parent,
     Borrower and their respective Subsidiaries.

(b)  Consolidated   Total   Funded  Debt  to  Total   Capitalization.   Parent's
     Consolidated Total Funded Debt to Total  Capitalization will not, as of the
     last day of any Fiscal Quarter, be greater than 60%.

                                    ARTICLE 6

                         EVENTS OF DEFAULT AND REMEDIES

         Section 6.1   Events  of  Default.    Each  of  the   following  events
constitutes an "Event of Default" under this Agreement:

(a)  Borrower  shall  default on the payment when due of any principal on any of
     its  Loans  or  any  of  its  Notes  or any  amount  in  respect  of any LC
     Obligation;

(b)  Borrower fails to pay any of its  Obligations  (other than principal or any
     amount in  respect of its LC  Obligations)  when due and  payable,  whether
     interest  in  respect of any Loan or any fee or any other  amounts  payable
     under any of the Loan Documents and such failure shall continue  unremedied

                                       57


<PAGE>



     for a period of five (5) Business Days;  provided,  however,  that any such
     Default shall not constitute an Event of Default if subsequently  available
     information indicates that a payment made when due was insufficient because
     of a good faith error in  calculation  so long as Borrower  shall cure such
     deficiency  within five (5) Business Days after  Borrower  becomes aware of
     such deficiency;

(c)  any Obligor  fails to duly  observe,  perform or comply with any  covenant,
     agreement,  condition  or provision  set forth in Section  5.1(d) or 5.2 of
     this Agreement;

(d)  any Obligor  fails (other than as referred to in  subsections  (a), (b) and
     (c) above) to duly observe, perform or comply with any covenant, agreement,
     condition or provision of any Loan  Document  applicable to it (even if all
     or part of such agreement or covenant is void or  unenforceable),  and such
     failure is not remedied  within  thirty (30)  Business  Days after  written
     notice thereof shall have been sent to Borrower by Administrative  Agent or
     any Lender;

(e)  any representation or warranty  previously,  presently or hereafter made in
     writing or deemed  made by or on behalf of any Obligor in  connection  with
     any Loan  Document  shall  have been  false or  incorrect  in any  material
     respect  on any date on or as of which  made and  either  (1) an  Executive
     Officer  of  Borrower  had actual  knowledge  that such  representation  or
     warranty was false or  incorrect in a material  respect when made or (2) if
     no Executive  Officer had such knowledge,  such  representation or warranty
     shall continue to be false or incorrect in any material respect thirty (30)
     Business  Days  after the  earlier  of an  Executive  Officer  of  Borrower
     obtaining  actual  knowledge  thereof or written  notice thereof shall have
     been sent to Borrower by Administrative Agent;

(f)  any Obligor (1) fails to pay when due Debt in excess of  $20,000,000 or (2)
     breaches or defaults in the  performance  of any agreement or instrument by
     which  any  such  Debt in  excess  of  $20,000,000  is  issued,  evidenced,
     governed,  or secured,  and any such failure,  breach or default  continues
     beyond any applicable period of grace provided therefor;

(g)  either (1) any  "accumulated  funding  deficiency"  (as  defined in Section
     412(a) of the  Internal  Revenue  Code of 1986,  as  amended)  in excess of
     $10,000,000 exists with respect to any ERISA Plan, whether or not waived by
     the Secretary of the Treasury or his delegate, or (2) any Termination Event
     which has a Material  Adverse  Effect occurs with respect to any ERISA Plan
     and the then current value of such ERISA Plan's benefit liabilities exceeds
     the then  current  value of such  ERISA  Plan's  assets  available  for the
     payment of such benefit  liabilities  by more than  $10,000,000  (or in the
     case of a  Termination  Event  involving  the  withdrawal  of a substantial
     employer,  the withdrawing  employer's  proportionate  share of such excess
     exceeds such amount);

                                       58



<PAGE>



(h)  any Obligor:

     (1)    suffers   the   commencement   of   any   involuntary    bankruptcy,
            reorganization, debt arrangement, winding up, dissolution,  official
            management or administration,  or other case or proceeding under any
            bankruptcy or insolvency  law or the entry against it of a judgment,
            decree  or order for relief by a court  of competent jurisdiction in
            such a case or proceeding,  which in either case remains undismissed
            for a period of sixty (60) days;  provided  that each Obligor hereby
            expressly  authorizes  each Agent and  each Lender to  appear in any
            court  proceeding  during such  sixty (60) day  period to  preserve,
            protect and defend their rights under the Loan Documents;

     (2)    commences  a  voluntary   case  under   any  applicable  bankruptcy,
            insolvency  or similar law  now  or hereafter in effect,  including,
            without  limitation,  the  United  States  Bankruptcy  Code  or  the
            Corporations  Law of  Australia,  as from time to time  amended;  or
            applies  for or consents or acquiesces  to the entry of an order for
            relief in  an involuntary  case  under  any  such  law,  or  becomes
            insolvent  or   makes  a  general  assignment  for  the  benefit  of
            creditors,  or fails  generally  to pay  (or admits  in writing  its
            inability  to pay)  its debts  as such  debts  become  due, or takes
            corporate or other action to authorize any of the foregoing;

     (3)    suffers  the  appointment  of or  taking  possession  by a receiver,
            liquidator,     assignee,    custodian,    trustee,    sequestrator,
            administrator  or similar official of all or a substantial  part  of
            its assets in a proceeding  brought against or  initiated by it, and
            such appointment  is neither made  ineffective nor discharged within
            sixty  (60)  days after  such event or  such  appointment  or taking
            possession is at any time consented to,  requested by, or acquiesced
            to by such Obligor;

     (4)    suffers the entry against it of a final judgment for the  payment of
            money  in  excess   of  $20,000,000    (not   covered  by  insurance
            satisfactory to  Administrative Agent in its discretion), unless the
            same is discharged  within thirty  (30) days after the date of entry
            thereof or an appeal or appropriate proceeding for review thereof is
            taken within such period and a stay of execution pending such appeal
            is obtained and continues; or

     (5)    suffers a writ or warrant of attachment or any similar process to be
            issued by  any court  against  all  or any  substantial  part of its
            property,   and such  writ or  warrant of  attachment or any similar
            process is not stayed or  released within thirty (30) days after the
            entry or levy thereof or after any stay is vacated or set aside;

(i)  (a) any person  (other than Parent,  Borrower,  a Restricted  Subsidiary of
     Borrower  or  any  employee   benefit  plan  of  Borrower  or  any  of  its
     Subsidiaries)  or group (as such term is used in Section  13(d) or 14(d)(2)
     of the Securities Exchange Act of 1934, as amended) shall acquire, directly
     or indirectly,  beneficial  ownership of an aggregate of 35% or more of the

                                       59


<PAGE>



     issued and  outstanding  voting stock of Parent or (b) 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 Parent (other than additions  thereto
     or removals therefrom from time to time thereafter approved by a vote of at
     least two-thirds of such Incumbent Directors) shall cease for any reason to
     constitute  50% or more of the  Board of  Directors  of  Parent;  provided,
     however,  that for each determination  period ending on or before September
     30, 1999, each determination period shall be deemed to be a period from the
     Effective Date through the date of such calculation;

(j)  any of the Loan Documents are determined to be invalid or  unenforceable in
     any material respect;

(k)  (1) any Restricted Subsidiary other than any Foreign Restricted Subsidiary,
     and any of their respective  Restricted  Subsidiaries  fails to execute and
     deliver to  Collateral  Agent a Guaranty of the type  referred to in clause
     (i) of  the  definition  of  "Guaranty",  within  30  days  of  becoming  a
     Restricted Subsidiary;

     (2)    unless and  to the extent  that any Foreign Restricted Subsidiary or
            any other  Restricted Subsidiary  is prohibited from,  or subject to
            adverse  tax   consequences   as  a  result  of,   guaranteeing  the
            Obligations  under  this  Agreement  (a) under  Section  956  of the
            Internal Revenue  Code of 1986,  as amended, reformed  or  otherwise
            modified  from  time to time ("ss.956") (b) pursuant to  contractual
            restrictions  in existence  prior to the Effective Date  or (c) as a
            matter of corporate  law,  any Foreign  Restricted Subsidiary or any
            other  Restricted  Subsidiary   fails  to  execute  and  deliver  to
            Collateral Agent, a  Guaranty of the  type referred to in clause (i)
            of the  definition of  "Guaranty"  together  with in the case of any
            Foreign Restricted Subsidiary, a notice in relation to such Guaranty
            or,  in  the  case  of  any  Restricted  Subsidiary  subject  to the
            Corporation Laws of Australia, a certificate under Section 206(6) of
            the Corporations Laws of Australia in relation to such Guaranty,  in
            each case  (1) as soon  as practicable following  the termination or
            inapplicability  of  the  contractual   restrictions, corporate  law
            prohibitions  and  adverse  tax  consequences  referred  to  in this
            paragraph or (2) if no such contractual restrictions,  corporate law
            prohibitions  and  adverse  tax  consequences  apply,   as  soon  as
            practicable  following   a  determination   that  such   contractual
            restrictions,   corporate   law   prohibitions   and   adverse   tax
            consequences do not apply;

(l)  unless and to the extent that (a) any such pledge or mortgage  would result
     in (i) substantial  stamp or similar taxes or (ii) adverse tax consequences
     pursuant to ss.956,  (b) any such pledge or mortgage is  prohibited  either
     (i)  pursuant  to  contractual  restrictions  in  existence  prior  to  the
     Effective  Date or (ii) as a matter of corporate  law, or (c) a Guaranty of
     the type referred to in clause (i) of the definition of "Guaranty" has been
     executed and delivered by the  Restricted  Subsidiary  the capital stock or

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     shares of which would otherwise be subject to pledge or mortgage under this
     paragraph, Borrower, or any Subsidiary of Borrower, owning capital stock or
     shares of any Restricted  Subsidiary of any Foreign Restricted  Subsidiary,
     fails (x) to execute and deliver to Collateral Agent the Pledge Agreements,
     together with all issued and outstanding stock or shares of such Restricted
     Subsidiary of such Foreign Restricted  Subsidiary and stock powers or share
     transfers  executed in blank,  together with a either a  certificate  under
     Section 206 (6) of the  Corporations  Law of  Australia  or a notice of the
     type  described in Section  6.1(k)(2)  hereof,  in each case in relation to
     such Pledge  Agreement,  as the case may be and if  applicable,  as soon as
     practicable  after the termination or  inapplicability  of such contractual
     restrictions  and corporate law  prohibitions  and adverse tax consequences
     referred to in this  paragraph and (y) to repay all  Obligations  and other
     amounts and to cause all outstanding Letters of Credit to be terminated and
     the  originals  thereof  to be  returned  to the  Issuing  Bank  as soon as
     practical  after the  termination or  inapplicability  of such  contractual
     restrictions  and corporate law  prohibitions  and adverse tax consequences
     referred to in this paragraph; or

(m)  any  Obligor,  to the  extent  applicable,  fails,  (x)  promptly  upon the
     reasonable  request of the Managing Agents at any time or from time to time
     prior to the applicable  Stock Pledge Release Date, as the case may be, (1)
     to  execute,   acknowledge  or  deliver,   or  to  cause  to  be  executed,
     acknowledged or delivered,  or to register,  record or file, or to cause to
     be registered,  recorded or filed, any document or instrument  necessary or
     advisable or as Required  Lenders may from time to time  reasonably deem to
     be  necessary  or  advisable  in  connection  with  the  grant,   creation,
     preservation,  perfection  or  maintenance,  as first,  prior and perfected
     Liens,  the Liens  created,  or intended to be created,  by the  applicable
     Security Instruments,  subject only to Permitted Liens or (2) to perform or
     to  continue  to  perform  at all times  and from time to time all  actions
     necessary or advisable or reasonably deemed to be necessary or advisable by
     the  Required  Lenders  in  connection  with such  creation,  preservation,
     perfection  and  maintenance;  and (y) to repay all  Obligations  and other
     amounts and to cause all outstanding Letters of Credit to be terminated and
     the  originals  thereof  to be  returned  to the  Issuing  Bank  as soon as
     practical  after  receipt  of the  reasonable  request of  Managing  Agents
     pursuant to the foregoing clause (x);

provided,  however,  that the  foregoing  events  which  affect only  Restricted
Subsidiaries  that  (a)  are  not  guarantors  of the  Obligations,  and (b) are
immaterial (as determined by the Managing Agents),  shall not constitute "Events
of Default"  under this  Agreement.  It is agreed by the parties  hereto that so
long as Borrower or any Restricted  Subsidiary has made reasonable efforts under
the  circumstances  to obtain the approvals  required by Section  205(10) of the
Corporations Law of Australia (if applicable),  the foregoing paragraphs (k)(2),
(l) and (m) shall not require any Restricted  Subsidiaries to provide any pledge
or guaranty  prohibited by corporate law unless the requirements of such Section
205(10) of the Corporations  Law of Australia,  to the extent  applicable,  have
been satisfied.

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Upon the occurrence of an Event of Default described in Section  6.1(h)(1),  (2)
or (3) with respect to Borrower,  the Commitments shall automatically  terminate
and all of the  Obligations  shall  thereupon  be  immediately  due and payable,
without  demand,  presentment,  notice of demand or of dishonor and  nonpayment,
protest,  notice of protest,  notice of intention to accelerate,  declaration or
notice of  acceleration,  or any other notice or declaration of any kind, all of
which are hereby  expressly  waived by Borrower and each Obligor who at any time
ratifies or approves this  Agreement.  During the continuance of any other Event
of Default,  Administrative Agent at any time and from time to time upon written
instructions  from Required Lenders (which,  for purposes of this sentence only,
shall be  determined  giving  effect to each  Lender's  outstanding  Swing  Line
Advances  and  Competitive  Bid  Advances)  shall,  by notice to  Borrower  (but
otherwise  without notice to any other  Obligor),  declare the Commitments to be
terminated,  and/or declare any or all of the  Obligations  immediately  due and
payable,  and all  such  Obligations  shall  thereupon  be  immediately  due and
payable,  without  demand,  presentment,  notice of demand  or of  dishonor  and
nonpayment,  protest,  notice of protest,  notice of  intention  to  accelerate,
declaration or notice of acceleration, or any other notice or declaration of any
kind, all of which are hereby  expressly waived by Borrower and each Obligor who
at any time  ratifies,  approves or guaranties  this  Agreement  and/or  require
Borrower  to deposit  Cash  Collateral  with  Administrative  Agent in an amount
determined in accordance with paragraph (c) of Section 2.14.

         Section 6.2   Remedies.  If any Default  shall occur and be continuing,
each Lender or Administrative Agent on behalf of Lenders may protect and enforce
its rights under the Loan Documents by any appropriate  proceedings,  including,
without  limitation,  proceedings  for specific  performance  of any covenant or
agreement  contained  in any Loan  Document,  and each  Lender may  enforce  the
payment of any Obligations due it or enforce any other legal or equitable rights
which it may have. Additionally,  under such circumstances, the Required Lenders
or, at the direction of Required Lenders,  the Trustee (or Collateral Agent) may
proceed to protect the  Lenders'  rights  under the  Security  Instruments.  All
rights,  remedies and powers  conferred  upon  Administrative  Agent and Lenders
under the Loan  Documents are  cumulative and not exclusive of any other rights,
remedies or powers available under the Loan Documents or at law or in equity.

         Section 6.3   Annulment   of   Acceleration.     If  a  declaration  of
acceleration  is made  pursuant to this  Article 6, then  Required  Lenders,  by
written notice to Borrower and  Administrative  Agent, may collectively  rescind
and annul such  declaration  in its  entirety;  provided,  that at the time such
declaration  is  annulled  and  rescinded:  (a) no  judgment  or decree has been
entered  for  the  payment  of any  moneys  due  pursuant  to any  Note  or this
Agreement;  (b) all  arrears of  interest  upon all the Notes and all other sums
payable under the Notes and this Agreement  (other than principal  amounts which
may have  become  due as a result  of  acceleration),  including  interest  upon
overdue interest,  to the extent payment thereof is lawful, shall have been duly
paid;  and (c) each and every  other  Event of  Default  which  has  theretofore
occurred  shall have been waived  pursuant to Section 8.1 or otherwise made good
or cured.

         Section 6.4   Indemnity.   Borrower  hereby indemnifies  each Agent and
each Lender,  from and  against any and  all liabilities,  obligations,  claims,

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losses,  damages,  penalties,  actions,  judgments,  suits,  costs,  expenses or
disbursements (including reasonable fees of attorneys,  accountants, experts and
advisors) of any kind or nature whatsoever (in this Section  collectively called
"liabilities  and  costs")  which to any  extent  (in  whole or in part)  may be
imposed  on,  incurred  by, or asserted  against  such Agent or such Lender as a
result of, arising out of, relating to or in connection with:

(a)  the Loan Documents to which Borrower or one or more of its  Subsidiaries is
     a party or the  rights  provided  therein  (including  the  enforcement  or
     defense thereof);

(b)  the direct or indirect  application or proposed application of the proceeds
     of  any  Loan  or  Letter  of  Credit  to or  for  Borrower  or  any of its
     Subsidiaries;

(c)  any transaction financed or to be financed in whole or in part, directly or
     indirectly,  with the  proceeds  of any Loan or  Letter of Credit to or for
     Borrower or any of its Subsidiaries;

(d)  any  investigation,  litigation or proceeding  related to any environmental
     cleanup, audit, compliance or other matter (including enforcement) relating
     to any  Environmental  Law or the  condition  of any  facility  or property
     owned, leased or operated by Borrower or any of its Subsidiaries; or

(e)  the  presence  on or under,  or the  escape,  seepage,  leakage,  spillage,
     discharge,  emission,  discharging  or releases from, any facility owned or
     operated by Borrower or any of its  Subsidiaries  of any hazardous or toxic
     substance  (including  any  liabilities  and costs under any  Environmental
     Law),  regardless of whether caused by, or within the control of,  Borrower
     or any of its  Subsidiaries;  or any  misrepresentation,  inaccuracy or any
     breach in or of  Section  4.1(j) or  Section  5.1(i) by or with  respect to
     Borrower or any of its Subsidiaries.

The foregoing indemnification shall not apply to the extent such liabilities and
costs are  determined to have  resulted or been caused,  in whole or in part, by
the gross negligence or willful  misconduct on the part of such Agent or Lender.
THE FOREGOING  INDEMNIFICATION  SHALL APPLY WHETHER OR NOT SUCH  LIABILITIES AND
COSTS  ARE IN ANY WAY OR TO ANY  EXTENT  CAUSED,  IN WHOLE  OR IN  PART,  BY ANY
NEGLIGENT  ACT OR OMISSION  OF ANY KIND  EXCEPT AS  PROVIDED BY THE  IMMEDIATELY
PRECEDING  SENTENCE.  In the event that any claim or demand  for which  Borrower
would be  liable to any Agent or any  Lender  under  this  Section  is  asserted
against or sought to be collected from any Agent or any Lender by a third party,
Agent or such Lender  shall  promptly  notify  Borrower of such claim or demand.
Borrower shall have the lesser of: (i) thirty (30) Business Days from receipt of
the above notice; or (ii) three (3) Business Days prior to the expiration of any
period  after  which a default  judgment  may be entered  against  such Agent or
Lender (the "Notice  Period") to notify such Agent and/or Lender  whether or not
Borrower desires, at the sole cost and expense of Borrower, to defend such Agent
and/or Lender against such claim or demand.  In the event that Borrower notifies
such Agent and/or  Lender  within the Notice  Period,  that it desires to defend
such Agent and/or Lender  against such claim or demand,  Borrower shall have the

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right to settle or otherwise  dispose of such claim or demand (other than claims
alleging criminal violations) on such terms as Borrower, with the consent of the
indemnified party (which consent shall not be unreasonably  withheld) shall deem
appropriate; provided that:

     (w)    counsel  designated  by  Borrower is  reasonably  acceptable  to the
            Managing Agents and the affected Lender;

     (x)    Borrower will  have acknowledged  in writing that  this Section will
            cover any liabilities and costs in any such claim or demand;

     (y)    in the  sole determination  of the  Managing Agents and the affected
            Lender,  Borrower  will  have  the  financial  ability  to  pay such
            liabilities and costs; and

     (z)    Borrower shall  thereafter consult with  the Managing Agents and the
            affected Lender with respect to such claim or demand; and

provided  further,  that each of Agents and the  affected  Lender shall have the
right at all times to  participate  in any  proceeding,  at their  sole cost and
expense,  subject,  however,  to Borrower's  right to control the defense of all
proceedings concerning such claim or demand.

In the event that  Borrower  fails to give such Agent and/or Lender such notice,
such Agent  and/or  Lender may defend  against  such claim or demand;  provided,
however,  that Borrower's obligation to reimburse such Agent and/or Lender shall
be limited to a single law firm of such Agent  and/or  Lender  (unless  Borrower
otherwise consents, which consent shall not be unreasonably withheld);  provided
further,  that Borrower  shall have the right at all times to participate in any
such proceeding, at its sole cost and expense, subject, however, to the right of
such Agent and/or  Lender to control the defense of all  proceedings  concerning
such claim or demand.  As used in this  Section,  the terms "Agent" and "Lender"
shall refer not only to the Persons  designated  as such in Section 1.1 but also
to each director,  officer, agent, attorney, employee and representative of such
Person.

                                    ARTICLE 7

                                     AGENTS

         Section 7.1   Appointment and Authority.  NationsBank of Texas, N.A. is
hereby  appointed  Administrative  Agent  hereunder  and under  each  other Loan
Document,  CIBC Inc. is hereby appointed Documentation Agent hereunder and under
each other Loan  Document,  Morgan  Guaranty Trust Company of New York is hereby
appointed  Documentation  Agent hereunder and under each other Loan Document and
The Chase  Manhattan Bank is hereby  appointed  Syndication  Agent hereunder and
under each other Loan  Document,  each  Co-Agent  is hereby  appointed  Co-Agent
hereunder  and under each other Loan  Document,  and each of the Lenders  hereby
authorizes each such Agent to act as the agent of such Lender hereunder and each
other Loan Document to the extent provided herein or therein. In addition,  each
Lender hereby irrevocably  authorizes  Administrative  Agent, and Administrative

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Agent  hereby  undertakes,  to  receive  payments  of  principal,  interest  due
hereunder as specified  herein and to act as Collateral Agent under the Security
Instruments.  In addition,  each Lender hereby  authorizes each Agent,  and each
Agent hereby  undertakes  to take all other  actions and to exercise such powers
under the Loan  Documents  as are  specifically  delegated  to such Agent by the
terms hereof or thereof,  together with all other powers  reasonably  incidental
thereto. No Co-Agent has any duties or  responsibilities  whatsoever as Co-Agent
(as  opposed  to its  capacity  as  Lender)  under or in  connection  with  this
Agreement or any of the Loan Documents. The relationship of each Agent to Lender
is only that of one commercial bank acting as  administrative  agent for others,
and nothing in the Loan  Documents  shall be construed to constitute any Agent a
trustee  or  other  fiduciary  for  any  holder  of any of the  Notes  or of any
participation  therein  or in the LC  Obligations,  nor to  impose  on any Agent
duties  and  obligations  other than those  expressly  provided  for in the Loan
Documents.  None of the Agents  shall have  implied  duties to  Lenders,  or any
obligations to Lenders to take any action under the Loan  Documents,  except any
action by an Agent  specifically  provided by the Loan  Documents to be taken by
such Agent.  With respect to any matters not expressly  provided for in the Loan
Documents and any matters which the Loan  Documents  place within the discretion
of any Agent,  such Agent shall not be required to exercise  any  discretion  or
take any action, and each such Agent may request  instructions from Lenders with
respect to any such matter, in which case such Agent shall be required to act or
to refrain from acting (and shall be fully  protected and free from liability to
any and all Lenders and Agents in so acting or refraining  from acting) upon the
instructions of Required Lenders (including itself); provided,  however, that no
Agent  shall  be  required  to take any  action  which  exposes  it to a risk of
personal  liability that it considers  unreasonable  or which is contrary to the
Loan Documents or to applicable law unless  indemnified to its  satisfaction  by
Lenders or Borrower.  Upon receipt by Administrative  Agent from Borrower of any
communication  calling for action on the part of Lenders or upon notice from any
Lender  to   Administrative   Agent  of  any   Default  or  Event  of   Default,
Administrative Agent shall promptly notify each Lender thereof.

         Section 7.2   Agent's  Reliance.  No Agent  or any of their  respective
directors,  officers,  agents,  attorneys,  or employees shall be liable for any
action taken or omitted to be taken by any of them under or in  connection  with
the Loan  Documents,  including their  negligence of any kind,  except that each
shall be liable  for its own gross  negligence  or willful  misconduct.  Without
limiting the generality of the foregoing, each Agent:

(a)  may treat the payee of any Note as the holder thereof until  Administrative
     Agent  receives  written  notice of the  assignment or transfer  thereof in
     accordance  with  this  Agreement,   signed  by  such  payee  and  in  form
     satisfactory to Administrative Agent;

(b)  may  consult  with  legal  counsel   (including   counsel  for   Borrower),
     independent public accountants and other experts selected by such Agent and
     shall not be liable  for any  action  taken or  omitted to be taken in good
     faith by it in accordance  with the advice of such counsel,  accountants or
     experts;

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(c)  makes no warranty or representation to any Lender or to any other Agent and
     shall  not be  responsible  to any  Lender  or  Agent  for any  statements,
     warranties  or  representations  made in or in  connection  with  the  Loan
     Documents by any other Person;

(d)  shall not have any duty to ascertain or to inquire as to the performance or
     observance  of  any of the  terms,  covenants  or  conditions  of the  Loan
     Documents on the part of any Obligor or to inspect the property  (including
     the books and records) of any Obligor;

(e)  shall not be  responsible  to any Lender or to any other  Agent for the due
     execution  (other  than  its own due  execution  and  delivery),  legality,
     validity, enforceability,  genuineness,  existence, sufficiency or value of
     any Loan  Document,  the Credit  Facility  Agreement or any  instrument  or
     document furnished in connection herewith, or any collateral;

(f)  may rely upon the  representations  and  warranties  of any Obligor and the
     Lenders in exercising its powers hereunder;

(g)  shall not be responsible for the satisfaction of any condition specified in
     Article 3, except  receipt by an Agent of items required to be delivered to
     such Agent; and

(h)  shall  incur no  liability  under or in  respect of the Loan  Documents  by
     acting upon any notice, consent, certificate or other instrument or writing
     (including  any telecopy,  telegram,  cable or telex)  believed by it to be
     genuine and signed or sent by the proper Person or Persons.

         Section 7.3   Lenders' Credit Decisions.  Each Lender acknowledges that
it has, independently and  without reliance upon any  Agent or any other Lender,
made its own analysis of Obligors and the transactions  contemplated  hereby and
its own  independent  decision to enter into this  Agreement  and the other Loan
Documents. Each Lender also acknowledges that it will, independently and without
reliance  upon any Agent or any other  Lender  and based on such  documents  and
information as it shall deem  appropriate at the time,  continue to make its own
credit decisions in taking or not taking action under the Loan Documents.

         Section 7.4   Indemnification.  Each Lender  agrees to  indemnify  each
Agent (to  the extent not  reimbursed  by  Borrower  within ten  (10) days after
demand)  from  and  against  such  Lender's  Percentage  Share  of any  and  all
liabilities,   obligations,   claims,  losses,  damages,   penalties,   actions,
judgments, suits, costs, expenses or disbursements (including reasonable fees of
attorneys,  accountants, experts, and advisors) of any kind or nature whatsoever
(in this  Section  collectively  called  "liabilities  and costs")  which to any
extent (in whole or in part) may be imposed on, incurred by, or asserted against
such Agent growing out of,  resulting from or in any other way  associated  with
any of the Loan Documents and the  transactions and events  (including,  without
limitation,  the  enforcement  thereof)  at any  time  associated  therewith  or
contemplated  therein. THE FOREGOING  INDEMNIFICATION SHALL APPLY WHETHER OR NOT
SUCH  LIABILITIES AND COSTS ARE IN ANY WAY OR TO ANY EXTENT CAUSED,  IN WHOLE OR
IN PART,  BY ANY  NEGLIGENT  ACT OR OMISSION OF ANY KIND BY ANY AGENT,  PROVIDED

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ONLY THAT NO LENDER SHALL BE OBLIGATED  UNDER THIS SECTION TO INDEMNIFY AN AGENT
FOR THAT PORTION,  IF ANY, OF ANY LIABILITIES AND COSTS WHICH IS THE SOLE RESULT
OF SUCH  AGENT'S OWN  INDIVIDUAL  GROSS  NEGLIGENCE  OR WILLFUL  MISCONDUCT,  AS
DETERMINED IN A FINAL JUDGMENT OF A COURT OF COMPETENT JURISDICTION.  Cumulative
of the foregoing,  each Lender agrees to reimburse  Administrative  Agent,  each
Documentation Agent and Syndication Agent promptly upon demand for such Lender's
Percentage Share of any costs and expenses to be paid to  Administrative  Agent,
the  Documentation  Agent or the  Syndication  Agent by Borrower  under  Section
5.1(h) to the extent that  Administrative  Agent, the Documentation Agent or the
Syndication  Agent is not timely  reimbursed  for such  expenses  by Borrower as
provided in such section.  As used in this Section the term "Agents" shall refer
not only to the  Person(s)  designated  as such in Section  1.1 but also to each
director,   officer,  agent,  attorney,  employee  and  representative  of  such
Person(s).

         Section 7.5   Rights  as  Lender.  In  their  respective  capacity as a
Lender,  each Agent shall have the same rights and obligations as any Lender and
may exercise  such rights as though it were not an Agent.  Each Agent may accept
deposits from, lend money to, act as trustee under  indentures of, and generally
engage in any kind of business with any of Obligors or their Affiliates,  all as
if it were not an Agent  hereunder  and without any duty to account  therefor to
any other Lender.

         Section 7.6   Sharing of Set-Offs  and Other  Payments.  Each Agent and
Lender  agrees that if it shall,  whether  through the  exercise of rights under
security documents or rights of banker's lien,  setoff, or counterclaim  against
any  Obligor  or  otherwise,  obtain  payment  of a  portion  of  the  aggregate
Obligations owed to it (other than in respect of its Swing Line Advances and its
Competitive Bid Advances) which,  taking into account all distributions  made by
Administrative  Agent under  Section  2.11,  causes such Agent or such Lender to
have received more than it would have received had such payment been received by
Administrative  Agent and distributed  pursuant to Section 2.11 (or, in the case
of Swing Line  Advances  paid as  provided  in Section  2.6(b) or in the case of
Competitive Bid Advances paid as provided in Section 2.22(b)),  then it shall be
deemed to have  simultaneously  purchased  and shall be  obligated  to  purchase
interests in the Obligations as necessary to cause  Administrative Agent and all
Lenders to share all payments  (other than in respect of Swing Line Advances and
Competitive  Bid  Advances)  as  provided  for in Section  2.11,  and such other
adjustments shall be made from time to time as shall be equitable to ensure that
all Agents and all  Lenders  share all  payments of  Obligations  (other than in
respect of its Swing Line Advances and  Competitive Bid Advances) as provided in
Section 2.11. If any Agent or any Lender,  whether in connection  with setoff of
amounts  which might be subject to setoff or otherwise,  receives  collateral or
other  protection for its  Obligations or such amounts which might be subject to
setoff,  such Agent or Lender agrees,  promptly upon demand, to take such action
necessary  so that all  Agents and all  Lenders  share in the  benefits  of such
collateral  ratably  in  proportion  to the  Obligations  owing to each of them.
Nothing herein  contained  shall in any way affect the right of any Agent or any
Lender to obtain  payment  (whether  by  exercise  of rights of  banker's  lien,
set-off  or  counterclaim   or  otherwise)  of   indebtedness   other  than  the
Obligations.  Borrower  expressly  consents to the  foregoing  arrangements  and

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agrees  that any  holder  of any such  interest  or other  participation  in the
Obligations, whether or not acquired pursuant to the foregoing arrangements, may
to the fullest  extent  permitted by law exercise any and all rights of banker's
lien,  set-off,  or counterclaim as fully as if such holder were a holder of the
Obligations in the amount of such interest or other participation. If all or any
part of any funds transferred  pursuant to this Section is thereafter  recovered
from the  seller  under this  Section  which  received  the same,  the  purchase
provided  for in this  Section  shall be deemed to have  been  rescinded  to the
extent of such recovery, together with interest, if any, if interest is required
pursuant  to court order to be paid on account of the  possession  of such funds
prior to such recovery.

         Section 7.7   Investments.  Whenever Administrative Agent in good faith
determines  that it is uncertain  about how to  distribute  to Lenders any funds
which it has received, or whenever Administrative Agent in good faith determines
that  there is any  dispute  among  Lenders  about  how  such  funds  should  be
distributed,  Administrative Agent may choose to defer distribution of the funds
which are the subject of such uncertainty or dispute. If Administrative Agent in
good  faith  believes  that the  uncertainty  or  dispute  will not be  promptly
resolved,  or if  Administrative  Agent is  otherwise  required to invest  funds
pending  distribution  to  Lenders,  Administrative  Agent may invest such funds
pending distribution (at the risk of the subject Borrower);  all interest on any
such investment  shall be distributed  upon the  distribution of such investment
and in the same  proportion  and to the same  Persons  as such  investment.  All
moneys received by Administrative  Agent for distribution to Lenders (other than
to the Person who is Administrative  Agent in its separate capacity as a Lender)
shall be held by  Administrative  Agent  pending  such  distribution  solely  as
Administrative  Agent for such Lenders,  and Administrative  Agent shall have no
equitable title to any portion thereof.

         Section 7.8   Benefit  of  Article  7.   The provisions of this Article
(other than the  following  Section 7.9) are intended  solely for the benefit of
Agent  and  Lenders,  and no  Obligor  shall  be  entitled  to rely on any  such
provision or assert any such  provision in a claim or defense  against  Agent or
any Lender.  Agent and Lenders may waive or amend such provisions as they desire
without any notice to or consent of any Obligor.

         Section 7.9   Resignation and Removal. Any Agent may resign at any time
by giving written notice thereof to Lenders and Borrower. Each such notice shall
set forth the date of such resignation.  Majority Lenders or Borrower,  with the
consent (which shall not be  unreasonably  withheld) of Majority  Lenders (other
than Agent to be removed)  shall be entitled to remove any Agent.  Upon any such
resignation or removal,  Borrower may, with the written concurrence (which shall
not be  unreasonably  withheld)  of  Majority  Lenders  (exclusive  of any  such
resigned or removed Agent), designate a successor Agent. If, within fifteen (15)
days  after the date of such  resignation  or  removal,  Borrower  makes no such
designation  or  such  written  concurrence  is  not  given,   Majority  Lenders
(exclusive  of any such resigned or removed  Agent)  shall,  with the consent of
Borrower (which consent shall not be unreasonably withheld or delayed), have the
right to appoint a  successor  Agent.  A  successor  must be  appointed  for any
retiring  Managing Agent,  and such Managing  Agent's  resignation  shall become

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effective when such successor accepts such  appointment.  Upon the acceptance of
any appointment as a Managing Agent hereunder by a successor  Managing Agent and
the  satisfaction  of all  obligations  on the part of such  retiring or removed
Managing  Agent  necessary  to  facilitate  succession,  the retiring or removed
Managing  Agent,  as the case may be,  shall be  discharged  from its duties and
obligations under this Agreement and the other Loan Documents. After any Agent's
resignation  or  removal  hereunder,  the  provisions  of this  Article  7 shall
continue to inure to its benefit as to any actions  taken or omitted to be taken
by it while it was Agent under the Loan  Documents.  Any  out-going  Agent shall
promptly execute all assignments and other documents necessary to effectuate the
transfer of the agency in  connection  with this  Agreement  and shall  promptly
deliver all original  documents  and any  collateral  in its  possession  to the
successor Agents.


                                    ARTICLE 8

                                  MISCELLANEOUS

         Section 8.1   Waivers and Amendments.  No failure or delay  (whether by
course of conduct or  otherwise)  by any Agent or any Lender in  exercising  any
right,  power or remedy which any Agent or Lender may have under any of the Loan
Documents  shall  operate as a waiver  thereof or of any other  right,  power or
remedy,  nor shall any single or partial  exercise by any Agent or Lender of any
such right, power or remedy preclude any other or further exercise thereof or of
any  other  right,  power or  remedy.  No waiver  of any  provision  of any Loan
Document  and no  consent to any  departure  therefrom  shall ever be  effective
unless it is in writing and signed as provided  below in this Section,  and then
such waiver or consent shall be effective only in the specific instances and for
the purposes for which given and to the extent  specified  in such  writing.  No
notice to or  demand on any  Obligor  shall in any case of  itself  entitle  any
Obligor  to  any  other  or  further  notice  or  demand  in  similar  or  other
circumstances.  This Agreement and the other Loan Documents set forth the entire
understanding  between  the  parties  hereto  with  respect to the  transactions
contemplated  herein  and  therein  and  supersede  all  prior  discussions  and
understandings  with respect to the subject  matter  hereof and thereof,  and no
waiver,  consent,  release,  modification  or amendment of or supplement to this
Agreement or the other Loan  Documents  shall be valid or effective  against any
party hereto unless the same is in writing and signed by (a) if such party is an
Obligor,  by such Obligor,  (b) if such party is an Agent, by such Agent and (c)
if such party is a Lender, by such Lender or by  Administrative  Agent on behalf
of Lenders  with the  written  consent of Required  Lenders (or without  further
consent  than that  already  provided  herein in the  circumstances  provided in
Section 8.7).  Notwithstanding  the foregoing or anything to the contrary herein
or in any other Loan Document, no Agent shall, without the prior consent of each
Lender,  execute  and  deliver on behalf of any  Lender any waiver or  amendment
which would:

     (i)   increase the Commitment of such Lender or  subject such Lender to any
           additional obligations;

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    (ii)   reduce  or  forgive  any  fees  hereunder,  or  the  principal of, or
           interest on, such Lender's Notes or LC Obligations;

   (iii)   postpone  any date fixed for any  payment of any fees  hereunder,  or
           principal of, or interest on, such Lender's Notes or LC Obligations;

    (iv)   amend  the  definitions  herein  of  "Required Lenders"  or "Majority
           Lenders" or otherwise  change  the  aggregate  amount  of  Percentage
           Shares  which is required for Administrative  Agent, any other Agent,
           Lenders or any of them to take  any particular  action under the Loan
           Documents;

     (v)   release  collateral   (except  as   expressly  contemplated  by  this
           Agreement)  or any Borrower  from its obligation to pay such Lender's
           Notes  or LC  Obligations  or  any  Restricted  Subsidiary  from  its
           Guaranty   (except  upon  the  Restricted   Subsidiary   becoming  an
           Unrestricted Subsidiary as specified in this Agreement);

    (vi)   amend this Section 8.1;

   (vii)   extend the Loan Commitment Period;

    (ix)   amend,   modify   or   waive   any  provision   applicable   to   the
           indemnification of any Lender;

     (x)   consent to  the assignment or transfer  by any  Obligor of any of its
           rights  or  obligations  under  this  Agreement  or  the  other  Loan
           Documents; or

    (xi)   amend, modify or waive the rights and obligations of the Issuing Bank
           or the Agents;  provided,  that no  obligation to  any Obligor of any
           Lender or  Issuing  Bank  or any  Agent  may be amended,  modified or
           waived without the written approval of Borrower, which approval shall
           not be unreasonably withheld.

         Notwithstanding  the foregoing or anything to the contrary herein or in
any other Loan  Document,  no  provision  of Article 7 may be amended in any way
which  impacts or affects  any Agent in its  capacity as an Agent (as opposed to
its  capacity  as a Lender)  without  the prior  written  consent of such Agent.
Except as provided in the preceding three sentences or as expressly  provided in
any Loan Document,  the Required Lenders may waive,  modify, amend or supplement
this Agreement and each of the other Loan Documents.

         Section 8.2   Survival of Agreements; Cumulative Nature. Each Obligor's
various representations,  warranties,  covenants,  indemnities and agreements in
the Loan  Documents  shall survive the execution and delivery of this  Agreement
and the other Loan Documents and the performance  hereof and thereof,  including
the making or granting of the Loans,  the  issuance of the Letters of Credit and
the  delivery  of the Notes,  and the other Loan  Documents,  and shall  further
survive until all of the Obligations are paid in full to Agents and Lenders, all

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Letters of Credit have expired or been  canceled and all of Agents' and Lenders'
obligations  to Borrower are  terminated,  provided  that,  notwithstanding  the
foregoing,  certain  Obligations  of certain  Obligors  under  their  respective
Guaranties  shall survive or be reinstated as provided in such  Guaranties.  The
representations,  warranties,  indemnities, and covenants made by any Obligor in
any Loan Documents, and the rights, powers, and privileges granted to Agents and
Lenders in the Loan Documents, are cumulative.

         Section 8.3   Notices. All notices,  requests,  consents,  demands  and
other  communications  required or permitted under any Loan Document shall be in
writing,  unless otherwise specifically provided in such Loan Document (provided
that  Administrative  Agent may give telephonic  notices to the other Agents and
Lenders),  and shall be deemed  sufficiently  given or furnished if delivered by
personal delivery,  by telecopy (with telephonic  confirmation of transmission),
by delivery service with proof of delivery, or by registered or certified United
States mail,  postage prepaid,  to Borrower at the address of Borrower specified
on the  signature  pages  hereto  and to each  Agent  and each  Lender  at their
addresses  specified on the signature  pages hereto  (unless  changed by similar
notice  in  writing  given  by the  particular  Person  whose  address  is to be
changed). Any such notice or communication shall be deemed to have been given:

(a)  in the case of personal  delivery or  delivery  service,  as of the date of
     first  attempted  delivery  during  normal  business  hours at the  address
     provided herein;

(b)  in the case of telecopy, upon receipt; or

(c)  in the case of registered or certified  United States mail,  three (3) days
     after deposit in the mail,  postage  prepaid;  provided,  however,  that no
     Request for Advance or Rate Election shall become  effective until actually
     received  by  Administrative  Agent and no request  for the  issuance  of a
     Letter of Credit or Letter of Credit  Application  shall  become  effective
     until actually received by the Issuing Bank.

         Section 8.4   Parties in Interest. All grants, covenants and agreements
contained  in the Loan  Documents  shall  bind and inure to the  benefit  of the
parties thereto and their respective successors and assigns; provided,  however,
that no Obligor may assign or transfer  any of its rights or delegate any of its
duties or obligations  under any Loan Document without the prior written consent
of all Lenders.

         Section 8.5   Governing  Law.   THE  LOAN  DOCUMENTS  SHALL  BE  DEEMED
CONTRACTS AND INSTRUMENTS MADE UNDER THE LAWS OF THE STATE OF TEXAS AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE  WITH AND GOVERNED BY THE LAWS OF THE STATE
OF TEXAS  AND THE LAWS OF THE  UNITED  STATES  OF  AMERICA,  WITHOUT  REGARD  TO
PRINCIPLES  OF  CONFLICTS OF LAW.  CHAPTER 15 OF TEXAS  REVISED  CIVIL  STATUTES
ANNOTATED  ARTICLE 5069 (WHICH REGULATES  CERTAIN REVOLVING CREDIT LOAN ACCOUNTS
AND REVOLVING  TRI-PARTY  ACCOUNTS)  DOES NOT APPLY TO THIS  AGREEMENT OR TO THE
NOTES.

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         Section 8.6   Limitation  on  Interest.  It is  the  intention  of  the
parties hereto to conform strictly to applicable usury laws and, anything herein
or any other Loan Document to the contrary  notwithstanding,  the obligations of
Obligors to a Lender or an Agent  under this  Agreement  and the Loan  Documents
shall be  subject to the  limitation  that  payments  of  interest  shall not be
required to the extent that receipt  thereof  would be contrary to provisions of
law  applicable to such Lender or Agent  limiting rates of interest which may be
charged or collected by such Lender or Agent.  Accordingly,  if the transactions
contemplated hereby would be usurious under laws applicable to a Lender or Agent
(including  the federal and state laws of the United States of America or of any
other  jurisdiction  whose laws may be mandatorily  applicable to such Lender or
Agent  notwithstanding  anything to the contrary in this  Agreement or any other
Loan Document) then, in that event,  notwithstanding anything to the contrary in
this Agreement or any other Loan Document, it is agreed as follows:

(a)  the provisions of this Section shall govern and control;

(b)  the  aggregate  of  all  consideration  which  constitutes  interest  under
     applicable law that is contracted for, taken, reserved, charged or received
     under this Agreement, or under any of the aforesaid agreements or otherwise
     in connection with this Agreement or any other Loan Document by such Lender
     or Agent shall under no circumstances exceed the maximum amount of interest
     allowed by applicable law (such maximum lawful  interest rate, if any, with
     respect to each Lender and each Agent  herein  called the  "Maximum  Lawful
     Rate"),  and any excess shall be canceled  automatically and if theretofore
     paid shall be credited to the relevant Obligor by such Lender or Agent (or,
     if such consideration shall have been paid in full, such excess refunded to
     the relevant Obligor);

(c)  all sums paid,  or agreed to be paid,  to such Lender or Agent for the use,
     forbearance and detention of the  indebtedness  of the relevant  Obligor to
     such Lender or Agent  hereunder or under any other Loan Document  shall, to
     the extent  permitted by laws  applicable  to such Lender or Agent,  as the
     case may be, be amortized,  prorated,  allocated and spread  throughout the
     full term of such  indebtedness  until  payment  in full so that the actual
     rate of interest is uniform throughout the full term thereof;

(d)  if at any time the  interest  provided  pursuant to any  provision  of this
     Agreement or any other Loan Document,  together with any other fees payable
     pursuant to this  Agreement or any other Loan Document and deemed  interest
     under laws  applicable  to such Lender or Agent,  exceeds the amount  which
     would have accrued at the Maximum  Lawful Rate,  the amount of interest and
     any such fees to accrue to such Lender or Agent  pursuant to this Agreement
     or any other Loan Document  shall be limited,  notwithstanding  anything to
     the contrary in this Agreement or any other Loan  Document,  to that amount
     which would have  accrued at the Maximum  Lawful Rate,  but any  subsequent
     reductions, as applicable,  shall not reduce the interest to accrue to such
     Lender or Agent pursuant to this Agreement or any other Loan Document below
     the Maximum Lawful Rate until the total amount of interest accrued pursuant
     to this Agreement or such other Loan Document, as the case may be, and such
     fees deemed to be interest  equals the amount of interest  which would have
     accrued to such  Lender or Agent if a varying  rate of  interest  per annum

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     equal  to the  interest  provided  pursuant  to  Section  2.3 or any  other
     relevant  Section  hereof  (other  than this  Section)  and the  Notes,  as
     applicable,  had at all times been in effect, plus the amount of fees which
     would have been received but for the effect of this Section; and

(e)  if the total  amount of  interest  paid by or accrued  with  respect to the
     Obligations of Borrower,  together with any other fees payable  pursuant to
     this Agreement and the other Loan Documents and deemed  interest under laws
     applicable to such Lender or Agent  pursuant to this Agreement or any other
     Loan Document  under the foregoing  provisions of this Section is less than
     the total amount of interest which would have accrued if a varying rate per
     annum equal to the interest  provided  pursuant to Section 2.3 or any other
     relevant  section hereof (other than this Section),  as applicable,  had at
     all times been in effect and all fees  provided for in this  Agreement  and
     the other Loan Documents had been paid, then Borrower  severally  agrees to
     pay to such Lender or Agent an amount equal to the difference between,  (i)
     the lesser of, (x) the amount of interest and fees which would have accrued
     if the  Maximum  Lawful  Rate had at all times been in effect,  and (y) the
     amount of interest  and fees which would have accrued if a varying rate per
     annum equal to the interest  provided pursuant to Section 2.3 or such other
     relevant section of this Agreement (other than this Section) and the Notes,
     as applicable,  had at all times been in effect and all fees had been paid,
     and (ii) the amount of interest  and fees  accrued in  accordance  with the
     other provisions of this Agreement and other Loan Documents.

         For purposes of Article  5069-1.04 of Vernon's Texas Civil Statues,  as
amended, to the extent, if any, applicable to any Lender or Agent,  Borrower and
each other Obligor  agrees that the Maximum  Lawful Rate shall be the "indicated
(weekly) rate ceiling" as defined in said Article,  provided that such Lender or
Agent, as applicable,  may also rely, to the extent permitted by applicable laws
of the State of Texas and the United States of America,  on alternative  maximum
rates of interest under other laws  applicable to such Lender or Agent from time
to time if greater.

         Section 8.7   Termination; Limited  Survival.  In its sole and absolute
discretion,  Borrower may, at any time that no  Obligations or other amounts are
owing  and no  Letters  of  Credit  are  outstanding,  elect to  terminate  this
Agreement in a written notice delivered to Administrative Agent. Upon receipt by
Administrative  Agent of such a notice,  if no  Obligations or other amounts are
then  owing and no Letters of Credit are  outstanding,  this  Agreement  and all
other Loan  Documents  shall  thereupon be  terminated  and the parties  thereto
released   from   all   prospective   obligations   hereunder   or   thereunder.
Notwithstanding the foregoing or anything herein to the contrary, any waivers or
admissions  made by any  Obligor in any Loan  Document,  any  Obligations  under
Sections  2.16  through  2.20,  any  obligations  which any  Obligor may have to
indemnify or compensate any Agent, any Issuing Bank, or any Lender in connection
with matters  arising upon or prior to the termination of this Agreement and any
obligations  which any Lender may have to indemnify or  compensate  any Agent or
Issuing Bank in connection with matters arising upon or prior to the termination
of this Agreement  shall survive any  termination of this Agreement or any other
Loan  Document  and the  release of  Obligors.   At the  request and  expense of

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Borrower, Managing Agents shall prepare and execute all necessary instruments to
reflect and effect such  termination  of the Loan Documents  including,  without
limitation,  the Security  Instruments.  Managing Agents are hereby  authorized,
jointly and severally, to execute all such instruments on behalf of all Lenders,
without the joinder of or further action or consent by any Lender.

         Section 8.8   Assignments; Participations.

(a)  Each Lender  shall have the right to sell,  assign or  transfer  all or any
     part  of  such  Lender's  Notes,  Loans,  Commitments  and  LC  Obligations
     hereunder  to one or  more  Affiliates,  Lenders,  financial  institutions,
     pension plans, investment funds, or similar Persons or to a Federal Reserve
     Bank; provided,  that in connection with each sale,  assignment or transfer
     (other  than to an  Affiliate,  a Lender or a Federal  Reserve  Bank),  the
     applicable Lender will consider the opinion and recommendation of Borrower,
     which  opinion  and  recommendation  shall in no way be  binding  upon such
     Lender,  and each such sale,  assignment,  or  transfer  (other  than to an
     Affiliate, a Lender or a Federal Reserve Bank) shall be with the consent of
     Borrower (unless an Event of Default has occurred and is continuing), which
     consent  will  not be  unreasonably  withheld,  and  with  the  consent  of
     Administrative Agent, which consent will not be unreasonably  withheld, and
     the  assignee,  transferee  or recipient  shall have, to the extent of such
     sale, assignment, or transfer, the same rights, benefits and obligations as
     it would if it were such Lender and a holder of such Notes, Commitments and
     LC  Obligations,  including,  without  limitation,  the  right  to  vote on
     decisions requiring consent or approval of all Lenders, Majority Lenders or
     Required  Lenders and the obligation to fund its Loans;  provided  further,
     that (1) each Lender in making each such sale, assignment, or transfer must
     sell,  assign or transfer a pro rata  portion of its  Commitments  and each
     Loan (other than a Swing Line Advance or a Competitive  Bid Advance) and LC
     Obligation made or held by such Lender, (2) each such sale, assignment,  or
     transfer  (other than to an Affiliate,  a Lender or a Federal Reserve Bank)
     shall be in an aggregate  principal amount not less than  $10,000,000,  (3)
     each  remaining  Lender  shall  at  all  times  maintain  Commitments  then
     outstanding in an aggregate principal amount at least equal to $10,000,000;
     (4) no Lender may offer to sell its Notes,  Commitments,  LC Obligations or
     Loans or interests  therein in violation of any securities laws; and (5) no
     such  assignments  (other  than to a Federal  Reserve  Bank)  shall  become
     effective until the assigning Lender delivers to  Administrative  Agent and
     Borrower copies of all written  assignments and other documents  evidencing
     any such  assignment and an Agreement to be Bound in the form of Exhibit L,
     providing for the assignee's  ratification and agreement to be bound by the
     terms of this Agreement and the other Loan Documents.  An assignment fee in
     the amount of $3,500 for each such assignment  (other than to an Affiliate,
     a Lender or a Federal Reserve Bank) will be payable to Administrative Agent
     by assignor or assignee. Within five (5) Business Days after its receipt of
     copies of any assignment and the other documents  relating  thereto and the
     following   described   Notes,   Borrower  shall  execute  and  deliver  to
     Administrative  Agent (for  delivery to the  relevant  assignee)  new Notes
     evidencing  such  assignee's  assigned  Loans  and  Commitments  and if the

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     assignor Lender has retained a portion of its Loans,  replacement  Notes in
     the principal amount of the Loans and Commitments  retained by the assignor
     Lender  (except as provided in the last sentence of this paragraph (a) such
     Notes to be in exchange  for, but not in payment of, the Notes held by such
     Lender).  On and after the effective date of an assignment  hereunder,  the
     assignee  shall for all purposes be a Lender,  party to this  Agreement and
     any other Loan  Document  executed  by the  Lenders  and shall have all the
     rights and  obligations of a Lender under the Loan  Documents,  to the same
     extent as if it were an original party thereto,  and no further  consent or
     action by  Borrower,  Lenders or any Agent shall be required to release the
     transferor Lender, with respect to the Commitments,  the LC Obligations and
     the  Loans  assigned  to such  assignee  and the  transferor  Lender  shall
     henceforth be so released.

(b)  Each Lender shall have the right to grant participations in all or any part
     of such Lender's Notes, Commitments, LC Obligations, and Loans hereunder to
     one or more pension plans,  investment  funds,  financial  institutions  or
     other Persons; provided, that:

     (1)    each Lender granting a  participation shall retain the right to vote
            hereunder, and no participant shall be entitled to vote hereunder on
            decisions requiring consent or approval of Lenders, Majority Lenders
            or Required Lenders (except as set forth in (3) below);

     (2)    in  the  event any  Lender  grants a  participation hereunder,  such
            Lender's  obligations  under   the  Loan   Documents  shall   remain
            unchanged,  such Lender shall remain solely responsible to the other
            parties hereto for the performance of such obligations,  such Lender
            shall remain the holder of any such Notes for all purposes under the
            Loan Documents,  and each Agent, each Lender and  Borrower  shall be
            entitled to deal with  the Lender  granting a  participation  in the
            same manner as if no participation had been granted; and

     (3)    no  participant  shall  ever   have  any  right  by  reason  of  its
            participation  to exercise  any of the rights of Lenders  hereunder,
            except  that any  Lender may agree with any  participant  that  such
            Lender will not,  without  the consent of  such  participant  (which
            consent may not be unreasonably withheld), consent to any  amendment
            or waiver described in Section 8.1 requiring approval of 100% of the
            Lenders.

(c)  It is  understood  and agreed that any Lender may provide to assignees  and
     participants   and  prospective   assignees  and   participants   financial
     information  and  reports and data  concerning  Borrower's  properties  and
     operations  which was provided to such Lender  pursuant to this  Agreement,
     subject to Section 8.9.

(d)  Upon the reasonable  request of either of the Managing  Agents or Borrower,
     each Lender will identify those to whom it has assigned or participated any
     part of its Notes,  LC  Obligations  or Loans,  and  provide the amounts so
     assigned or participated.

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         Section 8.9   Confidentiality.  Each  Agent and each Lender agrees that
it (a) will maintain the confidentiality of all non-public information  from any
Obligor or any  Subsidiary  of Borrower  obtained  pursuant to the terms of this
Agreement or any other Loan Document in  accordance  with safe and sound banking
practices,  and (b) will not use such  confidential  information for any purpose
other than in  connection  with this  Agreement;  provided,  however,  that this
restriction  shall not apply to information which (w) has at the particular time
in question entered the public domain, or been  independently  developed without
the use or incorporation of any non-public information provided to such Agent or
Lender by any Obligor or any Subsidiary of Borrower by such Agent or such Lender
other than through  disclosure by such Agent or such Lender in violation of this
Section,  (x)  is  required  to be  disclosed  by law  or by  any  order,  rule,
regulation  or  legal  process  (whether  valid  or  invalid)  of any  court  or
Governmental Authority, (y) is furnished to any other Lender or to any purchaser
or prospective  purchaser of  participations,  assignments or other interests in
any Loan,  Note, LC Obligation or Commitment  that has executed and delivered to
Borrower an agreement containing terms substantially similar to this Section and
reasonably acceptable to Borrower, to keep such information  confidential or (z)
is  disclosed  to  such  Lender's  or  Agent's  examiners,  Affiliates,  outside
auditors,  counsel  and  other  professional  advisors  who have a need for such
information  in  connection  with  this  Agreement  and who are  advised  of the
confidential  nature of such  information.  As used in this  Section,  the terms
"Agent" and "Lender"  shall refer not only to the Persons  designated as such in
Section 1.1, but also to each director,  Affiliate,  officer,  agent,  attorney,
employee and representative of such Person. Notwithstanding any other provisions
of this  Agreement,  the terms of this Section shall survive the  termination of
this Agreement for a period of three (3) years.

         Section 8.10   Severability.  If any  term  or  provision  of any  Loan
Document shall be determined to be illegal or unenforceable in any jurisdiction,
such  term  or  provision  shall,  as  to  such  jurisdiction,   be  illegal  or
unenforceable,  without affecting the remaining  provisions in that jurisdiction
or the  legality  or  enforceability  of such terms or  conditions  in any other
jurisdiction.

         Section 8.11   Counterparts.  This Agreement may be separately executed
in any  number of counterparts  and  by  different  parties  hereto in  separate
counterparts,  each of which when so executed  shall be deemed to constitute one
and the same Agreement.

         Section 8.12   WAIVER  OF  JURY  TRIAL,  PUNITIVE  DAMAGES. EACH OF THE
BORROWER,  AGENTS AND  LENDERS  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
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

                                       76



<PAGE>



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.

         Section 8.13   Several  Obligations.   The  respective  obligations  of
Lenders  hereunder  are several and not joint and no Lender shall be the partner
or agent of any other  (except to the extent to which an Agent is  authorized to
act as such).  The  failure  of any  Lender to  perform  any of its  obligations
hereunder  shall  not  relieve  any  other  Lender  from any of its  obligations
hereunder.  This  Agreement is not intended to, and shall not be construed so as
to,  confer any right or benefit  upon any Person other than the parties to this
Agreement and their respective successors and assigns.

         Section 8.14   Nonliability  of  Lenders.   The  relationship   between
Borrower  on the one hand and  Lenders  and  Agents on the other  hand  shall be
solely that of borrower and lender. None of the Agents nor any Lender shall have
any   fiduciary   responsibilities   to  Borrower  or  any  of  its   respective
Subsidiaries. None of the Agents nor any Lender undertakes any responsibility to
Borrower or any of their respective Subsidiaries to review or inform Borrower of
any  matter in  connection  with any phase of  Borrower's  or such  Subsidiary's
business or operations.

         Section 8.15   Setoff.  In addition to,  and without any limitation of,
any rights of the Lenders under applicable law, if Borrower  becomes  insolvent,
however evidenced, or any Event of Default or Default occurs and the maturity of
the  Obligations  has been  accelerated,  any  indebtedness  from any  Lender to
Borrower  (including  all account  balances,  whether  provisional  or final and
whether or not  collected  or  available)  may be offset and applied  toward the
payment of the Obligations owing to such Lender, whether or not the Obligations,
or any part thereof, shall then be due and payable.

         Section 8.16   Release  of  Liens.  Upon  the  date  of  execution  and
delivery of a Guaranty of the type  referred to in clause (i) of the  definition
of  "Guaranty"  by a Restricted  Subsidiary  the capital stock of which has been
pledged (each such date, a "Stock Pledge Release  Date"),  the Collateral  Agent
shall  release and  discharge,  at the cost or expense of  Borrower,  the Pledge
Agreement  covering  such  Subsidiary's  capital  stock,  all  of  Lenders'  and
Collateral  Agent's rights and interests in such Pledge Agreement and all liens,
security  interests,  pledges  and  encumbrances  created or  existing  under or
pursuant to such Pledge Agreement.

         Section 8.17   Forum  Selection  and  Consent  to  Jurisdiction.    ANY
LITIGATION  BASED HEREON,  OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
AGREEMENT  OR ANY OTHER  LOAN  DOCUMENT,  OR ANY  COURSE OF  CONDUCT,  COURSE OF
DEALING,  STATEMENTS  (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE AGENTS,  THE
LENDERS OR THE  BORROWER  SHALL BE BROUGHT  AND  MAINTAINED  EXCLUSIVELY  IN THE
COURTS  OF THE STATE OF TEXAS OR IN THE  UNITED  STATES  DISTRICT  COURT FOR THE
NORTHERN DISTRICT OF TEXAS; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT
AGAINST ANY  COLLATERAL  OR OTHER  PROPERTY  MAY BE BROUGHT,  AT THE  COLLATERAL

                                       77



<PAGE>



AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER
PROPERTY MAY BE FOUND.  BORROWER HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE
JURISDICTION  OF THE COURTS OF THE STATE OF TEXAS AND THE UNITED STATES DISTRICT
COURT FOR THE NORTHERN  DISTRICT OF TEXAS FOR THE PURPOSE OF ANY SUCH LITIGATION
AS SET FORTH ABOVE AND IRREVOCABLY  AGREES TO BE BOUND BY ANY JUDGMENT  RENDERED
THEREBY  IN  CONNECTION  WITH  SUCH  LITIGATION.  BORROWER  FURTHER  IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL,  POSTAGE  PREPAID,  OR BY
PERSONAL  SERVICE  WITHIN OR WITHOUT THE STATE OF TEXAS.  FOR THE PURPOSE OF ANY
ACTION  OR  PROCEEDING  INSTITUTED  IN THE  FEDERAL  OR STATE  COURTS  OF TEXAS,
HOLDINGS HEREBY IRREVOCABLY  DESIGNATES BORROWER WITH OFFICES ON THE DATE HEREOF
AT 303 WEST WALL STREET,  SUITE 101, MIDLAND,  TEXAS 79701 TO RECEIVE FOR AND ON
BEHALF OF HOLDINGS,  SERVICES OF PROCESS IN TEXAS. BORROWER HEREBY EXPRESSLY AND
IRREVOCABLY  WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH
IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH  LITIGATION
BROUGHT  IN ANY  SUCH  COURT  REFERRED  TO  ABOVE  AND ANY  CLAIM  THAT ANY SUCH
LITIGATION  HAS BEEN  BROUGHT  IN AN  INCONVENIENT  FORUM.  TO THE  EXTENT  THAT
BORROWER HAS OR  HEREAFTER  MAY ACQUIRE ANY IMMUNITY  FROM  JURISDICTION  OF ANY
COURT OR FROM ANY LEGAL PROCESS (WHETHER  THROUGH SERVICE OR NOTICE,  ATTACHMENT
PRIOR TO JUDGMENT,  ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO
ITSELF OR ITS  PROPERTY,  BORROWER  HEREBY  IRREVOCABLY  WAIVES SUCH IMMUNITY IN
RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.

         Section 8.18   Renewal, Extension or Rearrangement.  All  provisions of
this  Agreement and any other Loan  Document  relating to the Notes or the other
Obligations  (including LC Obligations)  shall apply with equal force and effect
to each and all promissory  notes or other  agreements or instruments  hereafter
executed which in whole or in part represent a renewal,  extension,  increase or
rearrangement of any part of the original Notes or Obligations.

         Section 8.19   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 THE FOLLOWING PAGE]





                                       78



<PAGE>



         IN WITNESS  WHEREOF,  this  Agreement  is executed as of the date first
written above.

                                          BORROWER:

                                          PIONEER NATURAL RESOURCES
                                          USA, INC.

                                          By:     /s/ Curt F. Kamradt
                                              ----------------------------
                                          Name:   Curt F. Kamradt
                                          Title:  Vice President - Treasurer

                                          Address:     303 West Wall, Suite 101
                                                       P.O. Box 3178
                                                       Midland, Texas  79701
                                          Attention:   Curt Kamradt

                                          Telephone:   (915) 571-3171
                                          Telecopy:    (915) 571-5696

                                          with a copy to:

                                          Garrett Smith
                                          1400 Williams Square West
                                          5205 North O'Connor Blvd.
                                          Irving, Texas 75039

                                          Telephone:    (972) 402-7013
                                          Telecopy:     (972) 402-7028



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                                      S - 1


<PAGE>



                                          LENDERS:

                                          NATIONSBANK OF TEXAS, N.A.,
                                          individually and as Administrative
                                          Agent and as Collateral Agent


                                          By:      /s/ Frank K. Stowers
                                              ------------------------------
                                          Name:    Frank K. Stowers
                                          Title:   Vice President

                                          Address:      303 W. Wall
                                                        P. O. Box 1599
                                                        Midland, Texas  79701
                                          Attention:    Mr. Frank K. Stowers

                                          Telephone:    (915) 685-2179
                                          Telecopy:     (915) 685-2009

                                          with further notice to:

                                          901 Main Street, 64th Floor
                                          Dallas, Texas  75202
                                          Attention:  Mr. E. Murphy Markham IV

                                          Telephone:     (214) 508-1251
                                          Telecopy:      (214) 508-1285


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                                      S - 2


<PAGE>



                                          CIBC INC., individually and as
                                          Documentation Agent


                                          By:     /s/ Aleksandra Dymanus
                                              ----------------------------
                                          Name:   Aleksandra K. Dymanus
                                          Title:  Authorized Signatory


                                          Address:       2727 Paces Ferry Road
                                                         Suite 1200
                                                         Atlanta, GA  30339

                                          Attention:     Joan Moseley
                                          Telephone:     (770) 319-4824
                                          Telecopy:      (770) 319-4950


                                          with further notice to:

                                          2 Houston Center
                                          909 Fannin Street, Suite 1200
                                          Houston, Texas  77010
                                          Attention:  Mr. Paul Jordan

                                          Telephone:     (713) 655-5220
                                          Telecopy:      (713) 650-3727



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                                      S - 3


<PAGE>



                                          MORGAN GUARANTY TRUST
                                          COMPANY OF NEW YORK, individually
                                          and as Documentation Agent


                                          By:     /s/ John Kowalczuk
                                              ----------------------------
                                          Name:   John Kowalczuk
                                          Title:  Vice President

                                          Address:    60 Wall Street, 22nd Floor
                                                      New York, New York 10260


                                          Attention:  Mr. Philip McNeal
                                          Telephone:  (212) 648-7181
                                          Telecopy:   (212) 648-5023

                                          with further notice to:

                                          Sandra H. Doherty
                                          500 Christiana Stanton Road
                                          Newark  DE  19713-2107

                                          Telephone:  (302) 634-8122
                                          Telecopy:   (302) 634-1092




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                                      S - 4


<PAGE>



                                          THE CHASE MANHATTAN BANK,
                                          individually and as Syndication Agent


                                          By:     /s/ Lawrence Palumbo, Jr. 
                                               ------------------------------
                                          Name:   Lawrence Palumbo, Jr.
                                          Title:  Vice President


                                          Address:    712 Main Street, 5th Floor
                                                      P. O. Box 2558
                                                      Houston, Texas  77252-8086
                                          Attention:  Mr. Robert Mertensoto


                                          Telephone:     (713) 216-4147
                                          Telecopy:      (713) 216-4117




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                                      S - 5


<PAGE>



                                          BANK OF AMERICA NATIONAL
                                          TRUST AND SAVINGS ASSOCIATION
                                          individually and as Co-Agent


                                          By:     /s/ Ronald E. McKaig
                                               -------------------------
                                          Name:   Ronald E. McKaig
                                          Title:  Vice President


                                          Address:   3 Allen Center
                                                     333 Clay Street, Suite 4550
                                                     Houston, TX  77002


                                          Attention: Mr. Ron McKaig
                                          Telephone: (713) 651-4881
                                          Telecopy:  (713) 651-4841

 







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                                      S - 6


<PAGE>



                                         THE BANK OF NEW YORK, individually
                                         and as Co-Agent



                                         By:     /s/ Raymond J. Palmer
                                              ----------------------------
                                         Name:   Raymond J. Palmer
                                         Title:  Vice President

                                         Address:    One Wall Street, 19th Floor
                                                     New York, New York 10286


                                         Attention:  Mr. Ray Palmer
                                         Telephone:  (212) 635-7834
                                         Telecopy:   (212) 635-7923

                                      




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                                      S - 7


<PAGE>




                                          THE BANK OF NOVA SCOTIA,
                                          individually and as Co-Agent



                                          By:    /s/ F.C.H. Ashby
                                               --------------------------------
                                          Name:  F.C.H. Ashby
                                          Title: Senior Manager Loan Operations


                                          Address:   600 Peachtree Street, N.E.
                                                     Suite 2700
                                                     Atlanta, Georgia  30308


                                          Attention:  Mr. Cleve Bushey
                                          Telephone:  (404) 877-1500
                                          Telecopy:   (404) 888-8998






 




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                                      S - 8


<PAGE>



                                          ROYAL BANK OF CANADA, individually
                                          and as a Co-Agent



                                          By:    /s/ Linda M. Stephens
                                               --------------------------
                                          Name:  Linda M. Stephens
                                          Title: Manager

                                          Address:   Financial Square
                                                     32 Old Slip St.
                                                     New York, New York
                                                     10005-3531


                                          Attention:  Loan Administrator
                                          Telephone:  (212) 428-6321
                                          Telecopy:   (212) 428-2372

                                          with copy to:

                                          Address:    Royal Bank of Canada
                                                      12450 Greenspoint Drive
                                                      Suite 1450
                                                      Houston, Texas  77060

                                          Attention:  Linda M. Stephens

                                          Telephone:  (281) 874-5669
                                          Telecopy:   (281) 874-0081



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                                      S - 9


<PAGE>



                                          UNION BANK OF CALIFORNIA, N.A.,
                                          individually as a Co-Agent



                                          By:    /s/ Katie Murray
                                               --------------------------
                                          Name:  Katie Murray
                                          Title: Vice President


                                          Address:   500 North Akard, Suite 4200
                                                     Dallas, Texas  75201


                                          Attention:  Ms. Katie Murray
                                          Telephone:  (214) 922-4207
                                          Telecopy:   (214) 922-4209












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                                      S - 10


<PAGE>



                                          WELLS FARGO BANK, N.A.,
                                          individually as a Co-Agent



                                          By:    /s/ Lester J.N. Keliher
                                               --------------------------
                                          Name:  Lester J.N. Keliher
                                          Title: Vice President

                                          Address:   1445 Ross Avenue, Suite 400
                                                     LB 224
                                                     Dallas, Texas  75202

                                          Attention:  Mr. Lester Keliher
                                          Telephone:  (214) 777-4025
                                          Telecopy:   (214) 777-4044







 




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                                      S - 11


<PAGE>



                                          THE FUJI BANK, LIMITED-HOUSTON
                                          AGENCY, individually as a Co-Agent



                                          By:    /s/ Yutaka Taniuchi
                                               --------------------------
                                          Name:  Yutaka Taniuchi
                                          Title: Senior Vice President

                                          Address:   1221 McKinney Street
                                                     Suite 4100
                                                     Houston, Texas  77002

                                          Attention:  Mr. Tommy Watts
                                          Telephone:  (713) 650-7868
                                          Telecopy:   (713) 759-0717

 





 




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                                      S - 12


<PAGE>



                                          DEN NORSKE BANK ASA, individually
                                          and as Lead Manager



                                          By:     /s/ J. Morten Kreutz
                                               --------------------------
                                          Name:   J. Morten Kreutz
                                          Title:  Vice President


                                          By:     /s/ Charles E. Hall
                                               --------------------------
                                          Name:   Charles E. Hall
                                          Title:  Senior Vice President


                                          Address:   333 Clay Street, Suite 4890
                                                     Houston, Texas  77002


                                          Attention:  Mr. J. Morten Kreutz
                                          Telephone:  (713) 844-9255
                                          Telecopy:   (713) 757-1167











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                                      S - 13


<PAGE>



                                          BANQUE PARIBAS, individually and
                                          as Lead Manager



                                          By:     /s/ Barton D. Schouest
                                               --------------------------
                                          Name:   Barton D. Schouest
                                          Title:  Group Vice President


                                          By:     /s/ Brian Malone
                                               --------------------------
                                          Name:   Brian Malone
                                          Title:  Vice President



                                          Address:   1200 Smith Street
                                                     Two Allen Center
                                                     Suite 3100
                                                     Houston, Texas  77002


                                          Attention:  Mr. David Dodd
                                          Telephone:  (713) 659-4811
                                          Telecopy:   (713) 659-6915









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                                      S - 14


<PAGE>



                                          FIRST UNION NATIONAL BANK,
                                          individually and as a Lead Manager



                                          By:     /s/ Michael J. Kolosowsky
                                               -----------------------------
                                          Name:   Michael J. Kolosowsky
                                          Title:  Vice President


                                          Address:   1001 Fannin Street
                                                     Suite 2255
                                                     Houston, Texas  77002


                                          Attention:  Mr. Paul N. Riddle
                                          Telephone:  (713) 650-3716
                                          Telecopy:   (713) 650-6354

 





 



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                                      S - 15


<PAGE>



                                          BANKERS TRUST COMPANY, as a Lender



                                          By:     /s/ Marcus M. Tarkington
                                               ------------------------------
                                          Name:   Marcus M. Tarkington
                                          Title:  Vice President


                                          Address:   130 Liberty Street
                                                     M.S. 2344
                                                     New York, New York 10006


                                          Attention:  Marcus M. Tarkington
                                          Telephone:  (212) 250-7684
                                          Telecopy:   (212) 250-8693









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                                      S - 16


<PAGE>



                                          CAISSE NATIONALE DE CREDIT
                                          AGRICOLE, as a Lender



                                          By:     /s/ Katherine L. Abbott
                                               -----------------------------
                                          Name:   Katherine L. Abbott
                                          Title:  First Vice President


                                          Address:   55 East Monroe
                                                     Chicago, Illinois  60603


                                          Attention:  Ms. Rosemary Brown
                                          Telephone:  (312) 917-7420
                                          Telecopy:   (312) 372-4421

                                          with further notice to:

                                          Mr. Kevin Costello
                                          600 Travis, Suite 2340
                                          Houston, Texas  77002

                                          Telephone:  (713) 223-7003
                                          Telecopy:   (713) 223-7029





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                                      S - 17


<PAGE>



                                          NATEXIS BANQUE, as a Lender
                                             BFCE


                                          By:     /s/ Mark A. Harrington
                                               ----------------------------
                                          Name:   Mark A. Harrington
                                          Title:  Vice President and
                                                  Regional Manager


                                          By:     /s/ Eric Ditges
                                               ----------------------------
                                          Name:   Eric Ditges
                                          Title:  Assistant Treasurer


                                          Address:   333 Clay Street, Suite 4340
                                                     Houston, Texas  77002


                                          Attention:  Mr. Eric Ditges
                                          Telephone:  (713) 759-9401
                                          Telecopy:   (713) 759-9908









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                                      S - 18


<PAGE>



                                          THE SUMITOMO BANK, LIMITED, as
                                          a Lender



                                          By:     /s/ Harumitsu Seki
                                               --------------------------
                                          Name:   Harumitsu Seki
                                          Title:  General Manager


                                          Administrative matters:

                                          Address:   277 Park Avenue, 6th Floor
                                                     New York, New York 10172


                                          Attention:  Thierry LeJouan
                                          Telephone:  (212) 224-4138
                                          Telecopy:   (212) 224-5197


                                          Credit matters:

                                          Mr. Bill McKown
                                          700 Louisiana, Suite 1750
                                          Houston, Texas  77002

                                          Telephone:  (713) 238-8217
                                          Telecopy:   (713) 759-0020




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                                      S - 19


<PAGE>



                                          TORONTO DOMINION (TEXAS), INC.
                                          as a Lender



                                          By:     /s/ Darlene Riedel
                                               --------------------------
                                          Name:   Darlene Riedel
                                          Title:  Vice President


                                          Address:  909 Fannin Street, Ste. 1700
                                                    Houston, Texas  77010


                                          Attention:  Darlene Riedel
                                          Telephone:  (713) 653-8250
                                          Telecopy:   (713) 951-9921









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                                      S - 20


<PAGE>



                                          THE TOYO TRUST & BANKING CO.,
                                          LTD., as a Lender



                                          By:    /s/ T. Mikumo
                                               --------------------------
                                          Name:   T. Mikumo
                                          Title:  Vice President


                                          Address:   666 5th Avenue, 33rd Floor
                                                     New York, New York 10103


                                          Attention:  Ms. Sharon Bonelli
                                          Telephone:  (212) 307-3410
                                          Telecopy:   (212) 307-3498

 








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                                      S - 21


<PAGE>



                                          WACHOVIA BANK, N.A., as a Lender



                                          By:     /s/ Paige D. Mesaros
                                               --------------------------
                                          Name:   Paige D. Mesaros
                                          Title:  Vice President


                                          Address:   191 Peachtree Street
                                                     Atlanta, Georgia 30303


                                          Attention:  Ms. Paige Mesaros
                                          Telephone:  (404) 332-1322
                                          Telecopy:   (404) 332-6898










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                                      S - 22


<PAGE>



                                          THE DAI-ICHI KANGYO BANK, LTD.,
                                          NEW YORK BRANCH,as a Lender



                                          By:     /s/ Masayoshi Komaki
                                               --------------------------
                                          Name:   Masayoshi Komaki
                                          Title:  Vice President


                                          Address:   One World Trade Center
                                                     48th Floor
                                                     New York, New York 10048

                                          Attention:  Mr. Masayoshi Komaki
                                          Telephone:  (212) 432-6627
                                          Telecopy:   (212) 912-1879


                                          Further notice to:

                                          DKB-Houston LPO
                                          1100 Louisiana, Suite 4940
                                          Houston, Texas  77002


                                          Attention:  Mr. Warren Ross

                                          Telephone:  (713) 654-5055
                                          Telecopy:   (713) 654-1667



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                                      S - 23


<PAGE>



                                          THE SANWA BANK, LIMITED, as a Lender



                                          By:     /s/ Toru Sakamuro
                                               --------------------------
                                          Name:   Toru Sakamuro
                                          Title:  Vice President


                                          Address:   4100W Texas Commerce Tower
                                                     2200 Ross Avenue
                                                     Dallas, Texas  75201


                                          Attention:  Mr. Matthew Patrick
                                          Telephone:  (214) 665-0242
                                          Telecopy:   (214) 953-3963

 







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                                      S - 24


<PAGE>



                                          KREDIETBANK N.V., as a Lender



                                          By:     /s/ Robert Snauffer
                                               --------------------------
                                          Name:   Robert Snauffer
                                          Title:  Vice President


                                          By:     /s/ Tod R. Angus
                                               --------------------------
                                          Name:   Tod R. Angus
                                          Title:  Vice President


                                          Address:   125 West 55th Street
                                                     New York, NY  10019


                                          Attention:  Robert E. Snauffer
                                                      Vice President
                                          Telephone:  (212) 541-0700
                                          Telecopy:   (212) 956-5580

                                          with a copy to:

                                          Kredietbank N.V., Atlanta
                                          Representative Office
                                          Two Midtown Plaza
                                          1349 W. Peachtree Street
                                          Atlanta, Georgia  30309

                                          Attention:  Mr. Felip Ferrante

                                          Telephone:  (404) 876-2556
                                          Telecopy:   (404) 876-3212



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                                      S - 25


<PAGE>


                                   Exhibit A-1

                                    [Form of]

                          Loan Note - Primary Facility

$                                                                       , 199
 -----------------                                          -----------      --

         FOR VALUE RECEIVED,  the  undersigned,  PIONEER NATURAL  RESOURCES USA,
INC., a Delaware  corporation,  with offices at 303 W. Wall, Suite 101, Midland,
Texas  (herein called  "Borrower"),  hereby  promises  to  pay  to the  order of
                          (herein called "Lender"), the principal sum of
and  No/100 Dollars ($       ), or,  if greater or less,  the aggregate  unpaid
principal  amount  of each  Loan made  under  this  Note by  Lender to  Borrower
pursuant to the terms of the Credit Agreement (as defined herein), together with
interest on the unpaid principal  balance thereof as hereinafter set forth, both
principal and interest  payable as herein provided in lawful money of the United
States of America at the principal banking offices of the  Administrative  Agent
under the Credit  Agreement,  901 Main Street,  Dallas,  Texas 75202, or at such
other place as from time to time may be  designated  by the holder of this Note,
with the concurrence of Borrower and Administrative  Agent. Subject to the terms
and conditions of the Credit  Agreement and hereof,  Borrower may borrow,  repay
and reborrow hereunder.

