RAM ENERGY INC/OK, S-1, 1997-12-18

RAM ENERGY INC/OK
S-1, 1997-12-18

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<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 18, 1997
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933
------------------------------

RAM ENERGY, INC.*#

(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 1311 52-1535102
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>

5100 EAST SKELLY DRIVE, SUITE 650
TULSA, OKLAHOMA 74135
(918) 663-2800

(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)

JOHN M. LONGMIRE
SENIOR VICE PRESIDENT, TREASURER, SECRETARY
AND CHIEF FINANCIAL OFFICER
9400 BROADWAY EXTENSION, SUITE 130
OKLAHOMA CITY, OKLAHOMA 73114
(405) 478-0600
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------------

COPIES TO:

THEODORE M. ELAM, ESQ. CHARLES L. STRAUSS, ESQ.
McAfee & Taft Fulbright & Jaworski L.L.P.
A Professional Corporation 1301 McKinney, Suite 5100
211 North Robinson, Suite 1000 Houston, Texas 77010-3095
Oklahoma City, Oklahoma 73102 (713) 651-5151
(405) 235-9621

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

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
------------------------------

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 of the Securities Act of
1933, check the following box. / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. /X/
------------------------------

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES TO BE AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
REGISTERED REGISTERED UNIT(1) PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
3,680,000
Common Stock, par value $.01 per share...... Shares(2) $12.00 $44,160,000(2) $13,028(1)
% Senior Notes due 2008................. $100,000,000 100% $100,000,000 $29,500(3)
Guarantees of % Senior Notes due 2008... -- -- -- -- (4)
</TABLE>

(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 of the Securities Act of 1933.

(2) Includes amounts attributable to shares which the Underwriters have the
option to purchase to cover over-allotments, if any.

(3) Calculated in accordance with Rule 457 of the Securities Act of 1933.

(4) Pursuant to Rule 457(n), no registration fee is required for Guarantees of
the Notes registered hereby.
------------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

* THE CURRENT NAME OF THE REGISTRANT IS "RAMCO OPERATING COMPANY" WHICH WILL
BE CHANGED TO "RAM ENERGY, INC." PRIOR TO THE CONSUMMATION OF THE OFFERINGS
THAT ARE THE SUBJECT OF THIS REGISTRATION STATEMENT.

# THE SUBSIDIARY GUARANTORS OF RAM ENERGY, INC. WILL GUARANTEE THE % SENIOR
NOTES DUE 2008 BEING REGISTERED HEREBY AND THEREFORE ARE ALSO REGISTRANTS.
INFORMATION ABOUT SUCH ADDITIONAL REGISTRANTS APPEARS ON THE FOLLOWING PAGE.
<PAGE>
ADDITIONAL REGISTRANTS

RB OPERATING COMPANY
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 1311 73-1523738
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification Number)
incorporation or
organization)
</TABLE>

5100 EAST SKELLY DRIVE, SUITE 650
TULSA, OKLAHOMA 74135
(918) 663-2800
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)

RLP GULF STATES, L.L.C.
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
OKLAHOMA 1311 73-1522976
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification Number)
incorporation or
organization)
</TABLE>

5100 EAST SKELLY DRIVE, SUITE 650
TULSA, OKLAHOMA 74135
(918) 663-2800
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)

This Registration Statement contains two forms of prospectuses: one to be
used in connection with the underwritten offering of % Senior Notes due
2008 (the "Senior Note Prospectus"), and the other to be used in connection with
a concurrent underwritten offering of Common Stock, including shares offered by
certain selling stockholders (the "Common Stock Prospectus"). The Senior Note
Prospectus is contained in its entirety, followed by the sections (pages E-1
through E-16) of the Common Stock Prospectus that differ from the Senior Note
Prospectus. The closing of the offering being made pursuant to the Senior Note
Prospectus (the "Debt Offering") is conditioned on the closing of the offering
being made pursuant to the Common Stock Prospectus (the "Equity Offering"), and
the closing of the Equity Offering is conditioned on the closing of the Debt
Offering. The form of Senior Note Prospectus immediately follows this page and
is followed by the form of Common Stock Prospectus.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION DATED DECEMBER 18, 1997
PROSPECTUS

$100,000,000

[LOGO]
RAM ENERGY, INC.

% SENIOR NOTES DUE 2008
---------------------

THE % SENIOR NOTES DUE 2008 (THE "NOTES") ARE BEING OFFERED (THE "DEBT
OFFERING") BY RAM ENERGY, INC. INTEREST ON THE NOTES WILL BE PAYABLE
SEMI-ANNUALLY ON AND OF EACH YEAR AT THE INTEREST RATE PER
ANNUM SET FORTH ABOVE, COMMENCING , 1998. THE NOTES WILL MATURE ON
, 2008, AND WILL BE REDEEMABLE AT THE OPTION OF RAM ENERGY, INC., IN
WHOLE OR IN PART, AT ANY TIME ON OR AFTER , 2003, AT THE REDEMPTION
PRICES SET FORTH HEREIN, TOGETHER WITH ACCRUED AND UNPAID INTEREST TO THE DATE
OF REDEMPTION. IN THE EVENT RAM ENERGY, INC. CONSUMMATES A PUBLIC EQUITY
OFFERING ON OR PRIOR TO , 2001, RAM ENERGY, INC., AT ITS OPTION, MAY
USE ALL OR A PORTION OF THE NET PROCEEDS FROM SUCH OFFERING TO REDEEM UP TO
$ MILLION AGGREGATE PRINCIPAL AMOUNT OF THE NOTES, AT A REDEMPTION PRICE OF
% OF THE PRINCIPAL AMOUNT THEREOF, PLUS ACCRUED AND UNPAID INTEREST TO THE
DATE OF REDEMPTION, PROVIDED THAT AT LEAST $ MILLION IN AGGREGATE PRINCIPAL
AMOUNT OF THE NOTES REMAINS OUTSTANDING FOLLOWING SUCH REDEMPTION. IN THE EVENT
OF A CHANGE OF CONTROL, RAM ENERGY, INC. WILL BE REQUIRED TO OFFER TO REPURCHASE
THE NOTES AT A PRICE EQUAL TO 101% OF THE PRINCIPAL AMOUNT THEREOF, PLUS ACCRUED
AND UNPAID INTEREST TO THE DATE OF REPURCHASE. SEE "DESCRIPTION OF NOTES."

CONCURRENTLY WITH THE DEBT OFFERING, RAM ENERGY, INC. IS OFFERING 2,300,000
SHARES OF ITS COMMON STOCK, $.01 PAR VALUE ("COMMON STOCK") (2,780,000 SHARES IF
THE UNDERWRITERS' OVER-ALLOTMENT OPTION IS FULLY EXERCISED), AND CERTAIN SELLING
STOCKHOLDERS ARE OFFERING 900,000 SHARES OF COMMON STOCK PURSUANT TO A SEPARATE
PROSPECTUS (THE "EQUITY OFFERING" AND COLLECTIVELY WITH THE DEBT OFFERING, THE
"OFFERINGS"). RAM ENERGY, INC. WILL USE APPROXIMATELY $43 MILLION OF THE
AGGREGATE NET PROCEEDS FROM THE OFFERINGS TO ACQUIRE THE OUTSTANDING CAPITAL
STOCK AND TO REPAY CERTAIN INDEBTEDNESS OF CARLTON RESOURCES CORPORATION. SEE
"USE OF PROCEEDS" AND "BUSINESS -- THE CARLTON ACQUISITION." THE CLOSINGS OF THE
DEBT OFFERING AND THE EQUITY OFFERING ARE EACH CONDITIONED ON THE SIMULTANEOUS
CLOSING OF THE OTHER AND UPON THE SIMULTANEOUS CLOSING OF THE CARLTON
ACQUISITION.

THE NOTES WILL BE SENIOR UNSECURED OBLIGATIONS OF RAM ENERGY, INC. AND WILL
RANK PARI PASSU IN RIGHT OF PAYMENT WITH ALL EXISTING AND FUTURE SENIOR
INDEBTEDNESS AND OTHER SENIOR OBLIGATIONS OF RAM ENERGY, INC., AND SENIOR IN
RIGHT OF PAYMENT TO ALL SUBORDINATED INDEBTEDNESS OF RAM ENERGY, INC. BORROWINGS
BY RAM ENERGY, INC., UNDER ITS REVOLVING CREDIT FACILITY ARE SECURED BY
SUBSTANTIALLY ALL OF RAM ENERGY, INC.'S OIL AND GAS PROPERTIES. TO THE EXTENT OF
THE PLEDGED COLLATERAL, SUCH INDEBTEDNESS WILL HAVE PRIORITY OF PAYMENT OVER THE
NOTES. PAYMENT OF INTEREST ON AND PRINCIPAL OF THE NOTES WILL BE UNCONDITIONALLY
GUARANTEED, JOINTLY AND SEVERALLY, ON A SENIOR UNSECURED BASIS BY THE SUBSIDIARY
GUARANTORS. THE NOTES AND THE SUBSIDIARY GUARANTEES WILL BE EFFECTIVELY
SUBORDINATED TO SECURED INDEBTEDNESS OF RAM ENERGY, INC. AND THE SUBSIDIARY
GUARANTORS. THE INDENTURE GOVERNING THE NOTES WILL PERMIT RAM ENERGY, INC. AND
THE SUBSIDIARY GUARANTORS TO INCUR ADDITIONAL INDEBTEDNESS IN THE FUTURE,
SUBJECT TO CERTAIN LIMITATIONS. AT NOVEMBER 30, 1997, AFTER GIVING PRO FORMA
EFFECT TO THE CONSUMMATION OF THE OFFERINGS AND THE APPLICATION OF THE NET
PROCEEDS THEREFROM AS DESCRIBED IN "USE OF PROCEEDS," RAM ENERGY, INC. WOULD
HAVE HAD $0.2 MILLION OF OUTSTANDING SENIOR INDEBTEDNESS OTHER THAN THE NOTES.
SEE "USE OF PROCEEDS."

THE NOTES WILL BE REPRESENTED BY A GLOBAL NOTE REGISTERED IN THE NAME OF THE
NOMINEE OF THE DEPOSITORY TRUST COMPANY, WHICH WILL ACT AS THE DEPOSITORY (THE
"DEPOSITORY"). BENEFICIAL INTERESTS IN THE GLOBAL NOTE WILL BE SHOWN ON, AND
TRANSFERS THEREOF WILL BE EFFECTED ONLY THROUGH, RECORDS MAINTAINED BY THE
DEPOSITORY AND ITS PARTICIPANTS. EXCEPT AS DESCRIBED HEREIN, NOTES IN DEFINITIVE
FORM WILL NOT BE ISSUED. SEE "DESCRIPTION OF NOTES."
---------------------

SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS IN THE NOTES.
-------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) COMPANY(3)
------------------------- ------------------------- -------------------------
<S> <C> <C> <C>
Per Note........................................ % % %
Total........................................... $ $ $
</TABLE>

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

(1) Plus accrued interest, if any, from the date of issuance.

(2) RAM Energy, Inc. and the Subsidiary Guarantors have agreed to indemnify the
Underwriter against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."

(3) Before deducting expenses payable by RAM Energy, Inc., estimated to be
$ .
------------------------

THE NOTES ARE OFFERED BY THE UNDERWRITER, SUBJECT TO PRIOR SALE, WHEN, AS
AND IF DELIVERED TO AND ACCEPTED BY THE UNDERWRITER. THE UNDERWRITER RESERVES
THE RIGHT TO REJECT ORDERS IN WHOLE OR IN PART. IT IS EXPECTED THAT DELIVERY OF
THE NOTES WILL BE MADE IN BOOK-ENTRY FORM THROUGH THE FACILITIES OF THE
DEPOSITORY TRUST COMPANY IN NEW YORK, NEW YORK, ON OR ABOUT , 1998.
---------------------

JEFFERIES & COMPANY, INC.

, 1998
<PAGE>
RAM ENERGY -- PRINCIPAL OPERATING AREAS

[MAP]

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

IN CONNECTION WITH THE OFFERINGS, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OR THE
COMMON STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

2
<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED
INFORMATION AND FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING
ELSEWHERE IN THIS PROSPECTUS. CERTAIN TERMS RELATING TO THE OIL AND GAS BUSINESS
ARE DEFINED IN THE "GLOSSARY OF TERMS" SECTION OF THIS PROSPECTUS. UNLESS
OTHERWISE INDICATED, REFERENCES TO "RAM ENERGY" ARE TO RAM ENERGY, INC. AND ITS
SUBSIDIARIES, AS THE CONTEXT REQUIRES, AND REFERENCES TO THE "COMPANY" ARE TO
THE COMBINED OPERATIONS OF RAM ENERGY AND, UNTIL NOVEMBER 30, 1996, THE
PARTNERSHIP (AS DEFINED HEREIN). UNLESS OTHERWISE INDICATED, ALL FINANCIAL AND
QUANTITATIVE INFORMATION PROVIDED IN THIS PROSPECTUS ON A "PRO FORMA" BASIS
GIVES EFFECT, ON THE DATE AND FOR THE PERIODS INDICATED, TO THE COMPLETION OF
THE OFFERINGS AND THE APPLICATION OF THE NET PROCEEDS THEREFROM, THE COMPLETION
OF THE PARTNERSHIP ACQUISITION, THE COMPLETION OF THE CARLTON ACQUISITION (AS
DEFINED HEREIN) AND THE CONSUMMATION OF CERTAIN OTHER ACQUISITIONS AND
DISPOSITIONS. UNLESS THE CONTEXT INDICATES OTHERWISE, THE DISCUSSION IN THIS
PROSPECTUS REFLECTS A 27,000-FOR-ONE STOCK SPLIT TO BE EFFECTED IN DECEMBER 1997
AND ASSUMES THAT THE UNDERWRITERS' OVER-ALLOTMENT OPTION IN THE EQUITY OFFERING
IS NOT EXERCISED.

THE COMPANY

RAM Energy is an independent oil and gas company engaged in the acquisition,
development and production of oil and gas properties primarily in the
mid-continent region of Oklahoma and the Texas panhandle (the "Mid-Continent
Area") and in the Permian Basin of West Texas and eastern New Mexico (the
"Permian Basin"). At November 30, 1997, the Company's estimated net proved
reserves, on a pro forma basis, were 114.3 Bcf of natural gas and 4.3 MMBbls of
oil, or 140.1 Bcfe, with a PV-10 Value of approximately $150 million and a
reserve life of approximately 12 years. As of such date, on a pro forma basis,
the Company operated 725 wells representing approximately 64% of its PV-10
Value, a 165-mile oil and gas gathering system and a saltwater disposal
operation. The Company has grown principally through producing property
acquisitions, acquiring approximately $190 million of oil and gas properties
since inception, including the Carlton Acquisition.

From 1989 to November 1996, the Company primarily developed and operated oil
and gas properties owned jointly by RAM Energy and an institutional limited
partnership (the "Partnership") managed by RAM Energy. During that eight-year
period, the Company drilled 245 oil and gas wells with a 96% success rate. The
Partnership distributed a substantial portion of the net cash flows from these
properties to its partners and the Company did not invest significantly in its
asset base. Management believes that the Partnership's business strategy allowed
the Company's properties to remain under-developed and that these properties
contain significant potential for the addition of reserves and production
through accelerated development and exploration activities.

In November 1996, RAM Energy acquired the limited partner's interest in the
Partnership (the "Partnership Acquisition"). As a result of the Partnership
Acquisition and the Carlton Acquisition, the Company is pursuing a more
aggressive growth strategy. The Company has identified a substantial inventory
of over 200 development and exploitation opportunities on its existing
properties and on the properties included in the Carlton Acquisition. These
projects generally involve moderate drilling and completion costs, as they are
located primarily in intermediate depth, normally pressured reservoirs. The
Company has budgeted capital spending of $20.3 million in 1998 for development
projects and certain exploration activities. The Company also intends to
continue to pursue attractive oil and gas acquisition opportunities.

THE CARLTON ACQUISITION

On December 16, 1997, the Company entered into a definitive agreement to
purchase Carlton Resources Corporation ("Carlton") for $43.0 million (the
"Carlton Acquisition"). Carlton is engaged in the exploration, development and
production of oil and gas properties in the Mid-Continent Area and, to a lesser
extent, in the Permian Basin and other oil and gas producing regions. At
November 30, 1997,

3
<PAGE>
Carlton's estimated net proved reserves were 36.8 Bcfe. Carlton also owns and
operates a 165-mile oil and gas gathering system and a saltwater disposal
operation in north central Oklahoma (the "Carmen System"). The Carmen System
purchases, transports and markets oil and gas production and disposes of
produced water from properties owned by Carlton and other oil and gas companies.
The Company believes the Carlton Acquisition provides the opportunity to improve
cash flow from additional development and exploration activities, gathering and
sale of oil and gas production and reduction of operating and administrative
costs.

STRATEGY

The Company's primary goal is to maximize shareholder value by increasing
reserves, production and operating cash flow through the acquisition and
aggressive development of oil and gas properties. Key elements of the Company's
growth strategy include the following:

DEVELOP AND EXPLOIT EXISTING OIL AND GAS PROPERTIES. The Company has
identified over 200 infill drilling, recompletion, enhanced recovery and
workover opportunities on its properties, and plans to pursue these relatively
lower-risk development activities, as well as selective exploration activities.
The Company has budgeted capital spending of $20.3 million in 1998 to complete
approximately 75 planned development and exploration projects, as compared to
expenditures of $5.4 million to complete 28 development projects in 1997.

COMPLETE SELECTIVE OIL AND GAS ACQUISITIONS. The Company seeks to acquire
producing oil and gas properties that provide opportunities for reserve
additions and increased cash flow through operating improvements, production
enhancement and additional development and exploratory drilling. The Company
believes these criteria are met in regions that are characterized by long
histories of production and multiple producing oil and gas horizons, such as the
Mid-Continent Area and the Permian Basin. As part of its growth strategy, the
Company intends to evaluate acquisitions in other regions where it can add
properties and personnel to establish concentrated operations and economies of
scale.

MAINTAIN AND EXPAND CORE AREAS. Over 90% of the Company's pro forma PV-10
Value as of November 30, 1997 is concentrated in the Mid-Continent Area and the
Permian Basin. The Company believes that its geographic concentration and
region-specific geological, engineering and production experience provide it
with focused, efficient operations. The Company will continue to evaluate and
pursue acquisitions and drilling opportunities in its core areas and will
evaluate acquisitions that could establish additional core areas.

REDUCE COSTS THROUGH OPERATING CONTROL. The Company seeks to operate a
substantial number of its producing properties and, as of November 30, 1997,
operated 64% of its pro forma PV-10 Value. As a result of the Carlton
Acquisition, the Company will also operate an oil and gas gathering system and a
saltwater disposal operation. The Company believes that operating a high
percentage of its producing properties and drilling prospects within its core
areas provides it with substantial control of the timing, level and incurrence
of operating and drilling expenditures.

4
<PAGE>
THE DEBT OFFERING

<TABLE>
<S> <C>
NOTES OFFERED..................... $100,000,000 aggregate principal amount of % Senior
Notes due 2008.

ISSUER............................ RAM Energy, Inc.

MATURITY DATE..................... , 2008.

INTEREST RATE AND PAYMENT DATES... The Notes will bear interest at a rate of % per
annum. Interest on the Notes will accrue from the date
of issuance thereof and will be payable semi-annually in
cash in arrears on and of each year
commencing , 1998.

RANKING........................... The Notes will be senior unsecured obligations of RAM
Energy, Inc., ranking PARI PASSU in right of payment
with all existing and future senior Indebtedness of RAM
Energy, Inc. and senior to all existing and future
Subordinated Indebtedness of RAM Energy, Inc. The Notes
and the Subsidiary Guarantees (as defined herein) will
be effectively subordinated to secured Indebtedness of
RAM Energy, Inc. and the Subsidiary Guarantors,
including any Indebtedness under the Credit Facility (as
defined herein), which is secured by liens on certain
assets of the Company. At November 30, 1997, on a pro
forma basis, RAM Energy, Inc. would have had $0.2
million of outstanding senior Indebtedness other than
the Notes. Subject to certain limitations, RAM Energy,
Inc. and the Subsidiary Guarantors may incur additional
secured and unsecured Indebtedness in the future. See
"Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and
Capital Resources."

SUBSIDIARY GUARANTEES............. The Notes will be unconditionally guaranteed on a senior
unsecured basis by the existing and future Subsidiary
Guarantors. Each Subsidiary Guarantee will rank PARI
PASSU in right of payment to all existing and future
senior Indebtedness of the Subsidiary Guarantors and
senior to all existing and future Subordinated
Indebtedness of the Subsidiary Guarantors.

OPTIONAL REDEMPTION............... The Notes will be redeemable at the option of RAM
Energy, Inc., in whole or in part, at any time on or
after , 2003, at the redemption prices set
forth herein, together with accrued and unpaid interest
to the date of redemption. In the event RAM Energy, Inc.
consummates a Public Equity Offering on or prior to
, 2001, RAM Energy, Inc. has the option to
use all or a portion of the proceeds from such offering
to redeem up to $ million aggregate principal amount
of the Notes at a redemption price equal to % of the
principal amount thereof, together with accrued and
unpaid interest to the date of redemption, provided that
at least $ million aggregate principal amount of the
Notes remains outstanding after such redemption.
</TABLE>

5
<PAGE>

<TABLE>
<S> <C>
CHANGE OF CONTROL................. Upon the occurrence of a Change of Control, RAM Energy,
Inc. will be required to offer to repurchase the Notes
at a price equal to 101% of the principal amount
thereof, together with accrued and unpaid interest to
the date of repurchase.

CERTAIN COVENANTS................. The indenture under which the Notes will be issued (the
"Indenture") will contain certain covenants including,
but not limited to, covenants that limit (i) incurrence
of additional indebtedness and issuances of disqualified
capital stock, (ii) restricted payments, (iii) dividends
and other payments affecting subsidiaries, (iv)
transactions with affiliates, (v) asset sales, (vi)
liens, (vii) lines of business and (viii) merger, sale
or consolidation. The Indenture will also contain
covenants regarding the designation of Unrestricted
Subsidiaries (as defined herein), ownership of
Subsidiary Guarantors and issuance of reports.

EQUITY OFFERING................... Concurrently with the Debt Offering, RAM Energy, Inc. is
offering 2,300,000 shares (2,780,000 shares if the
underwriters' over-allotment option is fully exercised),
and certain Selling Stockholders are offering 900,000
shares, of Common Stock for sale to the public. RAM
Energy, Inc. will not receive any proceeds from the sale
of the Common Stock by the Selling Stockholders in the
Equity Offering. The closings of the Debt Offering and
the Equity Offering are each conditioned upon the
simultaneous closing of the other and upon the
simultaneous closing of the Carlton Acquisition.

USE OF PROCEEDS................... RAM Energy, Inc. plans to use the net proceeds from the
Offerings primarily to (i) repay indebtedness
outstanding under the Credit Facility, (ii) acquire the
stock and repay certain indebtedness of Carlton in
connection with the Carlton Acquisition and (iii)
provide additional working capital for general corporate
purposes, including the acquisition and development of
oil and gas properties. See "Use of Proceeds."
</TABLE>

For a more detailed discussion of the terms of the Notes, see "Description
of Notes."

RISK FACTORS

For a discussion of certain factors that should be considered by prospective
purchasers in evaluating an investment in the Notes, see "Risk Factors."

6
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA

The following summary historical and pro forma financial data were derived
from the financial statements of the Company and the Partnership, including the
notes thereto (the "Financial Statements"), as well as the selected historical
and pro forma financial and operating information included elsewhere in this
Prospectus. The pro forma financial data are based on the assumptions and
adjustments described in the pro forma combined financial information and do not
purport to present the results of operations and financial position of the
Company and the Partnership as if the Offerings and the application of the net
proceeds therefrom, the Partnership Acquisition, the Carlton Acquisition and
certain other acquisitions and dispositions had actually occurred on such dates,
nor are they necessarily indicative of the results of operations that may be
achieved in the future. The information set forth below should be read in
conjunction with "Selected Historical and Pro Forma Financial Information and
Operating Data," "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Financial Statements included elsewhere
herein.
<TABLE>
<CAPTION>
PARTNERSHIP COMPANY
----------------------------------- ----------------------
YEAR ENDED ELEVEN YEAR ENDED
PARTNERSHIP COMPANY
----------- ---------
NINE MONTHS
DECEMBER 31, ENDED SEPTEMBER 30,
DECEMBER 31, MONTHS ENDED ---------------------- ----------------------
-------------------- NOVEMBER 30, PRO FORMA
1994 1995 1996(1) 1996 1996(2) 1996 1997
--------- --------- ------------- --------- ----------- ----------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Operating revenues:
Oil and gas.......................... $ 24,481 $ 21,802 $ 23,456 $ 3,275 $ 31,900 $ 18,744 $ 16,819
Gathering system..................... -- -- -- -- 14,688 -- --
Management fees(3)................... -- -- -- 1,482 22 -- --
Operator overhead fees(3)............ -- -- -- 1,343 -- -- --
Consulting fees(3)................... -- -- -- 153 -- -- --
Other................................ 60 139 7 568 1,356 -- 85
--------- --------- ------------- --------- ----------- ----------- ---------
Total operating revenues........... 24,541 21,941 23,463 6,820 47,966 18,744 16,905

Operating expenses:
Oil and gas production............... 9,839 9,902 7,609 827 10,856 6,153 4,795
Cost of oil and gas purchased........ -- -- -- -- 6,657 -- --
Gathering system..................... -- -- -- -- 1,177 -- --
Depreciation and amortization........ 11,608 9,808 5,114 990 11,954 4,160 5,268
Writedown of oil and gas properties
and equipment...................... 8,700 -- -- -- -- -- --
Management fees(3)................... 1,555 1,606 1,482 -- -- 1,210 --
Operator overhead fees(3)............ 1,746 1,686 1,343 -- -- 1,108 --
General and administrative........... 676 502 378 4,164 3,872 240 3,325
--------- --------- ------------- --------- ----------- ----------- ---------
Total operating expenses........... 34,124 23,504 15,926 5,981 34,516 12,872 13,389
--------- --------- ------------- --------- ----------- ----------- ---------

Operating income (loss)................ (9,583) (1,563) 7,537 839 13,450 5,872 3,516

Other income (expense):
Interest expense..................... (587) (809) (564) (542) (10,600) (484) (3,787)
Interest income...................... 41 59 114 29 536 91 43
Equity in income of the
Partnership........................ -- -- -- 71 71 -- --
Minority interest in the
Partnership........................ -- -- -- 10 10 -- (15)
--------- --------- ------------- --------- ----------- ----------- ---------
Income (loss) before income taxes...... (10,129) (2,313) 7,087 408 3,467 5,480 (243)
Income tax provision (benefit)......... -- -- -- -- 1,317 -- --
--------- --------- ------------- --------- ----------- ----------- ---------
Net income (loss)...................... $ (10,129) $ (2,313) $ 7,087 $ 408 $ 2,150 $ 5,480 $ (243)
--------- --------- ------------- --------- ----------- ----------- ---------
--------- --------- ------------- --------- ----------- ----------- ---------
Net income (loss) per common share..... $ 0.43
-----------
-----------
Weighted average common shares
outstanding (in thousands)........... 5,027
-----------
-----------
OTHER FINANCIAL DATA:
Cash flow from operations(4)........... $ 10,178 $ 7,495 $ 12,201 $ 1,451 $ 14,157 $ 9,640 $ 5,120
EBITDA(5).............................. 10,766 8,304 12,765 1,940 26,021 10,124 8,812
Capital expenditures................... 4,325 5,380 3,310 250 -- 1,950 14,692
Ratio of:
EBITDA to interest expense........... 2.5x
Long-term debt to EBITDA(6)..........
Net debt to EBITDA(6)................

PRO FORMA
1997(2)
-----------

<S> <C>
INCOME STATEMENT DATA:
Operating revenues:
Oil and gas.......................... $ 21,352
Gathering system..................... 7,468
Management fees(3)................... 8
Operator overhead fees(3)............ --
Consulting fees(3)................... --
Other................................ 268
-----------
Total operating revenues........... 29,096
Operating expenses:
Oil and gas production............... 7,226
Cost of oil and gas purchased........ 4,785
Gathering system..................... 569
Depreciation and amortization........ 7,750
Writedown of oil and gas properties
and equipment...................... --
Management fees(3)...................
Operator overhead fees(3)............ --
General and administrative........... 2,806
-----------
Total operating expenses........... 23,136
-----------
Operating income (loss)................ 5,960
Other income (expense):
Interest expense..................... (7,951)
Interest income...................... 89
Equity in income of the
Partnership........................ --
Minority interest in the
Partnership........................ (15)
-----------
Income (loss) before income taxes...... (1,917)
Income tax provision (benefit)......... (728)
-----------
Net income (loss)...................... $ (1,189)
-----------
-----------
Net income (loss) per common share..... $ (0.24)
-----------
-----------
Weighted average common shares
outstanding (in thousands)........... 5,027
-----------
-----------
OTHER FINANCIAL DATA:
Cash flow from operations(4)........... $ 6,656
EBITDA(5).............................. 13,784
Capital expenditures................... --
Ratio of:
EBITDA to interest expense........... 1.7x
Long-term debt to EBITDA(6).......... 5.5x
Net debt to EBITDA(6)................ 4.6x
</TABLE>

7
<PAGE>

<TABLE>
<CAPTION>
COMPANY
-------------------------
AT SEPTEMBER 30, 1997
-------------------------
ACTUAL AS ADJUSTED(7)
--------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................................................. $ 2,031 $ 16,293
Net property and equipment............................................................ 60,100 124,576
Total assets.......................................................................... 70,344 155,238
Long-term debt, including current portion............................................. 62,215 100,215
Stockholders' equity (deficit)(8)..................................................... (1,563) 20,967
</TABLE>

- ------------------------------
(1) Partnership operations were effectively terminated on a stand-alone basis on
November 30, 1996 upon consummation of the Partnership Acquisition.

(2) Pro forma to reflect the Offerings and the application of the net proceeds
therefrom, the Partnership Acquisition, the Carlton Acquisition and certain
other acquisitions and dispositions as if they had occurred on January 1,
1996.

(3) Management fees and operator overhead fees were charged to the Partnership
by RAM Energy for all periods to and including the eleven months ended
November 30, 1996.

(4) Calculated before changes in operating assets and liabilities.

(5) EBITDA is defined as earnings before interest expense, income taxes,
depreciation and amortization and writedown of oil and gas properties and
equipment. EBITDA is not a measure of cash flow as determined by generally
accepted accounting principles ("GAAP"). EBITDA should not be considered as
an alternative to, or more meaningful than, net income or cash flow as
determined in accordance with GAAP or as an indicator of a company's
operating performance or liquidity. Certain items excluded from EBITDA are
significant components in understanding and assessing a company's financial
performance, such as a company's cost of capital and tax structure, as well
as historic costs of depreciable assets, none of which are components of
EBITDA. The Company's computation of EBITDA may not be comparable to other
similarly titled measures of other companies. The Company believes that
EBITDA is a widely followed measure of operating performance and may also be
used by investors to measure the Company's ability to meet future debt
service requirements, if any.

(6) The ratio of long-term debt to EBITDA is computed on the basis of annualized
EBITDA for periods shorter than one year. The ratio of net debt to EBITDA is
the ratio of long-term debt, including the current portion thereof, less
cash and cash equivalents, to EBITDA, annualized for periods shorter than
one year.

(7) Pro forma to reflect the Offerings and the application of the net proceeds
therefrom and the Carlton Acquisition as if they had occurred on September
30, 1997.

(8) Before giving effect to the redemption of all outstanding shares (77,714
shares) of RAM Energy, Inc.'s Series A Preferred Stock at a redemption price
of $10.00 per share and the redemption of all outstanding shares (69,652
shares) of its Series B Preferred Stock at a redemption price of $10.00 per
share. See "Management -- Certain Transactions."

8
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA RESERVE AND OPERATING DATA

The following tables set forth summary information with respect to the
estimated proved oil and gas reserves and certain operating data of the Company
and the Partnership at or for the periods shown and on a pro forma basis. See
"Risk Factors," "Selected Historical and Pro Forma Financial Information and
Operating Data," "Management's Discussion and Analysis of Financial Condition
and Results of Operations," "Business," "Reserve Engineers" and the Financial
Statements included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
PARTNERSHIP COMPANY COMPANY
-------------------- ----------- ----------------------
NOVEMBER 30,
DECEMBER 31, ----------------------
--------------------------------- PRO FORMA
RESERVE DATA: 1994 1995 1996 1997 1997(1)
--------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C>
Proved reserves:
Natural gas (MMcf)................................................. 75,435 68,920 82,885 83,006 114,323
Oil and condensate (MBbls)......................................... 3,770 3,333 4,282 3,376 4,295
Total (MMcfe)...................................................... 98,055 88,918 108,577 103,263 140,092
Proved developed reserves:
Natural gas (MMcf)................................................. 56,792 51,664 62,319 58,717 78,399
Oil and condensate (MBbls)......................................... 2,797 2,714 3,511 2,569 3,182
Total (MMcfe)...................................................... 73,574 67,948 83,385 74,128 97,492
PV-10 Value (in thousands)(2)........................................ $ 56,480 $ 63,913 $ 160,930 $ 116,186 $ 150,403
</TABLE>

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

(1) Pro forma to reflect the Carlton Acquisition as if it had occurred on
November 30, 1997.

(2) PV-10 Value represents the present value of estimated future net revenues
before income tax discounted at 10%, using prices in effect at the end of
the respective periods presented and including the effects of hedging
activities. In accordance with applicable requirements of the Securities and
Exchange Commission (the "Commission"), estimates of the Company's proved
reserves and future net revenues are made using oil and gas sales prices
estimated to be in effect as of the date of such reserve estimates and are
held constant throughout the life of the properties (except to the extent a
contract specifically provides for escalation). The average prices used in
calculating PV-10 Value as of November 30, 1997 were $3.00 per Mcf of
natural gas and $17.99 per Bbl of oil, compared to weighted average prices
used as of December 31, 1996 of $3.78 per Mcf of natural gas and $23.88 per
Bbl of oil. The average prices used in calculating the pro forma PV-10 Value
as of November 30, 1997 were $3.01 per Mcf of natural gas and $17.81 per Bbl
of oil.
<TABLE>
<CAPTION>
PARTNERSHIP
COMPANY -------------
PARTNERSHIP ----------------------------
----------------------------------------------- NINE MONTHS
YEAR ENDED ENDED
YEAR ENDED DECEMBER 31, ELEVEN MONTHS DECEMBER 31, SEPTEMBER 30,
ENDED NOVEMBER ---------------------------- -------------
---------------------------- 30, PRO FORMA
OPERATING DATA: 1994 1995 1996(1) 1996 1996(2) 1996
------------- ------------- ----------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Production volumes:
Natural gas (MMcf)............ 9,403 9,700 7,594 692 10,626 5,933
Oil and condensate (MBbls).... 534 463 387 38 487 313
Total (MMcfe)................. 12,607 12,478 9,916 920 13,547 7,811
Average realized prices(3):
Natural gas (per Mcf)......... $ 1.71 $ 1.44 $ 2.04 $ 3.44 $ 2.07 $ 2.13
Oil and condensate (per Bbl).. 15.75 16.86 20.59 23.49 20.35 19.52
Per Mcfe...................... 1.94 1.75 2.37 3.56 2.36 2.40
Expenses (per Mcfe):
Lease operating (including
production taxes)........... 0.78 0.79 0.77 0.90 0.80 0.79
Depreciation and
amortization................ 0.92 0.79 0.52 1.08 0.88 0.53
General and
administrative(4)........... 0.32 0.30 0.32 1.29 0.29 0.33

COMPANY
----------------------------

PRO FORMA
OPERATING DATA: 1997 1997(2)
------------- -------------
<S> <C> <C>
Production volumes:
Natural gas (MMcf)............ 5,245 6,710
Oil and condensate (MBbls).... 236 306
Total (MMcfe)................. 6,661 8,544
Average realized prices(3):
Natural gas (per Mcf)......... $ 2.32 $ 2.31
Oil and condensate (per Bbl).. 19.71 19.12
Per Mcfe...................... 2.53 2.50
Expenses (per Mcfe):
Lease operating (including
production taxes)........... 0.72 0.85
Depreciation and
amortization................ 0.79 0.91
General and
administrative(4)........... 0.50 0.33
</TABLE>

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

(1) Partnership operations were effectively terminated on a stand-alone basis on
November 30, 1996 upon consummation of the Partnership Acquisition.

(3) Reflects the actual realized prices received by the Company, including the
results of the Company's hedging activities. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."

(4) For the Partnership, includes management fees and operator overhead fees
charged to the Partnership by RAM Energy during 1994, 1995 and the 1996
periods. For the Company, general and administrative expense is net of
management fees, operator overhead fees and consulting fees, if any,
received by RAM Energy from the Partnership.

9
<PAGE>
FORWARD-LOOKING STATEMENTS

This Prospectus includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). All statements other than statements
of historical facts included in this Prospectus, including without limitation
statements under "Prospectus Summary," "Risk Factors," "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and "Business"
regarding the planned capital expenditures, increases in oil and gas production,
the number of anticipated wells to be drilled in 1998 and thereafter, the
Company's financial position, business strategy and other plans and objectives
for future operations, are forward-looking statements. Although the Company
believes that the expectations reflected in such forward-looking statements are
reasonable, it can give no assurance that such expectations will prove to have
been correct. The Company cautions prospective investors that actual results
could differ materially from those expected by the Company, depending on the
outcome of certain factors, including, without limitation, (i) factors discussed
under "Risk Factors" such as fluctuations in the prices of oil and gas,
uncertainties inherent in estimating quantities of oil and gas reserves and
projecting future rates of production and timing of development expenditures,
competition, operating risks, acquisition risks, liquidity and capital
requirements and the effects of governmental and environmental regulation, (ii)
adverse changes in the operations acquired in the Carlton Acquisition or the
failure of the Company to achieve anticipated consolidation cost savings in
connection with the Carlton Acquisition and (iii) adverse changes in the market
for the Company's oil and gas production. Readers are cautioned not to place
undue reliance on these forward-looking statements, which speak only as of the
date hereof. The Company undertakes no obligation to release publicly the result
of any revisions to these forward-looking statements that may be made to reflect
events or circumstances after the date hereof, including, without limitation,
changes in the Company's business strategy or planned capital expenditures, or
to reflect the occurrence of unanticipated events.

10
<PAGE>
RISK FACTORS

IN ADDITION TO THE OTHER INFORMATION SET FORTH ELSEWHERE IN THIS PROSPECTUS,
THE FOLLOWING FACTORS RELATING TO THE COMPANY AND THE DEBT OFFERING SHOULD BE
CONSIDERED WHEN EVALUATING AN INVESTMENT IN THE NOTES OFFERED HEREBY.

INCURRENCE OF SUBSTANTIAL INDEBTEDNESS

At September 30, 1997, on a pro forma basis, RAM Energy, Inc. and the
Subsidiary Guarantors would have had $100.2 million of indebtedness (including
current maturities of long-term indebtedness) as compared to the Company's
stockholders' equity of $21.0 million. See "Equity Offering," "Use of Proceeds"
and "Capitalization." The Indenture may limit the amounts of borrowings under
secured bank facilities, including the Credit Facility. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources" and "Description of Notes -- Certain
Covenants."

This level of indebtedness may pose substantial risks to holders of Notes,
including the possibility that the Company might not generate sufficient cash
flow to pay the principal of and interest on the Notes. If the Company is
unsuccessful in increasing its proved reserves, the future net revenues from
existing proved reserves may not be sufficient to pay the principal of and
interest on the Notes in accordance with their terms. Such indebtedness may also
adversely affect the Company's ability to finance its future operations and
capital needs, and may limit its ability to pursue other business opportunities.

The Indenture and the instruments governing the Credit Facility impose
significant operating and financial restrictions on the Company. Such
restrictions will affect, and in many respects significantly limit or prohibit,
among other things, the ability of the Company to incur additional indebtedness,
pay dividends, repay indebtedness prior to its stated maturity, sell assets or
engage in mergers or acquisitions. These restrictions could also limit the
ability of the Company to effect future financings, make needed capital
expenditures, withstand a future downturn in the Company's business or the
economy in general, or otherwise conduct necessary corporate activities. A
failure by the Company to comply with these restrictions could lead to a default
under the terms of such indebtedness and the Notes. In the event of default, the
holders of such indebtedness could elect to declare all of the funds borrowed
pursuant thereto to be due and payable together with accrued and unpaid
interest. In such event, there can be no assurance that the Company would be
able to make such payments or borrow sufficient funds from alternative sources
to make any such payment. Even if additional financing could be obtained, there
can be no assurance that it would be on terms that are favorable or acceptable
to the Company. In addition, the Company's indebtedness under the Credit
Facility is secured by a substantial portion of the assets of RAM Energy, Inc.
and the Subsidiary Guarantors. The pledge of such collateral to existing lenders
could impair the Company's ability to obtain favorable financing. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

SUBSTANTIAL CAPITAL REQUIREMENTS

The Company has made, and will likely continue to make, substantial capital
expenditures in connection with the acquisition, development, exploration and
production of oil and gas properties. Since 1991, the Company has funded its
capital expenditures through bank borrowings and cash flow from operations.
Future cash flows and the availability of credit are subject to a number of
variables, such as the level of production from existing wells, prices of oil
and gas and the Company's success in locating and producing new reserves. If
revenues were to decrease as a result of lower oil and gas prices, decreased
production or otherwise, and the Company had no availability under the Credit
Facility, the Company could have limited ability to replace its reserves or to
maintain production at current levels, resulting in a decrease in production and
revenues over time. If the Company's cash flow from operations and

11
<PAGE>
availability under the Credit Facility are not sufficient to satisfy its capital
expenditure requirements, there can be no assurance that additional debt or
equity financing will be available to meet these requirements.

EFFECTIVE SUBORDINATION

The obligations under the Credit Facility are secured by substantially all
of the proved oil and gas reserves of RAM Energy, Inc. and the Subsidiary
Guarantors. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."

Holders of secured indebtedness of the Company under the Credit Facility
have claims with respect to the assets constituting collateral for such
indebtedness that are prior to the claims of the holders of Notes. In the event
of a default on the Notes, or a bankruptcy, liquidation or reorganization of RAM
Energy, Inc. and the Subsidiary Guarantors, such assets will be available to
satisfy obligations with respect to the indebtedness secured thereby before any
payment therefrom could be made on the Notes. Accordingly, the Notes will be
effectively subordinated to claims of secured creditors of RAM Energy, Inc. and
the Subsidiary Guarantors to the extent of such pledged collateral. At September
30, 1997, after giving pro forma effect to the sale of the Notes, RAM Energy,
Inc. and the Subsidiary Guarantors would have had $100.0 million of indebtedness
represented by the Notes and $0.2 million of other indebtedness.

RESTRICTIONS ON REPURCHASES OF NOTES UPON A CHANGE OF CONTROL AND CERTAIN OTHER
EVENTS

In the event of a Change of Control, RAM Energy, Inc. will be required to
offer to repurchase all Notes then outstanding at a purchase price equal to 101%
of the principal amount thereof, plus accrued interest to the date of
repurchase. In the event of certain asset dispositions, RAM Energy, Inc. will be
required under certain circumstances to use the Excess Cash (as defined herein)
to offer to repurchase the Notes at 100% of the principal amount thereof, plus
accrued interest to the date of repurchase (an "Excess Cash Offer"). See
"Description of Notes -- Repurchase of Notes at the Option of the Holder Upon a
Change of Control" and "-- Certain Covenants."

The events that constitute a Change of Control or require an Excess Cash
Offer under the Indenture may also be events of default under the Credit
Facility or other senior indebtedness of RAM Energy, Inc. and the Subsidiary
Guarantors. Such events may permit the lenders under such debt instruments to
accelerate the debt and, if the debt is not paid, to enforce security interests
on substantially all the assets of RAM Energy, Inc. and the Subsidiary
Guarantors, thereby limiting the Company's ability to raise cash to repurchase
the Notes and reducing the practical benefit of the offer to repurchase
provisions to the holders of the Notes. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources." There can be no assurance that the Company will have
sufficient funds available at the time of any Change of Control or Excess Cash
Offer to make any debt payment (including repurchases of Notes) as described
above. Any failure by RAM Energy, Inc. to repurchase Notes tendered pursuant to
a Change of Control Offer (as defined herein) or an Excess Cash Offer will
constitute an Event of Default under the Indenture. See "Description of Notes --
Certain Covenants."

POSSIBLE LIMITATIONS ON ENFORCEABILITY OF SUBSIDIARY GUARANTEES

RAM Energy, Inc.'s obligations under the Notes will be guaranteed on a
senior unsecured basis by the Subsidiary Guarantors pursuant to the provisions
of the Indenture. The obligations of any Subsidiary Guarantor under its
Subsidiary Guarantee may be subject to review under applicable fraudulent
conveyance statutes in the event of the bankruptcy or other financial difficulty
of any such Subsidiary Guarantor. Under such laws, if a court in a lawsuit by an
unpaid creditor or representative of creditors of any such person, such as a
trustee in bankruptcy of any such person as debtor in possession, were to find
that at the time such person incurred its obligations under its guarantee or
pledged its assets, it (i) received less than fair consideration or reasonably
equivalent value therefor, and (ii) either, (a) was insolvent, (b) was

12
<PAGE>
rendered insolvent by such guarantee or pledge, (c) was engaged in a business or
transaction for which its remaining unencumbered assets constituted unreasonably
small capital or (d) intended to incur or believed that it would incur debts
beyond its ability to pay such debts as they matured, such court could void such
obligations under its guarantee and direct the return of any amounts paid with
respect thereto. Moreover, regardless of the factors identified in the foregoing
clauses (i) and (ii), a court could take such action if it found that the
guarantee was entered into or the security interest granted with actual intent
to hinder, delay or defraud creditors. The measure of insolvency for purposes of
the foregoing will vary depending on the law of the jurisdiction being applied.
Generally, however, an entity would be considered insolvent if the sum of its
debts (including contingent or unliquidated debts) is greater than all of its
property at a fair valuation or if the present fair salable value of its assets
is less than the amount that would be required to pay its probable liability on
its existing debts as they become absolute and mature. There can be no assurance
that, after providing for all prior claims, if any, there would be sufficient
assets to satisfy the claims of the holders of the Notes relating to any voided
portion of such Subsidiary Guarantees.

ADDITIONS AND DEVELOPMENT OF RESERVES

The Company's future success depends upon its ability to find, develop or
acquire additional oil and gas reserves that are economically recoverable.
Unless the Company successfully replaces the reserves that it produces (through
successful development, exploration or acquisition), the Company's proved
reserves will decline. There can be no assurance that the Company will continue
to be successful in its effort to increase or replace its proved reserves.
Approximately 30% of the PV-10 Value of the Company's total proved reserves at
November 30, 1997, on a pro forma basis, was attributable to undeveloped
reserves. Recovery of such reserves will require significant capital
expenditures and successful drilling operations. There can be no certainty
regarding the results of developing these reserves. To the extent the Company is
unsuccessful in replacing or expanding its estimated proved reserves, the
Company may be unable to pay the principal of and interest on the Notes in
accordance with their terms, or otherwise to satisfy certain of its covenants
contained in the Indenture. See "Description of Notes -- Certain Covenants."

ACQUISITION RISKS

The Company's growth strategy includes the acquisition of oil and gas
properties. There can be no assurance, however, that the Company will be able to
identify attractive acquisition opportunities, obtain financing for acquisitions
on satisfactory terms or successfully acquire identified targets. In addition,
no assurance can be given that the Company will be successful in integrating
acquired businesses into its existing operations, and such integration may
result in unforeseen operational difficulties or require a disproportionate
amount of management's attention. Future acquisitions may be financed through
the incurrence of additional indebtedness to the extent permitted under the
Indenture or through the issuance of capital stock. Furthermore, there can be no
assurance that competition for acquisition opportunities in these industries
will not escalate, thereby increasing the cost to the Company of making further
acquisitions or causing the Company to refrain from making additional
acquisitions.

PRICE FLUCTUATIONS

13
<PAGE>
significant decline in oil and gas prices would have a material adverse effect
on the Company's results of operations and financial condition. Although the
Company may enter into hedging arrangements from time to time to reduce its
exposure to price risks in the sale of its oil and gas, the Company's hedging
arrangements are likely to apply to only a portion of its production and provide
only limited price protection against fluctuations in the oil and gas markets.
See "Business -- Oil and Gas Marketing and Hedging."

WRITEDOWN OF CARRYING VALUES

The Company periodically reviews the carrying value of its oil and gas
properties under the full cost accounting rules of the Commission. Under these
rules, capitalized costs of proved oil and gas properties may not exceed the
present value of estimated future net revenues from proved reserves, discounted
at 10%. Application of this "ceiling" test generally requires pricing future
revenue at the unescalated prices in effect as of the end of each fiscal quarter
and requires a write-down for accounting purposes if the ceiling is exceeded,
even if prices were depressed for only a short period of time. The Company may
be required to write down the carrying value of its oil and gas properties when
oil and gas prices are depressed or unusually volatile, which would result in a
charge to earnings. Once incurred, a write-down of oil and gas properties is not
reversible at a later date.

UNCERTAINTY OF ESTIMATES OF OIL AND GAS RESERVES

This Prospectus contains estimates of the Company's proved oil and gas
reserves and the estimated future net revenues therefrom. There are numerous
uncertainties inherent in estimating quantities and future values of proved oil
and gas reserves, including many factors beyond the control of the Company. Each
of these estimates relies upon various assumptions, including assumptions
required by the Commission as to constant oil and gas prices, drilling and
operating expenses, capital expenditures, taxes and availability of funds. The
process of estimating oil and gas reserves is complex, requiring significant
decisions and assumptions in the evaluation of available geological,
geophysical, engineering and economic data for each reservoir. As a result, such
estimates are inherently imprecise. Actual future production, revenues, taxes,
development expenditures, operating expenses and quantities of recoverable oil
and gas reserves may vary substantially from those estimated in the report. Any
significant variance in these assumptions could materially affect the estimated
quantity and value of reserves set forth in this Prospectus. In addition, the
Company's reserves may be subject to downward or upward revision, based upon
production history, results of future exploration and development, prevailing
oil and gas prices and other factors, many of which are beyond the Company's
control.

DRILLING AND OPERATING RISKS

Oil and gas drilling activities are subject to numerous risks, many of which
are beyond the Company's control, including the risk that no commercially
productive oil or gas reservoirs will be encountered. The cost of drilling,
completing and operating wells is often uncertain, and drilling operations may
be curtailed, delayed or canceled as a result of a variety of factors, including
unexpected drilling conditions, pressure irregularities in formations, equipment
failures or accidents, adverse weather conditions, title problems and shortages
or delays in the delivery of equipment. The Company's future drilling activities
may not be successful and, if unsuccessful, such failure will have an adverse
effect on future results of operations and financial condition.

14
<PAGE>
and penalties and suspension of operations. In accordance with customary
industry practice, the Company maintains insurance against some, but not all, of
the risks described above. There can be no assurance that any insurance will be
adequate to cover losses or liabilities. The Company cannot predict the
continued availability of insurance, or its availability at premium levels that
justify its purchase.

RISKS RELATING TO INJECTION WELLS

The Company's saltwater injection operations will pose certain risks of
environmental liability to the Company. Although the Company will monitor the
injection process, any leakage from the subsurface portions of the wells could
cause degradation of fresh groundwater resources, potentially resulting in
suspension of operation of the wells, fines and penalties from governmental
agencies, expenditures for remediation of the affected resource, and liability
to third parties for property damages and personal injuries. In addition, the
sale by the Company of residual crude oil collected as part of the saltwater
injection process could impose liability on the Company in the event the entity
to which the oil was transferred fails to manage the material in accordance with
applicable environmental health and safety laws.

MARKETABILITY OF PRODUCTION

The marketability of the Company's oil and gas production depends upon the
availability and capacity of gas gathering systems, pipelines and processing
facilities, and any lack of availability or capacity could result in the shut-in
of producing wells or the delay or discontinuance of development plans for
properties. In addition, federal and state regulation of oil and gas production
and transportation, general economic conditions and changes in supply and demand
could adversely affect the Company's ability to produce and market its oil and
gas on a profitable basis.

GOVERNMENTAL REGULATION

Oil and gas operations are subject to various federal, state and local
governmental regulations which may be changed from time to time in response to
economic or political conditions. From time to time, regulatory agencies have
imposed price controls and limitations on production in order to conserve
supplies of oil and gas. In addition, the production, handling, storage,
transportation and disposal of oil and gas, by-products thereof and other
substances and materials produced or used in connection with oil and gas
operations are subject to regulation under federal, state and local laws and
regulations. See "Business -- Regulation."

ENVIRONMENTAL RISKS

The Company is subject to a variety of federal, state and local governmental
laws and regulations related to the storage, use, discharge and disposal of
toxic, volatile or otherwise hazardous materials. These regulations subject the
Company to increased operating costs and potential liability associated with the
use and disposal of hazardous materials. Although these laws and regulations
have not had a material adverse effect on the Company's financial condition or
results of operations, there can be no assurance that the Company will not be
required to make material expenditures in the future. Moreover, the Company
anticipates that such laws and regulations will become increasingly stringent in
the future, which could lead to material costs for environmental compliance and
remediation by the Company. See "Business -- Regulation."

Any failure by the Company to obtain required permits for, control the use
of, or adequately restrict the discharge of hazardous substances under present
or future regulations could subject the Company to substantial liability or
could cause its operations to be suspended. Such liability or suspension of
operations could have a material adverse effect on the Company's business,
financial condition and results of operations.

15
<PAGE>
COMPETITION

The Company operates in a highly competitive environment. The Company
competes with major and independent oil and gas companies and with individual
producers and developers for the acquisition of desirable oil and gas
properties, as well as for the equipment and labor required to develop and
operate such properties. Many of these competitors have financial and other
resources that are substantially greater than those of the Company. See
"Business -- Competition."

CONTROL BY CERTAIN STOCKHOLDERS

At September 30, 1997, three of the Company's directors, two of whom are
also executive officers, beneficially owned 2,025,000 shares of Common Stock
representing, in the aggregate, approximately 74% of the outstanding Common
Stock. Upon consummation of the Equity Offering, such stockholders will
beneficially own shares of Common Stock representing, in the aggregate,
approximately 27% of the outstanding Common Stock (approximately 25% of the
outstanding Common Stock, assuming exercise of the underwriters' over-allotment
option in full). As a result, these stockholders may be in a position to control
the Company through their ability to significantly influence matters requiring
the vote or consent of the Company's stockholders. See "Security Ownership of
Management and Principal and Selling Stockholders."

ABSENCE OF A PUBLIC MARKET FOR THE NOTES

The Notes will constitute a new issue of securities with no established
trading market, and there can be no assurance as to the liquidity of any markets
that may develop for the Notes, the ability of the holders of Notes to sell
their Notes or the price at which holders would be able to sell their Notes.
Future trading prices of the Notes will depend on many factors, including, among
others, prevailing interest rates, the Company's operating results and the
market for similar securities. The Company does not intend to apply for listing
of the Notes on any securities exchange. The Underwriter has informed the
Company that it currently intends to make a market for the Notes. However, it is
not so obligated, and any such market making may be discontinued at any time
without notice. Accordingly, no assurance can be given that an active public or
other market will develop for the Notes or as to the liquidity of or the trading
market for the Notes. See "Underwriting."

16
<PAGE>
THE COMPANY

RAM Energy was incorporated in 1987 in Delaware. In October 1987, RAM
Energy, as managing general partner, together with New York Life Insurance
Company ("New York Life") and an affiliate of RAM Energy, formed RAMCO-NYL 1987
Limited Partnership. From September 1987 through May 1989, RAM Energy, acting on
its own behalf and on behalf of the Partnership, completed 14 oil and gas
acquisitions at a total cost of approximately $140 million.

From May 1989 to November 1996, RAM Energy conducted drilling and
development activities primarily on behalf of and as the managing general
partner of the Partnership. As a result, the Company maintained a relatively
stable level of proved reserves and did not acquire significant additional
leasehold interests, aggressively develop or explore its existing property base.
In November 1996, RAM Energy purchased New York Life's interest in the
Partnership, effectively terminating the Partnership's activities on a
stand-alone basis.

In the first quarter of 1997, the Company sold certain of its oil and gas
properties located offshore in the Gulf of Mexico, in East Texas and in the
Rocky Mountain area for $10.4 million. In September 1997, the Company concluded
an acquisition of oil and gas properties in the Mid-Continent Area and in the
Louisiana and Mississippi Gulf Coast area for $11.2 million. In December 1997,
the Partnership was liquidated and all of its oil and gas properties and other
assets were distributed to RAM Energy. See "Business."

On December 16, 1997, the Company entered into a definitive agreement to
purchase Carlton for $43.0 million in cash, including the repayment of existing
Carlton debt. The closing of the Carlton Acquisition is conditioned upon the
simultaneous closing of the Offerings.

In December 1997, the Company increased its authorized capital to 15,000,000
shares of Common Stock and 5,000,000 shares of preferred stock, par value $.01
per share ("Preferred Stock"), and effected a 27,000-for-one split of the Common
Stock.

The Company's principal executive and operating offices are located at Suite
650, Meridian Tower, 5100 E. Skelly Drive, Tulsa, Oklahoma 74135, telephone
(918) 663-2800.

EQUITY OFFERING

Concurrently with the Debt Offering, the Company and the Selling
Stockholders are offering 2,300,000 shares and 900,000 shares, respectively, of
Common Stock to the public. In addition, the Company has granted the
underwriters an option to purchase up to 480,000 additional shares of Common
Stock to cover over-allotments. The closings of the Debt Offering and the Equity
Offering are each conditioned upon the simultaneous closing of the other and
upon the simultaneous closing of the Carlton Acquisition.

17
<PAGE>
USE OF PROCEEDS

The net proceeds to RAM Energy, Inc. from the issuance and sale of the Notes
offered hereby, after deducting the underwriting discount and expenses of the
Debt Offering, are estimated to be $96.5 million. The net proceeds to RAM
Energy, Inc. from the sale of the shares of Common Stock offered by RAM Energy,
Inc. pursuant to the Equity Offering are estimated to be $22.5 million ($27.4
million if the underwriters' over-allotment option is exercised in full),
assuming an offering price of $ per share and after deducting the
underwriting discount and expenses of the Equity Offering payable by RAM Energy,
Inc.

The following table illustrates the sources and uses of the net proceeds to
the Company, as estimated by the Company's management, in connection with the
Offerings:

<TABLE>
<CAPTION>
SOURCES OF FUNDS USES OF FUNDS
- --------------------------------------------------- -----------------------------------------------
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS)

Debt Offering....................... $ 96,500 Carlton Acquisition(1).............. $ 43,000
Equity Offering..................... 22,530 Repayment of existing debt(2)....... 62,000
Working capital..................... 14,030
------------- ---------
Total sources of funds............ $ 119,030 Total uses of funds................. $ 119,030
------------- ---------
------------- ---------
</TABLE>

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

(1) The Carlton Acquisition purchase price is subject to certain adjustments,
and includes the repayment of $24.6 million outstanding under Carlton's
credit facility, which will be extinguished upon completion of the Carlton
Acquisition. See "Business -- The Carlton Acquisition."

(2) Consists of a $62.0 million principal balance under the Credit Facility.
Advances under the Credit Facility were used to complete the Partnership
Acquisition and other acquisitions and bear interest at varying rates for
which the weighted average at November 30, 1997, was 8.6%. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources."

18
<PAGE>
CAPITALIZATION

The following table sets forth as of September 30, 1997, the cash and cash
equivalents and capitalization of the Company, and as adjusted to give effect to
the Offerings and the application of the net proceeds therefrom as set forth
under "Use of Proceeds." This table should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Financial Statements included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
---------------------
AS
ACTUAL ADJUSTED
--------- ----------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Cash and cash equivalents............................................................... $ 2,031 $ 16,293
--------- ----------
--------- ----------
Long-term debt, including current portion:
Credit Facility(1).................................................................... $ 62,000 --
% Senior Notes due 2008......................................................... -- $ 100,000
Other indebtedness.................................................................... 215 215
--------- ----------
Total long-term debt.................................................................. 62,215 100,215
Redeemable Preferred Stock.............................................................. -- 550

Stockholders' equity (deficit)(2):
Series A Preferred Stock(2)........................................................... 1 1
Series B Preferred Stock(2)........................................................... 1 1
Common Stock.......................................................................... 22 50
Paid-in capital....................................................................... 1,493 23,995
Retained earnings (deficit)........................................................... (3,080) (3,080)
--------- ----------
Total stockholders' equity (deficit)................................................ (1,563) 20,967
--------- ----------
Total capitalization................................................................ $ 60,652 $ 121,732
--------- ----------
--------- ----------
</TABLE>

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

(1) The Company expects to amend and restate the Credit Facility upon completion
of the Offerings to provide for up to $50.0 million of revolving credit
availability, subject to borrowing base limitations. The Indenture may limit
the amount the Company may borrow under the Credit Facility. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

(2) Before giving effect to the redemption of all outstanding shares of RAM
Energy, Inc.'s Series A Preferred Stock and Series B Preferred Stock. RAM
Energy, Inc. has given notice to the holders of its Series A Preferred Stock
(none of whom are officers, directors or holders of Common Stock of the
Company) of the redemption of such stock, which will be redeemed not later
than December 26, 1997, for an aggregate redemption cost of $777,140. RAM
Energy, Inc. expects to redeem its Series B Preferred Stock from the holders
thereof (all of whom also are holders of Common Stock) in January 1998, for
an aggregate redemption cost of $696,520. See "Management -- Certain
Transactions."

19
<PAGE>
SELECTED HISTORICAL AND PRO FORMA
FINANCIAL INFORMATION AND OPERATING DATA

PRO FORMA COMBINED FINANCIAL INFORMATION

The following Pro Forma Combined Statements of Operations and Other
Financial Data for the year ended December 31, 1996 and for the nine months
ended September 30, 1997 reflect the historical results of the Company, adjusted
to give effect to the Offerings and the application of the net proceeds
therefrom, the completion of the Partnership Acquisition, the completion of the
Carlton Acquisition and the consummation of certain other acquisitions and
dispositions by the Company as though each of the transactions had occurred on
January 1, 1996.

The Pro Forma Combined Condensed Balance Sheet as of September 30, 1997
reflects the historical financial position of the Company as of such date
adjusted to give pro forma effect to the Carlton Acquisition and the Offerings
and the application of the net proceeds therefrom as if they had occurred on
September 30, 1997.

The pro forma adjustments are based upon available information and
assumptions that management of the Company believes are reasonable. The Pro
Forma Combined Financial Information do not purport to represent the financial
position or results of operations which would have occurred had such
transactions been consummated on the dates indicated or the Company's financial
position or results of operations for any future date or period. The Pro Forma
Combined Financial Information and notes thereto should be read in conjunction
with the Financial Statements included elsewhere in this Prospectus.

20
<PAGE>
RAM ENERGY, INC.

PRO FORMA COMBINED STATEMENT OF OPERATIONS AND OTHER FINANCIAL DATA
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
ADJUSTMENTS
HISTORICAL -----------------------------------------------------
------------------------------------- 1997 1997
PARTNERSHIP COMPANY CARLTON DISPOSITION ACQUISITION COMBINING OFFERINGS
----------- ----------- ----------- ----------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
NOTE A NOTE B NOTE C NOTE D NOTE E NOTE F
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
INCOME STATEMENT DATA:

Operating revenues:
Oil and gas..................... $ 23,456 $ 3,275 $ 6,713 $ (5,518) $ 3,974
Gathering system................ -- -- 14,688
Management fees................. -- 1,482 22 $ (1,482)(1)
Operator overhead fees.......... -- 1,343 616 (1,959)(1)
Consulting fees................. -- 153 -- (153)(1)
Other........................... 7 568 782
----------- ----------- ----------- ----------- ----------- ------------
Total operating revenues...... 23,463 6,820 22,821 (5,518) 3,974 (3,594)
Operating expenses:
Oil and gas production.......... 7,609 827 2,387 (1,851) 1,884
Other charges to production..... -- -- 754 (754)(3)
Cost of oil and gas purchased... -- -- 6,657
Gathering system................ -- -- 1,177
Depreciation and amortization... 5,114 990 3,269 (1,452) 1,108 2,925(2)
Management fees................. 1,482 -- -- (1,482)(1)
Operator overhead fees.......... 1,343 -- -- (1,343)(1)
Consulting fees................. 53 -- -- (53)(1)
General and administrative...... 325 4,164 2,396 (616)(1) $ 350(8)
(1,660)(3) (1,087)(9)
----------- ----------- ----------- ----------- ----------- ------------ -------------
Total operating expenses...... 15,926 5,981 16,640 (3,303) 2,992 (2,983) (737)
----------- ----------- ----------- ----------- ----------- ------------ -------------

Operating income (loss)........... 7,537 839 6,181 (2,215) 982 (611) 737

Other income (expense):
Interest expense................ (564) (542) (326) 1,118 (1,204) (8,192)(4) (541)(6)
(350)(7)
Interest income................. 114 29 393
Equity in income of the
Partnership................... -- 71 --
Minority interest in the
Partnership................... -- 10 --
----------- ----------- ----------- ----------- ----------- ------------ -------------
Income (loss) before income
taxes........................... 7,087 408 6,248 (1,097) (222) (8,803) (154)
Income tax provision (benefit).... -- -- 2,324 (948)(5) (59)(10)
----------- ----------- ----------- ----------- ----------- ------------ -------------
Net income (loss)................. $ 7,087 $ 408 $ 3,924 $ (1,097) $ (222) $ (7,855) $ (95)
----------- ----------- ----------- ----------- ----------- ------------ -------------
----------- ----------- ----------- ----------- ----------- ------------ -------------
Net income per common share.......
Weighted average common shares
outstanding (in thousands)......

OTHER FINANCIAL DATA (NOTE G):
Cash flow from operations(11).....
EBITDA(12)........................
Ratio of:
Earnings to fixed charges(13)...
EBITDA to interest expense......

PRO FORMA
-----------
<S> <C>

INCOME STATEMENT DATA:
Operating revenues:
Oil and gas..................... $ 31,900
Gathering system................ 14,688
Management fees................. 22
Operator overhead fees.......... --
Consulting fees................. --
Other........................... 1,356
-----------
Total operating revenues...... 47,966
Operating expenses:
Oil and gas production.......... 10,856
Other charges to production..... --
Cost of oil and gas purchased... 6,657
Gathering system................ 1,177
Depreciation and amortization... 11,954
Management fees................. --
Operator overhead fees.......... --
Consulting fees................. --
General and administrative......
3,872
-----------
Total operating expenses...... 34,516
-----------
Operating income (loss)........... 13,450
Other income (expense):
Interest expense................
(10,600)
Interest income................. 536
Equity in income of the
Partnership................... 71
Minority interest in the
Partnership................... 10
-----------
Income (loss) before income
taxes........................... 3,467
Income tax provision (benefit).... 1,317
-----------
Net income (loss)................. $ 2,150
-----------
-----------
Net income per common share....... $ 0.43
-----------
-----------
Weighted average common shares
outstanding (in thousands)...... 5,027
-----------
-----------
OTHER FINANCIAL DATA (NOTE G):
Cash flow from operations(11)..... $ 14,157
EBITDA(12)........................ 26,021
Ratio of:
Earnings to fixed charges(13)... 1.3x
EBITDA to interest expense...... 2.5x
</TABLE>

(SEE FOOTNOTES ON PAGE 24)

21
<PAGE>
RAM ENERGY, INC.

PRO FORMA COMBINED STATEMENT OF OPERATIONS AND OTHER FINANCIAL DATA

NINE MONTHS ENDED SEPTEMBER 30, 1997

<TABLE>
<CAPTION>
HISTORICAL
----------------
COMPANY PRO FORMA
------- ---------
ADJUSTMENTS
----------------------------------------------
CARLTON 1997 1997 COMBINING OFFERINGS
------- DISPOSITION ACQUISITION ---------- ---------
----------- -------
NOTE B NOTE E NOTE F
NOTE C NOTE D
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Operating revenues:
Oil and gas................................ $16,819 $4,109 $(1,365) $1,789 $21,352
Gathering system........................... -- 7,468 7,468
Management fees............................ -- 8 8
Operator overhead fees..................... -- 520 $ (520)(1) --
Other...................................... 85 183 268
------- ------- ----------- ------- ---------- ---------
Total operating revenues................. 16,905 12,288 (1,365) 1,789 (520) 29,096
Operating expenses:
Oil and gas production..................... 4,795 1,593 (341) 1,179 7,226
Other charges to production................ -- 377 (377)(3)
Cost of oil and gas purchased.............. -- 4,785 4,785
Gathering system........................... -- 569 569
Depreciation and amortization.............. 5,268 2,343 (291) 436 (6)(2) 7,750
General and administrative................. 3,325 1,860 (520)(1) $ 263(8)
(1,307)(3) (815)(9) 2,806
------- ------- ----------- ------- ---------- --------- ---------
Total operating expenses................. 13,389 11,527 (632) 1,615 (2,210) (552) 23,136
------- ------- ----------- ------- ---------- --------- ---------

Operating income (loss)...................... 3,516 761 (733) 174 1,690 552 5,960

Other income (expense):
Interest expense........................... (3,787 ) (2,305 ) 839 (903) (1,000)(4) (532)(6)
(263)(7) (7,951)
Interest income............................ 43 46 89
Minority interest in the Partnership....... (15 ) -- (15)
------- ------- ----------- ------- ---------- --------- ---------
Income (loss) before income taxes............ (243 ) (1,498 ) 106 (729) 690 (243) (1,917)
Income tax provision (benefit)............... -- (559 ) (77)(5) (92)(10) (728)
------- ------- ----------- ------- ---------- --------- ---------
Net income (loss)............................ $ (243 ) $ (939 ) $ 106 $ (729) $ 767 $(151) $(1,189)
------- ------- ----------- ------- ---------- --------- ---------
------- ------- ----------- ------- ---------- --------- ---------
Net (loss) per common share.................. $ (0.24)
---------
---------
Weighted average common shares
outstanding (in thousands)................. 5,027
---------
---------

OTHER FINANCIAL DATA (NOTE G):
Cash flow from operations(11)................ $ 6,656
EBITDA(12)................................... 13,784
Ratio of:
Earnings to fixed charges(13).............. 0.8x
EBITDA to interest expense................. 1.7x
Long-term debt to EBITDA(14)............... 5.5x
Net debt to EBITDA(14)..................... 4.6x
</TABLE>

(SEE FOOTNOTES ON PAGE 24)

22
<PAGE>
RAM ENERGY, INC.
PRO FORMA COMBINED CONDENSED BALANCE SHEET
SEPTEMBER 30, 1997

<TABLE>
<CAPTION>
ADJUSTMENTS
HISTORICAL -------------------------
------------------------ CARLTON
COMPANY CARLTON ACQUISITION OFFERINGS PRO FORMA
----------- ----------- ------------ ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ASSETS

Current assets
Cash and cash equivalents............................ $ 2,031 $ 232 $ (43,000)(1) $ 57,030(2) $ 16,293
Restricted cash...................................... -- 346 346
Accounts receivable:
Oil and gas sales.................................. 2,898 -- 2,898
Joint interest..................................... 1,399 1,270 2,669
Other.............................................. 46 214 260
Prepaid expenses..................................... 254 826 1,080
----------- ----------- ------------ ----------- -----------
Total current assets............................. 6,627 2,888 (43,000) 57,030 23,546
Property and equipment (net)........................... 60,100 43,306 21,170(1) 124,576
Other assets........................................... 3,616 403 (403)(1) 3,500(2) 7,116
----------- ----------- ------------ ----------- -----------
Total assets..................................... $ 70,344 $ 46,597 $ (22,233) $ 60,530 $ 155,238
----------- ----------- ------------ ----------- -----------
----------- ----------- ------------ ----------- -----------

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities
Account payable:
Oil and gas proceeds due others.................... $ 2,855 -- $ 2,855
Trade.............................................. 3,549 $ 1,938 5,487
Affiliates......................................... -- 22 22
Accrued liabilities:
Interest........................................... 401 -- 401
Gas balancing liability............................ 300 -- 300
Other.............................................. 98 354 452
Long-term debt due within one year................... 9,244 24,572 $ (24,572)(1) $ (9,029)(2) 215
----------- ----------- ------------ ----------- -----------
Total current liabilities........................ 16,448 26,886 (24,572) (9,029) 9,732
% Senior Notes due 2008............................. 100,000(2) 100,000
Other long-term debt due after one year................ 52,971 -- (52,971)(2) --
Deferred tax liability................................. -- 20,445 1,055(1) 21,500
Other.................................................. 2,489 -- 2,489
Redeemable preferred stock............................. -- 550 550
Stockholders' equity (deficit)......................... (1,563) (1,284) 1,284(1) 22,530(2) 20,967
----------- ----------- ------------ ----------- -----------
Total liabilities and stockholders' equity
(deficit)...................................... $ 70,344 $ 46,597 $ (22,233) $ 60,530 $ 155,238
----------- ----------- ------------ ----------- -----------
----------- ----------- ------------ ----------- -----------
</TABLE>

(SEE FOOTNOTES ON PAGE 24)

23
<PAGE>
RAM ENERGY, INC.

NOTES TO PRO FORMA COMBINED FINANCIAL INFORMATION

STATEMENTS OF OPERATIONS AND OTHER FINANCIAL DATA

NOTE A --

The historical results of the Partnership are presented for the eleven
months ended November 30, 1996 (prior to the acquisition by RAM Energy effective
November 30, 1996). Combining adjustments are included in Note E to eliminate
charges in 1996 by RAM Energy to the Partnership and to recalculate depreciation
and amortization to reflect the revised basis in Partnership assets acquired by
RAM Energy.

NOTE B --

The historical results of Carlton are presented as follows:

YEAR ENDED DECEMBER 31, 1996. The eight months ended August 31, 1996 of the
predecessor to Carlton are combined with the four months results of Carlton
after its acquisition of the predecessor on September 1, 1996. Prior to such
date, Carlton's activities were insignificant. The impact of changes in the
asset values on depreciation and amortization following Carlton's acquisition
were not given separate pro forma effect as the adjustment to consider the
Carlton Acquisition and the resulting valuation of its assets are considered in
Note E.

NINE MONTHS ENDED SEPTEMBER 30, 1997 include the historical results of
Carlton for such period.

NOTE C --

Adjustments to reduce the Company's historical oil and gas revenues and
related costs of certain producing oil and gas properties sold in March 1997,
for the periods prior to their sale.

NOTE D --

Adjustments to increase oil and gas revenues and related costs for the
periods prior to the purchase by the Company in August 1997 of certain producing
oil and gas properties.

NOTE E --

Adjustments to combine the entities and properties presented including
elimination of transactions between entities; adjustment of depreciation and
amortization to consider carrying amounts after purchase allocations; interest
on debt incurred or reduced by the transactions; reductions in general and
administrative expenses to reflect economies expected following the Carlton
Acquisition and adjustment of income taxes resulting from other adjustments.
Such adjustments include:

(1) Elimination of fees billed to the Partnership prior to its acquisition
by RAM Energy, together with related expenses of the Partnership and
reclassification of operator fees recorded by Carlton as recovery of
expenses.

(2) Adjust depreciation and amortization to reflect changes in the asset
values after acquisitions:

<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1996 SEPTEMBER 30, 1997
----------------- -------------------
<S> <C> <C>
(DOLLARS IN THOUSANDS)
Acquired cost................................... $ 11,954 $ 7,750
Historical cost................................. 9,029 7,756
------- -------
Adjustment...................................... $ 2,925 $ (6)
------- -------
------- -------
</TABLE>

(3) Identified reductions, net, in Carlton general and administrative
expenses and other charges after the Carlton Acquisition:

<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1996 SEPTEMBER 30, 1997
----------------- -------------------
<S> <C> <C>
(DOLLARS IN THOUSANDS)
Reductions in personnel and facilities expense.. $ (1,902) $ (1,489)
New personnel and additional costs after
relocation.................................... 242 182
------- -------
$ (1,660) $ (1,307)
------- -------
------- -------
Elimination of administrative charges of Carlton
classified as other production charges........ $ (754) $ (377)
------- -------
------- -------
</TABLE>

24
<PAGE>
RAM ENERGY, INC.

NOTES TO PRO FORMA COMBINED FINANCIAL INFORMATION (CONTINUED)

NOTE E -- (CONTINUED)
(4) Additional interest expense resulting from acquisitions:

<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1996 SEPTEMBER 30, 1997
----------------- -------------------
<S> <C> <C>
(DOLLARS IN THOUSANDS)
Partnership -- $60.0 million in debt (eleven
months in 1996)............................... $ 4,675
Less actual..................................... (564)
-------
Incremental -- Partnership...................... 4,111
-------
Carlton -- $43.0 million in debt at 10 1/4%..... 4,407 $ 3,305
Less actual..................................... (326) (2,305)
------- -------
Incremental -- Carlton.......................... 4,081 1,000
------- -------
Total incremental............................... $ 8,192 $ 1,000
------- -------
------- -------
</TABLE>

(5) Income tax effect of inclusion of the Partnership and adjustments to
Combined amounts at 38%:

<TABLE>
<S> <C> <C>
Year ended December 31, 1996............. $ (948)
-----
-----
Nine months ended September 30, 1997..... $ (77)
-----
-----
</TABLE>

NOTE F --

Effects of Offerings as follows:

<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1996 SEPTEMBER 30, 1997
----------------- -------------------
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS)
(6) Incremental interest expense of Debt Offering, net
of amounts allocated to acquisitions:
$100.0 million of % Senior Notes due 2008......... $ 10,250 $ 7,688
Allocated to transactions and actual................ 9,709 7,156
------- -------
Incremental......................................... $ 541 $ 532
------- -------
------- -------
(7) Additional amortization related to deferred offering
costs on debt issuance............................ $ 350 $ 263
------- -------
------- -------
(8) Estimated incremental expenses related to public
reporting......................................... $ 350 $ 263
------- -------
------- -------
(9) Reductions in general and administrative expense for
reduced executive compensation to reflect new
employment agreements............................. $ (1,087) $ (815)
------- -------
------- -------
(10) Tax effect of adjustments at 38%.................... $ (59) $ (92)
------- -------
------- -------
</TABLE>

NOTE G --

Definitions to other financial data as follows:

(11) Calculated before changes in operating assets and liabilities.

(12) EBITDA is defined as earnings before interest expense, income taxes,
depreciation and amortization and writedown of oil and gas properties and
equipment. EBITDA is not a measure of cash flow as determined by GAAP.
EBITDA should not be considered as an alternative to, or more meaningful
than, net income or cash flow as determined in accordance with GAAP or as
an indicator of a company's operating performance or liquidity. Certain
items excluded from EBITDA are significant components in understanding
and assessing a company's financial performance, such as a company's cost
of capital and tax structure, as well as historic

25
<PAGE>
RAM ENERGY, INC.

NOTES TO PRO FORMA COMBINED FINANCIAL INFORMATION (CONTINUED)

NOTE G -- (CONTINUED)
costs of depreciable assets, none of which are components of EBITDA. The
Company's computation of EBITDA may not be comparable to other similarly
titled measures of other companies. The Company believes that EBITDA is a
widely followed measure of operating performance and may also be used by
investors to measure the Company's ability to meet future debt service
requirements, if any.

(13) For purposes of computing the ratio of earnings to fixed charges,
earnings are computed as income from continuing operations before taxes,
plus fixed charges. Fixed charges consist of interest expense.

(14) The ratio of long-term debt to EBITDA is computed on the basis of
annualized EBITDA for periods shorter than one year. The ratio of net
debt to EBITDA is the ratio of long-term debt, including the current
portion thereof, less cash and cash equivalents, to EBITDA, annualized
for periods shorter than one year.

BALANCE SHEET

<TABLE>
<S> <C> <C>
(1) Record the Carlton Acquisition as if consummated on September 30,
1997:
Purchase price........................................................ $ 43,000
---------
---------
Retirement of Carlton debt............................................ $ 24,572
---------
---------
Allocation to property and equipment:
Purchase price -- oil and gas properties.............................. $ 26,000
Purchase price -- gathering system.................................... 17,000
Deferred income taxes................................................. 21,500
---------
64,500
Carlton -- historical................................................. 43,306
---------
21,194
Allocation to other assets and liabilities, net....................... 24
---------
Adjustment............................................................ $ 21,170
---------
---------
(2) Record net proceeds of Offerings and retirement of existing debt of
Company:
% Senior Notes due 2008............................................... $ 100,000
Less issuance costs and expenses...................................... 3,500
---------
Net proceeds from the Debt Offering................................... 96,500
Common Stock.......................................................... 22,530
---------
119,030
Retirement of other long-term debt.................................... 62,000
---------
Net proceeds after retirement of existing long-term debt.............. $ 57,030
---------
---------
</TABLE>

26
<PAGE>
PARTNERSHIP HISTORICAL FINANCIAL INFORMATION AND OTHER FINANCIAL DATA

The following tables set forth selected historical financial information and
other financial data of the Partnership for the periods shown. The following
information should be read in conjunction with "Capitalization," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Financial Statements included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
ELEVEN MONTHS
YEAR ENDED DECEMBER 31, ENDED
------------------------------------ NOVEMBER 30,
1992 1993 1994 1995 1996(1)
------- -------- -------- ------- -----------------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
INCOME STATEMENT DATA:
Operating revenues:
Oil and gas............................................... $31,093 $ 30,005 $ 24,481 $21,802 $23,456
Other..................................................... 164 74 60 139 7
------- -------- -------- ------- -------
Total operating revenues................................ 31,257 30,079 24,541 21,941 23,463
Operating expenses:
Oil and gas production.................................... 11,809 11,230 9,839 9,902 7,609
Depreciation and amortization............................. 13,860 14,526 11,608 9,808 5,114
Writedown of oil and gas properties and equipment......... -- 15,100 8,700 -- --
Management fees(2)........................................ 1,418 1,518 1,555 1,606 1,482
Operator overhead fees(2)................................. 1,805 1,756 1,746 1,686 1,343
General and administrative................................ 897 676 676 502 378
------- -------- -------- ------- -------
Total operating expense................................. 29,789 44,806 34,124 23,504 15,926
------- -------- -------- ------- -------
Operating income (loss)..................................... 1,468 (14,727) (9,583) (1,563) 7,537

Other income (expense):
Interest expense.......................................... (412) (477) (587) (809) (564)
Interest income........................................... 40 50 41 59 114
------- -------- -------- ------- -------
Net income (loss)........................................... $ 1,096 $(15,154) $(10,129) $(2,313) $ 7,087
------- -------- -------- ------- -------
------- -------- -------- ------- -------
OTHER FINANCIAL DATA:
Cash flow from operations(3)................................ $14,956 $ 14,472 $ 10,178 $ 7,495 $12,201
EBITDA(4)................................................... 15,368 14,949 10,766 8,304 12,765
Capital expenditures........................................ 9,496 8,407 4,325 5,380 3,310
Ratio of earnings to fixed charges(5)....................... 3.7x -- -- -- 13.6x
</TABLE>

<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------------------------- AT NOVEMBER 30,
1992 1993 1994 1995 1996
-------- -------- -------- ------- ---------------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
BALANCE SHEET DATA:
Cash and cash equivalents............................................. $ 885 $ 353 $ 356 $ 1,266 $ 1,102
Net property and equipment............................................ 89,405 68,701 54,663 49,601 46,198
Total assets.......................................................... 101,969 76,075 62,967 57,208 115,611
Long-term debt, including currrent portion............................ 10,000 10,000 10,000 10,000 62,800
Total partners' equity................................................ 83,797 61,534 47,775 43,166 48,120
</TABLE>

(SEE FOOTNOTES ON PAGE 29)

27
<PAGE>
RAM ENERGY HISTORICAL FINANCIAL INFORMATION AND OTHER FINANCIAL DATA

The following tables set forth selected historical financial information and
other financial data of RAM Energy for the periods shown. The following
information should be read in conjunction with "Capitalization," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Financial Statements included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1992 1993 1994 1995
--------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Operating revenues:
Oil and gas........................................................................ $ 224 $ 236 $ 153 $ 166
Gathering system................................................................... -- -- -- --
Management fees(2)................................................................. 1,548 1,545 1,555 1,606
Operator overhead fees(2).......................................................... 1,805 1,756 1,746 1,686
Consulting fees(2)................................................................. 1,959 1,927 236 163
Other.............................................................................. 369 93 119 85
--------- --------- --------- ---------
Total operating revenues......................................................... 5,905 5,557 3,810 3,705
Operating expenses:
Oil and gas production............................................................. 84 80 76 77
Cost of oil and gas purchased...................................................... -- -- -- --
Gathering system................................................................... -- -- -- --
Depreciation and amortization...................................................... 650 663 406 353
General and administrative......................................................... 4,523 4,310 3,279 3,364
--------- --------- --------- ---------
Total operating expense.......................................................... 5,257 5,053 3,761 3,794

Operating income (loss).............................................................. 648 504 (49) (89)

Other income (expense):
Interest expense................................................................... (278) (45) (23) (18)
Interest income.................................................................... 88 106 75 73
Equity in income of the Partnership................................................ -- -- -- --
Minority interest in the Partnership............................................... -- -- (101) (23)
--------- --------- --------- ---------
Net income (loss).................................................................... $ 458 $ 565 $ 0 $ (57)
--------- --------- --------- ---------
--------- --------- --------- ---------
Net income (loss) per common share................................................... $ 0.17 $ 0.21 $ 0.00 $ (0.02)
--------- --------- --------- ---------
--------- --------- --------- ---------
Weighted average common shares outstanding (in thousands)............................ 2,727 2,727 2,727 2,727
--------- --------- --------- ---------
--------- --------- --------- ---------
OTHER FINANCIAL DATA:
Cash flow from operations(3)......................................................... $ 1,270 $ 1,362 $ 539 $ 480
EBITDA(4)............................................................................ 1,387 1,273 428 314
Capital expenditures................................................................. 162 305 79 335
Ratio of earnings to fixed charges(5)................................................ 2.6x 13.6x 1.0x --

NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
1996(1) 1996(1) 1997
--------- ----------- ---------

<S> <C> <C> <C>
INCOME STATEMENT DATA:
Operating revenues:
Oil and gas........................................................................ $ 3,275 $ 148 $ 16,819
Gathering system................................................................... -- -- --
Management fees(2)................................................................. 1,482 1,225
Operator overhead fees(2).......................................................... 1,343 1,108 --
Consulting fees(2)................................................................. 153 91 --
Other.............................................................................. 568 79 85
--------- ----------- ---------
Total operating revenues......................................................... 6,820 2,650 16,905
Operating expenses:
Oil and gas production............................................................. 827 62 4,795
Cost of oil and gas purchased...................................................... -- -- --
Gathering system................................................................... -- -- --
Depreciation and amortization...................................................... 990 264 5,268
General and administrative......................................................... 4,164 2,517 3,325
--------- ----------- ---------
Total operating expense.......................................................... 5,981 2,843 13,389
Operating income (loss).............................................................. 839 (192) 3,516
Other income (expense):
Interest expense................................................................... (542) (14) (3,787)
Interest income.................................................................... 29 22 43
Equity in income of the Partnership................................................ 71 -- --
Minority interest in the Partnership............................................... 10 55 (15)
--------- ----------- ---------
Net income (loss).................................................................... $ 408 $ (130) $ (243)
--------- ----------- ---------
--------- ----------- ---------
Net income (loss) per common share................................................... $ 0.15 $ (0.05) $ (0.09)
--------- ----------- ---------
--------- ----------- ---------
Weighted average common shares outstanding (in thousands)............................ 2,727 2,727 2,727
--------- ----------- ---------
--------- ----------- ---------
OTHER FINANCIAL DATA:
Cash flow from operations(3)......................................................... $ 1,451 $ 185 $ 5,120
EBITDA(4)............................................................................ 1,940 148 8,812
Capital expenditures................................................................. 250 187 14,692
Ratio of earnings to fixed charges(5)................................................ 1.8x -- 0.9x
</TABLE>

<TABLE>
<CAPTION>
AT DECEMBER 31, AT SEPTEMBER 30,
------------------------------------------- ----------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
BALANCE SHEET DATA:
Cash and cash equivalents............... $ 4,731 $ 2,211 $ 1,426 $ 524 $ 1,607 $ 838 $ 2,031
Net property and equipment.............. 1,671 1,317 1,014 995 54,738 946 60,100
Total assets............................ 16,524 10,335 10,263 6,485 71,410 6,292 70,344
Long-term debt, including current
portion............................... 2,319 1,254 618 49 62,984 128 62,215
Stockholders' equity (deficit)(6)....... (2,106) (1,541) (1,571) (1,729) (1,321) (1,727) (1,563)
</TABLE>

(SEE FOOTNOTES ON PAGE 29)

28
<PAGE>
- --------------------------

(1) RAM Energy acquired the limited partner's interest in the Partnership on
November 30, 1996 in the Partnership Acquisition. For periods following that
date, the Partnership and RAM Energy are presented on a consolidated basis.
The Partnership (on an unconsolidated basis) includes the first 11 months of
1996; the Company includes one month (December 1996) of Partnership data on
a consolidated basis.

(2) Under the terms of the Partnership's partnership agreement, RAM Energy was
reimbursed by the Partnership for management fees, operator overhead fees
and certain consulting fees. The Partnership capitalized consulting fees.

(3) Calculated before changes in operating assets and liabilities.

(4) EBITDA is defined as earnings before interest expense, income taxes,
depreciation and amortization and writedown of oil and gas properties and
equipment. EBITDA is not a measure of cash flow as determined by GAAP.
EBITDA should not be considered as an alternative to, or more meaningful
than, net income or cash flow as determined in accordance with GAAP or as an
indicator of a company's operating performance or liquidity. Certain items
excluded from EBITDA are significant components in understanding and
assessing a company's financial performance, such as a company's cost of
capital and tax structure, as well as historic costs of depreciable assets,
none of which are components of EBITDA. The Company's computation of EBITDA
may not be comparable to other similarly titled measures of other companies.
The Company believes that EBITDA is a widely followed measure of operating
performance and may also be used by investors to measure the Company's
ability to meet future debt service requirements, if any.

(5) For the Partnership, earnings were insufficient to cover fixed charges by
$15,154, $10,129 and $2,313 for the years ended December 31, 1993, 1994 and
1995, respectively. For RAM Energy, earnings were insufficient to cover
fixed charges by $57 for the year ended December 31, 1995 and by $130 for
the nine months ended September 30, 1996. For purposes of computing the
ratio of earnings to fixed charges, earnings are computed as income from
continuing operations before taxes, plus fixed charges. Fixed charges
consist of interest expense.

(6) Before giving effect to the redemption of all outstanding shares (77,714
shares) of RAM Energy, Inc.'s Series A Preferred Stock at a redemption price
of $10.00 per share and the redemption of all outstanding shares (69,652
shares) of its Series B Preferred Stock at a redemption price of $10.00 per
share. See "Capitalization" and "Management -- Certain Transactions."

29
<PAGE>
HISTORICAL AND PRO FORMA OPERATING DATA

The following table sets forth selected Partnership and Company operating
data for the periods shown and on a pro forma basis to give effect to the
Offerings and the application of the net proceeds therefrom, the completion of
the Partnership Acquisition, the completion of the Carlton Acquisition and the
consummation of certain other acquisitions and dispositions. Prior to November
30, 1996, RAM Energy did not own significant reserves and, therefore no
historical operating data is provided for RAM Energy.
<TABLE>
<CAPTION>
PARTNERSHIP COMPANY
----------------------------------------------------------- ------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, ELEVEN DECEMBER 31,
MONTHS ENDED ------------------------
------------------------------------------ NOVEMBER 30, PRO FORMA
1992 1993 1994 1995 1996(1) 1996 1996(2)
--------- --------- --------- --------- --------------- ----------- -----------

<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA
Production volumes:
Natural gas (MMcf).......... 9,503 9,515 9,403 9,700 7,594 692 10,626
Oil and condensate
(MBbls)................... 760 644 534 463 387 38 487
Total (MMcfe)............... 14,063 13,379 12,607 12,478 9,916 920 13,547
Average realized prices(3):
Natural gas (per Mcf)....... $ 1.74 $ 2.00 $ 1.71 $ 1.44 $ 2.04 $ 3.44 $ 2.07
Oil and condensate (per
Bbl)...................... 19.10 17.01 15.75 16.86 20.59 23.49 20.35
Per Mcfe.................... 2.21 2.24 1.94 1.75 2.37 3.56 2.36
Expenses (per Mcfe):
Lease operating (including
production taxes)......... 0.84 0.84 0.78 0.79 0.77 0.90 0.80
Depreciation and
amortization.............. 0.99 1.09 0.92 0.79 0.52 1.08 0.88
General and
administrative(4)......... 0.29 0.30 0.32 0.30 0.32 1.29 0.29

PARTNERSHIP COMPANY
--------------- --------------------------
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------------------
PRO FORMA
1996 1997 1997(2)
--------------- ------------- -----------
<S> <C> <C> <C>
OPERATING DATA
Production volumes:
Natural gas (MMcf).......... 5,933 5,245 6,710
Oil and condensate
(MBbls)................... 313 236 306
Total (MMcfe)............... 7,811 6,661 8,544
Average realized prices(3):
Natural gas (per Mcf)....... $ 2.13 $ 2.32 $ 2.31
Oil and condensate (per
Bbl)...................... 19.52 19.71 19.12
Per Mcfe.................... 2.40 2.53 2.50
Expenses (per Mcfe):
Lease operating (including
production taxes)......... 0.79 0.72 0.85
Depreciation and
amortization.............. 0.53 0.79 0.91
General and
administrative(4)......... 0.33 0.50 0.33
</TABLE>

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

(1) Partnership operations were effectively terminated on a stand-alone basis on
November 30, 1996 upon consummation of the Partnership Acquisition.

30
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

GENERAL

RAM Energy is an independent oil and gas company engaged in the acquisition,
development and production of oil and gas properties primarily in the
Mid-Continent Area and the Permian Basin.

Prior to December 1996, RAM Energy conducted drilling and development
activities on behalf of and as the managing general partner of the Partnership.
The Partnership's objective was to replace reserves through a limited
development drilling program and to distribute cash flows from operating
activities. In November 1996, RAM Energy acquired the limited partner's interest
in the Partnership. The historical financial information and operating data
discussed in detail for the periods ended December 31, 1994 through December 31,
1996 are those of the Partnership, whose operations were effectively terminated
on a stand-alone basis on November 30, 1996 as a result of the Partnership
Acquisition. Results for 1996 also include December 1996 results of the Company,
following the Partnership Acquisition. The financial information and operating
data discussed in detail for the periods ended September 30, 1996 and 1997 are
those of the Partnership for the 1996 period and those of the Company for the
1997 period. A summary discussion of RAM Energy's financial results for the
periods ended December 31, 1994 through December 31, 1996 follows "-- Quarterly
Results of Operations."

As the result of certain acquisitions and dispositions of oil and gas
properties, operating results may not be comparable from period to period. In
the first quarter of 1997, the Company sold certain non-core properties for
$10.4 million. In September 1997, the Company concluded the acquisition of
certain interests in oil and gas properties from Quarles Drilling Corporation
for $11.2 million. On December 16, 1997 the Company entered into a definitive
agreement to purchase Carlton for $43.0 million in cash, including the repayment
of existing Carlton debt. The closing of the Carlton Acquisition is conditioned
upon the simultaneous closing of the Offerings.

The Company's revenue, profitability and cash flow are substantially
dependent upon prevailing prices for oil and gas and the volumes of oil and gas
it produces. In addition, the Company's proved reserves and oil and gas
production will decline as oil and gas are produced unless the Company is
successful in acquiring producing properties or conducts successful exploration
and development drilling activities.

The Company uses the full cost method of accounting for its investment in
oil and gas properties. Under the full cost method of accounting, all costs of
acquisition, exploration and development of oil and gas reserves are capitalized
into a "full cost pool" as incurred, and properties in the pool are amortized
and charged to operations using the future recoverable units of production
method based on the ratio of current production to total proved reserves,
computed based on current prices and costs. Significant downward revisions of
quantity estimates or declines in oil and gas prices that are not offset by
other factors could result in a writedown for impairment of the carrying value
of oil and gas properties. Once incurred, a writedown of oil and gas properties
is not reversible at a later date, even if oil or gas prices increase.

All of the Company's computers and operating systems are Year 2000
compliant. Mainframe business software will be modified during 1998 and 1999 at
a cost estimated to be less than $100,000.

RESULTS OF OPERATIONS

NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1996

The Company's results of operations for the nine months ended September 30,
1997 are compared herein to the Partnership's results of operations for the nine
months ended September 30, 1996. The results of operations for the nine months
ended September 30, 1996 exclude the results of operations for RAM Energy, Inc.
Because RAM Energy, Inc.'s results are excluded from the nine months ended
September 30, 1996, the nine month periods discussed herein may not be
comparable.

31
<PAGE>
OPERATING REVENUES. Operating revenues decreased by $1.8 million, or 10%,
for the nine months ended September 30, 1997, compared to the year earlier
period, primarily due to overall production volume decreases resulting from the
sale of non-core properties, partially offset by increases in average realized
oil and gas prices.

The following table summarizes production volumes, average sales prices and
period to period comparisons, including the effect on operating revenues, for
the periods indicated:

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------ 1997 PERIOD COMPARED
TO 1996 PERIOD
PARTNERSHIP COMPANY ------------------------------------
----------- ----------- % INCREASE OPERATING REVENUE
1996 1997 (DECREASE) INCREASE (DECREASE)
----------- ----------- --------------- -------------------
(DOLLARS IN
THOUSANDS)
<S> <C> <C> <C> <C>
Production volumes:
Core areas:
Natural gas (MMcf)......... 4,516 4,973 10% $ 973
Oil (MBbls)................ 208 216 4% 156
Non-core areas:
Natural gas (MMcf)......... 1,417 272 (81)% (2,439)
Oil (MBbls)................ 105 20 (81)% (1,659)
Total production:
Natural gas (MMcf)......... 5,933 5,245 (12)% (1,466)
Oil (MBbls)................ 313 236 (25)% (1,503)

Average sale prices:
Natural gas (per Mcf)...... $ 2.13 $ 2.32 9% 997
Oil (per Bbl).............. 19.52 19.71 1% 45
</TABLE>

Production of oil and gas decreased by 25% and 12%, respectively, for the
nine months ended September 30, 1997, compared to the prior year period, due
primarily to the sale in the first quarter of 1997 of certain non-core
properties located offshore Gulf of Mexico, in the Rocky Mountain area and in
east Texas. This decrease in production resulted in a decrease in operating
revenues of $3.0 million. For the nine months ended September 30, 1997, the
average realized natural gas price was $2.32 per Mcf, an increase of 9%, and the
average realized price of oil was $19.71 per Bbl, essentially unchanged,
compared to the nine months ended September 30, 1996. Changes in oil and gas
prices resulted in increased operating revenues of $1.0 million.

OIL AND GAS PRODUCTION EXPENSE. Oil and gas production expense decreased by
$1.4 million, or 22%, for the nine months ended September 30, 1997, compared to
the same period in 1996. The oil and gas production expense was $0.72 per Mcfe
for the nine months ended September 30, 1997, a decrease of 9% from $0.79 per
Mcfe for the same period in 1996. This decrease in costs was attributable
primarily to the sale of certain higher cost non-core properties, discussed
above.

GENERAL AND ADMINISTRATIVE ("G&A") EXPENSE. G&A expense, including
management and operator overhead fees, increased by $767,000, or 30%, for the
nine months ended September 30, 1997 and was $0.50 per Mcfe, an increase of 52%
compared to the prior year period, due primarily to the Company's increased
acquisition activity and the addition of technical staff to accommodate the
Company's increased inventory of development drilling opportunities. Per unit
increases were also impacted by decreased production associated with the sale of
non-core properties, which production declines were not offset by acquisitions
which occurred subsequent to such property sales.

DEPRECIATION AND AMORTIZATION ("D&A") EXPENSE. D&A expense increased by
$1.1 million, or 27%, for the nine months ended September 30, 1997 and was $0.79
per Mcfe, an increase of 48% from the prior year period, due primarily to the
Partnership Acquisition.