         This  Note (a) is  issued  and  delivered  under  that  certain  Credit
Facility Agreement dated as of August 7, 1997 by and among Borrower, NationsBank
of Texas,  N.A., as  Administrative  Agent,  CIBC Inc., as Documentation  Agent,
Morgan  Guaranty Trust Company of New York, as  Documentation  Agent,  The Chase
Manhattan  Bank, as Syndication  Agent,  the Co-Agents  party  thereto,  and the
Lenders from time to time parties  thereto  (the "Credit  Agreement"),  and is a
"Loan Note" as defined  therein,  and (b) is subject to the terms and provisions
of the Credit  Agreement,  which contains  provisions for payment and prepayment
hereunder and  acceleration of the maturity hereof upon the happening of certain
events.  Payments on this Note shall be made and applied as provided  herein and
in the Credit Agreement.  Reference is hereby made to the Credit Agreement for a
description of certain rights,  limitations of rights, obligations and duties of
the parties hereto and for the meanings assigned to terms used and not otherwise
defined herein.

         Interest  accrued on each Loan evidenced by this Note shall be payable,
without duplication: (a) on the Maturity Date; (b) with respect to any Base Rate
Portion of the Loans  evidenced by this Note, on the third  Business Day of each
Fiscal Quarter  occurring after the date of the initial borrowing of a Base Rate
Portion  hereunder;  (c) with  respect  to any  Eurodollar  Portion of the Loans
evidenced by this Note, on the last day of each applicable Interest Period (and,
if such  Interest  Period shall exceed 90 days, on the 90th day of such Interest
Period and every 90 days thereafter until the end of such Interest Period);  (d)
with respect to any Base Rate Portion converted into a Eurodollar Portion of the
Loans  evidenced by this Note pursuant to a Rate Election on a day when interest
would not  otherwise have  been  payable  pursuant to  clause (b),  on the third

                                 Exhibit A-1 - 1


<PAGE>



Business Day of each Fiscal Quarter occurring after the date of such conversion;
and (e) on any portion of the Loans evidenced by this Note, the Maturity Date of
which is  accelerated  pursuant to Section 6.1 of the Credit  Agreement,  on the
date to which the Maturity Date of such portion has been  accelerated.  Interest
accrued  on the  Loans  evidenced  by this  Note or other  monetary  Obligations
arising under this Note,  the Credit  Agreement or any other Loan Document after
the date such amount is due and  payable  (whether on the  Maturity  Date,  upon
acceleration or otherwise) shall be payable upon demand.

         The principal  amount of this Note,  together with all interest accrued
hereon and unpaid, shall be due and payable in full on the Maturity Date.

         The Base Rate Portion of the Loans evidenced by this Note (exclusive of
any past due  principal or interest)  from time to time  outstanding  shall bear
interest on each day outstanding at the Base Rate, plus the applicable Base Rate
Margin.  Each Eurodollar  Portion of the Loans evidenced by this Note (exclusive
of any past due  principal or interest)  shall bear  interest on each day during
the  related  Interest  Period  at the  applicable  Eurodollar  Rate,  plus  the
applicable  Eurodollar  Margin. All past due principal of the Loans evidenced by
this Note or other  Obligations  arising under the Credit Agreement or any other
Loan Document  (whether  payable on the Maturity  Date or otherwise)  shall bear
interest on each day  outstanding  after its due date at the applicable  Default
Rate in effect on such day.

         Notwithstanding  the  other  provisions  of  this  Note  or the  Credit
Agreement,  in no event shall the interest  payable  hereon,  whether  before or
after  maturity,  exceed the Maximum Lawful Rate and this Note is expressly made
subject to the provisions of the Credit  Agreement  which more fully set out the
limitations on how interest accrues hereon. In the event applicable law provides
for a ceiling under Texas Revised Civil Statutes  Annotated  article  5069-1.04,
that ceiling shall be the indicated rate ceiling.  The term  "applicable law" as
used in this Note  shall  mean the laws of the State of Texas or the laws of the
United States,  whichever laws allow the greater interest as such laws now exist
or may be enacted, changed or amended or come into effect in the future.

         If this Note is placed in the hands of an attorney for collection after
a  Default,  or if all or any part of the  indebtedness  represented  hereby  is
proved,   established   or  collected  in  any  court  or  in  any   bankruptcy,
receivership, debtor relief, probate or other court proceedings, the undersigned
Borrower and all  endorsers,  sureties and  guarantors  of this Note jointly and
severally agree to pay reasonable  attorneys'  fees and collection  costs to the
holder hereof in addition to the principal and interest payable hereunder.

         The undersigned Borrower and all endorsers,  sureties and guarantors of
this Note hereby  severally waive demand,  presentment,  notice of demand and of
dishonor and  nonpayment  of this Note,  protest,  notice of protest,  notice of
intention  to  accelerate  the maturity of this Note,  declaration  or notice of
acceleration of the maturity of this Note, diligence in collecting, the bringing
of any suit  against  any party and any  notice of or  defense on account of any
extensions,  renewals,  partial  payments or changes in any manner of or in this

                                 Exhibit A-1 - 2


<PAGE>



Note or in any of its  terms,  provisions  and  covenants,  or any  releases  or
substitutions  of any  security,  or any delay,  indulgence  or other act of any
trustee or any holder hereof, whether before or after maturity.

         It is  contemplated  that by reason of  prepayment  hereon there may be
times when no indebtedness is owing hereunder; notwithstanding such occurrences,
this Note shall  remain  valid and shall be in full force and effect as to Loans
made pursuant to the Credit Agreement subsequent to each occurrence.

         Except as permitted by Section 8.8 of the Credit  Agreement,  this Note
may not be assigned by Lender to any other Person.

THIS NOTE AND THE RIGHTS AND DUTIES OF THE UNDERSIGNED  BORROWER AND LENDER WITH
RESPECT  HERETO  SHALL BE  GOVERNED  BY THE LAWS OF THE STATE OF TEXAS  (WITHOUT
REGARD TO  PRINCIPLES  OF CONFLICTS  OF LAW),  EXCEPT TO THE EXTENT THE SAME ARE
GOVERNED BY APPLICABLE FEDERAL LAW.

                                            PIONEER NATURAL RESOURCES USA,
                                            INC.


                                            By:
                                            Name:
                                            Title:



                                 Exhibit A-1 - 3


<PAGE>



                                   Exhibit A-2

                                    [Form of]

                       Swing Line Note - Primary Facility

$                                                                        , 199
  ------------------                                          -----------     --

         FOR VALUE RECEIVED,  the  undersigned,  PIONEER NATURAL  RESOURCES USA,
INC., a Delaware  corporation with offices at 303 W. Wall,  Suite 101,  Midland,
Texas  (herein called  "Borrower"),  hereby  promises  to  pay to the  order  of
                            (herein called "Lender"), the principal sum of FIFTY
MILLION AND NO/100  Dollars  ($50,000,000),  or, if less,  the aggregate  unpaid
principal  amount of the Swing Line  Advances  made under this Note by Lender to
Borrower  pursuant to the terms of the Credit  Agreement  (as  defined  herein),
together with interest on the unpaid  principal  balance  thereof as hereinafter
set forth,  both  principal  and interest  payable as herein  provided in lawful
money of the  United  States of  America  at the  principal  banking  offices of
Administrative Agent under the Credit Agreement,  901 Main Street, Dallas, Texas
75202,  or at such  other  place as from time to time may be  designated  by the
holder of this Note, with the concurrence of Borrower and Administrative Agent.

         This  Note (a) is  issued  and  delivered  under  that  certain  Credit
Facility Agreement dated as of August 7, 1997 by and among Borrower, NationsBank
of Texas,  N.A., as  Administrative  Agent,  CIBC Inc., as Documentation  Agent,
Morgan  Guaranty Trust Company of New York, as  Documentation  Agent,  The Chase
Manhattan  Bank, as Syndication  Agent,  the Co-Agents  party  thereto,  and the
Lenders from time to time parties  thereto  (the "Credit  Agreement"),  and is a
"Swing  Line  Note" as  defined  therein,  and (b) is  subject  to the terms and
provisions of the Credit  Agreement,  which contains  provisions for payment and
prepayment  hereunder and acceleration of the maturity hereof upon the happening
of certain  events.  Payments on this Note shall be made and applied as provided
herein  and in the  Credit  Agreement.  Reference  is hereby  made to the Credit
Agreement  for  a  description  of  certain   rights,   limitations  of  rights,
obligations  and duties of the parties  hereto and for the meanings  assigned to
terms used and not otherwise defined herein.

         The unpaid  principal  amount of this Note,  together with all interest
accrued  hereon and unpaid,  shall be due and payable in full as provided in the
Credit  Agreement and not later than the Maturity Date.  Interest accrued on the
Swing Line  Advances  evidenced by this Note shall be payable as provided in the
Credit Agreement.

         Notwithstanding  other provisions of this Note or the Credit Agreement,
in no event shall the interest payable hereon, whether before or after maturity,
exceed the Maximum  Lawful Rate and this Note is  expressly  made subject to the
provisions of the Credit  Agreement  which more fully set out the limitations on
how interest accrues hereon.  In the event applicable law provides for a ceiling
under Texas Revised Civil Statutes  Annotated  article  5069-1.04,  that ceiling

                                 Exhibit A-2 - 1


<PAGE>



shall be the indicated rate ceiling.  The term  "applicable law" as used in this
Note shall mean the laws of the State of Texas or the laws of the United States,
whichever  laws  allow  the  greater  interest  as such laws now exist or may be
enacted, changed or amended or come into effect in the future.

         If this Note is placed in the hands of an attorney for collection after
a  Default,  or if all or any part of the  indebtedness  represented  hereby  is
proved,   established   or  collected  in  any  court  or  in  any   bankruptcy,
receivership, debtor relief, probate or other court proceedings, the undersigned
Borrower and all  endorsers,  sureties and  guarantors  of this Note jointly and
severally agree to pay reasonable  attorneys'  fees and collection  costs to the
holder hereof in addition to the principal and interest payable hereunder.

         The undersigned Borrower and all endorsers,  sureties and guarantors of
this Note hereby  severally waive demand,  presentment,  notice of demand and of
dishonor and  nonpayment  of this Note,  protest,  notice of protest,  notice of
intention  to  accelerate  the maturity of this Note,  declaration  or notice of
acceleration of the maturity of this Note, diligence in collecting, the bringing
of any suit  against  any party and any  notice of or  defense on account of any
extensions,  renewals,  partial  payments or changes in any manner of or in this
Note or in any of its  terms,  provisions  and  covenants,  or any  releases  or
substitutions  of any  security,  or any delay,  indulgence  or other act of any
trustee or any holder hereof, whether before or after maturity.

         It is  contemplated  that by reason of  prepayment  hereon there may be
times when no indebtedness is owing hereunder; notwithstanding such occurrences,
this Note shall  remain  valid and shall be in full force and effect as to Loans
made pursuant to the Credit Agreement subsequent to each occurrence.

         Except as permitted by Section 8.8 of the Credit  Agreement,  this Note
may not be assigned by Lender to any other Person.

         THIS NOTE AND THE  RIGHTS AND DUTIES OF THE  UNDERSIGNED  BORROWER  AND
LENDER WITH  RESPECT  HERETO SHALL BE GOVERNED BY THE LAWS OF THE STATE OF TEXAS
(WITHOUT  REGARD TO  PRINCIPLES  OF CONFLICTS OF LAW),  EXCEPT TO THE EXTENT THE
SAME ARE GOVERNED BY APPLICABLE FEDERAL LAW.

                                           PIONEER NATURAL RESOURCES USA,
                                           INC.


                                           By:
                                           Name:
                                           Title:



                                 Exhibit A-2 - 2


<PAGE>



                                   Exhibit A-3

                                    [Form of]

                     Competitive Bid Note - Primary Facility

$                                                                        , 199
 --------------------------                                 ------------      --

         FOR VALUE RECEIVED,  the  undersigned,  PIONEER NATURAL  RESOURCES USA,
INC., a Delaware  corporation,  with offices at 303 W. Wall, Suite 101, Midland,
Texas  (herein called  "Borrower"),  hereby  promises  to  pay to the  order  of
                              (herein called "Lender"), the principal sum of ONE
BILLION ONE HUNDRED MILLION AND No/100 DOLLARS  ($1,100,000,000),  or,  if less,
the aggregate  unpaid  principal amount of all Competitive Bid Advances shown on
the schedule attached hereto (and any continuation  thereof),  if so shown, made
by the Lender to  Borrower,  together  with  interest  on the  unpaid  principal
balance thereof as hereinafter set forth, both principal and interest payable as
herein provided in lawful money of the United States of America at the principal
banking offices of  Administrative  Agent under the Credit Agreement (as defined
herein),  901 Main Street,  Dallas,  Texas 75202, or at such other place as from
time to time may be designated by the holder of this Note,  with the concurrence
of Borrower and Administrative Agent.

         This  Note (a) is  issued  and  delivered  under  that  certain  Credit
Facility Agreement dated as of August 7, 1997 by and among Borrower, NationsBank
of Texas,  N.A., as  Administrative  Agent,  CIBC Inc., as Documentation  Agent,
Morgan  Guaranty Trust Company of New York, as  Documentation  Agent,  The Chase
Manhattan  Bank, as Syndication  Agent,  the Co-Agents  party  thereto,  and the
Lenders from time to time parties  thereto  (the "Credit  Agreement"),  and is a
"Competitive Bid Note" as defined  therein,  and (b) is subject to the terms and
provisions of the Credit  Agreement,  which contains  provisions for payment and
prepayment  hereunder and acceleration of the maturity hereof upon the happening
of certain  events.  Payments on this Note shall be made and applied as provided
herein  and in the  Credit  Agreement.  Reference  is hereby  made to the Credit
Agreement  for  a  description  of  certain   rights,   limitations  of  rights,
obligations  and duties of the parties  hereto and for the meanings  assigned to
terms used and not otherwise defined herein.

         The unpaid  principal  amount of this Note,  together with all interest
accrued  hereon and unpaid,  shall be due and payable in full as provided in the
Credit Agreement and not later than the Maturity Date.

         Interest accrued on the Competitive Bid Advances evidenced by this Note
shall be payable as provided in the Credit Agreement.

         Notwithstanding  other provisions of this Note or the Credit Agreement,
in no event shall the interest payable hereon, whether before or after maturity,
exceed the Maximum  Lawful Rate and this Note is  expressly  made subject to the
provisions of the Credit  Agreement  which more fully set out the limitations on
how interest accrues hereon.  In the event applicable law provides for a ceiling

                                 Exhibit A-3 - 1


<PAGE>



under Texas Revised Civil Statutes  Annotated  article  5069-1.04,  that ceiling
shall be the indicated rate ceiling.  The term  "applicable law" as used in this
Note shall mean the laws of the State of Texas or the laws of the United States,
whichever  laws  allow  the  greater  interest  as such laws now exist or may be
enacted, changed or amended or come into effect in the future.

         If this Note is placed in the hands of an attorney for collection after
a  Default,  or if all or any part of the  indebtedness  represented  hereby  is
proved,   established   or  collected  in  any  court  or  in  any   bankruptcy,
receivership, debtor relief, probate or other court proceedings, the undersigned
Borrower and all  endorsers,  sureties and  guarantors  of this Note jointly and
severally agree to pay reasonable  attorneys'  fees and collection  costs to the
holder hereof in addition to the principal and interest payable hereunder.

         The undersigned Borrower and all endorsers,  sureties and guarantors of
this Note hereby  severally waive demand,  presentment,  notice of demand and of
dishonor and  nonpayment  of this Note,  protest,  notice of protest,  notice of
intention  to  accelerate  the maturity of this Note,  declaration  or notice of
acceleration of the maturity of this Note, diligence in collecting, the bringing
of any suit  against  any party and any  notice of or  defense on account of any
extensions,  renewals,  partial  payments or changes in any manner of or in this
Note or in any of its  terms,  provisions  and  covenants,  or any  releases  or
substitutions  of any  security,  or any delay,  indulgence  or other act of any
trustee or any holder hereof, whether before or after maturity.

         It is  contemplated  that by reason of  prepayment  hereon there may be
times when no indebtedness is owing hereunder; notwithstanding such occurrences,
this  Note  shall  remain  valid and  shall be in full  force  and  effect as to
Competitive  Bid Advances  made pursuant to the Credit  Agreement  subsequent to
each occurrence.

         Except as permitted by Section 8.8 of the Credit  Agreement,  this Note
may not be assigned by Lender to any other Person.

         THIS NOTE AND THE  RIGHTS AND DUTIES OF THE  UNDERSIGNED  BORROWER  AND
LENDER WITH  RESPECT  HERETO SHALL BE GOVERNED BY THE LAWS OF THE STATE OF TEXAS
(WITHOUT  REGARD TO  PRINCIPLES  OF CONFLICTS OF LAW),  EXCEPT TO THE EXTENT THE
SAME ARE GOVERNED BY APPLICABLE FEDERAL LAW.

                                            PIONEER NATURAL RESOURCES USA,
                                            INC.


                                            By:
                                            Name:
                                            Title:


                                 Exhibit A-3 - 2


<PAGE>



                                   Exhibit B-1

[Note: Language in brackets will not be included in every Guaranty to the extent
that, at the time of execution and delivery of the Guaranty,  such execution and
delivery  would result in adverse tax  consequences  under ss.956 or substantial
stamp tax or similar taxes, are prohibited pursuant to contractual  restrictions
or are prohibited as a matter of corporate law.]

                                    [Form of]

                                    GUARANTY

         THIS GUARANTY  (this "Guaranty"), dated as of           , 199 , made by
               [(A.C.N.             )], a                ("Guarantor"), in favor
of each of the Lender Parties (as defined below).

                              W I T N E S S E T H:

         WHEREAS, pursuant to that certain Credit Facility Agreement dated as of
August 7, 1997 by and among  Pioneer  Natural Resources  USA,  Inc.,  a Delaware
corporation  ("Borrower"),  NationsBank of Texas, N.A., as Administrative Agent,
CIBC Inc., as Documentation Agent, Morgan Guaranty Trust Company of New York, as
Documentation  Agent,  The Chase  Manhattan  Bank,  as  Syndication  Agent,  the
Co-Agents  party  thereto,  and the Lenders  from time to time  parties  thereto
(together   with   all   amendments,   supplements,   restatements   and   other
modifications, if any, thereafter made thereto, the "Primary Credit Agreement"),
the  Lenders  have  extended  Commitments  (as  defined  in the  Primary  Credit
Agreement) to make Loans to Borrower and to issue or  participate  in Letters of
Credit on behalf of Borrower; and

         WHEREAS, pursuant to that certain Credit Facility Agreement dated as of
August 7,  1997  by  and  among  Borrower,   NationsBank  of  Texas,   N.A.,  as
Administrative  Agent, CIBC Inc., as Documentation  Agent, Morgan Guaranty Trust
Company of New York,  as  Documentation  Agent,  The Chase  Manhattan  Bank,  as
Syndication  Agent,  the Co-Agents  party thereto,  and the Lenders from time to
time parties thereto  (together with all amendments,  supplements,  restatements
and other  modifications,  if any, thereafter made thereto,  the "364 Day Credit
Agreement",  and  together  with  the  Primary  Credit  Agreement,  the  "Credit
Agreements"),  the Lenders have extended  Commitments (as defined in the 364 Day
Credit Agreement) to make Loans to Borrower; and

         WHEREAS, as a condition precedent to the making of the initial Loans or
issuing of the initial Letters of Credit under the Credit Agreements,  Guarantor
is required to execute and deliver this Guaranty; and

         WHEREAS,  Guarantor  has duly  authorized the  execution,  delivery and
performance of this Guaranty; and


                                 Exhibit B-1 - 1


<PAGE>



         WHEREAS,  it is in the best  interests  of  Guarantor  to execute  this
Guaranty  inasmuch as  Guarantor  will derive  substantial  direct and  indirect
benefits from the Loans made from time to time to Borrower and Letters of Credit
issued on behalf of Borrower pursuant to the Credit Agreements;

         NOW THEREFORE, for good and valuable consideration the receipt of which
is  hereby  acknowledged,  and in order to  induce  the  Lenders  to make  Loans
(including the initial Loans) to Borrower  pursuant to the Credit Agreements and
for the Issuing  Bank to issue  Letters of Credit on behalf of Borrower  and for
the Lenders to acquire  participations in such Letters of Credit pursuant to the
Primary  Credit  Agreement,  Guarantor  agrees,  for the  benefit of each Lender
Party, as follows:

                                    ARTICLE I
                                   DEFINITIONS

         SECTION 1.1.   Certain  Terms.  The  following  terms  (whether  or not
underscored)  when used in this  Guaranty,  including its preamble and recitals,
shall have the following  meanings (such definitions to be equally applicable to
the singular and plural forms thereof):

         "Administrative Agent" is defined in the first recital.

         "Borrower" is defined in the first recital.

         "Commitments"  means  "Commitments"  as defined in the  Primary  Credit
Agreement and "Commitments" as defined in the 364 Day Credit Agreement.

         "Credit Agreements" is defined in the second recital.

         "Debtor" is defined in Section 2.1(a)(i).

         "Guarantor" is defined in the preamble.

         "Guaranty" is defined in the preamble.

         "Lender  Party"  means,  as the context may  require,  any Lender,  any
Issuing Bank or any Agent and each of its respective successors, transferees and
assigns under the Credit Agreements.

         "Lenders"  means  "Lenders" as defined in the Primary Credit  Agreement
and "Lenders" as defined in the 364 Day Credit Agreement.

         "Loan  Documents"  means  "Loan  Documents"  as defined in the  Primary
Credit  Agreement  and  "Loan  Documents"  as  defined  in the  364  Day  Credit
Agreement.

                                 Exhibit B-1 - 2


<PAGE>



         "Notes"  means "Notes" as defined in the Primary  Credit  Agreement and
"Notes" as defined in the 364 Day Credit Agreement.

         "Obligations"  means  "Obligations"  as defined in the  Primary  Credit
Agreement and "Obligations" as defined in the 364 Day Credit Agreement.

         "Primary Credit Agreement" is defined in the first recital.

         "364 Day Credit Agreement" is defined in the second recital.

         SECTION 1.2.   Primary Credit  Agreement Definitions.  Unless otherwise
defined herein or the context otherwise  requires,  terms used in this Guaranty,
including its preamble and recitals,  have the meanings  provided in the Primary
Credit Agreement.

                                   ARTICLE II
                               GUARANTY PROVISIONS

         SECTION 2.1.   Guaranty.   Guarantor hereby absolutely, unconditionally
and irrevocably
                  (a)  guarantees

                           (i) the full and punctual  payment when due,  whether
                  at  stated  maturity,  by  required  prepayment,  declaration,
                  acceleration,  demand  or  otherwise,  of all  Obligations  of
                  Borrower   now  or   hereafter   existing   under  the  Credit
                  Agreements, the Notes, the LC Applications and each other Loan
                  Document to which  Borrower is or may become a party,  whether
                  for principal, interest, fees, expenses or otherwise;

                           (ii) the payment  and  performance  of  any  and  all
                  present or future  obligations  of Borrower  according  to the
                  terms of any  present  or future  rate  swap,  rate cap,  rate
                  floor,  rate collar,  currency exchange  transaction,  forward
                  rate   agreement,   or  other  exchange  or  rate   protection
                  agreements or any option with respect to any such  transaction
                  now existing or hereafter entered into between Borrower or any
                  of its  Subsidiaries  and one or more of the  Lenders or their
                  Affiliates ("interest rate swap agreement");

                           (iii)  the  payment  and  performance  of any and all
                  present or future  obligations  of Borrower  according  to the
                  terms of any present or future crude oil, natural gas or other
                  hydrocarbons swap agreements,  crude oil, natural gas or other
                  hydrocarbons cap, crude oil, natural gas or other hydrocarbons
                  floor,  crude oil, natural gas or other  hydrocarbons  collar,
                  crude  oil,  natural  gas  or  other   hydrocarbons   exchange
                  transaction,   forward   crude  oil,   natural  gas  or  other
                  hydrocarbons  agreement,  or  other  exchange  or  crude  oil,
                  natural gas or other hydrocarbons protection agreements or any
                  option with  respect to any  such transaction  now existing or

                                 Exhibit B-1 - 3


<PAGE>



                  hereafter   entered  into  between  Borrower  or  any  of  its
                  Subsidiaries  and  one  or  more  of  the   Lenders  or  their
                  Affiliates; and

                           (iv)   all   renewals,   rearrangements,   increases,
                  extensions  for  any  period,   substitutions,   modification,
                  amendments or  supplements in whole  or in  part of any of the
                  above loan documents or obligations,

         (including  all  such  amounts  which  would  become  due  but  for the
         operation  of the  automatic  stay under  Section  362(a) of the United
         States  Bankruptcy  Code,  11 U.S.C.  ss.362(a),  and the  operation of
         Sections  502(b) and 506(b) of the United  States  Bankruptcy  Code, 11
         U.S.C. ss.502(b) and ss.506(b)), and (b) indemnifies and holds harmless
         strictly in  accordance  with the terms of the Credit  Agreements  each
         Lender Party and each holder of a Note from Borrower, an LC Application
         or any interest in an LC Obligation  for any and all costs and expenses
         (including  reasonable  attorney's fees and expenses)  incurred by such
         Lender  Party or such  holder,  as the case may be,  in  enforcing  any
         rights under this Guaranty;  provided,  however,  that Guarantor  shall
         only be liable  under  this  Guaranty  for the  maximum  amount of such
         liability that can be hereby incurred without  rendering this Guaranty,
         as it relates to Guarantor,  voidable under  applicable law relating to
         fraudulent  conveyance or fraudulent transfer,  and not for any greater
         amount.  This  Guaranty  constitutes a guaranty of payment when due and
         not of collection,  and Guarantor specifically agrees that it shall not
         be  necessary  or required  that any Lender  Party or any holder of any
         Note  exercise  any right,  assert  any claim or demand or enforce  any
         remedy  whatsoever  against Borrower or any other Obligor (or any other
         Person)  before  or as a  condition  to the  obligations  of  Guarantor
         hereunder.  All  payments  hereunder  are to be made in the currency in
         which they are due under the Credit Agreements.

         SECTION 2.2.   Acceleration of Guaranty.  Guarantor agrees that, in the
event of the dissolution or insolvency of Borrower,  Parent or Guarantor, or the
inability  or  failure of  Borrower,  Parent or  Guarantor  to pay debts as they
become due, or an assignment by Borrower, Parent or Guarantor for the benefit of
creditors, or the commencement of any case or proceeding in respect of Borrower,
Parent or Guarantor  under any  bankruptcy,  insolvency or similar laws,  and if
such event shall  occur at a time when any of the  Obligations  of Borrower  and
Parent  may not  then be due and  payable,  Guarantor  will  pay to the  Lenders
forthwith  the full amount which would be payable  hereunder by Guarantor if all
such Obligations were then due and payable.

         SECTION 2.3.   Guaranty  Absolute,  etc.  This  Guaranty  shall  in all
respects be a continuing,  absolute,  unconditional and irrevocable  guaranty of
payment,  and shall  remain in full force and effect  until all  Obligations  of
Borrower  and  Parent  have  been paid in full,  all  obligations  of  Guarantor
hereunder  shall  have  been  paid  in  full  and  all  Commitments  shall  have
terminated.  Guarantor  guarantees  that the  Obligations of Borrower and Parent

                                 Exhibit B-1 - 4


<PAGE>



will be paid strictly in accordance with the terms of the Credit  Agreements and
each  other  Loan  Document  under  which  they  arise,  regardless  of any law,
regulation or order now or hereafter in effect in any jurisdiction affecting any
of such terms or the rights of any Lender  Party or any holder of any  Note with
respect  thereto.  The  liability  of  Guarantor  under this  Guaranty  shall be
absolute, unconditional and irrevocable irrespective of:

                  (a) (i) any lack of validity,  legality or  enforceability  of
         the Credit  Agreements,  any Note, any LC Application or any other Loan
         Document or any  portion of any thereof or (ii) the Credit  Agreements,
         any Note,  any LC Application or any other Loan Document or any portion
         of any thereof being void or voidable;

                  (b) the failure of any Lender Party or any holder of any Note,
         any LC Application, Letter of Credit or any interest therein

                           (i) to assert any claim or demand or to  enforce  any
                  right or remedy  against  Borrower,  any other  Obligor or any
                  other  Person   (including  any  other  guarantor)  under  the
                  provisions  of  the  Credit  Agreements,   any  Note,  any  LC
                  Application, any other Loan Document or otherwise, or

                           (ii)  to exercise  any  right or  remedy  against any
                  other guarantor of, or collateral securing, any Obligations of
                  Borrower or any other Obligor;

                  (c) any change in the time,  manner or place of payment of, or
         in any other term of, all or any of the  Obligations of Borrower or any
         other  Obligor,  or any other  extension,  compromise or renewal of any
         Obligation of Borrower or any other Obligor;

                  (d) any  reduction,  limitation,  impairment or termination of
         any  Obligations  of  Borrower  or any other  Obligor  for any  reason,
         including  any  claim of  waiver,  release,  surrender,  alteration  or
         compromise,  and shall not be subject to (and  Guarantor  hereby waives
         any  right  to or  claim  of)  any  defense  or  setoff,  counterclaim,
         recoupment  or  termination  whatsoever  by reason  of the  invalidity,
         illegality, nongenuineness,  irregularity, compromise, unenforceability
         of, or any other event or  occurrence  affecting,  any  Obligations  of
         Borrower, any other Obligor or otherwise;

                  (e) any amendment to,  extensions of,  rescission,  waiver, or
         other  modification  of, or any consent to departure  from,  any of the
         terms of the  Credit  Agreements,  any Note,  any LC  Application,  any
         Letter of Credit or any other Loan Document;

                  (f)   any   addition,    exchange,   release,   surrender   or
         non-perfection  of any  collateral,  or any  amendment  to or waiver or
         release  or  addition  of, or  consent  to  departure  from,  any other
         guaranty,  held by any Lender  Party or any holder of any Note,  any LC
         Application,  any Letter of Credit or interest  therein securing any of
         the Obligations of Borrower or any other Obligor; or

                                 Exhibit B-1 - 5


<PAGE>



                  (g) any other circumstance which might otherwise  constitute a
         defense  available to, or a legal or equitable  discharge of, Borrower,
         any other Obligor, any surety or any guarantor.

         SECTION 2.4.   Reinstatement. Guarantor agrees that this Guaranty shall
continue to be  effective or be  reinstated,  as the case may be, if at any time
any payment (in whole or in part) of any of the Obligations guaranteed hereby is
rescinded or must otherwise be restored by any Lender Party or any holder of any
Note,  any  LC  Application  or  any  interest  in an LC  Obligation,  upon  the
insolvency,  bankruptcy or reorganization  of Borrower,  or any other Obligor or
otherwise, all as though such payment had not been made.

         SECTION 2.5.   Waiver.  Guarantor hereby waives promptness,  diligence,
presentment,  notice of  acceptance  and any other notice with respect to any of
the  Obligations  of Borrower or any other  Obligor  and this  Guaranty  and any
requirement  that any Agent,  any other  Lender Party or any holder of any Note,
any LC  Application,  any  Letter  of Credit or any  interest  therein  protect,
secure, perfect or insure any security interest or Lien, or any property subject
thereto,  or exhaust any right or take any action  against  Borrower,  any other
Obligor or any other Person  (including  any other  guarantor)  or entity or any
collateral  securing the  Obligations of Borrower or any other  Obligor,  as the
case may be.

         SECTION 2.6.   Waiver  of  Subrogation.  Guarantor  hereby  irrevocably
waives any claim or other rights which it may now or hereafter  acquire  against
Borrower  or  any  other  Obligor  that  arise  from  the  existence,   payment,
performance or enforcement of Guarantor's obligations under this Guaranty or any
other  Loan  Document,  including  any  right  of  subrogation,   reimbursement,
contribution,  exoneration, or indemnification,  any right to participate in any
claim or remedy of the Lender Parties  against  Borrower or any other Obligor or
any collateral which the Collateral Agent now has or hereafter acquires, whether
or not such claim, remedy or right arises in equity, or under contract,  statute
or common law, including the right to take or receive from Borrower or any other
Obligor,  directly or indirectly,  in cash or other property or by set-off or in
any manner, payment or security on account of such claim or other rights. If any
amount shall be paid to Guarantor in violation of the preceding sentence and the
Obligations  shall not have been paid in cash in full and the  Commitments  have
not been terminated,  such amount shall be deemed to have been paid to Guarantor
for the  benefit  of,  and held in trust  for,  the  Lender  Parties,  and shall
forthwith  be paid to the Lender  Parties to be credited  and  applied  upon the
Obligations,  whether  matured or  unmatured;  otherwise it shall be returned to
remitter.  Guarantor  acknowledges  that it will  receive  direct  and  indirect
benefits from the financing  arrangements  contemplated by the Credit Agreements
and that the waiver set forth in this Section is knowingly made in contemplation
of such benefits.

         SECTION 2.7.   Successors, Transferees and Assigns; Transfers of Notes.
This Guaranty shall:

                                 Exhibit B-1 - 6


<PAGE>



                  (a) be binding upon Guarantor, and its successors, transferees
         and assigns  (provided,  however,  that Guarantor may not assign any of
         its  obligations  hereunder  without the prior  written  consent of all
         Lenders); and

                  (b) inure to the  benefit of and be  enforceable by each Agent
and each other Lender Party.

Without  limiting the  generality  of the  foregoing  clause (b), any Lender may
assign  or  otherwise  transfer  (in  whole  or in  part)  any  Note,  Loan,  LC
Application, Letter of Credit or interest therein held by it to any other Person
or entity,  and such other Person or entity shall  thereupon  become vested with
all rights and benefits in respect thereof granted to such Lender under any Loan
Document  (including  this  Guaranty) or  otherwise,  subject,  however,  to any
contrary  provisions in such  assignment or transfer,  and to the  provisions of
Section 8.8 of the Credit Agreements.

         SECTION 2.8.   Taxes.  All payments by the undersigned  hereunder shall
be made free  and clear  of and  without  deduction  for any  present  or future
income,  excise,  stamp,  or  franchise  taxes and other  taxes,  fees,  duties,
withholdings  or other  charges of any nature  whatsoever  imposed by any taxing
authority, but excluding franchise taxes and taxes imposed on or measured by any
Lender's net income or receipts (such  non-excluded items being called "Taxes").
In the event  that any  withholding  or  deduction  from any  payment to be made
hereunder is required in respect of any Taxes  pursuant to any  applicable  law,
rule or  regulation,  then,  subject  to the  provisions  of  Section  2.9,  the
undersigned will:

                  (a)  pay  directly to the  relevant authority  the full amount
         required to be so withheld or deducted;

                  (b)  promptly  forward to  Administrative  Agent  an  official
         receipt or  other  documentation satisfactory  to Administrative  Agent
         evidencing such payment to such authority; and

                  (c)  pay  to  Administrative  Agent  for  the  account  of the
         applicable  Lender(s)  such  additional  amount(s)  as is  necessary to
         ensure that the net amount actually  received by each Lender will equal
         the full amount such Lender would have received had no such withholding
         or deduction been required and the undersigned hereby acknowledges that
         it is not entitled to and will not seek recovery or  restitution of any
         amount due to any of the  Lenders or Agents and paid by it  pursuant to
         this clause (c) or pursuant to the next sentence.

If any Taxes are directly  asserted against any Agent or any Lender with respect
to any payment  received by such Agent or such Lender  hereunder,  such Agent or
such Lender may pay such Taxes and, if paid in good faith,  the undersigned will
promptly pay such additional amounts to the Administrative Agent for the account
of such Lender or Agent  (including any  penalties,  interest or expenses) as is
necessary in order that the net amount received by such person after the payment

                                 Exhibit B-1 - 7


<PAGE>



of such Taxes  (including any taxes on such  additional  amount) shall equal the
amount such person would have received had no such Taxes been asserted,  subject
to the provisions of Section 2.9.

         The  undersigned  shall pay all stamp,  transaction,  registration  and
similar taxes (including  financial  institutions  duties,  debit taxes or other
taxes  payable by return and taxes passed on to any Lender or Agent by a bank or
financial institution (collectively "Stamp Taxes") and, if the undersigned fails
to pay any such charges or taxes after reasonable notice from any such Lender or
Agent,  fines and penalties) which may be payable or determined to be payable in
relation to the execution, delivery, performance or enforcement of this Guaranty
or any Loan Document or any other transaction  contemplated by any Loan Document
to which the undersigned is a party.  The undersigned  hereby  indemnifies  each
Lender and Agent against any liability  resulting  from delay or omission to pay
such charges or taxes except to the extent the liability results from failure by
the  relevant  Lender or Agent to pay any such tax after  having been  delivered
funds to do so by the  undersigned  or to the extent such liability is for fines
and  penalties  resulting  from such  Lender's  or  Agent's  failure  to provide
reasonable notice to the undersigned as provided herein.

         If the  undersigned  fails to pay any Taxes or Stamp  Taxes when due to
the appropriate taxing authority or fails to remit to Administrative  Agent, for
the account of the respective  Lenders,  the required receipts or other required
documentary  evidence,  the undersigned  shall indemnify  Lenders for any Taxes,
interest or penalties  that may become  payable by any Lender as a result of any
such failure, subject to the provisions of Section 2.9.

         The undersigned waives any statutory right to recover from any Agent or
any  Lender  any  amount  due to any  such  Agent  or  Lender  and  paid  by the
undersigned under this Section.

         SECTION 2.9.   Make-Whole  Qualifications.  Each  Lender's  claims  for
reimbursements,  payments,  indemnities or otherwise under Section  2.8  and the
undersigned's obligations with  respect thereto,  shall be limited and qualified
by and subject to the following:

                  (a) the undersigned's  obligation to pay, satisfy or recognize
         such claim shall be limited to costs or losses  incurred within one (1)
         year  immediately  prior to any  demand or  request  therefor  upon the
         undersigned;

                  (b)  each  Lender's  demand  for  reimbursement,   payment  or
         indemnity must be limited to that which is being  generally  applied at
         the  time by such  Lender  for  comparable  guarantors  and  guaranties
         subject to similar provisions;

                  (c) each Lender which asserts its rights with respect  thereto
         or  which  is  seeking  or  imposing  such  reimbursement,  payment  or
         indemnity shall provide evidence  regarding the basis of such claim and
         the calculation and  application  thereof in reasonable  detail and, in
         determining  such  amount,  each Lender may use  reasonable  methods of
         attribution and averaging; and

                                 Exhibit B-1 - 8


<PAGE>



                  (d)  each  Lender  which  is  seeking  payment,  indemnity  or
         reimbursement  pursuant to Section 2.8 shall,  if so  requested  by the
         undersigned  use  reasonable  efforts  (subject to the  overall  policy
         considerations  of such Lender) to designate a different lending office
         hereunder if to do so will avoid the need for, or reduce the amount of,
         any such payment,  indemnity or  reimbursement;  provided that,  Lender
         would,  in its sole but  reasonable  determination,  suffer no material
         economic, legal or regulatory disadvantage or burden.

         [SECTION 2.10.   Judgment.  Guarantor hereby agrees that:

                  (a) If, for the purposes of  obtaining  judgment in any court,
         it is necessary to convert a sum due hereunder in United States Dollars
         into  another  currency,   Guarantor  agrees,  to  the  fullest  extent
         permitted by law, that the rate of exchange used shall be that at which
         in accordance with normal banking procedures the  Administrative  Agent
         could  purchase  United States  Dollars with such other currency on the
         Business Day preceding that on which final judgment is given.

                  (b) The obligation of Guarantor in respect of any sum due from
         it to any  Lender  Party  or any  holder  of a  Note  hereunder  shall,
         notwithstanding  any  judgment in a currency  other than United  States
         Dollars,  be  discharged  only to the extent that on the  Business  Day
         following  receipt by such Lender Party or such holder, as the case may
         be, of any sum adjudged to be so due in such other currency such Lender
         Party or such  holder,  as the case may be,  may,  in  accordance  with
         normal  banking  procedures,  purchase  United States Dollars with such
         other  currency;  in the  event  that  the  United  States  Dollars  so
         purchased are less than the sum  originally due to such Lender Party in
         United  States  Dollars,   Guarantor,  as  a  separate  obligation  and
         notwithstanding  any  such  judgment,   hereby  indemnifies  and  holds
         harmless  such Lender Party and such holder  against such loss,  and if
         the United States Dollars so purchased exceed the sum originally due to
         such Lender Party or such holder in United States Dollars,  such Lender
         Party or such holder, as the case may be, shall remit to Guarantor such
         excess.]

                                   ARTICLE III
                         REPRESENTATIONS AND WARRANTIES

         SECTION 3.1.   Representations  and   Warranties.     Guarantor  hereby
represents and warrants unto each Lender Party as set forth in this Article.

         SECTION 3.1.1.  Organization, Existence and Good Standing. Guarantor is
duly organized or incorporated,  validly existing and in good standing under the
laws of its jurisdiction of organization or incorporation,  having all corporate
or  partnership  powers  required  to enter into and carry out the  transactions
contemplated  hereby.  Guarantor  is  duly  qualified,  in  good  standing,  and
authorized  to do business in all other  jurisdictions  within the United States

                                 Exhibit B-1 - 9


<PAGE>



wherein the character of the properties owned or held by it or the nature of the
business  transacted by it makes such  qualification  necessary,  except for any
lack of  qualification,  good standing or  authorization  that is not reasonably
expected to result in a Material Adverse Effect. Guarantor has taken all actions
customarily  taken in order to enter, for the purpose of conducting  business or
owning  property,  each  jurisdiction  outside  the United  States  wherein  the
character  of the  properties  owned or held by it or the nature of the business
transacted by it makes such actions  desirable,  except any failure to take such
action that is not reasonably expected to result in a Material Adverse Effect.

         SECTION 3.1.2.  Authorization.  Guarantor has duly taken all corporate,
partnership  or  shareholder  action  necessary to authorize  the  execution and
delivery  by it of  this  Guaranty  and to  authorize  the  consummation  of the
transactions   contemplated  hereby  and  the  performance  of  its  obligations
hereunder.

         SECTION 3.1.3.  No Conflicts or Consents. The execution and delivery by
Guarantor of this Guaranty,  the performance by it of its obligations hereunder,
and the  consummation  of the  transactions  contemplated  by the  various  Loan
Documents,  do not and will not (i) conflict  with any provision of the articles
or certificate of incorporation,  bylaws,  charter, or partnership  agreement or
certificate  of such  Guarantor,  or (ii)  except as to  matters  that could not
reasonably  be expected to result in a Material  Adverse  Effect,  result in the
acceleration  of any Debt  owed by such  Guarantor,  or  conflict  with any law,
statute,  rule,  regulation,  or agreement,  judgment,  license, order or permit
applicable to or binding upon such Guarantor, or require the consent,  approval,
authorization  or  order  of,  or  notice  to  or  filing  with,  any  court  or
Governmental  Authority or third party,  or result in or require the creation of
any Lien upon any material  assets or  properties of such  Guarantor,  except as
permitted in the Loan Documents.

         SECTION 3.1.4.  Enforceable  Obligations.   This Guaranty is the legal,
valid and binding  obligation of Guarantor,  enforceable in accordance  with its
terms,  except as such  enforcement may be limited by bankruptcy,  insolvency or
similar laws of general  application  relating to the  enforcement of creditors'
rights and by general principles of equity.

                                   ARTICLE IV
                                    COVENANTS

         SECTION 4.1.   Covenants.  Guarantor covenants and agrees that, so long
as any portion of the Obligations of Borrower shall remain  unpaid or any Lender
shall have any  outstanding  Commitment,  Guarantor  will,  unless the  Required
Lenders  shall  otherwise  consent  in  writing,  perform  or  comply  with  the
obligations of a Restricted Subsidiary of Borrower set forth in Sections 5.1 and
5.2 of the Credit  Agreements,  subject to any  limitations  on  performance  or
compliance  contained  in such  sections,  including,  without  limitation,  the
limitation,  when  applicable,  that the failure to perform or comply  could not
reasonably be expected to have a Material Adverse Effect.

                                Exhibit B-1 - 10


<PAGE>



                                    ARTICLE V
                            MISCELLANEOUS PROVISIONS

         SECTION 5.1.   Loan Document. This Guaranty is a Loan Document executed
pursuant  to  the  Credit  Agreements  and  shall  (unless  otherwise  expressly
indicated herein) be construed,  administered and applied in accordance with the
terms and provisions thereof.

         SECTION 5.2.   Binding   on   Successors,   Transferees   and  Assigns;
Assignment. In addition to, and not in limitation of, Section 2.7, this Guaranty
shall be binding upon Guarantor and its successors,  transferees and assigns and
shall inure to the  benefit of and be  enforceable by each Lender Party and each
holder of a Note,  an LC  Application,  or an interest in an LC  Obligation  and
their  respective  successors,  transferees  and  assigns  (to the  full  extent
provided  pursuant to Section 2.7);  provided,  however,  that Guarantor may not
assign any of its obligations hereunder without the prior written consent of all
Lenders.

         SECTION 5.3.   Amendments.  No amendment to or waiver  of any provision
of this Guaranty,  nor consent to any departure by Guarantor herefrom,  shall in
any event be effective unless  the same  shall be in  writing  and signed by the
Administrative Agent, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.

         SECTION 5.4.   Notices.  All notices,  requests,  consents, demands and
other communications required or permitted hereunder shall be in writing, unless
otherwise specifically provided herein and shall be deemed sufficiently given or
furnished  if  delivered  by personal  delivery,  by telecopy  (with  telephonic
confirmation of transmission,  by delivery service with proof of delivery, or by
registered or certified United States mail, postage prepaid, to Guarantor at the
address of Guarantor  specified on the signature  pages hereto and to each Agent
and each  Lender at their  addresses  specified  on the  signature  pages to the
Credit  Agreements  (unless  changed by similar  notice in writing  given by the
particular  Person  whose  address  is  to  be  changed).  Any  such  notice  or
communication shall be deemed to have been given:

                  (a) in the case of  personal delivery or delivery service,  as
         of the date of first attempted delivery at the address provided herein;

                  (b) in the case of telecopy, upon receipt; or

                  (c) in the case of registered or certified United States mail,
         three days after deposit in the mail, postage prepaid.

         SECTION 5.5.   No  Waiver;  Remedies.   In  addition  to,  and  not  in
limitation of, Section 2.3 and Section 2.5, no failure on the part of any Lender
Party or any  holder  of a Note,  an LC  Application,  or an  interest  in an LC
Obligation to exercise,  and no delay in exercising,  any right  hereunder shall
operate as a waiver  thereof;  nor shall any single or partial  exercise  of any
right hereunder  preclude any other or further  exercise thereof or the exercise
of any  other  right.  The  remedies  herein  provided  are  cumulative  and not
exclusive of any remedies provided by law.

                                Exhibit B-1 - 11


<PAGE>



         SECTION 5.6.   Section Captions. Section captions used in this Guaranty
are for convenience of reference only,  and shall not affect the construction of
this Guaranty.

         SECTION 5.7.   Severability.  Wherever possible  each provision of this
Guaranty shall be interpreted  in such manner as to be effective and valid under
applicable law,  but if any provision of this Guaranty shall be prohibited by or
invalid  under such law,  such provision  shall be  ineffective to the extent of
such  prohibition  or  invalidity,  without  invalidating  the remainder of such
provision or the remaining provisions of this Guaranty.

         SECTION 5.8.   Governing Law, Entire  Agreement. THIS GUARANTY SHALL BE
DEEMED A CONTRACT AND  INSTRUMENT  MADE UNDER THE LAWS OF THE STATE OF TEXAS AND
SHALL BE CONSTRUED AND ENFORCED IN  ACCORDANCE  WITH AND GOVERNED BY THE LAWS OF
THE STATE OF TEXAS AND THE LAWS OF THE UNITED STATES OF AMERICA,  WITHOUT REGARD
TO PRINCIPLES  OF CONFLICTS OF LAW.  THIS GUARANTY AND THE OTHER LOAN  DOCUMENTS
CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH RESPECT TO THE
SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS,  WRITTEN OR ORAL, WITH
RESPECT THERETO.

         SECTION 5.9.   Waiver of Jury  Trial.  EACH OF  GUARANTOR,  AGENTS  AND
LENDERS HEREBY (a) IRREVOCABLY WAIVES, 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 THIS
GUARANTY OR ANY TRANSACTION CONTEMPLATED THEREBY OR ASSOCIATED THEREWITH, BEFORE
OR AFTER MATURITY;  (b) 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; (c) 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 (d) ACKNOWLEDGES THAT IT
HAS BEEN  INDUCED  TO ENTER  INTO AND  ACCEPT  THIS  GUARANTY,  THE  OTHER  LOAN
DOCUMENTS AND THE TRANSACTIONS  CONTEMPLATED  HEREBY AND THEREBY BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION.

         SECTION 5.10.   Forum  Selection  and  Consent  to  Jurisdiction.   ANY
LITIGATION  BASED HEREON,  OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
GUARANTY  OR ANY  OTHER  LOAN  DOCUMENT,  OR ANY  COURSE OF  CONDUCT,  COURSE OF
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE LENDER PARTIES
OR GUARANTOR  SHALL BE BROUGHT AND  MAINTAINED  EXCLUSIVELY IN THE COURTS OF THE
STATE OF TEXAS OR IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN  DISTRICT
OF TEXAS;  PROVIDED,  HOWEVER,  THAT ANY SUIT  SEEKING  ENFORCEMENT  AGAINST ANY
PROPERTY MAY BE BROUGHT,  AT THE COLLATERAL AGENT'S OPTION, IN THE COURTS OF ANY
JURISDICTION  WHERE SUCH PROPERTY MAY BE FOUND.  GUARANTOR  HEREBY EXPRESSLY AND
IRREVOCABLY  SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF TEXAS AND

                                Exhibit B-1 - 12


<PAGE>



THE UNITED  STATES  DISTRICT  COURT FOR THE  NORTHERN  DISTRICT OF TEXAS FOR THE
PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND  IRREVOCABLY  AGREES TO BE
BOUND BY ANY  JUDGMENT  RENDERED  THEREBY IN  CONNECTION  WITH SUCH  LITIGATION.
GUARANTOR FURTHER  IRREVOCABLY  CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED
MAIL,  POSTAGE  PREPAID,  OR BY PERSONAL  SERVICE WITHIN OR WITHOUT THE STATE OF
TEXAS.  FOR PURPOSES OF ANY ACTION OR  PROCEEDING  INSTITUTED  IN THE FEDERAL OR
STATE COURTS OF TEXAS, THE UNDERSIGNED  HEREBY IRREVOCABLY  DESIGNATES  BORROWER
WITH  OFFICES ON THE DATE HEREOF AT 303 WEST WALL  STREET,  SUITE 101,  MIDLAND,
TEXAS 79701 TO RECEIVE FOR AND ON BEHALF OF THE  UNDERSIGNED  SERVICE OF PROCESS
IN TEXAS.  GUARANTOR  HEREBY  EXPRESSLY AND IRREVOCABLY  WAIVES,  TO THE FULLEST
EXTENT  PERMITTED BY LAW, ANY OBJECTION  WHICH IT MAY HAVE OR HEREAFTER MAY HAVE
TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED
TO ABOVE  AND ANY  CLAIM  THAT  ANY  SUCH  LITIGATION  HAS  BEEN  BROUGHT  IN AN
INCONVENIENT  FORUM.  TO THE EXTENT THAT  GUARANTOR HAS OR HEREAFTER MAY ACQUIRE
ANY IMMUNITY FROM  JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS  (WHETHER
THROUGH SERVICE OR NOTICE,  ATTACHMENT  PRIOR TO JUDGMENT,  ATTACHMENT IN AID OF
EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, GUARANTOR HEREBY
IRREVOCABLY  WAIVES  SUCH  IMMUNITY  IN  RESPECT OF ITS  OBLIGATIONS  UNDER THIS
GUARANTY.

         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]




                                Exhibit B-1 - 13


<PAGE>



         IN WITNESS  WHEREOF,  Guarantor  has caused  this  Guaranty  to be duly
executed and delivered by its officer  thereunto duly  authorized as of the date
first above written but effective as of the Effective Date.

                                          [Name of Guarantor]


                                          By
                                          Name:
                                          Title:

                                          Address:       303 West Wall
                                                         Suite 101
                                                         P. O. Box 3178
                                                         Midland, Texas  79701

                                          Attention:     Curt Kamradt

                                          Telephone:     (915) 571-3171
                                          Telecopy:      (915) 571-5696

                                          with a copy to:

                                          Garrett Smith
                                          1400 Williams Square West
                                          5205 North O'Connor
                                          Irving, Texas  75039

                                          Telephone:     (972) 402-7013
                                          Telecopy:      (972) 402-7028




                                Exhibit B-1 - 14


<PAGE>



                                   Exhibit B-2

                                    [Form of]

                                    GUARANTY

         THIS GUARANTY  (this  "Guaranty"), dated as of August  7, 1997, made by
PIONEER NATURAL RESOURCES  COMPANY,  a Delaware  corporation  ("Guarantor"),  in
favor of each of the Lender Parties (as defined below).

                              W I T N E S S E T H:

         WHEREAS, pursuant to that certain Credit Facility Agreement dated as of
August 7, 1997 by and  among  Pioneer  Natural Resources USA,  Inc.,  a Delaware
corporation  ("Borrower"),  NationsBank of Texas, N.A., as Administrative Agent,
CIBC Inc., as Documentation Agent, Morgan Guaranty Trust Company of New York, as
Documentation  Agent,  The Chase  Manhattan  Bank,  as  Syndication  Agent,  the
Co-Agents  party  thereto,  and the Lenders  from time to time  parties  thereto
(together   with   all   amendments,   supplements,   restatements   and   other
modifications, if any, thereafter made thereto, the "Primary Credit Agreement"),
the  Lenders  have  extended  Commitments  (as  defined  in the  Primary  Credit
Agreement) to make Loans to Borrower and to issue or  participate  in Letters of
Credit on behalf of Borrower; and

         WHEREAS, pursuant to that certain Credit Facility Agreement dated as of
August 7,  1997  by  and  among  Borrower,   NationsBank  of  Texas,   N.A.,  as
Administrative  Agent, CIBC Inc., as Documentation  Agent, Morgan Guaranty Trust
Company of New York,  as  Documentation  Agent,  The Chase  Manhattan  Bank,  as
Syndication  Agent,  the Co-Agents  party thereto,  and the Lenders from time to
time parties thereto  (together with all amendments,  supplements,  restatements
and other  modifications,  if any, thereafter made thereto,  the "364 Day Credit
Agreement",  and  together  with  the  Primary  Credit  Agreement,  the  "Credit
Agreements"),  the Lenders have extended  Commitments (as defined in the 364 Day
Credit Agreement) to make Loans to Borrower; and

         WHEREAS, as a condition precedent to the making of the initial Loans or
issuing of the initial Letters of Credit under the Credit Agreements,  Guarantor
is required to execute and deliver this Guaranty; and

         WHEREAS,  Guarantor  has duly  authorized the  execution,  delivery and
performance of this Guaranty; and

         WHEREAS,  it is in the best  interests  of  Guarantor  to execute  this
Guaranty  inasmuch as  Guarantor  will derive  substantial  direct and  indirect
benefits from the Loans made from time to time to Borrower and Letters of Credit
issued on behalf of Borrower pursuant to the Credit Agreements;

                                 Exhibit B-2 - 1


<PAGE>



         NOW THEREFORE, for good and valuable consideration the receipt of which
is  hereby  acknowledged,  and in order to  induce  the  Lenders  to make  Loans
(including the initial Loans) to Borrower  pursuant to the Credit Agreements and
for the Issuing  Bank to issue  Letters of Credit on behalf of Borrower  and for
the Lenders to acquire  participations in such Letters of Credit pursuant to the
Primary  Credit  Agreement,  Guarantor  agrees,  for the  benefit of each Lender
Party, as follows:

                                    ARTICLE I
                                   DEFINITIONS

         SECTION 1.1.   Certain  Terms.  The  following  terms  (whether  or not
underscored)  when used in this  Guaranty,  including its preamble and recitals,
shall have the following  meanings (such definitions to be equally applicable to
the singular and plural forms thereof):

         "Administrative Agent" is defined in the first recital.

         "Borrower" is defined in the first recital.

         "Commitments"  means  "Commitments"  as defined in the  Primary  Credit
Agreement and "Commitments" as defined in the 364 Day Credit Agreement.

         "Credit Agreements" is defined in the second recital.

         "Debtor" is defined in Section 2.1(a)(i).

         "Guarantor" is defined in the preamble.

         "Guaranty" is defined in the preamble.

         "Lender  Party"  means,  as the context may  require,  any Lender,  any
Issuing Bank or any Agent and each of its respective successors, transferees and
assigns under the Credit Agreements.

         "Lenders"  means  "Lenders" as defined in the Primary Credit  Agreement
and "Lenders" as defined in the 364 Day Credit Agreement.

         "Loan  Documents"  means  "Loan  Documents"  as defined in the  Primary
Credit  Agreement  and  "Loan  Documents"  as  defined  in the  364  Day  Credit
Agreement.

         "Notes"  means "Notes" as defined in the Primary  Credit  Agreement and
"Notes" as defined in the 364 Day Credit Agreement.

         "Obligations"  means  "Obligations"  as defined in the  Primary  Credit
Agreement and "Obligations" as defined in the 364 Day Credit Agreement.

                                 Exhibit B-2 - 2


<PAGE>



         "Primary Credit Agreement" is defined in the first recital.

         "364 Day Credit Agreement" is defined in the second recital.

         SECTION 1.2.   Primary Credit  Agreement Definitions.  Unless otherwise
defined herein or the context otherwise  requires,  terms used in this Guaranty,
including its preamble and recitals,  have the meanings  provided in the Primary
Credit Agreement.

                                   ARTICLE II
                               GUARANTY PROVISIONS

         SECTION 2.1.   Guaranty.  Guarantor hereby absolutely,  unconditionally
and irrevocably

                  (a)      guarantees

                           (i) the full and punctual  payment when due,  whether
                  at  stated  maturity,  by  required  prepayment,  declaration,
                  acceleration,  demand  or  otherwise,  of all  Obligations  of
                  Borrower   now  or   hereafter   existing   under  the  Credit
                  Agreements, the Notes, the LC Applications and each other Loan
                  Document to which  Borrower is or may become a party,  whether
                  for principal, interest, fees, expenses or otherwise;

                           (ii)the  payment  and  performance  of  any  and  all
                  present or future  obligations  of Borrower  according  to the
                  terms of any  present  or future  rate  swap,  rate cap,  rate
                  floor,  rate collar,  currency exchange  transaction,  forward
                  rate   agreement,   or  other  exchange  or  rate   protection
                  agreements or any option with respect to any such  transaction
                  now existing or hereafter entered into between Borrower or any
                  of its  Subsidiaries  and one or more of the  Lenders or their
                  Affiliates ("interest rate swap agreement");

                           (iii)  the  payment  and  performance  of any and all
                  present or future  obligations  of Borrower  according  to the
                  terms of any present or future crude oil, natural gas or other
                  hydrocarbons swap agreements,  crude oil, natural gas or other
                  hydrocarbons cap, crude oil, natural gas or other hydrocarbons
                  floor,  crude oil, natural gas or other  hydrocarbons  collar,
                  crude  oil,  natural  gas  or  other   hydrocarbons   exchange
                  transaction,   forward   crude  oil,   natural  gas  or  other
                  hydrocarbons  agreement,  or  other  exchange  or  crude  oil,
                  natural gas or other hydrocarbons protection agreements or any
                  option with  respect to any such  transaction  now existing or
                  hereafter   entered  into  between  Borrower  or  any  of  its
                  Subsidiaries   and  one  or  more  of  the  Lenders  or  their
                  Affiliates; and

                                 Exhibit B-2 - 3


<PAGE>



                           (iv)    all   renewals,   rearrangements,  increases,
                  extensions  for  any  period,   substitutions,   modification,
                  amendments or supplements  in whole or  in part of  any of the
                  above loan documents or obligations,

         (including  all  such  amounts  which  would  become  due  but  for the
         operation  of the  automatic  stay under  Section  362(a) of the United
         States  Bankruptcy  Code,  11 U.S.C.  ss.362(a),  and the  operation of
         Sections  502(b) and 506(b) of the United  States  Bankruptcy  Code, 11
         U.S.C. ss.502(b) and ss.506(b)), and (b) indemnifies and holds harmless
         strictly in  accordance  with the terms of the Credit  Agreements  each
         Lender Party and each holder of a Note from Borrower, an LC Application
         or any interest in an LC Obligation  for any and all costs and expenses
         (including  reasonable  attorney's fees and expenses)  incurred by such
         Lender  Party or such  holder,  as the case may be,  in  enforcing  any
         rights under this Guaranty;  provided,  however,  that Guarantor  shall
         only be liable  under  this  Guaranty  for the  maximum  amount of such
         liability that can be hereby incurred without  rendering this Guaranty,
         as it relates to Guarantor,  voidable under  applicable law relating to
         fraudulent  conveyance or fraudulent transfer,  and not for any greater
         amount.  This  Guaranty  constitutes a guaranty of payment when due and
         not of collection,  and Guarantor specifically agrees that it shall not
         be  necessary  or required  that any Lender  Party or any holder of any
         Note  exercise  any right,  assert  any claim or demand or enforce  any
         remedy  whatsoever  against Borrower or any other Obligor (or any other
         Person)  before  or as a  condition  to the  obligations  of  Guarantor
         hereunder.  All  payments  hereunder  are to be made in the currency in
         which they are due under the Credit Agreements.

         SECTION 2.2.   Acceleration of Guaranty.  Guarantor agrees that, in the
event  of the  dissolution  or  insolvency  of  Borrower  or  Guarantor,  or the
inability  or failure of Borrower or  Guarantor to pay debts as they become due,
or an assignment  by Borrower or Guarantor for the benefit of creditors,  or the
commencement of any case or proceeding in respect of Borrower or Guarantor under
any  bankruptcy,  insolvency or similar laws, and if such event shall occur at a
time when any of the  Obligations  of Borrower  may not then be due and payable,
Guarantor  will pay to the  Lenders  forthwith  the full  amount  which would be
payable  hereunder  by  Guarantor  if all  such  Obligations  were  then due and
payable.

         SECTION 2.3.   Guaranty  Absolute,  etc.  This  Guaranty  shall  in all
respects be a continuing,  absolute,  unconditional and irrevocable  guaranty of
payment,  and shall  remain in full force and effect  until all  Obligations  of
Borrower have been paid in full, all  obligations of Guarantor  hereunder  shall
have been paid in full and all  Commitments  shall  have  terminated.  Guarantor
guarantees  that the Obligations of Borrower will be paid strictly in accordance
with the terms of the Credit Agreements and each other Loan Document under which
they arise,  regardless  of any law,  regulation  or order now or  hereafter  in
effect in any  jurisdiction  affecting  any of such  terms or the  rights of any
Lender Party or any holder of any Note with respect  thereto.  The  liability of
Guarantor under this Guaranty shall be absolute,  unconditional  and irrevocable
irrespective of:
                                 Exhibit B-2 - 4


<PAGE>



                  (a) (i) any lack of validity,  legality or  enforceability  of
         the Credit  Agreements,  any Note, any LC Application or any other Loan
         Document or any  portion of any thereof or (ii) the Credit  Agreements,
         any Note,  any LC Application or any other Loan Document or any portion
         of any thereof being void or voidable;

                  (b) the failure of any Lender Party or any holder of any Note,
         any LC Application, Letter of Credit or any interest therein

                           (i) to assert any claim or demand or to  enforce  any
                  right or remedy  against  Borrower,  any other  Obligor or any
                  other  Person   (including  any  other  guarantor)  under  the
                  provisions  of  the  Credit  Agreements,   any  Note,  any  LC
                  Application, any other Loan Document or otherwise, or

                           (ii) to  exercise  any  right  or remedy  against any
                  other guarantor of, or collateral securing, any Obligations of
                  Borrower or any other Obligor;

                  (c) any change in the time,  manner or place of payment of, or
         in any other term of, all or any of the  Obligations of Borrower or any
         other  Obligor,  or any other  extension,  compromise or renewal of any
         Obligation of Borrower or any other Obligor;

                  (d) any  reduction,  limitation,  impairment or termination of
         any  Obligations  of  Borrower  or any other  Obligor  for any  reason,
         including  any  claim of  waiver,  release,  surrender,  alteration  or
         compromise,  and shall not be subject to (and  Guarantor  hereby waives
         any  right  to or  claim  of)  any  defense  or  setoff,  counterclaim,
         recoupment  or  termination  whatsoever  by reason  of the  invalidity,
         illegality, nongenuineness,  irregularity, compromise, unenforceability
         of, or any other event or  occurrence  affecting,  any  Obligations  of
         Borrower, any other Obligor or otherwise;

                  (e) any amendment to,  extensions of,  rescission,  waiver, or
         other  modification  of, or any consent to departure  from,  any of the
         terms of the  Credit  Agreements,  any Note,  any LC  Application,  any
         Letter of Credit or any other Loan Document;

                  (f)   any   addition,    exchange,   release,   surrender   or
         non-perfection  of any  collateral,  or any  amendment  to or waiver or
         release  or  addition  of, or  consent  to  departure  from,  any other
         guaranty,  held by any Lender  Party or any holder of any Note,  any LC
         Application,  any Letter of Credit or interest  therein securing any of
         the Obligations of Borrower or any other Obligor; or

                  (g) any other circumstance which might otherwise  constitute a
         defense  available to, or a legal or equitable  discharge of, Borrower,
         any other Obligor, any surety or any guarantor.

                                 Exhibit B-2 - 5


<PAGE>



         SECTION 2.4.   Reinstatement. Guarantor agrees that this Guaranty shall
continue to be  effective or be  reinstated,  as the case may be, if at any time
any payment (in whole or in part) of any of the Obligations guaranteed hereby is
rescinded or must otherwise be restored by any Lender Party or any holder of any
Note,  any  LC  Application  or  any  interest  in an LC  Obligation,  upon  the
insolvency,  bankruptcy or reorganization  of Borrower,  or any other Obligor or
otherwise, all as though such payment had not been made.

         SECTION 2.5.   Waiver.  Guarantor hereby waives promptness,  diligence,
presentment,  notice of  acceptance  and any other notice with respect to any of
the  Obligations  of Borrower or any other  Obligor  and this  Guaranty  and any
requirement  that any Agent,  any other  Lender Party or any holder of any Note,
any LC  Application,  any  Letter  of Credit or any  interest  therein  protect,
secure, perfect or insure any security interest or Lien, or any property subject
thereto,  or exhaust any right or take any action  against  Borrower,  any other
Obligor or any other Person  (including  any other  guarantor)  or entity or any
collateral  securing the  Obligations of Borrower or any other  Obligor,  as the
case may be.

         SECTION 2.6.   Waiver  of  Subrogation.  Guarantor  hereby  irrevocably
waives any claim or other rights which it may now or hereafter  acquire  against
Borrower  or  any  other  Obligor  that  arise  from  the  existence,   payment,
performance or enforcement of Guarantor's obligations under this Guaranty or any
other  Loan  Document,  including  any  right  of  subrogation,   reimbursement,
contribution,  exoneration, or indemnification,  any right to participate in any
claim or remedy of the Lender Parties  against  Borrower or any other Obligor or
any collateral which the Collateral Agent now has or hereafter acquires, whether
or not such claim, remedy or right arises in equity, or under contract,  statute
or common law, including the right to take or receive from Borrower or any other
Obligor,  directly or indirectly,  in cash or other property or by set-off or in
any manner, payment or security on account of such claim or other rights. If any
amount shall be paid to Guarantor in violation of the preceding sentence and the
Obligations  shall not have been paid in cash in full and the  Commitments  have
not been terminated,  such amount shall be deemed to have been paid to Guarantor
for the  benefit  of,  and held in trust  for,  the  Lender  Parties,  and shall
forthwith  be paid to the Lender  Parties to be credited  and  applied  upon the
Obligations,  whether  matured or  unmatured;  otherwise it shall be returned to
remitter.  Guarantor  acknowledges  that it will  receive  direct  and  indirect
benefits from the financing  arrangements  contemplated by the Credit Agreements
and that the waiver set forth in this Section is knowingly made in contemplation
of such benefits.

         SECTION 2.7.   Successors, Transferees and Assigns; Transfers of Notes.
This Guaranty shall:

                  (a) be binding upon Guarantor, and its successors, transferees
         and assigns  (provided,  however,  that Guarantor may not assign any of
         its  obligations  hereunder  without the prior  written  consent of all
         Lenders); and

                  (b)  inure to the benefit of and be  enforceable by each Agent
         and each other Lender Party.

                                 Exhibit B-2 - 6


<PAGE>



Without  limiting the  generality  of the  foregoing  clause (b), any Lender may
assign  or  otherwise  transfer  (in  whole  or in  part)  any  Note,  Loan,  LC
Application, Letter of Credit or interest therein held by it to any other Person
or entity,  and such other Person or entity shall  thereupon  become vested with
all rights and benefits in respect thereof granted to such Lender under any Loan
Document  (including  this  Guaranty) or  otherwise,  subject,  however,  to any
contrary  provisions in such  assignment or transfer,  and to the  provisions of
Section 8.8 of the Credit Agreements.

         SECTION 2.8.   Taxes.  All payments by the undersigned  hereunder shall
be made  free and  clear of and  without  deduction  for any  present  or future
income,  excise,  stamp,  or  franchise  taxes and other  taxes,  fees,  duties,
withholdings  or other  charges of any nature  whatsoever  imposed by any taxing
authority, but excluding franchise taxes and taxes imposed on or measured by any
Lender's net income or receipts (such  non-excluded items being called "Taxes").
In the event  that any  withholding  or  deduction  from any  payment to be made
hereunder is required in respect of any Taxes  pursuant to any  applicable  law,
rule or  regulation,  then,  subject  to the  provisions  of  Section  2.9,  the
undersigned will:

                  (a)  pay  directly  to the relevant authority  the full amount
         required to be so withheld or deducted;

                  (b)  promptly  forward to  Administrative  Agent  an  official
         receipt or  other documentation  satisfactory to  Administrative  Agent
         evidencing such payment to such authority; and

                  (c)  pay  to  Administrative  Agent  for  the  account  of the
         applicable  Lender(s)  such  additional  amount(s)  as is  necessary to
         ensure that the net amount actually  received by each Lender will equal
         the full amount such Lender would have received had no such withholding
         or deduction been required and the undersigned hereby acknowledges that
         it is not entitled to and will not seek recovery or  restitution of any
         amount due to any of the  Lenders or Agents and paid by it  pursuant to
         this clause (c) or pursuant to the next sentence.

If any Taxes are directly  asserted against any Agent or any Lender with respect
to any payment  received by such Agent or such Lender  hereunder,  such Agent or
such Lender may pay such Taxes and, if paid in good faith,  the undersigned will
promptly pay such additional amounts to the Administrative Agent for the account
of such Lender or Agent  (including any  penalties,  interest or expenses) as is
necessary in order that the net amount received by such person after the payment
of such Taxes  (including any taxes on such  additional  amount) shall equal the
amount such person would have received had no such Taxes been asserted,  subject
to the provisions of Section 2.9.