INTEREST EXPENSE. Interest expense increased by $3.3 million for the nine
months ended September 30, 1997, compared to the prior year period, due to
additional borrowings by the Company of $62.8 million in

32
<PAGE>
November 1996 to fund the Partnership Acquisition. The average interest rate
also increased by 1% on the revolving portion of the Credit Facility, and
approximately 4% on the term portion of that facility compared to the average
interest rate on the Partnership's previous credit facility.

NET INCOME (LOSS). Due to the factors described above, net income decreased
$5.7 million to a loss of $243,000 for the nine months ended September 30, 1997,
compared to the same period in 1996.

YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995

The results of operations for the year ended December 31, 1996, discussed
herein, include results for the Partnership through November 30, 1996, the date
of the Partnership Acquisition at which time the Partnership's operations were
effectively terminated on a stand-alone basis, combined with results for RAM
Energy for the year 1996. The results of operations for the year ended December
31, 1995, discussed herein, are those of the Partnership. Because RAM Energy's
results are excluded from the year ended December 31, 1995, the annual periods
disclosed herein may not be comparable. The following table illustrates the
combination of eleven months of 1996 Partnership operations with the annual 1996
results for RAM Energy, Inc., compared to results for the Partnership in 1995:

<TABLE>
<CAPTION>
1996
-------------------------------------
ELEVEN
MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED
DECEMBER NOVEMBER DECEMBER DECEMBER
31, 1995 30, 31, 31,
----------- ----------- ----------- -----------
PARTNERSHIP PARTNERSHIP RAM ENERGY COMBINED
----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Operating revenues:
Oil and gas....................... $ 21,802 $ 23,456 $ 3,275 $ 26,731
Consulting fees................... -- -- 153 153
Other............................. 139 7 568 575
----------- ----------- ----------- -----------
Total operating revenues........ 21,941 23,463 3,996 27,459
Operating expenses:
Oil and gas production............ 9,902 7,609 827 8,436
Depreciation and amortization..... 9,808 5,114 990 6,104
Management fees................... 1,606 1,482 (1,482) --
Operator overhead fees............ 1,686 1,343 (1,343) --
General and administrative........ 502 378 4,164 4,542
----------- ----------- ----------- -----------
Total operating expenses........ 23,504 15,926 3,156 19,082
----------- ----------- ----------- -----------
Operating income (loss)............. (1,563) 7,537 840 8,377
Other income (expense):
Interest expense.................. (809) (564) (542) (1,106)
----------- ----------- ----------- -----------
Interest income................... 59 114 29 143
Equity in income of the
Partnership..................... -- -- 71 71
Minority interest in the
Partnership..................... -- -- 10 10
----------- ----------- ----------- -----------
Net income (loss)................... $ (2,313) $ 7,087 $ 408 $ 7,495
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>

For purposes of this presentation, management fees and operator overhead
fees charged by RAM Energy to the Partnership are treated as reimbursements in
order to eliminate these items upon combination.

OPERATING REVENUES. Operating revenues increased by $5.5 million, or 25%,
for 1996 compared to 1995, primarily due to increases in average realized oil
and gas prices, partially offset by production decreases.

33
<PAGE>
The following table summarizes production volumes, average sales prices and
year to year comparisons, including the effect on operating revenues, for the
periods indicated:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------ 1996 COMPARED TO 1995
--------------------------------
PARTNERSHIP COMBINED OPERATING REVENUE
----------- ----------- % INCREASE INCREASE
1995 1996 (DECREASE) (DECREASE)
----------- ----------- ------------- -----------------
(DOLLARS IN
THOUSANDS)
<S> <C> <C> <C> <C>
Production volumes:
Natural gas (MMcf)...... 9,700 8,286 (15)% $ (2,036)
Oil (MBbls)............. 463 425 (8)% (641)
Average sale prices:
Natural gas (per Mcf)... $ 1.44 $ 2.16 50% $ 5,966
Oil (per Bbl)........... 16.86 20.85 24% 1,696
</TABLE>

Production of oil and gas decreased by 8% and 15%, respectively, for 1996
compared to 1995 due to the natural decline in the rate of production resulting
from a limited development drilling program during the period. This decrease in
production resulted in a decrease in operating revenues of $2.7 million. The
average realized natural gas price was $2.16 per Mcf, an increase of 50%, and
the average realized price of oil was $20.85 per Bbl, an increase of 24%, for
1996 compared to 1995. These higher oil and gas prices resulted in increased
operating revenues of $7.7 million.

OIL AND GAS PRODUCTION EXPENSE. Oil and gas production expense decreased by
$1.5 million, or 15%, for 1996 compared to 1995. The average operating expense
was $0.78 per Mcfe in 1996, a decrease of 1% from the prior year, impacted by
reduced production during 1996.

G&A EXPENSE. G&A expense, including management and operator overhead fees,
increased by $748,000, or 20%, for 1996 compared to 1995, and was $0.42 per
Mcfe, an increase of 38% from the prior year. This expense increased principally
due to the increased personnel costs in the 1997 period as the result of the
addition of technical personnel in connection with the Partnership Acquisition.

D&A EXPENSE. D&A expense decreased by $3.7 million, or 38% in 1996 compared
to 1995, and was $0.56 per Mcfe, a decrease of 29% compared to the prior year.
D&A expense decreased due to reduced production and an increase in booked
reserves, resulting from the identification of additional development drilling
locations.

INTEREST EXPENSE. Interest expense increased by $297,000, or 37%, for 1996
compared to 1995 as a result of the $62.8 million borrowed for the Partnership
Acquisition at the end of November 1996.

NET INCOME (LOSS). Due to the factors described above, net income increased
$9.8 million to $7.5 million for 1996.

YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994

OPERATING REVENUES. Operating revenues decreased by $2.6 million, or 11%,
for 1995 compared to 1994, primarily due to decreases in average realized prices
received for natural gas and decreases in oil production, partially offset by
natural gas production increases and increases in prices received for oil.

34
<PAGE>
The following table summarizes production volumes, average sales prices and
year to year comparisons, including the effect on operating revenues, for the
periods indicated:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
-------------------- 1995 COMPARED TO 1994
--------------------------------
PARTNERSHIP OPERATING REVENUE
-------------------- % INCREASE INCREASE
1994 1995 (DECREASE) (DECREASE)
--------- --------- ------------- -----------------
(DOLLARS IN
THOUSANDS)
<S> <C> <C> <C> <C>
Production volumes:
Natural gas (MMcf)......... 9,403 9,700 3% $ 508
Oil (MBbls)................ 534 463 (13)% (1,119)
Average sale prices:
Natural gas (per Mcf)...... $ 1.71 $ 1.44 (16)% $ (2,578)
Oil (per Bbl).............. 15.75 16.86 7% 511
</TABLE>

Natural gas production increased by 3%, while oil production decreased by
13%, in 1995 compared to 1994, due to increased natural gas development
activities and reduced oil development activities. These changes in production
resulted in a net decrease in operating revenues of $611,000. The average
realized natural gas price was $1.44 per Mcf, a decrease of 16%, and the average
realized price of oil was $16.86 per Bbl, an increase of 7%, for 1995 compared
to 1994. Changes in oil and gas prices resulted in a net decrease in operating
revenues of $2.1 million.

OIL AND GAS PRODUCTION EXPENSE. Oil and gas production expense increased by
$63,000, or 1%, in 1995 compared to 1994, due to increased property maintenance
expense, partially offset by lower production taxes attributable to reduced gas
prices. The average operating expense was $0.79 per Mcfe in 1995, an increase of
1% from the prior year.

G&A EXPENSE. G&A expense, including management and operator overhead fees,
decreased by $184,000, or 5%, for 1995 compared to 1994, and was $0.30 per Mcfe,
a decrease of 4% from the prior year. This expense decreased due to reduced
litigation expenses compared to the prior year.

D&A EXPENSE. D&A expense decreased by $1.8 million, or 16%, for 1995
compared to 1994, and was $0.79 per Mcfe, a decrease of 15% compared to the
prior year. D&A expense decreased due primarily to a reduced depreciable base
which was the result of an impairment write-down of $8.7 million at the end of
1994.

INTEREST EXPENSE. Interest expense increased by $222,000, or 38%, for 1995
compared to 1994 primarily due to an increase in the average interest rate to
7.90% in 1995 compared to 5.87% in 1994.

NET INCOME (LOSS). Due to the factors described above, net loss decreased
$7.8 million to a loss of $2.3 million for 1995.

QUARTERLY RESULTS OF OPERATIONS

The following table sets forth certain unaudited consolidated statements of
operations data for the first three quarters of 1996 for the Partnership and the
first three quarters of 1997 for the Company. The fourth quarter of 1996 for the
Partnership was omitted because the Partnership's operations were effectively
terminated on a stand-alone basis upon consummation of the Partnership
Acquisition on November 30, 1996. The unaudited consolidated financial
statements have been prepared on the same basis as the Financial Statements
contained herein and include all adjustments that the Company considers

35
<PAGE>
necessary for a fair presentation of such information when read in conjunction
with the Financial Statements appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PARTNERSHIP COMPANY
----------------------------------------- ------------------------
1996 1997
----------------------------------------- ------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 MARCH 31 JUNE 30
----------- ----------- --------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Operating revenues:
Oil and gas............................................. $ 6,431 $ 6,054 $ 6,259 $ 6,303 $ 4,764
Other................................................... -- -- -- 17 25
----------- ----------- ------- ----------- -----------
Total operating revenues.............................. 6,431 6,054 6,259 6,320 4,789
Operating expenses:
Oil and gas production.................................. 2,266 1,916 1,971 1,661 1,458
Depreciation and amortization........................... 1,386 1,452 1,322 2,110 1,909
Writedown of oil and gas properties and equipment.......
Management fees......................................... 398 405 406 -- --
Operator overhead fees.................................. 368 368 372 -- --
General and administrative.............................. 37 101 102 770 977
----------- ----------- ------- ----------- -----------
Total operating expenses.............................. 4,455 4,242 4,173 4,541 4,344
----------- ----------- ------- ----------- -----------
Operating income (loss)................................... 1,976 1,812 2,086 1,779 445
Other income (expense):
Interest expense........................................ (180) (161) (143) (1,293) (1,138)
Interest income......................................... 48 18 25 21 4
Minority interest in the Partnership.................... -- -- -- (30) 31
----------- ----------- ------- ----------- -----------
Net income (loss)......................................... $ 1,844 $ 1,669 $ 1,968 $ 477 $ (658)
----------- ----------- ------- ----------- -----------
----------- ----------- ------- ----------- -----------
Net income (loss) per common share........................ $ 0.17 $ (0.24)
----------- -----------
----------- -----------
Weighted average common shares
outstanding (in thousands).............................. 2,727 2,727
----------- -----------
----------- -----------

SEPTEMBER 30
---------------
<S> <C>

Operating revenues:
Oil and gas............................................. $ 5,752
Other................................................... 43
---------------
Total operating revenues.............................. 5,795
Operating expenses:
Oil and gas production.................................. 1,676
Depreciation and amortization........................... 1,249
Writedown of oil and gas properties and equipment.......
Management fees......................................... --
Operator overhead fees.................................. --
General and administrative.............................. 1,578
---------------
Total operating expenses.............................. 4,503
---------------
Operating income (loss)................................... 1,292
Other income (expense):
Interest expense........................................ (1,356)
Interest income......................................... 18
Minority interest in the Partnership.................... (16)
---------------
Net income (loss)......................................... $ (62)
---------------
---------------
Net income (loss) per common share........................ $ (0.02)
---------------
---------------
Weighted average common shares
outstanding (in thousands).............................. 2,727
---------------
---------------
</TABLE>

RAM ENERGY, INC. RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1994
THROUGH 1996

Prior to December 1, 1996, RAM Energy, Inc. principally managed the
operations and assets of the Partnership, for which RAM Energy, Inc. received
management fees and operator overhead fees from the Partnership. Other
activities prior to December 31, 1996 were insignificant to RAM Energy, Inc. RAM
Energy, Inc.'s operating revenues and expenses for the three year period ended
December 31, 1996 are shown below:

<TABLE>
<CAPTION>
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Operating revenues........................................................ $3,810 $3,705 $ 6,820
Operating expenses........................................................ 3,761 3,794 5,981
--------- --------- ---------
Operating income (loss)................................................. $ 49 $ (89) $ 839
--------- --------- ---------
--------- --------- ---------
</TABLE>

Operating revenues for 1994 and 1995 consisted primarily of management fees
and operator overhead fees billed to the Partnership. Operating expenses for
1994 and 1995 consisted of $3.7 million of G&A expenses in each year, composed
primarily of management and technical personnel expenses. The balance of
operating expenses during 1994 and 1995 consisted primarily of D&A expenses.

Operating revenues in 1996 increased $3.1 million from 1995 due primarily to
increases related to the Partnership Acquisition, which added $3.1 million of
oil and gas revenues. Management fees and reimbursements during 1996 declined
slightly through the eleven months of the period during which RAM Energy, Inc.
managed the Partnership, as compared to 1995. Operating expenses in 1996
increased $2.2 million from 1995 due primarily to increased D&A expenses,
increased oil and gas production expense and the addition of technical personnel
due to increased reserves and production attributable to the Partnership
Acquisition.

36
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 1997, the Company had cash and cash equivalents of $2.0
million ($16.3 million on a pro forma basis).

As of September 30, 1997, on a pro forma basis, the Company would have had
$100.2 million of indebtedness outstanding. Pursuant to the Indenture, the
Company will be allowed to incur up to $30.0 million in Permitted Indebtedness
(as defined herein). Subject to certain limitations in the Indenture, the
Company may incur additional indebtedness, including indebtedness under the
Credit Facility. See "-- Credit Facility."

Funding for the Company's business activities has historically been provided
by operating cash flow and reserve-based bank borrowings. The Company regularly
engages in discussions relating to potential acquisitions of oil and gas
properties or companies engaged in the oil and gas business. The Company has no
present agreement, commitment or understanding with respect to any such
acquisition, other than the Carlton Acquisition. Any future acquisitions may
require additional financing which will be dependent upon financing
arrangements, if any, available at the time.

CREDIT FACILITY. The Company currently has a revolving credit and term loan
facility (the "Credit Facility"), with Union Bank of California, N.A. and Den
Norske Bank ASA under which $62.0 million is outstanding. The term portion ($7.0
million) matures in June 1998 and the revolving credit portion ($55.0 million)
amortizes quarterly over four years commencing in June 1998. Borrowings under
the term facility bear interest at Union Bank's base rate plus 3.5%. The
revolving credit borrowings bear interest at the Eurodollar rate plus 2.5%. All
amounts outstanding under the Credit Facility are secured by a lien on all oil
and gas reserves, wells, personal property and contract rights of the Company.

Upon the closing of the Offerings, the Company expects to amend and restate
the Credit Facility to provide for a $50.0 million revolving commitment which
the Company expects will amortize over a three-year period commencing February
28, 2000 and will be payable in full on February 28, 2003. The Company expects
advances under the amended Credit Facility will bear interest on a sliding scale
based on the ratio of the aggregate amount outstanding to the borrowing base.
The applicable rate may, at the Company's option, be based either on the
Eurodollar rate or the Union Bank base rate. The Company expects to pay a
commitment fee on the amount by which the borrowing base exceeds the aggregate
amount outstanding under the Credit Facility. In addition, the Company expects
to continue to pay an annual agent's fee while amounts are outstanding under the
Credit Facility.

The amount of credit available at any time under the Credit Facility may not
exceed the borrowing base which will be redetermined semi-annually. The Credit
Facility contains customary covenants which, among other things, require
periodic financial and reserve reporting and limit the Company's incurrence of
indebtedness, liens, dividends, loans, capital expenditures, transactions with
affiliates, investments, and purchases and sales of assets.

NET CASH PROVIDED BY OPERATING ACTIVITIES. For the nine months ended
September 30, 1997, net cash provided by the Company's operating activities was
$6.4 million compared to $8.1 million for the comparable period in 1996 for the
Partnership. Although core-area natural gas production and the average prices
received for natural gas were higher in the nine months ended September 30, 1997
compared to the comparable period in 1996, these factors were offset by
production decreases attributable to the sale of non-core properties in the
first quarter of 1997.

NET CASH USED IN INVESTING ACTIVITIES. For the nine months ended September
30, 1997, net cash used in the Company's investing activities was $5.2 million
compared to $1.6 million for the Partnership in the comparable period in 1996
attributable primarily to oil and gas development and acquisitions. The Company
has budgeted capital spending of $20.3 million during 1998 for development
projects and certain exploration activities.

37
<PAGE>
BUSINESS

THE COMPANY

RAM Energy is an independent oil and gas company engaged in the acquisition,
development and production of oil and gas properties primarily in the
Mid-Continent Area and in the Permian Basin. At November 30, 1997, the Company's
estimated net proved reserves, on a pro forma basis, were 114.3 Bcf of natural
gas and 4.3 MMBbls of oil, or 140.1 Bcfe, with a PV-10 Value of approximately
$150 million and a reserve life of approximately 12 years. As of such date, on a
pro forma basis, the Company operated 725 wells representing approximately 64%
of its PV-10 Value, a 165-mile oil and gas gathering system and a saltwater
disposal operation. The Company has grown principally through producing property
acquisitions, acquiring approximately $190 million of oil and gas properties
since inception, including the Carlton Acquisition.

From 1989 to November 1996, the Company primarily developed and operated oil
and gas properties owned jointly by RAM Energy and the Partnership. During that
eight-year period, the Company drilled 245 oil and gas wells with a 96% success
rate. The Partnership distributed a substantial portion of the net cash flows
from these properties to its partners and the Company did not invest
significantly in its asset base. Management believes that the Partnership's
business strategy allowed the Company's properties to remain under-developed and
that these properties contain significant potential for the addition of reserves
and production through accelerated development and exploration activities.

In November 1996, RAM Energy acquired the limited partner's interest in the
Partnership and subsequently liquidated the Partnership and distributed all of
its oil and gas properties and other assets to RAM Energy. As a result of the
Partnership Acquisition and the Carlton Acquisition, the Company is pursuing a
more aggressive growth strategy. The Company has identified a substantial
inventory of 218 exploitation opportunities on its existing properties and on
the properties included in the Carlton Acquisition. These projects generally
involve moderate drilling and completion costs, as they are located primarily in
intermediate depth, normally pressured reservoirs. The Company has budgeted
capital spending of $20.3 million in 1998 for development projects and certain
exploration activities. The Company also intends to continue to pursue
attractive oil and gas acquisition opportunities.

STRATEGY

DEVELOP AND EXPLOIT EXISTING OIL AND GAS PROPERTIES. The Company has
identified 218 infill drilling, recompletion, enhanced recovery and workover
opportunities on its properties, and plans to pursue these relatively lower-risk
development activities, as well as selective exploration activities. The Company
has budgeted capital spending of $20.3 million in 1998 to complete 75 planned
development and exploration projects, as compared to expenditures of $5.4
million to complete 28 development projects in 1997.

MAINTAIN AND EXPAND CORE AREAS. Over 90% of the Company's pro forma PV-10
Value as of November 30, 1997 is concentrated in the Mid-Continent Area and the
Permian Basin. The Company

38
<PAGE>
believes that its geographic concentration and region-specific geological,
engineering and production experience provide it with focused, efficient
operations. The Company will continue to evaluate and pursue acquisitions and
drilling opportunities in its core areas and will evaluate acquisitions that
could establish additional core areas.

REDUCE COSTS THROUGH OPERATING CONTROL. The Company seeks to operate a
substantial portion of its producing properties and, as of November 30, 1997,
operated 64% of its pro forma PV-10 Value. As a result of the Carlton
Acquisition, the Company will also operate an oil and gas gathering system and a
saltwater disposal operation. The Company believes that operating a high
percentage of its producing properties and drilling prospects within its core
areas provides it with substantial control of the timing, level and incurrence
of operating and drilling expenditures.

THE CARLTON ACQUISITION

On December 16, 1997, the Company entered into a definitive agreement to
purchase Carlton for $43.0 million subject to closing adjustments. With the
Carlton Acquisition, the Company will acquire interests in 399 producing oil and
gas wells, primarily located in the Carmen Field in the Mid-Continent Area and
other fields in the Mid-Continent Area, the Permian Basin and other oil and gas
producing regions. The Company will operate 230 of these wells. The Carlton
Acquisition will add approximately 36.8 Bcfe of estimated net proved reserves to
the Company's reserve base, as of November 30, 1997. Carlton's properties
include an attractive combination of established, long-life production and
development and exploratory drilling opportunities, with over 60 identified
projects. The Carlton properties have an estimated reserve life of approximately
15 years.

As part of the Carlton Acquisition, the Company will acquire, own and
operate the Carmen System, a 165-mile oil and gas gathering system and a
saltwater disposal operation in the Carmen Field of the Mid-Continent Area. The
Carmen System purchases, transports and markets oil and gas production and
disposes of produced water from properties owned by Carlton and other oil and
gas companies. Of the 196 producing wells currently dedicated to the Carmen
System, the Company will operate 143 wells.

The Carmen System purchases oil and gas at the lease and transports the
production, with associated saltwater, to a collection and separation facility
operated by Carlton. From this point, the natural gas is delivered to a
processing and compression facility operated by Continental Gas, Inc. After
processing, gas volumes are returned to Carlton and sold into a variety of
delivery points. Oil purchasing and gathering, saltwater gathering and saltwater
disposal comprise an integrated operation whereby oil and saltwater are gathered
at the lease and subsequently measured and transported to a central facility
through the liquids gathering line. Upon separation, the oil is aggregated and
sold at a central sales point to a number of crude purchasers, and the saltwater
is disposed into Carlton's saltwater disposal well.

The Company believes the Carlton Acquisition provides the opportunity to
improve cash flow from additional development and exploration activities,
gathering and sale of oil and gas production and reduction of operating and
administrative costs. The closing of the Carlton Acquisition is conditioned upon
the simultaneous closing of the Offerings.

PRINCIPAL OIL AND GAS PROPERTIES

The Company's oil and gas properties located in the Mid-Continent Area and
the Permian Basin comprised approximately 73% and 18%, respectively, of the
Company's pro forma PV-10 Value as of November 30, 1997. These regions are
large, well established oil and gas producing basins with activities dating from
the early 1900s and are characterized by numerous known producing horizons
ranging from shallow oil and gas production to deep gas reservoirs. The Company
owns interests in numerous properties which provide opportunities to increase
reserves and production through additional development, recompletions, enhanced
recovery methods and the use of 3-D seismic technology. At November 30, 1997,
the Company operated properties which comprised approximately 64% of its PV-10
Value, on a pro forma

39
<PAGE>
basis. The Company has budgeted $17.7 million of its planned $20.3 million 1998
capital expenditures for additional oil and gas development in these two
regions.

The following table provides information for the Company's major fields as
of November 30, 1997, on a pro forma basis.

NET PROVED RESERVES FOR PRINCIPAL OIL AND GAS PROPERTIES

<TABLE>
<CAPTION>
GAS
GAS EQUIVALENT % OF TOTAL
AREA/FIELD OIL (MBBL) (MMCF) (MMCFE) PV-10 VALUE
- ---------------------------------------------------------------------- ----------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Mid-Continent Area:
Carmen Field........................................................ 601 25,269 28,875 17.3%
Hammon Area......................................................... 272 22,497 24,130 17.8
Strong City Area.................................................... 10 8,427 8,484 5.8
Wickham Ranch Field................................................. 62 6,577 6,946 5.5
Butler Field........................................................ 159 5,719 6,676 5.4
Major County Area................................................... 194 5,030 6,195 4.8
South Thomas Field.................................................. 21 2,922 3,050 3.0
Dewey County Area................................................... 38 2,077 2,304 2.2

Permian Basin:
South Culebra Bluff Field........................................... 1,272 7,772 15,405 10.2
El Dorado Field..................................................... 0 4,047 4,049 2.1
----- --------- ----------- -----

Total - Principal oil and gas properties.......................... 2,629 90,337 106,114 74.0

Gulf Coast Properties................................................. 76 3,821 4,277 4.0

Other properties...................................................... 1,589 20,165 29,702 22.0
----- --------- ----------- -----

Total net proved reserves......................................... 4,295 114,323 140,093 100.0%
----- --------- ----------- -----
----- --------- ----------- -----
</TABLE>

MID-CONTINENT AREA

CARMEN FIELD. The Carmen Field is located in Alfalfa, Major and Woods
Counties, Oklahoma, and produces from the Mississippi, Chester, Red Fork and
Oswego reservoirs at depths ranging from 6,000 to 8,500 feet. The field was
discovered in 1957. The shallower Tonkawa and Cottage Grove formations, as well
as the deeper Hunton, Simpson and Arbuckle formations, have also produced
economically. Upon completion of the Carlton Acquisition, the Company will own
average working and net revenue interests of 44% and 36%, respectively, in over
52,550 gross acres. The Company will have interests in 196 producing wells and
operate 143 of those wells. The Company has identified 64 infill drilling
locations within the field and is evaluating numerous additional potential
locations.

HAMMON AREA. The Hammon Area is comprised of the Northeast Hammon and
Hammon Fields, which are located in Roger Mills and Custer Counties, Oklahoma,
and produces from the Red Fork and Skinner reservoirs at depths ranging from
12,300 to 12,800 feet. The fields were discovered in 1978 and 1981,
respectively. The Company owns average working and net revenue interests of 24%
and 19%, respectively, in over 5,866 gross acres in the Hammon Area. The Company
has interests in 45 producing wells and operates seven of those wells. The
Company has drilled and completed 28 gross wells in this area. Future
development plans include the drilling and completion of 23 infill wells.

STRONG CITY AREA. The Strong City Area includes the Carpenter, Cheyenne and
Strong City Fields, which are located in Roger Mills County, Oklahoma, and
produces from the Skinner and Red Fork reservoirs at depths ranging from 11,900
to 12,500 feet. The area was discovered in 1978. The Company

40
<PAGE>
owns average working and net revenue interests of 17% and 13%, respectively, in
over 4,489 gross acres. The Company has interests in 47 producing wells and
operates 13 of those wells. The Company has drilled 19 and completed 18 gross
wells in this area. Future development plans include the drilling and completion
of 13 infill wells and two recompletions.

BUTLER FIELD. The Butler Field is located in Custer County, Oklahoma, and
produces from the Skinner and Red Fork reservoirs at depths ranging from 11,900
to 12,500 feet. The field was discovered in 1980. The Company owns average
working and net revenue interests of 28% and 23%, respectively, in over 6,833
gross acres. The Company has interests in 17 producing wells and operates nine
of those wells. The Company has drilled three and completed two gross wells in
this field. Future development plans include the drilling and completion of
seven infill wells and one recompletion.

WICKHAM RANCH FIELD. The Wickham Ranch Field is located in Roger Mills
County, Oklahoma, and produces from the Prue and Red Fork reservoirs at depths
ranging from 11,600 to 12,400 feet. The field was discovered in 1978. The
Company owns average working and net revenue interests of 11% and 9%,
respectively, in over 9,146 gross acres. The Company has non-operated interests
in 53 producing wells. The Company has drilled and completed 31 gross wells in
this field. Future development plans include the drilling and completion of 11
infill wells.

MAJOR COUNTY AREA. The Major County Area of Oklahoma produces from the
Oswego, Manning, Mississippi, Meramec, Hunton and Arbuckle reservoirs at depths
ranging from 6,000 to 8,500 feet. Production in this area commenced in 1949. The
Company owns average working and net revenue interests of 40% and 31%,
respectively, in over 13,935 gross acres. The Company has interests in 77
producing wells and operates 37 of those wells. The Company has drilled and
completed eight gross wells in this field. Future development plans include the
drilling and completion of two infill wells and four recompletions.

SOUTH THOMAS FIELD. The South Thomas Field is located in Custer and Roger
Mills Counties, Oklahoma, and produces from the Red Fork reservoir at depths
ranging from 10,800 to 11,000 feet. The field was discovered in 1975. The
Company owns average working and net revenue interests of 17% and 14%,
respectively, in over 6,404 gross acres. The Company has interests in 30
producing wells and operates 12 of those wells. The Company has drilled and
completed two gross wells in this field. Future development plans include the
drilling and completion of four infill wells.

DEWEY COUNTY AREA. The Dewey County Area of Oklahoma produces from the Red
Fork and Skinner reservoirs at depths ranging from 12,300 to 12,800 feet.
Production in this area commenced in 1952. The Company owns average working and
net revenue interests of 26% and 20%, respectively, in over 13,740 gross acres.
The Company has interests in 31 wells and operates seven of those wells. The
Company has drilled and completed one gross well in this field. The Company is
currently evaluating future development potential of the field.

PERMIAN BASIN

SOUTH CULEBRA BLUFF FIELD. The South Culebra Bluff Field is located in Eddy
County, New Mexico, and produces from the Brushy Canyon reservoir at depths
ranging from 5,800 to 6,350 feet. The field was discovered in 1989. The Company
owns average working and net revenue interests of 48% and 38%, respectively, in
over 2,810 gross acres. The Company has interests in 46 producing wells and
operates 36 of those wells. The Company has drilled and completed 30 gross wells
in this field. Future development plans include the drilling and completion of
nine infill wells and 12 recompletions.

EL DORADO FIELD. The El Dorado Field is located in Schleicher County,
Texas, and produces from the Canyon Sand reservoir at depths ranging from 6,300
to 6,500 feet. The field was discovered in 1948. The Company owns average
working and net revenue interests of 35% and 28%, respectively, in over 4,222
gross acres. The Company has interests in 28 producing wells and operates 27 of
those wells. The Company

41
<PAGE>
has drilled five and completed four gross wells in this field. Future
development plans include the drilling and completion of six infill wells and
nine recompletions.

GULF COAST PROPERTIES

The Company owns a 54% working interest and 40% net revenue interest in 602
gross acres in the Newman Field in Hinds County, Mississippi, which produces
from the Cotton Valley reservoir at depths ranging from 16,300 to 17,500 feet.
The Company has an interest in and operates one well in the Newman Field. The
Company also owns average working and net revenue interests of 38% and 32%,
respectively, in 4,366 gross acres in the Egan Field located in Acadia Parish,
Louisiana, which produces from multiple reservoirs at depths ranging from 7,000
to 11,000 feet. The Company owns interests in and operates 29 producing wells in
the Egan Field. The Company is currently evaluating 3-D seismic data for further
drilling potential.

OIL AND GAS RESERVES

The following table summarizes the estimates of the Company's historical and
pro forma net proved reserves and the related present values of such reserves at
the dates shown. The reserve and present value data for the Company's oil and
gas properties as of November 30, 1997 on an actual and pro forma basis were
prepared by Forrest A. Garb & Associates, Inc., ("Garb & Associates") and
audited by Netherland, Sewell & Associates, Inc. ("Netherland & Sewell"). The
reserve and present value data for the Company's oil and gas properties as of
December 31, 1994, 1995 and 1996 were prepared by Garb & Associates.

<TABLE>
<CAPTION>
PARTNERSHIP COMPANY COMPANY
-------------------- ---------- -----------------------
NOVEMBER 30,
DECEMBER 31, -----------------------
-------------------------------- PRO FORMA
1994 1995 1996 1997 1997(1)
--------- --------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
RESERVE DATA:
Proved reserves:
Natural gas (MMcf).......................................... 75,435 68,920 82,885 83,006 114,323
Oil and condensate (MBbls).................................. 3,770 3,333 4,282 3,376 4,295
Total (MMcfe)............................................... 98,055 88,918 108,577 103,263 140,092
Proved developed reserves:
Natural gas (MMcf).......................................... 56,792 51,664 62,319 58,717 78,399
Oil and condensate (MBbls).................................. 2,797 2,714 3,511 2,569 3,182
Total (MMcfe)............................................... 73,574 67,948 83,385 74,128 97,492
PV-10 Value (in thousands)(2)................................. $ 56,480 $ 63,913 $ 160,930 $ 116,186 $ 150,403
</TABLE>

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

(1) Pro forma to reflect the Carlton Acquisition as if it had occurred on
November 30, 1997.

Estimated quantities of proved reserves and future net revenues therefrom
are affected by oil and gas prices, which have fluctuated widely in recent
years. There are numerous uncertainties inherent in estimating oil and gas
reserves and their values, including many factors beyond the control of the
producer. The reserve data set forth in this Prospectus represent only
estimates. Reservoir engineering is a subjective process of estimating
underground accumulations of oil and gas that cannot be measured in an exact

42
<PAGE>
manner. The accuracy of any reserve estimate is a function of the quality of
available data and of engineering and geological interpretation and judgment. As
a result, estimates of different engineers, including those used by the Company,
may vary. In addition, estimates of reserves are subject to revisions based upon
actual production, results of future development and exploration activities,
prevailing oil and gas prices, operating costs and other factors, which
revisions may be material. Accordingly, reserve estimates are often different
from the quantities of oil and gas that are ultimately recovered. The
meaningfulness of such estimates is highly dependent upon the accuracy of the
assumptions upon which they are based.

In general, the volume of production from oil and gas properties declines as
reserves are depleted. Except to the extent the Company acquires properties
containing proved reserves or conducts successful exploitation and development
activities, the proved reserves of the Company will decline as reserves are
produced. The Company's future oil and gas production is, therefore, highly
dependent upon its level of success in finding or acquiring additional reserves.
See "Risk Factors -- Additions and Development of Reserves" and "-- Uncertainty
of Estimates of Oil and Gas Reserves."

NET PRODUCTION, UNIT PRICES AND COSTS

The following table presents certain information with respect to oil and gas
production, prices and costs attributable to all oil and gas properties owned by
the Partnership and the Company for the periods shown and on a pro forma basis:
<TABLE>
<CAPTION>
PARTNERSHIP COMPANY PARTNERSHIP COMPANY
-----------------------------------------
ELEVEN MONTHS
YEAR ENDED ENDED
-----------------------
---------------------------------------
-----------
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
DECEMBER 31, NOVEMBER 30, ------------------------ --------------------------
------------------------ --------------- PRO FORMA
1994 1995 1996(1) 1996 1996(2) 1996 1997
----------- ----------- --------------- ----------- ----------- ------------- -----------

<S> <C> <C> <C> <C> <C> <C> <C>
Operating Data:
Production volumes:
Natural gas (MMcf).... 9,403 9,700 7,594 692 10,626 5,933 5,245
Oil and condensate
(MBbls)............. 534 463 387 38 487 313 236
Total (MMcfe)......... 12,607 12,478 9,916 920 13,547 7,811 6,661
Average realized
prices(3):
Natural gas (per
Mcf)................ $ 1.71 $ 1.44 $ 2.04 $ 3.44 $ 2.07 $ 2.13 $ 2.32
Oil and condensate
(per Bbl)........... 15.75 16.86 20.59 23.49 20.35 19.52 19.71
Per Mcfe.............. 1.94 1.75 2.37 3.56 2.36 2.40 2.53
Expenses (per Mcfe):
Lease operating
(including
production taxes)... 0.78 0.79 0.77 0.90 0.80 0.79 0.72
Depreciation and
amortization........ 0.92 0.79 0.52 1.08 0.88 0.53 0.79
General and
administrative(4)... 0.32 0.30 0.32 1.29 0.29 0.33 0.50

PRO FORMA
1997(2)
-----------
<S> <C>
Operating Data:
Production volumes:
Natural gas (MMcf).... 6,710
Oil and condensate
(MBbls)............. 306
Total (MMcfe)......... 8,544
Average realized
prices(3):
Natural gas (per
Mcf)................ $ 2.31
Oil and condensate
(per Bbl)........... 19.12
Per Mcfe.............. 2.50
Expenses (per Mcfe):
Lease operating
(including
production taxes)... 0.85
Depreciation and
amortization........ 0.91
General and
administrative(4)... 0.33
</TABLE>

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

(1) Partnership operations were effectively terminated on a stand-alone basis on
November 30, 1996 upon consummation of the Partnership Acquisition.

43
<PAGE>
PRODUCING WELLS

The following table sets forth the number of productive wells in which the
Company owned an interest, and on a pro forma basis, as of November 30, 1997:

<TABLE>
<CAPTION>
ACTUAL PRO FORMA
-------------------- --------------------
GROSS NET GROSS NET
--------- --- --------- ---
<S> <C> <C> <C> <C>
Natural Gas......................................................................... 830 162 1,073 252
Oil................................................................................. 1,374 216 1,530 268
--------- --- --------- ---
Total........................................................................... 2,204 378 2,603 520
--------- --- --------- ---
--------- --- --------- ---
</TABLE>

Productive wells consist of producing wells and wells capable of production,
including gas wells awaiting pipeline connections and oil wells awaiting
connection to production facilities. Wells that are completed in more than one
producing horizon are counted as one well.

ACREAGE

The following table sets forth the Company's developed and undeveloped gross
and net leasehold acreage, and on a pro forma basis, as of November 30, 1997:

<TABLE>
<CAPTION>
ACTUAL PRO FORMA
-------------------- --------------------
GROSS NET GROSS NET
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Developed.............................................................. 230,751 90,828 317,150 119,079
Undeveloped............................................................ 27,790 5,088 27,790 5,088
--------- --------- --------- ---------
Total.............................................................. 258,541 95,916 344,940 124,167
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>

Approximately 73% of the Company's acreage was located in the Mid-Continent
Area and Permian Basin, on a pro forma basis as of November 30, 1997.
Undeveloped acreage includes leased acres on which wells have not been drilled
or completed to a point that would permit the production of commercial
quantities of oil and gas, regardless of whether or not such acreage contains
proved reserves. A gross acre is an acre in which an interest is owned. A net
acre is deemed to exist when the sum of fractional ownership interests in gross
acres equals one. The number of net acres is the sum of the fractional interests
owned in gross acres.

DRILLING ACTIVITIES

During the periods indicated, the Company drilled the following wells, but
did not drill any exploratory wells.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------
1994 1995 1996
---------------------- ---------------------- ----------------------
GROSS NET GROSS NET GROSS NET
----------- --- ----------- --- ----------- ---
<S> <C> <C> <C> <C> <C> <C>
Development wells:
Productive............................................ 25 4.3 9 1.1 19 2.8
Non-productive........................................ 1 0.4 -- -- 1 0.2
-- -- --
--- --- ---
Total............................................... 26 4.7 9 1.1 20 2.9
-- -- --
-- -- --
--- --- ---
--- --- ---

NINE MONTHS ENDED

SEPTEMBER 30, 1997
----------------------
GROSS NET
----------- ---
<S> <C> <C>
Development wells:
Productive............................................ 15 2.6
Non-productive........................................ -- --
--
---
Total............................................... 15 2.6
--
--
---
---
</TABLE>

From October 1, 1997 through November 30, 1997, the Company participated in
drilling activities on nine gross wells. Of the nine gross (1.3 net) wells, two
gross (0.1 net) wells are being completed, or have been completed, as commercial
producers, none were dry holes, and seven gross (1.2 net) wells are currently
being drilled.

44
<PAGE>
OIL AND GAS MARKETING AND HEDGING

The Company's oil and gas production is sold primarily under market
sensitive or spot price contracts. The Company sells substantially all of its
casinghead gas to purchasers under varying percentage-of-proceeds contracts. By
the terms of these contracts, the Company receives a fixed percentage of the
resale price received by the purchaser for sales of natural gas and natural gas
liquids recovered after gathering and processing the Company's gas. The Company
receives between 84% and 100% of the proceeds from natural gas sales and from
40% to 100% of the proceeds from natural gas liquids sales received by the
purchasers of the Company's production when the products are resold. The natural
gas and natural gas liquids are sold primarily based on spot market prices. The
revenues received by the Company from the sale of natural gas liquids are
included in natural gas sales. As a result of the natural gas liquids contained
in the Company's production, the Company has historically improved its price
realization on its natural gas sales. For the year ended December 31, 1996,
purchases of the Company's oil and gas production by Coastal Gas Marketing
accounted for 11.2% of the Company's total oil and gas sales for such period.
For the nine months ended September 30, 1997, purchases of the Company's oil and
gas production by GPM Gas Corp. and American Central Western Oklahoma Gas
Company, L.L.C. accounted for 13% and 12%, respectively, of the Company's total
oil and gas sales for such period.

Periodically the Company utilizes various hedging strategies to manage the
price received for a portion of its future oil and gas production. The Company
does not establish hedges in excess of its expected production. These strategies
customarily emphasize forward-sale, fixed-price contracts for physical delivery
of a specified quantity of production or swap arrangements that establish an
index-related price above which the Company pays the hedging partner and below
which the Company is paid by the hedging partner. These contracts allow the
Company to predict with greater certainty the effective oil and gas prices to be
received for its production and benefit the Company when market prices are less
than the fixed prices provided in its forward-sale contracts. However, the
Company will not benefit from market prices that are higher than the fixed
prices in such contracts for its hedged production. For the year ended December
31, 1996, forward-sale contracts affected prices received for 17% and 22% of the
Company's production of oil and gas, respectively, and for the nine months ended
September 30, 1997, forward-sale contracts affected prices received for 0% and
33% of the Company's production of oil and gas, respectively. As of September
30, 1997, forward-sale contracts were in place for 1.7 Bcfe of the Company's
future oil and gas production, all of which will be settled by December 31,
1997.

The Company has only limited involvement with derivative financial
instruments, as defined in SFAS No. 119 "Disclosure About Derivative Financial
Instruments and Fair Value of Financial Instruments" and does not use them for
trading purposes. The Company's objective is to hedge a portion of its exposure
to price volatility from producing oil and gas. These arrangements expose the
Company to credit risk of its counterparties and to basis risk.

EMPLOYEES

As of September 30, 1997, the Company employed 56 people, 27 of which were
administrative, accounting and financial personnel and 29 of which were
professional, technical or geological personnel. The Company's future success
will depend partially on its ability to attract, retain and motivate qualified
personnel. The Company is not a party to any collective bargaining agreements
and has not experienced any strikes or work stoppages. The Company considers its
relations with its employees to be satisfactory.

COMPETITION

The oil and gas industry is highly competitive. The Company competes for the
acquisition of oil and gas properties, primarily on the basis of the price to be
paid for such properties, with numerous entities including major oil companies,
other independent oil and gas concerns and individual producers and operators.
Many of these competitors are large, well established companies and have
financial and other

45
<PAGE>
resources substantially greater than those of the Company. The Company's ability
to acquire additional oil and gas properties and to discover reserves in the
future will depend upon its ability to evaluate and select suitable properties
and to consummate transactions in a highly competitive environment.

LEGAL PROCEEDINGS

From time to time, the Company is party to litigation or other legal
proceedings that it considers to be a part of the ordinary course of its
business. The Company is not involved in any legal proceedings, nor is it party
to any pending or threatened claims, that could reasonably be expected to have a
material adverse effect on its financial condition or results of operations.

REGULATION

GENERAL. Various aspects of the Company's oil and gas operations are
subject to extensive and continually changing regulation, as legislation
affecting the oil and gas industry is under constant review for amendment or
expansion. Numerous departments and agencies, both federal and state, are
authorized by statute to issue, and have issued, rules and regulations binding
upon the oil and gas industry and its individual members. The Federal Energy
Regulatory Commission (the "FERC") regulates the transportation and sale for
resale of natural gas in interstate commerce pursuant to the Natural Gas Act of
1938 (the "NGA") and the Natural Gas Policy Act of 1978 (the "NGPA"). In the
past, the federal government has regulated the prices at which oil and gas could
be sold. While sales by producers of natural gas and all sales of crude oil,
condensate and natural gas liquids can currently be made at uncontrolled market
prices, Congress could reenact price controls in the future. Deregulation of
wellhead sales in the natural gas industry began with the enactment of the NGPA
in 1978. In 1989, Congress enacted the Natural Gas Wellhead Decontrol Act (the
"Decontrol Act"). The Decontrol Act removed all remaining NGA and NGPA price and
nonprice controls affecting wellhead sales of natural gas effective January 1,
1993.

REGULATION OF SALES AND TRANSPORTATION OF NATURAL GAS. The Company's sales
of natural gas are affected by the availability, terms and cost of
transportation. The price and terms for access to pipeline transportation are
subject to extensive regulation. In recent years, the FERC has undertaken
various initiatives to increase competition within the natural gas industry. As
a result of initiatives like FERC Order No. 636, issued in April 1992, the
interstate natural gas transportation and marketing system has been
substantially restructured to remove various barriers and practices that
historically limited non-pipeline natural gas sellers, including producers, from
effectively competing with interstate pipelines for sales to local distribution
companies and large industrial and commercial customers. The most significant
provisions of Order No. 636 require that interstate pipelines provide firm and
interruptible transportation service on an open access basis that is equal for
all natural gas suppliers. In many instances, the results of Order No. 636 and
related initiatives have been to substantially reduce or eliminate the
interstate pipelines' traditional role as wholesalers of natural gas in favor of
providing only storage and transportation services. While the United States
Court of Appeals upheld most of Order No. 636 last year, certain related FERC
orders, including the individual pipeline restructuring proceedings, are still
subject to judicial review and may be reversed or remanded in whole or in part.
While the outcome of these proceedings cannot be predicted with certainty, the
Company does not believe that it will be affected materially differently than
its competitors.

The FERC has also announced several important transportation-related policy
statements and proposed rule changes, including a statement of policy and a
request for comments concerning alternatives to its traditional cost-of-service
ratemaking methodology to establish the rates interstate pipelines may charge
for their services. A number of pipelines have obtained FERC authorization to
charge negotiated rates as one such alternative. Both the policy statement and
individual pipeline negotiated rate authorizations are currently subject to
appeal before the U.S. Court of Appeals for the D.C. Circuit. In February 1997,
the FERC announced a broad inquiry into issues facing the natural gas industry
to assist the FERC in establishing regulatory goals and priorities in the
post-Order No. 636 environment. Moreover,

46
<PAGE>
the FERC has refined the criteria used to distinguish non-jurisdictional
gathering from jurisdictional transportation. Similarly, the Oklahoma
Corporation Commission and the Texas Railroad Commission have been reviewing
changes to their regulations governing transportation and gathering services
provided by intrastate pipelines and gatherers. While the changes being
considered by these federal and state regulators would affect the Company only
indirectly, they are intended to further enhance competition in natural gas
markets. The Company cannot predict what further action the FERC or state
regulators will take on these matters, however, the Company does not believe
that it will be affected by any action taken materially differently than other
natural gas producers with which it competes.

Additional proposals and proceedings that might affect the natural gas
industry are pending before Congress, the FERC, state commissions and the
courts. The natural gas industry historically has been very heavily regulated;
therefore, there is no assurance that the less stringent regulatory approach
recently pursued by the FERC and Congress will continue.

OIL PRICE CONTROLS AND TRANSPORTATION RATES. Sales of crude oil, condensate
and gas liquids by the Company are not currently regulated and are made at
market prices. The price the Company receives from the sale of these products
may be affected by the cost of transporting the products to market.

ENVIRONMENTAL. Extensive federal, state and local laws regulating the
discharge of materials into the environment or otherwise relating to the
protection of the environment affect the Company's oil and gas operations.
Numerous governmental departments issue rules and regulations to implement and
enforce such laws, which are often difficult and costly to comply with and which
carry substantial civil and even criminal penalties for failure to comply. Some
laws, rules and regulations relating to protection of the environment may, in
certain circumstances, impose strict liability for environmental contamination,
rendering a person or entity liable for environmental damages and cleanup costs
without regard to negligence or fault on the part of such person or entity.
Other laws, rules and regulations may restrict the rate of oil and gas
production below the rate that would otherwise exist or even prohibit
exploration and production activities in sensitive areas. In addition, state
laws often require various forms of remedial action to prevent pollution, such
as closure of inactive pits and plugging of abandoned wells. The regulatory
burden on the oil and gas industry increases the Company's cost of doing
business and consequently affects the Company's profitability. The Company
believes that it is in substantial compliance with current applicable
environmental laws and regulations and that continued compliance with existing
requirements will not have a material adverse impact on the Company's
operations. However, environmental laws and regulations have been subject to
frequent changes over the years, and the imposition of more stringent
requirements could have a material adverse effect upon the capital expenditures
or competitive position of the Company.

The Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA") imposes liability, without regard to fault or the legality of the
original act, on certain classes of persons that are considered to be
responsible for the release of a "hazardous substance" into the environment.
These persons include the current or former owner or operator of the disposal
site or sites where the release occurred and companies that disposed or arranged
for the disposal of hazardous substances at the disposal site. Under CERCLA such
persons may be subject to joint and several liability for the costs of
investigating and cleaning up hazardous substances that have been released into
the environment, for damages to natural resources and for the costs of certain
health studies. Comparable state statutes also impose liability on the owner or
operator of a property for remediation of environmental contamination existing
on such property. In addition, companies that incur liability frequently
confront third party claims because it is not uncommon for neighboring
landowners and other third parties to file claims for personal injury and
property damage allegedly caused by hazardous substances or other pollutants
released into the environment from a polluted site.

The Company currently owns or leases, and has in the past owned or leased,
numerous properties that have been used for the exploration and production of
oil and gas and for other uses associated with the oil

47
<PAGE>
and gas industry. Although the Company has followed operating and disposal
practices that it considered appropriate under applicable laws and regulations,
hydrocarbons or other wastes may have been disposed of or released on or under
the properties owned or leased by the Company or on or under other locations
where such wastes were taken for disposal. In addition, the Company owns or
leases properties that have been operated by third parties in the past. The
Company could incur liability under CERCLA or comparable state statutes for
contamination caused by wastes it generated or for contamination existing on
properties it owns or leases, even if the contamination was caused by the waste
disposal practices of the prior owners or operators of the properties.

The Federal Solid Waste Disposal Act, as amended by the Resource
Conservation and Recovery Act of 1976 ("RCRA"), regulates the generation,
transportation, storage, treatment and disposal of hazardous wastes and can
require cleanup of hazardous waste disposal sites. RCRA currently excludes
drilling fluids, produced waters and other wastes associated with the
exploration, development or production of oil and gas from regulation as
"hazardous waste." A similar exemption is contained in many of the state
counterparts to RCRA. Disposal of such non-hazardous oil and gas exploration,
development and production wastes usually is regulated by state law. Other
wastes handled at exploration and production sites or used in the course of
providing well services may not fall within this exclusion. Moreover, stricter
standards for waste handling and disposal may be imposed on the oil and gas
industry in the future. From time to time legislation has been proposed in
Congress that would revoke or alter the current exclusion of exploration,
development and production wastes from the RCRA definition of "hazardous wastes"
thereby potentially subjecting such wastes to more stringent handling and
disposal requirements. If such legislation were enacted, or if changes to
applicable state regulations required the wastes to be managed as hazardous
wastes, it could have a significant impact on the operating costs of the
Company, as well as the oil and gas industry in general.

The Company's operations are also subject to the Clean Air Act (the "CAA")
and comparable state and local requirements. Amendments to the CAA were adopted
in 1990 and contain provisions that may result in the gradual imposition of
certain pollution control requirements with respect to air emissions from
operations of the Company. The Company may be required to incur certain capital
expenditures in the next several years for air pollution control equipment in
connection with obtaining and maintaining operating permits and approvals for
air emissions. However, the Company believes its operations will not be
materially adversely affected by any such requirements, and the requirements are
not expected to be any more burdensome to the Company than to other similarly
situated companies involved in oil and gas exploration and production activities
or well servicing activities.

The Federal Water Pollution Control Act of 1972 (the "FWPCA") imposes
restrictions and strict controls regarding the discharge of wastes, including
produced waters and other oil and gas wastes, into navigable waters. These
controls have become more stringent over the years, and it is probable that
additional restrictions will be imposed in the future. Permits must be obtained
to discharge pollutants into state and federal waters. The FWPCA provides for
civil, criminal and administrative penalties for unauthorized discharges of oil
and other hazardous substances and imposes substantial potential liability for
the costs of removal or remediation. State laws governing discharges to water
also provide varying civil, criminal and administrative penalties and impose
liabilities in the case of a discharge of petroleum or its derivatives, or other
hazardous substances, into state waters. In addition, the Environmental
Protection Agency has promulgated regulations that require many oil and gas
production sites, as well as other facilities, to obtain permits to discharge
storm water runoff. The Company believes that compliance with existing
requirements under the FWPCA and comparable state statutes will not have a
material adverse effect on the Company's financial condition or results of
operations.

The Company maintains insurance against "sudden and accidental" occurrences
which may cover some, but not all, of the risks described above. Most
significantly, the insurance maintained by the Company may not cover the risks
described above which occur over a sustained period of time. Further, there can
be no assurance that such insurance will continue to be available to cover all
such costs or that

48
<PAGE>
such insurance will be available at premium levels that justify its purchase.
The occurrence of a significant event not fully insured or indemnified against
could have a material adverse effect on the Company's financial condition and
results of operations.

REGULATION OF OIL AND GAS EXPLORATION AND PRODUCTION. Exploration and
production operations of the Company are subject to various types of regulation
at the federal, state and local levels. Such regulations include requiring
permits and drilling bonds for the drilling of wells, regulating the location of
wells, the method of drilling and casing wells, and the surface use and
restoration of properties upon which wells are drilled. Many states also have
statutes or regulations addressing conservation matters, including provisions
for the unitization or pooling of oil and gas properties, the establishment of
maximum rates of production from oil and gas wells and the regulation of
spacing, plugging and abandonment of such wells. Some state statutes limit the
rate at which oil and gas can be produced from the Company's properties. See
"Risk Factors -- Governmental Regulation."

TITLE TO PROPERTIES

The Company believes it has satisfactory title to its properties in
accordance with standards generally accepted in the oil and gas industry. As is
customary in the oil and gas industry, the Company makes only a cursory review
of title to farmout acreage and to undeveloped oil and gas leases upon execution
of any contracts. Prior to the commencement of drilling operations, a title
examination is conducted and curative work is performed with respect to
significant defects. To the extent title opinions or other investigations
reflect title defects, the Company, rather than the seller of the undeveloped
property, is typically responsible to cure any such title defects at its
expense. If the Company were unable to remedy or cure any title defect of a
nature such that it would not be prudent to commence drilling operations on the
property, the Company could suffer a loss of its entire investment in the
property. The Company has obtained title opinions on substantially all of its
producing properties. Prior to completing an acquisition of producing oil and
gas leases, the Company performs a title review on a material portion of the
leases. The Company's oil and gas properties are subject to customary royalty
interests, liens for current taxes and other burdens that the Company believes
do not materially interfere with the use of or affect the value of such
properties.

FACILITIES

The Company's principal executive and operating offices are located at Suite
650, Meridian Tower, 5100 E. Skelly Drive, Tulsa, Oklahoma 74135. The Company's
finance and accounting offices, along with the office of the Chairman, are
located at Suite 130, One Benham Place, 9400 N. Broadway, Oklahoma City,
Oklahoma 73114. The Company leases all of its significant facilities. The
Company believes that its facilities are adequate for its current needs.

49
<PAGE>
MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth names, ages and titles of the directors and
executive officers of the Company.

<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------------- --- -------------------------------------------------------------------
<S> <C> <C>
William W. Talley II, Ph.D............. 55 Chairman of the Board of Directors
Larry E. Lee........................... 49 President and Chief Executive Officer and Director
M. Helen Bennett(1)(2)................. 50 Director
Gerald R. Marshall(1)(2)............... 63 Director
John M. Reardon(1)(2).................. 55 Director
Larry G. Rampey........................ 52 Senior Vice President - Operations
John M. Longmire....................... 55 Senior Vice President and Chief Financial Officer, Treasurer and
Secretary
Drake N. Smiley........................ 50 Senior Vice President - Land, Legal and Business Development
</TABLE>

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

(1) Member of the Compensation Committee.

(2) Member of the Audit Committee.

WILLIAM W. TALLEY II, PH.D. has been Chairman of the Board and a director of
the Company since its incorporation in 1987 and was Chief Executive Officer from
1987 to 1989 and from 1992 to October 31, 1997. Dr. Talley served as the Society
of Petroleum Engineers' Distinguished Lecturer on natural gas marketing and
pricing in 1987 and 1988 and was Vice President and director of the Independent
Petroleum Association of America in 1987. Dr. Talley has been an officer and a
principal of the RAM Group, Ltd., an energy and management consulting firm,
since 1974. He is a registered professional engineer.

LARRY E. LEE has been President and a director of the Company since its
incorporation in 1987. Mr. Lee served as its Chief Executive Officer from 1989
to 1992 and has served in such capacity since November 1, 1997. Mr. Lee is a
member of the Oklahoma Independent Petroleum Association and of the Independent
Petroleum Association of America. He served as a director of the Independent
Petroleum Association of America from 1990 to 1992. Mr. Lee has been an officer
and a principal of the RAM Group, Ltd. since 1984.

M. HELEN BENNETT has been a director of the Company since 1992 and was a
Vice President of the Company from December 1996 until November 30, 1997. Mrs.
Bennett has been a limited partner of Goldman, Sachs & Co., an investment
banking firm, since May 1992. From 1980 until 1986, Mrs. Bennett served in
several executive capacities with Time, Incorporated, including General Manager
of Fortune magazine from 1984 to 1986. From 1973 until 1980, she was employed by
McKinsey & Company.

GERALD R. MARSHALL became a director of the Company in December 1997. Since
October 1996, Mr. Marshall has served as Vice Chairman of the Midland Group, an
Oklahoma-based financial services organization. Since December 1993, Mr.
Marshall has served as President and Chief Executive Officer of Midland Asset
Management Co., an asset management and financial consulting firm. He has served
as Chairman and Chief Executive Officer of RAM Management Associates, Inc., a
management contractor for the Resolution Trust Corporation, since March 1990.

JOHN M. REARDON became a director of the Company in December 1997 and served
as an adviser to the Company's Board of Directors from August 1994 until
December 1997. Mr. Reardon has been President and Chief Executive Officer of
Valencia National Bank of Santa Clarita, California, since August 1994. From
1991 to August 1994, he was Senior Vice President of RAMCO Oil & Gas, Inc., a
former subsidiary

50
<PAGE>
of the Company, and of RAM Management Associates, Inc. From 1987 to 1991, Mr.
Reardon was a Senior Vice President of Wells Fargo Bank.

LARRY G. RAMPEY became a Senior Vice President of the Company in December
1997 and had been a Vice President of the Company since 1989. From 1972 to 1989,
Mr. Rampey held the positions of Vice President of International Operations,
Vice President of Domestic Operations and staff engineer for Reading & Bates
Petroleum Co.

JOHN M. LONGMIRE became a Senior Vice President of the Company in December
1997 and had been a Vice President of the Company since 1994. Mr. Longmire has
been Chief Financial Officer, Treasurer and Secretary of the Company since
August 1994 and was its Controller from 1990 to February 1994. Previously, he
held various financial management positions with Texas International Company,
Amarex, Inc. and Union Oil Company of California. Mr. Longmire is a Certified
Public Accountant.

DRAKE N. SMILEY became a Senior Vice President of the Company in December
1997 and had been a Vice President of the Company since February 1997. Mr.
Smiley was Vice President - Land and Legal of the Company from 1989 to 1994.
From 1994 until he rejoined the Company in 1997, Mr. Smiley served as Vice
President - Land of Continental Resources, Inc., an independent oil and gas
company. From 1980 to 1989, he was employed by Reading & Bates Petroleum Co.,
serving as Manager of Land. Mr. Smiley is a member of the Oklahoma and Tulsa
County Bar Associations.

The directors are divided into three classes, with each class having as
equal a number of directors as practicable. The directors are elected on a
staggered basis for three-year terms. One class stands for re-election at each
annual meeting of stockholders. The Company's executive officers serve at the
discretion of the Board of Directors. Dr. Talley's term as a director will
expire in 1998, the terms of Mr. Lee and Mr. Marshall will expire in 1999, and
the terms of Mrs. Bennett and Mr. Reardon will expire in 2000.

Dr. Talley and Mr. Lee beneficially own and were formerly executive officers
of Jobs for St. Landry Parish, Inc., d/b/a Standard Fittings Company ("Standard
Fittings"), a manufacturer of pipe fittings. Standard Fittings filed a petition
pursuant to Chapter 11 of the U.S. Bankruptcy Code in January 1997 in the U.S.
Bankruptcy Court for the Western District of Louisiana. The Chapter 11
proceeding was dismissed in June 1997.

EXECUTIVE COMPENSATION

The following table sets forth for 1996 the cash compensation of (i) the
Company's chief executive officer and (ii) each other person who was an
executive officer as of December 31, 1996 (together with the Company's chief
executive officer, the "Named Executive Officers"). As described below, the
Company entered into a severance agreement with Dr. Talley and a revised
employment agreement with Mr. Lee. See "-- Employment and Consulting
Agreements."

51
<PAGE>
SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------- OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION(1) COMPENSATION(2)
- ------------------------------------------------------ ---------- ---------- ---------------- ----------------
<S> <C> <C> <C> <C>
William W. Talley II, Ph.D. .......................... $ 441,340 $ 276,890 -- $ 9,000
Chairman of the Board(3)
Larry E. Lee ......................................... 418,010 310,760 -- 7,720
President and Chief Executive Officer(4)
M. Helen Bennett ..................................... 315,720 202,380 -- --
Vice President(5)
Larry G. Rampey ...................................... 114,000 30,290 -- 3,600
Vice President
John M. Longmire ..................................... 108,000 30,120 -- 6,930
Vice President, Chief Financial Officer, Treasurer
and Secretary
</TABLE>

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

(1) Personal benefits provided by the Company did not exceed the lesser of
$50,000 or 10% of total annual salary and bonus for any Named Executive
Officer. No other annual compensation was paid.

(2) Represents matching contributions made by the Company to the account of the
executive officer under the Company's 401(k) Profit Sharing Plan.

(3) Dr. Talley was Chief Executive Officer until October 31, 1997. Director fees
of $289,380 are included as salary.

(4) Mr. Lee was appointed Chief Executive Officer effective November 1, 1997.
Director fees of $289,380 are included as salary.

(5) Mrs. Bennett was Vice President until November 30, 1997. Director fees of
$289,380 are included as salary.

DIRECTORS' COMPENSATION

Each director received $289,380 and $178,960 in 1996 and 1997, respectively,
for serving as a director. In 1998, the annual fee to be paid to each
non-employee director will be $24,000 plus $1,000 for each meeting attended.
Directors who are also employees of the Company will not receive annual
directors fees. Directors are also reimbursed for travel and other expenses.

EMPLOYMENT AND SEVERANCE AGREEMENTS

The Company is a party to a Special Severance Agreement with Dr. Talley
which continues until Dr. Talley ceases to be Chairman of the Board of the
Company. During the existence of this agreement, Dr. Talley will receive an
annual base salary of $240,000 and a bonus as determined by the Board. The term
of the agreement ends upon Dr. Talley's death, disability or voluntary
resignation, and may be terminated by the Company for cause. Upon Dr. Talley's
death, his representatives or, upon his disability, Dr. Talley, will receive
accrued but unpaid salary, bonus and benefits, a pro rata share of any bonus
paid for the preceding year, one year's salary and an amount equal to the
highest bonus paid to him during the term of the agreement. In the event of Dr.
Talley's disability, he will continue to be entitled to receive benefits for the
remainder of the agreement. If Dr. Talley ceases to be Chairman of the Board
other than by reason of death, disability, for cause or by voluntary
resignation, he is entitled to receive his accrued but unpaid salary and
benefits, an amount equal to a pro rata share of any bonus paid for the
immediately preceding year, plus an amount equal to three times his base salary.

The Company has an employment agreement with Mr. Lee for an initial term
expiring in December 2000, subject to annual extensions of one year, at an
annual salary of $295,000 and an annual bonus to be determined by the Board.
Under this agreement, Mr. Lee's employment may be terminated by the Company for
death or disability, or for cause, and by Mr. Lee for good reason. Upon Mr.
Lee's death, his representatives or, upon his disability, Mr. Lee, will receive
accrued but unpaid salary, bonus and benefits, a pro rata share of any bonus
paid for the immediately preceding year, one year's salary and an amount

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<PAGE>
equal to the highest bonus paid to him during the term of the agreement. In the
event of Mr. Lee's disability, he will continue to be entitled to receive
benefits for the remainder of the agreement. If Mr. Lee ceases to be an employee
other than by reason of death, disability, for cause or by voluntary
resignation, he is entitled to receive his accrued but unpaid salary and
benefits, an amount equal to a pro rata share of any bonus paid for the
immediately preceding year, plus an amount equal to three times his base salary.

The Company has employment and severance agreements with Messrs. Longmire,
Rampey and Smiley. Each of these agreements expires December 31, 1998. Under the
terms of each agreement, the officer's employment may be terminated by the
Company at any time for good cause, or for any other reason upon two weeks prior
notice, subject to certain severance payments.

From May through November 1997, the Company employed William S. Price, a
principal stockholder of the Company, as a consultant to assist it in
identifying acquisition opportunities. Mr. Price received $15,000 per month
pursuant to a consulting agreement.

STOCK INCENTIVE PLAN

The Company's 1998 Stock Incentive Plan (the "Plan") authorizes the grant of
nonqualified stock options, incentive stock options and restricted stock awards
to employees and directors. The purpose of the Plan is to create incentives
designed to motivate employees of the Company, and any present or future parent
or subsidiary, and directors of the Company to exert maximum efforts toward the
success and growth of the Company and to attract and retain experienced
individuals who by their position, ability and diligence are able to make
important contributions to the Company's success. The Plan is administered by
the Compensation Committee of the Board of Directors; however, awards under the
Plan to members of the Compensation Committee are made by the full Board
(whether the Compensation Committee or the Board, the "Committee").

The maximum number of shares of Common Stock for which options and
restricted stock awards may be granted under the Plan is 550,000, subject to
adjustment in the event of any stock dividend, stock split, recapitalization or
reorganization or certain business combinations. Shares subject to previously
expired or terminated options or other forfeited awards which did not result in
the issuance of shares become available again for awards under the Plan. The
shares to be issued under the Plan may be newly issued shares, treasury shares
or shares acquired privately or by open-market purchases. The number of shares
and other terms of each grant are determined by the Committee; provided that the
shares subject to stock options granted under the Plan in any year to a
participant may not exceed 25,000, and the shares of restricted stock awarded
under the Plan in any year to any participant may not exceed 25,000. Awards
under the Plan may, in the discretion of the Committee, provide for immediate
vesting upon a change of control (as defined in the Plan).

The price payable upon the exercise of both incentive and nonqualified stock
options may not be less than 100% of the fair market value of the Common Stock
at the time of grant or, in the case of an incentive stock option granted to an
employee owning stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company (a "10% Shareholder"), 110% of the
fair market value of the Common Stock on the date of grant. Incentive stock
options may be granted only to employees, and the aggregate exercise price of
all incentive stock options under all Company plans becoming exercisable for the
first time by an employee during any calendar year may not exceed $100,000. Each
option granted under the Plan will expire on the date specified by the
Committee, but, with respect to incentive stock options, not more than ten years
from the date of grant or, in the case of a 10% Shareholder, not more than five
years from the date of grant. Unless the Committee otherwise provides, a stock
option will terminate three months (one year in the event of an optionee's
disability or three years in the event of an optionee's death) after the
optionee's termination of employment or termination as a director. In no event,
however, will an option be exercisable after its expiration date. The Committee
has the power to accelerate the vesting of options not exercisable on the
optionee's termination date. The

53
<PAGE>
exercise price of an option granted under the Plan may be paid in cash, shares
of Common Stock having a fair market value equal to the exercise price (either
shares then owned by the optionee or to be issued upon exercise of the option)
or a combination of cash and Common Stock. In addition, an optionee may utilize
a broker to effect a contemporaneous sale of sufficient shares subject to the
option to pay the exercise price by following the procedure set forth in the
Plan.

Restricted stock awards will be subject to such terms, conditions,
restrictions and/or limitations as the Committee deems appropriate including,
but not limited to, restrictions on transferability and continued employment (or
service as a director in the case of non-employee directors).

Outstanding options become nonforfeitable and exercisable in full
immediately prior to the liquidation or dissolution of the Company or the merger
or consolidation of the Company or sale of all or substantially all of the
Company's assets if provision is not made in such transaction for the assumption
by the acquiror of outstanding unvested options granted under the Plan or the
substitution of new options therefor. Unexercised outstanding options will
terminate upon the consummation of the dissolution or liquidation of the Company
or such merger, consolidation or sale of assets.

The Plan may be terminated or amended by the Board of Directors at any time,
subject to stockholder approval in the case of amendments to increase the
aggregate number of shares of Common Stock subject to the Plan or to permit
options with below-market exercise prices. If not earlier terminated, the Plan
expires in 2008.

OFFICER AND DIRECTOR LIABILITY

As permitted by the provisions of the Delaware General Corporation Law, the
Company's Certificate of Incorporation, as amended (the "Certificate"),
eliminates in certain circumstances the monetary liability of directors of the
Company for a breach of their fiduciary duty as directors. These provisions do
not eliminate the liability of a director (i) for a breach of the director's
duty of loyalty to the Company or its stockholders, (ii) for acts or omissions
by a director not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) for liability arising under Section 174 of the
Delaware General Corporation Law (relating to the declaration of dividends and
purchase or redemption of shares in violation of the Delaware General
Corporation Law) or (iv) for any transaction from which the director derived an
improper personal benefit. In addition, these provisions do not eliminate the
liability of a director for violations of federal securities law, nor do they
limit the rights of the Company or its stockholders, in appropriate
circumstances, to seek equitable remedies such as injunctive or other forms of
non-monetary relief. Such remedies may not be effective in all cases.

The Certificate and the Company's Bylaws, as amended (the "Bylaws"), provide
that the Company shall indemnify all of its directors and officers to the full
extent permitted by the Delaware General Corporation Law. Under such provisions,
any director or officer, who in his capacity as such, is made or threatened to
be made a party to any suit or proceeding, may be indemnified if the Board of
Directors determines such director or officer acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interest of
the Company. The Certificate, Bylaws and the Delaware General Corporation Law
further provide that such indemnification is not exclusive of any other rights
to which such individuals may be entitled under the Certificate, the Bylaws, any
agreement, vote of stockholders or disinterested directors or otherwise.

The Company expects to enter into indemnity agreements with each of its
directors and executive officers. Under each indemnity agreement, the Company
will pay on behalf of the indemnitee, and the indemnitee's executors,
administrators and heirs, any amount which he or she is or becomes legally
obligated to pay because of (i) any claim or claims from time to time threatened
or made against him or her by any person because of any act or omission or
neglect or breach of duty, including any actual or alleged error or misstatement
or misleading statement, which he or she commits or suffers while acting in his
or her capacity as a director and/or officer of the Company or an affiliate or
(ii) being a party, or being

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<PAGE>
threatened to be made a party, to any threatened, pending or contemplated
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he or she is or was an officer,
director, employee or agent of the Company or an affiliate or is or was serving
at the request of the Company as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise. The
payments which the Company will be obligated to make pursuant to such indemnity
agreement include, INTER ALIA, damages, charges, judgments, fines, penalties,
settlements and costs, costs of investigation and costs of defense of legal,
equitable or criminal actions, claims or proceedings and appeals therefrom, and
costs of attachment, supersedeas, bail, surety or other bonds. The Company also
intends to provide liability insurance for each of its directors and executive
officers.

CERTAIN TRANSACTIONS

The Company expects to redeem all of its Series B Preferred Stock in January
1998. Dr. Talley, Mr. Lee, Mrs. Bennett and Mr. Price beneficially own in equal
amounts all of the issued and outstanding shares of Series B Preferred Stock.
The redemption price for each share of Series B Preferred Stock is $10.00 per
share, resulting in the payment of $174,130 to each holder, for an aggregate
redemption cost of $696,520. The Company expects to issue notes to each holder
in the principal amount of the redemption consideration, with each note payable
on or prior to February 10, 1998 together with interest at an annual rate of
8.5% until paid.

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<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
AND PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of November 30, 1997, and as adjusted to
reflect the sale of Common Stock in the Equity Offering, by (i) each director of
the Company who owns Common Stock, (ii) each Named Executive Officer who owns
Common Stock, (iii) each person known or believed by the Company to own
beneficially 5% or more of the Common Stock, (iv) all directors and executive
officers as a group and (v) the Selling Stockholders. Unless otherwise
indicated, each person has sole voting and dispositive power with respect to
such shares.

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
BEFORE THE EQUITY OFFERING AFTER THE EQUITY OFFERING
--------------------------- ---------------------------
SHARES OF SHARES TO SHARES OF
NAME OF BENEFICIAL OWNER COMMON STOCK PERCENT BE SOLD COMMON STOCK PERCENT
- -------------------------------------------------- -------------- ----------- ----------- -------------- -----------
<S> <C> <C> <C> <C> <C>
William W. Talley II, Ph.D. (1)(2) ............... 675,000 24.75% 225,000 450,000 8.95%
9400 N. Broadway
Oklahoma City, Oklahoma 73114

Larry E. Lee (1)(2) .............................. 675,000 24.75 225,000 450,000 8.95
5100 E. Skelly Drive
Suite 650
Tulsa, Oklahoma 74135

M. Helen Bennett (1) ............................. 675,000 24.75 225,000 450,000 8.95
3333 Hagen Road
Napa, California 94558

William S. Price ................................. 702,000 25.74 225,000 477,000 9.49
13635 Deering Bay Drive #233
Coral Gables, Florida 33158

All executive officers and directors as a group (8
persons)........................................ 2,025,000 74.26 675,000 1,350,000 26.85
</TABLE>

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

(1) Director

(2) Named Executive Officer

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<PAGE>
DESCRIPTION OF NOTES

The Notes will be issued pursuant to the Indenture, to be dated as of the
Issue Date, by and among RAM Energy, Inc., the Subsidiary Guarantors and United
States Trust Company of New York, as Trustee (the "Trustee"). The terms of the
Notes include those stated in the Indenture and those made part of the Indenture
by reference to the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"). The following summaries of certain provisions of the Notes and
the Indenture do not purport to be complete and are subject to, and are
qualified in their entirety by reference, to all of the provisions of the
Indenture or the Notes, as applicable. Capitalized terms used herein, and not
otherwise defined herein, have the meanings defined under the heading "Certain
Definitions." ALL REFERENCES TO RAM ENERGY, INC. IN THE FOLLOWING SUMMARY REFER
EXCLUSIVELY TO RAM ENERGY, INC. AND NOT TO ANY OF ITS SUBSIDIARIES. Other
capitalized terms not otherwise defined herein have the meanings assigned to
them in the Indenture.

GENERAL

The Notes will be issued in full registered form only, without coupons, in
denominations of $1,000 and integral multiples thereof. Initially, the Trustee
will act as Paying Agent and Registrar for the Notes. The Notes may be presented
for registration of transfer and exchange at the offices of the Registrar, which
currently is the Trustee's corporate trust office in New York, New York. RAM
Energy, Inc. may change the Paying Agent and Registrar without notice to Holders
of the Notes. RAM Energy, Inc. will pay principal (premium, if any) and interest
on the Notes at the corporate trust offices of the Trustee or its agency in New
York, New York. In addition, in the event the Notes do not remain in book-entry
form, interest may be paid, at RAM Energy, Inc.'s option, by wire transfer or
check mailed to the registered addresses of the Holders as shown on the Note
Register.

The obligations of RAM Energy, Inc. under the Notes will be guaranteed by
the Subsidiary Guarantors. See "-- Ranking and Subsidiary Guarantees." All of
RAM Energy, Inc.'s Subsidiaries will be Subsidiary Guarantors unless, subject to
certain requirements of the Indenture, RAM Energy, Inc. designates one or more
future Subsidiaries as Unrestricted Subsidiaries. Unrestricted Subsidiaries will
not be subject to the restrictive covenants of the Indenture. See "-- Certain
Covenants -- Designation of Unrestricted Subsidiaries."

PRINCIPAL, MATURITY AND INTEREST

The Notes will be limited in aggregate principal amount to $100.0 million
and will mature on , 2008. Interest on the Notes will accrue at the rate
of % per annum and will be payable semi-annually on each and
commencing on , 1998 to the Persons who are registered Holders at the close
of business on and immediately preceding the applicable interest payment
date. Interest on the Notes will accrue from and including the most recent date
to which interest has been paid or, if no interest has been paid, from and
including the Issue Date. Interest will be computed on the basis of a 360-day
year comprised of twelve 30-day months.

OPTIONAL REDEMPTION

RAM Energy, Inc. will not have the right to redeem the Notes prior to
, 2003. Thereafter, RAM Energy, Inc. may redeem the Notes, at its option, in
whole or in part, at any time, at the following redemption prices (expressed as
a percentage of the outstanding principal amount) if redeemed during the

57
<PAGE>
twelve-month period commencing on of the year set forth below, plus, in
each case, accrued and unpaid interest thereon to the date of redemption:

<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- --------------------------------------------------------------------------------- -----------
<S> <C>
2003............................................................................. %
2004............................................................................. %
2005 and thereafter.............................................................. %
</TABLE>

Notwithstanding the foregoing, at any time on or prior to , 2001, RAM
Energy, Inc. may redeem up to $ million of the aggregate principal amount of
the Notes in cash at a redemption price equal to % of the principal amount of
the Notes so redeemed, together with accrued and unpaid interest thereon to the
redemption date, with the net proceeds of any Public Equity Offering, provided
that at least $ million in aggregate principal amount of the Notes remains
outstanding immediately after the occurrence of such redemption and provided
further that such redemption occurs within 60 days of the date of the closing of
such Public Equity Offering.

In the case of any partial redemption, selection of the Notes for redemption
will be made by the Trustee in compliance with the requirements of the principal
national securities exchange, if any, on which the Notes are listed, or if the
Notes are not listed, on a pro rata basis, by lot or by such other method as the
Trustee shall deem fair and appropriate, provided that no Note of $1,000 or less
shall be redeemed in part. Notice of redemption will be sent by first class
mail, at least 30 days and not more than 60 days prior to the date fixed for
redemption, to the Holder of each Note to be redeemed to such Holder's last
address as then shown upon the Note Register. Any notice which relates to a Note
to be redeemed in part only must state the portion of the principal amount to be
redeemed and must state that on and after the date fixed for redemption, upon
surrender of such Note, a new Note in a principal amount equal to the unredeemed
portion thereof will be issued. On and after the date fixed for redemption,
unless RAM Energy, Inc. defaults on its payment obligations, interest will cease
to accrue on the Notes or portions thereof called for redemption.

RANKING AND SUBSIDIARY GUARANTEES

The indebtedness of RAM Energy, Inc. evidenced by the Notes will rank senior
in right of payment to all Subordinated Indebtedness of RAM Energy, Inc. and
PARI PASSU in right of payment with all existing and future senior Indebtedness
of RAM Energy, Inc. Pursuant to the Subsidiary Guarantees, the Subsidiary
Guarantors will unconditionally guarantee, jointly and severally, on a senior
unsecured basis, to each Holder and the Trustee, the full and prompt payment and
performance of RAM Energy, Inc.'s obligations under the Indenture and the Notes,
including the payment of principal of, premium, if any, and interest on the
Notes. The Subsidiary Guarantees will rank PARI PASSU in right of payment to all
existing and future senior unsecured Indebtedness of each Subsidiary Guarantor.
The Notes and the Subsidiary Guarantees will be effectively subordinated,
however, to any secured Indebtedness of RAM Energy, Inc. and the Subsidiary
Guarantors to the extent of the collateral therefor, including any Indebtedness
under the Permitted Bank Credit Facility, which currently is secured by
substantially all of RAM Energy, Inc.'s oil and gas properties. As of September
30, 1997, on a pro forma basis, after giving effect to the issuance of the Notes
in the Debt Offering and the issuance of Common Stock in the Equity Offering,
and the application of the estimated net proceeds therefrom, RAM Energy, Inc.
would have had $0.2 million of senior Indebtedness outstanding, excluding the
Notes. See "Capitalization."

The Indenture also will provide that each of RB Operating Company and RLP
Gulf States, L.L.C., which constitute all of RAM Energy, Inc.'s Subsidiaries as
of the Issue Date, will be, and each Person (other than an Unrestricted
Subsidiary) that after the Issue Date becomes a Subsidiary of RAM Energy, Inc.
(whether by formation, acquisition or otherwise) shall become, a Subsidiary
Guarantor thereunder.

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<PAGE>
See "-- Certain Covenants -- Limitation on Incurrences of Additional
Indebtedness and Issuances of Disqualified Capital Stock."

The obligations of each Subsidiary Guarantor will be limited to the maximum
amount which, after giving effect to all other contingent and fixed liabilities
of such Subsidiary Guarantor and after giving effect to any collections from or
payments made by or on behalf of any other Subsidiary Guarantor in respect of
the obligations of such other Subsidiary Guarantor under its Subsidiary
Guarantee or pursuant to its contribution obligations under the Indenture, will
result in the obligations of such Subsidiary Guarantor under the Subsidiary
Guarantee not constituting a fraudulent conveyance or fraudulent transfer under
applicable federal or state law. Each Subsidiary Guarantor that makes a payment
or distribution under the Subsidiary Guarantee shall be entitled to a
contribution from each other Subsidiary Guarantor in a pro rata amount, based on
the net assets of RAM Energy, Inc. and each Subsidiary Guarantor, determined in
accordance with GAAP. See "Risk Factors -- Possible Limitations on
Enforceability of Subsidiary Guarantees."

The Indenture will provide that, subject to the following paragraph, each
Subsidiary Guarantor (including any existing or future Subsidiary Guarantor) may
not consolidate or merge with or into (whether or not such Subsidiary Guarantor
is the surviving Person) another Person or sell or convey all or substantially
all of its assets to another Person or group unless (i) the Person formed by or
surviving any such consolidation or merger (if other than such Subsidiary
Guarantor) or the transferee entity (a) is a corporation organized and existing
under the laws of the United States of America, any state thereof, or the
District of Columbia and (b) expressly assumes all the obligations of such
Subsidiary Guarantor pursuant to a supplemental indenture, in a form
satisfactory to the Trustee, under the Notes and the Indenture, and cause an
opinion of counsel in accordance with the terms of the Indenture to be delivered
to the Trustee, (ii) immediately before and after giving effect to such
transaction, no Default or Event of Default exists and immediately after giving
effect to such transaction, the resulting, surviving or transferee entity could
Incur $1.00 of additional Indebtedness (other than Permitted Indebtedness)
pursuant to the covenant described herein under the caption "-- Certain
Covenants -- Limitation on Incurrences of Additional Indebtedness and Issuances
of Disqualified Capital Stock," and (iii) such Subsidiary Guarantor or the
Person formed by or surviving any such consolidation or merger or the transferee
entity on a pro forma basis will have Net Worth (immediately after giving effect
to the transaction) equal to or greater than the Net Worth of such Subsidiary
Guarantor immediately preceding the transaction. The foregoing will not apply to
a merger, consolidation, sale or other such transaction between Subsidiary
Guarantors or between RAM Energy, Inc. and any Subsidiary Guarantor.

The Indenture will provide that in the event of (i) the designation of any
Subsidiary Guarantor as an Unrestricted Subsidiary or (ii) a sale or other
disposition of all or substantially all of the properties or assets of any
Subsidiary Guarantor to a third party or an Unrestricted Subsidiary, by way of
merger, consolidation or otherwise, or a sale or other disposition of all of the
Capital Stock of any Subsidiary Guarantor, in either case, in a transaction or
manner that does not violate any of the covenants in the Indenture, then such
Subsidiary Guarantor (in the event of such a designation or a sale or other
disposition (other than a lease), by way of such a merger, consolidation or
otherwise, or a disposition of all of the Capital Stock of such Subsidiary
Guarantor) or the Person acquiring such properties or assets (in the event of a
sale or other disposition (other than a lease) of all or substantially all of
the properties or assets of such Subsidiary Guarantor) will be released from and
relieved of any obligations under its Subsidiary Guarantee, provided that any
Net Cash Proceeds of such sale or other disposition are applied, and the Trustee
has received an officer's certificate from RAM Energy, Inc. that such Net Cash
Proceeds have been or shall be applied, in accordance with the covenant
described under the caption "-- Certain Covenants -- Limitation on Asset Sales,"
and provided, further, however, that any such termination shall occur only to
the extent that all obligations of such Subsidiary Guarantor under all of its
guarantees of, and under all of its pledges of assets or other security
interests that secure, any other Indebtedness of RAM Energy, Inc. or its
Subsidiary Guarantors shall also terminate upon such release, sale or
disposition.

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<PAGE>
REPURCHASE OF NOTES AT THE OPTION OF THE HOLDER UPON A CHANGE OF CONTROL

Upon the occurrence of a Change of Control, RAM Energy, Inc. shall be
obligated to make an irrevocable, unconditional offer to repurchase (a "Change
of Control Offer") and shall, subject to the provisions described below,
repurchase on a Business Day not more than 60 nor less than 30 days following
the occurrence of such Change of Control (the date on which the repurchase is
effected being referred to herein as the "Change of Control Payment Date"), all
of the then outstanding Notes validly tendered pursuant to such Change of
Control Offer, at a cash purchase price equal to 101% of the principal amount
thereof (the "Change of Control Purchase Price"), plus accrued and unpaid
interest thereon to the Change of Control Payment Date. The Change of Control
Offer is required to remain open for at least 20 Business Days and until the
close of business of the fifth Business Day prior to the Change of Control
Purchase Date.

In order to effect such Change of Control Offer, RAM Energy, Inc. (i) shall,
not later than five Business Days after the occurrence of the Change of Control,
notify the Trustee and (ii) shall, not later than 20 Business Days after the
occurrence of the Change of Control, make a Change of Control Offer to the
Holders of all of the then outstanding Notes, by sending written notice of a
Change of Control Offer, by first class mail, to each Holder at its registered
address, with a copy to the Trustee. The notice to Holders will contain all
instructions and materials required by applicable law, will contain or make
available to Holders other information material to such Holders' decision to
tender Notes pursuant to the Change of Control Offer and will otherwise govern
the terms of the Change of Control Offer.

On or before the Change of Control Payment Date, RAM Energy, Inc. will, to
the extent lawful, (i) accept for payment Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying
Agent an amount sufficient to pay the Change of Control Purchase Price of all
Notes so tendered, and (iii) deliver or cause to be delivered to the Trustee all
Notes so accepted, together with an officers' certificate listing the Notes or
portions thereof being purchased by RAM Energy, Inc. The Paying Agent will
promptly mail to the Holders of Notes so accepted payment in an amount equal to
the Change of Control Purchase Price for such Notes, plus accrued and unpaid
interest thereon to the Change of Control Payment Date, and the Trustee will
promptly cancel all Notes so accepted by RAM Energy, Inc. pursuant to the Change
of Control Offer and authenticate and mail (or cause to be transferred by book
entry) to such Holders a new Note equal in principal amount, as applicable, to
any unpurchased portion of the Note surrendered. Any Notes not so accepted will
be promptly mailed by RAM Energy, Inc. to the Holder thereof. RAM Energy, Inc.
will publicly announce the results of the Change of Control Offer on or as soon
as practicable after the Change of Control Payment Date.

The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as described
above with respect to a Change of Control, the Indenture will not contain
provisions that permit the Holders to require that RAM Energy, Inc. repurchase
or redeem the Notes in the event of a takeover, recapitalization or other
similar transaction of RAM Energy, Inc. The provisions of the Indenture may not
afford Holders protection in the event of a highly leveraged transaction,
reorganization, restructuring, merger or other similar transaction affecting RAM
Energy, Inc. that may adversely affect the Holders if such transaction is not
the type of transaction included within the definition of "Change of Control." A
transaction involving the management of RAM Energy, Inc. or any Affiliate or a
transaction involving a recapitalization of RAM Energy, Inc. will result in a
Change of Control only if it is the type of transaction specified in such
definition.

The existence of a Holder's right to require RAM Energy, Inc. to repurchase
Notes in connection with a Change of Control may deter a third party from
acquiring RAM Energy, Inc. in a transaction that would constitute a Change of
Control.

The source of funds for any repurchase of Notes upon a Change of Control
will be RAM Energy, Inc.'s cash or cash generated from operation or other
sources, including borrowings or sales of assets. The occurrence of a Change of
Control may result in a default under the Credit Facility and give the lenders

60
<PAGE>
the right to require RAM Energy, Inc. to repay all Indebtedness outstanding
thereunder; however, there can be no assurance that sufficient funds will be
available at the time of any Change of Control to repay all Indebtedness owing
or to make any required repurchase of the Notes. Any failure by RAM Energy, Inc.
to repurchase Notes tendered pursuant to a Change of Control Offer will
constitute an Event of Default. See "-- Events of Default and Remedies."

RAM Energy, Inc. will not be required to make a Change of Control Offer upon
a Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by RAM Energy,
Inc. and repurchases all Notes validly tendered and not withdrawn under such
Change of Control Offer.

The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of RAM Energy, Inc. Although there is a developing body of
judicial opinions interpreting the phrase "all or substantially all," no precise
standard exists under New York law, which is the law governing the Indenture and
the Notes. Accordingly, the ability of a Holder of Notes to require RAM Energy,
Inc. to repurchase such Notes as a result of a sale, lease, transfer, conveyance
or other disposition of less than all of the assets of RAM Energy, Inc. to
another Person or group is uncertain.

To the extent applicable and if required by law, RAM Energy, Inc. will
comply with Section 14 of the Exchange Act, the provisions of Regulation 14E and
any other tender offer rules under the Exchange Act and other securities laws,
rules, and regulations which may then be applicable to any offer by RAM Energy,
Inc. to repurchase the Notes at the option of Holders upon a Change of Control;
and, if such laws, rules, and regulations require or prohibit any action
inconsistent with the foregoing, compliance by RAM Energy, Inc. with such laws,
rules, and regulations will not constitute a breach of RAM Energy, Inc.'s
obligations with respect to the foregoing.

CERTAIN COVENANTS

The Indenture will contain, among others, the following covenants:

LIMITATION ON INCURRENCES OF ADDITIONAL INDEBTEDNESS AND ISSUANCES OF
DISQUALIFIED CAPITAL STOCK

The Indenture will provide that RAM Energy, Inc. may not, and may not permit
any of its Subsidiary Guarantors to, directly or indirectly, Incur any
Indebtedness or issue any Disqualified Capital Stock, except that RAM Energy,
Inc. or a Subsidiary Guarantor may Incur Indebtedness and RAM Energy, Inc. may
issue shares of Disqualified Capital Stock if, on a pro forma basis, after
giving effect to such Incurrence or issuance, as the case may be, and the
application of the proceeds therefrom, all of the following tests have been
satisfied:

(i) the Consolidated Fixed Charge Coverage Ratio for RAM Energy, Inc's.
Reference Period for which internal financial statements are available
immediately preceding the date on which such additional Indebtedness is Incurred
or such Disqualified Capital Stock is issued would have been (A) at least 2.0 to
1.0 if such additional Indebtedness is Incurred or such Disqualified Capital
Stock is issued during the period commencing on the Issue Date and ending on
December 31, 1998 or (B) at least 2.5 to 1.0 if such additional Indebtedness is
Incurred or such Disqualified Capital Stock is issued at any time thereafter;

(ii) no Default or Event of Default shall have occurred and be continuing at
the time such additional Indebtedness is Incurred or such Disqualified Capital
Stock is issued or would occur as the result of such Incurrence of such
additional Indebtedness or the issuance of such Disqualified Capital Stock; and

(iii) RAM Energy, Inc.'s Adjusted Consolidated Net Tangible Assets as of the
last day of the applicable Reference Period are equal to or greater than 150% of
the consolidated Indebtedness of RAM Energy, Inc. and its Subsidiary Guarantors.

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Notwithstanding the foregoing, if no Default or Event of Default shall have
occurred and be continuing at the time or as a consequence of the Incurrence of
such Indebtedness, RAM Energy, Inc. and any Subsidiary Guarantor may Incur
Permitted Indebtedness.

Any Indebtedness Incurred or Disqualified Capital Stock issued by any Person
that is not a Subsidiary Guarantor of RAM Energy, Inc., which Indebtedness or
Disqualified Capital Stock is outstanding at the time such Person becomes a
Subsidiary Guarantor of, or is merged into, or consolidated with RAM Energy,
Inc. or such Subsidiary Guarantor, as the case may be, shall be deemed to have
been Incurred or issued, as the case may be, at the time such Person becomes a
Subsidiary Guarantor of, or is merged into, or consolidated with RAM Energy,
Inc. or such Subsidiary Guarantor.

LIMITATION ON RESTRICTED PAYMENTS

(a) The Indenture will provide that RAM Energy, Inc. will not, and will not
permit any Subsidiary Guarantor to, directly or indirectly (i) declare or pay
any dividend on, or make any other distribution to holders of, any shares of
Capital Stock of RAM Energy, Inc. or any Subsidiary Guarantor (other than
dividends or distributions payable solely in shares of Qualified Capital Stock
of RAM Energy, Inc. or any Subsidiary Guarantor or dividends or distributions
payable to RAM Energy, Inc. or any wholly-owned Subsidiary Guarantor of RAM
Energy, Inc. or warrants, rights or options to acquire Qualified Capital Stock
of RAM Energy, Inc. or any Subsidiary Guarantor), (ii) purchase, redeem or
otherwise acquire or retire for value any such shares of Capital Stock of RAM
Energy, Inc. or any Affiliate (other than any Capital Stock owned by RAM Energy,
Inc. or any of its wholly-owned Subsidiary Guarantors), or any options, warrants
or other rights to acquire such Capital Stock, (iii) make any principal payment
on or repurchase, redeem, defease or otherwise acquire or retire for value,
prior to any scheduled principal payment, scheduled sinking fund payment or
maturity, any Subordinated Indebtedness, or (iv) make any Restricted Investment
(such payments or other actions described in clauses (i) through (iv) being
collectively referred to as a "Restricted Payment"), unless at the time of and
after giving effect to the proposed Restricted Payment (the amount of any such
Restricted Payment, if other than cash, shall be the amount determined by the
Board of Directors of RAM Energy, Inc., whose determination shall be conclusive
and evidenced by a Board Resolution),

(1) no Default or Event of Default shall have occurred and be continuing,

(2) RAM Energy, Inc. could Incur $1.00 of additional Indebtedness (other
than Permitted Indebtedness) in accordance with the covenant "-- Certain
Covenants -- Limitation on Incurrences of Additional Indebtedness and Issuances
of Disqualified Capital Stock," and

(3) the aggregate amount of all Restricted Payments declared or made after
the Issue Date shall not exceed the sum (without duplication) of the following:

(A) 50% of the Adjusted Consolidated Net Income of RAM Energy, Inc. accrued
on a cumulative basis during the period commencing with the first full quarter
after the Issue Date and ending on the last day of RAM Energy, Inc.'s last
fiscal quarter ending prior to the date of such proposed Restricted Payment (or
if Adjusted Consolidated Net Income is a loss, minus 100% of such loss), plus

(B) the aggregate Net Proceeds received after the Issue Date by RAM Energy,
Inc. from the issuance or sale (other than to any of its Subsidiary Guarantors)
of shares of Qualified Capital Stock of RAM Energy, Inc. or any options,
warrants or rights to purchase such shares of Qualified Capital Stock of RAM
Energy, Inc., plus

(C) the aggregate Net Proceeds received after the Issue Date by RAM Energy,
Inc. (other than from any of its Subsidiary Guarantors) upon the exercise of any
options, warrants or rights to purchase shares of Qualified Capital Stock of RAM
Energy, Inc., plus

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(D) the aggregate Net Proceeds received after the Issue Date by RAM Energy,
Inc. from the issuance or sale (other than to any of its Subsidiary Guarantors)
of Indebtedness or shares of Disqualified Capital Stock that have been converted
into or exchanged for Qualified Capital Stock of RAM Energy, Inc., together with
the aggregate cash received by RAM Energy, Inc. at the time of such conversion
or exchange, minus

(E) the amount of any write-downs or writeoffs (each expressed as a negative
amount), other negative revaluations, and other negative extraordinary charges
not otherwise reflected in Adjusted Consolidated Net Income of RAM Energy, Inc.
during such period.

(b) Notwithstanding paragraph (a) above, RAM Energy, Inc. and its Subsidiary
Guarantors may take the following actions so long as (in the case of clauses (2)
and (3) below) no Default or Event of Default shall have occurred and be
continuing:

(1) the payment of any dividend on Capital Stock of RAM Energy, Inc. or any
Subsidiary Guarantor within 60 days after the date of declaration thereof, if at
such declaration date such declaration complied with the provisions of paragraph
(a) above;

(2) the repurchase, redemption or other acquisition or retirement of any
shares of any class of Capital Stock of RAM Energy, Inc. or any Subsidiary
Guarantor, in exchange for, or out of the aggregate Net Proceeds from, a
substantially concurrent issue and sale (other than to a Subsidiary Guarantor)
of shares of Qualified Capital Stock of RAM Energy, Inc.; and

(3) the repurchase, redemption, repayment, defeasance or other acquisition
or retirement for value of any Subordinated Indebtedness in exchange for, or out
of the aggregate Net Proceeds from, a substantially concurrent issue and sale
(other than to a Subsidiary Guarantor) of (i) Subordinated Indebtedness
(provided such Indebtedness is on terms no less favorable to the Holders of the
Notes than the terms of the Subordinated Indebtedness being redeemed) or (ii)
shares of Qualified Capital Stock of RAM Energy, Inc.

The actions described in clause (1) of this paragraph (b) shall be
Restricted Payments that shall be permitted to be made in accordance with this
paragraph (b) but shall reduce the amount that would otherwise be available for
Restricted Payments under clause (3) of paragraph (a), provided that any
dividend paid pursuant to clause (1) of this paragraph (b) shall reduce the
amount that would otherwise be available under clause (3) of paragraph (a) when
declared, but not also when subsequently paid pursuant to clause (1) of this
paragraph (b), and provided that any Net Proceeds received under clauses (2) or
(3)(ii) of paragraph (b) shall not be included in subclauses (B) or (C) of
clause (3) of paragraph (a) above.

LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARY
GUARANTORS

The Indenture will provide that RAM Energy, Inc. may not, and may not permit
any of its Subsidiary Guarantors to, directly or indirectly, create, or permit
or suffer to exist or become effective any consensual encumbrance or restriction
on the ability of any Subsidiary Guarantor of RAM Energy, Inc. to (i) pay
dividends or make other distributions on its Capital Stock to RAM Energy, Inc.
or any of its other Subsidiary Guarantors, (ii) make loans or advances or pay
any Indebtedness or other obligations owed to RAM Energy, Inc. or to any other
Subsidiary Guarantor, or (iii) transfer any of its properties or assets to RAM
Energy, Inc. or to any other Subsidiary Guarantor, except encumbrances and
restrictions existing under (a) this Indenture, any Permitted Bank Credit
Facility as in effect on the Issue Date and any amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings thereof, provided that such amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings are no more restrictive with respect to such dividend and other
payment or transfer restrictions than those contained in the Permitted Bank
Credit Facility as in effect on the Issue Date and (b) any agreement of a Person
acquired by RAM Energy, Inc. or a Subsidiary Guarantor of RAM Energy, Inc.,
which restrictions existed at the time of acquisition, were not

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put in place in anticipation of such acquisition, and are not applicable to any
Person or property, other than the Person or any property of the Person so
acquired.

LIMITATION ON TRANSACTIONS WITH AFFILIATES

The Indenture will provide that RAM Energy, Inc. may not, and may not permit
any of its Subsidiary Guarantors to, enter directly or indirectly into, or
permit to exist, any transaction or series of related transactions with or for
the benefit of any Affiliate except for transactions made in good faith, the
terms of which are fair and reasonable to RAM Energy, Inc. or such Subsidiary
Guarantor, as the case may be, and are at least as favorable as the terms which
could be obtained by RAM Energy, Inc. or such Subsidiary Guarantor, as the case
may be, in a comparable transaction made on an arm's length basis with Persons
who are not Affiliates and RAM Energy, Inc. delivers (i) with respect to any
transaction or series of related transactions with an Affiliate involving
aggregate consideration in excess of $1 million, an officers' certificate
certifying that such transaction or transactions comply with this covenant, (ii)
with respect to any transaction or series of transactions with an Affiliate
involving aggregate consideration in excess of $2 million, a resolution of the
Board of Directors set forth in an officers' certificate certifying that such
transaction or transactions comply with this covenant and that such transaction
or transactions have been approved in good faith by a majority of the
disinterested members of the Board of Directors (which resolution shall be
conclusive evidence of compliance with this provision), provided that if there
is not a majority of disinterested directors able to approve such transaction,
RAM Energy, Inc. shall also deliver an opinion as to the fairness, from a
financial point of view, to RAM Energy, Inc. or such Subsidiary of such
transaction or transactions issued by an investment banking firm of recognized
national standing, which opinion shall be conclusive evidence of compliance with
this provision, and (iii) with respect to any transaction or series of
transactions with an Affiliate involving aggregate consideration in excess of $5
million, an officers' certificate as described in subclause (ii) above and an
opinion as to the fairness, from a financial point of view, to RAM Energy, Inc.
or such Subsidiary of such transaction or transactions issued by an investment
banking firm of recognized national standing, which resolution and opinion shall
be conclusive evidence of compliance with this provision; provided, however,
that this covenant will not restrict (i) transactions between RAM Energy, Inc.
and any of its Subsidiary Guarantors or transactions between Subsidiary
Guarantors of RAM Energy, Inc., (ii) Restricted Payments permitted by the
provisions of the Indenture described under the caption "-- Certain Covenants --
Limitation on Restricted Payments," (iii) any employee compensation arrangements
by RAM Energy, Inc. or any of its Subsidiaries which has been approved by a
majority of RAM Energy, Inc.'s disinterested directors and found in good faith
by such directors to be in the best interests of RAM Energy, Inc. or such
Subsidiary, as the case may be, and (iv) customary directors' fees and
indemnification and similar arrangements.

LIMITATION ON ASSET SALES

The Indenture will provide that RAM Energy, Inc. may not, and may not permit
any Subsidiary Guarantor to, consummate an Asset Sale unless (i) RAM Energy,
Inc. or such Subsidiary Guarantor, as the case may be, receives consideration at
the time of such Asset Sale at least equal to the fair market value (as
determined in good faith by resolution of the Board of Directors set forth in an
officers' certificate delivered to the Trustee, which determination shall be
conclusive evidence of compliance with this provision) of the assets or Capital
Stock being sold or issued or otherwise disposed of, and (ii) at least 85% of
the value of the consideration for such Asset Sales consists of cash, Cash
Equivalents or Exchange Assets or any combination thereof; provided that the
amount of any liabilities (as shown on RAM Energy, Inc.'s or such Subsidiary
Guarantor's most recent balance sheet) of RAM Energy, Inc. or any Subsidiary
Guarantor (other than contingent liabilities and liabilities that are
Subordinated Indebtedness or otherwise by their terms subordinated to the Notes
or the Subsidiary Guarantees) that are assumed by the transferee of such assets
pursuant to a customary novation agreement that releases RAM Energy, Inc. and
such Subsidiary Guarantor from further liability shall also be deemed to be cash
for purposes of this provision.

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Within 365 days after the receipt of any Net Cash Proceeds from an Asset
Sale, RAM Energy, Inc. or such Subsidiary Guarantor may apply such Net Cash
Proceeds, at its option, in any order or combination (i) to repay and
permanently reduce Indebtedness outstanding under any Permitted Bank Credit
Facility to which it or any Subsidiary Guarantor is a party, (ii) to make
Capital Expenditures or (iii) to make other acquisitions of assets to be used in
RAM Energy, Inc.'s and its Subsidiary Guarantors' Oil and Gas Business. Pending
the final application of any such Net Cash Proceeds, RAM Energy, Inc. or such
Subsidiary Guarantor may temporarily invest such Net Cash Proceeds in any manner
that is not prohibited by the terms of the Indenture. Any Net Cash Proceeds from
Asset Sales that are not applied as provided in clauses (i) through (iii) of the
first sentence of this paragraph will (after expiration of the relevant periods)
be deemed to constitute "Excess Cash."

When the amount of Excess Cash exceeds $10.0 million, RAM Energy, Inc. will
make an irrevocable, unconditional offer (an "Excess Cash Offer") to the Holders
to purchase the maximum amount of Notes which could be acquired by application
of such amount of Excess Cash as described herein (the "Excess Cash Offer
Amount"), in cash at the purchase price equal to 100% of the principal amount
thereof (the "Excess Cash Offer Price"), together with accrued and unpaid
interest to the Excess Cash Purchase Date.

Notice of an Excess Cash Offer will be sent at least 30 and not more than 60
days prior to the date on which the Notes tendered shall be accepted (the
"Excess Cash Purchase Date"), by first-class mail, by RAM Energy, Inc. to each
Holder at the address on the Note Register, with a copy to the Trustee. Such
notice will set forth the Excess Cash Purchase Date and the Excess Cash Offer
shall remain open for at least 20 Business Days and close no later than 30
Business Days after the date such notice is given. The notice to the Holders
will contain all information, instructions and materials required by applicable
law or otherwise material to such Holders' decision to tender Notes pursuant to
the Excess Cash Offer.

To the extent applicable and if required by law, RAM Energy, Inc. will
comply with Section 14 of the Exchange Act, the provisions of Regulation 14E and
any other tender offer rules under the Exchange Act and other securities laws,
rules, and regulations which may then be applicable to any Excess Cash Offer by
RAM Energy, Inc.; and, if such laws, rules, and regulations require or prohibit
any action inconsistent with the foregoing, compliance by RAM Energy, Inc. with
such laws, rules, and regulations will not constitute a breach of its
obligations with respect to the foregoing.

On or before an Excess Cash Purchase Date, RAM Energy, Inc. shall (i) accept
for payment Notes or portions thereof properly tendered pursuant to the Excess
Cash Offer, (ii) deposit with the Paying Agent money sufficient to pay the
Excess Cash Offer Price, plus accrued and unpaid interest thereon to the Excess
Cash Purchase Date of all Notes or portions thereof so accepted, and (iii)
deliver to the Trustee all Notes so accepted together with an officers'
certificate listing the Notes or portions thereof being purchased by RAM Energy,
Inc.. The Paying Agent shall promptly mail to Holders of Notes so accepted
payment in an amount equal to the Excess Cash Offer Price, plus accrued and
unpaid interest thereon to the Excess Cash Purchase Date. The Trustee shall
promptly cancel all Notes accepted by RAM Energy, Inc. pursuant to the Excess
Cash Offer and authenticate and mail to the Holders of Notes so accepted a new
Note equal to the principal amount of any unpurchased portion of the Note
surrendered. Any Notes not so accepted shall be promptly mailed by RAM Energy,
Inc. to the Holder thereof. RAM Energy, Inc. will publicly announce the results
of the Excess Cash Offer on or as soon as practicable after the Excess Cash
Purchase Date.

If the amount required to acquire all Notes tendered by Holders pursuant to
the Excess Cash Offer (the "Excess Cash Acceptance Amount") shall be less than
the aggregate Excess Cash Offer Amount, then the excess of the Excess Cash Offer
Amount over the Excess Cash Acceptance Amount may be used by RAM Energy, Inc. or
any Subsidiary Guarantor in any manner permitted by the Indenture. Upon
consummation of any Excess Cash Offer made in accordance with the terms of the
Indenture, the amount of Excess Cash will be reduced to zero.

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LIMITATION ON LIENS

The Indenture will provide that RAM Energy, Inc. may not, and may not permit
any Subsidiary Guarantor to, directly or indirectly, incur, or suffer to exist
any Lien upon any of their respective properties or assets, whether now owned or
hereafter acquired, other than Permitted Liens.

LIMITATION ON LINES OF BUSINESS

The Indenture will provide that RAM Energy, Inc. will not engage, and will
not permit any Subsidiary Guarantor to engage, in any line of business other
than the Oil and Gas Business, and such other business activities as are
reasonably and customarily related or incidental thereto.

DESIGNATION OF UNRESTRICTED SUBSIDIARIES

The Board of Directors of RAM Energy, Inc. may designate any Subsidiary
Guarantor to be an Unrestricted Subsidiary if such designation would not cause a
Default or an Event of Default and following such designation, RAM Energy, Inc.
could Incur $1.00 of additional Indebtedness (other than Permitted Indebtedness)
pursuant to the covenant described herein under the caption "-- Certain
Covenants -- Limitation on Incurrences of Additional Indebtedness and Issuances
of Disqualified Capital Stock." For purposes of making such determination, all
outstanding Investments by RAM Energy, Inc. and its Subsidiary Guarantors in the
Subsidiary so designated which have not been repaid in cash will be deemed to be
Restricted Payments at the time of such designation and will reduce the amount
available for Restricted Payments under clause (3) of paragraph (a) of the
covenant described under the caption "-- Certain Covenants -- "Limitation on
Restricted Payments." All such outstanding Investments will be deemed to
constitute Restricted Investments in an amount equal to the greater of the fair
market value or book value of such Investments at the time of such designation.
Such designation will only be permitted if such Restricted Payment would be
permitted at such time and if such Subsidiary Guarantor otherwise meets the
definition of an Unrestricted Subsidiary. In addition, the definition of
"Unrestricted Subsidiary" set forth under the caption "Certain Definitions"
describes additional requirements that a Subsidiary of RAM Energy, Inc. must
satisfy before it may be designated as an Unrestricted Subsidiary by the Board
of Directors of RAM Energy, Inc.

The Indenture will provide that neither RAM Energy, Inc. nor any Subsidiary
Guarantor, nor any Unrestricted Subsidiary may take any action or omit to take
any action which would cause any requirement in the definition of "Unrestricted
Subsidiary" set forth under the caption "Certain Definitions" not to be at all
times satisfied with respect to any Unrestricted Subsidiary, other than pursuant
to a redesignation as provided in the following paragraph. If, at any time
subsequent to the designation of a Person as an Unrestricted Subsidiary and
prior to a corresponding redesignation as provided in the next paragraph, any
requirement in the definition of "Unrestricted Subsidiary" set forth under the
caption "Certain Definitions" is not met with respect to such Unrestricted
Subsidiary, then such Unrestricted Subsidiary shall thereafter cease to be an
Unrestricted Subsidiary for purposes of the Indenture and any Indebtedness of
such Subsidiary shall be deemed Incurred as of such date.

The Board of Directors of RAM Energy, Inc. or any Subsidiary Guarantor may
designate any Unrestricted Subsidiary of such Person as a Subsidiary Guarantor
of such Person; provided that, (i) if the Unrestricted Subsidiary has any
Indebtedness outstanding or is otherwise liable for any Indebtedness or has a
negative Net Worth, then immediately after giving pro forma effect to such
designation, such Person could Incur at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) pursuant to the provisions described under
the heading "-- Certain Covenants -- Limitation on Incurrences of Additional
Indebtedness and Issuances of Disqualified Capital Stock" (assuming, for
purposes of this calculation, that each dollar of negative Net Worth is equal to
one dollar of Indebtedness), (ii) all Indebtedness of such Unrestricted
Subsidiary shall be deemed to be Incurred by a Subsidiary Guarantor of the
Person on the date such Unrestricted Subsidiary becomes a Subsidiary Guarantor,
and (iii) no Default or Event of

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Default would occur or be continuing after giving effect to such designation.
Any Subsidiary of an Unrestricted Subsidiary shall be an Unrestricted Subsidiary
for purposes of the Indenture.

LIMITATION ON THE SALE OR ISSUANCE OF CAPITAL STOCK OF SUBSIDIARY GUARANTORS

The Indenture will provide that RAM Energy, Inc. will not, directly or
indirectly, sell or otherwise dispose of any shares of Capital Stock of any
Subsidiary Guarantor, and shall not permit any Subsidiary Guarantor, directly or
indirectly, to issue or sell or otherwise dispose of any of its Capital Stock
except (i) to RAM Energy, Inc. or a wholly-owned Subsidiary Guarantor, or (ii)
if all shares of Capital Stock of such Subsidiary Guarantor are sold or
otherwise disposed of. In connection with any sale or disposition of Capital
Stock of any Subsidiary Guarantor, RAM Energy, Inc. will be required to comply
with the covenant described under the caption "-- Certain Covenants --
Limitation on Asset Sales."

OWNERSHIP AND RECOGNITION OF SUBSIDIARY GUARANTORS

The Indenture will provide (i) that all of the Capital Stock of each
Subsidiary Guarantor be owned, whether directly or indirectly, by RAM Energy,
Inc. and (ii) that all Persons (other than an Unrestricted Subsidiary) now or
hereafter becoming a Subsidiary of RAM Energy, Inc. (whether by formation,
acquisition or otherwise) shall be, and shall be recognized as, a Subsidiary
Guarantor for all purposes thereunder.

LIMITATION ON MERGER, SALE OR CONSOLIDATION

The Indenture will provide that RAM Energy, Inc. will not consolidate with
or merge with or into any other Person, or, directly or indirectly, sell, lease,
assign, transfer, or convey all or substantially all of its assets (computed on
a consolidated basis), to another Person or group of Persons acting in concert,
whether in a single transaction or through a series of related transactions,
unless (i) either (a) RAM Energy, Inc. is the continuing Person or (b) the
resulting, surviving, or transferee entity is a corporation organized under the
laws of the United States, any state thereof, or the District of Columbia, and
shall expressly assume all of the obligations of RAM Energy, Inc. under the
Indenture and the Notes by a supplemental indenture, executed and delivered to
the Trustee on or prior to the consummation of such transaction, in form
satisfactory to the Trustee, and cause to be delivered to the Trustee an opinion
of counsel in accordance with the terms of the Indenture, (ii) no Default or
Event of Default shall exist or shall occur immediately after giving effect to
such transaction, (iii) immediately after giving effect to such transaction on a
pro forma basis, the Net Worth of the resulting, surviving or transferee entity
is at least equal to the Net Worth of RAM Energy, Inc. immediately prior to such
transaction, (iv) except for a merger of RAM Energy, Inc. with or into any
wholly-owned Subsidiary Guarantor, the resulting, surviving or transferee entity
would, at the time of such transaction and after giving effect thereto, be
permitted to Incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) pursuant to the covenant described under the caption "--
Certain Covenants -- Limitation on Incurrences of Additional Indebtedness and
Issuances of Disqualified Capital Stock," (v) each Subsidiary Guarantor shall
have executed and delivered to the Trustee, in form satisfactory to the Trustee,
a supplemental indenture confirming such Subsidiary Guarantor's obligations to
pay the principal of and interest on the Notes pursuant to its Subsidiary
Guarantee and caused to be delivered to the Trustee an opinion of counsel in
accordance with the terms of the Indenture, and (vi) the Trustee shall have
received an opinion of counsel to the effect that such consolidation, merger,
conveyance, transfer or lease will not result in RAM Energy, Inc. being required
to make any deduction for or on account of taxes from payments made under or in
respect of the Notes. For purposes of this covenant, the Consolidated Fixed
Charge Coverage Ratio shall be determined on a pro forma consolidated basis
(after giving effect to the transaction) as if such transaction had occurred at
the beginning of the Reference Period immediately preceding such transaction.

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Upon any consolidation or merger or any transfer of all or substantially all
of the assets of RAM Energy, Inc. in accordance with the foregoing, the
successor Person formed by such consolidation or merger or the Person to whom
such transfer is made, shall succeed to, and be substituted for, and may
exercise every right and power of, RAM Energy, Inc. under the Indenture with the
same effect as if such successor corporation had been named as RAM Energy, Inc.
therein, but RAM Energy, Inc. in the case of a conveyance, transfer or lease
shall not be released from the obligation to pay principal of, premium (if any)
and interest on the Notes.

This covenant will include a phrase relating to the sale, lease, transfer,
conveyance or other dispositions of "all or substantially all" of the assets of
a Person. Although there is a developing body of judicial opinions interpreting
the phrase "all or substantially all," no precise standard exists under
applicable law. Accordingly, the ability of the Holders of the Notes to declare
an Event of Default as the result of such a disposition or series of
dispositions is uncertain.

FUTURE GUARANTORS

Promptly upon the acquisition or formation of a Person which becomes a
Subsidiary of RAM Energy, Inc. (other than a Person designated an Unrestricted
Subsidiary in accordance with the provisions under the caption " -- Certain
Covenants -- Designation of Unrestricted Subsidiaries"), RAM Energy, Inc. shall
cause such Subsidiary to execute and deliver a supplement to the Indenture
pursuant to which such Person will unconditionally guarantee to each Holder and
the Trustee, the full and prompt payment and performance of RAM Energy, Inc.'s
obligations under the Indenture and Notes, including the payment of principal
of, premium, if any, and interest on the Notes, such guarantee being limited in
maximum amount as otherwise provided under the caption "-- Certain Covenants --
Ranking and Subsidiary Guarantees," all in form satisfactory to the Trustee.

EVENTS OF DEFAULT AND REMEDIES

The Indenture will define an Event of Default as (i) the failure by RAM
Energy, Inc. to pay installments of interest on the Notes as and when the same
become due and payable and the continuance of any such failure for 30 days, (ii)
the failure by RAM Energy, Inc. to pay all or any part of the principal or
premium, if any, on the Notes when and as the same become due and payable at
maturity, redemption, by acceleration or otherwise, (iii) the failure by RAM
Energy, Inc. to comply with the provisions described under the caption "--
Certain Covenants -- Repurchase of Notes at the Option of the Holder Upon a
Change of Control," "-- Limitation on Asset Sales" or "-- Limitation on Merger,
Sale or Consolidation," (iv) the failure by RAM Energy, Inc. or any of its
Subsidiary Guarantors to observe or perform any other covenant, agreement or
warranty contained in the Notes, the Indenture or any Subsidiary Guarantee and,
subject to certain exceptions, the continuance of such failure for a period of
30 days after written notice is given to RAM Energy, Inc. by the Trustee or to
RAM Energy, Inc. and the Trustee by the Holders of at least 25% of the principal
amount of the Notes then outstanding, (v) certain events of bankruptcy,
insolvency, or reorganization in respect of RAM Energy, Inc. or any of its
Subsidiary Guarantors, (vi) a default which extends beyond any stated period of
grace applicable thereto (including any extension thereof) under any mortgage,
indenture, or instrument under which there is outstanding any Indebtedness of
RAM Energy, Inc. or any of its Subsidiary Guarantors aggregating in excess of
$1.0 million or a failure to pay such Indebtedness at its stated maturity,
provided that a waiver by all of the lenders of such Indebtedness of such
default shall constitute a waiver hereunder for the same period, (vii) one or
more final judgments not covered by insurance aggregating at least $1.0 million
at any one time rendered against RAM Energy, Inc. or any of its Subsidiary
Guarantors and not stayed or discharged within 60 days, (viii) any Note or the
Indenture not being in full force and effect (except where no material adverse
effect to the Holders of the Notes would result), or (ix) any of the Subsidiary
Guarantees ceases to be in full force and effect, or any of the Subsidiary
Guarantees is declared to be null and void or unenforceable, or any of the
Subsidiary Guarantees is found to be invalid, or RAM Energy, Inc. or any
Subsidiary Guarantor

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denies liability under any Subsidiary Guarantee (other than by reason of release
of a Subsidiary Guarantor in accordance with the terms of the Indenture).

The Indenture will provide that if an Event of Default occurs and is
continuing and if it is known to the Trustee, the Trustee must, within 90 days
after the occurrence of such Event of Default, give to the Holders notice of
such default; provided, that, except in the case of default in payment of
principal of, premium, if any, or interest on the Notes, the Trustee will be
protected in withholding such notice if it in good faith determines that the
withholding of such notice is in the interest of the Holders of the Notes.

If an Event of Default occurs and is continuing (other than an Event of
Default specified in clause (v) above), then in every such case, unless the
principal of all of the Notes shall have already become due and payable, either
the Trustee or the Holders of 25% of the principal amount of Notes then
outstanding, by notice in writing to RAM Energy, Inc. (and to the Trustee if
given by Holders), may declare all principal of, premium, if any, and accrued
interest on the Notes to be due and payable immediately. If an Event of Default
specified in clause (v) above occurs, all principal, premium, if any, and
accrued interest on the Notes will be immediately due and payable on all
outstanding Notes without any declaration or other act on the part of the
Trustee or the Holders. The Holders of not less than a majority of the principal
amount of Notes are authorized to rescind such acceleration if any existing
Events of Default, other than the non-payment of the principal of, premium, if
any, and interest on the Notes which have become due solely by such
acceleration, have been cured or waived.

Prior to the declaration of acceleration of the Notes, the Holders of a
majority of the Notes at the time outstanding may waive on behalf of all the
Holders any Default or Event of Default, except a Default in the payment of
principal of, premium, if any, or interest on any Note not yet cured, or a
Default, or Event of Default with respect to any covenant or provision which
cannot be modified or amended without the consent of all of the Holders of the
Notes. Subject to the provisions of the Indenture relating to the duties of the
Trustee, the Trustee will be under no obligation to exercise any of its rights
or powers under the Indenture at the request, order or direction of any of the
Holders, unless such Holders have offered to the Trustee reasonable security or
indemnity. Subject to all provisions of the Indenture, the Holders of a majority
of the Notes at the time outstanding will have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee or exercising any trust or power conferred on the Trustee.

LEGAL DEFEASANCE; SATISFACTION AND DISCHARGE OF THE INDENTURE

RAM Energy, Inc. will be deemed to have paid and discharged the entire
indebtedness on all of the outstanding Notes (except as to (i) rights of
registration of transfer, substitution, and exchange of Notes and RAM Energy,
Inc.'s right of optional redemption, (ii) rights of Holders to receive payments
of principal of, premium, if any, and interest on the Notes (but not the Change
of Control Purchase Price or the Excess Cash Offer Price) and any other rights
of the Holders with respect to such amounts, (iii) the rights, obligations and
immunities of the Trustee under the Indenture, and (iv) certain other specified
provisions in the Indenture (the foregoing exceptions (i) through (iv) are
collectively referred to as the "Reserved Rights")) on the 91st day (or one day
after such other greater period of time in which any such deposit of trust funds
may remain subject to set aside or avoidance under applicable bankruptcy or
insolvency laws, e.g., one year after any such deposit) after the irrevocable
deposit by RAM Energy, Inc. with the Trustee, in trust for the benefit of the
Holders, of (i) money in an amount, (ii) U.S. Government Obligations which
through the payment of interest and principal will provide, not later than one
day before the due date of payment in respect of the Notes, money in an amount,
or (iii) a combination thereof, sufficient to pay and discharge the principal
of, premium, if any, and interest on the Notes then outstanding on the Stated
Maturity Date or on the applicable redemption date, as the case may be, and RAM
Energy, Inc. must specify whether the Notes are being defeased to the Stated
Maturity Date or to a particular redemption date. Such a trust may be
established only if certain conditions are satisfied, including delivery by RAM
Energy, Inc. to the Trustee of an opinion of outside counsel acceptable to the

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Trustee (who may be outside counsel to RAM Energy, Inc.) to the effect that (i)
the defeasance and discharge will not be deemed, or result in, a taxable event
for Federal income tax purposes, with respect to the Holders, (ii) RAM Energy,
Inc.'s deposit will not result in RAM Energy, Inc. or any Subsidiary Guarantor,
the trust or the Trustee being subject to regulation under the Investment
Company Act of 1940, and (iii) after the passage of 90 days (or any greater
period of time in which any such deposit of trust funds may remain subject to
bankruptcy or insolvency laws insofar as those laws apply to RAM Energy, Inc. or
any Subsidiary Guarantor) following the deposit of the trust funds, such funds
will not be subject to set aside or avoidance under any bankruptcy, insolvency,
or other similar laws affecting creditors' rights generally. The Indenture will
not be discharged if, among other things, an Event of Default relating to
certain events of bankruptcy, insolvency or reorganization of RAM Energy, Inc.
or any Subsidiary Guarantor shall have occurred and be continuing on the date of
such deposit. The Indenture and any Subsidiary Guarantee will cease to be of
further effect as to all outstanding Notes when (i) all outstanding Notes have
been delivered to the Trustee for cancellation or (ii) RAM Energy, Inc. has paid
or caused to be paid the principal of, premium, if any, and interest on the
Notes.

REPORTS

The Indenture will require RAM Energy, Inc. to furnish to the Trustee,
within 60 days after the end of each fiscal quarter or 90 days after the end of
a fiscal quarter that is also the end of a fiscal year, an officers' certificate
to the effect that responsible officers of RAM Energy, Inc. have conducted or
supervised a review of the activities of RAM Energy, Inc. and its Subsidiaries
and of performance under the Indenture and that, to the best of such officers'
knowledge, based on their review, RAM Energy, Inc. has fulfilled all of its
obligations under the Indenture or, if there has been a Default, specifying each
Default known to them, its nature and its status. RAM Energy, Inc. will also be
required to notify the Trustee of any changes in the composition of the Board of
Directors of RAM Energy, Inc. or any of its Subsidiaries or of any amendment to
the charter or bylaws of RAM Energy, Inc. or any of its Subsidiaries.

Each of RAM Energy, Inc. and its Subsidiaries, where applicable, shall
deliver to the Trustee and to each Holder, within 15 days after it files them
with the Commission, copies of all reports and information that it is required
to file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act.
In addition, whether or not required by the rules and regulations of the
Commission, RAM Energy, Inc. will file a copy of all such information with the
Commission for public availability (unless the Commission will not accept such a
filing) and make such information available to investors or prospective
investors who request it in writing.

Concurrently with the reports delivered pursuant to the preceding paragraph,
RAM Energy, Inc. will be required to deliver to the Trustee and to each Holder
annual and quarterly financial statements with appropriate footnotes of RAM
Energy, Inc. and its consolidated Subsidiaries, all prepared and presented in a
manner substantially consistent with those of RAM Energy, Inc. required by the
preceding paragraph.

RAM Energy, Inc. is required upon becoming aware of any Default or Event of
Default to deliver to the Trustee a statement specifying such Default or Event
of Default.

AMENDMENTS AND SUPPLEMENTS

The Indenture will contain provisions permitting RAM Energy, Inc., the
Subsidiary Guarantors and the Trustee to amend or supplement the Indenture or
enter into a supplemental indenture for certain limited purposes without the
consent of the Holders, including curing ambiguities, defects or
inconsistencies, releasing Subsidiary Guarantees as described under the caption
"-- Ranking and Subsidiary Guarantees" or making any other change with respect
to matters arising under the Indenture, so long as such change does not
adversely affect the rights of any of the Holders. With the consent of the
Holders of not less than a majority of the principal amount of the Notes then
outstanding, RAM Energy, Inc., the Subsidiary Guarantors and the Trustee will be
permitted to amend or supplement the Indenture or enter

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into any supplemental indenture or modify the rights of the Holders; provided
that no such modification may, without the consent of the Holders of not less
than 66% of the principal amount of the Notes then outstanding, (i) prior to the
date on which a Change of Control Offer is required to be made, reduce the
Change of Control Purchase Price or alter the provisions of the covenant
described herein under the caption "-- Repurchase of Notes at the Option of the
Holder Upon a Change of Control," (ii) prior to the date upon which an Excess
Cash Offer is required to be made, reduce the Excess Cash Offer Price or alter
the provisions of the covenant described herein under the caption "-- Certain
Covenants -- Limitation on Asset Sales," in a manner adverse to the Holders;
provided further, that no such modification may, without the consent of each
Holder (a) change the stated maturity date or the date any installment of
principal of, or any installment of interest on, any Note is due, or reduce the
principal amount thereof or the rate of interest thereon or any premium payable
upon the redemption thereof, or change the place of payment where, or the coin
or currency in which, any Note or any premium or the interest thereon is payable
or impair the right to institute suit for the enforcement of any such payment on
or after the stated maturity date thereof (or, in the case of redemption, on or
after the redemption date), or, (b) after the date upon which a Change of
Control Offer is required to be made, reduce the Change of Control Purchase
Price or alter the provisions of the covenant described herein under the caption
"-- Repurchase of Notes at the Option of the Holder Upon a Change of Control" or
(c) after the date upon which an Excess Cash Offer is required to be made,
reduce the Excess Cash Offer Price or alter the provisions of the covenant
described under the caption "-- Certain Covenants -- Limitation on Asset Sales"
in a manner adverse to the Holders, (iii) reduce the percentage of the
outstanding Notes whose consent is required for any such amendment, supplemental
indenture, or waiver provided for in the Indenture, (iv) modify certain of the
waiver provisions, except to increase any required percentage or to provide that
certain other provisions of the Indenture cannot be modified or waived without
the consent of all Holders of the Notes, (v) adversely affect the ranking of the
Notes or the Subsidiaries Guarantees; or (vi) release any Subsidiary Guarantee,
in any case otherwise than in accordance with the terms of the Indenture.

CONCERNING THE TRUSTEE

The Indenture will contain certain limitations on the rights of the Trustee,
should it become a creditor of RAM Energy, Inc. or any Subsidiary Guarantor, to
obtain payment of claims in certain cases, or to realize on certain property
received in respect of any such claim as security or otherwise. The Trustee will
be permitted to engage in other transactions; however, if it acquires any
conflicting interests, it must eliminate such conflict within 90 days, apply to
the Commission for permission to continue or resign.

The Holders of a majority of the principal amount of the then outstanding
Notes will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture will provide that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the conduct
of his own affairs. Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any Holder of the Notes.

NO PERSONAL LIABILITY OF STOCKHOLDERS, OFFICERS OR DIRECTORS

No stockholder, officer, or director, as such, past, present, or future of
RAM Energy, Inc. or any of its Subsidiaries or any successor corporation of any
of them shall have any personal liability in respect of the obligations of RAM
Energy, Inc. or such Subsidiary under the Notes, the Indenture or any Subsidiary
Guarantees by reason of his or its status as such stockholder, officer, or
director.

GOVERNING LAW

The Indenture, the Notes and any Subsidiary Guarantees will be governed by
the laws of the State of New York.

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CERTAIN DEFINITIONS

Set forth below is a summary of certain defined terms contained in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided.

"Adjusted Consolidated Net Income" of RAM Energy, Inc. for any period means
the Net Income (loss) of RAM Energy, Inc. and its Subsidiary Guarantors for such
period, determined in accordance with GAAP, excluding (i) the Net Income of any
Unrestricted Subsidiary which is a consolidated Subsidiary for such period and
(ii) the amount of the deduction from Net Income of RAM Energy, Inc.
attributable to the minority interest in any Unrestricted Subsidiary which is a
consolidated Subsidiary for such period.

"Adjusted Consolidated Net Tangible Assets" means (without duplication), as
of the date of determination, (i) the sum of (a) discounted future net revenue
from proved oil and gas reserves of RAM Energy, Inc. and its Subsidiary
Guarantors calculated in accordance with SEC guidelines before any state or
federal income taxes, as estimated or audited by independent petroleum engineers
in one or more Reserve Reports prepared as of the end of RAM Energy, Inc.'s most
recently completed fiscal year as increased by, as of the date of determination,
the discounted future net revenue of (A) estimated proved oil and gas reserves
of RAM Energy, Inc. and its Subsidiary Guarantors attributable to any
acquisition consummated since the effective date of such year-end Reserve
Reports and (B) estimated oil and gas reserves of RAM Energy, Inc. and its
Subsidiary Guarantors attributable to extensions, discoveries and other
additions and upward revisions of estimates of proved oil and gas reserves due
to exploration, development or exploitation, production or other activities
conducted or otherwise occurring since the effective date of such year-end
Reserve Reports which, in the case of sub-clauses (A) and (B), would, in
accordance with standard industry practice, result in such increases, in each
case calculated in accordance with SEC guidelines (utilizing the prices and
costs utilized in such year-end Reserve Reports), and decreased by, as of the
date of determination, the discounted future net revenue of (C) estimated proved
oil and gas reserves of RAM Energy, Inc. and its Subsidiary Guarantors produced
or disposed of since the effective date of such year-end Reserve Reports and (D)
reductions in the estimated oil and gas reserves of RAM Energy, Inc. and its
Subsidiary Guarantors since the effective date of such year-end Reserve Reports
attributable to downward revisions of estimates of proved oil and gas reserves
due to exploration, development or exploitation, production or other activities
conducted or otherwise occurring since the effective date of such year-end
Reserve Reports which would, in accordance with standard industry practice,
result in such revisions, in each case calculated in accordance with SEC
guidelines (utilizing the prices utilized in such year-end Reserve Reports);
provided that, in the case of each of the determinations made pursuant to
sub-clauses (A) through (D) above, such increases and decreases shall be as
estimated by RAM Energy, Inc.'s engineers, except that if there is a Material
Change and in connection with the Incurrence of Indebtedness for which the
Consolidated Fixed Charge Coverage Ratio must be determined, all or any part of
an increase in discounted future net revenue resulting from the matters
described in sub-clauses (A) and (B) above is needed to permit the Incurrence of
such Indebtedness, then the discounted future net revenue utilized for purposes
of this clause (a) (i) shall be confirmed in writing by independent petroleum
engineers, provided further that, if the events referred to in sub-clauses (C)
and (D) above, when taken alone, would not cause a Material Change, then such
written confirmation need only cover the incremental additions to discounted
future net revenue resulting from the determinations made pursuant to
sub-clauses (A) and (B) above to the extent needed to permit the Incurrence of
such Indebtedness, (ii) the capitalized costs that are attributable to oil and
gas properties of RAM Energy, Inc. and its Subsidiary Guarantors to which no
proved oil and gas reserves are attributed, based on RAM Energy, Inc.'s books
and records as of a date no earlier than the date of RAM Energy, Inc.'s latest
annual or quarterly financial statements, (iii) the Net Working Capital on a
date no earlier than the date of RAM Energy, Inc.'s latest annual or quarterly
financial statements and (iv) the greater of (A) the net book value on a date no
earlier than the date of RAM Energy, Inc.'s latest annual or quarterly financial
statements and (B) the appraised value, as estimated by independent appraisers,
of other tangible assets (including the amount of Investments in

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unconsolidated Subsidiaries) of RAM Energy, Inc. and its Subsidiary Guarantors,
as of a date no earlier than the date of RAM Energy, Inc.'s latest audited
financial statements, minus (ii) the sum of (a) minority interests, (b) any
non-current portion of gas balancing liabilities of RAM Energy, Inc. and its
Subsidiary Guarantors reflected in RAM Energy, Inc.'s latest annual or quarterly
financial statements, (c) the discounted future net revenue, calculated in
accordance with SEC guidelines (utilizing the prices utilized in RAM Energy,
Inc.'s year-end Reserve Reports), attributable to reserves which are required to
be delivered to third parties to fully satisfy the obligations of RAM Energy,
Inc. and its Subsidiary Guarantors with respect to Production Payments on the
schedules specified with respect thereto, (d) the discounted future net revenue,
calculated in accordance with SEC guidelines (utilizing the same prices utilized
in RAM Energy, Inc.'s initial or year-end Reserve Reports), attributable to
reserves subject to participation interests, overriding royalty interests or
other interests of third parties, pursuant to participation, partnership, vendor
financing or other agreements then in effect, or which otherwise are required to
be delivered to third parties and (e) the amount of environmental liabilities
payable by RAM Energy, Inc. or any Subsidiary Guarantor. If RAM Energy, Inc.
changes its method of accounting from the full cost method to the successful
efforts method or a similar method of accounting, Adjusted Consolidated Net
Tangible Assets will continue to be calculated as if RAM Energy, Inc. was still
using the full cost method of accounting.

"Affiliate" means (i) any Person, directly or indirectly, controlling or
controlled by or under direct or indirect common control with RAM Energy, Inc.
or any Subsidiary of RAM Energy, Inc. or any officer, director, or employee of
RAM Energy, Inc. or any Subsidiary of RAM Energy, Inc. or of such Person, (ii)
the spouse, any immediate family member, or any other relative who has the same
principal residence of any Person described in clause (i) above, and any Person,
directly or indirectly, controlling or controlled by or under direct or indirect
common control with, such spouse, family member or other relative, and (iii) any
trust in which any Person described in clause (i) or (ii), above, is a fiduciary
or has a beneficial interest. For purposes of this definition the term "control"
means (i) the power to direct the management and policies of a Person, directly
or through one or more intermediaries, whether through the ownership of voting
securities, by contract, or otherwise, or (ii) the beneficial ownership of 10%
or more of the voting common equity of such Person (on a fully diluted basis) or
of warrants or other rights to acquire such equity (whether or not presently
exercisable).

"Asset Sale" means (i) any direct or indirect conveyance, sale, transfer or
other disposition (including through damage or destruction for which Insurance
Proceeds are paid or by condemnation), in one transaction or a series of related
transactions, of any of the properties, businesses or assets of RAM Energy, Inc.
or any Subsidiary Guarantor, whether owned on the Issue Date or thereafter
acquired or (ii) any sale or other disposition by RAM Energy, Inc. of any
Capital Stock of any Affiliate, Unrestricted Subsidiary or any Subsidiary
Guarantor of RAM Energy, Inc.. Notwithstanding the foregoing, the following will
not be deemed to be an Asset Sale: (a) the conveyance, sale, lease, transfer or
other disposition by any of RAM Energy, Inc.'s Subsidiary Guarantors of any or
all of its assets (upon voluntary liquidation or otherwise) to RAM Energy, Inc.;
(b) the conveyance, sale, lease, transfer or other disposition by any Subsidiary
Guarantor of any or all of its assets (upon voluntary liquidation or otherwise)
to another Subsidiary Guarantor; (c) non-material dispositions of assets in the
ordinary course of business; (d) Asset Sales not otherwise included by clauses
(a) through (c) or (f) and (g) of this sentence provided that the aggregate
proceeds from all such Asset Sales do not exceed $1.0 million in any
twelve-month period; (e) the disposition of all or substantially all of the
assets of (i) RAM Energy, Inc. and its Subsidiary Guarantors, taken as a whole,
or (ii) RAM Energy, Inc., if such disposition is governed by the provisions of
the covenant captioned "-- Repurchase of Notes at the Option of Holder Upon a
Change of Control" or "-- Covenants -- Limitation on Merger, Sale or
Consolidation;" (f) a conveyance, sale, assignment, lease, license, transfer,
abandonment or other disposal by RAM Energy, Inc. and its Subsidiary Guarantors
of (i) damaged, worn out, unserviceable or other obsolete property in the
ordinary course of business or (ii) other property no longer necessary for the
proper conduct of their business; and (g) the conveyance,

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sale, transfer or other disposition by RAM Energy, Inc. and its Subsidiary
Guarantors of crude oil and natural gas production and refined products in the
ordinary course of business.

"Attributable Indebtedness" in respect of a Sale and Leaseback Transaction
means, at the time of determination, the present value (discounted at the rate
of interest implicit in such transaction, determined in accordance with GAAP or,
in the event that such rate of interest is not reasonably determinable,
discounted at the rate of interest borne by the Notes) of the obligation of the
lessee for net rental payments during the remaining term of the lease included
in such Sale and Leaseback Transaction (including any period for which such
lease has been extended or may, at the option of the lessor, be extended).

"Business Day" means any day other than a Saturday, Sunday or any other day
on which banking institutions in the cities of New York, New York are required
or authorized by law or other governmental action to be closed.

"Capital Expenditures" of a Person means expenditures (whether paid in cash
or accrued as a liability) by such Person or any of its Subsidiaries that, in
conformity with GAAP, are or would be included in "capital expenditures,"
"additions to property, plant, or equipment" or comparable items in the
consolidated financial statements of such Person consistent with prior
accounting practices.

"Capital Stock" means, with respect to any Person, any capital stock of such
Person and shares, interests, participations, or other ownership interests
(however designated) of such Person and any rights (other than debt securities
convertible into corporate stock), warrants or options to purchase any of the
foregoing, including without limitation, each class of common stock and
preferred stock of such Person, if such Person is a corporation, and each
general or limited partnership interest or other equity interest of such Person,
if such Person is a partnership or limited liability company.

"Capitalized Lease Obligation" means obligations under a lease that are
required to be capitalized for financial reporting purposes in accordance with
GAAP, and the amount of Indebtedness represented by such obligations shall be
the capitalized amount of such obligations, as determined in accordance with
GAAP.

"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of not more than one
year from the date of acquisition, (iii) certificates of deposit with maturities
of one year or less from the date of acquisition, bankers' acceptances with
maturities not exceeding one year, and overnight bank deposits, in each case,
with any Eligible Institution, (iv) repurchase obligations with a term of not
more than seven days for underlying securities of the types described in clauses
(ii) and (iii) entered into with any Eligible Institution, (v) commercial paper
rated "P-l," "A-l" or the equivalent thereof by Moody's Investors Service, Inc.
or Standard & Poor's Ratings Service, respectively, and in each case maturing
within 180 days after the date of acquisition, (vi) shares of money market
funds, including those of the Trustee, that invest solely in United States
dollars and securities of the types described in clauses (i) through (v), and
(vii) demand and time deposits and certificates of deposit with an Eligible
Institution or with commercial banks insured by the Federal Deposit Insurance
Corporation.

"Change of Control" means the occurrence of (i) the sale, lease, transfer,
conveyance or other disposition, in one or a series of related transactions, of
all or substantially all of the assets of RAM Energy, Inc. to any person (as
such term is used in Section 13(d)(3) of the Exchange Act) other than to a
Subsidiary Guarantor, (ii) RAM Energy, Inc. consolidates with or merges into
another Person or any Person consolidates with, or merges into, RAM Energy,
Inc., in any such event pursuant to a transaction in which the outstanding
Voting Stock of RAM Energy, Inc. is changed into or exchanged for cash,
securities or other property, other than any such transaction where (a) the
outstanding Voting Stock of RAM Energy, Inc. is changed into or exchanged for
Voting Stock of the surviving or resulting Person that is Qualified Capital
Stock and (b) the holders of the Voting Stock of RAM Energy, Inc. immediately
prior to

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such transaction own, directly or indirectly, not less than a majority of the
Voting Stock of the surviving or resulting Person immediately after such
transaction, (iii) the adoption of a plan relating to the liquidation or
dissolution of RAM Energy, Inc. not involving a merger or consolidation or a
sale or other disposition of assets described in clause (i) above, (iv) the
consummation of any transaction (including, without limitation, any merger or
consolidation) the result of which is that any person (as defined above),
excluding the Permitted Holders, becomes the "beneficial owner" (as that term is
used in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly,
of more than 50% of the total voting power of RAM Energy, Inc.'s then
outstanding Voting Stock; provided that the sale of Voting Stock of RAM Energy,
Inc. to a Person or Persons acting as underwriters in connection with a firm
commitment underwriting shall not constitute a Change of Control, or (v) the
first day on which a majority of the members of the Board of Directors of RAM
Energy, Inc. are not Continuing Directors (other than by action of the Permitted
Holders). For purposes of this definition, any transfer of an equity interest of
an entity that was formed for the purpose of acquiring Voting Stock of RAM
Energy, Inc. will be deemed to be a transfer of such portion of such Voting
Stock as corresponds to the portion of the equity of such entity that has been
so transferred.

"Change of Control Offer" shall have the meaning given to it as described
under the caption "-- Certain Covenants -- Repurchase of Notes at the Option of
the Holder Upon a Change of Control."

"Change of Control Purchase Price" shall have the meaning given to it as
described under the caption "-- Certain Covenants -- Repurchase of Notes at the
Option of the Holder Upon a Change of Control."

"Commission" means the Securities and Exchange Commission.

"Consolidated Fixed Charge Coverage Ratio" on any date means, with respect
to RAM Energy, Inc., the ratio, on a pro forma basis, of (i) the aggregate
amount of EBITDA attributable to continuing operations and businesses (exclusive
of the amounts attributable to operations and businesses discontinued or
disposed of, on a pro forma basis as if such operations and businesses were
discontinued or disposed of on the first day of the Reference Period) for the
Reference Period to (ii) the aggregate Consolidated Interest Expense (exclusive
of amounts attributable to discontinued operations and businesses on a pro forma
basis as if such operations and businesses were discontinued or disposed of on
the first day of the Reference Period, but only to the extent that the
obligations giving rise to such Consolidated Interest Expense would no longer be
obligations contributing to Consolidated Interest Expense subsequent to the date
of discontinuation or disposal) during the Reference Period; provided, that for
purposes of such computation, in calculating EBITDA and Consolidated Interest
Expense, (a) the transaction giving rise to the need to calculate the
Consolidated Fixed Charge Coverage Ratio shall be assumed to have occurred on
the first day of the Reference Period, (b) the Incurrence of any Indebtedness or
issuance of Disqualified Capital Stock or the retirement of any Indebtedness or
Capital Stock during the Reference Period or subsequent thereto shall be assumed
to have occurred on the first day of such Reference Period, and (c) Consolidated
Interest Expense attributable to any Indebtedness (whether existing or being
Incurred) bearing a floating interest rate shall be computed as if the rate in
effect on the date of determination had been the applicable rate for the entire
period, unless RAM Energy, Inc. or any of its Subsidiary Guarantors is a party
to a Swap Obligation (that remains in effect for the 12-month period after the
date of determination) that has the effect of fixing the interest rate on the
date of computation, in which case such rate (whether higher or lower) shall be
used.

"Consolidated Interest Expense" means, for any period, the aggregate
interest expense (without duplication), during such period in respect of all
Indebtedness of RAM Energy, Inc. and its Subsidiary Guarantors (including all
commissions, discounts, other fees and charges owed with respect to letters of
credit and banker's acceptance financing and costs associated with Swap
Obligations) determined on a consolidated basis in accordance with GAAP. For
purposes of this definition, (i) interest on a Capitalized Lease Obligation
shall be deemed to accrue at an interest rate reasonably determined to be the
rate of interest implicit in such Capitalized Lease Obligation in accordance
with GAAP (including Statement of

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Financial Accounting Standards No. 13 of the Financial Accounting Standards
Board), and (ii) Consolidated Interest Expense attributable to any Indebtedness
represented by the guarantee by RAM Energy, Inc. or a Subsidiary Guarantor of
such Person other than with respect to Indebtedness of RAM Energy, Inc. or a
Subsidiary Guarantor of RAM Energy, Inc. shall be deemed to be the interest
expense attributable to the item guaranteed.

"Continuing Directors" means, as of any date of determination, any member of
the Board of Directors of RAM Energy, Inc. who (i) was a member of such Board of
Directors on the Issue Date or (ii) was nominated for election or elected to
such Board of Directors with the approval of a majority of the Continuing
Directors who were members of such Board of Directors at the time of such
nomination or election.

"Default" means an event or condition, the occurrence of which is, or with
the lapse of time or giving of notice or both would be, an Event of Default.

"Disqualified Capital Stock" means with respect to any Person any Capital
Stock of such Person or its Subsidiaries that, by its terms or by the terms of
any security into which it is convertible or exchangeable, is, or upon the
happening of an event or the passage of time would be, required to be redeemed
or repurchased by such Person or its Subsidiaries, including at the option of
the holder, in whole or in part, or has, or upon the happening of an even or
passage of time would have, a redemption or similar payment due, on or prior to
the Stated Maturity Date.

"EBITDA" means for any period the sum of the Adjusted Consolidated Net
Income for such period, plus the sum, without duplication (and only to the
extent such amounts are deducted from net revenues in determining such Adjusted
Consolidated Net Income), of (i) the provision for federal and state income
taxes for such period, (ii) depreciation, depletion, and amortization for such
period, (iii) Consolidated Interest Expense for such period, determined, in each
case, on a consolidated basis for RAM Energy, Inc. and its Subsidiary Guarantors
otherwise in accordance with GAAP, (iv) any charge associated solely with the
prepayment of any Indebtedness (provided that neither the Incurrence of such
Indebtedness nor the making of such prepayment occurred in violation of any
provision of the Indenture) and (v) any other non-cash charges.

"Eligible Institution" means a commercial banking institution that has
combined capital and surplus of not less than $500 million and that is rated "A"
(or higher) according to Moody's Investors Service, Inc. or Standard & Poor's
Ratings Service at the time as of which any investment or rollover therein is
made.

"Excess Cash Acceptance Amount" shall have the meaning given to it as
described under the caption "-- Certain Covenant -- Limitation on Asset Sales."

"Excess Cash Offer" shall have the meaning given to it as described under
the caption "-- Certain Covenant -- Limitation on Asset Sales."

"Excess Cash Offer Amount" shall have the meaning given to it as described
under the caption "-- Certain Covenant -- Limitation on Asset Sales."

"Excess Cash Offer Price" shall have the meaning given to it as described
under the caption "-- Certain Covenant -- Limitation on Asset Sales."

"Excess Cash Purchase Date" shall have the meaning given to it as described
under the caption "-- Certain Covenant -- Limitation on Asset Sales."

"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated by the SEC thereunder.

"Exchange Assets" means assets acquired by RAM Energy, Inc. or any
Subsidiary Guarantor in exchange for assets of RAM Energy, Inc. or any
Subsidiary Guarantor in connection with an Asset Sale, which acquired assets
include proved reserves with a value that, together with the cash or Cash
Equivalents received therefor by RAM Energy, Inc. or such Subsidiary Guarantor,
is equal to or greater than the value of the proved reserves included in the
assets disposed of by RAM Energy, Inc. or such Subsidiary Guarantor in
connection with such Asset Sale; provided, that (i) ownership of such assets
does not violate

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the covenant "Limitation on Lines of Business" and (ii) during any fiscal year,
RAM Energy, Inc. and its Subsidiary Guarantors can collectively acquire assets
(other than proved reserves, cash or Cash Equivalents) with a fair market value
of up to $500,000 in exchange for assets of RAM Energy, Inc. and the Subsidiary
Guarantors with proved reserves, and such assets acquired by such Person shall
constitute "Exchange Assets" hereunder.

"GAAP" means generally accepted accounting principles as in effect in the
United States on the Issue Date applied on a basis consistent with that used in
the preparation of the audited financial statements of RAM Energy, Inc. included
in this Prospectus.

"Hedging Contract" means an oil, gas or oil and gas purchase or hedging
agreement, and other agreement or arrangements, in each case, that is designed
to provide protection against fluctuations in the prices of oil or gas, or both.

"Holders" means any Person from time to time in whose name any Note is
registered on the Note Register.

"Hydrocarbons" means oil, natural gas, condensate, and natural gas liquids.

"Incur" means, with respect to any Indebtedness, to create, incur, assume,
guarantee or otherwise become liable for, contingently or otherwise, any
Indebtedness, and the term "Incurrence" when used as a noun shall have a
correlative meaning. Neither the accrual of interest nor the accretion of
original issue discount, nor the accretion of principal of a non-interest
bearing or other discount security shall be deemed the Incurrence of
Indebtedness.

"Indebtedness" means, with respect to any Person, without duplication (i)
all liabilities, contingent or otherwise, of such Person (a) for borrowed money
(whether or not the recourse of the lender is to the whole of the assets of such
Person or only to a portion thereof), (b) evidenced by bonds, notes, debentures,
or similar instruments or letters of credit or representing the balance deferred
and unpaid of the purchase price of any property acquired by such Person or
services received by such Person, but excluding trade account payables and
accrued liabilities arising in the ordinary course of business that are not
overdue by 90 days or being contested in good faith by appropriate proceedings,
promptly instituted and diligently pursued, (c) evidenced by bankers'
acceptances or similar instruments issued or accepted by banks or Swap
Obligations, (d) for the payment of money relating to a Capitalized Lease
Obligation, (e) for the Attributable Indebtedness associated with any Sale and
Leaseback Transaction or (f) for Production Payments, (ii) reimbursement
obligations of such Person with respect to letters of credit, (iii) all
liabilities of others of the kind described in the preceding clause (i) or (ii)
that such Person has guaranteed or that is otherwise its legal liability (to the
extent of such guaranty or other legal liability) other than for endorsements,
with recourse, of negotiable instruments in the ordinary course of business, and
(iv) all obligations secured by a Lien (other than Permitted Liens, except to
the extent the obligations secured by such Permitted Liens are otherwise
included in clause (i), (ii) or (iii) of this definition and are obligations of
such Person) to which the property or assets (including, without limitation,
leasehold interests and any other tangible or intangible property rights) of
such Person are subject, regardless of whether the obligations secured thereby
shall have been assumed by or shall otherwise be such Person's legal liability
(but, if such obligations are not assumed by such Person or are not otherwise
such Person's legal liability, the amount of such Indebtedness shall be deemed
to be limited to the fair market value of such property or assets determined as
of the end of the preceding fiscal quarter).

"Insurance Proceeds" means the interest in and to all proceeds (net of costs
of collection, including attorneys' fees) which now or hereafter may be paid
under any insurance policies now or hereafter obtained by or on behalf of RAM
Energy, Inc. or any Subsidiary Guarantor in connection with any assets thereof,
together with interest payable thereon and the right to collect and receive the
same, including, without limitation, proceeds of casualty insurance, title
insurance, business interruption insurance and any other insurance now or
hereafter maintained with respect to such assets.

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"Interest Rate or Currency Agreement" of any Person means any forward
contract, futures contract, swap, option or other financial agreement or
arrangement (including, without limitation, caps, floors, collars, puts and
similar agreements) relating to, or the value of which is dependent upon,
interest rates or currency exchange rates.

"Investment" by any Person in any other Person means (i) the acquisition
(whether for cash, property, services, securities or otherwise) of capital
stock, bonds, notes, debentures, partnership, or other ownership interests or
other securities of such other Person or any agreement to make any such
acquisition, (ii) the making by such Person of any deposit with, or advance,
loan or other extension of credit to, such other Person (including the purchase
of property from another Person subject to an understanding or agreement,
contingent or otherwise, to resell such property to such other Person) and
(without duplication) any amount committed to be advanced, loaned or extended to
such other Person, (iii) the entering into of any guarantee of, or other
contingent obligation with respect to, Indebtedness or other liability of such
other Person, (iv) the entering into of any Swap Obligation with such other
Person, or (v) the making of any capital contribution by such Person to such
other Person.

"Investment Grade Rating" means with respect to any Person or issue of debt
securities or preferred stock, a rating in one of the four highest letter rating
categories (without regard to "+" or "-" or other modifiers) by any rating
agency or if any such rating agency has ceased using letter rating categories or
the four highest of such letter rating categories are not considered to
represent "investment grade" ratings, then the comparable "investment grade"
ratings (as designated by any such rating agency).

"Issue Date" means the date of first issuance of the Notes under the
Indenture.

"Lien" means any mortgage, lien, pledge, charge, security interest, or other
encumbrance of any kind, regardless of whether filed, recorded, or otherwise
perfected under applicable law (including any conditional sale or other title
retention agreement and any lease deemed to constitute a security interest and
any option or other agreement to give any security interest).

"Material Change" means an increase or decrease (excluding changes that
result solely from changes in prices) of more than either (i) 10% from the end
of the immediately preceding fiscal quarter in the estimated discounted future
net revenue from proved oil and gas reserves of RAM Energy, Inc. and its
Subsidiary Guarantors, or (ii) 20% from the end of the immediately preceding
year in the estimated discounted future net revenue from proved oil and gas
reserves of RAM Energy, Inc. and its Subsidiary Guarantors, in each case
calculated in accordance with clause (i) (a) of the definition of Adjusted
Consolidated Net Tangible Assets; provided, however, that the following will be
excluded from the calculation of Material Change: (a) any acquisitions of oil
and gas reserves made after the end of the immediately preceding year for which
the discounted future net revenues have been estimated by independent petroleum
engineers since the end of the preceding year and on which a Reserve Report or
Reserve Reports exist and (b) any disposition of properties existing at the
beginning of the current quarter or current year, as the case may be, for
purposes of clause (i) or clause (ii) above, that have been disposed of in
accordance with the covenant described under the caption "-- Certain Covenants
- -- Limitation on Asset Sales."

"Net Cash Proceeds" means an amount equal to the aggregate amount of cash
and Cash Equivalents received by RAM Energy, Inc. or any Subsidiary Guarantor in
respect of an Asset Sale, less the sum of (i) all reasonable out-of-pocket fees,
commissions, and other expenses incurred in connection with such Asset Sale,
including the amount (estimated in good faith by RAM Energy, Inc.) of income,
franchise, sales and other applicable taxes to be paid, payable or accrued by
RAM Energy, Inc. or such Subsidiary Guarantor (in each case as estimated in good
faith by RAM Energy, Inc. without giving effect to tax attributes unrelated to
such Asset Sale) in connection with such Asset Sale, and (ii) the aggregate
amount of cash and Cash Equivalents so received which is used to retire any then
existing Indebtedness of RAM Energy, Inc. or such Subsidiary Guarantor (other
than the Notes), as the case may be, which is secured by a

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Lien on the property subject of the Asset Sale or which is required by the terms
of such Indebtedness to be repaid in connection with such Asset Sale.

"Net Income" of any Person for any period means the net income (loss) of
such Person for such period, determined on a consolidated basis in accordance
with GAAP, excluding (without duplication) (i) all extraordinary, unusual and
nonrecurring gains, (ii) the net income, if positive, of any other Person, in
which such Person or any of its consolidated Subsidiaries has an interest,
except to the extent of the amount of any dividends or distributions actually
paid in cash to such Person or a consolidated Subsidiary of such Person during
such period, (iii) the net income, if positive, of any Person acquired in a
pooling of interests transaction for any period prior to the date of such
acquisition and (iv) the net income, if positive, of any Subsidiary of such
Person to the extent that the declaration or payment of dividends or similar
distributions is not at the time permitted by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute, rule, or
governmental regulation applicable to such Subsidiary.

"Net Proceeds" means (i) in the case of any sale by a Person of Qualified
Capital Stock or other securities, the aggregate net cash proceeds received by
such Person from the sale of such securities (other than to a Subsidiary
Guarantor) after payment of reasonable out-of-pocket expenses, commissions and
discounts incurred in connection therewith, and (ii) in the case of any
exchange, exercise, conversion or surrender of any outstanding securities or
Indebtedness of such Person for or into shares of Qualified Capital Stock of
such Person, the net book value of such outstanding securities as adjusted on
the books of such Person or Indebtedness of such Person to the extent recorded
in accordance with GAAP, in each case, on the date of such exchange, exercise,
conversion or surrender (plus any additional amount required to be paid by the
holder of such Indebtedness or securities to such Person upon such exchange,
exercise, conversion or surrender and less (i) any and all payments made to the
holders of such Indebtedness or securities and (ii) all other expenses incurred
by such Person in connection therewith, in each case, in so far as such payments
or expenses are incident to such exchange, exercise, conversion, or surrender).

"Net Working Capital" of any Person means (i) all current assets of such
Person and its Subsidiary Guarantors, minus (ii) all current liabilities of such
Person and its consolidated Subsidiaries other than the current portion of long
term Indebtedness, each item to be determined on a consolidated basis in
conformity with GAAP.

"Net Worth" of any Person means, at any date of determination, stockholders'
equity as set forth on the most recently available quarterly or annual
consolidated balance sheet of such Person and its Subsidiary Guarantors (which
shall be as of a date not more than 90 days prior to the date of such
computation), less any amounts included therein attributable to Disqualified
Capital Stock or any equity security convertible into or exchangeable for
Indebtedness, the cost of treasury stock (not otherwise deducted from
stockholder's equity), and the principal amount of any promissory notes
receivable from the sale of the Capital Stock of such Person or any of its
Subsidiary Guarantors each item to be determined in conformity with GAAP.

"Note Register" means the register maintained by or for RAM Energy, Inc. in
which RAM Energy, Inc. shall provide for the registration of the Notes and the
transfer of the Notes.

"Oil and Gas Assets" means assets and properties used in the Oil and Gas
Business.

"Oil and Gas Business" means the business of the exploration for, and
exploitation, development, production, processing (but not refining),
purchasing, marketing and transportation of, hydrocarbons and other related oil
and gas business.

"Oil and Gas Securities" means the Voting Stock of a Person engaged in the
Oil and Gas Business, provided that such Voting Stock shall constitute a
majority of the Voting Stock of such Person in the event that such Voting Stock
is not subject to the reporting requirements of the Exchange Act.

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"Permitted Bank Credit Facility" means, with respect to any Person, a term,
revolving credit or letter of credit facility, or any combination of such
facilities, with a commercial banking institution, the proceeds of which are
used to acquire Oil and Gas Securities or Oil and Gas Assets, for working
capital and other general corporate purposes, as the same may be amended,
extended or refinanced from time to time.

"Permitted Hedging Transactions" means non-speculative transactions in
futures, forwards, swaps or option contracts (including both physical and
financial settlement transactions) engaged in by RAM Energy, Inc. and its
Subsidiary Guarantors as part of their normal business operations as a risk-
management strategy or hedge against adverse changes in the prices of natural
gas, feedstock or refined products which arise in the ordinary course of
business of RAM Energy, Inc. and its Subsidiary Guarantors; provided , that such
transactions do not in the case of RAM Energy, Inc. and its Subsidiary
Guarantors, on a monthly basis, relate to more than 90% of their combined
average net natural oil and gas production per month for the most recent 3-month
period measured at the time of such transaction; provided, further, that, at the
time of such transaction (i) the counter party to any such transaction is an
Eligible Institution or a Person that has an Investment Grade Rating or has an
issue of debt securities or preferred stock outstanding with an Investment Grade
Rating or (ii) such counter party's obligation pursuant to such transaction is
unconditionally guaranteed in full by, or secured by a letter of credit issued
by, an Eligible Institution or a Person that has an Investment Grade Rating or
that has an issue of debt securities or preferred stock outstanding with an
Investment Grade Rating.

"Permitted Holders" means Dr. William W. Talley II, Larry E. Lee, William
Stuart Price and M. Helen Bennett (or their heirs, their estates or any trusts
in which their immediate family members own, directly or indirectly, a
beneficial interest in excess of 50%).

"Permitted Indebtedness" means, without duplication, (i) the Indebtedness
evidenced by the Notes or the Subsidiary Guarantees, (ii) Indebtedness owed by
any Subsidiary Guarantor to RAM Energy, Inc. or any other Subsidiary Guarantor
or Indebtedness owed by RAM Energy, Inc. to any Subsidiary Guarantor; provided
that in each case, (a) such Indebtedness is Subordinated Indebtedness, and (b)
upon any subsequent issuance or transfer of any Capital Stock or any other event
that results in any such Subsidiary Guarantor ceasing to be a Subsidiary
Guarantor or any other subsequent transfer of any such Indebtedness (except to
RAM Energy, Inc. or a Subsidiary Guarantor), such Indebtedness shall be deemed
to be Incurred and shall be treated as an Incurrence of Indebtedness for
purposes of the "-- Limitation on Incurrences of Additional Indebtedness and
Issuances of Disqualified Capital Stock" covenant at the time the Subsidiary
Guarantor in question ceased to be a Subsidiary Guarantor or the time such
subsequent transfer occurred, (iii) Indebtedness outstanding under a Permitted
Bank Credit Facility so long as the aggregate principal amount of all
Indebtedness outstanding under all Permitted Bank Credit Facilities for RAM
Energy, Inc. and its Subsidiary Guarantors does not exceed $25.0 million less
the amount of Net Cash Proceeds from any Asset Sale applied pursuant to the
covenant "Limitation on Asset Sales" to repay or prepay such Indebtedness that
results in a permanent reduction relating thereto, (iv) Swap Obligations of RAM
Energy, Inc. or its Subsidiary Guarantors, (v) Indebtedness outstanding on the
Issue Date (and not repaid with the proceeds of the Offering), (vi) other
Indebtedness owed by RAM Energy, Inc. or its Subsidiary Guarantors in an
aggregate principal amount outstanding not to exceed $5.0 million at any one
time, and (vii) Permitted Refinancing Indebtedness of RAM Energy, Inc. and the
Subsidiary Guarantors.

"Permitted Investment" means, when used with reference to RAM Energy, Inc.
or any Subsidiary Guarantor, (i) trade credit extended to Persons in the
ordinary course of business, (ii) purchases of Cash Equivalents, (iii)
Investments by RAM Energy, Inc. or its Subsidiary Guarantors in Persons which
are or which will, contemporaneously with or immediately following the making of
such Investment, become wholly-owned Subsidiary Guarantors and are engaged in
the Oil and Gas Business, (iv) Investments in Oil and Gas Assets, (v)
Investments in any Person the sole consideration for which consists of Qualified
Capital Stock of RAM Energy, Inc., (vi) Swap Obligations, (vii) advances to
officers and employees of RAM Energy, Inc. or any Subsidiary Guarantor in
connection with the performance of their duties in the ordinary course of
business in an amount not to exceed $250,000 in the aggregate outstanding at any
time,

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(viii) margin deposits in connection with Permitted Hedging Transactions, (ix)
Investments and expenditures made in the ordinary course of business by RAM
Energy, Inc. or its Subsidiary Guarantors, and of a nature that is or shall have
become customary in, the oil and gas business as a means of actively exploiting,
exploring for, acquiring, developing, enhanced recovery of, processing,
gathering, purchasing, selling, marketing or transporting oil or gas through
agreements, transactions, interests or arrangements, including arrangements
which permit a Person to share risks or costs, comply with regulatory
requirements regarding local ownership or satisfy other objectives customarily
achieved through the conduct of the oil and gas business jointly with third
parties, including, without limitation, (a) ownership interests in oil and gas
properties or gathering systems and (b) Investments and expenditures in the form
of or pursuant to operating agreements, processing agreements, farm-in
agreements, farm-out agreements, development agreements, area of mutual interest
agreements, unitization agreements, pooling arrangements, joint bidding
agreements, service contracts, joint venture agreements, partnership agreements
(whether general or limited), subscription agreements, stock purchase agreements
and other similar agreements with third parties; provided that in the case of
any joint venture engaged in processing, gathering, marketing or transporting
oil or gas (1) all Indebtedness of such joint venture (other than a joint
venture that is an Unrestricted Subsidiary) that would not otherwise constitute
Indebtedness of RAM Energy, Inc. or a Subsidiary Guarantor shall be deemed
Indebtedness of such Person in proportion to its direct or indirect ownership
interest in such joint venture and (2) such joint venture shall be reasonably
calculated to enhance the value of the reserves of such Person or marketability
of production from such reserves, (x) other Investments not in excess of $2.5
million at any time outstanding, and (xi) loans made to officers, directors and
employees of RAM Energy, Inc. or any of its Subsidiary Guarantors approved by
the applicable Board of Directors (or by an authorized officer), the proceeds of
which are used solely to purchase stock or to exercise stock options received
pursuant to an employee stock option plan or other incentive plan, in a
principal amount not to exceed the purchase price of such stock or the exercise
price of such stock options, as applicable.

"Permitted Liens" with respect to any Person means (i) Liens imposed by
governmental authorities for taxes, assessments, or other charges not yet due or
which are being contested in good faith and by appropriate proceedings, if
adequate reserves with respect thereto are maintained on the books of any of
such Person in accordance with GAAP, (ii) statutory Liens of landlords,
carriers, warehousemen, mechanics, materialmen, repairmen, vendors, mineral
interest owners, or other like Liens arising by operation of law in the ordinary
course of business provided that (a) the underlying obligations are not overdue
for a period of more than 60 days, or (b) such Liens are being contested in good
faith and by appropriate proceedings and adequate reserves with respect thereto
are maintained on the books of any of such Person in accordance with GAAP, (iii)
deposits of cash or Cash Equivalents to secure the performance of bids, trade
contracts (other than borrowed money), leases, statutory obligations, surety
bonds, performance bonds, and other obligations of a like nature incurred in the
ordinary course of business (or to secure reimbursement obligations or letters
of credit issued to secure such performance or other obligations), (iv)
easements, rights-of-way, zoning, similar restrictions and other similar
encumbrances or title defects incurred in the ordinary course of business which,
in the aggregate, are not material in amount and which do not, in any case,
materially detract from the value of the property subject thereto or materially
interfere with the ordinary conduct of the business of such Person, (v) Liens
securing the Notes, any Subsidiary Guarantee or any Permitted Bank Credit
Facility, (vi) pledges or deposits made in the ordinary course of business in
connection with worker's compensation, unemployment insurance, other types of
social security legislation, property insurance and liability insurance, (vii)
Liens on the assets of any Person existing at the time such assets are acquired
by such Person, whether by merger, consolidation, purchase of assets or
otherwise so long as such Liens (a) are not created, incurred or assumed in
contemplation of such assets being acquired by such Person and (b) do not extend
to any other assets of such Person, (viii) leases or subleases granted to others
(to the extent of such lessee's normal and customary usage rights thereunder) or
obtained from others (to the extent of such lessor's title thereunder), in
either case, that do not materially interfere with the ordinary course of
business of any of such Person, (ix) Liens ordinarily and

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customarily arising under operating agreements, and (x) any extension, renewal
or replacement of the Liens created pursuant to any of clauses (i) through (ix),
provided that such Liens would have otherwise been permitted under such clauses,
and provided further that the Liens permitted by this clause (x) do not secure
any additional Indebtedness or encumber any additional property.

"Permitted Refinancing Indebtedness" means any Indebtedness of a Person
issued in exchange for, or the net proceeds of which are used to extend,
refinance, renew, replace, defease or refund, other Indebtedness of such Person;
provided that (i) the principal amount (or accredited value, if applicable) of
such Permitted Refinancing Indebtedness does not exceed the principal amount (or
accredited value, if applicable) then outstanding of the Indebtedness for which
the exchange is made or so extended, refinanced, renewed, replaced, defeased or
refunded (plus the amount of reasonable expenses incurred in connection
therewith), (ii) such Permitted Refinancing Indebtedness (other than
Indebtedness under Permitted Bank Credit Facilities) has a final maturity date
later than the final maturity date of, and has a weighted average life equal to
or greater than the weighted average life of, the Indebtedness for which the
exchange is made or being extended, refinanced, renewed, replaced, defeased or
refunded, (iii) if the Indebtedness for which the exchange is made or being
extended, refinanced, renewed, replaced, defeased or refunded is subordinated in
right of payment to the Notes or any Subsidiary Guarantee (as the case may be),
such Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and is subordinated in right of payment to, the Notes or
any Subsidiary Guarantee (as the case may be), on terms at least as favorable to
the Holders of Notes or any Subsidiary Guarantee (as the case may be), as those
contained in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded, and (iv) with respect to
any such Indebtedness of RAM Energy, Inc. for which the exchange is made or
being extended, refinanced, renewed, replaced, defeased or refunded, such
Permitted Refinancing Indebtedness shall not be Incurred by any Subsidiary
Guarantor.

"Person" means any corporation, individual, joint stock company, joint
venture, partnership, unincorporated association, governmental regulatory
entity, country, state, or political subdivision thereof, trust, municipality,
or other entity.

"Preferred Stock" means, with respect to any Person, any class or classes
(however designated) of Capital Stock of such Person that is preferred as to the
payment of dividends, or as to the distribution of assets upon any voluntary or
involuntary liquidation or dissolution of such Person over shares of Capital
Stock of any other class of such Person.

"Production Payment" means any volumetric or dollar-denominated production
payment or other similar burden on the property of RAM Energy, Inc. or any of
its Subsidiary Guarantors.

"Public Equity Offering" means an underwritten public offering, subsequent
to the Issue Date, by a nationally recognized member of the National Association
of Securities Dealers of Qualified Capital Stock of RAM Energy, Inc. pursuant to
an effective registration statement filed with the SEC pursuant to the
Securities Act.

"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.

"Reference Period" with regard to any Person means the four full fiscal
quarters of such Person ended on or immediately preceding any date upon which
any determination is to be made pursuant to the terms of the Notes or the
Indenture.

"Reserve Report" means a report prepared by independent petroleum engineers
with respect to Hydrocarbon reserves in accordance with guidelines published by
the SEC.

"Restricted Investment" means (i) the designation of a Subsidiary as an
Unrestricted Subsidiary in the manner described in the definition of
Unrestricted Subsidiary and (ii) any Investment other than a Permitted
Investment.

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"Sale and Leaseback Transaction" means an arrangement relating to property
owned on the Issue Date or thereafter acquired whereby a Person or a Subsidiary
of such Person transfers such property to another Person and leases it back from
such other Person.

"Securities Act" means the Securities Act of 1933, as amended, and the rules
and regulations of the SEC promulgated thereunder.

"Stated Maturity Date" means , 2008.

"Subordinated Indebtedness" means Indebtedness of RAM Energy, Inc. or a
Subsidiary Guarantor that (i) requires no payment of principal prior to or on
the Stated Maturity Date and (ii) is expressly subordinate and junior in right
of payment to the Notes or the Subsidiary Guarantees, as the case may be.

"Subsidiary" with respect to any Person means (i) a corporation with respect
to which such Person or its Subsidiaries own, directly or indirectly, at least
50% of such corporation's Voting Stock, (ii) a partnership in which such Person
or a Subsidiary of such Person is, at the time, a general partner of such
partnership and has more than 50% of the total voting power of partnership
interests, or (iii) any other Person (other than a corporation or a partnership)
in which such Person, one or more Subsidiaries of such Person, or such Person
and one or more Subsidiaries of such Person, directly or indirectly, at the date
of determination thereof has (a) at least a 50% ownership interest or (b) the
power to elect or direct the election of the directors or other governing body
of such other Person.

"Subsidiary Guarantee" means any guarantee of the Notes by any Subsidiary
Guarantor.

"Subsidiary Guarantor" means each Subsidiary that becomes a Subsidiary
Guarantor of the Notes in compliance with the provisions of the Indenture.

"Swap Obligation" of any Person means any Interest Rate, Currency Agreement
or Hedging Contract entered into with one or more financial institutions or one
or more futures exchanges in the ordinary course of business and not for
purposes of speculation that is designed to protect such Person against risks or
fluctuations that arise in the ordinary course of business of RAM Energy, Inc.
and its Subsidiary Guarantors in (i) interest rates related to payment
obligations on Indebtedness (other than Permitted Indebtedness) permitted to be
Incurred as described under the caption "-- Certain Covenants -- Limitation or
Incurrences of Additional Indebtedness and Issuances of Disqualified Capital
Stock" and which shall have a notional amount no greater than 100% of the
principal amount of such Indebtedness being hedged thereby, (ii) currency
exchange rate fluctuations related to the payment obligations on Indebtedness
(other than Permitted Indebtedness) permitted to be Incurred as described under
the caption "-- Certain Covenants -- Limitation on Incurrences of Additional
Indebtedness and Issuances of Disqualified Capital Stock" or to the foreign
currency cash flows reasonably expected to be generated by RAM Energy, Inc. and
the Subsidiary Guarantors and the notional principal amount of such currency
exchange obligations does not exceed the amount of such foreign currency cash
flows to which they relate, or (iii) fluctuations in oil and gas prices.

"Unrestricted Non-Recourse Indebtedness" of any Unrestricted Subsidiary
means (i) Indebtedness of such Person that is secured solely (other than with
respect to clause (ii) below) by a Lien upon the stock of an Unrestricted
Subsidiary of such Person and as to which there is no recourse (other than with
respect to clause (ii) below) against such Person or any of its assets other
than against such stock (and the dollar amount of any Indebtedness of such
Person as described in this clause (i) shall be deemed to be zero for purposes
of all other provisions of the Indenture) and (ii) guarantees of the
Indebtedness of Unrestricted Subsidiaries of such Person.

"Unrestricted Subsidiary" means, in respect of any Person, any other Person
("Other Person") that would, but for this definition of "Unrestricted
Subsidiary" be a Subsidiary of such Person organized or acquired after the Issue
Date as to which all of the following conditions apply: (i) neither such Person
nor any of its other Subsidiaries provides, or is obligated to provide, any
credit support of any Indebtedness, or

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other financial support, of such Other Person (including any undertaking,
agreement or instrument evidencing such Indebtedness or maintenance or
preservation of such Other Person's financial condition or to cause such Other
Person to achieve any specified levels of operating results); (ii) such Other
Person is not liable, directly or indirectly, with respect to any Indebtedness
other than Unrestricted Subsidiary Indebtedness and does not own any Capital
Stock of, or own or hold any Lien on any property of, such Person or any of its
other Subsidiaries; (iii) neither such Person nor any of its Subsidiaries has
made an Investment in such Other Person unless such Investment was permitted by
the provisions as described under the caption "-- Certain Covenants --
Limitation on Restricted Payments," and neither such Person nor any of its
Subsidiaries has any obligations to make any Investment in such Other Person;
(iv) such Other Person, either alone or in the aggregate with all other
Unrestricted Subsidiaries, does not operate or own, directly or indirectly, any
significant portion of the assets or business of such Person and its other
Subsidiaries; and (v) the Board of Directors of such Person, as provided below,
shall have designated such Other Person to be an Unrestricted Subsidiary on or
prior to the date of organization or acquisition of such Other Person. Any such
designation by the Board of Directors of such Person shall be evidenced to the
Trustee by delivering to the Trustee a resolution thereof giving effect to such
designation and an officers' certificate certifying that such designation
complies with the foregoing conditions and was permitted by the covenant as
described under the caption "-- Certain Covenants -- Limitation on Restricted
Payments."

"Unrestricted Subsidiary Indebtedness" means, as to any Unrestricted
Subsidiary of any Person, Indebtedness of such Unrestricted Subsidiary (i) as to
which neither such Person nor any Subsidiary of such Person (a) is directly or
indirectly liable (by virtue of such Person or any such Subsidiary being the
primary obligor on, guarantor of, general partner of, or otherwise liable in any
respect to, such Indebtedness), unless such liability constitutes Unrestricted
Non-Recourse Indebtedness or (b) constitutes a lender, (ii) no default with
respect to which would permit any holder of any Indebtedness of such Person or
any Subsidiary of such Person to declare a default on such Indebtedness of such
Person or any Subsidiary of such Person or cause the payment thereof to be
accelerated or payable prior to its stated maturity, unless, in the case of this
clause (ii), such Indebtedness constitutes Unrestricted Non-Recourse
Indebtedness and (iii) as to which the lenders have been notified in writing
that they will not have any recourse to the stock or assets of such Person or
any of its Subsidiaries.

"Voting Stock" means Capital Stock of a Person having generally the right to
vote in the election to directors of such Person.

BOOK ENTRY; DELIVERY AND FORM

The Notes will initially be issued in the form of one or more fully
registered global Notes (collectively, the "Global Note"). The Global Note will
be deposited on the Issue Date with, or on behalf of, The Depository Trust
Company, New York, New York (the "Depository") and registered in the name of
Cede & Co., as nominee of the Depository (such nominee being referred to herein
as the "Global Note Holder").

The Depository is a limited-purpose trust company organized under the
Banking Law of the State of New York, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the New York Uniform Commercial
Code, and a "clearing agency" registered pursuant to the provisions of Section
17A of the Exchange Act. The Depository was created to hold securities for its
participating organizations (collectively, the "Participants" or the
"Depository's Participants") and to facilitate the clearance and settlement of
transactions in such securities between Participants through electronic book-
entry changes in accounts of its Participants. The Depository's Participants
include securities brokers and dealers (including the Underwriter), banks and
trust companies, clearing corporations and certain other organizations, some of
whom (and/or representatives) own the Depository. Access to the Depository's
book-entry system is also available to other such as banks, brokers, dealers and
trust companies (collectively, the "Indirect Participants" or the "Depository's
Indirect Participants") that clear through or maintain a custodial relationship
with a Participant, either directly or indirectly. Persons who are not

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Participants may beneficially own securities held by or on behalf of the
Depository only through the Depository's Participants or the Depository's
Indirect Participants.

The Company expects that pursuant to procedures established by the
Depository (i) upon deposit of the Global Note, the Depository will credit the
accounts of Participants designated by the Underwriter with portions of the
principal amount of the Global Note and (ii) ownership of beneficial interests
in the Global Note will be shown on, and the transfer of that ownership will be
effected only through, records maintained by the Depository (with respect to
such interests of the Depository's Participants), the Depository's Participants
and the Depository's Indirect Participants. A beneficial owner is the person who
has the right to sell, transfer or otherwise dispose of an interest in the Notes
and the right to receive the proceeds therefrom, as well as principal, premium
(if any) and interest payable in respect of the Notes. The beneficial owner must
rely on the foregoing arrangements to evidence its interest in the Notes.
Beneficial ownership of the Notes may be transferred only by complying with the
procedures of a beneficial owner's Participant (e.g., a brokerage firm) and the
Depository. The laws of some states require that certain persons take physical
delivery in definitive form of securities that they own. Consequently, the
ability to transfer beneficial interests in the Global Note is limited to such
extent.

So long as the Global Note Holder is the registered owner of the Global
Note, the Global Note Holder will be considered the sole Holder under the
Indenture of the Notes for all purposes under the Indenture and any applicable
laws. Except as provided below, beneficial owners of the Global Note will not be
entitled to have the Notes registered in their names, will not receive or be
entitled to receive physical delivery of the Notes in definitive form and will
not be considered the owners or Holders thereof under the Indenture for any
purpose.

All rights of ownership must be exercised through the Depository and the
book-entry system, and notices that are to be given to registered owners by RAM
Energy, Inc. or the Trustee will be given only to the Depository. It is expected
that the Depository will forward notices to the Participants who will in turn
forward notices to the beneficial owners. Neither RAM Energy, Inc., the Trustee,
the paying agent nor the Notes registrar will have any responsibility or
obligation to assure that any notices are forwarded by the Depository to any
Participant or by any Participant to the beneficial owners. Neither RAM Energy,
Inc., the Trustee, the paying agent nor the Notes registrar will have any
responsibility or liability for any aspect of the records relating to, or
payments made on account of, beneficial ownership interests in the Global Note,
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.

Payments in respect of the principal of, premium, if any, and interest on
the Global Note registered in the name of the Global Note Holder on the
applicable record date will be made by the Company through the Paying Agent to
or at the direction of the Global Note Holder in its capacity as the registered
Holder under the Indenture. Under the terms of the Indenture, RAM Energy, Inc.
and the Trustee will treat the persons in whose names Notes, including the
Global Note, are registered as the owners thereof for the purpose of receiving
such payments. Consequently, neither RAM Energy, Inc. nor the Trustee nor any
paying agent has or will have any responsibility or liability for the payment of
such amounts to beneficial owners in the Global Note. RAM Energy, Inc. believes,
however, that it is currently the policy of the Depository to immediately credit
the accounts of the relevant Participants with such payments, in amounts
proportionate to their respective holdings of beneficial interests in the
relevant security as shown on the records of the Depository. Payments by the
Depository's Participants and the Depository's Indirect Participants to the
beneficial owners in the Global Note will be governed by standing instructions
and customary practice and will be the responsibility of the Depository's
Participants or the Depository's Indirect Participants.

As long as the Notes are represented by a Global Note, the Depository's
nominee will be the Holder of the Notes and therefore will be the only entity
that can exercise a right to repurchase the Notes. See "-- Certain Covenants"
and "-- Repurchase of Notes at the Option of the Holder Upon a Change of

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Control." Notice by Participants or Indirect Participants or by owners of
beneficial interests in a Global Note held through such Participants or Indirect
Participants of the exercise of the option to elect repurchase of beneficial
interests in Notes represented by the Global Note must be transmitted to the
Depository in accordance with its procedures on a form required by the
Depository and provided to Participants. To ensure that the Depository's nominee
will timely exercise a right to repurchase with respect to a particular Note,
the beneficial owner of such Note must instruct the broker or other Participant
or Indirect Participant through which it holds an interest in such Note to
notify the Depository of its desire to exercise a right to repurchase. Different
firms have different cut-off times for accepting instructions from their
customers and, accordingly, each beneficial owner should consult the broker or
other Participant or Indirect Participant through which it holds an interest in
a Note in order to ascertain the cut-off time by which such an instruction must
be given in order for timely notice to be delivered to the Depository. RAM
Energy, Inc. will not be liable for any delay in delivery of notices of the
exercise of any option to elect repurchase.

If (i) RAM Energy, Inc. notifies the Trustee in writing that the Depository
is no longer willing or able to act as a depository and RAM Energy, Inc. is
unable to locate and appoint a qualified successor within 90 days or (ii) RAM
Energy, Inc., at its option, notifies the Trustee in writing that it elects to
cause the Issuance of Notes in the form of Certificated Securities under the
Indenture, then, upon surrender by the Global Note Holder of its Global Note,
Notes in such form will be issued to each person that the Global Note Holder and
the Depository identify as being the beneficial owner of the related Notes.

Neither RAM Energy, Inc. nor the Trustee will be liable for any delay by the
Global Note Holder or the Depository in identifying the beneficial owners of
Notes and RAM Energy, Inc. and the Trustee may conclusively rely on, and will be
protected in relying on, instructions from the Global Note Holder or the
Depository for all purposes.

SAME-DAY SETTLEMENT AND PAYMENT

The Indenture will require that payments on the Global Note (including
principal, premium, if any, and interest) registered in the name of the Global
Note Holder be made by wire transfer of immediately available funds to the
accounts specified by the Global Note Holder. With respect to Certificated
Securities, RAM Energy, Inc. will make all payments of principal, premium, if
any, and interest by wire transfer of immediately available funds to the
accounts specified by the Holders thereof or, if no such account is specified,
by mailing a check to each such Holder's registered address. The Notes
represented by the Global Note are expected to trade in the Depository's
Same-Day Funds Settlement System, and any permitted secondary market trading
activity in such Notes will, therefore, be required by the Depository to be
settled in immediately available funds. RAM Energy, Inc. expects that secondary
trading in Certificated Securities will also be settled in immediately available
funds.

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CERTAIN TAX CONSIDERATIONS

The following is a general discussion of certain U.S. federal income tax
considerations relevant to holders of the Notes. This discussion is based upon
the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
Regulations, Internal Revenue Service ("IRS") rulings and judicial decisions now
in effect, all of which are subject to change (possibly with retroactive effect)
or different interpretations. This discussion does not purport to deal with all
aspects of federal income taxation that may be relevant to a particular
investor's decision to purchase the Notes, and it is not intended to be wholly
applicable to all categories of investors, some of which, such as dealers in
securities, financial institutions, insurance companies, tax-exempt
organizations, or investors who have hedged the risk of owning Notes, may be
subject to special rules. In addition, this discussion is limited to persons
that will hold the Notes represented thereby as a "capital asset" within the
meaning of section 1221 of the Code.

PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE
PARTICULAR TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION
OF THE NOTES, INCLUDING THE APPLICABILITY OF ANY FEDERAL TAX LAWS OR ANY STATE,
LOCAL OR FOREIGN TAX LAWS, AND ANY CHANGES (OR PROPOSED CHANGES) IN APPLICABLE
TAX LAWS OR INTERPRETATIONS THEREOF.

INTEREST INCOME

Interest on the Notes will be includable in the income of a holder as
ordinary income under the holder's regular method of accounting. The Notes will
not be treated as having been issued with original issue discount.

MARKET DISCOUNT

Investors acquiring Notes pursuant to this Prospectus, other than at
original issuance of the Notes, should note that the resale of the Notes may be
adversely affected by the market discount provisions of sections 1276 through
1278 of the Code. Under the market discount rules, if a holder of a Note (other
than a holder who purchased the Note upon original issuance) purchases it at a
market discount (i.e., at a price below its stated redemption price at maturity)
in excess of a statutorily-defined de minimis amount and thereafter recognizes
gain upon a disposition or retirement of the Note, then the lesser of the gain
recognized or the portion of the market discount that accrued on a ratable basis
(or, if elected, on a constant interest rate basis) generally will be treated as
ordinary income at the time of the disposition. Moreover, any market discount in
a Note may be taxable to an investor to the extent of appreciation in the value
of the Note at the time of certain otherwise non-taxable transactions (e.g.,
gifts). Absent an election to include market discount in income as it accrues, a
holder of a market discount Note may be required to defer a portion of any
interest expense that otherwise may be deductible on any indebtedness incurred
or maintained to purchase or carry such Note until the holder disposes of the
Note in a taxable transaction.

SALE, EXCHANGE OR RETIREMENT OF THE NOTES

Each holder of a Note generally will recognize gain or loss on the sale,
exchange, redemption, retirement or other disposition of the Note measured by
the difference (if any) between (i) the amount of cash and the fair market value
of any property received (except to the extent that such cash or other property
is attributable to the payment of accrued interest not previously included in
income, which amount will be taxable as ordinary income) and (ii) the holder's
adjusted tax basis in the Note (generally, the cost of the Note plus any market
discount previously included in income by the holder, less any principal
payments received by the holder). Any such gain or loss recognized on the sale,
exchange, redemption, retirement or other disposition of a Note should be
capital gain or loss (except as discussed under "Market Discount" above), and
would be long-term capital gain or loss if the Note had been held

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for more than one year at the time of the sale or exchange. If the Note had been
held for more than 18 months, such capital gain generally would be subject to
tax at a maximum 20% rate.

BACKUP WITHHOLDING AND INFORMATION REPORTING

A holder of Notes may be subject to "backup withholding" at a rate of 31%
with respect to certain "reportable payments," including interest payments and,
under certain circumstances, principal payments on the Notes. These backup
withholding rules apply if the holder, among other things, (i) fails to furnish
a social security number or other taxpayer identification number ("TIN")
certified under penalties of perjury within a reasonable time after the request
therefor, (ii) furnishes an incorrect TIN, (iii) fails to properly report
interest or (iv) fails to provide a certified statement, signed under penalties
of perjury, that the TIN furnished is the correct number and that such holder is
not subject to backup withholding. A holder who does not provide the Company
with its correct TIN also may be subject to penalties imposed by the IRS. Any
amount withheld from a payment to a holder under the backup withholding rules is
creditable against the holder's federal income tax liability, provided that the
required information is furnished to the IRS. Backup withholding will not apply,
however, with respect to payments made to certain holders, including
corporations and tax-exempt organizations ("exempt recipients"), provided their
exemptions from backup withholding are properly established.

The amount of any "reportable payments", including interest, made to the
holders of Notes (other than to holders which are exempt recipients) and the
amount of tax withheld, if any, with respect to such payments will be reported
to such holders and to the IRS for each calendar year.

FOREIGN HOLDERS

The following discussion is a summary of certain U.S. federal income tax and
estate tax consequences to a Foreign Person that holds a Note. As used herein,
the term "Foreign Person" means a nonresident alien individual, a foreign
corporation, a nonresident alien fiduciary of a foreign estate or trust, or a
foreign partnership, but only if the income or gain on the Note is not
"effectively connected with the conduct of a trade or business within the U.S."
If the income or gain on the Note is "effectively connected with the conduct of
a trade or business within the U.S.," then the foreign individual, corporation,
estate, trust or partnership will be subject to tax on such income or gain in
essentially the same manner as a comparable U.S. holder of Notes, as discussed
above, and in the case of a foreign corporation, may also be subject to the
branch profits tax.

Under the portfolio interest exception to the general rules for the
withholding of tax on interest paid to a Foreign Person, a Foreign Person will
not be subject to U.S. federal income tax (or to withholding) on interest
payments on a Note, provided that (i) the Foreign Person does not actually or
constructively own 10% or more of the total combined voting power of all classes
of stock of the Company entitled to vote and is not a controlled foreign
corporation with respect to the U.S. that is related to the Company actually or
constructively through stock ownership and (ii) the Company, its paying agent or
the person who would otherwise be required to withhold tax receives either (A) a
statement (an "Owner's Statement") signed under penalties of perjury by the
beneficial owner of the Note in which the owner certifies that the owner is not
a U.S. person, or, in the case of an individual, that he is neither a citizen
nor a resident of the United States, and which provides the owner's name and
address, or (B) a statement signed under penalties of perjury by the Financial
Institution holding the Note on behalf of the beneficial owner, together with a
copy of the Owner's Statement. As used herein, the term "Financial Institution"
means a securities clearing organization, bank or other financial institution
that holds customers' securities in the ordinary course of its trade or business
and that holds a Note on behalf of the owner of the Note. A Foreign Person who
does not qualify for the "portfolio interest" exception, would, under current
law, generally be subject to U.S. federal withholding tax at a flat rate of 30%
(or lower applicable treaty rate) on interest payments.

In general, gain recognized by a Foreign Person upon the redemption,
retirement, sale, exchange or other disposition of a Note (including any gain
representing accrued market discount) will not be subject to U.S. federal income
tax. However, a Foreign Person may be subject to U.S. federal income tax at a
flat rate

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of 30% (unless exempt by an applicable treaty) on any such gain if the Foreign
Person is an individual present in the U.S. for 183 days or more during the
taxable year of the disposition of the Note and certain other requirements are
met.

Backup withholding and information reporting requirements do not apply to
payments of interest made by the Company or a paying agent to Foreign Persons if
the Owner's Statement described above is received, provided that the payor does
not have actual knowledge that the holder is a United States holder. If any
payments of principal and interest are made to the beneficial owner of a Note by
or through the foreign office of a foreign custodian, foreign nominee or other
foreign agent of such beneficial owner, or if the foreign office of a foreign
"broker" (as defined in applicable Treasury Regulations) pays the proceeds of
the sale of a Note to the seller thereof, backup withholding and information
reporting will not apply. Information reporting requirements (but not backup
withholding) will apply, however, to a payment by a foreign office of a broker
that is a United States person, that derives 50% or more of its gross income for
certain periods from the conduct of a trade or business in the United States or
that is a "controlled foreign corporation" (generally, a foreign corporation
controlled by certain United States shareholders) with respect to the United
States unless the broker has no documentary evidence in its records that the
holder is a Foreign Person and certain other conditions are met or the holder
otherwise establishes an exemption. Payment by a United States office of a
broker is subject to both backup withholding at a rate of 31% and information
reporting unless the holder certifies under penalties of perjury that it is a
Foreign Person or otherwise establishes an exemption.

The procedures described above for withholding tax on interest payments, and
some of the associated backup withholding and information reporting rules, are
the subject of new, final regulations issued in 1997, which will be effective
for payments made after December 31, 1998, subject to certain transition rules.
These final regulations modify the procedures for establishing an exemption from
withholding tax described above. PROSPECTIVE INVESTORS ARE URGED TO CONSULT
THEIR OWN TAX ADVISORS REGARDING THE EFFECT THAT THESE FINAL REGULATIONS WILL
HAVE ON PAYMENTS AFTER DECEMBER 31, 1998 WITH RESPECT TO THE NOTES.

Subject to applicable estate tax treaty provisions, Notes held at the time
of death (or Notes transferred before death but subject to certain retained
rights or powers) by an individual who at the time of death is a Foreign Person
will not be included in such Foreign Person's gross estate for United States
federal estate tax purposes provided that the individual does not actually or
constructively own 10% or more of the total combined voting power of all classes
of stock of the Company entitled to vote or hold the Notes in connection with a
United States trade or business.

DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of 15,000,000 shares of
Common Stock and 5,000,000 shares of Preferred Stock, par value of $.01 per
share ("Preferred Stock"). After giving effect to the Offerings, the issued and
outstanding capital stock of the Company will consist of 5,027,000 shares of
Common Stock (5,507,000 shares if the underwriters' over-allotment option is
exercised in full in the Equity Offering) and no shares of Preferred Stock will
be outstanding. The Company has reserved 550,000 shares of Common Stock for
issuance under the Plan. See "Management -- Stock Incentive Plan."

The following description of certain matters relating to the capital stock
of the Company is a summary and is qualified in its entirety by the provisions
of the Certificate and the Bylaws, copies of which have been filed as exhibits
to the Registration Statement of which this Prospectus is a part.

COMMON STOCK

The holders of Common Stock are entitled to one vote per share on all
matters submitted to a vote of stockholders of the Company. In addition, such
holders are entitled to receive ratably such dividends, if any, as may be
declared from time to time by the Board of Directors out of funds legally
available therefor, subject to the payment of preferential dividends with
respect to any Preferred Stock that from time to time may be outstanding. In the
event of the dissolution, liquidation or winding-up of the Company, the holders
of Common Stock are entitled to share ratably in all assets remaining after
payment of all liabilities of the

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Company and subject to the prior distribution rights of the holders of any
Preferred Stock that may be outstanding at that time. The holders of Common
Stock do not have cumulative voting rights or preemptive or other rights to
acquire or subscribe for additional, unissued or treasury shares. All
outstanding shares of Common Stock are, and when issued the shares of Common
Stock offered hereby will be, fully paid and nonassessable.

PREFERRED STOCK

The Company has an authorized class of Preferred Stock consisting of
5,000,000 shares, none of which are issued and outstanding. The Board of
Directors is authorized, subject to any limitations prescribed by law, without
further stockholder approval, to issue shares of Preferred Stock from time to
time. The Board of Directors may designate one or more series of Preferred
Stock. Each such series of Preferred Stock shall have such number of shares,
designations, preferences, voting powers, qualifications and special or relative
rights or privileges as shall be determined by the Board of Directors, which may
include, among others, dividend rights, voting rights, redemption and sinking
fund provisions, liquidation preferences and conversion rights.

The Board of Directors has the authority to issue shares of Preferred Stock
and to determine its rights and preferences to eliminate delays associated with
a stockholder vote on specific issuances. The issuance of Preferred Stock, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, could adversely affect the voting power of holders of
Common Stock and the likelihood that such holders will receive dividend payments
and payments upon liquidation and could have the effect of delaying, deferring
or preventing a change in control of the Company.

ANTI-TAKEOVER PROVISIONS

The Certificate and Bylaws and the General Corporation Law of Delaware
include a number of provisions which may have the effect of encouraging persons
considering unsolicited tender offers or other unilateral takeover proposals to
negotiate with the Board of Directors rather than pursue non-negotiated takeover
attempts. These provisions include a classified board of directors, authorized
blank check preferred stock, restrictions on business combinations and the
availability of authorized but unissued Common Stock.

CLASSIFIED BOARD OF DIRECTORS. The Certificate contains provisions for a
staggered board of directors with only one-third of the board standing for
election each year. Directors can only be removed for cause. A staggered board
makes it more difficult for stockholders to change the majority of the directors
and instead promotes a continuity of existing management.

BLANK CHECK PREFERRED STOCK. The Certificate authorizes blank check
Preferred Stock. The Board of Directors can set the voting rights, redemption
rights, conversion rights and other rights relating to such Preferred Stock and
could issue such stock in either a private or public transaction. In some
circumstances, the blank check Preferred Stock could be issued and have the
effect of preventing a merger, tender offer or other takeover attempt which the
Board of Directors opposes.

DELAWARE TAKEOVER STATUTE. The Company is subject to Section 203 of the
Delaware General Corporation Law ("Section 203"). In general, Section 203
prevents an "interested stockholder" from engaging in a "business combination"
with a Delaware corporation for three years following the date such person
became an interested stockholder, unless (i) prior to the date such person
became an interested stockholder, the board of directors of the corporation
approved the transaction in which the interested stockholder became an
interested stockholder or approved the business combination, (ii) upon
consummation of the transaction that resulted in the interested stockholder
becoming an interested stockholder, the interested stockholder owns at least 85%
of the voting stock of the corporation outstanding at the time the transaction
commenced, excluding stock held by directors who are also officers of the
corporation and stock held by certain employee stock plans, or (iii) on or
subsequent to the date of the transaction in which such person became an
interested stockholder, the business combination is approved by the board of
directors of the corporation and authorized at a meeting of stockholders by the
affirmative vote of the

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holders of at least two-thirds of the outstanding voting stock of the
corporation not owned by the interested stockholder.

Section 203 defines a "business combination" to include (i) any merger or
consolidation involving the corporation and an interested stockholder, (ii) any
sale, transfer, pledge or other disposition involving an interested stockholder
of 10% or more of the assets of the corporation, (iii) subject to certain
exceptions, any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to an interested stockholder, (iv)
any transaction involving the corporation which has the effect of increasing the
proportionate share of the stock of any class or series of the corporation
beneficially owned by the interested stockholder or (v) the receipt by an
interested stockholder of any loans, guarantees, pledges or other financial
benefits provided by or through the corporation. In addition, Section 203
defines an "interested stockholder" as any entity or person beneficially owning
15% or more of the outstanding voting stock of the corporation and any entity or
person affiliated with or controlling or controlled by such entity or person.

STOCK PURCHASE AND SUPER MAJORITY VOTING PROVISIONS. The Certificate
includes a provision which requires the affirmative vote of two-thirds of the
outstanding shares of capital stock entitled to vote generally in the election
of directors held by persons who are not interested stockholders (as defined in
the Certificate) to approve the repurchase of any equity securities of the
Company from an interested stockholder unless either (a) such repurchase is made
on the same terms offered to all holders of the same securities or (b) the
Company does not pay above the market price or fair market value of such
securities. The Certificate also includes a provision which requires the
affirmative vote of two-thirds of the outstanding shares of capital stock
entitled to vote generally in the election of directors to (i) sell all or
substantially all of the assets of the Company, (ii) merge or consolidate the
Company with or into any other corporation, partnership, limited liability
company or other entity, (iii) dissolve, liquidate or terminate the business of
the Company or (iv) alter, amend or repeal certain sections of the Certificate
or the Bylaws.

STOCKHOLDER ACTION

Except as otherwise required by law or the Certificate, with respect to any
act or action required of or by the holders of the Common Stock, the affirmative
vote of the holders of a majority of the issued and outstanding shares of Common
Stock entitled to vote thereon is sufficient to authorize the act or action. See
"-- Anti-Takeover Provisions."

Pursuant to Delaware law, stockholders may take actions without the holding
of a meeting by written consent or consents signed by the holders of a
sufficient number of shares to approve the transaction had all of the
outstanding shares of the capital stock of the Company entitled to vote thereon
been present at a meeting. Upon the completion of the Offerings, Dr. Talley and
Mr. Lee, together with Mrs. Bennett, will beneficially own approximately 27% of
the outstanding Common Stock. Pursuant to the rules and regulations of the
Commission, if stockholder action is taken by written consent, the Company will
be required to send each stockholder entitled to vote on the matter acted on,
but whose consent was not solicited, an information statement containing
information substantially similar to that which would have been contained in a
proxy statement.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is
of .