         The  undersigned  shall pay all stamp,  transaction,  registration  and
similar taxes (including  financial  institutions  duties,  debit taxes or other
taxes  payable by return and taxes passed on to any Lender or Agent by a bank or
financial institution (collectively "Stamp Taxes") and, if the undersigned fails
to pay any such  charges or taxes  after reasonable notice  from any such Lender

                                 Exhibit B-2 - 7


<PAGE>



or Agent,  fines and penalties) which may be payable or determined to be payable
in relation to the  execution,  delivery,  performance  or  enforcement  of this
Guaranty or any Loan Document or any other transaction  contemplated by any Loan
Document to which the undersigned is a party. The undersigned hereby indemnifies
each Lender and Agent against any liability  resulting from delay or omission to
pay such  charges  or taxes  except to the  extent the  liability  results  from
failure by the  relevant  Lender or Agent to pay any such tax after  having been
delivered  funds to do so by the  undersigned or to the extent such liability is
for fines and  penalties  resulting  from such  Lender's  or Agent's  failure to
provide reasonable notice to the undersigned as provided herein.

         If the  undersigned  fails to pay any Taxes or Stamp  Taxes when due to
the appropriate taxing authority or fails to remit to Administrative  Agent, for
the account of the respective  Lenders,  the required receipts or other required
documentary  evidence,  the undersigned  shall indemnify  Lenders for any Taxes,
interest or penalties  that may become  payable by any Lender as a result of any
such failure, subject to the provisions of Section 2.9.

         The undersigned waives any statutory right to recover from any Agent or
any  Lender  any  amount  due to any  such  Agent  or  Lender  and  paid  by the
undersigned under this Section.

         SECTION 2.9.   Make-Whole  Qualifications.    Each  Lender's claims for
reimbursements,  payments,  indemnities  or otherwise  under Section 2.8 and the
undersigned's  obligations with respect thereto,  shall be limited and qualified
by and subject to the following:

                  (a) the undersigned's  obligation to pay, satisfy or recognize
         such claim shall be limited to costs or losses  incurred within one (1)
         year  immediately  prior to any  demand or  request  therefor  upon the
         undersigned;

                  (b)  each  Lender's  demand  for  reimbursement,   payment  or
         indemnity must be limited to that which is being  generally  applied at
         the  time by such  Lender  for  comparable  guarantors  and  guaranties
         subject to similar provisions;

                  (c) each Lender which asserts its rights with respect  thereto
         or  which  is  seeking  or  imposing  such  reimbursement,  payment  or
         indemnity shall provide evidence  regarding the basis of such claim and
         the calculation and  application  thereof in reasonable  detail and, in
         determining  such  amount,  each Lender may use  reasonable  methods of
         attribution and averaging; and

                  (d)  each  Lender  which  is  seeking  payment,  indemnity  or
         reimbursement  pursuant to Section 2.8 shall,  if so  requested  by the
         undersigned  use  reasonable  efforts  (subject to the  overall  policy
         considerations  of such Lender) to designate a different lending office
         hereunder if to do so will avoid the need for, or reduce the amount of,
         any such payment,  indemnity or  reimbursement;  provided that,  Lender
         would,  in its sole but  reasonable  determination,  suffer no material
         economic, legal or regulatory disadvantage or burden.

                                 Exhibit B-2 - 8


<PAGE>



                                   ARTICLE III
                         REPRESENTATIONS AND WARRANTIES

         SECTION 3.1.   Representations   and   Warranties.    Guarantor  hereby
represents and warrants unto each Lender Party as set forth in this Article.

         SECTION 3.1.1.  Organization,  Existence and  Good Standing.  Guarantor
is duly organized or  incorporated,  validly existing and in good standing under
the laws of its  jurisdiction  of  organization  or  incorporation,  having  all
corporate  or  partnership  powers  required  to enter  into and  carry  out the
transactions contemplated hereby. Guarantor is duly qualified, in good standing,
and  authorized  to do  business  in all other  jurisdictions  within the United
States wherein the character of the properties owned or held by it or the nature
of the business transacted by it makes such qualification necessary,  except for
any lack of qualification, good standing or authorization that is not reasonably
expected to result in a Material Adverse Effect. Guarantor has taken all actions
customarily  taken in order to enter, for the purpose of conducting  business or
owning  property,  each  jurisdiction  outside  the United  States  wherein  the
character  of the  properties  owned or held by it or the nature of the business
transacted by it makes such actions  desirable,  except any failure to take such
action that is not reasonably expected to result in a Material Adverse Effect.

         SECTION 3.1.2.   Authorization. Guarantor has duly taken all corporate,
partnership or  shareholder  action necessary to  authorize  the  execution  and
delivery  by  it of  this  Guaranty  and  to authorize  the  consummation of the
transactions  contemplated  hereby  and  the   performance  of  its  obligations
hereunder.

         SECTION 3.1.3.   No Conflicts or Consents.  The execution  and delivery
by  Guarantor  of  this  Guaranty,  the  performance  by it of  its  obligations
hereunder, and the consummation of the transactions  contemplated by the various
Loan  Documents,  do not and will not (i)  conflict  with any  provision  of the
articles or  certificate  of  incorporation,  bylaws,  charter,  or  partnership
agreement or  certificate of such  Guarantor,  or (ii) except as to matters that
could not reasonably be expected to result in a Material Adverse Effect,  result
in the  acceleration  of any Debt owed by such  Guarantor,  or conflict with any
law, statute, rule, regulation, or agreement, judgment, license, order or permit
applicable to or binding upon such Guarantor, or require the consent,  approval,
authorization  or  order  of,  or  notice  to  or  filing  with,  any  court  or
Governmental  Authority or third party,  or result in or require the creation of
any Lien upon any material  assets or  properties of such  Guarantor,  except as
permitted in the Loan Documents.

         SECTION 3.1.4.   Enforceable  Obligations.  This Guaranty is the legal,
valid and binding  obligation of Guarantor,  enforceable in accordance  with its
terms,  except as such  enforcement may be limited by bankruptcy,  insolvency or
similar laws of general  application  relating to the  enforcement of creditors'
rights and by general principles of equity.

         SECTION 3.1.5.   Solvency. Guarantor is solvent and will continue to be
solvent after the making of this Guaranty.

                                 Exhibit B-2 - 9


<PAGE>



                                   ARTICLE IV
                                    COVENANTS

         SECTION 4.1.   Affirmative Covenants.  Guarantor  covenants  and agrees
that,  so long as any  portion of the  Obligations  shall  remain  unpaid or any
Lender Party shall have any outstanding  Commitment,  the Guarantor will, unless
the Required Lenders shall otherwise consent in writing,  perform,  comply with,
observe  and  fulfill,  for  the  benefit  of the  Lender  Parties,  each of the
covenants,  agreements  and  obligations  pertaining or otherwise  applicable to
Guarantor contained in Section 5.1 of the Credit Agreement,  including,  without
limitation,  the delivery of financial  reports and notices described in Section
5.1(b) of the Credit Agreement. Guarantor hereby irrevocably and unconditionally
agrees to be bound by, and not to breach or otherwise  fail to comply with,  any
of such  covenants,  agreements and  obligations as if Guarantor were a party to
the Credit  Agreement and such covenants,  agreements and obligations are hereby
reaffirmed by the Guarantor and are,  together with all related  definitions and
ancillary  provisions  incorporated  herein by reference  hereby and made a part
hereof for all purposes as if set out in full herein.

         SECTION 4.2.   Financial  Covenants.  Guarantor  covenants  and  agrees
that,  so long as any  portion of the  Obligations  shall  remain  unpaid or any
Lender Party shall have any outstanding  Commitment,  Guarantor will, unless the
Required  Lenders  shall  otherwise  consent in writing,  perform,  comply with,
observe  and  fulfill,  for  the  benefit  of the  Lender  Parties,  each of the
covenants,  agreements and obligations  pertaining to or otherwise applicable to
Guarantor  contained in Section 5.3 of the Credit  Agreement.  Guarantor  hereby
irrevocably  and  unconditionally  agrees to be bound  by,  and not to breach or
otherwise fail to comply with,  any of the provisions in any of such  covenants,
agreements and obligations as if Guarantor were a party to the Credit  Agreement
and  such  covenants,  agreements  and  obligations  are  hereby  reaffirmed  by
Guarantor  and  are,  together  with  all  related   definitions  and  ancillary
provisions  incorporated  herein by reference  hereby and made a part hereof for
all purposes as if set out in full herein.

         SECTION 4.3.   Negative  Covenants.   Guarantor  covenants  and  agrees
that,  so long as any  portion of the  Obligations  shall  remain  unpaid or any
Lender Party shall have any outstanding  Commitment,  Guarantor will, unless the
Required  Lenders  shall  otherwise  consent in writing,  perform,  comply with,
observe  and  fulfill,  for  the  benefit  of the  Lender  Parties,  each of the
covenants,  agreements and obligations  pertaining to or otherwise applicable to
Guarantor  contained in Section 5.2 of the Credit  Agreement.  Guarantor  hereby
unconditionally  and  irrevocably  agrees to be bound  by,  and not to breach or
otherwise fail to comply with, any of such covenants, agreements and obligations
to  the  extent  such  provisions  pertain  to  Guarantor  and  such  covenants,
agreements and obligations are hereby reaffirmed by Guarantor and, together with
all related  definitions  and ancillary  provisions are  incorporated  herein by
reference  hereby  made a part  hereof  for all  purposes  as if set out in full
herein.

                                Exhibit B-2 - 10


<PAGE>



                                    ARTICLE V
                            MISCELLANEOUS PROVISIONS

         SECTION 5.1.   Loan Document. This Guaranty is a Loan Document executed
pursuant  to  the  Credit  Agreements  and  shall  (unless  otherwise  expressly
indicated herein) be construed,  administered and applied in accordance with the
terms and provisions thereof.

         SECTION 5.2.   Binding   on   Successors,   Transferees   and  Assigns;
Assignment. In addition to, and not in limitation of, Section 2.7, this Guaranty
shall be binding upon Guarantor and its successors,  transferees and assigns and
shall inure to the benefit of and be  enforceable  by each Lender Party and each
holder of a Note,  an LC  Application,  or an interest in an LC  Obligation  and
their  respective  successors,  transferees  and  assigns  (to the  full  extent
provided  pursuant to Section 2.7);  provided,  however,  that Guarantor may not
assign any of its obligations hereunder without the prior written consent of all
Lenders.

         SECTION 5.3.   Amendments.   No amendment to or waiver of any provision
of this Guaranty,  nor consent to any departure by Guarantor herefrom,  shall in
any event be  effective  unless the same  shall be in writing  and signed by the
Administrative Agent, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.

         SECTION 5.4.   Notices.  All notices,  requests,  consents, demands and
other communications required or permitted hereunder shall be in writing, unless
otherwise specifically provided herein and shall be deemed sufficiently given or
furnished  if  delivered  by personal  delivery,  by telecopy  (with  telephonic
confirmation of transmission,  by delivery service with proof of delivery, or by
registered or certified United States mail, postage prepaid, to Guarantor at the
address of Guarantor  specified on the signature  pages hereto and to each Agent
and each  Lender at their  addresses  specified  on the  signature  pages to the
Credit  Agreements  (unless  changed by similar  notice in writing  given by the
particular  Person  whose  address  is  to  be  changed).  Any  such  notice  or
communication shall be deemed to have been given:

                  (a) in the  case of personal delivery or delivery service,  as
         of the date of first attempted delivery at the address provided herein;

                  (b) in the case of telecopy, upon receipt; or

                  (c) in the case of registered or certified United States mail,
         three days after deposit in the mail, postage prepaid.

         SECTION 5.5.   No  Waiver;  Remedies.   In  addition  to,  and  not  in
limitation of, Section 2.3 and Section 2.5, no failure on the part of any Lender
Party or any  holder  of a Note,  an LC  Application,  or an  interest  in an LC
Obligation to exercise,  and no delay in exercising,  any right  hereunder shall
operate as a waiver  thereof;  nor shall any single or partial  exercise  of any
right hereunder  preclude any other or further  exercise thereof or the exercise
of any  other  right.  The  remedies  herein  provided  are  cumulative  and not
exclusive of any remedies provided by law.

                                Exhibit B-2 - 11


<PAGE>




         SECTION 5.6.   Section Captions. Section captions used in this Guaranty
are for convenience of reference only,  and shall not affect the construction of
this Guaranty.

         SECTION 5.7.   Severability.  Wherever possible each  provision of this
Guaranty  shall be interpreted in such manner as to be effective and valid under
applicable  law, but if any provision of this Guaranty shall be prohibited by or
invalid under such law, such  provision  shall be  ineffective  to the extent of
such  prohibition  or  invalidity,  without  invalidating  the remainder of such
provision or the remaining provisions of this Guaranty.

         SECTION 5.8.   Governing Law, Entire Agreement.  THIS GUARANTY SHALL BE
DEEMED A CONTRACT AND  INSTRUMENT  MADE UNDER THE LAWS OF THE STATE OF TEXAS AND
SHALL BE CONSTRUED AND ENFORCED IN  ACCORDANCE  WITH AND GOVERNED BY THE LAWS OF
THE STATE OF TEXAS AND THE LAWS OF THE UNITED STATES OF AMERICA,  WITHOUT REGARD
TO PRINCIPLES  OF CONFLICTS OF LAW.  THIS GUARANTY AND THE OTHER LOAN  DOCUMENTS
CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH RESPECT TO THE
SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS,  WRITTEN OR ORAL, WITH
RESPECT THERETO.

         SECTION 5.9.   Waiver of Jury  Trial.  EACH OF  GUARANTOR,  AGENTS  AND
LENDERS HEREBY (a) IRREVOCABLY WAIVES, 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 THIS
GUARANTY OR ANY TRANSACTION CONTEMPLATED THEREBY OR ASSOCIATED THEREWITH, BEFORE
OR AFTER MATURITY;  (b) 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; (c) 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 (d) ACKNOWLEDGES THAT IT
HAS BEEN  INDUCED  TO ENTER  INTO AND  ACCEPT  THIS  GUARANTY,  THE  OTHER  LOAN
DOCUMENTS AND THE TRANSACTIONS  CONTEMPLATED  HEREBY AND THEREBY BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION.

         SECTION 5.10.   Forum  Selection  and  Consent  to  Jurisdiction.   ANY
LITIGATION  BASED HEREON,  OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
GUARANTY  OR  ANY OTHER  LOAN DOCUMENT,  OR  ANY COURSE  OF  CONDUCT,  COURSE OF

                                Exhibit B-2 - 12


<PAGE>



DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE LENDER PARTIES
OR GUARANTOR  SHALL BE BROUGHT AND  MAINTAINED  EXCLUSIVELY IN THE COURTS OF THE
STATE OF TEXAS OR IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN  DISTRICT
OF TEXAS;  PROVIDED,  HOWEVER,  THAT ANY SUIT  SEEKING  ENFORCEMENT  AGAINST ANY
PROPERTY MAY BE BROUGHT,  AT THE COLLATERAL AGENT'S OPTION, IN THE COURTS OF ANY
JURISDICTION  WHERE SUCH PROPERTY MAY BE FOUND.  GUARANTOR  HEREBY EXPRESSLY AND
IRREVOCABLY  SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF TEXAS AND
THE UNITED  STATES  DISTRICT  COURT FOR THE  NORTHERN  DISTRICT OF TEXAS FOR THE
PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND  IRREVOCABLY  AGREES TO BE
BOUND BY ANY  JUDGMENT  RENDERED  THEREBY IN  CONNECTION  WITH SUCH  LITIGATION.
GUARANTOR FURTHER  IRREVOCABLY  CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED
MAIL,  POSTAGE  PREPAID,  OR BY PERSONAL  SERVICE WITHIN OR WITHOUT THE STATE OF
TEXAS.  FOR PURPOSES OF ANY ACTION OR  PROCEEDING  INSTITUTED  IN THE FEDERAL OR
STATE COURTS OF TEXAS, THE UNDERSIGNED  HEREBY IRREVOCABLY  DESIGNATES  BORROWER
WITH  OFFICES ON THE DATE HEREOF AT 303 WEST WALL  STREET,  SUITE 101,  MIDLAND,
TEXAS 79701 TO RECEIVE FOR AND ON BEHALF OF THE  UNDERSIGNED  SERVICE OF PROCESS
IN TEXAS.  GUARANTOR  HEREBY  EXPRESSLY AND IRREVOCABLY  WAIVES,  TO THE FULLEST
EXTENT  PERMITTED BY LAW, ANY OBJECTION  WHICH IT MAY HAVE OR HEREAFTER MAY HAVE
TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED
TO ABOVE  AND ANY  CLAIM  THAT  ANY  SUCH  LITIGATION  HAS  BEEN  BROUGHT  IN AN
INCONVENIENT  FORUM.  TO THE EXTENT THAT  GUARANTOR HAS OR HEREAFTER MAY ACQUIRE
ANY IMMUNITY FROM  JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS  (WHETHER
THROUGH SERVICE OR NOTICE,  ATTACHMENT  PRIOR TO JUDGMENT,  ATTACHMENT IN AID OF
EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, GUARANTOR HEREBY
IRREVOCABLY  WAIVES  SUCH  IMMUNITY  IN  RESPECT OF ITS  OBLIGATIONS  UNDER THIS
GUARANTY.

         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]


                                Exhibit B-2 - 13


<PAGE>



         IN WITNESS  WHEREOF,  Guarantor  has caused  this  Guaranty  to be duly
executed and delivered by its officer  thereunto duly  authorized as of the date
first above written but effective as of the Effective Date.

                                           PIONEER NATURAL RESOURCES
                                           COMPANY


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

                                           Address:       303 West Wall
                                                          Suite 101
                                                          P. O. Box 3178
                                                          Midland, Texas  79701

                                           Attention:     Curt Kamradt

                                           Telephone:     (915) 571-3171
                                           Telecopy:      (915) 571-5696

                                           with a copy to:

                                           Garrett Smith
                                           1400 Williams Square West
                                           5205 North O'Connor
                                           Irving, Texas  75039

                                           Telephone:     (972) 402-7013
                                           Telecopy:      (972) 402-7028


                                Exhibit B-2 - 14


<PAGE>



                                    Exhibit C

                           Form of Request for Advance

                                        ,
                                  -------  -----

NationsBank of Texas, N.A.
901 Main Street, 14th Floor
Dallas, Texas  75202

Attn:  Ruth De la Garza

         Re:      Request for Advance - Primary Facility

Gentlemen:

         Reference is made to that certain Credit Facility Agreement dated as of
August  7,  1997  by  and  among  Borrower,  NationsBank  of  Texas,   N.A.,  as
Administrative  Agent, CIBC Inc., as Documentation  Agent, Morgan Guaranty Trust
Company of New York,  as  Documentation  Agent,  The Chase  Manhattan  Bank,  as
Syndication  Agent,  the Co-Agents  party thereto,  and the Lenders from time to
time parties  thereto (the "Credit  Agreement").  Terms which are defined in the
Credit  Agreement and which are used but not defined herein are used herein with
the meanings ascribed to them in the Credit Agreement.  Pursuant to the terms of
the Credit Agreement, the undersigned Borrower hereby requests that Lenders make
Advances  to  the  undersigned  Borrower in the  aggregate  principal  amount of
$       , specifies        ,     , as the date the undersigned  Borrower desires
for Lenders to make such Advances and requests that Administrative Agent deliver
to the undersigned Borrower the proceeds thereof on such date.

         To induce  Lenders  to make such  Advances,  the  undersigned  Borrower
hereby represents, warrants, acknowledges, and agrees to and with each Agent and
each Lender that:

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

         (b) The representations and warranties of the undersigned  Borrower and
each  other  Obligor  set  forth in the  Credit  Agreement  and the  other  Loan
Documents  are true and  correct  on and as of the  date  hereof,  with the same
effect as though such  representations and warranties had been made on and as of
the date 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 6.1 of the Credit Agreement;  nor will any such Default exist Agreement;

                                  Exhibit C - 1


<PAGE>



nor will any such  Default  exist  upon the  undersigned  Borrower's receipt and
application of the Advances requested hereby. The undersigned  Borrower will use
the Advances hereby requested in compliance with the Credit Agreement.

         (d) Except to the extent  waived in writing as  provided in Section 6.1
of the Credit  Agreement,  the  undersigned  Borrower has performed and complied
with all  agreements  and  conditions  in the Credit  Agreement  required  to be
performed or complied with by the  undersigned  Borrower on or prior to the date
hereof, and each of the conditions precedent to Advances contained in the Credit
Agreement remains satisfied.

         (e) The aggregate  unpaid  principal  balance of the Advances under the
Facility after the making of such Advance requested  hereby,  plus the aggregate
outstanding amount of LC Obligations and Swing Line Advances and Competitive Bid
Advances at the date hereof will not be in excess of the Facility  Amount on the
date requested for the making of such Advances.

         (g) 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 8.1 of the Credit  Agreement.  The
Credit Agreement and the other Loan Documents are hereby ratified, approved, and
confirmed in all respects.

         The  undersigned  Borrower  agrees  that  if,  prior to the time of the
Advances 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 Advances requested hereby,  Administrative Agent shall have received written
notice from the  undersigned  Borrower 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 Advances as if then made.

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

                                     PIONEER NATURAL RESOURCES USA, INC.


                                     By:
                                     Name:
                                     Title:


                                  Exhibit C - 2


<PAGE>



                                    Exhibit D

                              Form of Rate Election

                                ------- , -----


NationsBank of Texas, N.A.
901 Main Street, 14th Floor
Dallas, Texas  75202

Attn:  Ruth De la Garza

         Re:      Rate Election - Primary Facility

Gentlemen:

         Reference is made to that certain Credit Facility Agreement dated as of
August  7,  1997  by  and  among  Borrower,  NationsBank  of  Texas,   N.A.,  as
Administrative  Agent, CIBC Inc., as Documentation  Agent, Morgan Guaranty Trust
Company of New York,  as  Documentation  Agent,  The Chase  Manhattan  Bank,  as
Syndication  Agent,  the Co-Agents  party thereto,  and the Lenders from time to
time parties  thereto (the "Credit  Agreement").  Terms which are defined in the
Credit  Agreement and which are used but not defined herein are used herein with
the meanings ascribed to them in the Credit Agreement.  Pursuant to the terms of
the  Credit  Agreement,  the  undersigned  Borrower  hereby  elects a Tranche of
Eurodollar  Portions  in the aggregate amount of $       with an Interest Period
beginning on         and continuing for a period of          .

         To  satisfy  the  conditions  set out in the Credit  Agreement  for the
making of such election,  the undersigned Borrower hereby represents,  warrants,
acknowledges and agrees that:

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

         (b) 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 6.1 of the Credit Agreement.

         (c) 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 8.1  of the Credit  Agreement.  The

                                  Exhibit D - 1


<PAGE>



Credit Agreement and the other Loan Documents are hereby ratified, approved, and
confirmed in all respects.

         (d) The undersigned Borrower further agrees that if, on or prior to the
date of the commencement of the Interest Period  designated  herein,  any matter
certified  herein  by it will not be true and  correct  at such  time as if such
certification  were then  made,  it will  immediately  so notify  Administrative
Agent.  Except to the  extent,  if any,  that prior to the  commencement  of the
Interest Period  designated  herein  Administrative  Agent shall receive written
notice to the contrary  from the  undersigned  Borrower,  each matter  certified
herein  shall be deemed to be certified  as of the date of the  commencement  of
such Interest Period as if then made.

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

                                     PIONEER NATURAL RESOURCES USA, INC.


                                     By:
                                     Name:
                                     Title:




                                  Exhibit D - 2


<PAGE>



                                    Exhibit E

                       Form of Request for Swing Line Bid


VIA FACSIMILE #

[NAME AND ADDRESS OF LENDER]

Reference  is made to the  Primary  Facility  pursuant  to that  certain  Credit
Facility Agreement dated as of August 7, 1997 by and among Borrower, NationsBank
of Texas,  N.A., as  Administrative  Agent,  CIBC Inc., as Documentation  Agent,
Morgan  Guaranty Trust Company of New York, as  Documentation  Agent,  The Chase
Manhattan  Bank, as Syndication  Agent,  the Co-Agents  party  thereto,  and the
Lenders from time to time parties thereto (the "Credit Agreement"),. Capitalized
terms used  herein  and not  otherwise  defined  herein  shall have the  meaning
assigned  in  the  Credit  Agreement.   In  accordance  with  Section  2.5,  the
undersigned  hereby  requests a  Swing Line  Bid in an  amount of  not less than
$         to be advanced today,                 . We request this advance be for
a period of     day(s), maturing on           .

If you wish to submit a Swing Line Bid,  please do so in accordance with Section
2.5 of the Credit Agreement.

If you have any questions regarding this request, please contact the undersigned
at (915)             , or Frank K. Stowers at (915) 685-2179.

                                            PIONEER NATURAL RESOURCES USA,
                                            INC.


                                            By:
                                            Name:
                                            Title:



                                  Exhibit E - 1


<PAGE>



                                    Exhibit F

                             Form of Swing Line Bid

                                                              ,
                                                    ---------   -----

VIA FAX (915)571-5696
Pioneer Natural Resources USA, Inc.
303 W. Wall, Suite 101
Midland, Texas  79701

         Attn:    Curt Kamradt

VIA FAX (214)508-2515
NationsBank of Texas, N.A.
901 Main Street, 14th Floor
Dallas, Texas  75202

         Attn:    Ruth De la Garza

Gentlemen:

         Reference  is made to the Primary  Facility  pursuant  to that  certain
Credit  Facility  Agreement  dated as of  August 7, 1997 by and among  Borrower,
NationsBank of Texas, N.A., as Administrative Agent, CIBC Inc., as Documentation
Agent,  Morgan Guaranty Trust Company of New York, as  Documentation  Agent, The
Chase Manhattan Bank, as Syndication Agent, the Co-Agents party thereto, and the
Lenders from time to time parties thereto (the "Credit Agreement").  Capitalized
terms used  herein and not  otherwise  defined  herein  shall have the  meanings
assigned in the Credit Agreement.

         In accordance with Section 2.5 of the Credit Agreement, the undersigned
Lender offers to make a Swing Line Advance to             today in the following
principal amount, bearing interest at the rate and maturing as stated:

Principal Amount $             Interest Rate              Maturity
                  ------------               ------------          -----------

                                             [Name of Bank]


                                             By:
                                             Name:
                                             Title:


                                  Exhibit F - 1


<PAGE>



                                    Exhibit G

                            Form of Acceptance Notice

                                                                      , 19
                                                           ----------     --
VIA FACSIMILE #214/508-2515

NationsBank of Texas, N.A.
901 Main Street, 14th Floor
Dallas, Texas  75202
Attn:  Ruth De la Garza

       Re:  Notice of Acceptance of Swing Line Bid(s) - Primary Facility

Gentlemen:

         Reference is made to that certain Credit Facility Agreement dated as of
August  7,  1997  by  and  among  Borrower,  NationsBank  of  Texas,   N.A.,  as
Administrative  Agent, CIBC Inc., as Documentation  Agent, Morgan Guaranty Trust
Company of New York,  as  Documentation  Agent,  The Chase  Manhattan  Bank,  as
Syndication  Agent,  the Co-Agents  party thereto,  and the Lenders from time to
time parties thereto (the "Credit Agreement"). Capitalized terms used herein and
not  otherwise  defined  herein shall have the meanings  assigned to them in the
Credit Agreement.

         In accordance with Section 2.5 of the Credit  Agreement and in response
to the Swing Line Bid(s)  received  today,  the  undersigned  hereby accepts the
following   bid(s).   Swing  Line   Advance(s)  must  be  funded  and  wired  to
Administrative Agent by no later than 2:00 p.m.
(Dallas, Texas time) today.

Lender            Principal Amount        Interest Rate         Maturity Date

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

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

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



                                            PIONEER NATURAL RESOURCES USA,
                                            INC.

                                            By:
                                            Name:
                                            Title:


                                  Exhibit G - 1


<PAGE>



                                    Exhibit H

       Form of Opinion of Borrower's and Restricted Subsidiaries' Counsel

Exhibit H has been  omitted  from this  filing as (i) it is not  material  to an
investment decision and (ii) the information that it contains has been disclosed
elsewhere  if  disclosure  of such  information  is  required.  Pioneer  Natural
Resources  Company  agrees  to  furnish  supplementally  a copy  of any  omitted
schedule to the Securities and Exchange Commission upon request.











                                  Exhibit H - 1


<PAGE>



                                    Exhibit I



           Organization Chart of Parent, Borrower and Its Subsidiaries


Exhibit I has been  omitted  from this  filing as (i) it is not  material  to an
investment decision and (ii) the information that it contains has been disclosed
elsewhere  if  disclosure  of such  information  is  required.  Pioneer  Natural
Resources  Company  agrees  to  furnish  supplementally  a copy  of any  omitted
schedule to the Securities and Exchange Commission upon request.


                            







                                  Exhibit I - 1


<PAGE>



                                    Exhibit J

                    Form of Designated Officer's Certificate

         Reference is made to (i) the Primary Facility  pursuant to that certain
Credit  Facility  Agreement dated as of August  7, 1997 by and  among  Borrower,
NationsBank of Texas, N.A., as Administrative Agent, CIBC Inc., as Documentation
Agent,  Morgan Guaranty Trust Company of New York, as  Documentation  Agent, The
Chase Manhattan Bank, as Syndication Agent, the Co-Agents party thereto, and the
Lenders from time to time parties thereto (the "Primary  Credit  Agreement") and
(ii) the 364 Day Facility  pursuant to that certain  Credit  Facility  Agreement
dated as of August 7,  1997 by  and among Borrower,  NationsBank of Texas, N.A.,
as  Administrative  Agent,  CIBC Inc., as Documentation  Agent,  Morgan Guaranty
Trust Company of New York, as Documentation  Agent, The Chase Manhattan Bank, as
Syndication  Agent,  the Co-Agents  party thereto,  and the Lenders from time to
time parties  thereto (the "364 Day Credit  Agreement"  and,  together  with the
Primary Facility, the "Credit Agreements") Terms which are defined in the Credit
Agreements  and which are used but not  defined  herein are used herein with the
meanings given them in the Credit Agreements.

         This  Certificate  is  furnished  pursuant to Section  5.1(b)(2) of the
Credit  Agreements.  Together  herewith the Borrower is  furnishing  to Managing
Agents, the Co-Agents and each Lender the Parent's  [Financial  Statements] (the
"Financial Statements") as of              (the "Reporting Date").  The Borrower
hereby represents, warrants, and acknowledges to Agents and each Lender that:

         (a)      the Designated Officer of the Borrower signing this instrument
                  is  a  duly  elected,  qualified  and  acting  officer  of the
                  Borrower;

         (b)      the Financial Statements are accurate and complete and satisfy
                  the requirements of the Credit Agreements;

         (c)      attached as  Schedule I hereto is a schedule  of  calculations
                  showing compliance (or  noncompliance,  as the case may be) as
                  of the Reporting Date with the  requirements of Section 5.3 of
                  the Credit Agreements; and

         (d)      on the  Reporting  Date,  each  Borrower  was, and on the date
                  hereof the Borrower is, in full compliance with the disclosure
                  requirements of Section 5.1(d) of the Credit  Agreements,  and
                  no  Default   otherwise  existed  on  the  Reporting  Date  or
                  otherwise exists on the date of this  Certificate  [except for
                  Default(s)  under Section(s)        of the Credit  Agreements,
                  which  [is/are]  more  fully described on a schedule  attached
                  hereto].


                                  Exhibit J - 1


<PAGE>



         The Designated  Officer of the Borrower signing this instrument  hereby
certifies that he has reviewed the Loan  Documents and the Financial  Statements
and has  otherwise  undertaken  such  inquiry as is in his opinion  necessary to
enable  him  to  express  an  informed   opinion   with  respect  to  the  above
representations, warranties and acknowledgments of the Borrower and, to the best
of his knowledge,  such  representations,  warranties,  and  acknowledgments are
true, correct and complete.

                                            PIONEER NATURAL RESOURCES USA,
                                            INC.

                                            By:
                                            Name:
                                            Title:

                                            Date:






                                  Exhibit J - 2


<PAGE>



                                   Schedule I

================================================================================
COMPLIANCE WITH FINANCIAL COVENANTS AS OF              . ($ in 000's)
                                          -------------
================================================================================
A.     EBITDAX TO CONSOLIDATED INTEREST EXPENSE RATIO
                                                                       ========
                      Minimum ratio allowed               3.75
                                                        ========
B.     CONSOLIDATED TOTAL FUNDED DEBT TO TOTAL
       CAPITALIZATION                                                  ========

                      Maximum ratio allowed                60%
                                                        ========
================================================================================
COMPUTATION OF FINANCIAL REQUIREMENTS AND RATIOS AS OF
                                                        --------
================================================================================
A.     EBITDAX TO CONSOLIDATED INTEREST EXPENSE RATIO
       (Section 5.3(a)) ($ in 000's)

         (i)   EBITDAX (as defined in Section 5.3(a))

               For the period ended               , the sum of the
               amounts for such period of Consolidated net income,
               Consolidated    Interest   Expense,    depreciation
               expense,  depletion expense, amortization  expense,
               federal and  state  income  taxes, exploration  and
               abandonment   expense  and  other  non-cash charges
               and expenses,  all as determined  on a Consolidated
               basis for Parent and its Consolidated Subsidiaries;   $
                                                                      ----------
        (ii)   CONSOLIDATED INTEREST EXPENSE
               (as defined in Section 5.3(a))

               For the period ended               , total interest
               expense, whether paid or accrued, of Parent and its
               Consolidated Subsidiaries on a Consolidated  basis,
               including,  without  limitation,  all  commissions,
               discounts  and   other  fees and charges  owed with
               respect to Letters of Credit.                         $
                                                                      ----------
               CONSOLIDATED INTEREST EXPENSE                         $
                                                                      ==========
       EBITDAX TO CONSOLIDATED INTEREST EXPENSE RATIO ((i)(ii))      $
                                                                      ==========
                    Minimum ratio allowed      3.75:1
                                              ========


                                  Exhibit J - 3


<PAGE>



B.     CONSOLIDATED TOTAL FUNDED DEBT TO TOTAL
       CAPITALIZATION (Section 5.3(b)) ($ in 000's)

        (i)    CONSOLIDATED TOTAL FUNDED DEBT
               (as defined in Section 1.1)

               (a)    All  indebtedness  of  Borrower and its
                      Consolidated  Subsidiaries for borrowed
                      money                                          $
                                                                      ----------
               (b)    Plus  indebtedness  of Parent  and  its
                      Consolidated  Subsidiaries constituting
                      an  obligation  to   pay  the  deferred
                      purchase price of  property or services
                      (other  than  customary  payment  terms
                      taken  in the  ordinary  course of  the
                      business)                                      $
                                                                      ----------
               (c)    Plus  indebtedness of  Parent  and  its
                      Consolidated Subsidiaries  evidenced by
                      a  bond,  debenture,  note  or  similar
                      instrument                                     $
                                                                      ----------
               (d)    Plus principal obligations under leases
                      capitalized  in  accordance  with  GAAP
                      under which either Parent or any of its
                      Consolidated Subsidiaries is the lessee        $
                                                                      ----------
               (e)    Plus indebtedness or obligations of the
                      type described in clauses (a), (b), (c)
                      or (d) of the definition of Debt, which
                      are secured  by a Lien on  any property
                      owned   by   Parent   or  any   of  its
                      Consolidated  Subsidiaries,  whether or
                      not  such  indebtedness or  obligations
                      have  been assumed by  Parent or any of
                      its Consolidated Subsidiaries  (limited
                      however to the lesser of (1) the amount
                      of its  liability  or (2)  the value of
                      such property)  (excluding  Debt of the
                      type  referred to  in clause (e) of the
                      definition of "Debt)                           $
                                                                      ----------
               (f)    Plus  the  undischarged  balance of any
                      production payment created by Parent or
                      any of its Consolidated Subsidiaries or
                      for the creation of which Parent or its
                      Consolidated  Subsidiaries  directly or
                      indirectly received payment.                   $
                                                                      ----------
                      CONSOLIDATED TOTAL FUNDED DEBT                 $
                                                                      ==========

                                  Exhibit J - 4


<PAGE>




       (ii)    TOTAL CAPITALIZATION (as defined in Section 1.1)

               (a)    Consolidated  Total  Funded  Debt of the
                      Parent and its Consolidated Subsidiaries
                      (See B(i) above)                               $
                                                                      ----------
               (b)    Plus  Consolidated  shareholders' equity
                      of  the  Parent  and  its   Consolidated
                      Subsidiaries                                   $
                                                                      ----------
               TOTAL CAPITALIZATION                                  $
                                                                      ==========
       CONSOLIDATED TOTAL FUNDED DEBT TO TOTAL
       CAPITALIZATION((i)/(ii))                                                %
                                                                      ==========
               Maximum ratio                                              60   %
                                                                      ==========


                                  Exhibit J - 5


<PAGE>



                                   Exhibit K-1

                           Form of Election to Convert

                                          ,
                                 --------   -----

NationsBank of Texas, N.A.
901 Main Street, 14th Floor
Dallas, Texas  75202

Attn:  Ruth De la Garza

         Re:  Conversion of Restricted Subsidiary

Gentlemen:

         Reference is made to (i) that certain Credit  Facility  Agreement dated
as of August  7, 1997 by and  among  Borrower, NationsBank  of Texas,  N.A.,  as
Administrative  Agent, CIBC Inc., as Documentation  Agent, Morgan Guaranty Trust
Company of New York,  as  Documentation  Agent,  The Chase  Manhattan  Bank,  as
Syndication  Agent,  the Co-Agents  party thereto,  and the Lenders from time to
time parties  thereto (the  "Primary  Credit  Agreement")  and (ii) that certain
Credit  Facility  Agreement dated as of August  7, 1997 by and  among  Borrower,
NationsBank of Texas, N.A., as Administrative Agent, CIBC Inc., as Documentation
Agent,  Morgan Guaranty Trust Company of New York, as  Documentation  Agent, The
Chase Manhattan Bank, as Syndication Agent, the Co-Agents party thereto, and the
Lenders from time to time parties  thereto (the "364 Day Credit  Agreement" and,
together with the Primary Credit Agreement, the "Credit Agreements").  Terms not
defined  herein  which are  defined in the Credit  Agreement  shall have for the
purposes hereof the meanings provided therein.

         The Borrower  hereby elects,  pursuant and subject to Section 5.2(i) of
the Credit  Agreements,  to  convert,  effective  as of               ,        ,
[name of Restricted Subsidiary], a [jurisdiction]  [corporation]  [partnership],
("Subject  Subsidiary"),   from  a  Restricted  Subsidiary  to  an  Unrestricted
Subsidiary.  The  Borrower  hereby  certifies  that  all  requirements  for  the
conversion of the Subject Subsidiary to an Unrestricted Subsidiary, as specified
in the Credit Agreements,  have been and will be met, both as of the date hereof
and  after  giving  effect  to such  conversion.  After  giving  effect  to such
conversion,  no Default will exist. The Borrower hereby agrees that the election
to  convert   contained   herein  shall  not  be  effective  if  the   foregoing
certifications are not true and correct in all respects as of the date hereof or
are not true and correct in all respects as of the date of such conversion. This
election to convert shall not affect any  obligation  of the Borrower  under the
Credit Agreements or under any Note under any Credit Agreement.


                                 Exhibit K-1 - 1


<PAGE>



         This  instrument  shall be construed in accordance with and governed by
the laws of the State of Texas.

                                     PIONEER NATURAL RESOURCES USA, INC.


                                     By:
                                     Name:
                                     Title:

         Receipt  of the above  Election to Convert  is hereby  acknowledged  on
               ,         .
- ---------------  --------

                                     NATIONSBANK OF TEXAS, N.A., as
                                     Administrative Agent


                                     By:
                                     Name:
                                     Title:



                                 Exhibit K-1 - 2


<PAGE>



                                   Exhibit K-2

                                 Form of Release

         This Release is delivered to [name of  subsidiary]  in connection  with
(i) the Primary  Facility  pursuant  to Section  5.2(i) of that  certain  Credit
Facility Agreement dated as of August 7, 1997 by and among Borrower, NationsBank
of Texas,  N.A., as  Administrative  Agent,  CIBC Inc., as Documentation  Agent,
Morgan  Guaranty Trust Company of New York, as  Documentation  Agent,  The Chase
Manhattan  Bank, as Syndication  Agent,  the Co-Agents  party  thereto,  and the
Lenders from time to time parties thereto (the "Primary Credit Agreement"),  and
(ii) the 364 Day  Facility  pursuant to Section  5.2(i) of that  certain  Credit
Facility Agreement dated as of August 7, 1997 by and among Borrower, NationsBank
of Texas,  N.A., as  Administrative  Agent,  CIBC Inc., as Documentation  Agent,
Morgan  Guaranty Trust Company of New York, as  Documentation  Agent,  The Chase
Manhattan  Bank, as Syndication  Agent,  the Co-Agents  party  thereto,  and the
Lenders from time to time parties  thereto (the "364 Day Credit  Agreement" and,
together with the Primary Credit Agreement,  the "Credit  Agreements").  Defined
terms used in this Release shall be used with the same meanings set forth in the
Credit Agreements.

         Pursuant  to the  election to convert in the form of Exhibit K-1 to the
Credit Agreements  delivered to Administrative  Agent on           , 19    , the
Borrower has notified  the  Lenders  that  it  has  converted
[Name of Subsidiary] from a Restricted Subsidiary to an Unrestricted Subsidiary.
Subject  to  the  accuracy  of  the  information  contained  in  such  notice of
conversion, the undersigned Managing Agents and Lenders hereby release
                 [Name of former Restricted  Subsidiary] from its obligations as
Guarantor under its  Guaranty dated as of          , 199  , as from time to time
amended,  modified and supplemented,  other than obligations if any, pursuant to
Section      thereof.

         This Release may be separately  executed in any number of  counterparts
and by different parties hereto on separate counterparts,  each of which when so
executed shall be deemed to constitute one and the same release.

              [Add signature lines for Lenders and Managing Agents]

Agreed and Accepted
this     day of           , 199   :
    -----      -----------     ---



- -------------------------------
[Name of Restricted Subsidiary]

By:
Name:
Title:


                                 Exhibit K-2 - 1


<PAGE>



                                    Exhibit L

                          Form of Agreement to be Bound

                                         , 199
                                 -------      --

PIONEER NATURAL RESOURCES USA, INC.
303 West Wall, Suite 101
Midland, Texas 79701
Attention:  Curt F. Kamradt

NationsBank of Texas, N.A.
901 Main Street, 14th Floor
Dallas, Texas  75202
Attention:  Ruth De la Garza

NationsBank of Texas, N.A.
303 West Wall Street
Midland, Texas 79701
Attn:  Frank K. Stowers

CIBC Inc.
2 Houston Center
909 Fannin Street, Suite 1200
Houston, Texas  77010

Attention:  Paul Jordan

       Re:  Assignment to                   of                      the Loans of
                          ------------------  ----------------------
                          - Primary Facility
            --------------

Gentlemen:

         We refer to Section  8.8(a) of that certain Credit  Facility  Agreement
dated as of August 7, 1997 by and among Borrower, NationsBank of Texas, N.A., as
Administrative  Agent, CIBC Inc., as Documentation  Agent, Morgan Guaranty Trust
Company of New York,  as  Documentation  Agent,  The Chase  Manhattan  Bank,  as
Syndication  Agent,  the Co-Agents  party thereto,  and the Lenders from time to
time parties thereto (the "Credit  Agreement").  Unless otherwise defined herein
or the context otherwise requires,  terms used herein have the meanings provided
in the Credit Agreement.

         This Credit  Agreement to be Bound  constitutes  notice to each of you,
pursuant  to  Section  8.8(a) of the  Credit  Agreement,  of the  assignment  to
                     ("Assignee") of (i) an undivided           (the "Designated
Percentage"), ($              ), of the Loans, LC Obligations and Commitments of
[NAME OF LENDER] ("Assignor") in effect on the date hereof.

                                  Exhibit L - 1


<PAGE>



         After giving effect to the foregoing  assignment,  the Loan  Commitment
and  Percentage  Share of each of the  Assignor  and  Assignee  is as set  forth
beneath the signatures of each such Person below.

         Assignee hereby  acknowledges  and confirms that it has received a copy
of the Credit Agreement and the exhibits  related thereto,  together with a copy
of all documents which were required to be delivered under the Credit  Agreement
as a  condition  to the  making  of the  Loans  and  issuing  Letters  of Credit
thereunder.  Assignee  further confirms and agrees that in becoming a Lender and
in making its Loans and  participating  in  Letters  of Credit  under the Credit
Agreement,  such  actions  have  and  will  be  made  without  recourse  to,  or
representation  or warranty by,  Assignor,  except as expressly set forth in the
Assignment and Assumption of even date herewith between Assignor and Assignee.

         Assignor and Assignee  hereby agree that  [Assignor/Assignee]  will pay
the  processing  fee  referred to in Section  8.8(a) of the Credit  Agreement to
Administrative Agent upon the delivery thereof. It is understood and agreed that
all  fees  accrued  under  the  Credit  Agreement  to the  date  hereof  are for
Assignor's  account  and those  accruing  from and after the date hereof are for
Assignee's account to the extent specified in the second paragraph hereof.  Each
of Assignor and  Assignee  hereby agree that if it receives any amount under the
Credit  Agreement  which is for the account of the other,  it shall  receive and
hold the same for the  account of the other and shall  promptly  pay the same to
the other.

         The  assignment  shall  become  effective  upon (i) the  receipt by the
Borrower  and  Administrative  Agent  of this  document,  (ii)  the  receipt  by
Administrative  Agent  of  the  processing  fee  referred  to in  the  preceding
paragraph,  and (iii) in accordance with Section 8.8(a) of the Credit Agreement,
the consent of the Borrower and Administrative Agent.

         Upon the effective date of this Credit Agreement the Assignee:

         (a) shall have all rights and  benefits of a "Lender"  under the Credit
Agreement as if it were an original signatory thereto to the extent specified in
the second paragraph hereof; and

         (b)  agrees  to be bound by the  terms  and  conditions  of each of the
Credit  Agreement,  and be  obligated  thereunder,  and hereby makes each of the
representations and warranties and  acknowledgments  contained in such documents
as if it were an original signatory thereto.

         Upon  the  effective  date of this  Agreement,  the  Assignor  shall be
released  from its  obligations  under the Credit  Agreement  and the other Loan
Documents to the extent specified in the second paragraph.


                                  Exhibit L - 2


<PAGE>



         Assignee  hereby  advises  each of you of the  following  matters  with
respect to the assigned Loans:

         (A)    Addresses for Notice:
                                     ------------------
                Telephone:
                Telecopy:
                Institution Name:
                Attention:

         (B)    Payment Instructions:

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

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

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

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

         This Credit  Agreement  may be executed  by  Assignor  and  Assignee in
separate  counterparts,  each of which when so executed and  delivered  shall be
deemed to be an original and all of which taken  together  shall  constitute one
and the same agreement.

         The  execution  below by the  Borrower and  Administrative  Agent shall
evidence  their consent to this  Agreement in accordance  with Section 8.8(a) of
the Credit Agreement.


                                  Exhibit L - 3


<PAGE>




         IN WITNESS  WHEREOF,  each of the undersigned has caused this Agreement
to be executed by its  official,  officer or agent  thereunto  duly  authorized,
effective as of                 ,         .


- ------------------------                     --------------------------
As Assignor                                  As Assignee

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

Percentage Share:       %                    Percentage Share:        %
Loan Commitment:                             Loan Commitment:



APPROVED:

PIONEER NATURAL RESOURCES USA, INC.          NATIONSBANK OF TEXAS, N.A.


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



                                  Exhibit L - 4


<PAGE>



                                    Exhibit M

                                    [Form of]

                                PLEDGE AGREEMENT

          THIS PLEDGE AGREEMENT (this "Pledge Agreement"), dated as of         ,
199  , made by                 , a             corporation ("Pledgor"), in favor
of  NATIONSBANK  OF  TEXAS,   N.A.,  as  collateral  agent  (together  with  any
successor(s)  thereto in such  capacity,  the  "Collateral  Agent")  for each of
Lender Parties (as defined below).

                              W I T N E S S E T H:

          WHEREAS,  pursuant to that certain Credit Facility  Agreement dated as
of August  7, 1997 by and among Pioneer Natural Resources  USA, Inc., a Delaware
corporation  ("Borrower"),  NationsBank of Texas, N.A., as Administrative Agent,
CIBC Inc., as Documentation Agent, Morgan Guaranty Trust Company of New York, as
Documentation  Agent,  The Chase  Manhattan  Bank,  as  Syndication  Agent,  the
Co-Agents  party  thereto,  and the Lenders  from time to time  parties  thereto
(together   with   all   amendments,   supplements,   restatements   and   other
modifications, if any, thereafter made thereto, the "Primary Credit Agreement"),
the  Lenders  have  extended  Commitments  (as  defined  in the  Primary  Credit
Agreement) to make Loans to Borrower and to issue or  participate  in Letters of
Credit on behalf of Borrower; and

          WHEREAS,  pursuant to that certain Credit Facility  Agreement dated as
of  August  7, 1997  by and  among  Borrower, NationsBank  of  Texas,  N.A.,  as
Administrative  Agent, CIBC Inc., as Documentation  Agent, Morgan Guaranty Trust
Company of New York,  as  Documentation  Agent,  The Chase  Manhattan  Bank,  as
Syndication  Agent,  the Co-Agents  party thereto,  and the Lenders from time to
time parties thereto  (together with all amendments,  supplements,  restatements
and other  modifications,  if any, thereafter made thereto,  the "364 Day Credit
Agreement",  and  together  with  the  Primary  Credit  Agreement,  the  "Credit
Agreements"),  the Lenders have extended  Commitments (as defined in the 364 Day
Credit Agreement) to make Loans to Borrower; and

          WHEREAS,  pursuant  to the Credit Agreements,  Pledgor is  required to
execute and deliver this Pledge Agreement; and

          WHEREAS,  Pledgor  has  duly  authorized the  execution,  delivery and
performance of this Pledge Agreement; and

          WHEREAS,  it is in the  best  interests  of  Pledgor to  execute  this
Pledge Agreement inasmuch as Pledgor will derive substantial direct and indirect
benefits from the Loans made from time to time to Borrower and Letters of Credit
issued on behalf of Borrower pursuant to the Credit Agreements;

                                  Exhibit M - 1


<PAGE>



          NOW  THEREFORE,  for good and  valuable  consideration  the receipt of
which is hereby  acknowledged,  and in order to induce the Lenders to make Loans
(including the initial Loans) to Borrower  pursuant to the Credit Agreements and
for the Issuing  Bank to issue  Letters of Credit on behalf of Borrower  and for
the Lenders to acquire  participations in such Letters of Credit pursuant to the
Primary Credit Agreement,  Pledgor agrees, for the benefit of each Lender Party,
as follows:

                                    ARTICLE I
                                   DEFINITIONS

         SECTION 1.1   Certain  Terms.  The  following  terms  (whether  or  not
underscored)  when  used in this  Pledge Agreement,  including  its preamble and
recitals,  shall have  the following  meanings  (such definitions to  be equally
applicable to the singular and plural forms thereof):

         "Administrative Agent" is defined in the first recital.

         "Borrower" is defined in the first recital.

         "Collateral" is defined in Section 2.1.

         "Collateral Agent" is defined in the preamble.

         "Commitments"  means  "Commitments"  as defined in the  Primary  Credit
Agreement and "Commitments" as defined in the 364 Day Credit Agreement.

         "Credit Agreements" is defined in the second recital.

         "Debtor" is defined in Section 2.1(a)(i).

         "Distributions"  means  all  stock  dividends,  liquidating  dividends,
shares of stock  resulting  from (or in  connection  with the exercise of) stock
splits,  reclassifications,  warrants,  options,  non-cash  dividends,  mergers,
consolidations,  and all other  distributions  (whether similar or dissimilar to
the  foregoing)  on or with  respect to any  Pledged  Shares or other  shares of
capital stock or security entitlements  constituting  Collateral,  but shall not
include Dividends.

         "Dividends" means cash dividends and cash distributions with respect to
any Pledged Shares made in the ordinary course of business and not a liquidating
dividend.

         "Lender  Party"  means,  as the context may  require,  any Lender,  any
Issuing Bank or any Agent and each of its respective successors, transferees and
assigns under the Credit Agreements.

         "Lenders"  means  "Lenders" as defined in the Primary Credit  Agreement
and "Lenders" as defined in the 364 Day Credit Agreement.


                                  Exhibit M - 2


<PAGE>



         "Loan  Documents"  means  "Loan  Documents"  as defined in the  Primary
Credit  Agreement  and  "Loan  Documents"  as  defined  in the  364  Day  Credit
Agreement.

         "1994  Amendments" means the 1994 Amendments to Articles 8 and 9 of the
Uniform  Commercial  Code  promulgated  by the  American Law  Institute  and the
National Conference of Commissions for Uniform State Laws.

         "Notes"  means "Notes" as defined in the Primary  Credit  Agreement and
"Notes" as defined in the 364 Day Credit Agreement.

         "Obligations"  means  "Obligations"  as defined in the  Primary  Credit
Agreement and "Obligations" as defined in the 364 Day Credit Agreement.

         "Pledge Agreement" is defined in the preamble.

         "Pledged  Share  Issuer"  means each Person  identified in Attachment 1
hereto as the issuer of the Pledged Shares identified  opposite the name of such
Person.

         "Pledged Shares" means all shares of capital stock of any Pledged Share
Issuer which are  delivered by Pledgor to  Collateral  Agent  hereunder  and all
other pledged shares of capital stock from time to time  hereafter  delivered by
Pledgor  to  Collateral  Agent for the  purpose  of  pledge  under  this  Pledge
Agreement or any other Loan Document, and all proceeds of any of the foregoing.

         "Pledgor" is defined in the preamble.

         "Primary Credit Agreement" is defined in the first recital.

         "Secured Obligations" is defined in Section 2.2.

         "Securities Act" is defined in Section 6.2.

         "364 Day Credit Agreement" is defined in the second recital.

         "U.C.C." means the Uniform Commercial Code as in effect in the State of
Texas.

         SECTION 1.2   Primary Credit Agreement  Definitions.  Unless  otherwise
defined  herein or the  context  otherwise  requires,  terms used in this Pledge
Agreement,  including its preamble and recitals,  have the meanings  provided in
the Primary Credit Agreement.

         SECTION 1.3   U.C.C.  Definitions.   Unless otherwise defined herein or
the context  otherwise requires,  terms for which  meanings are  provided in the
U.C.C. are used in this Pledge Agreement,  including its  preamble and recitals,
with such meanings.

                                  Exhibit M - 3


<PAGE>



                                   ARTICLE II
                                     PLEDGE

         SECTION 2.1   Grant  of  Security  Interest.  Pledgor  hereby  pledges,
hypothecates, assigns, charges, mortgages, delivers, and transfers to Collateral
Agent,  for its benefit and the ratable benefit of each of Lender  Parties,  and
hereby grants to Collateral  Agent,  for its benefit and the ratable  benefit of
Lender Parties, a continuing security interest in, all of the following property
(the "Collateral"):

     (a)  65% of the issued  and  outstanding  shares of  capital  stock of each
          Pledged Share Issuer identified in Item B of Attachment 1 hereto;

     (b)  65% of all other Pledged Shares issued from time to time;

     (c)  all Dividends, Distributions,  interest, and other payments and rights
          with respect to any Pledged Shares; and

     (d)  all proceeds of any of the foregoing.

         SECTION 2.2   Security for Obligations.  This Pledge Agreement secures:

     (a)  the payment in full of all  Obligations  of Borrower  now or hereafter
          existing  under the Credit Agreements,  the Notes, the LC Applications
          and each other Loan  Document  to which  Borrower  is or may  become a
          party,  whether  for principal,  interest,  costs, fees, expenses,  or
          otherwise,  and all obligations of Pledgor and each other Obligor  now
          or hereafter existing  under this Pledge Agreement and each other Loan
          Document to which it is or may become a party

     (b)  the  payment  and  performance  of  any  and  all  present  or  future
          obligations  of  Borrower  according  to the terms of any  present  or
          future rate swap, rate cap, rate floor, rate collar, currency exchange
          transaction,  forward  rate  agreement,  or  other  exchange  or  rate
          protection   agreements  or  any  option  with  respect  to  any  such
          transaction now existing or hereafter entered into between Borrower or
          any of its  Subsidiaries  and  one or  more of the  Lenders  or  their
          Affiliates ("interest rate swap agreement";

     (c)  the  payment  and  performance  of  any  and  all  present  or  future
          obligations  of  Borrower  according  to the terms of any  present  or
          future crude oil, natural gas or other  hydrocarbons  swap agreements,
          crude oil, natural gas or other  hydrocarbons  cap, crude oil, natural
          gas or other  hydrocarbons  floor,  crude  oil,  natural  gas or other
          hydrocarbons  collar,  crude oil,  natural  gas or other  hydrocarbons
          exchange  transaction,   forward  crude  oil,  natural  gas  or  other
          hydrocarbons agreement, or other exchange or crude oil, natural gas or
          other hydrocarbons protection agreements or any option with respect to
          any such  transaction  now existing or hereafter  entered into between
          Borrower or any of its  Subsidiaries and one or more of the Lenders or
          their Affiliates; and

                                  Exhibit M - 4


<PAGE>



     (d)  all renewals,  rearrangements,  increases,  extensions for any period,
          substitutions,  modification, amendments or supplements in whole or in
          part of any of the above loan documents or obligations

(all such obligations of Borrower and Pledgor being the "Secured Obligations").

         SECTION 2.3   Delivery  of  Pledged  Shares.  (a) All  certificates  or
instruments  representing  or evidencing any  Collateral,  including all Pledged
Shares  shall be  delivered  to and held by or on  behalf  of  Collateral  Agent
pursuant hereto,  shall be in suitable form for transfer by delivery,  and shall
be  accompanied  by all necessary  indorsements  or  instruments  of transfer or
assignment, duly executed in blank.

         (b)
                 (i)   To  the   extent   any  of  the   Collateral  constitutes
         "uncertificated securities" (as defined in Section  8-102(a)(18) of the
         U.C.C. or Section 8-102 of the Uniform Commercial Code as in  effect in
         any  jurisdiction  that has not  adopted the  1994  Amendments) and the
         issuer  of  which  is  organized in a jurisdiction,  or has  selected a
         jurisdiction  (in  circumstances  permitted by  Section 8-110(d) of the
         U.C.C.), that has not enacted the 1994 Amendments,  Pledgor shall cause
         the issuer thereof to acknowledge to Collateral Agent the  registration
         on the  books of such issuer of the pledge and security interest hereby
         created  in the  manner  required  by  Section  8-408(d) of the Uniform
         Commercial Code of its jurisdiction of organization.

                  (ii)  To  the  extent  any  of  the   Collateral   constitutes
         "uncertificated  securities" (as defined in Section 8-102(a)(18) of the
         U.C.C.) and the issuer of which is organized in a jurisdiction,  or has
         selected a jurisdiction (in circumstances permitted by Section 8-110(d)
         of the U.C.C.),  that has enacted the 1994  Amendments,  Pledgor  shall
         cause  the  issuer  thereof  to  acknowledge  to  Collateral  Agent the
         registration  on the books of such  issuer of the pledge  and  security
         interest  hereby created in the manner required by Section 8- 301(1)(b)
         of the U.C.C.

         (c)
                  (i)  To  the  extent  any  of  the  Collateral  constitutes  a
         "security entitlement"  or a  "securities  account" (as such  terms are
         defined  in  Sections  8-102(a)(17) and  8-501,  respectively,  of  the
         U.C.C.)  and  the  jurisdiction  of  the  securities  intermediary  (as
         described  in  Section  8-110(e)  of  the U.C.C.)  against  which  such
         securities  entitlement  is  established  or at  which such  securities
         account is maintained  is not a jurisdiction  that has adopted the 1994
         Amendments,  Pledgor shall cause such Collateral  to be transferred  to
         Collateral Agent pursuant to Section 8-313(1) of the Uniform Commercial
         Code as  in effect  in such  jurisdiction  in a  manner satisfactory to
         Collateral Agent.


                                  Exhibit M - 5


<PAGE>



                  (ii)  To  the  extent  any  of the  Collateral  constitutes  a
         "security  entitlement"  or a  "securities  account" (as such terms are
         defined  in  Sections  8-102(a)(17)  and  8-501,  respectively,  of the
         U.C.C.)  and  the  jurisdiction  of  the  securities  intermediary  (as
         described  in  Section  8-110(e)  of the  U.C.C.)  against  which  such
         securities  entitlement  is  established  or at which  such  securities
         account is  maintained  is a  jurisdiction  that has  adopted  the 1994
         Amendments,  Pledgor shall cause to be delivered to Collateral Agent an
         agreement,  in form and substance  satisfactory  to  Collateral  Agent,
         executed  by  such  securities  intermediary  whereby  such  securities
         intermediary  agrees (i) that it will  comply with  entitlement  orders
         originated by Collateral  Agent without further consent by Pledgor with
         respect to all such Collateral (it being understood that such agreement
         may provide that at all times when such securities intermediary has not
         been  notified  that  a  Default  is  in  existence,   the   securities
         intermediary  may comply with entitlement  orders of Pledgor),  (ii) to
         subordinate  any  security  interest  it may  have  in and to all  such
         Collateral  to the security  interest of  Collateral  Agent therein and
         (iii)  that it will not agree with any  Person  other  than  Collateral
         Agent in any manner  that would grant such  Person  "control"  over any
         such Collateral.

         SECTION 2.4   Dividends  on  Pledged  Shares.  In  the  event  that any
Dividend is to be paid on any Pledged Share or securities  entitlement at a time
when (x) no Default has occurred and is continuing,  and no (y) Event of Default
has occurred and is continuing, such Dividend or payment may be paid directly to
Pledgor. If any such Default or Event of Default has occurred and is continuing,
then any such Dividend or payment shall be paid directly to Collateral Agent.

         SECTION 2.5   Continuing Security Interest;  Transfer of Note.   This
Pledge Agreement shall create a  continuing  security interest in the Collateral
and shall
                  (a) remain  in full force  and effect until payment in full of
         all Secured Obligations and the termination of all Commitments,

                  (b) be binding upon  Pledgor and  its successors,  transferees
         and assigns, and

                  (c) inure, together with the rights and remedies of Collateral
         Agent  hereunder,  to the  benefit of  Collateral  Agent and each other
         Lender Party.

Without  limiting the  foregoing  clause (c), any Lender may assign or otherwise
transfer  (in whole or in part) any Note or Loan held by it to any other  Person
or entity,  and such other Person or entity shall  thereupon  become vested with
all the rights and benefits in respect  thereof granted to such Lender under any
Loan Document (including this Pledge Agreement) or otherwise,  subject, however,
to any contrary provisions in such assignment or transfer, and to the provisions
of  Section  8.8  of the  Credit  Agreements  and  Article  VII  of  the  Credit
Agreements.  Upon  the  payment  in  full  of all  Secured  Obligations  and the

                                  Exhibit M - 6


<PAGE>



termination  of all  Commitments,  the security  interest  granted  herein shall
terminate  and all rights to the  Collateral  shall revert to Pledgor.  Upon any
such termination,  Collateral Agent will, at Pledgor's sole expense,  deliver to
Pledgor,  without  any  representations,  warranties  or  recourse  of any  kind
whatsoever,  all  certificates  and  instruments  representing or evidencing all
Pledged  Shares,  together with all other  Collateral  held by Collateral  Agent
hereunder,  and execute and deliver to Pledgor such  documents as Pledgor  shall
reasonably request to evidence such termination.

         SECTION 2.6   Security  Interest  Absolute.   All rights  of Collateral
Agent and the security interests granted to Collateral Agent hereunder,  and all
obligations  of  Pledgor   hereunder,   shall  be  absolute  and  unconditional,
irrespective  of (a) any  lack  of  validity  or  enforceability  of the  Credit
Agreements,  any Note or any other Loan Document,  (b) the failure of any Lender
Party or any holder of any Note, (i) to assert any claim or demand or to enforce
any right or remedy  against  Borrower,  any other  Obligor or any other  Person
under the provisions of the Credit Agreements, any Note, any other Loan Document
or  otherwise,  or (ii) to  exercise  any  right or  remedy  against  any  other
guarantor of, or collateral  securing,  any Obligations of Borrower or any other
Obligor,  (c) any change in the time,  manner or place of payment  of, or in any
other term of, all or any of the Obligations or any other extension,  compromise
or  renewal  of any  Obligation  of  Borrower  or any  other  Obligor,  (d)  any
reduction, limitation,  impairment or termination of any Obligations of Borrower
or any other  Obligor for any reason,  including  any claim of waiver,  release,
surrender,  alteration or  compromise,  and shall not be subject to (and Pledgor
hereby  waives any right to or claim of) any  defense  or setoff,  counterclaim,
recoupment or termination  whatsoever by reason of the  invalidity,  illegality,
nongenuineness,  irregularity,  compromise,  unenforceability  of,  or any other
event or occurrence affecting, any Obligations of Borrower, any other Obligor or
otherwise,  (e) any amendment to, rescission,  waiver, or other modification of,
or any consent to departure from, any of the terms of the Credit Agreements, any
Note or any other Loan Document, (f) any addition,  exchange, release, surrender
or non-perfection of any collateral (including the Collateral), or any amendment
to or waiver or release of or  addition  to or  consent  to  departure  from any
guaranty, for any of the Obligations, or (g) any other circumstances which might
otherwise  constitute a defense available to, or a legal or equitable  discharge
of, Borrower, any other Obligor, any surety or any guarantor.

         SECTION 2.7   Waiver of Subrogation.  Pledgor hereby irrevocably waives
any claim or other rights which it may now or hereafter acquire against Borrower
or any other  Obligor that arise from the  existence,  payment,  performance  or
enforcement of Pledgor's  obligations  under this Pledge  Agreement or any other
Loan Document, including any right of subrogation,  reimbursement,  exoneration,
or  indemnification,  any right to  participate in any claim or remedy of Lender
Parties against Borrower or any other Obligor or any collateral which Collateral
Agent now has or hereafter acquires,  whether or not such claim, remedy or right
arises in equity, or under contract,  statute or common law, including the right

                                  Exhibit M - 7


<PAGE>



to take or receive from Borrower or any other  Obligor,  directly or indirectly,
in cash or other property or by set-off or in any manner, payment or security on
account of such claim or other rights. If any amount shall be paid to Pledgor in
violation of the preceding sentence and the Obligations shall not have been paid
in cash in full and the Commitments have not been terminated,  such amount shall
be deemed to have been paid to  Pledgor  for the  benefit  of, and held in trust
for,  Lender  Parties,  and  shall  forthwith  be paid to Lender  Parties  to be
credited and applied upon the Obligations, whether matured or unmatured. Pledgor
acknowledges  that it  will  receive  direct  and  indirect  benefits  from  the
financing arrangements contemplated by the Credit Agreements and that the waiver
set forth in this Section is knowingly made in contemplation of such benefits.

                                   ARTICLE III
                         REPRESENTATIONS AND WARRANTIES

         SECTION 3.1   Warranties, etc.   Pledgor  represents and  warrants unto
each  Lender  Party,  as at the  date  of each  pledge  and  delivery  hereunder
(including  each pledge and delivery of Pledged Shares) by Pledgor to Collateral
Agent of any Collateral, as set forth in this Article.

         SECTION 3.1.1  Representations  in Credit  Agreement.   Pledgor  hereby
incorporates by reference,  mutatis  mutandi,  each of the  representations  and
warranties  made in  Sections  4.1(a),  (b),  (c),  (d)  and  (e) of the  Credit
Agreement.

         SECTION 3.1.2  Ownership,  No  Liens,  etc.   Pledgor  is the legal and
beneficial  owner of, and has good title to (and has full right and authority to
pledge  and  assign)  such  Collateral,  free and clear of all  liens,  security
interests,  options,  or  other  charges  or  encumbrances,  except  any lien or
security interest granted pursuant hereto in favor of Collateral Agent.

         SECTION 3.1.3  Valid  Security  Interest.      The  delivery   of  such
Collateral to Collateral Agent is effective to create a valid, perfected,  first
priority security interest in such Collateral and all proceeds thereof, securing
the Secured Obligations.  No filing or other action will be necessary to perfect
or protect such security interest.

         SECTION 3.1.4  As to Pledged Shares.  In the case of any Pledged Shares
constituting such Collateral, all of such Pledged Shares are duly authorized and
validly issued, fully paid, and non-assessable, and constitute 65% of the issued
and  outstanding  shares of capital  stock of each Pledged Share Issuer owned by
Pledgor  set  forth  across  from  the  name of such  Pledged  Share  Issuer  on
Attachment 1 hereto. Pledgor has no Restricted Subsidiary other than the Pledged
Share Issuers.

         SECTION 3.1.5   Authorization, Approval, etc. Except as contemplated by
Section 2.3(b) and (c), no authorization,  approval,  or other action by, and no
notice to or filing with, any  governmental  authority,  regulatory  body or any
other Person is required  either (a) for the pledge by Pledgor of any Collateral

                                  Exhibit M - 8


<PAGE>



pursuant  to  this  Pledge  Agreement  or  for  the  execution,   delivery,  and
performance  of this Pledge  Agreement  by Pledgor,  or (b) for the  exercise by
Collateral Agent of the rights provided for in this Pledge Agreement, or, except
with  respect to any Pledged  Shares,  as may be required in  connection  with a
disposition  of such Pledged  Shares by laws  affecting the offering and sale of
securities generally, the remedies in respect of the Collateral pursuant to this
Pledge Agreement.

                                   ARTICLE IV
                                    COVENANTS

         SECTION 4.1   Protect Collateral; Further Assurances, etc. Pledgor will
not  sell,  assign,  transfer,  pledge,  or  encumber  in any other  manner  the
Collateral (except in favor of Collateral Agent hereunder). Pledgor will warrant
and defend the right and title herein  granted unto  Collateral  Agent in and to
the Collateral (and all right, title and interest represented by the Collateral)
against the claims and demands of all Persons whomsoever. Pledgor agrees that at
any  time,  and from time to time,  at the  expense  of  Pledgor,  Pledgor  will
promptly  execute  and deliver  all  further  instruments,  and take all further
action,  that may be  necessary  or  desirable,  or that  Collateral  Agent  may
reasonably  request,  in order to perfect  and  protect  any  security  interest
granted or  purported  to be  granted  hereby or to enable  Collateral  Agent to
exercise  and  enforce its rights and  remedies  hereunder  with  respect to any
Collateral.  Pledgor shall provide  Collateral  Agent with copies of all written
information received from any securities intermediary of Pledgor with respect to
any Collateral.

         SECTION 4.2   Stock Powers, etc. Pledgor agrees that all Pledged Shares
(and all other shares of capital  stock  constituting  Collateral)  delivered by
Pledgor  pursuant to this Pledge  Agreement will be accompanied by duly indorsed
undated blank stock powers, in substantially the form of Attachment 2 hereto, or
other equivalent instruments of transfer acceptable to Collateral Agent. Pledgor
will, from time to time upon the request of Collateral  Agent,  promptly deliver
to Collateral Agent such stock powers,  in substantially  the form of Attachment
2,  instruments  and similar  documents,  satisfactory  in form and substance to
Collateral  Agent,  with  respect  to the  Collateral  as  Collateral  Agent may
reasonably request and  will,  from time to time  upon the request of Collateral
Agent  after the  occurrence  of any Event of  Default,  promptly  transfer  any
Pledged Shares or other shares of common stock constituting  Collateral into the
name of any nominee designated by Collateral Agent.

         SECTION 4.3   Continuous  Pledge.  Subject to Section 2.4,  the Pledgor
will, at all times, keep pledged to Collateral Agent pursuant hereto all Pledged
Shares,  all other  shares of capital  stock  constituting  Collateral,  and all
securities,   security   entitlements  and  securities   accounts   constituting
Collateral and all other Collateral and other securities,  instruments, security
entitlements,  financial assets, investment property,  proceeds, and rights from
time  to  time  received  by or  distributable  to  Pledgor  in  respect  of any
Collateral.

                                  Exhibit M - 9


<PAGE>



         SECTION 4.4   Dividends,  etc.  Pledgor  agrees after  any acceleration
under the Credit Agreements or Default occurring on the Maturity Date,  promptly
upon receipt  thereof by Pledgor and without any request  therefor by Collateral
Agent,  to deliver  (properly  endorsed  where  required  hereby or requested by
Collateral  Agent)  to  Collateral  Agent  all  Dividends,   Distributions,  all
interest,  all  principal,  all other cash  payments,  and all  proceeds  of the
Collateral,  all of  which  shall  be held by  Collateral  Agent  as  additional
Collateral for use in accordance with Section 6.3. All Dividends, Distributions,
interest,  principal, cash payments, and proceeds which may at any time and from
time to time be held by Pledgor but which  Pledgor is then  obligated to deliver
to Collateral  Agent,  shall,  until  delivery to Collateral  Agent,  be held by
Pledgor  separate  and apart  from its other  property  in trust for  Collateral
Agent.

         SECTION 4.5   Additional Undertakings.  Pledgor  will not,  without the
prior written consent of Collateral  Agent,  take or omit to take any action the
taking or the omission of which would result in any  impairment or alteration of
the security interest in the Pledged Shares.

                                    ARTICLE V
                                COLLATERAL AGENT

         SECTION 5.1   Agent   Appointed   Attorney-in-Fact.    Pledgor   hereby
irrevocably  appoints  Collateral  Agent Pledgor's  attorney-in-fact,  with full
authority  in the place  and  stead of  Pledgor  and in the name of  Pledgor  or
otherwise,  from  time to time in  Collateral  Agent's  discretion,  to take any
action  and to execute  any  writing or paper  which  Collateral  Agent may deem
necessary  or  advisable to  accomplish  the purposes of this Pledge  Agreement,
including  without  limitation:  (a) after the occurrence and  continuance of an
Event of Default, to ask, demand, collect, sue for, recover, compromise, receive
and give  acquittance  and receipts for moneys due and to become due under or in
respect of any of the  Collateral;  (b) to  receive,  endorse,  and  collect any
drafts or other  instruments,  documents and chattel paper,  in connection  with
clause (a) above; and (c) to file any claims or take any action or institute any
proceedings  which  Collateral  Agent may deem  necessary or  desirable  for the
collection  of any of the  Collateral  or  otherwise  to  enforce  the rights of
Collateral  Agent  with  respect  to  any  of  the  Collateral.  Pledgor  hereby
acknowledges, consents and agrees that the power of attorney granted pursuant to
this Section is irrevocable and coupled with an interest.

         SECTION 5.2   Agent  May  Perform.  If  Pledgor  fails to  perform  any
agreement  contained  herein,  Collateral  Agent may  itself  perform,  or cause
performance of, such agreement, and the expenses of Collateral Agent incurred in
connection therewith shall be payable by Pledgor pursuant to Section 6.4.

         SECTION 5.3   Agent  Has  No  Duty.  The powers conferred on Collateral
Agent hereunder are solely to protect its interest (on behalf of Lender Parties)
in the  Collateral  and shall not  impose  any duty on it to  exercise  any such
powers.  Except for reasonable  care of any Collateral in its possession and the
accounting for moneys actually received by it hereunder,  Collateral Agent shall

                                 Exhibit M - 10


<PAGE>



have no duty as to any  Collateral or  responsibility  for (a)  ascertaining  or
taking action with respect to calls, conversions, exchanges, maturities, tenders
or other matters relative to any Pledged Shares, whether or not Collateral Agent
has or is deemed to have  knowledge of such matters or (b) taking any  necessary
steps to preserve rights against prior parties or any other rights pertaining to
any Collateral.

         SECTION 5.4   Reasonable Care. Collateral Agent is required to exercise
reasonable care in the custody and  preservation of any of the Collateral in its
possession;  provided,  however,  Collateral  Agent  shall  be  deemed  to  have
exercised  reasonable  care  in  the  custody  and  preservation  of  any of the
Collateral,  if it takes  such  action for that  purpose  as Pledgor  reasonably
requests  in writing  at times  other  than upon the  occurrence  and during the
continuance of any Event of Default,  but failure of Collateral  Agent to comply
with any such  request  at any time  shall not in itself be deemed a failure  to
exercise reasonable care.

                                   ARTICLE VI
                                    REMEDIES

         SECTION 6.1   Certain Remedies.  On or after any acceleration under the
Credit Agreements or Default occurring on the Maturity Date:

                  (a)   Collateral   Agent  may   exercise  in  respect  of  the
         Collateral,  in  addition to other  rights and  remedies  provided  for
         herein or  otherwise  available to it, all the rights and remedies of a
         secured  party on default  under the U.C.C.  (whether or not the U.C.C.
         applies to the affected Collateral) and also may, without notice except
         as specified  below,  sell the Collateral or any part thereof in one or
         more parcels at public or private sale,  at any of  Collateral  Agent's
         offices or elsewhere,  for cash, on credit or for future delivery,  and
         upon  such  other  terms as  Collateral  Agent  may  deem  commercially
         reasonable.  Pledgor agrees that, to the extent notice of sale shall be
         required by law, at least ten days' prior notice to Pledgor of the time
         and place of any public sale or the time after  which any private  sale
         is to be made  shall  constitute  reasonable  notification.  Collateral
         Agent shall not be obligated to make any sale of Collateral  regardless
         of notice of sale having been given.  Collateral  Agent may adjourn any
         public or private  sale from time to time by  announcement  at the time
         and place fixed therefor, and such sale may, without further notice, be
         made at the time and place to which it was so adjourned.

                  (b)  Collateral  Agent may (i) transfer all or any part of the
         Collateral  into the name of Collateral  Agent or its nominee,  with or
         without  disclosing  that such  Collateral  is  subject to the lien and
         security interest  hereunder,  (ii) notify the parties obligated on any
         of the Collateral to make payment to Collateral Agent of any amount due
         or to become due  thereunder,  (iii)  enforce  collection of any of the
         Collateral by suit or otherwise, and surrender, release or exchange all
         or any part  thereof,  or  compromise or extend or renew for any period

                                 Exhibit M - 11


<PAGE>



         (whether or not longer than the original period) any obligations of any
         nature of any party with  respect  thereto,  (iv)  endorse  any checks,
         drafts,  or other writings in Pledgor's name to allow collection of the
         Collateral,  (v) take  control of any proceeds of the  Collateral,  and
         (vi)  execute (in the name,  place and stead of Pledgor)  endorsements,
         assignments,  stock  powers  and other  instruments  of  conveyance  or
         transfer with respect to all or any of the Collateral.

         SECTION 6.2   Compliance with Restrictions.  Pledgor agrees that in any
sale of any of the  Collateral  whenever an Event of Default shall have occurred
and be  continuing,  Collateral  Agent is hereby  authorized  to comply with any
limitation or restriction  in connection  with such sale as it may be advised by
counsel  is  necessary  in  order to  avoid  any  violation  of  applicable  law
(including  compliance  with  such  procedures  as may  restrict  the  number of
prospective  bidders and purchasers,  require that such prospective  bidders and
purchasers have certain  qualifications,  and restrict such prospective  bidders
and  purchasers to persons who will represent and agree that they are purchasing
for their own account for investment and not with a view to the  distribution or
resale of such  Collateral),  or in order to obtain any required approval of the
sale or of the purchaser by any governmental  regulatory  authority or official,
and Pledgor  further agrees that such  compliance  shall not result in such sale
being  considered or deemed not to have been made in a  commercially  reasonable
manner,  nor shall Collateral Agent be liable nor accountable to Pledgor for any
discount  allowed  by the  reason of the fact that  such  Collateral  is sold in
compliance with any such limitation or restriction.

         SECTION 6.3   Application of Proceeds.  All cash  proceeds  received by
Collateral  Agent  in  respect  of  any  sale  of,  collection  from,  or  other
realization  upon, all or any part of the  Collateral  may, in the discretion of
Collateral Agent, be held by Collateral Agent as additional  collateral security
for, or then or at any time  thereafter be applied (after payment of any amounts
payable to Collateral  Agent pursuant to Sections 6.4 of the Credit  Agreements)
in whole or in part by Collateral Agent against,  all or any part of the Secured
Obligations in such order as Collateral Agent shall elect.

         Any surplus of such cash or cash proceeds held by Collateral  Agent and
remaining  after  payment  in  full  of all  the  Secured  Obligations,  and the
termination of all  Commitments,  shall be paid over to Pledgor or to whomsoever
may be lawfully entitled to receive such surplus.

         SECTION 6.4   Indemnity and Expenses.  Pledgor  hereby indemnifies  and
holds harmless  Collateral  Agent in accordance  with Sections 6.4 of the Credit
Agreements.


                                 Exhibit M - 12



<PAGE>



                                   ARTICLE VII
                            MISCELLANEOUS PROVISIONS

         SECTION 7.1   Loan Document.  This Pledge Agreement is a Loan  Document
executed pursuant to the Credit Agreement and shall (unless otherwise  expressly
indicated herein) be construed,  administered and applied in accordance with the
terms and provisions thereof.

         SECTION 7.2   Amendments. No amendment to or waiver of any provision of
this Pledge Agreement,  nor consent to any departure by Pledgor herefrom,  shall
in any event be effective  unless the same shall be in writing and signed by the
Administrative Agent, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.

         SECTION 7.3   Protection of Collateral.  Collateral Agent may from time
to time,  at its  option,  perform any act which  Pledgor  agrees  hereunder  to
perform and which Pledgor shall fail to perform after being requested in writing
so to perform after the  occurrence  and  continuance of an Event of Default and
Collateral  Agent may from time to time take any other action  which  Collateral
Agent reasonably deems necessary for the maintenance, preservation or protection
of any of the Collateral or of its security interest therein.

         SECTION 7.4   Obligations  Not  Affected.   The obligations  of Pledgor
under this Pledge Agreement shall remain in full force and effect without regard
to, and shall not be impaired or affected by:

                  (a) any amendment or modification or addition or supplement to
         the  Credit  Agreements,  any  Note,  any  other  Loan  Documents,  any
         instrument  delivered in  connection  therewith,  or any  assignment or
         transfer thereof;

                  (b) any exercise,  non-exercise, or waiver by Collateral Agent
         or any Lender of any right,  remedy,  power,  or privilege  under or in
         respect  of, or any  release of any  guaranty  or  collateral  provided
         pursuant to, this Pledge Agreement,  the Credit  Agreements,  Pledgor's
         Guaranty or any other Loan Document;

                  (c) any  waiver,  consent,  extension,  indulgence,  or  other
         action or  inaction  in respect of this  Pledge  Agreement,  the Credit
         Agreements,  Pledgor's  Guaranty  or any  other  Loan  Document  or any
         assignment or transfer of any thereof; or

                  (d) any bankruptcy, insolvency,  reorganization,  arrangement,
         readjustment,  composition, liquidation, or the like, of Pledgor or any
         other Person,  whether or not Pledgor shall have notice or knowledge of
         any of the foregoing.

                                 Exhibit M - 13


<PAGE>



         SECTION 7.5   Notices.  All notices,  requests,  consents,  demands and
other communications required or permitted hereunder shall be in writing, unless
otherwise specifically provided herein and shall be deemed sufficiently given or
furnished  if  delivered  by personal  delivery,  by telecopy  (with  telephonic
confirmation of transmission,  by delivery service with proof of delivery, or by
registered or certified United States mail,  postage prepaid,  to Pledgor at the
address of Pledgor specified on the signature pages hereto and to each Agent and
each Lender at their  addresses  specified on the signature  pages to the Credit
Agreements  (unless changed by similar notice in writing given by the particular
Person whose address is to be changed).  Any such notice or communication  shall
be deemed to have been given: (a) in the case of personal delivery  service,  as
of the date of first attempted  delivery at the address provided herein;  (b) in
the  case  of  telecopy,  upon  receipt;  or (c) in the  case of  registered  or
certified  United  States mail,  three days after  deposit in the mail,  postage
prepaid.

         SECTION 7.6   No Waiver; Remedies. No failure on the part of any Lender
Party or any  holder  of a Note,  an LC  Application,  or an  interest  in an LC
Obligation to exercise,  and no delay in exercising,  any right  hereunder shall
operate as a waiver  thereof;  nor shall any single or partial  exercise  of any
right hereunder  preclude any other or further  exercise thereof or the exercise
of any  other  right.  The  remedies  herein  provided  are  cumulative  and not
exclusive of any remedies provided by law.

         SECTION 7.7   Section Captions.  Section  captions  used in this Pledge
Agreement  are for  convenience  of  reference  only,  and shall not  affect the
construction of this Pledge Agreement.

         SECTION 7.8   Severability.  Wherever  possible each  provision of this
Pledge  Agreement  shall be  interpreted  in such manner as to be effective  and
valid under  applicable law, but if any provision of this Pledge Agreement shall
be prohibited by or invalid under such law, such provision  shall be ineffective
to the  extent of such  prohibition  or  invalidity,  without  invalidating  the
remainder  of  such  provision  or  the  remaining  provisions  of  this  Pledge
Agreement.

         SECTION 7.9   Governing  Law, Entire  Agreement.  THIS PLEDGE AGREEMENT
SHALL BE DEEMED A CONTRACT  AND  INSTRUMENT  MADE UNDER THE LAWS OF THE STATE OF
TEXAS AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF THE STATE OF TEXAS AND THE LAWS OF THE UNITED STATES OF AMERICA, WITHOUT
REGARD TO PRINCIPLES  OF CONFLICTS OF LAW.  THIS PLEDGE  AGREEMENT AND THE OTHER
LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH
RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN
OR ORAL, WITH RESPECT THERETO.

         SECTION 7.10  Waiver of Jury Trial. EACH OF PLEDGOR, AGENTS AND LENDERS
HEREBY (a)  IRREVOCABLY WAIVES,  THE MAXIMUM EXTENT  NOT PROHIBITED BY LAW,  ANY
RIGHT IT MAY HAVE  TO A TRIAL  BY JURY IN  RESPECT OF ANY LITIGATION DIRECTLY OR

                                 Exhibit M - 14


<PAGE>



INDIRECTLY AT ANY TIME ARISING OUT OF, UNDER OR IN  CONNECTION  WITH THIS PLEDGE
AGREEMENT  OR ANY  TRANSACTION  CONTEMPLATED  THEREBY OR  ASSOCIATED  THEREWITH,
BEFORE OR AFTER  MATURITY;  (b)  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; (c) 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 (d)
ACKNOWLEDGES  THAT IT HAS BEEN  INDUCED  TO ENTER INTO AND  ACCEPT  THIS  PLEDGE
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.

         SECTION 7.11   Forum  Selection  and  Consent  to  Jurisdiction.    ANY
LITIGATION  BASED HEREON,  OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
PLEDGE AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING,  STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF LENDER PARTIES OR
PLEDGOR SHALL BE BROUGHT AND  MAINTAINED  EXCLUSIVELY IN THE COURTS OF THE STATE
OF TEXAS OR IN THE UNITED  STATES  DISTRICT  COURT FOR THE NORTHERN  DISTRICT OF
TEXAS; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY PROPERTY
MAY BE BROUGHT,  AT COLLATERAL AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION
WHERE SUCH  PROPERTY MAY BE FOUND.  PLEDGOR  HEREBY  EXPRESSLY  AND  IRREVOCABLY
SUBMITS TO THE  JURISDICTION  OF THE COURTS OF THE STATE OF TEXAS AND THE UNITED
STATES DISTRICT COURT FOR THE NORTHERN  DISTRICT OF TEXAS FOR THE PURPOSE OF ANY
SUCH  LITIGATION  AS SET FORTH ABOVE AND  IRREVOCABLY  AGREES TO BE BOUND BY ANY
JUDGMENT  RENDERED THEREBY IN CONNECTION WITH SUCH  LITIGATION.  PLEDGOR FURTHER
IRREVOCABLY  CONSENTS  TO THE  SERVICE OF PROCESS BY  REGISTERED  MAIL,  POSTAGE
PREPAID,  OR BY  PERSONAL  SERVICE  WITHIN OR  WITHOUT  THE STATE OF TEXAS.  FOR
PURPOSES OF ANY ACTION OR  PROCEEDING  INSTITUTED IN THE FEDERAL OR STATE COURTS
OF TEXAS, THE UNDERSIGNED HEREBY IRREVOCABLY DESIGNATES BORROWER WITH OFFICES ON
THE DATE  HEREOF AT 303 WEST WALL  STREET,  SUITE 101,  MIDLAND,  TEXAS 79701 TO
RECEIVE  FOR AND ON BEHALF  OF THE  UNDERSIGNED  SERVICE  OF  PROCESS  IN TEXAS.
PLEDGOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY LAW, ANY  OBJECTION  WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF
VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY
CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE

                                 Exhibit M - 15


<PAGE>



EXTENT THAT PLEDGOR HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM  JURISDICTION
OF ANY COURT OR FROM ANY LEGAL  PROCESS  (WHETHER  THROUGH  SERVICE  OR  NOTICE,
ATTACHMENT PRIOR TO JUDGMENT,  ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH
RESPECT  TO ITSELF OR ITS  PROPERTY,  PLEDGOR  HEREBY  IRREVOCABLY  WAIVES  SUCH
IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS PLEDGE AGREEMENT.

         THIS WRITTEN PLEDGE  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]








                                 Exhibit M - 16


<PAGE>



         IN  WITNESS  WHEREOF,  the  parties  hereto  have  caused  this  Pledge
Agreement  to be duly  executed  and  delivered  by  their  respective  officers
thereunto duly authorized as of the day and year first above written.

                                                         [Pledgor]
                                               -----------------------------


                                           By:
                                           Name:
                                           Title:

                                           Address:    303 West Wall
                                                       Suite 101
                                                       P. O. Box 3178
                                                       Midland, Texas  79701

                                           Attention:  Curt Kamradt
                                           Telephone:  (915) 571-3171
                                           Telecopy:   (915) 571-5696


                                           with a copy to:

                                           Garrett Smith
                                           1400 Williams Square West
                                           5205 North O'Connor Blvd.
                                           Irving, Texas  75039

                                           Telephone:  (972) 402-7013
                                           Telecopy:   (972) 402-7028




                                 Exhibit M - 17


<PAGE>




                                            NATIONSBANK OF TEXAS, N.A.


                                            By
                                                -----------------------------
                                            Name:        Frank K. Stowers
                                            Title:       Vice President

                                            Address:     303 W. Wall
                                                         P. O. Box 1599
                                                         Midland, Texas 79701

                                            Attention:   Frank K. Stowers




                                 Exhibit M - 18


<PAGE>




                                 ACKNOWLEDGMENT

         The undersigned  hereby agrees and consents to the terms and provisions
of the foregoing Pledge Agreement,  including,  without limitation,  Section 2.3
and Article IV of the Pledge Agreement.  The undersigned hereby acknowledges the
registration  on its books of the pledge and  security  interest  created by the
Pledge Agreement in the manner required by Section 8-301(1)(b) of the U.C.C. and
that undersigned will not permit any sale, transfer, pledge or other encumbrance
of the Pledged Interests without the prior written consent of the Agent.


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

                                       By:
                                      Name:
                                     Title:


                                 Exhibit M - 19


<PAGE>



                                                               ATTACHMENT 1
                                                                    to
                                                             Pledge Agreement


Pledged Shares

Pledged Share Issuer

                                       Outstanding                  Shares
                                         Shares                   Delivered
                                       -----------                ---------


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








                                 Exhibit M - 20


<PAGE>



                                                                ATTACHMENT 2
                                                                     to
                                                              Pledge Agreement



                                   STOCK POWER

         FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto                                                             (             )
     -----------------------------------------------------------  -------------
shares of common stock in                          , a 
                          -------------------------    -------------------------
corporation, represented by the attached Certificate No.         herewith and do
                                                         -------
hereby irrecovably constitute and appoint
                                          --------------------------------------
attorney to transfer the said stock on the books of                         with
                                                    -----------------------
full power of substitution in the premises.


         DATED
               ----------------
                                                          [PLEDGOR]
                                                   ------------------------

                                                   By:
                                                   Name:
                                                   Title:

IN PRESENCE OF

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



                                 Exhibit M - 21


<PAGE>



                                    Exhibit N

                        Request for Competitive Bid Offer

                                                                   ,
                                                        -----------  -------

To:         The Lenders  party to the  Credit Agreement,  NationsBank  of Texas,
            N.A., as agent (the "Administrative Agent")

From:                                 (the "Borrower")
            --------------------------

Re:         Primary  Facility - Credit Facility Agreement dated as of August  7,
            1997  by  and  among  Borrower,   NationsBank  of  Texas,  N.A.,  as
            Administrative  Agent,  CIBC Inc., as  Documentation  Agent,  Morgan
            Guaranty  Trust Company of New York,  as  Documentation  Agent,  The
            Chase  Manhattan  Bank, as Syndication  Agent,  the Co-Agents  party
            thereto,  and the Lenders  from time to time  parties  thereto  (the
            "Credit Agreement")

         Pursuant to Section  2.22 of the Credit  Agreement,  we hereby  request
Competitive Bid Offers for the following proposed Competitive Bid Advance(s):

Borrowing Date:                  ,
                -----------------  ----

Principal Amount (1)                          Requested Maturity Date (2)

$



         Upon acceptance by the undersigned of any or all of the Competitive Bid
Offers tendered by Lenders in response to this request, the undersigned shall be
deemed  to affirm as of the  borrowing  date  thereof  the  representations  and
warranties  made by the  Obligors  in the  Credit  Agreement  and the other Loan
Documents to the extent  specified in Section 3.2 thereof  (except to the extent
such representations and warranties relate solely to an earlier date).

- --------
(1)  Amount must be at least $10,000,000 and an integral multiple of $1,000,000.
(2)  At least 15 and up to 360 days.

                                  Exhibit N - 1


<PAGE>



         Capitalized terms used herein have the meanings assigned to them in the
Credit Agreement.

                                              PIONEER NATURAL RESOURCES
                                              USA, INC.


                                              By:
                                              Name:
                                              Title:






                                  Exhibit N - 2


<PAGE>




                                    Exhibit O

                              Competitive Bid Offer

                                                                        ,
                                                             -----------  -----
To:
         -------------------------
         Attn:
               -------------------

Re:      Primary Facility - Competitive Bid Offer to Pioneer Natural Resources
         USA, Inc. (the "Borrower")

         In response  to the Borrower's  Request for Competitive Bid Offer dated
           , 199   , we hereby make the following Competitive Bid Offer pursuant
to Section 2.22  of the  Credit Agreement  hereinafter  referred to  and on  the
following terms:

1.       Quoting Lender:
2.       Person to contact at Lender:
3.       Borrowing Date:             ,      (1)
                         ------------  -----
4.       We hereby  offer to  make  Competitive Bid Advance(s)  in the following
         principal amounts,  for the  following  periods and  at  the  following
         rates:

Principal                         Maturity                        Competitive
Amount (2)                        Date (3)                        Bid Rate (4)
- ----------                        --------                        ------------

$






- --------
1  As specified in the related Request for Competitive Bid Offer.
2  Principal  amount  bid for  each maturity  date may  not exceed the principal
   amount requested.   Bids must be made for at least $10,000,000 or an integral
   multiple of $1,000,000 in excess thereof.
3  At least 15 and  up to  360 days,  as specified  in the  related  Request for
   Competitive Bid Offer.
4  Specify rate of interest per annum (rounded to the nearest 1/10,000 of 1%).

                                  Exhibit O - 1


<PAGE>



       We understand and agree that the offer(s) set forth above, subject to the
satisfaction  of the  applicable  conditions  set forth in that  certain  Credit
Facility Agreement dated as of August 7, 1997 by and among Borrower, NationsBank
of Texas,  N.A., as  Administrative  Agent,  CIBC Inc., as Documentation  Agent,
Morgan  Guaranty Trust Company of New York, as  Documentation  Agent,  The Chase
Manhattan  Bank, as Syndication  Agent,  the Co-Agents  party  thereto,  and the
Lenders from time to time parties thereto (the "Credit Agreement"),  irrevocably
obligates us to make the  Competitive  Bid Advance(s) for which any offer(s) are
accepted,  in whole or in part.  Capitalized terms used herein and not otherwise
defined herein shall have their meanings as defined in the Credit Agreement.

                                       Very truly yours,

                                       [NAME OF BANK]



Dated:               ,
       --------------  ------
                                       By:
                                           ------------------------------
                                                 Authorized Officer





                                  Exhibit O - 2


<PAGE>



                                    Exhibit P

                                 Bid Acceptance

                                                                   ,
                                                          ---------  ----

To:    [Name of Lender]

Re:    Primary Facility - Request for Competitive Bid Offer from Pioneer Natural
       Resources USA, Inc. (the "Borrower")

        Pursuant to that certain Credit Facility Agreement dated as of August 7,
1997 by and among Borrower, NationsBank of Texas, N.A., as Administrative Agent,
CIBC Inc., as Documentation Agent, Morgan Guaranty Trust Company of New York, as
Documentation  Agent,  The Chase  Manhattan  Bank,  as  Syndication  Agent,  the
Co-Agents party thereto,  and the Lenders from time to time parties thereto (the
"Credit  Agreement"),  we accept your  Competitive  Bid Offer for the  following
proposed  Competitive Bid Advance(s) and reject any Competitive Bid Offer to the
Competitive Bid Borrower not described below:

Borrowing Date:                ,
                ---------------  ------

Principal Amount        Maturity Date                     Competitive Bid Rate
- ----------------        -------------                     --------------------
$



         Capitalized terms used herein have the meanings assigned to them in the
Credit Agreement.

                                             PIONEER NATURAL RESOURCES
                                             USA, INC.

                                             By:
                                                 --------------------------
                                                     Authorized Officer




                                  Exhibit P - 1


<PAGE>



                                   Schedule 1

              Schedule of Lenders' Commitments and Percentage Share


Schedule 1 has been  omitted  from this filing as (i) it is not  material  to an
investment decision and (ii) the information that it contains has been disclosed
elsewhere  if  disclosure  of such  information  is  required.  Pioneer  Natural
Resources  Company  agrees  to  furnish  supplementally  a copy  of any  omitted
schedule to the Securities and Exchange Commission upon request.






                                 Schedule 1 - 1


<PAGE>



                                   Schedule 2

                               Disclosure Schedule

Schedule 2 has been  omitted  from this filing as (i) it is not  material  to an
investment decision and (ii) the information that it contains has been disclosed
elsewhere  if  disclosure  of such  information  is  required.  Pioneer  Natural
Resources  Company  agrees  to  furnish  supplementally  a copy  of any  omitted
schedule to the Securities and Exchange Commission upon request.








                                 Schedule 2 - 1



<PAGE>



                                   Schedule 3

                       Schedule of Restricted Subsidiaries

Schedule 3 has been  omitted  from this filing as (i) it is not  material  to an
investment decision and (ii) the information that it contains has been disclosed
elsewhere  if  disclosure  of such  information  is  required.  Pioneer  Natural
Resources  Company  agrees  to  furnish  supplementally  a copy  of any  omitted
schedule to the Securities and Exchange Commission upon request.






                                 Schedule 3 - 1


<PAGE>



                                   Schedule 4

                              Schedule of Insurance



Schedule 4 has been  omitted  from this filing as (i) it is not  material  to an
investment decision and (ii) the information that it contains has been disclosed
elsewhere  if  disclosure  of such  information  is  required.  Pioneer  Natural
Resources  Company  agrees  to  furnish  supplementally  a copy  of any  omitted
schedule to the Securities and Exchange Commission upon request.









                                 Schedule 4 - 1


<PAGE>



                                   Schedule 5

                        Schedule of Security Instruments


Schedule 5 has been  omitted  from this filing as (i) it is not  material  to an
investment decision and (ii) the information that it contains has been disclosed
elsewhere  if  disclosure  of such  information  is  required.  Pioneer  Natural
Resources  Company  agrees  to  furnish  supplementally  a copy  of any  omitted
schedule to the Securities and Exchange Commission upon request.





                                 Schedule 5 - 1


<PAGE>



                                   Schedule 6

                          Continuing Letters of Credit


Schedule 6 has been  omitted  from this filing as (i) it is not  material  to an
investment decision and (ii) the information that it contains has been disclosed
elsewhere  if  disclosure  of such  information  is  required.  Pioneer  Natural
Resources  Company  agrees  to  furnish  supplementally  a copy  of any  omitted
schedule to the Securities and Exchange Commission upon request.






                                 Schedule 6 - 1


<PAGE>






                                                                  EXHIBIT 10.2
                               [364 DAY FACILITY]




                            CREDIT FACILITY AGREEMENT


                      PIONEER NATURAL RESOURCES USA, INC.,
                                  as Borrower,

                                       and

                           NATIONSBANK OF TEXAS, N.A.,
                            as Administrative Agent,

                                       and

                                   CIBC INC.,
                             as Documentation Agent,

                                       and

                   MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
                             as Documentation Agent,

                                       and

                            THE CHASE MANHATTAN BANK,
                              as Syndication Agent,

                         THE CO-AGENTS SIGNATORY HERETO,

                                       and

                       THE OTHER LENDERS SIGNATORY HERETO


as of August 7, 1997                                              $300,000,000






<PAGE>



                                TABLE OF CONTENTS

                                                                           Page

ARTICLE 1             DEFINITIONS AND REFERENCES...........................  1
      Section 1.1     Defined Terms........................................  1
      Section 1.2     Exhibits and Schedules............................... 17
      Section 1.3     Amendment of Defined Instruments..................... 17
      Section 1.4     References and Titles................................ 18
      Section 1.5     Calculations and Determinations...................... 18

ARTICLE 2             LOANS................................................ 18
      Section 2.1     Making the Loans..................................... 18
      Section 2.2     Requests for Revolving Loan Advances................. 19
      Section 2.3     Rate Elections....................................... 20
      Section 2.4     Swing Line Borrowings................................ 21
      Section 2.5     Procedure for Swing Line Advances.................... 22
      Section 2.6     Swing Line Advances.................................. 24
      Section 2.7     Facility Fee......................................... 25
      Section 2.8     Managing Agents' Fees................................ 25
      Section 2.9     Termination and Reduction of Commitments............. 25
      Section 2.10    Optional Prepayments................................. 26
      Section 2.11    Payments to Lenders.................................. 26
      Section 2.12    Extension of Maturity Date and of Commitments........ 27
      Section 2.13    [Intentionally Omitted...............................
 29
      Section 2.14    [Intentionally Omitted............................... 29
      Section 2.15    [Intentionally Omitted............................... 29
      Section 2.16    Capital Reimbursement................................ 29
      Section 2.17    Increased Cost of Eurodollar Portions................ 29
      Section 2.18    Availability......................................... 30
      Section 2.19    Funding Losses....................................... 30
      Section 2.20    Taxes................................................ 32
      Section 2.21    Make-Whole Qualifications............................ 34
      Section 2.22    Competitive Bid Advances............................. 36

ARTICLE 3             CONDITIONS PRECEDENT TO LENDING...................... 40
      Section 3.1     Initial Conditions Precedent......................... 40
      Section 3.2     Additional Conditions Precedent...................... 41

ARTICLE 4             REPRESENTATIONS AND WARRANTIES....................... 43
      Section 4.1     Borrower's Representations and Warranties............ 43
      Section 4.2     Representation by Lenders............................ 47


                                        i


<PAGE>



                                TABLE OF CONTENTS
                                   (continued)
                                                                           Page

ARTICLE 5             COVENANTS OF BORROWER................................ 47
      Section 5.1     Affirmative Covenants................................ 47
      Section 5.2     Negative Covenants................................... 51
      Section 5.3     Financial Covenants.................................. 54

ARTICLE 6             EVENTS OF DEFAULT AND REMEDIES....................... 55
      Section 6.1     Events of Default.................................... 55
      Section 6.2     Remedies............................................. 59
      Section 6.3     Annulment of Acceleration............................ 60
      Section 6.4     Indemnity............................................ 60

ARTICLE 7             AGENTS............................................... 62
      Section 7.1     Appointment and Authority............................ 62
      Section 7.2     Agent's Reliance..................................... 63
      Section 7.3     Lenders' Credit Decisions............................ 64
      Section 7.4     Indemnification...................................... 64
      Section 7.5     Rights as Lender..................................... 64
      Section 7.6     Sharing of Set-Offs and Other Payments............... 65
      Section 7.7     Investments.......................................... 65
      Section 7.8     Benefit of Article 7................................. 66
      Section 7.9     Resignation and Removal.............................. 66

ARTICLE 8             MISCELLANEOUS........................................ 67
      Section 8.1     Waivers and Amendments............................... 67
      Section 8.2     Survival of Agreements; Cumulative Nature............ 68
      Section 8.3     Notices.............................................. 68
      Section 8.4     Parties in Interest.................................. 69
      Section 8.5     Governing Law........................................ 69
      Section 8.6     Limitation on Interest............................... 69
      Section 8.7     Termination; Limited Survival........................ 71
      Section 8.8     Assignments; Participations.......................... 71
      Section 8.9     Confidentiality...................................... 73
      Section 8.10    Severability......................................... 74
      Section 8.11    Counterparts......................................... 74
      Section 8.12    WAIVER OF JURY TRIAL, PUNITIVE DAMAGES............... 74
      Section 8.13    Several Obligations.................................. 74
      Section 8.14    Nonliability of Lenders.............................. 75
      Section 8.15    Setoff............................................... 75
      Section 8.16    Release of Liens..................................... 75
      Section 8.17    Forum Selection and Consent to Jurisdiction.......... 75
      Section 8.18    Renewal, Extension or Rearrangement.................. 76
      Section 8.19    Entire Agreement..................................... 76

                                       ii


<PAGE>



                             EXHIBITS AND SCHEDULES

Exhibits:

Exhibit A-1      -    Form of Loan Note
Exhibit A-2      -    Form of Swing Line Note
Exhibit A-3      -    Form of Competitive Bid Note
Exhibit B-1      -    Form of Guaranty
Exhibit B-2      -    Form of Parent Guaranty
Exhibit C        -    Form of Request for Advance
Exhibit D        -    Form of Rate Election
Exhibit E        -    Form of Request for Swing Line Bid
Exhibit F        -    Form of Swing Line Bid
Exhibit G        -    Form of Acceptance Notice
Exhibit H        -    Form of Opinion of Parent's, Borrower's and Restricted
                      Subsidiaries' Counsel
Exhibit I        -    Organization Chart of Parent and its Subsidiaries
Exhibit J        -    Form of Designated Officer's Certificate
Exhibit K-1      -    Form of Election to Convert
Exhibit K-2      -    Form of Release
Exhibit L        -    Form of Agreement to be Bound
Exhibit M        -    Form of Pledge Agreement
Exhibit N        -    Form of Request for Competitive Bid Offer
Exhibit O        -    Form of Competitive Bid Offer
Exhibit P        -    Form of Bid Acceptance
Exhibit Q        -    Form of Certificate of Extension


Schedules:

Schedule 1       -    Schedule of Lenders' Commitments and Percentage Share
Schedule 2       -    Disclosure Schedule
Schedule 3       -    Schedule of Restricted Subsidiaries
Schedule 4       -    Schedule of Insurance
Schedule 5       -    Schedule of Security Instruments


                                       iii


<PAGE>



                            CREDIT FACILITY AGREEMENT

         THIS CREDIT  FACILITY  AGREEMENT is made as of August 7, 1997 (together
with all amendments,  renewals, extensions and other modifications, if any, from
time  to time  hereafter  made  hereto,  the  "Agreement"  or  "Credit  Facility
Agreement"),  by and among  PIONEER  NATURAL  RESOURCES  USA,  INC.,  a Delaware
corporation  and  wholly-owned  subsidiary of the Parent (the  "Borrower"),  and
NATIONSBANK  OF TEXAS,  N.A.,  CIBC INC.,  MORGAN  GUARANTY TRUST COMPANY OF NEW
YORK,  THE CHASE  MANHATTAN  BANK,  in the  capacities  herein  identified,  the
Co-Agents party hereto, and the other Lenders from time to time parties hereto.

         The parties hereto agree as follows:

                                    ARTICLE 1

                           DEFINITIONS AND REFERENCES

         Section 1.1   Defined  Terms.  As used in this  Agreement,  each of the
following  terms has the meaning given it in this Section or in the sections and
subsections referred to below:

         "Acceptance Notice" has the meaning given it in Section 2.5(f).

         "Accepting Lenders" is defined in Section 2.12(c).

         "Adjusted  Eurodollar  Rate"  means,  with  respect to each  particular
Eurodollar  Portion and the associated  Eurodollar Rate and Reserve  Percentage,
the rate per annum determined hereunder by Administrative Agent on a daily basis
pursuant to the following formula:

                   AER     =          ER      + EM
                                   ---------
                                   1.00 - RP

                   AER     =      Adjusted Eurodollar Rate
                   ER      =      Eurodollar Rate
                   RP      =      Reserve Percentage
                   EM      =      Eurodollar Margin

The Adjusted  Eurodollar  Rate shall change as and when the  associated  Reserve
Percentage and Eurodollar Margin change.

         "Administrative   Agent"  means   NationsBank   of  Texas,   N.A.,   as
Administrative Agent hereunder and its successors and assigns in such capacity.


                                        1


<PAGE>



         "Advance" means any Revolving Loan Advance,  Competitive Bid Advance or
Swing Line Advance.

         "Affiliate" means, as to any Person, each other Person that directly or
indirectly  (through  one or more  intermediaries  or  otherwise)  controls,  is
controlled by, or is under common control with, such Person.

         "Agent"  means  any of the  Managing  Agents  or the  Collateral  Agent
hereunder,  solely in such capacities and not in their respective  capacities as
Lenders.

         "Agreement"  means  this  Credit  Facility  Agreement,  as this  Credit
Facility  Agreement  may be  amended,  modified  or  restated  from time to time
hereafter.

         "Agreement  to be Bound" means an agreement to be bound entered into by
a Lender  and an  assignee  (with the  consent  of any party  whose  consent  is
required  by  Section  8.8),  and  accepted  by  the  Administrative  Agent,  in
substantially  the  form  of  Exhibit  L or  any  other  form  approved  by  the
Administrative Agent.

         "Applicable  Rating  Level"  means  the  level  set  forth  below  that
corresponds  to the  highest of ratings  issued from time to time by Moody's and
S&P, as applicable to Borrower's senior unsecured long-term debt:


                        Moody's                S&P
                  -------------------    -------------------
Level I           greater than   Baa1    greater than   BBB+
Level II                         Baa1                   BBB+
Level III                        Baa2                   BBB
Level IV                         Baa3                   BBB-
Level V              less than   Baa3       less than   BBB-

For example,  if the Moody's  rating is Baa1 and the S&P rating is BBB, Level II
shall apply.

         For purposes of the foregoing,  (i)  "greater than" means a rating more
favorable than;  "less than" means a rating less favorable than; (ii) if ratings
for  the Company's senior unsecured  long-term debt shall not  be available from
S&P or Moody's, Level V shall be deemed  applicable;  (iii) if any of the Rating
Agencies shall change its ratings nomenclature prior to the date all Obligations
have  been  paid and the  Commitments canceled,  Borrower  and the Lenders shall
negotiate  in good  faith to amend the  references  to  specific ratings in this
definition to reflect such change, and pending such amendment, if an appropriate
Applicable  Rating Level is otherwise not determinable  based upon the foregoing
grid,  the last Applicable  Rating Level  in effect at the  time of such  change
shall continue to apply. 

                                       2



<PAGE>



         "Base Rate" means the  fluctuating per annum rate of interest from time
to time in effect  equal to the higher of (a) the rate of  interest  as publicly
announced by  Administrative  Agent as its "Prime Rate" or (b) the Federal Funds
Rate plus  one-half  of one percent  (1/2 of 1%),  whether or not  Borrower  has
notice thereof.  Such rate is set by  Administrative  Agent as a general rate of
interest,  taking into  account such  factors as  Administrative  Agent may deem
appropriate,  it being understood that many of Administrative Agent's commercial
or other loans are priced in relation to such rate,  that it is not  necessarily
the lowest or best rate actually charged to any customer and that Administrative
Agent may make various  commercial or other loans at rates of interest having no
relationship to such rate. If  Administrative  Agent's Prime Rate or the Federal
Funds Rate changes after the date hereof,  the Base Rate shall be  automatically
increased or  decreased,  as the case may be,  without  prior notice to Borrower
from time to time as of the  effective  time of each  change  in  Administrative
Agent's Prime Rate or the Federal  Funds Rate.  The  Administrative  Agent shall
promptly thereafter notify Borrower of such change in the Base Rate.

         "Base Rate Portion" means that portion of the unpaid principal  balance
of a Loan which is not made up of  Eurodollar  Portions,  Swing Line Advances or
Competitive Bid Advances.

         "Bid  Acceptance"  means a Bid Acceptance  substantially in the form of
Exhibit P hereto with appropriate insertions.

         "Borrower" is defined in the Preamble hereto.

         "Business  Day"  means a day on  which  commercial  banks  are open for
business  with the  public in the State of Texas.  Any  Business  Day in any way
relating to Eurodollar  Portions (such as the day on which a Eurodollar Interest
Period  begins or ends)  must also be a day on which,  in the  reasonable,  good
faith judgment of Administrative Agent,  significant transactions in dollars are
carried out in the interbank eurocurrency market.

         "Certificate of Extension" means a certificate of Borrower, executed by
a Designated Officer and delivered to the Administrative Agent, in substantially
the form of  Exhibit  Q,  which  requests  an  extension  of the then  scheduled
Maturity Date pursuant to Section 2.12.

         "Co-Agent"  means each of  Bank of America  National  Trust and Savings
Association,  The Bank of New  York,  The  Bank of Nova  Scotia,  Royal  Bank of
Canada, Union Bank of California,  N.A., The Fuji Bank Limited - Houston Agency,
and Wells Fargo Bank. N.A., as Co-Agents,  and their  respective  successors and
assigns in such capacity.

         "Collateral  Agent" means  NationsBank  of Texas,  N.A.,  as collateral
agent under the  Security  Instruments  and its  successors  and assigns in such
capacity.

                                        3


<PAGE>



         "Commitment"  means,  with respect to each Lender,  such  Lender's Loan
Commitment.

         "Competitive Bid Advances" has the meaning given it in Section 2.22.

         "Competitive Bid Note" has the meaning given it in Section 2.22.

         "Competitive  Bid  Obligations"   means,  at  the  particular  time  in
question, the sum of all outstanding Competitive Bid Advances.

         "Competitive Bid Offer" has the meaning given it in Section 2.22.

         "Competitive Bid Rate" has the meaning given it in Section 2.22.

         "Consolidated" refers to the consolidation of any Person, in accordance
with GAAP, with its properly consolidated  Subsidiaries.  References herein to a
Person's  Consolidated  financial  statements,   financial  position,  financial
condition,  or  liabilities  refer  to the  consolidated  financial  statements,
financial position,  financial condition or liabilities,  as the case may be, of
such Person and its properly consolidated Subsidiaries.

         "Consolidated Interest Expense" is defined in Section 5.3(a).

         "Credit Facility  Agreement" means this Credit Facility  Agreement,  as
this Credit Facility Agreement may be amended, modified or restated from time to
time hereafter.

         "Debt" of any Person means, without duplication:

(a)  indebtedness of such Person for borrowed money;

(b)  indebtedness of such Person  constituting an obligation to pay the deferred
     purchase price of property or services (other than customary  payment terms
     taken in the ordinary course of such Person's business);

(c)  indebtedness of such Person evidenced by a bond, debenture, note or similar
     instrument;

(d)  principal  obligations  under leases  capitalized  in accordance  with GAAP
     under which such Person is the lessee;

(e)  indebtedness,  contingent  or  otherwise,  of such Person  with  respect to
     bankers'   acceptances   or  the  face  amount  of  letters  of  credit  or
     applications or reimbursement agreements therefor;

                                        4


<PAGE>



(f)  guaranties  of such  Person  of  indebtedness  or  obligations  of the type
     described in clauses (a), (b), (c), (d) or (e) above of any other Person or
     obligations  to  purchase  or acquire or to  otherwise  protect or insure a
     creditor against loss in respect of indebtedness or obligations of the type
     described in clauses (a),  (b),  (c), (d) or (e) above of any other Person,
     but excluding endorsements in the ordinary course of business of negotiable
     instruments in the course of collection;

(g)  indebtedness or obligations of the type described in clauses (a), (b), (c),
     (d) or (e) above, which are secured by a Lien on any property owned by such
     Person,  whether or not such  indebtedness or obligations have been assumed
     by such  Person  (limited  however  to the  lesser of (1) the amount of its
     liability or (2) the value of such property); and

(h)  the undischarged  balance of any production  payment created by such Person
     or for the creation of which such Person  directly or  indirectly  received
     payment;

provided,  however,  Debt shall not include (1) accounts payable incurred in the
ordinary course of such Person's business,  or (2) any obligations in respect of
(i) exchange,  forward,  future,  swap,  hedging or similar  agreements and (ii)
prepayments for gas or oil production or gas or oil imbalances.

         "Declining Lenders" is defined in Section 2.12(c).

         "Default"  means  any  Event  of  Default  and any  default,  event  or
condition which would,  with the giving of any requisite notices and the passage
of any requisite periods of time, constitute an Event of Default.

         "Default Rate" means, at the particular  time in question,  two percent
(2%) per annum plus the Base Rate then in effect;  provided,  that, with respect
to any Eurodollar  Portion with an Eurodollar  Interest Period  extending beyond
the date such Eurodollar  Portion becomes due and payable,  "Default Rate" shall
mean,  during such Eurodollar  Interest Period,  two percent (2%) per annum plus
the related Eurodollar Rate and plus the applicable Eurodollar Margin.

         "Designated   Officer"  means  any  Executive   Officer  or  any  other
individual  duly  elected  to and  holding  one or more of the  offices  of vice
president,   managing  director,  executive  director,  secretary  or  assistant
secretary  of an  Obligor,  or any other  Person  authorized  in  writing by any
Obligor to execute any Loan Document,  in each case designated by an Obligor and
acceptable to Required Lenders.

         "Disclosure Schedule" means (a) Schedule 2 hereto and (b) any documents
listed on such schedule and expressly  incorporated  therein by reference,  true
and correct  copies of which shall have been  delivered  to Managing  Agents and
each other Lender prior to the date hereof.  Insofar as any  representations and
warranties made herein are incorporated by reference or otherwise remade in Loan

                                        5


<PAGE>



Documents  delivered  as of a date  after the date hereof,  the term "Disclosure
Schedule"  shall in such  representations and  warranties be  deemed to refer as
well to all other documents indicated  by  Borrower to be part of the Disclosure
Schedule and which Borrower has at the particular  time in question delivered to
the Managing Agents, the Co-Agents and each other Lender and which have not been
promptly objected to in writing by or on behalf of the Required Lenders.

         "Documentation Agent" means each of CIBC Inc. and Morgan Guaranty Trust
Company of New York,  as Documentation Agents,  and  their respective successors
and assigns in such capacity.

         "EBITDAX" is defined in Section 5.3(a).

         "Effective  Date" means the date the parties hereto shall have executed
and delivered  counterparts  hereof to Administrative  Agent and  Administrative
Agent shall have notified the parties  hereto that the Effective Date shall have
occurred.

         "Environmental Law" means any federal, state, or local statute, or rule
or regulation  promulgated  thereunder,  any judicial or administrative order or
judgment to which Borrower,  or any of its  Subsidiaries is a party or which are
applicable  to Borrower or any of its  Subsidiaries  or its or their  respective
properties  (whether or not by consent),  and any  provision or condition of any
permit,  license or other  governmental  operating  authorization,  relating  to
protection  of the  environment,  persons or the public  welfare  from actual or
potential  exposure  or the  effects  of  exposure  to any  actual or  potential
release, discharge, spill or emission (whether past or present) of, or regarding
the manufacture, processing, production, gathering, transportation, importation,
use, treatment,  storage or disposal of, any chemical, raw material,  pollutant,
contaminant or toxic or hazardous substance or waste.

         "ERISA" means the Employee  Retirement  Income Security Act of 1974, as
amended from time to time,  together with all rules and regulations  promulgated
with respect thereto.

         "ERISA  Plan" means any  pension  benefit  plan  subject to Title IV of
ERISA  maintained by any Obligor or any Affiliate  thereof with respect to which
any Obligor has a fixed or contingent liability.

         "Eurodollar  Interest  Period" means,  with respect to each  particular
Eurodollar  Portion,  a period of one (1), two (2), three (3) or six (6) months,
or,  subject to  Section  2.3, a period of nine (9) or twelve  (12)  months,  as
specified in the Rate Election  applicable  thereto,  beginning on and including
the date  specified in such Rate Election  (which must be a Business  Day),  and
ending on but not  including  the same day of the  relevant  month as the day on
which it began (e.g., a period beginning on the third day of one month shall end
on but not  include  the third day of  another  month),  or if such month has no
numerically  corresponding  day, on the last  Business  Day of such  month,  and
provided that each Eurodollar Interest Period which would otherwise end on a day

                                        6


<PAGE>



which is not a  Business  Day  shall  end on the next  succeeding  Business  Day
(unless  such  next  succeeding  Business  Day is the  first  Business  Day of a
calendar month,  in which case such Eurodollar  Interest Period shall end on the
immediately  preceding  Business  Day).  No  Eurodollar  Interest  Period may be
elected for any Eurodollar  Portion which would extend past the Maturity Date of
the Loan of which the Eurodollar Portion is a part.

         "Eurodollar Margin" means, on any date, with respect to each Eurodollar
Portion of a  Revolving  Loan,  the  number of basis  points per annum set forth
below based on the Applicable Rating Level on such date:


                   Applicable                   Eurodollar
                  Rating Level                    Margin
                  ------------                  ----------
                   Level I                       20.0 b.p.
                   Level II                      22.0 b.p.
                   Level III                     25.0 b.p.
                   Level IV                      30.0 b.p.
                   Level V                       47.0 b.p.

Changes in the Eurodollar Margin will occur automatically  without prior notice.
Administrative  Agent will give notice  promptly to Borrower  and the Lenders of
changes in the Eurodollar Margin.

         "Eurodollar Portion" means the unpaid principal balance of a Loan which
Borrower designates as such in a Rate Election.

         "Eurodollar  Rate" means,  with respect to each  particular  Eurodollar
Portion  within a Tranche and with  respect to the related  Eurodollar  Interest
Period,  the rate of interest per annum (stated to the nearest  10,000ths of 1%)
determined  by  Administrative  Agent in accordance  with its customary  general
practices to be  representative of the rates (stated to the nearest 10,000ths of
1%) at  which  deposits  of  dollars  are  offered  to  Administrative  Agent at
approximately  10:00 a.m.,  Dallas,  Texas time,  two Business Days prior to the
first day of such  Eurodollar  Interest  Period by prime banks in the  interbank
eurocurrency  market  which  have  been  selected  by  Administrative  Agent  in
accordance with its customary general practices for delivery on the first day of
such  Eurodollar  Interest Period in an amount equal or comparable to the amount
of  Administrative  Agent's  Eurodollar  Portion  within such  Tranche and for a
period of time equal or  comparable  to the length of such  Eurodollar  Interest
Period. The Eurodollar Rate determined by Administrative Agent with respect to a
particular  Eurodollar  Portion  shall be fixed at such rate for the duration of
the associated  Eurodollar Interest Period.  If  Administrative  Agent is unable

                                        7


<PAGE>



so to determine the Eurodollar Rate for any Eurodollar  Portion,  Borrower shall
be deemed not to have elected such Eurodollar Portion.

         "Eurodollars" is defined in Section 2.18.

         "Event of Default" has the meaning given it in Section 6.1.

         "Executive Officer"  means any  individual duly  elected to and holding
one or more of the following  offices of Borrower:  President,  Chief  Executive
Officer,  Chief  Financial  Officer,  Executive  Vice  President  or Senior Vice
President.

         "Existing Mesa Credit  Facility"  means that certain Credit  Agreement,
dated July 2, 1996, as amended and restated  through April 15, 1997,  among Mesa
Operating,  the Lenders  therein named,  Bankers Trust  Company,  as Syndication
Agent, Societe Generale, Southwest Agency, as Documentation Agent, and The Chase
Manhattan  Bank,  as  Administrative  Agent for the Lenders,  as may be amended,
restated or modified from time to time.

         "Existing  Petroleum  Credit  Facility"  means that certain Amended and
Restated Credit Facility Agreement,  dated as of July 31, 1996, among Petroleum,
NationsBank of Texas, N.A., as Administrative Agent, CIBC Inc., as Documentation
Agent,  Bank of  America  National  Trust  and  Savings  Association,  The Chase
Manhattan  Bank,  First Union National Bank of North  Carolina,  Morgan Guaranty
Trust Company of New York and Wells Fargo Bank, N.A., each as Co-Agent,  and the
Lenders signatory thereto, as amended by that certain First Amendment to Amended
and Restated Credit Facility Agreement, dated as of May 15, 1997.

         "Facility Amount" means the aggregate amount of the Commitments  (which
amount shall initially be $300,000,000), as such amount may be reduced from time
to time pursuant to the terms of this Agreement.

         "Facility  Fee  Rate"  means,  on any date that a  facility  fee is due
pursuant to Section  2.7,  the number of basis  points per annum set forth below
based on the Applicable Rating Level on such date:


                   Applicable                  Facility Fee Rate
                  Rating Level                      Margin
                  ------------                 -----------------
                   Level I                          7.0 b.p.
                   Level II                         8.0 b.p.
                   Level III                       10.0 b.p.
                   Level IV                        12.0 b.p.
                   Level V                         18.0 b.p.


                                        8


<PAGE>



Changes in the Facility Fee Rate will occur automatically  without prior notice.
Administrative  Agent will give notice  promptly to Borrower  and the Lenders of
changes in the Facility Fee Rate.

         "Federal  Funds Rate" means,  for any day, the rate per annum  (rounded
upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average
of the rates on overnight Federal funds transactions with members of the Federal
Reserve  System  arranged by Federal  funds brokers on such day, as published by
the Federal  Reserve Bank of New York on the Business Day next  succeeding  such
day, provided that (a) if such day is not a Business Day, the Federal Funds Rate
for  such day  shall be such  rate on such  transactions  on the next  preceding
Business Day, as so published on the next succeeding Business Day, and (b) if no
such rate is so  published  on such next  succeeding  Business  Day, the Federal
Funds Rate for such day shall be the average rate quoted to Administrative Agent
on such day on such transactions as determined by Administrative Agent.

         "Fiscal  Quarter"  means a three-month  period ending on March 31, June
30, September 30 or December 31 of each year.

         "Fiscal Year" means a twelve-month period ending on December 31 of each
year.

         "Foreign Restricted  Subsidiary" means any Restricted Subsidiary of the
Borrower  organized  under the laws of any  jurisdiction  other  than the United
States or any state thereof.

         "GAAP"  means  those  generally  accepted  accounting   principles  and
practices  which are  recognized as such by the Financial  Accounting  Standards
Board (or any generally recognized  successor) and which, in the case of Parent,
Borrower and their Consolidated Subsidiaries,  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 Updated  Financial  Statements  (except for
changes   concurred   with  by  Parent's  or   Borrower's   independent   public
accountants).  If any change in any accounting principle or practice is required
by the Financial Accounting Standards Board (or any such successor) in order for
such  principle  or practice to  continue  as a  generally  accepted  accounting
principle or practice,  all reports and financial  statements required hereunder
with respect to Parent or Borrower or with respect to Parent, Borrower and their
Consolidated  Subsidiaries  must be prepared in accordance with such change.  In
the event any  changes in GAAP  materially  affect the  calculation  of Parent's
EBITDAX to Consolidated Interest Expense Ratio or Consolidated Total Funded Debt
to Total  Capitalization  as defined and  described in Sections 5.3 (a) and (b),
respectively,  Parent,  Borrower  and  Lenders  agree to enter  into good  faith
negotiations for  an agreement  to revise  such tests to take into  account such

                                        9


<PAGE>



changes in GAAP;  until Parent,  Borrower and Majority Lenders have entered into
such an  agreement,  such  financial  calculation  shall  continue to be made in
accordance with GAAP as in effect immediately preceding the date of such change.

         "Governmental Authority" means any national, state, county or municipal
government,  domestic or foreign, any agency, board, bureau, commission,  court,
department or other instrumentality of any such government, or any arbitrator in
any  case  which  has  jurisdiction  over  any of  the  Lenders,  Borrower,  its
Subsidiaries or any properties of Borrower or its Subsidiaries.

         "Guaranty" means (i) any guaranty  substantially in the form of Exhibit
B-1, with  appropriate  insertions and deletions,  executed or to be executed by
any  Restricted  Subsidiary,  as  from  time  to  time  amended,   modified,  or
supplemented, (ii) the Parent Guaranty, or (iii) any Guaranty delivered pursuant
to Section 3.1(a)(1) of the Agreement as from time to time amended, modified, or
supplemented, as the case may be.

         "Incumbent Directors" has the meaning given in Section 6.1(i).

         "Lenders"  means each party hereto  (other than  Borrower),  including,
without  limitation,  NationsBank  of Texas,  N.A.  in its  capacity as a Lender
hereunder rather than as Administrative  Agent or Collateral Agent, CIBC Inc. in
its capacity as a Lender hereunder rather than as  Documentation  Agent,  Morgan
Guaranty Trust Company of New York in its capacity as a Lender  hereunder rather
than as  Documentation  Agent,  The Chase  Manhattan  Bank in its  capacity as a
Lender  hereunder  rather than as  Syndication  Agent,  the  Co-Agents  in their
capacity as Lenders  hereunder rather than as Co-Agents,  and the successors and
assigns of each as holder of a Note.

         "Lien" means, any lien, mortgage,  security interest,  pledge, deposit,
production payment, encumbrance, rights of a vendor under any title retention or
conditional  sale  agreement  or  lease  or  other   arrangement   substantially
equivalent thereto.

         "Loan" means any of a Revolving Loan,  Competitive Bid Advance or Swing
Line Advance, as the context requires.

         "Loan Commitment"  means,  with respect to each Lender,  the amount set
forth as such Lender's Loan  Commitment  opposite the name of such Lender in the
column  headed "New  Commitment"  or otherwise  indicated on Schedule 1 attached
hereto (or, if such Lender is an assignee, the amount of its Loan Commitment set
forth in the assignment pursuant to which it became a Lender) as such amount may
be reduced or increased from time to time pursuant to any assignment to which it
is a party or otherwise pursuant to the terms of this Agreement.

         "Loan  Commitment  Period" means the period from and including the date
hereof until and including  the Maturity Date (or, if earlier,  the day on which

                                       10


<PAGE>



the Loan Notes first become due and payable in full or the Loan  Commitments are
terminated upon notice by  Administrative  Agent to Borrower pursuant to Section
6.1).

         "Loan Documents" means this Credit Facility Agreement,  as the same may
have been or may be amended from time to time  hereafter,  the Notes,  the Swing
Line Bids accepted by Borrower, the Bid Acceptances, the Acceptance Notices, the
Guaranties,  the Disclosure Schedule,  the Security Instruments,  the agreements
with the Managing  Agents  referred to in Section 2.8, any  amendments to any of
the foregoing, and all other agreements,  certificates,  notices and disclosures
at any time executed or certified by a Designated Officer of and on behalf of an
Obligor and delivered by such Obligor or such  Designated  Officer in connection
herewith  or  therewith   (exclusive   of  term  sheets,   commitment   letters,
correspondence and similar documents used in the negotiation hereof or thereof).

         "Loan Note" has the meaning given it in Section 2.1(c).

         "Majority  Lenders"  means Lenders whose  aggregate  Percentage  Shares
exceed 50%.

         "Managing Agents" means Administrative  Agent, each Documentation Agent
and the  Syndication  Agent  hereunder and their  successors and assigns in such
capacities.

         "Margin  Regulations"  means, as applicable,  Regulations G, 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 (a)
the  financial  condition of Parent,  Borrower and its  Subsidiaries  taken as a
whole, or, prior to the Effective Date of this Agreement, Mesa or Petroleum, (b)
the ability of Parent, Borrower and its Subsidiaries taken as a whole to operate
their respective businesses, (c) the ability of Borrower to meet its obligations
under the Loan  Documents on a timely basis or (d) the ability of Obligors taken
as a whole to meet their obligations under the Loan Documents on a timely basis;
provided,  however,  that a  material  adverse  effect  that  is  limited  to an
Unrestricted  Subsidiary  shall not (i) be a Material  Adverse Effect or (ii) be
included in the  determination  of whether a Material  Adverse Effect shall have
occurred or shall be expected to occur.

         "Maturity  Date" means the Original  Maturity Date, or such other later
date as may result from any extension  requested by Borrower and consented to by
the Lenders pursuant to Section 2.12.

         "Maximum Lawful Rate" has the meaning given it in Section 8.6.

         "Merger Agreement" has the meaning given it in Section 3.1(e).

         "Mergers" has the meaning given it in Section 3.1(e).

                                       11


<PAGE>



         "Mesa" means Mesa, Inc., a Delaware corporation.

         "Mesa Operating" means Mesa Operating Co., a Delaware corporation.

         "Moody's"  means Moody's  Investors  Service,  Inc.  and any  successor
thereto that is a nationally-recognized rating agency.

         "Note" means any Loan Note, Swing Line Note or Competitive Bid Note.

         "Notice Period" has the meaning given it in Section 6.4.

         "Obligations" means all Debt from time to time owing by any of Obligors
to any  Agent or any  Lender  under or  pursuant  to any of the Loan  Documents,
including,  without  limitation,  all Swing Line Obligations and Competitive Bid
Obligations. "Obligation" means any part of the Obligations.

         "Obligor"   means  Parent,   Borrower  and   each   of  the  Restricted
Subsidiaries.

         "Original Maturity Date"  means the earlier of  (a) August 5,  1998 and
(b) the date on which  the Loan  Commitment of each Lender is reduced to zero or
terminated.

         "Parent"   means   Pioneer  Natural  Resources  Company,    a  Delaware
corporation.

         "Parent Guaranty" means a guaranty substantially in the form of Exhibit
B-2, with  appropriate  insertions and deletions,  executed or to be executed by
the Parent, as from time to time amended, modified, or supplemented, as the case
may be.

         "Percentage  Share" means,  with respect to any Lender (a) when used in
Section 2.1 or 2.3,  in any  Request  for  Advance or when no Loans  (other than
Swing Line Advances or Competitive Bid Advances,  if applicable) are outstanding
hereunder, the percentage set forth opposite such Lender's name on Schedule 1 to
this Agreement, or in documents of assignment delivered pursuant to Section 8.8,
as such  percentage  may be  adjusted  from  time  to  time  by such  assignment
documents  and (b) when  used  otherwise,  the  percentage  equal to the  unpaid
principal  balance of such  Lender's  Loans,  other than Swing Line Advances and
Competitive  Bid Advances,  at the  particular  time in question  divided by the
aggregate unpaid principal balance of all Loans of all Lenders, other than Swing
Line Advances and Competitive Bid Advances, at such time.

         "Permitted  Liens"  means  (a) Liens for  taxes,  assessments  or other
governmental  charges or levies if the same shall not at the particular  time in
question be due and  delinquent  or (if  foreclosure,  distraint,  sale or other
similar  proceedings shall not have been commenced or, if commenced,  shall have
been stayed) are being  contested in good faith and by appropriate  proceedings,
and if  the subject Borrower  or Parent shall  have set aside  on its books such

                                       12


<PAGE>



reserves  (segregated to the extent required by sound  accounting  practices) as
may be required by GAAP or  otherwise  determined  by the Board of  Directors of
Borrower or Parent to be adequate with respect  thereto;  (b) Liens of carriers,
warehousemen, mechanics, laborers, materialmen, landlords, vendors, workmen, and
operators  arising  in the  ordinary  course  of  business  or  incident  to the
exploration,  development,  operations  and  maintenance  of oil,  gas and other
hydrocarbon  properties and related  facilities and assets, for sums not yet due
or being contested in good faith and by appropriate proceedings,  if Borrower or
Parent shall have set aside on its books such reserves (segregated to the extent
required by sound accounting  practices) as may be required by GAAP or otherwise
determined  by the Board of Directors of Borrower or Parent to be adequate  with
respect  thereto;  (c)  Liens  incurred  in the  ordinary  course  of  Obligors'
respective  businesses in connection  with worker's  compensation,  unemployment
insurance and other social security  legislation  (other than ERISA);  (d) Liens
incurred  in  the  ordinary  course  of  Obligors'   businesses  to  secure  the
performance  of  bids,  tenders,  trade  contracts,   leases  (statutory  only),
statutory obligations,  surety and appeal bonds, performance and return-of-money
bonds  and  other   obligations  of  a  like  nature;   (e)  Liens,   easements,
rights-of-way  restrictions,   servitudes,   permits,   conditions,   covenants,
exceptions, reservations and other similar encumbrances incurred in the ordinary
course of Obligors'  businesses or existing on property and not in the aggregate
materially  interfering with the ordinary conduct of Obligors'  businesses;  (f)
legal or equitable  encumbrances  deemed to exist by reason of negative  pledges
such as in Section 5.2 of this  Agreement or the existence of any  litigation or
other  legal  proceeding  and any  related lis  pendens  filing  (excluding  any
attachment  prior  to  judgment,  judgment  lien  or  attachment  lien in aid of
execution  on a  judgment);  (g)  rights of a common  owner of any  interest  in
property held by any Obligor as such common owner; (h) farmout,  carried working
interest, joint operating,  unitization,  royalty, overriding royalty, sales and
similar agreements  relating to the exploration or development of, or production
from, oil and gas properties  incurred in the ordinary  course of business,  (i)
Liens arising pursuant to Section 9.319 of the Texas Uniform  Commercial Code or
other  similar  statutory  provisions of other states with respect to production
purchased from others;  (j) Liens  represented by capital leases permitted under
this  Agreement;  (k) any defects,  irregularities,  or deficiencies in title to
easements,  rights-of-way or other properties which do not in the aggregate have
a  Material  Adverse  Effect;  (l)  Liens  existing  pursuant  to  the  Security
Instruments;  (m) Liens  existing in favor of Agents and Lenders  under the Loan
Documents; (n) Liens on assets of a Subsidiary of Parent or Borrower in favor of
Parent, Borrower or another Restricted Subsidiary;  (o) Liens on any property or
assets  owned or leased by Parent,  Borrower or any  Subsidiary  existing at the
time such  property or asset was acquired  (or at the time such Person  became a
Subsidiary);  provided that (1) in the case of the  acquisition of a Subsidiary,
such lien only encumbers property or assets of such Subsidiary immediately prior
to or at the time of acquisition by Borrower of such Subsidiary and (2) Borrower
and Parent  will use their  best  efforts  to  eliminate  such Liens in a timely
manner;  (p) purchase money Liens, so long as such Liens only encumber  property
or assets (including any improvements  thereon,  accessions  thereto or proceeds
thereof) acquired with the proceeds of purchase money  indebtedness  incurred in
connection with such Lien; (q) Liens on the stock or other ownership interest of

                                       13


<PAGE>



or in any Unrestricted  Subsidiary;  (r) Liens in renewal or extension of any of
the foregoing permitted Liens,  so long as limited  to the  property  or  assets
encumbered  and the amount of  indebtedness  secured  immediately  prior to such
renewal or extension;  and (s) Liens  approved in writing by or on behalf of the
Required Lenders.

         "Person"  means  an  individual,   corporation,  company,  partnership,
association,  joint stock company, trust or trustee thereof,  estate or executor
thereof,  unincorporated  organization  or joint venture,  court or governmental
unit or any agency or  subdivision  thereof,  or any other legally  recognizable
entity.

         "Petroleum"  means  Parker  &  Parsley  Petroleum  Company,  a Delaware
corporation.

         "Pledge  Agreement" means a Pledge Agreement  substantially in the form
of Exhibit M hereto,  or other form of pledge agreement or deed of mortgage,  in
form and substance  satisfactory to the Managing Agents and the subject Obligor,
pledging an interest in the capital  shares or stock of,  partnership  interests
in, or other ownership interest in, a Restricted Subsidiary as from time to time
amended, modified and supplemented.

         "Primary Facility" means that certain Credit Facility Agreement,  dated
as of August 7, 1997,  among Pioneer  Natural Resources  USA, Inc., as Borrower,
NationsBank of Texas, N.A., as Administrative Agent, CIBC Inc., as Documentation
Agent,  Morgan Guaranty Trust Company of New York, as  Documentation  Agent, The
Chase Manhattan Bank, as Syndication Agent, the Co-Agents party thereto, and the
Lenders party thereto,  as such  agreement may be amended,  modified or restated
from time to time.

         "Rate Election" has the meaning given it in Section 2.3.

         "Rating Agencies" means any or all of S&P or Moody's.

         "Regulation  D" means  Regulation  D of the Board of  Governors  of the
Federal Reserve System, as from time to time in effect.

         "Replacement Lenders" is defined in Section 2.12(c)(ii).

         "Request  for  Advance"  means a written or  telephonic  request,  or a
written confirmation, made by a Borrower which meets the requirements of Section
2.2.

         "Request for Competitive Bid Offer" has the meaning given it in Section
2.22.

         "Request  for  Swing  Line  Bid"  has the  meaning  given it in Section
2.5(a).

         "Required  Lenders"  means Lenders whose  aggregate  Percentage  Shares
exceed 66 2/3%.

                                       14


<PAGE>



         "Reserve  Percentage" means, on any day with respect to each particular
Eurodollar Portion in a Tranche, the maximum reserve requirement,  as determined
by Administrative  Agent (including without limitation any basic,  supplemental,
marginal, emergency or similar reserves),  expressed as a percentage and rounded
to the nearest  1/100th of 1%,  which would then apply to  Administrative  Agent
under  Regulation  D or  successor  regulations  issued from time to time by the
Board of Governors of the Federal  Reserve System with respect to  "Eurocurrency
liabilities"  (as such  term is  defined  in  Regulation  D) equal in  amount to
Administrative  Agent's Eurodollar Portion in such Tranche,  were Administrative
Agent to have any such  Eurocurrency  liabilities.  If such reserve  requirement
shall  change  after  the  date  hereof,   the  Reserve   Percentage   shall  be
automatically  increased or decreased,  as the case may be, from time to time as
of the effective time of each such change in such reserve requirement.

         "Restricted Payment" means any investment, contribution,  distribution,
loan or advance of cash to a Person  other than a Restricted  Subsidiary,  other
than:

(a)  prudent short-term investments;

(b)  investments,  contributions,  distributions, loans or advances disclosed in
     the  Updated  Financial  Statements  or in the  Disclosure  Schedule  or in
     disclosures  made subsequent to the date hereof and consented to in writing
     by or on behalf of the  Majority  Lenders or  otherwise  made to effect the
     Mergers  and the  subsequent  restructuring  of certain  of the  Restricted
     Subsidiaries, as described in the Merger Agreement;

(c)  investments,  contributions,  loans or advances  made by any Obligor in the
     ordinary course of its business; or

(d)  contributions made by Borrower to any of its Subsidiaries arising out of or
     in respect of Letters of Credit (as defined in the Primary Facility) issued
     under the Primary Facility and used for the general  corporate  purposes of
     such  Subsidiary  (i) so long as no amounts  have been drawn under any such
     Letter of Credit or (ii) to the extent that Borrower has been reimbursed by
     such Subsidiary for amounts drawn under any such Letter of Credit.

provided,  however,  that any  loan,  advance,  contribution  or  investment  by
Borrower or any Restricted  Subsidiary to any Restricted Subsidiary which is not
a guarantor of Borrower's obligations shall be a Restricted Payment.

         "Restricted  Subsidiary"  means each  Subsidiary  of Borrower or Parent
that,  at the  particular  time in question,  owns  directly or  indirectly  any
material  assets or any interest in any other  Restricted  Subsidiary or has not
been designated as an Unrestricted  Subsidiary.  The Restricted  Subsidiaries on
the  Effective  Date are listed on  Schedule  3  attached  hereto and each other
Subsidiary  of  Borrower  as of the  Effective  Date  shall  be an  Unrestricted
Subsidiary. A Restricted Subsidiary shall remain such (even if it no longer owns
directly  or  indirectly  any  interest  in any of the  material  assets)  until
designated as an Unrestricted Subsidiary pursuant to Section 5.2(i).

                                       15


<PAGE>



         "Revolving Loan" has the meaning given it in Section 2.1(c).

         "Revolving Loan Advance" has the meaning given it in Section 2.1(a).

         "ss.956" has the meaning given it in Section 6.1(k).

         "S&P" means Standard & Poor's  Ratings Group and any successor  thereto
that is a nationally-recognized rating agency.

         "Security   Instruments"  shall  mean  the  agreements  or  instruments
described or referred to in Schedule 5, the  Guaranties,  the Pledge  Agreement,
and any and all other  agreements or instruments  now or hereafter  executed and
delivered by any Obligor or any other Person in connection  with, or as security
for the payment or performance of, the Notes,  this Agreement or the Guaranties,
as any such  instrument  or agreement  may be  supplemented,  amended,  renewed,
extended or restated from time to time.

         "Stock  Pledge  Release  Date"  has the  meaning given to it in Section
8.16.

         "Subsidiary" means, with respect to any Person, any corporation,  which
is directly or indirectly (through one or more intermediaries)  controlled by or
with respect to which fifty percent  (50%) or more of the stock having  ordinary
voting power to elect the board of  directors  is owned by such  Person,  or any
association, partnership, joint venture, or other non-corporate business entity,
enterprise or organization which is directly or indirectly  (through one or more
intermediaries)  controlled  by, or owned one  hundred  percent  (100%) by, such
Person,  provided that associations,  joint ventures or other  relationships (a)
which are established pursuant to an operating agreement or similar agreement or
which are  partnerships  for purposes of federal income taxation only, (b) which
are  not  partnerships  (or  subject  to  the  Uniform  Partnership  Act)  under
applicable  state law, and (c) whose  businesses are limited to the exploration,
development and operation of oil, gas or mineral  properties and interests owned
directly by the parties in such  associations,  joint ventures or relationships,
shall not be deemed to be "Subsidiaries" of such Person.

         "Swing Line Advances" has the meaning given it in Section 2.4.

         "Swing Line Bid" has the meaning given it in Section 2.5(a).

         "Swing Line Note" has the meaning given it in Section 2.6(d).

         "Swing Line Obligations" means, at the particular time in question, the
sum of all outstanding Swing Line Advances.

         "Swing Line Rate" has the meaning given it in Section 2.5(b).

         "Syndication  Agent" means The Chase  Manhattan  Bank,  as  Syndication
Agent hereunder and its successors and assigns in such capacity.

         "Taxes" has the meaning given it in Section 2.20.

                                       16


<PAGE>



         "Termination  Event" means (a) the occurrence with respect to any ERISA
Plan of (1) a reportable event described in Sections  4043(b)(5) or (6) of ERISA
or (2) any other  reportable  event  described in Section 4043(b) of ERISA other
than a reportable  event not subject to the  provision  for 30-day notice to the
Pension Benefit  Guaranty  Corporation  pursuant to a waiver by such corporation
under Section  4043(a) of ERISA,  or (b) the withdrawal of any Obligor or of any
Affiliate of any Obligor from an ERISA Plan during a plan year in which it was a
"substantial  employer" as defined in Section  4001(a)(2)  of ERISA,  or (c) the
filing of a notice of intent to terminate any ERISA Plan or the treatment of any
ERISA Plan  amendment as a termination  under Section 4041 of ERISA,  or (d) the
institution of  proceedings  to terminate any ERISA Plan by the Pension  Benefit
Guaranty  Corporation  under  Section  4042 of ERISA,  or (e) any other event or
condition  which might  constitute  grounds  under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any ERISA Plan.

         "364 Day Facility" means the facility for loans established pursuant to
this Agreement.

         "Total  Capitalization"  means  the sum  (without  duplication)  of (i)
Consolidated  Total  Funded Debt of the Parent and its  Subsidiaries,  plus (ii)
Consolidated shareholder's equity of the Parent and its Subsidiaries.

         "Total  Funded Debt" means all Debt of the type  referred to in clauses
(a), (b), (c), (d), (g) (excluding Debt of the type referred to in clause (e) of
the definition of "Debt") and (h) of the definition of "Debt".

         "Tranche" has the meaning given it in Section 2.3.

         "Unrestricted  Subsidiary"  means each  Subsidiary of Borrower which is
not  designated as a Restricted  Subsidiary on Schedule 3 attached  hereto or is
designated by Borrower as an Unrestricted Subsidiary pursuant to Section 5.2(i).

         "Updated   Financial   Statements"   means  (a)  the   audited   annual
Consolidated  financial  statements of Petroleum  and Mesa and their  respective
Consolidated  Subsidiaries  dated as of December 31, 1996, and (b) the unaudited
Consolidated financial statements and unaudited consolidating balance sheets and
statements of operations of Petroleum and Mesa and their respective Consolidated
Subsidiaries  prepared in reasonable detail in accordance with GAAP and dated as
of March 31, 1997.

         Section 1.2   Exhibits  and  Schedules.   All  Exhibits  and  Schedules
attached to this Agreement are a part hereof for all purposes.

         Section 1.3   Amendment  of Defined  Instruments.  Unless  the  context
otherwise  requires or unless otherwise  provided  herein,  the terms defined in
this  Agreement  which refer to a particular  agreement,  instrument or document
also refer to and include all renewals,  extensions,  modifications,  amendments
and restatements  of  such agreement,  instrument  or  document,  provided  that

                                       17


<PAGE>



nothing contained in this Section shall be construed to authorize or require any
such renewal, extension, modification, amendment or restatement.

         Section 1.4  References and Titles. All references in this Agreement to
Exhibits,  Schedules,  articles,  sections,  subsections and other  subdivisions
refer to the Exhibits,  Schedules,  articles,  sections,  subsections  and other
subdivisions  of this Agreement  unless  expressly  provided  otherwise.  Titles
appearing at the beginning of any  subdivisions  are for convenience only and do
not  constitute  any  part of such  subdivisions  and  shall be  disregarded  in
construing  the  language  contained  in  such  subdivisions.  The  words  "this
Agreement",  "this 364 Day  Facility",  "364 Day Facility",  "this  instrument",
"herein", "hereof",  "hereby",  "hereunder" and words of similar import refer to
this Agreement as a whole and not to any particular subdivision unless expressly
so limited. The phrases "this section" and "this subsection" and similar phrases
refer only to the sections or  subsections  hereof in which such phrases  occur.
The word "or" is not exclusive,  and the word "including" (in its various forms)
means "including without limitation". Pronouns in masculine, feminine and neuter
genders  shall be  construed  to  include  any  other  gender,  and words in the
singular  form shall be construed  to include the plural and vice versa,  unless
the context otherwise requires.

         Section 1.5  Calculations  and  Determinations.  All calculations under
the Loan Documents of interest  chargeable  with respect to Eurodollar  Portions
and  Competitive  Bid Advances shall be made on the basis of actual days elapsed
(including  the  first  day but  excluding  the  last)  and a year of 360  days,
subject,  however, to the limitations set forth in Section 8.6 hereof. All other
calculations of interest and fees made under the Loan Documents shall be made on
the basis of actual days  elapsed  (including  the first day but  excluding  the
last) and a year of 365 or 366 days, as appropriate.  Unless otherwise expressly
provided  herein or unless Required  Lenders  otherwise  consent,  all financial
statements  and reports  furnished to  Administrative  Agent or any other Lender
hereunder shall be prepared and all financial  computations  and  determinations
pursuant hereto shall be made in accordance with GAAP.

                                    ARTICLE 2

                                      LOANS

         Section 2.1   Making the Loans.

(a)  Subject to the terms and  conditions  hereof,  each  Lender  agrees to make
     advances  on a revolving  basis  (herein a  "Revolving  Loan  Advance")  to
     Borrower  from time to time on any Business Day during the Loan  Commitment
     Period,  equal to such Lender's Percentage Share of the aggregate amount of
     Revolving  Loan  Advances  requested by Borrower to be made on such day, so
     long as the aggregate  amount of (i) all Lenders'  Revolving  Loan Advances
     (including any Revolving Loan Advances to be made but not yet made pursuant

                                       18



<PAGE>



     to a Request for  Advance)  outstanding  at any time plus (ii) all Lenders'
     Swing Line  Advances to Borrower  plus (iii) all Lenders'  Competitive  Bid
     Advances  outstanding  at such time,  does not exceed the Facility  Amount.
     Subject to the terms and conditions hereof,  Borrower may borrow, repay and
     reborrow Revolving Loan Advances.