91
<PAGE>
UNDERWRITING

Subject to the terms and upon the conditions set forth in the Underwriting
Agreement, RAM Energy, Inc. has agreed to sell to Jefferies & Company, Inc. (the
"Underwriter"), and the Underwriter has agreed to purchase, the Notes at the
public offering price less the underwriting discount set forth on the cover page
of this Prospectus.

The Underwriting Agreement provides that the obligation of the Underwriter
to purchase the Notes offered hereby is subject to certain conditions. Under the
terms and upon the conditions of the Underwriting Agreement, the Underwriter is
committed to purchase all of the Notes offered hereby, if any are purchased. The
Underwriter proposes to offer the Notes to the public initially at the public
offering price set forth on the cover of this Prospectus. After the initial
public offering of the Notes, the public offering price may be changed by the
Underwriter.

Prior to the Debt Offering, there has been no public market for the Notes.
The initial public offering price for the Notes will be determined by
negotiations between RAM Energy, Inc. and the Underwriter. Among the principal
factors that will be considered in determining such public offering price will
be the financial strength of the Company in recent periods, prevailing economic
prospects, debt offerings of companies in related businesses, the prospects for
the Company and the oil and gas industry, and the general conditions prevailing
in the securities markets. The Underwriter does not intend to confirm sales of
the Notes to any accounts over which it exercises discretionary authority.

RAM Energy, Inc. has agreed to indemnify the Underwriter against certain
liabilities that may be incurred in connection with the offering of the Notes,
including liabilities under the Securities Act, or to contribute to the payments
that the Underwriter may be required to make in respect thereof.

The Underwriter has advised the Company that it currently intends to make a
market in the Notes after the consummation of the Debt Offering, as permitted by
applicable laws and regulations; however, it is not obligated to do so, and any
such market-making, if commenced, may be discontinued at any time without
notice. Accordingly, there can be no assurance as to the liquidity of the
trading market for the Notes or that any active trading market for the Notes
will develop. See "Risk Factors -- Absence of a Public Market for the Notes."

The closing of the Debt Offering is conditioned upon the simultaneous
closings of the Equity Offering and the Carlton Acquisition.

Jefferies & Company, Inc. is serving as one of the representatives of the
underwriters for purposes of the Equity Offering. The underwriters of the Equity
Offering will receive customary compensation for such underwriting consisting of
the underwriting discount.

In connection with the closing of the Debt Offering, Energy Spectrum
Advisors will receive a finder's fee equal to $100,000 payable from the
underwriting discount otherwise payable to the Underwriter. In connection with
the closing of the Equity Offering, Energy Spectrum Advisors will receive a
finder's fee equal to $100,000 payable from the underwriting discount otherwise
payable to the underwriters.

LEGAL MATTERS

The validity of the Notes offered hereby will be passed upon for the Company
by McAfee & Taft A Professional Corporation, Oklahoma City, Oklahoma. Certain
legal matters relating to the sale of the Notes will be passed upon for the
Underwriter by Fulbright & Jaworski L.L.P., Houston, Texas.

92
<PAGE>
EXPERTS

The consolidated financial statements of RAM Energy, Inc. as of December 31,
1995 and 1996 and for each of the years in the three-year period ended December
31, 1996, the financial statements of RAMCO-NYL 1987 Limited Partnership as of
December 31, 1995 and November 30, 1996 and for each of the years in the
two-year period ended December 31, 1995 and for the eleven-month period ended
November 30, 1996 and the consolidated financial statements of Carlton Resources
Corporation (and its predecessor) as of December 31, 1995 and 1996 and for the
year ended December 31, 1995, the eight-month period ended August 31, 1996 and
the four-month period ended December 31, 1996 appearing in this Prospectus and
in the Registration Statement, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports thereon appearing elsewhere
herein, and are included in reliance upon such reports given upon the authority
of such firm as experts in accounting and auditing.

Information relating to the estimated proved reserves of oil and gas and the
related estimates of future net revenues and present values thereof as of
November 30, 1997 on an actual and pro forma basis was estimated by Forrest A.
Garb & Associates, Inc., independent petroleum engineers, and audited by
Netherland & Sewell Associates, Inc., independent petroleum engineers. The
reserve and present value data for the Company's existing properties as of
December 31, 1994, 1995 and 1996 were estimated by Forrest A. Garb & Associates,
Inc. Such estimates are included herein in reliance on the authority of such
firms as experts in such matters.

AVAILABLE INFORMATION

Prior to the Offerings, RAM Energy, Inc. has not been subject to the
reporting requirements of the Securities Exchange Act of 1934, as amended. RAM
Energy, Inc. intends to furnish its stockholders with annual reports containing
audited consolidated financial statements examined and reported on, with an
opinion expressed by, independent public accountants following the end of each
fiscal year and such interim reports as it may determine to be necessary or
desirable.

RAM Energy, Inc. has filed with the Commission a Registration Statement on
Form S-1 (the "Registration Statement") under the Securities Act of 1933, as
amended, with respect to the securities offered pursuant to the Offerings. This
Prospectus, which constitutes a part of the Registration Statement, does not
contain all of the information contained in the Registration Statement and in
the exhibits and schedules thereto, certain portions of which are omitted as
permitted by the rules and regulations of the Commission. For further
information with respect to the Company and the securities offered pursuant to
the Offerings, reference is made to the Registration Statement, including the
exhibits and schedules thereto.

The Registration Statement and the exhibits and schedules thereto may be
inspected, without charge, and copies may be obtained at prescribed rates at the
Public Reference Section of the Commission at Room 1024, 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549, and at the regional offices of the
Commission at Citicorp Center, 500 West Madison Street, 14th Floor, Chicago,
Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New York
10048. The Commission maintains a web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. This web site can be visited at
http://www.sec.gov.

93
<PAGE>
GLOSSARY OF TERMS

The definitions set forth below shall apply to the indicated terms as used
in this Prospectus. All volumes of natural gas referred to herein are stated at
the legal pressure base of the state or area where the reserves exist and at 60
degrees Fahrenheit and in most instances are rounded to the nearest major
multiple.

BBL. One stock tank barrel, or 42 U.S. gallons liquid volume, used herein
in reference to crude oil or other liquid hydrocarbons.

BCF. One billion cubic feet of natural gas.

BCFE. One billion cubic feet of natural gas equivalent, determined using
the ratio of six Mcf of natural gas to one Bbl of crude oil, condensate or
natural gas liquids.

COMPLETION. The installation of permanent equipment for the production of
oil or natural gas or, in the case of a dry hole, the reporting of abandonment
to the appropriate agency.

DEVELOPMENT WELL. A well drilled within the proved areas of an oil or
natural gas reservoir to the depth of a stratigraphic horizon known to be
productive.

DRY HOLE OR WELL. A well found to be incapable of producing hydrocarbons in
sufficient quantities such that proceeds from the sale of such production exceed
production expenses and taxes.

EXPLORATORY WELL. A well drilled to find and produce oil or natural gas
reserves not classified as proved, to find a new reservoir in a field previously
found to be productive of oil or natural gas in another reservoir or to extend a
known reservoir.

FIELD. An area consisting of a single reservoir or multiple reservoirs all
grouped on or related to the same individual geological structural feature
and/or stratigraphic condition.

GROSS ACRES OR GROSS WELLS. The total acres or wells, as the case may be,
in which a working interest is owned.

MBBLS. One thousand barrels of crude oil or other liquid hydrocarbons.

MCF. One thousand cubic feet of natural gas.

MCFD. One thousand cubic feet of natural gas per day.

MCFE. One thousand cubic feet of natural gas equivalent, determined using
the ratio of six Mcf of natural gas to one Bbl of crude oil, condensate or
natural gas liquids.

MMBBLS. One million barrels of crude oil or other liquid hydrocarbons.

MMCF. One million cubic feet of natural gas.

MMCFE. One million cubic feet of natural gas equivalent determined using
the ratio of six Mcf of natural gas to one Bbl of crude oil, condensate or
natural gas liquids.

NET ACRES OR NET WELLS. The sum of the fractional working interests owned
in gross acres or gross wells, as the case may be.

OIL. Crude oil, condensate and natural gas liquids.

PV-10 VALUE AND PRESENT VALUE. When used with respect to oil and natural
gas reserves, the estimated future gross revenues to be generated from the
production of proved reserves, net of estimated production and future
development costs, using prices and costs in effect as of the date indicated,
without giving effect

94
<PAGE>
to non-property related expenses such as general and administrative expenses,
debt service and future income tax expenses or to depreciation, depletion and
amortization, discounted using an annual discount rate of 10%.

PRODUCTIVE WELL. A well that is found to be capable of producing
hydrocarbons in sufficient quantities such that proceeds from the sale of such
production exceed production expenses and taxes.

PROVED DEVELOPED PRODUCING RESERVES. Proved developed reserves that are
expected to be recovered from completion intervals currently open in existing
wells and capable of production.

PROVED DEVELOPED RESERVES. Proved reserves that are expected to be
recovered from existing wellbores, whether or not currently producing, without
drilling additional wells. Production of such reserves may require a
recompletion.

PROVED RESERVES. The estimated quantities of crude oil, natural gas and
natural gas liquids that geological and engineering data demonstrate with
reasonable certainty to be recoverable in future years from known reservoirs
under existing economic and operating conditions.

PROVED UNDEVELOPED LOCATION. A site on which a development well can be
drilled consistent with spacing rules for purposes of recovering proved
undeveloped reserves.

PROVED UNDEVELOPED RESERVES. Proved reserves that are expected to be
recovered from new wells on undrilled acreage or from existing wells where a
relatively major expenditure is required for recompletion.

RECOMPLETION. The completion for production of an existing wellbore in
another formation from that in which the well has been previously completed.

RESERVE LIFE. A ratio determined by dividing the existing reserves
determined as of the stated measurement date by production from such reserves
for the prior twelve month period.

RESERVOIR. A porous and permeable underground formation containing a
natural accumulation of producible oil and/or natural gas that is confined by
impermeable rock or water barriers and is individual and separate from other
reservoirs.

ROYALTY INTEREST. An interest in an oil and gas property entitling the
owner to a share of oil or natural gas production free of costs of production.

UNDEVELOPED ACREAGE. Lease acreage on which wells have not been drilled or
completed to a point that would permit the production of commercial quantities
of oil and gas regardless of whether such acreage contains proved reserves.

WELLBORE. The hole drilled by the bit.

WORKING INTEREST. The operating interest that gives the owner the right to
drill, produce and conduct operating activities on the property and a share of
production.

WORKOVER. Operations on a producing well to restore or increase production.

95
<PAGE>
RAM ENERGY, INC.
INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
RAM ENERGY, INC. -- NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
Balance Sheet as of September 30, 1997 (unaudited)................................... F-2
Statements of Operations for the nine months ended September 30, 1996 and 1997
(unaudited)........................................................................ F-3
Statements of Cash Flows for the nine months ended September 30, 1996 and 1997
(unaudited)........................................................................ F-4
Notes to Unaudited Financial Statements.............................................. F-5
RAM ENERGY, INC. -- YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
Report of Independent Auditors....................................................... F-9
Consolidated Balance Sheets as of December 31, 1995 and 1996......................... F-10
Consolidated Statements of Operations for the years ended December 31, 1994, 1995 and
1996............................................................................... F-11
Consolidated Statements of Stockholders' Equity (Deficiency) for the years ended
December 31, 1994, 1995 and 1996................................................... F-12
Consolidated Statements of Cash Flows for the years ended December 31, 1994, 1995 and
1996............................................................................... F-13
Notes to Consolidated Financial Statements........................................... F-14

RAMCO-NYL 1987 LIMITED PARTNERSHIP
Report of Independent Auditors....................................................... F-27
Balance Sheets as of December 31, 1995 and November 30, 1996......................... F-28
Statements of Operations for the years ended December 31, 1994 and 1995 and for the
eleven months ended November 30, 1996.............................................. F-29
Statements of Partners' Equity for the years ended December 31, 1994 and 1995 and for
the eleven months ended November 30, 1996.......................................... F-30
Statements of Cash Flows for the years ended December 31, 1994 and 1995 and for the
eleven months ended November 30, 1996.............................................. F-31
Notes to Financial Statements........................................................ F-32

CARLTON RESOURCES CORPORATION (AND ITS PREDECESSOR)
Report of Independent Auditors....................................................... F-41

Consolidated Balance Sheets as of December 31, 1995 and 1996 and September 30, 1997
(unaudited)........................................................................ F-42

Consolidated Statements of Operations for the year ended December 31, 1995, the eight
month period ended August 31, 1996, the four month period ended December 31, 1996
and the nine month period ended September 30, 1997 (unaudited)..................... F-43

Consolidated Statements of Stockholders' Equity (Deficit) for the year ended December
31, 1995, the eight month period ended August 31, 1996, the four month period ended
December 31, 1996 and the nine month period ended September 30, 1997 (unaudited)... F-44

Consolidated Statements of Cash Flows for the year ended December 31, 1995, the eight
month period ended August 31, 1996, the four month period ended December 31, 1996
and the nine month period ended September 30, 1997 (unaudited)..................... F-45

Notes to Consolidated Financial Statements........................................... F-46
</TABLE>

F-1
<PAGE>
RAM ENERGY, INC.
BALANCE SHEET
(UNAUDITED)

<TABLE>
<CAPTION>
SEPTEMBER 30,
1997
-------------
<S> <C>
ASSETS
Current assets (NOTE 4):
Cash and cash equivalents........................................................................ $ 2,030,959
Accounts receivable:
Oil and gas sales.............................................................................. 2,897,636
Joint interest operations, net of allowance for doubtful accounts of $452,818.................. 1,398,874
Other.......................................................................................... 45,643
Prepaid expenses................................................................................. 254,261
-------------
Total current assets............................................................................... 6,627,373
Properties and equipment, at cost (NOTES 2, 3 AND 4):
Oil and gas properties and equipment, based on full cost accounting.............................. 69,064,229
Other equipment.................................................................................. 3,409,392
-------------
72,473,621
Less accumulated amortization and depreciation................................................... 12,373,486
-------------
Net properties and equipment....................................................................... 60,100,135
Other assets (NOTE 4):
Receivable from affiliate not expected to be collected within one year, net of allowance of
$139,695 (NOTE 7).............................................................................. 1,800,000
Loan origination fees, net of accumulated amortization of $253,555............................... 1,282,201
Other............................................................................................ 534,094
-------------
Total assets....................................................................................... $ 70,343,803
-------------
-------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Accounts payable:
Oil and gas proceeds due others................................................................ $ 2,854,931
Trade.......................................................................................... 3,549,075
Accrued liabilities:
Interest....................................................................................... 401,503
Gas balancing liability........................................................................ 300,000
Other.......................................................................................... 98,200
Long-term debt due within one year (NOTE 4)...................................................... 9,243,900
-------------
Total current liabilities.......................................................................... 16,447,609
Gas balancing liability not expected to be settled within one year................................. 685,244
Long-term debt due after one year (NOTE 4)......................................................... 52,970,824
Contingencies...................................................................................... 600,000
Minority interest.................................................................................. 1,203,468
Stockholders' equity (deficiency):
Series A preferred stock, $.01 par value; authorized--100,000 shares; issued and
outstanding--77,714 shares (liquidating preference $10 per share).............................. 777
Series B preferred stock, $.01 par value; authorized--100,000 shares; issued and
outstanding--69,652 shares (liquidating preference $10 per share).............................. 697
Class A common stock, $225 par value; authorized--222 shares; issued and outstanding--101
shares......................................................................................... 22,725
Paid-in capital.................................................................................. 1,492,805
Accumulated deficit.............................................................................. (3,080,346)
-------------
Stockholders' equity (deficiency).................................................................. (1,563,342)
-------------
Total liabilities and stockholders' equity (deficiency)............................................ $ 70,343,803
-------------
-------------
</TABLE>

SEE ACCOMPANYING NOTES.

F-2
<PAGE>
RAM ENERGY, INC.
STATEMENTS OF OPERATIONS (NOTE 1)
(UNAUDITED)

<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
------------------------------------------
1996
------------- 1996 1997
PARTNERSHIP ------------ -------------
(PREDECESSOR) COMPANY COMPANY
------------- ------------ -------------
<S> <C> <C> <C>
Operating revenues:
Oil and gas sales.................................................... $ 18,744,175 $ 147,697 $ 16,819,429
Management fees from Partnership..................................... -- 1,224,660 --
Operator's overhead fees from Partnership -- 1,108,423 --
Consulting fees from related parties................................. -- 91,106 --
Other................................................................ -- 78,596 85,301
------------- ------------ -------------
Total operating revenues......................................... 18,744,175 2,650,482 16,904,730

Operating expenses (NOTE 3):
Oil and gas production expenses:
Operator fees to Managing General Partner.......................... 1,108,423 -- --
Other.............................................................. 6,152,880 61,591 4,795,344
Amortization and depreciation........................................ 4,160,423 264,128 5,268,012
General and administrative, overhead and other expenses, net:
Management fee to Managing General Partner......................... 1,209,770 -- --
Other.............................................................. 240,444 2,517,157 3,325,170
------------- ------------ -------------
Total operating expenses......................................... 12,871,940 2,842,876 13,388,526
------------- ------------ -------------
Operating income (loss)................................................ 5,872,235 (192,394) 3,516,204
Other income (expense):
Interest expense..................................................... (483,805) (13,979) (3,787,067)
Interest income...................................................... 91,477 22,000 42,611
Equity in income of partnership...................................... -- 54,800 --

Minority interest in net income of Partnership....................... -- -- (14,572)
------------- ------------ -------------
Net income (loss)...................................................... $ 5,479,907 $ (129,573) $ (242,824)
------------- ------------ -------------
------------- ------------ -------------
Net loss per share (NOTE 7)........................................................... $ (.05) $ (.09)
------------ -------------
------------ -------------
Weighted average shares outstanding (NOTE 7).......................................... 2,727,000 2,727,000
------------ -------------
------------ -------------
</TABLE>

SEE ACCOMPANYING NOTES.

F-3
<PAGE>
RAM ENERGY, INC.

STATEMENTS OF CASH FLOWS (NOTE 1)
(UNAUDITED)

<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
----------------------------------------------
1996
-------------- 1996 1997
PARTNERSHIP -------------- --------------
(PREDECESSOR) COMPANY COMPANY
-------------- -------------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)................................................ $ 5,479,907 $ (129,573) $ (242,824)
Adjustments to reconcile net income (loss) to net cash provided
(used) by operating activities:
Amortization and depreciation.................................. 4,160,423 264,128 5,268,012
Provision for doubtful accounts receivable and other........... -- 105,403 80,000
Equity in income of Partnership................................ -- (54,800) --
Minority interest in net income after acquisition of
Partnership.................................................. -- -- 14,572
Cash provided (used) by changes in operating assets and
liabilities:
Prepaid expenses and deposits................................ 255,119 46,744 111,195
Accounts receivable.......................................... (871,261) 578,123 1,257,741
Accounts payable............................................. (506,112) (200,634) 866,918
Accrued liabilities.......................................... (420,000) (204,000) (934,840)
-------------- -------------- --------------
Total adjustments................................................ 2,618,169 534,964 6,663,598
-------------- -------------- --------------
Net cash provided by operating activities........................ 8,098,076 405,391 6,420,774

CASH FLOWS FROM INVESTING ACTIVITIES
Distributions from Partnership................................... -- 20,305 --
Payments for oil and gas properties and equipment................ (1,950,450) (21,905) (14,506,757)
Proceeds from sales of oil and gas properties and equipment...... 412,998 5,956 9,693,576
Payments for other property and equipment........................ -- (165,271) (185,086)
Proceeds from sales of other property and equipment.............. -- -- 15,139
Advances for development costs................................... (27,868) -- (226,371)
Purchases of other assets........................................ (60,000) -- (17,978)
Proceeds from sale of other assets............................... -- -- --
Other............................................................ -- (9,337) --
-------------- -------------- --------------
Net cash used by investing activities............................ (1,625,320) (170,252) (5,227,477)

CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term debt............................. (2,500,000) (41,502) (10,396,417)
Proceeds from borrowings on long-term debt....................... -- 120,559 9,626,714
Distributions to partners........................................ (2,030,439) -- --
-------------- -------------- --------------
Net cash provided (used) by financing activities................. (4,530,439) 79,057 (769,703)
-------------- -------------- --------------
Increase in cash and cash equivalents............................ 1,942,317 314,196 423,594
Cash and cash equivalents at beginning of period................. 1,265,980 523,506 1,607,365
-------------- -------------- --------------
Cash and cash equivalents at end of period....................... $ 3,208,297 $ 837,702 $ 2,030,959
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>

SEE ACCOMPANYING NOTES.

F-4
<PAGE>
RAM ENERGY, INC.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, ORGANIZATION AND BASIS OF
FINANCIAL STATEMENTS

The accompanying unaudited financial statements present the results of
operations and cash flows of RAM Energy, Inc. for the nine-month periods ended
September 30, 1996 and 1997 as well as that for RAM Energy, Inc.'s predecessor,
RAMCO-NYL 1987 Limited Partnership (the "Partnership"), for the nine-month
period ended September 30, 1996. These financial statements include all
adjustments, consisting of normal and recurring adjustments, which, in the
opinion of management, were necessary for a fair presentation of the financial
position and the results of operations for the indicated periods. The results of
operations for the nine months ended September 30, 1997 are not necessarily
indicative of the results to be expected for the full year ending December 31,
1997.

NATURE OF OPERATIONS AND ORGANIZATION

RAM Energy, Inc. (Note 7), formerly RAMCO Operating Company ("RAM"
collectively, when referring to RAM Energy, Inc. and its consolidated
subsidiaries, or "REI" when referring to RAM Energy, Inc. only) operates
exclusively in the oil and natural gas industry with activities including the
drilling, completion and operation of oil and natural gas wells. RAM conducts
the majority of its operations in the states of Oklahoma, Texas and New Mexico.

REI serves as the managing general partner of the Partnership. The
Partnership was activated on February 3, 1988 by REI, Oklahoma Double R
Corporation, the special general partner and an affiliate of REI, and New York
Life Insurance Company, the original limited partner. Under the terms of the
limited partnership agreement, as amended, for financial reporting purposes,
virtually all Partnership revenues, costs and expenses are allocated 1.0% to the
managing general partner, 2.5% to the special general partner and 96.5% to the
limited partner prior to Payout Nos. 1 and 2, as defined. Upon reaching these
payouts, the allocation to the managing general partner increases to 11.5% while
that of the limited partner decreases to 86.0%.

Effective November 30, 1996, REI's wholly-owned subsidiary, RB Operating
Company ("RBO"), purchased the limited partner's interest in the Partnership for
$60.0 million, as provided for under the terms of a purchase and sale agreement
previously executed by the parties (Note 2). Funding for the transaction was
obtained from borrowings under a credit agreement with a bank (Note 4).

PRINCIPLES OF CONSOLIDATION

The financial statements of RAM are presented on a consolidated basis and
include the accounts of REI, RBO and the accounts of REI's majority-owned
Partnership beginning December 1, 1996. All significant intercompany
transactions, including transactions between REI or RBO and the Partnership
(beginning December 1, 1996) have been eliminated.

2. ACQUISITIONS AND SALE

In August 1997, RAM purchased certain primarily producing oil and gas
properties and equipment located principally in Oklahoma, Louisiana and
Mississippi for $11.2 million (before closing adjustments). This transaction,
which has been accounted for under the purchase method of accounting, was
financed with additional borrowings under the credit agreement (Note 4).

As described in Note 1, RBO purchased the limited partner's interest in the
Partnership and has reflected this additional ownership in RAM's accompanying
consolidated financial statements beginning on December 1, 1996. This
transaction has been accounted for under the purchase method of accounting.

F-5
<PAGE>
RAM ENERGY, INC.

NOTES TO UNAUDITED FINANCIAL STATEMENTS (CONTINUED)

2. ACQUISITIONS AND SALE (CONTINUED)
RAM sold certain oil and gas properties in 1997 and received cash proceeds
of $10.4 million (before closing adjustments). As required by the credit
agreement (Note 4), such proceeds were used to pay down the principal balance
outstanding under the credit agreement.

3. RELATED PARTY TRANSACTIONS

REI and RBO also serve as operator on many of the wells of the Partnership
and charge operator fees in connection therewith.

4. LONG-TERM DEBT

Long-term debt consists of the following at September 30, 1997:

<TABLE>
<S> <C>
Revolving note payable......................................... $55,000,000
Term note payable.............................................. 7,000,000
Installment loan agreements.................................... 214,724
----------
62,214,724
Less amount due within one year................................ 9,243,900
----------
$52,970,824
----------
----------
</TABLE>

The original maturity date of the term commitment was October 31, 1997. The
maturity date on the term commitment has been extended to June 30, 1998. The
credit agreement, as amended in December 1997, contains various affirmative and
restrictive covenants. These covenants, among other things, restrict mergers
involving RAM and payment of dividends on REI's stock, limit additional
indebtedness and sales or other dispositions of assets, and require RAM to meet
certain financial covenants. In addition, the credit agreement requires RAM to
enter into certain interest rate swaps and collars to hedge the interest rate
exposure associated with the credit agreement.

Effective January 3, 1997, RAM had entered into interest rate swaps and
collars to hedge the interest rate exposure associated with the borrowings under
the credit agreement. As of September 30, 1997, RAM had entered into two
interest rate swaps with notional amounts of $10 million each to fix the
interest rate on the borrowings under the revolving commitment and entered into
an interest rate collar to cap the interest rate on an additional notional
amount of $10.0 million of the borrowings under the revolving commitment. Under
the terms of the interest rate swaps, RAM receives the LIBOR three-month rate
(5.66% at September 30, 1997) and pays an average of 6.35% for 1997. Under the
terms of the interest rate

F-6
<PAGE>
RAM ENERGY, INC.

NOTES TO UNAUDITED FINANCIAL STATEMENTS (CONTINUED)

4. LONG-TERM DEBT (CONTINUED)
collar, RAM pays 5.50% in the event that the LIBOR three-month rate falls below
5.50% and receives 7.14% in the event that the LIBOR three-month rate exceeds
7.14%. The notional amounts under these interest rate swaps and collars are less
than the amounts outstanding under the credit agreement at September 30, 1997.
At September 30, 1997, the effective interest rate for the borrowings under the
revolving commitment was 8.47%. The interest rate swaps mature in January 2000
and January 2002 and the interest rate collar matures in January 1999.

For the interest rate swaps, the differential between the fixed rate and the
floating rate multiplied by the notional amount results in a gain or loss
related to the swap. For the interest rate collar, when the floating rate
exceeds the cap rate, the differential between the floating rate and the cap
rate results in a gain and when the floating rate is less than the floor rate,
the differential between the floating rate and the floor rate results in a loss.
Such gains or losses are included in interest expense in the period for which
the interest rate exposure was hedged. For the nine months ended September 30,
1997, the swap loss included in interest expense was $93,321 (there was no gain
or loss on the interest rate collar for the nine months ended September 30,
1997).

5. FIXED-PRICE CONTRACTS

RAM has entered into certain fixed price contracts to reduce its exposure to
unfavorable changes in natural gas prices which are subject to significant and
often volatile fluctuation. RAM's fixed-price contracts are comprised of
short-term physical delivery contracts. These contracts allow RAM to predict
with greater certainty the effective gas prices to be received from its hedged
production. As of September 30, 1997, these fixed-price contracts are in place
to hedge 1,740,000 MMbtu of RAM's estimated future production through April 1998
from proved gas reserves at a weighted average price of $2.73 per MMbtu.

6. FINANCIAL INSTRUMENTS

The following information is provided regarding the estimated fair value of
financial instruments employed by RAM as of September 30, 1997 and the method
and assumptions used to estimate the fair value of such financial instruments:

The carrying amounts reported in the accompanying balance sheet for cash and
cash equivalents and variable rate long-term debt approximate their fair
values.

The carrying value of RAM's interest rate swaps at September 30, 1997
exceeded the fair value by approximately $192,000, representing the amount
RAM would be required to pay to terminate the contracts at such date.

7. SUBSEQUENT EVENTS

Effective November 1, 1997, the Board of Directors of Oklahoma Double R
Corporation ("DRC") authorized the assignment to REI, in partial payment for the
$1,800,000 indebtedness owed by DRC to REI, of all assets and properties of the
Partnership otherwise distributable to DRC upon dissolution and liquidation of
the Partnership in respect of DRC's 2.5% special general partnership interest in
the Partnership.

Effective November 26, 1997, RBO was merged with and into REI, resulting in
REI becoming the direct owner of all of the assets and properties of RBO and
assuming all of its liabilities. Effective

F-7
<PAGE>
RAM ENERGY, INC.

NOTES TO UNAUDITED FINANCIAL STATEMENTS (CONTINUED)

7. SUBSEQUENT EVENTS (CONTINUED)
December 1, 1997, REI, as managing general partner and sole limited partner of
the Partnership, and DRC, as special general partner of the Partnership,
authorized the dissolution of the Partnership, the liquidation of all of the
assets of the Partnership into REI and the assumption by REI of all liabilities
of the Partnership.

In November 1997, RAM entered into a letter of intent to purchase certain
producing oil and gas properties and equipment and pipeline gathering systems
located principally in Oklahoma for $43.0 million. This transaction is expected
to close simultaneously with certain debt and stock offerings RAM Energy, Inc.
is in the process of completing.

On December , 1997, the Board of Directors of RAM Energy, Inc. approved a
27,000-for-1 stock split of RAM Energy, Inc.'s common stock. Additionally, on
such date, the name of RAM was changed from RAMCO Operating Company to RAM
Energy, Inc. The effects of the stock split on the computations of net income
(loss) per share have been reflected retroactively in the accompanying financial
statements.

F-8
<PAGE>
REPORT OF INDEPENDENT AUDITORS

The Board of Directors
RAM Energy, Inc.

We have audited the accompanying consolidated balance sheets of RAM Energy,
Inc. as of December 31, 1995 and 1996, and the related consolidated statements
of operations, stockholders' equity (deficiency), and cash flows for each of the
three years in the period ended December 31, 1996. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of RAM Energy,
Inc. at December 31, 1995 and 1996, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.

Oklahoma City, Oklahoma
December 15, 1997,

except for the matters described in the last paragraph of Note 11, as to which
the date is

December , 1997

The foregoing report is in the form that will be signed upon completion of
the shareholder approval of the matters described in the last paragraph of Note
11 to the accompanying financial statements.

ERNST & YOUNG LLP

Oklahoma City, Oklahoma
December 15, 1997

F-9
<PAGE>
RAM ENERGY, INC.

CONSOLIDATED BALANCE SHEETS (NOTE 1)

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
<S> <C> <C>
1995 1996
----------- ------------
ASSETS
Current assets (NOTE 3):
Cash and cash equivalents........................................................... $ 523,506 $ 1,607,365
Accounts receivable:
Oil and gas sales................................................................. 24,327 5,051,508
Joint interest operations, net of allowance for doubtful accounts of $230,154 in
1995 and $370,693 in 1996....................................................... 768,650 464,826
Related parties (NOTE 2).......................................................... 1,349,412 9,500
Other............................................................................. 62,585 154,060
Prepaid expenses and deposits....................................................... 119,204 365,456
Oil and gas properties and equipment held for sale.................................. -- 5,400,000
----------- ------------
Total current assets.................................................................. 2,847,684 13,052,715
Properties and equipment, at cost (NOTES 2 AND 3):
Oil and gas properties and equipment, based on full cost accounting................. 1,006,495 58,807,298
Other property and equipment........................................................ 3,065,172 3,275,688
----------- ------------
4,071,667 62,082,986
Less accumulated amortization and depreciation...................................... 3,077,142 7,344,660
----------- ------------
Net properties and equipment.......................................................... 994,525 54,738,326
Other assets (NOTE 3):
Receivable from sister corporation not expected to be collected within one year, net
of allowance of $139,695 (NOTES 2 AND 11)......................................... 1,800,000 1,800,000
Loan origination fees, net of accumulated amortization of $33,862................... -- 1,532,927
Investment in Partnership, at equity (Notes 2 and 8)................................ 507,094 --
Other............................................................................... 335,374 285,712
----------- ------------
Total assets.......................................................................... $ 6,484,677 $ 71,409,680
----------- ------------
----------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Accounts payable:
Trade............................................................................. $ 3,006,309 $ 3,062,826
Oil and gas proceeds due others................................................... 2,021,230 2,474,262
Related parties (NOTE 2).......................................................... 2,548,344 --
Accrued liabilities:
Compensation...................................................................... 293,000 820,200
Interest.......................................................................... -- 384,653
Other (NOTE 2).................................................................... 295,561 300,000
Long-term debt due within one year (NOTE 3)......................................... 31,464 5,475,673
----------- ------------
Total current liabilities............................................................. 8,195,908 12,517,614
Gas balancing liability not expected to be settled within one year.................... -- 914,934
Long-term debt due after one year (NOTE 3)............................................ 17,439 57,508,754
Commitments and contingencies (NOTES 4 AND 8)......................................... -- 600,000
Minority interest..................................................................... -- 1,188,896
Stockholders' equity (deficiency) (NOTES 3, 6 AND 11):
Series A preferred stock, $.01 par value; authorized--100,000 shares; issued and
outstanding--77,714 shares (liquidating preference $10 per share)................. 777 777
Series B preferred stock, $.01 par value; authorized--100,000 shares; issued and
outstanding--69,652 shares (liquidating preference $10 per share)................. 697 697
Class A common stock, $225 par value; authorized--222 shares; issued and
outstanding--101 shares (NOTE 11)................................................. 22,725 22,725
Paid-in capital..................................................................... 1,492,805 1,492,805
Accumulated deficit................................................................. (3,245,674) (2,837,522)
----------- ------------
Stockholders' equity (deficiency)..................................................... (1,728,670) (1,320,518)
----------- ------------
Total liabilities and stockholders' equity (deficiency)............................... $ 6,484,677 $ 71,409,680
----------- ------------
----------- ------------
</TABLE>

SEE ACCOMPANYING NOTES.

F-10
<PAGE>
RAM ENERGY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (NOTE 1)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
<S> <C> <C> <C>
1994 1995 1996
------------ ------------ ------------
Operating revenues (NOTE 2):
Oil and gas sales..................................................... $ 152,992 $ 165,627 $ 3,274,941
Management fees from Partnership...................................... 1,554,929 1,605,743 1,482,293
Operator's overhead fees from Partnership............................. 1,746,145 1,686,043 1,342,777
Consulting income from related parties................................ 236,402 162,748 152,648
Other................................................................. 119,311 85,277 567,536
------------ ------------ ------------
Total operating revenues............................................ 3,809,779 3,705,438 6,820,195

Operating expenses:
Oil and gas production expenses....................................... 75,791 77,209 826,825
Amortization and depreciation......................................... 405,728 353,449 990,032
General and administrative, overhead and other expenses, net of
operator's overhead fees to unrelated interests of $1,382,250,
$1,352,929, and $1,217,796 in 1994, 1995 and 1996, respectively..... 3,279,413 3,363,713 4,164,314
------------ ------------ ------------
Total operating expenses............................................ 3,760,932 3,794,371 5,981,171
------------ ------------ ------------
Operating Income (loss)................................................. 48,847 (88,933) 839,024
Other income (expense):
Interest expense...................................................... (22,691) (18,022) (541,526)
Interest income....................................................... 75,149 72,786 29,434
Equity in income (loss) of Partnership................................ (101,293) (23,129) 70,874

Minority interest in net loss of Partnership.......................... -- -- 10,346
------------ ------------ ------------
Net income (loss)....................................................... $ 12 $ (57,298) $ 408,152
------------ ------------ ------------
------------ ------------ ------------
Net income (loss) per share (NOTE 11)................................... $ -- $ (.02) $ .15
------------ ------------ ------------
------------ ------------ ------------
Weighted average shares outstanding (NOTE 11)........................... 2,727,000 2,727,000 2,727,000
------------ ------------ ------------
------------ ------------ ------------
</TABLE>

SEE ACCOMPANYING NOTES.

F-11
<PAGE>
RAM ENERGY, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)

<TABLE>
<CAPTION>
PREFERRED STOCK CLASS A STOCKHOLDERS'
------------------------ COMMON PAID-IN ACCUMULATED EQUITY
SERIES A SERIES B STOCK CAPITAL DEFICIT (DEFICIENCY)
----------- ----------- --------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993................... $ 777 $ 697 $ 22,500 $ 1,472,186 $ (3,188,388) $ (1,692,228)

Net income..................................... -- -- -- -- 12 12
----- ----- --------- ------------ ------------- -------------
Balance at December 31, 1994................... 777 697 22,500 1,472,186 (3,188,376) (1,692,216)

Class A common stock issued (1 share).......... -- -- 225 20,619 -- 20,844

Net loss....................................... -- -- -- -- (57,298) (57,298)
----- ----- --------- ------------ ------------- -------------
Balance at December 31, 1995................... 777 697 22,725 1,492,805 (3,245,674) (1,728,670)

Net income..................................... -- -- -- -- 408,152 408,152
----- ----- --------- ------------ ------------- -------------
Balance at December 31, 1996................... $ 777 $ 697 $ 22,725 $ 1,492,805 $ (2,837,522) $ (1,320,518)
----- ----- --------- ------------ ------------- -------------
----- ----- --------- ------------ ------------- -------------
</TABLE>

SEE ACCOMPANYING NOTES.

F-12
<PAGE>
RAM ENERGY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
<S> <C> <C> <C>
1994 1995 1996
----------- ------------ -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)....................................................... $ 12 $ (57,298) $ 408,152
Adjustments to reconcile net income (loss) to net cash provided (used)
by operating activities:
Amortization and depreciation......................................... 405,728 353,449 990,032
Provision for doubtful accounts receivable and other.................. 49,123 17,960 169,624
Provision for uncollectible receivable from sister corporation........ -- 139,695 --
(Gain) loss on sales of other property and equipment.................. (16,910) 2,693 (35,712)
Equity in (income) loss of Partnership................................ 101,293 23,129 (70,874)
Minority interest in net loss after acquisition of Partnership........ -- -- (10,346)
Cash provided (used) by changes in operating assets and liabilities:
Prepaid expenses and deposits....................................... 87,219 114,358 (40,946)
Accounts receivable................................................. (797,114) 1,418,267 (874,505)
Accounts payable.................................................... 34,692 (2,420,341) (1,288,026)
Accrued liabilities................................................. (15,572) 175,247 505,819
Deferred revenue.................................................... 295,561 -- --
----------- ------------ -------------
Total adjustments....................................................... 144,020 (175,543) (654,934)
----------- ------------ -------------
Net cash provided (used) by operating activities........................ 144,032 (232,841) (246,782)
CASH FLOWS FROM INVESTING ACTIVITIES
Payment for acquisition of limited partner's interest in the
Partnership, less cash acquired (NOTE 2).............................. -- -- (58,898,313)
Payments for loan origination fees...................................... -- -- (31,225)
Payments for oil and gas properties and equipment....................... (49,986) (47,098) (21,905)
Proceeds from sales of oil and gas properties and equipment............. 18,555 1,356 55,087
Payments for other property and equipment............................... (29,368) (284,750) (227,781)
Proceeds from sales of other property and equipment..................... -- 27,609 --
Cash distributions received from Partnership............................ 66,300 12,953 21,342
Payments for restricted temporary investments........................... (317,835) -- --
Other................................................................... -- 282,126 1,034
----------- ------------ -------------
Net cash used by investing activities................................... (312,334) (7,804) (59,101,761)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term debt.................................... (901,001) (629,275) (60,521)
Proceeds from borrowings on long-term debt.............................. 265,012 60,468 176,045
Proceeds from borrowings to acquire Partnership interest................ -- -- 60,000,000
Advances to sister corporation.......................................... (105,654) (146,237) --
Collection of advances to sister corporation............................ 126,500 32,383 --
Increase in bank overdraft included in accounts payable................. -- -- 316,878
Proceeds from issuance of Class A common stock.......................... -- 20,844 --
Other................................................................... (1,359) -- --
----------- ------------ -------------
Net cash provided (used) by financing activities........................ (616,502) (661,817) 60,432,402
----------- ------------ -------------
Increase (decrease) in cash and cash equivalents........................ (784,804) (902,462) 1,083,859
Cash and cash equivalents at beginning of year.......................... 2,210,772 1,425,968 523,506
----------- ------------ -------------
Cash and cash equivalents at end of year................................ $ 1,425,968 $ 523,506 $ 1,607,365
----------- ------------ -------------
----------- ------------ -------------
DISCLOSURE OF NONCASH ACTIVITIES
Offset of certain accounts payable and accounts receivable between the
Partnership and the Company........................................... $ -- $ (781,786) $ --
----------- ------------ -------------
----------- ------------ -------------
</TABLE>

SEE ACCOMPANYING NOTES.

F-13
<PAGE>
RAM ENERGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, ORGANIZATION AND BASIS OF
FINANCIAL STATEMENTS

NATURE OF OPERATIONS AND ORGANIZATION

RAM Energy, Inc., (NOTE 11) formerly RAMCO Operating Company ("RAM"
collectively, when referring to RAM Energy, Inc. and its consolidated
subsidiaries, or "REI" when referring to RAM Energy, Inc. only) operates
exclusively in the oil and gas industry with activities including the drilling,
completion and operation of oil and gas wells. RAM conducts the majority of its
operations in the states of Oklahoma, Texas and New Mexico.

REI serves as the managing general partner of the RAMCO-NYL 1987 Limited
Partnership (the "Partnership"). The Partnership was activated on February 3,
1988 by REI, Oklahoma Double R Corporation, the special general partner and an
affiliate of REI, and New York Life Insurance Company, the original limited
partner. Under the terms of the limited partnership agreement, as amended, for
financial reporting purposes, virtually all Partnership revenues, costs and
expenses are allocated 1.0% to the managing general partner, 2.5% to the special
general partner and 96.5% to the limited partner prior to Payout Nos. 1 and 2,
as defined. Upon reaching these payouts, the allocation to the managing general
partner increases to 11.5% while that of the limited partner decreases to 86.0%.

Effective December 1, 1996, REI's wholly-owned subsidiary, RB Operating
Company ("RBO"), purchased the limited partner's interest in the Partnership for
$60.0 million, as provided for under the terms of a purchase and sale agreement
previously executed by the parties (NOTES 2 AND 8). Funding for the transaction
was obtained from borrowings under a credit agreement with a bank (NOTE 3).

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of REI and RBO
and effective December 1, 1996, the accounts of REI's majority-owned
Partnership. All significant intercompany transactions, including transactions
between REI or RBO and the Partnership beginning December 1, 1996, have been
eliminated.

OIL AND GAS PROPERTIES AND EQUIPMENT HELD FOR SALE

RAM had certain oil and gas properties and equipment held for sale at
December 31, 1996 for which the proceeds totaling $10.4 million (before closing
adjustments) were closed by March 1997. Because the sales are not considered
extraordinary transactions under the full cost method of accounting for oil and
gas operations, the full cost pool was reduced by the proceeds from such sales
in 1997. As described in Note 3, the proceeds from the sales of the properties
were utilized in 1997 to reduce RAM's long-term debt due within one year by $5.4
million and long-term debt due after one year by $5.0 million. RAM has
classified the $5.4 million portion of the proceeds from oil and gas properties
and equipment held for sale that were used in 1997 to reduce long-term debt due
within one year as a current asset at December 31, 1996, in the accompanying
consolidated balance sheet.

PROPERTIES AND EQUIPMENT

RAM follows the full cost method of accounting for oil and gas operations.
Under this method, all productive and nonproductive costs incurred in connection
with the acquisition, exploration and development of oil and gas reserves are
capitalized. No gains or losses are recognized upon the sale or other
disposition of oil and gas properties except in extraordinary transactions.

F-14
<PAGE>
RAM ENERGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, ORGANIZATION AND BASIS OF
FINANCIAL STATEMENTS (CONTINUED)
With the exception of the plugging and abandonment obligation further
described in Note 8, RAM does not believe that future costs related to
dismantlement, site restoration, and abandonment costs, net of estimated salvage
values, will have a significant effect on its results of operations or financial
position because the salvage value of equipment and related facilities should
approximate or exceed any future expenditures for dismantlement, restoration, or
abandonment. RAM has not incurred any net expenditures for costs of this nature
during the last two years.

To the extent that RAM's net capitalized costs of oil and gas properties and
equipment exceed estimated discounted future net revenues from proved reserves,
plus the lower of cost or estimated fair value of unproved properties (none at
December 31, 1995 and 1996) (the "ceiling amount"), such excess is charged to
expense in the period in which it occurs and is not subsequently reinstated.
Reserve estimates have been prepared by an independent petroleum engineering
firm.

Other property and equipment consists principally of furniture and equipment
and leasehold improvements. Other property and equipment and related accumulated
amortization and depreciation are relieved upon retirement or sale and the gain
or loss is included in operations. Renewals and replacements which extend the
useful life of property and equipment are treated as additions.

The discounted future net revenues at December 31, 1996 include
approximately $44.6 million related to undeveloped and nonproducing properties
on which estimated capital expenditures of approximately $14.9 million will be
required to develop and produce the reserves. Such amounts have been considered
in the calculation of the ceiling amount at December 31, 1996. The funding for
these projects is expected by RAM to be provided from cash flows from
operations.

AMORTIZATION AND DEPRECIATION

Amortization of oil and gas properties and equipment is computed based on
the unit-of-production method using total proved reserves. Depreciation on other
equipment is computed based on the double declining balance method over the
estimated useful lives of the assets which range from three to ten years.
Amortization of leasehold improvements is computed over the term of the
associated lease. Amortization of loan origination costs is computed based on
the straight-line method over the term of the related debt.

GAS BALANCING

RAM records oil and gas sales on the entitlement method, recognizing its net
share of all production as revenue. Any amount received in excess of or less
than RAM's revenue interest is recorded in the net gas balancing liability.

CASH EQUIVALENTS

RAM considers all highly liquid unrestricted investments with a maturity of
three months or less when purchased to be cash equivalents.

CREDIT AND MARKET RISK

RAM sells oil and gas to various customers and participates with other
parties in the drilling, completion and operation of oil and gas wells. Joint
interest and oil and gas sales receivables related to these operations are
generally unsecured. During 1994, 1995 and 1996, RAM's provisions for doubtful

F-15
<PAGE>
RAM ENERGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, ORGANIZATION AND BASIS OF
FINANCIAL STATEMENTS (CONTINUED)
accounts receivable were $42,000, $18,000 and $141,000, respectively, while
charge-offs of the allowance in those periods were $28,000, $116,000 and none,
respectively. RAM has established joint interest operations accounts receivable
allowances which management believes are adequate for uncollectible amounts at
December 31, 1995 and 1996.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

LIQUIDITY AND FUTURE OPERATIONS

RAM's consolidated financial statements have been presented on a going
concern basis which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. RAM has a deficiency in
stockholders' equity of $1,320,518 at December 31, 1996. RAM has been successful
in prior years in conducting its operations maintaining a working capital
deficit primarily as a result of the ability to control the timing of cash
disbursements in RAM's capacity as operator of oil and gas properties.

Management believes the acquisition of the limited partner interest in the
Partnership effective December 1, 1996 will improve RAM's cash flow. RAM intends
to continue to strive to improve cash flow, to conduct business effectively and
efficiently within the constraints of the available resources and to operate its
properties as a prudent operator. Management believes that these actions will
allow it to maintain operations and continue as a going concern. Accordingly,
the financial statements do not include any adjustments that might be necessary
should RAM be unable to continue as a going concern in its present form.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts reported in the balance sheets for cash and cash
equivalents and variable rate long-term debt approximate their fair values. As
more fully described in Note 2, RAM recorded a loss provision of $139,695 in
1995 (none in 1996), to reduce the carrying amount of the receivable from
Oklahoma Double R Corporation, a sister corporation to the estimated fair value
of the collateral.

2. ACQUISITION AND RELATED PARTY TRANSACTIONS

ACQUISITION

As described in Note 1, RBO purchased the limited partner's interest in the
Partnership and has reflected this additional ownership in the accompanying
consolidated financial statements beginning

F-16
<PAGE>
RAM ENERGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. ACQUISITION AND RELATED PARTY TRANSACTIONS (CONTINUED)
December 1, 1996. This transaction has been accounted for under the purchase
method of accounting. Details of the acquisition are as follows:

<TABLE>
<S> <C>
Assets acquired:
Accounts receivable:
Oil and gas sales......................................... $ 4,029,383
Related parties -- REI and RBO............................ 2,509,149
Prepaid expenses and deposits............................... 205,306
Note receivable from RBO.................................... 60,000,000
Properties and equipment, net............................... 59,834,123
Loan origination fees and other............................. 1,567,317
-----------
128,145,278

Liabilities assumed:
Accounts payable:
Trade..................................................... 1,521,237
Related parties -- REI and RBO............................ 1,244,452
Accrued liabilities......................................... 95,890
Long-term debt, including amount due within one year........ 62,800,000
Gas balancing liability, including amount expected to be
settled within one year................................... 1,229,518
Commitments and contingencies............................... 600,000
-----------
67,491,097
-----------
60,654,181
Minority interest at December 1, 1996....................... (1,199,242)
Elimination of REI's equity investment in Partnership at
December 1, 1996.......................................... (556,626)
-----------
Net cash paid................................................. $58,898,313
-----------
-----------
</TABLE>

The above amounts are exclusive of certain acquired net natural gas
imbalances of approximately 1.9 billion cubic feet at December 1, 1996. These
imbalances were historically recorded by the Partnership on a net basis within
the cost of acquired oil and gas properties and equipment with balancing of the
net liability subsequently recorded on the sales method. RAM has elected to
continue this method of accounting for these specific imbalances acquired from
the Partnership.

F-17
<PAGE>
RAM ENERGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. ACQUISITION AND RELATED PARTY TRANSACTIONS (CONTINUED)
Summarized financial information of the Partnership is as follows:

<TABLE>
<CAPTION>
ELEVEN MONTHS
YEAR ENDED ENDED
DECEMBER 31, NOVEMBER 30,
1995 1996
------------- --------------
<S> <C> <C>
Oil and gas sales.............................................. $ 21,801,849 $ 23,455,976
Other revenues................................................. 197,947 121,472
------------- --------------
Total revenues................................................. 21,999,796 23,577,448
Other costs and expenses:
Oil and gas production expenses:
Operator fees to REI....................................... 1,686,043 1,342,777
Other...................................................... 9,901,863 7,609,131
General and administrative:
Management fees to REI..................................... 1,605,743 1,482,293
Overhead and other......................................... 501,941 377,964
Interest expense............................................. 808,942 563,789
Amortization and depreciation................................ 9,808,191 5,114,112
------------- --------------
Total costs and expenses....................................... 24,312,723 16,490,066
------------- --------------
Net income (loss).............................................. $ (2,312,927) $ 7,087,382
------------- --------------
------------- --------------
</TABLE>

<TABLE>
<CAPTION>
AS OF AS OF
DECEMBER 31, NOVEMBER 30,
1995 1996
------------- --------------
<S> <C> <C>
Current assets................................................ $ 7,513,413 $ 13,245,525
Note receivable from RBO due after one year................... -- 54,600,000
Oil and gas properties and equipment and other assets......... 49,694,976 47,765,359
------------- --------------
$ 57,208,389 $ 115,610,884
------------- --------------
------------- --------------

Current liabilities........................................... $ 12,367,328 $ 8,561,579
Long-term debt due after one year............................. -- 57,400,000
Other noncurrent liabilities.................................. 1,674,587 1,529,518
Partners' equity.............................................. 43,166,474 48,119,787
------------- --------------
$ 57,208,389 $ 115,610,884
------------- --------------
------------- --------------
</TABLE>

The following pro forma data presents the results of RAM for the years ended
December 31, 1995 and 1996, as if the acquisition of the limited partner
interest in the Partnership had occurred on January 1, 1995. The pro forma
results of operations are presented for comparative purposes only and are not
necessarily indicative of the results which would have been obtained had the
acquisitions been consummated as presented. The following data reflect pro forma
adjustments to include the operating activity of

F-18
<PAGE>
RAM ENERGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. ACQUISITION AND RELATED PARTY TRANSACTIONS (CONTINUED)
the Partnership adjusted to reflect RAM's adjusted basis since acquisition and
additional interest related to the acquisition.

<TABLE>
<CAPTION>
PRO FORMA YEAR
ENDED DECEMBER 31,
----------------------
1995 1996
---------- ----------
(UNAUDITED)
<S> <C> <C>
Revenues........................................... $22,300,400 $27,520,200
---------- ----------
---------- ----------
Net income (loss).................................. $(8,977,200) $1,598,500
---------- ----------
---------- ----------
Net income (loss) per share (NOTE 11).............. $ (3.29) $ .59
---------- ----------
---------- ----------
</TABLE>

RELATED PARTY TRANSACTIONS

The Partnership agreement under which REI serves as the managing general
partner, provides for reimbursement of certain Partnership overhead costs to
REI. The management fee is computed monthly as a percentage of adjusted
cumulative contributed capital, as defined, at the beginning of the month. The
fee for the years ended December 31, 1994 and 1995 and for the eleven-month
period ended November 30, 1996 (the period prior to the acquisition of the
limited partner interest described in Note 1) was $1,554,929, $1,605,743 and
$1,482,293, respectively. Additionally, for the years ended December 31, 1994
and 1995, and for the eleven-month period ended November 30, 1996, $183,582,
$132,063 and $152,648, respectively, for technical personnel costs were charged
to the Partnership and are included in consulting fees from related parties in
the accompanying consolidated financial statements. Upon RAM's purchase of the
limited partner's interest in the Partnership effective December 1, 1996, the
operations of the Partnership are consolidated in those of RAM and subsequent
charges for the management fees and technical personnel costs made by REI to the
Partnership have been eliminated through consolidating adjustments in the
consolidated financial statements.

During 1994, 1995 and 1996, REI and RBO served as operator on many of the
wells of the Partnership. In connection with their services as operator on these
wells, REI and RBO charged the Partnership operator fees of $1,746,145,
$1,686,043 and $1,342,777 in 1994, 1995 and 1996, respectively. At December 31,
1996, the payables and receivables related to transactions between REI and RBO
and the Partnership are intercompany accounts as a result of the acquisition of
the limited partner interest in 1996 and, accordingly, have been eliminated in
the consolidated financial statements.

During the years ended December 31, 1994 and 1995 and the eleven-month
period ended November 30, 1996, REI received cash distributions from the
Partnership of $66,300, $12,953 and $21,342, respectively. No cash contributions
were made in 1994, 1995 or 1996. These cash distributions and contributions are
exclusive of cash flow from operations of the Partnership utilized to fund
development of Partnership properties.

In 1993, REI and RBO identified approximately $554,000 of oil and gas sales
proceeds received and other items which required resolution as a result of a
dispute with the limited partner of the Partnership as to ownership of these
funds. At December 31, 1995, a settlement had been reached on all but $295,561
of the amount. In December 1996, upon completion of the purchase of the limited
partner's interest in the Partnership, the $295,561 was recorded as other income
by RAM.

F-19
<PAGE>
RAM ENERGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. ACQUISITION AND RELATED PARTY TRANSACTIONS (CONTINUED)
In 1994 and 1995, RAM paid $861,490 and $339,910, respectively (none in
1996), for a sister corporation's debt service requirements on a joint long-term
debt obligation. RAM received net repayments on advances totaling $20,846 during
1994 and made net advances to the sister corporation of $113,854 in 1995 (none
in 1996).

In September 1994, RAM entered into a loan and security agreement under
which the sister corporation pledged as collateral on the amount due RAM, all of
the future distributions applicable to the sister corporation's investment
ownership interest in the Partnership. The ultimate realization of the
receivable from the sister corporation is dependent upon the value of the
collateral pledged under the loan and security agreement. Management believes
that the receivable is ultimately collectible. A fair market value analysis
using the estimated discounted cash flows from oil and gas reserves attributable
to the sister corporation's ownership interest in the Partnership resulted in a
provision for uncollectible receivable of $139,695 being included in the
consolidated financial statements for 1995 (none in 1994 or 1996). The net
amount of $1,800,000 due from the sister corporation at December 31, 1995 and
1996, is included in the accompanying consolidated balance sheets as a
receivable from the sister corporation not expected to be collected within one
year. (NOTE 11)

3. LONG-TERM DEBT

Long-term debt consists of the following at December 31:

<TABLE>
<CAPTION>
1995 1996
------------- -------------
<S> <C> <C>
Revolving note payable......................................... $ -- $ 52,000,000
Term note payable.............................................. -- 10,800,000
Installment loan agreements.................................... 48,903 184,427
------------- -------------
48,903 62,984,427
Less amount due within one year................................ 31,464 5,475,673
------------- -------------
$17,439 $ 57,508,754
------------- -------------
------------- -------------
</TABLE>

During November 1996, the Partnership entered into a credit agreement with a
bank consisting of a revolving commitment which provides up to $65.0 million in
borrowings and letters of credit including a $10.8 million term commitment. In
connection with the December 1, 1996 acquisition by RBO of the limited partner
interest in the Partnership, RBO borrowed from the Partnership $60.0 million of
the proceeds from the credit agreement. Borrowings under the credit agreement
are secured by essentially all assets of RAM.

The amount of the revolving commitment is subject to a borrowing base
calculation and certain other limitations as defined in the credit agreement.
The borrowing base relates to RAM's oil and gas reserve base and was $52.0
million at December 31, 1996. The borrowing base is subject to semiannual
redeterminations each April and October. In addition to the foregoing semiannual
redetermination, the lender has the right, at its sole discretion or at the
request of RAM, to make one additional redetermination of the borrowing base
during any twelve-month period. The revolving commitment reduces quarterly
commencing January 31, 1998 by 1/16th through October 31, 2001. Under the
revolving commitment, RAM has the ability to choose the index on which the
interest rate is based. At December 31, 1996, all borrowings under

F-20
<PAGE>
RAM ENERGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. LONG-TERM DEBT (CONTINUED)
the revolving commitment were accruing interest at a LIBOR-based interest rate
plus 2.5% (aggregate rate of 8%), and interest is payable currently.

The term commitment of $10.8 million has been fully drawn at December 31,
1996. The original maturity date of the term commitment was October 31, 1997.
The maturity date on the term commitment has been extended to June 30, 1998;
however, due to the repayment in 1997 of $5.4 million of the term note payable
as further described below, only the remaining $5.4 million balance of the term
commitment has been classified as due after one year. Interest on the borrowings
under the term commitment is based on the bank's reference rate plus 3% through
May 31, 1997 and 3.5% thereafter (aggregate of 11.25% at December 31, 1996), and
is payable monthly.

The credit agreement contains various affirmative and restrictive covenants.
These covenants, among other things, restrict mergers involving RAM and payment
of dividends on REI's stock, limit additional indebtedness and sales or other
dispositions of assets, and require RAM to meet certain financial covenants. In
addition, the credit agreement requires RAM to enter into certain interest rate
swaps and collars to hedge the interest rate exposure associated with the credit
agreement. Effective January 3, 1997, RAM entered into interest rate swaps to
fix the interest rate on notional amounts of $20 million of the borrowings under
the revolving commitment and entered into an interest rate collar to cap the
interest rate on an additional notional amount of $10.0 million of the
borrowings under the revolving commitment.

RAM sold certain oil and gas properties in 1997 and received cash proceeds
of approximately $10.4 million (before closing adjustments). As required by the
credit agreement, such proceeds were used to pay down the principal balance
outstanding under the credit agreement. The bank applied $5.0 million of such
proceeds to the revolving note payable as a result of a preliminary
redetermination of the borrowing base made in 1997 with the balance of $5.4
million applied to the term note payable.

The amount of principal payments required by the credit agreement during
each of the next five years as of December 31, 1996, including consideration of
the extension of the maturity date of the term commitment but exclusive of the
preliminary borrowing base redetermination discussed above, are as follows: 1997
- -- $5,400,000, 1998 -- $8,650,000, 1999 -- $16,250,000, 2000 -- $16,250,000, and
2001 -- $16,250,000.

Interest paid by RAM in 1994, 1995 and 1996 totaled $22,691, $18,022 and
$156,873, respectively.

4. OPERATING LEASES

RAM leases office space, equipment and vehicles under noncancelable
operating lease agreements which expire at various dates through 2000. The
leases provide that RAM pay insurance, taxes and maintenance related to the
leased assets. Rent expense of $552,569, $332,977 and $365,217 was incurred
under operating leases in 1994, 1995 and 1996, respectively.

Future minimum lease payments for operating leases at December 31, 1996 are
as follows:

F-21
<PAGE>
RAM ENERGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5. DEFINED CONTRIBUTION PLAN

RAM has a defined contribution plan for the benefit of substantially all
employees. The plan allows eligible employees to contribute up to 17.5% of their
annual compensation, not to exceed approximately $9,600 in 1996. RAM matched the
first 3.0% of employee contributions through January 1994, and RAM's
contribution in 1994 was $12,111. RAM elected to make a discretionary
contribution of $76,635 in 1996 (none in 1995).

6. PREFERRED STOCK

The Series A and B noncumulative preferred shares are entitled to receive
preferential quarterly dividends at the discretion of REI's Board of Directors.
The maximum quarterly dividends for the Series A and B shares are $0.125 and
$0.30 per share, respectively (no dividends were declared in 1994, 1995 or
1996). Holders of these shares are entitled to a preference in liquidation in
the amount of $10.00 per share plus declared and unpaid dividends, but are not
entitled to vote. REI may redeem the preferred shares at any time at the
discretion of REI's Board of Directors at a price of $10.00 per share plus
declared and unpaid dividends; however, no more than 25,000 shares of the Series
B preferred stock may be redeemed within any twelve-month period.

The holders of the Series B preferred shares are entitled to convert 22,500
of these shares into one share of Class A common stock at any time. Authorized
but unissued Class A common shares are reserved in the amount necessary to
comply with this conversion feature (4 shares at December 31, 1996).

7. INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
RAM's deferred tax assets and liabilities as of December 31, 1995 and 1996 are
as follows:

<TABLE>
<CAPTION>
1995 1996
------------- ------------
<S> <C> <C>
DEFERRED TAX ASSETS
Financial depreciation in excess of tax depreciation............. $ 79,269 $ 108,163
Financial charges which are deferred for tax purposes:
Provision for uncollectible receivable from sister
corporation.................................................. 53,084 53,084
Accrued compensation........................................... 77,520 222,680
Other, net..................................................... 111,012 166,725
Net operating loss carryforwards................................. 858,975 464,529
------------- ------------
Total deferred tax assets before valuation allowance............. 1,179,860 1,015,181
Less valuation allowance recognized.............................. (1,008,608) (851,920)
------------- ------------
Net deferred tax assets...................................... 171,252 163,261
</TABLE>

F-22
<PAGE>
RAM ENERGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. INCOME TAXES (CONTINUED)

<TABLE>
<CAPTION>
1995 1996
------------- ------------
<S> <C> <C>
DEFERRED TAX LIABILITIES
Intangible drilling costs capitalized for financial purposes and
expensed for tax purposes...................................... 106,498 111,197
Tax losses from equity method investment in Partnership.......... 64,754 52,064
------------- ------------
Deferred tax liabilities..................................... 171,252 163,261
------------- ------------
Net deferred tax................................................. $ -- $ --
------------- ------------
------------- ------------
</TABLE>

The reconciliation of income taxes computed at the U.S. Federal statutory
tax rates to RAM's income tax expense is as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Income tax (benefit) at statutory rate...... $ 5 $(19,481) $ 138,772
State income taxes.......................... -- (2,005) 17,916
Change in valuation allowance recognized.... (5) 21,486 (156,688)
--------- --------- ---------
Income tax expense.......................... $ -- $ -- $ --
--------- --------- ---------
--------- --------- ---------
</TABLE>

At December 31, 1996, RAM has federal income tax net operating loss
carryforwards of approximately $1.2 million which begin expiring in 2002.

8. COMMITMENTS AND CONTINGENCIES

In November 1993, the limited partner of the Partnership filed a lawsuit in
federal district court against REI, the special general partner, and certain
other affiliates of REI. In this lawsuit, the limited partner made numerous
allegations against REI and its affiliates related to REI's operation of the
Partnership as its general partner. In July 1996, the lawsuit was dismissed by
the federal court for lack of federal jurisdiction. The parties entered into a
purchase and sale agreement under which the limited partner's interest in the
Partnership was purchased effective December 1, 1996 (NOTES 1 AND 2). Upon
execution of the purchase and sale agreement, a complete release and discharge
of all claims by the limited partner against REI and its affiliates was
received.

In November 1995, the Partnership entered into a letter of intent to sell an
oil and gas property located in Louisiana state waters in Plaquemines Parish.
The sale was completed in early 1996. The property included several currently
uneconomical wells for which RAM estimates the plugging and abandonment ("P&A")
obligation is approximately $1,020,000. The purchaser provided a letter of
credit and a bond totaling $420,000 to ensure funding of a portion of the P&A
obligation. The P&A obligation would revert to the Partnership in the event the
purchaser does not complete the required P&A activities. As a result, in 1995
the Partnership recorded a contingent liability of $600,000, which is also
included in the accompanying December 31, 1996 consolidated balance sheet.

Effective January 1, 1996, RAM established a severance policy for three
senior officers and directors of REI. This policy provides for severance
benefits to be paid upon involuntary separation as a result of

F-23
<PAGE>
RAM ENERGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8. COMMITMENTS AND CONTINGENCIES (CONTINUED)
actions taken by RAM or its successors. Benefits under the policy are
principally based upon length of service to RAM. The covered officers and
directors are not entitled to these separation benefits upon voluntary
separation, including retirement. At December 31, 1996, the severance benefits
under this policy were approximately $630,000 with additional amounts payable
for group medical, health, and life benefits and other consulting fees for
services requested by RAM after termination of the individuals, as applicable. A
provision for these benefits would not be made unless an involuntary termination
was probable.

9. OIL AND GAS PRODUCING ACTIVITIES

Capitalized costs relating to crude oil and gas producing activities and
related accumulated depreciation and amortization are summarized as follows:

<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------------------------------
<S> <C> <C> <C>
1994 1995 1996
----------- ------------ -------------
Proved crude oil and natural gas properties........ $ 960,754 $ 1,006,495 $ 64,207,298
Accumulated depreciation and amortization.......... (446,815) (518,815) (4,632,819)
----------- ------------ -------------
$ 513,939 $ 487,680 $ 59,574,479
----------- ------------ -------------
----------- ------------ -------------
</TABLE>

Costs incurred in oil and gas producing activities for the years ended
December 31, 1994, 1995 and 1996, are as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1994 1995 1996
--------- --------- -------------
<S> <C> <C> <C>
Acquisition of proved properties......................... $ -- $ -- $ 59,834,123
Development costs........................................ $49,986 $47,098 $ 21,905
</TABLE>

10. SUPPLEMENTARY OIL AND GAS RESERVE INFORMATION (UNAUDITED)

RAM has interests in crude oil and gas properties that are principally
located in Oklahoma, Texas and New Mexico. RAM does not own or lease any oil and
gas properties outside the United States.

RAM retains independent engineering firms to provide year-end estimates of
RAM's future net recoverable oil, gas, and natural gas liquids reserves.
Estimated proved net recoverable reserves as shown below include only those
quantities that can be expected to be commercially recoverable at prices and
costs in effect at the balance sheet dates under existing regulatory practices
and with conventional equipment and operating methods.

Proved developed reserves represent only those reserves expected to be
recovered through existing wells. Proved undeveloped reserves include those
reserves expected to be recovered from new wells on undrilled acreage or from
existing wells on which a relatively major expenditure is required for
recompletion.

Net quantities of proved developed and undeveloped reserves of oil and gas,
including condensate and natural gas liquids, are provided below beginning in
1996, the year in which the purchase of the limited

F-24
<PAGE>
RAM ENERGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. SUPPLEMENTARY OIL AND GAS RESERVE INFORMATION (UNAUDITED) (CONTINUED)
partner interest in the Partnership occurred. Prior to this time, the amounts
were not significant and, therefore, have not been presented below:

<TABLE>
<CAPTION>
CRUDE OIL NATURAL GAS
(MILLIION (MILLION
BARRELS) CUBIC FEET)
----------- -----------
<S> <C> <C>
December 31, 1995.................................................. 26 550
Purchase of reserves in place...................................... 4,294 83,025
Production......................................................... (38) (690)
----------- -----------
December 31, 1996.................................................. 4,282 82,885
----------- -----------
----------- -----------
Proved developed reserves at December 31, 1996..................... 3,511 62,319
----------- -----------
----------- -----------
</TABLE>

The following is a summary of a standardized measure of discounted net cash
flows beginning in 1996, related to RAM's proved oil and gas reserves. For these
calculations, estimated future cash flows from estimated future production of
proved reserves were computed using crude oil and natural gas prices as of the
end of the period presented. Future development and production costs
attributable to the proved reserves were estimated assuming that existing
conditions would continue over the economic lives of the individual leases and
costs were not escalated for the future. Estimated future income tax expenses
were calculated by applying future statutory tax rates (based on the current tax
law adjusted for permanent differences and tax credits) to the estimated future
pre-tax net cash flows related to proved crude oil and natural gas reserves,
less the tax basis of the properties involved.

RAM cautions against using this data to determine the fair value of its oil
and gas properties. To obtain the best estimate of fair value of the oil and gas
properties, forecasts of future economic conditions, varying discount rates, and
consideration of other than proved reserves would have to be incorporated into
the calculation. In addition, there are significant uncertainties inherent in
estimating quantities of proved reserves and in projecting rates of production
that impair the usefulness of the data.

The standardized measure of discounted future net cash flows relating to
proved crude oil and natural gas reserves at December 31, 1996 are summarized as
follows:

<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Future cash inflows........................................................... $ 414,079
Future production and development costs....................................... (125,634)
Future income tax expenses.................................................... (38,560)
--------------
Future net cash flows......................................................... 249,885

10% annual discount for estimated timing of cash flows........................ (110,474)
--------------
Standardized measure of discounted future net cash flows...................... $ 139,411
--------------
--------------
</TABLE>

F-25
<PAGE>
RAM ENERGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. SUPPLEMENTARY OIL AND GAS RESERVE INFORMATION (UNAUDITED) (CONTINUED)
The following are the principal sources of change in the standardized
measure of discounted future net cash flows for the period from December 31,
1995 to December 31, 1996:

<TABLE>
<S> <C>
Sales and transfers of oil and gas produced, net of production
costs........................................................... $ (2,448)
Purchases of reserves in place, including those from purchase of
limited partner interest in Partnership......................... 141,167
Accretion of discount............................................. 63
---------
Net change........................................................ $ 138,782
---------
---------
</TABLE>

During recent years, there have been significant fluctuations in the prices
paid for crude oil in the world markets. This situation has had a destabilizing
effect on the oil posted prices in the United States, including the posted
prices paid by purchasers of RAM's oil. The net weighted average prices of oil
and gas at December 31, 1996 used in the above table were $23.89 per barrel of
crude oil and $3.79 per thousand cubic feet of natural gas.

11. SUBSEQUENT EVENTS

In August 1997, RAM purchased certain primarily producing oil and gas
properties and equipment located principally in Oklahoma, Louisiana and
Mississippi for $11.2 million (before closing adjustments). The purchase was
financed with additional borrowings under the credit agreement.

Effective November 26, 1997, RBO was merged with and into REI, resulting in
REI becoming the direct owner of all of the assets and properties of RBO and
assuming all of its liabilities. Effective December 1, 1997, REI, as managing
general partner and sole limited partner of the Partnership, and DRC, as special
general partner of the Partnership, authorized the dissolution of the
Partnership, the liquidation of all of the assets of the Partnership into REI
and the assumption by REI of all liabilities of the Partnership.

In November 1997, RAM entered into a letter of intent to purchase certain
producing oil and gas properties and equipment and pipeline gathering systems
located principally in Oklahoma for $43 million. This transaction is expected to
close simultaneously with certain debt and stock offerings RAM Energy Inc. is in
the process of completing.

On December , 1997, the Board of Directors of RAM Energy Inc. approved a
27,000-for-1 stock split of RAM Energy Inc.'s common stock. Additionally, on
such date, the name of RAM was changed from RAMCO Operating Company to RAM
Energy, Inc. The effects of the stock split on the computations of net income
(loss) per share have been reflected retroactively in the accompanying financial
statements.

F-26
<PAGE>
REPORT OF INDEPENDENT AUDITORS

The Partners
RAMCO-NYL 1987 Limited Partnership

We have audited the accompanying balance sheets of RAMCO-NYL 1987 Limited
Partnership as of December 31, 1995 and November 30, 1996, and the related
statements of operations, partners' equity and cash flows for each of the two
years in the period ended December 31, 1995 and for the eleven-month period
ended November 30, 1996. These financial statements are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of RAMCO-NYL 1987 Limited
Partnership at December 31, 1995, and November 30, 1996 and the results of its
operations and its cash flows for each of the two years in the period ended
December 31, 1995 and for the eleven-month period ended November 30, 1996 in
conformity with generally accepted accounting principles.

ERNST & YOUNG LLP

Oklahoma City, Oklahoma
December 15, 1997

F-27
<PAGE>
RAMCO-NYL 1987 LIMITED PARTNERSHIP
BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................................................... $ 1,265,980 $ 1,101,687
Restricted temporary investments, at cost which approximates market............... 280,000 --
Accounts receivable from affiliates (NOTES 1 AND 3):
Oil and gas sales............................................................... 4,666,293 4,029,383
Other........................................................................... 1,003,021 2,509,149
Prepaid expenses.................................................................. 298,119 205,306
Note receivable from RBO due within one year (NOTE 3)............................. -- 5,400,000
------------- -------------
Total current assets................................................................ 7,513,413 13,245,525

Note receivable from RBO due after one year (NOTE 3)................................ -- 54,600,000

Properties and equipment, at cost (NOTES 3 AND 4):
Oil and gas properties and equipment, based on full cost accounting............... 142,995,021 144,647,069
Other equipment................................................................... 124,707 124,707
------------- -------------
143,119,728 144,771,776
Less accumulated amortization and depreciation.................................... 93,518,299 98,573,734
------------- -------------
Net properties and equipment........................................................ 49,601,429 46,198,042

Loan origination fees, net of accumulated amortization of $131,973 in 1995 and
$190,650 in 1996.................................................................. 58,677 1,536,092
Other............................................................................... 34,870 31,225
------------- -------------
Total assets........................................................................ $ 57,208,389 $ 115,610,884
------------- -------------
------------- -------------

LIABILITIES AND PARTNERS' EQUITY
Current liabilities:
Accounts payable:
Affiliates (NOTE 3)............................................................. $ 1,347,412 $ 1,244,452
Trade........................................................................... -- 1,521,237
Long-term debt due within one year (NOTE 4)....................................... 10,000,000 5,400,000
Gas balancing liability........................................................... 500,000 300,000
Accrued liability for contingencies (NOTE 5)...................................... 420,000 --
Other accrued liabilities......................................................... 99,916 95,890
------------- -------------
Total current liabilities........................................................... 12,367,328 8,561,579

Gas balancing liability not expected to be settled within one year.................. 1,074,587 929,518
Long-term debt due after one year (NOTE 4).......................................... -- 57,400,000
Contingencies (NOTE 5).............................................................. 600,000 600,000

Partners' equity:
Managing General Partner.......................................................... 507,094 556,626
Special General Partner........................................................... 1,075,409 1,199,242
Limited Partner................................................................... 41,583,971 46,363,919
------------- -------------
Total partners' equity.............................................................. 43,166,474 48,119,787
------------- -------------
Total liabilities and partners' equity.............................................. $ 57,208,389 $ 115,610,884
------------- -------------
------------- -------------
</TABLE>

SEE ACCOMPANYING NOTES.

F-28
<PAGE>
RAMCO-NYL 1987 LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
ELEVEN MONTH
YEAR ENDED DECEMBER 31, PERIOD ENDED
----------------------------- NOVEMBER 30,
1994 1995 1996
-------------- ------------- -------------
<S> <C> <C> <C>
Operating revenues:
Oil and gas sales (NOTE 3)....................................... $ 24,481,019 $ 21,801,849 $ 23,455,976
Other............................................................ 59,630 139,431 6,929
-------------- ------------- -------------
Total operating revenues....................................... 24,540,649 21,941,280 23,462,905

Operating expenses:
Oil and gas production expenses (NOTES 3 AND 5).................. 9,838,892 9,901,863 7,609,131
Amortization and depreciation.................................... 11,607,625 9,808,191 5,114,112
Write-down of oil and gas properties and equipment (NOTE 1)...... 8,700,000 -- --
Management fee to Managing General Partner
(NOTE 3)....................................................... 1,554,929 1,605,743 1,482,293
Operator fees to Managing General Partner (NOTE 3)............... 1,746,145 1,686,043 1,342,777
General and administrative expenses.............................. 676,124 501,941 377,964
-------------- ------------- -------------
Total operating expenses....................................... 34,123,715 23,503,781 15,926,277
-------------- ------------- -------------
Operating income (loss)............................................ (9,583,066) (1,562,501) 7,536,628
Other income (expense):
Interest expense................................................. (587,361) (808,942) (563,789)
Interest income.................................................. 41,164 58,516 114,543
-------------- ------------- -------------
Net income (loss).................................................. $ (10,129,263) $ (2,312,927) $ 7,087,382
-------------- ------------- -------------
-------------- ------------- -------------
</TABLE>

SEE ACCOMPANYING NOTES.

F-29
<PAGE>
RAMCO-NYL 1987 LIMITED PARTNERSHIP
STATEMENTS OF PARTNERS' EQUITY

<TABLE>
<CAPTION>
MANAGING SPECIAL
GENERAL GENERAL LIMITED
TOTAL PARTNER PARTNER PARTNER
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Balance at December 31, 1993..................... $ 61,534,001 $ 690,769 $1,534,597 $59,308,635

Cash distributions to partners................... (4,630,000) (46,300) (115,750) (4,467,950)

Net loss......................................... (10,129,263) (101,293) (253,231) (9,774,739)
-------------- -------------- -------------- --------------
Balance at December 31, 1994..................... 46,774,738 543,176 1,165,616 45,065,946

Cash distributions to partners................... (1,295,337) (12,953) (32,384) (1,250,000)

Net loss......................................... (2,312,927) (23,129) (57,823) (2,231,975)
-------------- -------------- -------------- --------------
Balance at December 31, 1995..................... 43,166,474 507,094 1,075,409 41,583,971

Cash distributions to partners................... (2,134,069) (21,342) (53,352) (2,059,375)

Net income....................................... 7,087,382 70,874 177,185 6,839,323
-------------- -------------- -------------- --------------
Balance at November 30, 1996..................... $ 48,119,787 $ 556,626 $1,199,242 $46,363,919
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
</TABLE>

SEE ACCOMPANYING NOTES.

F-30
<PAGE>
RAMCO-NYL 1987 LIMITED PARTNERSHIP

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
ELEVEN MONTH
YEAR ENDED DECEMBER 31, PERIOD ENDED
-------------------------- NOVEMBER 30,
1994 1995 1996
------------- ----------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)..................................................... $ (10,129,263) $(2,312,927) $ 7,087,382
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Amortization and depreciation....................................... 11,607,625 9,808,191 5,114,112
Write-down of oil and gas properties and equipment.................. 8,700,000 -- --
Cash provided (used) by changes in operating assets and liabilities:
Accounts receivable from affiliates relating to operating
activities...................................................... (410,643) 1,539,106 (869,218)
Prepaid expenses.................................................. (121,404) (176,715) 92,813
Accounts payable to affiliates relating to operating activities... 1,100,250 (1,410,596) (102,960)
Other accrued liabilities......................................... 1,980 2,046 (4,026)
Accrued liability for contingencies............................... (50,000) 620,000 (420,000)
Gas balancing liability........................................... (730,000) (590,670) (345,069)
Restricted temporary investments and other........................ -- -- 283,645
------------- ----------- -------------
Total adjustments..................................................... 20,097,808 9,791,362 3,749,297
------------- ----------- -------------
Net cash provided by operating activities............................. 9,968,545 7,478,435 10,836,679

CASH FLOWS FROM INVESTING ACTIVITIES
Advance on note receivable from RBO................................... -- -- (60,000,000)
Payments for additions to oil and gas properties and equipment
exclusive of advances............................................... (4,308,533) (5,379,704) (3,310,238)
Proceeds from sales of oil and gas properties......................... 81,364 181,190 1,688,887
Advances paid for development costs................................... (1,106,511) (74,157) --
Payments for purchases of other equipment............................. (16,381) -- --
Proceeds from sales of other equipment................................ 13,762 -- --
------------- ----------- -------------
Net cash used by investing activities................................. (5,336,299) (5,272,671) (61,621,351)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowing on long-term debt............................. -- -- 62,800,000
Principal payments on long-term debt.................................. -- -- (10,000,000)
Distributions to partners............................................. (4,630,000) (1,295,337) (2,134,069)
Payments for loan origination fees.................................... -- -- (45,552)
------------- ----------- -------------
Net cash provided (used) by financing activities...................... (4,630,000) (1,295,337) 50,620,379
------------- ----------- -------------
Increase (decrease) in cash and cash equivalents...................... 2,246 910,427 (164,293)

Cash and cash equivalents at beginning of period...................... 353,307 355,553 1,265,980
------------- ----------- -------------
Cash and cash equivalents at end of period............................ $ 355,553 $ 1,265,980 $ 1,101,687
------------- ----------- -------------
------------- ----------- -------------

DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Oil and gas properties obtained utilizing advances for development
costs............................................................... $ 939,966 $ 262,211 $ --
------------- ----------- -------------
------------- ----------- -------------
Accounts payable includes costs related to the addition of loan
origination fees.................................................... $ -- $ -- $ 1,521,237
------------- ----------- -------------
------------- ----------- -------------
Offset of certain accounts payable and accounts receivable between
Managing General Partner and Limited Partner........................ $ -- $ 781,786 $ --
------------- ----------- -------------
------------- ----------- -------------
</TABLE>

SEE ACCOMPANYING NOTES.

F-31
<PAGE>
RAMCO-NYL 1987 LIMITED PARTNERSHIP

NOTES TO FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

RAMCO-NYL 1987 Limited Partnership (the "Partnership") was activated on
February 3, 1988 by RAM Energy, Inc., formerly RAMCO Operating Company (the
"Managing General Partner"), Oklahoma Double R Corporation (the "Special General
Partner"), and New York Life Insurance Company (the "Limited Partner"). On
November 30, 1996, the Limited Partner interest in the Partnership was sold to
RB Operating Company ("RBO"), a wholly-owned subsidiary of the Managing General
Partner (NOTE 8). The Partnership was formed for the purpose of acquiring and
developing interests in oil and gas properties.

The Partnership participates in the drilling, completion and acquisition of
oil and gas wells. While the Partnership's sales of oil and gas to various
purchasers are generally unsecured and distributed by an affiliate, the
Partnership has not experienced any significant credit losses from such sales.

PARTICIPATION IN REVENUES, COSTS AND EXPENSES

Under the terms of the limited partnership agreement, as amended (the
"Partnership Agreement"), for financial reporting purposes, virtually all
Partnership revenues, costs and expenses are allocated 1.0% to the Managing
General Partner, 2.5% to the Special General Partner and 96.5% to the Limited
Partner prior to Payout Nos. 1 and 2, as defined. Upon reaching these payouts,
the allocation to the Managing General Partner increases to 11.5% while that of
the Limited Partner decreases to 86.0%.

PROPERTIES AND EQUIPMENT

The Partnership follows the full cost method of accounting for oil and gas
operations. Under this method, all productive and nonproductive costs incurred
in connection with the acquisition, exploration and development of oil and gas
reserves are capitalized. No gains or losses are recognized upon the sale or
other disposition of oil and gas properties except in extraordinary
transactions.

With the exception of the plugging and abandonment obligation further
described in Note 5, the Partnership does not believe that future costs related
to dismantlement, site restoration, and abandonment costs, net of estimated
salvage values, will have a significant effect on its results of operations or
financial position because the salvage value of equipment and related facilities
should approximate or exceed any future expenditures for dismantlement,
restoration, or abandonment. The Partnership has not incurred any net
expenditures for costs of this nature in 1994, 1995 or 1996.

To the extent that the Partnership's net capitalized costs of oil and gas
properties and equipment exceed estimated discounted future net revenues from
proved reserves plus the lower of cost or estimated fair value of unproved
properties (none at December 31, 1995 or November 30, 1996) (the "ceiling
amount"), such excess is charged to expense in the period in which it occurs and
is not subsequently reinstated. The accompanying financial statements reflect
the pricing of oil and gas products used in the calculations of the
Partnership's oil and gas reserves in accordance with the guidelines established
by the Securities and Exchange Commission, which resulted in a write-down of oil
and gas properties and equipment of $8.7 million in 1994 (none in 1995 or 1996).

The discounted future net revenues at November 30, 1996 include
approximately $28.2 million related to properties on which estimated capital
expenditures of approximately $14.7 million will be required to develop and
produce the reserves. Such amounts have been considered in the calculation of
the ceiling

F-32
<PAGE>
RAMCO-NYL 1987 LIMITED PARTNERSHIP

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
amount at November 30, 1996. The funding for these projects is expected by the
Managing General Partner to be provided from cash flows from operations.

AMORTIZATION AND DEPRECIATION

Amortization of oil and gas properties and equipment is computed based on
the unit-of-production method. Depreciation on other equipment is computed based
on the double declining balance method over the estimated useful lives of the
assets. Amortization of loan origination costs is computed based on the
straight-line method over the term of the related debt.

GAS BALANCING

The Partnership's policy when acquiring oil and gas properties and equipment
has been to record the assets acquired net of the related net gas balancing
liability, if any. The subsequent balancing of the net liability acquired is
recorded on the sales method. At November 30, 1996, the Partnership has a
remaining net overproduced position from the acquired imbalances of
approximately 1,900,000 thousand cubic feet of natural gas that is not reflected
in the gas balancing liability in the accompanying balance sheets.

For other gas imbalance activity subsequent to acquisitions, the Partnership
records sales on the entitlement method, recognizing its net share of all
production as revenue. Any amount received in excess of or less than the
Partnership's revenue interest is recorded in the net gas balancing liability.

CASH EQUIVALENTS

The Partnership considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.

CREDIT AND MARKET RISK

The Partnership conducts a majority of its business in the states of
Oklahoma, Texas and New Mexico and engages exclusively in the oil and gas
industry. As further described in Note 3, the Managing General Partner and RBO
have served as operators on many of the Partnership wells and distribute all oil
and gas sales proceeds to the Partnership. The Managing General Partner and RBO
have certain oil and gas suspense payable accounts totaling approximately $1.7
million at November 30, 1996 related to oil and gas properties in which the
Partnership owns an interest. These suspended payables will ultimately require
funding when the appropriate parties to whom they are due are located or the
amounts become payable to the applicable states' authorities if the appropriate
parties to whom the funds are due cannot be located. In the event the Managing
General Partner or RBO are unable to fund the oil and gas suspense payable
accounts when due, the Partnership may be required to fund such obligations to
the extent they constitute obligations under the Partnership's leases. The
Managing General Partner and RBO are dependent upon the Partnership for future
management fees and other income. While the ultimate resolution of all these
matters and their effects on the accounts described above cannot be predicted
with certainty, the Managing General Partner does not expect such resolution to
have a material effect on the financial position of the Partnership.

F-33
<PAGE>
RAMCO-NYL 1987 LIMITED PARTNERSHIP

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES

INCOME TAXES

The income or loss of the Partnership for tax purposes is to be included in
the tax returns of the individual partners. Consequently, no provision for
income taxes has been reflected in these financial statements.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts reported in the balance sheets for cash and cash
equivalents, certificates of deposit with a one year maturity, and variable rate
note receivable from RBO and long-term debt approximate their fair values.

2. DISAGREEMENT AND LAWSUIT BETWEEN PARTNERS

In November 1993, the sole Limited Partner of the Partnership filed a
lawsuit in federal district court against the Managing General Partner, the
Special General Partner, which is a sister corporation of the Managing General
Partner, and certain affiliates of the Managing General Partner. In the lawsuit,
the Limited Partner sought dissolution of the Partnership, recovery of fees and
other charges claimed by the Limited Partner to be in excess of the amount
permitted by the Partnership Agreement, and recovery of interest charges on
Partnership funds claimed by the Limited Partner to have been improperly held in
the Managing General Partner's accounts. Although several motions for partial
summary judgment were filed by both sides, the court failed to rule on any
substantive issue in the case and in July 1996, dismissed the Limited Partner's
complaint for lack of jurisdiction.

On July 24, 1996, the Managing General Partner and the Limited Partner
entered into a Purchase and Sale Agreement pursuant to which the Managing
General Partner's subsidiary, RBO, purchased all of the Limited Partner's
interest in the Partnership (NOTE 8).

3. TRANSACTIONS WITH AFFILIATES

The Partnership Agreement provides for reimbursement of Partnership overhead
costs to the Managing General Partner. The management fee is computed monthly as
a percentage (.0833% prior to Payout No. 2 and .04167% thereafter) of adjusted
cumulative contributed capital, as defined, at the beginning of the month. The
management fee for 1994, 1995 and 1996 was $1,554,929, $1,605,743 and
$1,482,293, respectively. The Managing General Partner and RBO serve as
operators on many of the Partnership wells. In connection with their services as
operator on these wells, the Managing General Partner and RBO charged the
Partnership operator fees of $1,746,145, $1,686,083 and $1,342,777 in 1994,
1995, and 1996, respectively. In addition, the Managing General Partner and RBO
distribute all oil and gas sales, net of oil and gas production taxes, and bill
the Partnership for all operating and capital expenditures, including

F-34
<PAGE>
RAMCO-NYL 1987 LIMITED PARTNERSHIP

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

3. TRANSACTIONS WITH AFFILIATES (CONTINUED)
charges for technical personnel costs provided by the Managing General Partner,
related to the Partnership wells. In connection with these and other
transactions, the Partnership has recorded oil and gas accounts receivable from
these affiliates of $4,666,293 and $4,029,383 at December 31, 1995 and November
30, 1996, respectively. The Partnership's recorded oil and gas accounts
receivable includes $1,414,382 and $1,941,746 at December 31, 1995 and November
30, 1996, respectively, that had actually been received by these affiliates from
purchasers at year end. In addition, the Partnership had advances to and other
receivables from these affiliates of $1,003,021 and $2,509,149 at December 31,
1995 and November 30, 1996, respectively, and accounts payable for oil and gas
operations to these affiliates of $1,347,412 and $1,244,452 at December 31, 1995
and November 30, 1996, respectively.

In connection with the December 1, 1996 acquisition by RBO of the Limited
Partner interest in the Partnership (NOTE 8), in November 1996, RBO borrowed
from the Partnership $60.0 million of the proceeds from the credit agreement
described in Note 4. The Partnership has a note receivable from RBO which is due
at the same time as payments are required under the credit agreement. In
addition, the note bears interest at the same rates and terms as provided for in
the credit agreement.

4. LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
NOVEMBER NOVEMBER
31, 1995 30, 1996
----------- -----------
<S> <C> <C>
Revolving note payable.................................. $ -- $52,000,000
Term note payable....................................... -- 10,800,000
Note payable under credit agreement paid off in 1996.... 10,000,000 --
----------- -----------
10,000,000 62,800,000
Less amount due within one year......................... 10,000,000 5,400,000
----------- -----------
$ -- $57,400,000
----------- -----------
----------- -----------
</TABLE>

The amount of the revolving commitment is subject to a borrowing base
calculation and certain other limitations as defined in the credit agreement.
The borrowing base relates to the Partnership's oil and gas reserve base and was
$52.0 million at November 30, 1996. The borrowing base is subject to semiannual
redeterminations each April and October. In addition to the foregoing semiannual
redetermination, the lender has the right, at its sole discretion or at the
request of the Partnership, to make one additional redetermination of the
borrowing base during any twelve-month period. The revolving commitment reduces
quarterly commencing January 31, 1998 by 1/16(th) through October 31, 2001.
Under the revolving commitment, the Partnership has the ability to choose the
index on which the interest rate is based. At November 30, 1996, all borrowings
under the revolving commitment were accruing interest at a LIBOR-based interest
rate plus 2.5% (aggregate rate of 8%), and interest is payable currently.

F-35
<PAGE>
RAMCO-NYL 1987 LIMITED PARTNERSHIP

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

4. LONG-TERM DEBT (CONTINUED)
The term commitment of $10.8 million has been fully drawn at November 30,
1996. The original maturity date of the term commitment was October 31, 1997.
The maturity date on the term commitment has been extended to June 30, 1998;
however, due to the repayment in 1997 of $5.4 million of the term note payable
as further described below, only the remaining $5.4 million balance of the term
commitment, which would otherwise be classified as a current liability in the
accompanying November 30, 1996 balance sheet, has been classified as due after
one year. Interest on the borrowings under the term commitment is based on the
bank's reference rate plus 3.0% through May 31, 1997 and 3.5% thereafter
(aggregate of 11.25% at November 30, 1996), and is payable monthly.

The credit agreement contains various affirmative and restrictive covenants.
These covenants, among other things, restrict mergers involving the Partnership
and the Managing General Partner, payment of distributions to partners by the
Partnership and payment of dividends on the Managing General Partner's stock,
limit additional indebtedness and sales or other dispositions of assets, and
require the Partnership and the Managing General Partner to meet certain
financial covenants. In addition, the credit agreement requires the Partnership
to enter into certain interest rate swaps and collars to hedge the interest rate
exposure associated with the credit agreement. Effective January 3, 1997, the
Partnership entered into interest rate swaps to fix the interest rate on
notional amounts of $20.0 million of the borrowings under the revolving
commitment and entered into an interest rate collar to cap the interest rate on
an additional notional amount of $10.0 million of the borrowings under the
revolving commitment.

The Partnership sold certain oil and gas properties in 1997 and received
cash proceeds of approximately $10.4 million (before closing adjustments). As
required by the credit agreement, such proceeds were used to pay down the
principal balance outstanding under the credit agreement. The bank applied $5.0
million of such proceeds to the revolving note payable as a result of a
preliminary redetermination of the borrowing base made in 1997 with the balance
of $5.4 million applied to the term note payable.

The amount of principal payments required by the credit agreement during
each of the next five years as of November 30, 1996, including consideration of
the extension of the maturity date of the term commitment but exclusive of the
preliminary borrowing base redetermination discussed above, are as follows: 1997
- -- $5,400,000, 1998 -- $8,650,000, 1999 -- $16,250,000, 2000 -- $16,250,000, and
2001 -- $16,250,000.

Interest paid by the Partnership in 1994, 1995 and 1996 totaled $587,361,
$808,942 and $563,789, respectively.

5. CONTINGENCIES

As a result of its acquisition of certain oil and gas properties, the
Partnership was a party to a lawsuit involving certain Indian leases in Custer
County, Oklahoma. The contingent liability of $400,000 was classified as a
current liability in the accompanying balance sheet at December 31, 1995. The
parties achieved a final settlement during 1996 and settlement payments of
approximately the recorded liability have been made and dismissals with
prejudice have been filed as required under the terms of the settlement.

In November 1995, the Partnership entered into an agreement to sell an oil
and gas property located in Louisiana state waters in Plaquemines Parish. The
property includes several currently uneconomical wells for which the Managing
General Partner estimates the plugging and abandonment ("P&A") obligation is
approximately $1,020,000. The purchaser provided a letter of credit and a bond
totaling $420,000 to ensure funding of a portion of the P&A obligation. The P&A
obligation would revert to the

F-36
<PAGE>
RAMCO-NYL 1987 LIMITED PARTNERSHIP

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

5. CONTINGENCIES (CONTINUED)
Partnership in the event the purchaser does not complete the required P&A
activities. The Managing General Partner believes that the Partnership may
ultimately be required to fund a portion of the P&A obligation. As a result, the
Partnership has recorded a contingent liability of $600,000 in the accompanying
balance sheets.

6. OIL AND GAS PRODUCING ACTIVITIES

Capitalized costs relating to oil and gas producing activities and related
accumulated depreciation and amortization are summarized as follows:

<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER
----------------------- 30,
1994 1995 1996
---------- ----------- -----------
<S> <C> <C> <C>
Proved oil and gas properties................ $138,271,641 $142,995,021 $144,647,069
Accumulated depreciation and amortization.... (83,664,092) (93,439,682) (98,495,117)
---------- ----------- -----------
$54,607,549 $49,555,339 $46,151,952
---------- ----------- -----------
---------- ----------- -----------
</TABLE>

Costs incurred in crude oil and gas producing activities for the years ended
December 31, 1994 and 1995 and the period ended November 30, 1996, are as
follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, PERIOD ENDED
-------------------------- NOVEMBER 30,
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Development costs.................................. $ 4,475,078 $ 5,191,650 $3,310,238
------------ ------------ ------------
------------ ------------ ------------
Amortization rate per equivalent MCF............... $ .92 $ .78 $ .51
------------ ------------ ------------
------------ ------------ ------------
</TABLE>

Revenues from one customer in 1996 (none in 1994 or 1995) exceeded 10% of
the Partnership's total crude oil and natural gas sales. The 1996 revenues from
Coastal Gas Marketing of approximately $2,740,000 represent approximately 11.7%
of such sales for the Partnership. The Partnership's management believes that
the loss of this customer would not have a significant impact on the
Partnership's results of operations or financial condition.

7. SUPPLEMENTARY OIL AND GAS RESERVE INFORMATION (UNAUDITED)

The Partnership has interests in crude oil and gas properties that are
principally located in Oklahoma, Texas and New Mexico. The Partnership does not
own or lease any crude oil and gas properties outside the United States.

The Partnership retains independent engineering firms to provide period-end
estimates of the Partnership's future net recoverable oil, gas, and natural gas
liquids reserves. Estimated proved net recoverable reserves as shown below
include only those quantities that can be expected to be commercially
recoverable at prices and costs in effect at the balance sheet dates under
existing regulatory practices and with conventional equipment and operating
methods.

Proved developed reserves represent only those reserves expected to be
recovered through existing wells. Proved undeveloped reserves include those
reserves expected to be recovered from new wells on

F-37
<PAGE>
RAMCO-NYL 1987 LIMITED PARTNERSHIP

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

7. SUPPLEMENTARY OIL AND GAS RESERVE INFORMATION (UNAUDITED) (CONTINUED)
undrilled acreage or from existing wells on which a relatively major expenditure
is required for recompletion.

Net quantities of proved developed and undeveloped reserves of oil and gas,
including condensate and natural gas liquids, are summarized as follows:

<TABLE>
<CAPTION>
CRUDE OIL NATURAL GAS
(THOUSAND (MILLION
BARRELS) CUBIC FEET)
----------- -----------
<S> <C> <C>
December 31, 1993................................................... 4,020 77,537

Extensions and discoveries.......................................... 131 8,136
Revisions of previous estimates..................................... 153 (836)
Production.......................................................... (534) (9,402)
----- -----------
December 31, 1994................................................... 3,770 75,435

Extensions and discoveries.......................................... 88 3,708
Revisions of previous estimates..................................... (63) (523)
Production.......................................................... (462) (9,700)
----- -----------
December 31, 1995................................................... 3,333 68,920

Extensions and discoveries.......................................... 247 12,071
Sales of minerals in place.......................................... (4) (929)
Revisions of previous estimates..................................... 705 4,383
Production.......................................................... (387) (7,594)
----- -----------
November 30, 1996................................................... 3,894 76,851
----- -----------
----- -----------

Proved developed reserves:
December 31, 1993................................................. 3,053 60,040
December 31, 1994................................................. 2,797 56,792
December 31, 1995................................................. 2,714 51,664
November 30, 1996................................................. 3,177 56,692
</TABLE>

The following is a summary of a standardized measure of discounted net cash
flows related to the Partnership's proved crude oil and natural gas reserves.
For these calculations, estimated future cash flows from estimated future
production of proved reserves were computed using oil and gas prices as of the
end of each period presented. Future development and production costs
attributable to the proved reserves were estimated assuming that existing
conditions would continue over the economic lives of the individual leases and
costs were not escalated for the future. Future income tax expenses were not
considered in computing the standardized measure since the Partnership does not
record income taxes as described in Note 1.

The Partnership cautions against using this data to determine the fair value
of its oil and gas properties. To obtain the best estimate of fair value of the
oil and gas properties, forecasts of future economic conditions, varying
discount rates, and consideration of other than proved reserves would have to be
incorporated into the calculation. In addition, there are significant
uncertainties inherent in

F-38
<PAGE>
RAMCO-NYL 1987 LIMITED PARTNERSHIP

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

7. SUPPLEMENTARY OIL AND GAS RESERVE INFORMATION (UNAUDITED) (CONTINUED)
estimating quantities of proved reserves and in projecting rates of production
that impair the usefulness of the data.