(b)  No Lender shall be permitted or required to make any Revolving Loan Advance
     under this Agreement  unless the aggregate of such Lender's  Revolving Loan
     Advances under this Agreement  (including any Revolving Loan Advances to be
     made but not yet made pursuant to a Request for Advance) outstanding at any
     time  is less  than  or  equal  to the  least  of (i)  such  Lender's  Loan
     Commitment or (ii) such Lender's Percentage Share of the Facility Amount.

(c)  The  aggregate  amount of all  Revolving  Loan  Advances  requested  of all
     Lenders  in any  Request  for  Advance  must  be an  integral  multiple  of
     $1,000,000  which equals or exceeds  $10,000,000 or must equal the least of
     the unadvanced  portion of the aggregate Loan Commitments of all Lenders or
     the unadvanced  portion of the Facility Amount.  The obligation of Borrower
     to repay to each Lender the aggregate amount of all Revolving Loan Advances
     made by such Lender to Borrower  (herein  called such  Lender's  "Revolving
     Loan"),  together with interest accruing in connection therewith,  shall be
     evidenced by a single  promissory  note (herein  called such Lender's "Loan
     Note") made by Borrower  payable to the order of such Lender in the form of
     Exhibit A-1 with appropriate  insertions.  The amount of principal owing on
     any Lender's Loan Note at any given time shall be the  aggregate  amount of
     all  Revolving  Loan  Advances  theretofore  made by such Lender  minus all
     payments  of  principal  theretofore  received  by such Lender on such Loan
     Note.  Interest  on each Loan Note shall  accrue and be due and  payable as
     provided herein and therein.

         Section 2.2   Requests for Revolving Loan Advances.  Borrower must give
to Administrative  Agent not later than 11:00 a.m., Dallas, Texas time, for same
day funding, and not later than 1:00 p.m., Dallas, Texas time, for next Business
Day funding, written notice, or telephonic notice promptly confirmed in writing,
of any requested Revolving Loan Advances, after which Administrative Agent shall
give each other Lender  prompt  notice  thereof.  Each such  written  request or
confirmation  must be made in the form  and  substance  of  Exhibit  C  attached
hereto,  duly  completed  (herein  called a "Request  for  Advance").  Each such
telephonic  request shall be deemed a representation,  warranty,  acknowledgment
and  agreement by Borrower as to the matters which are required to be set out in
such written  confirmation.  If all  conditions  precedent  to a Revolving  Loan
Advance have been met, each Lender will on the date requested  remit,  not later
than 1:00 p.m.,  Dallas,  Texas time,  for same day funding,  and not later than
11:00 a.m., Dallas, Texas time, the following Business Day for next Business Day
funding,  to Administrative  Agent at  Administrative  Agent's office in Dallas,
Texas,  or to such other office as Administrative Agent may specify from time to

                                       19


<PAGE>



time by notice to Lenders, the amount of such Lender's Revolving Loan Advance in
immediately  available  funds,  and upon  receipt of such  funds,  unless to its
actual  knowledge any conditions  precedent to such Revolving Loan Advances have
been  neither  met nor waived as  provided  herein,  Administrative  Agent shall
promptly make the Revolving  Loan Advances  available to Borrower.  Each Request
for Advance shall be irrevocable and binding on Borrower.  Unless Administrative
Agent shall have received  prompt notice from a Lender that such Lender will not
make  available to  Administrative  Agent such Lender's  Revolving Loan Advance,
Administrative Agent may in its discretion assume that such Lender has made such
Revolving Loan Advance available to Administrative Agent in accordance with this
Section  and  Administrative  Agent may if it  chooses,  in  reliance  upon such
assumption,  make such Revolving Loan Advance  available to Borrower.  If and to
the extent such Lender shall not so make its Revolving Loan Advance available to
Administrative  Agent, such Lender and Borrower  severally agree to pay or repay
to  Administrative  Agent on demand the amount of such  Revolving  Loan  Advance
together with interest  thereon,  for each day from the date such amount is made
available  to  Borrower  until  the  date  such  amount  is  paid or  repaid  to
Administrative  Agent,  (i) if paid or repaid by Borrower at the  interest  rate
applicable at the time to the other Revolving Loan Advances made on such date of
such  Revolving  Loan Advance and (ii) if paid or repaid by such Lender,  at the
Federal Funds Rate. The failure of any Lender to make any Revolving Loan Advance
to be made by it hereunder  shall not relieve any other Lender of its obligation
hereunder,  if any, to make its Revolving  Loan Advance,  but no Lender shall be
responsible  for the  failure  of any other  Lender to make any  Revolving  Loan
Advance to be made by such other Lender.

         Section 2.3   Rate Elections.  Borrower may from time to time designate
all or any portions of the Loans  (including  any yet to be made  Revolving Loan
Advances  which are to be made prior to or at the  beginning  of the  designated
Eurodollar  Interest  Period but  excluding  any portions of the Loans which are
required to be repaid  prior to the end of the  designated  Eurodollar  Interest
Period and excluding any  Competitive Bid Advance and any Swing Line Advance) as
a "Tranche",  which term refers to a set of Eurodollar Portions of the same type
with identical Eurodollar Interest Periods and with each Lender participating in
such Tranche in accordance  with its  Percentage  Share.  Without the consent of
Required Lenders,  Borrower may not make such election, and Administrative Agent
and Lenders  shall not be required to give effect to such  election,  during the
continuance  of a Default and Borrower may make such an election with respect to
already existing  Eurodollar  Portions only if such election will take effect at
or after the termination of the Eurodollar  Interest Period applicable  thereto.
Each election by Borrower of a Tranche shall:

(a)  Be made in writing in the form and substance of Exhibit D attached  hereto,
     duly completed, herein called a "Rate Election";

(b)  Specify  the  aggregate  amount  of the Loans  which  Borrower  desires  to
     designate as such Tranche,  the first day of the Eurodollar Interest Period
     which is to apply  thereto,  and the  length  of such  Eurodollar  Interest
     Period; and

                                       20


<PAGE>



(c)  Be received  by  Administrative  Agent not later than 10:00  a.m.,  Dallas,
     Texas  time,  on the  third  Business  Day  preceding  the first day of the
     specified Eurodollar Interest Period.

         Promptly  after  receiving  any such  Rate  Election  which  meets  the
requirements  of this  Section,  Administrative  Agent shall  notify each Lender
thereof. Each Rate Election shall be irrevocable. Borrower may not make any Rate
Election which does not specify an Eurodollar Interest Period complying with the
definition  of  "Eurodollar  Interest  Period" in Section 1.1, and the aggregate
amount of the Tranche  elected in any Rate  Election  must be  $10,000,000  or a
higher integral multiple of $1,000,000.  Upon the termination of each Eurodollar
Interest  Period the  portion of each Loan  within the  related  Tranche  shall,
unless the  subject of a new Rate  Election  then taking  effect,  automatically
become a part of the Base Rate  Portion of such Loan and  become  subject to all
provisions of the Loan  Documents  governing  such Base Rate  Portion.  Borrower
shall have no more than fifteen (15) Tranches in effect at any time.

         If requested to do so by Borrower through Administrative Agent at least
two (2) Business Days before the delivery  date of any proposed  Rate  Election,
each Lender will advise  Administrative  Agent before 10:00 a.m., Dallas,  Texas
time,  on the Business Day following  receipt of such request as to whether,  if
Borrower selects a specified  duration of nine (9) or twelve (12) months for the
Eurodollar  Interest  Period  applicable to such proposed  Rate  Election,  such
Lender  expects  that  deposits  in dollars  with a  corresponding  term will be
available  to it in the  relevant  market on the  first  day of such  Eurodollar
Interest  Period in the amount  required to fund the  Eurodollar  Portion of its
Loan to which such  Eurodollar  Interest  Period  would  apply.  Unless a Lender
responds  by such time to the  effect  that it  expects  such  deposits  will be
available to it, Borrower shall not be entitled to select such proposed duration
for such Eurodollar Interest Period.

         Each Lender may, if it so elects,  fulfill its  obligation  to fund any
Eurodollar  Portion by causing one of its foreign  branches or Affiliates (or an
international  banking facility created by such Lender) to fund or continue such
Eurodollar  Portion;  provided,  however,  that such Eurodollar Portion shall be
deemed to have been made and held by such  Lender,  and the  obligations  of the
subject Borrower to repay such Eurodollar  Portion shall nevertheless be to such
Lender for the account of such branch,  or Affiliate (or  international  banking
facility).  In addition,  Borrower hereby consents and agrees that, for purposes
of any  determination  to be made for purposes of Sections 2.17,  2.18, 2.19 and
2.20,  it shall be  conclusively  assumed  that such Lender  elected to fund all
Eurodollar  Portions by purchasing  Dollar deposits in the interbank  eurodollar
market of its designated office.

         Section 2.4   Swing Line Borrowings. In addition to borrowings pursuant
to Section 2.1(a) or Section 2.22, Borrower may request each Lender severally to
submit offers to make advances to Borrower on any Business Day (unless  Borrower
and  Administrative  Agent agree  otherwise and notify  Lenders) during the Loan
Commitment Period as provided in Sections 2.5 and 2.6 (herein called "Swing Line
Advances");  provided,  however,  that  (a)  each Lender may,  but shall have no

                                       21


<PAGE>



obligation to, submit such offers and Borrower may, but shall have no obligation
to,  accept  any such  offers,  (b) at no time shall the  outstanding  aggregate
principal  amount of all Swing  Line  Advances  made by all  Lenders  under this
Agreement plus all "Swing Line  Advances" (as defined in the Primary  Facility),
if any, outstanding under the Primary Facility exceed $50,000,000, and (c) at no
time  shall the sum of (1) the  outstanding  aggregate  principal  amount of all
Swing  Line  Advances  made by all  Lenders  to  Borrower,  (2) the  outstanding
aggregate  principal  amount of the  Revolving  Loans,  and (3) the  outstanding
aggregate principal amount of all Competitive Bid Advances,  exceed the Facility
Amount.

         Section 2.5   Procedure for Swing Line Advances.

(a)  No later than 11:00 a.m.,  Dallas,  Texas time,  on each  Business Day that
     Borrower  desires the  submission of an offer to make a Swing Line Advance,
     Borrower shall transmit to each Lender (which has indicated to Borrower its
     interest in making a Swing Line  Advance)  and to  Administrative  Agent by
     telecopy a notice in  substantially  the form of Exhibit E attached  hereto
     (herein called a "Request for Swing Line Bid"),  requesting  each Lender in
     its sole  discretion  to submit an offer to make a Swing  Line  Advance  by
     transmitting to Borrower and  Administrative  Agent by telecopy a notice in
     substantially  the same form as Exhibit F attached  hereto (herein called a
     "Swing Line Bid"). Each Swing Line Bid must comply with the requirements of
     this Section and must be received by  Administrative  Agent and Borrower by
     telecopy at their respective  offices by no later than 12:00 noon,  Dallas,
     Texas time, on the date of the Request for Swing Line Bid.

(b)  Each  Swing  Line Bid must  specify  the Lender and the amount of the Swing
     Line Advance that such Lender is  committed,  subject to acceptance of such
     Swing Line Bid by Borrower pursuant to Section 2.5(f) and the provisions of
     Sections  2.5(c) and (d), to lend to Borrower on such date. Each Swing Line
     Bid must  specify  the rate of  interest  per annum which will be the fixed
     rate of interest to be charged for such Swing Line Advance  until  maturity
     (herein called the "Swing Line Rate"). Unless Borrower notifies the Lenders
     otherwise in its Request for Swing Line Bid and  Administrative  Agent does
     not promptly  oppose such notice,  each Swing Line Advance  shall mature on
     the next  Business Day and each Swing Line Bid shall  specify such maturity
     date;  provided  that no Swing  Line  Advance  may have a term of more than
     fourteen (14) Business  Days,  and no Swing Line Advance shall mature after
     the Maturity Date.

(c)  Any  Swing  Line Bid  shall be  disregarded,  and may not be  accepted,  by
     Borrower if such Swing Line Bid:

     (1)   is not substantially in conformity with Exhibit F or does not specify
           all of the information required by Section 2.5(b);

                                       22


<PAGE>



     (2)   contains qualifying, conditional or similar language;

     (3)   proposes  terms  other  than  or in  addition to  those set  forth in
           Section 2.5(b); or

     (4)   is received by Borrower after the time set forth in Section 2.5(a).

(d)  Borrower  may accept  any Swing Line  Bid(s) in whole or in part;  provided
     that:

     (1)   the aggregate principal amount of all Swing Line Advances to Borrower
           under this Agreement plus all  "Swing Line Advances"  (as  defined in
           the Primary Facility), if any, outstanding under the Primary Facility
           may not exceed $50,000,000;

     (2)   the sum of (i) the aggregate principal amount of the Revolving  Loans
           outstanding at such  time,  (ii) the  aggregate  principal  amount of
           Swing Line Advances outstanding at such time, and (iii) the aggregate
           principal amount  of Competitive  Bid  Advances  outstanding  at such
           time, does not exceed the Facility Amount;

     (3)   the principal amount of each Swing Line  Advance must be in a minimum
           of $1,000,000 and multiples of $100,000 in excess thereof; and

     (4)   Borrower  may  not  accept  any Swing  Line  Bid that is described in
           Section  2.5(c)  or  that  otherwise  fails   to  comply   with   the
           requirements of this Agreement.

(e)  Borrower  shall not be required  to accept  Swing Line Bids on the basis of
     the lowest Swing Line Rate offered,  but may in its sole discretion  accept
     any of the Swing  Line Bids  regardless  of the  Swing  Line Rate  offered.
     Notwithstanding  the  procedure  set forth in this  Section,  Borrower  may
     request and accept Swing Line  Advances  from any Lender with terms greater
     than one (1) Business  Day,  (but not greater than  fourteen  (14) Business
     Days,  and  maturing on or before the Maturity  Date),  and Borrower is not
     required to make such  requests to all of the Lenders,  provided  that such
     procedure is otherwise in compliance with Sections 2.4, 2.6 and 2.5(f); and

(f)  Borrower  shall  confirm  its  acceptance  or  rejection  of the Swing Line
     Advances offered to it by telecopying to  Administrative  Agent a notice in
     substantially  the form of  Exhibit G  attached  hereto  (herein  called an
     "Acceptance  Notice")  which  shall set forth the Lenders and the amount of
     each Lender's  Swing Line Advances  accepted by Borrower and the Swing Line
     Rate. Such Acceptance Notice must be received by Administrative Agent by no
     later than 12:15 p.m., Dallas, Texas time, on the date of request for Swing

                                       23


<PAGE>



     Line Bid.  Administrative  Agent shall notify the Lenders that  submitted a
     Swing Line Bid for such Business Day of Borrower's  decision by telecopying
     to each such Lender a copy of the Acceptance  Notice by no later than 12:30
     p.m., Dallas, Texas time, on the date of request for Swing Line Bid, unless
     a later time is agreed to by a Lender in respect of the  Acceptance  Notice
     to be received by such Lender.

         Section 2.6   Swing Line Advances.

(a)  Each Lender  whose Swing Line Bid is accepted by Borrower on a timely basis
     pursuant to the  Acceptance  Notice shall wire the amount of its Swing Line
     Advance in immediately  available funds by no later than 1:00 p.m., Dallas,
     Texas  time on the date of  request  for  Swing  Line  Bid,  on such day to
     Administrative  Agent,  which  shall  deposit  such  funds  to  an  account
     designated by Borrower by no later than 1:15 p.m. on the same day.

(b)  Borrower  shall repay each such Swing Line  Advance on or before 1:00 p.m.,
     Dallas, Texas time, on the following Business Day or at such other maturity
     (such date of maturity being no more than fourteen (14) Business Days after
     the date of the Swing Line Advance and no later than the Maturity  Date) as
     is agreed to by Borrower, Administrative Agent and the funding Lenders. The
     repayment plus accrued  interest  shall be paid by Borrower  (which payment
     may be in the form of a Swing Line  Advance  advanced  to  Borrower on that
     day)  to   Administrative   Agent  in  immediately   available  funds  with
     instructions by telecopy to Administrative Agent specifying the amounts and
     the Lenders receiving  application of such proceeds.  If any Lender makes a
     Swing Line  Advance on a day on which  Borrower is to repay all or any part
     of an  outstanding  Swing Line Advance  from such  Lender,  if requested by
     Borrower,  such  Lender  shall  apply the  proceeds  of its new Swing  Line
     Advance to make such repayment and, in such instance,  only an amount equal
     to the difference (if any) between the amount being borrowed and the amount
     being repaid shall be made available by such Lender to Administrative Agent
     as provided in Section  2.6(a),  or remitted by Borrower to  Administrative
     Agent as provided in this Section, as the case may be.

(c)  Interest  on the Swing Line  Advances  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 and
     shall not exceed Maximum  Lawful Rate.  Past due principal and interest (to
     the extent allowed by law) shall bear interest at the lesser of the Default
     Rate or the Maximum Lawful Rate and shall be payable on demand.

(d)  The Swing Line  Advances made by each Lender shall be evidenced by a single
     promissory  note of  Borrower  payable  to the order of such  Lender in the
     amount of $50,000,000 and in substantially the form of Exhibit A-2 attached
     hereto,  with appropriate  insertions  (herein called a "Swing Line Note").
     The date,  amount,  Swing Line Rate and maturity of each Swing Line Advance
     made by a Lender to  Borrower,  and each  payment  made on  account  of the
     principal thereof, shall be recorded by such Lender on its books.

                                       24


<PAGE>



(e)  The Swing Line Advances will be used by Borrower to provide working capital
     for the  operations  of  Borrower  and  its  Subsidiaries  and for  general
     business purposes.  No Swing Line Advances shall be used for the purpose of
     purchasing  or  carrying  any  Margin  Stock  in  violation  of the  Margin
     Regulations.

(f)  The  obligation  of Lenders to make each Swing Line  Advance  after  timely
     acceptance by Borrower is further  subject to the  conditions  contained in
     Article 3.

         Section 2.7   Facility  Fee.   In   consideration   of   each  Lender's
commitment to make Revolving Loan Advances,  Swing Line Advances and Competitive
Bid Advances,  Borrower will pay, or cause the payment, to Administrative  Agent
for the  account of each  Lender an annual  facility  fee payable to each Lender
determined by applying the Facility Fee Rate to such Lender's  Percentage  Share
of the  Facility  Amount  as of the date of such  payment,  payable  in  arrears
quarterly  until  the  Maturity  Date,  with the  first  payment  thereof  to be
September 30, 1997 and  subsequent  payments on the last day of each  successive
calendar  quarter ending on each  September,  December,  March and June, and the
final payment thereof on the Maturity Date.

         Section 2.8   Managing Agents' Fees.  In addition to  all other amounts
due to the  Managing  Agents  under the Loan  Documents,  Borrower  will pay the
non-refundable annual fees set forth in those certain Fee Letters dated June 25,
1997.

         Section 2.9   Termination and Reduction of Commitments.

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

(b)  Borrower  may at any  time  terminate,  or from  time to time  reduce,  the
     Commitments;  provided that (i) each reduction of the Commitments  shall be
     in an amount that is an integral  multiple of $1,000,000  and not less than
     $5,000,000 and (ii) Borrower shall not terminate or reduce the  Commitments
     if,  after  giving  effect  to any  concurrent  prepayment  of the Loans in
     accordance  with Section 2.10,  the sum of (i) all Lenders'  Revolving Loan
     Advances (including any Revolving Loan Advances to be made but not yet made
     pursuant to a Request for  Advance)  outstanding  at any time plus (ii) all
     Lenders'  Swing  Line  Advances  to  Borrower   plus  (iii)  all   Lenders'
     Competitive Bid Advances outstanding at such time,  would exceed the total
     Commitments.

(c)  Borrower shall notify the Administrative Agent of any election to terminate
     or reduce the Commitments  under paragraph (b) of this Section at least two
     Business Days prior to the effective date of such termination or reduction,
     specifying such election and the effective date thereof. Promptly following
     receipt of any notice, the Administrative Agent shall advise the Lenders of
     the contents  thereof.  Each notice delivered by Borrower  pursuant to this
     Section shall be irrevocable;  provided that a notice of termination of the
     Commitments delivered by Borrower may state that such notice is conditioned

                                       25


<PAGE>



     upon the  effectiveness  of other  credit  facilities,  in which  case such
     notice may be revoked by Borrower (by notice to the Administrative Agent on
     or  prior  to the  specified  effective  date)  if  such  condition  is not
     satisfied.  Any  termination  or  reduction  of the  Commitments  shall  be
     permanent.  Each reduction of the  Commitments  shall be made ratably among
     the Lenders in accordance with their respective Commitments.

         Section 2.10   Optional Prepayments.  Borrower may, upon notice to each
Lender  identical to that required for related  borrowings under this Agreement,
from time to time and without premium or penalty,  prepay its Notes, in whole or
in  part,  so  long as the  aggregate  amounts  of all  partial  prepayments  of
principal  concurrently  paid on such  Notes  equals  $5,000,000  or any  higher
integral  multiple of  $1,000,000 or the  aggregate  outstanding  balance of the
Loans,  and so long as  Borrower  does not prepay any  Revolving  Loan  Advance,
Competitive Bid Advance or Swing Line Advance except in accordance herewith. Any
amounts  prepaid  pursuant to this  Section  shall be in addition to, and not in
lieu of, all payments  otherwise required to be paid under the Loan Documents at
the time of such prepayment.

         Section 2.11   Payments to Lenders.  Except as  expressly  set forth in
Section  2.6(b) with  respect to  repayment  of Swing Line  Advances and Section
2.22(b) with respect to repayment of  Competitive  Bid  Advances,  Borrower will
make each payment which it owes under the Loan Documents to Administrative Agent
at its principal  banking  office in Dallas,  Texas,  or to such other office as
Administrative Agent may specify from time to time by notice to Borrower for the
account of each Lender to whom such payment is owed,  without the application of
any setoff,  deduction  or  counterclaim.  Each such payment must be received by
Administrative  Agent not later than 1:00 p.m., Dallas,  Texas time, on the date
such payment  becomes due and payable,  in lawful money of the United  States of
America  and  in  immediately   available   funds.   Any  payment   received  by
Administrative  Agent  after  such  time will be deemed to have been made on the
next Business Day. Should any such payment become due and payable on a day other
than a Business  Day, the maturity of such payment shall be extended to the next
succeeding Business Day (except,  with respect to any Eurodollar Portion, as may
be otherwise required by the definition of Eurodollar Interest Period),  and, in
the case of a payment of principal or past due interest,  interest  shall accrue
and be payable thereon for the period of such  extension as provided in the Loan
Document under which such payment is due.

         All  payments  applied to  principal  or  interest on any Note shall be
applied first to any interest then due and payable,  then to principal  then due
and payable,  and last to any prepayment of principal and interest in compliance
with Section 2.10.  Unless  otherwise  expressly  provided,  all payments by any
Obligor  pursuant to this  Agreement or any other Loan Document shall be made by
such Obligor to Administrative  Agent for account of Agents and Lenders pro rata
among  Obligations  of the  same  type  and,  if  applicable,  having  the  same
Eurodollar Interest Period or, in the case of Swing Line Advances or Competitive
Bid Advances, the same maturity date.

                                       26


<PAGE>



         Section 2.12   Extension of Maturity Date and of Commitments.

(a)  Subject to the other  provisions  of this  Agreement  and provided  that no
     Event of Default has  occurred  and is  continuing,  the total  Commitments
     shall be effective  for an initial  period from the  Effective  Date to the
     Original Maturity Date;  provided that the Maturity Date, and concomitantly
     the total  Commitments,  may be  extended  for  successive  364 day periods
     expiring  on the date  which is 364 days from the then  scheduled  Maturity
     Date. If Borrower 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 Maturity  Date that the Maturity Date be extended for 364 days
     from the then scheduled Maturity Date, then the Administrative  Agent shall
     promptly  notify each Lender of such  request and each Lender  shall notify
     the Administrative Agent, no later than 30 days prior to the Maturity Date,
     whether such Lender,  in the exercise of its sole  discretion,  will extend
     the  Maturity  Date for such 364 day  period.  Any Lender  which  shall not
     timely notify the Administrative  Agent whether it will extend the Maturity
     Date shall be deemed to not have  agreed to extend the  Maturity  Date.  No
     Lender shall have any obligation whatsoever to agree to extend the Maturity
     Date.  Any  agreement  to extend the  Maturity  Date by any Lender shall be
     irrevocable, except as provided in clause (c) of this Section.

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

(c)  If Lenders constituting at least the Majority Lenders approve the extension
     of the then  scheduled  Maturity Date (such Lenders  agreeing to extend the
     Maturity  Date herein  called the  "Accepting  Lenders") and if one or more
     Lenders  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   Maturity  Date  (such  Lenders  herein  called  the  "Declining
     Lenders"),  then (A) the  Administrative  Agent  shall  promptly  so notify
     Borrower and the Accepting  Lenders,  (B) the Accepting Lenders shall, upon
     Borrower's   election  to  extend  the  then  scheduled  Maturity  Date  in
     accordance  with  clause  (i) or (ii)  below,  extend  the  then  scheduled
     Maturity Date and (C) Borrower shall, pursuant to a notice delivered to the
     Administrative  Agent, the Accepting Lenders and the Declining Lenders,  no
     later than the tenth (10th) day  following the date by which each Lender is
     required,  pursuant to clause (a) of this Section, to approve or disapprove
     the requested extension of the total Commitments, either:

     (i)  elect to extend  the  Maturity  Date  with  respect  to the  Accepting
          Lenders  and  direct  the   Declining   Lenders  to  terminate   their
          Commitments,  which  termination  shall  become  effective on the date
          which would have been the  Maturity  Date except for the  operation of
          this Section. On such date, (x) Borrower shall deliver a notice of the
          effectiveness of such termination to the Declining Lenders with a copy

                                       27


<PAGE>



          to the  Administrative  Agent  and (y)  Borrower  shall pay in full in
          immediately  available  funds all Obligations of Borrower owing to the
          Declining Lenders,  including any amounts required pursuant to Section
          2.19,  and (z) upon the  occurrence of the events set forth in clauses
          (x) and (y),  the  Declining  Lenders  shall each cease to be a Lender
          hereunder for all  purposes,  other than for purposes of Sections 2.16
          through 2.20 and Section 6.4, and shall cease to have any  obligations
          or any  Commitment  hereunder,  other than to the Agents  pursuant  to
          Article 7, and the  Administrative  Agent  shall  promptly  notify the
          Accepting  Lenders and Borrower of the new Commitments;  or

    (ii)  elect to extend  the  Maturity  Date  with  respect  to the  Accepting
          Lenders  and,  prior to or no later than the then  scheduled  Maturity
          Date, (A) to replace one or more of the Declining  Lender or Declining
          Lenders with another  lender or lenders  reasonably  acceptable to the
          Administrative  Agent  or any  Accepting Lender (such  lenders  herein
          called the "Replacement Lenders")  and  (B) Borrower shall pay in full
          in immediately  available funds all  Obligations of Borrower  owing to
          any  Declining Lenders  which are  not being replaced,  as provided in
          clause  (i)  above;  provided  that  (x)  the  Replacement  Lender  or
          Replacement  Lenders  shall  purchase,  and  the  Declining  Lender or
          Declining  Lenders shall  sell,  the Declining Lender's  or  Declining
          Lenders' rights and obligations hereunder without  recourse or expense
          to, or warranty by,  such Declining Lender or Declining  Lenders being
          replaced  for a  purchase  price  equal  to the aggregate  outstanding
          principal  amount of  the Obligations payable to such Declining Lender
          or  Declining  Lenders  plus any  accrued but unpaid interest  on such
          Obligations  and  accrued  but  unpaid fees or other amounts  owing in
          respect of such  Declining  Lender's  or  Declining Lenders' Loans and
          Commitments  hereunder,  and  (y)  upon  the  payment of such  amounts
          referred  to in  clause (x) and  the  execution  of an Agreement to be
          Bound  by  the  Replacement  Lender  or  Replacement  Lenders and  the
          Declining  Lender or Declining  Lenders (which   each  such  Declining
          Lender  agrees  to  execute  promptly),   the  Replacement  Lender  or
          Replacement  Lenders shall each  constitute a Lender hereunder and the
          Declining  Lender  or  Declining  Lenders  being  so replaced shall no
          longer  constitute a Lender  (other than for purposes of Sections 2.16
          through  2.20  and  Section  6.4),   and  shall  no  longer  have  any
          obligations hereunder, other than to the Agents pursuant to Article 7;
          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 Lenders
          thereof)  no later  than the tenth  (10th) day  following  the date by
          which each Lender is required, pursuant to clause (a) of this Section,
          to approve or disapprove the requested extension of the Maturity Date,
          and concomitantly the total Commitments.

                                       28


<PAGE>



         If Borrower fails to timely provide the election  notice referred to in
this clause (c),  Borrower  shall be deemed to have  revoked  and  canceled  the
extension  request in the  Certificate  of Extension  and to have elected not to
extend the Maturity  Date,  and, on the then scheduled  Maturity Date,  Borrower
shall repay in full all Obligations under the Loan Documents.

         Section 2.13   [Intentionally Omitted].

         Section 2.14   [Intentionally Omitted].

         Section 2.15   [Intentionally Omitted].

         Section 2.16   Capital Reimbursement. If either (a) the introduction or
implementation  of,  or  the  compliance  with,  or  any  change  in,  or in the
interpretation  of, any law,  rule or  regulation,  or (b) the  introduction  or
implementation  of or the  compliance  with any request,  directive or guideline
from any central bank or Governmental Authority (whether or not having the force
of law) affects or would affect the amount of capital  required to be maintained
by any Lender or any corporation  controlling  any Lender,  then, upon demand by
such Lender,  Borrower  will  immediately  pay to  Administrative  Agent for the
benefit of such Lender,  from time to time as  specified  by such  Lender,  such
additional  amount  which such  Lender  shall  determine  to be  appropriate  to
compensate  such Lender or any corporation  controlling  such Lender in light of
such circumstances,  to the extent that such Lender reasonably  determines that,
because of the existence of such  circumstances,  the amount of any such capital
would be increased  or the rate of return on any such capital  would be reduced,
in whole or in part,  by or as a  consequence  of the existence of such Lender's
Commitments,  its  Loans,  and its other  commitments  under this  Agreement  to
Borrower, subject to the provisions of Section 2.21.

         Section 2.17   Increased Cost of Eurodollar Portions. If any applicable
domestic or foreign law, treaty,  rule,  directive or regulation (whether now in
effect or hereinafter  enacted or  promulgated,  including  Regulation D) or any
interpretation or administration  thereof by any Governmental  Authority charged
with the  interpretation  or  administration  thereof (whether or not having the
force of law):

(a)  shall  change  the  basis of  taxation  of  payments  to any  Lender of any
     principal,  interest,  or  other  amounts  attributable  to any  Eurodollar
     Portion of its Loans or its Swing Line Advances or Competitive Bid Advances
     or otherwise due under this Agreement in respect of any Eurodollar  Portion
     of its Loans or its Swing Line Advances or Competitive Bid Advances  (other
     than taxes  imposed on the overall net income of such Lender or any lending
     office of such Lender by any  jurisdiction in which such Lender or any such
     lending office is located);

(b)  shall change, impose, modify, apply or deem applicable any reserve, special
     deposit or similar requirements in respect of any Eurodollar Portion of any
     Lender (excluding those for which such Lender is fully compensated pursuant

                                       29


<PAGE>



     to  adjustments  made in the  definition  of Adjusted  Eurodollar  Rate) or
     against assets of,  deposits with or for the account of, or credit extended
     by, such Lender; or

(c)  shall  impose on any  Lender,  the  certificate  of  deposit  market or the
     interbank  eurocurrency  deposit market any other  condition  affecting any
     Eurodollar Portion;

and the result of any of the  foregoing  (a) through (c) is to (1)  increase the
cost to any Lender of funding or maintaining any Eurodollar Portion,  Swing Line
Advance or  Competitive  Bid  Advance,  as the case may be, or (2) to reduce the
amount of any sum receivable by any Lender in respect of any Eurodollar Portion,
Swing Line Advance or Competitive Bid Advance,  as the case may be, by an amount
reasonably  deemed by such Lender to be  material;  then (i) such  Lender  shall
promptly notify Administrative Agent and Borrower in writing of the happening of
such event,  (ii) Borrower shall  thereafter  upon demand pay to  Administrative
Agent for the account of such Lender such  additional  amount or amounts as will
compensate  such Lender for such  additional  cost or reduction,  subject to the
provisions of Sections 2.21 and 2.19, and (iii) Borrower may elect, by giving to
Administrative  Agent and Lender not less than three (3) Business  Days' notice,
to convert  all (but not less than all) of any such  Eurodollar  Portion  into a
part of the Base Rate Portion.

         Section 2.18   Availability.  If (a) any  change  in  applicable  laws,
treaties,  rules  or  regulations  or in the  interpretation  or  administration
thereof in any  jurisdiction  whatsoever,  domestic  or  foreign,  shall make it
unlawful  or  impracticable  for  any  Lender  to fund  or  maintain  Eurodollar
Portions,  or shall materially  restrict the authority of any Lender to purchase
or  take  offshore  deposits  of  dollars  ("Eurodollars"),  or (b)  any  Lender
determines that matching deposits appropriate to fund or maintain any Eurodollar
Portion are not available to it, or (c) any Lender  determines  that the formula
for calculating the Adjusted Eurodollar Rate does not fairly reflect the cost to
such  Lender of making or  maintaining  loans based on such  rates,  then,  upon
notice by such Lender to Administrative Agent and to Borrower,  Borrower's right
to elect  Eurodollar  Portions  shall be  suspended  to the  extent  and for the
duration of such illegality, impracticability, restriction or condition, and all
Eurodollar Portions (or portions thereof) which are then outstanding or are then
the subject of any Rate  Election and which cannot  lawfully or  practicably  be
maintained  or funded shall  immediately  become or remain part of the Base Rate
Portions of such Lender's  Loan,  subject to the provisions of Sections 2.21 and
2.19. Borrower agrees to indemnify Administrative Agent and each Lender and hold
Administrative  Agent and each  Lender  harmless  against  all costs,  expenses,
claims, penalties, liabilities and damages which may result from any such change
in law, treaty, rule, regulation,  interpretation or administration,  subject to
the provisions of Section 2.21.

         Section 2.19   Funding  Losses.  In addition  to its other  obligations
hereunder,  subject to the provisions of Section 2.21,  Borrower shall indemnify
each Lender  against,  and  reimburse  each  Lender on demand  for,  any loss or
expense  incurred or sustained by such  Lender,  determined  as provided in this
Section,  as a result of (a) any payment or  prepayment  (whether  authorized or

                                       30


<PAGE>



required  hereunder or otherwise) of all or a portion of a Eurodollar Portion of
Borrower on a day other than the day on which the applicable Eurodollar Interest
Period  ends,  (b) any payment or  prepayment,  whether  required  hereunder  or
otherwise,  of a Loan of  Borrower  made  after the  delivery,  but  before  the
effective date, of a Rate Election,  if such payment or prepayment prevents such
Rate Election from becoming  fully  effective,  (c) the failure of any Revolving
Loan  Advance or Swing Line  Advance or  Competitive  Bid  Advance to be made to
Borrower or of any Rate  Election of  Borrower  to become  effective  due to any
condition  precedent  to a  Revolving  Loan  Advance  or Swing  Line  Advance or
Competitive  Bid  Advance  not  being   satisfied,   due  to  the  inability  of
Administrative  Agent (acting reasonably and in accordance with Section 2.18) to
determine a Eurodollar  Rate for a Eurodollar  Portion of Borrower or due to any
other action or inaction of any Obligor,  (d) any conversion (whether authorized
or required  hereunder  or  otherwise)  of all or any portion of any  Eurodollar
Portion of  Borrower  into a Base Rate  Portion or into a  different  Eurodollar
Portion on a day other than the day on which the applicable  Eurodollar Interest
Period ends,  (e) any payment or  prepayment of all or a portion of a Swing Line
Advance to  Borrower on a day other than the  maturity  date for such Swing Line
Advance or (f) any payment or  prepayment  of all or a portion of a  Competitive
Bid  Advance  on a day other than the  maturity  date for such  Competitive  Bid
Advance.

         Upon the occurrence of an event as described in subsections (a) through
(f) of this Section,  the method to be used by each Lender to calculate the loss
or expense  incurred by reason of the liquidation or reemployment of deposits or
other funds required by such Lender to fund or maintain  Eurodollar  Portions of
Revolving Loan Advances, Swing Line Advances or Competitive Bid Advances, as the
case may be, is as follows:

         Funding Loss = P x (F-R) x D/360

              P      =      principal amount of payment, prepayment, conversion,
                            non-borrowing or non-effective Rate Election
              F      =      Eurodollar  Rate or Swing  Line  Rate or Competitive
                            Bid  Rate,  as the case may be (adjusted for Reserve
                            Percentage),  utilized  in  the  calculations of the
                            Eurodollar  Rate or  Swing Line Rate  or Competitive
                            Bid Rate,  as the case  may be,  on  the  Eurodollar
                            Portion  or Swing  Line  Advance  or Competitive Bid
                            Advance which is being paid, prepaid, converted, not
                            borrowed or not subject to effective Rate Election
              R      =      reinvestment rate (as hereinafter defined)
              D      =      number  of  days  from  the  date  of  the  payment,
                            prepayment,     conversion,     non-borrowing     or
                            non-effectiveness   until  the  day  on   which  the
                            Eurodollar Interest Period of the Eurodollar Portion
                            ends or the Swing  Line  Advance or Competitive  Bid
                            Advance matures

                                       31


<PAGE>



Reinvestment  rate as it is used  herein will be equal to the  Eurodollar  Rate,
adjusted for the Reserve  Percentage  quoted to such  Lender,  or the Swing Line
Rate or  Competitive  Bid Rate that would be quoted by such Lender,  as the case
may be,  effective  for the date on which the payment,  prepayment,  conversion,
non-borrowing  or  non-effectiveness  occurs.  For purposes of  determining  the
reinvestment rate for purposes of this Section,  the Eurodollar Rate will be the
quote for  either one (1)  month,  two (2)  months,  three (3)  months,  six (6)
months,  nine (9) months or twelve (12) months, the Competitive Bid Rate will be
the quote for a number of days  between  seven (7) and 360,  and the Swing  Line
Rate will be the quote for a number of days between one (1) and  fourteen  (14),
whichever  most closely  approximates  (but which may contain more or fewer days
than) the number of days from the date of the payment,  prepayment,  conversion,
non-borrowing or non-effectiveness until the last day of the relevant Eurodollar
Interest Period or the scheduled maturity, as the case may be, of the Eurodollar
Portion,  Competitive Bid Advance or Swing Line Advance,  as the case may be, in
respect  of  which  the  payment,  prepayment,   conversion,   non-borrowing  or
non-effectiveness  occurs;  provided that if such number of days in respect of a
Eurodollar Rate is the midpoint between two such periods,  such rate will be the
lower of the two rates for such periods.

         Section 2.20   Taxes.  All payments by  Borrower of  principal  of, and
interest on, the Loans and all other  amounts  payable  hereunder  shall be made
free and clear of and  without  deduction  for any  present  or  future  income,
excise, stamp, or franchise taxes and other taxes, fees, duties, withholdings or
other  charges of any nature  whatsoever  imposed by any taxing  authority,  but
excluding  franchise  taxes and taxes imposed on or measured by any Lender's net
income or receipts (such non-excluded items being called "Taxes").  In the event
that any  withholding  or  deduction  from any  payment  to be made by  Borrower
hereunder is required in respect of any Taxes  pursuant to any  applicable  law,
rule or regulation,  then,  subject to the provisions of Section 2.21,  Borrower
will:

(a)  pay directly to the relevant  authority  the full amount  required to be so
     withheld or deducted;

(b)  promptly  forward  to  Administrative  Agent an  official  receipt or other
     documentation  satisfactory to Administrative Agent evidencing such payment
     to such authority; and

(c)  pay to  Administrative  Agent for the account of the  applicable  Lender(s)
     such  additional  amount(s)  as is  necessary to ensure that the net amount
     actually  received  by each  Lender  will equal the full amount such Lender
     would have received had no such  withholding or deduction been required and
     Borrower hereby  acknowledges  that it is not entitled to and will not seek
     recovery or  restitution  of any amount due to any of the Lenders or Agents
     and paid by  Borrower  pursuant  to this clause (c) or pursuant to the next
     sentence.

                                       32


<PAGE>



If any Taxes are directly  asserted against any Agent or any Lender with respect
to any payment  received by such Agent or such Lender  hereunder,  such Agent or
such  Lender  may pay such  Taxes  and,  if paid in good  faith,  Borrower  will
promptly pay such additional amounts to Administrative  Agent for the account of
such Lender or Agent  (including  any  penalties,  interest or  expenses)  as is
necessary in order that the net amount received by such person after the payment
of such Taxes  (including any taxes on such  additional  amount) shall equal the
amount such person would have received had no such Taxes been asserted,  subject
to the provisions of Section 2.21.

         Borrower  shall pay all stamp,  transaction,  registration  and similar
taxes  (including  financial  institutions'  duties,  debit taxes or other taxes
payable  by  return  and  taxes  passed  on to any  Lender or Agent by a bank or
financial institution (collectively "Stamp Taxes") and, if Borrower fails to pay
any such charges or taxes after reasonable notice from any such Lender or Agent,
fines and  penalties)  which may be  payable  or  determined  to be  payable  in
relation  to  the  execution,  delivery,  performance  or  enforcement  of  this
Agreement or any Loan Document or any other transaction contemplated by any Loan
Document to which Borrower is a party.  Borrower hereby  indemnifies each Lender
and Agent  against any  liability  resulting  from delay or omission to pay such
charges or taxes except to the extent the liability  results from failure by the
relevant  Lender or Agent to pay any such tax after having been delivered  funds
to do so by Borrower or to the extent such  liability is for fines and penalties
resulting from such Lender's or Agent's failure to provide  reasonable notice to
Borrower as provided herein.

         If  Borrower  fails to pay any  Taxes or  Stamp  Taxes  when due to the
appropriate taxing authority or fails to remit to Administrative  Agent, for the
account of the  respective  Lenders,  the  required  receipts or other  required
documentary  evidence,  Borrower shall indemnify Lenders for any Taxes, interest
or  penalties  that may  become  payable  by any  Lender as a result of any such
failure,  subject  to the  provisions  of Section  2.21.  For  purposes  of this
Section,  a distribution  hereunder by Administrative  Agent or any Lender to or
for the  account of any Lender or Agent shall be deemed a payment by the subject
Borrower.

         Borrower  waives any  statutory  right to recover from any Agent or any
Lender any amount  due to any such  Agent or Lender and paid by  Borrower  under
this Section.

         On or prior to the first  date on which  interest  or fees are  payable
hereunder for the account of any Lender, each Lender that is organized under the
laws of a jurisdiction other than the United States shall execute and deliver to
Administrative  Agent, three (3) or more (as Administrative Agent may reasonably
request) United States Internal Revenue Service Forms 1001 or 4224 or such other
forms or documents (or successor forms or documents),  appropriately  completed,

                                       33


<PAGE>


as may be applicable to establish the extent, if any, to which a payment to such
Lender is exempt from  withholding  or deduction of Taxes.  Each Lender which so
delivers a Form 1001 or 4224  further  undertakes  to deliver to  Administrative
Agent  three (3)  additional  copies of such  form (or a  successor  form) on or
before  the date  that  such  form  expires  or  becomes  obsolete  or after the
occurrence of any event  requiring a change in the most recent form so delivered
by it, and such amendments  thereto or extensions or renewals  thereof as may be
reasonably requested by Administrative  Agent, in each case certifying that such
Lender is entitled to receive  payments from Borrower  under this  Agreement and
the Notes without  deduction or  withholding of any United States federal income
taxes,  unless an event (including  without limitation any change in treaty, law
or  regulation)  has occurred prior to the date on which any such delivery would
otherwise  be  required  which  renders  all such  forms of the type  previously
delivered  inapplicable  or which would prevent such Lender from duly completing
and   delivering   such  form  with  respect  to  it  and  such  Lender  advises
Administrative  Agent that it is not capable of receiving  such  payments on the
basis  reflected in such  previously  delivered  form  without any  deduction or
withholding  of United States  federal  income tax.  Administrative  Agent shall
provide one (1) copy of each of such forms or  documents so provided to Borrower
and Documentation Agent.

         Section 2.21   Make-Whole  Qualifications.  Each  Lender's  claims  for
reimbursements,  payments,  indemnities or otherwise under Sections 2.16,  2.17,
2.18,  2.19 and 2.20 and Borrower's  obligation with respect  thereto,  shall be
limited and qualified by and subject to the following:

(a)  Borrower's  obligation  to pay,  satisfy or  recognize  such claim shall be
     limited to costs or losses incurred within one (1) year  immediately  prior
     to any demand or request therefor upon Borrower;

(b)  each Lender's demand for reimbursement,  payment or indemnity from Borrower
     must be  limited to that  which is being  generally  applied at the time by
     such  Lender  for  comparable  borrowers  and  credits  subject  to  credit
     agreements  similar to this  Agreement,  but without  regard to  provisions
     similar to this Section;

(c)  each  Lender  which  asserts its rights  with  respect  thereto or which is
     seeking or imposing such reimbursement,  payment or indemnity shall provide
     evidence  regarding  the  basis  of  such  claim  and the  calculation  and
     application  thereof in reasonable  detail and, in determining such amount,
     each Lender may use reasonable methods of attribution and averaging;

                                       34


<PAGE>



(d)  each Lender which is seeking payment or  reimbursement  pursuant to Section
     2.20 shall, if so requested by Borrower, use reasonable efforts (subject to
     the overall policy  considerations of such Lender) to designate a different
     lending office hereunder if to do so will avoid the need for, or reduce the
     amount of, any such payment or reimbursement;  provided that, Lender would,
     in its sole but  reasonable  determination,  suffer no  material  economic,
     legal or regulatory disadvantage or burden;

(e)  Borrower  may,  in  its  sole  discretion,  elect,  unless  and  until  the
     applicable  Lender  notifies  Borrower that the  circumstances  giving rise
     thereto no longer apply to such Lender, that, to the extent that a Lender's
     claims for such  reimbursements,  payments or indemnities  would be reduced
     thereby,  that  subject to Section  2.19,  (1) all Loans to Borrower  which
     would otherwise be made by such Lender as Eurodollar Portions shall be made
     instead as Base Rate Portions (all of which interest and principal shall be
     payable as provided herein with respect to the related Eurodollar  Portions
     of the Lenders), and (2) after each Eurodollar Portion has been repaid, all
     payments of principal  which would otherwise would be applied to repay such
     Eurodollar  Portion shall be applied to repay Base Rate  Portions  instead;
     and

(f)  Borrower may designate a  replacement  Lender (which may be one (1) or more
     of the then  existing  Lenders  hereunder  and  which  shall be  reasonably
     satisfactory to  Administrative  Agent) to purchase the Notes, in each case
     without  recourse,  and assume the  Commitments  and all other  obligations
     hereunder of any Lender that has suspended the  availability  of Eurodollar
     Portions  pursuant  to  Section  2.18 or that has  demanded  reimbursement,
     payment or indemnity  under Sections 2.16,  2.17,  2.18,  2.19 or 2.20, and
     such Lender  shall be  obligated  to sell,  transfer and deliver all of its
     Notes to such  replacement  Lender for the outstanding  principal amount of
     such Notes,  plus in each case,  accrued interest thereon and such Lender's
     portion of accrued but unpaid fees through the date of such  purchase,  and
     permit such replacement lender to assume its Commitments. Borrower shall be
     obligated to pay all  additional  amounts due to the Lender being  replaced
     pursuant to Sections 2.16,  2.17,  2.18,  2.19 and 2.20 through the date of
     such purchase and  assumption;  provided,  that if the  replacement  Lender
     fails to  purchase  all such  rights  and  interests  and  assume  all such
     Commitments  on the specified date in accordance  herewith,  Borrower shall
     continue to be  obligated  to pay such  amounts to such Lender which was to
     have been replaced and provided  further that Borrower  shall pay any Taxes
     or Stamp Taxes, if any, as a result of such transfer.

                                       35


<PAGE>



         Section 2.22   Competitive Bid Advances.

         (a) In addition  to  borrowings  pursuant to Section  2.1(a) or Section
2.4,  Borrower may request each Lender severally to submit offers (herein called
a  "Competitive  Bid Offer") to make  advances to Borrower on any  Business  Day
during the Loan  Commitment  Period as provided in this Section  (herein  called
"Competitive Bid Advances"); provided, however, that each Lender may in its sole
discretion,  but shall have no obligation  whatsoever to submit such offers, and
Borrower may, but shall have no obligation to, accept any such offers.

(b)  Procedure for Competitive Bid Advances.

     (i)  Borrower may request  Competitive Bid Advances by delivering a request
          for a  Competitive  Bid Advance to each Lender (which has indicated to
          Borrower  its  interest  in  making a  Competitive  Bid  Advance)  and
          Administrative Agent not later than 9:00 a.m., Dallas, Texas time, one
          (1) Business Day prior to the proposed  borrowing  date.  Each request
          for a Competitive  Bid Advance shall be in  substantially  the form of
          Exhibit N hereto (herein called a "Request for Competitive Bid Offer")
          and may solicit bids for Competitive Bid Advances having not more than
          three (3) alternative  maturity dates and for Competitive Bid Advances
          in any respective principal amount equal to $10,000,000 or an integral
          multiple  of  $1,000,000  in excess  thereof  for each  maturity  date
          requested. The maturity date for each Competitive Bid Advance shall be
          not less  than  fifteen  (15)  days nor more  than 360 days  after the
          borrowing  date  therefor  (and in any event  not  after the  Maturity
          Date). 

     (ii) Upon receipt of a Request for Competitive  Bid Offer,  any Lender that
          elects,  in its sole discretion,  to do so, shall irrevocably offer to
          make  one (1) or more  Competitive  Bid  Advances  at a fixed  rate of
          interest  determined  by such Lender in its sole  discretion  for each
          such Competitive Bid Advance. Any such irrevocable offer shall be made
          by delivering a Competitive Bid Offer to  Administrative  Agent and to
          Borrower,  before 9:00 a.m., Dallas,  Texas time (or, in the case of a
          Competitive  Bid Offer by  Administrative  Agent,  before  8:45  a.m.,
          Dallas, Texas time), on the proposed borrowing date, setting forth the
          maximum amount of Competitive Bid Advances for each maturity date, and
          the aggregate maximum amount for all maturity dates, which such Lender
          would be willing to make  (which  amounts  may  exceed  such  Lender's
          Percentage Share of the Commitments) and the fixed rate of interest at
          which  such  Lender  is  willing  to make each  such  Competitive  Bid
          Advance,  which  fixed  rate of  interest  may or may not be,  in such
          Lender's  discretion,  different  for  each  Competitive  Bid  Advance
          (respectively herein a "Competitive Bid Rate").  Borrower shall pay to
          Administrative Agent a fee of $500 on each day that Borrower accepts a
          Competitive Bid Offer.

                                       36


<PAGE>



    (iii) The  Competitive  Bid Offer  delivered by each Lender in response to a
          Request for  Competitive  Bid Offer shall set forth an amount proposed
          to be  loaned by such  Lender  for each  maturity  date  requested  by
          Borrower  that is equal to  $10,000,000  or an  integral  multiple  of
          $1,000,000 in excess thereof.  Any Competitive Bid Offer by any Lender
          that:  (A) does not  substantially  conform  to the form of  Exhibit O
          hereto, (B) contains qualifying,  conditional or similar language, (C)
          proposes  terms  other than or in  addition  to those set forth in the
          applicable  Request  for  Competitive  Bid Offer or (D) is received by
          Borrower after the applicable time specified in this subsection, shall
          be rejected by Borrower and Administrative  Agent (and  Administrative
          Agent shall notify the relevant  Lender of such  rejection  for one or
          more of the  matters  described  in the  foregoing  (A) through (D) by
          telephone and telecopy as soon as practicable thereafter).

     (iv) Borrower shall before 10:00 a.m., Dallas,  Texas time, on the proposed
          borrowing date either, in its absolute discretion:

          (A)  withdraw  such  Request  for  Competitive  Bid  Offer  by  giving
               telephonic  notice to that effect; 

          (B)  accept  one (1) or more of the  Competitive  Bid Offers by giving
               telephonic notice to Administrative Agent (immediately  confirmed
               by delivery to Administrative Agent by facsimile  transmission of
               a Bid Acceptance) of the amount of Competitive Bid Advance(s) for
               each relevant maturity date to be made by the relevant  Lender(s)
               (which  amount for each such  maturity  date shall be equal to or
               less than the maximum  amount for such maturity date specified in
               the Competitive Bid Offer of such Lender(s), and for all maturity
               dates included in such Competitive Bid Offer shall be equal to or
               less than the aggregate  maximum amount specified in such Request
               for Competitive Bid Offer for all such maturity dates) and reject
               any  Competitive  Bid Offers not  accepted  by Borrower by giving
               telephonic  notice  to  Administrative  Agent of such  rejection;
               provided,  however,  that (1) Borrower may not accept Competitive
               Bid Offers for any maturity date in an aggregate principal amount
               in  excess  of the  maximum  principal  amount  requested  in the
               related Request for  Competitive  Bid Offer (and  Competitive Bid
               Advances  allocated  to a  Lender  on a  borrowing  date for each
               relevant  maturity  date shall be in a principal  amount equal to
               $10,000,000  or an  integral  multiple  of  $1,000,000  in excess
               thereof);  and (2)  Administrative  Agent shall notify the Lender
               that submitted a Competitive  Bid Offer for  such Business Day of

                                       37


<PAGE>



               Borrower's decision by  telecopying to each such Lender a copy of
               the Bid  Acceptance by no later than  12:00 noon,  Dallas,  Texas
               time,  on  the  borrowing  date  specified  in  the  Request  for
               Competitive Bid Offer; or

          (C)  Borrower  may accept or reject any  Competitive  Bid  Offer(s) in
               whole or in part;  provided  that after giving effect to any such
               accepted  Competitive Bid Offer(s),  the sum of (i) the aggregate
               principal  amount of the Revolving  Loans and Swing Line Advances
               outstanding at such time, and (ii) the aggregate principal amount
               of Competitive  Bid Advances  outstanding at such time,  does not
               exceed the Facility Amount.

     (v)  If  Borrower  notifies   Administrative   Agent  that  a  Request  for
          Competitive Bid Offer is withdrawn  pursuant to clause (iv) above, the
          Competitive Bid Advance requested thereby shall not be made.

     (vi) Each Lender which is to make a Competitive  Bid Advance shall,  before
          1:00 p.m., Dallas,  Texas time, on the borrowing date specified in the
          Request for Competitive Bid Offer applicable  thereto,  make available
          to Administrative  Agent in immediately  available funds the amount of
          each Competitive Bid Advance to be made by such Lender. Administrative
          Agent shall deposit such funds to an account designated by Borrower by
          no later than 1:15  p.m.,  Dallas,  Texas  time,  on such date.

    (vii) Borrower shall repay to Administrative  Agent, for the account of each
          Lender which has made a Competitive Bid Advance,  on the maturity date
          of each  Competitive  Bid  Advance  (such  maturity  date  being  that
          specified by Borrower for repayment of such Competitive Bid Advance in
          the  related  Request  for  Competitive  Bid  Offer)  the then  unpaid
          principal amount of such  Competitive Bid Advance.  Borrower shall not
          have the right to prepay any principal  amount of any  Competitive Bid
          Advance.  If any Lender  makes a  Competitive  Bid Advance on a day on
          which  Borrower  is to  repay  all  or  any  part  of  an  outstanding
          Competitive  Bid Advance from such  Lender,  if requested by Borrower,
          such  Lender  shall  apply the  proceeds  of its new  Competitive  Bid
          Advance to make such repayment  and, in such instance,  only an amount
          equal to the difference (if any) between the amount being borrowed and
          the amount  being  repaid  shall be made  available  by such Lender to
          Administrative Agent as provided in Section  2.22(b)(vi),  or remitted
          by  Borrower  to  Administrative  Agent as  provided  in this  Section
          2.22(b)(vii), as the case may be.

                                       38


<PAGE>



   (viii) Borrower shall  pay interest  on the unpaid  principal  amount of each
          Competitive Bid Advance from the borrowing date to the stated maturity
          date thereof,  at the rate of interest  determined  pursuant to clause
          (b) (ii) above  (calculated  on the basis of a 360 day year for actual
          days elapsed  including the first but excluding the last),  but not in
          excess of the Maximum  Lawful Rate,  payable on the maturity date with
          respect to such  Competitive Bid Advance and, if such maturity date is
          more  than 90 days  after  the date of  making  such  Competitive  Bid
          Advance,  on such ninetieth day and each ninetieth day occurring after
          such ninetieth day until the maturity date. If all or a portion of the
          principal of or interest on any  Competitive  Bid Advance shall not be
          paid when due  (whether at the stated  maturity,  by  acceleration  or
          otherwise),  without  limiting  any  rights of any  Lender  under this
          Agreement,  (i) such overdue principal amount shall bear interest from
          the date on which such  payment was due (other  than on the  scheduled
          maturity date with respect  thereto) at the Default  Rate,  but not in
          excess of the  Maximum  Lawful  Rate,  until  paid in full (as well as
          after as before  judgment) and (ii) such overdue  interest  shall bear
          interest  from the date on which  payment was due at the Default Rate,
          but not in excess of the Maximum  Lawful Rate,  until paid in full (as
          well as after as before judgment).

         (c)      The  Competitive  Bid  Advances  made by each Lender  shall be
                  evidenced by a single  promissory note of Borrower  payable to
                  the order of such Lender  substantially in the form of Exhibit
                  A-3  attached  hereto,  with  appropriate  insertions  (herein
                  called  a   "Competitive   Bid  Note").   The  date,   amount,
                  Competitive Bid Rate and maturity date of each Competitive Bid
                  Advance made by a Lender to Borrower, and each payment made on
                  account of the  principal  thereof,  shall be recorded by such
                  Lender on its books.

         (d)      The  Competitive  Bid  Advances  will be used by  Borrower  to
                  provide working capital and for the general business  purposes
                  of Borrower and its Subsidiaries.  No Competitive Bid Advances
                  shall be used for the purpose of  purchasing  or carrying  any
                  Margin Stock in violation of the Margin Regulations.

         (e)      The obligation of Lenders to make each Competitive Bid Advance
                  after timely  acceptance by Borrower is further subject to the
                  conditions contained in Article 3.

         (f)      Borrower  shall  not be  required  to accept  Competitive  Bid
                  Offers  on  the  basis  of the  lowest  Competitive  Bid  Rate
                  offered, but may in its sole discretion accept any Competitive
                  Bid Offer regardless of the Competitive Bid Rate(s) offered.

                                       39


<PAGE>



                                    ARTICLE 3

                         CONDITIONS PRECEDENT TO LENDING

         Section 3.1   Initial   Conditions   Precedent.    No  Lender  has  any
obligation  to make  its first  Revolving  Loan Advance,  Swing Line  Advance or
Competitive Bid Advance unless:

(a)  Administrative  Agent shall have received all of the following  with copies
     for each Lender, at Administrative Agent's office in Midland, Texas:

     (1)  This Agreement,  the Notes, those Security  Instruments and Guaranties
          listed  on  Schedule  5  hereto,   any  other  documents  required  in
          connection  herewith,  each duly  executed and  delivered and in form,
          substance and date satisfactory to Managing Agents.

     (2)  The following certificates:

          (i)  an  "Omnibus  Certificate"  of  the  Secretary  or  an  Assistant
               Secretary  and of a Designated  Officer,  which shall contain the
               names and  signatures  of the officers of Borrower  authorized to
               execute  Loan  Documents  and which  shall  certify to the truth,
               correctness and completeness of the following  exhibits  attached
               thereto:  (A) a copy of resolutions  duly adopted by the Board of
               Directors  of  Borrower  and in full force and effect at the time
               this Agreement is entered into, authorizing the execution of this
               Agreement  and  the  other  Loan  Documents  delivered  or  to be
               delivered  in  connection  herewith and the  consummation  of the
               transactions  contemplated herein and therein,  (B) a copy of the
               charter  documents  of  Borrower  and  all  amendments   thereto,
               certified by the appropriate official of Borrower's  jurisdiction
               of  organization,  and  (C) a  copy  of  the  bylaws  or  similar
               governing  documents of Borrower  (provided  that,  to the extent
               Borrower has previously provided  Administrative  Agent certified
               copies of the  documents  described  in (B) and (C)  above,  such
               Omnibus Certificate may omit such documents,  but shall include a
               statement  that  such  documents  have not been  modified  in any
               respect since the date last so provided to Administrative  Agent,
               except as may be specifically  noted in such Omnibus  Certificate
               with appropriate attachments); and

          (ii) a "Compliance  Certificate" of a Designated  Officer of Borrower,
               of even date with such Revolving Loan Advance, Swing Line Advance
               or Competitive  Bid Advance,  in which  such officer certifies to
               the  satisfaction of the conditions set out in Section 3.2(a) and
               (b) and that all conditions hereunder have been satisfied.

                                       40


<PAGE>




     (3)  A certificate (or certificates) of the due formation, valid  existence
          and  good  standing of Borrower in its jurisdiction  of  organization,
          issued  by  the appropriate authorities of such jurisdiction.

     (4)  The  favorable  opinion  of  counsel  for  Borrower,  Parent  and  the
          Restricted   Subsidiaries,   given  upon  their  express  instructions
          substantially in the form set forth as Exhibit H attached hereto.

     (5)  Documents  similar  to those  specified  in Section  3.1(a)(2)(i)  and
          3.1(a)(3)  with  respect  to  (i)  Parent  and  (ii)  each  Restricted
          Subsidiary  which  is or will be  party to a  Security  Instrument  or
          Guaranty on the date hereof.

     (6)  A  certificate  of a  Designated  Officer of Borrower as to  insurance
          concerning  the  material  assets  of  Obligors.  Lenders  agree  that
          Obligors'  insurance coverage disclosed on Schedule 4 is acceptable at
          the date hereof.

(b)  Except as disclosed to the Lenders in the Disclosure  Schedule or otherwise
     in writing  prior to the  execution  hereof and not objected to by Required
     Lenders,  there  shall be no pending or  threatened  litigation,  action or
     proceeding  against  Borrower,  Parent,  Petroleum  or Mesa or any of their
     respective Subsidiaries which, if adversely determined, could reasonably be
     expected to have a Material Adverse Effect.

(c)  No event or condition shall have occurred since December 31, 1996, which is
     reasonably expected to result in a Material Adverse Effect.

(d)  After  giving  effect to such  Revolving  Loan  Advances,  Competitive  Bid
     Advances  and  Swing  Line  Advances,  Borrower  and  Lenders  shall  be in
     compliance with the Margin Regulations.

(e)  The  mergers  among  Petroleum,   Mesa,  Mesa  Operating  and  Parent  (the
     "Mergers")  shall have been  consummated as contemplated by and pursuant to
     that certain Amended and Restated  Agreement and Plan of Merger dated April
     6, 1997 (the "Merger  Agreement"),  among such parties,  and Administrative
     Agent shall have received (i) satisfactory  evidence of the consummation of
     such Mergers and (ii) a certificate  from a Designated  Officer of Borrower
     certifying that the Mergers have been consummated.

                                       41


<PAGE>



(f)  A certificate of a Designated  Officer of Borrower  certifying that (i) all
     representations and warranties made by any Obligor in this Agreement or any
     other Loan Document are true and correct as of the Effective  Date and (ii)
     that all  conditions  precedent  to the initial  Advance  contained in this
     Agreement  or  any  other  Loan  Document  have  been  satisfied  as of the
     Effective Date.

(g)  All  requisite  Governmental  Authorities  and  third  parties  shall  have
     approved  or  consented  to  the  Mergers  and  all  related  transactions,
     including,  without limitation,  the issuance,  closing and funding of this
     Agreement  and the  facilities  thereunder,  to the  extent  required.  All
     applicable  appeal  periods  shall have  expired and there shall be, in the
     judgment of the Managing Agents, in their sole discretion,  no governmental
     or  judicial  action,  actual or  threatened,  restraining,  preventing  or
     imposing burdensome conditions on the Mergers and all related transactions,
     including,  without limitation,  the issuance,  closing and funding of this
     Agreement and the facilities thereunder.

(h)  Administrative  Agent shall have received  documentation  of the release of
     all Liens  associated  with the  Existing  Mesa  Facility  and the Existing
     Petroleum Facility,  in form and substance acceptable to the Administrative
     Agent, in its sole discretion.

(i)  Managing  Agents shall have received  copies of all  financial  statements,
     reports,  notices and proxy  statements sent by Parent to its  stockholders
     and all SEC filings concerning the Mergers.

(j)  No  litigation  or  administrative  proceeding or other legal or regulatory
     developments prohibiting or enjoining the consummation of the Mergers shall
     exist.

(k)  Exclusive of the Mergers, no "Event of Default" (as defined in the Existing
     Petroleum  Credit Facility) for Petroleum or "Event of Default" (as defined
     in the Existing  Mesa Credit  Facility) for Mesa shall have occurred and be
     continuing.

         Section 3.2   Additional  Conditions  Precedent.   No  Lender  has  any
obligation to make any Revolving Loan Advance,  Competitive Bid Advance or Swing
Line Advance  (including its initial  Advance)  unless the following  conditions
precedent have been satisfied:

(a)  All representations and warranties made by any Obligor in any Loan Document
     shall be true on and  as of the date of such Revolving Loan Advance,  Swing

                                       42


<PAGE>



     Line  Advance or  Competitive  Bid Advance as if such  representations  and
     warranties  had been made as of the date of such  Revolving  Loan  Advance,
     Swing Line  Advance or  Competitive  Bid Advance  (unless  stated to relate
     solely  to  an  earlier  date,  in  which  case  such  representations  and
     warranties shall be true and correct as of such earlier date).

(b)  In the case of the first  Revolving  Loan  Advance,  Swing Line  Advance or
     Competitive Bid Advance, no Event of Default,  and in the case of any other
     Revolving Loan Advance,  Swing Line Advance or Competitive Bid Advance,  no
     Default shall exist at the date of such Revolving Loan Advance,  Swing Line
     Advance or Competitive  Bid Advance or will occur as a result of the making
     of the requested Revolving Loan Advance,  Swing Line Advance or Competitive
     Bid Advance.

                                    ARTICLE 4

                         REPRESENTATIONS AND WARRANTIES

         Section 4.1   Borrower's  Representations  and  Warranties.  To confirm
each Lender's understanding  concerning Borrower and its businesses,  properties
and  obligations,  and to induce Managing  Agents,  Co-Agents and each Lender to
enter  into  this  Agreement  and to make the  Loans to  Borrower,  except as to
matters disclosed herein or in the Disclosure Schedule,  Borrower represents and
warrants to Managing Agents, Co-Agents and each Lender that:

(a)  No  Default.  No Obligor is in  default  in the  performance  of any of the
     covenants and agreements contained herein or under any other Loan Document.
     No event or circumstance has occurred and is continuing which constitutes a
     Default.

(b)  Organization,  Existence and Good Standing.  Each Obligor is duly organized
     or  incorporated,  validly  existing and in good standing under the laws of
     its jurisdiction of organization or incorporation,  having all corporate or
     partnership  powers  required to enter into and carry out the  transactions
     contemplated hereby. Each Obligor is duly qualified,  in good standing, and
     authorized  to do  business  in all other  jurisdictions  within the United
     States of America and the  Commonwealth of Australia  wherein the character
     of the  properties  owned  or  held  by it or the  nature  of the  business
     transacted by it makes such qualification necessary, except for any lack of
     qualification,  good standing or authorization that could not reasonably be
     expected  to have a Material  Adverse  Effect.  Each  Obligor has taken all
     actions  customarily taken in order to enter, for the purpose of conducting
     business or owning property,  each jurisdiction  outside  the United States
     wherein the character of the  properties  owned or held by it or the nature
     of the business  transacted by it makes such actions desirable,  except for
     any failure or other matter that could not reasonably be expected to have a
     Material Adverse Effect.

                                       43


<PAGE>



(c)  Authorization.  Each Obligor has duly taken all  corporate  or  partnership
     action  necessary to authorize the execution and delivery by it of the Loan
     Documents to which it is a party and to authorize the  consummation  of the
     transactions  contemplated  thereby and the  performance of its obligations
     thereunder. Borrower is duly authorized to borrow funds hereunder.

(d)  No Conflicts or Consents. The execution and delivery by each Obligor of the
     Loan Documents to which it is a party,  the  performance by each Obligor of
     its  obligations  under such Loan  Documents,  and the  consummation of the
     transactions contemplated by the various Loan Documents, including, without
     limitation,  the  consummation  of the  Mergers,  do not and  will  not (1)
     conflict   with  any   provision   of  the  articles  or   certificate   of
     incorporation,  bylaws,  charter,  partnership  agreement or certificate or
     other governing document of such Obligor,  or (2) except as to matters that
     could not reasonably be expected to have a Material Adverse Effect,  result
     in the acceleration of any Debt owed by such Obligor,  or conflict with any
     law, statute, rule, regulation, or material agreement,  judgment,  license,
     order or permit applicable to or binding upon such Obligor,  or require the
     consent, approval,  authorization or order of, or notice to or filing with,
     any  Governmental  Authority  or third  party,  or result in or require the
     creation  of any Lien  upon  any  material  assets  or  properties  of such
     Obligor, except (i) as permitted in the Loan Documents and (ii) for filings
     and recordings of the Security Instruments.

(e)  Enforceable  Obligations.  This  Agreement is, and the other Loan Documents
     when  duly  executed  and  delivered  will be,  legal,  valid  and  binding
     obligations of each Obligor which is a party hereto or thereto, enforceable
     in accordance with their terms except as such enforcement may be limited by
     bankruptcy,  insolvency or similar laws of general application  relating to
     the enforcement of creditors' rights generally and by general principles of
     equity.

(f)  Financial Statements.

     (i)  The Updated Financial Statements fairly present Mesa's and Petroleum's
          financial  position at the respective dates thereof and the results of
          Mesa's and  Petroleum's  operations  and cash flows for the respective
          periods  thereof.  From  the  date of the  audited  Updated  Financial
          Statements to the Effective  Date no change has occurred in Mesa's and
          Petroleum's Consolidated financial condition which could reasonably be
          expected to result in a Material  Adverse Effect,  except as reflected
          in  the Disclosure Schedule.  All  Updated Financial  Statements  were
          prepared in accordance with GAAP as in effect on the date thereof.

     (ii) The Unaudited Pro Forma Financial Statements of Parent for the periods
          ending  December  31, 1996 and March 31, 1997  contained  in the Proxy
          Statement,  dated June 27,  1997,  fairly  present  Parent's pro forma
          financial  position at the respective dates thereof and the results of
          Parent's  pro  forma  operations  and cash  flows  for the  respective
          periods  thereof.  From the date of such  financial  statements to the

                                       44


<PAGE>



          Effective  Date no  change  has  occurred  in  Mesa's  or  Petroleum's
          Consolidated financial condition which could reasonably be expected to
          result in a Material Adverse Effect on Parent's Pro Forma Consolidated
          Financial  Condition,  except as reflected in the Disclosure Schedule.
          All such financial statements were prepared in accordance with GAAP as
          in effect on the date thereof.

(g)  Other  Obligations.  As of the Effective Date,  neither Borrower nor any of
     its  Consolidated  Subsidiaries  has any outstanding  Debt which is, in the
     aggregate,  material  to  either  Petroleum  or Mesa and  their  respective
     Consolidated   Subsidiaries   and  not  shown  in  the  Updated   Financial
     Statements.

(h)  Full Disclosure.  No certificate,  statement or other information delivered
     herewith or heretofore by any  Designated  Officer of any Obligor to either
     of  Managing  Agents,  Co-Agents  or any  Lender  in  connection  with  the
     negotiation  of  this  Agreement  or in  connection  with  any  transaction
     contemplated  hereby  contains  any untrue  statement of a fact or omits to
     state  any fact  known to  Petroleum,  Mesa,  or any  Obligor  (other  than
     industry-wide  risks  normally  associated  with the  types  of  businesses
     conducted by Petroleum,  Mesa or Obligors) necessary to make the statements
     contained  herein or therein not  misleading  as of the date made or deemed
     made,  except to the extent that any untrue statement or omission could not
     reasonably be expected to have a Material Adverse Effect.

(i)  Litigation.  Except as disclosed in the Updated Financial  Statements or in
     the  Disclosure  Schedule:  (1)  there  are no  actions,  suits  or  legal,
     equitable,  arbitrative or administrative  proceedings  pending, or, to the
     knowledge  of  Borrower,   threatened,   against  any  Obligor  before  any
     Governmental Authority that could reasonably be expected to have a Material
     Adverse Effect,  and (2) there are no outstanding  judgments,  injunctions,
     writs,  rulings  or  orders  by any  such  Governmental  Authority  against
     Borrower,  Petroleum  or  Mesa  or any  of  their  respective  Consolidated
     Subsidiaries  which could reasonably be expected to have a Material Adverse
     Effect.

(j)  Environmental  Matters.  The  liabilities  and  costs of  Borrower  and its
     Consolidated   Subsidiaries   related   to   compliance   with   applicable
     Environmental  Laws (as in effect on the date on which this  representation
     is made or deemed made) could not reasonably be expected to have a Material
     Adverse Effect.

(k)  Title to Properties.  Each Obligor has good and defensible  title to all of
     its material  properties  and assets,  except any failure,  defect or other
     matter that could not, in the  aggregate,  reasonably be expected to have a
     Material Adverse Effect.

(l)  Investment  Company  Act.  Neither  Parent  or  Borrower  nor any of  their
     respective   Subsidiaries   is  an  "investment   company"  or  a  "company
     controlled"  by  an  "investment  company",   within  the  meaning  of  the
     Investment Company Act of 1940, as amended.

                                       45


<PAGE>


(m)  Public Utility Holding  Company Act.  Neither Parent or Borrower nor any of
     their  respective  Subsidiaries  is a "holding  company",  or a "subsidiary
     company" of a "holding  company",  or an "affiliate" of a "holding company"
     or of a "subsidiary company" of a "holding company",  or a "public utility"
     within the meaning of the Public  Utility  Holding  Company Act of 1935, as
     amended.

(n)  Principal  Business  Offices.  As of the  Effective  Date,  each  Obligor's
     principal  place of business and chief  executive  office is located at the
     place described in the Disclosure Schedule.

(o)  Solvency. Each Obligor is solvent and will continue to be solvent after the
     making and guarantying of the Loans.

(p)  Organization.  As of the Effective Date, the organization  chart of Parent,
     Borrower and their  respective  Subsidiaries set forth on Exhibit I is true
     and correct in all material respects. As of the Effective Date, Borrower or
     a  Restricted  Subsidiary  owns all of the issued and  outstanding  capital
     stock  of  each  Restricted  Subsidiary.  As  of  the  Effective  Date,  no
     Restricted Subsidiary has issued any securities  convertible into shares of
     its stock or any options (except as set forth in the Disclosure  Schedule),
     warrants or other rights to acquire such shares or  securities  convertible
     into such shares and the  outstanding  capital stock and securities of each
     Restricted Subsidiary is owned by Borrower or another Restricted Subsidiary
     free and clear of all Liens,  warrants,  options or rights of others of any
     kind whatsoever, except for Permitted Liens.