The standardized measure of discounted future net cash flows relating to
proved oil and gas reserves are summarized as follows:

<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Future cash inflows.............................................. $ 191,531 $ 284,661
Future production and development costs.......................... (88,956) (113,155)
------------ ------------
Future net cash flows............................................ 102,575 171,506
10% annual discount for estimated timing of cash flows........... (38,662) (70,791)
------------ ------------
Standardized measure of discounted future net cash flows......... $ 63,913 $ 100,715
------------ ------------
------------ ------------
</TABLE>

The following are the principal sources of change in the standardized
measure of discounted future net cash flows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31, PERIOD ENDED
---------------------- NOVEMBER 30,
1994 1995 1996
---------- ---------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Sales and transfers of crude oil and natural gas
produced, net of production costs.................... $ (12,896) $ (10,214) $ (14,504)
Net changes in prices and production costs............. (10,373) 14,595 18,456
Extensions and discoveries, less related costs......... 7,177 3,980 13,510
Development costs incurred............................. 2,634 3,681 3,061
Sales of minerals in place............................. -- -- (712)
Revisions of previous quantity estimates............... 66 (847) 8,587
Accretion of discount.................................. 6,920 5,648 5,858
Other.................................................. (6,245) (9,410) 2,546
---------- ---------- ------------
Net change............................................. $ (12,717) $ 7,433 $ 36,802
---------- ---------- ------------
---------- ---------- ------------
</TABLE>

During recent years, there have been significant fluctuations in the prices
paid for oil in the world markets. This situation has had a destabilizing effect
on the oil posted prices in the United States, including the posted prices paid
by purchasers of the Partnership's crude oil. The net weighted average prices of
oil and gas at December 31, 1994, December 31, 1995 and November 30, 1996 used
in the above table were $15.93, $17.22 and $22.44 per barrel of oil,
respectively, and $1.67, $1.94 and $2.56 per thousand cubic feet of natural gas,
respectively.

8. SUBSEQUENT EVENTS

Effective December 1, 1996, the Managing General Partner's wholly-owned
subsidiary, RB Operating Company, purchased the Limited Partner's interest in
the Partnership for $60 million, as provided for under the terms of a Purchase
and Sale Agreement previously executed by the parties. Upon execution of

F-39
<PAGE>
RAMCO-NYL 1987 LIMITED PARTNERSHIP

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

8. SUBSEQUENT EVENTS (CONTINUED)
the Purchase and Sale Agreement, a complete release and discharge of all claims
by the Limited Partner against the Managing General Partner and its affiliates
was provided.

In August 1997, the Partnership purchased certain primarily producing oil
and gas properties and equipment located principally in Oklahoma, Louisiana and
Mississippi for $11.2 million (before closing adjustments). The purchase was
financed with additional borrowings by the Partnership under the credit
agreement.

Effective December 1, 1997, the Managing General Partner and sole limited
partner of the Partnership at that date, and the Special General Partner of the
Partnership, authorized the dissolution of the Partnership, the liquidation of
all of the assets of the Partnership into the Managing General Partner and the
assumption by the Managing General Partner of all liabilities of the
Partnership.

F-40
<PAGE>
REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Carlton Resources Corporation

We have audited the accompanying consolidated balance sheet of Carlton
Resources Corporation (the "Company") as of December 31, 1996 and the related
consolidated statements of operations, stockholders' equity (deficit), and cash
flows for the four months then ended. We have audited the accompanying
consolidated balance sheet of Magic Circle Energy Corporation (the
"Predecessor") as of December 31, 1995, and the related consolidated statements
of operations, stockholders' equity (deficit), and cash flows for the year ended
December 31, 1995 and the eight months ended August 31, 1996. These financial
statements are the responsibility of the Company's and Predecessor's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of the Company at
December 31, 1996, and the consolidated results of its operations and its cash
flows for the four months then ended, and the consolidated financial position of
the Predecessor at December 31, 1995 and the results of its operations and its
cash flows for the year then ended and for the eight months ended August 31,
1996, in conformity with generally accepted accounting principles.

ERNST & YOUNG LLP

Tulsa, Oklahoma
December 16, 1997

F-41
<PAGE>
CARLTON RESOURCES CORPORATION
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------ ---------------------------
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1995 1996 1997
------------ ------------ -------------
<S> <C> <C> <C>
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents.......................................... $1,880,000 $1,335,000 $ 232,000
Restricted cash.................................................... -- 246,000 346,000
Investment securities.............................................. 2,729,000 -- --
Accounts receivable, less allowance for doubtful accounts of
$156,000 at December 31, 1995, $51,000 at December 31, 1996 and
$55,000 at September 30, 1997.................................... 908,000 1,806,000 1,270,000
Receivables from affiliates........................................ 2,141,000 143,000 214,000
Prepaid expenses and other current assets.......................... 168,000 285,000 826,000
------------ ------------ -------------
Total current assets................................................. 7,826,000 3,815,000 2,888,000
Property and equipment, at cost:
Oil and gas properties............................................. 19,395,000 22,732,000 23,442,000
Gathering and disposal systems..................................... 5,794,000 22,708,000 22,855,000
Other.............................................................. 770,000 410,000 336,000
------------ ------------ -------------
25,959,000 45,850,000 46,633,000
Less accumulated depreciation, depletion and amortization.......... 8,792,000 1,066,000 3,327,000
------------ ------------ -------------
Net property and equipment........................................... 17,167,000 44,784,000 43,306,000
Other assets......................................................... 3,000 433,000 403,000
------------ ------------ -------------
Total assets......................................................... $24,996,000 $49,032,000 $46,597,000
------------ ------------ -------------
------------ ------------ -------------

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable................................................... $1,252,000 $2,429,000 $ 1,938,000
Payables to affiliates............................................. -- 83,000 22,000
Accrued liabilities................................................ 62,000 690,000 354,000
Long-term debt in default.......................................... -- 24,820,000 24,572,000
------------ ------------ -------------
Total current liabilities............................................ 1,314,000 28,022,000 26,886,000
Deferred tax liability............................................... 5,485,000 20,805,000 20,445,000
------------ ------------ -------------
Total liabilities.................................................... 6,799,000 48,827,000 47,331,000
Redeemable preferred stock, $.01 par value; 120 shares authorized; 12
shares issued and outstanding; stated at redemption value.......... -- 475,000 550,000
Stockholders' equity (deficit):
Common stock....................................................... 1,000 -- --
Paid-in capital.................................................... 7,646,000 -- --
Retained earnings.................................................. 10,719,000 -- --
Treasury stock (at cost)........................................... (169,000) -- --
Common stock--10,000 shares of $0.01 par value authorized; 1,025
shares issued and outstanding...................................... -- 1,000 1,000
Paid-in capital.................................................... -- 31,000 31,000
Retained earnings (deficit)........................................ -- (302,000) (1,316,000)
------------ ------------ -------------
Total stockholders' equity (deficit)................................. 18,197,000 (270,000) (1,284,000)
------------ ------------ -------------
Total liabilities and stockholders' equity........................... $24,996,000 $49,032,000 $46,597,000
------------ ------------ -------------
------------ ------------ -------------
</TABLE>

SEE ACCOMPANYING NOTES.

F-42
<PAGE>
CARLTON RESOURCES CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
PREDECESSOR COMPANY
---------------------------- ---------------------------
YEAR EIGHT MONTHS FOUR MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED
DECEMBER 31, AUGUST 31, DECEMBER 31, SEPTEMBER 30,
1995 1996 1996 1997
------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
(UNAUDITED)
Revenues:
Gathering systems.................................. $ 9,584,000 $11,731,000 $2,957,000 $ 7,468,000
Oil and gas sales.................................. 6,439,000 4,613,000 2,100,000 4,109,000
Supervision fees and overhead reimbursements....... 556,000 422,000 194,000 520,000
Management fees.................................... 515,000 18,000 4,000 8,000
------------- ------------- ------------ -------------
17,094,000 16,784,000 5,255,000 12,105,000
Costs and expenses:
Oil and gas purchases.............................. 3,518,000 4,993,000 1,664,000 4,785,000
Lease operating expenses and production taxes...... 2,582,000 1,524,000 863,000 1,593,000
Other charges to production........................ 457,000 580,000 174,000 377,000
Gathering system operations........................ 801,000 758,000 419,000 569,000
Depreciation, depletion and amortization........... 2,723,000 2,259,000 1,010,000 2,343,000
General and administrative expenses................ 2,336,000 1,430,000 966,000 1,860,000
------------- ------------- ------------ -------------
12,417,000 11,544,000 5,096,000 11,527,000
------------- ------------- ------------ -------------
4,677,000 5,240,000 159,000 578,000
Other income (expense):
Interest income.................................... 372,000 234,000 159,000 46,000
Interest expense................................... (4,000) -- (326,000) (2,305,000)
Other.............................................. 510,000 464,000 318,000 183,000
------------- ------------- ------------ -------------
878,000 698,000 151,000 (2,076,000)
------------- ------------- ------------ -------------
Income (loss) before income taxes.................... 5,555,000 5,938,000 310,000 (1,498,000)
Income taxes......................................... 2,289,000 2,206,000 118,000 (559,000)
------------- ------------- ------------ -------------
Net income (loss).................................... $ 3,266,000 $ 3,732,000 $ 192,000 $ (939,000)
------------- ------------- ------------ -------------
------------- ------------- ------------ -------------
</TABLE>

SEE ACCOMPANYING NOTES.

F-43
<PAGE>
CARLTON RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
RETAINED
COMMON PAID-IN EARNINGS TREASURY STOCK
STOCK CAPITAL (DEFICIT) AT COST TOTAL
----------- ------------ ------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
PREDECESSOR
Balance at December 31, 1994................. $ 1,000 $ 7,646,000 $ 7,453,000 $ (134,000) $ 14,966,000
Purchase of treasury stock at cost........... -- -- -- (35,000) (35,000)
Net income for the year...................... -- -- 3,266,000 -- 3,266,000
----------- ------------ ------------- -------------- --------------
Balance at December 31, 1995................. 1,000 7,646,000 10,719,000 (169,000) 18,197,000
Net income for the eight months ended August
31, 1996................................... -- -- 3,732,000 -- 3,732,000
Purchase of treasury stock at cost........... -- -- -- (11,521,000) (11,521,000)
Distribution of properties to stockholders... -- -- (1,290,000) -- (1,290,000)
----------- ------------ ------------- -------------- --------------
Balance at August 31, 1996................... $ 1,000 $ 7,646,000 $ 13,161,000 $ (11,690,000) $ 9,118,000
----------- ------------ ------------- -------------- --------------
----------- ------------ ------------- -------------- --------------
COMPANY
Balance at September 1, 1996................. $ 1,000 $ 31,000 $ (461,000) $ -- $ (429,000)
Accretion of redeemable preferred stock to
redemption value........................... -- -- (33,000) -- (33,000)
Net income for the four months ended December
31, 1996................................... -- -- 192,000 -- 192,000
----------- ------------ ------------- -------------- --------------
Balance at December 31, 1996................. 1,000 31,000 (302,000) -- (270,000)
Accretion of redeemable preferred stock to
redemption value........................... -- -- (75,000) -- (75,000)
Net loss for the nine months ended September
30, 1997 (unaudited)....................... -- -- (939,000) -- (939,000)
----------- ------------ ------------- -------------- --------------
Balance at September 30, 1997 (unaudited).... $ 1,000 $ 31,000 $ (1,316,000) $ -- $ (1,284,000)
----------- ------------ ------------- -------------- --------------
----------- ------------ ------------- -------------- --------------
</TABLE>

SEE ACCOMPANYING NOTES.

F-44
<PAGE>
CARLTON RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
COMPANY
PREDECESSOR ----------------------------
--------------------------- FOUR MONTHS
YEAR ENDED EIGHT MONTHS ENDED
DECEMBER 31, ENDED AUGUST DECEMBER 31,
1995 31, 1996 1996
------------ ------------- ------------- NINE MONTHS
ENDED
SEPTEMBER 30,
1997
-------------
(UNAUDITED)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income............................................ $3,266,000 $ 3,732,000 $ 192,000 $ (939,000)
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation, depletion and amortization............ 2,723,000 2,259,000 1,010,000 2,343,000
Deferred taxes...................................... 2,136,000 1,936,000 (300,000) (360,000)
Change in operating assets and liabilities:
Restricted cash................................... 157,000 (245,000) (1,000) (100,000)
Accounts receivable............................... 164,000 (692,000) 195,000 536,000
Receivables from affiliates....................... (570,000) 1,495,000 96,000 (71,000)
Prepaid expenses and other current assets......... (89,000) (662,000) (225,000) (541,000)
Other assets...................................... 17,000 -- 47,000 30,000
Accounts payable.................................. 589,000 785,000 174,000 (491,000)
Payables to affiliates............................ (109,000) -- 83,000 (61,000)
Accrued liabilities............................... (190,000) 245,000 (81,000) (336,000)
Deferred revenue.................................. (188,000) -- -- --
------------ ------------- ------------- -------------
Net cash provided by operating activities............. 7,906,000 8,853,000 1,190,000 10,000
INVESTING ACTIVITIES
Acquisition of common stock of Predecessor............ -- -- (24,800,000) --
Capital expenditures.................................. (9,125,000) (2,694,000) (164,000) (1,301,000)
Proceeds from asset dispositions...................... 795,000 827,000 -- 434,000
Investment sales and maturities....................... 1,000,000 2,729,000 -- --
Investment purchases.................................. (1,235,000) -- -- --
Other, net............................................ 76,000 4,000 248,000 2,000
------------ ------------- ------------- -------------
Net cash provided by (used in) investing activities... (8,489,000) 866,000 (24,716,000) (865,000)
FINANCING ACTIVITIES
Debt proceeds......................................... -- -- 24,800,000 1,585,000
Debt payments......................................... -- -- (16,000) (1,833,000)
Purchase of common stock.............................. (35,000) (11,521,000) -- --
------------ ------------- ------------- -------------
Net cash (used in) provided by financing activities... (35,000) (11,521,000) 24,784,000 (248,000)
------------ ------------- ------------- -------------
Net increase (decrease) in cash and cash equivalents.. (618,000) (1,802,000) 1,258,000 (1,103,000)
Cash and cash equivalents at beginning of period...... 2,498,000 1,880,000 77,000 1,335,000
------------ ------------- ------------- -------------
Cash and cash equivalents at end of period............ $1,880,000 $ 78,000 $ 1,335,000 $ 232,000
------------ ------------- ------------- -------------
------------ ------------- ------------- -------------
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the periods for:
Interest............................................ $ 4,000 $ -- $ 326,000 $ 2,305,000
Income taxes........................................ $ 390,000 $ 558,000 $ 40,000 $ 510,000
</TABLE>

SEE ACCOMPANYING NOTES.

F-45
<PAGE>
CARLTON RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1995 AND 1996
(INFORMATION FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1997 IS UNAUDITED)

1. COMPANY BUSINESS AND ACQUISITION

Carlton Resources Corporation (the "Company") is an independent oil and gas
company which owns operated and nonoperated interests in properties located
primarily in the Anadarko Basin in Oklahoma, the Gulf Coast of Texas, and the
Austin Chalk area of Texas. In addition, the Company owns and operates an oil
and gas gathering system and plant and a saltwater disposal system in the
Anadarko Basin of Oklahoma. As used herein the term "Company" refers to Carlton
Resources Corporation ("Carlton") and collectively to Carlton and the
Predecessor, Magic Circle Energy Corporation ("Magic").

Effective September 1, 1996, Carlton, which had no previous operations,
acquired all of the outstanding stock of Magic, for $24.8 million in cash. The
acquisition was accounted for under the purchase method of accounting. The
purchase price has been allocated to assets acquired and liabilities assumed
based on fair values at the date of acquisition and is summarized as follows:

<TABLE>
<S> <C>
Current assets......................................................... $2,620,000
Property and equipment................................................. 45,852,000
Other assets........................................................... 437,000
Current liabilities.................................................... (3,002,000)
Net deferred tax liabilities........................................... (21,107,000)
----------
$24,800,000
----------
----------
</TABLE>

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries after elimination of all material intercompany
accounts and transactions. The Company's percentage interests in the assets and
liabilities of certain working interest oil and gas partnerships (for which the
Company serves as general partner) are proportionately consolidated in the
balance sheet.

OIL AND GAS PROPERTIES

Carlton follows the successful efforts method of accounting for its oil and
gas properties. Under this method, all costs to acquire oil and gas interests,
to drill and equip successful exploratory wells and to drill and equip
development wells are capitalized. Geological and geophysical costs and costs to
drill unsuccessful exploratory wells are expensed. When complete units of
depreciable property are retired or sold, the asset cost and related accumulated
depreciation are eliminated with any gain or loss reflected in income. When less
than complete units of depreciable property are disposed of or retired, the
difference between asset cost and salvage value is charged or credited to
accumulated depreciation.

The Predecessor followed the full cost method of accounting for oil and gas
operations. Under this method, all productive and nonproductive costs incurred
in connection with the acquisition, exploration and development of oil and gas
reserves are capitalized. No gains or losses are recognized upon the sale or
other disposition of oil and gas properties except in extraordinary
transactions.

Impairment of oil and gas properties is provided when the carrying value of
properties is less than their discounted estimated future net cash flows.

F-46
<PAGE>
CARLTON RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995 AND 1996
(INFORMATION FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1997 IS UNAUDITED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Company's historical experience has been that the salvage value of
equipment on property abandonments will cover the costs of dismantlement and
property restoration.

Depletion, depreciation and amortization of capitalized costs are provided
on the units-of-production method based on proved developed oil and gas
reserves.

GATHERING AND SALTWATER DISPOSAL SYSTEMS

Depreciation of gathering and saltwater disposal systems is determined by
the units of production method based on connected oil and gas supplies.

PROPERTY AND EQUIPMENT--OTHER

Other property and equipment are depreciated using the straight-line method
over the estimated useful lives of the assets.

ENVIRONMENTAL LIABILITIES

Environmental liabilities, which have not been significant, are recognized
when it is probable that a loss has been incurred and the amount is estimable.

CASH AND CASH EQUIVALENTS

Cash equivalents are highly liquid short-term investments that are readily
convertible to known amounts of cash and generally have original maturities
within three months from their date of purchase.

RESTRICTED CASH

Certain amounts which have been posted as deposits or as surety bonds as
required by the Oklahoma Tax Commission have been classified as restricted cash.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts for cash and cash equivalents, investment securities
and long-term debt reported in the balance sheets approximate fair value.

OIL AND GAS SALES

The Company recognizes oil and gas sales on the sales method, when oil and
gas is sold. Under this method the Company may sell more or less than its
entitled share creating an imbalance position. An asset or liability for the
imbalance position is only recorded when the position cannot be recovered from
remaining reserves. The Company's net imbalance positions at December 31, 1996
and 1995 were not material.

F-47
<PAGE>
CARLTON RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995 AND 1996
(INFORMATION FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1997 IS UNAUDITED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES

Deferred income taxes are computed using the liability method and are
provided on all temporary differences between the financial reporting basis and
the tax basis of the Company's assets and liabilities. Allowable tax credits are
applied currently as reductions of the provision for income taxes.

CONCENTRATION OF CREDIT RISK

The Company maintains a portion of its unrestricted cash in bank deposit
accounts which at times may exceed federally insured limits. The Company has not
experienced any losses in such accounts. The Company believes it is not exposed
to any significant credit risk on cash and cash equivalents.

The Company's accounts receivable relate primarily to the sale of oil and
natural gas to purchasers located in the midwestern portion of the United
States. The Company generally does not require collateral from its customers.
Credit losses have been within management's expectations.

DERIVATIVES

The Company does not engage in any hedging or other similar transactions
which are intended to manage risks related to movements in oil and natural gas
prices.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.

UNAUDITED FINANCIAL STATEMENTS

The accompanying unaudited consolidated financial statements at September
30, 1997 and for the nine-month period then ended include all adjustments,
consisting of normal and recurring adjustments, which, in the opinion of
management, were necessary for a fair presentation of the financial position at
September 30, 1997 and the results of operations for the nine-month period ended
September 30, 1997. The results of operations for the nine months ended
September 30, 1997 are not necessarily indicative of the results to be expected
for the full year ending December 31, 1997.

3. LONG-TERM DEBT

On November 22, 1996, the Company entered into a credit agreement with a
bank for borrowings up to $16,000,000. Proceeds from the borrowings were used to
satisfy the Company's liability for the purchase of the stock of Magic, see Note
1. The loan bears interest at the bank's base rate plus 1 1/4% (9.5% at December
31, 1996 and 10.4% at September 30, 1997) which is payable monthly. Principal
payments are due based upon the reduction in the Borrowing Base, as defined,
initially $16,000,000. The Borrowing Base is redetermined semiannually, based on
certain criteria, and is reduced $200,000 per month. The bank also, at its
discretion, may redetermine the Borrowing Base and the amount by which the
Borrowing Base is

F-48
<PAGE>
CARLTON RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995 AND 1996
(INFORMATION FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1997 IS UNAUDITED)

3. LONG-TERM DEBT (CONTINUED)
reduced each month. Any remaining principal or interest balance is due at
maturity (November 22, 1999). At September 30, 1997, $15,785,000 was outstanding
under the credit agreement. The credit agreement is secured by substantially all
of the Company's assets and requires the Company to meet certain financial
ratios and covenants.

Also on November 22, 1996 the Company entered into a pre-production payment
secured note agreement with an energy services company for borrowings up to
$8,800,000. Proceeds from this borrowing were also used to satisfy the Company's
liability for the purchase of the stock of Magic noted above. The borrowing
bears interest at 16% per annum which is payable monthly. Principal and interest
payments are due in the form of a monthly credit which the energy services
company withholds from monthly gas purchases under a gas supply agreement (see
Note 4). The amount of the credit is $135,000 per month through December 1997
and $310,000 per month thereafter until paid in full in December 2000. The
balance of this borrowing was $8,787,000 at September 30, 1997. The note is
secured by a secondary interest in substantially all of the Company's assets and
requires compliance with certain nonfinancial covenants.

In connection with the above borrowing, a contingent warrant agreement was
executed whereby the energy services company acquires the right, under certain
circumstances explained below, to purchase up to 8,800,000 shares, which would
represent 90% of the shares outstanding, subject to adjustment in certain
circumstances, of the Common Stock of Magic Circle Energy Corporation, a
wholly-owned subsidiary of Carlton through which operations are conducted, at $1
per share, plus an amount equal to 16% per annum from the date of the contingent
warrant agreement to date of exercise. Each warrant share becomes exercisable
for each dollar by which the monthly credit, described above, does not equal the
agreed monthly credit under the note agreement. Under certain conditions the
Company can repurchase the warrant shares at a redemption price of $1.25. At
September 30, 1997, no warrants had been issued.

The Company is not in compliance with certain provisions of the credit
agreement discussed above, related to current ratio, tangible net worth and debt
coverage ratio which also cause the Company not to be in compliance with
provisions of the pre-production payment secured note agreement. Accordingly,
the Company has classified the amounts payable under both agreements as a
current liability in the accompanying balance sheets. Management believes they
will be able to obtain waivers for the noncompliance or refinance the debt.

4. GAS PROCESSING AND SUPPLY CONTRACTS

The Company has a gas processing and compression contract which provides for
compression services to the Company in exchange for certain processing rights to
the processor. The contract provides for the processing of a minimum of 10,000
Mcf's of gas per day for the life of the oil and gas leases of the dedicated
area, as defined. Payment to the processor for compression services is in the
form of condensate and liquid hydrocarbons removed by the processor. Cash
payment for compression services is only required if gas volumes delivered fall
below 8,000 Mcf's per day. The Company does not expect to be required to make
any cash payments.

The Company also has a gas supply agreement with the energy services company
as discussed in Note 3 whereby the Company is required to sell to the energy
services company 10,000 Decatherms of

F-49
<PAGE>
CARLTON RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995 AND 1996
(INFORMATION FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1997 IS UNAUDITED)

4. GAS PROCESSING AND SUPPLY CONTRACTS (CONTINUED)
natural gas per day through October 2000. The energy services company has
options to extend the agreement through October 2004 and has a right of first
refusal on any gas volumes processed at the Company's facilities which exceed
11,000 Decatherms per day. The agreement provides for base volumes to be sold at
the current published index price less $0.01 and less $0.05 for all option
volumes. If the agreement is extended, base and option volumes will be sold at
the current published index price less $0.05.

5. INCOME TAXES

The income tax provisions on income reconciled to the tax computed at the
statutory federal rate were as follows:

<TABLE>
<CAPTION>
PREDECESSOR COMPANY
--------------------------- ------------
YEAR EIGHT MONTHS FOUR MONTHS
ENDED ENDED ENDED
DECEMBER 31, AUGUST 31, DECEMBER 31,
1995 1996 1996
------------ ------------- ------------
<S> <C> <C> <C>
Tax at statutory rate....................................... $2,111,000 $ 2,073,000 $ 118,000
Other....................................................... 178,000 133,000 --
------------ ------------- ------------
$2,289,000 $ 2,206,000 $ 118,000
------------ ------------- ------------
------------ ------------- ------------
</TABLE>

<TABLE>
<S> <C> <C> <C>
The components of the provision (credit) for
income taxes are as follows:
Current....................................... $ 153,000 $ 270,000 $ 418,000
Deferred...................................... 2,136,000 1,936,000 (300,000)
----------- ----------- -----------
Total provision............................... $2,289,000 $2,206,000 $ 118,000
----------- ----------- -----------
----------- ----------- -----------
</TABLE>

F-50
<PAGE>
CARLTON RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995 AND 1996
(INFORMATION FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1997 IS UNAUDITED)

5. INCOME TAXES (CONTINUED)
Significant components of the Company's deferred tax asset and liability are
as follows:

<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------- -------------
DECEMBER 31, DECEMBER 31,
1995 1996
------------- -------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforward........................................ $ 3,291,000 $ --
Investment tax credits................................................. 1,810,000 284,000
Original issue discount................................................ 2,435,000 1,353,000
Other.................................................................. 420,000 452,000
------------- -------------
7,956,000 2,089,000

Deferred tax liabilities:
Pre-acquisition basis difference resulting from debt
restructuring........................................................ 11,375,000 6,951,000
Property and equipment................................................. 2,066,000 15,943,000
------------- -------------
13,441,000 22,894,000
------------- -------------
Net long-term deferred tax liabilities................................... $ 5,485,000 $ 20,805,000
------------- -------------
------------- -------------
</TABLE>

At December 31, 1996, the Company has alternative minimum net operating loss
and investment tax credit carryforwards totaling $437,000 which expire through
the year 2008.

6. CONTINGENCIES

A former officer of the Predecessor who was also a limited partner in
certain of the limited partnership drilling programs sponsored by the
Predecessor has brought two separate actions in which the Company, among others,
is a defendant. The first is an adversary proceeding commenced in 1994 relating
to the bankruptcy proceeding of the Predecessor (which was filed in 1985). This
asserts several causes of actions based upon transfers of properties in 1987 by
the Predecessor pursuant to an order of the Bankruptcy Court to a newly formed
limited partnership for the benefit primarily of the secured lender and other
creditors of the Predecessor. The secured lender and the limited partnerships in
which the plaintiff was a limited partner were joined as additional defendants.
The other action was filed in 1996 in Oklahoma state court alleging breaches of
fiduciary duties, rights to an accounting, breaches of contracts and several
other claims relating to the dissolution of certain of the limited partnerships
in which the plaintiff was a limited partner. The plaintiff has purportedly
brought the actions on behalf of himself and the other limited partners in the
relevant limited partnerships, although the actions have not yet been certified
as class actions. The Company denies all allegations and has filed a motion for
summary judgment. While management cannot predict the outcome of these actions,
management believes that the results will not materially affect the Company's
financial position.

The Company is also a party to routine claims and actions incident to the
ordinary course of its business. Management, after review and consultation with
counsel, believes resolution of such contingencies will not materially affect
the financial position or results of operations of the Company.

F-51
<PAGE>
CARLTON RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995 AND 1996
(INFORMATION FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1997 IS UNAUDITED)

6. CONTINGENCIES (CONTINUED)
The Company is subject to various federal, state and local environmental
laws and regulations and as such is involved in environmental remediation
projects and ongoing compliance. The Company believes they are currently in
substantial compliance with applicable environmental requirements and does not
expect future costs related to known exposures to exceed amounts currently
accrued.

7. LEASES

Future minimum lease payments under noncancelable operating leases as of
December 31, 1996 are as follows:

Total rent expense for the year ended December 31, 1995, the eight months
ended August 31, 1996, and the four months ended December 31, 1996 was $133,000,
$89,000 and $47,000, respectively.

8. EMPLOYEE BENEFIT PLAN

The Company sponsors a 401(k) defined contribution plan which provides
employees the opportunity to defer a percentage, 1 to 15%, of their annual
compensation. Effective January 1, 1997, the Company will match employee
contributions 100% up to 3% of compensation deferred. Employees are vested in
Company matching contributions over a seven-year period. The Company contributed
$6,000 to the plan for the four months ended December 31, 1996. The Predecessor
contributed $31,000 and $5,000 for the year ended December 31, 1995 and the
eight months ending August 31, 1996, respectively.

9. RELATED PARTY TRANSACTIONS

Affiliate receivables represent amounts due from oil and gas partnerships in
which the Company has an interest. The Company pays operating expenses and
drilling costs for certain wells and bills the related parties for their
proportionate share. The amounts due also include the Company's share of
earnings of the partnerships that have not been distributed. Payable to
affiliates represents amounts due to oil and gas partnerships for undistributed
oil and gas receipts.

10. REDEEMABLE PREFERRED STOCK

The Company is authorized to issue preferred stock, in one or more series,
and to designate the preferences of each series. At December 31, 1996 (and
September 30, 1997), the Company had authorized 120 shares of Redeemable
Preferred Stock ("Preferred"), $.01 par value with a stated value of $25,000 per
share; 12 shares were issued and outstanding. The Preferred has no dividend
rights and is redeemable on the third anniversary of issuance, March 29, 1998
(scheduled redemption date), at 150% of the stated value plus shares of common
stock of the Company having an aggregate value of $12,500. The Company may, at
its option, redeem the Preferred prior to the scheduled redemption date at the
same amount required at

F-52
<PAGE>
CARLTON RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995 AND 1996
(INFORMATION FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1997 IS UNAUDITED)

10. REDEEMABLE PREFERRED STOCK (CONTINUED)
the scheduled redemption date, adjusted for the period the Preferred is
outstanding. Should the Company fail to redeem the Preferred at the scheduled
redemption date, the Preferred will convert into promissory notes payable to the
holders of each Preferred share in the amount of $50,000 per share (total of
$600,000 for the 12 shares outstanding) bearing interest at the then current
interest rate and due one year from the date of scheduled redemption. The
Preferred has preference over common shares in the event of liquidation, has no
voting rights and no dividends can be paid on the common stock as long as the
Preferred is outstanding. The carrying value of the Preferred is being accreted
to the redemption value ($600,000) by periodic changes to retained earnings over
the life of the issue.

11. CRUDE OIL AND NATURAL GAS PRODUCING ACTIVITIES

Capitalized costs relating to crude oil and natural gas producing activities
and related accumulated depreciation, depletion and amortization are summarized
as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1995 1996
------------- -------------
<S> <C> <C>
Proved crude oil and natural gas properties.............................. $ 19,350,000 $ 22,732,000
Accumulated depreciation, depletion and amortization..................... 7,293,000 708,000
------------- -------------
$ 12,057,000 $ 22,024,000
------------- -------------
------------- -------------
</TABLE>

Costs incurred in crude oil and natural gas producing activities for the
years ended December 31, 1995 and 1996, are as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1995 1996
------------ ------------
<S> <C> <C>
Acquisition of properties:
Proved.................................................................... $ 4,310,000 $ 512,000
Unproved.................................................................. 100,000 70,000
Exploration costs........................................................... 786,000 86,000
Development costs........................................................... 2,493,000 810,000
</TABLE>

The amortization rates per barrel of oil equivalent produced for the year
ended December 31, 1995 and the eight months ended August 31, 1996 were $3.12
and $2.99, respectively.

MAJOR CUSTOMERS

In the year ended December 31, 1995, approximately $14,126,000 and
$1,783,000 of the Company's gross revenue was from one customer and a second
customer, respectively. Revenue of $8,612,000 was from one customer for the
eight months ended August 31, 1996. For the four months ended December 31, 1996,
$1,108,000, $1,070,000, $1,004,000 and $630,983, respectively, of the Company's
gross revenue was received from four different customers.

The Company believes that the loss of these customers would not have a
significant impact on the Company's results of operations or financial
condition.

F-53
<PAGE>
CARLTON RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995 AND 1996
(INFORMATION FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1997 IS UNAUDITED)

12. SUPPLEMENTARY CRUDE OIL AND NATURAL GAS RESERVE INFORMATION (UNAUDITED)

The Company has interests in crude oil and natural gas properties that are
principally located in Oklahoma and Texas. The Company does not own or lease any
crude oil and natural gas properties outside the United States.

The Company retains independent engineering firms to provide year-end
estimates of the Company's future net recoverable crude oil, and natural gas
reserves. Estimated proved net recoverable reserves as shown below include only
those quantities that can be expected to be commercially recoverable at prices
and costs in effect at the balance sheet dates under existing regulatory
practices and with conventional equipment and operating methods.

Proved developed reserves represent only those reserves expected to be
recovered through existing wells. Proved undeveloped reserves include those
reserves expected to be recovered form new wells on undrilled acreage or from
existing wells on which a relatively major expenditure is required for
recompletion.

Net quantities of proved developed and undeveloped reserves of natural gas
and crude oil, including condensate and natural gas liquids, are provided below.

<TABLE>
<CAPTION>
NATURAL GAS
CRUDE OIL (THOUSAND
(BARRELS) CUBIC FEET)
---------- ------------
<S> <C> <C>
Proved reserves at December 31, 1994............................... 314,000 11,373,000
Purchase of reserves in place...................................... 166,000 6,157,000
Revisions of previous estimates.................................... 209,000 1,203,000
Production......................................................... (113,000) (2,675,000)
---------- ------------
Proved reserves at December 31, 1995............................... 576,000 16,058,000
Purchase of reserves in place...................................... 1,000 5,000
Revisions of previous estimates.................................... 749,000 24,408,000
Production......................................................... (102,000) (2,560,000)
Sales of reserves in place......................................... (50,000) (2,543,000)
---------- ------------
Proved reserves at December 31, 1996............................... 1,174,000 35,368,000
---------- ------------
---------- ------------
Proved developed reserves at December 31, 1995..................... 515,000 14,597,000
---------- ------------
---------- ------------
Proved developed reserves at December 31, 1996..................... 837,000 22,618,000
---------- ------------
---------- ------------
</TABLE>

The following is a summary of a standardized measure of discounted net cash
flows related to the Company's proved crude oil and natural gas reserves. For
these calculations, estimated future cash flows from estimated future production
of proved reserves were computed using crude oil and natural gas prices as of
the end of the period presented. Prices used were $17.70 and $23.62 per barrel
of crude oil at December 31, 1995 and 1996, respectively, and $1.63 and $3.47
per thousand cubic feet of natural gas at December 31, 1995 and 1996,
respectively. Future development and production costs attributable to the proved
reserves were estimated assuming that existing conditions would continue over
the economic lives of the individual leases and costs were not escalated for the
future. Estimated future income tax expenses were calculated by applying future
statutory tax rates (based on the current tax law adjusted for permanent

F-54
<PAGE>
CARLTON RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995 AND 1996
(INFORMATION FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1997 IS UNAUDITED)

12. SUPPLEMENTARY CRUDE OIL AND NATURAL GAS RESERVE INFORMATION (UNAUDITED)
(CONTINUED)
differences and tax credits) to the estimated future pretax net cash flows
related to proved crude oil and natural gas reserves, less the tax basis of the
properties involved.

The Company cautions against using this data to determine the fair value of
its crude oil and natural gas properties. To obtain the best estimate of fair
value of the crude oil and natural gas properties, forecasts of future economic
conditions, varying discount rates, and consideration of other than proved
reserves would have to be incorporated into the calculation. In addition, there
are significant uncertainties inherent in estimating quantities of proved
reserves and in projecting rates of production that impair the usefulness of the
data.

The standardized measure of discounted future net cash flows relating to
proved crude oil and natural gas reserves are summarized as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1995 1996
------------ --------------
<S> <C> <C>
Future cash inflows.............................................. $ 35,893,000 $ 150,401,000
Future production and development costs.......................... 15,726,000 51,946,000
Future income tax expenses....................................... 7,663,000 37,413,000
------------ --------------
Future net cash flows............................................ 12,504,000 61,042,000
10% annual discount for estimated timing of cash flows........... 3,690,000 32,436,000
------------ --------------
Standardized measure of discounted future net cash flows......... $ 8,814,000 $ 28,606,000
------------ --------------
------------ --------------
</TABLE>

The following are the principal sources of change in the standardized
measure of discounted future net cash flows for the years ended December 31,
1995 and 1996:

<TABLE>
<CAPTION>
1995 1996
------------ ------------
<S> <C> <C>
Discounted future net cash flows at the beginning of the year..... $ 5,814,000 $ 8,814,000
Changes during the year:
Sales and transfers of crude oil and natural gas produced, net
of production costs........................................... (3,651,000) (4,326,000)
Net changes in prices and production costs...................... 724,000 16,705,000
Development costs incurred during the period.................... 2,493,000 810,000
Changes in estimated future development costs................... (962,000) (627,000)
Purchases of reserves in place.................................. 5,258,000 2,000
Sales of reserves in place...................................... -- (2,142,000)
Extensions and discoveries, less related costs.................. 4,185,000 1,675,000
Revisions of previous quantity estimates........................ (289,000) 18,203,000
Accretion of discount........................................... 938,000 1,422,000
Net change in income taxes...................................... (1,839,000) (12,131,000)
Changes in production rates (timing) and other.................. (3,857,000) 201,000
------------ ------------
Total changes................................................... $ 3,000,000 $ 19,792,000
------------ ------------
------------ ------------
Discounted future net cash flows at the end of year............... $ 8,814,000 $ 28,606,000
------------ ------------
------------ ------------
</TABLE>

F-55
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFERING
DESCRIBED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR THE UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE
DATE HEREOF.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Forward-Looking Statements................................................ 10
Risk Factors.............................................................. 11
The Company............................................................... 17
Equity Offering........................................................... 17
Use of Proceeds........................................................... 18
Capitalization............................................................ 19
Selected Historical and Pro Forma Financial Information and Operating
Data.................................................................... 20
Management's Discussion and Analysis of Financial Condition and Results of
Operations.............................................................. 31
Business.................................................................. 38
Management................................................................ 50
Security Ownership of Management and Principal and Selling Stockholders... 56
Description of Notes...................................................... 57
Certain Tax Considerations................................................ 87
Description of Capital Stock.............................................. 89
Underwriting.............................................................. 92
Legal Matters............................................................. 92
Experts................................................................... 93
Available Information..................................................... 93
Glossary of Terms......................................................... 94
Index to Consolidated Financial Statements................................ F-1
</TABLE>

Until , 1998 (25 days after the date of this Prospectus), all dealers
effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This delivery requirement is in addition to the obligation of dealers to deliver
a Prospectus when acting as Underwriters and with respect to their unsold
allotments or subscriptions.

$100,000,000

[LOGO]

RAM ENERGY, INC.

% SENIOR NOTES
DUE 2008

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

PROSPECTUS
-----------------

JEFFERIES & COMPANY, INC.

, 1998

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED DECEMBER 18, 1997

PROSPECTUS

[LOGO]
RAM ENERGY, INC.

COMMON STOCK
-------------------

RAM ENERGY, INC. IS OFFERING 2,300,000 SHARES, AND CERTAIN SELLING
STOCKHOLDERS (THE "SELLING STOCKHOLDERS") ARE
OFFERING 900,000 SHARES, OF COMMON STOCK, PAR VALUE $.01 PER SHARE ("COMMON
STOCK"), OF RAM ENERGY, INC. (THE "EQUITY OFFERING"). CONCURRENTLY WITH THE
EQUITY OFFERING, RAM ENERGY, INC. IS OFFERING $100.0 MILLION OF % SENIOR
NOTES DUE , 2008 (THE "NOTES") PURSUANT TO A SEPARATE PROSPECTUS
(THE "DEBT OFFERING" AND, TOGETHER WITH THE EQUITY OFFERING, THE "OFFERINGS").
THE CLOSINGS OF THE DEBT OFFERING AND THE EQUITY OFFERING ARE EACH CONDITIONED
UPON THE SIMULTANEOUS CLOSING OF THE OTHER AND UPON THE SIMULTANEOUS CLOSING OF
THE CARLTON ACQUISITION.

RAM ENERGY, INC. INTENDS TO FILE AN APPLICATION FOR QUOTATION OF THE COMMON
STOCK ON THE NASDAQ NATIONAL MARKET UNDER THE SYMBOL "RAME." PRIOR TO THE EQUITY
OFFERING, THERE HAS BEEN NO PUBLIC MARKET FOR THE COMMON STOCK. IT IS ESTIMATED
THAT THE INITIAL PUBLIC OFFERING PRICE WILL BE IN THE RANGE OF $ TO $
PER SHARE. SEE "UNDERWRITING" FOR A DISCUSSION OF THE FACTORS TO BE CONSIDERED
IN DETERMINING THE INITIAL PUBLIC OFFERING PRICE.

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

SEE "RISK FACTORS" BEGINNING ON PAGE FOR A DISCUSSION OF MATERIAL RISKS THAT
SHOULD BE CONSIDERED BY POTENTIAL INVESTORS.

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

<TABLE>
<CAPTION>
PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNT(1) COMPANY(2) STOCKHOLDERS
--------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
Per Share............................ $ $ $ $
Total(3)............................. $ $ $ $
</TABLE>

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

(1) RAM Energy, Inc. and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."

(2) Before deducting expenses payable by RAM Energy, Inc. estimated to be
$ .

(3) RAM Energy, Inc. has granted the Underwriters a 30-day option to purchase up
to an additional 480,000 shares of Common Stock on the same terms and
conditions as set forth above, solely to cover over-allotments, if any. If
the Underwriters exercise such option in full, the total Price to Public,
Underwriting Discount, Proceeds to Company and Proceeds to Selling
Stockholders will be $ , $ , $ and $ , respectively. See
"Underwriting."

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

THE SHARES OF COMMON STOCK ARE OFFERED BY THE UNDERWRITERS, SUBJECT TO PRIOR
SALE, WHEN, AS AND IF ISSUED TO AND ACCEPTED BY THE UNDERWRITERS. THE
UNDERWRITERS RESERVE THE RIGHT TO REJECT ORDERS IN WHOLE OR IN PART. IT IS
EXPECTED THAT DELIVERY OF THE SHARES OF COMMON STOCK WILL BE MADE AGAINST
PAYMENT THEREFOR IN NEW YORK, NEW YORK ON OR ABOUT , 1998.

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

JEFFERIES & COMPANY, INC. GAINES, BERLAND INC.

, 1998
E-1
<PAGE>
RAM ENERGY -- PRINCIPAL OPERATING AREAS

[MAP]

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

CERTAIN PERSONS PARTICIPATING IN THE EQUITY OFFERING MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE MARKET PRICE OF
THE COMMON STOCK, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING
TRANSACTIONS IN THE COMMON STOCK, AND THE IMPOSITION OF A PENALTY BID, IN
CONNECTION WITH THE EQUITY OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."

E-2
<PAGE>
THE EQUITY OFFERING

<TABLE>
<S> <C>
COMMON STOCK OFFERED BY THE
COMPANY......................... 2,300,000 shares

COMMON STOCK OFFERED BY THE
SELLING STOCKHOLDERS............ 900,000 shares

COMMON STOCK OUTSTANDING:

BEFORE THE EQUITY OFFERING...... 2,727,000 shares

AFTER THE EQUITY OFFERING....... 5,027,000 shares

DEBT OFFERING..................... Concurrently with the Equity Offering, RAM Energy, Inc.
is offering $100.0 million of % Senior Notes due 2008
for sale to the public. The closings of the Equity
Offering and the Debt Offering are each conditioned upon
the simultaneous closing of the other and upon the
simultaneous closing of the Carlton Acquisition. See
"Debt Offering" and "Description of Notes."

PROPOSED NASDAQ NATIONAL MARKET
SYMBOL.......................... RAME
</TABLE>

E-3
<PAGE>
RISK FACTORS

IN ADDITION TO THE OTHER INFORMATION SET FORTH ELSEWHERE IN THIS PROSPECTUS,
THE FOLLOWING FACTORS RELATING TO THE COMPANY AND THE EQUITY OFFERING SHOULD BE
CONSIDERED WHEN EVALUATING AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY.

INCURRENCE OF SUBSTANTIAL INDEBTEDNESS

At September 30, 1997, on a pro forma basis, RAM Energy, Inc. and the
Subsidiary Guarantors would have had approximately $100.2 million of
indebtedness (including current maturities of long-term indebtedness) as
compared to the Company's stockholders' equity of $21.0 million. See "Debt
Offering," "Use of Proceeds" and "Capitalization." The Indenture may limit the
amounts of borrowings under secured bank facilities, including the Credit
Facility. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources" and "Description of
Notes."

This level of indebtedness may pose substantial risks to stockholders,
including the possibility that the Company might not generate sufficient cash
flow to pay the principal of and interest on its indebtedness, including the
Notes. If the Company is unsuccessful in increasing its proved reserves, the
future net revenues from existing proved reserves may not be sufficient to pay
the principal of and interest on its indebtedness, including the Notes, in
accordance with the terms of any such indebtedness. Such indebtedness may also
adversely affect the Company's ability to finance its future operations and
capital needs, and may limit its ability to pursue other business opportunities.

The Indenture and the instruments governing the Credit Facility impose
significant operating and financial restrictions on the Company. Such
restrictions will affect, and in many respects significantly limit or prohibit,
among other things, the ability of the Company to incur additional indebtedness,
pay dividends, repay indebtedness prior to its stated maturity, sell assets or
engage in mergers or acquisitions. These restrictions could also limit the
ability of the Company to effect future financings, make needed capital
expenditures, withstand a future downturn in the Company's business or the
economy in general, or otherwise conduct necessary corporate activities. A
failure by the Company to comply with these restrictions could lead to a default
under the terms of such indebtedness, including the Notes. In the event of
default, the holders of such indebtedness could elect to declare all of the
funds borrowed pursuant thereto to be due and payable together with accrued and
unpaid interest. In such event, there can be no assurance that the Company would
be able to make such payments or borrow sufficient funds from alternative
sources to make any such payment. Even if additional financing could be
obtained, there can be no assurance that it would be on terms that are favorable
or acceptable to the Company. In addition, the Company's indebtedness under the
Credit Facility is secured by a substantial portion of the assets of RAM Energy,
Inc. and the Subsidiary Guarantors. The pledge of such collateral to existing
lenders could impair the Company's ability to obtain favorable financing. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

SUBSTANTIAL CAPITAL REQUIREMENTS

E-4
<PAGE>
availability under the Credit Facility are not sufficient to satisfy its capital
expenditure requirements, there can be no assurance that additional debt or
equity financing will be available to meet these requirements.

ADDITIONS AND DEVELOPMENT OF RESERVES

The Company's future success depends upon its ability to find, develop or
acquire additional oil and gas reserves that are economically recoverable.
Unless the Company successfully replaces the reserves that it produces (through
successful development, exploration or acquisition), the Company's proved
reserves will decline. There can be no assurance that the Company will continue
to be successful in its effort to increase or replace its proved reserves.
Approximately 30% of the PV-10 Value of the Company's total proved reserves at
November 30, 1997, on a pro forma basis, was attributable to undeveloped
reserves. Recovery of such reserves will require significant capital
expenditures and successful drilling operations. There can be no certainty
regarding the results of developing these reserves. To the extent the Company is
unsuccessful in replacing or expanding its estimated proved reserves, the
Company may be unable to pay the principal of and interest on its indebtedness,
including the Notes, in accordance with the terms of any such indebtedness, or
otherwise to satisfy certain of its covenants contained in the Indenture or the
instruments governing the Credit Facility. See "Description of Notes -- Certain
Covenants."

ACQUISITION RISKS

PRICE FLUCTUATIONS

The Company's revenues, profitability and future rate of growth are
substantially dependent upon prevailing prices for oil and gas and natural gas
liquids, which are dependent upon numerous factors such as weather, economic,
political and regulatory developments and competition from other sources of
energy. The Company is affected more by fluctuations in natural gas prices than
oil prices, because a majority of its production is natural gas. The volatile
nature of the energy markets and the unpredictability of actions of OPEC members
make it particularly difficult to estimate future prices of oil and gas and
natural gas liquids. Prices of oil and gas and natural gas liquids are subject
to wide fluctuations in response to relatively minor changes in circumstances,
and there can be no assurance that future prolonged decreases in such prices
will not occur. All of these factors are beyond the control of the Company. Any
significant decline in oil and gas prices would have a material adverse effect
on the Company's results of operations and financial condition. Although the
Company may enter into hedging arrangements from time to time to reduce its
exposure to price risks in the sale of its oil and gas, the Company's hedging
arrangements are likely to apply to only a portion of its production and provide
only limited price protection against fluctuations in the oil and gas markets.
See "Business -- Oil and Gas Marketing and Hedging."

WRITEDOWN OF CARRYING VALUES

E-5
<PAGE>
may not exceed the present value of estimated future net revenues from proved
reserves, discounted at 10%. Application of this "ceiling" test generally
requires pricing future revenue at the unescalated prices in effect as of the
end of each fiscal quarter and requires a write-down for accounting purposes if
the ceiling is exceeded, even if prices were depressed for only a short period
of time. The Company may be required to write down the carrying value of its oil
and gas properties when oil and gas prices are depressed or unusually volatile,
which would result in a charge to earnings. Once incurred, a write-down of oil
and gas properties is not reversible at a later date.

UNCERTAINTY OF ESTIMATES OF OIL AND GAS RESERVES

DRILLING AND OPERATING RISKS

The Company's properties may be susceptible to hydrocarbon drainage from
production by other operators on adjacent properties. Industry operating risks
include the risk of fire, explosions, blow-outs, pipe failure, abnormally
pressured formations and environmental hazards such as oil spills, gas leaks,
ruptures or discharges of toxic gases, the occurrence of any of which could
result in substantial losses to the Company due to injury or loss of life,
severe damage to or destruction of property, natural resources and equipment,
pollution or other environmental damage, clean-up responsibilities, regulatory
investigation and penalties and suspension of operations. In accordance with
customary industry practice, the Company maintains insurance against some, but
not all, of the risks described above. There can be no assurance that any
insurance will be adequate to cover losses or liabilities. The Company cannot
predict the continued availability of insurance, or its availability at premium
levels that justify its purchase.

RISKS RELATING TO INJECTION WELLS

E-6
<PAGE>
remediation of the affected resource, and liability to third parties for
property damages and personal injuries. In addition, the sale by the Company of
residual crude oil collected as part of the saltwater injection process could
impose liability on the Company in the event the entity to which the oil was
transferred fails to manage the material in accordance with applicable
environmental health and safety laws.

MARKETABILITY OF PRODUCTION

GOVERNMENTAL REGULATION

ENVIRONMENTAL RISKS

COMPETITION

E-7
<PAGE>
CONTROL BY CERTAIN STOCKHOLDERS

IMMEDIATE AND SUBSTANTIAL DILUTION

A purchaser of the Common Stock in the Equity Offering will experience an
immediate and substantial dilution in the net tangible book value per share of
the Common Stock.

DIVIDEND POLICY

The Company has never paid cash dividends on the Common Stock and does not
anticipate that cash dividends will be paid in the foreseeable future.
Furthermore, certain provisions of the Credit Facility and the Indenture
relating to the Notes will restrict the Company's ability to pay cash dividends
on the Common Stock. The Company currently intends to retain any future earnings
to finance the expansion and continuing development of the Company's business.
The declaration and payment in the future of any cash dividends will be at the
election of the Company's Board of Directors and will depend upon the earnings,
capital requirements and financial position of the Company, future loan
covenants, general economic conditions and other pertinent factors. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and "Description of Notes."

ABSENCE OF PRIOR PUBLIC MARKET FOR COMMON STOCK AND DETERMINATION OF INITIAL
PUBLIC OFFERING PRICE

Prior to the Equity Offering, there has been no public market for the Common
Stock. Although RAM Energy, Inc. intends to file an application for quotation of
the Common Stock on the Nasdaq National Market, there can be no assurance that
an active trading market will develop or continue upon completion of the Equity
Offering. The initial public offering price of the Common Stock will be
determined by negotiations among RAM Energy, Inc. and the representatives of the
Underwriters (the "Representatives") and may not be indicative of the market
price of the Common Stock after the Equity Offering. For a discussion of the
factors to be considered in determining the initial public offering price, see
"Underwriting." The market price of the Common Stock could be subject to
significant fluctuations in response to variations in quarterly and yearly
operating results, the success of the Company's business strategy, general
trends in the oil and gas industry, competition, changes in federal regulations
affecting the Company or the oil and gas industry and other factors. In
addition, the stock market in recent years has experienced extreme price and
volume fluctuations that have often been unrelated or disproportionate to the
operating performance of affected companies. These broad fluctuations may
adversely affect the market price of the Common Stock.

POTENTIAL EFFECT OF SHARES ELIGIBLE FOR FUTURE SALE ON PRICE OF COMMON STOCK

Upon completion of the Equity Offering, the Company will have outstanding
5,027,000 shares of Common Stock. The 3,200,000 shares sold in the Equity
Offering (plus any additional shares sold upon exercise of the Underwriters'
over-allotment option) will be freely tradeable in the public market without
restriction or further registration under the Securities Act, except for shares
purchased by affiliates of the Company. The Company, and all executive officers,
directors and current stockholders of the Company, all

E-8
<PAGE>
of whom together will beneficially own approximately 36% of the Common Stock
following the Equity Offering, have entered into agreements (the "Lock-up
Agreements") providing that they will not offer for sale, sell or otherwise
dispose of any shares of Common Stock or any securities convertible into or
exchangeable for shares of Common Stock for a period of 180 days after the date
of this Prospectus, without the prior written consent of Jefferies & Company,
Inc. Commencing 90 days after the consummation of the Equity Offering,
stockholders who have received restricted securities and are not subject to a
Lock-up Agreement may sell shares of Common Stock under Rule 144 of the
Securities Act, provided that such stockholders satisfy the requirements of such
rule. The Company has adopted the 1998 Stock Incentive Plan (the "Plan") and
reserved 550,000 shares of Common Stock for issuance to employees of the Company
under the Plan. Shares of Common Stock issued pursuant to options may be subject
to a Lock-up Agreement or Rule 144, or both. The Company intends to register
under the Securities Act the shares issuable upon the exercise of options
granted under the Plan and, upon such registration, such shares will be eligible
for resale in the public market, except that any such shares issued to
affiliates are subject to the volume limitations and other restrictions of Rule
144.

Prior to the Equity Offering, there has been no public market for Common
Stock, and no prediction can be made as to the effect, if any, that the sale of
shares or the availability of shares for sale will have on the market price of
the Common Stock prevailing from time to time. Nevertheless, sales of
substantial amounts of the Common Stock in the public market could adversely
affect prevailing market prices and the ability of the Company to raise equity
capital in the future. See "Shares Eligible for Future Sale" and "Underwriting."

ANTI-TAKEOVER EFFECT OF CERTAIN PROVISIONS

The Company's Certificate of Incorporation and Bylaws contain certain
provisions that may have the effect of discouraging potential unsolicited offers
or other efforts to obtain control of the Company that are not approved by the
Board. Upon a change of control of RAM Energy, Inc., holders of the Notes will
have the right to require RAM Energy, Inc. to repurchase the Notes at a price
equal to 101% of the aggregate principal amount thereof, together with accrued
and unpaid interest to the date of repurchase. Such provisions may adversely
affect the market price of the Common Stock and may also deprive the
stockholders of opportunities to sell shares of Common Stock at prices higher
than prevailing market prices. The Company's Certificate of Incorporation also
provides for a classified Board with only one-third of the Board standing for
election each year. A classified Board could have the effect of making the
removal of incumbent directors more time-consuming and, therefore, discouraging
a third party from making a tender offer or otherwise attempting to obtain
control of the Company, even though such an attempt might be beneficial to the
Company and its stockholders. The Board will also have the authority, without
further action by the stockholders, to issue up to 5,000,000 shares of the
Company's preferred stock in one or more series and to fix the rights,
preferences, privileges and restrictions thereof, and to issue over 9,400,000
additional shares of Common Stock after the Equity Offering. The issuance of the
Company's preferred stock or additional shares of Common Stock could adversely
affect the voting power of the purchasers of Common Stock in the Equity Offering
and could have the effect of delaying, deferring or preventing a change in
control of the Company. See "Description of Capital Stock -- Anti-takeover
Provisions."

E-9
<PAGE>
DEBT OFFERING

Concurrently with the Equity Offering, RAM Energy, Inc. is offering $100.0
million of % Senior Notes due 2008 to the public. The Indenture (as defined
herein) relating to the Notes will contain certain covenants, including, but not
limited to, covenants that limit (i) incurrence of additional indebtedness and
issuances of disqualified capital stock, (ii) restricted payments, (iii)
dividend and other payments affecting subsidiaries, (iv) transactions with
affiliates, (v) asset sales, (vi) liens, (vii) lines of business and (viii)
merger, sale or consolidation. The Indenture also will contain covenants
regarding the designation of Unrestricted Subsidiaries (as defined in the
Indenture), ownership of Subsidiary Guarantors (as defined in the Indenture) and
issuance of reports. The closings of the Equity Offering and the Debt Offering
are each conditioned upon the simultaneous closing of the other and upon the
simultaneous closing of the Carlton Acquisition. See "Description of Notes."

E-10
<PAGE>
USE OF PROCEEDS

The net proceeds to RAM Energy, Inc. from the issuance and sale of the
shares of Common Stock offered hereby, after deducting the underwriting discount
and expenses of the Equity Offering payable by RAM Energy, Inc., are estimated
to be $22.5 million ($27.4 million if the Underwriters' over-allotment option is
exercised in full), assuming an offering price of $ per share. The net
proceeds to RAM Energy, Inc. from the sale of the Notes offered by RAM Energy,
Inc. pursuant to the Debt Offering, after deducting the underwriting discount
and expenses of the Debt Offering, are estimated to be $96.5 million.

The following table illustrates the sources and uses of the net proceeds to
the Company, as estimated by the Company's management, in connection with the
Offerings:

<TABLE>
<S> <C> <C> <C>
SOURCES OF FUNDS USES OF FUNDS
(DOLLARS IN THOUSANDS)

Debt Offering............................ $ 96,500 Carlton Acquisition(1)................... $ 43,000
Equity Offering.......................... 22,530 Repayment of existing debt(2)............ 62,000
Working capital.......................... 14,030
------------- ----------
Total sources of funds................. $ 119,030 Total uses of funds...................... $ 119,030
------------- ----------
------------- ----------
</TABLE>

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

(2) Consists of a $62.0 million principal balance under the Credit Facility.
Advances under the Credit Facility were used to complete the Partnership
Acquisition and other acquisitions and bear interest at varying rates for
which the weighted average at November 30, 1997 was 8.6%. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources."

DIVIDEND POLICY

The Company has never paid cash dividends on the Common Stock or its
preferred stock and does not anticipate that cash dividends will be paid in the
foreseeable future. Furthermore, certain provisions of the Credit Facility and
the Indenture relating to the Notes will restrict the Company's ability to pay
dividends (other than dividends payable solely in qualified Common Stock) on the
Common Stock, or to redeem for value any such shares. The Company currently
intends to retain any future earnings to finance the expansion and continuing
development of the Company's business. The declaration and payment in the future
of any cash dividends will be at the election of the Company's Board of
Directors and will depend upon the earnings, capital requirements and financial
position of the Company, future loan covenants, general economic conditions and
other pertinent factors. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources" and
"Description of Notes."

E-11
<PAGE>
DESCRIPTION OF NOTES

Concurrently with the Equity Offering, RAM Energy, Inc. is offering $100.0
million aggregate principal amount of the Notes pursuant to the Debt Offering.
The following is a summary of certain terms of the Notes and is qualified in its
entirety by reference to the Indenture (the "Indenture") relating to the Notes.
A copy of the proposed form of Indenture has been filed with the Securities and
Exchange Commission and is available as set forth under "Available Information."

The Notes mature on , 2008, and bear interest at the rate of %
per annum payable semiannually. The Notes are redeemable at the option of RAM
Energy, Inc., in whole or in part, at any time on or after , 2003, at
a premium declining ratably to par on or after , 2005, together with
accrued and unpaid interest to the date of redemption. In the event RAM Energy,
Inc. consummates a Public Equity Offering (as defined in the Indenture) on or
prior to , 2001, RAM Energy, Inc. may at its option use all or a
portion of the proceeds from such offering to redeem up to $ million
principal amount of the Notes at a redemption price equal to % of the
aggregate principal thereof, together with accrued and unpaid interest to the
date of redemption, provided that at least $ million in aggregate principal
amount of the Notes remain outstanding immediately after such redemption.

Upon the occurrence of a Change in Control (as defined in the Indenture),
RAM Energy, Inc. will be required to repurchase all Notes tendered to it
pursuant thereto at a price equal to 101% of the aggregate principal amount
thereof, together with accrued and unpaid interest to the date of repurchase.

The Notes will be unconditionally guaranteed on a senior unsecured basis by
each of the existing and future Subsidiary Guarantors (as defined in the
Indenture), and such subsidiary guarantees will rank PARI PASSU in right of
payment with all existing and future senior Indebtedness of the Subsidiary
Guarantors and senior to all existing and future Subordinated Indebtedness (as
defined in the Indenture) of the Subsidiary Guarantors. The subsidiary
guarantees may be released under certain circumstances.

The Notes will be senior unsecured obligations of RAM Energy, Inc., ranking
PARI PASSU in right of payment with all existing and future senior Indebtedness
of the Company and senior in right of payment to all existing and future
Subordinated Indebtedness of the Company. The Notes and the subsidiary
guarantees will be effectively subordinated to secured indebtedness of RAM
Energy, Inc. and the Subsidiary Guarantors, including any indebtedness under the
Credit Facility, which is secured by liens on substantially all of the Company's
oil and gas reserves, wells, related personal property and contract rights.
Subject to certain limitations, the Company, including the Subsidiary
Guarantors, may incur additional Indebtedness in the future.

The Indenture will contain certain covenants, including, but not limited to,
covenants that limit (i) incurrence of additional indebtedness and issuance of
disqualified capital stock, (ii) restricted payments, (iii) dividend and other
payments affecting subsidiaries, (iv) transactions with affiliates, (v) assets
sales, (vi) liens, (vii) lines of business and (viii) merger, sale or
consolidation. The closings of the Equity Offering and the Debt Offering are
each conditioned upon the simultaneous closing of the other and upon the
simultaneous closing of the Carlton Acquisition.

E-12
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE

Immediately upon completion of the Equity Offering, the Company will have
outstanding 5,027,000 shares of Common Stock. An aggregate of 550,000 shares has
been reserved for issuance upon the exercise of options and rights which may be
granted in the future under the Plan. Additionally, the Company will have
9,423,000 shares of Common Stock available for issuance at such times and upon
such terms as may be approved by its Board of Directors. Prior to the Equity
Offering, there has been no market for the Common Stock and no prediction can be
made as to the effect, if any, that future sales or the availability of shares
for sale will have on the market price of the Common Stock prevailing from time
to time. Nevertheless, sales of substantial amounts of Common Stock in the
public market could adversely affect the prevailing market price of the Common
Stock and could impair the Company's ability to raise capital through sales of
its equity securities.

The shares of Common Stock sold in the Equity Offering will be immediately
eligible for resale in the public market without restriction or further
registration under the Securities Act, except for any shares purchased by an
"affiliate" (as that term is defined under the Securities Act) of the Company,
which will be subject to the resale limitations of Rule 144 promulgated under
the Securities Act. In addition, shares of Common Stock (the
"Restricted Shares") are held by executive officers and directors of the Company
and affiliates of the Company and may be sold after the Equity Offering pursuant
to Rule 144 of the Securities Act, subject to the contractual restrictions
described below.

In general, under Rule 144, as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned Restricted Shares for at
least one year, including an affiliate, is entitled to sell within any
three-month period, a number of shares that does not exceed the greater of (i)
1% of the then outstanding shares of Common Stock, or (ii) an amount equal to
the average weekly reported volume of trading in such shares during the four
calendar weeks preceding the date on which notice of such sale is filed with the
Commission. Sales under Rule 144 are also subject to certain manner of sale
limitations, notice requirements and the availability of current public
information about the Company. Restricted Shares properly sold in reliance on
Rule 144 are thereafter freely tradeable without restrictions or registration
under the Securities Act, unless thereafter held by an affiliate of the Company.
In addition, affiliates of the Company must comply with the restrictions and
requirements of Rule 144, other than the one-year holding period requirement, in
order to sell shares of Common Stock which are not Restricted Shares (such as
shares of Common Stock acquired by affiliates of the Company in the Equity
Offering). As defined in Rule 144, an "affiliate" of an issuer is a person that
directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, such issuer. If two years have
elapsed since the later of the date of any acquisition of Restricted Shares from
the Company or from any affiliate of the Company, and the acquiror or subsequent
holder thereof is deemed not to have been an affiliate of the Company at any
time during the 90 days preceding a sale, such person would be entitled to sell
such shares in the public market pursuant to Rule 144(k) without regard to
volume limitations, manner of sale restrictions, or public information or notice
requirements.

Except for shares of Common Stock sold pursuant to this Equity Offering, all
of the Company's existing stockholders, executive officers and directors have
agreed not to offer for sale, sell or otherwise dispose of any shares of Common
Stock or any securities convertible into or exchangeable for shares of Common
Stock for a period of 180 days from the date of this Prospectus, without the
prior written consent of Jefferies & Company, Inc. After such 180-day period,
shares of Common Stock held by current stockholders will be eligible for sale in
the open market only pursuant to an effective registration statement under the
Securities Act or upon satisfaction of the applicable holding period
requirements of Rule 144. The Company has agreed not to offer for sale, sell or
otherwise dispose of any shares of Common Stock or any securities convertible
into or exhangeable for shares of Common Stock for a period of 180 days from the
date of this Prospectus, without the prior written consent of Jefferies &
Company, Inc., except that during such period shares of Common Stock may be
issued upon the exercise of outstanding stock options and the Company may issue
employee stock options which are exercisable 180 days after the date of this
Prospectus. See "Description of Capital Stock" and "Underwriting."

E-13
<PAGE>
UNDERWRITING

Subject to the terms and conditions set forth in the Underwriting Agreement,
RAM Energy, Inc. and the Selling Stockholders have agreed to sell to the
Underwriters named below (the "Underwriters"), for whom Jefferies & Company,
Inc. and Gaines, Berland Inc. are acting as the representatives (the
"Representatives"), and the Underwriters have severally agreed to purchase, the
number of shares of Common Stock set forth opposite their respective names in
the table below at the public offering price less the underwriting discount set
forth on the cover page of this Prospectus:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
- --------------------------------------------------------------------------------- ----------
<S> <C>
Jefferies & Company, Inc.........................................................
Gaines, Berland Inc..............................................................
----------
Total.......................................................................... 3,200,000
----------
----------
</TABLE>

The Underwriting Agreement provides that the obligation of the Underwriters
to purchase the shares of Common Stock offered hereby is subject to certain
conditions, including the closings of the Debt Offering and the Carlton
Acquisition. The Underwriters are committed to purchase all of the shares of
Common Stock offered hereby (other than those covered by the over-allotment
option described below), if any are purchased.

The Underwriters propose to offer the shares of Common Stock to the public
initially at the public offering price set forth on the cover page of this
Prospectus and to certain dealers at such price less a concession not in excess
of $ per share. The Underwriters may allow, and such dealers may reallow, a
discount not in excess of $ per share to certain other dealers. After the
public offering of the shares of Common Stock, the public offering price, the
concession to selected dealers and the reallowance to other dealers may be
changed by the Representatives.

RAM Energy, Inc. has granted the Underwriters an option, exercisable for 30
days from the date of this Prospectus, to purchase up to 480,000 additional
shares of Common Stock at the public offering price, less the underwriting
discount. To the extent such option is exercised, each Underwriter will become
obligated, subject to certain conditions, to purchase additional shares of
Common Stock proportionate to such Underwriter's initial commitment as indicated
in the preceding table. The Underwriters may exercise such right of purchase
only for the purpose of covering over-allotments, if any, made in connection
with the shares of Common Stock offered hereby.

Except for shares of Common Stock sold by the Selling Stockholders, the
Company and all executive officers, directors and current stockholders of the
Company have agreed not to offer for sale, sell or otherwise dispose of any
shares of Common Stock or any securities convertible into or exchangeable for
shares of Common Stock for a period of 180 days from the date of this
Prospectus, without the prior written consent of Jefferies & Company, Inc.

The Representatives have advised the Company and the Selling Stockholders
that they do not expect the Underwriters to confirm sales of shares of Common
Stock offered by this Prospectus to any accounts over which they exercise
discretionary authority.

The closing of the Equity Offering is conditioned upon the simultaneous
closings of the Debt Offering and the Carlton Acquisition.

RAM Energy, Inc. and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities that may be incurred in connection with
the Equity Offering, including liabilities under the Securities Act, or to
contribute to payments that the Underwriters may be required to make in respect
thereof.

E-14
<PAGE>
Prior to the Equity Offering, there has been no public trading market for
the shares of Common Stock, and there can be no assurance that an active trading
market will develop or be sustained upon the completion of the Equity Offering.
The initial public offering price of the shares of Common Stock will be
determined by negotiations among RAM Energy, Inc. and the Representatives. Among
the principal factors that will be considered in determining such public
offering price will be the history of and the prospects for the industry in
which the Company competes, an assessment of the Company's management, the past
and present operations of the Company, the past and present earnings of the
Company and the trend of its earnings, the general condition of the securities
markets at the time of the Offerings, the price-earning ratios and market prices
of publicly-traded securities of companies that the Company and the
Representatives believe to be comparable to the Company, and other factors
deemed to be relevant.

In order to facilitate the offering of the Common Stock, the Underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the Common Stock. Specifically, the Underwriters may over-allot in
connection with the Equity Offering, creating a short position in the Common
Stock for their own account. In addition, to cover over-allotments or to
stabilize the price of the Common Stock, the Underwriters may bid for, and
purchase, the Common Stock in the open market. Finally, the underwriting
syndicate may reclaim selling concessions allowed to an Underwriter or a dealer
in distributing the Common Stock in the Equity Offering, if the syndicate
repurchases previously distributed shares of Common Stock in transactions to
cover syndicate short positions, in stabilization transactions or otherwise. Any
of these activities may stabilize or maintain the market price of the Common
Stock above independent market levels. The Underwriters are not required to
engage in these activities and may end any of these activities at any time.

Jefferies & Company, Inc. is serving as the underwriter for purposes of the
Debt Offering and will receive customary compensation for such services
consisting of the underwriting discount.

In connection with the closing of the Equity Offering, Energy Spectrum
Advisors will receive a finder's fee equal to $100,000 payable from the
underwriting discount otherwise payable to the Underwriters. In connection with
the closing of the Debt Offering, Energy Spectrum Advisors will receive a
finder's fee equal to $100,000 payable from the underwriting discount otherwise
payable to the underwriter.

E-15
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFERING
DESCRIBED IN THIS PROSPECTUS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER
OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................
Forward-Looking Statements................................................
Risk Factors..............................................................
The Company...............................................................
Debt Offering.............................................................
Use of Proceeds...........................................................
Dividend Policy...........................................................
Capitalization............................................................
Selected Historical and Pro Forma Financial Information and Operating
Data....................................................................
Management's Discussion and Analysis of Financial Condition and Results of
Operations..............................................................
Business..................................................................
Management................................................................
Security Ownership of Management and Principal and Selling Stockholders...
Description of Capital Stock..............................................
Description of Notes......................................................
Shares Eligible for Future Sale...........................................
Underwriting..............................................................
Legal Matters.............................................................
Experts...................................................................
Available Information.....................................................
Glossary of Term..........................................................
Index to Consolidated Financial Statements................................
</TABLE>

Until , 1998 (25 days after the date of this Prospectus), all
dealers effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.This
delivery requirement is in addition to the obligation of dealers to deliver a
Prospectus when acting as Underwriters and with respect to their unsold
allotments or subscriptions.

3,200,000 SHARES

[LOGO]

RAM ENERGY, INC.

COMMON STOCK

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

PROSPECTUS

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

JEFFERIES & COMPANY, INC.

GAINES, BERLAND INC.

, 1998

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

E-16
<PAGE>
PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

Set forth below is an itemization of the costs expected to be incurred in
connection with the offer and sale of the securities registered hereby. With the
exception of the Securities Act and NASD fees, all amounts are estimates.

<TABLE>
<S> <C>
Securities Act Registration Fee................................... $ 42,528
NASD Filing Fee................................................... 14,916
Printing and Engraving Expenses................................... *
Legal Fees and Expenses........................................... *
Accounting Fees and Expenses...................................... *
Independent Petroleum Engineer Fees............................... *
Transfer Agent Fees............................................... *
Fees of Indenture Trustee......................................... 7,500
Miscellaneous..................................................... *
---------
Total......................................................... $ *
---------
---------
</TABLE>

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

* To be completed by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The General Corporation Law of Delaware, under which the Registrant is
incorporated, permits indemnification against expenses, including attorneys'
fees, actually and reasonably incurred by such persons in connection with the
defense of any action, suit or proceeding in which such a person is a party by
reason of his being or having been a director, employee or agent of the
Registrant, or of any corporation, partnership, joint venture, trust or other
enterprise in which he served as such at the request of the Registrant, provided
that he acted in good faith and in a manner reasonably believed to be in or not
opposed to the best interests of the corporation, and with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful, and provided further (if the threatened, pending or completed
action or suit is by or in the right of the corporation) that he shall not have
been adjudged to be liable for negligence or misconduct in the performance of
his duty to the corporation (unless the court determines that indemnity would
nevertheless be proper under the circumstances). Article VIII of the
Registrant's Certificate of Incorporation and Article VII of the Registrant's
Bylaws provide for indemnification of the Registrant's directors and officers.
The Delaware General Corporation Law also permits the Registrant to purchase and
maintain insurance on behalf of the Registrant's directors and officers against
any liability arising out of their status as such, whether or not Registrant
would have the power to indemnify them against such liability. These provisions
may be sufficiently broad to indemnify such persons for liabilities arising
under the Securities Act of 1933 (the "Securities Act").

The Company has entered into indemnity agreements with each of its directors
and executive officers. Under each indemnity agreement, the Company will pay on
behalf of the indemnitee, and his executors, administrators and heirs, any
amount which he is or becomes legally obligated to pay because of (i) any claim
or claims from time to time threatened or made against him by any person because
of any act or omission or neglect or breach of duty, including any actual or
alleged error or misstatement or misleading statement, which he commits or
suffers while acting in his capacity as a director and/or officer of the Company
or an affiliate or (ii) being a party, or being threatened to be made a party,
to any threatened, pending or contemplated action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that he
is or was an officer, director, employee or agent of the Company or an affiliate

II-1
<PAGE>
or is or was serving at the request of the Company as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise. The payments which the Registrant will be obligated to make
hereunder shall include, INTER ALIA, damages, charges, judgments, fines,
penalties, settlements and costs, cost of investigation and cost of defense of
legal, equitable or criminal actions, claims or proceedings and appeals
therefrom, and costs of attachment, supersedeas, bail, surety or other bonds.
The Company also provides liability insurance for each of its directors and
executive officers.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

None.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits

<TABLE>
<C> <S> <C>
1 -- Form of Underwriting Agreement*
2 -- Stock Purchase Agreement dated December 16, 1997 among Rolf N. Hufnagel and
Robert E. Davis, Jr. and the Registrant with respect to the Carlton
Acquisition
3.1 -- Form of Registrant's Amended and Restated Certificate of Incorporation*
3.2 -- Form of Registrant's Amended and Restated Bylaws*
4.1 -- Form of Common Stock Certificate*
4.2 -- Indenture dated as of , 1998 among the Registrant, as issuer, RB
Operating Company and RCP Gulf States, L.L.C., as Subsidiary Guarantors, and
United States Trust Company of New York, as trustee with respect to %
Senior Notes due 2008*
4.3 -- Form of % Senior Notes due 2008 (included in Exhibit 4.2)*
4.4 -- Form of Registrant's Amended and Restated Certificate of Incorporation (filed as
Exhibit 3.1)*
4.5 -- Form of Registrant's Amended and Restated Bylaws (filed as Exhibit 3.2)*
5 -- Opinion of McAfee & Taft A Professional Corporation, including consent*
10.1 -- Sale and Purchase Agreement by and between Quarles Drilling Corporation and
RAMCO-NYL 1987 Limited Partnership dated as of June 16, 1997
10.2 -- Sale and Purchase Agreement by and among RAMCO-NYL 1987 Limited Partnership and
RB Operating Company, and Wynn-Crosby 1996, Ltd., Wildcard Oil & Gas Company,
Wynn-Crosby (Texas), L.L.C. and Providence Energy Corp. dated as of February
13, 1997
10.3 -- Purchase and Sale Agreement by and among New York Life Insurance Company, RAMCO
Operating Company, Oklahoma Double R Corporation, RAMCO-NYL 1987 Limited
Partnership, William W. Talley II, individually and as trustee of the William
W. Talley II 1982 Revocable Trust, Larry E. Lee and M. Helen Bennett, formerly
Fisher, individually and as trustee of the M. Helen Fisher 1992 Trust dated as
of July 24, 1996
10.4 -- RAM Energy, Inc. 1998 Stock Incentive Plan*
10.5 -- Special Severance Agreement by and between William W. Talley II and the
Registrant dated as of December 1, 1997
10.6 -- Employment Agreement by and between Larry E. Lee and the Registrant dated as of
December 1, 1997
10.7 -- Form of Employment Agreement by and between the Registrant and each Senior Vice
President of the Registrant*
10.8 -- Form of RAM Energy, Inc. Indemnity Agreement
10.9 -- Amended and Restated Credit Agreement among RAMCO Operating Company, as
Borrower, the Banks named in the Credit Agreement and Union Bank of
California, N.A., as Agent dated December 12, 1997 (the "Credit Agreement")
</TABLE>

II-2
<PAGE>
<TABLE>
<C> <S> <C>
10.10 -- Form of Amended and Restated Revolving Note under the Credit Agreement (included
in Exhibit 10.9)
10.11 -- Form of Amended and Restated Term Note under the Credit Agreement (included in
Exhibit 10.9)
12 -- Statement re computation of ratios*
21 -- Subsidiaries of Registrant
23.1 -- Consent of Ernst & Young LLP
23.2 -- Consent of Ernst & Young LLP
23.3 -- Consent of John M. Reardon
23.4 -- Consent of Gerald R. Marshall
23.5 -- Consent of McAfee & Taft A Professional Corporation (included in Exhibit 5)*
23.6 -- Consent of Forrest A. Garb & Associates, Inc.
23.7 -- Consent of Netherland, Sewell & Associates, Inc.
24 -- Power of Attorney
25 -- Statement of eligibility of trustee on Form T-1 (bound separately)*
</TABLE>

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

* To be filed by amendment.

(b) Financial Statement Schedules--None

ITEM 17. UNDERTAKINGS.

The undersigned Registrant hereby undertakes to provide to the
Representatives of the Underwriters at the closing specified in the Underwriting
Agreement certificates for Common Stock in such denominations and registered in
such names as required by the Representatives of the Underwriters to permit
prompt delivery to each purchaser of Common Stock.

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part
of the registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Securities Act of 1933 shall be deemed to be
part of this Registration Statement as of the time it was declared
effective.

(2) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

(3) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions described under Item
14, or otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer or controlling person of
the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of
such issue.

(4) The undersigned Registrant hereby undertakes to file an application for
the purpose of determining the eligibility of the trustee to act under
subsection (a) of section 310 of the Trust Indenture Act ("Act") in
accordance with the rules and regulations prescribed by the Commission
under section 305(b)(2) of the Act.

II-3
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Oklahoma City, State of
Oklahoma, on December 18, 1997.

<TABLE>
<S> <C> <C>
RAM ENERGY, INC.*

By: /s/ LARRY E. LEE
-----------------------------------------
Larry E. Lee, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
</TABLE>

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on December 18, 1997.

SIGNATURE TITLE
- ------------------------------ --------------------------

/s/ WILLIAM W. TALLEY II Chairman of the Board and
- ------------------------------ Director of RAM Energy,
William W. Talley II Inc.

President and Chief
/s/ LARRY E. LEE Executive Officer and
- ------------------------------ Director (Principal
Larry E. Lee Executive Officer) of
RAM Energy, Inc.

Senior Vice President,
Secretary, Treasurer and
/s/ JOHN M. LONGMIRE Chief Financial Officer
- ------------------------------ (Principal Financial
John M. Longmire Officer and Principal
Accounting Officer) of
RAM Energy, Inc.

/s/ M. HELEN BENNETT
- ------------------------------ Director
M. Helen Bennett

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

* The current name of the Registrant is "RAMCO Operating Company" which will
be changed to "RAM Energy, Inc." prior to the consummation of the offering
that is the subject of this Registration Statement.

II-4
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the following
additional Registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Oklahoma City, State of Oklahoma, on December 18, 1997.

<TABLE>
<S> <C> <C>
RB OPERATING COMPANY

By: /s/ LARRY E. LEE
-----------------------------------------
Larry E. Lee, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
</TABLE>

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on December 18, 1997.

SIGNATURE TITLE
- ------------------------------ --------------------------

/s/ WILLIAM W. TALLEY II Chairman of the Board and
- ------------------------------ Director of RB Operating
William W. Talley II Company

President and Chief
/s/ LARRY E. LEE Executive Officer and
- ------------------------------ Director (Principal
Larry E. Lee Executive Officer) of RB
Operating Company

/s/ M. HELEN BENNETT
- ------------------------------ Director
M. Helen Bennett

II-5
<PAGE>
SIGNATURES

<TABLE>
<S> <C> <C>
RLP GULF STATES, L.L.C.

BY: RAM ENERGY, INC.*, MANAGER

By: /s/ LARRY E. LEE
-----------------------------------------
Larry E. Lee, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
</TABLE>

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on December 18, 1997.

SIGNATURE TITLE
- ------------------------------ --------------------------

/s/ WILLIAM W. TALLEY II Chairman of the Board and
- ------------------------------ Director of RAM Energy,
William W. Talley II Inc.

President and Chief
/s/ LARRY E. LEE Executive Officer and
- ------------------------------ Director (Principal
Larry E. Lee Executive Officer) of
RAM Energy, Inc.

/s/ M. HELEN BENNETT
- ------------------------------ Director
M. Helen Bennett

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

* The current name of RAM Energy, Inc. is "RAMCO Operating Company" which will
be changed to "RAM Energy, Inc." prior to the consummation of the offering
that is the subject of this Registration Statement.

II-6
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ------------- ------------------------------------------------------------------------------------------------
<C> <S> <C>
1 -- Form of Underwriting Agreement*
2 -- Stock Purchase Agreement dated December 16, 1997 among Rolf N. Hufnagel and Robert E. Davis, Jr.
and the Registrant with respect to the Carlton Acquisition
3.1 -- Form of Registrant's Amended and Restated Certificate of Incorporation*
3.2 -- Form of Registrant's Amended and Restated Bylaws*
4.1 -- Form of Common Stock Certificate*
4.2 -- Indenture dated as of , 1998 among the Registrant, as issuer, RB Operating Company
and RCP Gulf States, L.L.C., as Subsidiary Guarantors, and United States Trust Company of New
York, as trustee with respect to % Senior Notes due 2008*
4.3 -- Form of % Senior Notes due 2008 (included in Exhibit 4.2)*
4.4 -- Form of Registrant's Amended and Restated Certificate of Incorporation (filed as Exhibit 3.1)*
4.5 -- Form of Registrant's Amended and Restated Bylaws (filed as Exhibit 3.2)
5 -- Opinion of McAfee & Taft A Professional Corporation, including consent*
10.1 -- Sale and Purchase Agreement by and between Quarles Drilling Corporation and RAMCO-NYL 1987
Limited Partnership dated as of June 16, 1997
10.2 -- Sale and Purchase Agreement by and among RAMCO-NYL 1987 Limited Partnership and RB Operating
Company, and Wynn-Crosby 1996, Ltd., Wildcard Oil & Gas Company, Wynn-Crosby (Texas), L.L.C.
and Providence Energy Corp. dated as of February 13, 1997
10.3 -- Purchase and Sale Agreement by and among New York Life Insurance Company, RAMCO Operating
Company, Oklahoma Double R Corporation, RAMCO-NYL 1987 Limited Partnership, William W. Talley
II, individually and as trustee of the William W. Talley II 1982 Revocable Trust, Larry E. Lee
and M. Helen Bennett, formerly Fisher, individually and as trustee of the M. Helen Fisher 1992
Trust dated as of July 24, 1996
10.4 -- RAM Energy, Inc. 1998 Stock Incentive Plan*
10.5 -- Special Severance Agreement by and between William W. Talley II and the Registrant dated as of
December 1, 1997
10.6 -- Employment Agreement by and between Larry E. Lee and the Registrant dated as of December 1, 1997
10.7 -- Form of Employment Agreement by and between the Registrant and each Senior Vice President of the
Registrant*
10.8 -- Form of RAM Energy, Inc. Indemnity Agreement
10.9 -- Amended and Restated Credit Agreement among RAMCO Operating Company, as Borrower, the Banks
named in the Credit Agreement and Union Bank of California, N.A. as Agent dated December 12,
1997 (the "Credit Agreement")
10.10 -- Form of Amended and Restated Revolving Note under the Credit Agreement (included in Exhibit
10.9)
10.11 -- Form of Amended and Restated Term Note under the Credit Agreement (included in Exhibit 10.9)
12 -- Statement re computation of ratios*
21 -- Subsidiaries of Registrant
23.1 -- Consent of Ernst & Young LLP
23.2 -- Consent of Ernst & Young LLP
23.3 -- Consent of John M. Reardon
23.4 -- Consent of Gerald R. Marshall
23.5 -- Consent of McAfee & Taft A Professional Corporation (included in Exhibit 5)*
23.6 -- Consent of Forrest A. Garb & Associates, Inc.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ------------- ------------------------------------------------------------------------------------------------
<C> <S> <C>
23.7 -- Consent of Netherland, Sewell & Associates, Inc.
24 -- Power of Attorney
25 -- Statement of eligibility of trustee on Form T-1 (bound separately)*
</TABLE>

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

* To be filed by amendment.

<PAGE>

STOCK PURCHASE AGREEMENT

THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and
entered as of the 16th day of December, 1997, by and among Rolf N. Hufnagel
and Robert E. Davis, Jr. (collectively the "Sellers" and individually a
"Seller"), and RAMCO Operating Company, a Delaware corporation ("Buyer").

WITNESSETH THAT:

WHEREAS, Sellers are the owners of all of the outstanding shares
(the "Shares") of the common capital stock of Carlton Resources Corporation,
a Delaware corporation ("Carlton"), and Carlton and Carmen Field Limited
Partnership, an Oklahoma limited partnership ("CFLP"), collectively are the
owners of all of the outstanding shares of the capital stock of Magic Circle
Energy Corporation, a Delaware corporation ("MCEN"); and

WHEREAS, Sellers desire to sell to Buyer and Buyer desires to
purchase from Sellers the Shares on the terms and conditions set forth herein.

NOW THEREFORE, in consideration of the premises and of the mutual
covenants of the parties hereinafter expressed, it is hereby agreed as
follows:

ARTICLE 1
CORPORATE STRUCTURE; ASSETS

1.1 CORPORATE STRUCTURE. The corporate structure of Carlton and
its affiliates is as shown in Exhibit A. MCEN and Carmen Development
Corporation ("CDC") are, respectively, the sole limited and general partners
of CFLP. Carlton, MCEN and its subsidiary corporations shown in Exhibit A,
together with CFLP, are sometimes hereinafter referred to collectively as the
"Company."

1.2 DRILLING PARTNERSHIPS. MCEN is the general partner of the
"drilling program" and "drilling fund" limited partnerships also shown in
Exhibit A (the "Drilling Partnerships"). For purposes of this Agreement,
Carlton shall be deemed to own "directly" all of the assets owned by the
entities collectively referred to as the "Company" and shall be deemed to own
"indirectly" an interest in all of the assets owned by each of the Drilling
Partnerships equal to MCEN's interest in each such Drilling Partnership.

1.3 ASSETS. The principal assets owned directly and indirectly by
the Company are (i) the oil and gas properties described in Exhibit B,
including leasehold interests, mineral interests, royalty interests,
overriding royalty interests and other interests in and payable out of
production, together with the wells, personal property, fixtures and
equipment located on the lands covered thereby or used or obtained in
connection with the production and development thereof, and together with
all contracts,

<PAGE>

agreements, licenses, permits, easements, orders of regulatory agencies and
other rights and interests relating thereto (collectively, the "Properties"),
(ii) the gas and liquids gathering system, salt water disposal system and
storage facilities described in Exhibit C, together with all real property,
easements, rights of way, surface use agreements and other interests in real
property related or appurtenant thereto, all personal property, fixtures and
equipment comprising or used in connection therewith, and all contracts and
agreements of every nature whatsoever relating thereto (the "Carmen System"),
and (iii) the cash, accounts receivable, accounts, securities, notes, choses
in action, and all other assets, properties, rights, contracts, claims and
interests of every kind, whether real, personal or mixed, owned directly or
indirectly by the Company (the "Other Assets"). The Properties, the Carmen
System and the Other Assets are hereinafter referred to collectively as the
"Assets."

ARTICLE 2
SALE AND PURCHASE OF THE SHARES

2.1 AGREEMENT FOR SALE AND PURCHASE. Sellers hereby agree to sell
to Buyer and Buyer hereby agrees to purchase from Sellers on the Closing Date
(as hereinafter defined) all, but not less than all, of the Shares.

2.2 PURCHASE PRICE. The purchase price for the Shares (the
"Purchase Price") shall be (i) the sum of $43,000,000 (the "Base Price"),
less (ii) the Net Adjustment (as hereinafter defined). A portion of the Base
Price has been allocated by the parties among the Properties, as set out in
Exhibit B, and the Carmen System as set out in Exhibit C. The amounts so
allocated and are referred to herein as the "Agreed Values" of such Assets.

2.3 NET ADJUSTMENT. The Net Adjustment shall be (i) the aggregate
amount of the indebtedness of the Company and of the Sellers (to the extent
secured by the Shares) outstanding as of the Closing Date (including
principal, accrued interest, lender fees, expenses and other amounts payable
in connection with said indebtedness, the "Outstanding Indebtedness") under
the credit facilities and loan agreements described in Schedule 2.3, which
Outstanding Indebtedness will be paid by Buyer at the Closing, plus (ii) the
sum of the adjustment amounts described in Section 3.4 (Title Defects), plus
(iii) the Preferred Stock Redemption Adjustment (as described in Section
7.6), if applicable, plus (iv) the Gas Supply Adjustment (as defined in
Section 7.8), if applicable, plus or minus, as the case may be, (v) the
adjustment described in Section 8.4 (Gas Imbalances), minus (vi) the
adjustment described in Section 8.5 (Approved Capital Expenditures), plus or
minus, as the case may be, (vii) the Working Capital Adjustment (as defined
in Section 8.6), and plus (viii) the sum of the adjustment amounts described
in Section 9.5 (Environmental Defects).

-2-
<PAGE>

2.4 DEPOSIT. Buyer will advance to Sellers from time to time
prior to the Closing Date, with the first such advance to be made
contemporaneously with the execution and delivery of this Agreement and each
subsequent advance to be made in accordance with the schedule set out in
Exhibit D, the amounts set out in Exhibit D (the aggregate amount so advanced
by Buyer is referred to herein as the "Deposit"). In the event the Closing
does not occur other than by reason of termination of this Agreement by Buyer
pursuant to subsection (b) of this Section 2.4, Buyer nevertheless shall be
obligated to continue making advances in accordance with the schedule set
out in Exhibit D. Funds advanced as part of the Deposit will be paid by
Sellers or the Company promptly after receipt of same to satisfy the
obligation for which each advance is made, as set out in Exhibit D, and for
no other purpose. The Deposit shall be credited toward the Purchase Price
at the Closing.

(a) In the event that Buyer shall fail to close the
transaction contemplated hereby in accordance with the terms of this
Agreement, and provided that either (i) all of the conditions precedent to
the obligations of Buyer as set forth in Article 10 hereof have been
satisfied, or (ii) Buyer is excused from Closing solely because one of the
public offerings described in Section 10.3 closes but the other does not,
Buyer nevertheless shall continue to be obligated to make the advances in
accordance with the schedule set out in Exhibit D and Sellers shall be
entitled to retain the entire amount of the Deposit so advanced as liquidated
damages pursuant to Section 12.2.

(b) In the event that (i) prior to the date on which the
Closing is to occur (as provided in Section 13.1), Sellers shall fail to
perform any material obligation to be performed by Sellers under this
Agreement and timely notice thereof is given by Buyer to Sellers, or (iii)
prior to the date on which the Closing is to occur (as provided in Section
13.1), any representation made by Sellers in Section 4 or Section 5 hereof is
determined to be untrue in any material respect and timely notice thereof is
given by Buyer to Sellers, or (iii) Sellers shall fail to close the
transaction contemplated hereby in accordance with the terms of this
Agreement under circumstances where all of the conditions precedent to the
obligations of Sellers as set forth in Article 11 hereof have been satisfied,
then Buyer shall be excused from any further obligation to make additional
advances hereunder and the sum of all advances theretofore made by Buyer
shall constitute a demand obligation owing from Sellers to Buyer for which
Sellers shall be jointly and severally liable. Said demand obligation shall
bear interest from the date of Buyer's demand for repayment thereof until
paid in full at the highest rate per annum applicable to any outstanding
borrowings under Buyer's then existing credit facility.

(c) In the event the transaction contemplated hereby is not
closed for any reason other than one of the reasons described in subsections
(a) or (b) above, then the difference between (i) the

-3-
<PAGE>

sum of all advances made by Buyer pursuant to this Section 2.4, and (ii)
$250,000, shall constitute a term loan from Sellers to Buyer for which
Sellers shall be jointly and severally liable. Said loan shall bear interest
from February 1, 1998 (or from the date advanced, with respect to advances
made after February 1, 1998) until paid at the highest rate per annum
applicable to any outstanding borrowings under Buyer's then existing credit
facililty, and shall be due and payable in full, with all accrued interest
thereon, not later than August 15, 1998.

ARTICLE 3
TITLE EXAMINATION; ADJUSTMENTS

3.1 TITLE MATERIALS. From the date hereof to the Closing Date,
Sellers shall cause the Company to provide Buyer full opportunity to examine
the books, records and files of the Company insofar as they pertain to the
Assets. Sellers make no warranty or representation, express or implied, with
respect to the accuracy or completeness of any title information, records or
other data made available to Buyer in connection with this Agreement.

3.2 TITLE DEFECTS; DEFENSIBLE TITLE.

(a) Adjustments to the Base Price for failure of title shall
be made only with respect to the Carmen System and the Properties
(collectively, the "Examined Interests"). As used herein, the term "Title
Defect" shall mean any lien, claim, defect, encumbrance, security interest,
burden or deficiency such that the Company (directly or indirectly) does not
have Defensible Title (hereinafter defined), as distinguished from
technically marketable title, to any item of the Examined Interests;
provided, no Permitted Encumbrance (hereinafter defined) shall constitute a
Title Defect.

(b) As used herein, the term "Defensible Title" (i) with
respect to the Carmen System means clear, unencumbered (other than Permitted
Encumbrances) and uncontested title in the Company to the real and personal
property comprising the Carmen System, and (ii) with respect to the
Properties means clear, unencumbered (other than Permitted Encumbrances) and
uncontested title in the Company (or in the Drilling Partnerships) to the
Properties such that (A) after giving effect to existing spacing orders,
operating agreements, unit agreements, unitization orders and pooling
designations, and subject to the limitations, if any, described in Exhibit B,
and after taking into account all royalty interests, overriding royalty
interests, net profit interests, production payments and other burdens on
production, the Company (directly or indirectly) is entitled to a share
(expressed as a decimal) of all oil, gas and other minerals produced from
each well described in Exhibit B which is not less than the Net Revenue
Interest set out in Exhibit B in connection with the description of such
well, (B) the Company owns (directly or indirectly) an undivided interest
(expressed as a decimal) equal to the Working Interest set out in Exhibit B
in

-4-
<PAGE>

connection with the description of each such well in and to all property and
rights incident thereto, including all rights in, to and under all
agreements, leases, permits, easements, licenses and orders in any way
relating thereto, and in and to all wells, personal property, fixtures and
improvements thereon, appurtenant thereto or used or obtained in connection
therewith or with the production or treatment or sale or disposal of
hydrocarbons or water produced therefrom or attributable thereto, (C) the
Company (directly or indirectly) is obligated for a fraction of the costs
relating to the exploration, development and operation of such well no
greater than the Working Interest set out in Exhibit B in connection with the
description of such well, (D) except as shown in Exhibit B, the Company's
interests (owned directly or indirectly) in such wells and the production
therefrom are not subject to being reduced by virtue of reversionary
interests owned by third parties, and (E) the Company and the Drilling
Partnerships are in material compliance with all of the terms and conditions
of all agreements, leases, permits, easements, licenses and orders relating
to each Property and the personal property, fixtures and improvements thereon.

(c) As used herein, the term "Permitted Encumbrances" means
(i) the mortgages, security interests, financing statements and other liens
and encumbrances securing the Outstanding Indebtedness, all as more
particularly described in Schedule 3.2, (ii) royalties, overriding royalties,
net profits interests, production payments and other burdens on production
which do not reduce the Company's Net Revenue Interest in any of the
Properties to less than that described in Exhibit B, (iii) liens for taxes,
assessments, labor and materials where payment is not due, (iv) operating
agreements, unit agreements, unitization and pooling designations and
declarations, gathering and transportation agreements, processing
agreements, gas, oil and liquids purchase, sale and exchange agreements, and
other similar agreements which are not required by the terms of this
Agreement to be disclosed on any Schedule hereto, provided (A) they contain
terms and conditions customary in the oil and gas industry, (B) they do not
adversely affect or burden the ownership of the Carmen System or the
Properties to any material extent, (C) all amounts due and payable by the
Company and the Drilling Partnerships thereunder have been paid, and (D)
neither the Company nor any of the Drilling Partnerships is in material
default thereunder, (v) regulatory authority of governmental agencies not
presently or previously violated, easements, surface leases and rights, plat
restrictions and similar encumbrances, provided that they do not materially
detract from the value or materially increase the cost of operation of any
item of the Examined Interests or otherwise adversely affect the operation
thereof, (vi) liens, charges, encumbrances and irregularities in the chain
of title which, because of remoteness in or passage of time, statutory cure
periods, marketable title acts or other similar reasons, have not affected
or interrupted, and are not reasonably expected to affect or interrupt, the
claimed ownership of the Company, the Drilling Partnerships or their
predecessors in title or the receipt of

-5-
<PAGE>

production revenues from the Properties affected thereby, and (vii) mortgages
on and security interests in any of the Assets in favor of any entity
comprising the Company.

3.3 TITLE EXAMINATION; NOTICE OF DEFECTS.

(a) Promptly after execution of this Agreement, Buyer shall,
at Buyer's sole cost and expense, commence and pursue such examination of
title to the Examined Interests as Buyer deems necessary or proper. Buyer
will conclude its title review and give notice to Sellers of any asserted
Title Defects affecting the Examined Interests not later than thirty-five
(35) days after the date of this Agreement (the "Title Notice Date"). Each
such notice shall include a brief description of each Title Defect of which
notice is being given, the action required to cure such Title Defect and the
proposed adjustment to the Base Price by reason of the existence of such
Title Defect. Buyer shall be deemed to have waived any Title Defects
existing with respect to the Examined Interests except to the extent such
Title Defects are set out in a notice given on or prior to the Title Notice
Date.