(q)  Use of Proceeds;  Margin Stock. Borrower and its Subsidiaries shall use (i)
     the  initial  Revolving  Loan  Advance  (1) to  discharge  all  outstanding
     obligations  under  the  Existing  Petroleum  Credit  Facility  and  (2) to
     discharge  all  outstanding  obligations  under the  Existing  Mesa  Credit
     Facility,  and (ii) all Revolving Loan Advances,  Competitive  Bid Advances
     and Swing Line  Advances  for its and their  respective  general  corporate
     purposes.  In no event  shall the funds from any  Revolving  Loan  Advance,
     Swing  Line  Advance  or  Competitive  Bid  Advance  be  used  directly  or
     indirectly by any Persons for personal,  family,  household or agricultural
     purposes or for the purpose, whether immediate,  incidental or ultimate, of
     purchasing,  acquiring  or  carrying  any  "margin  stock"  or any  "margin
     securities"  (as such  terms are  defined  in the  Margin  Regulations)  in
     violation  of the Margin  Regulations,  or for the  purpose of  reducing or
     retiring  any  indebtedness  which was  originally  incurred to purchase or
     carry  "margin  stock" or "margin  securities"  in  violation of the Margin
     Regulations,  or to extend credit to others  directly or indirectly for the
     purpose  of  purchasing  or  carrying  any  such  margin  stock  or  margin
     securities in violation of the Margin Regulations.  Borrower is not engaged
     principally,  or as one of Borrower's important activities, in the business
     of  extending  credit to others for the purpose of  purchasing  or carrying
     such margin stock or margin securities.  Neither any Obligor nor any Person
     acting on behalf of any  Obligor  has taken or will take any  action  which
     might cause this Agreement,  the Notes, or any Guaranty,  any Loan Document

                                       46



<PAGE>



     or any Loan to violate the Margin  Regulations  or to violate  Section 7 of
     the Securities Exchange Act of 1934, or any rule or regulation  thereunder,
     in each case as now or hereafter in effect.

(r)  Liens Under the Security Instruments.    Upon the execution and delivery of
     the  Security  Instruments in accordance herewith,   and  where appropriate
     the filing and recordation thereof with the appropriate filing or recording
     officers in each of the necessary jurisdictions, the Liens  granted  and to
     be granted  by any Obligor to  Lenders or the Trustee (as defined in any of
     the Security  Instruments)  on behalf of Lenders  in such Obligor's  assets
     pursuant to the Security Instruments will be validly created, perfected and
     first priority Liens, subject only to Permitted Liens.

         Section 4.2   Representation by Lenders.  Each Lender hereby represents
that it will acquire its Notes for its own account in the ordinary course of its
commercial lending business; however, such Lender may sell or otherwise transfer
its Notes, any participation  interest or other interest in its Notes, or any of
its other  rights and  obligations  under the Loan  Documents  as  permitted  by
Section 8.8.


                                    ARTICLE 5

                              COVENANTS OF BORROWER

         Section 5.1   Affirmative  Covenants.  To  conform  with the  terms and
conditions  under  which each Lender is willing to have  credit  outstanding  to
Borrower, and to induce Managing Agents, Co-Agents and each Lender to enter into
this  Agreement and make the Loans to Borrower,  unless  Required  Lenders shall
have  previously  agreed  otherwise  in writing,  Borrower  and, as  applicable,
Parent,  severally for itself and their  respective  Subsidiaries  covenants and
agrees that:

(a)  Payment and  Performance.  Borrower  will pay all amounts due from it under
     the Loan  Documents in accordance  with the terms thereof and will observe,
     perform and comply with every covenant, term and condition expressed in the
     Loan  Documents,  and will  cause each  Obligor  which is a  Subsidiary  of
     Borrower  to perform  and comply with every  covenant,  term and  condition
     expressed in the Loan Documents and applicable to such Obligor.

(b)  Books,  Financial  Statements and Reports.  Parent and Borrower will at all
     times maintain full and  materially  accurate books of account and records.
     Parent  and  Borrower  will  maintain  and  will  cause  their   respective
     Subsidiaries to maintain a standard system of accounting and will cause the
     following  statements  and reports to be delivered  to Managing  Agents and
     each Lender at Borrower's expense:

     (1)  As soon as  available,  and in any event within 120 days after the end
          of  each  Fiscal  Year,   complete  audited   Consolidated   financial
          statements of Parent and its Subsidiaries and unaudited  consolidating

                                       47



<PAGE>



          balance  sheets  and  statements  of  operations  of  Parent  and  its
          Subsidiaries,  prepared in reasonable  detail in accordance with GAAP;
          such audited statements to be accompanied by an opinion,  by KPMG Peat
          Marwick,  or such other  independent  certified public  accountants of
          nationally  recognized standing selected by Parent,  stating that such
          Consolidated financial statements have been so prepared.  Parent will,
          together with each set of such financial statements delivered pursuant
          to this Section, furnish a certificate in the form of Exhibit J signed
          by a Designated  Officer of Borrower  stating that, to the best of his
          knowledge,  (i) such  financial  statements are accurate and complete,
          and (ii) no  Default  or Event of  Default  exists  at the end of such
          Fiscal  Quarter or at the time of such  certificate  or specifying the
          nature  and  period  of  existence  of any  such  Default  or Event of
          Default.   Such  certificate   shall  contain   calculations   showing
          compliance (or  noncompliance)  at the end of such Fiscal Quarter with
          the requirements of Sections 5.3(a) and (b).

     (2)  As soon as available, and in any event within 60 days after the end of
          the  first  three  Fiscal  Quarters  in each  Fiscal  Year,  unaudited
          Consolidated  financial  statements of Parent and its Subsidiaries and
          unaudited  consolidating balance sheet and statements of operations of
          Parent and its Subsidiaries as of the end of such Fiscal Quarter,  all
          in reasonable detail and prepared in accordance with GAAP,  subject to
          changes  resulting from year-end  adjustments.  Parent will,  together
          with each set of such financial  statements delivered pursuant to this
          Section,  furnish a  certificate  in the form of Exhibit J signed by a
          Designated  Officer  of  Borrower  stating  that,  to the  best of his
          knowledge,  (i) such  financial  statements are accurate and complete,
          and (ii) no  Default  or Event of  Default  exists  at the end of such
          Fiscal  Quarter or at the time of such  certificate  or specifying the
          nature  and  period  of  existence  of any  such  Default  or Event of
          Default.   Such  certificate   shall  contain   calculations   showing
          compliance (or  noncompliance)  at the end of such Fiscal Quarter with
          the requirements of Sections 5.3(a) and (b).

     (3)  Promptly  after  transmittal  or  filing,   copies  of  all  financial
          statements,  reports,  notices and proxy  statements sent by Parent to
          its stockholders and all registration statements, periodic reports and
          other  statements  and  schedules  filed  by  Parent  or  any  of  its
          Subsidiaries with any securities exchange, the Securities and Exchange
          Commission or any similar Governmental Authority.

                                       48



<PAGE>



(c)  Other  Information  and  Inspections.  Parent and Borrower  will furnish to
     Managing Agents and each Lender any information which Administrative Agent,
     on  behalf  of any  Lender,  may from time to time  reasonably  request  in
     writing  concerning  any  covenant,  provision  or  condition  of the  Loan
     Documents or any matter in connection  with  Parent's,  Borrower's  and its
     Subsidiaries'  businesses and  operations.  Parent and Borrower will permit
     and  will  cause   each  of  their   respective   Subsidiaries   to  permit
     representatives of Agents and Lenders (including  independent  accountants,
     agents and attorneys), at the expense and risk of the applicable Lender, to
     visit and inspect,  during normal business hours and upon reasonable notice
     any of Parent's or Borrower's or such Subsidiaries' property, including its
     books of account,  other books and  records,  and any  facilities  or other
     business  assets,  and to make extra copies  therefrom and  photocopies and
     photographs  thereof,  and to write down and record  any  information  such
     representatives obtain, and Parent and Borrower shall permit and will cause
     each of their  respective  Subsidiaries to permit Agents and the Lenders or
     their  representatives,  to  investigate  and  verify the  accuracy  of the
     information  furnished to Administrative  Agent or any Lender in connection
     with the Loan  Documents and to discuss all such matters with its officers,
     employees  and  representatives;  provided,  however,  that any such visit,
     inspection,  investigation  or  verification  or discussion with respect to
     Parent or Borrower  taking place at a time when  Borrower has been notified
     in  writing by  Administrative  Agent of the  existence  of a Default or an
     Event  of  Default  applicable  to  Borrower  which  has  occurred  and  is
     continuing  shall be at the cost and expense of Borrower,  and that neither
     Managing Agents, Co-Agents nor Lenders shall have any obligation to pay any
     costs or  expenses  of Parent or  Borrower  or any other  Obligor or any of
     their   officers,   employees  or   representatives   in  respect   thereof
     irrespective of the existence of any Default or Event of Default.

(d)  Notice of  Material  Events.  Borrower  will  promptly  upon its  awareness
     thereof notify  Administrative  Agent and each Lender (1) of the occurrence
     of any Default or any other event,  which has or may reasonably be expected
     to have, a Material Adverse Effect, (2) of the acceleration of the maturity
     of any Debt owed by any  Obligor or any  default by any  Obligor  under any
     instrument  evidencing or governing  Debt, if such  acceleration or default
     has a Material  Adverse  Effect,  (3) of the occurrence of any  Termination
     Event which may reasonably be expected to have a Material  Adverse  Effect,
     and (4) of the filing of any  litigation or proceeding in which any Obligor
     is a party or of any material  developments in existing litigation in which
     any  Obligor  is a party in which an adverse  decision  may  reasonably  be
     expected to have a Material Adverse Effect.

(e)  Maintenance of Existence and Qualifications.  Parent and Borrower will, and
     will cause  each  Restricted  Subsidiary  to,  maintain  and  preserve  its
     existence as a corporation or  partnership,  as the case may be. Parent and
     Borrower will, and will cause each  Restricted  Subsidiary to, maintain and
     preserve its good standing and its rights and  franchises in full force and
     effect and qualify to do business as a foreign corporation in all states or
     jurisdictions  where required by applicable  law, except for any failure to

                                       49



<PAGE>



     maintain,  preserve  and qualify that could not  reasonably  be expected to
     have a Material Adverse Effect.  Nothing in this Section shall prohibit (i)
     a merger or consolidation permitted by Section 5.2(c) or (ii) a termination
     of such  existence,  good standing,  rights or franchises of any Restricted
     Subsidiary  if  Parent  or  Borrower  determines  in good  faith  that such
     termination  is in the best  interest of the Parent and  Borrower and could
     not reasonably be expected to have a Material Adverse Effect.

(f)  Payment of Taxes and Trade Debt.  Borrower will, and will cause each of its
     Subsidiaries  to,  except for any  failure or other  matter  that could not
     reasonably be expected to have a Material  Adverse Effect,  (1) timely file
     all required tax returns, (2) timely pay all taxes, assessments,  and other
     governmental charges or levies imposed upon it or upon its income,  profits
     or property, and (3) timely pay all trade debt. Borrower and its respective
     Subsidiaries  may,  however,  delay paying or  discharging  any such taxes,
     assessments,  charges,  debts or levies so long as the validity  thereof is
     contested in good faith by appropriate  proceedings  and adequate  reserves
     therefor in accordance  with GAAP have been set aside and  reflected  among
     the books and records of Borrower and its Subsidiaries.

(g)  Insurance.  Borrower will, and will cause each of its  Subsidiaries  to, at
     all times maintain insurance in such amounts and covering such risks as are
     in  accordance  with normal  industry  practice  for  companies  engaged in
     similar  businesses and owning similar  properties in the same general area
     in which Borrower and its Subsidiaries  conduct  business,  which insurance
     (other than prudent self-insurance  programs) shall be by financially sound
     and reputable insurers.

(h)  Payment of Expenses.  Whether or not the transactions  contemplated by this
     Agreement are consummated,  Borrower will promptly pay all reasonable costs
     and  expenses  (including  reasonable  attorneys'  fees)  incurred by or on
     behalf of (1) the Documentation  Agents in connection with the negotiation,
     preparation,   execution  and  delivery  of  the  Loan  Documents  and  any
     amendment,  modification or restatement  thereof, and any and all consents,
     waivers or other documents or instruments,  including  commitment  letters,
     term sheets and any  memorandum  relating  thereto  (provided that Borrower
     shall be obligated to pay only the attorneys'  fees of a common counsel for
     the Documentation  Agents,  Mayer, Brown & Platt), (2) Agents in connection
     with due diligence,  syndication,  travel and  advertising  related to this
     Agreement and the transactions contemplated thereby, and (3) Administrative
     Agent or any Lender in connection with enforcement of the Loan Documents or
     the  defense of  Administrative  Agent's or any  Lender's  exercise  of its
     rights   thereunder.   The  selection  of  Managing   Agents'  counsel  and
     consultants  in  connection  with the matters  described  in the  preceding
     sentence shall be subject to the approval of Borrower, which approval shall
     not be  unreasonably  withheld.  Attorneys' fees reimbursed by Borrower for
     any  amendment,  modification  or restatement of any Loan Document shall be
     estimated and approved by Borrower prior to  incurrence,  such approval not
     to be  unreasonably  withheld.  Attorneys'  fees  reimbursed by Borrower in
     connection  with the  enforcement  of the Loan  Documents or the defense of
     Administrative  Agent's or any  Lenders'  exercise of its rights  hereunder

                                       50



<PAGE>



     shall be for a single law firm per  country  (unless  conflicts  (including
     conflicts  between  Managing  Agents and the other Lenders as determined in
     the reasonable  discretion of the Required Lenders)  otherwise prohibit the
     engagement of a single law firm).

(i)  Compliance  with  Agreements  and Law.  Borrower and Parent will,  and will
     cause each of their  respective  Subsidiaries  to (1) perform all  material
     obligations  it is  required  to perform  under the terms of each  material
     agreement,  contract or other  instrument  or  obligation  to which it is a
     party or by which it or any of its material properties is bound, except for
     any non-performance  that will not have or reasonably be expected to have a
     Material  Adverse  Effect;  and (2)  conduct  its  business  and affairs in
     material  compliance  with all laws,  regulations,  and  orders  applicable
     thereto (including without  limitation  Environmental  Laws) except for any
     non-compliance  that could not  reasonably  be  expected to have a Material
     Adverse Effect.

(j)  Maintenance  of Business.  Borrower  will,  and will cause each  Restricted
     Subsidiary to, maintain as its primary business the exploration, production
     and  development  of  oil,   natural  gas  and  other  liquid  and  gaseous
     hydrocarbons and the gathering,  processing,  transmission and marketing of
     hydrocarbons and activities related or ancillary thereto.

(k)  Operations.  Borrower will, and will cause each  Restricted  Subsidiary to,
     cause all material  properties  to be regularly  operated,  maintained  and
     developed in a good and workmanlike manner, as would a prudent operator and
     in accordance with all applicable federal,  state and local laws, rules and
     regulations,  except for any  failure to so operate,  maintain  and develop
     that could not reasonably be expected to have a Material Adverse Effect.

         Section 5.2   Negative  Covenants.   To  conform  with  the  terms  and
conditions  under  which each Lender is willing to have  credit  outstanding  to
Borrower,  and to induce  Managing  Agents  and each  Lender to enter  into this
Agreement  and make the Loans to Borrower,  unless  Required  Lenders shall have
previously  agreed  otherwise in writing,  Borrower and, as applicable,  Parent,
severally  for itself and their  respective  Subsidiaries  covenants  and agrees
that:

(a)  Limitation  on Debt.  Parent and Borrower will not, and will not permit any
     Restricted Subsidiary to, in any manner owe or be liable for Debt except:

     (1)  the Obligations;

     (2)  Debt pursuant to the Primary Facility;

     (3)  unsecured Debt among Obligors;

     (4)  Debt arising under capital  leases which does not in the aggregate for
          Parent, Borrower and all Restricted Subsidiaries exceed $20,000,000 at
          any  one  time  outstanding; 

                                       51



<PAGE>


     (5)  Debt, other than Debt otherwise  permitted by another  subparagraph of
          this Section  5.2(a),  which,  at the time incurred,  is at prevailing
          market  rates of  interest and contains  convenants and conditions and
          rates of interest and contains  covenants and conditions and events of
          default no more onerous to Obligors than the terms of this  Agreement;
          provided,  that no Default or Event of Default  will  result  from the
          incurrence of such Debt and be continuing;

     (6)  guaranties  of Debt which is the primary  obligation of an Obligor and
          permitted under this Section 5.2(a);

     (7)  Debt  arising  (whether  by  contract  or  as a  result  of  statutory
          liability  of a general  partner)  by virtue  of any  Obligor  being a
          general  partner  of a general  or  limited  partnership  pursuant  to
          agreements  in  effect  on the  Effective  Date not in  excess  of the
          aggregate amounts permitted to be incurred pursuant to such agreements
          on the Effective  Date for all such Debt and other such Debt otherwise
          permitted pursuant to the other  subparagraphs of this Section 5.2(a);
          and

     (8)  Debt  existing on the  Effective  Date which is  disclosed  (i) in the
          Updated  Financial  Statements or (ii) in the Disclosure  Schedule and
          any extensions,  renewals or  replacements  thereof upon terms no more
          onerous to Borrower  than the terms of this  Agreement or the terms of
          the instruments evidencing such Debt as of the date of this Agreement.

(b)  Negative  Pledge.  Borrower and Parent will not, and will not permit any of
     their respective  Restricted  Subsidiaries to, create,  assume or permit to
     exist  any Lien  upon any of their  respective  material  property,  except
     Permitted Liens.

(c)  Limitation  on Mergers.  Except as expressly  provided  Borrower and Parent
     will not,  and will not permit  any of their  Restricted  Subsidiaries  to,
     merge or  consolidate  with or into any other business  entity,  except (1)
     Parent or Borrower may be party to a merger or consolidation so long as the
     surviving  entity is Parent or Borrower  and no Default  will exist and the
     Obligations  do not exceed the Facility  Amount after giving effect thereto
     and  (2)  any  Restricted  Subsidiary  may  be a  party  to any  merger  or
     consolidation  so long as the surviving  entity is a Restricted  Subsidiary
     and any Guaranty of, or Pledge  Agreement  by, such  Restricted  Subsidiary
     continues  as to such  surviving  entity,  no Default  will exist,  and the
     Obligations do not exceed the Facility Amount after giving effect thereto.

(d)  Limitation on  Disposition  of Capital  Stock of  Restricted  Subsidiaries.
     Borrower will not, and will not permit any Restricted  Subsidiary to, sell,
     transfer  or  otherwise   dispose  of  capital  stock  of  any   Restricted
     Subsidiary,  except that Borrower and any  Restricted  Subsidiary may sell,
     issue, transfer or otherwise dispose of the capital stock of any Restricted
     Subsidiary to Parent, Borrower or to another Restricted Subsidiary.

                                       52



<PAGE>



(e)  Limitation on Restricted  Payments.  Parent and Borrower will not, and will
     not permit any Restricted Subsidiary to, make Restricted Payments in excess
     of  $50,000,000 in the aggregate for the duration of this Agreement for all
     such Restricted  Payments;  provided,  however,  that in the event that any
     Unrestricted  Subsidiary  of  Borrower  is  determined  to be a  Restricted
     Subsidiary of Borrower for purposes of this Agreement, then for purposes of
     determining  compliance with this Section,  all Restricted Payments made to
     such Unrestricted  Subsidiary shall be deducted from the aggregate total of
     all  Restricted  Payments  made  for the  duration  of this  Agreement.  No
     Restricted  Payment  may be made (1) if the  Obligations  shall  exceed the
     Facility  Amount or (2), if any  Default  or Event of  Default  shall  have
     occurred and be continuing,  or (3) if as a result thereof,  any Default or
     Event of Default shall have occurred and be continuing.

(f)  Transactions  with  Affiliates.  Parent and Borrower will not, and will not
     permit  any of its  Restricted  Subsidiaries  to,  engage  in any  material
     transaction  with any of  Borrower's  Affiliates  on terms  which  are less
     favorable  than  those  which  would  have been  obtainable  at the time in
     arm's-length  dealing with Persons  other than such  Affiliates,  provided,
     however  that  such  restriction  shall  not  apply to  transactions  among
     Borrower   and  its   Restricted   Subsidiaries,   (ii)  among   Restricted
     Subsidiaries.

(g)  Limitations on Restricted Subsidiaries. Parent and Borrower will not permit
     any Restricted Subsidiary to become subject to covenants which:

     (1)  restrict dividends or dividend capacity;

     (2)  restrict loans and advances to Borrower;

     (3)  restrict  the ability to make tax payments or  management  payments to
          Borrower; or

     (4)  restrict the capitalization structure of any Restricted Subsidiary.

(h)  Limitation   on   Sale/Leasebacks.   Obligors   will  not  enter  into  any
     arrangement,  directly or  indirectly,  with any Person whereby any Obligor
     shall sell or transfer any material  asset,  and whereby any Obligor  shall
     then or  immediately  thereafter  rent or lease as lessee such asset or any
     part thereof.

(i)  Conversion of Restricted Subsidiary to Unrestricted Subsidiary.  Parent and
     Borrower  may  convert  any  Restricted   Subsidiary  to  an   Unrestricted
     Subsidiary by giving  Administrative Agent at least five (5) Business Days'
     notice of such  conversion  in the form of  Exhibit  K-1  attached  hereto;
     provided that (1) no Restricted Subsidiary shall be so converted so long as
     it owns or will thereafter own, directly or indirectly, any interest in any
     material asset or in another Restricted Subsidiary unless the value of such

                                       53



<PAGE>



     material  assets,  together with the aggregate of all  Restricted  Payments
     made and the value of any other material assets  determined as aforesaid of
     any Restricted  Subsidiaries converted to Unrestricted  Subsidiaries do not
     exceed in the aggregate the limitation on Restricted  Payments contained in
     Section 5.2(e) hereof,  and (2) no such  conversion  shall be made if after
     giving effect to such  conversion,  any Default would exist.  Upon any such
     conversion of a Restricted Subsidiary to an Unrestricted  Subsidiary,  such
     Subsidiary shall be released from its obligations  under its Guaranty,  and
     Managing   Agents  and  Lenders   shall   execute  and  deliver  a  release
     substantially in the form of Exhibit K-2 hereto.

(j)  Margin  Securities.  Proceeds  of the Loans will not be used to purchase or
     carry Margin Stock except in compliance with the Margin Regulations.

         Section 5.3   Financial  Covenants.  To  conform  with  the  terms  and
conditions  under  which each Lender is willing to have  credit  outstanding  to
Borrower,  and to induce  Managing  Agents  and each  Lender to enter  into this
Agreement  and make the Loans to Borrower,  unless  Required  Lenders shall have
previously  agreed  otherwise in writing,  Borrower and, as applicable,  Parent,
severally  for itself and their  respective  Subsidiaries  covenants  and agrees
that:

(a)  EBITDAX to  Consolidated  Interest  Expense  Ratio.  The ratio of  Parent's
     "EBITDAX"  to  "Consolidated  Interest  Expense"  for the last four rolling
     Fiscal Quarters will not be less than 3.75 to 1.0; provided,  however, that
     the  EBITDAX  to  Consolidated   Interest  Expense  Ratio  shall  first  be
     calculated on December 31, 1997;  provided further that for the periods for
     calculation  ending on or before September 30, 1998, each reference to "for
     the last four rolling Fiscal Quarters" shall be deemed to be a reference to
     the period from  October 1, 1997 through the date of such  calculation.  As
     used in this paragraph,  the term "Consolidated Interest Expense" means for
     any period,  total interest  expense,  whether paid or accrued,  of Parent,
     Borrower  and  their  respective  Subsidiaries  on  a  Consolidated  basis,
     including,  without limitation,  all commissions,  discounts and other fees
     and  charges  owed with  respect to  Letters  of Credit (as  defined in the
     Primary Facility). As used in this paragraph,  the term "EBITDAX" means for
     any period  the sum of the  amounts  for such  period of  Consolidated  net
     income,  Consolidated  Interest Expense,  depreciation  expense,  depletion
     expense,  amortization expense, federal and state income taxes, exploration
     and  abandonment  expense and other non-cash  charges and expenses,  all as
     determined  on  a  Consolidated  basis  for  Parent,   Borrower  and  their
     respective Subsidiaries.

(b)  Consolidated   Total   Funded  Debt  to  Total   Capitalization.   Parent's
     Consolidated Total Funded Debt to Total  Capitalization will not, as of the
     last day of any Fiscal Quarter, be greater than 60%.

                                       54



<PAGE>



                                    ARTICLE 6

                         EVENTS OF DEFAULT AND REMEDIES

        Section 6.1   Events   of   Default.    Each  of  the  following  events
constitutes an "Event of Default" under this Agreement:

(a)  Borrower  shall  default on the payment when due of any principal on any of
     its Loans or any of its Notes;

(b)  Borrower fails to pay any of its  Obligations  (other than  principal) when
     due and payable,  whether interest in respect of any Loan or any fee or any
     other  amounts  payable  under any of the Loan  Documents  and such failure
     shall continue unremedied for a period of five (5) Business Days; provided,
     however,  that any such Default shall not constitute an Event of Default if
     subsequently  available  information indicates that a payment made when due
     was  insufficient  because of a good faith error in  calculation so long as
     Borrower  shall cure such  deficiency  within five (5) Business  Days after
     Borrower becomes aware of such deficiency;

(c)  any Obligor  fails to duly  observe,  perform or comply with any  covenant,
     agreement,  condition  or provision  set forth in Section  5.1(d) or 5.2 of
     this Agreement;

(d)  any Obligor  fails (other than as referred to in  subsections  (a), (b) and
     (c) above) to duly observe, perform or comply with any covenant, agreement,
     condition or provision of any Loan  Document  applicable to it (even if all
     or part of such agreement or covenant is void or  unenforceable),  and such
     failure is not remedied  within  thirty (30)  Business  Days after  written
     notice thereof shall have been sent to Borrower by Administrative  Agent or
     any Lender;

(e)  any representation or warranty  previously,  presently or hereafter made in
     writing or deemed  made by or on behalf of any Obligor in  connection  with
     any Loan  Document  shall  have been  false or  incorrect  in any  material
     respect  on any date on or as of which  made and  either  (1) an  Executive
     Officer  of  Borrower  had actual  knowledge  that such  representation  or
     warranty was false or  incorrect in a material  respect when made or (2) if
     no Executive  Officer had such knowledge,  such  representation or warranty
     shall continue to be false or incorrect in any material respect thirty (30)
     Business  Days  after the  earlier  of an  Executive  Officer  of  Borrower
     obtaining  actual  knowledge  thereof or written  notice thereof shall have
     been sent to Borrower by Administrative Agent;

(f)  any Obligor (1) fails to pay when due Debt in excess of  $20,000,000 or (2)
     breaches or defaults in the  performance  of any agreement or instrument by
     which  any  such  Debt in  excess  of  $20,000,000  is  issued,  evidenced,
     governed,  or secured,  and any such failure,  breach or default  continues
     beyond any applicable period of grace provided therefor;

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<PAGE>



(g)  either (1) any  "accumulated  funding  deficiency"  (as  defined in Section
     412(a) of the  Internal  Revenue  Code of 1986,  as  amended)  in excess of
     $10,000,000 exists with respect to any ERISA Plan, whether or not waived by
     the Secretary of the Treasury or his delegate, or (2) any Termination Event
     which has a Material  Adverse  Effect occurs with respect to any ERISA Plan
     and the then current value of such ERISA Plan's benefit liabilities exceeds
     the then  current  value of such  ERISA  Plan's  assets  available  for the
     payment of such benefit  liabilities  by more than  $10,000,000  (or in the
     case of a  Termination  Event  involving  the  withdrawal  of a substantial
     employer,  the withdrawing  employer's  proportionate  share of such excess
     exceeds such amount);

(h)  any Obligor:

     (1)  suffers   the    commencement   of   any    involuntary    bankruptcy,
          reorganization,  debt arrangement,  winding up, dissolution,  official
          management or  administration,  or other case or proceeding  under any
          bankruptcy  or  insolvency  law or the entry against it of a judgment,
          decree or order for  relief by a court of  competent  jurisdiction  in
          such a case or  proceeding,  which in either case remains  undismissed
          for a period of sixty (60) days;  provided  that each  Obligor  hereby
          expressly authorizes each Agent and each Lender to appear in any court
          proceeding during such sixty (60) day period to preserve,  protect and
          defend  their  rights  under  the  Loan  Documents;  

     (2)  commences a voluntary case under any applicable bankruptcy, insolvency
          or  similar  law  now  or  hereafter  in  effect,  including,  without
          limitation,  the United States Bankruptcy Code or the Corporations Law
          of Australia, as from time to time amended; or applies for or consents
          or  acquiesces  to the entry of an order for relief in an  involuntary
          case  under  any such law,  or  becomes  insolvent  or makes a general
          assignment for the benefit of creditors, or fails generally to pay (or
          admits in writing its inability to pay) its debts as such debts become
          due,  or takes  corporate  or other  action  to  authorize  any of the
          foregoing;

     (3)  suffers  the  appointment  of  or  taking  possession  by a  receiver,
          liquidator, assignee, custodian, trustee, sequestrator,  administrator
          or similar  official of all or a  substantial  part of its assets in a
          proceeding brought against or initiated by it, and such appointment is
          neither made  ineffective nor discharged  within sixty (60) days after
          such event or such  appointment  or taking  possession  is at any time
          consented to, requested by, or acquiesced to by such Obligor;

     (4)  suffers the entry  against it of a final  judgment  for the payment of
          money in excess of $20,000,000 (not covered by insurance  satisfactory
          to  Administrative  Agent  in its  discretion),  unless  the  same  is
          discharged  within thirty (30) days after the date of entry thereof or
          an appeal or appropriate proceeding for review thereof is taken within
          such period and a stay of  execution  pending  such appeal is obtained
          and continues; or

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     (5)  suffers a writ or warrant of attachment  or any similar  process to be
          issued  by  any  court  against  all or any  substantial  part  of its
          property,  and such  writ or  warrant  of  attachment  or any  similar
          process is not stayed or  released  within  thirty (30) days after the
          entry or levy thereof or after any stay is vacated or set aside;

(i)  (a) any person  (other than Parent,  Borrower,  a Restricted  Subsidiary of
     Borrower  or  any  employee   benefit  plan  of  Borrower  or  any  of  its
     Subsidiaries)  or group (as such term is used in Section  13(d) or 14(d)(2)
     of the Securities Exchange Act of 1934, as amended) shall acquire, directly
     or indirectly,  beneficial  ownership of an aggregate of 35% or more of the
     issued and  outstanding  voting stock of Parent or (b) 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 Parent (other than additions  thereto
     or removals therefrom from time to time thereafter approved by a vote of at
     least two-thirds of such Incumbent Directors) shall cease for any reason to
     constitute  50% or more of the  Board of  Directors  of  Parent;  provided,
     however,  that for each determination  period ending on or before September
     30, 1999, each determination period shall be deemed to be a period from the
     Effective Date through the date of such calculation;

(j)  any of the Loan Documents are determined to be invalid or  unenforceable in
     any material respect;

(k)  (1)  any  Restricted   Subsidiary  other   than  any   Foreign   Restricted
          Subsidiary,  and any of their respective Restricted Subsidiaries fails
          to execute  and  deliver to  Collateral  Agent a Guaranty  of the type
          referred to in clause (i) of the definition of  "Guaranty",  within 30
          days of becoming a Restricted Subsidiary;

     (2)  unless and to the extent that any Foreign Restricted Subsidiary or any
          other Restricted  Subsidiary is prohibited from, or subject to adverse
          tax consequences as a result of,  guaranteeing  the Obligations  under
          this  Agreement (a) under Section 956 of the Internal  Revenue Code of
          1986,  as amended,  reformed or otherwise  modified  from time to time
          ("ss.956") (b) pursuant to contractual restrictions in existence prior
          to the Effective Date or (c) as a matter of corporate law, any Foreign
          Restricted  Subsidiary  or any other  Restricted  Subsidiary  fails to
          execute  and  deliver to  Collateral  Agent,  a  Guaranty  of the type
          referred to in clause (i) of the  definition  of  "Guaranty"  together
          with in the case of any  Foreign  Restricted  Subsidiary,  a notice in
          relation to such Guaranty or, in the case of any Restricted Subsidiary
          subject to the  Corporation  Laws of Australia,  a  certificate  under
          Section  206(6) of the  Corporations  Laws of Australia in relation to
          such Guaranty,  in each case (1) as soon as practicable  following the
          termination  or  inapplicability  of  the  contractual   restrictions,

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<PAGE>



          corporate law prohibitions and adverse tax consequences referred to in
          this paragraph or (2) if no such contractual  restrictions,  corporate
          law  prohibitions  and  adverse  tax  consequences  apply,  as soon as
          practicable   following   a   determination   that  such   contractual
          restrictions,  corporate law prohibitions and adverse tax consequences
          do not apply;

(l)  unless and to the extent that (a) any such pledge or mortgage  would result
     in (i) substantial  stamp or similar taxes or (ii) adverse tax consequences
     pursuant to ss.956,  (b) any such pledge or mortgage is  prohibited  either
     (i)  pursuant  to  contractual  restrictions  in  existence  prior  to  the
     Effective  Date or (ii) as a matter of corporate  law, or (c) a Guaranty of
     the type referred to in clause (i) of the definition of "Guaranty" has been
     executed and delivered by the  Restricted  Subsidiary  the capital stock or
     shares of which would otherwise be subject to pledge or mortgage under this
     paragraph, Borrower, or any Subsidiary of Borrower, owning capital stock or
     shares of any Restricted  Subsidiary of any Foreign Restricted  Subsidiary,
     fails (x) to execute and deliver to Collateral Agent the Pledge Agreements,
     together with all issued and outstanding stock or shares of such Restricted
     Subsidiary of such Foreign Restricted  Subsidiary and stock powers or share
     transfers  executed in blank,  together with a either a  certificate  under
     Section 206 (6) of the  Corporations  Law of  Australia  or a notice of the
     type described  in Section  6.1(k)(2)  hereof,  in each case in relation to
     to such Pledge Agreement, as the case may be and if applicable,  as soon as
     practicable  after the termination or  inapplicability  of such contractual
     restrictions  and corporate law  prohibitions  and adverse tax consequences
     referred to in this  paragraph and (y) to repay all  Obligations  and other
     amounts as soon as practical  after the termination or  inapplicability  of
     such  contractual  restrictions  and corporate law prohibitions and adverse
     tax consequences referred to in this paragraph; or

(m)  any  Obligor,  to the  extent  applicable,  fails,  (x)  promptly  upon the
     reasonable  request of the Managing Agents at any time or from time to time
     prior to the applicable  Stock Pledge Release Date, as the case may be, (1)
     to  execute,   acknowledge  or  deliver,   or  to  cause  to  be  executed,
     acknowledged or delivered,  or to register,  record or file, or to cause to
     be registered,  recorded or filed, any document or instrument  necessary or
     advisable or as Required  Lenders may from time to time  reasonably deem to
     be  necessary  or  advisable  in  connection  with  the  grant,   creation,
     preservation,  perfection  or  maintenance,  as first,  prior and perfected
     Liens,  the Liens  created,  or intended to be created,  by the  applicable
     Security Instruments,  subject only to Permitted Liens or (2) to perform or
     to  continue  to  perform  at all times  and from time to time all  actions
     necessary or advisable or reasonably deemed to be necessary or advisable by
     the  Required  Lenders  in  connection  with such  creation,  preservation,
     perfection  and  maintenance;  and (y) to repay all  Obligations  and other
     amounts as soon as practical  after  receipt of the  reasonable  request of
     Managing Agents pursuant to the foregoing clause (x);

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<PAGE>



provided,  however,  that the  foregoing  events  which  affect only  Restricted
Subsidiaries  that  (a)  are  not  guarantors  of the  Obligations,  and (b) are
immaterial (as determined by the Managing Agents),  shall not constitute "Events
of Default"  under this  Agreement.  It is agreed by the parties  hereto that so
long as Borrower or any Restricted  Subsidiary has made reasonable efforts under
the  circumstances  to obtain the approvals  required by Section  205(10) of the
Corporations Law of Australia (if applicable),  the foregoing paragraphs (k)(2),
(l) and (m) shall not require any Restricted  Subsidiaries to provide any pledge
or guaranty  prohibited by corporate law unless the requirements of such Section
205(10) of the Corporations  Law of Australia,  to the extent  applicable,  have
been satisfied.

Upon the occurrence of an Event of Default described in Section  6.1(h)(1),  (2)
or (3) with respect to Borrower,  the Commitments shall automatically  terminate
and all of the  Obligations  shall  thereupon  be  immediately  due and payable,
without  demand,  presentment,  notice of demand or of dishonor and  nonpayment,
protest,  notice of protest,  notice of intention to accelerate,  declaration or
notice of  acceleration,  or any other notice or declaration of any kind, all of
which are hereby  expressly  waived by Borrower and each Obligor who at any time
ratifies or approves this  Agreement.  During the continuance of any other Event
of Default,  Administrative Agent at any time and from time to time upon written
instructions  from Required Lenders (which,  for purposes of this sentence only,
shall be  determined  giving  effect to each  Lender's  outstanding  Swing  Line
Advances  and  Competitive  Bid  Advances)  shall,  by notice to  Borrower  (but
otherwise  without notice to any other  Obligor),  declare the Commitments to be
terminated,  and/or declare any or all of the  Obligations  immediately  due and
payable,  and all  such  Obligations  shall  thereupon  be  immediately  due and
payable,  without  demand,  presentment,  notice of demand  or of  dishonor  and
nonpayment,  protest,  notice of protest,  notice of  intention  to  accelerate,
declaration or notice of acceleration, or any other notice or declaration of any
kind, all of which are hereby  expressly waived by Borrower and each Obligor who
at any time ratifies, approves or guaranties this Agreement.

         Section 6.2   Remedies.  If any Default shall occur and be  continuing,
each Lender or Administrative Agent on behalf of Lenders may protect and enforce
its rights under the Loan Documents by any appropriate  proceedings,  including,
without  limitation,  proceedings  for specific  performance  of any covenant or
agreement  contained  in any Loan  Document,  and each  Lender may  enforce  the
payment of any Obligations due it or enforce any other legal or equitable rights
which it may have. Additionally,  under such circumstances, the Required Lenders
or, at the direction of Required Lenders,  the Trustee (or Collateral Agent) may
proceed to protect the  Lenders'  rights  under the  Security  Instruments.  All
rights,  remedies and powers  conferred  upon  Administrative  Agent and Lenders
under the Loan  Documents are  cumulative and not exclusive of any other rights,
remedies or powers available under the Loan Documents or at law or in equity.

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<PAGE>



         Section 6.3   Annulment   of   Acceleration.    If  a   declaration  of
acceleration  is made  pursuant to this  Article 6, then  Required  Lenders,  by
written notice to Borrower and  Administrative  Agent, may collectively  rescind
and annul such  declaration  in its  entirety;  provided,  that at the time such
declaration  is  annulled  and  rescinded:  (a) no  judgment  or decree has been
entered  for  the  payment  of any  moneys  due  pursuant  to any  Note  or this
Agreement;  (b) all  arrears of  interest  upon all the Notes and all other sums
payable under the Notes and this Agreement  (other than principal  amounts which
may have  become  due as a result  of  acceleration),  including  interest  upon
overdue interest,  to the extent payment thereof is lawful, shall have been duly
paid;  and (c) each and every  other  Event of  Default  which  has  theretofore
occurred  shall have been waived  pursuant to Section 8.1 or otherwise made good
or cured.

         Section 6.4   Indemnity.   Borrower  hereby  indemnifies each Agent and
each  Lender,  from and against any and all  liabilities,  obligations,  claims,
losses,  damages,  penalties,  actions,  judgments,  suits,  costs,  expenses or
disbursements (including reasonable fees of attorneys,  accountants, experts and
advisors) of any kind or nature whatsoever (in this Section  collectively called
"liabilities  and  costs")  which to any  extent  (in  whole or in part)  may be
imposed  on,  incurred  by, or asserted  against  such Agent or such Lender as a
result of, arising out of, relating to or in connection with:

(a)  the Loan Documents to which Borrower or one or more of its  Subsidiaries is
     a party or the  rights  provided  therein  (including  the  enforcement  or
     defense thereof);

(b)  the direct or indirect  application or proposed application of the proceeds
     of any Loan to or for Borrower or any of its Subsidiaries;

(c)  any transaction financed or to be financed in whole or in part, directly or
     indirectly,  with the proceeds of any Loan to or for Borrower or any of its
     Subsidiaries;

(d)  any  investigation,  litigation or proceeding  related to any environmental
     cleanup, audit, compliance or other matter (including enforcement) relating
     to any  Environmental  Law or the  condition  of any  facility  or property
     owned, leased or operated by Borrower or any of its Subsidiaries; or

(e)  the  presence  on or under,  or the  escape,  seepage,  leakage,  spillage,
     discharge,  emission,  discharging  or releases from, any facility owned or
     operated by Borrower or any of its  Subsidiaries  of any hazardous or toxic
     substance  (including  any  liabilities  and costs under any  Environmental
     Law),  regardless of whether caused by, or within the control of,  Borrower
     or any of its  Subsidiaries;  or any  misrepresentation,  inaccuracy or any
     breach in or of  Section  4.1(j) or  Section  5.1(i) by or with  respect to
     Borrower or any of its Subsidiaries.

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<PAGE>



The foregoing indemnification shall not apply to the extent such liabilities and
costs are  determined to have  resulted or been caused,  in whole or in part, by
the gross negligence or willful  misconduct on the part of such Agent or Lender.
THE FOREGOING  INDEMNIFICATION  SHALL APPLY WHETHER OR NOT SUCH  LIABILITIES AND
COSTS  ARE IN ANY WAY OR TO ANY  EXTENT  CAUSED,  IN WHOLE  OR IN  PART,  BY ANY
NEGLIGENT  ACT OR OMISSION  OF ANY KIND  EXCEPT AS  PROVIDED BY THE  IMMEDIATELY
PRECEDING  SENTENCE.  In the event that any claim or demand  for which  Borrower
would be  liable to any Agent or any  Lender  under  this  Section  is  asserted
against or sought to be collected from any Agent or any Lender by a third party,
Agent or such Lender  shall  promptly  notify  Borrower of such claim or demand.
Borrower shall have the lesser of: (i) thirty (30) Business Days from receipt of
the above notice; or (ii) three (3) Business Days prior to the expiration of any
period  after  which a default  judgment  may be entered  against  such Agent or
Lender (the "Notice  Period") to notify such Agent and/or Lender  whether or not
Borrower desires, at the sole cost and expense of Borrower, to defend such Agent
and/or Lender against such claim or demand.  In the event that Borrower notifies
such Agent and/or  Lender  within the Notice  Period,  that it desires to defend
such Agent and/or Lender  against such claim or demand,  Borrower shall have the
right to settle or otherwise  dispose of such claim or demand (other than claims
alleging criminal violations) on such terms as Borrower, with the consent of the
indemnified party (which consent shall not be unreasonably  withheld) shall deem
appropriate; provided that:

           (w)    counsel designated by Borrower is reasonably acceptable to the
                  Managing Agents and the affected Lender;

           (x)    Borrower will have acknowledged in  writing that this  Section
                  will  cover  any liabilities  and costs  in any such claim  or
                  demand;

           (y)    in  the  sole determination  of  the Managing  Agents  and the
                  affected Lender,  Borrower will have the  financial ability to
                  pay such liabilities and costs; and

           (z)    Borrower shall thereafter consult with the Managing Agents and
                  the affected Lender with respect to such claim or demand; and

provided  further,  that each of Agents and the  affected  Lender shall have the
right at all times to  participate  in any  proceeding,  at their  sole cost and
expense,  subject,  however,  to Borrower's  right to control the defense of all
proceedings concerning such claim or demand.

In the event that  Borrower  fails to give such Agent and/or Lender such notice,
such Agent  and/or  Lender may defend  against  such claim or demand;  provided,
however,  that Borrower's obligation to reimburse such Agent and/or Lender shall
be limited to a single law firm of such Agent  and/or  Lender  (unless  Borrower
otherwise consents, which consent shall not be unreasonably withheld);  provided
further,  that Borrower  shall have the right at all times to participate in any

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<PAGE>



such proceeding, at its sole cost and expense, subject, however, to the right of
such Agent and/or  Lender to control the defense of all  proceedings  concerning
such claim or demand.  As used in this  Section,  the terms "Agent" and "Lender"
shall refer not only to the Persons  designated  as such in Section 1.1 but also
to each director,  officer, agent, attorney, employee and representative of such
Person.


                                    ARTICLE 7

                                     AGENTS

         Section 7.1   Appointment and Authority.  NationsBank of Texas, N.A. is
hereby  appointed  Administrative  Agent  hereunder  and under  each  other Loan
Document,  CIBC Inc. is hereby appointed Documentation Agent hereunder and under
each other Loan  Document,  Morgan  Guaranty Trust Company of New York is hereby
appointed  Documentation  Agent hereunder and under each other Loan Document and
The Chase  Manhattan Bank is hereby  appointed  Syndication  Agent hereunder and
under each other Loan  Document,  each  Co-Agent  is hereby  appointed  Co-Agent
hereunder and  under each  other Loan Document,  and each of the  Lenders hereby
authorizes each such Agent to act as the agent of such Lender hereunder and each
other Loan Document to the extent provided herein or therein. In addition,  each
Lender hereby irrevocably  authorizes  Administrative  Agent, and Administrative
Agent  hereby  undertakes,  to  receive  payments  of  principal,  interest  due
hereunder as specified  herein and to act as Collateral Agent under the Security
Instruments.  In addition,  each Lender hereby  authorizes each Agent,  and each
Agent hereby  undertakes  to take all other  actions and to exercise such powers
under the Loan  Documents  as are  specifically  delegated  to such Agent by the
terms hereof or thereof,  together with all other powers  reasonably  incidental
thereto. No Co-Agent has any duties or  responsibilities  whatsoever as Co-Agent
(as  opposed  to its  capacity  as  Lender)  under or in  connection  with  this
Agreement or any of the Loan Documents. The relationship of each Agent to Lender
is only that of one commercial bank acting as  administrative  agent for others,
and nothing in the Loan  Documents  shall be construed to constitute any Agent a
trustee  or  other  fiduciary  for  any  holder  of any of the  Notes  or of any
participation  therein,  nor to impose on any Agent duties and obligations other
than those  expressly  provided  for in the Loan  Documents.  None of the Agents
shall have implied duties to Lenders,  or any obligations to Lenders to take any
action  under the Loan  Documents,  except any  action by an Agent  specifically
provided by the Loan  Documents  to be taken by such Agent.  With respect to any
matters not expressly  provided for in the Loan  Documents and any matters which
the Loan Documents  place within the  discretion of any Agent,  such Agent shall
not be required to exercise  any  discretion  or take any action,  and each such
Agent may request  instructions from Lenders with respect to any such matter, in
which case such Agent shall be  required  to act or to refrain  from acting (and
shall be fully  protected  and free from  liability  to any and all  Lenders and
Agents in so acting or refraining from acting) upon the instructions of Required
Lenders (including itself);  provided,  however, that no Agent shall be required
to take any action  which  exposes it to a risk of  personal  liability  that it

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considers  unreasonable  or  which  is  contrary  to the  Loan  Documents  or to
applicable law unless  indemnified to its  satisfaction  by Lenders or Borrower.
Upon receipt by Administrative Agent from Borrower of any communication  calling
for  action  on  the  part  of  Lenders  or  upon  notice  from  any  Lender  to
Administrative  Agent of any Default or Event of Default,  Administrative  Agent
shall promptly notify each Lender thereof.

         Section 7.2   Agent's  Reliance.  No Agent  or any of their  respective
directors,  officers,  agents,  attorneys,  or employees shall be liable for any
action taken or omitted to be taken by any of them under or in  connection  with
the Loan  Documents,  including their  negligence of any kind,  except that each
shall be liable  for its own gross  negligence  or willful  misconduct.  Without
limiting the generality of the foregoing, each Agent:

(a)  may treat the payee of any Note as the holder thereof until  Administrative
     Agent  receives  written  notice of the  assignment or transfer  thereof in
     accordance  with  this  Agreement,   signed  by  such  payee  and  in  form
     satisfactory to Administrative Agent;

(b)  may  consult  with  legal  counsel   (including   counsel  for   Borrower),
     independent public accountants and other experts selected by such Agent and
     shall not be liable  for any  action  taken or  omitted to be taken in good
     faith by it in accordance  with the advice of such counsel,  accountants or
     experts;

(c)  makes no warranty or representation to any Lender or to any other Agent and
     shall  not be  responsible  to any  Lender  or  Agent  for any  statements,
     warranties  or  representations  made in or in  connection  with  the  Loan
     Documents by any other Person;

(d)  shall not have any duty to ascertain or to inquire as to the performance or
     observance  of  any of the  terms,  covenants  or  conditions  of the  Loan
     Documents on the part of any Obligor or to inspect the property  (including
     the books and records) of any Obligor;

(e)  shall not be  responsible  to any Lender or to any other  Agent for the due
     execution  (other  than  its own due  execution  and  delivery),  legality,
     validity, enforceability,  genuineness,  existence, sufficiency or value of
     any Loan  Document,  the Credit  Facility  Agreement or any  instrument  or
     document furnished in connection herewith, or any collateral;

(f)  may rely upon the  representations  and  warranties  of any Obligor and the
     Lenders in exercising its powers hereunder;

(g)  shall not be responsible for the satisfaction of any condition specified in
     Article 3, except  receipt by an Agent of items required to be delivered to
     such Agent; and

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(h)  shall  incur no  liability  under or in  respect of the Loan  Documents  by
     acting upon any notice, consent, certificate or other instrument or writing
     (including  any telecopy,  telegram,  cable or telex)  believed by it to be
     genuine and signed or sent by the proper Person or Persons.

         Section 7.3   Lenders' Credit Decisions.  Each Lender acknowledges that
it has,  independently  and without reliance upon any Agent or any other Lender,
made its own analysis of Obligors and the transactions  contemplated  hereby and
its own  independent  decision to enter into this  Agreement  and the other Loan
Documents. Each Lender also acknowledges that it will, independently and without
reliance  upon any Agent or any other  Lender  and based on such  documents  and
information as it shall deem  appropriate at the time,  continue to make its own
credit decisions in taking or not taking action under the Loan Documents.

         Section 7.4   Indemnification.  Each Lender  agrees to  indemnify  each
Agent (to the  extent  not  reimbursed  by  Borrower  within ten (10) days after
demand)  from  and  against  such  Lender's  Percentage  Share  of any  and  all
liabilities,   obligations,   claims,  losses,  damages,   penalties,   actions,
judgments, suits, costs, expenses or disbursements (including reasonable fees of
attorneys,  accountants, experts, and advisors) of any kind or nature whatsoever
(in this  Section  collectively  called  "liabilities  and costs")  which to any
extent (in whole or in part) may be imposed on, incurred by, or asserted against
such Agent growing out of,  resulting from or in any other way  associated  with
any of the Loan Documents and the  transactions and events  (including,  without
limitation,  the  enforcement  thereof)  at any  time  associated  therewith  or
contemplated  therein. THE FOREGOING  INDEMNIFICATION SHALL APPLY WHETHER OR NOT
SUCH  LIABILITIES AND COSTS ARE IN ANY WAY OR TO ANY EXTENT CAUSED,  IN WHOLE OR
IN PART,  BY ANY  NEGLIGENT  ACT OR OMISSION OF ANY KIND BY ANY AGENT,  PROVIDED
ONLY THAT NO LENDER SHALL BE OBLIGATED  UNDER THIS SECTION TO INDEMNIFY AN AGENT
FOR THAT PORTION,  IF ANY, OF ANY LIABILITIES AND COSTS WHICH IS THE SOLE RESULT
OF SUCH  AGENT'S OWN  INDIVIDUAL  GROSS  NEGLIGENCE  OR WILLFUL  MISCONDUCT,  AS
DETERMINED IN A FINAL JUDGMENT OF A COURT OF COMPETENT JURISDICTION.  Cumulative
of the foregoing,  each Lender agrees to reimburse  Administrative  Agent,  each
Documentation Agent and Syndication Agent promptly upon demand for such Lender's
Percentage Share of any costs and expenses to be paid to  Administrative  Agent,
the  Documentation  Agent or the  Syndication  Agent by Borrower  under  Section
5.1(h) to the extent that  Administrative  Agent, the Documentation Agent or the
Syndication  Agent is not timely  reimbursed  for such  expenses  by Borrower as
provided in such section.  As used in this Section the term "Agents" shall refer
not only to the  Person(s)  designated  as such in Section  1.1 but also to each
director,   officer,  agent,  attorney,  employee  and  representative  of  such
Person(s).

         Section 7.5   Rights  as  Lender.   In their respective  capacity  as a
Lender,  each Agent shall have the same rights and obligations as any Lender and
may exercise  such rights as though it were not an Agent.  Each Agent may accept
deposits from, lend money to, act as trustee under  indentures of, and generally
engage in any kind of business with any of Obligors or their Affiliates,  all as
if it were not an Agent  hereunder  and without any duty to account  therefor to
any other Lender.

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         Section 7.6   Sharing of Set-Offs  and Other  Payments.  Each Agent and
Lender  agrees that if it shall,  whether  through the  exercise of rights under
security documents or rights of banker's lien,  setoff, or counterclaim  against
any  Obligor  or  otherwise,  obtain  payment  of a  portion  of  the  aggregate
Obligations owed to it (other than in respect of its Swing Line Advances and its
Competitive Bid Advances) which,  taking into account all distributions  made by
Administrative  Agent under  Section  2.11,  causes such Agent or such Lender to
have received more than it would have received had such payment been received by
Administrative  Agent and distributed  pursuant to Section 2.11 (or, in the case
of Swing Line  Advances  paid as  provided  in Section  2.6(b) or in the case of
Competitive Bid Advances paid as provided in Section 2.22(b)),  then it shall be
deemed to have  simultaneously  purchased  and shall be  obligated  to  purchase
interests in the Obligations as necessary to cause  Administrative Agent and all
Lenders to share all payments  (other than in respect of Swing Line Advances and
Competitive  Bid  Advances)  as  provided  for in Section  2.11,  and such other
adjustments shall be made from time to time as shall be equitable to ensure that
all Agents and all  Lenders  share all  payments of  Obligations  (other than in
respect of its Swing Line Advances and  Competitive Bid Advances) as provided in
Section 2.11. If any Agent or any Lender,  whether in connection  with setoff of
amounts  which might be subject to setoff or otherwise,  receives  collateral or
other  protection for its  Obligations or such amounts which might be subject to
setoff,  such Agent or Lender agrees,  promptly upon demand, to take such action
necessary  so that all  Agents and all  Lenders  share in the  benefits  of such
collateral  ratably  in  proportion  to the  Obligations  owing to each of them.
Nothing herein  contained  shall in any way affect the right of any Agent or any
Lender to obtain  payment  (whether  by  exercise  of rights of  banker's  lien,
set-off  or  counterclaim   or  otherwise)  of   indebtedness   other  than  the
Obligations.  Borrower  expressly  consents to the  foregoing  arrangements  and
agrees  that any  holder  of any such  interest  or other  participation  in the
Obligations, whether or not acquired pursuant to the foregoing arrangements, may
to the fullest  extent  permitted by law exercise any and all rights of banker's
lien,  set-off,  or counterclaim as fully as if such holder were a holder of the
Obligations in the amount of such interest or other participation. If all or any
part of any funds transferred  pursuant to this Section is thereafter  recovered
from the  seller  under this  Section  which  received  the same,  the  purchase
provided  for in this  Section  shall be deemed to have  been  rescinded  to the
extent of such recovery, together with interest, if any, if interest is required
pursuant  to court order to be paid on account of the  possession  of such funds
prior to such recovery.

         Section 7.7   Investments.  Whenever Administrative Agent in good faith
determines  that it is uncertain  about how to  distribute  to Lenders any funds
which it has received, or whenever Administrative Agent in good faith determines
that  there is any  dispute  among  Lenders  about  how  such  funds  should  be
distributed,  Administrative Agent may choose to defer distribution of the funds
which are the subject of such uncertainty or dispute. If Administrative Agent in
good  faith  believes  that the  uncertainty  or  dispute  will not be  promptly
resolved,  or if  Administrative  Agent is  otherwise  required to invest  funds
pending  distribution  to  Lenders,  Administrative  Agent may invest such funds

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pending distribution (at the risk of the subject Borrower);  all interest on any
such investment  shall be distributed  upon the  distribution of such investment
and in the same  proportion  and to the same  Persons  as such  investment.  All
moneys received by Administrative  Agent for distribution to Lenders (other than
to the Person who is Administrative  Agent in its separate capacity as a Lender)
shall be held by  Administrative  Agent  pending  such  distribution  solely  as
Administrative  Agent for such Lenders,  and Administrative  Agent shall have no
equitable title to any portion thereof.

         Section 7.8   Benefit of Article 7.   The  provisions  of this  Article
(other than the  following  Section 7.9) are intended  solely for the benefit of
Agent  and  Lenders,  and no  Obligor  shall  be  entitled  to rely on any  such
provision or assert any such  provision in a claim or defense  against  Agent or
any Lender.  Agent and Lenders may waive or amend such provisions as they desire
without any notice to or consent of any Obligor.

         Section 7.9   Resignation and Removal. Any Agent may resign at any time
by giving written notice thereof to Lenders and Borrower. Each such notice shall
set forth the date of such resignation.  Majority Lenders or Borrower,  with the
consent (which shall not be  unreasonably  withheld) of Majority  Lenders (other
than Agent to be removed)  shall be entitled to remove any Agent.  Upon any such
resignation or removal,  Borrower may, with the written concurrence (which shall
not be  unreasonably  withheld)  of  Majority  Lenders  (exclusive  of any  such
resigned or removed Agent), designate a successor Agent. If, within fifteen (15)
days  after the date of such  resignation  or  removal,  Borrower  makes no such
designation  or  such  written  concurrence  is  not  given,   Majority  Lenders
(exclusive  of any such resigned or removed  Agent)  shall,  with the consent of
Borrower (which consent shall not be unreasonably withheld or delayed), have the
right to appoint a  successor  Agent.  A  successor  must be  appointed  for any
retiring  Managing Agent,  and such Managing  Agent's  resignation  shall become
effective when such successor accepts such  appointment.  Upon the acceptance of
any appointment as a Managing Agent hereunder by a successor  Managing Agent and
the  satisfaction  of all  obligations  on the part of such  retiring or removed
Managing  Agent  necessary  to  facilitate  succession,  the retiring or removed
Managing  Agent,  as the case may be,  shall be  discharged  from its duties and
obligations under this Agreement and the other Loan Documents. After any Agent's
resignation  or  removal  hereunder,  the  provisions  of this  Article  7 shall
continue to inure to its benefit as to any actions  taken or omitted to be taken
by it while it was Agent under the Loan  Documents.  Any  out-going  Agent shall
promptly execute all assignments and other documents necessary to effectuate the
transfer of the agency in  connection  with this  Agreement  and shall  promptly
deliver all original  documents  and any  collateral  in its  possession  to the
successor Agents.

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                                    ARTICLE 8

                                  MISCELLANEOUS

         Section 8.1   Waivers and Amendments.   No failure or delay (whether by
course of conduct or  otherwise)  by any Agent or any Lender in  exercising  any
right,  power or remedy which any Agent or Lender may have under any of the Loan
Documents  shall  operate as a waiver  thereof or of any other  right,  power or
remedy,  nor shall any single or partial  exercise by any Agent or Lender of any
such right, power or remedy preclude any other or further exercise thereof or of
any  other  right,  power or  remedy.  No waiver  of any  provision  of any Loan
Document  and no  consent to any  departure  therefrom  shall ever be  effective
unless it is in writing and signed as provided  below in this Section,  and then
such waiver or consent shall be effective only in the specific instances and for
the purposes for which given and to the extent  specified  in such  writing.  No
notice to or  demand on any  Obligor  shall in any case of  itself  entitle  any
Obligor  to  any  other  or  further  notice  or  demand  in  similar  or  other
circumstances.  This Agreement and the other Loan Documents set forth the entire
understanding  between  the  parties  hereto  with  respect to the  transactions
contemplated  herein  and  therein  and  supersede  all  prior  discussions  and
understandings  with respect to the subject  matter  hereof and thereof,  and no
waiver,  consent,  release,  modification  or amendment of or supplement to this
Agreement or the other Loan  Documents  shall be valid or effective  against any
party hereto unless the same is in writing and signed by (a) if such party is an
Obligor,  by such Obligor,  (b) if such party is an Agent, by such Agent and (c)
if such party is a Lender, by such Lender or by  Administrative  Agent on behalf
of Lenders  with the  written  consent of Required  Lenders (or without  further
consent  than that  already  provided  herein in the  circumstances  provided in
Section 8.7).  Notwithstanding  the foregoing or anything to the contrary herein
or in any other Loan Document, no Agent shall, without the prior consent of each
Lender,  execute  and  deliver on behalf of any  Lender any waiver or  amendment
which would:

    (i)   increase the  Commitment  of such Lender or subject such Lender to any
          additional obligations;

    (ii)  reduce or forgive any fees hereunder, or the principal of, or interest
          on, such Lender's Notes;

    (iii) postpone  any date  fixed for any  payment of any fees  hereunder,  or
          principal of, or interest on, such Lender's Notes;

    (iv)  amend  the  definitions  herein of  "Required  Lenders"  or  "Majority
          Lenders" or otherwise change the aggregate amount of Percentage Shares
          which is required for Administrative  Agent, any other Agent,  Lenders
          or any of them to take any particular action under the Loan Documents;

    (v)   release   collateral   (except  as  expressly   contemplated  by  this
          Agreement)  or any Borrower  from its  obligation to pay such Lender's
          Notes or any Restricted  Subsidiary from its Guaranty (except upon the
          Restricted Subsidiary becoming an Unrestricted Subsidiary as specified
          in this Agreement);
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    (vi)  amend this Section 8.1;

    (vii) extend the Loan Commitment Period;

    (ix)  amend, modify or waive any provision applicable to the indemnification
          of any Lender;

    (x)   consent to the  assignment  or  transfer  by any Obligor of any of its
          rights  or  obligations   under  this  Agreement  or  the  other  Loan
          Documents; or

    (xi)  amend,  modify or waive the  rights  and  obligations  of the  Agents;
          provided, that no obligation to any Obligor of any Lender or any Agent
          may be  amended,  modified or waived  without the written  approval of
          Borrower, which approval shall not be unreasonably withheld.

         Notwithstanding  the foregoing or anything to the contrary herein or in
any other Loan  Document,  no  provision  of Article 7 may be amended in any way
which  impacts or affects  any Agent in its  capacity as an Agent (as opposed to
its  capacity  as a Lender)  without  the prior  written  consent of such Agent.
Except as provided in the preceding three sentences or as expressly  provided in
any Loan Document,  the Required Lenders may waive,  modify, amend or supplement
this Agreement and each of the other Loan Documents.

         Section 8.2   Survival of Agreements; Cumulative Nature. Each Obligor's
various representations,  warranties,  covenants,  indemnities and agreements in
the Loan  Documents  shall survive the execution and delivery of this  Agreement
and the other Loan Documents and the performance  hereof and thereof,  including
the making or granting of the Loans and the delivery of the Notes, and the other
Loan Documents,  and shall further survive until all of the Obligations are paid
in full to Agents and  Lenders and all of Agents' and  Lenders'  obligations  to
Borrower are terminated,  provided that, notwithstanding the foregoing,  certain
Obligations of certain Obligors under their respective  Guaranties shall survive
or  be  reinstated  as  provided  in  such  Guaranties.   The   representations,
warranties,  indemnities,  and  covenants  made  by  any  Obligor  in  any  Loan
Documents,  and the rights, powers, and privileges granted to Agents and Lenders
in the Loan Documents, are cumulative.

         Section 8.3   Notices.   All notices,  requests,  consents, demands and
other  communications  required or permitted under any Loan Document shall be in
writing,  unless otherwise specifically provided in such Loan Document (provided
that  Administrative  Agent may give telephonic  notices to the other Agents and
Lenders),  and shall be deemed  sufficiently  given or furnished if delivered by
personal delivery,  by telecopy (with telephonic  confirmation of transmission),
by delivery service with proof of delivery, or by registered or certified United
States mail,  postage prepaid,  to Borrower at the address of Borrower specified
on the  signature  pages  hereto  and to each  Agent  and each  Lender  at their
addresses  specified on the signature  pages hereto  (unless  changed by similar
notice  in  writing  given  by the  particular  Person  whose  address  is to be
changed). Any such notice or communication shall be deemed to have been given:

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(a)  in the case of personal  delivery or  delivery  service,  as of the date of
     first  attempted  delivery  during  normal  business  hours at the  address
     provided herein;

(b)  in the case of telecopy, upon receipt; or

(c)  in the case of registered or certified  United States mail,  three (3) days
     after deposit in the mail,  postage  prepaid;  provided,  however,  that no
     Request for Advance or Rate Election shall become  effective until actually
     received by Administrative Agent.

         Section 8.4   Parties in Interest. All grants, covenants and agreements
contained  in the Loan  Documents  shall  bind and inure to the  benefit  of the
parties thereto and their respective successors and assigns; provided,  however,
that no Obligor may assign or transfer  any of its rights or delegate any of its
duties or obligations  under any Loan Document without the prior written consent
of all Lenders.

         Section 8.5   Governing  Law.   THE  LOAN  DOCUMENTS  SHALL  BE  DEEMED
CONTRACTS AND INSTRUMENTS MADE UNDER THE LAWS OF THE STATE OF TEXAS AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE  WITH AND GOVERNED BY THE LAWS OF THE STATE
OF TEXAS  AND THE LAWS OF THE  UNITED  STATES  OF  AMERICA,  WITHOUT  REGARD  TO
PRINCIPLES  OF  CONFLICTS OF LAW.  CHAPTER 15 OF TEXAS  REVISED  CIVIL  STATUTES
ANNOTATED  ARTICLE 5069 (WHICH REGULATES  CERTAIN REVOLVING CREDIT LOAN ACCOUNTS
AND REVOLVING  TRI-PARTY  ACCOUNTS)  DOES NOT APPLY TO THIS  AGREEMENT OR TO THE
NOTES.

         Section 8.6   Limitation  on  Interest.   It is  the  intention of  the
parties hereto to conform strictly to applicable usury laws and, anything herein
or any other Loan Document to the contrary  notwithstanding,  the obligations of
Obligors to a Lender or an Agent  under this  Agreement  and the Loan  Documents
shall be  subject to the  limitation  that  payments  of  interest  shall not be
required to the extent that receipt  thereof  would be contrary to provisions of
law  applicable to such Lender or Agent  limiting rates of interest which may be
charged or collected by such Lender or Agent.  Accordingly,  if the transactions
contemplated hereby would be usurious under laws applicable to a Lender or Agent
(including  the federal and state laws of the United States of America or of any
other  jurisdiction  whose laws may be mandatorily  applicable to such Lender or
Agent  notwithstanding  anything to the contrary in this  Agreement or any other
Loan Document) then, in that event,  notwithstanding anything to the contrary in
this Agreement or any other Loan Document, it is agreed as follows:

(a)  the provisions of this Section shall govern and control;

(b)  the  aggregate  of  all  consideration  which  constitutes  interest  under
     applicable law that is contracted for, taken, reserved, charged or received
     under this Agreement, or under any of the aforesaid agreements or otherwise
     in connection with this Agreement or any other Loan Document by such Lender
     or Agent shall under no circumstances exceed the maximum amount of interest
     allowed by applicable law (such maximum lawful  interest rate, if any, with

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<PAGE>



     respect to each Lender and each Agent  herein  called the  "Maximum  Lawful
     Rate"),  and any excess shall be canceled  automatically and if theretofore
     paid shall be credited to the relevant Obligor by such Lender or Agent (or,
     if such consideration shall have been paid in full, such excess refunded to
     the relevant Obligor);

(c)  all sums paid,  or agreed to be paid,  to such Lender or Agent for the use,
     forbearance and detention of the  indebtedness  of the relevant  Obligor to
     such Lender or Agent  hereunder or under any other Loan Document  shall, to
     the extent  permitted by laws  applicable  to such Lender or Agent,  as the
     case may be, be amortized,  prorated,  allocated and spread  throughout the
     full term of such  indebtedness  until  payment  in full so that the actual
     rate of interest is uniform throughout the full term thereof;

(d)  if at any time the  interest  provided  pursuant to any  provision  of this
     Agreement or any other Loan Document,  together with any other fees payable
     pursuant to this  Agreement or any other Loan Document and deemed  interest
     under laws  applicable  to such Lender or Agent,  exceeds the amount  which
     would have accrued at the Maximum  Lawful Rate,  the amount of interest and
     any such fees to accrue to such Lender or Agent  pursuant to this Agreement
     or any other Loan Document  shall be limited,  notwithstanding  anything to
     the contrary in this Agreement or any other Loan  Document,  to that amount
     which would have  accrued at the Maximum  Lawful Rate,  but any  subsequent
     reductions, as applicable,  shall not reduce the interest to accrue to such
     Lender or Agent pursuant to this Agreement or any other Loan Document below
     the Maximum Lawful Rate until the total amount of interest accrued pursuant
     to this Agreement or such other Loan Document, as the case may be, and such
     fees deemed to be interest  equals the amount of interest  which would have
     accrued to such  Lender or Agent if a varying  rate of  interest  per annum
     equal  to the  interest  provided  pursuant  to  Section  2.3 or any  other
     relevant  Section  hereof  (other  than this  Section)  and the  Notes,  as
     applicable,  had at all times been in effect, plus the amount of fees which
     would have been received but for the effect of this Section; and

(e)  if the total  amount of  interest  paid by or accrued  with  respect to the
     Obligations of Borrower,  together with any other fees payable  pursuant to
     this Agreement and the other Loan Documents and deemed  interest under laws
     applicable to such Lender or Agent  pursuant to this Agreement or any other
     Loan Document  under the foregoing  provisions of this Section is less than
     the total amount of interest which would have accrued if a varying rate per
     annum equal to the interest  provided  pursuant to Section 2.3 or any other
     relevant  section hereof (other than this Section),  as applicable,  had at
     all times been in effect and all fees  provided for in this  Agreement  and
     the other Loan Documents had been paid, then Borrower  severally  agrees to
     pay to such Lender or Agent an amount equal to the difference between,  (i)
     the lesser of, (x) the amount of interest and fees which would have accrued
     if the  Maximum  Lawful  Rate had at all times been in effect,  and (y) the
     amount of interest  and fees which would have accrued if a varying rate per

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     annum equal to the interest  provided pursuant to Section 2.3 or such other
     relevant section of this Agreement (other than this Section) and the Notes,
     as applicable,  had at all times been in effect and all fees had been paid,
     and (ii) the amount of interest  and fees  accrued in  accordance  with the
     other provisions of this Agreement and other Loan Documents.

         For purposes of Article  5069-1.04 of Vernon's Texas Civil Statues,  as
amended, to the extent, if any, applicable to any Lender or Agent,  Borrower and
each other Obligor  agrees that the Maximum  Lawful Rate shall be the "indicated
(weekly) rate ceiling" as defined in said Article,  provided that such Lender or
Agent, as applicable,  may also rely, to the extent permitted by applicable laws
of the State of Texas and the United States of America,  on alternative  maximum
rates of interest under other laws  applicable to such Lender or Agent from time
to time if greater.

         Section 8.7   Termination; Limited  Survival.  In its sole and absolute
discretion,  Borrower may, at any time that no  Obligations or other amounts are
owing,  elect to  terminate  this  Agreement  in a written  notice  delivered to
Administrative  Agent. Upon receipt by Administrative Agent of such a notice, if
no  Obligations  or other amounts are then owing,  this  Agreement and all other
Loan Documents shall  thereupon be terminated and the parties  thereto  released
from all prospective  obligations  hereunder or thereunder.  Notwithstanding the
foregoing or anything herein to the contrary,  any waivers or admissions made by
any Obligor in any Loan Document,  any  Obligations  under Sections 2.16 through
2.20, any obligations  which any Obligor may have to indemnify or compensate any
Agent,  or any Lender in  connection  with matters  arising upon or prior to the
termination of this Agreement and any  obligations  which any Lender may have to
indemnify or  compensate  any Agent in connection  with matters  arising upon or
prior to the termination of this Agreement shall survive any termination of this
Agreement or any other Loan Document and the release of Obligors. At the request
and expense of Borrower, Managing Agents shall prepare and execute all necessary
instruments  to  reflect  and  effect  such  termination  of the Loan  Documents
including,  without limitation,  the Security  Instruments.  Managing Agents are
hereby  authorized,  jointly and severally,  to execute all such  instruments on
behalf of all  Lenders,  without the joinder of or further  action or consent by
any Lender.

         Section 8.8   Assignments; Participations.

(a)  Each Lender  shall have the right to sell,  assign or  transfer  all or any
     part of such Lender's Notes, Loans and Commitments hereunder to one or more
     Affiliates,  Lenders,  financial  institutions,  pension plans,  investment
     funds, or similar Persons or to a Federal Reserve Bank;  provided,  that in
     connection  with  each  sale,  assignment  or  transfer  (other  than to an
     Affiliate,  a Lender or a Federal Reserve Bank), the applicable Lender will
     consider  the opinion and  recommendation  of Borrower,  which  opinion and
     recommendation  shall in no way be binding upon such Lender,  and each such
     sale,  assignment,  or transfer (other than to an Affiliate,  a Lender or a
     Federal  Reserve  Bank) shall be with the  consent of  Borrower  (unless an

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     Event of Default has occurred and is continuing), which consent will not be
     unreasonably  withheld, and with the consent of Administrative Agent, which
     consent will not be unreasonably withheld, and the assignee,  transferee or
     recipient shall have, to the extent of such sale, assignment,  or transfer,
     the same  rights,  benefits  and  obligations  as it would if it were  such
     Lender  and a holder of such  Notes  and  Commitments,  including,  without
     limitation, the right to vote on decisions requiring consent or approval of
     all Lenders,  Majority  Lenders or Required  Lenders and the  obligation to
     fund its Loans;  provided further, that (1) each Lender in making each such
     sale,  assignment,  or  transfer  must sell,  assign or transfer a pro rata
     portion of its  Commitments  and each Loan (other than a Swing Line Advance
     or a Competitive  Bid Advance)  made or held by such Lender,  (2) each such
     sale,  assignment,  or transfer (other than to an Affiliate,  a Lender or a
     Federal  Reserve Bank) shall be in an aggregate  principal  amount not less
     than  $10,000,000,  (3) each  remaining  Lender shall at all times maintain
     Commitments  then  outstanding  in an aggregate  principal  amount at least
     equal  to  $10,000,000;  (4)  no  Lender  may  offer  to  sell  its  Notes,
     Commitments  or Loans or interests  therein in violation of any  securities
     laws; and (5) no such  assignments  (other than to a Federal  Reserve Bank)
     shall   become   effective   until  the   assigning   Lender   delivers  to
     Administrative  Agent and Borrower  copies of all written  assignments  and
     other documents evidencing any such assignment and an Agreement to be Bound
     in the form of Exhibit L,  providing for the  assignee's  ratification  and
     agreement  to be bound by the terms of this  Agreement  and the other  Loan
     Documents.  An  assignment  fee in the  amount  of  $3,500  for  each  such
     assignment (other than to an Affiliate, a Lender or a Federal Reserve Bank)
     will be payable to  Administrative  Agent by assignor or  assignee.  Within
     five (5) Business  Days after its receipt of copies of any  assignment  and
     the other documents  relating  thereto and the following  described  Notes,
     Borrower shall execute and deliver to Administrative Agent (for delivery to
     the relevant assignee) new Notes evidencing such assignee's  assigned Loans
     and  Commitments  and if the assignor  Lender has retained a portion of its
     Loans,  replacement  Notes  in  the  principal  amount  of  the  Loans  and
     Commitments retained by the assignor Lender (except as provided in the last
     sentence of this paragraph (a) such Notes to be in exchange for, but not in
     payment of, the Notes held by such Lender). On and after the effective date
     of an  assignment  hereunder,  the  assignee  shall for all  purposes  be a
     Lender, party to this Agreement and any other Loan Document executed by the
     Lenders and shall have all the rights and obligations of a Lender under the
     Loan Documents, to the same extent as if it were an original party thereto,
     and no further consent or action by Borrower, Lenders or any Agent shall be
     required to release the transferor Lender,  with respect to the Commitments
     and the Loans  assigned to such  assignee and the  transferor  Lender shall
     henceforth be so released.

(b)  Each Lender shall have the right to grant participations in all or any part
     of such Lender's  Notes,  Commitments,  and Loans  hereunder to one or more
     pension plans,  investment funds,  financial institutions or other Persons;
     provided, that:
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     (1)  each Lender  granting a  participation  shall retain the right to vote
          hereunder,  and no participant  shall be entitled to vote hereunder on
          decisions  requiring consent or approval of Lenders,  Majority Lenders
          or Required  Lenders  (except as set forth in (3)  below);

     (2)  in the  event  any  Lender  grants  a  participation  hereunder,  such
          Lender's  obligations under the Loan Documents shall remain unchanged,
          such Lender  shall  remain  solely  responsible  to the other  parties
          hereto for the  performance  of such  obligations,  such Lender  shall
          remain the holder of any such  Notes for all  purposes  under the Loan
          Documents,  and each Agent, each Lender and Borrower shall be entitled
          to deal with the Lender granting a participation in the same manner as
          if no participation had been granted; and

     (3)  no  participant  shall   ever  have  any   right  by  reason   of  its
          participation  to exercise  any of the  rights of  Lenders  hereunder,
          except that any Lender may agree with any participant that such Lender
          will not,  without the consent of such participant (which consent  may
          not be  unreasonably  withheld),  consent  to  any amendment or waiver
          described in Section 8.1 requiring approval of 100% of the Lenders.

(c)  It is  understood  and agreed that any Lender may provide to assignees  and
     participants   and  prospective   assignees  and   participants   financial
     information  and  reports and data  concerning  Borrower's  properties  and
     operations  which was provided to such Lender  pursuant to this  Agreement,
     subject to Section 8.9.

(d)  Upon the reasonable  request of either of the Managing  Agents or Borrower,
     each Lender will identify those to whom it has assigned or participated any
     part of its  Notes or  Loans,  and  provide  the  amounts  so  assigned  or
     participated.

         Section 8.9   Confidentiality.   Each Agent and each Lender agrees that
it (a) will maintain the confidentiality of all non-public information  from any
Obligor or any  Subsidiary  of Borrower  obtained  pursuant to the terms of this
Agreement or any other Loan Document in  accordance  with safe and sound banking
practices,  and (b) will not use such  confidential  information for any purpose
other than in  connection  with this  Agreement;  provided,  however,  that this
restriction  shall not apply to information which (w) has at the particular time
in question entered the public domain,  or been independently  developed without
the use or incorporation of any non-public information provided to such Agent or
Lender by any Obligor or any Subsidiary of Borrower by such Agent or such Lender
other than through  disclosure by such Agent or such Lender in violation of this
Section,  (x)  is  required  to be  disclosed  by law  or by  any  order,  rule,
regulation  or  legal  process  (whether  valid  or  invalid)  of any  court  or
Governmental Authority, (y) is furnished to any other Lender or to any purchaser
or prospective  purchaser of  participations,  assignments or other interests in

                                       73



<PAGE>



any Loan,  Note or  Commitment  that has executed  and  delivered to Borrower an
agreement containing terms substantially  similar to this Section and reasonably
acceptable  to  Borrower,  to  keep  such  information  confidential  or  (z) is
disclosed to such Lender's or Agent's examiners,  Affiliates,  outside auditors,
counsel and other professional  advisors who have a need for such information in
connection with this Agreement and who are advised of the confidential nature of
such information.  As used in this Section, the terms "Agent" and "Lender" shall
refer not only to the Persons  designated  as such in Section  1.1,  but also to
each director,  Affiliate, officer, agent, attorney, employee and representative
of such Person.  Notwithstanding  any other  provisions of this  Agreement,  the
terms of this Section  shall  survive the  termination  of this  Agreement for a
period of three (3) years.

         Section 8.10   Severability.  If any  term  or  provision  of any  Loan
Document shall be determined to be illegal or unenforceable in any jurisdiction,
such  term  or  provision  shall,  as  to  such  jurisdiction,   be  illegal  or
unenforceable,  without affecting the remaining  provisions in that jurisdiction
or the  legality  or  enforceability  of such terms or  conditions  in any other
jurisdiction.

         Section 8.11   Counterparts.  This Agreement may be separately executed
in any number  of  counterparts  and by  different  parties  hereto in  separate
counterparts,  each of which when so executed  shall be deemed to constitute one
and the same Agreement.

         Section 8.12   WAIVER  OF  JURY  TRIAL,  PUNITIVE DAMAGES.  EACH OF THE
BORROWER,  AGENTS AND  LENDERS  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
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.

         Section 8.13   Several  Obligations.   The  respective  obligations  of
Lenders  hereunder  are several and not joint and no Lender shall be the partner
or agent of any other  (except to the extent to which an Agent is  authorized to
act as such).  The  failure  of any  Lender to  perform  any of its  obligations
hereunder  shall  not  relieve  any  other  Lender  from any of its  obligations
hereunder.  This  Agreement is not intended to, and shall not be construed so as
to,  confer any right or benefit  upon any Person other than the parties to this
Agreement and their respective successors and assigns.

                                       74


<PAGE>



         Section 8.14   Nonliability  of  Lenders.    The  relationship  between
Borrower  on the one hand and  Lenders  and  Agents on the other  hand  shall be
solely that of borrower and lender. None of the Agents nor any Lender shall have
any   fiduciary   responsibilities   to  Borrower  or  any  of  its   respective
Subsidiaries. None of the Agents nor any Lender undertakes any responsibility to
Borrower or any of their respective Subsidiaries to review or inform Borrower of
any  matter in  connection  with any phase of  Borrower's  or such  Subsidiary's
business or operations.

         Section 8.15   Setoff.  In addition to,  and without any limitation of,
any rights of the Lenders under applicable law, if  Borrower becomes  insolvent,
however evidenced, or any Event of Default or Default occurs and the maturity of
the  Obligations  has been  accelerated,  any  indebtedness  from any  Lender to
Borrower  (including  all account  balances,  whether  provisional  or final and
whether or not  collected  or  available)  may be offset and applied  toward the
payment of the Obligations owing to such Lender, whether or not the Obligations,
or any part thereof, shall then be due and payable.

         Section 8.16   Release  of  Liens.   Upon  the  date  of  execution and
delivery of a Guaranty of the type  referred to in clause (i) of the  definition
of  "Guaranty"  by a Restricted  Subsidiary  the capital stock of which has been
pledged (each such date, a "Stock Pledge Release  Date"),  the Collateral  Agent
shall  release and  discharge,  at the cost or expense of  Borrower,  the Pledge
Agreement  covering  such  Subsidiary's  capital  stock,  all  of  Lenders'  and
Collateral  Agent's rights and interests in such Pledge Agreement and all liens,
security  interests,  pledges  and  encumbrances  created or  existing  under or
pursuant to such Pledge Agreement.

         Section 8.17   Forum  Selection  and  Consent  to  Jurisdiction.    ANY
LITIGATION  BASED HEREON,  OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
AGREEMENT  OR ANY OTHER  LOAN  DOCUMENT,  OR ANY  COURSE OF  CONDUCT,  COURSE OF
DEALING,  STATEMENTS  (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE AGENTS,  THE
LENDERS OR THE  BORROWER  SHALL BE BROUGHT  AND  MAINTAINED  EXCLUSIVELY  IN THE
COURTS  OF THE STATE OF TEXAS OR IN THE  UNITED  STATES  DISTRICT  COURT FOR THE
NORTHERN DISTRICT OF TEXAS; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT
AGAINST ANY  COLLATERAL  OR OTHER  PROPERTY  MAY BE BROUGHT,  AT THE  COLLATERAL
AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER
PROPERTY MAY BE FOUND.  BORROWER HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE
JURISDICTION  OF THE COURTS OF THE STATE OF TEXAS AND THE UNITED STATES DISTRICT
COURT FOR THE NORTHERN  DISTRICT OF TEXAS FOR THE PURPOSE OF ANY SUCH LITIGATION
AS SET FORTH ABOVE AND IRREVOCABLY  AGREES TO BE BOUND BY ANY JUDGMENT  RENDERED
THEREBY  IN  CONNECTION  WITH  SUCH  LITIGATION.  BORROWER  FURTHER  IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL,  POSTAGE  PREPAID,  OR BY
PERSONAL  SERVICE  WITHIN OR WITHOUT THE STATE OF TEXAS.  FOR THE PURPOSE OF ANY
ACTION  OR  PROCEEDING  INSTITUTED  IN THE  FEDERAL  OR STATE  COURTS  OF TEXAS,
HOLDINGS HEREBY IRREVOCABLY  DESIGNATES BORROWER WITH OFFICES ON THE DATE HEREOF
AT 303 WEST WALL STREET,  SUITE 101, MIDLAND,  TEXAS 79701 TO RECEIVE FOR AND ON
BEHALF OF HOLDINGS,  SERVICES OF PROCESS IN TEXAS. BORROWER HEREBY EXPRESSLY AND
IRREVOCABLY  WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH

                                       75



<PAGE>



IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH  LITIGATION
BROUGHT  IN ANY  SUCH  COURT  REFERRED  TO  ABOVE  AND ANY  CLAIM  THAT ANY SUCH
LITIGATION  HAS BEEN  BROUGHT  IN AN  INCONVENIENT  FORUM.  TO THE  EXTENT  THAT
BORROWER HAS OR  HEREAFTER  MAY ACQUIRE ANY IMMUNITY  FROM  JURISDICTION  OF ANY
COURT OR FROM ANY LEGAL PROCESS (WHETHER  THROUGH SERVICE OR NOTICE,  ATTACHMENT
PRIOR TO JUDGMENT,  ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO
ITSELF OR ITS  PROPERTY,  BORROWER  HEREBY  IRREVOCABLY  WAIVES SUCH IMMUNITY IN
RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.

         Section 8.18   Renewal, Extension or Rearrangement.  All  provisions of
this  Agreement and any other Loan  Document  relating to the Notes or the other
Obligations  shall apply with equal force and effect to each and all  promissory
notes or other agreements or instruments hereafter executed which in whole or in
part represent a renewal,  extension,  increase or  rearrangement of any part of
the original Notes or Obligations.

         Section 8.19   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 THE FOLLOWING PAGE]


                                       76



<PAGE>



         IN WITNESS  WHEREOF,  this  Agreement  is executed as of the date first
written above.

                                          BORROWER:

                                          PIONEER NATURAL RESOURCES
                                          USA, INC.

                                          By:     /s/ Curt F. Kamradt
                                              ----------------------------
                                          Name:   Curt F. Kamradt
                                          Title:  Vice President - Treasurer

                                          Address:     303 West Wall, Suite 101
                                                       P.O. Box 3178
                                                       Midland, Texas  79701
                                          Attention:   Curt Kamradt

                                          Telephone:   (915) 571-3171
                                          Telecopy:    (915) 571-5696

                                          with a copy to:

                                          Garrett Smith
                                          1400 Williams Square West
                                          5205 North O'Connor Blvd.
                                          Irving, Texas 75039

                                          Telephone:    (972) 402-7013
                                          Telecopy:     (972) 402-7028



                      [SIGNATURE PAGE TO 364 DAY FACILITY]

                                      S - 1


<PAGE>



                                          LENDERS:

                                          NATIONSBANK OF TEXAS, N.A.,
                                          individually and as Administrative
                                          Agent and as Collateral Agent


                                          By:      /s/ Frank K. Stowers
                                              ------------------------------
                                          Name:    Frank K. Stowers
                                          Title:   Vice President

                                          Address:      303 W. Wall
                                                        P. O. Box 1599
                                                        Midland, Texas  79701
                                          Attention:    Mr. Frank K. Stowers

                                          Telephone:    (915) 685-2179
                                          Telecopy:     (915) 685-2009

                                          with further notice to:

                                          901 Main Street, 64th Floor
                                          Dallas, Texas  75202
                                          Attention:  Mr. E. Murphy Markham IV

                                          Telephone:     (214) 508-1251
                                          Telecopy:      (214) 508-1285


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                                      S - 2


<PAGE>



                                          CIBC INC., individually and as
                                          Documentation Agent


                                          By:     /s/ Aleksandra Dymanus
                                              ----------------------------
                                          Name:   Aleksandra K. Dymanus
                                          Title:  Authorized Signatory


                                          Address:       2727 Paces Ferry Road
                                                         Suite 1200
                                                         Atlanta, GA  30339

                                          Attention:     
                                          Telephone:     (770) 319-4824
                                          Telecopy:      (770) 319-4950


                                          with further notice to:

                                          2 Houston Center
                                          909 Fannin Street, Suite 1200
                                          Houston, Texas  77010
                                          Attention:  Mr. Paul Jordan

                                          Telephone:     (713) 655-5220
                                          Telecopy:      (713) 650-3727



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                                      S - 3


<PAGE>



                                          MORGAN GUARANTY TRUST
                                          COMPANY OF NEW YORK, individually
                                          and as Documentation Agent


                                          By:     /s/ John Kowalczuk
                                              ----------------------------
                                          Name:   John Kowalczuk
                                          Title:  Vice President

                                          Address:    60 Wall Street, 22nd Floor
                                                      New York, New York 10260


                                          Attention:  Mr. Philip McNeal
                                          Telephone:  (212) 648-7181
                                          Telecopy:   (212) 648-5023

                                          with further notice to:

                                          Sandra H. Doherty
                                          500 Christiana Stanton Road
                                          Newark  DE  19713-2107

                                          Telephone:  (302) 634-8122
                                          Telecopy:   (302) 634-1092




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                                      S - 4


<PAGE>



                                          THE CHASE MANHATTAN BANK,
                                          individually and as Syndication Agent


                                          By:     /s/ Lawrence Palumbo, Jr. 
                                               ------------------------------
                                          Name:   Lawrence Palumbo, Jr.
                                          Title:  Vice President


                                          Address:    712 Main Street, 5th Floor
                                                      P. O. Box 2558
                                                      Houston, Texas  77252-8086
                                          Attention:  Mr. Robert Mertensoto


                                          Telephone:     (713) 216-4147
                                          Telecopy:      (713) 216-4117




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                                      S - 5


<PAGE>



                                          BANK OF AMERICA NATIONAL
                                          TRUST AND SAVINGS ASSOCIATION
                                          individually and as Co-Agent


                                          By:     /s/ Ronald E. McKaig
                                               -------------------------
                                          Name:   Ronald E. McKaig
                                          Title:  Vice President


                                          Address:   3 Allen Center
                                                     333 Clay Street, Suite 4550
                                                     Houston, TX  77002


                                          Attention: Mr. Ron McKaig
                                          Telephone: (713) 651-4881
                                          Telecopy:  (713) 651-4841

 







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                                      S - 6


<PAGE>



                                         THE BANK OF NEW YORK, individually
                                         and as Co-Agent



                                         By:     /s/ Raymond J. Palmer
                                              ----------------------------
                                         Name:   Raymond J. Palmer
                                         Title:  Vice President

                                         Address:    One Wall Street, 19th Floor
                                                     New York, New York 10286


                                         Attention:  Mr. Ray Palmer
                                         Telephone:  (212) 635-7834
                                         Telecopy:   (212) 635-7923

                                      




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                                      S - 7


<PAGE>




                                          THE BANK OF NOVA SCOTIA,
                                          individually and as Co-Agent



                                          By:    /s/ F.C.H. Ashby
                                               --------------------------------
                                          Name:  F.C.H. Ashby
                                          Title: Senior Manager Loan Operations


                                          Address:   600 Peachtree Street, N.E.
                                                     Suite 2700
                                                     Atlanta, Georgia  30308


                                          Attention:  Mr. Cleve Bushey
                                          Telephone:  (404) 877-1500
                                          Telecopy:   (404) 888-8998






 




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                                      S - 8


<PAGE>



                                          ROYAL BANK OF CANADA, individually
                                          and as a Co-Agent



                                          By:    /s/ Linda M. Stephens
                                               --------------------------
                                          Name:  Linda M. Stephens
                                          Title: Manager

                                          Address:   Financial Square
                                                     32 Old Slip St.
                                                     New York, New York
                                                     10005-3531


                                          Attention:  Loan Administrator
                                          Telephone:  (212) 428-6321
                                          Telecopy:   (212) 428-2372

                                          with copy to:

                                          Address:    Royal Bank of Canada
                                                      12450 Greenspoint Drive
                                                      Suite 1450
                                                      Houston, Texas  77060

                                          Attention:  Linda M. Stephens

                                          Telephone:  (281) 874-5669
                                          Telecopy:   (281) 874-0081



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                                      S - 9


<PAGE>



                                          UNION BANK OF CALIFORNIA, N.A.,
                                          individually as a Co-Agent



                                          By:    /s/ Katie Murray
                                               --------------------------
                                          Name:  Katie Murray
                                          Title: Vice President


                                          Address:   500 North Akard, Suite 4200
                                                     Dallas, Texas  75201


                                          Attention:  Ms. Katie Murray
                                          Telephone:  (214) 922-4207
                                          Telecopy:   (214) 922-4209












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                                      S - 10


<PAGE>



                                          WELLS FARGO BANK, N.A.,
                                          individually as a Co-Agent



                                          By:    /s/ Lester J.N. Keliher
                                               --------------------------
                                          Name:  Lester J.N. Keliher
                                          Title: Vice President

                                          Address:   1445 Ross Avenue, Suite 400
                                                     LB 224
                                                     Dallas, Texas  75202

                                          Attention:  Mr. Lester Keliher
                                          Telephone:  (214) 777-4025
                                          Telecopy:   (214) 777-4044







 




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                                      S - 11


<PAGE>



                                          THE FUJI BANK, LIMITED-HOUSTON
                                          AGENCY, individually as a Co-Agent



                                          By:    /s/ Yutaka Taniuchi
                                               --------------------------
                                          Name:  Yutaka Taniuchi
                                          Title: Senior Vice President

                                          Address:   1221 McKinney Street
                                                     Suite 4100
                                                     Houston, Texas  77002

                                          Attention:  Mr. Tommy Watts
                                          Telephone:  (713) 650-7868
                                          Telecopy:   (713) 759-0717

 





 




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                                      S - 12


<PAGE>



                                          DEN NORSKE BANK ASA, individually
                                          and as Lead Manager



                                          By:     /s/ J. Morten Kreutz
                                               --------------------------
                                          Name:   J. Morten Kreutz
                                          Title:  Vice President


                                          By:     /s/ Charles E. Hall
                                               --------------------------
                                          Name:   Charles E. Hall
                                          Title:  Senior Vice President


                                          Address:   333 Clay Street, Suite 4890
                                                     Houston, Texas  77002


                                          Attention:  Mr. J. Morten Kreutz
                                          Telephone:  (713) 844-9255
                                          Telecopy:   (713) 757-1167











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                                      S - 13


<PAGE>



                                          BANQUE PARIBAS, individually and
                                          as Lead Manager



                                          By:     /s/ Barton D. Schouest
                                               --------------------------
                                          Name:   Barton D. Schouest
                                          Title:  Group Vice President


                                          By:     /s/ Brian Malone
                                               --------------------------
                                          Name:   Brian Malone
                                          Title:  Vice President



                                          Address:   1200 Smith Street
                                                     Two Allen Center
                                                     Suite 3100
                                                     Houston, Texas  77002


                                          Attention:  Mr. David Dodd
                                          Telephone:  (713) 659-4811
                                          Telecopy:   (713) 659-6915









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                                      S - 14


<PAGE>



                                          FIRST UNION NATIONAL BANK,
                                          individually and as a Lead Manager



                                          By:     /s/ Michael J. Kolosowsky
                                               -----------------------------
                                          Name:   Michael J. Kolosowsky
                                          Title:  Vice President


                                          Address:   1001 Fannin Street
                                                     Suite 2255
                                                     Houston, Texas  77002


                                          Attention:  Mr. Paul N. Riddle
                                          Telephone:  (713) 650-3716
                                          Telecopy:   (713) 650-6354

 





 



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                                      S - 15


<PAGE>



                                          BANKERS TRUST COMPANY, as a Lender



                                          By:     /s/ Marcus M. Tarkington
                                               ------------------------------
                                          Name:   Marcus M. Tarkington
                                          Title:  Vice President


                                          Address:   130 Liberty Street
                                                     M.S. 2344
                                                     New York, New York 10006


                                          Attention:  Marcus M. Tarkington
                                          Telephone:  (212) 250-7684
                                          Telecopy:   (212) 250-8693









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                                      S - 16


<PAGE>



                                          CAISSE NATIONALE DE CREDIT
                                          AGRICOLE, as a Lender



                                          By:     /s/ Katherine L. Abbott
                                               -----------------------------
                                          Name:   Katherine L. Abbott
                                          Title:  First Vice President


                                          Address:   55 East Monroe
                                                     Chicago, Illinois  60603


                                          Attention:  Ms. Rosemary Brown
                                          Telephone:  (312) 917-7420
                                          Telecopy:   (312) 372-4421

                                          with further notice to:

                                          Mr. Kevin Costello
                                          600 Travis, Suite 2340
                                          Houston, Texas  77002

                                          Telephone:  (713) 223-7003
                                          Telecopy:   (713) 223-7029





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                                      S - 17


<PAGE>



                                          NATEXIS BANQUE, as a Lender
                                             BFCE


                                          By:     /s/ Mark A. Harrington
                                               ----------------------------
                                          Name:   Mark A. Harrington
                                          Title:  Vice President and
                                                  Regional Manager


                                          By:     /s/ Eric Ditges
                                               ----------------------------
                                          Name:   Eric Ditges
                                          Title:  Assistant Treasurer


                                          Address:   333 Clay Street, Suite 4340
                                                     Houston, Texas  77002


                                          Attention:  Mr. Eric Ditges
                                          Telephone:  (713) 759-9401
                                          Telecopy:   (713) 759-9908









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                                      S - 18


<PAGE>



                                          THE SUMITOMO BANK, LIMITED, as
                                          a Lender



                                          By:     /s/ Harumitsu Seki
                                               --------------------------
                                          Name:   Harumitsu Seki
                                          Title:  General Manager

                                          Administrative matters:

                                          Address:   277 Park Avenue, 6th Floor
                                                     New York, New York 10172


                                          Attention:  Thierry LeJouan
                                          Telephone:  (212) 224-4138
                                          Telecopy:   (212) 224-5197


                                          Credit matters:

                                          Mr. Bill McKown
                                          700 Louisiana, Suite 1750
                                          Houston, Texas  77002

                                          Telephone:  (713) 238-8217
                                          Telecopy:   (713) 759-0020




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                                      S - 19


<PAGE>



                                          TORONTO DOMINION (TEXAS), INC.
                                          as a Lender



                                          By:     /s/ Darlene Riedel
                                               --------------------------
                                          Name:   Darlene Riedel
                                          Title:  Vice President


                                          Address:  909 Fannin Street, Ste. 1700
                                                    Houston, Texas  77010


                                          Attention:  Darlene Riedel
                                          Telephone:  (713) 653-8250
                                          Telecopy:   (713) 951-9921









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                                      S - 20


<PAGE>



                                          THE TOYO TRUST & BANKING CO.,
                                          LTD., as a Lender



                                          By:    /s/ T. Mikumo
                                               --------------------------
                                          Name:   T. Mikumo
                                          Title:  Vice President


                                          Address:   666 5th Avenue, 33rd Floor
                                                     New York, New York 10103


                                          Attention:  Ms. Sharon Bonelli
                                          Telephone:  (212) 307-3410
                                          Telecopy:   (212) 307-3498

 








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                                      S - 21


<PAGE>



                                          WACHOVIA BANK, N.A., as a Lender



                                          By:     /s/ Paige D. Mesaros
                                               --------------------------
                                          Name:   Paige D. Mesaros
                                          Title:  Vice President


                                          Address:   191 Peachtree Street
                                                     Atlanta, Georgia 30303


                                          Attention:  Ms. Paige Mesaros
                                          Telephone:  (404) 332-1322
                                          Telecopy:   (404) 332-6898










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                                      S - 22


<PAGE>



                                          THE DAI-ICHI KANGYO BANK, LTD.,
                                          NEW YORK BRANCH,as a Lender



                                          By:     /s/ Masayoshi Komaki
                                               --------------------------
                                          Name:   Masayoshi Komaki
                                          Title:  Vice President


                                          Address:   One World Trade Center
                                                     48th Floor
                                                     New York, New York 10048

                                          Attention:  Mr. Masayoshi Komaki
                                          Telephone:  (212) 432-6627
                                          Telecopy:   (212) 912-1879


                                          Further notice to:

                                          DKB-Houston LPO
                                          1100 Louisiana, Suite 4940
                                          Houston, Texas  77002


                                          Attention:  Mr. Warren Ross

                                          Telephone:  (713) 654-5055
                                          Telecopy:   (713) 654-1667



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                                      S - 23


<PAGE>



                                          THE SANWA BANK, LIMITED, as a Lender



                                          By:     /s/ Toru Sakamuro
                                               --------------------------
                                          Name:   Toru Sakamuro
                                          Title:  Vice President


                                          Address:   4100W Texas Commerce Tower
                                                     2200 Ross Avenue
                                                     Dallas, Texas  75201


                                          Attention:  Mr. Matthew Patrick
                                          Telephone:  (214) 665-0242
                                          Telecopy:   (214) 953-3963

 







                      [SIGNATURE PAGE TO 364 DAY FACILITY]

                                      S - 24


<PAGE>



                                          KREDIETBANK N.V., as a Lender



                                          By:     /s/ Robert Snauffer
                                               --------------------------
                                          Name:   Robert Snauffer
                                          Title:  Vice President


                                          By:     /s/ Tod R. Angus
                                               --------------------------
                                          Name:   Tod R. Angus
                                          Title:  Vice President


                                          Address:   125 West 55th Street
                                                     New York, NY  10019


                                          Attention:  Robert E. Snauffer
                                                      Vice President
                                          Telephone:  (212) 541-0700
                                          Telecopy:   (212) 956-5580

                                          with a copy to:

                                          Kredietbank N.V., Atlanta
                                          Representative Office
                                          Two Midtown Plaza
                                          1349 W. Peachtree Street
                                          Atlanta, Georgia  30309

                                          Attention:  Mr. Felip Ferrante

                                          Telephone:  (404) 876-2556
                                          Telecopy:   (404) 876-3212



                      [SIGNATURE PAGE TO 364 DAY FACILITY]

                                      S - 25



<PAGE>



                                   Exhibit A-1

                                    [Form of]

                          Loan Note - 364 Day Facility

$                                                                        , 199
 -----------------                                             ----------     --



         FOR VALUE RECEIVED,  the  undersigned,  PIONEER NATURAL  RESOURCES USA,
INC., a Delaware  corporation,  with offices at 303 W. Wall, Suite 101, Midland,
Texas (herein called "Borrower"), hereby promises to pay to the order of
                         (herein called "Lender"), the principal sum of
and No/100 Dollars ($            ), or, if greater or less, the aggregate unpaid
principal  amount  of each  Loan made  under  this  Note by  Lender to  Borrower
pursuant to the terms of the Credit Agreement (as defined herein), together with
interest on the unpaid principal  balance thereof as hereinafter set forth, both
principal and interest  payable as herein provided in lawful money of the United
States of America at the principal banking offices of the  Administrative  Agent
under the Credit  Agreement,  901 Main Street,  Dallas,  Texas 75202, or at such
other place as from time to time may be  designated  by the holder of this Note,
with the concurrence of Borrower and Administrative  Agent. Subject to the terms
and conditions of the Credit  Agreement and hereof,  Borrower may borrow,  repay
and reborrow hereunder.

         This  Note (a) is  issued  and  delivered  under  that  certain  Credit
Facility Agreement dated as of August 7, 1997 by and among Borrower, NationsBank
of Texas,  N.A., as  Administrative  Agent,  CIBC Inc., as Documentation  Agent,
Morgan  Guaranty Trust Company of New York, as  Documentation  Agent,  The Chase
Manhattan  Bank, as Syndication  Agent,  the Co-Agents  party  thereto,  and the
Lenders from time to time parties  thereto  (the "Credit  Agreement"),  and is a
"Loan Note" as defined  therein,  and (b) is subject to the terms and provisions
of the Credit  Agreement,  which contains  provisions for payment and prepayment
hereunder and  acceleration of the maturity hereof upon the happening of certain
events.  Payments on this Note shall be made and applied as provided  herein and
in the Credit Agreement.  Reference is hereby made to the Credit Agreement for a
description of certain rights,  limitations of rights, obligations and duties of
the parties hereto and for the meanings assigned to terms used and not otherwise
defined herein.


                                 Exhibit A-1 - 1


<PAGE>



         Interest  accrued on each Loan evidenced by this Note shall be payable,
without duplication: (a) on the Maturity Date; (b) with respect to any Base Rate
Portion of the Loans  evidenced by this Note, on the third  Business Day of each
Fiscal Quarter  occurring after the date of the initial borrowing of a Base Rate
Portion  hereunder;  (c) with  respect  to any  Eurodollar  Portion of the Loans
evidenced by this Note, on the last day of each applicable Interest Period (and,
if such  Interest  Period shall exceed 90 days, on the 90th day of such Interest
Period and every 90 days thereafter until the end of such Interest Period);  (d)
with respect to any Base Rate Portion converted into a Eurodollar Portion of the
Loans  evidenced by this Note pursuant to a Rate Election on a day when interest
would not  otherwise  have been  payable  pursuant  to clause  (b), on the third
Business Day of each Fiscal Quarter occurring after the date of such conversion;
and (e) on any portion of the Loans evidenced by this Note, the Maturity Date of
which is  accelerated  pursuant to Section 6.1 of the Credit  Agreement,  on the
date to which the Maturity Date of such portion has been  accelerated.  Interest
accrued  on the  Loans  evidenced  by this  Note or other  monetary  Obligations
arising under this Note,  the Credit  Agreement or any other Loan Document after
the date such amount is due and  payable  (whether on the  Maturity  Date,  upon
acceleration or otherwise) shall be payable upon demand.

         The principal  amount of this Note,  together with all interest accrued
hereon and unpaid, shall be due and payable in full on the Maturity Date.

         The Base Rate Portion of the Loans evidenced by this Note (exclusive of
any past due  principal or interest)  from time to time  outstanding  shall bear
interest on each day outstanding at the Base Rate, plus the applicable Base Rate
Margin.  Each Eurodollar  Portion of the Loans evidenced by this Note (exclusive
of any past due  principal or interest)  shall bear  interest on each day during
the  related  Interest  Period  at the  applicable  Eurodollar  Rate,  plus  the
applicable  Eurodollar  Margin. All past due principal of the Loans evidenced by
this Note or other  Obligations  arising under the Credit Agreement or any other
Loan Document  (whether  payable on the Maturity  Date or otherwise)  shall bear
interest on each day  outstanding  after its due date at the applicable  Default
Rate in effect on such day.

         Notwithstanding  the  other  provisions  of  this  Note  or the  Credit
Agreement,  in no event shall the interest  payable  hereon,  whether  before or
after  maturity,  exceed the Maximum Lawful Rate and this Note is expressly made
subject to the provisions of the Credit  Agreement  which more fully set out the
limitations on how interest accrues hereon. In the event applicable law provides
for a ceiling under Texas Revised Civil Statutes  Annotated  article  5069-1.04,
that ceiling shall be the indicated rate ceiling.  The term  "applicable law" as
used in this Note  shall  mean the laws of the State of Texas or the laws of the
United States,  whichever laws allow the greater interest as such laws now exist
or may be enacted, changed or amended or come into effect in the future.


                                 Exhibit A-1 - 2


<PAGE>



         If this Note is placed in the hands of an attorney for collection after
a  Default,  or if all or any part of the  indebtedness  represented  hereby  is
proved,   established   or  collected  in  any  court  or  in  any   bankruptcy,
receivership, debtor relief, probate or other court proceedings, the undersigned
Borrower and all  endorsers,  sureties and  guarantors  of this Note jointly and
severally agree to pay reasonable  attorneys'  fees and collection  costs to the
holder hereof in addition to the principal and interest payable hereunder.

         The undersigned Borrower and all endorsers,  sureties and guarantors of
this Note hereby  severally waive demand,  presentment,  notice of demand and of
dishonor and  nonpayment  of this Note,  protest,  notice of protest,  notice of
intention  to  accelerate  the maturity of this Note,  declaration  or notice of
acceleration of the maturity of this Note, diligence in collecting, the bringing
of any suit  against  any party and any  notice of or  defense on account of any
extensions,  renewals,  partial  payments or changes in any manner of or in this
Note or in any of its  terms,  provisions  and  covenants,  or any  releases  or
substitutions  of any  security,  or any delay,  indulgence  or other act of any
trustee or any holder hereof, whether before or after maturity.

         It is  contemplated  that by reason of  prepayment  hereon there may be
times when no indebtedness is owing hereunder; notwithstanding such occurrences,
this Note shall  remain  valid and shall be in full force and effect as to Loans
made pursuant to the Credit Agreement subsequent to each occurrence.

         Except as permitted by Section 8.8 of the Credit  Agreement,  this Note
may not be assigned by Lender to any other Person.

THIS NOTE AND THE RIGHTS AND DUTIES OF THE UNDERSIGNED  BORROWER AND LENDER WITH
RESPECT  HERETO  SHALL BE  GOVERNED  BY THE LAWS OF THE STATE OF TEXAS  (WITHOUT
REGARD TO  PRINCIPLES  OF CONFLICTS  OF LAW),  EXCEPT TO THE EXTENT THE SAME ARE
GOVERNED BY APPLICABLE FEDERAL LAW.

                                              PIONEER NATURAL RESOURCES
                                              USA, INC.


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


                                 Exhibit A-1 - 3


<PAGE>



                                   Exhibit A-2

                                    [Form of]

                       Swing Line Note - 364 Day Facility

$                                                                        , 199 
  --------------------                                        ------------    --

         FOR VALUE RECEIVED,  the  undersigned,  PIONEER NATURAL  RESOURCES USA,
INC., a Delaware  corporation with offices at 303 W. Wall,  Suite 101,  Midland,
Texas (herein called "Borrower"), hereby promises to pay to the order of
                        (herein called "Lender"),  the principal sum of
and No/100 Dollars ($             ), or, if less, the aggregate unpaid principal
amount of the Swing Line  Advances  made  under this Note by Lender to  Borrower
pursuant to the terms of the Credit Agreement (as defined herein), together with
interest on the unpaid principal  balance thereof as hereinafter set forth, both
principal and interest  payable as herein provided in lawful money of the United
States of America at the principal banking offices of Administrative Agent under
the Credit  Agreement,  901 Main Street,  Dallas,  Texas 75202, or at such other
place as from time to time may be  designated  by the holder of this Note,  with
the concurrence of Borrower and Administrative Agent.

         This  Note (a) is  issued  and  delivered  under  that  certain  Credit
Facility Agreement dated as of August 7, 1997 by and among Borrower, NationsBank
of Texas,  N.A., as  Administrative  Agent,  CIBC Inc., as Documentation  Agent,
Morgan  Guaranty Trust Company of New York, as  Documentation  Agent,  The Chase
Manhattan  Bank, as Syndication  Agent,  the Co-Agents  party  thereto,  and the
Lenders from time to time parties  thereto  (the "Credit  Agreement"),  and is a
"Swing  Line  Note" as  defined  therein,  and (b) is  subject  to the terms and
provisions of the Credit  Agreement,  which contains  provisions for payment and
prepayment  hereunder and acceleration of the maturity hereof upon the happening
of certain  events.  Payments on this Note shall be made and applied as provided
herein  and in the  Credit  Agreement.  Reference  is hereby  made to the Credit
Agreement  for  a  description  of  certain   rights,   limitations  of  rights,
obligations  and duties of the parties  hereto and for the meanings  assigned to
terms used and not otherwise defined herein.

         The unpaid  principal  amount of this Note,  together with all interest
accrued  hereon and unpaid,  shall be due and payable in full as provided in the
Credit  Agreement and not later than the Maturity Date.  Interest accrued on the
Swing Line  Advances  evidenced by this Note shall be payable as provided in the
Credit Agreement.

         Notwithstanding  other provisions of this Note or the Credit Agreement,
in no event shall the interest payable hereon, whether before or after maturity,
exceed the Maximum  Lawful Rate and this Note is  expressly  made subject to the
provisions of the Credit  Agreement  which more fully set out the limitations on
how interest accrues hereon. In the event

                                 Exhibit A-2 - 1


<PAGE>



applicable  law  provides  for a ceiling  under  Texas  Revised  Civil  Statutes
Annotated article  5069-1.04,  that ceiling shall be the indicated rate ceiling.
The term  "applicable law" as used in this Note shall mean the laws of the State
of Texas or the laws of the United  States,  whichever  laws  allow the  greater
interest  as such laws now exist or may be  enacted,  changed or amended or come
into effect in the future.

         If this Note is placed in the hands of an attorney for collection after
a  Default,  or if all or any part of the  indebtedness  represented  hereby  is
proved,   established   or  collected  in  any  court  or  in  any   bankruptcy,
receivership, debtor relief, probate or other court proceedings, the undersigned
Borrower and all  endorsers,  sureties and  guarantors  of this Note jointly and
severally agree to pay reasonable  attorneys'  fees and collection  costs to the
holder hereof in addition to the principal and interest payable hereunder.

         The undersigned Borrower and all endorsers,  sureties and guarantors of
this Note hereby  severally waive demand,  presentment,  notice of demand and of
dishonor and  nonpayment  of this Note,  protest,  notice of protest,  notice of
intention  to  accelerate  the maturity of this Note,  declaration  or notice of
acceleration of the maturity of this Note, diligence in collecting, the bringing
of any suit  against  any party and any  notice of or  defense on account of any
extensions,  renewals,  partial  payments or changes in any manner of or in this
Note or in any of its  terms,  provisions  and  covenants,  or any  releases  or
substitutions  of any  security,  or any delay,  indulgence  or other act of any
trustee or any holder hereof, whether before or after maturity.

         It is  contemplated  that by reason of  prepayment  hereon there may be
times when no indebtedness is owing hereunder; notwithstanding such occurrences,
this Note shall  remain  valid and shall be in full force and effect as to Loans
made pursuant to the Credit Agreement subsequent to each occurrence.

         Except as permitted by Section 8.8 of the Credit  Agreement,  this Note
may not be assigned by Lender to any other Person.


                                 Exhibit A-2 - 2


<PAGE>



         THIS NOTE AND THE  RIGHTS AND DUTIES OF THE  UNDERSIGNED  BORROWER  AND
LENDER WITH  RESPECT  HERETO SHALL BE GOVERNED BY THE LAWS OF THE STATE OF TEXAS
(WITHOUT  REGARD TO  PRINCIPLES  OF CONFLICTS OF LAW),  EXCEPT TO THE EXTENT THE
SAME ARE GOVERNED BY APPLICABLE FEDERAL LAW.

                                             PIONEER NATURAL RESOURCES
                                             USA, INC.


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



                                 Exhibit A-2 - 3


<PAGE>



                                   Exhibit A-3

                                    [Form of]

                     Competitive Bid Note - 364 Day Facility

$300,000,000                                                             , 199 
                                                               ----------     --

         FOR VALUE RECEIVED,  the  undersigned,  PIONEER NATURAL  RESOURCES USA,
INC., a Delaware  corporation,  with offices at 303 W. Wall, Suite 101, Midland,
Texas (herein called "Borrower"), hereby promises to pay to the order of
                           (herein called "Lender"),  the principal sum of THREE
HUNDRED  MILLION AND No/100 DOLLARS  ($300,000,000),  or, if less, the aggregate
unpaid  principal  amount of all  Competitive Bid Advances shown on the schedule
attached hereto (and any continuation  thereof), if so shown, made by the Lender
to Borrower,  together with interest on the unpaid principal  balance thereof as
hereinafter set forth, both principal and interest payable as herein provided in
lawful money of the United States of America at the principal banking offices of
Administrative  Agent under the Credit Agreement (as defined  herein),  901 Main
Street,  Dallas, Texas 75202, or at such other place as from time to time may be
designated  by the holder of this Note,  with the  concurrence  of Borrower  and
Administrative Agent.

         This  Note (a) is  issued  and  delivered  under  that  certain  Credit
Facility Agreement dated as of August 7, 1997 by and among Borrower, NationsBank
of Texas,  N.A., as  Administrative  Agent,  CIBC Inc., as Documentation  Agent,
Morgan  Guaranty Trust Company of New York, as  Documentation  Agent,  The Chase
Manhattan  Bank, as Syndication  Agent,  the Co-Agents  party  thereto,  and the
Lenders from time to time parties  thereto  (the "Credit  Agreement"),  and is a
"Competitive Bid Note" as defined  therein,  and (b) is subject to the terms and
provisions of the Credit  Agreement,  which contains  provisions for payment and
prepayment  hereunder and acceleration of the maturity hereof upon the happening
of certain  events.  Payments on this Note shall be made and applied as provided
herein  and in the  Credit  Agreement.  Reference  is hereby  made to the Credit
Agreement  for  a  description  of  certain   rights,   limitations  of  rights,
obligations  and duties of the parties  hereto and for the meanings  assigned to
terms used and not otherwise defined herein.

         The unpaid  principal  amount of this Note,  together with all interest
accrued  hereon and unpaid,  shall be due and payable in full as provided in the
Credit Agreement and not later than the Maturity Date.

         Interest accrued on the Competitive Bid Advances evidenced by this Note
shall be payable as provided in the Credit Agreement.

         Notwithstanding  other provisions of this Note or the Credit Agreement,
in no event shall the interest payable hereon, whether before or after maturity,
exceed the Maximum

                                 Exhibit A-3 - 1


<PAGE>



Lawful Rate and this Note is  expressly  made subject to the  provisions  of the
Credit  Agreement  which  more  fully set out the  limitations  on how  interest
accrues hereon.  In the event  applicable law provides for a ceiling under Texas
Revised Civil Statutes  Annotated article  5069-1.04,  that ceiling shall be the
indicated  rate ceiling.  The term  "applicable  law" as used in this Note shall
mean the laws of the State of Texas or the laws of the United States,  whichever
laws  allow the  greater  interest  as such  laws now  exist or may be  enacted,
changed or amended or come into effect in the future.

         If this Note is placed in the hands of an attorney for collection after
a  Default,  or if all or any part of the  indebtedness  represented  hereby  is
proved,   established   or  collected  in  any  court  or  in  any   bankruptcy,
receivership, debtor relief, probate or other court proceedings, the undersigned
Borrower and all  endorsers,  sureties and  guarantors  of this Note jointly and
severally agree to pay reasonable  attorneys'  fees and collection  costs to the
holder hereof in addition to the principal and interest payable hereunder.

         The undersigned Borrower and all endorsers,  sureties and guarantors of
this Note hereby  severally waive demand,  presentment,  notice of demand and of
dishonor and  nonpayment  of this Note,  protest,  notice of protest,  notice of
intention  to  accelerate  the maturity of this Note,  declaration  or notice of
acceleration of the maturity of this Note, diligence in collecting, the bringing
of any suit  against  any party and any  notice of or  defense on account of any
extensions,  renewals,  partial  payments or changes in any manner of or in this
Note or in any of its  terms,  provisions  and  covenants,  or any  releases  or
substitutions  of any  security,  or any delay,  indulgence  or other act of any
trustee or any holder hereof, whether before or after maturity.

         It is  contemplated  that by reason of  prepayment  hereon there may be
times when no indebtedness is owing hereunder; notwithstanding such occurrences,
this  Note  shall  remain  valid and  shall be in full  force  and  effect as to
Competitive  Bid Advances  made pursuant to the Credit  Agreement  subsequent to
each occurrence.

         Except as permitted by Section 8.8 of the Credit  Agreement,  this Note
may not be assigned by Lender to any other Person.

         THIS NOTE AND THE  RIGHTS AND DUTIES OF THE  UNDERSIGNED  BORROWER  AND
LENDER WITH  RESPECT  HERETO SHALL BE GOVERNED BY THE LAWS OF THE STATE OF TEXAS
(WITHOUT  REGARD TO  PRINCIPLES  OF CONFLICTS OF LAW),  EXCEPT TO THE EXTENT THE
SAME ARE GOVERNED BY APPLICABLE FEDERAL LAW.

                                            PIONEER NATURAL RESOURCES
                                            USA, INC.


                                                              By:
                                                              Name:
                                                              Title:


                                 Exhibit A-3 - 2


<PAGE>



                                   Exhibit B-1

[Note: Language in brackets will not be included in every Guaranty to the extent
that, at the time of execution and delivery of the Guaranty,  such execution and
delivery  would result in adverse tax  consequences  under ss.956 or substantial
stamp tax or similar taxes, are prohibited pursuant to contractual  restrictions
or are prohibited as a matter of corporate law.]

                                    [Form of]

                                    GUARANTY

         THIS GUARANTY (this "Guaranty"), dated as of           , 199  , made by
                            [(A.C.N.          )], a               ("Guarantor"),
- ----------------------------        ----------     --------------
in favor of each of the Lender Parties (as defined below).

                              W I T N E S S E T H:

         WHEREAS, pursuant to that certain Credit Facility Agreement dated as of
August  7, 1997 by and among Pioneer  Natural  Resources USA,  Inc.,  a Delaware
corporation  ("Borrower"),  NationsBank of Texas, N.A., as Administrative Agent,
CIBC Inc., as Documentation Agent, Morgan Guaranty Trust Company of New York, as
Documentation  Agent,  The Chase  Manhattan  Bank,  as  Syndication  Agent,  the
Co-Agents  party  thereto,  and the Lenders  from time to time  parties  thereto
(together   with   all   amendments,   supplements,   restatements   and   other
modifications, if any, thereafter made thereto, the "Primary Credit Agreement"),
the  Lenders  have  extended  Commitments  (as  defined  in the  Primary  Credit
Agreement) to make Loans to Borrower and to issue or  participate  in Letters of
Credit on behalf of Borrower; and

         WHEREAS, pursuant to that certain Credit Facility Agreement dated as of
August  7,  1997  by  and  among  Borrower,   NationsBank  of Texas,   N.A.,  as
Administrative  Agent, CIBC Inc., as Documentation  Agent, Morgan Guaranty Trust
Company of New York,  as  Documentation  Agent,  The Chase  Manhattan  Bank,  as
Syndication  Agent,  the Co-Agents  party thereto,  and the Lenders from time to
time parties thereto  (together with all amendments,  supplements,  restatements
and other  modifications,  if any, thereafter made thereto,  the "364 Day Credit
Agreement",  and  together  with  the  Primary  Credit  Agreement,  the  "Credit
Agreements"),  the Lenders have extended  Commitments (as defined in the 364 Day
Credit Agreement) to make Loans to Borrower; and

         WHEREAS, as a condition precedent to the making of the initial Loans or
issuing of the initial Letters of Credit under the Credit Agreements,  Guarantor
is required to execute and deliver this Guaranty; and

                                 Exhibit B-1 - 1


<PAGE>



         WHEREAS,  Guarantor has  duly  authorized the  execution,  delivery and
performance of this Guaranty; and

         WHEREAS,  it is in the best  interests  of  Guarantor  to execute  this
Guaranty  inasmuch as  Guarantor  will derive  substantial  direct and  indirect
benefits from the Loans made from time to time to Borrower and Letters of Credit
issued on behalf of Borrower pursuant to the Credit Agreements;

         NOW THEREFORE, for good and valuable consideration the receipt of which
is  hereby  acknowledged,  and in order to  induce  the  Lenders  to make  Loans
(including the initial Loans) to Borrower  pursuant to the Credit Agreements and
for the Issuing  Bank to issue  Letters of Credit on behalf of Borrower  and for
the Lenders to acquire  participations in such Letters of Credit pursuant to the
Primary  Credit  Agreement,  Guarantor  agrees,  for the  benefit of each Lender
Party, as follows:

                                    ARTICLE I
                                   DEFINITIONS

         SECTION 1.1   Certain  Terms.   The  following  terms  (whether  or not
underscored)  when used in this  Guaranty,  including its preamble and recitals,
shall have the following  meanings (such definitions to be equally applicable to
the singular and plural forms thereof):

         "Administrative Agent" is defined in the first recital.

         "Borrower" is defined in the first recital.

         "Commitments"  means  "Commitments"  as defined in the  Primary  Credit
Agreement and "Commitments" as defined in the 364 Day Credit Agreement.

         "Credit Agreements" is defined in the second recital.

         "Debtor" is defined in Section 2.1(a)(i).

         "Guarantor" is defined in the preamble.

         "Guaranty" is defined in the preamble.

         "Lender  Party"  means,  as the context may  require,  any Lender,  any
Issuing Bank or any Agent and each of its respective successors, transferees and
assigns under the Credit Agreements.


                                 Exhibit B-1 - 2


<PAGE>



         "Lenders"  means  "Lenders" as defined in the Primary Credit  Agreement
and "Lenders" as defined in the 364 Day Credit Agreement.

         "Loan  Documents"  means  "Loan  Documents"  as defined in the  Primary
Credit  Agreement  and  "Loan  Documents"  as  defined  in the  364  Day  Credit
Agreement.

         "Notes"  means "Notes" as defined in the Primary  Credit  Agreement and
"Notes" as defined in the 364 Day Credit Agreement.

         "Obligations"  means  "Obligations"  as defined in the  Primary  Credit
Agreement and "Obligations" as defined in the 364 Day Credit Agreement.

         "Primary Credit Agreement" is defined in the first recital.

         "364 Day Credit Agreement" is defined in the second recital.

         SECTION 1.2   Primary Credit  Agreement  Definitions.  Unless otherwise
defined herein or the context otherwise  requires,  terms used in this Guaranty,
including its preamble and recitals,  have the meanings  provided in the Primary
Credit Agreement.

                                   ARTICLE II
                               GUARANTY PROVISIONS

         SECTION 2.1   Guaranty.   Guarantor hereby absolutely,  unconditionally
and irrevocably

(a)  guarantees

     (i)  the full and punctual payment when due, whether at stated maturity, by
          required prepayment,  declaration,  acceleration, demand or otherwise,
          of all  Obligations  of Borrower now or hereafter  existing  under the
          Credit Agreements,  the Notes, the LC Applications and each other Loan
          Document  to which  Borrower  is or may  become a party,  whether  for
          principal,  interest, fees, expenses or otherwise; 

     (ii) the  payment  and  performance  of  any  and  all  present  or  future
          obligations  of  Borrower  according  to the terms of any  present  or
          future rate swap, rate cap, rate floor, rate collar, currency exchange
          transaction,  forward  rate  agreement,  or  other  exchange  or  rate
          protection   agreements  or  any  option  with  respect  to  any  such
          transaction now existing or hereafter entered into between Borrower or
          any of  its  Subsidiaries and  one  or more  of the  Lenders or  their
          Affiliates ("interest rate swap agreement");

                                 Exhibit B-1 - 3


<PAGE>



    (iii) the  payment  and  performance  of  any  and  all  present  or  future
          obligations  of  Borrower  according  to the terms of any  present  or
          future crude oil, natural gas or other  hydrocarbons  swap agreements,
          crude oil, natural gas or other  hydrocarbons  cap, crude oil, natural
          gas or other  hydrocarbons  floor,  crude  oil,  natural  gas or other
          hydrocarbons  collar,  crude oil,  natural  gas or other  hydrocarbons
          exchange  transaction,   forward  crude  oil,  natural  gas  or  other
          hydrocarbons agreement, or other exchange or crude oil, natural gas or
          other hydrocarbons protection agreements or any option with respect to
          any such  transaction  now existing or hereafter  entered into between
          Borrower or any of its  Subsidiaries and one or more of the Lenders or
          their Affiliates; and

     (iv) all renewals,  rearrangements,  increases,  extensions for any period,
          substitutions,  modification, amendments or supplements in whole or in
          part of any of the above loan documents or obligations,

(including  all such amounts which would become due but for the operation of the
automatic  stay under Section  362(a) of the United States  Bankruptcy  Code, 11
U.S.C. ss.362(a),  and the operation of Sections 502(b) and 506(b) of the United
States Bankruptcy Code, 11 U.S.C. ss.502(b) and ss.506(b)),  and (b) indemnifies
and  holds  harmless  strictly  in  accordance  with  the  terms  of the  Credit
Agreements  each  Lender  Party and each holder of a Note from  Borrower,  an LC
Application  or any  interest  in an LC  Obligation  for any and all  costs  and
expenses  (including  reasonable  attorney's fees and expenses) incurred by such
Lender Party or such holder,  as the case may be, in enforcing  any rights under
this Guaranty; provided, however, that Guarantor shall only be liable under this
Guaranty for the maximum amount of such  liability  that can be hereby  incurred
without  rendering  this  Guaranty,  as it relates to Guarantor,  voidable under
applicable law relating to fraudulent conveyance or fraudulent transfer, and not
for any greater amount. This Guaranty constitutes a guaranty of payment when due
and not of collection,  and Guarantor  specifically  agrees that it shall not be
necessary or required  that any Lender Party or any holder of any Note  exercise
any right,  assert any claim or demand or enforce any remedy whatsoever  against
Borrower or any other Obligor (or any other Person)  before or as a condition to
the obligations of Guarantor hereunder. All payments hereunder are to be made in
the currency in which they are due under the Credit Agreements.

         SECTION 2.2   Acceleration of Guaranty.  Guarantor agrees that,  in the
event of the dissolution or insolvency of Borrower,  Parent or Guarantor, or the
inability or  failure of  Borrower,  Parent  or Guarantor  to pay debts  as they
become due, or an assignment by Borrower, Parent or Guarantor for the benefit of

                                 Exhibit B-1 - 4


<PAGE>



creditors, or the commencement of any case or proceeding in respect of Borrower,
Parent or Guarantor  under any  bankruptcy,  insolvency or similar laws,  and if
such event shall  occur at a time when any of the  Obligations  of Borrower  and
Parent  may not  then be due and  payable,  Guarantor  will  pay to the  Lenders
forthwith  the full amount which would be payable  hereunder by Guarantor if all
such Obligations were then due and payable.

         SECTION 2.3   Guaranty  Absolute,  etc.   This  Guaranty  shall  in all
respects be a continuing,  absolute,  unconditional and irrevocable  guaranty of
payment,  and shall  remain in full force and effect  until all  Obligations  of
Borrower  and  Parent  have  been paid in full,  all  obligations  of  Guarantor
hereunder  shall  have  been  paid  in  full  and  all  Commitments  shall  have
terminated.  Guarantor  guarantees  that the  Obligations of Borrower and Parent
will be paid strictly in accordance with the terms of the Credit  Agreements and
each  other  Loan  Document  under  which  they  arise,  regardless  of any law,
regulation or order now or hereafter in effect in any jurisdiction affecting any
of such terms or the  rights of any Lender  Party or any holder of any Note with
respect  thereto.  The  liability  of  Guarantor  under this  Guaranty  shall be
absolute, unconditional and irrevocable irrespective of:

(a)  (i)  any  lack  of  validity,  legality  or  enforceability  of the  Credit
     Agreements,  any Note, any LC Application or any other Loan Document or any
     portion  of any  thereof or (ii) the Credit  Agreements,  any Note,  any LC
     Application  or any other Loan Document or any portion of any thereof being
     void or voidable;

(b)  the  failure  of any  Lender  Party  or any  holder  of  any  Note,  any LC
     Application, Letter of Credit or any interest therein

     (i)  to  assert  any  claim or  demand  or to  enforce  any right or remedy
          against Borrower, any other Obligor or any other Person (including any
          other  guarantor) under the provisions of the Credit  Agreements,  any
          Note, any LC Application, any other Loan Document or otherwise, or

     (ii) to exercise any right or remedy  against  any other  guarantor  of, or
          collateral securing, any Obligations of Borrower or any other Obligor;

(c)  any change in the time, manner or place of payment of, or in any other term
     of, all or any of the Obligations of Borrower or any other Obligor,  or any
     other extension, compromise or renewal of any Obligation of Borrower or any
     other Obligor;

(d)  any reduction, limitation,  impairment or termination of any Obligations of
     Borrower  or any  other  Obligor  for any  reason,  including  any claim of
     waiver,  release,  surrender,  alteration or  compromise,  and shall not be
     subject to (and Guarantor

                                 Exhibit B-1 - 5


<PAGE>



     hereby   waives  any  right  to  or  claim  of)  any   defense  or  setoff,
     counterclaim,  recoupment  or  termination  whatsoever  by  reason  of  the
     invalidity,   illegality,    nongenuineness,    irregularity,   compromise,
     unenforceability  of,  or any  other  event or  occurrence  affecting,  any
     Obligations of Borrower, any other Obligor or otherwise;

(e)  any amendment to, extensions of, rescission,  waiver, or other modification
     of, or any  consent  to  departure  from,  any of the  terms of the  Credit
     Agreements, any Note, any LC Application, any Letter of Credit or any other
     Loan Document;

(f)  any  addition,  exchange,  release,  surrender  or  non-perfection  of  any
     collateral,  or any  amendment  to or waiver or release or addition  of, or
     consent to departure from, any other guaranty,  held by any Lender Party or
     any  holder  of any  Note,  any LC  Application,  any  Letter  of Credit or
     interest  therein  securing any of the Obligations of Borrower or any other
     Obligor; or

(g)  any other circumstance which might otherwise constitute a defense available
     to, or a legal or equitable discharge of, Borrower,  any other Obligor, any
     surety or any guarantor.

         SECTION 2.4   Reinstatement.  Guarantor agrees that this Guaranty shall
continue to be  effective or be  reinstated,  as the case may be, if at any time
any payment (in whole or in part) of any of the Obligations guaranteed hereby is
rescinded or must otherwise be restored by any Lender Party or any holder of any
Note,  any  LC  Application  or  any  interest  in an LC  Obligation,  upon  the
insolvency,  bankruptcy or reorganization  of Borrower,  or any other Obligor or
otherwise, all as though such payment had not been made.

         SECTION 2.5   Waiver.  Guarantor hereby waives  promptness,  diligence,
presentment,  notice of  acceptance  and any other notice with respect to any of
the  Obligations  of Borrower or any other  Obligor  and this  Guaranty  and any
requirement  that any Agent,  any other  Lender Party or any holder of any Note,
any LC  Application,  any  Letter  of Credit or any  interest  therein  protect,
secure, perfect or insure any security interest or Lien, or any property subject
thereto,  or exhaust any right or take any action  against  Borrower,  any other
Obligor or any other Person  (including  any other  guarantor)  or entity or any
collateral  securing the  Obligations of Borrower or any other  Obligor,  as the
case may be.

         SECTION 2.6   Waiver  of  Subrogation.   Guarantor  hereby  irrevocably
waives any claim or other rights which it may now or hereafter  acquire  against
Borrower  or  any  other  Obligor  that  arise  from  the  existence,   payment,
performance or enforcement of Guarantor's obligations under this Guaranty or any
other  Loan  Document,  including  any  right  of  subrogation,   reimbursement,
contribution,  exoneration,  or indemnification, any right to participate in any

                                 Exhibit B-1 - 6


<PAGE>



claim or remedy of the Lender Parties  against  Borrower or any other Obligor or
any collateral which the Collateral Agent now has or hereafter acquires, whether
or not such claim, remedy or right arises in equity, or under contract,  statute
or common law, including the right to take or receive from Borrower or any other
Obligor,  directly or indirectly,  in cash or other property or by set-off or in
any manner, payment or security on account of such claim or other rights. If any
amount shall be paid to Guarantor in violation of the preceding sentence and the
Obligations  shall not have been paid in cash in full and the  Commitments  have
not been terminated,  such amount shall be deemed to have been paid to Guarantor
for the  benefit  of,  and held in trust  for,  the  Lender  Parties,  and shall
forthwith  be paid to the Lender  Parties to be credited  and  applied  upon the
Obligations,  whether  matured or  unmatured;  otherwise it shall be returned to
remitter.  Guarantor  acknowledges  that it will  receive  direct  and  indirect
benefits from the financing  arrangements  contemplated by the Credit Agreements
and that the waiver set forth in this Section is knowingly made in contemplation
of such benefits.

         SECTION 2.7   Successors, Transferees and Assigns;  Transfers of Notes.
This Guaranty shall:

(a)  be binding upon  Guarantor,  and its  successors,  transferees  and assigns
     (provided,  however,  that Guarantor may not assign any of its  obligations
     hereunder without the prior written consent of all Lenders); and

(b)  inure to the  benefit  of and be  enforceable  by each Agent and each other
     Lender Party.

Without  limiting the  generality  of the  foregoing  clause (b), any Lender may
assign  or  otherwise  transfer  (in  whole  or in  part)  any  Note,  Loan,  LC
Application, Letter of Credit or interest therein held by it to any other Person
or entity,  and such other Person or entity shall  thereupon  become vested with
all rights and benefits in respect thereof granted to such Lender under any Loan
Document  (including  this  Guaranty) or  otherwise,  subject,  however,  to any
contrary  provisions in such  assignment or transfer,  and to the  provisions of
Section 8.8 of the Credit Agreements.

         SECTION 2.8   Taxes. All payments by the undersigned hereunder shall be
made free and clear of and without  deduction for any present or future  income,
excise, stamp, or franchise taxes and other taxes, fees, duties, withholdings or
other  charges of any nature  whatsoever  imposed by any taxing  authority,  but
excluding  franchise  taxes and taxes imposed on or measured by any Lender's net
income or receipts (such non-excluded items being called "Taxes").  In the event
that any  withholding  or  deduction  from any payment to be made  hereunder  is
required  in  respect  of any Taxes  pursuant  to any  applicable  law,  rule or
regulation,  then,  subject to the  provisions  of Section 2.9, the  undersigned
will:


                                 Exhibit B-1 - 7


<PAGE>



(a)  pay directly to the relevant  authority  the full amount  required to be so
     withheld or deducted;

(b)  promptly  forward  to  Administrative  Agent an  official  receipt or other
     documentation  satisfactory to Administrative Agent evidencing such payment
     to such authority; and

(c)  pay to  Administrative  Agent for the account of the  applicable  Lender(s)
     such  additional  amount(s)  as is  necessary to ensure that the net amount
     actually  received  by each  Lender  will equal the full amount such Lender
     would have received had no such  withholding or deduction been required and
     the undersigned hereby acknowledges that it is not entitled to and will not
     seek  recovery  or  restitution  of any amount due to any of the Lenders or
     Agents and paid by it  pursuant  to this clause (c) or pursuant to the next
     sentence.

If any Taxes are directly  asserted against any Agent or any Lender with respect
to any payment  received by such Agent or such Lender  hereunder,  such Agent or
such Lender may pay such Taxes and, if paid in good faith,  the undersigned will
promptly pay such additional amounts to the Administrative Agent for the account
of such Lender or Agent  (including any  penalties,  interest or expenses) as is
necessary in order that the net amount received by such person after the payment
of such Taxes  (including any taxes on such  additional  amount) shall equal the
amount such person would have received had no such Taxes been asserted,  subject
to the provisions of Section 2.9.

         The  undersigned  shall pay all stamp,  transaction,  registration  and
similar taxes (including  financial  institutions  duties,  debit taxes or other
taxes  payable by return and taxes passed on to any Lender or Agent by a bank or
financial institution (collectively "Stamp Taxes") and, if the undersigned fails
to pay any such charges or taxes after reasonable notice from any such Lender or
Agent,  fines and penalties) which may be payable or determined to be payable in
relation to the execution, delivery, performance or enforcement of this Guaranty
or any Loan Document or any other transaction  contemplated by any Loan Document
to which the undersigned is a party.  The undersigned  hereby  indemnifies  each
Lender and Agent against any liability  resulting  from delay or omission to pay
such charges or taxes except to the extent the liability results from failure by
the  relevant  Lender or Agent to pay any such tax after  having been  delivered
funds to do so by the  undersigned  or to the extent such liability is for fines
and  penalties  resulting  from such  Lender's  or  Agent's  failure  to provide
reasonable notice to the undersigned as provided herein.

         If the  undersigned  fails to pay any Taxes or Stamp  Taxes when due to
the appropriate taxing authority or fails to remit to Administrative  Agent, for
the account of the respective  Lenders,  the required receipts or other required
documentary evidence, the undersigned shall

                                 Exhibit B-1 - 8


<PAGE>



indemnify  Lenders for any Taxes,  interest or penalties that may become payable
by any  Lender as a result of any such  failure,  subject to the  provisions  of
Section 2.9.

         The undersigned waives any statutory right to recover from any Agent or
any  Lender  any  amount  due to any  such  Agent  or  Lender  and  paid  by the
undersigned under this Section.

         SECTION 2.9   Make-Whole   Qualifications.    Each Lender's  claims for
reimbursements,  payments,  indemnities or otherwise under  Section 2.8  and the
undersigned's obligations with  respect thereto,  shall be limited and qualified
by and subject to the following:

(a)  the undersigned's  obligation to pay, satisfy or recognize such claim shall
     be limited  to costs or losses  incurred  within  one (1) year  immediately
     prior to any demand or request therefor upon the undersigned;

(b)  each  Lender's  demand  for  reimbursement,  payment or  indemnity  must be
     limited to that which is being generally applied at the time by such Lender
     for comparable guarantors and guaranties subject to similar provisions;

(c)  each  Lender  which  asserts its rights  with  respect  thereto or which is
     seeking or imposing such reimbursement,  payment or indemnity shall provide
     evidence  regarding  the  basis  of  such  claim  and the  calculation  and
     application  thereof in reasonable  detail and, in determining such amount,
     each Lender may use reasonable methods of attribution and averaging; and

(d)  each Lender which is seeking payment,  indemnity or reimbursement  pursuant
     to Section 2.8 shall,  if so requested by the  undersigned  use  reasonable
     efforts  (subject to the overall policy  considerations  of such Lender) to
     designate a different  lending office  hereunder if to do so will avoid the
     need  for,  or  reduce  the  amount  of,  any such  payment,  indemnity  or
     reimbursement;  provided  that,  Lender would,  in its sole but  reasonable
     determination,   suffer  no   material   economic,   legal  or   regulatory
     disadvantage or burden.

         [SECTION 2.10   Judgment.  Guarantor hereby agrees that:

(a)  If, for the purposes of obtaining judgment in any court, it is necessary to
     convert a sum due hereunder in United States Dollars into another currency,
     Guarantor  agrees, to the fullest extent permitted by law, that the rate of
     exchange  used shall be that at which in  accordance  with  normal  banking
     procedures the  Administrative  Agent could purchase  United States Dollars
     with such other  currency on the Business Day preceding that on which final
     judgment is given.

                                 Exhibit B-1 - 9


<PAGE>



(b)  The obligation of Guarantor in respect of any sum due from it to any Lender
     Party or any holder of a Note hereunder shall, notwithstanding any judgment
     in a currency other than United States  Dollars,  be discharged only to the
     extent that on the Business Day  following  receipt by such Lender Party or
     such  holder,  as the case may be, of any sum adjudged to be so due in such
     other  currency such Lender Party or such holder,  as the case may be, may,
     in  accordance  with normal  banking  procedures,  purchase  United  States
     Dollars  with such other  currency;  in the event  that the  United  States
     Dollars so purchased  are less than the sum  originally  due to such Lender
     Party in United States  Dollars,  Guarantor,  as a separate  obligation and
     notwithstanding  any such judgment,  hereby  indemnifies and holds harmless
     such Lender  Party and such  holder  against  such loss,  and if the United
     States  Dollars so purchased  exceed the sum  originally due to such Lender
     Party or such holder in United  States  Dollars,  such Lender Party or such
     holder, as the case may be, shall remit to Guarantor such excess.]



                                   ARTICLE III
                         REPRESENTATIONS AND WARRANTIES

         SECTION 3.1    Representations  and   Warranties.    Guarantor   hereby
represents and warrants unto each Lender Party as set forth in this Article.

         SECTION 3.1.1  Organization, Existence and Good Standing. Guarantor is
duly organized or incorporated,  validly existing and in good standing under the
laws of its jurisdiction of organization or incorporation,  having all corporate
or  partnership  powers  required  to enter into and carry out the  transactions
contemplated  hereby.  Guarantor  is  duly  qualified,  in  good  standing,  and
authorized  to do business in all other  jurisdictions  within the United States
wherein the character of the properties owned or held by it or the nature of the
business  transacted by it makes such  qualification  necessary,  except for any
lack of  qualification,  good standing or  authorization  that is not reasonably
expected to result in a Material Adverse Effect. Guarantor has taken all actions
customarily  taken in order to enter, for the purpose of conducting  business or
owning  property,  each  jurisdiction  outside  the United  States  wherein  the
character  of the  properties  owned or held by it or the nature of the business
transacted by it makes such actions  desirable,  except any failure to take such
action that is not reasonably expected to result in a Material Adverse Effect.

         SECTION 3.1.2  Authorization.   Guarantor has duly taken all corporate,
partnership or  shareholder  action  necessary  to  authorize  the execution and
delivery  by it  of  this Guaranty  and to  authorize the  consummation  of  the
transactions  contemplated   hereby  and  the  performance  of  its  obligations
hereunder.

         SECTION 3.1.3  No Conflicts or Consents.  The execution and delivery by
Guarantor of this Guaranty,  the performance by it of its obligations hereunder,
and  the  consummation  of the transactions  contemplated  by the  various  Loan

                                Exhibit B-1 - 10


<PAGE>



Documents,  do not and will not (i) conflict  with any provision of the articles
or certificate of incorporation,  bylaws,  charter, or partnership  agreement or
certificate  of such  Guarantor,  or (ii)  except as to  matters  that could not
reasonably  be expected to result in a Material  Adverse  Effect,  result in the
acceleration  of any Debt  owed by such  Guarantor,  or  conflict  with any law,
statute,  rule,  regulation,  or agreement,  judgment,  license, order or permit
applicable to or binding upon such Guarantor, or require the consent,  approval,
authorization  or  order  of,  or  notice  to  or  filing  with,  any  court  or
Governmental  Authority or third party,  or result in or require the creation of
any Lien upon any material  assets or  properties of such  Guarantor,  except as
permitted in the Loan Documents.

         SECTION 3.1.4  Enforceable  Obligations.    This Guaranty is the legal,
valid and binding  obligation of Guarantor,  enforceable in accordance  with its
terms,  except as such  enforcement may be limited by bankruptcy,  insolvency or
similar laws of general  application  relating to the  enforcement of creditors'
rights and by general principles of equity.


                                   ARTICLE IV
                                    COVENANTS

         SECTION 4.1   Covenants.  Guarantor covenants and agrees that,  so long
as any portion of the  Obligations of Borrower shall remain unpaid or any Lender
shall have any  outstanding  Commitment,  Guarantor  will,  unless the  Required
Lenders  shall  otherwise  consent  in  writing,  perform  or  comply  with  the
obligations of a Restricted Subsidiary of Borrower set forth in Sections 5.1 and
5.2 of the Credit  Agreements,  subject to any  limitations  on  performance  or
compliance  contained  in such  sections,  including,  without  limitation,  the
limitation,  when  applicable,  that the failure to perform or comply  could not
reasonably be expected to have a Material Adverse Effect.


                                    ARTICLE V
                            MISCELLANEOUS PROVISIONS

         SECTION 5.1   Loan Document.  This Guaranty is a Loan Document executed
pursuant  to  the  Credit  Agreements  and  shall  (unless  otherwise  expressly
indicated herein) be construed,  administered and applied in accordance with the
terms and provisions thereof.

         SECTION 5.2   Binding   on   Successors,    Transferees   and  Assigns;
Assignment. In addition to, and not in limitation of, Section 2.7, this Guaranty
shall be binding upon Guarantor and its successors,  transferees and assigns and
shall inure to the benefit of and be  enforceable  by each Lender Party and each
holder of a Note,  an LC  Application,  or an interest in an LC  Obligation  and
their  respective  successors,  transferees  and  assigns  (to the  full  extent
provided  pursuant to Section 2.7);  provided,  however,  that Guarantor may not
assign any of its obligations hereunder without the prior written consent of all
Lenders.

                                Exhibit B-1 - 11


<PAGE>



         SECTION 5.3   Amendments. No amendment to or waiver of any provision of
this Guaranty, nor consent to any departure by Guarantor herefrom,  shall in any
event be  effective  unless  the same  shall be in  writing  and  signed  by the
Administrative Agent, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.

         SECTION 5.4   Notices.  All notices,  requests,  consents,  demands and
other communications required or permitted hereunder shall be in writing, unless
otherwise specifically provided herein and shall be deemed sufficiently given or
furnished  if  delivered  by personal  delivery,  by telecopy  (with  telephonic
confirmation of transmission,  by delivery service with proof of delivery, or by
registered or certified United States mail, postage prepaid, to Guarantor at the
address of Guarantor  specified on the signature  pages hereto and to each Agent
and each  Lender at their  addresses  specified  on the  signature  pages to the
Credit  Agreements  (unless  changed by similar  notice in writing  given by the
particular  Person  whose  address  is  to  be  changed).  Any  such  notice  or
communication shall be deemed to have been given:

(a)  in the case of personal  delivery or  delivery  service,  as of the date of
     first attempted delivery at the address provided herein;

(b)  in the case of telecopy, upon receipt; or

(c)  in the case of registered or certified United States mail, three days after
     deposit in the mail, postage prepaid.

         SECTION 5.5   No  Waiver;  Remedies.   In  addition  to,   and  not  in
limitation of, Section 2.3 and Section 2.5, no failure on the part of any Lender
Party or any  holder  of a Note,  an LC  Application,  or an  interest  in an LC
Obligation to exercise,  and no delay in exercising,  any right  hereunder shall
operate as a waiver  thereof;  nor shall any single or partial  exercise  of any
right hereunder  preclude any other or further  exercise thereof or the exercise
of any  other  right.  The  remedies  herein  provided  are  cumulative  and not
exclusive of any remedies provided by law.

         SECTION 5.6   Section Captions.  Section captions used in this Guaranty
are for convenience of reference only,  and shall not affect the construction of
this Guaranty.

         SECTION 5.7   Severability.   Wherever possible  each provision of this
Guaranty shall be interpreted  in such manner as to be effective and valid under
applicable law, but if any

                                Exhibit B-1 - 12


<PAGE>



provision of this  Guaranty  shall be  prohibited  by or invalid under such law,
such  provision  shall be  ineffective  to the  extent  of such  prohibition  or
invalidity,  without  invalidating  the  remainder  of  such  provision  or  the
remaining provisions of this Guaranty.

         SECTION 5.8   Governing Law,  Entire Agreement.  THIS GUARANTY SHALL BE
DEEMED A CONTRACT AND  INSTRUMENT  MADE UNDER THE LAWS OF THE STATE OF TEXAS AND
SHALL BE CONSTRUED AND ENFORCED IN  ACCORDANCE  WITH AND GOVERNED BY THE LAWS OF
THE STATE OF TEXAS AND THE LAWS OF THE UNITED STATES OF AMERICA,  WITHOUT REGARD
TO PRINCIPLES  OF CONFLICTS OF LAW.  THIS GUARANTY AND THE OTHER LOAN  DOCUMENTS
CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH RESPECT TO THE
SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS,  WRITTEN OR ORAL, WITH
RESPECT THERETO.

         SECTION 5.9   Waiver of Jury  Trial.  EACH  OF  GUARANTOR,  AGENTS  AND
LENDERS HEREBY (a) IRREVOCABLY WAIVES, 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 THIS
GUARANTY OR ANY TRANSACTION CONTEMPLATED THEREBY OR ASSOCIATED THEREWITH, BEFORE
OR AFTER MATURITY;  (b) 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; (c) 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 (d) ACKNOWLEDGES THAT IT
HAS BEEN  INDUCED  TO ENTER  INTO AND  ACCEPT  THIS  GUARANTY,  THE  OTHER  LOAN
DOCUMENTS AND THE TRANSACTIONS  CONTEMPLATED  HEREBY AND THEREBY BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION.