(b) Sellers shall have (i) a period of twenty (20) days after
the Title Notice Date to cure or cause the Company to cure all or any portion
of the Title Defects described in any notice(s) of Title Defects properly
given by Buyer prior to such date. In the event Sellers are unable or
unwilling to cure or cause the Company to cure any of the asserted Title
Defects prior to the expiration of cure period, the parties shall proceed in
accordance with Section 3.4.

3.4 ADJUSTMENTS.

(a) If any uncured Title Defect is based on Buyer's
substantiated notice in reasonable detail that the Company directly or
indirectly owns a Net Revenue Interest less than that shown on Exhibit B with
respect to a particular Property, then the Agreed Value of such Property
shall be reduced in the same proportion that the actual Net Revenue Interest
bears to the Net Revenue Interest shown therefor on Exhibit B and the amount
of such reduction shall constitute the approved adjustment amount with
respect to such Title Defect.

(b) If any uncured Title Defect involves a claim against or
uncertainty with respect to the Company's title (owned directly or
indirectly) to a particular item of the Examined Interests, the parties shall
attempt to negotiate a mutually acceptable reduction in the Agreed Value of
such Property by reason of such defect. In the event the parties agree on an
appropriate reduction in the Agreed Value, such amount shall constitute the
principal amount of Buyer's approved claim with respect to such Title Defect.
If the parties are unable to agree on an appropriate reduction and Buyer
elects not to waive the Title Defect, then Seller shall have

-6-
<PAGE>

the option of (i) proceeding to Closing but reducing the Base Price by the
Agreed Value of such Property, or (ii) proceeding to Closing but prior
thereto causing the Company to assign the affected Property to a third party
(which may be owned by Sellers) and reducing the Base Price by the Agreed
Value of such Property, provided that if Sellers notify Buyer of Sellers'
election to proceed under this subsection, Buyer shall have the last
opportunity to agree to a mutually acceptable adjustment or waive the Defect.

(c) Notwithstanding the provisions of subsections (a) and (b)
above, Buyer shall not be entitled to any adjustment of the Base Price at the
Closing by reason of Title Defects unless the sum of all such claims approved
pursuant to Section 3.4(a), agreed to by Sellers pursuant to Section 3.4(b),
or treated by Sellers as a reduction of the Base Price pursuant to Section
3.4(b), exceeds the sum of $50,000.

(d) In the event the sum of the Agreed Values of all
Properties affected by Title Defects for which the parties are unable to
agree on an appropriate adjustment exceeds the sum of $5,000,000, then
either party may terminate this Agreement in its entirety without further
liability to either party other than return by Sellers of Buyer's Deposit
(less the $250,000 amount referred to in Section 2.4(c)); provided, however,
that if either party notifies the other of the first party's election to
terminate this Agreement under this subsection, the party receiving such
notice shall have the last opportunity to agree to mutually acceptable
adjustments or waive the Defects necessary to reduce the number and value of
Defects for which no agreement has been reached.

ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLERS RELATING TO THE COMPANY

Sellers hereby jointly and severally represent and warrant to Buyer
as of the date hereof as follows:

4.1 COMPLIANCE WITH AGREEMENTS AND LAWS. Except as disclosed in
Schedule 4.1, no material default exists under any of the terms and
provisions, express or implied, of any material agreement, contract or
commitment to which the Company or any of the Drilling Partnerships is a
party or to which any material item the Assets is subject, and the Company
has not received any notice of any claim of such default (other than
defaults, if any, that will be cured at or by reason of the Closing). All
wells included in the Properties have been drilled, completed and operated,
and all production therefrom has been accounted for and paid to the persons
entitled thereto, and the Properties and the Carmen System have been
operated, in substantial compliance with all applicable Federal, state and
local laws and applicable rules and regulations of the Federal, state and
local regulatory authorities having jurisdiction thereof.

-7-
<PAGE>

4.2 SALE/PURCHASE OF PRODUCTION. Neither the Company nor any of
the Drilling Partnerships is obligated by virtue of any prepayment made under
any production sales contract or any other contract containing a take-or-pay
clause, or under any similar arrangement, to deliver oil, gas or other
minerals produced from or allocated to any of the Properties at any time
after January 1, 1998, without receiving full payment therefor at the time of
delivery. Except for routine suspense on new wells, proceeds from the sale
of oil and gas from the Properties are being received by the Company and the
Drilling Partnerships in a timely manner and are not being held in suspense
for any reason. Seller has described in Schedule 4.2 and made available to
Buyer for examination all agree-ments having a term extending beyond March 1,
1998 (other than agreements terminable upon less than sixty (60) days'
notice), (i) pursuant to which hydrocarbons produced from the Properties are
sold, transported, processed or otherwise disposed of or marketed, and (ii)
pursuant to which the Company purchases hydrocarbons from any third party.

4.3 PRODUCTION AND AD VALOREM TAXES. All ad valorem, property,
production, severance and similar taxes based on or measured by the
ownership of property or the production or removal of hydrocarbons or the
receipt of proceeds therefrom have been timely paid and all required returns
and reports related thereto filed.

4.4 CLAIMS OR LITIGATION. Except as disclosed in Schedule 4.4,
there is neither any suit, action or other proceeding pending before any
court or governmental agency, nor to the knowledge of Sellers has any claim,
dispute, suit, action or other proceeding been overtly threatened against the
Company or any of the Drilling Partnerships or affecting any of the Assets.

4.5 MATERIAL EXECUTORY CONTRACTS RELATING TO THE ASSETS. Sellers
have described in Schedule 4.5 all agreements and other obligations of the
Company which, after the Closing, will (i) require an expenditure by the
Company or the Drilling Partnerships in excess of $50,000 with respect to any
one project, failing which the Company may be liable for damages, (ii)
entitle a third party to earn or purchase any of the Properties or all or any
part of the Carmen System, or (iii) require payments for leased office
space, leased equipment, surface use, salt water disposal or similar lease
or license obligations in excess of $50,000 per year.

4.6 CONSUMMATION OF TRANSACTIONS. Except as disclosed in Schedule
4.6, the consummation of the transactions contemplated hereby will not
constitute a violation or breach of, or an event of default under, the
organizational documents of the Company or any of the Drilling Partnerships
or any contract or agreement to which the Company or any of the Drilling
Partnerships is a party, or constitute the happening of a condition upon
which any other party to such a contract may exercise any right or option
which will adversely

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affect any of the Assets; nor will the happening of such event result in any
liability of the Company or any of the Drilling Partnerships to any person
under the terms of any contracts of employment, consultancy or for services
of any kind.

4.7 CORPORATE EXISTENCE AND QUALIFICATION. Carlton, MCEN and each
of MCEN's subsidiaries is a corporation duly organized, validly existing and
in good standing under the laws of the state of its incorporation, and is or
will be at the Closing qualified to carry on its business and in good
standing in each jurisdiction where Properties are located. Carlton, MCEN
and each subsidiary has the corporate power and authority to own and use its
properties and to transact the business in which it is engaged, and holds all
franchises, licenses and permits necessary and required therefor. Sellers
have made available to Buyer true and correct copies of the organizational
documents of Carlton, MCEN and each of such subsidiaries.

4.8 PARTNERSHIP EXISTENCE AND QUALIFICATION. CFLP and each of the
Drilling Partnerships is a limited partnership duly organized, validly
existing and in good standing under the laws of the State of Oklahoma, and
each such partnership is duly qualified to carry on its business as a limited
partnership and is in good standing in each jurisdiction where any of the
Properties owned by such partnership is located. CFLP and each of the
Drilling Partnerships has the power and authority under its partnership
agreement and applicable law to own and use its properties and to transact
the business in which it is engaged, and holds all franchises, licenses and
permits necessary and required therefor. Sellers have made available to Buyer
true and correct copies of the organizational documents of each of the
Drilling Partnerships.

4.9 CAPITALIZATION.

(a) The entire authorized capital stock of Carlton consists
of 10,000 shares of common stock, par value $.01 per share (the "Common
Stock"), and 1,000 shares of preferred stock, par value $.01 per share (the
"Preferred Stock"). There are presently outstanding 1,125 shares of Common
Stock, all of which are duly authorized, validly issued, fully paid and
nonassessable, and all of which shares are owned by Sellers. There are
presently outstanding 12 shares of Preferred Stock (the "Outstanding
Preferred Stock") which is owned of record by the parties and in the amounts
described in Schedule 4.9. Except as disclosed in Schedule 4.9, there are
no outstanding warrants, options, contracts, calls, or other rights of any
kind or restriction on the right of transfer with regard to any issued and
outstanding, authorized and unissued, or issued but not outstanding, shares
of the Common Stock, Preferred Stock or any other security of Carlton of any
kind.

(b) The entire authorized capital stock of MCEN consists of
20,000 shares of common stock, par value $.001 per

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share, of which (i) 1,000 shares are issued, outstanding and owned by
Carlton, and (ii) 163.111 shares are owned by CFLP, all as described in
Schedule 4.9. Except as disclosed in Schedule 4.9, there are no outstanding
warrants, options, contracts, calls, or other rights of any kind or
restriction on the right of transfer with regard to any issued and
outstanding, authorized and unissued, or issued but not outstanding, shares
of the capital stock or any other security of MCEN of any kind. None of the
warrants described in Schedule 4.9 (x) have been issued, (y) will be issued
prior to the Closing, and (z) will be outstanding on the Closing Date.

4.10 SUBSIDIARIES AND OTHER ACTIVITIES. Carlton has no direct
subsidiaries other than MCEN. MCEN has no subsidiaries other than the
subsidiaries shown on Exhibit A and, except for CFLP and the Drilling
Partnerships or as disclosed in Schedule 4.10, does not own any interest in
any other corporation, partnership, joint venture, limited liability company
or other entity. All of the issued and outstanding stock of each subsidiary
corporation shown in Exhibit A is owned by MCEN. There are no outstanding
warrants, options, contracts, calls, or other rights of any kind or
restriction on the right of transfer with regard to any issued and
outstanding, authorized and unissued, or issued but not outstanding, shares
of common stock or any other security of any such subsidiary of any kind.

4.11 FINANCIAL STATEMENTS.

(a) Attached hereto as Schedule 4.11 are copies of the
following financial statements of Carlton, MCEN and the Company (the
"Financial Statements"), each of which presents fairly the financial
position of the reporting entity as of the date stated and the results of
operations for the period then ended and, except as disclosed in Schedule
4.11, has been prepared in accordance with generally accepted accounting
principles consistently applied:

(i) The Balance Sheet of Carlton as of December 31,
1995, and the Statement of Income and Statement of Cash Flows of Carlton for
the year then ended, with audit report thereon prepared by Ernst & Young,
L.L.P. ("EY");

(ii) The Balance Sheet of Carlton as of December 31,
1996, and the Statement of Income and Statement of Cash Flows of Carlton for
the year then ended, with audit report thereon prepared by EY;

(iii) The Consolidated Balance Sheet of MCEN as of
December 31, 1995, and the Consolidated Statement of Income and Consolidated
Statement of Cash Flows of MCEN for the year then ended, with audit report
thereon prepared by EY;

(iv) The Consolidated Balance Sheet of MCEN as of
December 31, 1996, and the Consolidated Statement of Income and

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<PAGE>

Consolidated Statement of Cash Flows of MCEN for the year then ended, with
audit report thereon prepared by EY; and

(v) The unaudited Consolidated Balance Sheet of Carlton
as of September 30, 1997 (the "Balance Sheet Date"), and the Consolidated
Statement of Income and Consolidated Statement of Cash Flows of Carlton for
the nine-month period then ended, with a review letter from EY.

(b) The Company and each of the Drilling Partnerships has,
and as of the Closing Date will have, no material liabilities or obligations
except for those (i) reflected or reserved against in the Financial
Statements described at (a)(v) above, (ii) otherwise disclosed in this
Agreement, or (iii) incurred in the ordinary course of business since the
Balance Sheet Date.

4.12 ABSENCE OF CERTAIN CHANGES AND EVENTS. Since the Balance
Sheet Date, and except as disclosed on Schedule 4.12 or any other Schedule
attached hereto or as may be approved in writing by Buyer, there has not/have
not been:

(a) Any change in the affairs, business, financial condition,
reserves or operations of the Company or any of the Drilling Partnerships
which has had or is expected to have, individually or in the aggregate, a
material adverse effect on the business or financial condition of the Company
or any of the Drilling Partnerships other than changes or developments which
affect the oil and gas industry generally in the geographic areas in which
the Company operates;

(b) Any damage, destruction or casualty loss (whether or not
covered by insurance) to any material item of the Assets other than
incidences of damage or loss which occur in the ordinary course of business
and which individually and in the aggregate are not material;

(c) Any change in the Articles of Incorporation or Bylaws of
Carlton, MCEN or any of its subsidiaries or in the partnership agreement of
CFLP or any of the Drilling Partnerships;

(d) Any dividends declared or paid or other distribution with
respect to, or any issuance or delivery of, any stocks, bonds or corporate
securities (whether authorized and unissued or held in treasury) of Carlton,
MCEN or any of its subsidiaries, or any grant by Carlton, MCEN or any of its
subsidiaries of any options, warrants or other rights calling for the
issuance thereof by Carlton, MCEN or any of its subsidiaries;

(e) Any sale, assignment or transfer of any material Asset,
other than the Excluded Assets described in Section 7.7;

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<PAGE>

(f) Any increase in the compensation of any officer of the
Company or any material increase in the rate of pay of its employees, except
as part of regular compensation increases in the ordinary course of business;

(g) Any labor trouble, or any controversies or unsettled
grievances pending or threatened, between the Company and any of its
employees or a collective bargaining organization representing or seeking to
represent such employees, or any entrance into any collective bargaining
agreement by the Company with respect to any such employees;

(h) Any addition to, or modification of, any of the profit
sharing, bonus, deferred compensation, insurance, pension retirement or
other employee benefit plans, arrangements and practices described on
Schedule 4.19;

(i) Any borrowing of money by the Company or any of the
Drilling Partnerships, or the incurrence of any material obligation by the
Company or any of the Drilling Partnerships, other than in the ordinary
course of business;

(j) Any capital expenditure or commitment by the Company or
any of the Drilling Partnerships to make a capital expenditure (exclusive of
expenditures for normal repair or maintenance of equipment) other than in
the ordinary course of business or as permitted by the terms of this
Agreement;

(k) Any incurrence of any material losses or knowing waiver
of any rights of value by the Company or any of the Drilling Partnerships in
connection with any aspect of its business;

(l) Any material change in the Company's insurance policies
or any cancellation, termination or substantive amendment of any material
contract, agreement, license or other instrument to which the Company or any
of the Drilling Partnerships is a party;

(m) Any lending or advancement of money by the Company or any
of the Drilling Partnerships;

(n) Any mortgage, pledge, lien, security interest or
encumbrance created or perfected on any of the Assets, other than a Permitted
Encumbrance;

(o) Any payment on the Outstanding Indebtedness, other than
scheduled payments pursuant to and other required payments under agreements
in effect on the Balance Sheet Date;

(p) Any agreement by or commitment of the Company or any of
the Drilling Partnerships to do any of the foregoing; or

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(q) Any other event or condition of any character which, in any
one case or in the aggregate, has materially adversely affected, or which might
reasonably be expected to materially adversely affect, the condition (financial
or otherwise), Assets, operations, liabilities, or business of the Company or
any of the Drilling Partnerships.

4.13 ACCOUNTS RECEIVABLE. All accounts receivable existing on the
Closing Date (net of the allowance for doubtful accounts reflected on the
Financial Statements described in subsection 4.11(a)(v)) will be (i) valid,
genuine, and subsisting, (ii) subject to no known defenses, setoffs or
counterclaims, and (iii) collectible.

4.14 TAX RETURNS AND AUDIT. Except as disclosed in Schedule 4.14,
all federal and state income tax returns and reports required by law to be filed
on or prior to the Closing Date relating to the income or operations of the
Company or the Drilling Partnerships shall have been filed on or prior to the
Closing Date, and all taxes shown on such returns and reports shall have been
paid in full. The Company has not received any notice of any audit,
investigation, or action by any taxing authority relating to a redetermination
of previously reported income, deductions, tax credits, or tax liabilities
of the Company for any taxable period ended on or prior to the Closing Date
which remains open for assessment or redetermination. All income, profits,
franchise, sales, use, occupation, property, excise, ad valorem and other
taxes due prior to the Closing Date have been fully paid. There has not been
any intentional disregard of any applicable statute, regulation, rule, or
published ruling in the preparation of any tax returns or reports filed by
or on behalf of the Company or any of the Drilling Partnerships.

4.15 NO RESTRICTIONS. There exists no restriction or reservation
affecting the Company's or any of the Drilling Partnerships' title to or the
utility of its Assets which would prevent it from occupying or utilizing such
Assets, or any part thereof, after the Closing, to the same full extent that it
might continue to do so if the transaction contemplated hereby did not take
place.

4.16 OTHER CONTRACTS AND COMMITMENTS. Neither the Company nor any of
the Drilling Partnerships has outstanding (i) any contract, bid or offer to
provide services to third parties which (A) the Company knows or has reason to
believe is at a price or on terms which would not result in a net profit to the
Company in providing such services, or (B) includes terms and conditions the
Company or the applicable Partnership cannot reasonably expect to satisfy or
fulfill in their entirety; (ii) any revocable or irrevocable power of attorney
to any person, firm or corporation for any purpose whatsoever; (iii) any loan
agreement, indenture, promissory note, conditional sales agreement or other
similar type of agreement, except to the extent the indebtedness thereunder is
reflected on the

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September 30, 1997 Financial Statements (including inter-Company indebtedness
eliminated by principles of consolidation), (iv) any forward sale, swap or
other type of hedging agreement or commitment, or (v) except as disclosed on
Schedule 4.5 or Schedule 4.16, any other material contract or commitment not
directly related to operations on the Properties and which is not cancelable
without liability or penalty on sixty (60) days notice or less.

4.17 INDEBTEDNESS TO AND FROM OFFICERS, DIRECTORS AND OTHERS. The
Company is not indebted to any of its current or former shareholders, directors,
officers, employees or agents, or their respective heirs, legatees,
beneficiaries or legal representatives, except for amounts due as normal
salaries, wages, bonuses, commissions and in reimbursement of ordinary expenses,
all on a current basis and consistent with historical practices. All
obligations, whether arising by operation of law, contract, agreement, or
otherwise, for payments to trusts or other funds or to any governmental
agency or to any employees, directors, officers, agents, or any other
individual (or any of their respective heirs, legatees, beneficiaries, or
legal representatives) with respect to profit sharing, pension or retirement
benefits, or any other employee benefit of any kind whatsoever have been
paid, if due, or adequate accruals for such payments, if such accruals are
required in accordance with generally accepted accounting principles, are
reflected on the September 30, 1997 Financial Statements. Except as disclosed
in Schedule 4.17, no present or former shareholder, director, officer,
employee or agent of the Company is indebted to the Company other than for
advancements for ordinary business expenses in a normal amount.

4.18 EMPLOYEES. The employees of the Company are listed in
Schedule 4.18. Those employees identified in Schedule 4.18 as "corporate"
(collectively, the "Corporate Employees") will resign or their employment
with the Company will be terminated prior to or effective as of the Closing.
All severance and other obligations of the Company to the Corporate Employees
arising prior to or resulting from (i) their resignation or termination, or
(ii) the Closing of the transactions contemplated by this Agreement, will be
paid prior to the Closing. The Drilling Partnerships have no employees.
Seller has made available to Buyer copies of all OSHA citations, EEOC claims
and workers' compensation claims received by the Company during the five (5)
year period prior to the date of this Agreement.

4.19 LABOR AGREEMENTS, EMPLOYEE BENEFIT PLANS, AND EMPLOYMENT AGREE-
MENTS. Except as disclosed in Schedule 4.19, the Company is not a party to (i)
any union collective bargaining or similar agreement, (ii) any profit sharing,
deferred compensation, bonus, stock option, stock purchase, retainer,
consulting, health, welfare or incentive plan, agreement, policy or arrangement
of any kind whatsoever, whether legally binding or not, which will continue or
be binding in any way on the Company beyond the Closing, or (iii)

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any agreement relating to employment or severance from employment which will
continue beyond the Closing. All required Company contributions to employee
benefit, retirement, deferred compensation, 401(k) and similar plans have
been made and all employee contributions to such plans for which funds have
been retained by or paid to the Company have been made.

4.20 OVERTIME, BACK WAGES, VACATION AND MINIMUM WAGES. Except for
claims accrued as a liability of the Company and included in the computation of
Adjusted Consolidated Working Capital, no present or former employee of the
Company has any claim against the Company on account of or for (i) overtime
pay, other than overtime pay for the current payroll period, (ii) wages or
salary for any period other than the current payroll period, (iii) vacation,
time off or pay in lieu of vacation or time off other than that earned in
respect of the current year, or (iv) any violation of any statute, ordinance
or regulation relating to minimum wages or minimum hours of work.

4.21 INSURANCE POLICIES. Set forth on Schedule 4.21 is a list of all
material insurance policies in force covering the Company, the Drilling
Partnerships, and any of its and their properties, operations or personnel.

4.22 SHORT-TERM INVESTMENTS, BANK ACCOUNTS AND SAFE DEPOSIT BOXES.
Set forth on Schedule 4.22 is a list of (i) all short-term investments of the
Company together with the location of the certificate(s) or other evidence of
such investments, and (ii) all bank accounts maintained by the Company together
with the names of authorized signatories on each such account and the location
of all safe deposit boxes maintained by the Company together with the names of
the persons authorized access thereto.

4.23 OTHER ASSETS. Except as disclosed in Schedule 4.23, the Company
and the Drilling Partnerships have good title to the Other Assets, free and
clear of all liens, encumbrances, security interests, claims or charges of every
kind or description, other than routine maintenance agreements and Permitted
Encumbrances.

4.24 PERMITS AND COMPLIANCE WITH LAWS. The Company possesses all
governmental licenses, permits, certificates, orders, consents, approvals,
franchises and authorizations (collectively, the "Permits") required to
enable it to conduct its business and operations. The Company is in compliance
in all material respects with the Permits and all laws, regulations, ordinances
and orders applicable to its business and operations.

4.25 SECURITIES LAWS. To the knowledge of Sellers, the Company has
complied in all material respects with all applicable state and federal
securities laws in respect of the offer and sale of securities of the Company
and the Drilling Partnerships.

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4.26 ENVIRONMENTAL CONDITIONS. To the knowledge of Sellers, except as
disclosed in Schedule 9.4 the Properties and the Carmen System are in compliance
with the environmental standards set out in Section 9.4.

4.27 OUTSTANDING INDEBTEDNESS. The Outstanding Indebtedness may be
paid in full at the Closing by either Buyer or the Company. Upon receipt of
such payments, neither the holders of the instruments evidencing the Outstanding
Indebtedness nor any of their affiliates or assigns will have any continuing or
resulting lien upon, interest in, option, call or any other rights whatsoever
with respect to the Assets, the Shares, any other debt or equity security of the
Company, or any subsequent business activity or enterprise of the Company,
except for the Gas Supply Agreement described in Section 7.8 hereof (in the
event such agreement is not terminated prior to the Closing).

4.28 FULL DISCLOSURE. To the knowledge of Sellers, no representation
or warranty made by Sellers in this Agreement contains any untrue statement of a
material fact or omits to state a material fact necessary to make the statements
made herein not misleading. Sellers shall not be deemed to have made to Buyer
any representation or warranty other than as expressly made by Sellers in
Articles 4 and 5 of this Agreement. Without limiting the generality of the
foregoing, Sellers make no representation or warranty to Buyer with respect to
(i) any projections, estimates or budgets heretofore delivered or made available
to Buyer of future revenues, expenses, expenditures or future results of
operations, or (ii) except as expressly covered by a representation or warranty
in this Article 4, any other information or documents, financial or otherwise,
made available to Buyer or its counsel, accountants or advisors with respect
to the Company.

ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF SELLERS
RELATING TO THIS AGREEMENT AND THE SHARES

Each Seller, severally and not jointly, hereby represents and warrants
to Buyer as of the date hereof, and by proceeding with the Closing will be
deemed to represent and warrant to Buyer as of the Closing Date, as follows:

5.1 AGREEMENT VALID. This Agreement constitutes the valid and
binding agreement of Seller, enforceable against Seller in accordance with its
terms. All instruments required hereunder to be executed and delivered by
Seller at the Closing will constitute valid and binding agreements of Seller
enforceable against Seller in accordance with their terms.

5.2 OWNERSHIP. Seller is, and at the Closing Date will be, the
record and beneficial owner of the number of Shares set forth opposite the name
of such Seller on Schedule 4.9.

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5.3 TITLE. Seller now has (except as set forth in Schedule 4.9), and
at the Closing Date will have, good and marketable title to the number of Shares
set forth opposite name of such Seller in Schedule 4.9, free and clear of all
adverse claims, options, liens, security interests, restrictions and other
encumbrances.

5.4 RIGHT TO TRANSFER. Seller now has (except as set forth in
Schedule 4.9), and at the Closing Date will have, full legal right and power
to transfer and deliver to Buyer the number of Shares set forth opposite the
name of such Seller in Schedule 4.9 in the manner provided in this Agreement,
and upon delivery of such Shares pursuant to the terms of this Agreement,
Buyer will receive good and marketable title thereto, free and clear of all
adverse claims, options, liens, security interests, restrictions and other
encumbrances.

5.5 BROKERS AND FINDERS. Subject to the provisions of Section 14.4,
neither Seller nor the Company has incurred any liability, contingent or
otherwise, for brokers' or finders' fees in respect of this transaction for
which Buyer or the Company shall have any responsibility whatsoever.

5.6 NO BREACH; CONSENTS. Neither the execution and delivery of this
Agreement or of the instruments or documents contemplated hereby nor the
consummation of the transactions contemplated herein or therein will directly
or indirectly (i) violate any provision of any applicable law, rule or
regulation to which Seller is subject, (ii) violate any order, judgment or
decree applicable to Seller, or (iii) conflict with or result in breach under
any agreement to which Seller is a party or by which Seller may be bound,
except in the case of (iii) as provided in Schedule 4.6, and except in each
case for violations, conflicts, breaches and defaults that in the aggregate
would not materially hinder or impair the consummation of the transaction
contemplated hereby.

ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer represents and warrants to Sellers as follows:

6.1 ORGANIZATION. Buyer is a corporation duly organized and validly
existing under the laws of the State of Delaware.

6.2 AGREEMENT AUTHORIZED. This Agreement has been duly authorized,
executed and delivered by Buyer and all instruments and agreements required
hereunder to be extended and delivered by Buyer at the Closing will be duly
authorized, executed and delivered by Buyer and all requisite corporate action
has been taken to authorize the execution hereof, the transactions contemplated
hereby and all things necessary or desirable in order to accomplish the purchase
of the Shares and the performance by Buyer of all of its obligations

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under this Agreement, and Buyer has all necessary authority under its
charter, bylaws and other governing documents and otherwise has good right
and lawful authority to consummate the same.

6.3 VALID AGREEMENT. This Agreement constitutes the valid and
binding agreement of Buyer enforceable against Buyer in accordance with its
terms, and all instruments required hereunder to be executed and delivered by
Buyer at the Closing will constitute valid and binding agreements of Buyer
enforceable against Buyer in accordance with their terms.

6.4 BROKERS AND FINDERS. Subject to the provisions of Section 14.4
hereof, Buyer has incurred no liability, contingent or otherwise, for brokers'
or finders' fees in respect of this transaction for which Sellers shall have any
responsibility whatsoever.

6.5 SECURITIES LAW MATTERS. Buyer hereby acknowledges that the
Shares will not be registered under the Securities Act of 1933 or any applicable
state securities laws. Buyer represents and warrants to Sellers that Buyer (i)
has reviewed such information as Buyer has deemed relevant in connection with
Buyer's acquisition of the Shares, and (ii) is acquiring the Shares for
investment purposes only and not for resale with a view to, or in connection
with, a distribution.

ARTICLE 7
COVENANTS OF SELLERS PENDING CLOSING

Sellers covenant and agree with Buyer that from and after the date of
this Agreement and until the Closing, Sellers will cause the Company to conduct
its business and that of the Drilling Partnerships subject to the following
provisions and limitations:

7.1 ORDINARY COURSE. The Properties, the Carmen System and the Other
Assets will be maintained and operated in a good and workmanlike manner
consistent with historical practices, and the Company will timely pay or
cause to be paid all costs and expenses incurred in connection therewith.

7.2 RESTRICTIONS ON OPERATIONS. Subject to the provisions of Section
8.5 hereof, no operations will be conducted for the drilling of any new well,
the reworking or redrilling of any existing well or the making of any other
capital expenditure on the Properties or the Carmen System requiring an
expenditure by the Company in excess of $25,000 for any single project.
Neither the Company nor any of the Drilling Partnerships will waive any rights
or enter into any new agreements or commitments other than in the ordinary
course of business, abandon any well capable of commercial production (based
upon prevailing economic conditions), release or abandon any of the Properties,
or encumber, sell or otherwise dispose of any of the Properties other than
personal property

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thereon which is replaced by equivalent property or consumed in the operation
of such Properties in the ordinary course of business.

7.3 MAINTENANCE OF FILES. The Company and the Drilling Partnership
will exercise reasonable diligence in safeguarding and maintaining secure all
files, books and records currently maintained.

7.4 ACCESS OF BUYER. Buyer shall have access to the employees,
offices, properties, records, files, seismic data, engineering reports and
evaluations, books of account, and all other information of the Company
pertaining to the business, properties and affairs of the Company and the
Drilling Partnerships; provided, however, that such investigation shall be
conducted during normal business hours and in a manner that does not
unreasonably interfere with the Company's normal operations and employee
relationships. Sellers shall cause the Company's personnel to reasonably
assist Buyer in making such investigation and shall cause the counsel,
accountants, employees and other representatives of the Company to be
reasonably available to Buyer for such purposes. During such investigation,
Buyer shall have the right, at Buyer's sole cost and expense, to make copies
of such records, files and other materials as Buyer may deem advisable.

7.5 CERTAIN PAYMENTS; ARRANGEMENTS. The Company will make all
scheduled payments due under all agreements and instruments providing for or
evidencing the Outstanding Indebtedness, but will not make any payments in
addition to the scheduled payments. Upon receipt from Buyer of notice to do
so, Sellers will make arrangements with the holders of the instruments
evidencing the Outstanding Indebtedness for receipt of payment in full
thereof at the Closing and for the contemporaneous release by such holders
and their respective affiliates and assigns of any and all liens upon,
interests in, options, calls or any other rights whatsoever with respect to
the Assets, the Shares, any other debt or equity security of the Company, or
any subsequent business activity or enterprise of the Company, except for
the Gas Supply Agreement described in Section 7.8 hereof (in the event such
agreement is not terminated prior to the Closing).

7.6 REDEMPTION OF PREFERRED STOCK. Prior to the Closing, Buyer may
give Sellers written notice that Buyer desires to have Carlton redeem all of the
outstanding shares of Preferred Stock (a "Redemption Request"). Upon receipt of
a Redemption Request, Sellers promptly will cause Carlton to issue a notice of
redemption to all holders of the Preferred Stock, directing such holders to
tender the subject shares for redemption. In the event the Redemption Request
is delivered to Sellers thirty-five (35) days or more prior to the date
scheduled for Closing, Sellers will cause all outstanding shares of Preferred
Stock to be redeemed or cancelled prior to the Closing. In the event the
Redemption Request is delivered to Sellers less than thirty-five (35) days
prior to the date scheduled

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for Closing, Sellers will use their reasonable best efforts to cause all
outstanding shares of Preferred Stock to be redeemed or cancelled prior to
the Closing. Upon receipt by Buyer of notice from Sellers that shares of
Preferred Stock have been tendered for redemption, Buyer will fund that
portion of the Deposit allocated in Exhibit D for redemption of Preferred
Stock to the extent attributable to the tendered shares. If on the Closing
Date shares of Preferred Stock remain outstanding, the Base Price shall be
adjusted downward by an amount equal to $50,000 times the number of shares of
Preferred Stock then outstanding (the "Preferred Stock Redemption Adjustment").

7.7 EXCLUDED ASSETS. Prior to the Closing, Sellers shall cause the
Company to assign to Sellers or their designee (i) those certain Properties and
Assets of the Company specifically described in Schedule 7.7, (ii) leases cover-
ing those certain vehicles described in Schedule 7.7 which currently are used by
the Company's executive officers and senior management employees, (iii) those
certain office space and other real estate leases described in Schedule 7.7,
which described leases constitute all of the office and other real estate leases
to which the Company is a party (other than the office space lease at One Benham
Place, 9400 N. Broadway, Oklahoma City, Oklahoma, which lease is being retained
by MCEN), and (iv) all of the Company's office equipment, furniture and
furnishings. The Properties, Assets, leases, vehicles, furniture, equipment
and furnishings described in (i) through (iv) above are referred to herein as
the "Excluded Assets." Following such assignments and from and after the
Closing, the Company shall be relieved from all liabilities and obligations
with respect to, and Sellers or their designee shall assume and be responsible
for, all debts, lease obligations and other liabilities related to the
Excluded Assets. If Sellers' designee assumes such obligations and liabilities,
Sellers shall indemnify the Company with respect thereto without limitation as
to time. Any additional tax liability to the Company as the result of assigning
the Excluded Assets to Sellers or their designee will be a current liability for
purposes of determining Adjusted Consolidated Working Capital at the Closing.

7.8 GAS SUPPLY AGREEMENT. The Company is a party to that certain Gas
Supply Agreement dated November 22, 1996, by and between MCEN, as Seller, and
Miami Valley Resources, Inc., as Purchaser (the "Gas Supply Agreement"), a copy
of which has been separately provided to Buyer. Sellers agree to use their best
efforts to cause the Gas Supply Agreement to be terminated in connection with
the payment of the Outstanding Indebtedness owed to the purchaser under the Gas
Supply Agreement or its affiliate. In the event a termination payment is
required in order to terminate the Gas Supply Agreement, Buyer will bear and pay
such payment up to but not to exceed the sum of $100,000, provided Sellers are
willing to pay or cause the Company to pay (out of working capital prior to the
Adjusted Consolidated Working Capital calculation) the amount, if any, by which
the termination payment exceeds $100,000. In the event Sellers are not

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successful in obtaining termination of the Gas Supply Agreement, then the
Base Price will be adjusted downward at Closing by the sum of $200,000 (the
"Gas Supply Agreement Adjustment").

7.9 CONSULTATION WITH BUYER. During the period from the execution of
this Agreement to the Closing Date, Sellers will consult with Buyer from time to
time and on a timely basis upon request with respect to any operations being
conducted, or proposed to be conducted, in connection with the Properties, the
Carmen System or the business of the Company, and will provide Buyer with all
information reasonably available with respect thereto.

7.10 OPERATION OF BUSINESS. Except as provided in Schedule 7.10,
without the prior written consent of Buyer, Sellers will not permit the Company
to (i) grant any increase in the rate of pay of any of its employees, nor grant
any increase in the salaries of any officer, employee or agent, nor enter into,
or by means of any bonus, profit-sharing, incentive compensation payment,
pension, retirement, medical, hospitalization, life insurance or other
insurance plan or plans, or other contracts or commitments, increase in any
amount, the benefits or compensation of any such officer, employee or agent,
(ii) enter into any employment contract or collective bargaining agreement,
(iii) enter into any contract or commitment or engage in any transaction which
is not in the ordinary course of business, (iv) sell or dispose of or encumber
any material item of the Assets, (v) make any material capital expenditure
(other than capital expenditures permitted under Section 7.2 or 8.5) or enter
into any lease of equipment or real estate, (vi) create, assume, incur or
guarantee any indebtedness, (vii) declare or pay any dividend or make any sale
of, or distribution in respect of, its capital stock or directly or indirectly
redeem, purchase or otherwise acquire any of its capital stock, except as
permitted by Section 7.6, (viii) make any amendments to or changes in its
Articles of Incorporation or ByLaws, or (ix) perform any act, or attempt to
do any act or permit any act or omission to act, which will cause a breach of
any material contract, commitment or obligation to which the Company or any
of the Drilling Partnerships is a party.

7.11 PRESERVATION OF BUSINESS. The Company shall carry on its
business and that of the Partnerships diligently and substantially in the
same manner as heretofore conducted and shall use its best efforts to keep
its business organization intact, including its present employees and its
present relationships with suppliers and customers and others having
business relations with the Company and the Drilling Partnerships.

7.12 INSURANCE AND MAINTENANCE OF PROPERTY. The Company will cause
all property owned or leased by it to continue to be insured against all
ordinary and insurable risks in accordance with past practices, and will
operate, maintain and repair all its

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property in a careful, prudent and efficient manner in accordance with past
practices.

7.13 BOOKS AND FINANCIAL RECORDS. The Company shall continue to
maintain its books and financial records and those of the Drilling Partnerships
in accordance with generally accepted accounting principles, and said books and
financial records shall fairly and accurately reflect the operations of the
Company and the Drilling Partnerships.

7.14 ESTOPPEL CERTIFICATES. Prior to the Closing, Sellers shall
provide to Buyer estoppel certificates from the sublessees of the MCEN office
space lease at 9400 Broadway, Oklahoma City, Oklahoma, in the form provided for
in the base lease.

ARTICLE 8
ADDITIONAL AGREEMENTS OF THE PARTIES

8.1 CONFIDENTIALITY; RETURN OF INFORMATIONAL MATERIAL. From the
date of this Agreement until the first to occur of (i) the Closing Date, or
(ii) the day that is two (2) years from and after the date of this Agreement,
Buyer agrees for itself and its representatives to keep all non-public
information concerning the Company confidential and not to use such
information for any purpose other than the evaluation of the business,
financial condition and assets of the Company in connection with the proposed
acquisition of the Shares; provided, however, that Buyer may (x) disclose
such information to its underwriters, investment bankers, prospective
purchasers and prospective investors in connection with marketing activities,
and (y) may include such information as may be required to be disclosed in
documents filed with the Securities and Exchange Commission, in connection
with the public or private offering of debt or equity securities of the
Buyer. If the Closing does not occur, Buyer shall return to Sellers or the
Company, or shall destroy and confirm such destruction in writing, all of the
items of information which Sellers or the Company has delivered to Buyer
hereunder, including all copies of same made by Buyer.

8.2 COMPLIANCE WITH CONDITIONS. Buyer and Sellers, respectively,
will proceed diligently using all reasonable efforts to cause all of the
conditions to the obligations of Sellers and Buyer, respectively, to be timely
satisfied.

8.3 CONDEMNATION OR CASUALTY LOSS. Buyer's obligation to close shall
not be excused and no adjustment to the Base Price shall be required if, after
the execution of this Agreement and prior to the Closing Date, any item of the
Assets is damaged or destroyed by fire or other casualty or is taken under the
right of eminent domain. Prior to the Closing Date, neither the Company nor the
Drilling Partnership shall voluntarily compromise, settle or adjust any claims,
causes of action or demands against third parties, arising out of such damage,
destruction or taking, or commit,

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use or apply any insurance proceeds or payments toward the repair, restoration
or replacement of the affected property without the prior written consent of
Buyer. Notwithstanding the above to the contrary, in the event the Assets
are damaged or destroyed by fire or other casualty or are taken under the
right of eminent domain and as a result thereof the value of the Assets is
reduced by an amount exceeding $5,000,000, then Buyer may terminate this
Agreement in its entirety without liability to either party other than return
to Buyer of the Deposit, subject to the provisions of Section 2.4(c).

8.4 GAS IMBALANCES. Sellers and Buyer acknowledge, but Sellers do
not represent or warrant, that there are certain gas imbalances with respect to
production from or attributable to certain of the Properties as set forth on
Schedule 8.4. The Base Price shall be adjusted at the Closing (i) upward by the
amount of $1.00 per Mcf for the net underproduction set forth on Schedule 8.4,
or (ii) downward by the amount of $1.00 per Mcf for the net overproduction set
forth on Schedule 8.4. Schedule 8.4 will be adjusted prior to the Closing as
necessary to reflect the actual gas imbalance existing with respect to the
Properties determined as the result of additional investigation by the parties.
Notwithstanding the foregoing, in the event the net overproduction or net
underproduction set out on Schedule 8.4 as amended to the Closing is less than
50,0-00 Mcf, no adjustment to the Base Price shall be made.

8.5 CAPITAL EXPENDITURES. During the period from the execution of
this Agreement to the Closing Date, Sellers will cause representatives of the
Company to consult with Buyer from time to time with respect to any operation on
the Properties or the Carmen System proposed by the Company, or by a third party
and recommended for approval by the Company, reasonably expected to require a
capital expenditure by the Company, and will provide Buyer with all information
reasonably available to the Company with respect thereto (for this purpose,
costs incurred in connection with a workover shall not be deemed to constitute a
capital expenditure). Buyer shall, within ten (10) days after receipt of the
Company's recommendation for conducting or participating in any such project or
making such capital expenditure, or within such shorter period as may be
required by the terms of any applicable agreement, approve or disapprove such
project or capital expenditure. Failure of Buyer to respond within the time
required will be deemed to constitute disapproval by Buyer of the project or
capital expenditure. In the event Buyer approves such project or capital
expenditure pursuant to the provisions of this Section 8.5, the Company shall
conduct, propose or elect to participate in such project or make such capital
expenditure and shall incur and pay as they become due the expenditures
associated therewith. In such event, at the Closing the Base Price shall be
adjusted upward by the sum of all costs and expenses incurred by the Company
to the Closing Date in connection with such approved project or capital
expenditure, less all revenues received by or accrued in favor of the Company
attributable thereto. In the event Buyer disapproves any project or capital
expenditure proposed

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by a third party under circumstances where an election not to participate would
require the Company to relinquish some interest in the Properties, the Company
shall not participate in such operation or make such captial expenditure but
shall attempt to farm out or otherwise relinquish its interests on the most
favorable terms reasonably available. Buyer hereby approves (i) the capital
expenditures described in Schedule 8.5, and (ii) capital expenditures hereafter
incurred by the Company and not otherwise approved pursuant to this Section 8.5
up to an aggregate amount of $25,000.

8.6 ADJUSTED CONSOLIDATED WORKING CAPITAL. The Base Price will be
adjusted (i) upward by the amount of the positive Adjusted Consolidated Working
Capital of the Company as of the Closing Date, but in no event more than
$1,000,000, or (ii) downward by the amount of the negative Adjusted Consolidated
Working Capital of the Company as of the Closing Date (the "Working Capital
Adjustment"). For purposes of this Agreement, the term "Adjusted Consolidated
Working Capital" means the current assets less current liabilities of the
Company on a consolidated basis determined in accordance with generally accepted
accounting principles, except that current assets will exclude deferred tax
assets and current liabilities will exclude the current portion of long-term
debt and current income tax liabilities (to the extent, only, that current
income tax liabilities can be offset by the deferred tax assets).

ARTICLE 9
ENVIRONMENTAL MATTERS

9.1 PHYSICAL CONDITION OF THE PROPERTIES. The Properties (solely for
purposes of this Article, the term "Properties" shall include the Carmen System)
have been used for oil and gas drilling, production, gathering and processing
operations, related oil field operations and possibly for other operations,
whether of a similar or dissimilar nature. Physical changes in or under the
Properties or adjacent lands may have occurred as a result of such uses. The
Properties also may contain buried pipelines and other equipment, whether or not
of a similar nature, the locations of which may not be known to Sellers or be
readily apparent by a physical inspection of the Properties. Third parties may
have used the Properties or the surface rights thereon for other purposes as
well. Buyer understands that the Company does not have the requisite
information with which to determine the exact nature or condition of the
Properties nor the effect any such use has had on the physical condition of
the Properties. Buyer is hereby notified that detectable amounts of regulated
and unregulated chemicals and other substances which may pose a threat to
health or to plants or wildlife, or which are known to cause illnesses,
diseases, cancer, birth defects and other reproductive harm, may be found in,
on or around the Properties. Adverse physical conditions, including the
presence of such chemicals and other substances, may not be revealed by
Buyer's investigation. In addition, Buyer acknowledges that some oil field
production equipment may contain various contaminants or hazardous sub-

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stances, including without limitation, asbestos and/or naturally-occurring
radioactive material ("NORM"). In this regard, Buyer expressly understand
that NORM may affix or attach itself to the inside of wells, materials, pipes
and equipment as scale or in other forms, and that wells, materials, pipes
and equipment located on the Properties described herein may contain NORM and
that NORM-containing materials may be buried or have been otherwise disposed
of on the Properties. Buyer also expressly understands that special procedures
may be required for the removal and disposal of various contaminants or
hazardous substances, including without limitation asbestos and NORM, from the
Properties where it may be found. The statements in this Section 9.1 are
intended as disclosures and acknowledgments of possible conditions existing on
the Properties.

9.2 ENVIRONMENTAL ASSESSMENT. Buyer shall have the right, at Buyer's
sole cost, risk, and expense, to undertake an environmental assessment of the
Properties during the period ending on the Title Notice Date (the "Inspection
Period"). Buyer and its agents shall have the same right as the Company to
enter upon the Properties, inspect the same, conduct soil and water sampling,
analysis and monitoring, including soil borings (and, after notice and
consultation with the Company, drilling groundwater monitoring wells), and
generally conduct such tests, examinations, investigations and studies as
Buyer deems necessary or appropriate for preparing appropriate evaluation and
other reports and making judgments relating to the Properties, their condition,
and the presence of chemicals and other substances. Sellers shall cooperate
with any efforts of Buyer and its agents to obtain third party consents for
access to those parcels of land within the Properties to which the Company
may not presently have access. Buyer and its agents shall have reasonable
access to the Company's agents and employees in the course of conducting
Buyer's environmental assessment. Sellers shall cause the Company to make
available to Buyer within five (5) days after the date of this Agreement
copies of all reports (including, without limitation, all environmental studies,
assessments, audit reports, or other evaluations prepared by or for Sellers or
the Company), citations, notices, correspondence and other documents
concerning the environmental condition of the Properties. Buyer agrees to
provide to Sellers a copy of all facts discovered in the course of conducting
Buyer's environmental assessment, including all direct observations (if in
writing or other tangible or transferable medium), data and summaries
thereof. Buyer shall keep any data or information acquired in the course of
such examinations and the results of all analyses of such data and
information strictly confidential and not disclose same to any person or
agency without the prior written approval of the Company, except that Buyer
may disclose to authorities having jurisdiction such information as is
required by law or by court order at the same time that Buyer provides such
information to Sellers. If Buyer determines that conditions on a Property do
not satisfy the environmental standards set forth in Section 9.4 below in a
material respect, then Buyer may notify Sellers of such condition by provid-

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ing Sellers, on or prior to the Title Notice Date, a written "Notice of
Environmental Defect" setting forth in detail the facts giving rise to the
claimed defect, the environmental standard which Buyer claims is not
satisfied, any Applicable Environmental Law (hereinafter defined) which Buyer
contends has been breached or violated and, if the claimed defect arises from
information contained in a document, a copy of such document or the relevant
parts thereof. Buyer shall be deemed to have accepted without objection (i)
the environmental conditions described in Schedule 9.4, and (ii) any Property
which does not meet the environmental standards or which is subject to an
environmental defect unless a Notice of Environmental Defect is given with
respect to such Property on or prior to the Title Notice Date.

9.3 ACCESS; INDEMNIFICATION. Access to the Properties to conduct
Buyer's environmental assessment shall be subject to the following conditions:
Buyer waives and releases all claims against Sellers, the Company, and its
directors, officers, employees and agents, for injury to or death of persons
or damage to property arising in any way from the exercise of rights granted
to Buyer hereby or the activities of Buyer or its employees, agents or
contractors on the Properties, provided that Buyer does not hereby assume the
risk of damage, injury or death attributable to the willful misconduct or
gross negligence of Sellers or the Company. Buyer shall indemnify Sellers,
the Company, and its directors, officers, employees, and agents, and shall
hold each and all of said indemitees harmless from and against any and all
loss whatsoever arising out of (i) any and all statutory or common law liens
or other encumbrances for labor or materials furnished in connection with
such tests, samplings, studies or surveys as Buyer may conduct with respect
to the Properties, and (ii) any injury to or death of persons or damage to
property occurring in, on or about the Properties as a result of such exercise
or activities (except for any such injuries or damages caused by the gross
negligence or willful misconduct of any said indemnitees). Notwithstanding
any provision of this Agreement to the contrary, the foregoing obligation of
indemnity shall survive the Closing or the termination of this Agreement
without Closing.

9.4. ENVIRONMENTAL STANDARDS. This section sets out the
environmental standards applicable to the Properties for purposes of this
Agreement.

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stance" shall mean any hazardous substance, pollutant, contaminant, solid or
hazardous waste, hazardous waste constituents, hazardous material or toxic
substance subject to regulation or liability under Applicable Environmental
Laws in force as of the date hereof, including asbestos, radioactive
substances, and any other substance or material that would constitute or
cause a health, safety or environmental hazard on or at the Properties under
Applicable Environmental Laws. "Applicable Environmental Laws" shall mean
(i) all federal statutes regulating or prescribing restrictions regarding the
use of the Properties or other activities affecting the environment (air,
water, land, animal and plant life), including but not limited to the
following: the Clean Air Act, Clean Water Act, Comprehensive Environmental
Response, Compensation and Liability Act, Emergency Planning and Community
Right-to-Know Act, Endangered Species Act, Hazardous Materials Transportation
Act, Migratory Bird Treaty Act, National Environmental Policy Act, Occupational
Safety and Health Act, Oil Pollution Act of 1990, Resource Conservation and
Recovery Act, Safe Drinking Water Act, and Toxic Substances Control Act; (ii)
any regulations promulgated under such federal statutes, (iii) any state law
counterparts of such federal statutes and the regulations promulgated
thereunder; (iv) any other state or local statutes, rules, regulations or
ordinances regulating the use of or affecting the environment, and (v) all
common law rights, duties and obligations regarding the use of or matters
affecting the environment.

(b) Except as disclosed in Schedule 9.4, there are no
agreements, consent or administrative orders, injunctions, decrees,
judgments, license or permit conditions, or other directives of governmental
authorities based on any Applicable Environmental Laws that require any
material change in the present condition of the Properties, and the Company
has not received any notice from any governmental authority or private or
public entity advising the Company that it is or is potentially responsible
for response costs under an Applicable Environmental Law as a result of the
Company's ownership or activities in connection with the Properties.

(c) Except as disclosed in Schedule 9.4, no conditions or
circumstances exist on the Properties that would subject the Company to any
material damages, penalties, injunctive relief or cleanup or closure costs
under any Applicable Environmental Laws or that would require cleanup, removal,
remedial or corrective action or other response involving a material expenditure
by the Company pursuant to Applicable Environmental Laws.

9.5 PROPERTIES SUBJECT TO ENVIRONMENTAL DEFECT. Sellers shall have a
period of twenty (20) days after the Title Notice Date to cure or cause the
Company to cure or remediate the environmental defect(s) set out in any Notice
of Environmental Defect timely and properly given by Buyer. In the event
Sellers are unable or unwilling to cure or remediate any such defect prior to
Closing, one of the following shall occur:

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(a) The parties shall agree upon an adjustment to the Base
Price to compensate Buyer (i) for the defect and all future liability
associated therewith or resulting therefrom, and (ii) for agreeing to
indemnify, defend and hold harmless Sellers from and against any and all
loss, cost, liability or expense associated therewith or resulting therefrom.

(b) If the parties are unable to reach agreement pursuant to
(a) above, Sellers, at their sole discretion, may elect either (i) to proceed
to Closing but prior thereto cause the Company to assign the affected
Property to a third party (which may be owned by Sellers) and reduce the Base
Price by the Agreed Value of such Property (provided that if Sellers notify
Buyer of Sellers' election to proceed under this subsection, Buyer shall have
the last opportunity to agree to a mutually acceptable adjustment or waive
the Defect), or (ii) to proceed to Closing but reduce the Base Price by the
Agreed Value of the affected Property, provided Buyer is willing to accept
the affected Property in its unremediated condition (this alternative will
not be available to Sellers if Buyer is not so willing). In the event the
estimated (by an independent third party environmental consultant) cost of
remediation of all environmental defects for which the parties are unable to
reach agreement is greater than $1,000,000, either party may terminate this
Agreement in its entirety without further liability to either party other
than return to Buyer of the Deposit, subject to the provisions of Section 2.4.

(c) Notwithstanding the provisions of (a) and (b) above,
Buyer shall not be entitled to an adjustment of the Base Price pursuant to
the provisions of this Section 9.5 unless the cumulative amount of all such
adjustments exceeds $50,000.

9.6 INDEMNIFICATION OF SELLERS. All liabilities attributable to
conditions existing and operations conducted on the Properties (other than
Properties assigned to a third party prior to the Closing pursuant to Section
9.5(b) hereof) under Applicable Environmental Laws and under all future
environmental laws shall be liabilities of the Company or the Drilling
Partnerships, as applicable, and Buyer shall indemnify, defend, and hold
harmless Sellers from and against all loss, cost, liability or expense
attributable thereto or resulting therefrom, except for liabilities known to
Sellers and not disclosed in Schedule 9.4 hereof.

ARTICLE 10
CONDITIONS TO OBLIGATIONS OF BUYER

The obligation of Buyer to consummate the transactions provided for in
this Agreement shall be subject to the satisfaction of each of the following
conditions on or before the Closing Date, subject to the right of Buyer to waive
any one or more of such conditions:

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10.1 REPRESENTATIONS AND WARRANTIES OF SELLERS. At and as of the
Closing Date, the representations and warranties of Sellers contained in
Articles 4 and 5 hereof shall be true and correct in all material respects as
though made on such date.

10.2 PERFORMANCE OF THIS AGREEMENT. Sellers shall have duly performed
or complied in all material respects with all of the obligations to be performed
or complied with by Sellers under the terms of this Agreement on or prior to the
Closing Date.

10.3 CLOSING OF PUBLIC OFFERINGS. The closing of Buyer's planned
public offering of high-yield notes and common stock (the "Public Offering")
shall occur simultaneously with the Closing. If for whatever reason the
Public Offering does not close on or before the date scheduled for Closing in
Section 13.1 hereof (or prior to April 30, 1998, if Buyer exercises its
option to extend the Closing Date as provided in Section 13.1 hereof), Buyer
shall have no obligation to close the transaction contemplated by this
Agreement.

10.4 RESIGNATIONS. Buyer shall have received the written resignations
of each member of the Board of Directors and each officer of Carlton, MCEN and
each of its subsidiaries.

10.5 OPINION OF COUNSEL. Buyer shall have received an opinion of
Conner & Winters A Professional Corporation, dated the Closing Date,
substantially in the form attached hereto as Exhibit E.

10.6 SELLERS' CLOSING CERTIFICATE. Buyer shall have received a
Closing Certificate, dated as of the Closing Date, signed by Sellers, stating
that (i) to the best of Sellers' knowledge, all of the representations and
warranties made by Sellers under Section 4 of this Agreement are true and
correct at and as of the Closing Date, (ii) all of the representations and
warranties made by Sellers under Section 5 of this Agreement are true and
correct at and as of the Closing Date, and (iii) Sellers have duly performed
or complied with in all material respects all of the obligations to be
performed or complied with by Sellers under the terms of this Agreement on or
prior to the Closing Date.

ARTICLE 11
CONDITIONS TO OBLIGATIONS OF SELLERS

The obligations of Sellers to consummate the transactions provided for
in this Agreement shall be subject to the satisfaction of each of the following
conditions on or before the Closing Date, subject to the right of Sellers to
waive any one or more of such conditions:

11.1 REPRESENTATIONS AND WARRANTIES OF BUYER. The representations and
warranties of Buyer contained in this Agreement shall

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be true and correct in all material respects at and as of the Closing Date.

11.2 PERFORMANCE OF THIS AGREEMENT. Buyer shall have duly performed
or complied in all material respects with all of the obligations to be performed
or complied with by Buyer under the terms of this Agreement on or prior to the
Closing Date.

11.3 OPINION OF COUNSEL. Sellers shall have received an opinion of
McAfee & Taft A Professional Corporation, dated the Closing Date, substantially
in the form attached hereto as Exhibit F.

11.4 BUYER'S CLOSING CERTIFICATE. Sellers shall have received a
Closing Certificate, dated as of the Closing Date, executed on behalf of
Buyer, stating that (i) all of the representations and warranties made by
Buyer under Section 6 of this Agreement are true and correct at and as of the
Closing Date, and (ii) Buyer has duly performed or complied with in all
material respects all of the obligations to be performed or complied with by
Buyer under the terms of this Agreement on or prior to the Closing Date.
Such Certificate shall also state that (w) Buyer has had the opportunity to
visit with Sellers and with other officers and representatives of the Company
to discuss the business and the assets, liabilities, financial condition,
cash flow and operations of the Company, (x) all materials and information
requested by Buyer have been provided to Buyer to Buyer's reasonable
satisfaction, (y) Buyer has made its own independent examination,
investigation, analysis and evaluation of the Company, including Buyer's own
estimate of the value of the Company, and (z) that Buyer has undertaken such
due diligence (including review of the assets, liabilities, books, records
and contracts of the Company) as Buyer has deemed adequate, including that
described above.

ARTICLE 12
TERMINATION

12.1 BUYER'S RIGHT TO TERMINATE. Buyer shall be entitled to
terminate this Agreement by written notice to Sellers if the conditions to
Buyer's obligations under this Agreement, as set forth in Article 10 hereof,
shall not have been satisfied, complied with or performed in all material
respects (and, where applicable, Sellers shall not be prepared to comply with
or perform the same) by the date on which the Closing is to occur (as set
forth in Section 13.1), and such non-compliance or non-performance shall not
have been waived in writing by Buyer. Upon such termination, the provisions
of Section 2.4 shall govern the entitlement of the parties to the Deposit.
In the event such termination is a result of Sellers' failure or refusal to
close the transaction contemplated hereby under circumstances in which all
conditions precedent to Sellers' obligations as set forth in Article 11 have
been performed

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or satisfied in all material respects, Buyer shall be entitled to pursue any
available remedies existing at law or in equity.

12.2 SELLERS' RIGHT TO TERMINATE. Sellers shall be entitled to
terminate this Agreement by written notice to Buyer if the conditions to
Sellers' obligations under this Agreement, as set forth in Article 11 hereof,
shall not have been satisfied, complied with or performed in all material
respects (and Buyer shall not be prepared to comply with or perform the same)
by the date on which the Closing is to occur (as set forth in Section 13.1),
and such non-compliance or non-performance shall not have been waived in
writing by Sellers. Upon such termination, the provisions of Section 2.4
shall govern the entitlement of the parties to the Deposit. In the event
such termination is a result of Buyer's failure or refusal to close the
transaction contemplated hereby under circumstances in which all conditions
precedent to Buyer's obligations as set forth in Article 10 have been
performed or satisfied in all material respects, Seller shall be entitled to
pursue any available remedies existing at law or in equity.

ARTICLE 13
CLOSING; POST-CLOSING

13.1 DATE AND PLACE. The Closing shall be held at 9:00 o'clock
a.m. on the first to occur of (i) February 20, 1998, or (ii) such earlier
date as the Public Offering is closed. Buyer shall give Sellers at least
three (3) business days' prior notice if the Closing is to occur prior to
February 13, 1998. Notwithstanding the foregoing, however, if becomes
apparent to Buyer that the Public Offering will not be closed by February 20,
1998, but is likely to close on or before April 30, 1997, then Buyer shall
have the option, exercisable by written notice to Sellers not later than
February 18, 1998, to extend the date set forth in subsection (i) above to
April 30, 1998. The date on which the Closing actually occurs is referred to
herein as the "Closing Date". The Closing shall take place in the offices of
Buyer, 5100 E. Skelly Drive, Suite 650, Tulsa, Oklahoma 74135.

13.2 SATISFACTION OF CONDITIONS. Not later than the day prior to
the Closing Date, each party shall provide the other party such evidence of
satisfaction of conditions under Articles 10 and 11 hereof as the other party
shall have reasonably and timely requested.

13.3 STOCK CERTIFICATES. At the Closing, Sellers shall deliver to
Buyer certificates registered in the name of Sellers, endorsed in blank,
representing the Shares, free and clear of all liens, encumbrances, security
interests and adverse claims.

13.4 PAYMENT OF CLOSING AMOUNT. On the day that is two (2) business
days prior to the date scheduled for Closing, Sellers shall furnish to Buyer a
pro forma consolidated balance sheet of the

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<PAGE>

Company as at the date scheduled for Closing, certified by the chief
financial officer of the Company as having been prepared in good faith using
the best information then available. On the day that is one (1) business day
prior to the Closing, Sellers and Buyer will cooperatively prepare an agreed
Closing statement listing each of the Base Price adjustments to be effected
at the Closing pursuant to Sections 3.4, 7.6, 7.8, 8.4, 8.5, 8.6 and 9.5
hereof and the estimated Purchase Price after such Adjustments. Such
estimate, less the Deposit and the amount of Outstanding Debt, shall be paid
by Buyer to Sellers at Closing by wire transfer in accordance with payment
instructions furnished by Sellers.

13.5 WORKING CAPITAL RECONCILIATION.

(a) Within the period ending sixty (60) days after the Closing
Date, Buyer shall furnish to Sellers a consolidated balance sheet of the
Company as at Closing Date, together with a calculation of the Adjusted
Consolidated Working Capital as at the Closing Date, certified by the chief
financial officer of the Buyer as having been prepared based upon the best
information reasonably available. Representatives of Sellers shall have such
access to the offices, records, files, books of account and other information
of the Company as may be reasonably necessary to audit and verify the
information set out on the balance sheet furnished by Buyer. Buyer shall
cause its and the Company's personnel to reasonably assist Sellers'
representatives in conducting such audit. Upon completion of Sellers' audit,
representatives of Sellers and Buyer shall meet and attempt to reach
agreement on the actual Adjusted Consolidated Working Capital of the Company
as at the Closing Date. Any such agreement shall be evidenced by a written
memorandum of agreement executed by authorized representatives of Sellers and
Buyer and shall be final, conclusive and binding on the parties.

(b) If within thirty (30) days after receipt by Sellers of the
balance sheet furnished by Buyer pursuant to (a) above, the parties are unable
to reach agreement on the actual amount of the Adjusted Consolidated Working
Capital as at the Closing Date, then (i) if the parties so agree, the period for
attempting to reach agreement shall be extended for an additional specified
period, or (ii) if the parties cannot or do not choose to agree on an extension,
the amount of the Adjusted Consolidated Working Capital as at the Closing Date
shall be determined pursuant to subsection (c) of this Section 13.5.

(c) Sellers shall submit to Buyer the names of two (2)
national independent public accounting firms, neither of which shall have
been engaged by Sellers or the Company during the three-year period ending on
the Closing Date. Buyer shall select one of said firms by written notice to
Sellers within three (3) business days after receipt of Sellers' nomination.
The independent public accounting firm selected by Buyer (the "Accounting
Firm") shall be engaged jointly by Buyer and Sellers and shall meet with
representa-

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<PAGE>

tives of Buyer and Sellers and be apprised of their respective calculations
of the Adjusted Consolidated Working Capital as at the Closing Date. The
Accounting Firm then shall make such independent study as it shall deem
appropriate to determine, as nearly as possible, the actual Adjusted
Consolidated Working Capital as at the Closing Date. Sellers and Buyer shall
make available to the Accounting Firm all information reasonably requested
by the Accounting Firm to make such determination. Said determination when
made shall be conveyed to Sellers and Buyer in writing and shall be final,
conclusive and binding on the parties with respect to such issue. All fees
and expenses charged by the Accounting Firm in connection with the
above-described engagement shall be paid by the party whose calculation of
the Adjusted Consolidated Working Capital originally submitted to the
Accounting Firm bears the greatest difference from the Adjusted Consolidated
Working Capital determined by the Accounting Firm. Sellers and Buyer hereby
agree that the Accounting Firm shall have no liability of any nature
whatsoever to Sellers, Buyer or any of their respective affiliates based upon
or arising out of services performed in connection with the above-described
engagement, except to the extent resulting from gross negligence or willful
misconduct.

(d) Promptly after the Adjusted Consolidated Working Capital
as at the Closing Date is determined by agreement of the parties pursuant to
(b) above or by the Accounting Firm pursuant to (c) above, a revised Closing
statement shall be prepared with the only changed entry being the adjustment
for Adjusted Consolidated Working Capital. Promptly thereafter the party in
whose favor such changed entry is made shall be paid by the other party the
amount of the change, to the same end as if the revised Closing statement had
been the Closing statement upon which the payments at Closing were based.

13.6 ADDITIONAL DOCUMENTS. Within five (5) days after Closing,
each Seller shall deliver to Buyer at the Company's offices, to the extent
the same are not already in the possession of the Company, copies or
originals of all lease files, well files, gas and oil sales contract files,
division order files, abstracts, title opinions, reports, maps, engineering,
geological and geophysical data and other files, records and data, insofar as
the same are in existence and in the possession of such Seller or its
affiliates, are directly related to the Assets (other than the Excluded
Assets), and are necessary for the realization by the Company of the value of
the Assets.

ARTICLE 14
MISCELLANEOUS

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<PAGE>

given by facsimile transmission on weekends, holidays or after 5:00 p.m.
Central Time, shall be deemed received on the next business day. If
delivered by commercial delivery service or mailed by registered or certified
mail, the delivery receipt shall be evidence of the date of receipt. Either
party may, by written notice so delivered to the other, change the address to
which delivery shall thereafter be made.

(a) Notices to Sellers:

Mr. Rolf N. Hufnagel
Carlton Resources Corporation
Two Warren Place, Suite 813
6120 S. Yale
Tulsa, OK 74136
Fax No. (918) 495-1077

and to:

Mr. Robert E. Davis, Jr.
Carlton Resources Corporation
Two Warren Place, Suite 813
6120 S. Yale
Tulsa, OK 74136
Fax No. (918) 495-1077

With copy to:

Lynnwood R. Moore, Jr., Esq.
Conner & Winters A Professional Corporation
First Place Tower, Suite 3700
15 E. Fifth Street
Tulsa, OK 74103-4391
Fax No. (918) 586-8548

(b) Notices to Buyer:

Mr. Larry E. Lee, President
RAMCO Operating Company
Meridian Tower, Suite 650
5100 E. Skelly Drive
Tulsa, OK 74135
Fax No. (918) 663-9214

With copy to:

C. David Stinson, Esq.
McAfee & Taft A Professional Corporation
Tenth Floor, Two Leadership Square
Oklahoma City, Oklahoma 73102
Fax No. (405) 235-0439

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<PAGE>

14.2 BINDING EFFECT. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns.

14.3 COUNTERPARTS. This Agreement may be executed in any number of
counterparts which taken together shall constitute one and the same instrument
and each of which shall be considered an original for all purposes.

14.4 FEES AND EXPENSES. Each party hereto will bear and pay its
own expenses of negotiating and consummating the transactions contemplated by
this Agreement, except that Sellers shall bear and pay all of the fees and
expenses of Spectrum Energy Advisors, Inc. ("Spectrum") with respect to the
services rendered by Spectrum to both Sellers and Buyer in connection with
the transaction contemplated hereby, but not to exceed the sum of $250,000.

14.5 SECTION HEADINGS. The section headings contained in this
Agreement are for convenient reference only and shall not in any way affect
the meaning or interpretation of this Agreement.

14.6 SUPERSEDING EFFECT. This Agreement supersedes any prior
agreement or understanding between the parties with respect to the subject
matter hereof.

14.7 GOVERNING LAW; ENFORCEMENT. This Agreement shall be governed
by, construed and enforced in accordance with the laws of the State of
Oklahoma applicable to contracts made and to be performed entirely therein.
The prevailing party in any litigation initiated to enforce rights under or
collect damages for breach of this Agreement shall be entitled to
reimbursement from the non-prevailing party of all costs and expenses,
including attorneys' fees, incurred by the prevailing party in connection
with such litigation.

14.8 EXHIBITS AND SCHEDULES. The Exhibits and Schedules referred to
herein are attached hereto and by this reference made a part hereof.

14.9 ANNOUNCEMENTS. Sellers and Buyer shall consult with each other
with regard to all press releases and other announcements issued by either party
concerning this Agreement or the transaction contemplated hereby and, except as
may be required by applicable laws or the applicable rules and regulations of
any governmental agency or stock exchange, neither Buyer nor Sellers shall issue
any such press release or other publicity without the prior written consent of
the other party.

14.10 SURVIVAL. The representations and warranties of Sellers set out
in Article 4 hereof shall survive the Closing; provided, however, that after the
Closing, Buyer shall have no claim against Sellers for breach of warranty or
inaccuracy of representa-

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<PAGE>

tion made by Sellers in said Article 4 unless (i) Sellers or either of them
had actual knowledge prior to the Closing Date that the facts which are the
subject of Buyer's claim were misrepresented or not as warranted in Section
4, and (ii) Buyer initiates litigation against Sellers or either of them with
respect to such misrepresentation or breach of warranty on or prior to (2)
years from the Closing Date. The representations and warranties (i) of
Sellers as set out in Article 5 hereof, and (ii) of Buyer as set out in
Article 6 hereof, shall survive the Closing. The covenants of the parties
under this Agreement shall survive the Closing (for this purpose, nothing
contained in Article 4 hereof shall be deemed to be a covenant).

14.11 INDEMNITY.

(a) Subject to the limitations under Section 14.10 hereof,
Sellers agree to indemnify, defend and hold Buyer harmless against any
damage, loss, cost, liability and expense, including court costs and
attorneys' fees (hereinafter referred to as "Damages"), resulting from (i)
any inaccuracy of representation or breach of warranty made by Sellers under
this Agreement, and (ii) any breach of covenant on the part of Sellers
hereunder. Buyer agrees to indemnify, defend and hold Sellers harmless
against any damage, loss, cost, liability and expense, including court costs
and attorneys' fees, resulting from any inaccuracy of representation or
breach of warranty or covenant on the part of Buyer hereunder.
Notwithstanding anything herein to the contrary (x) neither party (for this
purpose, Sellers collectively shall be deemed a "party") will have any
liability for Damages under this Section 14.11 until the total of all Damages
for which such party otherwise would be liable exceeds the sum of $50,000,
(y) except as provided in (z) below, the amount of damages for which Sellers
shall be liable hereunder shall never exceed seventy percent (70%) of the
cash portion of the Purchase Price received by Sellers at the Closing, and
(z) the amount of Damages for which Buyer shall be liable hereunder, or for
which Sellers shall be liable for inaccuracy of representation or breach of
warranty made under Article 5 hereof, shall never exceed the cash portion of
the Purchase Price received by Sellers at the Closing.

(b) Any claim for indemnification shall be adjusted to take
into account the receipt of any insurance proceeds by the indemnified party
incident to the matter giving rise to such claim. Buyer agrees that it will
make (or cause to be made) a claim against any applicable insurance policy
available to it with respect to such matter, and in such event Buyer may
provide notice of such claim to the indemnifying party but shall not proceed
further against the indemnifying party for indemnification hereunder (except
for the filing of an action if necessary to avoid the running of any
applicable statute of limitations) until any related insurance claim has been
paid, denied or settled. Buyer will not be required to pursue any other
remedies against any insurance policy or carrier if a

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<PAGE>

claim is denied. To the extent Buyer elects not to further pursue any
claim, the indemnifying party shall be entitled to pursue such claim at its
sole cost and expense. Any such action by the indemnifying party shall not
affect or delay the rights of Buyer to proceed against the indemnifying
party for indemnification hereunder.

14.12 FURTHER ASSURANCES. After the Closing the parties shall, at
the sole cost and expense of the requesting party if more than an immaterial
expense is involved, (i) furnish such additional information, (ii) execute
and deliver such additional documents, and (iii) perform such additional
acts, as may be necessary and reasonably requested by the other party or
parties to effect the transaction contemplated by this Agreement.

14.13 WAIVER. The rights and remedies of the parties to this
Agreement are cumulative and not alternative. Neither the failure nor any
delay by any party in exercising any right, power or privilege under this
Agreement or the documents referred to herein will operate as a waiver of
such right, power or privilege, and no single or partial exercise of any such
right, power or privilege will preclude any other or further exercise of such
right, power or privilege or the exercise of any other right, power or
privilege. To the maximum extent permitted by applicable law, (i) no waiver
of any claim or right under this Agreement will be valid unless evidenced by
a writing signed by the waiving party, (ii) no waiver given by a party will
be applicable except in the specific instance for which it is given, and
(iii) no notice to or demand on a party will be deemed to be a waiver of any
obligation of such party or of the right of the party giving such notice or
demand to take further action without notice or demand as provided in this
Agreement or the documents referred to herein.

Executed as of the date first above written.

SELLERS:

s/Rolf N. Hufnagel
-----------------------------------
Rolf N. Hufnagel

s/Robert E. Davis, Jr.
-----------------------------------
Robert E. Davis, Jr.

BUYER:

RAMCO Operating Company

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<PAGE>

By: s/Larry E. Lee
----------------------------------
Larry E. Lee, President

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<PAGE>

SALE AND PURCHASE AGREEMENT

THIS SALE AND PURCHASE AGREEMENT (this "Agreement") is made and entered
as of the 16th day of June, 1997, by and between QUARLES DRILLING
CORPORATION, an Oklahoma corporation ("Seller"), and RAMCO-NYL 1987 LIMITED
PARTNERSHIP, a Texas limited partnership ("Buyer").

WITNESSETH THAT:

WHEREAS, Seller is the owner of the Interests, as hereinafter defined);
and

WHEREAS, Seller desires to sell to Buyer and Buyer desires to purchase
from Seller the Interests on the terms and conditions set forth herein.

NOW THEREFORE, in consideration of the premises and of the mutual
covenants of the parties hereinafter expressed, it is hereby agreed as
follows:

ARTICLE 1
INTERESTS

1.1 INTERESTS DEFINED. As used herein, the term "Interests"
means the aggregate of all right, title and interest owned by Seller in, to
and under the following:

(a) The oil and gas leases, the oil, gas and mineral leases,
and the licenses, permits and orders (the "Leases") which authorize or relate
to the exploration for and production of oil, gas and other minerals from the
lands described in Exhibit A (the "Land");

(b) All wells, personal property, fixtures, gathering
systems (including, without limitation, the Camelot System located in Dewey
County, Oklahoma), inventory, equipment and improvements located on the
Leases or the Land, or used or obtained in connection with the ownership,
exploration, development or operation of the Leases or the Land, or the
production, sale, processing, treating, storing, gathering, transportation or
disposal of hydrocarbons, water or any other substances produced therefrom or
attributable thereto;

(c) All contracts, agreements, leases, licenses, easements,
rights under orders of regulatory authorities having jurisdiction with
respect to, and other properties and rights of every nature whatsoever in or
incident to the ownership, exploration, development, use or occupancy of the
Leases or the Land or any interest therein, or the production, sale,
processing, treating, storing, gathering, transportation or disposal of
hydrocarbons, water or any other substance produced therefrom or attributable
thereto, including, without limitation, all mineral, royalty, overriding
royalty, production payment, net profits and

<PAGE>

other rights and interests in or to share in the proceeds from the sale of
production from the Leases or the Land, and all rights relating to gas
imbalances (including the right to balance in kind or by cash payment);

(d) All other oil and gas properties, rights and interests
of every nature whatsoever owned by Assignor, including, but not limited to,
undeveloped leasehold; provided, however, that properties not described in
Exhibit A may be excluded from the Interests by written notice given by Buyer
to Seller within a reasonable time after discovery of such properties by
Buyer, whether before of after the Closing; and

(e) All of the properties, interests and rights described in
(a) through (d) above as the same may be enlarged by the discharge of any
payments out of production or by the removal of any charges or encumbrances
to which any of said properties, interests or rights are subject; any and all
renewals and extensions of any of said properties, interests or rights; all
contracts and agreements supplemental to or amendatory of or in substitution
for the contracts and agreements described above; and all rights, titles and
interests accruing or attributable to the Leases by virtue of being included
in any unit.

1.2 EXCEPTION; RESERVATION. There is hereby excepted from the
Interests and reserved unto Seller (i) all accounts receivable accruing prior
to the Effective Time; (ii) all hydrocarbon production from or attributable
to the Interests with respect to all periods prior to the Effective Time,
including all proceeds attributable thereto and all hydrocarbons owned by
Assignor and in storage at the Effective Time; and (iii) any refunds or
additional revenues accruing to the Interests and any adjustments for
expenses paid by Assignor to the extent attributable to the period prior to
the Effective Time.

1.3 PROPERTY DEFINED. As used herein, the term "Property" shall
mean each individual well or unit scheduled separately on Exhibit A, together
with all of the Leases, personal property, fixtures, equipment and other
rights and interests related exclusively thereto.

ARTICLE 2
SALE AND PURCHASE OF THE INTERESTS

2.1 AGREEMENT FOR SALE AND PURCHASE; EFFECTIVE TIME. Seller
hereby agrees to sell to Buyer and Buyer hereby agrees to purchase from
Seller on the Closing Date (as hereinafter defined) the Interests. The
effective time of the sale and purchase of the Interests shall be 7:00 a.m.
local time (in each locality where the various items of the Interests are
located) on April 1, 1997 (the "Effective Time").

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<PAGE>

2.2 PURCHASE PRICE. The purchase price for the Interests (the
"Purchase Price") shall be the sum of (i) $11,200,000 the "Base Price"), less
(ii) the Net Adjustment (as hereinafter defined). The Purchase Price shall
be paid by Buyer in immediately available funds at the Closing (as
hereinafter defined).

2.3 NET ADJUSTMENT. The Net Adjustment shall be the sum of the
adjustment amounts described in Sections 3.4 (Title Defects), Section 7.4
(Gas Imbalances), Section 7.5 (Disapproved Operations), Section 7.6
(Preferential Rights), Section 7.7 (Operations Subsequent to the Effective
Time), Section 8.5 (Environmental Defects) and Section 9.3 (Material Adverse
Changes).

2.6 AGREED VALUES. The Base Price has been allocated by the
parties among the various items of the Interests as set out in Exhibit A.
The amounts so allocated and are referred to herein as the "Agreed Values" of
such items of the Interests.

ARTICLE 3
TITLE EXAMINATION; ADJUSTMENTS

3.1 TITLE MATERIALS. From the date hereof to the Closing Date,
Seller shall provide Buyer full opportunity to examine the books, records and
files of Seller insofar as they pertain to the Interests. Seller makes no
warranty or representation, express or implied, with respect to the accuracy
or completeness of any title information, records or other data made
available to Buyer in connection with this Agreement.

3.2 TITLE DEFECTS; DEFENSIBLE TITLE.

(a) As used herein, the term "Title Defect" shall mean any
lien, claim, defect, encumbrance, security interest, burden or deficiency
such that Seller does not have Defensible Title (hereinafter defined), as
distinguished from technically marketable title, to any Property; provided,
no Permitted Encumbrance (hereinafter defined) shall constitute a Title
Defect.

(b) As used herein, the term "Defensible Title" shall mean
clear, unencumbered, uncontested, record title to a Property in Seller, such
that (i) after giving effect to existing spacing orders, operating
agreements, unit agreements, unitization orders and pooling designations, and
subject to the limitations, if any, described in Exhibit A, and after taking
into account all royalty interests, overriding royalty interests, net profit
interests, production payments and other burdens on production, Seller is
entitled to a share (expressed as a decimal) of all oil, gas and other
minerals produced from each well on such Property which is not less than the
Net Revenue Interest set out in Exhibit A in connection with the description
of such Property, (ii) Seller owns an undivided interest (expressed as a
decimal) equal to the

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<PAGE>

Working Interest set out in Exhibit A in connection with the description of
such Property in and to all property and rights incident thereto, including
all rights in, to and under all agreements, leases, permits, easements,
licenses and orders in any way relating thereto, and in and to all wells,
personal property, fixtures and improvements thereon, appurtenant thereto or
used or obtained in connection therewith or with the production or treatment
or sale or disposal of hydrocarbons or water produced therefrom or
attributable thereto, (iii) Seller is obligated for a fraction of the costs
relating to the exploration, development and operation of such Property no
greater than the Working Interest set out in Exhibit A in connection with the
description of such Property, and (iv) except as shown in Exhibit A, Seller's
interest in such Property and in the production therefrom is not subject to
being reduced by virtue of reversionary interests owned by third parties.

(c) As used herein, the term "Permitted Encumbrances" means
(i) matters described without material omission in any of the Exhibits or
Schedules attached hereto, (ii) royalties, overriding royalties, net profits
interests, production payments and other burdens on production which do not
reduce Seller's Net Revenue Interest in any Property to less than that
described in Exhibit A, (iii) liens for taxes, assessments, labor and
materials where payment is not due, (iv) operating agreements, unit
agreements, unitization and pooling designations and declarations, gathering
and transportation agreements, processing agreements, gas, oil and liquids
purchase, sale and exchange agreements, and other similar agreements which
are not required by the terms of this Agreement to be disclosed on any
Schedule hereto, provided (A) they contain terms and conditions customary in
the oil and gas industry, (B) they do not adversely affect or burden the
ownership or operation of the Interests affected thereby, (C) all amounts due
and payable by Seller thereunder have been paid, and (D) Seller is not in
material default thereunder, (v) regulatory authority of governmental
agencies not presently or previously violated, easements, surface leases and
rights, plat restrictions and similar encumbrances, provided that they do not
materially detract from the value, materially increase the cost of operation
of any of the Properties or otherwise adversely affect the operation thereof,
and (vi) liens, charges, encumbrances and irregularities in the chain of
title which, because of remoteness in or passage of time, statutory cure
periods, marketable title acts or other similar reasons, have not affected or
interrupted, and are not reasonably expected to affect or interrupt, the
ownership of Seller or its predecessors in or the receipt of production
revenues from the Properties affected thereby.

3.3 TITLE EXAMINATION; NOTICE OF DEFECTS.

(a) Promptly after execution of this Agreement, Buyer shall,
at Buyer's sole cost and expense, commence and pursue

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<PAGE>

such examination of title to the Interests as Buyer deems necessary or
proper. Buyer will conclude its title review and give notice to Sellers of
any asserted Title Defects affecting the Interests not later than five (5)
business days prior to the date scheduled for the Closing in Section 12.1
hereof (the "Title Notice Date"). Each such notice shall include a brief
description of each Title Defect of which notice is being given, the action
required to cure such Title Defect and the proposed adjustment to the Base
Price by reason of the existence of such Title Defect. Buyer shall be deemed
to have waived any Title Defects existing with respect to the Interests
except to the extent such Title Defects are set out in a notice given on or
prior to the Title Notice Date.

(b) Seller shall have a period of three (3) business days
after the Title Notice Date to cure all or any portion of the Title Defects
described in any notice(s) of Title Defects properly given by Buyer prior to
such date. In the event Seller is unable or unwilling to cure any of the
asserted Title Defects prior to the expiration of each cure period, the
parties shall proceed in accordance with Section 3.4.

3.4 ADJUSTMENTS.

(a) If any uncured Title Defect is based on Buyer's notice
that Seller owns a Net Revenue Interest in any Property less than that shown
on Exhibit A with respect to such Property, then the Agreed Value of such
Property shall be reduced in the same proportion that the actual Net Revenue
Interest bears to the Net Revenue Interest shown therefor on Exhibit A and
the amount of such reduction shall constitute the approved adjustment amount
with respect to such Title Defect.

(b) If any uncured Title Defect involves a claim against or
uncertainty with respect to Seller's title to a particular Property, the
parties shall attempt to negotiate a mutually acceptable reduction in the
Agreed Value of the affected Property by reason of such defect. In the event
the parties agree on an appropriate reduction in the Agreed Value, such
amount shall constitute the principal amount of Buyer's approved claim with
respect to such Title Defect. If the parties are unable to agree on an
appropriate reduction and Buyer elects not to waive the Title Defect, then
Seller shall have the option of (i) proceeding to Closing with respect to
such Property (provided Buyer elects to accept such Property) but reducing
the Base Price by the Agreed Value of such Property, or (ii) excluding the
affected Property from the Interests and reducing the Base Price by the
Agreed Value thereof, or (iii) proceeding to Closing but directing the Buyer
to deposit in escrow pursuant to Section 3.5 the amount described in Section
3.5 with respect to the affected Property and resolving the outstanding Title
Defect after the Closing pursuant to the terms of such Section.

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<PAGE>

(c) Notwithstanding the provisions of subsections (a) and
(b) above, Buyer shall not be entitled to any adjustment of the Purchase
Price at the Closing by reason of asserted Title Defects unless the sum of
all such claims approved pursuant to Section 3.4(a), agreed to by the parties
pursuant to Section 3.4(b), treated by as a reduction of the Base Price or
subject to being deposited in escrow pursuant to Section 3.4(b), exceeds the
sum of $50,000.

3.5 ESCROW FOR TITLE DEFECTS. In the event Seller desires
additional time to cure any Title Defect that Seller is unable to cure prior
to Closing, Seller shall so notify Buyer not later than one (1) business day
prior to the Closing Date. Such notice shall constitute the agreement of
Seller to use its reasonable best efforts following the Closing to cure the
Title Defect(s) specified in such notice. With respect to each Property
specified in such notice, at the Closing Buyer shall either (i) waive the
Defect(s) affecting such Property, or (ii) deposit in escrow with a mutually
acceptable escrow agent (a bank or trust company having an office in Tulsa,
Oklahoma) the Agreed Value of such Property, plus or minus the amount of any
Closing adjustments relating to such Property. Seller shall deposit with the
escrow agent a properly executed and acknowledged Assignment, Conveyance and
Bill of Sale, in the form attached hereto as Exhibit B, covering each
Property for which the asserted Defect(s) are not waived and the prescribed
amount is deposited in escrow by Buyer. Seller shall have a period of thirty
(30) days after the Closing to cure the specified Title Defect(s) affecting
each such Property, and upon concurrence by Buyer that the required curative
action has been completed with respect to any Property, Seller and Buyer
shall jointly direct the escrow agent to distribute to Seller the amount
deposited in escrow with respect to such Property, and to Buyer the
Assignment covering such Property. Any adjustment items arising after the
Closing Date with respect to such Property promptly shall be accounted for
between Seller and Buyer. The escrow agreement shall direct the escrow agent
to return to Buyer the entire amount deposited in escrow with respect to any
Property, and to Seller the Assignment covering any Property, for which a
joint notice of distribution is not received by the escrow agent by the day
that is thirty-five (35) days after the Closing Date, whereupon the escrow
shall be terminated. Any remaining disagreement between the parties with
respect to the exclusion of or deferred closing with respect to such
Properties shall be resolved between Seller and Buyer without involvement of
the escrow agent. All fees and expenses of the escrow agent shall be borne
and paid equally by Seller and Buyer; provided, however, that if either party
makes any claim or assertion that extends the involvement of the escrow agent
beyond the thirty-five (35) day period hereinabove described, such party
alone shall bear and pay all fees and expenses of the escrow agent thereafter
incurred.

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<PAGE>
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER

Seller hereby represents and warrants to Buyer as follows:

4.1 ORGANIZATION; AUTHORITY TO CONDUCT BUSINESS. Seller is a
corporation duly organized, validly existing and in good standing under the
laws of its state of incorporation, and is duly qualified as a foreign
corporation and in good standing under the laws of each state where
Properties are located, except to the extent failure to so qualify is not
required under the laws of any such state and Seller furnishes to Buyer an
opinion of counsel to that effect from an attorney licensed to practice law
in such state. Seller has the power and authority under its corporate
charter and applicable law to own and use its properties and to transact the
business in which it is engaged, and holds all franchises, licenses and
permits necessary and required therefor.

4.2 AGREEMENT AUTHORIZED; BINDING EFFECT. This Agreement has
been duly authorized, executed and delivered by Seller and all requisite
corporate action has been taken to authorize the execution hereof, the
transactions contemplated hereby and all things necessary or desirable in
order to accomplish the sale of the Interests, and Seller otherwise has good
right and lawful authority to consummate the same. This Agreement
constitutes the valid and binding agreement of Seller, enforceable against
Seller in accordance with its terms, and all instruments required hereunder
to be executed and delivered by Seller at the Closing will constitute valid
and binding agreements of Seller, enforceable against Seller in accordance
with their terms.

4.3 STATUS OF PROPERTIES; NO LIENS. Seller has not since the
Effective Time made any assignment, conveyance or encumbrance of the
Interests. To Seller's knowledge, (i) the Leases to which production has been
attributed for purposes of calculating the working interests and net revenue
interests in Exhibit A are in full force and effect, have not been cancelled
or terminated, and no basis exists for the assertion of any such claim, and
(ii) the Interests are not subject to or burdened by any mortgage, security
interest or other lien, and no basis exists for the assertion of any such
lien.

4.4 BROKERS AND FINDERS. Seller has incurred no liability,
contingent or otherwise, for brokers' or finders' fees in respect of this
transaction for which Buyer shall have any responsibility whatsoever.

4.5 COMPLIANCE WITH AGREEMENTS AND LAWS. No default exists under
any of the terms and provisions, express or implied, of the Leases or of any
material agreement, contract or commitment to which Seller is a party or to
which any part of the Interests is

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subject, and Seller has not received any notice of any claim of such default.
All wells included in the Interests have been drilled, completed and
operated, and all production therefrom has been accounted for and paid to the
persons entitled thereto, and the Properties have been operated, in
substantial compliance with all applicable Federal, Indian, state and local
laws and applicable rules and regulations of the Federal, Indian, state and
local regulatory authorities having jurisdiction thereof.

4.6 SALE OF PRODUCTION. Except as disclosed in Schedule 4.6,
Seller is not obligated by virtue of any prepayment made under any production
sales contract or any other contract containing a take-or-pay clause, or
under any similar arrangement, to deliver oil, gas or other minerals produced
from or allocated to any of the Properties at any time after the Effective
Time without receiving full payment therefor at the time of delivery. Except
for routine suspense on new wells, proceeds from the sale of oil and gas from
the Properties are being received by Seller in a timely manner and are not
being held in suspense for any reason. Seller has described in Schedule 4.6
and made available to Buyer for examination all agreements having a term
extending beyond August 1, 1997 (other than agreements terminable upon less
than sixty (60) days' notice) pursuant to which hydrocarbons produced from
the Properties are sold, transported, processed or otherwise disposed of or
marketed.

4.7 PRODUCTION AND AD VALOREM TAXES. All ad valorem, property,
production, severance and similar taxes based on or measured by the ownership
of property or the production or removal of hydrocarbons or the receipt of
proceeds therefrom have been timely paid and all required returns and reports
related thereto filed.

4.8 MATERIAL EXECUTORY CONTRACTS RELATING TO THE INTERESTS.
Except for operating agreements, gas purchase and sale contracts and similar
operating and disposition of production contracts containing terms and
provisions reasonably customary in the industry, or as disclosed in Schedule
4.8, there are no material contracts or agreements affecting the Interests
for which Buyer will have any responsibility or liability after the Closing.
To Seller's knowledge, there are no express provisions under any Lease or
other agreement which the require the drilling of any well or the conduct of
any other operations involving a material capital expenditure to earn or
continue to own any of the Interests.

4.9 CLAIMS OR LITIGATION. Except as disclosed in Schedule 4.9,
there is neither any suit, action or other proceeding pending before any
court or governmental agency nor, to the knowledge of Seller, any claim,
dispute, suit, action or other proceeding threatened against Seller or any of
the Interests or any third party which might result in the impairment or loss
of

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Seller's title to any of the Interests or the value thereof, or increase
the cost of operation thereof.

4.10 EQUIPMENT AND OFF-LEASE FACILITIES. With the exception of
the real and personal property described in Schedule 4.10, all of which is
being retained by Seller, the Interests include and there will be conveyed to
Buyer at the Closing all property, equipment, easements, rights and
facilities utilized in connection with the operation of the Interests at the
Effective Time, and there are no properties, equipment, easements, rights or
facilities necessary for the continued operation of the Interests which are
not included in the Interests.

4.11 OPERATIONS. No operations of the types prohibited by Section
6.2 hereof have been conducted since the Effective Time or are now being
conducted.

4.12 CONSUMMATION OF TRANSACTIONS. The consummation of the
transactions contemplated hereby will not constitute a violation or breach
of, or an event of default under, any contract or agreement affecting the
Interests or constitute the happening of a condition upon which any other
party to such a contract may exercise any right or option which will
adversely affect any of the Interests.

4.13 STATUS OF WELLS. Except as disclosed in Schedule 4.13, all
wells included in the Interests, and all wells located on the Land and not
included in the Interests but with respect to which Seller has, or after the
Closing Buyer may have, any liability to plug, either (i) are producing or
capable of producing hydrocarbons in commercial quantities without the
necessity of rework or recompletion operations, or (ii) are being utilized as
injection, water supply or disposal wells and are properly permitted and
fully equipped for such operations, or (iii) have been properly plugged and
abandoned in accordance with all applicable rules and regulations of
governmental authorities having jurisdiction with respect thereto.

4.14 GAS IMBALANCES. Certain gas imbalances existed at the
Effective Time with respect to production from or attributable to certain of
the Properties. The best information concerning such imbalances available to
Seller as of the date of this Agreement is set forth on Schedule 4.14 and
such imbalances have been taken into account by Buyer in determining the
Purchase Price.

4.15 ENVIRONMENTAL CONDITIONS. Except as disclosed in Schedule
4.15, to Seller's knowledge the Properties are in compliance with the
environmental standards set out in Section 8.4.

4.16 NO RESTRICTIONS ON SEISMIC DATA. To Seller's knowledge,
except as provided in the Abbeville 3-D Participation

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Agreement (the "Abbeville Agreement"), no restrictions exist under any
contract, license or other agreement with respect to the transfer or
assignment by Seller to Buyer of any raw, processed or other seismic data
owned by or available to Seller with respect to the Interests or the
assignment by Seller to Buyer of the right to access and use any such data in
the possession of third parties. Seller agrees to use its best efforts to
obtain all consents or waivers required under the Abbeville Agreement in
order to permit the assignment to Buyer of all of Seller's rights thereunder,
including, without limitation, access to all raw, processed and interpretive
data heretofore obtained under the Abbeville Agreement to the same extent
presently available to Seller, and the right to participate in and receive
the benefit of future seismic operations thereunder to the same extent
presently available to Seller. In the event Seller is unable to obtain such
consents and waivers prior to the Closing, the Base Price shall be adjusted
downward at the Closing by the Agreed Value of the Abbeville Seismic data as
set out in Exhibit A; however, if within three (3) months after the Closing,
either Seller or Buyer is successful in obtaining such consents and waivers,
then upon receipt of same by Buyer in form and substance reasonably
satisfactory to Buyer, Buyer shall pay to Seller the Agreed Value of the
Abbeville Seismic data as set out in Exhibit A, less any actual out-of-pocket
costs or expenses incurred by Buyer in obtaining such consents and waivers.

ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer represents and warrants to Seller as follows:

5.1 ORGANIZATION. Buyer is a limited partnership, duly organized
and validly existing under the laws of the State of Texas.

5.2 AGREEMENT AUTHORIZED; BINDING EFFECT. This Agreement has
been duly authorized, executed and delivered by Buyer and all requisite
partnership action has been taken to authorize the execution hereof, the
transactions contemplated hereby and all things necessary or desirable in
order to accomplish the purchase of the Interests, and Buyer has all
necessary authority under its partnership agreement and other governing
documents and otherwise has good right and lawful authority to consummate the
same. This Agreement constitutes the valid and binding agreement of Buyer
enforceable against Buyer in accordance with its terms, and all instruments
required hereunder to be executed and delivered by Buyer at the Closing will
constitute valid and binding agreements of Buyer enforceable against Buyer in
accordance with their terms.

5.3 BROKERS AND FINDERS. Buyer has incurred no liability,
contingent or otherwise, for brokers' or finders' fees

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in respect of this transaction for which Seller shall have any responsibility
whatsoever.

ARTICLE 6
COVENANTS OF SELLER PENDING CLOSING

Seller covenants and agrees with Buyer that from and after the date
of this Agreement and until the Closing, Seller will conduct its business
subject to the following provisions and limitations:

6.1 ORDINARY COURSE. The Properties will be maintained and
operated in a good and workmanlike manner consistent with historical
practices, and Seller will timely pay or cause to be paid all costs and
expenses incurred in connection therewith.

6.2 RESTRICTIONS ON OPERATIONS. Subject to the provisions of
Section 7.5 hereof, except with Buyer's prior written consent no operations
will be conducted for the drilling of any new well, the reworking or
redrilling of any existing well or the making of any other capital
expenditure on the Properties requiring an expenditure by Seller in excess of
$20,000 for any single project. Insofar as any of the following described
actions would affect the Interests, Seller will not waive any rights or enter
into any new agreements or commitments other than in the ordinary course of
business, abandon any well capable of commercial production (based upon
prevailing economic conditions), release or abandon any Properties, or
encumber, sell or otherwise dispose of any of the Properties other than
personal property thereon which is replaced by equivalent property or
consumed in the operation of such Properties in the ordinary course of
business.

6.3 MAINTENANCE OF FILES. Seller will exercise reasonable
diligence in safeguarding and maintaining secure all files, books and records
currently maintained.

6.4 ACCESS OF BUYER. Buyer shall have access to the employees,
offices, properties, records, files, geological and geophysical data,
engineering reports and evaluations, books of account, and all other
information of the Seller pertaining to the Interests; provided, however,
that such investigation shall be conducted during normal business hours and
in a manner that does not unreasonably interfere with Seller's normal
operations. Seller shall reasonably assist Buyer in making such
investigation and shall cause the counsel, accountants, employees and other
representatives of Seller to be reasonably available to Buyer for such
purposes. During such investigation, Buyer shall have the right to make
copies of such records, files and other materials as Buyer may deem
advisable.

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ARTICLE 7
ADDITIONAL AGREEMENTS OF THE PARTIES

7.1 RETURN OF INFORMATIONAL MATERIAL. If this Agreement is not
consummated, Buyer shall return to Seller all of the items of information
which Seller has delivered to Buyer hereunder, including all copies of same
made by Buyer, together with all due diligence studies and reports prepared
by or for Buyer.

7.2 CONFIDENTIALITY OF INFORMATION. If the purchase and sale of
the Interests as contemplated by this Agreement is not completed, Buyer (i)
will keep the information furnished to Buyer hereunder or in contemplation
hereof strictly confidential, except to the extent such information (A)
becomes public other than as a result of dissemination by Buyer, (B) was
already known to Buyer other than as a result of a breach of a
confidentiality restriction, or (C) is furnished to Buyer by a third party
independently of Buyer's investigation pursuant to this Agreement, and (ii)
will not use any of such information to Buyer's financial advantage or in
competition with Seller. Notwithstanding the provisions of Section 14.6
hereof, this provision shall not be construed as superseding or limiting the
provisions of any confidentiality agreement heretofore executed by and
between Buyer and Seller.

7.3 COMPLIANCE WITH CONDITIONS. Buyer and Seller, respectively,
will proceed diligently using all reasonable efforts to cause all of the
conditions to the obligations of Seller and Buyer, respectively, to be timely
satisfied.

7.4 GAS IMBALANCES. If, prior to the Title Notice Date, Buyer
determines that the net gas imbalance (that is, the difference between
aggregate overproduction attributable to Seller's interest in the Properties
and the aggregate underproduction attributable to such interest) at the
Effective Date was greater than that set forth on Schedule 4.14, Buyer shall
so notify Seller. If such increase is confirmed, the Base Price shall be
adjusted at the Closing by an amount equal to $1.00 per Mcf for the increase
in net overproduction over that shown in Schedule 4.14; provided, however,
that no adjustment shall be made unless the increase in net overproduction
exceeds 10,000 Mcf. If, within the period ending December 1, 1997, Buyer
determines that the net gas imbalance at the Effective Time was greater than
that set forth in Schedule 4.14 (adjusted for any imbalance for which a
Purchase Price adjustment was made at the Closing), Buyer shall so notify
Seller. If such increase is confirmed, Seller promptly shall make a payment
to Buyer in an amount equal to $1.00 per Mcf for such increase; provided,
however, that no adjustment shall be made unless such increase exceeds 10,000
Mcf.

7.5 CAPITAL EXPENDITURES. During the period from the execution
of this Agreement to the Closing Date, Seller will

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consult with Buyer from time to time with respect to any operation proposed
to be conducted on the Properties which reasonably is expected to require an
expenditure by Seller in excess of $20,000 for any single project, and will
provide Buyer with all information reasonably available to Seller with
respect thereto. Buyer shall, within ten (10) days after receipt of Seller's
recommendation for conducting or participating in any such project, or within
such lesser period as may be required by the terms of any applicable
agreement, approve or disapprove such project. Failure of Buyer to respond
within the time required will be deemed to constitute disapproval by Buyer of
the project. In the event Buyer approves such project, Seller shall conduct,
propose or elect to participate in such project and shall incur and pay as
they become due the expenditures associated therewith. In the event the
project or operation is a well proposed by an unrelated third party and
Seller must, by operation of an applicable agreement or order of a regulatory
agency, elect either to participate in such well or lose the right to
participate in such well and/or other rights in the unit in which such well
is proposed (for example, but not by way of limitation, a non-consent penalty
under a joint operating agreement, requirement to accept consideration in
lieu of participation under a pooling order or forfeiture of the right to
participate in future development under an area of mutual interest
agreement), and Buyer disapproves or is deemed to have disapproved
participation by Seller in such well, then, upon five (5) days written notice
to Buyer (during which time Buyer may reverse its decision and approve
participation by Seller), Seller may elect to exclude from the Interests and
the sale hereunder the Property on which such operation is to be conducted
and reduce the Base Price by the Agreed Value of such Property.

7.6 CONSENTS; PREFERENTIAL RIGHTS TO PURCHASE. Promptly after
execution hereof, Seller will proceed diligently to solicit any consents to
the transfers contemplated hereby which are required to be obtained from
third parties and will give all notices required by existing contracts with
respect to preferential rights to purchase on the part of third parties and
to obtain waivers of such preferential rights. At the request of either
Seller or Buyer, the Closing may be deferred for a period of not more than
thirty (30) days solely with respect to those Properties, if any, for which a
consent is required and is not obtained by the Closing Date, or for which a
preferential right is outstanding as of the Closing Date, in order to obtain
the required consent or the waiver or exercise of the open preferential
right. Any item of the Interests which requires the consent of a third party
for transfer where such consent cannot be obtained prior to the Closing Date
or within such thirty (30) day period (other than routine consents required
in connection with federal, state and Indian leases), or which is subject to
a preferential right to purchase which is exercised prior to the Closing or
within such thirty (30) day period, shall be excluded from the Interests and
the sale hereunder and the Base Price reduced by the Agreed Value of such
Property.

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<PAGE>

7.7 ADJUSTMENTS FOR OPERATIONS SUBSEQUENT TO THE EFFECTIVE TIME.
The following adjustments shall be made to the Base Price for operations
conducted subsequent to the Effective Time to the extent the following described
items of revenue and expense relate to the Interests:

(a) The Base Price shall be adjusted upward by all amounts
actually paid by Seller in respect of (i) actual direct operating expenses and
capital expenditures (other than those prohibited by the terms hereof), (ii)
overhead or indirect expenses required to be paid by the terms of existing
operating agreements, and (iii) ad valorem, property, production, severance and
similar taxes and assessments based upon or measured by the ownership of
property, the production or removal of hydrocarbons or the receipt of proceeds
therefrom; to the extent such expenditures relate to the period between the
Effective Time and the Closing Date on the accrual method of accounting. Ad
valorem taxes shall be prorated on the basis of time, and if the taxes cannot be
determined for the current taxable year, then the amount thereof for the taxable
year most recently ended shall be used in determining ad valorem taxes
attributable to a particular period of time.

(b) The Base Price shall be adjusted downward by all proceeds
actually received by Seller (including proceeds from sale or salvage of any
personal property forming a part of the Interests as well as the hydrocarbons
produced therefrom and attributable thereto) to the extent such proceeds relate
to the period from the Effective Time to the Closing Date on the accrual method
of accounting. Proceeds received by Seller after the Effective Time for the
sale of production in storage at the Effective Time shall remain the property of
Seller and shall not give rise to an adjustment.

7.8 REVENUES IN SUSPENSE. Promptly after the execution of this
Agreement, Seller shall furnish Buyer a schedule listing all revenues held in
suspense by Seller relating to the Interests, including the Property to which
such revenues relate, the owners of the suspensed revenues (to the extent known
to Seller), the reasons such revenues are being in suspense and the date such
revenues were received by Seller. Such schedule shall include interest accrued
on the suspensed revenues to the extent required by applicable law. At the
Closing, Seller shall deliver to Buyer an amount equal to the amount of the
suspensed revenues and accrued interest described in such schedule, as updated
to the Closing Date. Buyer agrees to pay when due to the owners thereof, or
otherwise in accordance with applicable law, all suspense revenues and accrued
interest listed on the schedule furnished by Seller, as updated to the Closing
Date, and to indemnify and hold harmless Seller with respect to the payment
thereof up to but not exceeding the amounts reflected in such schedule and
delivered to Buyer at Closing. Any suspense obligations not listed on the above
described schedule, including

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interest not listed, shall remain the obligations of Seller and shall not be
assumed by Buyer.

ARTICLE 8
ENVIRONMENTAL MATTERS

8.1 PHYSICAL CONDITION OF THE PROPERTIES. The Properties have been
used for oil and gas drilling, production, gathering and processing operations,
related oil field operations and possibly for other operations, whether of a
similar or dissimilar nature. Physical changes in or under the Properties or
adjacent lands may have occurred as a result of such uses. The Properties also
may contain buried pipelines and other equipment, whether or not of a similar
nature, the locations of which may not be known to Seller or be readily apparent
by a physical inspection of the Properties. Third parties may have used the
Properties or the surface rights thereon for other purposes as well. Buyer
understands that Seller does not have the requisite information with which to
determine the exact nature or condition of the Properties nor the effect any
such use has had on the physical condition of the Properties. Buyer is hereby
notified that detectable amounts of regulated and unregulated chemicals and
other substances which may pose a threat to health or to plants or wildlife, or
which are known to cause illnesses, diseases, cancer, birth defects and other
reproductive harm, may be found in, on or around the Properties. Adverse
physical conditions, including the presence of such chemicals and other
substances, may not be revealed by Buyer's investigation. In addition, Buyer
acknowledges that some oil field production equipment may contain various
contaminants or hazardous substances, including without limitation, asbestos
and/or naturally-occurring radioactive material ("NORM"). In this regard, Buyer
expressly understand that NORM may affix or attach itself to the inside of
wells, materials, pipes and equipment as scale or in other forms, and that
wells, materials, pipes and equipment located on the Properties may contain NORM
and that NORM-containing materials may be buried or have been otherwise disposed
of on the Properties. Buyer also expressly understands that special procedures
may be required for the removal and disposal of various contaminants or
hazardous substances, including without limitation asbestos and NORM, from the
Properties where it may be found. The statements in this Section 8.1 are
intended as disclosures and acknowledgments of possible conditions existing on
the Properties.

8.2 ENVIRONMENTAL ASSESSMENT. Buyer shall have the right, at
Buyer's sole cost, risk, and expense, to undertake an environmental assessment
of the Properties during the period prior to the Closing. Buyer and its agents
shall have the same right as Seller to enter upon the Properties, inspect the
same, conduct soil and water sampling, analysis and monitoring, including soil
borings (and, after notice and consultation with Seller, drilling groundwater
monitoring wells), an generally conduct such tests,

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examinations, investigations and studies as Buyer deems necessary or
appropriate for preparing appropriate engineering and other reports and
making judgments relating to the Properties, their condition, and the
presence of chemicals and other substances. Seller shall cooperate with any
efforts of Buyer and its agents to obtain third party consents for access to
those parcels of land within the Properties to which Seller may not presently
have access. Buyer and its agents shall have reasonable access to Seller's
agents and employees in the course of conducting Buyer's environmental
assessment. Buyer shall keep any data or information acquired in the course
of such examinations and the results of all analyses of such data and
information strictly confidential and not disclose same to any person or
agency without the prior written approval of Seller, except that Buyer may
disclose to authorities having jurisdiction such information as is required
by law or by court order at the same time that Buyer provides such
information to Seller. If Buyer determines that conditions on a Property do
not satisfy the environmental standards set forth in Section 8.4 below in a
material respect, then Buyer may notify Seller of such condition by providing
Seller, on or prior to the day that is ten (10) business days prior to the
date scheduled for Closing in Section 12.1 hereof (the "Environmental Notice
Date"), a written "Notice of Environmental Defect" setting forth in detail
the facts giving rise to the claimed defect, the environmental standard which
Buyer claims is not satisfied, and any Applicable Environmental Law
(hereinafter defined) which Buyer contends has been breached or violated.
Buyer shall be deemed to have accepted without objection (i) the
environmental conditions described in Schedule 4.15, and (ii) except to the
extent an environmental condition was known to Seller and not disclosed
pursuant to Section 4.15, any Property which does not meet the environmental
standards or which is subject to an environmental defect unless a Notice of
Environmental Defect is given with respect to such Property on or prior to
the First Title Notice Date.

8.3 ACCESS; INDEMNIFICATION. Access to the Properties to conduct
Buyer's environmental assessment shall be subject to the following conditions:
Buyer waives and releases all claims against Seller and its partners, employees
and agents, for injury to or death of persons or damage to property arising in
any way from the exercise of rights granted to Buyer hereby or the activities of
Buyer or its employees, agents or contractors on the Properties, provided that
Buyer does not hereby assume the risk of damage, injury or death attributable to
the willful misconduct or gross negligence of Seller. Buyer shall indemnify
Seller, its partners employees, and agents, and shall hold each and all of said
indemnities harmless from and against any and all loss whatsoever arising out of
(i) any and all statutory or common-law liens or other encumbrances for labor or
materials furnished in connection with such tests, samplings, studies or surveys
as Buyer may conduct with respect to the Properties, and (ii) any injury to or
death of persons or damage to property occurring in, on or about the Proper-

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ties as a result of such exercise or activities (except for any such injuries
or damages caused by the gross negligence or willful misconduct of any said
indemnities). Notwithstanding any provision of this Agreement to the
contrary, the foregoing obligation of indemnity shall survive the Closing or
the termination of this Agreement without Closing.

8.4. ENVIRONMENTAL STANDARDS. This section sets out the
environmental standards applicable to the Properties for purposes of this
Agreement and, except as provided in Section 4.15, do not constitute covenants,
representations or warranties of Seller.

(a) The Properties shall not have been used for the generation,
treatment, storage or disposal of a Hazardous Substance (as defined below) in a
manner or to an extent that would subject Seller to a material liability for
violation of any Applicable Environmental Laws (as defined below). Except as
disclosed in Schedule 4.15, there shall not have been any release or discharge
of a Hazardous Substance from the Properties in a manner or to an extent that
would subject Seller to a material liability for violation of any Applicable
Environmental Laws. "Hazardous Substance" shall mean any hazardous substance,
pollutant, contaminant, solid or hazardous waste, hazardous waste constituents,
hazardous material or toxic substance subject to regulation or liability under
Applicable Environmental Laws in force as of the date hereof, including
asbestos, radioactive substances, and any other substance or material that would
constitute or cause a health, safety or environmental hazard on or at the
Properties under Applicable Environmental Laws. "Applicable Environmental Laws"
shall mean (i) all federal statutes regulating or prescribing restrictions
regarding the use of the Properties or other activities affecting the
environment (air, water, land, animal and plant life), including but not limited
to the following: the Clean Air Act, Clean Water Act, Comprehensive
Environmental Response, Compensation and Liability Act, Emergency Planning and
Community Right-to-Know Act, Endangered Species Act, Hazardous Materials
Transportation Act, Migratory Bird Treaty Act, National Environmental Policy
Act, Occupational Safety and Health Act, Oil Pollution Act of 1990, Resource
Conservation and Recovery Act, Safe Drinking Water Act, and Toxic Substances
Control Act, (ii) any regulations promulgated under such federal statutes, (iii)
any state law counterparts of such federal statutes and the regulations
promulgated thereunder, (iv) any other state or local statutes, rules,
regulations or ordinances regulating the use of or affecting the environment,
and (v) all common law rights, duties and obligations regarding the use of or
matters affecting the environment.

(b) Except as disclosed in Schedule 4.15, there are no
agreements, consent or administrative orders, injunctions, decrees, judgments,
license or permit conditions, or other directives of governmental authorities
based on any Applicable

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Environmental Laws that require any material change in the present condition
of the Properties, and Seller has not received any notice from any
governmental authority or private or public entity advising Seller that it is
or is potentially responsible for response costs under an Applicable
Environmental Law as a result of Seller's ownership or activities in
connection with the Properties.

(c) Except as disclosed in Schedule 4.15, no conditions or
circumstances exist on the Properties that would subject Seller to any material
damages, penalties, injunctive relief or cleanup or closure costs under any
Applicable Environmental Laws or that would require cleanup, removal, remedial
or corrective action or other response involving a material expenditure by
Seller pursuant to Applicable Environmental Laws.

8.5 PROPERTIES SUBJECT TO ENVIRONMENTAL DEFECT. Seller shall have a
period of seven (7) days after the Environmental Notice Date to cure or
remediate the environmental defect(s) set out in any Notice of Environmental
Defect timely and properly given by Buyer. In the event Seller is unable or
unwilling to cure or remediate any such defect prior to Closing, one of the
following shall occur:

(a) The parties shall agree upon an adjustment to the Purchase
Price to compensate Buyer (i) for the defect and all future liability associated
therewith or resulting therefrom, and (ii) for agreeing to indemnify, defend and
hold harmless Seller from and against any and all loss, cost, liability or
expense associated therewith or resulting therefrom.

(b) If the parties are unable to reach agreement pursuant to
(a) above, Seller may elect to proceed to Closing but exclude the affected
Property from the Interests and the sale hereunder and reduce the Base Price by
the Agreed Value of such Property.

(c) Notwithstanding the provisions of (a) and (b) above, Buyer
shall not be entitled to an adjustment of the Base Price pursuant to the
provisions of this Section 8.5 unless the cumulative amount of all such
adjustments exceeds $20,000.

ARTICLE 9
CONDITIONS TO OBLIGATIONS OF BUYER

9.1 REPRESENTATIONS AND WARRANTIES OF SELLER. At and as of the
Closing Date, the representations and warranties of

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Seller contained in Article 4 hereof shall be true and correct in all
material respects as though made on such date.

9.2 PERFORMANCE OF THIS AGREEMENT. Seller shall have duly performed
or complied in all material respects with all of the obligations to be performed
or complied with by Seller under the terms of this Agreement on or prior to the
Closing Date.

9.3 NO MATERIAL ADVERSE CHANGE. There shall have been no material
adverse change in the production levels from the Properties from that projected
in the most recent engineering report furnished by Seller and no material
adverse change in the value of the Properties as a result of economic or other
conditions occurring between the date of this Agreement and the Closing Date;
provided, however, that Buyer may waive this condition with respect to any
Property for which an adjustment to the Base Price is agreed upon between Seller
and Buyer. In this regard, Seller and Buyer have agreed to adjust the Base
Price downward by the sum of $150,000 attributable to the Peterman #1-D Well and
to exclude such Property from the Interests.

ARTICLE 10
CONDITIONS TO OBLIGATIONS OF SELLER

The obligations of Seller to consummate the transactions provided for
in this Agreement shall be subject to the satisfaction of each of the following
conditions on or before the Closing Date, subject to the right of Seller to
waive any one or more of such conditions:

10.1 REPRESENTATIONS AND WARRANTIES OF BUYER. The representations
and warranties of Buyer contained in Article 5 hereof shall be true and correct
in all material respects at and as of the Closing Date.

10.2 PERFORMANCE OF THIS AGREEMENT. Buyer shall have duly performed
or complied in all material respects with all of the obligations to be performed
or complied with by Buyer under the terms of this Agreement on or prior to the
Closing Date.

ARTICLE 11
TERMINATION

11.1. NONCOMPLIANCE BY SELLER. Buyer may terminate this Agreement by
written notice to Seller if the conditions to Buyer's obligations under this
Agreement, as set forth in Article 9 hereof, shall not have been complied with
or performed in all material respects (and Seller shall not be prepared to
comply with or perform the same) by the date on which the Closing is to occur
(as set forth in Section 12.1), and such non-compliance or non-performance shall
not have been waived in writing by Buyer. In the event such termination is a
result of Seller's failure or refusal

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to close the transaction contemplated hereby under circumstances in which all
conditions precedent to Seller's obligations as set forth in Article 10 have
been performed or satisfied in all material respects, Buyer shall be entitled
to pursue any remedies for breach of this Agreement available at law or in
equity.

11.3 EXCESSIVE ADJUSTMENTS. In the event the Base Price is reduced
at the Closing by an amount in excess of $560,000 by reason of adjustments
effected pursuant to Sections 3.4 (Title Defects), 7.4 (Gas Imbalances), and 8.5
(Environmental Defects), then either (i) Buyer, or (ii) Seller (provided the
representations and warranties of Seller under Sections 4.3, 4.14 and 4.15 with
respect to the Properties and conditions giving rise to such Defects are true on
the date hereof), shall have the right to terminate this Agreement by written
notice to the other at any time prior to the Closing. Specific adjustments
agreed to by the parties shall not be taken into account in determining the
above-described termination threshold amount.

11.4. COOPERATION BY BUYER. In the event of termination of this
Agreement, Seller shall be free to sell the Interests to any third party without
any limitation under or by reason of this Agreement. Buyer shall cooperate with
Seller in effectuating any such sale by promptly executing any instrument
reasonably requested by Seller evidencing the termination of this Agreement or
Buyer's right to acquire the Interests.

ARTICLE 12
CLOSING

12.1 DATE AND PLACE. The Closing shall be held at 9:00 o'clock a.m.
on July 29, 1997 (the date on which the Closing actually occurs is referred to
herein as the "Closing Date"). The Closing shall take place in the offices of
Seller at 6506 S. Lewis, Suite 204, Tulsa, Oklahoma.

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<PAGE>

12.2 SATISFACTION OF CONDITIONS. Not later than two (2) business
days prior to the Closing Date, each party shall provide the other party such
evidence of satisfaction of conditions under Sections 9.2 and 10.2 hereof as the
other party shall have reasonably and timely requested.

12.3 ASSIGNMENTS. At the Closing, Seller shall deliver to Buyer a
fully executed and acknowledged Assignment, Conveyance and Bill of Sale, in the
form attached hereto as Exhibit B, assigning to Buyer Seller's interest in the
Interests.

12.4 DETERMINATION AND PAYMENT OF PURCHASE PRICE. On the day that is
two (2) business days prior to the Closing Date, Seller shall furnish to Buyer
(i) a summary of the Base Price adjustments to be effected at the Closing
pursuant to Sections 3.4, 7.4, 7.5, 7.6, 7.7, 8.5 and 9.3 hereof, and (ii) based
upon the information at (i), a calculation of the Purchase Price. Buyer and
Seller shall work together diligently and in good faith prior to the Closing in
an effort to agree upon the amount of the adjustments necessary to determine the
Purchase Price, and if they do so agree, the agreed amount shall be paid by
Buyer to Seller by wire transfer of immediately available funds at the Closing.
If the parties cannot agree on the adjustment amounts necessary to determine the
Purchase Price, the Closing shall occur as scheduled based on Seller's
reasonable, good faith estimate of the Purchase Price ("Seller's Estimate") and
the difference between Seller's Estimate and Buyer's calculation of the Purchase
Price shall be deposited in escrow with a mutually acceptable escrow agent (a
bank or trust company having a office in Tulsa, Oklahoma) pending a
determination of the final Purchase Price. In such event the final Purchase
Price shall be determined either (i) by subsequent agreement of the parties, or
(ii) by binding arbitration pursuant to an arbitration proceeding initiated and
conducted in accordance with the Commercial Arbitration Rules of the American
Arbitration Association ("AAA"). The arbitration proceedings shall be conducted
in Tulsa, Oklahoma, by a single arbitrator agreed to by the parties, or if they
are unable to agree, selected by the AAA. The arbitrator shall be a businessman
experienced in transactions involving the sale and purchase of oil and gas
properties. The decision of the arbitrator shall be conclusive and binding on
the parties. In the event arbitration is necessary to determine the Purchase
Price, prior to initiating the arbitration, each party shall furnish to the
other a statement of such party's calculation of the Purchase Price. All fees
and expenses of the arbitration, including attorneys' fees and expert witness
fees of BOTH parties, shall be paid by the party whose calculation of the
Purchase Price bears the greatest difference from the Purchase Price determined
by the arbitrator. The award of the arbitrator shall not be subject to appeal
or judicial review of any nature and shall be promptly furnished to the escrow
agent who shall make distribution of the escrowed funds in a manner consistent
with such award.

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<PAGE>

12.5 LETTERS IN LIEU. Seller shall execute and deliver to Buyer at
the Closing, on forms prepared by Buyer, transfer orders or letters in lieu
thereof directing all purchasers of production to make payment to Buyer of
proceeds attributable to production from the Interests.

12.6 CHANGE OF OPERATOR FORMS. At the Closing, Seller will execute
and deliver to Buyer all forms required by State or Federal law or regulations
to reflect the resignation of Seller and the appointment of Buyer (or its
designated affiliate) as operator of the Properties currently operated by
Seller, and Seller will use its reasonable best efforts to assist Buyer in being
designated or elected operator of such Properties under applicable operating and
similar agreements.

ARTICLE 13
POST-CLOSING MATTERS

13.1 SALES TAXES. It is understood that the Purchase Price does not
include sales taxes imposed on account of the transactions contemplated hereby.
Buyer will be responsible for all such taxes, will remit same to the proper
governmental authorities within the time allowed by law for payment thereof and
will hold Seller harmless with respect thereto, including any penalties or
interest assessed for late payment.

13.2 RECEIPTS AND DISBURSEMENTS. If, after the Closing, Buyer
receives any funds relating to operations on or production from the Interests
prior to the Effective Time, or Seller receives any funds relating to operations
on or production from the Interests after the Effective Time, then the party
receiving such funds shall account therefor and pay the same to the other party
promptly after receipt thereof. Likewise, if Buyer shall be required to pay any
amount relating to items of the Interests which accrued to the owner of the
Interests before the Effective Time, or if Seller shall be required to pay any
amount (not otherwise prohibited by the terms of this Agreement) relating to
items of the Interests which accrued to the owner of the Interests after the
Effective Time, then the party making such payment shall invoice the other party
for the amount of such payment and the party receiving such invoice promptly
shall pay the same. Notwithstanding the foregoing, there shall be no accounting
for amounts received or paid which have already been taken into account in
calculating the Purchase Price. In determining the amount paid by a party
accruing during a period of time in respect of ad valorem taxes, the taxes shall
be prorated as provided in Section 7.7.

13.3 ALLOCATION OF LIABILITY. Seller shall remain liable and
responsible for all costs and expenses attributable to the ownership or
operation of the Interests prior to the Effective Time. Buyer shall be

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<PAGE>

liable and responsible for all costs and expenses attributable to the
ownership or operation of the Interests after the Effective Time.

13.4 BOOKS AND RECORDS. Seller shall deliver to Buyer, as soon as
practicable after the Closing Date (but in no event more than ten (10) days
after the Closing Date), all books, files, records and other information
(including tapes, disks and other media for storing information) of Seller,
including, without limitation, land, geological, geophysical (raw and
interpretive data), engineering and accounting files, records and other
material, relating to the Interests. For a period of two (2) years after the
delivery of such files and records, Buyer shall permit Seller reasonable access
to such files and records solely for tax and accounting purposes, but such right
of access shall not constitute an obligation of Buyer to maintain such files in
the same form as maintained by Seller prior to delivery thereof.

13.5 SUBSEQUENT DISPOSITIONS BY BUYER. If within the period ending
two (2) years after the Closing Date, Buyer intends to offer for sale, whether
in a bid package or in a negotiated transaction, any group of properties that
includes at least five (5) of the Properties acquired from Seller pursuant to
this Agreement, Buyer shall give prior written notice to Seller of the proposed
sale, describing the Properties to be offered and the terms of sale, and
including any sale materials compiled by Buyer with respect to such Properties.
Seller shall have the right to submit to Buyer, within ten (10) days after
receipt of such notice, an offer to purchase the Properties described therein.
Buyer shall have the absolute right in its sole discretion to accept or reject
Seller's offer and shall be under no obligation to sell such Properties to
Seller, even if Seller offers more than any other prospective purchaser,
provided Buyer determines in good faith and for a valid business purpose that
the retention of such Properties by Buyer or the sale of such Properties to
another purchaser is more advantageous to Buyer. This provision shall not be
applicable with respect to any sale or transfer by Buyer to an affiliate or in
connection with the sale or other disposition by Buyer of all or substantially
all of its oil and gas properties. Seller's rights under this Section 13.5
shall not be assignable.

ARTICLE 14
MISCELLANEOUS

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mailed by registered or certified mail, the delivery receipt shall be
evidence of the date of receipt. Either party may, by written notice so
delivered to the other, change the address to which delivery shall thereafter
be made.

(a) Notices to Buyer:

RAMCO Operating Company
Meridian Tower, Suite 650
5100 E. Skelly Drive
Tulsa, OK 74135
Attn: Mr. Larry E. Lee, President
Fax No. (918) 663-9540

With copy to:

C. David Stinson, Esq.
McAfee & Taft A Professional Corporation
10th Floor, Two Leadership Square
Oklahoma City, OK 73102
Fax No. (405) 235-0439

(b) Notices to Seller:

Quarles Drilling Corporation
7633 E. 63rd Place, Suite 500
Tulsa, OK 74133
Attn: Mr. Donald B. Quarles, President
Fax No. (918) 252-2971

With copy to:

Tom E. Drummond, Esq.
1924 S. Utica, Suite 1000
Tulsa, Ok 74104
Fax No. (918) 749-7869

14.2 BINDING EFFECT. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns.

14.4 EXPENSES. Each party hereto will bear and pay its own expenses
of negotiating and consummating the transactions contemplated hereby.

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<PAGE>

14.5 SECTION HEADINGS. The section headings contained in this
Agreement are for convenient reference only and shall not in any way affect the
meaning or interpretation of this Agreement.

14.6 SUPERSEDING EFFECT. This Agreement supersedes any prior
agreement or understanding between the parties with respect to the subject
matter hereof.

14.7 GOVERNING LAW; ENFORCEMENT. This Agreement shall be governed
by, construed and enforced in accordance with the laws of the State of Oklahoma
applicable to contracts made and to be performed entirely therein. The
prevailing party in any litigation initiated to enforce rights under or collect
damages for breach of this Agreement shall be entitled to reimbursement from the
non-prevailing party of all costs and expenses, including attorneys' fees,
incurred by the prevailing party in connection with such litigation.

14.8 EXHIBITS AND SCHEDULES. The Exhibits and Schedules referred to
herein are attached hereto and by this reference made a part hereof.

14.9 ANNOUNCEMENTS. Seller and Buyer shall consult with each other
with regard to all press releases and other announcements issued by either party
concerning this Agreement or the transaction contemplated hereby and, except as
may be required by applicable laws or the applicable rules and regulations of
any governmental agency or stock exchange, neither Buyer nor Seller shall issue
any such press release or other publicity without the prior written consent of
the other party.

14.10 SURVIVAL. The representations and warranties of the parties set
out herein shall survive the Closing; provided, however, that any claim by
either party for inaccuracy of representation or breach of warranty hereunder
shall be asserted by written notice to the other party given within six (6)
months after the Closing Date, and any claim not asserted within such period
shall be forever barred. The covenants of the parties under this Agreement
shall survive the Closing without limitation (for this purpose, nothing
contained in Article 4 or 5 hereof shall be deemed to be a covenant).

14.11 INDEMNITY. Each party agrees to indemnify, defend and hold the
other party harmless from and against any and all damage, loss, cost, liability
and expense, including court costs and attorneys' fees, resulting from (i) any
inaccuracy of representation or breach of warranty hereunder, provided notice of
any claim therefor is given within the period set out in Section 14.10, and (ii)
any breach of covenant hereunder.

14.12 FURTHER ASSURANCES. After the Closing the parties shall, at the
sole cost and expense of the requesting party if more

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than an immaterial expense is involved, (i) furnish such additional
information, (ii) execute and deliver such additional documents, and (iii)
perform such additional acts, as may be necessary and reasonably requested by
the other party or parties to effect the transaction contemplated by this
Agreement.

14.13 WAIVER. The rights and remedies of the parties to this
Agreement are cumulative and not alternative. Neither the failure nor any delay
by any party in exercising any right, power or privilege under this Agreement or
the documents referred to herein will operate as a waiver of such right, power
or privilege, and no single or partial exercise of any such right, power or
privilege will preclude any other or further exercise of such right, power or
privilege or the exercise of any other right, power or privilege. To the
maximum extent permitted by applicable law, (i) no waiver of any claim or right
under this Agreement will be valid unless evidenced by a writing signed by the
waiving party, (ii) no waiver given by a party will be applicable except in the
specific instance for which it is given, and (ii) no notice to or demand on a
party will be deemed to be a waiver of any obligation of such party or of the
right of the party giving such notice or demand to take further action without
notice or demand as provided in this Agreement or the documents referred to
herein.

Executed as of the date first above written.

SELLER:

QUARLES DRILLING CORPORATION

By /s/ Donald B. Quarles
---------------------------------
President

BUYER:

RAMCO-NYL 1987 LIMITED PARTNERSHIP,
a Texas limited partnership

By: RAMCO Operating Company, its
Managing General Partner

By /s/ Drake N. Smiley
----------------------------------
Vice President

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LIST OF EXHIBITS AND SCHEDULES

EXHIBIT
- -------

A Description of Interests; Agreed Values

B Assignment, Conveyance and Bill of Sale

SCHEDULES
- ---------

4.6 Prepayments received, Properties subject to makeup rights; long
term production sale contracts

4.8 Other material executory contracts

4.9 Pending and threatened litigation/claims

4.10 Real and personal property excluded from sale

4.13 Inactive/abandoned wells not plugged

4.14 Gas balancing status

4.15 Environmental conditions on the Properties

<PAGE>

SALE AND PURCHASE AGREEMENT

THIS SALE AND PURCHASE AGREEMENT (this "Agreement") is made and entered
as of the 13th day of February, 1997, by and among RAMCO-NYL 1987 LIMITED
PARTNERSHIP, a Texas limited partnership ("R-NYL"), and RB OPERATING COMPANY,
an Oklahoma corporation ("RBOC"), (R-NYL and RBOC being hereinafter referred
to collectively as "Seller"), and WYNN-CROSBY 1996, LTD., a Texas limited
partnership ("W-C Ltd."), WILDCARD OIL & GAS COMPANY, a Texas corporation
("Wildcard"), WYNN-CROSBY (TEXAS), LLC, a Texas limited liability company
("WCT"), and PROVIDENCE ENERGY CORP., a Texas corporation ("Providence"),
(W-C Ltd., Wildcard, WCT and Providence being hereinafter referred to
collectively as "Buyer").

WITNESSETH THAT:

WHEREAS, Seller is the owner of the Interests, as hereinafter defined);
and

WHEREAS, Seller desires to sell to Buyer and Buyer desires to purchase
from Seller the Interests on the terms and conditions set forth herein.

NOW THEREFORE, in consideration of the premises and of the mutual
covenants of the parties hereinafter expressed, it is hereby agreed as
follows:

ARTICLE 1
PROVISIONS CONCERNING BUYER

1.1 PARTIES COMPRISING BUYER. Except as otherwise indicated to
the contrary in the various provisions of this Agreement the term "Buyer" as
used herein is intended to be inclusive of all parties comprising Buyer, as
hereinabove defined. Prior to the Closing (hereinafter defined), all parties
comprising Buyer shall act in concert in exercising the rights and performing
the obligations of Buyer under this Agreement. In order to effectuate such
agreement, each party comprising Buyer hereby irrevocably appoints W-C Ltd.
as such party's agent and representative with respect to all rights to be
exercised and obligations to be performed by Buyer hereunder prior to the
Closing. All notices and other communications given or made by W-C Ltd.
prior to the Closing shall be binding upon all parties comprising Buyer, and
Seller shall never be obligated to deal with, or to accept, act upon or be
bound by notices from, the individual parties comprising Buyer other than W-C
Ltd.

1.2 OBLIGATIONS AT CLOSING; POST-CLOSING. At the Closing, each
party comprising Buyer will purchase and receive from Seller an assignment of
an undivided percentage interest in each group of properties (i.e., Rocky
Mountain, Gulf Coast, East Texas Operated and Texas(Other), individually a
"Property Group" and collectively the "Property Groups") comprising the
Interests (hereinafter defined), and will pay therefor a percentage of the

<PAGE>

Purchase Price (hereinafter defined) attributable to each Property Group,
equal to the percentage set opposite the name of such party in Appendix I
under the heading for each Property Group (as to each such party and each
Property Group, the "Applicable Percentage"). Failure to close of any party
comprising Buyer shall be deemed a failure to close of all parties comprising
Buyer; however, any party comprising Buyer may assume the responsibilities of
any other party failing to perform hereunder and thereby succeed to the
rights and obligations of the non-performing party. Following the Closing,
the obligations of Seller to Buyer and of Buyer to Seller as provided herein
will be several as between Seller and each party comprising Buyer and will
relate only to the Applicable Percentage interest in the Interests acquired
by each party comprising Buyer.

ARTICLE 2
SALE AND PURCHASE OF THE INTERESTS

2.1 INTERESTS. Seller is the owner of undivided interests in
and under oil and gas leases covering lands upon which the wells or units
described in Exhibit A are located, or to which production from the wells or
units described in Exhibit A is attributed by reason of inclusion in a
statutory or voluntary unit, together with undivided interests attributable
to said leases in the wells, personal property, fixtures and equipment
located on the lands covered by said leases or units, or used or obtained in
connection with the production and development thereof, and together with all
contracts, agreements, licenses, permits, easements, orders of regulatory
agencies and other rights and interests relating thereto (collectively, the
"Interests").

2.2 AGREEMENT FOR SALE AND PURCHASE; EFFECTIVE TIME. Seller
hereby agrees to sell to each party comprising Buyer, and each party
comprising Buyer hereby agrees to purchase from Seller on the Closing Date
(as hereinafter defined), such party's Applicable Percentage share of each
Property Group, as set out in Appendix I opposite the name of such party.
The effective time of the sale and purchase of the Interests (the "Effective
Time") shall be (i) as to all of the Interests other than West Cameron Block
504, 7:00 a.m. local time (in each locality where such items of the Interests
are located) on January 1, 1997, and (ii) as to West Cameron Block 504, 7:00
a.m. Central Time on November 1, 1996.

2.3 PURCHASE PRICE. The purchase price for the Interests (the
"Purchase Price") shall be the sum of (i) $10,762,000 (the "Base Price"),
allocated among the Property Groups as set out in Exhibit A, less (ii) the
Net Adjustment (as hereinafter defined) applicable to each Property Group.
The Purchase Price, less the Deposit (as hereinafter defined), shall be paid
by Buyer in immediately available funds at the Closing (as hereinafter
defined).

2.4 NET ADJUSTMENT. The Net Adjustment shall be the sum of the
adjustment amounts described in Sections 3.4 (Title

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Defects), Section 7.4 (Gas Imbalances), Section 7.5 (Disapproved Operations),
Section 7.6 (Preferential Rights), Section 7.7 (Operations Subsequent to the
Effective Time), Section 7.8 (Revenues in Suspense) and Section 8.5
(Environmental Defects). A Net Adjustment shall be calculated as to each
Property Group.

2.5 DEPOSIT. Contemporaneously with the execution of this
Agreement, Buyer is delivering to Seller, in immediately available funds in
accordance with wire instructions furnished by Seller, the sum of $1,076,200
as a deposit toward the Purchase Price (the "Deposit"). The Deposit shall be
paid by Buyer in the amounts set out in Appendix I and so credited toward the
Purchase Price payable by each such party at the Closing. In the event that
Buyer shall fail to close the transaction contemplated hereby in accordance
with the terms of this Agreement, and provided that the conditions precedent
to the obligations of Buyer as set forth in Article 9 hereof have been
fulfilled or Seller is ready, willing and able to comply with all such
conditions precedent, Seller shall be entitled to retain the Deposit as
liquidated damages pursuant to Section 11.2.

2.6 AGREED VALUES. The Base Price has been allocated by the
parties among the Interests as set out in Exhibit A. The amounts so
allocated and are referred to herein as the "Agreed Values" of such items of
the Interests.

2.7 WILDCARD LIKE-KIND EXCHANGE. Wildcard has elected to
structure the Closing as to its Applicable Percentage share of the Interests
in such a manner so as to qualify as a tax deferred exchange under Section
1031 of the Internal Revenue Code of 1986, as amended. In connection
therewith, Wildcard has conveyed oil and gas properties to an exchange
partner and has designated its Applicable Percentage share of the Interests
as the properties to be exchanged therefor. The funds to be utilized to pay
the Purchase Price attributable to Wildcard's Applicable Percentage share of
the Interests are being held by a third party (the "Intermediary") who will
pay the Purchase Price for such share of the Interests at the Closing.
Notwithstanding such exchange transaction and Seller's consent thereto,
Wildcard shall remain responsible for all of its obligations under this
Agreement, whether accruing before or after the Closing (including, without
limitation, the obligation to pay the Purchase Price if the Intermediary
fails to do so at the Closing), and Seller shall never be required or
obligated to look to the Intermediary for payment or performance of any of
such obligations. In no event shall Seller be required to, by reason of the
exchange agreement or otherwise in connection with the exchange, (i) defer
the Closing or retain title to the Interests beyond the Closing, (ii) take
title to any property of Wildcard, the Intermediary or any other person or
entity, or (iii) incur any cost, expense (including attorney's fees) or other
obligation or liability of any nature whatsoever in connection with
facilitating the transaction contemplated by the exchange agreement or
otherwise in

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connection with the exchange. Wildcard agrees to indemnify and hold harmless
Seller from and against any and all cost, expense or other obligation or
liability described in clause (iii) next above.

ARTICLE 3
TITLE EXAMINATION; ADJUSTMENTS

3.2 TITLE DEFECTS; DEFENSIBLE TITLE.

(a) As used herein, the term "Title Defect" shall mean any
lien, claim, defect, encumbrance, security interest, burden or deficiency
such that Seller does not have Defensible Title (hereinafter defined), as
distinguished from technically marketable title, to any of the Interests;
provided, no Permitted Encumbrance (hereinafter defined) shall constitute a
Title Defect.

(b) As used herein, the term "Defensible Title" means
clear, unencumbered and uncontested title in Seller to the Interests such
that (i) after giving effect to existing spacing orders, operating
agreements, unit agreements, unitization orders and pooling designations, and
subject to the limitations, if any, described in Exhibit A, and after taking
into account all royalty interests, overriding royalty interests, net profit
interests, production payments and other burdens on production, Seller is
entitled to a share (expressed as a decimal) of all oil, gas and other
minerals produced from each well or unit described in Exhibit A which is not
less than the Net Revenue Interest set out in Exhibit A in connection with
the description of such well or unit, (ii) Seller owns an undivided interest
(expressed as a decimal) equal to the Working Interest set out in Exhibit A
in connection with the description of each such well or unit in and to all
property and rights incident thereto, including all rights in, to and under
all agreements, leases, permits, easements, licenses and orders in any way
relating thereto, and in and to all wells, personal property, fixtures and
improvements thereon, appurtenant thereto or used or obtained in connection
therewith or with the production or treatment or sale or disposal of
hydrocarbons or water produced therefrom or attributable thereto, (iii)
Seller is obligated for a fraction of the costs relating to the exploration,
development and operation of such well or unit no greater than the Working
Interest set out in Exhibit A in connection with the description of such
well, and (iv) except as shown in Exhibit A, Seller's interests in such wells
and the production therefrom are not subject to being reduced by virtue of
reversionary interests owned by third parties.

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<PAGE>

(c) As used herein, the term "Permitted Encumbrances" means
(i) matters described without material omission in any of the Exhibits or
Schedules attached hereto, (ii) royalties, overriding royalties, net profits
interests, production payments and other burdens on production which do not
reduce Seller's Net Revenue Interest in any of the Interests to less than
that described in Exhibit A, (iii) liens for taxes, assessments, labor and
materials where payment is not due, (iv) operating agreements, unit
agreements, unitization and pooling designations and declarations, gathering
and transportation agreements, processing agreements, gas, oil and liquids
purchase, sale and exchange agreements, and other similar agreements which
are not required by the terms of this Agreement to be disclosed on any
Schedule hereto, provided (A) they contain terms and conditions customary in
the oil and gas industry, (B) they do not adversely affect or burden the
ownership of the Interests, (C) all amounts due and payable by Seller
thereunder have been paid, and (D) Seller is not in material default
thereunder, (v) regulatory authority of governmental agencies not presently
or previously violated, easements, surface leases and rights, plat
restrictions and similar encumbrances, provided that they do not materially
detract from the value, materially increase the cost of operation of any of
the Interests or otherwise adversely affect the operation thereof, and (vi)
liens, charges, encumbrances and irregularities in the chain of title which,
because of remoteness in or passage of time, statutory cure periods,
marketable title acts or other similar reasons, have not affected or
interrupted, and are not reasonably expected to affect or interrupt, the
claimed ownership of Seller or its predecessors in or the receipt of
production revenues from the Interests affected thereby.

3.3 TITLE EXAMINATION; NOTICE OF DEFECTS.

(a) Promptly after execution of this Agreement, Buyer
shall, at Buyer's sole cost and expense, commence and pursue such examination
of title to the Interests as Buyer deems necessary or proper. Buyer will
conclude its title review and give notice to Sellers of any asserted Title
Defects affecting the Interests not later than February 23, 1997 (the "Title
Notice Date"). Each such notice shall include a brief description of each
Title Defect of which notice is being given, the action required to cure such
Title Defect and the proposed adjustment to the Base Price by reason of the
existence of such Title Defect. Buyer shall be deemed to have waived any
Title Defects existing with respect to the Interests except to the extent
such Title Defects (i) constitute a breach of the special warranty contained
in the Assignment, Conveyance and Bill of Sale to be delivered at Closing, or
(ii) are set out in a notice given to Seller on or prior to the Title Notice
Date.

(b) Seller shall have a period of five (5) days after the
Title Notice Date to cure all or any portion of the Title Defects described
in any notice(s) of Title Defects affecting Interests properly given by Buyer
prior to such date. In the event

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Seller is unable or unwilling to cure any of the asserted Title Defects prior
to the expiration of each cure period, the parties shall proceed in
accordance with Section 3.4.

3.4 ADJUSTMENTS.

(a) If any uncured Title Defect is based on Buyer's
substantiated notice in reasonable detail that Seller owns a Net Revenue
Interest less than that shown on Exhibit A with respect to a particular item
of the Interests, then the Agreed Value of such item shall be reduced in the
same proportion that the actual Net Revenue Interest bears to the Net Revenue
Interest shown therefor on Exhibit A and the amount of such reduction shall
constitute the approved adjustment amount with respect to such Title Defect.

(b) If any uncured Title Defect involves a substantiated
claim against or uncertainty with respect to Seller's title to a particular
item of the Interests, the parties shall attempt to negotiate a mutually
acceptable reduction in the Agreed Value of the affected item of the
Interests by reason of such defect. In the event the parties agree on an
appropriate reduction in the Agreed Value, such amount shall constitute the
principal amount of Buyer's approved claim with respect to such Title Defect.
If the parties are unable to agree on an appropriate reduction and Buyer
elects not to waive the Title Defect, then Seller shall have the option of
(i) proceeding to Closing but reducing the Base Price by the Agreed Value of
such item, or (ii) excluding the affected item from the Interests being sold
and reducing the Base Price by the Agreed Value of such item, or (iii) if the
sum of the Agreed Values of the Interests for which Buyer has given a Notice
of Title Defects exceeds $645,000, and if Buyer or Seller elects to terminate
this Agreement pursuant to the provisions of Section 3.4(d) by reason
thereof, then either Buyer or Seller may elect to postpone the Closing and
arbitrate the disputed issues to determine if Title Defects in fact exist
which would result in reducing the Purchase Price by more than the sum of
$645,000. Such arbitration shall be conducted in accordance with the
procedures set out in Section 11.4 hereof. In the event the arbitrator shall
determine that the Title Defects asserted by Buyer in fact constitute Title
Defects which would result in reducing the Purchase Price by more than
$645,000, then this Agreement shall terminate effective as of the date such
award is issued. If, however, the arbitrator shall determine that such
asserted Title Defects do not in fact constitute Title Defects under this
Agreement aggregating more than $645,000, then the Closing shall occur on the
day that is five (5) business days after the issuance by the arbitrator of
such award. The award of the arbitrator shall be final and not subject to
appeal or judicial review of any nature whatsoever.

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the Purchase Price at the Closing by reason of asserted Title Defects unless
the sum of all such claims approved pursuant to Section 3.4(a) or agreed to
by Seller pursuant to Section 3.4(b) exceeds the sum of $20,000.

(d) In the event the aggregate adjustment for Title Defects
exceeds the sum of $645,000, either Seller or Buyer may elect by written
notice to the other to terminate this Agreement, subject to the arbitration
provisions of Section 3.4(b) hereof. In the event this Agreement is so
terminated, Seller shall promptly return the Deposit to Buyer.

ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER

Seller hereby represents and warrants to Buyer as of the date
hereof as follows:

4.1 ORGANIZATION. R-NYL is a limited partnership, duly
organized and validly existing under the Texas Revised Uniform Limited
Partnership Act. RBOC is a corporation, duly organized and validly existing
under the laws of the State of Oklahoma. Each Seller has the power and
authority under its governing corporate and partnership documents and
applicable law to own and use its properties and to transact the business in
which it is engaged, and holds all franchises, licenses and permits necessary
and required therefor.

4.2 AGREEMENT AUTHORIZED. This Agreement has been duly
authorized, executed and delivered by each Seller and all requisite corporate
and partnership action has been taken to authorize the execution hereof, the
transactions contemplated hereby and all things necessary or desirable in
order to accomplish the sale of the Interests.

4.3 VALID AGREEMENT. This Agreement constitutes the valid and
binding agreement of each Seller enforceable against each Seller in
accordance with its terms, and all instruments required hereunder to be
executed and delivered by each Seller at the Closing will constitute valid
and binding agreements of such Seller enforceable against such Seller in
accordance with their terms.

4.5 COMPLIANCE WITH AGREEMENTS AND LAWS. No material default
exists under any of the terms and provisions, express or implied, of the
leases or any material agreement, contract or commitment to which Seller is a
party or to which any part of the Interests is subject, and Seller has not
received any notice of any

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claim of such default. To Seller's knowledge, all wells included in the
Interests have been drilled, completed and operated, and all production
therefrom has been accounted for and paid to the persons entitled thereto in
substantial compliance with all applicable Federal, state and local laws and
applicable rules and regulations of the Federal, state and local regulatory
authorities having jurisdiction thereof.

4.6 SALE OF PRODUCTION. Seller is not obligated by virtue of
any prepayment made under any production sales contract or any other contract
containing a take-or-pay clause, or under any similar arrangement, to deliver
oil, gas or other minerals produced from or allocated to any of the Interests
at any time after the Effective Time without receiving full payment therefor
at the time of delivery. Except for routine suspense on new wells, proceeds
from the sale of oil and gas from the Interests are being received by Seller
in a timely manner and are not being held in suspense for any reason.

4.8 MATERIAL EXECUTORY CONTRACTS RELATING TO THE ASSETS. Except
for operating agreements, gas purchase and sale contracts and similar
operating and disposition of production contracts containing terms and
provisions reasonably customary in the industry, there are no material
contracts or agreements affecting the Interests for which Buyer will have any
responsibility or liability after the Closing.

4.9 CLAIMS OR LITIGATION. There is neither any suit, action or
other proceeding pending before any court or governmental agency nor, to the
knowledge of Seller, any claim, dispute, suit, action or other proceeding
threatened against Seller or any of the Interests or any third party which
might result in the impairment or loss of Seller's title to any of the
Interests or the value thereof, or increase the cost of operation thereof.

4.10 ASSIGNMENTS PRIOR TO CLOSING. Seller has not since the
Effective Time made any assignment, conveyance or encumbrance of the
Interests.

4.11 OPERATIONS. Except as described in Schedule 6.2, no
operations of the types prohibited by Section 6.2 hereof have been conducted
since the Effective Time or are now being conducted.

4.12 CONSUMMATION OF TRANSACTIONS. The consummation of the
transactions contemplated hereby will not constitute a violation

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or breach of, or an event of default under, any contract or agreement
affecting the Interests or constitute the happening of a condition upon which
any other party to such a contract may exercise any right or option which
will adversely affect any of the Interests.

ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER

Each party comprising Buyer represents and warrants to Seller as to
such party as follows:

5.1 ORGANIZATION. (i) W-C Ltd. is a limited partnership, (ii)
WCT is a limited liability company, and (iii) each of Wildcard and Providence
is a corporation, all duly organized and validly existing under the laws of
the State of Texas.

5.2 AGREEMENT AUTHORIZED. This Agreement has been duly
authorized, executed and delivered by Buyer and all requisite partnership or
corporate action has been taken to authorize the execution hereof, the
transactions contemplated hereby and all things necessary or desirable in
order to accomplish the purchase of the Interests, and Buyer has all
necessary authority under its partnership agreement or charter, bylaws and
other governing documents, and otherwise has good right and lawful authority,
to consummate the same.

5.3 VALID AGREEMENT. This Agreement constitutes the valid and
binding agreement of Buyer enforceable against Buyer in accordance with its
terms, and all instruments required hereunder to be executed and delivered by
Buyer at the Closing will constitute valid and binding agreements of Buyer
enforceable against Buyer in accordance with their terms.

5.4 BROKERS AND FINDERS. Buyer has incurred no liability,
contingent or otherwise, for brokers' or finders' fees in respect of this
transaction for which Seller shall have any responsibility whatsoever.

ARTICLE 6
COVENANTS OF SELLER PENDING CLOSING

Seller covenants and agrees with Buyer that from and after the date
of this Agreement and until the Closing, Seller will conduct its business
subject to the following provisions and limitations:

6.1 ORDINARY COURSE. The Interests will be maintained and
operated in a good and workmanlike manner consistent with historical
practices, and Seller will timely pay or cause to be paid all costs and
expenses incurred in connection therewith.

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6.2 RESTRICTIONS ON OPERATIONS. Subject to the provisions of
Section 7.5 hereof, except with Buyer's prior written consent no operations
will be conducted for the drilling of any new well, the reworking or
redrilling of any existing well or the making of any other capital
expenditure on the Interests requiring an expenditure by Seller in excess of
$25,000 for any single project or $150,000 in the aggregate. Insofar as any
of the following described actions would affect the Interests, Seller will
not waive any rights or enter into any new agreements or commitments other
than in the ordinary course of business, abandon any well capable of
commercial production (based upon prevailing economic conditions), release or
abandon any Interests, or encumber, sell or otherwise dispose of any of the
Interests other than personal property thereon which is replaced by
equivalent property or consumed in the operation of such Interests in the
ordinary course of business. Buyer expressly consents to the post-Effective
Time operations described in Schedule 6.2.

6.3 MAINTENANCE OF FILES. Seller will exercise reasonable
diligence in safeguarding and maintaining secure all files, books and records
currently maintained.

6.4 ACCESS OF BUYER. Buyer shall have access to the employees,
offices, properties, records, files, geological and geophysical data,
engineering reports and evaluations, books of account, and all other
information of the Seller pertaining to the Interests; provided, however,
that such investigation shall be conducted during normal business hours and
in a manner that does not unreasonably interfere with Seller's normal
operations. Seller shall reasonably assist Buyer in making such
investigation and shall cause the counsel, accountants, employees and other
representatives of Seller to be reasonably available to Buyer for such
purposes. During such investigation, Buyer shall have the right, at Buyer's
sole cost and expense, to make copies of such records, files and other
materials as Buyer may deem advisable.

ARTICLE 7
ADDITIONAL AGREEMENTS OF THE PARTIES

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Buyer's investigation pursuant to this Agreement, and (ii) will not use any
of such information to Buyer's financial advantage or in competition with
Seller. Notwithstanding the provisions of Section 14.6 hereof, this
provision shall not be construed as superseding or limiting the provisions of
any confidentiality agreement heretofore executed by and between Buyer and
Seller.

7.4 GAS IMBALANCES. Seller and Buyer acknowledge, but Seller
does not represent or warrant, that certain gas imbalances existed at the
Effective Time with respect to production from or attributable to certain of
the Interests. The best information concerning such imbalances available to
Seller as of the date of this Agreement is set forth on Schedule 7.4 . At
the Closing, the Base Price shall be adjusted downward by the amount of
$135,231 to take into account the imbalances reflected in Schedule 7.4. For
all purposes hereunder, the Agreed Value of each item of the Interests on
which a gas imbalance exists shall be adjusted to take into account the
imbalance existing on such item of the Interests. If, prior to the Title
Notice Date, either Seller or Buyer determines that the net gas imbalance
(that is, the difference between aggregate overproduction attributable to
Seller's interest in the Interests and the aggregate underproduction
attributable to such interest) at the Effective Date was less or greater than
that set forth on Schedule 7.4, the party making such determination shall so
notify the other party. If such decrease or increase is confirmed, the Base
Price shall be adjusted at the Closing by an amount equal to $1.50 per Mcf
for the decrease or increase in net overproduction from that shown in
Schedule 7.4; provided, however, that no adjustment shall be made unless the
decrease or increase in net overproduction exceeds 10,000 Mcf. If, after the
Title Notice Date but not later than June 1, 1997, either party notifies the
other that the net gas imbalance at the Effective Time was less or greater
than that set forth on Schedule 7.4, and that such decrease or increase in
net overproduction (LESS any volume for which a Purchase Price adjustment was
made at Closing) exceeded 10,000 Mcf, then if such decrease or increase is
confirmed (i) Seller shall pay to Buyer an amount equal to $1.50 per Mcf for
any increase in net overproduction, or (ii) Buyer shall pay to Seller an
amount equal to $1.50 per Mcf for any decrease in net overproduction.

7.5 CAPITAL EXPENDITURES. During the period from the execution
of this Agreement to the Closing Date, Seller will consult with Buyer from
time to time with respect to any operation proposed to be conducted on the
Interests and reasonably expected to require an expenditure by Seller in
excess of $25,000 for any single project or $150,000 in the aggregate, and
will provide Buyer with all information reasonably available to Seller with
respect thereto.

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Buyer shall, within ten (10) days after receipt of Seller's recommendation
for conducting or participating in any such project, or within such lesser
period as may be required by the terms of any applicable agreement, approve
or disapprove such project. Failure of Buyer to respond within the time
required will be deemed to constitute disapproval by Buyer of the project.
In the event Buyer approves such project, Seller shall conduct, propose or
elect to participate in such project and shall incur and pay as they become
due the expenditures associated therewith. In the event the project or
operation is a well proposed by an unrelated third party and Seller must, by
operation of an applicable agreement or order of a regulatory agency, elect
either to participate in such well or lose the right to participate in such
well and/or other rights in the unit in which such well is proposed (for
example, but not by way of limitation, a non-consent penalty under a joint
operating agreement, requirement to accept consideration in lieu of
participation under a pooling order or forfeiture of the right to participate
in future development under an area of mutual interest agreement), and Buyer
disapproves or is deemed to have disapproved participation by Seller in such
well, then, upon five (5) days written notice to Buyer (during which time
Buyer may reverse its decision and approve participation by Seller), Seller
may elect to exclude from the Interests and the sale hereunder the property
on which such operation is to be conducted and reduce the Base Price by the
Agreed Value of such item of the Interests.

7.7 ADJUSTMENTS FOR OPERATIONS SUBSEQUENT TO THE EFFECTIVE TIME.
The following adjustments shall be made to the Base Price for operations
conducted subsequent to the Effective Time to the extent the following
described items of revenue and expense relate to the Interests:

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required to be paid by the terms of existing operating agreements, and (iii)
ad valorem, property, production, severance and similar taxes and assessments
based upon or measured by the ownership of property, the production or
removal of hydrocarbons or the receipt of proceeds therefrom; to the extent
such expenditures relate to the period between the Effective Time and the
Closing Date on the accrual method of accounting. Ad valorem taxes shall be
prorated on the basis of time, and if the taxes cannot be determined for the
current taxable year, then the amount thereof for the taxable year most
recently ended shall be used in determining ad valorem taxes attributable to
a particular period of time. Ad valorem taxes assessed on production prior
to the Effective Time shall be the responsibility of Seller regardless of
when such taxes are assessed.

(b) The Base Price shall be adjusted downward by all
proceeds actually received by Seller (including proceeds from sale or salvage
of any personal property forming a part of the Interests as well as the
hydrocarbons produced therefrom and attributable thereto) to the extent such
proceeds relate to the period from the Effective Time to the Closing Date on
the accrual method of accounting. Proceeds received by Seller after the
Effective Time for the sale of production in storage at the Effective Time
shall remain the property of Seller and shall not give rise to an adjustment.

7.8 REVENUES IN SUSPENSE. The Purchase Price shall be adjusted
downward at the Closing by the amount of all revenues held in suspense by
Seller with respect to the Interests. Seller shall furnish Buyer at the
Closing a schedule of such suspense revenues. Buyer agrees to pay when due
to the owners thereof or otherwise in accordance with applicable law all such
revenues for which an adjustment is made and to indemnify and hold harmless
Seller with respect to the payment thereof, including, without limitation,
any penalties, interest and other charges relating thereto to the extent
included in the amount for which an adjustment is made or accruing after the
Effective Time.

ARTICLE 8
ENVIRONMENTAL MATTERS

8.1 PHYSICAL CONDITION OF THE PROPERTIES. The Properties
(solely for purposes of this Article, the term "Properties" shall mean the
lands covered by the leases included in the Interests or included in a
statutory or voluntary unit with such lands, and shall included both the
surface and the subsurface) have been used for oil and gas drilling,
production, gathering and processing operations, related oil field operations
and possibly for other operations, whether of a similar or dissimilar nature.
Physical changes in or under the Properties or adjacent lands may have
occurred as a result of such uses. The Properties also may contain buried
pipelines and other equipment, whether or not of a similar nature, the
locations of which may not be known to Seller or be

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readily apparent by a physical inspection of the Properties. Third parties
may have used the Properties or the surface rights thereon for other purposes
as well. Buyer understands that Seller does not have the requisite
information with which to determine the exact nature or condition of the
Properties nor the effect any such use has had on the physical condition of
the Properties. Buyer is hereby notified that detectable amounts of
regulated and unregulated chemicals and other substances which may pose a
threat to health or to plants or wildlife, or which are known to cause
illnesses, diseases, cancer, birth defects and other reproductive harm, may
be found in, on or around the Properties. Adverse physical conditions,
including the presence of such chemicals and other substances, may not be
revealed by Buyer's investigation. In addition, Buyer acknowledges that some
oil field production equipment may contain various contaminants or hazardous
substances, including without limitation, asbestos and/or naturally-occurring
radioactive material ("NORM"). In this regard, Buyer expressly understand
that NORM may affix or attach itself to the inside of wells, materials, pipes
and equipment as scale or in other forms, and that wells, materials, pipes
and equipment located on the Properties may contain NORM and that
NORM-containing materials may be buried or have been otherwise disposed of on
the Properties. Buyer also expressly understands that special procedures may
be required for the removal and disposal of various contaminants or hazardous
substances, including without limitation asbestos and NORM, from the
Properties where it may be found. The statements in this Section 8.1 are
intended as disclosures and acknowledgments of possible conditions existing
on the Properties.

8.2 ENVIRONMENTAL ASSESSMENT.

(a) Buyer shall have the right, at Buyer's sole cost, risk,
and expense, to undertake an environmental assessment of the Properties
during the period ending on the Title Notice Date (the "Inspection Period").
Buyer and its agents shall have the same right as Seller to enter upon the
Properties, inspect the same, conduct soil and water sampling, analysis and
monitoring, including soil borings (and, after notice and consultation with
Seller, drilling groundwater monitoring wells), an generally conduct such
tests, examinations, investigations and studies as Buyer deems necessary or
appropriate for preparing appropriate engineering and other reports and
making judgments relating to the Properties, their condition, and the
presence of chemicals and other substances. Seller shall cooperate with any
efforts of Buyer and its agents to obtain third party consents for access to
those parcels of land within the Properties to which Seller may not presently
have access. Buyer and its agents shall have reasonable access to Seller's
agents and employees in the course of conducting Buyer's environmental
assessment. Buyer agrees to provide to Seller a copy of all facts discovered
in the course of conducting Buyer's environmental assessment, including all
direct observations (if in writing or other tangible or transferable medium),
data and summaries thereof. Buyer

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shall keep any data or information acquired in the course of such
examinations and the results of all analyses of such data and information
strictly confidential and not disclose same to any person or agency without
the prior written approval of Seller, except that Buyer may disclose to
authorities having jurisdiction such information as is required by law or by
court order at the same time that Buyer provides such information to Seller.
If Buyer determines that conditions on a Property do not satisfy the
environmental standards set forth in Section 8.4 below in a material respect,
then Buyer may notify Seller of such condition by providing Seller, on or
prior to the Title Notice Date, a written "Notice of Environmental Defect"
setting forth in detail the facts giving rise to the claimed defect, the
environmental standard which Buyer claims is not satisfied, any Applicable
Environmental Law (hereinafter defined) which Buyer contends has been
breached or violated and, if the claimed defect arises from information
contained in a document, a copy of such document or the relevant parts
thereof. Buyer shall be deemed to have accepted without objection (i) the
environmental conditions described in Schedule 8.4, and (ii) any Property
which does not meet the environmental standards or which is subject to an
environmental defect unless a Notice of Environmental Defect is given with
respect to such Property on or prior to the First Title Notice Date.

(b) Buyer shall be deemed to have given, effective as of
the date of this Agreement, a Notice of Environmental Defect with respect to
the Properties and conditions described in Schedule 8.2.

8.3 ACCESS; INDEMNIFICATION. Access to the Properties to
conduct Buyer's environmental assessment shall be subject to the following
conditions: Buyer waives and releases all claims against Seller and its
partners, employees and agents, for injury to or death of persons or damage
to property arising in any way from the exercise of rights granted to Buyer
hereby or the activities of Buyer or its employees, agents or contractors on
the Properties, provided that Buyer does not hereby assume the risk of
damage, injury or death attributable to the willful misconduct or gross
negligence of Seller. Buyer shall indemnify Seller, its partners employees,
and agents, and shall hold each and all of said indemnities harmless from and
against any and all loss whatsoever arising out of (i) any and all statutory
or common-law liens or other encumbrances for labor or materials furnished in
connection with such tests, samplings, studies or surveys as Buyer may
conduct with respect to the Properties, and (ii) any injury to or death of
persons or damage to property occurring in, on or about the Properties as a
result of such exercise or activities (except for any such injuries or
damages caused by the gross negligence or willful misconduct of any said
indemnities). Notwithstanding any provision of this Agreement to the
contrary, the foregoing obligation of indemnity shall survive the Closing or
the termination of this Agreement without Closing.

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8.4. ENVIRONMENTAL STANDARDS. This section sets out the
environmental standards applicable to the Properties for purposes of this
Agreement and do not constitute covenants, representations or warranties of
Seller. Seller disclaims all warranties and representations regarding and
makes no covenants with respect to environmental conditions on the
Properties.

(a) The Properties shall not have been used for the
generation, treatment, storage or disposal of a Hazardous Substance (as
defined below) in a manner or to an extent that would subject Seller to a
material liability for violation of any Applicable Environmental Laws (as
defined below). Except as disclosed in Schedule 8.4, there shall not have
been any release or discharge of a Hazardous Substance from the Properties in
a manner or to an extent that would subject Seller to a material liability
for violation of any Applicable Environmental Laws. "Hazardous Substance"
shall mean any hazardous substance, pollutant, contaminant, solid or
hazardous waste, hazardous waste constituents, hazardous material or toxic
substance subject to regulation or liability under Applicable Environmental
Laws in force as of the date hereof, including asbestos, radioactive
substances, and any other substance or material that would constitute or
cause a health, safety or environmental hazard on or at the Properties under
Applicable Environmental Laws. "Applicable Environmental Laws" shall mean
(i) all federal statutes regulating or prescribing restrictions regarding the
use of the Properties or other activities affecting the environment (air,
water, land, animal and plant life), including but not limited to the
following: the Clean Air Act, Clean Water Act, Comprehensive Environmental
Response, Compensation and Liability Act, Emergency Planning and Community
Right-to-Know Act, Endangered Species Act, Hazardous Materials Transportation
Act, Migratory Bird Treaty Act, National Environmental Policy Act,
Occupational Safety and Health Act, Oil Pollution Act of 1990, Resource
Conservation and Recovery Act, Safe Drinking Water Act, and Toxic Substances
Control Act; (ii) any regulations promulgated under such federal statutes,
(iii) any state law counterparts of such federal statutes and the regulations
promulgated thereunder; (iv) any other state or local statutes, rules,
regulations or ordinances regulating the use of or affecting the environment,
and (v) all common law rights, duties and obligations regarding the use of or
matters affecting the environment.

(b) Except as disclosed in Schedule 8.4, there are no
agreements, consent or administrative orders, injunctions, decrees,
judgments, license or permit conditions, or other directives of governmental
authorities based on any Applicable Environmental Laws that require any
material change in the present condition of the Properties, and Seller has
not received any notice from any governmental authority or private or public
entity advising Seller that it is or is potentially responsible for response
costs under an Applicable Environmental Law as a result of Seller's ownership
or activities in connection with the Properties.

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(c) Except as disclosed in Schedule 8.4, no conditions or
circumstances exist on the Properties that would subject Seller to any
material damages, penalties, injunctive relief or cleanup or closure costs
under any Applicable Environmental Laws or that would require cleanup,
removal, remedial or corrective action or other response involving a material
expenditure by Seller pursuant to Applicable Environmental Laws.

8.5 PROPERTIES SUBJECT TO ENVIRONMENTAL DEFECT. Seller shall
have a period of five (5) days after the Title Notice Date to cure or
remediate the environmental defect(s) set out in any Notice of Environmental
Defect timely and properly given by Buyer. In the event Seller is unable or
unwilling to cure or remediate any such defect prior to Closing, one of the
following shall occur:

(a) The parties shall agree upon an adjustment to the
Purchase Price to compensate Buyer (i) for the defect and all future
liability associated therewith or resulting therefrom, and (ii) for agreeing
to indemnify, defend and hold harmless Seller from and against any and all
loss, cost, liability or expense associated therewith or resulting therefrom.

(b) If the parties are unable to reach agreement pursuant
to (a) above, Seller, at its sole discretion, may elect to proceed to
Closing but exclude the affected Property from the Interests and the sale
hereunder and reduce the Base Price by the Agreed Value thereof.

(c) Notwithstanding the provisions of (a) and (b) above,
Purchaser shall not be entitled to an adjustment of the Base Price pursuant
to the provisions of this Section 8.5 unless the cumulative amount of all
such adjustments exceeds $50,000.

(d) With respect to the environmental defects described on
Schedule 8.2 as "excessive pressure on surface casing," each such defect
shall be deemed cured if, as a result of Seller filling the annulus with
heavy drilling mud or taking other appropriate action, the surface casing
pressure as measured at the surface is reduced to zero. With respect to the
environmental defect described on Schedule 8.2 as "open pit that needs to be
remediated and closed," such defect shall be deemed cured if the contents of
such pit are disposed of in an environmentally safe manner and the pit is
closed, filled and leveled prior to the Closing. In the event any of the
environmental defects described in Schedule 8.2 are not cured by Seller prior
to the Closing in the manner hereinabove provided, then Buyer may elect to
exclude the affected item of the Interests from the sale hereunder and reduce
the Base Price by the Agreed Value thereof.

8.6 INDEMNIFICATION OF SELLER. All liabilities attributable to
conditions existing and operations conducted on the Properties assigned to
Buyer, under Applicable Environmental Laws

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and under all future environmental laws, shall be liabilities of Buyer, and
Buyer shall indemnify, defend, and hold harmless Sellers from and against all
loss, cost, liability or expense attributable thereto or resulting therefrom.

ARTICLE 9
CONDITIONS TO OBLIGATIONS OF BUYER

The obligation of Buyer to consummate the transactions provided for
in this Agreement shall be subject to the satisfaction of each of the
following conditions on or before the Closing Date, subject to the right of
Buyer to waive any of such conditions:

9.1 REPRESENTATIONS AND WARRANTIES OF SELLER. At and as of the
Closing Date, the representations and warranties of Seller contained in
Article 4 hereof shall be true and correct in all material respects as though
made on such date.

9.2 PERFORMANCE OF THIS AGREEMENT. Seller shall have duly
performed or complied in all material respects with all of the obligations to
be performed or complied with by Seller under the terms of this Agreement on
or prior to the Closing Date.

ARTICLE 10
CONDITIONS TO OBLIGATIONS OF SELLER

The obligations of Seller to consummate the transactions provided
for in this Agreement shall be subject to the satisfaction of each of the
following conditions on or before the Closing Date, subject to the right of
Seller to waive any of such conditions:

10.1 REPRESENTATIONS AND WARRANTIES OF BUYER. The
representations and warranties of Buyer contained in Article 5 hereof shall
be true and correct in all material respects at and as of the Closing Date.

10.2 PERFORMANCE OF THIS AGREEMENT. Buyer shall have duly
performed or complied in all material respects with all of the obligations to
be performed or complied with by Buyer under the terms of this Agreement on
or prior to the Closing Date.

ARTICLE 11
TERMINATION

11.1. NONCOMPLIANCE BY SELLER. Buyer may terminate this Agreement
by written notice to Seller if the conditions to Buyer's obligations under
this Agreement, as set forth in Article 9 hereof, shall not have been
complied with or performed in all material respects (and Seller shall not be
prepared to comply with or perform the same) by the date on which the Closing
is to occur (as set forth in Section 12.1), and such non-compliance or
non-performance shall

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<PAGE>

not have been waived in writing by Buyer. Under such circumstances, Buyer
shall be entitled to a return of the Deposit, which shall be Buyer's sole
remedy hereunder unless such termination is a result of Seller's failure or
refusal to close the transaction contemplated hereby under circumstances in
which all conditions precedent to Seller's obligations as set forth in
Article 10 have been performed or satisfied in all material respects, in
which event Buyer shall be entitled to pursue any remedies existing at law or
in equity.

11.2. NONCOMPLIANCE BY BUYER. Seller may terminate this Agreement
by written notice to Buyer if the conditions to Seller's obligations under
this Agreement, as set forth in Article 10 hereof, shall not have been
complied with or performed in all material respects (and Buyer shall not be
prepared to comply with or perform the same) by the date on which the Closing
is to occur (as set forth in Section 12.1), and such non-compliance or
non-performance shall not have been waived in writing by Seller. In such
event, Seller shall retain the Deposit as liquidated damages for Buyer's
failure to purchase the Interests at the time specified herein. The parties
hereto agree that time is of the essence for the consummation of the
transactions contemplated hereby, that the amount of damages caused by
Buyer's breach would be very difficult to calculate exactly, and that the
provision for liquidated damages contained in this Section 11.2 shall not be
construed as a penalty provision. Such right to liquidated damages shall be
Seller's sole remedy hereunder, unless such termination is as a result of
Buyer's failure or refusal to close the transaction contemplated hereby under
circumstances in which all conditions precedent to Buyer's obligations as set
forth in Article 9 have been performed or satisfied in all material respects,
in which event Seller shall be entitled to pursue any remedies existing at
law or in equity.

11.3. COOPERATION BY BUYER. In the event of termination of this
Agreement, Seller shall be free to sell the Interests to any third party
without any limitation under or by reason of this Agreement. Buyer shall
cooperate with Seller in effectuating any such sale by promptly executing any
instrument reasonably requested by Seller evidencing the termination of this
Agreement or Buyer's right to acquire the Interests.

11.4. ARBITRATION. In the event this Agreement is terminated by
Buyer pursuant to Section 11.1 hereof or by Seller pursuant to Section 11.2
hereof and a dispute exists between the parties with respect to entitlement
to the Deposit, such dispute shall be resolved by binding arbitration
conducted in accordance with the Commercial Arbitration Rules of the AAA.
The arbitration proceedings shall be conducted in Oklahoma City, Oklahoma, by
a single arbitrator agreed to by the parties, or if they are unable to agree,
selected by the AAA. The arbitrator shall be a licensed attorney experienced
in transactions involving the sale and purchase of oil and gas properties
(and, if the arbitration proceeding is commenced pursuant to the provisions
of Section 3.4(b) hereof,

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<PAGE>

experienced in oil and gas title examination). The arbitrator shall be
instructed to make a determination that either Buyer is entitled to return of
the entire Deposit or Seller is entitled to retain the entire Deposit (or, in
the event of a proceeding commenced pursuant to Section 3.4(b) hereof, the
existence and value of Title Defects timely asserted by Buyer). The decision
of the arbitrator shall be conclusive and binding on the parties. The
general expenses of arbitration, including the fees of the AAA if
necessitated by reason of the failure of the parties to agree upon an
arbitrator, shall be borne equally by Seller and Buyer; however, each party
shall bear and pay the fees and expenses of its own witnesses, legal counsel
and of the collection and presentation of its evidence.

ARTICLE 12
CLOSING

12.1 DATE AND PLACE. The Closing shall be held at 9:00 o'clock
a.m. on February 28, 1997 (the date on which the Closing actually occurs is
referred to herein as the "Closing Date"). The Closing shall take place in
the offices of Seller, 5100 East Skelly Drive, Suite 650, Tulsa, Oklahoma.

12.2 SATISFACTION OF CONDITIONS. Not later than two (2) business
days prior to the Closing Date, each party shall provide the other party such
evidence of satisfaction of conditions under Sections 9.2 and 10.2 hereof as
the other party shall have reasonably and timely requested.

12.3 ASSIGNMENTS. At the Closing, Seller shall deliver to Buyer
a fully executed and acknowledged Assignment, Conveyance and Bill of Sale, in
the form attached hereto as Exhibit B, together with any necessary forms of
assignment for Federal, State and Indian leases as required by applicable law
and regulations.

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<PAGE>

Purchase Price. In such event the final Purchase Price shall be determined
either (i) by subsequent agreement of the parties, or (ii) by binding
arbitration pursuant to an arbitration proceeding initiated and conducted
substantially in accordance with the procedures set out in Section 11.4
hereof. In the event arbitration is necessary to determine the Purchase
Price, prior to initiating the arbitration, each party shall furnish to the
other a statement of such party's calculation of the Purchase Price. All
fees and expenses of the arbitration, including attorneys' fees, expert
witness fees and all other out-of-pocket expenses of BOTH parties, shall be
paid by the party whose calculation of the Purchase Price bears the greatest
difference from the Purchase Price determined by the arbitrator. The award
of the arbitrator shall not be subject to appeal or judicial review of any
nature and shall be promptly furnished to the escrow holder who shall make
distribution of the escrowed funds in a manner consistent with such award.

12.5 LETTERS IN LIEU. Seller shall execute and deliver to Buyer
at the Closing, on forms prepared by Buyer, transfer orders or letters in
lieu thereof directing all purchasers of production to make payment to Buyer
of proceeds attributable to production from the Interests.

12.6 CHANGE OF OPERATOR FORMS. At the Closing, Seller will
execute and deliver to Buyer all forms reasonably known to Seller as being
required by State or Federal agencies to reflect the resignation of Seller
(or its affiliates) as operator of the Interests currently operated by Seller
(or its affiliates) and the assumption of operations by Wynn-Crosby Energy,
Inc. Buyer agrees to cooperate with Seller in the identification and
preparation of the required forms.

ARTICLE 13
POST-CLOSING MATTERS

13.1 SALES TAXES. It is understood that the Purchase Price does
not include sales taxes imposed on account of the transactions contemplated
hereby. Buyer will be responsible for all such taxes, will remit same to the
proper governmental authorities within the time allowed by law for payment
thereof and will hold Seller harmless with respect thereto, including any
penalties or interest assessed for late payment.

13.2 RECEIPTS AND DISBURSEMENTS. If, after the Closing, Buyer
receives any funds relating to operations on or production from the Interests
prior to the Effective Time, including, without limitation, any joint
interest account credits relating to operations prior to the Effective Time,
or Seller receives any funds relating to operations on or production from the
Interests after the Effective Time, then the party receiving such funds shall
account therefor and pay the same to the other party promptly after receipt
thereof. Likewise, if Buyer shall be required to pay any amount

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<PAGE>

relating to items of the Interests which accrued to the owner of the
Interests before the Effective Time, or if Seller shall be required to pay
any amount (not otherwise prohibited by the terms of this Agreement) relating
to items of the Interests which accrued to the owner of the Interests after
the Effective Time, then the party making such payment shall invoice the
other party for the amount of such payment and the party receiving such
invoice promptly shall pay the same. Notwithstanding the foregoing, there
shall be no accounting for amounts received or paid which have already been
taken into account in calculating the Purchase Price. In determining the
amount paid by a party accruing during a period of time in respect of ad
valorem taxes, the taxes shall be prorated as provided in Section 7.7.

13.3 ALLOCATION OF LIABILITY. Seller shall, except as otherwise
provided in clause (ii) of Section 13.4 hereof, remain liable and responsible
for all costs and expenses attributable to the ownership or operation of the
Interests prior to the Effective Time. Buyer shall be liable and responsible
for all costs and expenses attributable to the ownership or operation of the
Interests after the Effective Time, together with those additional
liabilities and obligations assumed by Buyer pursuant to clause (ii) of
Section 13.4 hereof.

13.4 ASSUMPTION. By acceptance of the Assignment, Conveyance and
Bill of Sale at the Closing, Buyer shall be deemed to have accepted and
assumed responsibility for all obligations and liabilities of Seller (i)
accruing from and after the Effective Time under the terms of the leases
included in the Interests, under all prior assignments in the chain of title
to said leases, and under all joint operating agreements and other similar
agreements to which said leases are subject or pursuant to which operations
are conducted on the Land, (ii) relating to the environmental condition of
and other conditions on and under the Land, whether existing as of the
Effective Time or thereafter arising, and whether created by statute,
regulation, rule, order, common law or contract, including, without
limitation, any obligation to plug, replug or repair any well, or to restore,
clean up or remediate the surface of the Land, and (iii) all obligations
attributable to the Interests relating to gas overproduction, including
balancing rights of third parties and any cash balancing obligations
determined by contract, common law, settlement or court order or judgment.

13.5 BOOKS AND RECORDS. Seller shall deliver to Buyer, as soon
as practicable after the Closing Date (but in no event more than thirty (30)
days after the Closing Date), all original books, files, records and other
information of Seller (including, without limitation, land, geological,
geophysical and accounting files, records and other material) relating to the
Interests. For a period of five (5) years after the delivery of such files
and records, Buyer shall permit Seller reasonable access to such files and
records, but such right of access shall not constitute an obligation

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of Buyer to maintain such files in the same form as maintained by Seller
prior to delivery thereof.

ARTICLE 14
MISCELLANEOUS

14.1 NOTICES. All communications required or permitted to be
given under this Agreement shall be in writing and delivered, mailed or
transmitted to the parties at the addresses set out below. Notices shall be
deemed given when received except that notices given by facsimile
transmission on weekends, holidays or after 5:00 p.m. Central Time, shall be
deemed received on the next business day. If delivered by commercial
delivery service or mailed by registered or certified mail, the delivery
receipt shall be evidence of the date of receipt. Either party may, by
written notice so delivered to the other, change the address to which
delivery shall thereafter be made.

(a) Notices to Buyer:

Wynn-Crosby Energy, Inc.
5956 Sherry Lane
Dallas, TX 75225
Attn: Mr. Russell L. Harlow
Fax No. (214)987-4646

and to:

Providence Energy Corp.
3838 Oaklawn, Suite 1222
Dallas, TX 75219
Attn: Mr. Mike Allen
Fax No. (214)522-9337

(b) Notices to Seller:

Mr. Larry E. Lee
RAMCO Operating Company
5100 East Skelly Drive, Suite 650
Tulsa, OK 74135
Fax No. (918)663-9540

With copy to:

C. David Stinson, Esq.
McAfee & Taft A Professional Corporation
Tenth Floor, Two Leadership Square
Oklahoma City, Oklahoma 73102
Fax No. (405) 235-0439

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<PAGE>

14.2 BINDING EFFECT. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that Buyer may not assign this
Agreement or any of its rights or obligations hereunder without the prior
written consent of Seller, which consent may be withheld in Seller's sole
discretion.

14.3 COUNTERPARTS. This Agreement may be executed in any number
of counterparts which taken together shall constitute one and the same
instrument and each of which shall be considered an original for all purposes.

14.4 EXPENSES. Each party hereto will bear and pay its own
expenses of negotiating and consummating the transactions contemplated hereby.

14.5 SECTION HEADINGS. The section headings contained in this
Agreement are for convenient reference only and shall not in any way affect
the meaning or interpretation of this Agreement.

14.6 SUPERSEDING EFFECT. This Agreement supersedes any prior
agreement or understanding between the parties with respect to the subject
matter hereof.

14.7 GOVERNING LAW; ENFORCEMENT. This Agreement shall be
governed by, construed and enforced in accordance with the laws of the State
of Oklahoma applicable to contracts made and to be performed entirely
therein. The prevailing party in any litigation initiated to enforce rights
under or collect damages for breach of this Agreement shall be entitled to
reimbursement from the non-prevailing party of all costs and expenses,
including attorneys' fees, incurred by the prevailing party in connection
with such litigation.

14.8 EXHIBITS AND SCHEDULES. The Exhibits and Schedules referred
to herein are attached hereto and by this reference made a part hereof.

14.9 ANNOUNCEMENTS. Seller and Buyer shall consult with each
other with regard to all press releases and other announcements issued by
either party concerning this Agreement or the transaction contemplated hereby
and, except as may be required by applicable laws or the applicable rules and
regulations of any governmental agency or stock exchange, neither Buyer nor
Seller shall issue any such press release or other publicity without the
prior written consent of the other party.

14.10 SURVIVAL. The representations and warranties of Seller set
out in Article 4 hereof shall expire at, and be of no further force or effect
after, the Closing, and Buyer shall have no claim against Seller for
inaccuracy of any such representation or breach of any such warranty from and
after the Closing. Buyer's

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<PAGE>

only recourse for discovery of the inaccuracy of any representation or the
breach of any warranty set out in Section 4 hereof shall be excused
performance of Buyer's obligation to close pursuant to Section 9.1 hereof.
The representations and warranties of Buyer as set out in Article 5 hereof
shall survive the Closing. The covenants of the parties under this Agreement
shall survive the Closing (for this purpose, nothing contained in Article 4
hereof shall be deemed to be a covenant).

14.11 INDEMNITY. Seller agrees to indemnify, defend and hold
Buyer harmless against any damage, loss, cost, liability and expense,
including court costs and attorneys' fees, resulting from any breach of
covenant on the part of Sellers hereunder. Buyer agrees to indemnify, defend
and hold Sellers harmless against any damage, loss, cost, liability and
expense, including court costs and attorneys' fees, resulting from any
inaccuracy of representation or breach of warranty or covenant on the part of
Buyer hereunder.

14.13 WAIVER. The rights and remedies of the parties to this
Agreement are cumulative and not alternative. Neither the failure nor any
delay by any party in exercising any right, power or privilege under this
Agreement or the documents referred to herein will operate as a waiver of
such right, power or privilege, and no single or partial exercise of any such
right, power or privilege will preclude any other or further exercise of such
right, power or privilege or the exercise of any other right, power or
privilege. To the maximum extent permitted by applicable law, (i) no waiver
of any claim or right under this Agreement will be valid unless evidenced by
a writing signed by the waiving party, (ii) no waiver given by a party will
be applicable except in the specific instance for which it is given, and (ii)
no notice to or demand on a party will be deemed to be a waiver of any
obligation of such party or of the right of the party giving such notice or
demand to take further action without notice or demand as provided in this
Agreement or the documents referred to herein.

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<PAGE>

Executed as of the date first above written.

SELLER:

RAMCO-NYL 1987 LIMITED PARTNERSHIP, a Texas
limited partnership

By: RAMCO Operating Company,
Managing General Partner

By /s/ Larry E. Lee
--------------------------------------------
Larry E. Lee, President

RB OPERATING COMPANY, an Oklahoma corporation

By /s/ Larry E. Lee
--------------------------------------------
Larry E. Lee, President

BUYER:

WYNN-CROSBY 1996, LTD., a Texas limited
partnership

By: Eric Wynn Limited, a Texas
limited partnership, as
General Partner

By: Wynn-Crosby Energy, Inc., as
General Partner of Eric Wynn
Limited

By /s/ Russell L. Harlow
--------------------------------------------
Russell L. Harlow, Vice President

WILDCARD OIL & GAS COMPANY

By /s/ Russell L. Harlow
--------------------------------------------
President

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<PAGE>

WYNN-CROSBY (TEXAS), LLC,

By: Wynn-Crosby 1996, Ltd., a
Texas limited partnership, as
Manager

By: Eric Wynn Limited, a Texas
limited partnership, as
General Partner of Wynn-Crosby
1996, Ltd.

By: Wynn-Crosby Energy, Inc., as
General Partner of Eric Wynn
Limited

By /s/ Russell L. Harlow
--------------------------------------------
Russell L. Harlow, Vice President

PROVIDENCE ENERGY CORP.

By /s/ Mike Allen
--------------------------------------------
President

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<PAGE>

LIST OF APPENDICES, EXHIBITS AND SCHEDULES

APPENDICES

I Applicable Percentages and Allocation of Deposit

EXHIBIT

A Listing of Interests; WI and NRI; Agreed Values

B Assignment, Conveyance and Bill of Sale

SCHEDULES

6.2 Post-Effective Time operations

7.4 Gas balancing status

8.2 Environmental Defects

8.4 Environmental conditions on the Properties

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<PAGE>

Exhibit (10.3)

PURCHASE AND SALE AGREEMENT

BY AND AMONG

NEW YORK LIFE INSURANCE COMPANY,
RAMCO OPERATING COMPANY,
OKLAHOMA DOUBLE R CORPORATION,
RAMCO - NYL 1987 LIMITED PARTNERSHIP,
WILLIAM W. TALLEY, II, INDIVIDUALLY AND
AS TRUSTEE OF
THE WILLIAM W. TALLEY II, 1982
REVOCABLE TRUST, LARRY E. LEE
AND M. HELEN BENNETT, FORMERLY FISHER, INDIVIDUALLY
AND AS TRUSTEE OF THE M. HELEN FISHER
1992 TRUST

DATED AS OF JULY 24, 1996

<PAGE>

PURCHASE AND SALE AGREEMENT

THIS PURCHASE AND SALE AGREEMENT is made and entered into as of July 24,
1996, by and among New York Life Insurance Company, a New York mutual life
insurance company ("NYL"), RAMCO Operating Company, a Delaware corporation,
("RAMCO"), Oklahoma Double R Corporation, formerly Double R Corporation, a
Delaware corporation, ("Double R"), William W. Talley II, Individually and as
Trustee of the William W. Talley, II, 1982 Revocable Trust ("Talley"), Larry
E. Lee ("Lee") and M. Helen Bennett, formerly Fisher, Individually and as
Trustee of the M. Helen Fisher 1992 Trust ("Fisher"). RAMCO and Double R are
sometimes referred to collectively as the "RAMCO Entities" and Talley, Lee
and Fisher are sometimes referred to collectively as the "RAMCO Group
Stockholders".

PREAMBLE

A. The RAMCO-NYL 1987 Limited Partnership (the "Partnership") is a Texas
limited partnership of which NYL owns a 96.5% limited partnership interest
(the "NYL Partnership Interest") and the RAMCO Entities own a combined 3.5%
partnership interest.

B. RAMCO and NYL are parties to that certain RAMCO-NYL 1987 Limited
Partnership Agreement, dated October 26, 1987 (the "Partnership Agreement"),
relating to the Partnership.

C. RAMCO is the managing general partner of the Partnership. RAMCO's
issued and outstanding Common Stock, par value $225.00 (the "RAMCO Common
Stock"), is owned as follows:

Name Number of Shares
---- ----------------

Talley 25
Lee 25
Fisher 25
NYL 26
---

Total 101

D. NYL and RAMCO were parties to that certain litigation (the "Lawsuit")
styled NEW YORK LIFE INSURANCE COMPANY V. RAMCO HOLDING CORPORATION, ET. AL.,
United States District Court for the Northern District of Oklahoma, Case No.
93-C-1049-H, which Lawsuit has been dismissed by the Court for lack of
jurisdiction.

E. The parties desire to resolve and settle the issues raised in the
Lawsuit by either (i) the sale by NYL to RAMCO of the NYL Partnership
Interest or, alternatively (ii) the sale to NYL by Talley, Lee and Fisher of
all of their total of 75 shares of RAMCO Common Stock, all of their shares of
RAMCO's Series B Preferred Stock, and all of their shares of the Common Stock
of Double R, par value $0.01 (the "Double R Common Stock"), all on the terms
set forth herein.

NOW, THEREFORE, in consideration of the above recitals and the mutual
warranties, representations, covenants, and agreements set forth in this
Agreement, the parties agree as follows:

<PAGE>

DEFINITIONS

Except as otherwise provided herein, when used in this Agreement the
capitalized terms set forth below shall have the following meanings:

AFFILIATE of a Person means (i) any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled
by or under common control with such Person; (ii) any officer,
director, partner, employer, or direct or indirect beneficial owner
of any 10% or greater equity or voting interest of such Person; or
(iii) any other Person for which a Person described in clause (ii)
acts in any such capacity.

AGREEMENT means this Agreement, including the exhibits attached or
delivered pursuant hereto and incorporated herein by reference.

DOUBLE R NOTES means all indebtedness owed the RAMCO Group
Stockholders by Double R.

ESCROW AGENT means the entity appointed in accordance with SECTION
4.01.

EXPIRATION DATE means the first to occur of (i) the RAMCO Purchase
Closing, (ii) the NYL Purchase Closing, (iii) termination of this
Agreement by NYL, or (iv) the close of business on December 17, 1996.

GAAP means generally accepted accounting principles, consistently
applied during the periods involved.

INTELLECTUAL PROPERTY means computer programs and software and
geological information and data.

MATERIAL for purposes of this Agreement shall be determined in
light of the facts and circumstances of the matter in question,
provided that any specific monetary amount stated in this Agreement
shall determine materiality in that instance.

MATERIAL ADVERSE EFFECT on a Party means an event, change, or
occurrence which, individually or together with any other event, change
or occurrence, has a material adverse impact on (i) the financial
position, business, or results of operations of such Party and its
subsidiaries, taken as a whole, or (ii) the ability of such Party to
perform its obligations under this Agreement or to consummate the
other transactions contemplated by this Agreement.

NYL SPECIAL REPRESENTATIVE means R. Dobie Langenkamp or such other
person as may be appointed by NYL.

PERSON means a natural person or any legal, commercial or
governmental entity, such as, but not limited to, a corporation,
general partnership, joint venture, limited partnership, limited
liability company, trust, business association, group acting in
concert, or any person acting in a representative capacity.

RAMCO DISCLOSURE MEMORANDUM shall have the meaning set forth in
SECTION 8.

RAMCO ENTITIES means and includes RAMCO and Double R, together with
the subsidiaries of each.

<PAGE>
RAMCO STOCK means all of the shares of stock owned by the RAMCO
Group Stockholders in the RAMCO Entities.

Any singular term in this Agreement shall be deemed to include the
plural, and any plural term the singular. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed
followed by the words "without limitation."

II.

RAMCO'S PURCHASE OF THE NYL PARTNERSHIP INTEREST

2.01 PURCHASE AND SALE. RAMCO shall have the right (the "RAMCO Option")
at any time commencing on the date hereof and ending December 16, 1996, at
12:00 noon CST (the "Option Period") to purchase from NYL all of the NYL
Partnership Interest (the "RAMCO Purchase"). The RAMCO Option may be
exercised during the Option Period by payment of the RAMCO Purchase Price in
the manner set forth in SECTION 2.02.

2.02 RAMCO PURCHASE PRICE. The RAMCO purchase price payable by RAMCO to
NYL under SECTION 2.01 (the "RAMCO Purchase Price") shall be either (a) Sixty
Million Dollars ($60,000,000) if the RAMCO Option is exercised and such sum
is paid to NYL by wire transfer of immediately available funds initiated by
RAMCO on or before 12:00 noon CST, November 29, 1996, or (b) Sixty Million,
Five Hundred Thousand Dollars ($60,500,000) if the RAMCO Option is exercised
and such sum is paid to NYL by wire transfer of immediately available funds
initiated by RAMCO after 12:00 noon CST on November 29, 1996, but prior to
12:00 noon CST on December 16, 1996.

2.03 LAPSE OF OPTION. In the event that the RAMCO Option is not
exercised prior to the expiration of the Option Period, the RAMCO Option
shall immediately lapse and be of no further force and effect, the RAMCO
Purchase shall not occur and the provisions of SECTION 3 regarding the
purchase by NYL of the RAMCO Stock shall automatically and immediately apply.

2.04 EFFECT OF CLOSING. The representations and warranties of the RAMCO
Entities and the RAMCO Group Stockholders set out herein, together with the
covenants of the RAMCO Entities and the RAMCO Group Stockholders set out
herein relating to conduct of the business and financial condition of the
RAMCO Entities prior to the closing, shall expire and be of no further effect
upon and as of the closing of the RAMCO Purchase, and neither the RAMCO
Entities nor any of the RAMCO Group Stockholders shall have any liability
with respect thereto; provided, however, that all covenants and agreements
relating to matters to occur after closing shall continue to be applicable and
in full force and effect.

III.

NYL PURCHASE OF RAMCO ENTITIES STOCK

3.01 PURCHASE AND SALE. In the event that the RAMCO Option is not timely
and properly exercised as set forth in SECTION 2, then subject to
satisfaction of the conditions to closing set out in SECTION 3.03 hereof, the
RAMCO Group Stockholders shall sell to NYL and NYL shall purchase from the
RAMCO Group Stockholders (the "NYL Purchase") all of the following:

(a) Seventy-five (75) shares of RAMCO Common Stock owned by the
RAMCO Group Stockholders, which represents all of the issued and outstanding
RAMCO Common Stock other than the shares of RAMCO Common Stock owned by NYL;

<PAGE>

(b) Seven hundred fifty (750) shares of Double R's Common Stock
owned by the RAMCO Group Stockholders, which represents all of the issued and
outstanding shares of Double R Common Stock other than the shares of Double R
Common Stock owned by NYL;

(d) The Double R Notes owned by the RAMCO Group Stockholders.

A complete list of the holders of all classes of stock, common and preferred,
in RAMCO and Double R to include the number of shares owned by each such
person or entity is attached in Exhibit "A" hereto. It is the intent of these
provisions that in the event the RAMCO Option is not timely and properly
exercised, NYL shall acquire all of the stock and other interests in the
RAMCO Entities owned by the RAMCO Group Stockholders.

3.02 PURCHASE PRICE. The Purchase Price payable to the RAMCO Group
Stockholders by NYL for the RAMCO Stock under SECTION 3.01 shall be an
aggregate of Six Million Dollars ($6,000,000) (the "NYL Purchase Price"),
payable to each of the RAMCO Group Stockholders, as follows:

Talley $2,000,000
Lee $2,000,000
Fisher $2,000,000

The NYL Purchase Price shall be paid, as follows: Five percent (5%) of the
NYL Purchase Price shall be paid to the Escrow Agent at the NYL Purchase
Closing and the remaining ninety-five percent (95%) shall be paid by NYL to
the RAMCO Group Stockholders (one-third (1/3) each) on January 2, 1997. The
sum of $300,000 to be paid to the Escrow Agent shall be by wire transfer of
immediately available funds initiated by NYL before 12:00 noon on December 17,
1996 (provided the RAMCO Option has not theretofore been exercised); and on
January 2, 1997, NYL shall wire transfer to the RAMCO Group Stockholders
(one-third (1/3) each) immediately available funds in the aggregate sum of
$5,700,000. If NYL elects to acquire the RAMCO stock, the NYL payment of
January 2, 1997, shall be unconditional and not subject to setoff.

3.03 CLOSING CONDITIONS.

(a) NYL shall not be required to close the NYL Purchase (i) if
there has occurred a material adverse effect in the financial condition of
the RAMCO Entities between the date hereof and December 16, 1996, or (ii)
unless (A) the covenants of the RAMCO Entities and of the RAMCO Group
Stockholders have been performed in all material respects prior to the
closing, and (B) the representations and warranties of the RAMCO Entities and
the RAMCO Group Stockholders shall be true and correct in all material
respects at and as of the closing as though made on such date.

(b) In the event NYL elects to close the NYL Purchase with knowledge
of any breach of any such covenant or the inaccuracy of any such
representation or warranty, the act of closing shall constitute a waiver of
same, unless the breach of such covenant or inaccuracy in such representation
or warranty is the result of actions taken in bad faith by either the RAMCO
Entities or the RAMCO Group Stockholders for the purpose of discouraging or
impeding the NYL Purchase.

(c) In the event that NYL closes the NYL Purchase without knowledge
of a material breach of any covenant or material inaccuracy of any
representation or warranty, the act of closing shall not constitute a waiver
of the same; provided, however, that if no action or claim is made by NYL
with ninety (90) days of the NYL Purchase Closing, NYL will be deemed to have
waived any such breach or inaccuracy.

<PAGE>

3.04 TERMINATION. In the event NYL does not close the NYL Purchase by
reason of the failure of the conditions described in SECTION 3.03(a) hereof,
then (i) if such failure relates to a material inaccuracy (i.e., such
inaccuracy gives rise to a material adverse effect) in any of the
representations and warranties of any of the RAMCO Entities or the RAMCO
Group Stockholders as of the closing date, but such representation and/or
warranty was true when made, then NYL's only recourse shall be to terminate
this Agreement as of such date with no Party having any further rights or
obligations under this Agreement with respect to such inaccuracy, or (ii) if
such failure is due to a material breach (i.e., such breach gives rise to a
material adverse effect) of any of the covenants of any of the RAMCO Entities
or the RAMCO Group Stockholders set out herein, or relates to a material
inaccuracy when made in any of the representations or warranties of any of
the RAMCO Entities or the RAMCO Group Stockholders, then NYL may terminate
this Agreement and pursue whatever claims or causes of action NYL may have
against the offending RAMCO Entity or RAMCO Group Stockholder arising out of
such breach or inaccuracy or representation or warranty. In the event NYL
terminates this Agreement pursuant to this SECTION 3.04, notice promptly
shall be given to the Escrow Agent and the RAMCO Group Stockholders. Upon
receipt of such notice, the Escrow Agent shall return or dispose of the
documents in escrow as follows: the documents described in SECTION 4.02(a)
shall be returned to NYL; the documents described in SECTION 4.02(b) shall be
returned to the RAMCO Entities or the RAMCO Group Stockholders; and, the
documents described in SECTION 4.02(c) shall be destroyed by the Escrow Agent
and notice of such destruction given to the parties. The RAMCO Group
Stockholders shall be entitled to specific performance of this Agreement in
the event that it is determined by appropriate proceedings that NYL was not
entitled to termination under SECTION 3.03 OR 3.04.

IV.

ESCROW AGENT AND ESCROW DOCUMENTS

4.01 APPOINTMENT OF ESCROW AGENT. The parties do each hereby appoint
The Trust Company of Oklahoma to serve as the Escrow Agent for all purposes
related to this Agreement, to receive the closing documents set forth in
SECTION 4.02 and to distribute the closing documents deposited with the
Escrow Agent as set forth herein. Upon execution of this Agreement, the
parties and Escrow Agent shall enter into an Escrow Agreement substantially
in the form attached as Exhibit "B" hereto.

4.02 ESCROW DOCUMENTS. Upon execution of this Agreement, the following
documents shall be delivered to the Escrow Agent:

(a) NYL shall deliver an assignment in the form attached
hereto as Exhibit "C" of all of the NYL Partnership
Interest to RAMCO which shall be effective only if the
RAMCO Purchase Closing occurs.

(b) RAMCO shall deliver:

(i) A Certificate of good standing certifying that each
RAMCO Entity is in existence and has paid all
franchise taxes and is in good standing in the
states of their incorporation;

(ii) Stock certificates together with stock powers duly
endorsed by the RAMCO Group Stockholders providing
for the transfer free and clear of any liens,
claims or encumbrances of all of the shares of the
RAMCO Stock owned by the RAMCO Group Stockholders;

(iii) The written resignations in the form attached
hereto as Exhibit "D" of each of the RAMCO Group
Stockholders as Officers and/or Directors of any
of the RAMCO Entities, as trustees or fiduciaries
on any employee benefit plans of a

5
<PAGE>

RAMCO Entity, and as signatories on any of the
RAMCO Entities bank accounts effective as of the
NYL Purchase Closing;

(iv) Assignments in the form attached hereto as Exhibit
"E" of the Double R Notes in the amount of
$333,687.25 to NYL executed by the RAMCO Group
Stockholders.

(i) Five executed originals of the General Release
described in SECTION 5.01(a).