         SECTION 5.10   Forum  Selection  and  Consent  to  Jurisdiction.    ANY
LITIGATION  BASED HEREON,  OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
GUARANTY  OR ANY  OTHER  LOAN  DOCUMENT,  OR ANY  COURSE OF  CONDUCT,  COURSE OF
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE LENDER PARTIES
OR GUARANTOR  SHALL BE BROUGHT AND  MAINTAINED  EXCLUSIVELY IN THE COURTS OF THE
STATE OF TEXAS OR IN THE  UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT

                                Exhibit B-1 - 13


<PAGE>



OF TEXAS;  PROVIDED,  HOWEVER,  THAT ANY SUIT  SEEKING  ENFORCEMENT  AGAINST ANY
PROPERTY MAY BE BROUGHT,  AT THE COLLATERAL AGENT'S OPTION, IN THE COURTS OF ANY
JURISDICTION  WHERE SUCH PROPERTY MAY BE FOUND.  GUARANTOR  HEREBY EXPRESSLY AND
IRREVOCABLY  SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF TEXAS AND
THE UNITED  STATES  DISTRICT  COURT FOR THE  NORTHERN  DISTRICT OF TEXAS FOR THE
PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND  IRREVOCABLY  AGREES TO BE
BOUND BY ANY  JUDGMENT  RENDERED  THEREBY IN  CONNECTION  WITH SUCH  LITIGATION.
GUARANTOR FURTHER  IRREVOCABLY  CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED
MAIL,  POSTAGE  PREPAID,  OR BY PERSONAL  SERVICE WITHIN OR WITHOUT THE STATE OF
TEXAS.  FOR PURPOSES OF ANY ACTION OR  PROCEEDING  INSTITUTED  IN THE FEDERAL OR
STATE COURTS OF TEXAS, THE UNDERSIGNED  HEREBY IRREVOCABLY  DESIGNATES  BORROWER
WITH  OFFICES ON THE DATE HEREOF AT 303 WEST WALL  STREET,  SUITE 101,  MIDLAND,
TEXAS 79701 TO RECEIVE FOR AND ON BEHALF OF THE  UNDERSIGNED  SERVICE OF PROCESS
IN TEXAS.  GUARANTOR  HEREBY  EXPRESSLY AND IRREVOCABLY  WAIVES,  TO THE FULLEST
EXTENT  PERMITTED BY LAW, ANY OBJECTION  WHICH IT MAY HAVE OR HEREAFTER MAY HAVE
TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED
TO ABOVE  AND ANY  CLAIM  THAT  ANY  SUCH  LITIGATION  HAS  BEEN  BROUGHT  IN AN
INCONVENIENT  FORUM.  TO THE EXTENT THAT  GUARANTOR HAS OR HEREAFTER MAY ACQUIRE
ANY IMMUNITY FROM  JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS  (WHETHER
THROUGH SERVICE OR NOTICE,  ATTACHMENT  PRIOR TO JUDGMENT,  ATTACHMENT IN AID OF
EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, GUARANTOR HEREBY
IRREVOCABLY  WAIVES  SUCH  IMMUNITY  IN  RESPECT OF ITS  OBLIGATIONS  UNDER THIS
GUARANTY.

         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]


                                Exhibit B-1 - 14


<PAGE>



         IN WITNESS  WHEREOF,  Guarantor  has caused  this  Guaranty  to be duly
executed and delivered by its officer  thereunto duly  authorized as of the date
first above written but effective as of the Effective Date.

                                        [Name of Guarantor]


                                        By
                                        Name:
                                        Title:

                                        Address:        303 West Wall
                                                        Suite 101
                                                        P. O. Box 3178
                                                        Midland, Texas  79701

                                        Attention:      Curt Kamradt

                                        Telephone:      (915) 571-3171
                                        Telecopy:       (915) 571-5696

                                        with a copy to:

                                        Garrett Smith
                                        1400 Williams Square West
                                        5205 North O'Connor Blvd.
                                        Irving, Texas 75039

                                        Telephone:      (972) 402-7013
                                        Telecopy:       (972) 402-7028




                                Exhibit B-1 - 15


<PAGE>



                                   Exhibit B-2

                                    [Form of]

                                    GUARANTY

         THIS GUARANTY  (this  "Guaranty"),  dated as of August 7, 1997, made by
PIONEER NATURAL RESOURCES  COMPANY,  a Delaware  corporation  ("Guarantor"),  in
favor of each of the Lender Parties (as defined below).

                              W I T N E S S E T H:

         WHEREAS, pursuant to that certain Credit Facility Agreement dated as of
August 7, 1997 by and among Pioneer  Natural  Resources  USA,  Inc.,  a Delaware
corporation  ("Borrower"),  NationsBank of Texas, N.A., as Administrative Agent,
CIBC Inc., as Documentation Agent, Morgan Guaranty Trust Company of New York, as
Documentation  Agent,  The Chase  Manhattan  Bank,  as  Syndication  Agent,  the
Co-Agents  party  thereto,  and the Lenders  from time to time  parties  thereto
(together   with   all   amendments,   supplements,   restatements   and   other
modifications, if any, thereafter made thereto, the "Primary Credit Agreement"),
the  Lenders  have  extended  Commitments  (as  defined  in the  Primary  Credit
Agreement) to make Loans to Borrower and to issue or  participate  in Letters of
Credit on behalf of Borrower; and

         WHEREAS, pursuant to that certain Credit Facility Agreement dated as of
August 7,  1997  by  and  among  Borrower,   NationsBank  of  Texas,   N.A.,  as
Administrative  Agent, CIBC Inc., as Documentation  Agent, Morgan Guaranty Trust
Company of New York,  as  Documentation  Agent,  The Chase  Manhattan  Bank,  as
Syndication  Agent,  the Co-Agents  party thereto,  and the Lenders from time to
time parties thereto  (together with all amendments,  supplements,  restatements
and other  modifications,  if any, thereafter made thereto,  the "364 Day Credit
Agreement",  and  together  with  the  Primary  Credit  Agreement,  the  "Credit
Agreements"),  the Lenders have extended  Commitments (as defined in the 364 Day
Credit Agreement) to make Loans to Borrower; and

         WHEREAS, as a condition precedent to the making of the initial Loans or
issuing of the initial Letters of Credit under the Credit Agreements,  Guarantor
is required to execute and deliver this Guaranty; and

         WHEREAS,  Guarantor  has duly  authorized  the execution,  delivery and
performance of this Guaranty; and


                                 Exhibit B-2 - 1


<PAGE>



         WHEREAS,  it is in the best  interests  of  Guarantor  to execute  this
Guaranty  inasmuch as  Guarantor  will derive  substantial  direct and  indirect
benefits from the Loans made from time to time to Borrower and Letters of Credit
issued on behalf of Borrower pursuant to the Credit Agreements;

         NOW THEREFORE, for good and valuable consideration the receipt of which
is  hereby  acknowledged,  and in order to  induce  the  Lenders  to make  Loans
(including the initial Loans) to Borrower  pursuant to the Credit Agreements and
for the Issuing  Bank to issue  Letters of Credit on behalf of Borrower  and for
the Lenders to acquire  participations in such Letters of Credit pursuant to the
Primary  Credit  Agreement,  Guarantor  agrees,  for the  benefit of each Lender
Party, as follows:

                                    ARTICLE I
                                   DEFINITIONS

         SECTION 1.1   Certain  Terms.  The  following  terms  (whether  or  not
underscored)  when used in this  Guaranty,  including its preamble and recitals,
shall have the following  meanings (such definitions to be equally applicable to
the singular and plural forms thereof):

         "Administrative Agent" is defined in the first recital.

         "Borrower" is defined in the first recital.

         "Commitments"  means  "Commitments"  as defined in the  Primary  Credit
Agreement and "Commitments" as defined in the 364 Day Credit Agreement.

         "Credit Agreements" is defined in the second recital.

         "Debtor" is defined in Section 2.1(a)(i).

         "Guarantor" is defined in the preamble.

         "Guaranty" is defined in the preamble.

         "Lender  Party"  means,  as the context may  require,  any Lender,  any
Issuing Bank or any Agent and each of its respective successors, transferees and
assigns under the Credit Agreements.

         "Lenders"  means  "Lenders" as defined in the Primary Credit  Agreement
and "Lenders" as defined in the 364 Day Credit Agreement.


                                 Exhibit B-2 - 2


<PAGE>



         "Loan  Documents"  means  "Loan  Documents"  as defined in the  Primary
Credit  Agreement  and  "Loan  Documents"  as  defined  in the  364  Day  Credit
Agreement.

         "Notes"  means "Notes" as defined in the Primary  Credit  Agreement and
"Notes" as defined in the 364 Day Credit Agreement.

         "Obligations"  means  "Obligations"  as defined in the  Primary  Credit
Agreement and "Obligations" as defined in the 364 Day Credit Agreement.

         "Primary Credit Agreement" is defined in the first recital.

         "364 Day Credit Agreement" is defined in the second recital.

         SECTION 1.2   Primary Credit  Agreement  Definitions.  Unless otherwise
defined herein or the context otherwise  requires,  terms used in this Guaranty,
including its preamble and recitals,  have the meanings  provided in the Primary
Credit Agreement.

                                   ARTICLE II
                               GUARANTY PROVISIONS

         SECTION 2.1   Guaranty.   Guarantor hereby absolutely,  unconditionally
and irrevocably

(a)  guarantees

     (i)  the full and punctual payment when due, whether at stated maturity, by
          required prepayment,  declaration,  acceleration, demand or otherwise,
          of all  Obligations  of Borrower now or hereafter  existing  under the
          Credit Agreements,  the Notes, the LC Applications and each other Loan
          Document  to which  Borrower  is or may  become a party,  whether  for
          principal, interest, fees, expenses or otherwise;

     (ii) the payment  and   performance  of  any  and  all  present  or  future
          obligations  of  Borrower  according  to the terms of any  present  or
          future rate swap, rate cap, rate floor, rate collar, currency exchange
          transaction,  forward  rate  agreement,  or  other  exchange  or  rate
          protection   agreements  or  any  option  with  respect  to  any  such
          transaction now existing or hereafter entered into between Borrower or
          any of its  Subsidiaries  and  one or  more of the  Lenders  or  their
          Affiliates ("interest rate swap agreement");

                                 Exhibit B-2 - 3


<PAGE>



    (iii) the  payment  and  performance  of  any  and  all  present  or  future
          obligations  of  Borrower  according  to the terms of any  present  or
          future crude oil, natural gas or other  hydrocarbons  swap agreements,
          crude oil, natural gas or other  hydrocarbons  cap, crude oil, natural
          gas or other  hydrocarbons  floor,  crude  oil,  natural  gas or other
          hydrocarbons  collar,  crude oil,  natural  gas or other  hydrocarbons
          exchange  transaction,   forward  crude  oil,  natural  gas  or  other
          hydrocarbons agreement, or other exchange or crude oil, natural gas or
          other hydrocarbons protection agreements or any option with respect to
          any such  transaction  now existing or hereafter  entered into between
          Borrower or any of its  Subsidiaries and one or more of the Lenders or
          their Affiliates; and

     (iv) all renewals,  rearrangements,  increases,  extensions for any period,
          substitutions,  modification, amendments or supplements in whole or in
          part of any of the above loan documents or obligations,

(including  all such amounts which would become due but for the operation of the
automatic  stay under Section  362(a) of the United States  Bankruptcy  Code, 11
U.S.C. ss.362(a),  and the operation of Sections 502(b) and 506(b) of the United
States Bankruptcy Code, 11 U.S.C. ss.502(b) and ss.506(b)),  and (b) indemnifies
and  holds  harmless  strictly  in  accordance  with  the  terms  of the  Credit
Agreements  each  Lender  Party and each holder of a Note from  Borrower,  an LC
Application  or any  interest  in an LC  Obligation  for any and all  costs  and
expenses  (including  reasonable  attorney's fees and expenses) incurred by such
Lender Party or such holder,  as the case may be, in enforcing  any rights under
this Guaranty; provided, however, that Guarantor shall only be liable under this
Guaranty for the maximum amount of such  liability  that can be hereby  incurred
without  rendering  this  Guaranty,  as it relates to Guarantor,  voidable under
applicable law relating to fraudulent conveyance or fraudulent transfer, and not
for any greater amount. This Guaranty constitutes a guaranty of payment when due
and not of collection,  and Guarantor  specifically  agrees that it shall not be
necessary or required  that any Lender Party or any holder of any Note  exercise
any right,  assert any claim or demand or enforce any remedy whatsoever  against
Borrower or any other Obligor (or any other Person)  before or as a condition to
the obligations of Guarantor hereunder. All payments hereunder are to be made in
the currency in which they are due under the Credit Agreements.

         SECTION 2.2   Acceleration of Guaranty.  Guarantor  agrees that, in the
event  of the  dissolution  or  insolvency  of  Borrower  or  Guarantor,  or the
inability  or failure of Borrower or  Guarantor to pay debts as they become due,
or an assignment  by Borrower or Guarantor for the benefit of creditors,  or the
commencement of any case or proceeding in respect of Borrower or Guarantor under
any  bankruptcy,  insolvency or similar laws, and if such event shall occur at a
time when any of the  Obligations of  Borrower may not  then be due and payable,

                                 Exhibit B-2 - 4


<PAGE>



Guarantor  will pay to the  Lenders  forthwith  the full  amount  which would be
payable  hereunder  by  Guarantor  if all  such  Obligations  were  then due and
payable.

         SECTION 2.3   Guaranty  Absolute,  etc.  This  Guaranty  shall  in  all
respects be a continuing,  absolute,  unconditional and irrevocable  guaranty of
payment,  and shall  remain in full force and effect  until all  Obligations  of
Borrower have been paid in full, all  obligations of Guarantor  hereunder  shall
have been paid in full and all  Commitments  shall  have  terminated.  Guarantor
guarantees  that the Obligations of Borrower will be paid strictly in accordance
with the terms of the Credit Agreements and each other Loan Document under which
they arise,  regardless  of any law,  regulation  or order now or  hereafter  in
effect in any  jurisdiction  affecting  any of such  terms or the  rights of any
Lender Party or any holder of any Note with respect  thereto.  The  liability of
Guarantor under this Guaranty shall be absolute,  unconditional  and irrevocable
irrespective of:

(a)  (i)  any  lack  of  validity,  legality  or  enforceability  of the  Credit
     Agreements,  any Note, any LC Application or any other Loan Document or any
     portion  of any  thereof or (ii) the Credit  Agreements,  any Note,  any LC
     Application  or any other Loan Document or any portion of any thereof being
     void or voidable;

(b)  the  failure  of any  Lender  Party  or any  holder  of  any  Note,  any LC
     Application, Letter of Credit or any interest therein

     (i)  to  assert  any  claim or  demand  or to  enforce  any right or remedy
          against Borrower, any other Obligor or any other Person (including any
          other  guarantor) under the provisions of the Credit  Agreements,  any
          Note, any LC Application, any other Loan Document or otherwise, or

     (ii) to exercise any right or remedy  against  any other  guarantor  of, or
          collateral securing, any Obligations of Borrower or any other Obligor;

(c)  any change in the time, manner or place of payment of, or in any other term
     of, all or any of the Obligations of Borrower or any other Obligor,  or any
     other extension, compromise or renewal of any Obligation of Borrower or any
     other Obligor;

(d)  any reduction, limitation,  impairment or termination of any Obligations of
     Borrower  or any  other  Obligor  for any  reason,  including  any claim of
     waiver,  release,  surrender,  alteration or  compromise,  and shall not be
     subject  to (and  Guarantor  hereby  waives  any  right to or claim of) any
     defense or setoff,  counterclaim,  recoupment or termination  whatsoever by
     reason  of  the  invalidity,  illegality,   nongenuineness,   irregularity,
     compromise,   unenforceability   of,  or  any  other  event  or  occurrence
     affecting, any Obligations of Borrower, any other Obligor or otherwise;

                                 Exhibit B-2 - 5


<PAGE>



(e)  any amendment to, extensions of, rescission,  waiver, or other modification
     of, or any  consent  to  departure  from,  any of the  terms of the  Credit
     Agreements, any Note, any LC Application, any Letter of Credit or any other
     Loan Document;

(f)  any  addition,  exchange,  release,  surrender  or  non-perfection  of  any
     collateral,  or any  amendment  to or waiver or release or addition  of, or
     consent to departure from, any other guaranty,  held by any Lender Party or
     any  holder  of any  Note,  any LC  Application,  any  Letter  of Credit or
     interest  therein  securing any of the Obligations of Borrower or any other
     Obligor; or

(g)  any other circumstance which might otherwise constitute a defense available
     to, or a legal or equitable discharge of, Borrower,  any other Obligor, any
     surety or any guarantor.

         SECTION 2.4   Reinstatement.  Guarantor agrees that this Guaranty shall
continue to be  effective or be  reinstated,  as the case may be, if at any time
any payment (in whole or in part) of any of the Obligations guaranteed hereby is
rescinded or must otherwise be restored by any Lender Party or any holder of any
Note,  any  LC  Application  or  any  interest  in an LC  Obligation,  upon  the
insolvency,  bankruptcy or reorganization  of Borrower,  or any other Obligor or
otherwise, all as though such payment had not been made.

         SECTION 2.5   Waiver.  Guarantor hereby waives  promptness,  diligence,
presentment,  notice of  acceptance  and any other notice with respect to any of
the  Obligations  of Borrower or any other  Obligor  and this  Guaranty  and any
requirement  that any Agent,  any other  Lender Party or any holder of any Note,
any LC  Application,  any  Letter  of Credit or any  interest  therein  protect,
secure, perfect or insure any security interest or Lien, or any property subject
thereto,  or exhaust any right or take any action  against  Borrower,  any other
Obligor or any other Person  (including  any other  guarantor)  or entity or any
collateral  securing the  Obligations of Borrower or any other  Obligor,  as the
case may be.

         SECTION 2.6   Waiver  of  Subrogation.   Guarantor  hereby  irrevocably
waives any claim or other rights which it may now or hereafter  acquire  against
Borrower  or  any  other  Obligor  that  arise  from  the  existence,   payment,
performance or enforcement of Guarantor's obligations under this Guaranty or any
other  Loan  Document,  including  any  right  of  subrogation,   reimbursement,
contribution,  exoneration, or indemnification,  any right to participate in any
claim or remedy of the Lender Parties  against  Borrower or any other Obligor or
any collateral which the Collateral Agent now has or hereafter acquires, whether
or not such claim, remedy or right arises in equity, or under contract,  statute
or common law, including the right to take or receive from Borrower or any other
Obligor,  directly or indirectly,  in cash or other property or by set-off or in
any manner, payment or security on account of such claim or other rights. If any

                                 Exhibit B-2 - 6


<PAGE>



amount shall be paid to Guarantor in violation of the preceding sentence and the
Obligations  shall not have been paid in cash in full and the  Commitments  have
not been terminated,  such amount shall be deemed to have been paid to Guarantor
for the  benefit  of,  and held in trust  for,  the  Lender  Parties,  and shall
forthwith  be paid to the Lender  Parties to be credited  and  applied  upon the
Obligations,  whether  matured or  unmatured;  otherwise it shall be returned to
remitter.  Guarantor  acknowledges  that it will  receive  direct  and  indirect
benefits from the financing  arrangements  contemplated by the Credit Agreements
and that the waiver set forth in this Section is knowingly made in contemplation
of such benefits.

         SECTION 2.7   Successors, Transferees and Assigns;  Transfers of Notes.
This Guaranty shall:

(a)  be binding upon  Guarantor,  and its  successors,  transferees  and assigns
     (provided,  however,  that Guarantor may not assign any of its  obligations
     hereunder without the prior written consent of all Lenders); and

(b)  inure to the  benefit  of and be  enforceable  by each Agent and each other
     Lender Party.

Without  limiting the  generality  of the  foregoing  clause (b), any Lender may
assign  or  otherwise  transfer  (in  whole  or in  part)  any  Note,  Loan,  LC
Application, Letter of Credit or interest therein held by it to any other Person
or entity,  and such other Person or entity shall  thereupon  become vested with
all rights and benefits in respect thereof granted to such Lender under any Loan
Document  (including  this  Guaranty) or  otherwise,  subject,  however,  to any
contrary  provisions in such  assignment or transfer,  and to the  provisions of
Section 8.8 of the Credit Agreements.

         SECTION 2.8   Taxes. All payments by the undersigned hereunder shall be
made free and clear of and without  deduction for any present or future  income,
excise, stamp, or franchise taxes and other taxes, fees, duties, withholdings or
other  charges of any nature  whatsoever  imposed by any taxing  authority,  but
excluding  franchise  taxes and taxes imposed on or measured by any Lender's net
income or receipts (such non-excluded items being called "Taxes").  In the event
that any  withholding  or  deduction  from any payment to be made  hereunder  is
required  in  respect  of any Taxes  pursuant  to any  applicable  law,  rule or
regulation,  then,  subject to the  provisions  of Section 2.9, the  undersigned
will:

(a)  pay directly to the relevant  authority  the full amount  required to be so
     withheld or deducted;

                                 Exhibit B-2 - 7


<PAGE>



(b)  promptly  forward  to  Administrative  Agent an  official  receipt or other
     documentation  satisfactory to Administrative Agent evidencing such payment
     to such authority; and

(c)  pay to  Administrative  Agent for the account of the  applicable  Lender(s)
     such  additional  amount(s)  as is  necessary to ensure that the net amount
     actually  received  by each  Lender  will equal the full amount such Lender
     would have received had no such  withholding or deduction been required and
     the undersigned hereby acknowledges that it is not entitled to and will not
     seek  recovery  or  restitution  of any amount due to any of the Lenders or
     Agents and paid by it  pursuant  to this clause (c) or pursuant to the next
     sentence.

If any Taxes are directly  asserted against any Agent or any Lender with respect
to any payment  received by such Agent or such Lender  hereunder,  such Agent or
such Lender may pay such Taxes and, if paid in good faith,  the undersigned will
promptly pay such additional amounts to the Administrative Agent for the account
of such Lender or Agent  (including any  penalties,  interest or expenses) as is
necessary in order that the net amount received by such person after the payment
of such Taxes  (including any taxes on such  additional  amount) shall equal the
amount such person would have received had no such Taxes been asserted,  subject
to the provisions of Section 2.9.

         The  undersigned  shall pay all stamp,  transaction,  registration  and
similar taxes (including  financial  institutions  duties,  debit taxes or other
taxes  payable by return and taxes passed on to any Lender or Agent by a bank or
financial institution (collectively "Stamp Taxes") and, if the undersigned fails
to pay any such charges or taxes after reasonable notice from any such Lender or
Agent,  fines and penalties) which may be payable or determined to be payable in
relation to the execution, delivery, performance or enforcement of this Guaranty
or any Loan Document or any other transaction  contemplated by any Loan Document
to which the undersigned is a party.  The undersigned  hereby  indemnifies  each
Lender and Agent against any liability  resulting  from delay or omission to pay
such charges or taxes except to the extent the liability results from failure by
the  relevant  Lender or Agent to pay any such tax after  having been  delivered
funds to do so by the  undersigned  or to the extent such liability is for fines
and  penalties  resulting  from such  Lender's  or  Agent's  failure  to provide
reasonable notice to the undersigned as provided herein.

         If the  undersigned  fails to pay any Taxes or Stamp  Taxes when due to
the appropriate taxing authority or fails to remit to Administrative  Agent, for
the account of the respective  Lenders,  the required receipts or other required
documentary  evidence,  the undersigned  shall indemnify  Lenders for any Taxes,
interest or penalties  that may become  payable by any Lender as a result of any
such failure, subject to the provisions of Section 2.9.


                                 Exhibit B-2 - 8


<PAGE>



         The undersigned waives any statutory right to recover from any Agent or
any  Lender  any  amount  due to any  such  Agent  or  Lender  and  paid  by the
undersigned under this Section.

         SECTION 2.9   Make-Whole  Qualifications.   Each  Lender's  claims  for
reimbursements,  payments,  indemnities  or otherwise  under Section 2.8 and the
undersigned's  obligations with respect thereto,  shall be limited and qualified
by and subject to the following:

(a)  the undersigned's  obligation to pay, satisfy or recognize such claim shall
     be limited  to costs or losses  incurred  within  one (1) year  immediately
     prior to any demand or request therefor upon the undersigned;

(b)  each  Lender's  demand  for  reimbursement,  payment or  indemnity  must be
     limited to that which is being generally applied at the time by such Lender
     for comparable guarantors and guaranties subject to similar provisions;

(c)  each  Lender  which  asserts its rights  with  respect  thereto or which is
     seeking or imposing such reimbursement,  payment or indemnity shall provide
     evidence  regarding  the  basis  of  such  claim  and the  calculation  and
     application  thereof in reasonable  detail and, in determining such amount,
     each Lender may use reasonable methods of attribution and averaging; and

(d)  each Lender which is seeking payment,  indemnity or reimbursement  pursuant
     to Section 2.8 shall,  if so requested by the  undersigned  use  reasonable
     efforts  (subject to the overall policy  considerations  of such Lender) to
     designate a different  lending office  hereunder if to do so will avoid the
     need  for,  or  reduce  the  amount  of,  any such  payment,  indemnity  or
     reimbursement;  provided  that,  Lender would,  in its sole but  reasonable
     determination,   suffer  no   material   economic,   legal  or   regulatory
     disadvantage or burden.


                                   ARTICLE III
                         REPRESENTATIONS AND WARRANTIES

         SECTION 3.1    Representations   and   Warranties.    Guarantor  hereby
represents and warrants unto each Lender Party as set forth in this Article.

         SECTION 3.1.1  Organization, Existence and Good Standing.  Guarantor is
duly organized or incorporated,  validly existing and in good standing under the
laws of its jurisdiction of organization or incorporation,  having all corporate
or  partnership  powers  required  to enter into and carry out the  transactions
contemplated  hereby.  Guarantor  is  duly  qualified,  in  good  standing,  and
authorized  to do business in all other  jurisdictions  within the United States
wherein the character of the properties owned or held by it or the nature of the

                                 Exhibit B-2 - 9


<PAGE>



business  transacted by it makes such  qualification  necessary,  except for any
lack of  qualification,  good standing or  authorization  that is not reasonably
expected to result in a Material Adverse Effect. Guarantor has taken all actions
customarily  taken in order to enter, for the purpose of conducting  business or
owning  property,  each  jurisdiction  outside  the United  States  wherein  the
character  of the  properties  owned or held by it or the nature of the business
transacted by it makes such actions  desirable,  except any failure to take such
action that is not reasonably expected to result in a Material Adverse Effect.

         SECTION 3.1.2  Authorization.   Guarantor has duly taken all corporate,
partnership  or  shareholder  action  necessary to authorize  the  execution and
delivery  by it of  this  Guaranty  and to  authorize  the  consummation  of the
transactions   contemplated  hereby  and  the  performance  of  its  obligations
hereunder.

         SECTION 3.1.3  No Conflicts or Consents.  The execution and delivery by
Guarantor of this Guaranty,  the performance by it of its obligations hereunder,
and the  consummation  of the  transactions  contemplated  by the  various  Loan
Documents,  do not and will not (i) conflict  with any provision of the articles
or certificate of incorporation,  bylaws,  charter, or partnership  agreement or
certificate  of such  Guarantor,  or (ii)  except as to  matters  that could not
reasonably  be expected to result in a Material  Adverse  Effect,  result in the
acceleration  of any Debt  owed by such  Guarantor,  or  conflict  with any law,
statute,  rule,  regulation,  or agreement,  judgment,  license, order or permit
applicable to or binding upon such Guarantor, or require the consent,  approval,
authorization  or  order  of,  or  notice  to  or  filing  with,  any  court  or
Governmental  Authority or third party,  or result in or require the creation of
any Lien upon any material  assets or  properties of such  Guarantor,  except as
permitted in the Loan Documents.

         SECTION 3.1.4  Enforceable  Obligations.   This Guaranty  is the legal,
valid and binding  obligation of Guarantor,  enforceable in accordance  with its
terms,  except as such  enforcement may be limited by bankruptcy,  insolvency or
similar laws of general  application  relating to the  enforcement of creditors'
rights and by general principles of equity.

         SECTION 3.1.5  Solvency.   Guarantor is solvent and will continue to be
solvent after the making of this Guaranty.


                                   ARTICLE IV
                                    COVENANTS

         SECTION 4.1   Affirmative  Covenants.  Guarantor  covenants  and agrees
that,  so long as any  portion of the  Obligations  shall  remain  unpaid or any
Lender Party shall have any outstanding  Commitment,  the Guarantor will, unless
the Required Lenders shall otherwise consent in writing,  perform,  comply with,
observe  and  fulfill,  for  the  benefit  of  the  Lender  Parties, each of the

                                Exhibit B-2 - 10


<PAGE>



covenants,  agreements  and  obligations  pertaining or otherwise  applicable to
Guarantor contained in Section 5.1 of the Credit Agreement,  including,  without
limitation,  the delivery of financial  reports and notices described in Section
5.1(b) of the Credit Agreement. Guarantor hereby irrevocably and unconditionally
agrees to be bound by, and not to breach or otherwise  fail to comply with,  any
of such  covenants,  agreements and  obligations as if Guarantor were a party to
the Credit  Agreement and such covenants,  agreements and obligations are hereby
reaffirmed by the Guarantor and are,  together with all related  definitions and
ancillary  provisions  incorporated  herein by reference  hereby and made a part
hereof for all purposes as if set out in full herein.

         SECTION 4.2   Financial Covenants. Guarantor covenants and agrees that,
so long as  any  portion  of the  Obligations shall  remain unpaid or any Lender
Party shall have any outstanding Commitment, Guarantor will, unless the Required
Lenders shall otherwise consent in writing,  perform,  comply with,  observe and
fulfill,  for  the  benefit  of the  Lender Parties,  each  of  the  covenants,
agreements and  obligations  pertaining to or otherwise  applicable to Guarantor
contained in Section 5.3 of the Credit Agreement.  Guarantor hereby  irrevocably
and  unconditionally  agrees to be bound by, and not to breach or otherwise fail
to comply with, any of the provisions in any of such  covenants,  agreements and
obligations  as if  Guarantor  were a party  to the  Credit  Agreement  and such
covenants,  agreements and  obligations  are hereby  reaffirmed by Guarantor and
are, together with all related definitions and ancillary provisions incorporated
herein by reference hereby and made a part hereof for all purposes as if set out
in full herein.

         SECTION 4.3   Negative Covenants.  Guarantor covenants and agrees that,
so long as any  portion of  the  Obligations shall  remain  unpaid or any Lender
Party shall have any outstanding Commitment, Guarantor will, unless the Required
Lenders shall otherwise consent in writing, perform, comply  with,  observe  and
fulfill,  for  the  benefit  of  the  Lender Parties,  each  of  the  covenants,
agreements and  obligations  pertaining to or otherwise  applicable to Guarantor
contained   in  Section   5.2  of  the  Credit   Agreement.   Guarantor   hereby
unconditionally  and  irrevocably  agrees to be bound  by,  and not to breach or
otherwise fail to comply with, any of such covenants, agreements and obligations
to  the  extent  such  provisions  pertain  to  Guarantor  and  such  covenants,
agreements and obligations are hereby reaffirmed by Guarantor and, together with
all related  definitions  and ancillary  provisions are  incorporated  herein by
reference  hereby  made a part  hereof  for all  purposes  as if set out in full
herein.

                                    ARTICLE V
                            MISCELLANEOUS PROVISIONS

         SECTION 5.1   Loan Document.  This Guaranty is a Loan Document executed
pursuant  to  the  Credit  Agreements  and  shall  (unless  otherwise  expressly
indicated herein) be construed,  administered and applied in accordance with the
terms and provisions thereof.

                                Exhibit B-2 - 11


<PAGE>



         SECTION 5.2   Binding   on   Successors,    Transferees   and  Assigns;
Assignment. In addition to, and not in limitation of, Section 2.7, this Guaranty
shall be binding upon Guarantor and its successors,  transferees and assigns and
shall inure to the benefit of and be  enforceable  by each Lender Party and each
holder of a Note,  an LC  Application,  or an interest in an LC  Obligation  and
their  respective  successors,  transferees  and  assigns  (to the  full  extent
provided  pursuant to Section 2.7);  provided,  however,  that Guarantor may not
assign any of its obligations hereunder without the prior written consent of all
Lenders.

         SECTION 5.3   Amendments. No amendment to or waiver of any provision of
this Guaranty, nor consent to any departure by Guarantor herefrom,  shall in any
event be  effective  unless  the same  shall be in  writing  and  signed  by the
Administrative Agent, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.

         SECTION 5.4   Notices.  All notices,  requests,  consents,  demands and
other communications required or permitted hereunder shall be in writing, unless
otherwise specifically provided herein and shall be deemed sufficiently given or
furnished  if  delivered  by personal  delivery,  by telecopy  (with  telephonic
confirmation of transmission,  by delivery service with proof of delivery, or by
registered or certified United States mail, postage prepaid, to Guarantor at the
address of Guarantor  specified on the signature  pages hereto and to each Agent
and each  Lender at their  addresses  specified  on the  signature  pages to the
Credit  Agreements  (unless  changed by similar  notice in writing  given by the
particular  Person  whose  address  is  to  be  changed).  Any  such  notice  or
communication shall be deemed to have been given:

(a)  in the case of personal  delivery or  delivery  service,  as of the date of
     first attempted delivery at the address provided herein;

(b)  in the case of telecopy, upon receipt; or

(c)  in the case of registered or certified United States mail, three days after
     deposit in the mail, postage prepaid.

         SECTION 5.5   No  Waiver;  Remedies.   In  addition  to,   and  not  in
limitation of, Section 2.3 and Section 2.5, no failure on the part of any Lender
Party or any  holder  of a Note,  an LC  Application,  or an  interest  in an LC
Obligation to exercise,  and no delay in exercising,  any right  hereunder shall
operate as a waiver  thereof;  nor shall any single or partial  exercise  of any
right hereunder  preclude any other or further  exercise thereof or the exercise
of any  other  right.  The  remedies  herein  provided  are  cumulative  and not
exclusive of any remedies provided by law.

                                Exhibit B-2 - 12


<PAGE>



         SECTION 5.6   Section Captions.  Section captions used in this Guaranty
are for convenience of reference only,  and shall not affect the construction of
this Guaranty.

         SECTION 5.7   Severability.  Wherever  possible each  provision of this
Guaranty  shall be interpreted in such manner as to be effective and valid under
applicable  law, but if any provision of this Guaranty shall be prohibited by or
invalid under such law, such  provision  shall be  ineffective  to the extent of
such  prohibition  or  invalidity,  without  invalidating  the remainder of such
provision or the remaining provisions of this Guaranty.

         SECTION 5.8   Governing Law,  Entire Agreement.  THIS GUARANTY SHALL BE
DEEMED A  CONTRACT  AND INSTRUMENT MADE UNDER THE LAWS OF THE STATE OF TEXAS AND
SHALL BE CONSTRUED AND ENFORCED IN  ACCORDANCE  WITH AND GOVERNED BY THE LAWS OF
THE STATE OF TEXAS AND THE LAWS OF THE UNITED STATES OF AMERICA,  WITHOUT REGARD
TO PRINCIPLES  OF CONFLICTS OF LAW.  THIS GUARANTY AND THE OTHER LOAN  DOCUMENTS
CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH RESPECT TO THE
SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS,  WRITTEN OR ORAL, WITH
RESPECT THERETO.

         SECTION 5.9   Waiver of Jury  Trial.   EACH OF  GUARANTOR,  AGENTS  AND
LENDERS HEREBY (a) IRREVOCABLY WAIVES, 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 THIS
GUARANTY OR ANY TRANSACTION CONTEMPLATED THEREBY OR ASSOCIATED THEREWITH, BEFORE
OR AFTER MATURITY;  (b) 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; (c) 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 (d) ACKNOWLEDGES THAT IT
HAS BEEN  INDUCED  TO ENTER  INTO AND  ACCEPT  THIS  GUARANTY,  THE  OTHER  LOAN
DOCUMENTS AND THE TRANSACTIONS  CONTEMPLATED  HEREBY AND THEREBY BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION.

         SECTION 5.10  Forum  Selection  and  Consent  to  Jurisdiction.     ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH,

                                Exhibit B-2 - 13


<PAGE>



THIS GUARANTY OR ANY OTHER LOAN  DOCUMENT,  OR ANY COURSE OF CONDUCT,  COURSE OF
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE LENDER PARTIES
OR GUARANTOR  SHALL BE BROUGHT AND  MAINTAINED  EXCLUSIVELY IN THE COURTS OF THE
STATE OF TEXAS OR IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN  DISTRICT
OF TEXAS;  PROVIDED,  HOWEVER,  THAT ANY SUIT  SEEKING  ENFORCEMENT  AGAINST ANY
PROPERTY MAY BE BROUGHT,  AT THE COLLATERAL AGENT'S OPTION, IN THE COURTS OF ANY
JURISDICTION  WHERE SUCH PROPERTY MAY BE FOUND.  GUARANTOR  HEREBY EXPRESSLY AND
IRREVOCABLY  SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF TEXAS AND
THE UNITED  STATES  DISTRICT  COURT FOR THE  NORTHERN  DISTRICT OF TEXAS FOR THE
PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND  IRREVOCABLY  AGREES TO BE
BOUND BY ANY  JUDGMENT  RENDERED  THEREBY IN  CONNECTION  WITH SUCH  LITIGATION.
GUARANTOR FURTHER  IRREVOCABLY  CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED
MAIL,  POSTAGE  PREPAID,  OR BY PERSONAL  SERVICE WITHIN OR WITHOUT THE STATE OF
TEXAS.  FOR PURPOSES OF ANY ACTION OR  PROCEEDING  INSTITUTED  IN THE FEDERAL OR
STATE COURTS OF TEXAS, THE UNDERSIGNED  HEREBY IRREVOCABLY  DESIGNATES  BORROWER
WITH  OFFICES ON THE DATE HEREOF AT 303 WEST WALL  STREET,  SUITE 101,  MIDLAND,
TEXAS 79701 TO RECEIVE FOR AND ON BEHALF OF THE  UNDERSIGNED  SERVICE OF PROCESS
IN TEXAS.  GUARANTOR  HEREBY  EXPRESSLY AND IRREVOCABLY  WAIVES,  TO THE FULLEST
EXTENT  PERMITTED BY LAW, ANY OBJECTION  WHICH IT MAY HAVE OR HEREAFTER MAY HAVE
TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED
TO ABOVE  AND ANY  CLAIM  THAT  ANY  SUCH  LITIGATION  HAS  BEEN  BROUGHT  IN AN
INCONVENIENT  FORUM.  TO THE EXTENT THAT  GUARANTOR HAS OR HEREAFTER MAY ACQUIRE
ANY IMMUNITY FROM  JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS  (WHETHER
THROUGH SERVICE OR NOTICE,  ATTACHMENT  PRIOR TO JUDGMENT,  ATTACHMENT IN AID OF
EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, GUARANTOR HEREBY
IRREVOCABLY  WAIVES  SUCH  IMMUNITY  IN  RESPECT OF ITS  OBLIGATIONS  UNDER THIS
GUARANTY.

         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]


                                Exhibit B-2 - 14


<PAGE>



         IN WITNESS  WHEREOF,  Guarantor  has caused  this  Guaranty  to be duly
executed and delivered by its officer  thereunto duly  authorized as of the date
first above written but effective as of the Effective Date.

                                       PIONEER NATURAL RESOURCES
                                       COMPANY


                                       By
                                       Name:
                                       Title:

                                       Address:       303 West Wall
                                                      Suite 101
                                                      P. O. Box 3178
                                                      Midland, Texas  79701

                                       Attention:     Curt Kamradt

                                       Telephone:     (915) 571-3171
                                       Telecopy:      (915) 571-5696

                                       with a copy to:

                                       Garrett Smith
                                       1400 Williams Square West
                                       5205 North O'Connor Blvd.
                                       Irving, Texas 75039

                                       Telephone:     (972) 402-7013
                                       Telecopy:      (972) 402-7028


                                Exhibit B-2 - 15


<PAGE>



                                    Exhibit C

                           Form of Request for Advance

                                          ,
                                ---------  -----

NationsBank of Texas, N.A.
901 Main Street, 14th Floor
Dallas, Texas  75202

Attn:  Ruth De la Garza

         Re:      Request for Advance - 364 Day Facility

Gentlemen:

         Reference is made to that certain Credit Facility Agreement dated as of
August  7,  1997  by  and  among  Borrower,   NationsBank  of  Texas,  N.A.,  as
Administrative  Agent, CIBC Inc., as Documentation  Agent, Morgan Guaranty Trust
Company of New York,  as  Documentation  Agent,  The Chase  Manhattan  Bank,  as
Syndication  Agent,  the Co-Agents  party thereto,  and the Lenders from time to
time parties  thereto (the "Credit  Agreement").  Terms which are defined in the
Credit  Agreement and which are used but not defined herein are used herein with
the meanings ascribed to them in the Credit Agreement.  Pursuant to the terms of
the Credit Agreement, the undersigned Borrower hereby requests that Lenders make
Advances  to the  undersigned  Borrower  in  the aggregate  principal  amount of
$         , specifies        ,    , as the date the undersigned Borrower desires
for Lenders to make such Advances and requests that Administrative Agent deliver
to the undersigned Borrower the proceeds thereof on such date.

         To induce  Lenders  to make such  Advances,  the  undersigned  Borrower
hereby represents, warrants, acknowledges, and agrees to and with each Agent and
each Lender that:

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

         (b) The representations and  warranties of the undersigned Borrower and
each  other  Obligor  set  forth in the  Credit  Agreement  and the  other  Loan
Documents  are true and  correct  on and as of the  date  hereof,  with the same
effect as though such  representations and warranties had been made on and as of
the date hereof.

                                  Exhibit C - 1


<PAGE>




         (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 6.1 of the Credit  Agreement;  nor will any such Default  exist upon the
undersigned Borrower's receipt and application of the Advances requested hereby.
The undersigned  Borrower will use the Advances  hereby  requested in compliance
with the Credit Agreement.

         (d) Except to the extent  waived in writing as  provided in Section 6.1
of the Credit  Agreement,  the  undersigned  Borrower has performed and complied
with all  agreements  and  conditions  in the Credit  Agreement  required  to be
performed or complied with by the  undersigned  Borrower on or prior to the date
hereof, and each of the conditions precedent to Advances contained in the Credit
Agreement remains satisfied.

         (e) The aggregate  unpaid  principal  balance of the Advances under the
Facility after the making of such Advance requested  hereby,  plus the aggregate
outstanding  amount of Swing Line Advances and  Competitive  Bid Advances at the
date hereof will not be in excess of the Facility  Amount on the date  requested
for the making of such Advances.

         (g) 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 8.1 of the Credit  Agreement.  The
Credit Agreement and the other Loan Documents are hereby ratified, approved, and
confirmed in all respects.

         The  undersigned  Borrower  agrees  that  if,  prior to the time of the
Advances 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 Advances requested hereby,  Administrative Agent shall have received written
notice from the  undersigned  Borrower 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 Advances as if then made.

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

                                      PIONEER NATURAL RESOURCES USA, INC.

                                      By:

 


                                      Name:
                                      Title:

                                  Exhibit C - 2


<PAGE>



                                    Exhibit D

                              Form of Rate Election


                                          ,
                                 ---------  ----

NationsBank of Texas, N.A.
901 Main Street, 14th Floor
Dallas, Texas  75202

Attn:  Ruth De la Garza

         Re:      Rate Election - 364 Day Facility

Gentlemen:

         Reference is made to that certain Credit Facility Agreement dated as of
August  7,  1997  by  and  among  Borrower,   NationsBank  of Texas,   N.A.,  as
Administrative  Agent, CIBC Inc., as Documentation  Agent, Morgan Guaranty Trust
Company of New York,  as  Documentation  Agent,  The Chase  Manhattan  Bank,  as
Syndication  Agent,  the Co-Agents  party thereto,  and the Lenders from time to
time parties  thereto (the "Credit  Agreement").  Terms which are defined in the
Credit  Agreement and which are used but not defined herein are used herein with
the meanings ascribed to them in the Credit Agreement.  Pursuant to the terms of
the  Credit  Agreement,  the  undersigned  Borrower  hereby  elects a Tranche of
Eurodollar  Portions  in the  aggregate  amount  of $         with  an  Interest
Period beginning on               and continuing for a period of               .

         To  satisfy  the  conditions  set out in the Credit  Agreement  for the
making of such election,  the undersigned Borrower hereby represents,  warrants,
acknowledges and agrees that:

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

         (b) 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 6.1 of the Credit Agreement.


                                  Exhibit D - 1


<PAGE>



         (c) 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 8.1 of the Credit  Agreement.  The
Credit Agreement and the other Loan Documents are hereby ratified, approved, and
confirmed in all respects.

         (d) The undersigned Borrower further agrees that if, on or prior to the
date of the commencement of the Interest Period  designated  herein,  any matter
certified  herein  by it will not be true and  correct  at such  time as if such
certification  were then  made,  it will  immediately  so notify  Administrative
Agent.  Except to the  extent,  if any,  that prior to the  commencement  of the
Interest Period  designated  herein  Administrative  Agent shall receive written
notice to the contrary  from the  undersigned  Borrower,  each matter  certified
herein  shall be deemed to be certified  as of the date of the  commencement  of
such Interest Period as if then made.

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

                                     PIONEER NATURAL RESOURCES USA, INC.


                                     By:
                                     Name:
                                     Title:




                                  Exhibit D - 2


<PAGE>



                                    Exhibit E

                       Form of Request for Swing Line Bid


VIA FACSIMILE #
               ------------

[NAME AND ADDRESS OF LENDER]

Reference  is made  to the 364 Day  Facility  pursuant  to that  certain  Credit
Facility Agreement dated as of August 7, 1997 by and among Borrower, NationsBank
of Texas,  N.A., as  Administrative  Agent,  CIBC Inc., as Documentation  Agent,
Morgan  Guaranty Trust Company of New York, as  Documentation  Agent,  The Chase
Manhattan  Bank, as Syndication  Agent,  the Co-Agents  party  thereto,  and the
Lenders from time to time parties thereto (the "Credit Agreement"),. Capitalized
terms used  herein  and not  otherwise  defined  herein  shall have the  meaning
assigned  in  the  Credit  Agreement.   In  accordance  with  Section  2.5,  the
undersigned  hereby  requests a  Swing Line Bid  in an  amount of  not less than
$       to be advanced today,          . We request this advance be for a period
of       day(s), maturing on         .

If you wish to submit a Swing Line Bid,  please do so in accordance with Section
2.5 of the Credit Agreement.

If you have any questions regarding this request, please contact the undersigned
at (915)             , or Frank K. Stowers at (915) 685-2179.

                                             PIONEER NATURAL RESOURCES
                                             USA, INC.


                                             By:
                                             Name:
                                             Title:



                                  Exhibit E - 1


<PAGE>



                                    Exhibit F

                             Form of Swing Line Bid

                                                                     ,
                                                           ----------  ---

VIA FAX (915)571-5696
Pioneer Natural Resources USA, Inc.
303 W. Wall, Suite 101
Midland, Texas  79701

         Attn:    Curt Kamradt

VIA FAX (214)508-2515
NationsBank of Texas, N.A.
901 Main Street, 14th Floor
Dallas, Texas  75202

         Attn:    Ruth De la Garza

Gentlemen:

         Reference  is made to the 364 Day  Facility  pursuant  to that  certain
Credit  Facility  Agreement dated as of  August 7, 1997  by and among  Borrower,
NationsBank of Texas, N.A., as Administrative Agent, CIBC Inc., as Documentation
Agent,  Morgan Guaranty Trust Company of New York, as  Documentation  Agent, The
Chase Manhattan Bank, as Syndication Agent, the Co-Agents party thereto, and the
Lenders from time to time parties thereto (the "Credit Agreement").  Capitalized
terms used  herein and not  otherwise  defined  herein  shall have the  meanings
assigned in the Credit Agreement.

         In accordance with Section 2.5 of the Credit Agreement, the undersigned
Lender offers to make a Swing Line Advance to            today in the  following
principal amount, bearing interest at the rate and maturing as stated:

Principal Amount $             Interest Rate             Maturity
                  ------------               -----------          -----------

                                               [Name of Bank]


                                               By:
                                               Name:
                                               Title:

                                  Exhibit F - 1


<PAGE>



                                    Exhibit G

                            Form of Acceptance Notice
                                                                      , 19
                                                             ---------     ---
VIA FACSIMILE #214/508-2515

NationsBank of Texas, N.A.
901 Main Street, 14th Floor
Dallas, Texas  75202
Attn:  Ruth De la Garza

         Re:  Notice of Acceptance of Swing Line Bid(s) - 364 Day Facility

Gentlemen:

         Reference is made to that certain Credit Facility Agreement dated as of
August  7,  1997  by   and  among  Borrower,  NationsBank  of  Texas,  N.A.,  as
Administrative  Agent, CIBC Inc., as Documentation  Agent, Morgan Guaranty Trust
Company of New York,  as  Documentation  Agent,  The Chase  Manhattan  Bank,  as
Syndication  Agent,  the Co-Agents  party thereto,  and the Lenders from time to
time parties thereto (the "Credit Agreement"). Capitalized terms used herein and
not  otherwise  defined  herein shall have the meanings  assigned to them in the
Credit Agreement.

         In accordance with Section 2.5 of the Credit  Agreement and in response
to the Swing Line Bid(s)  received  today,  the  undersigned  hereby accepts the
following   bid(s).   Swing  Line   Advance(s)  must  be  funded  and  wired  to
Administrative Agent by no later than 2:00 p.m.
(Dallas, Texas time) today.

Lender           Principal Amount       Interest Rate       Maturity Date

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

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

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


                                             PIONEER NATURAL RESOURCES
                                             USA, INC.

                                             By:
                                             Name:
                                             Title:


                                  Exhibit G - 1


<PAGE>



                                    Exhibit H

       Form of Opinion of Borrower's and Restricted Subsidiaries' Counsel

Exhibit H has been  omitted  from this  filing as (i) it is not  material  to an
investment decision and (ii) the information that it contains has been disclosed
elsewhere  if  disclosure  of such  information  is  required.  Pioneer  Natural
Resources  Company  agrees  to  furnish  supplementally  a copy  of any  omitted
schedule to the Securities and Exchange Commission upon request.







                                  Exhibit H - 1


<PAGE>



                                    Exhibit I

           Organization Chart of Parent, Borrower and Its Subsidiaries


Exhibit I has been  omitted  from this  filing as (i) it is not  material  to an
investment decision and (ii) the information that it contains has been disclosed
elsewhere  if  disclosure  of such  information  is  required.  Pioneer  Natural
Resources  Company  agrees  to  furnish  supplementally  a copy  of any  omitted
schedule to the Securities and Exchange Commission upon request.


 






                                  Exhibit I - 1


<PAGE>



                                    Exhibit J

                    Form of Designated Officer's Certificate

         Reference is made to (i) the Primary Facility  pursuant to that certain
Credit  Facility  Agreement dated as of  August 7, 1997 by and  among  Borrower,
NationsBank of Texas, N.A., as Administrative Agent, CIBC Inc., as Documentation
Agent,  Morgan Guaranty Trust Company of New York, as  Documentation  Agent, The
Chase Manhattan Bank, as Syndication Agent, the Co-Agents party thereto, and the
Lenders from time to time parties thereto (the "Primary  Credit  Agreement") and
(ii) the 364 Day Facility  pursuant to that certain  Credit  Facility  Agreement
dated as of August 7, 1997 by and among Borrower, NationsBank of Texas, N.A., as
Administrative  Agent, CIBC Inc., as Documentation  Agent, Morgan Guaranty Trust
Company of New York,  as  Documentation  Agent,  The Chase  Manhattan  Bank,  as
Syndication  Agent,  the Co-Agents  party thereto,  and the Lenders from time to
time parties  thereto (the "364 Day Credit  Agreement"  and,  together  with the
Primary Facility, the "Credit Agreements") Terms which are defined in the Credit
Agreements  and which are used but not  defined  herein are used herein with the
meanings given them in the Credit Agreements.

         This  Certificate  is  furnished  pursuant to Section  5.1(b)(2) of the
Credit  Agreements.  Together  herewith the Borrower is  furnishing  to Managing
Agents, the Co-Agents and each Lender the Parent's  [Financial  Statements] (the
"Financial Statements") as of              (the "Reporting Date").  The Borrower
hereby represents, warrants, and acknowledges to Agents and each Lender that:

(a)  the Designated  Officer of the Borrower  signing this  instrument is a duly
     elected, qualified and acting officer of the Borrower;

(b)  the  Financial  Statements  are  accurate  and  complete  and  satisfy  the
     requirements of the Credit Agreements;

(c)  attached  as  Schedule  I hereto  is a  schedule  of  calculations  showing
     compliance (or noncompliance,  as the case may be) as of the Reporting Date
     with the requirements of Section 5.3 of the Credit Agreements; and

(d)  on the  Reporting  Date,  each  Borrower  was,  and on the date  hereof the
     Borrower is, in full compliance with the disclosure requirements of Section
     5.1(d) of the Credit  Agreements,  and no Default  otherwise existed on the
     Reporting Date or otherwise exists on the date of this Certificate  [except
     for Default(s) under Section(s)            of the Credit Agreements,  which
     [is/are] more fully described on a schedule attached hereto].

                                  Exhibit J - 1


<PAGE>



         The Designated  Officer of the Borrower signing this instrument  hereby
certifies that he has reviewed the Loan  Documents and the Financial  Statements
and has  otherwise  undertaken  such  inquiry as is in his opinion  necessary to
enable  him  to  express  an  informed   opinion   with  respect  to  the  above
representations, warranties and acknowledgments of the Borrower and, to the best
of his knowledge,  such  representations,  warranties,  and  acknowledgments are
true, correct and complete.

                                            PIONEER NATURAL RESOURCES
                                            USA, INC.

                                            By:
                                            Name:
                                            Title:

                                            Date:


                                  Exhibit J - 2


<PAGE>



                                   Schedule I

================================================================================
COMPLIANCE WITH FINANCIAL COVENANTS AS OF              . ($ in 000's)
                                          -------------
================================================================================

A.  EBITDAX TO CONSOLIDATED INTEREST EXPENSE RATIO                     ========

              Minimum ratio allowed             3.75
                                              ========
B.  CONSOLIDATED TOTAL FUNDED DEBT TO TOTAL
    CAPITALIZATION                                                     ========

              Maximum ratio allowed              60%
                                              ========
================================================================================
COMPUTATION OF FINANCIAL REQUIREMENTS AND RATIOS AS OF
                                                       -------------
================================================================================

A.  EBITDAX TO CONSOLIDATED INTEREST EXPENSE RATIO
    (Section 5.3(a)) ($ in 000's)

     (i)   EBITDAX (as defined in Section 5.3(a))

           For the period ended              , the sum of the amounts
           for such  period of Consolidated net income,  Consolidated
           Interest Expense, depreciation expense, depletion expense,
           amortization  expense,  federal  and  state  income taxes,
           exploration  and  abandonment  expense and  other non-cash
           charges and expenses,  all as determined on a Consolidated
           basis for Parent and its Consolidated Subsidiaries;        $
                                                                       --------
    (ii)   CONSOLIDATED INTEREST EXPENSE
           (as defined in Section 5.3(a))

           For the period ended             , total interest expense,
           whether paid or accrued,  of Parent  and its  Consolidated
           Subsidiaries on a Consolidated basis,  including,  without
           limitation,  all  commissions,  discounts  and  other fees
           and charges owed with respect to Letters of Credit.        $
                                                                       --------
           CONSOLIDATED INTEREST EXPENSE                              $
                                                                       ========
EBITDAX TO CONSOLIDATED INTEREST EXPENSE RATIO ((i)(ii))              $
                                                                       ========
               Minimum ratio allowed           3.75:1
                                              ========

                                  Exhibit J - 3


<PAGE>



B.  CONSOLIDATED TOTAL FUNDED DEBT TO TOTAL
    CAPITALIZATION (Section 5.3(b)) ($ in 000's)

    (i)    CONSOLIDATED TOTAL FUNDED DEBT
           (as defined in Section 1.1)

           (a)    All  indebtedness of Borrower and its  Consolidated
                  Consolidated Subsidiaries for borrowed money        $
                                                                       --------
           (b)    Plus indebtedness  of Parent  and its  Consolidated
                  Subsidiaries  constituting an obligation to pay the
                  deferred  purchase  price of property  or  services
                  (other  than  customary  payment terms taken in the
                  ordinary course of the business)                    $
                                                                       --------
           (c)    Plus  indebtedness  of Parent  and its Consolidated
                  Subsidiaries evidenced by a bond,  debenture,  note
                  or similar instrument                               $
                                                                       --------
           (d)    Plus principal obligations under leases capitalized
                  in accordance with  GAAP  under which either Parent
                  or  any  of its  Consolidated  Subsidiaries is  the
                  lessee                                              $
                                                                       --------
           (e)    Plus  indebtedness  or   obligations  of  the  type
                  described in clauses  (a),  (b),  (c) or (d) of the
                  definition of Debt,  which are secured by a Lien or
                  any   property  owned  by  Parent  or  any  of  its
                  Consolidated  Subsidiaries,  whether  or  not  such
                  indebtedness or  obligations  have  been assumed by
                  Parent  or  any of  its  Consolidated  Subsidiaries
                  (limited however to the lesser of (1) the amount of
                  its  liability or  (2)  the value of such property)
                  (excluding  Debt of the type  referred to in clause
                  (e) of the definition of "Debt")                    $
                                                                       --------
                                  Exhibit J - 4


<PAGE>



           (f)    Plus  the undischarged  balance  of any  production
                  payment  created   by  Parent   or   any   of   its
                  Consolidated  Subsidiaries  or for  the creation of
                  which  Parent  or  its  Consolidated   Subsidiaries
                  directly or indirectly received payment.            $
                                                                       --------
           CONSOLIDATED TOTAL FUNDED DEBT                             $
                                                                       --------
    (ii)   TOTAL CAPITALIZATION (as defined in Section 1.1)

           (a)    Consolidated  Total Funded  Debt of  the Parent and
                  its Consolidated Subsidiaries (See B(i) above)      $
                                                                       --------
           (b)    Plus  Consolidated   shareholders'  equity  of  the
                  Parent and its Consolidated Subsidiaries            $
                                                                       --------
           TOTAL CAPITALIZATION                                       $
                                                                       ========
CONSOLIDATED TOTAL FUNDED DEBT TO TOTAL
CAPITALIZATION((i)/(ii))                                                    %
                                                                       ========
           Maximum ratio                                                  60%
                                                                       ========


                                  Exhibit J - 5


<PAGE>



                                   Exhibit K-1

                           Form of Election to Convert

                                           ,
                                   --------  ---

NationsBank of Texas, N.A.
901 Main Street, 14th Floor
Dallas, Texas  75202

Attn:  Ruth De la Garza

         Re:      Conversion of Restricted Subsidiary

Gentlemen:

         Reference is made to (i) that  certain Credit  Facility Agreement dated
as of August 7, 1997 by and  among  Borrower, NationsBank  of  Texas,  N.A.,  as
Administrative  Agent, CIBC Inc., as Documentation  Agent, Morgan Guaranty Trust
Company of New York,  as  Documentation  Agent,  The Chase  Manhattan  Bank,  as
Syndication  Agent,  the Co-Agents  party thereto,  and the Lenders from time to
time parties  thereto (the  "Primary  Credit  Agreement")  and (ii) that certain
Credit  Facility  Agreement dated as of  August  7, 1997 by and among  Borrower,
NationsBank of Texas, N.A., as Administrative Agent, CIBC Inc., as Documentation
Agent,  Morgan Guaranty Trust Company of New York, as  Documentation  Agent, The
Chase Manhattan Bank, as Syndication Agent, the Co-Agents party thereto, and the
Lenders from time to time parties  thereto (the "364 Day Credit  Agreement" and,
together with the Primary Credit Agreement, the "Credit Agreements").  Terms not
defined  herein  which are  defined in the Credit  Agreement  shall have for the
purposes hereof the meanings provided therein.

         The Borrower  hereby elects,  pursuant and subject to Section 5.2(i) of
the Credit  Agreements,  to  convert,  effective  as of          ,    , [name of
Restricted Subsidiary], a [jurisdiction] [corporation] [partnership],  ("Subject
Subsidiary"),  from a Restricted Subsidiary to an Unrestricted  Subsidiary.  The
Borrower  hereby  certifies  that all  requirements  for the  conversion  of the
Subject  Subsidiary to an  Unrestricted  Subsidiary,  as specified in the Credit
Agreements,  have  been and will be met,  both as of the date  hereof  and after
giving effect to such  conversion.  After giving effect to such  conversion,  no
Default  will exist.  The  Borrower  hereby  agrees that the election to convert
contained herein shall not be effective if the foregoing  certifications are not
true and  correct  in all  respects  as of the date  hereof  or are not true and
correct in all  respects  as of the date of such  conversion.  This  election to
convert  shall not  affect  any  obligation  of the  Borrower  under the  Credit
Agreements or under any Note under any Credit Agreement.


                                 Exhibit K-1 - 1


<PAGE>




         This  instrument  shall be construed in accordance with and governed by
the laws of the State of Texas.

                                      PIONEER NATURAL RESOURCES USA, INC.


                                      By:
                                      Name:
                                      Title:

         Receipt of the above Election to Convert is hereby acknowledged on
                ,
- ---------------   ----.

                                      NATIONSBANK OF TEXAS, N.A., as
                                      Administrative Agent


                                      By:
                                      Name:
                                      Title:


                                 Exhibit K-1 - 2


<PAGE>



                                   Exhibit K-2

                                 Form of Release

         This Release is delivered to [name of  subsidiary]  in connection  with
(i) the Primary  Facility  pursuant  to Section  5.2(i) of that  certain  Credit
Facility Agreement dated as of August 7, 1997 by and among Borrower, NationsBank
of Texas,  N.A., as  Administrative  Agent,  CIBC Inc., as Documentation  Agent,
Morgan  Guaranty Trust Company of New York, as  Documentation  Agent,  The Chase
Manhattan  Bank, as Syndication  Agent,  the Co-Agents  party  thereto,  and the
Lenders from time to time parties thereto (the "Primary Credit Agreement"),  and
(ii) the 364 Day  Facility  pursuant to Section  5.2(i) of that  certain  Credit
Facility Agreement dated as of August 7, 1997 by and among Borrower, NationsBank
of Texas,  N.A., as  Administrative  Agent,  CIBC Inc., as Documentation  Agent,
Morgan  Guaranty Trust Company of New York, as  Documentation  Agent,  The Chase
Manhattan  Bank, as Syndication  Agent,  the Co-Agents  party  thereto,  and the
Lenders from time to time parties  thereto (the "364 Day Credit  Agreement" and,
together with the Primary Credit Agreement,  the "Credit  Agreements").  Defined
terms used in this Release shall be used with the same meanings set forth in the
Credit Agreements.

         Pursuant  to the  election to convert in the form of Exhibit K-1 to the
Credit Agreements delivered to Administrative Agent on             , 19    , the
Borrower has notified  the  Lenders  that  it  has  converted
[Name of Subsidiary] from a Restricted Subsidiary to an Unrestricted Subsidiary.
Subject  to  the  accuracy  of  the  information  contained  in  such  notice of
conversion, the undersigned Managing Agents and Lenders hereby release
                   [Name of former  Restricted  Subsidiary] from its obligations
as Guarantor under its Guaranty dated as of        , 199  , as from time to time
amended,  modified and supplemented,  other than obligations if any, pursuant to
Section thereof.

         This Release may be separately  executed in any number of  counterparts
and by different parties hereto on separate counterparts,  each of which when so
executed shall be deemed to constitute one and the same release.

                                   [Add signature lines for Lenders and Managing
                                   Agents]

Agreed and Accepted
this      day of           , 199   :
     ----        ---------      ---

- -------------------------------
[Name of Restricted Subsidiary]

By:
Name:
Title:


                                 Exhibit K-2 - 1



<PAGE>



                                    Exhibit L

                          Form of Agreement to be Bound

                                         , 199
                                ---------     ---

PIONEER NATURAL RESOURCES USA, INC.
303 West Wall, Suite 101
Midland, Texas 79701
Attention:  Curt F. Kamradt

NationsBank of Texas, N.A.
901 Main Street, 14th Floor
Dallas, Texas  75202
Attention:  Ruth De la Garza

NationsBank of Texas, N.A.
303 West Wall Street
Midland, Texas 79701
Attn:  Frank K. Stowers

CIBC Inc.
2 Houston Center
909 Fannin Street, Suite 1200
Houston, Texas  77010

Attention:        Paul Jordan

         Re:      Assignment to                    of                        the
                                -------------------   -----------------------
Loans of             - 364 Day Facility
        -------------

Gentlemen:

         We refer to Section  8.8(a) of that certain Credit  Facility  Agreement
dated as of August 7, 1997 by and among Borrower, NationsBank of Texas, N.A., as
Administrative  Agent, CIBC Inc., as Documentation  Agent, Morgan Guaranty Trust
Company of New York,  as  Documentation  Agent,  The Chase  Manhattan  Bank,  as
Syndication  Agent,  the Co-Agents  party thereto,  and the Lenders from time to
time parties thereto (the "Credit  Agreement").  Unless otherwise defined herein
or the context otherwise requires,  terms used herein have the meanings provided
in the Credit Agreement.

                                  Exhibit L - 1


<PAGE>



         This Credit  Agreement to be Bound  constitutes  notice to each of you,
pursuant  to  Section  8.8(a) of the  Credit  Agreement,  of the  assignment  to
                      ("Assignee") of (i) an undivided          (the "Designated
Percentage"),  ($           ),  of the Loans and Commitments of [NAME OF LENDER]
("Assignor") in effect on the date hereof.

         After giving effect to the foregoing  assignment,  the Loan  Commitment
and  Percentage  Share of each of the  Assignor  and  Assignee  is as set  forth
beneath the signatures of each such Person below.

         Assignee hereby  acknowledges  and confirms that it has received a copy
of the Credit Agreement and the exhibits  related thereto,  together with a copy
of all documents which were required to be delivered under the Credit  Agreement
as a condition to the making of the Loans thereunder.  Assignee further confirms
and agrees  that in  becoming a Lender and in making its Loans  under the Credit
Agreement,  such  actions  have  and  will  be  made  without  recourse  to,  or
representation  or warranty by,  Assignor,  except as expressly set forth in the
Assignment and Assumption of even date herewith between Assignor and Assignee.

         Assignor and Assignee  hereby agree that  [Assignor/Assignee]  will pay
the  processing  fee  referred to in Section  8.8(a) of the Credit  Agreement to
Administrative Agent upon the delivery thereof. It is understood and agreed that
all  fees  accrued  under  the  Credit  Agreement  to the  date  hereof  are for
Assignor's  account  and those  accruing  from and after the date hereof are for
Assignee's account to the extent specified in the second paragraph hereof.  Each
of Assignor and  Assignee  hereby agree that if it receives any amount under the
Credit  Agreement  which is for the account of the other,  it shall  receive and
hold the same for the  account of the other and shall  promptly  pay the same to
the other.

         The  assignment  shall  become  effective  upon (i) the  receipt by the
Borrower  and  Administrative  Agent  of this  document,  (ii)  the  receipt  by
Administrative  Agent  of  the  processing  fee  referred  to in  the  preceding
paragraph,  and (iii) in accordance with Section 8.8(a) of the Credit Agreement,
the consent of the Borrower and Administrative Agent.

         Upon the effective date of this Credit Agreement the Assignee:

         (a) shall have all rights and  benefits of a "Lender"  under the Credit
Agreement as if it were an original signatory thereto to the extent specified in
the second paragraph hereof; and

         (b)  agrees  to be bound by the  terms  and  conditions  of each of the
Credit  Agreement,  and be  obligated  thereunder,  and hereby makes each of the
representations and warranties and  acknowledgments  contained in such documents
as if it were an original signatory thereto.

                                  Exhibit L - 2


<PAGE>



         Upon  the  effective  date of this  Agreement,  the  Assignor  shall be
released  from its  obligations  under the Credit  Agreement  and the other Loan
Documents to the extent specified in the second paragraph.

         Assignee  hereby  advises  each of you of the  following  matters  with
respect to the assigned Loans:

         (A)   Addresses for Notice:

               Telephone:
                                --------------------
               Telecopy:
                                --------------------
               Institution Name:
                                --------------------
               Attention:
                                --------------------
         (B)   Payment Instructions:

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

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

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

         This Credit  Agreement  may be executed  by  Assignor  and  Assignee in
separate  counterparts,  each of which when so executed and  delivered  shall be
deemed to be an original and all of which taken  together  shall  constitute one
and the same agreement.

         The  execution  below by the  Borrower and  Administrative  Agent shall
evidence  their consent to this  Agreement in accordance  with Section 8.8(a) of
the Credit Agreement.


                                  Exhibit L - 3


<PAGE>



         IN WITNESS  WHEREOF,  each of the undersigned has caused this Agreement
to be executed by its  official,  officer or agent  thereunto  duly  authorized,
effective as of              ,      .


- ------------------------------               ------------------------------ 
As Assignor                                  As Assignee

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

Percentage Share:            %               Percentage Share:            %
                 ------------                                 ------------
Loan Commitment:                             Loan Commitment:
                 ------------                                 ------------


APPROVED:

PIONEER NATURAL RESOURCES USA, INC.          NATIONSBANK OF TEXAS, N.A.


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

                                  Exhibit L - 4


<PAGE>



                                    Exhibit M

                                    [Form of]

                                PLEDGE AGREEMENT

          THIS PLEDGE AGREEMENT (this "Pledge Agreement"), dated as of         ,
199  , made by               , a            corporation ("Pledgor"), in favor of
NATIONSBANK OF TEXAS,  N.A., as collateral agent (together with any successor(s)
thereto in such capacity, the "Collateral Agent") for each of Lender Parties (as
defined below).

                              W I T N E S S E T H:

          WHEREAS,  pursuant to that certain Credit Facility  Agreement dated as
of August 7, 1997 by and among Pioneer Natural  Resources  USA, Inc., a Delaware
corporation  ("Borrower"),  NationsBank of Texas, N.A., as Administrative Agent,
CIBC Inc., as Documentation Agent, Morgan Guaranty Trust Company of New York, as
Documentation  Agent,  The Chase  Manhattan  Bank,  as  Syndication  Agent,  the
Co-Agents  party  thereto,  and the Lenders  from time to time  parties  thereto
(together   with   all   amendments,   supplements,   restatements   and   other
modifications, if any, thereafter made thereto, the "Primary Credit Agreement"),
the  Lenders  have  extended  Commitments  (as  defined  in the  Primary  Credit
Agreement) to make Loans to Borrower and to issue or  participate  in Letters of
Credit on behalf of Borrower; and

          WHEREAS,  pursuant to that certain Credit Facility  Agreement dated as
of  August 7, 1997  by and  among  Borrower,  NationsBank  of  Texas,  N.A.,  as
Administrative  Agent, CIBC Inc., as Documentation  Agent, Morgan Guaranty Trust
Company of New York,  as  Documentation  Agent,  The Chase  Manhattan  Bank,  as
Syndication  Agent,  the Co-Agents  party thereto,  and the Lenders from time to
time parties thereto  (together with all amendments,  supplements,  restatements
and other  modifications,  if any, thereafter made thereto,  the "364 Day Credit
Agreement",  and  together  with  the  Primary  Credit  Agreement,  the  "Credit
Agreements"),  the Lenders have extended  Commitments (as defined in the 364 Day
Credit Agreement) to make Loans to Borrower; and

          WHEREAS,  pursuant  to the Credit Agreements,  Pledgor  is required to
execute and deliver this Pledge Agreement; and

          WHEREAS,  Pledgor  has  duly  authorized  the execution,  delivery and
performance of this Pledge Agreement; and


                                  Exhibit M - 1


<PAGE>



          WHEREAS, it is in the best interests of Pledgor to execute this Pledge
Agreement  inasmuch  as  Pledgor  will derive  substantial  direct and  indirect
benefits from the Loans made from time to time to Borrower and Letters of Credit
issued on behalf of Borrower pursuant to the Credit Agreements;

          NOW  THEREFORE,  for good and  valuable  consideration  the receipt of
which is hereby  acknowledged,  and in order to induce the Lenders to make Loans
(including the initial Loans) to Borrower  pursuant to the Credit Agreements and
for the Issuing  Bank to issue  Letters of Credit on behalf of Borrower  and for
the Lenders to acquire  participations in such Letters of Credit pursuant to the
Primary Credit Agreement,  Pledgor agrees, for the benefit of each Lender Party,
as follows:

                                    ARTICLE I
                                   DEFINITIONS

         SECTION 1.1   Certain  Terms.   The  following  terms  (whether  or not
underscored)  when used in this Pledge  Agreement,  including  its  preamble and
recitals,  shall have the following  meanings  (such  definitions  to be equally
applicable to the singular and plural forms thereof):

         "Administrative Agent" is defined in the first recital.

         "Borrower" is defined in the first recital.

         "Collateral" is defined in Section 2.1.

         "Collateral Agent" is defined in the preamble.

         "Commitments"  means  "Commitments"  as defined in the  Primary  Credit
Agreement and "Commitments" as defined in the 364 Day Credit Agreement.

         "Credit Agreements" is defined in the second recital.

         "Debtor" is defined in Section 2.1(a)(i).

         "Distributions"  means  all  stock  dividends,  liquidating  dividends,
shares of stock  resulting  from (or in  connection  with the exercise of) stock
splits,  reclassifications,  warrants,  options,  non-cash  dividends,  mergers,
consolidations,  and all other  distributions  (whether similar or dissimilar to
the  foregoing)  on or with  respect to any  Pledged  Shares or other  shares of
capital stock or security entitlements  constituting  Collateral,  but shall not
include Dividends.


                                  Exhibit M - 2


<PAGE>



         "Dividends" means cash dividends and cash distributions with respect to
any Pledged Shares made in the ordinary course of business and not a liquidating
dividend.

         "Lender  Party"  means,  as the context may  require,  any Lender,  any
Issuing Bank or any Agent and each of its respective successors, transferees and
assigns under the Credit Agreements.

         "Lenders"  means  "Lenders" as defined in the Primary Credit  Agreement
and "Lenders" as defined in the 364 Day Credit Agreement.

         "Loan  Documents"  means  "Loan  Documents"  as defined in the  Primary
Credit  Agreement  and  "Loan  Documents"  as  defined  in the  364  Day  Credit
Agreement.

         "1994  Amendments" means the 1994 Amendments to Articles 8 and 9 of the
Uniform  Commercial  Code  promulgated  by the  American Law  Institute  and the
National Conference of Commissions for Uniform State Laws.

         "Notes"  means "Notes" as defined in the Primary  Credit  Agreement and
"Notes" as defined in the 364 Day Credit Agreement.

         "Obligations"  means  "Obligations"  as defined in the  Primary  Credit
Agreement and "Obligations" as defined in the 364 Day Credit Agreement.

         "Pledge Agreement" is defined in the preamble.

         "Pledged  Share  Issuer"  means each Person  identified in Attachment 1
hereto as the issuer of the Pledged Shares identified  opposite the name of such
Person.

         "Pledged Shares" means all shares of capital stock of any Pledged Share
Issuer which are  delivered by Pledgor to  Collateral  Agent  hereunder  and all
other pledged shares of capital stock from time to time  hereafter  delivered by
Pledgor  to  Collateral  Agent for the  purpose  of  pledge  under  this  Pledge
Agreement or any other Loan Document, and all proceeds of any of the foregoing.

         "Pledgor" is defined in the preamble.

         "Primary Credit Agreement" is defined in the first recital.

         "Secured Obligations" is defined in Section 2.2.

         "Securities Act" is defined in Section 6.2.

                                  Exhibit M - 3


<PAGE>



         "364 Day Credit Agreement" is defined in the second recital.

         "U.C.C." means the Uniform Commercial Code as in effect in the State of
Texas.

         SECTION 1.2   Primary  Credit  Agreement Definitions.  Unless otherwise
defined  herein or the  context  otherwise  requires,  terms used in this Pledge
Agreement,  including its preamble and recitals,  have the meanings  provided in
the Primary Credit Agreement.

         SECTION 1.3   U.C.C.  Definitions.   Unless otherwise defined herein or
the context  otherwise  requires,  terms for which  meanings are provided in the
U.C.C. are used in this Pledge  Agreement,  including its preamble and recitals,
with such meanings.

                                   ARTICLE II
                                     PLEDGE

         SECTION 2.1   Grant of  Security  Interest.  Pledgor  hereby  pledges,
hypothecates, assigns, charges, mortgages, delivers, and transfers to Collateral
Agent,  for its benefit and the ratable benefit of each of Lender  Parties,  and
hereby grants to Collateral  Agent,  for its benefit and the ratable  benefit of
Lender Parties, a continuing security interest in, all of the following property
(the "Collateral"):

(a)  65% of the issued and  outstanding  shares of capital stock of each Pledged
     Share Issuer identified in Item B of Attachment 1 hereto;

(b)  65% of all other Pledged Shares issued from time to time;

(c)  all Dividends, Distributions,  interest, and other payments and rights with
     respect to any Pledged Shares; and

(d)  all proceeds of any of the foregoing.

         SECTION 2.2   Security for Obligations. This Pledge Agreement secures:

(a)  the  payment  in full  of all  Obligations  of  Borrower  no