(ii) Five executed originals of the Mutual Release of
all claims specified in SECTION 5.01(b).

4.03 RAMCO PURCHASE CLOSING. The Escrow Agent, upon receiving notice
from NYL that the RAMCO Option has been exercised and that NYL has received
the RAMCO Purchase Price, shall promptly deliver to RAMCO all of the
documents described in SECTIONS 4.02(a) AND 4.02(b)(the "RAMCO Purchase
Closing"). The Escrow Agent shall deliver one original of the General Release
and the Mutual Release to each of the RAMCO Group Stockholders, RAMCO and NYL.

4.04 NYL PURCHASE CLOSING. Upon exercise of the NYL Option and receipt
of the first installment ($300,000) of the NYL Purchase Price, the Escrow
Agent shall promptly deliver to NYL all of the documents set forth in
SECTIONS 4.02(a) AND 4.02(b) hereof. The Escrow Agent shall deliver one
original of the General Release and the Mutual Release to each of the RAMCO
Group Stockholders, RAMCO and NYL (the "NYL Purchase Closing") and shall
forward to the RAMCO Group Stockholders the first installment of the NYL
Purchase Price, all in accordance with the provisions of the Escrow Agreement.

4.05 COOPERATION. The Parties agree to fully cooperate and not impede
either the RAMCO Purchase Closing (if RAMCO timely and properly exercises the
RAMCO Option) or, failing the timely and proper exercise of the RAMCO Option,
the NYL Purchase Closing. In the event that the RAMCO Entities or RAMCO Group
Stockholders impede in any way the completion of the NYL Purchase Closing,
NYL may, at its sole option, reinstitute the Lawsuit in addition to any other
remedies available under this Agreement or otherwise arising out of RAMCO's
conduct.

RELEASES/CONFIDENTIALITY AGREEMENT

5.01 NYL, the RAMCO Group Stockholders and the RAMCO Entities shall
execute simultaneously with this Agreement:

(a) Five counterpart originals of a General Release, in the
form attached hereto as Exhibit "F," executed on behalf of each of the RAMCO
Entities and by NYL as the sole disinterested stockholder of the RAMCO
Entities, of all claims of every nature whatsoever against Lee, Talley and
Fisher with respect to all actions taken or omitted to be taken by them in
their respective capacities as officers, directors, employees, stockholders
and consultants of and to the RAMCO Entities.

(b) Five counterpart originals of a Mutual Release of all
claims (annexed hereto as Exhibit "G"), which shall be executed and delivered
to the Escrow Agent for subsequent delivery to the Parties after either the
RAMCO Purchase Closing or the NYL Purchase Closing, whichever shall occur.

<PAGE>

5.02 CONFIDENTIALITY AGREEMENT. NYL, the RAMCO Entities and the RAMCO
Group Stockholders shall execute and deliver, simultaneously with the
execution of this Agreement, a Confidentiality Agreement in the form attached
hereto as Exhibit "H" which shall become immediately effective between the
parties and shall continue in effect beyond the closing of either the RAMCO
Purchase, the NYL Purchase or the termination of this Agreement.

VI.

COVENANTS PENDING CLOSING

6.01 RAMCO AFFIRMATIVE COVENANTS. From the date of this Agreement
until the Expiration Date, unless the prior written consent of NYL shall have
been obtained, and except as otherwise expressly contemplated herein, each
RAMCO Entity covenants and agrees that it shall use its reasonable best
efforts to, and shall use its reasonable best efforts to cause the
Partnership to, comply with the following (and each RAMCO Group Stockholder
shall take such action as reasonably may be within each Stockholder's control
(i.e., Lee and Talley have day-to-day management and operational control
whereas Fisher's ability to control the following covenants by the RAMCO
Entities is limited to the right to vote as a director or shareholder on
matters brought before the Boards of Directors or stockholders) to assure
that each RAMCO Entity complies with the following):

(a) Each RAMCO Entity and the Partnership shall (i) preserve intact
its present business organization, (ii) preserve its present good will and
advantageous relationships with employees, vendors, suppliers and all persons
having business dealings with them, (iii) preserve and maintain in force all
of its licenses, registrations, franchises, patents, trademarks, copyrights,
permits and other similar rights, and (iv) maintain in force all property,
casualty, crime, product, directors' and officers' liability, and other forms
of insurance which they are presently carrying, except to the extent failure
to do any of the foregoing does not have a material adverse effect.

(b) Each RAMCO Entity and the Partnership shall operate their
businesses in the regular and ordinary course and manner.

(c) Subject only to the provisions of SECTION 10.05 hereinafter, all
monies otherwise distributable under SECTION 4.4 of the Partnership
Agreement shall be maintained in the Partnership account or paid to retire
the Partnership's obligation to Chase Bank.

(d) Each RAMCO Entity and the Partnership shall maintain their
books, accounts and records in the usual, regular and ordinary manner, and on
a basis consistent with prior years, and will make and keep books, records
and accounts, which, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of their assets and shall allow the NYL Special
Representative reasonable access thereto.

(e) Each RAMCO Entity and the Partnership will provide to the NYL
Special Representative:

(i) Contemporaneously, any letters furnished to it by its
independent public accountants which comment on its
accounting practices.

(ii) Promptly, but in any event within five days after the
discovery thereof, notice of any material adverse event or
circumstance affecting it including, but not limited to
the filing of any material litigation or threat thereof,
against it and the discovery that it is not, or with the
passage of time will not be, in compliance with any
provision of this Agreement, or any of its other material
agreements, a notice specifying the nature and period of
existence thereof.

(iii) Promptly, but in any event within 5 days following the
preparation thereof, copies of the minutes of proceedings
(or consents) of its Board of Directors or

<PAGE>

shareholders with appropriate deletions with respect to
matters, materials and actions not required to be disclosed
to NYL pursuant to SECTIONS 10.12 and 10.13 hereof, together
with all written materials given to Directors in connection
with any meeting of the Board of Directors, with appropriate
deletions with respect to matters, materials and actions not
required to be disclosed to NYL pursuant to SECTIONS 10.12
and 10.13 hereof, such materials to be in addition to any
materials to which NYL is otherwise entitled to as a
stockholder of the RAMCO Entities or a limited partner of
the Partnership.

(iv) Monthly and year-to-date balance sheets and income statements
prepared in accordance with historical practices, to be
provided as soon as available but not later than thirty (30)
days from the end of each month.

(v) The right to review at all reasonable times the current
check register (including wire transfer information),
accounts receivable ledger and accounts payable ledger for
the RAMCO Entities and the Partnership.

(vi) The right to review each contract to which a RAMCO Entity
or its assets is bound and which involves future payments
or performance in an amount in excess of $10,000.

(f) The NYL Special Representative shall have the right, at NYL's
expense, to visit and inspect any of the properties or assets of the RAMCO
Entities or the Partnership, to review and copy the Certificate of
Incorporation and Bylaws and review (but not copy) the minute books of the
RAMCO Entities, and to discuss the affairs, finances and accounts with the
officers and managers of each RAMCO Entity, all at such reasonable times and
as often as may be reasonably requested.

(g) Each RAMCO Entity will give the NYL Special Representative prior
written notice of each meeting of the Board of Directors of the company,
specifying the time and place of such meeting and, to the extent then known,
the matters to be discussed.

(h) Each RAMCO Entity and the Partnership shall perform and
observe, or cause to be performed or observed as the case may be, all of its
obligations pursuant to the terms, agreements and covenants of its
Certificate of Incorporation, its Bylaws, the Partnership Agreement, this
Agreement and all documents and agreements executed or delivered in connection
with this Agreement.

(i) Each RAMCO Entity and the Partnership will preserve intact
relationships existing with other parties and will at all times cause to be
done all things necessary to maintain, preserve, and renew its corporate
and/or partnership existence and will observe and conform with all valid
requirements of all governmental authorities relating to the conduct of its
business except to the extent that failure to do so does not have a material
adverse effect. Each RAMCO Entity and the Partnership will maintain and
keep in force all material licenses, permits and agreements necessary to the
conduct of its businesses except to the extent that failure to do so does not
have a material adverse effect.

(j) Each RAMCO Entity and the Partnership will maintain and keep its
material properties and assets, real and personal, in good repair, working
order and condition so that its business may be properly and advantageously
conducted at all times.

(k) Each RAMCO Entity and the Partnership will file all tax returns
and pay and discharge all taxes, assessments, interest and installments on
mortgages and governmental charges against it or against any of its
properties, upon the respective dates when due, except to the extent that
such taxes, assessments, interest, install-

<PAGE>

ments and governmental charges are contested in good faith and by appropriate
proceedings in such manner as not to cause any materially adverse effect on
its financial condition or loss of any right of redemption from any sale.

(l) Each RAMCO Entity and the Partnership shall comply with
all of the obligations which it has incurred or to which it becomes subject
pursuant to any contract or agreement, whether oral or written, express or
implied, the breach of which might have a material adverse effect upon its
business or financial condition, unless and to the extent that the same are
being contested in good faith and by appropriate proceedings. Each RAMCO
Entity and the Partnership shall comply with all applicable laws, rules and
regulations of all governmental authorities, the violation of which might
have a material adverse effect upon its business or financial condition.

6.02 RAMCO NEGATIVE COVENANTS. From the date of this Agreement until
the Expiration Date, each RAMCO Entity covenants and agrees that it will not
do or agree or commit to do, any of the following without the prior written
consent of NYL (and each RAMCO Group Stockholder covenants and agrees to take
such action as reasonably may be within each such Stockholder's control
(i.e., Lee and Talley have day-to-day management and operational control
whereas Fisher has only the ability to affect performance of the following
covenants by voting as a director or shareholder on matters brought before
the Boards of Directors or stockholders) to assure compliance by each RAMCO
Entity:

(a) Amend the Certificate of Incorporation, Bylaws or other
governing instruments of any RAMCO Entity or the Certificate of Limited
Partnership of the Partnership or the Partnership Agreement.

(b) Incur any additional debt obligation or other obligation
for borrowed money except in the ordinary course of the business of such
entity consistent with past practices, but in any event not greater than
$50,000 in any one transaction or series of transactions, or impose, or
suffer the imposition, on any oil and gas property or material operating
asset of such entity of any lien or permit any such lien to exist for a
period in excess of 30 days (other than in connection with liens being
contested in good faith and liens in effect as of the date hereof that are
disclosed in the RAMCO Disclosure Memorandum).

(c) Repurchase, redeem, or otherwise acquire or exchange,
directly or indirectly, any shares, or any securities convertible into any
shares, of the capital stock of any RAMCO Entity, or declare or pay any
dividend or make any other distribution in respect thereof.

(d) Except for this Agreement, issue, sell, pledge, encumber,
authorize the issuance of, enter into any contract to issue, sell, pledge,
encumber, or authorize the issuance of, or otherwise permit to become
outstanding, any additional shares of the capital stock of any RAMCO Entity,
or any stock appreciation rights, or any option, warrant, or other right.

(e) Adjust, split, combine or reclassify any capital stock of
any RAMCO Entity or issue or authorize the issuance of any other securities
in respect of or in substitution for shares of the capital stock of any RAMCO
Entity, or sell, lease, mortgage or otherwise dispose of or otherwise
encumber any shares of capital stock of any RAMCO Entity or any asset of any
RAMCO Entity, other than in the ordinary course of business for reasonable
and adequate consideration.

(f) Purchase any securities or make any material investment,
either by purchase of stock or securities, contributions to capital, or asset
transfers, in any person or otherwise acquire direct or indirect control over
any person.

(g) Grant any increase in compensation or benefits to the
RAMCO Group Stockholders; pay any severance or termination pay or any bonus
other than pursuant to written policies or written contracts in effect on the
date of this Agreement and disclosed in the RAMCO Disclosure Memorandum; or
enter into or amend any severance agreements with officials of any RAMCO
Entity, grant any increase in fees or other compensation or other benefits to
directors of any RAMCO Entity except in accordance with past practice
disclosed in the RAMCO

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<PAGE>

Disclosure Memorandum; or voluntarily accelerate the vesting of any stock
options, other stock-based compensation or employee benefits or any rights.

(h) Enter into or amend any employment contract between a
RAMCO Entity and any person (unless such amendment is required by law).

(i) Adopt any new employee benefit plan or terminate or
withdraw from, or make any material change in or to, any existing employee
benefit plans other than any such change that is required by law or that, in
the opinion of counsel, is necessary or advisable to maintain the tax
qualified status of any such plan, or make any distributions from such
employee benefit plans, except as required by law, the terms of such plans or
consistent with past practice.

(j) Sell any material assets except in the ordinary cause of
business.

(k) Make any significant change in any tax or accounting
methods or systems of internal accounting controls, except as may be
appropriate to conform to changes in tax laws or GAAP.

(l) Enter into, modify, amend or terminate any contract to
which their directors, shareholders, or related persons are a party
(including any loan contract) or waive, release, compromise or assign any
material rights or claims against any such persons, other than for reasonable
value consistent with historical practice.

(m) Cause any division or splitting of any securities or any
stock dividend, reclassification, exchange or substitution thereof or approve
or agree to any reorganization, merger, consolidation or combination with any
corporation or other entity or sell or lease (as lessor) more than 5 percent
of their total assets, or liquidate, dissolve, recapitalize or reorganize in
any form of transaction.

(n) Pay or declare any dividends or make other distributions
upon their shares of capital stock.

(o) Engage in any transaction with or make any distribution
(excluding payment of salary, expense allowance, consulting fees and director
fees in the same amount as paid to the RAMCO Group Stockholders during the
first half of calendar year 1996, as set out in the RAMCO Disclosure
Memorandum, and monthly interest on the Double R Notes) to any of their
directors, stockholders, or related persons or make any gift, transfer, loan,
or similar transaction with any such person.

(p) Take any action that violates the spirit and intent of the
terms hereof.

6.03 NYL AFFIRMATIVE COVENANTS. From the date of this Agreement until
the Expiration Date, NYL covenants and agrees as follows:

(a) Consistent with historical practices, NYL shall cause the
Special Representative to timely authorize, upon RAMCO's request, the use of
Partnership cash flow to fund development operations of the Partnership when
recommended by RAMCO and approved by Forrest A. Garb & Associates as meeting
the projected rate of return requirements of the Partnership Agreement.

(b) NYL shall not initiate any new litigation against any of
the RAMCO Entities, the RAMCO Group Stockholders, or any counsel or
accountants to any such Party, with reference to any matter involving the
RAMCO Entities or the RAMCO Group Stockholders based upon facts presently
known to NYL, unless (i) any of the RAMCO Entities or the RAMCO Group
Stockholders commits a material breach of this Agreement which remains
uncured for a period of ten (10) days after notice from NYL to each of the
RAMCO Group Stockholders, and (ii) as a result of such uncured breach, NYL
elects in writing to terminate this Agreement.

<PAGE>

6.04 ADVERSE CHANGES IN CONDITION. Prior to the Expiration Date, each
RAMCO Entity agrees to give written notice promptly to NYL upon becoming
aware of the occurrence or impending occurrence of any event or circumstance
relating to it or the Partnership which (a) is reasonably likely to have,
individually or in the aggregate, a material adverse effect on it or the
Partnership, or (b) would cause or constitute a material breach of any of its
representations, warranties, or covenants contained herein, and to use its
reasonable efforts to prevent or promptly to remedy the same.

VII.

REPRESENTATIONS AND WARRANTIES OF NYL
RELATING TO RAMCO PURCHASE OF THE NYL PARTNERSHIP INTEREST

NYL represents and warrants to the RAMCO Entities and the RAMCO Group
Stockholders that the statements contained in this SECTION 7 are correct and
complete as of the date of this Agreement and will be correct and complete as
of the RAMCO Purchase Closing.

7.01 ORGANIZATION, STANDING AND POWER. NYL is a corporation duly
organized, validly existing, and in good standing under the laws of the State
of New York, and has the corporate power and authority to carry on its
business as now conducted and to own, lease and operate its assets. NYL is
duly qualified or licensed to transact business as a foreign corporation in
good standing in the states of the United States and foreign jurisdictions
where the character of its assets or the nature or conduct of its business
requires it to be so qualified or licensed.

7.02 AUTHORITY; NO BREACH BY AGREEMENT.

(a) NYL has the corporate power and authority necessary to
execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement and the consummation of the transaction
contemplated herein, have been duly and validly authorized by all necessary
corporate action in respect thereof on the part of NYL. This Agreement
represents a legal, valid, and binding obligation of NYL, enforceable against
it in accordance with its terms (except in all cases as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, or similar laws affecting the enforcement of creditors' rights
generally and except that the availability of the equitable remedy of
specific performance or injunctive relief is subject to the discretion of the
court before which any proceeding may be brought).

(b) Neither the execution and delivery of this Agreement by NYL,
nor the consummation by NYL of the transactions contemplated hereby, nor
compliance by NYL with any of the provisions hereof, will (i) conflict with
or result in a breach of any provision of NYL's Certificate of Incorporation
or Bylaws, (ii) constitute or result in a default under, or require any
consent pursuant to, or result in the creation of any lien on any asset of
NYL under any contract or permit of NYL, or, (iii) violate any law or order
applicable to NYL or any of its material assets.

(c) No notice to, filing with, or consent of, any public body or
authority is necessary for the consummation by NYL of the transactions
contemplated in this Agreement.

7.03 OWNERSHIP OF NYL'S PARTNERSHIP INTEREST. NYL owns the NYL
Partnership Interest free and clear of any liens, claims, encumbrances, or
transfer restrictions and has the absolute right to sell the NYL Partnership
Interest to RAMCO as set forth herein without the need for the consent of any
other person.

7.04 STATEMENTS TRUE AND CORRECT. No statement, certificate, instrument
or other writing furnished by NYL or any of the Affiliates pursuant to this
Agreement contains or will contain any untrue statement of material

<PAGE>

fact or will omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which there were made, not
misleading.

7.05 SECURITIES LAW MATTERS. NYL hereby acknowledges that if the NYL
Purchase occurs, the RAMCO Stock will not be registered under the Securities
Act of 1933 or any applicable state securities laws. NYL expressly
represents and warrants to the RAMCO Group Stockholders that NYL (i) has or
will have prior to closing reviewed such information concerning the RAMCO
Entities as NYL has or will deem relevant in connection with NYL's
acquisition of the RAMCO Stock, and (ii) will be acquiring the RAMCO Stock
for investment purposes only and not for resale with a view to, or in
connection with, a distribution within the meaning of the securities laws.

VIII.

REPRESENTATIONS AND WARRANTIES OF RAMCO ENTITIES AND
RAMCO GROUP STOCKHOLDERS RELATING TO NYL PURCHASE OF THE RAMCO ENTITIES STOCK

Each of the RAMCO Entities and the RAMCO Group Stockholders do hereby
severally, and not jointly, represent and warrant to NYL that, to such
entity's or person's actual knowledge (as to the RAMCO Group Stockholders,
without inquiry), except as set forth in the RAMCO Disclosure Memorandum, the
statements contained in this SECTION 8 are correct and complete in all
material respects as of the date of this Agreement. Nothing in the RAMCO
Disclosure Memorandum shall be deemed adequate to disclose an exception to a
representation or warranty made herein unless the RAMCO Disclosure Memorandum
identifies the exception with reasonable particularity. The RAMCO Disclosure
Memorandum will be arranged in paragraphs corresponding to the lettered and
numbered paragraphs contained in this SECTION 8.

8.01 ORGANIZATION, STANDING, AND POWER. Each of the Ramco Entities is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware, and has the corporate power and authority to
carry on its business as now conducted and to own, lease and operate its
assets. Each of the RAMCO Entities is duly qualified or licensed to transact
business as a foreign corporation in good standing in the states of the
United States and foreign jurisdictions where the character of its assets or
the nature or conduct of its business requires it to be so qualified or
licensed, except where the failure to so qualify would not have a material
adverse effect.

8.02 AUTHORITY; NO BREACH BY AGREEMENT.

(a) Each of the RAMCO Entities has the corporate power and
together with the RAMCO Group Stockholders each has the authority necessary
to execute, deliver, and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery, and
performance of this Agreement and the consummation of the transactions
contemplated herein, have been duly and validly authorized by all necessary
corporate action in respect thereof on the part of each RAMCO Entity. This
Agreement represents a legal, valid, and binding obligation of each of the
RAMCO Entities and the RAMCO Group Stockholders, enforceable against each in
accordance with its terms (except in all cases as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, receivership,
conservatorship, moratorium, or similar laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the
discretion of the court before which any proceeding may be brought).

(b) Neither the execution and delivery of this Agreement by the
RAMCO Entities and the RAMCO Group Stockholders, nor the consummation by any
of them of the transactions contemplated hereby, nor compliance by them with
any of the provisions hereof, will (i) conflict with or result in a breach of
any provision of their respective Articles of Incorporation or Bylaws, (ii)
constitute or result in a default under, or require any

<PAGE>

consent pursuant to, or result in the creation of any lien on any asset of
any of them under any contract or permit, or, (iii) violate any law or order
applicable to any of them or any of their material assets.

(c) No notice to, filing with, or consent of, any public body
or authority or of any person is necessary for the consummation by the RAMCO
Entities or the RAMCO Group Stockholders of any of the transactions
contemplated in this Agreement.

8.03 CAPITAL STOCK.

(a) The authorized capital stock of RAMCO consists of 222 shares
of Common Stock, par value $225.00 per share, of which 101 shares are issued
and outstanding as of the date of this Agreement; 100,000 shares of Series A
Preferred Stock, par value $.01 per share, of which 77,714 shares are issued
and outstanding as of the date hereof; and 100,000 shares of Series B
Preferred Stock, par value $0.01 per share, of which 69,652 shares are issued
and outstanding as of the date hereof. The authorized capital stock of Double R
consists of 1,500 shares of common stock, $0.01 par value per share, of which
1,010 shares are issued and outstanding. The RAMCO Group Stockholders own
seventy-five (75) shares of RAMCO Common Stock, -0- shares of RAMCO Series A
Preferred Stock, 52,239 shares of RAMCO Series B Preferred Stock and 750 shares
of Double R Common Stock. All of the issued and outstanding shares of stock in
each RAMCO Entity are duly and validly issued and outstanding and are fully paid
and nonassessable. None of the outstanding shares of capital stock of any RAMCO
Entity has been issued in violation of any preemptive rights of the current or
past stockholders of such entity.

(b) There are no shares of capital stock or other equity
securities of any RAMCO Entity outstanding (other than the shares of common
and preferred stock listed in Exhibit "A") and there are no outstanding
rights against any RAMCO Entities or RAMCO Group Stockholders relating to the
capital stock of any RAMCO Entity. There are no voting trusts, voting
agreements, proxies or any other agreements or understandings with respect to
the voting of any voting securities of any RAMCO Entity.

8.04 OWNERSHIP OF RAMCO STOCK. Each of the RAMCO Group Stockholders
owns the shares of RAMCO stock which may be sold hereunder free and clear of
any liens, claims, encumbrances and transfer restrictions and has the absolute
right to sell the RAMCO Stock as set forth herein without the need for any
consent from any other person. The deliveries of the certificates
representing the RAMCO Stock will, upon delivery by the Escrow Agent to NYL,
transfer good and marketable title thereto.

8.05 NO SUBSIDIARIES. The RAMCO Entities have no subsidiaries except
as set forth in Exhibit 8.05 of the RAMCO Disclosure Memorandum.

8.06 FINANCIAL STATEMENTS. Attached as Exhibit 8.06 to the RAMCO
Disclosure Memorandum are as to each RAMCO Entity: the unaudited balance sheet
(including related notes and schedules, if any) as of May 31, 1996 and the
related unaudited statements of operations, stockholders equity and cash
flows (the "RAMCO Financial Statements"). Each of the RAMCO Financial
Statements (including, in each case, any related notes and schedules) was
prepared in accordance with historical practices consistently applied and
substantially in accordance with GAAP and fairly present in all material
respects the financial position of each RAMCO Entity as at the respective
dates and the results of operations and cash flows for the periods indicated.

8.07 EVENTS SUBSEQUENT. Since May 31, 1996, there has not been any
material adverse change in the assets, liabilities, business, financial
condition, operation, or results of operations of any RAMCO Entity. Without
limiting the generality of the foregoing, since that date:

(a) No RAMCO Entity has sold, leased, transferred or assigned any
of its material assets, tangible or intangible, other than for a fair
consideration and in the ordinary course of business;

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<PAGE>

(b) No RAMCO Entity has entered into any material contract (or
series of related contracts) outside the ordinary course of business;

(c) No person (including a RAMCO Entity) has accelerated,
terminated, modified or cancelled any material contract, (or series of
related contracts) to which a RAMCO Entity is a party or by which any of its
assets are bound;

(d) No RAMCO Entity has granted or imposed any lien upon any of
its assets, tangible or intangible;

(e) No RAMCO Entity has made any capital expenditure (or series
of related capital expenditures) outside the ordinary course of business;

(f) No RAMCO Entity has made any capital investment in, any loan
to, or any acquisition of the securities or assets of any other person (or
series of related capital investments, loans and acquisitions) outside the
ordinary course of business;

(g) No RAMCO Entity has created, incurred, assumed or guaranteed
any indebtedness (including capitalized lease obligations) outside the
ordinary course of business;

(h) No RAMCO Entity has delayed or postponed (beyond its normal
practice) the payment of accounts payable and other liabilities;

(i) No RAMCO Entity has cancelled, compromised, waived or
released any right or claim (or series of related rights and claims) outside
the ordinary course of business;

(j) There has been no change made or authorized in the Articles
of Incorporation or Bylaws of any RAMCO Entity;

(k) No RAMCO Entity has issued, sold or otherwise disposed of any
of its capital stock or granted any rights with respect to any of its capital
stock;

(l) No RAMCO Entity has declared, set aside or paid any dividend
or distribution with respect to its capital stock or redeemed, purchased or
otherwise acquired any of its capital stock;

(m) No RAMCO Entity has experienced any material damage,
destruction or loss (whether or not covered by insurance) to its property;

(n) Except for routine renewals of existing severance agreements,
no RAMCO entity has made any loan to or entered into any other transaction
with, any of its directors, officers, employees or related person giving rise
to any claim or right on its part against the person or on the part of the
person against it;

(o) Except for routine renewals of existing severance agreements,
no RAMCO Entity has entered into any employment contract or collective
bargaining agreement, written or oral, or modified the terms of any existing
such contract or agreement;

(p) No RAMCO Entity has granted any increase in the compensation
of any of its directors or officers;

(q) No RAMCO Entity has adopted any (i) bonus (ii) profit-sharing,
(iii) incentive compensation, (iv) pension, (v) retirement, (vi) medical,
hospitalization, life or other insurance, (vii) severance, or

<PAGE>

(viii) other plan, contract or commitments for any of its directors,
officers and employees or modified or terminated any existing such plan,
contract or commitment;

(r) Except for routine renewals of existing severance
agreements, no RAMCO Entity has made any other change in employment terms for
any of its directors and officers;

(s) No RAMCO Entity has made or pledged to make any charitable
or other capital contribution other than as consistent with past practices;
and

(t) No RAMCO Entity has committed in writing or orally to any of
the foregoing.

8.08 SUBSEQUENT EVENTS. No RAMCO Entity has incurred or paid any
material liability since May 31, 1996, except for such liabilities incurred
or paid in the ordinary course of business consistent with past business
practice. No RAMCO Entity is directly or indirectly liable, by guarantee,
indemnity, or otherwise, upon or with respect to, or obligated by, discount
or repurchase agreement or in any other way, to provide funds in respect to,
or obligated to guarantee or assume any liability of any person.

8.09 TAX MATTERS.

(a) All tax returns required to be filed by or on behalf of the
RAMCO Entities have been timely filed or requests for extensions have been
timely filed, granted, and have not expired for periods ended on or before
December 31, 1995, and all tax returns filed are complete and accurate in all
material respects. All taxes shown on filed tax returns have been paid.
There is no audit examination, deficiency, or refund litigation with respect
to any taxes. All taxes and other liabilities due with respect to completed
and settled examinations or concluded litigation have been paid.

(b) No RAMCO Entity has executed an extension or waiver of any
statute of limitations on the assessment or collection of any tax due
(excluding such statutes that relate to years currently under examination by
the Internal Revenue Service or other applicable taxing authorities) that is
currently in effect.

(c) The provision for any taxes due or to become due for any
RAMCO Entity for the period or periods through and including the date of the
respective RAMCO Financial Statements that has been made and is reflected on
such RAMCO Financial Statements is sufficient to cover all such taxes.

(d) The RAMCO Entities are in substantial compliance with, and
their records contain all information and documents (including properly
completed Internal Revenue Service Form W-9s) necessary to comply with, all
applicable information reporting and tax withholding requirements under
federal, state, and local tax laws, and such records identify with
specificity all accounts subject to backup withholding under Section 3406
of the Internal Revenue Code.

8.10 ASSETS. Each RAMCO Entity has defensible title, free and clear of
all liens, to all of its material assets except as set forth in SECTION 8.10
of the RAMCO Disclosure Memorandum. All tangible properties material to the
businesses of a RAMCO Entity are usable in the ordinary course of business
consistent with past practices. The assets of each RAMCO Entity include all
assets required to operate the business of that RAMCO Entity as presently
conducted. All assets which are material to a RAMCO Entity's business, held
under leases or subleases by each RAMCO Entity, are held under valid
contracts enforceable in accordance with their respective terms (except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or other laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the
discretion of the court before which any proceedings may be brought), and
each such contract is in full force and effect. No RAMCO Entity has received
notice from any insurance carrier that (i) any policy of insurance has been
or will be cancelled or that coverage thereunder will be

15
<PAGE>

reduced or eliminated, or (ii) premium costs with respect to such policies of
insurance will be substantially increased. There are presently no claims
pending under such policies of insurance.

8.11 INTELLECTUAL PROPERTY. Each RAMCO Entity owns all Intellectual
Property necessary for the operation of the business of each RAMCO Entity as
presently conducted. Each RAMCO Entity has taken all necessary action to
maintain and protect each item of Intellectual Property that it owns. Each
of the RAMCO Group Stockholders further represent that neither they nor any
related person or entity has retained possession of copies of any
Intellectual Properties of the RAMCO Entities or the Partnership.

8.12 COMPLIANCE WITH LAWS. Each RAMCO Entity has in effect all permits
necessary for it to own, lease, or operate its material assets and to carry
on its business as now conducted, and there has occurred no default under any
such permit. No RAMCO Entity:

(a) is in material violation (i.e., a violation that would have a
material adverse effect) of any laws, orders, or permits, including
environmental laws, applicable to its business or employees conducting its
business; or

(b) has received any notification or communication, which remains
effective and outstanding, from any agency or department of federal, state,
or local government or any, regulatory authority or the staff thereof (i)
asserting that it is not in compliance with any of the laws or orders which
such governmental authority or regulatory authority enforces, (ii) threatening
to revoke any permits, or (iii) requiring it to enter into or consent to the
issuance of a cease and desist order, formal agreement, directive,
commitment, or memorandum of understanding, or to adopt any board resolution
or similar undertaking.

8.13 LABOR RELATIONS. No RAMCO Entity is the subject of any litigation
or threatened claim asserting that it has committed an unfair labor practice
(within the meaning of the National Labor Relations Act or comparable state
law) or seeking to compel it to bargain with any labor organization as to
wages or conditions of employment, nor is it party to any collective
bargaining agreement, nor is there any strike or other material ongoing labor
dispute involving it, pending or, to its knowledge, threatened, or to its
knowledge, is there any activity involving its employees seeking to certify a
collective bargaining unit or engaging in any other organizational activity.

8.14 EMPLOYEE BENEFIT PLANS.

(a) Each RAMCO Entity has disclosed in SECTION 8.14 of the RAMCO
Disclosure Memorandum and delivered or made available to NYL prior to the
execution of this Agreement, copies of all pension, retirement,
profit-sharing, deferred compensation, stock option, employee stock
ownership, severance pay, vacation, bonus, or other incentive plans, all
other written employee programs, arrangements, or agreements, all medical,
vision, dental, or other health plans, all life insurance plans, and all other
employee benefit plans or fringe benefit plans currently adopted, maintained
by, sponsored in whole or in part by, or contributed to by any RAMCO Entity.

(b) All RAMCO Benefit Plans are in compliance, in all material
respects, with the applicable terms of ERISA, the Internal Revenue Code, and
any other applicable laws.

(c) Except as disclosed in SECTION 8.14 of the RAMCO Disclosure
Memorandum, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation, golden parachute,
or otherwise) becoming due to any director or any employee of any RAMCO
Entity from a RAMCO Entity under any RAMCO Benefit Plan or otherwise, (ii)
increase any benefits otherwise payable under any RAMCO Benefit Plan, or
(iii) result in any acceleration of the time of payment or vesting of any
such benefit.

<PAGE>

8.15 LEGAL PROCEEDINGS. Except for those matters set forth in
SECTION 8.15 of the RAMCO Disclosure Memorandum, there is no litigation
instituted or pending, or, to the knowledge of any RAMCO Entity, threatened
against a RAMCO Entity, which, if decided adversely, would have a material
adverse effect, nor are there any orders of any regulatory authorities, other
governmental authorities, or arbitrators outstanding against any of them.
SECTION 8.15 of the RAMCO Disclosure Memorandum includes a summary report of
all litigation as of the date of this Agreement to which each RAMCO Entity is
a party and which names it as a defendant or cross-defendant, or for which it
has potential liability.

8.16 SECURITIES LAWS MATTERS. RAMCO hereby acknowledges that if
the RAMCO Purchase occurs, the NYL Partnership Interest will not be
registered under the Securities Act of 1933 or any applicable state
securities laws. RAMCO expressly represents and warrants to NYL that RAMCO
(i) has or will have prior to Closing reviewed such information concerning
the NYL Partnership Interest as RAMCO has or will deem relevant in connection
with RAMCO's acquisition of the NYL Partnership Interest, and (ii) will be
acquiring the NYL Partnership Interest for investment purposes only and not
for resale with a view to, or in connection with, a distribution within the
meaning of the securities laws.

IX.

MINORITY STOCKHOLDER PROTECTIONS

9.01 INTENT. In the event that RAMCO acquires the NYL Partnership
Interest from NYL, NYL will continue to own 26 shares of the 101 issued and
outstanding shares of the Common Stock of RAMCO and 260 shares of the 1,010
issued and outstanding shares of the Common Stock of Double R.

9.02 DISTRIBUTIONS. For so long as NYL owns any shares of stock in
the RAMCO Entities, in the event that either of the RAMCO Entities sells any
properties or other assets, it shall do so in a manner consistent with the
best interests of all stockholders including NYL and to the extent any
distribution (excluding salaries, fees and expense reimbursements) is made
to stockholders, all stockholders of the same class will be treated equally
based upon their ownership interest in the RAMCO Entities.

9.03 NO DILUTION. In the event the RAMCO Purchase Closing occurs,
then for and during the period ending on the first to occur of (i) the
disposition by NYL of all or any part of its stock in the RAMCO Entities or
any of them, other than in connection with a similar and proportionate
disposition by the RAMCO Group Stockholders (as a group), or (ii) one year
from and after the RAMCO Purchase Closing, neither the RAMCO Entities nor the
RAMCO Group Stockholders -- this is an individual obligation to vote against
any action prohibited by this provision -- shall take any action which would
cause the dilution (i.e., a reduction) of NYL's current percentage stock
ownership in either of the RAMCO Entities as compared with the current
percentage stock ownership of the RAMCO Group Stockholders (as a group). This
provision shall not be construed as requiring that NYL's stock ownership
percentage in the RAMCO Entities be maintained at twenty-six percent (26%) or
as prohibiting members of the RAMCO Group Stockholders from transferring
shares among themselves. After the first to occur of (i) or (ii) above, this
provision shall expire and be of no further force or effect and neither NYL,
its successors or assigns, shall have these or any similar anti-dilution
rights but rather the rights and obligations of all of the stockholders shall
be governed by applicable Delaware law.

ADDITIONAL AGREEMENTS

10.01 CONFIDENTIALITY. Each Party agrees that the terms of this
Agreement are strictly confidential and shall not be revealed to any person,
corporation, or entity with the exception of a federal or state judicial,
legislative,

<PAGE>

regulatory, or administrative body as mandated by a subpoena, process,
directive, or order, either to testify or to produce or file documents, in
which event, the Party so served shall:

(a) Immediately notify the other Parties to this Agreement
of such service of a subpoena, process, directive or order;

(b) Give only such testimony or produce or file only such
documents as legally compelled to so do; and

(c) In the event any other Party to this Agreement objects
or moves to quash or restrict the scope or operation of such subpoena,
process, directive, or order, give only such testimony or produce or file
only such documents as a judicial, legislative, regulatory, or administrative
body shall require after ruling upon such objection or motion to quash.

Notwithstanding the provisions of this Section, nothing herein shall restrict
any Party from revealing the terms of this Agreement if litigation is
instituted by any Party. Further, this Agreement shall not be construed as
prohibiting any Party from reflecting any payments made hereunder in
financial statements, tax filings, or regulatory filings, or limiting in any
manner oversight and review by the New York State Insurance Department or the
National Association of Insurance Commissioners. The Parties shall agree upon
an abstract of this Agreement which may be disclosed by RAMCO if required to
obtain financing to exercise the RAMCO Option. The provisions of this Section
supersede the terms of the Confidentiality Order entered in the Lawsuit on
July 11, 1994.

10.02 PRESS RELEASES. The Parties shall not make any press release
or other public disclosure related to this Agreement or any other transaction
contemplated hereby; provided, that nothing in this SECTION 10.02 shall be
deemed to prohibit any Party from making any disclosure which its counsel
deems necessary or advisable in order to satisfy such Party's disclosure
obligations imposed by law. The Parties shall agree upon a public statement
respecting the resolution of their differences.

10.03 NYL SPECIAL REPRESENTATIVE. Between the date hereof and the
Expiration Date, the NYL Special Representative shall have all of the
following rights, powers and duties:

(a) Those rights, powers and duties contained in the Orders
entered December 17, 1993, and April 5, 1994, in the Lawsuit, except that the
Special Representative shall promptly approve all tech time charges up to
$10,000 per month;

(b) Those rights and powers to monitor and investigate
compliance by the RAMCO Entities and the RAMCO Group Stockholders of the
affirmative and negative covenants contained in SECTION 6 and the other
applicable provisions of this Agreement; and

(c) Those rights and powers incident to NYL's position as a
shareholder of the RAMCO Entities and a limited partner under the Partnership
Agreement.

10.04 RAMCO MANAGEMENT FEE AND TECH TIME. Prior to the Expiration
Date, RAMCO shall be paid a monthly "Management Fee" of $109,000 ($99,000 if
Coquille Bay is sold) and "Tech Time" paid to RAMCO shall not exceed $10,000
per month.

10.05 DISTRIBUTIONS. Prior to the Expiration Date, NYL shall
receive a distribution from the Partnership of $50,000 per month payable in
each month during the period from and including July, 1996, through the month
in which the Expiration Date occurs.

10.06 ANR JIB. NYL shall receive from RAMCO as general partner of
the Partnership NYL's 96.5% share of the Partnership's share of the ANR JIB
audit credit when received by the Partnership. RAMCO covenants

<PAGE>

to use its best efforts in securing, but shall not be obligated to commence
litigation to secure the timely receipt of same.

10.07 NO SEVERANCE/PERSONAL PROPERTY. In the event that NYL purchases
the RAMCO Stock pursuant to this Agreement, Talley, Lee and Fisher agree that
they shall not be entitled to and do hereby waive any right to receive,
whether by contract or by operation of law, any and all severance,
termination or similar payments to which they might otherwise be entitled
upon termination of employment. However, in such event, each shall be
entitled to receive and shall remove the office furniture and other items
described on Exhibit "I" hereof (the "Personal Items") as soon as possible,
but not later than February 28, 1997.

10.08 COOPERATION. Each of the RAMCO Group Stockholders specifically
agrees to fully cooperate in any transition following the purchase by NYL of
the RAMCO Stock, including signing any documents, returning any proprietary
or geological information or data of the RAMCO Entities and refrain from
using any such properties, Intellectual Property, or assets, and enter the
premises only when specifically authorized by NYL.

10.09 HEALTH INSURANCE. In the event that the NYL Purchase Closing
shall occur, NYL agrees to pay all costs and expenses of COBRA health
insurance coverage on behalf of the RAMCO Group Stockholders for a period of
eighteen (18) months from the NYL Purchase Closing.

10.10 AUDIT. NYL hereby consents to allow RAMCO to engage Ernst & Young
L.L.P. to conduct an audit and issue a report on the RAMCO Entities and the
Partnership for the year ended December 31, 1995, provided that NYL shall be
a signatory party to any engagement letter with such accountants and shall be
entitled to receive all draft reports and accountants' letters issued in
respect thereof. NYL shall be entitled to receive all such reports and
letters contemporaneously with the RAMCO Entities and to participate and be
privy to all meetings.

10.11 PARTNERSHIP AGREEMENT. Except as modified in this Agreement, the
Partnership Agreement shall remain in full force. To the extent that there is
any conflict between this Agreement and the Partnership Agreement, this
Agreement shall control.

10.12 ATTORNEY CLIENT PRIVILEGE. NYL acknowledges and agrees that all
communications between McAfee & Taft, A Professional Corporation (counsel to
the RAMCO Entities and, with the express consent of NYL heretofore granted,
counsel to the RAMCO Group Stockholders in connection with the matters
described in this Agreement) and the RAMCO Entities, the RAMCO Group
Stockholders, their respective employees, officers, agents, representatives,
other counsel, accountants, brokers, investment advisors, and others engaged by
them, in connection with the proposed RAMCO Purchase or the proposed NYL
Purchase or otherwise with respect to matters arising under this Agreement,
shall be privileged attorney-client communications and that NYL shall neither
seek to obtain any such communications nor attempt to discover the contents
thereof, whether through its Special Representative, by making a demand for
inspection of corporate records, in any court proceeding or otherwise.

10.13 INFORMATION RELATING TO THE RAMCO PURCHASE. NYL agrees that prior
to the closing of the RAMCO Purchase, all drafts, correspondence,
information, discussions, deliberations, alternatives, proposals, contracts,
etc., relating to the proposed RAMCO Purchase or the funding of same,
including, without limitation, documents and information of the kind
described in SECTION 10.14 hereof, shall be confidential information to which
NYL shall have no access, whether as a stockholder of the RAMCO Entities or
otherwise. RAMCO will, however, make a monthly report to a NYL officer
beginning September 30, 1996, of the status of financing efforts and the
probability of success of RAMCO acquiring the NYL Partnership Interest. In
the event the RAMCO Purchase closes, NYL shall have access to such
information as would be available to a stockholder under Delaware law.

10.14 FUNDING ARRANGEMENTS. Notwithstanding any provisions of this
Agreement to the contrary, the RAMCO Entities, for themselves and as general
partners for and on behalf of the Partnership, and the RAMCO Group
Stockholders, may enter into any agreements or commitments they deem
appropriate or desirable for the purpose of securing the financing or funding
required for the closing of the RAMCO Purchase, including, without

19
<PAGE>

limitation, loan agreements, mortgages, asset purchase and sale agreements,
stock sale, purchase and subscription agreements, brokerage agreements,
forward sale, swap or other transactions in derivatives, and other agreements
of every other nature and kind for the purpose of raising cash, debt or
equity financing, provided that (i) such agreements, transactions and
commitments that affect the ownership of, impose a lien upon or create rights
in third parties with respect to the stock, partnership interests or
properties of the RAMCO Entities or the Partnership may not be effective
until after or contemporaneous with the closing of the RAMCO Purchase, and
(ii) NYL shall not have the obligation to pledge its stock in the RAMCO
Entities. Any reorganization or recapitalization of the RAMCO Entities,
including any credit agreement or other debt financing, agreed to or
implemented for the purpose of effecting the RAMCO Purchase, regardless of
whether such agreements are to have present or future effect, shall be
structured so as to preserve the relative stock ownership percentages of NYL
on the one hand and the RAMCO Group Stockholders (as a group) on the other
hand, and any dilution of equity ownership or the creation of new stock or
rights or any changes to existing rights with respect to stock in the RAMCO
Entities in connection with effecting the RAMCO Purchase, regardless of
whether such agreements are to have present or future effect, shall affect
NYL on the one hand and the RAMCO Group Stockholders on the other hand in the
same manner and in proportion to their respective stock ownership interests.

10.15 FEES, COSTS AND EXPENSES. All reasonable legal fees, and all other
costs and expenses reasonably incurred by any of the RAMCO Entities or any of
the RAMCO Group Stockholders in connection with the attempted funding or
financing of the RAMCO Purchase or the NYL Purchase or otherwise in connection
with the negotiation, execution or performance of this Agreement by the RAMCO
Entities and the RAMCO Group Stockholders shall be paid by RAMCO and such
payment hereby is authorized and approved by NYL in its capacity as sole
disinterested stockholder of RAMCO and with the same effect as though put to
a vote of the stockholders of RAMCO. All commitment fees, arrangement fees,
initial fees, review fees, transaction fees, and other similar charges made
by, and all expense reimbursements paid to, any prospective third party
(i.e., not an Affiliate of any of the RAMCO Entities or RAMCO Group
Stockholders) lender, financing entity, investor representative, investment
banker or broker in connection with the proposed financing or funding of the
RAMCO Purchase shall be paid by the Partnership, which fees shall not exceed
the aggregate sum of Five Hundred Thousand Dollars ($500,000); provided,
however, that the RAMCO Entities, acting through Lee and Talley, shall use
their reasonable best efforts to avoid the requirement of paying any such
fees prior to the closing of the RAMCO Purchase.

XI.

[6~ BREACH OF COVENANTS

11.01 GOVERNING LAW AND VENUE. The validity, construction and
performance of this Agreement shall be determined in accordance with the laws
of the state of Oklahoma applicable to agreements made and to be performed in
Oklahoma, and the venue of any action pertaining to this document shall lie
in Tulsa, Oklahoma; inasmuch as, the signatories hereby acknowledge and
stipulate that this Agreement was negotiated, made, executed, and delivered
in Tulsa, Oklahoma and the subject matter hereof arose in Tulsa, Oklahoma.

11.02 RAMCO BREACH. In the event of a breach of any provision of this
Agreement by the RAMCO Entities or RAMCO Group Stockholders, NYL may
institute an action at law, or in equity, in the District Court for the
Northern District of Oklahoma or District Court of Tulsa County, Oklahoma,
and the RAMCO Entities and RAMCO Group Stockholders hereby waive any
objection to the jurisdiction of such court.

11.03 NYL BREACH. In the event of a breach of any provision of this
Agreement by NYL, the RAMCO Entities or the RAMCO Group Stockholders may
institute an action at law, or in equity, in the District Court for the
Northern District of Oklahoma or the District Court of Tulsa County,
Oklahoma, and NYL hereby waives any objection to the jurisdiction of such
court.

<PAGE>

XII.

NOTICES

12.01 NOTICES. All notices and other communications required
hereunder shall be in writing and shall be deemed given:

(i) when received, if delivered personally,

(ii) when sent, if by facsimile transmission during normal business
hours of the receiving party (or if after normal business hours of such party
on the next business day), or

(iii) twenty-four hours after deposit with an overnight express courier
(but if the end of such twenty-four hour period falls on other than a normal
business day, then on the next business day).

All notices to the parties shall be at the following addresses (or at such
other address for a party as shall be specified by like notice; provided that
notices of a change of address shall be effective only upon receipt thereof):

(a) to NYL as follows:

Mr. William Y. Cheng
Vice President
New York Life Insurance
51 Madison Avenue
New York, NY 10010
Fax: (212) 447-4166

John Stine, Esq.
Associate General Counsel
New York Life Insurance
51 Madison Avenue
New York, NY 10010
Fax: (212) 576-8340

with copies to:

R. Dobie Langenkamp, Esq.
400 South Boston Building
Suite 1200
Tulsa, OK 74103
Fax: (918) 583-9601

J. Warren Jackman, Esq.
Pray, Walker, Jackman,
Williamson & Marlar
900 ONEOK Plaza
100 West Fifth Street
Tulsa, OK 74103
Fax: (918) 581-5599

<PAGE>

(b) to RAMCO or Double R as follows:

Mr. Larry E. Lee
President
RAMCO
5100 E. Skelly Drive
Suite 650
Tulsa, OK 74135
Fax: (918) 663-9214

with copies to:

C. David Stinson, Esq.
McAfee & Taft
Two Leadership Square
10th Floor
Oklahoma City, OK 73102
Fax: (405) 235-0439

Dr. William W. Talley II
9400 N. Broadway, Suite 800
Oklahoma City, OK 73114
Fax: (405) 478-7175

Mr. Larry E. Lee
RAMCO
5100 E. Skelly Drive
Suite 650
Tulsa, OK 74135
Fax: (918) 663-9214

Ms. Helen Fisher-Bennett
RAMCO Director
3333 Hagen Road
Napa, CA
Fax: (707) 226-5566

with copies to:

C. David Stinson, Esq.
McAfee & Taft
Two Leadership Square
10th Floor
Oklahoma City, OK 73102
Fax: (405) 235-0439

<PAGE>

XIII.

MISCELLANEOUS

13.01 SURVIVAL OF REPRESENTATIONS AND COVENANTS. Subject to the
provisions of SECTIONS 2.04, 3.03 and 3.04 hereof, the respective
representations, warranties, obligations, covenants, and agreements of the
parties shall survive the NYL Purchase Closing or the RAMCO Purchase Closing,
as the case may be.

13.02 ENTIRE AGREEMENT. Except as otherwise expressly, provided herein,
this Agreement (including the documents and instruments referred to herein)
constitutes the entire agreement between the parties with respect to the
transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereto, written or oral. Nothing in this
Agreement expressed or implied, is intended to confer upon any person, other
than the parties or their respective successors, any rights, remedies,
obligations, or liabilities under or by reason of this Agreement.

13.03 AMENDMENTS. This Agreement may not be amended except by a
subsequent writing signed by each of the parties.

13.04 WAIVERS. The failure of any party at any time or times to require
performance of any provision hereof shall in no manner affect the right of
such party at a later time to enforce the same or any other provision of this
Agreement. No waiver of any condition or of the breach of any term contained
in this Agreement in one or more instances shall be deemed to be or construed
as a further or continuing waiver of such condition or breach or a waiver of
any other condition or of the breach of any other term of this Agreement. No
waiver shall be effective against a party unless in writing.

13.05 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any party hereto
(whether by operation of law or otherwise) without the prior written consent
of the other party. Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and permitted assigns.

13.06 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.

13.07 CAPTIONS AND SECTIONS. The captions contained in this Agreement
are for reference purposes only and are not part of this Agreement. Unless
otherwise indicated, all references to particular Sections shall mean and
refer to the referenced Sections of this Agreement.

13.08 INTERPRETATION. This document shall not construed in favor or
against any signatory hereto, but shall be construed as if all involved
herein prepared it.

13.09 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.

13.10 ATTORNEY FEES. In the event of any breach hereof resulting in
litigation, or should it ever become necessary for a party to bring suit in
order to enforce the provisions of this Agreement, all costs thereof, plus
reasonable attorney fees shall be awarded to the prevailing party. It shall
be irrebuttably presumed that any such fees actually billed and paid were
reasonable and necessary.

23
<PAGE>

IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf as of the day and year first above written.

New York Life Insurance Company

By /s/ William S. Cheng
---------------------------------
Title VICE PRESIDENT
-----------------------

RAMCO Operating Company

By /s/ Larry E. Lee
---------------------------------
Title President
----------------------

Oklahoma Double R Corporation

By /s/ Larry E. Lee
---------------------------------
Title President
----------------------

/s/ William W. Talley II
-----------------------------------
William W. Talley II, Individually
and as Trustee of the William W.
Talley II 1982 Revocable Trust

/s/ Larry E. Lee
-----------------------------------
Larry E. Lee

/s/ M. Helen Bennett
-----------------------------------
M. Helen Bennett, formerly Fisher,
Individually and as Trustee of
the M. Helen Fisher 1992 Trust

24
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EXHIBIT LIST

"A" Holders of all classes of stock, common and preferred, in RAMCO and
Double R (McAfee & Taft)

"B" Escrow Agreement (McAfee & Taft)

"C" Assignment of all of the NYL Partnership Interest to RAMCO
(McAfee & Taft)

"D" Written resignations of each of the RAMCO Group Stockholders as
Officers and/or Directors of any of the RAMCO Entities, as trustees
or fiduciaries on any employee benefit plans of a RAMCO Entity, and
as signatories on any of the RAMCO Entities bank accounts (Pray Walker)

"E" Assignments of the Double R Notes (Pray Walker)

"F" General Release (McAfee & Taft)

"G" Mutual Releases of All Claims (Pray Walker)

"H" Confidentiality Agreement (McAfee & Taft)

"I" Office Furniture and Other Personal Items (McAfee & Taft)

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RAMCO OPERATING COMPANY

SPECIAL SEVERANCE AGREEMENT

William W. Talley, II

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SPECIAL SEVERANCE AGREEMENT

THIS SPECIAL SEVERANCE AGREEMENT (this "Agreement") is entered into as of
December 1, 1997 (the "Effective Date") by and between RAMCO OPERATING COMPANY,
a Delaware corporation (the "Company"), and William W. Talley II, an individual
(the "Executive").

WHEREAS, the Executive is Chairman of the Board of Directors of the Company
(the "Board") and is presently making and is expected to continue making
substantial contributions to the Company as Chairman of the Board ("Chairman");
and

WHEREAS, the Board deems the services of the Executive as Chairman to be of
great and unique value to the Company and the Board desires to assure to the
Company continuity of management and leadership by the Executive as Chairman
and to the Executive the continued status as Chairman; and

WHEREAS, it is in the best interests of the Company and its shareholders to
induce the Executive to remain Chairman; and

WHEREAS, the Company desires to provide an additional inducement for the
Executive to remain Chairman by providing to him special compensation for
serving as Chairman and special severance payments upon termination of his
service as Chairman.

NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth and for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Executive and the Company hereby agree as
provided below.

1. OPERATION OF AGREEMENT. The purpose of this Agreement is to
provide to the Executive special compensation (in lieu of director fees) for
serving as Chairman and special severance benefits upon termination of his
service Chairman, on the terms and conditions provided herein.

2. TERM OF AGREEMENT. The term of this Agreement (the "Term") shall
be for the period commencing on the Effective Date and ending on the date the
Executive ceases to hold the office of Chairman.

DUTIES; COMPENSATION.

(a) STATUS; DUTIES. The Bylaws of the Company provide that the
Chairman shall be an officer of the Company, and during the Term the Executive
shall be considered an officer and employee of the Company for all purposes.
Executive's position (including status, offices, secretarial and administrative
support, titles and reporting requirements), authority, duties and
responsibilities shall be that of Chairman. During the Term, and excluding any
periods of vacation and sick leave to which the Executive is entitled, the
Executive agrees to devote reasonable attention and time during normal business
hours to the business and affairs of the Company and, to

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the extent necessary to discharge the responsibilities assigned to the
Executive hereunder, to use the Executive's reasonable best efforts to
perform faithfully and efficiently such responsibilities. During the Term it
shall not be a violation of this Agreement for the Executive to (i) serve on
corporate, civic or charitable boards or committees, (ii) deliver lectures,
fulfill speaking engagements or teach at educational institutions and (iii)
manage personal investments, so long as such activities do not significantly
interfere with the performance of the Executive's responsibilities as Chairman.
It is expressly understood and agreed that to the extent that any such
activities have been conducted by the Executive prior to the Effective Date,
the continued conduct of such activities (or the conduct of activities similar
in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Company.

(b) COMPENSATION.

(i) BASE SALARY. During the Term, the Executive shall receive
an annual base salary ("Base Salary") at least equal to $240,000. Such Base
Salary shall be payable monthly in cash. Base Salary shall be computed prior to
any reductions for (i) any deferrals of compensation made pursuant to Sections
125 or 401(k) of the Code or pursuant to any other program or arrangement
provided by the Company and (ii) any withholding, income or employment taxes.
The Base Salary shall be reviewed at least annually and shall be increased at
any time and from time to time as shall be determined by the Board. Any
increase in Base Salary shall not serve to limit or reduce any other obligation
to the Executive under this Agreement. Base Salary shall not be reduced after
any such increase.

(ii) BONUS. In addition to Base Salary, the Executive may be
paid, for any fiscal year during the Term, a bonus ("Bonus"), either pursuant to
the incentive compensation plan of the Company or otherwise as may be determined
by the Board.

(iii) INCENTIVE, SAVINGS AND RETIREMENT PLANS. In addition
to Base Salary and Bonus, the Executive shall be entitled to participate during
the Term in all incentive, savings and retirement plans, practices, supplemental
retirement plan policies and programs applicable to other key management
employees of the Company and its subsidiaries. Such plans, practices, policies
and programs, in the aggregate, shall provide the Executive with compensation,
benefits and reward opportunities at least as favorable as the most favorable of
such compensation, benefits and reward opportunities provided by the Company to
other key management employees of the Company and its subsidiaries.

(iv) WELFARE BENEFIT PLANS. During the Term, the Executive
and/or the Executive's family, as the case may be, shall be eligible for
participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and its subsidiaries
(including, without limitation, any medical, prescription, dental, disability,
salary continuance, employee life, group life, accidental death and travel
accident insurance plans and programs), at least as favorable as the most
favorable of such plans, practices, policies and programs

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provided by the Company and its subsidiaries to other key management
employees of the Company and its subsidiaries.

(v) EXPENSES. During the Term, the Executive shall be entitled
to receive prompt reimbursement for all reasonable expenses incurred by the
Executive in accordance with the policies, practices and procedures of the
Company and its subsidiaries provided to other key management employees of the
Company and its subsidiaries.

(vi) FRINGE BENEFITS. During the Term, the Executive shall be
entitled to fringe benefits, including use of an automobile and payment of
related expenses, in accordance with the most favorable plans, practices,
programs and policies of the Company and its subsidiaries provided to other key
management employees of the Company and its subsidiaries.

(vii) OFFICE AND SUPPORT STAFF. During the Term, the
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to secretarial and other assistance, at
least equal to the most favorable of the foregoing provided to other key
management employees of the Company and its subsidiaries.

(viii) VACATION. During the Term, the Executive shall be
entitled to paid vacation in accordance with the most favorable plans, policies,
programs and practices of the Company and its subsidiaries provided to other key
management employees of the Company and its subsidiaries.

(ix) EFFECT OF INCREASES. Any increase in Base Salary, Bonus or
any other benefit or perquisite described in the foregoing Sections (i)-(viii)
shall in no way diminish any obligation of the Company under the Agreement.

4. TERMINATION.

(a) DEATH OR DISABILITY. The Term shall terminate automatically upon
the Executive's death. If the Board determines in good faith that the
Disability of the Executive has occurred (pursuant to the definition of
"Disability" set forth below), it will give to the Executive written notice of
its intention to remove Executive as Chairman. In such event, Executive shall
be removed as Chairman effective on the 30th day after the date of such notice
(the "Disability Effective Date"), provided that, within such time period, the
Executive shall not have returned to full-time performance of the Executive's
duties. For purposes of this Agreement, "Disability" means disability (either
physical or mental) which (i) materially and adversely affects Executive's
ability to perform the duties required of his office, and (ii) at least 26 weeks
after its commencement, is determined to be total and permanent by a physician
selected by the Company or its insurers and acceptable to the Executive or the
Executive's legal representative (such agreement as to acceptability not to be
withheld unreasonably).

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(b) CAUSE. The Executive may be replaced as Chairman by vote of the
Board or removed as a director by vote of the stockholders of the Company having
the right to vote with respect to such removal (the "Stockholders"), in either
case with or without Cause. For purposes of this Agreement, replacement or
removal for "Cause" shall mean the taking of such action for one of the
following reasons: (i) the conviction of the Executive of a felony by a federal
or state court of competent jurisdiction; (ii) an act or acts of dishonesty
taken by the Executive and intended to result in substantial personal enrichment
of the Executive at the expense of the Company; or (iii) the Executive's
"willful" failure to follow a direct, reasonable and lawful written order from
the Board, within the reasonable scope of the Executive's duties, which failure
is not cured within 30 days. Further, for purposes of this Section (b):

(1) No act or failure to act, on the Executive's part shall be
deemed "willful" unless done, or omitted to be done, by the Executive not in
good faith and without reasonable belief that the Executive's action or omission
was in the best interest of the Company.

(2) The Executive shall not be deemed replaced or removed for
Cause unless and until there shall have been delivered to the Executive a copy
of a resolution duly adopted by the affirmative vote of not less than (i)
three-fourths (3/4ths) of the entire membership of the Board (excluding
Executive) at a meeting of the Board called and held for such purpose, or
(ii) two-thirds (2/3rds) of the Stockholders (excluding for purposes of such
determination shares of voting stock held by or for the benefit of the
Executive and his family), after reasonable notice to the Executive and an
opportunity for the Executive, together with the Executive's counsel, to be
heard before the Board or the Stockholders, finding that in the good faith
opinion of the Board or the Stockholders the Executive was guilty of conduct
set forth in clauses (i), (ii) or (iii) above and specifying the particulars
thereof in detail.

(c) GOOD REASON. The Executive may resign as Chairman for Good
Reason. For purposes of this Agreement, "Good Reason" means:

(i) the assignment to the Executive of any duties inconsistent
in any respect with the Executive's position (including status, offices, titles
and reporting requirements), authority, duties or responsibilities as
contemplated by Section 3(a) of this Agreement, or any other action by the
Company which results in a diminution in such position, compensation, authority,
duties or responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by the
Executive;

(ii) any failure by the Company to comply with any of the
provisions of Section 3(b) of this Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by the
Executive;

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(iii) any purported termination by the Company of this
Agreement otherwise than as expressly permitted by this Agreement; or

(iv) any failure by the Company to comply with and satisfy
Section 11(c) of this Agreement.

For purposes of this Section 4(c), any good faith determination of "Good
Reason" made by the Executive shall be conclusive unless such determination is
rejected by unanimous vote of the Board (excluding Executive), in which event
Executive may refer the determination of "Good Reason" to binding arbitration by
and between the Company and the Executive conducted pursuant to the Commercial
Arbitration Rules of the American Arbitration Association ("AAA") by a single
arbitrator appointed by the AAA. The decision of the arbitrator in such matter
shall be final, unappealable and binding upon the Company and the Executive.

(d) NOTICE OF TERMINATION. Any replacement or removal of the
Executive for Cause or resignation by the Executive for Good Reason shall be
communicated by Notice of Termination to the other party hereto given in
accordance with Section 13(b) of this Agreement. For purposes of this
Agreement, a "Notice of Termination" means a written notice which (i) indicates
the specific termination provisions in this Agreement relied upon, (ii) sets
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the of this Agreement under the provision so indicated
and (iii) if the Date of Termination (as defined below) is other than the date
of receipt of such notice, specifies the termination date (which date shall be
not more than 15 days after the giving of such notice). The failure by the
Executive to set forth in the Notice of Termination any fact or circumstance
which contributes to a showing of Good Reason shall not waive any right of the
Executive hereunder or preclude the Executive from asserting such fact or
circumstance in enforcing his rights hereunder.

(e) DATE OF TERMINATION. "Date of Termination" means the date of
receipt of the Notice of Termination by either the Company or the Executive as
the case may be or any later date specified therein; PROVIDED, HOWEVER, that if
the Executive cease to serve as Chairman by reason of death or Disability, the
Date of Termination shall be the date of death of the Executive or the
Disability Effective Date, as the case may be.

5. OBLIGATIONS OF THE COMPANY UPON TERMINATION.

(a) DEATH. If this Agreement is terminated by reason of the
Executive's death, this Agreement shall terminate without further obligations to
the Executive's legal representatives under this Agreement, other than those
obligations accrued or earned and vested (if applicable) by the Executive as of
the Date of Termination, including, for this purpose (i) the Executive's annual
full Base Salary through the Date of Termination at the rate in effect on the
Date of Termination, (ii) the product of the Bonus (defined in Section 3(b)(ii))
paid to the Executive for the last full fiscal year and a fraction, the
numerator of which is the number of days in the current fiscal year through the
Date of Termination, and the denominator of which is 365, (iii) the amount

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equal to the Executive's current Base Salary (for twelve (12) months), (iv)
the amount equal to the Bonus paid to the Executive for the last full fiscal
year (if any) ending during the Term or, if higher, the Bonus paid to the
Executive for any full fiscal year during the Term (as applicable, the
"Recent Bonus"), and (v) any compensation previously deferred by the
Executive (together with any accrued interest thereon) and not yet paid by
the Company and any accrued vacation pay not yet paid by the Company (such
amounts specified in clauses (i), (ii), (iii), (iv) and (v) are hereinafter
referred to as "Accrued Obligations"). All such Accrued Obligations shall be
paid to the Executive's estate or beneficiary, as applicable, in a lump sum
in cash within 30 days of the Date of Termination. Anything in this Agreement
to the contrary notwithstanding, the Executive's family shall be entitled to
receive benefits at least equal to the most favorable benefits provided by
the Company and any of its subsidiaries to surviving families of other key
management employees of the Company and such subsidiaries under such plans,
programs, practices and policies relating to family death benefits, if any,
in accordance with the most favorable plans, programs, practices and policies
of the Company and its subsidiaries provided to other key management
employees of the Company and its subsidiaries and their families.

(b) DISABILITY. If the Executive is replaced as Chairman by the
Board by reason of the Executive's Disability, this Agreement shall terminate
without further obligations to the Executive, other than those obligations
accrued or earned and vested (if applicable) by the Executive as of the Date of
Termination, including for this purpose, all Accrued Obligations. All such
Accrued Obligations shall be paid to the Executive in a lump sum in cash within
30 days of the Date of Termination. Anything in this Agreement to the contrary
notwithstanding, the Executive shall be entitled after the effective date of the
Disability to receive disability and other benefits at least equal to the most
favorable of those provided by the Company and its subsidiaries to disabled key
management employees and/or their families in accordance with such plans,
programs, practices and policies relating to disability, if any, in accordance
with the most favorable plans, programs, practices and policies of the Company
and its subsidiaries provided to other key management employees of the Company
and its subsidiaries and their families.

(c) CAUSE; VOLUNTARY RESIGNATION. If the Executive is (i) replaced
as Chairman by the Board, or (ii) removed as a director by the Stockholders, in
either case for Cause, this Agreement shall terminate without further
obligations to the Executive other than the obligation to pay to the Executive
the Base Salary accrued through the Date of Termination plus the vested amount
of any compensation previously deferred by the Executive. If the Executive (x)
resigns as Chairman, or (y) elects not to stand for reelection to the Board or
as Chairman, in either case other than for Good Reason ("Voluntary
Resignation"), this Agreement shall terminate without further obligations to the
Executive, other than those obligations accrued or earned and vested (if
applicable) by the Executive through the Date of Termination, including for this
purpose, all Accrued Obligations. All such Accrued Obligations to which the
Executive shall be entitled shall be paid to the Executive in a lump sum in cash
within 30 days of the Date of Termination.

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(d) TERMINATION OTHER THAN FOR DEATH, DISABILITY, CAUSE OR VOLUNTARY
RESIGNATION. If the Executive ceases to be Chairman other than by reason of
his death, disability, replacement or removal for Cause, or Voluntary
Resignation, then:

(i) the Company shall pay to the Executive in a lump sum in cash
within 30 days after the Date of Termination the aggregate of the following
amounts:

A. to the extent not theretofore paid, the Executive's
Base Salary through the Date of Termination; and

B. the product of (i) the Recent Bonus and (ii) a
fraction, the numerator of which is the number of days in the current fiscal
year through the Date of Termination and the denominator of which is 365; and

C. the product obtained by multiplying three (3) times the
current annual Base Salary; and

D. in the case of compensation previously deferred by the
Executive, all vested amounts previously deferred and not yet paid by the
Company, and any accrued vacation pay not yet paid by the Company; and

(ii) for a period of three (3) years after the Date of
Termination, or such longer period as any plan, program, practice or policy may
provide, the Company shall continue benefits to the Executive and/or the
Executive's family at least equal to those which would have been provided to
them in accordance with the plans, programs, practices and policies described in
Section 3(b)(iv) of this Agreement if this Agreement had not been terminated,
including health insurance and life insurance, in accordance with the most
favorable plans, practices, programs or policies of the Company and its
subsidiaries provided to other key management employees and their families and
for purposes of eligibility for retiree benefits pursuant to such plans,
practices, programs and policies, the Executive shall be considered to have
remained employed until the end of such three (3) year period after the Date of
Termination and to have retired on the last day of such period.

6. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any
benefit, bonus, incentive or other plans, programs, policies or practices,
provided by the Company or any of its subsidiaries and for which the Executive
may qualify, nor shall anything herein limit or otherwise affect such rights as
the Executive may have under any stock option or other agreements with the
Company or any of its subsidiaries. Amounts which are vested benefits or which
the Executive is otherwise entitled to receive under any plan, policy, practice
or program of the Company or any of its subsidiaries at or subsequent to the
Date of Termination shall be payable in accordance with such plan, policy,
practice or program.

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7. ACCELERATION OF VESTING. In the event that the Company has any
type of plan, program or arrangement which include, by example, not by
limitation, stock option plans, restricted stock award plans, phantom stock
plans and supplemental retirement income plans (the "Other Plans") and the
Executive is not 100% vested in his benefits in the Other Plans at the time this
Agreement is terminated, and the Executive would otherwise be entitled to the
payment of benefits pursuant to the terms of this Agreement, then, the Executive
shall be deemed to be 100% vested and non-forfeitable in his benefits in the
Other Plans; provided, no acceleration of vesting shall occur in the Other Plans
if such act would result in the disqualification of or otherwise adversely
affect the tax qualified status of such Other Plans or the participants in such
Other Plans. Further, in the event that the Company is unable to accelerate
vesting in the Other Plans because such acceleration would adversely effect the
tax status of any of the Other Plans or the participants in such Other Plans,
then, the Company shall pay to the Executive the amount equal to the benefits
which have been lost due to the inability to accelerate vesting in the Other
Plans; and such additional amounts shall be paid at the same time in the same
manner as benefits would otherwise be paid pursuant to the terms of this
Agreement.

8. FULL SETTLEMENT. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement. The Company
agrees to pay, to the full extent permitted by law, all legal fees and expenses
which the Executive may reasonably incur as a result of any contest (regardless
of the outcome thereof) by the Company or others of the validity or
enforceability of, or liability under, any provision of this Agreement or any
guarantee of performance thereof (including as a result of any contest by the
Executive about the amount of any payment pursuant to Section 9 of this
Agreement), plus in each case interest at the applicable Federal rate provided
for in Section 7872(f)(2) of the Code.

9. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.

(a) No payments made pursuant to this Agreement are contingent upon a
change in control as defined in Section 280G of the Internal Revenue Code of
1986, as amended (the "Code"). Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment or
distribution by the Company to or for the benefit of the Executive, whether paid
or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise, including, by example and not by way of limitation,
acceleration by the Company of the date of vesting or payment or rate of payment
under any plan, program or arrangement of the Company (a "Payment"), would be
subject to the excise tax imposed by Section 4999 of the Code or any interest or
penalties with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Executive of all income and excise taxes with respect to the Payment (including

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any interest or penalties imposed with respect to such taxes), and specifically
including any Excise Tax imposed on the Gross-Up Payment, the Executive retains
an amount of the Gross-Up Payment equal to the Excise Tax imposed on the
Payment.

(b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether a Gross-Up Payment
is required and the amount of such Gross-Up Payment, shall be made by Ernst &
Young, L.L.P. (the "Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Executive within 15 business days of
the receipt of notice from the Executive that there has been a Payment which
would be subject to the Excise Tax, or such earlier time as is requested by the
Company. The initial Gross-Up Payment, if any, as determined pursuant to this
Section 9(b), shall be paid to the Executive within five days of the receipt of
the Accounting Firm's determination. If the Accounting Firm determines that no
Excise Tax is payable by the Executive, it shall furnish the Executive with an
opinion that he has substantial authority not to report any Excise Tax on his
federal income tax return. Any determination by the Accounting Firm shall be
binding upon the Company and the Executive. As a result of the uncertainty in
the application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company should have been made
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 9(c) and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive.

(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than ten business days after the Executive knows of
such claim and shall apprise the Company of the nature of such claim and the
date on which such claim is requested to be paid. The Executive shall not pay
such claim prior to the expiration of the 30-day period following the date on
which he gives such notice to the Company (or such shorter period ending on the
date that any payment of taxes with respect to such claim is due). If the
Company notifies the Executive in writing prior to the expiration of such period
that it desires to contest such claim, the Executive shall:

(i) give the Company any information reasonably requested by the
Company relating to such claim,

(ii) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company,

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(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and

(iv) permit the Company to participate in any proceedings
relating to such claim;

provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax, including interest and
penalties with respect thereto, imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 9(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct the Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax or income
tax, including interest or penalties with respect thereto, imposed with respect
to such advance or with respect to any imputed income with respect to such
advance; and further provided that any extension of the statute of limitations
relating to payment of taxes for the taxable year of the Executive with respect
to which such contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company's control of the contest shall be
limited to issues with respect to which a Gross-Up Payment would be payable
hereunder and the Executive shall be entitled to settle or contest, as the case
may be, any other issue raised by the Internal Revenue Service or any other
taxing authority.

(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 9(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 9(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by the Company pursuant to Section 9(c), a determination
is made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the expiration of thirty days
after such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.

10. CONFIDENTIAL INFORMATION. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to

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the Company or any of its subsidiaries, and their respective businesses,
which shall have been obtained by the Executive during the term of this
Agreement and which shall not be or become public knowledge (other than by
acts by the Executive or his representatives in violation of this Agreement).
After termination of this Agreement, the Executive shall not, without the
prior written consent of the Company, communicate or divulge any such
information, knowledge or data to anyone other than the Company and those
designated by it. In no event shall an asserted violation of the provisions
of this Section 10 constitute a basis for deferring or withholding any
amounts otherwise payable to the Executive under this Agreement.

11. SUCCESSORS.

(a) This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the Executive's legal
representatives.

(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.

(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets which
assumes and agrees to perform this Agreement by operation of law, or otherwise.

12. INDEMNIFICATION AND INSURANCE. The Executive shall be indemnified
and held harmless by the Company during the term of this Agreement and
following any termination of this Agreement for any reason whatsoever in the
same manner as would any other key management employee of the Company with
respect to acts or omissions occurring prior to (a) the termination of this
Agreement or (b) the termination of employment of the Executive. In
addition, during the term of this Agreement and for a period of five years
following the termination of this Agreement for any reason whatsoever, the
Executive shall be covered by a Company held Directors and Officers liability
insurance policy covering acts or omissions occurring prior to (a) the
termination of this Agreement or (b) the termination of employment of the
Executive. Provided, in no event will the obligation of the Company to
indemnify the Executive or provide Directors and Officers insurance to the
Executive under this Section be less than the obligation and insurance
coverage which the Company had to the Executive immediately prior to the
occurrence of the Executive's Date of Termination.

13. MISCELLANEOUS.

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(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of Oklahoma, without reference to principles of
conflict of laws. The captions of this Agreement are not part of the provisions
hereof and shall have no force or effect. This Agreement may not be amended or
modified otherwise than by a written agreement executed by the parties hereto or
their respective successors and legal representatives.

(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:

IF TO THE EXECUTIVE: At his last known address evidenced on the Company's
payroll records

IF TO THE COMPANY: RAMCO Operating Company
Meridian Tower, Suite 650
5100 E. Skelly Drive
Tulsa, OK 74135

Attention: Mr. Larry E. Lee, President

WITH A COPY TO: McAfee & Taft A Professional Corporation
10th Floor, Two Leadership Square
Oklahoma City, Oklahoma 73102

Attention: C. David Stinson, Esq.

or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.

(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.

(d) The Company may withhold from any amounts payable under this
Agreement such federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.

(e) The Executive's failure to insist upon strict compliance with any
provision hereof shall not be deemed to be a waiver of such provision or any
other provision thereof.

(f) This Agreement contains the entire understanding of the Company
and the Executive with respect to the subject matter hereof.

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(g) The Executive and the Company acknowledge that this Agreement may
be terminated by either the Executive or the Company at any time. Upon a
termination of this Agreement prior to the Effective Date, there shall be no
further rights under this Agreement.

14. NO TRUST. No action under this Agreement by the Company or its
Board of Directors shall be construed as creating a trust, escrow or other
secured or segregated fund, in favor of the Executive or his beneficiary. The
status of the Executive and his beneficiary with respect to any liabilities
assumed by the Company hereunder shall be solely those of unsecured creditors of
the Company. Any asset acquired or held by the Company in connection with
liabilities assumed by it hereunder, shall not be deemed to be held under any
trust, escrow or other secured or segregated fund for the benefit of the
Executive or his beneficiary or to be security for the performance of the
obligations of the Company, but shall be, and remain a general, unpledged,
unrestricted asset of the Company at all times subject to the claims of general
creditors of the Company.

15. NO ASSIGNABILITY. Neither the Executive nor his beneficiary, nor
any other person shall acquire any right to or interest in any payments payable
under this Agreement, otherwise than by actual payment in accordance with the
provisions of this Agreement, or have any power to transfer, assign, anticipate,
pledge, mortgage or otherwise encumber, alienate or transfer any rights
hereunder in advance of any of the payments to be made pursuant to this
Agreement or any portion thereof which is expressly declared to be nonassignable
and nontransferable. No right or benefit hereunder shall in any manner be
liable for or subject to the debts, contracts, liabilities, or torts of the
person entitled to such benefit.

IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant
to the authorization from its Board of Directors, the Company has caused these
presents to be executed in its name on its behalf, all as of the day and year
first above written.

/s/ William W. Talley II
---------------------------------------
William W. Talley II

"EXECUTIVE"

RAMCO OPERATING COMPANY

By /s/ Larry E. Lee
-------------------------------------
Larry E. Lee, President

"COMPANY"

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RAMCO OPERATING COMPANY

EMPLOYMENT AGREEMENT

Larry E. Lee

<PAGE>

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of December
1, 1997 (the "Effective Date"), by and between RAMCO OPERATING COMPANY, a
Delaware corporation (the "Company"), and LARRY E. LEE, an individual (the
"Executive").

WHEREAS, the Board of Directors of the Company (the "Board"), has
determined that it is in the best interests of the Company and its shareholders
to assure that the Company will have the continued dedication of the Executive;

WHEREAS, the Board believes it is important to diminish the inevitable
distraction of the Executive by virtue of the personal uncertainties and risks
created by a pending or threatened loss of employment, and to encourage the
Executive's full attention and dedication to the affairs of the Company during
the term of this Agreement and upon the occurrence of such event;

WHEREAS, the Board also believes the Company is best served by providing
the Executive with compensation arrangements which provide the Executive with
individual financial security and which are competitive with those of other
corporations; and

WHEREAS, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.

NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

1. EMPLOYMENT PERIOD. The Company hereby agrees to continue the
Executive in its employ, and the Executive hereby agrees to remain in the employ
of the Company, for the period commencing on the Effective Date and ending on
the earlier to occur of (a) the third anniversary of such date unless extended
as provided herein or (b) the first day of the month coinciding with or next
following the Executive's Normal Retirement Date (the "Employment Period");
PROVIDED, HOWEVER, that commencing on the date one year after the date hereof,
and on each annual anniversary of such date (such date and each annual
anniversary thereof is hereinafter referred to as the "Renewal Date"), the
Employment Period shall be automatically extended so as to terminate on the
earlier of (i) three years from such Renewal Date or (ii) the first day of the
month coinciding with or next following the Executive's Normal Retirement Date,
unless at least 60 days prior to the Renewal Date, the Company shall give notice
that the Employment Period shall not be so extended in which event this
Agreement shall continue for the remainder of its then current term and
terminate as provided herein.

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TERMS OF EMPLOYMENT.

(a) POSITION AND DUTIES.

(i) During the Employment Period, (A) the Executive's position
(including status, offices, secretarial and administrative support, titles and
reporting requirements), authority, duties and responsibilities shall be that of
President and (B) unless the Executive consents to the contrary, the Executive's
services shall be performed at Tulsa, Oklahoma or any office or location less
than 25 miles from such location.

(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive agrees
to devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (C) manage personal investments, so long
as such activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to the extent that
any such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Company.

(b) COMPENSATION.

(i) BASE SALARY. During the Employment Period, the Executive
shall receive an annual base salary ("Base Salary") at least equal to $295,000.
Such Base Salary shall be payable monthly in cash. Base Salary shall be
computed prior to any reductions for (i) any deferrals of compensation made
pursuant to Sections 125 or 401(k) of the Code or pursuant to any other program
or arrangement provided by the Company and (ii) any withholding, income or
employment taxes. During the Employment Period, the Base Salary shall be
reviewed at least annually and shall be increased at any time and from time to
time as shall be determined by the Board. Any increase in Base Salary shall not
serve to limit or reduce any other obligation to the Executive under this
Agreement. Base Salary shall not be reduced after any such increase.

(ii) BONUS. In addition to Base Salary, the Executive may be
paid, for any fiscal year during the Employment Period, a bonus ("Bonus"),
either pursuant to the incentive compensation plan of the Company or otherwise
as may be determined by the Board.

(iii) INCENTIVE, SAVINGS AND RETIREMENT PLANS. In addition to
Base Salary and Bonus, the Executive shall be entitled to participate during
the Employment Period in all

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incentive, savings and retirement plans, practices, supplemental retirement
plan policies and programs applicable to other key management employees of
the Company and its subsidiaries. Such plans, practices, policies and
programs, in the aggregate, shall provide the Executive with compensation,
benefits and reward opportunities at least as favorable as the most favorable
of such compensation, benefits and reward opportunities provided by the
Company to other key management employees of the Company and its subsidiaries.

(iv) WELFARE BENEFIT PLANS. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and its subsidiaries
(including, without limitation, any medical, prescription, dental, disability,
salary continuance, employee life, group life, accidental death and travel
accident insurance plans and programs), at least as favorable as the most
favorable of such plans, practices, policies and programs provided by the
Company and its subsidiaries to other key management employees of the Company
and its subsidiaries.

(v) EXPENSES. During the Employment Period, the Executive
shall be entitled to receive prompt reimbursement for all reasonable expenses
incurred by the Executive in accordance with the policies, practices and
procedures of the Company and its subsidiaries provided to other key
management employees of the Company and its subsidiaries.

(vi) FRINGE BENEFITS. During the Employment Period, the
Executive shall be entitled to fringe benefits, including use of an automobile
and payment of related expenses, in accordance with the most favorable plans,
practices, programs and policies of the Company and its subsidiaries provided to
other key management employees of the Company and its subsidiaries.

(vii) OFFICE AND SUPPORT STAFF. During the Employment Period,
the Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to secretarial and other assistance,
at least equal to the most favorable of the foregoing provided to other key
management employees of the Company and its subsidiaries.

(viii) VACATION. During the Employment Period, the Executive
shall be entitled to paid vacation in accordance with the most favorable plans,
policies, programs and practices of the Company and its subsidiaries provided to
other key management employees of the Company and its subsidiaries.

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<PAGE>

3. TERMINATION.

(a) DEATH OR DISABILITY. This Agreement shall terminate
automatically upon the Executive's death. If the Company determines in good
faith that the Disability of the Executive has occurred (pursuant to the
definition of "Disability" set forth below), it will give to the Executive
written notice of its intention to terminate the Executive's employment. In
such event, the Executive's employment with the Company shall terminate
effective on the 30th day after the date of such notice (the "Disability
Effective Date"), provided that, within such time period, the Executive shall
not have returned to full-time performance of the Executive's duties. For
purposes of this Agreement, "Disability" means disability (either physical or
mental) which (i) materially and adversely affects Executive's ability to
perform the duties required of his office, and (ii) at least 26 weeks after
its commencement, is determined to be total and permanent by a physician
selected by the Company or its insurers and acceptable to the Executive or
the Executive's legal representative (such agreement as to acceptability not
to be withheld unreasonably).

(b) CAUSE. The Company may terminate the Executive's employment for
"Cause." For purposes of this Agreement, termination of the Executive's
employment by the Company for Cause shall mean termination for one of the
following reasons: (i) the conviction of the Executive of a felony by a federal
or state court of competent jurisdiction; (ii) an act or acts of dishonesty
taken by the Executive and intended to result in substantial personal enrichment
of the Executive at the expense of the Company; or (iii) the Executive's
"willful" failure to follow a direct, reasonable and lawful written order from
the Board, within the reasonable scope of the Executive's duties, which failure
is not cured within 30 days. Further, for purposes of this Section (b):

(2) The Executive shall not be deemed to have been terminated
for Cause unless and until there shall have been delivered to the Executive a
copy of a resolution duly adopted by the affirmative vote of not less than
three-fourths (3/4ths) of the entire membership of the Board (excluding
Executive if Executive is then a member of the Board) at a meeting of the Board
called and held for such purpose (after reasonable notice to the Executive and
an opportunity for the Executive, together with the Executive's counsel, to be
heard before the Board), finding that in the good faith opinion of the Board the
Executive was guilty of conduct set forth in clauses (i), (ii) or (iii) above
and specifying the particulars thereof in detail.

(c) GOOD REASON. The Executive's employment may be terminated by the
Executive for Good Reason. For purposes of this Agreement, "Good Reason" means:

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action by the Company which results in a diminution in such position,
compensation, authority, duties or responsibilities, excluding for this
purpose an isolated, insubstantial and inadvertent action not taken in bad
faith and which is remedied by the Company promptly after receipt of notice
thereof given by the Executive;

(ii) any failure by the Company to comply with any of the
provisions of Section 2(b) of this Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by the
Executive;

(iii) the Company's requiring the Executive to be based at
any office or location other than that described in Section 2(a)(i)(B) hereof,
except for periodic travel reasonably required in the performance of the
Executive's responsibilities;

(iv) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or

(v) any failure by the Company to comply with and satisfy
Section 10(c) of this Agreement.

For purposes of this Section 3(c), any good faith determination of "Good
Reason" made by the Executive shall be conclusive unless such determination is
rejected by unanimous vote of the Board (excluding Executive if Executive is
then a member of the Board), in which event Executive may refer the
determination of "Good Reason" to binding arbitration by and between the Company
and the Executive conducted pursuant to the Commercial Arbitration Rules of the
American Arbitration Association ("AAA") by a single arbitrator appointed by the
AAA. The decision of the arbitrator in such matter shall be final, unappealable
and binding upon the Company and the Executive.

(d) NOTICE OF TERMINATION. Any termination by the Company for Cause
or by the Executive for Good Reason shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 12(b) of
this Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provisions in this
Agreement relied upon, (ii) sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated and (iii) if the Date of Termination
(as defined below) is other than the date of receipt of such notice, specifies
the termination date (which date shall be not more than 15 days after the giving
of such notice). The failure by the Executive to set forth in the Notice of
Termination any fact or circumstance which contributes to a showing of Good
Reason shall not waive any right of the Executive hereunder or preclude the
Executive from asserting such fact or circumstance in enforcing his rights
hereunder.

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(e) DATE OF TERMINATION. "Date of Termination" means the date of
receipt of the Notice of Termination by either the Company or the Executive as
the case may be or any later date specified therein; PROVIDED, HOWEVER, that if
the Executive's employment is terminated by reason of death or Disability, the
Date of Termination shall be the date of death of the Executive or the
Disability Effective Date, as the case may be.

4. OBLIGATIONS OF THE COMPANY UPON TERMINATION.

(a) DEATH. If the Executive's employment is terminated by reason of
the Executive's death, this Agreement shall terminate without further
obligations to the Executive's legal representatives under this Agreement, other
than those obligations accrued or earned and vested (if applicable) by the
Executive as of the Date of Termination, including, for this purpose (i) the
Executive's annual full Base Salary through the Date of Termination at the rate
in effect on the Date of Termination, (ii) the product of the Bonus (defined in
Section 2(b)(ii)) paid to the Executive for the last full fiscal year and a
fraction, the numerator of which is the number of days in the current fiscal
year through the Date of Termination, and the denominator of which is 365, (iii)
the amount equal to the Executive's current Base Salary (for twelve (12)
months), (iv) the amount equal to the Bonus paid to the Executive for the last
full fiscal year (if any) ending during the Employment Period or, if higher, the
Bonus paid to the Executive for any full fiscal year during the Employment
Period (as applicable, the "Recent Bonus"), and (v) any compensation previously
deferred by the Executive (together with any accrued interest thereon) and not
yet paid by the Company and any accrued vacation pay not yet paid by the Company
(such amounts specified in clauses (i), (ii), (iii), (iv) and (v) are
hereinafter referred to as "Accrued Obligations"). All such Accrued Obligations
shall be paid to the Executive's estate or beneficiary, as applicable, in a lump
sum in cash within 30 days of the Date of Termination. Anything in this
Agreement to the contrary notwithstanding, the Executive's family shall be
entitled to receive benefits at least equal to the most favorable benefits
provided by the Company and any of its subsidiaries to surviving families of
other key management employees of the Company and such subsidiaries under such
plans, programs, practices and policies relating to family death benefits, if
any, in accordance with the most favorable plans, programs, practices and
policies of the Company and its subsidiaries provided to other key management
employees of the Company and its subsidiaries and their families.

(b) DISABILITY. If the Executive's employment is terminated by
reason of the Executive's Disability, this Agreement shall terminate without
further obligations to the Executive, other than those obligations accrued or
earned and vested (if applicable) by the Executive as of the Date of
Termination, including for this purpose, all Accrued Obligations. All such
Accrued Obligations shall be paid to the Executive in a lump sum in cash within
30 days of the Date of Termination. Anything in this Agreement to the contrary
notwithstanding, the Executive shall be entitled after the effective date of the
Disability to receive disability and other benefits at least equal to the most
favorable of those provided by the Company and its subsidiaries to disabled key
management employees and/or their families in accordance with such plans,
programs, practices and policies relating to disability, if any, in accordance
with the most favorable plans, programs,

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practices and policies of the Company and its subsidiaries provided to other
key management employees of the Company and its subsidiaries and their
families.

(c) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's employment
shall be terminated for Cause, this Agreement shall terminate without further
obligations to the Executive other than the obligation to pay to the Executive
the Base Salary accrued through the Date of Termination plus the vested amount
of any compensation previously deferred by the Executive. If the Executive
terminates employment other than for Good Reason, this Agreement shall terminate
without further obligations to the Executive, other than those obligations
accrued or earned and vested (if applicable) by the Executive through the Date
of Termination, including for this purpose, all Accrued Obligations. All such
Accrued Obligations to which the Executive shall be entitled shall be paid to
the Executive in a lump sum in cash within 30 days of the Date of Termination.

(d) GOOD REASON; TERMINATION OTHER THAN FOR CAUSE OR DISABILITY. If,
during the Employment Period, the Company shall terminate the Executive's
employment other than for Cause, Disability, or death or if the Executive shall
terminate his employment for Good Reason:

(i) the Company shall pay to the Executive in a lump sum in cash
within 30 days after the Date of Termination the aggregate of the following
amounts:

A. to the extent not theretofore paid, the Executive's
Base Salary through the Date of Termination; and

B. the product of (i) the Executive's Recent Bonus and
(ii) a fraction, the numerator of which is the number of days in the current
fiscal year through the Date of Termination and the denominator of which is 365;
and

C. the product obtained by multiplying three (3) times the
current Base Salary; and

(ii) for the remainder of the Employment Period, or such longer
period as any plan, program, practice or policy may provide, the Company shall
continue benefits to the Executive and/or the Executive's family at least equal
to those which would have been provided to them in accordance with the plans,
programs, practices and policies described in Section 2(b)(iv) of this Agreement
if the Executive's employment had not been terminated, including health
insurance and life insurance, in accordance with the most favorable plans,
practices, programs or policies of the Company and its subsidiaries provided to
other key management employees and their families and for purposes of
eligibility for retiree benefits pursuant to such plans, practices, programs

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and policies, the Executive shall be considered to have remained employed
until the end of the Employment Period and to have retired on the last day of
such period.

5. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any benefit, bonus,
incentive or other plans, programs, policies or practices, provided by the
Company or any of its subsidiaries and for which the Executive may qualify, nor
shall anything herein limit or otherwise affect such rights as the Executive may
have under any stock option or other agreements with the Company or any of its
subsidiaries. Amounts which are vested benefits or which the Executive is
otherwise entitled to receive under any plan, policy, practice or program of the
Company or any of its subsidiaries at or subsequent to the Date of Termination
shall be payable in accordance with such plan, policy, practice or program.

6. ACCELERATION OF VESTING. In the event that the Company has any type
of plan, program or arrangement which include, by example, not by limitation,
stock option plans, restricted stock award plans, phantom stock plans and
supplemental retirement income plans (the "Other Plans") and the Executive is
not 100% vested in his benefits in the Other Plans at the time of his
termination of employment, and the Executive would otherwise be entitled to the
payment of benefits pursuant to the terms of this Agreement, then, the Executive
shall be deemed to be 100% vested and non-forfeitable in his benefits in the
Other Plans; provided, no acceleration of vesting shall occur in the Other Plans
if such act would result in the disqualification of or otherwise adversely
affect the tax qualified status of such Other Plans or the participants in such
Other Plans. Further, in the event that the Company is unable to accelerate
vesting in the Other Plans because such acceleration would adversely effect the
tax status of any of the Other Plans or the participants in such Other Plans,
then, the Company shall pay to the Executive the amount equal to the benefits
which have been lost due to the inability to accelerate vesting in the Other
Plans; and such additional amounts shall be paid at the same time in the same
manner as benefits would otherwise be paid pursuant to the terms of this
Agreement.

7. FULL SETTLEMENT. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement. The Company
agrees to pay, to the full extent permitted by law, all legal fees and expenses
which the Executive may reasonably incur as a result of any contest (regardless
of the outcome thereof) by the Company or others of the validity or
enforceability of, or liability under, any provision of this Agreement or any
guarantee of performance thereof (including as a result of any contest by the
Executive about the amount of any payment pursuant to Section 8 of this
Agreement), plus in each case interest at the applicable Federal rate provided
for in Section 7872(f)(2) of the Code.

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8. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.

(b) Subject to the provisions of Section 8(c), all determinations
required to be made under this Section 8, including whether a Gross-Up Payment
is required and the amount of such Gross-Up Payment, shall be made by Ernst &
Young, L.L.P. (the "Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Executive within 15 business days of
the receipt of notice from the Executive that there has been a Payment which
would be subject to the Excise Tax, or such earlier time as is requested by the
Company. The initial Gross-Up Payment, if any, as determined pursuant to this
Section 8(b), shall be paid to the Executive within five days of the receipt of
the Accounting Firm's determination. If the Accounting Firm determines that no
Excise Tax is payable by the Executive, it shall furnish the Executive with an
opinion that he has substantial authority not to report any Excise Tax on his
federal income tax return. Any determination by the Accounting Firm shall be
binding upon the Company and the Executive. As a result of the uncertainty in
the application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company should have been made
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 8(c) and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive.

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such claim prior to the expiration of the 30-day period following the date on
which he gives such notice to the Company (or such shorter period ending on the
date that any payment of taxes with respect to such claim is due). If the
Company notifies the Executive in writing prior to the expiration of such period
that it desires to contest such claim, the Executive shall:

(i) give the Company any information reasonably requested by the
Company relating to such claim,

(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and

(iv) permit the Company to participate in any proceedings
relating to such claim;

provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax, including interest and
penalties with respect thereto, imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 8(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct the Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax or income
tax, including interest or penalties with respect thereto, imposed with respect
to such advance or with respect to any imputed income with respect to such
advance; and further provided that any extension of the statute of limitations
relating to payment of taxes for the taxable year of the Executive with respect
to which such contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company's control of the contest shall be
limited to issues with respect to which a Gross-Up Payment would be payable
hereunder and the Executive shall be entitled to settle or contest, as the case
may be, any other issue raised by the Internal Revenue Service or any other
taxing authority.

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(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 8(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 8(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by the Company pursuant to Section 8(c), a determination
is made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the expiration of thirty days
after such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.

9. CONFIDENTIAL INFORMATION. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its subsidiaries, and their
respective businesses, which shall have been obtained by the Executive during
the Executive's employment by the Company or any of its subsidiaries and which
shall not be or become public knowledge (other than by acts by the Executive or
his representatives in violation of this Agreement). After termination of the
Executive's employment with the Company, the Executive shall not, without the
prior written consent of the Company, communicate or divulge any such
information, knowledge or data to anyone other than the Company and those
designated by it. In no event shall an asserted violation of the provisions of
this Section 9 constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement.

10. SUCCESSORS.

(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.

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<PAGE>

11. INDEMNIFICATION AND INSURANCE. The Executive shall be indemnified and
held harmless by the Company during the term of this Agreement and following any
termination of this Agreement for any reason whatsoever in the same manner as
would any other key management employee of the Company with respect to acts or
omissions occurring prior to (a) the termination of this Agreement or (b) the
termination of employment of the Executive. In addition, during the term of
this Agreement and for a period of five years following the termination of this
Agreement for any reason whatsoever, the Executive shall be covered by a Company
held Directors and Officers liability insurance policy covering acts or
omissions occurring prior to (a) the termination of this Agreement or (b) the
termination of employment of the Executive. Provided, in no event will the
obligation of the Company to indemnify the Executive or provide Directors and
Officers insurance to the Executive under this Section be less than the
obligation and insurance coverage which the Company had to the Executive
immediately prior to the occurrence of the Executive's Date of Termination.

12. MISCELLANEOUS.

IF TO THE EXECUTIVE: At his last known address evidenced on the Company's
payroll records

IF TO THE COMPANY: RAMCO Operating Company
One Benham Place, Suite 130
9400 North Broadway
Oklahoma City, OK 73114

Attention: Dr. William W. Talley II, Chairman

WITH A COPY TO: McAfee & Taft A Professional Corporation
10th Floor, Two Leadership Square
Oklahoma City, Oklahoma 73102

Attention: C. David Stinson, Esq.

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<PAGE>

or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.

(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.

(d) The Company may withhold from any amounts payable under this
Agreement such federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.

(e) The Executive's failure to insist upon strict compliance with any
provision hereof shall not be deemed to be a waiver of such provision or any
other provision thereof.

(f) This Agreement contains the entire understanding of the Company
and the Executive with respect to the subject matter hereof.

(g) The Executive and the Company acknowledge that the employment of
the Executive by the Company is "at will," and, prior to the Effective Date, may
be terminated by either the Executive or the Company at any time. Upon a
termination of the Executive's employment or upon the Executive's ceasing to be
an officer of the Company, in each case, prior to the Effective Date, there
shall be no further rights under this Agreement.

13. NO TRUST. No action under this Agreement by the Company or its Board
of Directors shall be construed as creating a trust, escrow or other secured or
segregated fund, in favor of the Executive or his beneficiary. The status of
the Executive and his beneficiary with respect to any liabilities assumed by the
Company hereunder shall be solely those of unsecured creditors of the Company.
Any asset acquired or held by the Company in connection with liabilities assumed
by it hereunder, shall not be deemed to be held under any trust, escrow or other
secured or segregated fund for the benefit of the Executive or his beneficiary
or to be security for the performance of the obligations of the Company, but
shall be, and remain a general, unpledged, unrestricted asset of the Company at
all times subject to the claims of general creditors of the Company.

14. NO ASSIGNABILITY. Neither the Executive nor his beneficiary, nor any
other person shall acquire any right to or interest in any payments payable
under this Agreement, otherwise than by actual payment in accordance with the
provisions of this Agreement, or have any power to transfer, assign, anticipate,
pledge, mortgage or otherwise encumber, alienate or transfer any rights
hereunder in advance of any of the payments to be made pursuant to this
Agreement or any portion thereof which is expressly declared to be nonassignable
and nontransferable. No right or benefit hereunder shall in any manner be
liable for or subject to the debts, contracts, liabilities, or torts of the
person entitled to such benefit.

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<PAGE>

/s/ Larry E. Lee
--------------------------------------
Larry E. Lee

"EXECUTIVE"

RAMCO OPERATING COMPANY

By /s/ William W. Talley II
------------------------------------
William W. Talley II, Chairman

"COMPANY"

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<PAGE>

INDEMNITY AGREEMENT

THIS AGREEMENT made and entered into by and between RAM ENERGY, INC.,
a Delaware corporation (hereinafter the "Company") and [NAME OF DIRECTOR]
(hereinafter, together with [HIS/HER] heirs, personal representatives, and
estate, the "Indemnitee" or "Claimant").

WITNESSETH: THAT

WHEREAS, Section 145 ("Section 145") of the General Corporation Law of
the State of Delaware ("Delaware Law") empowers corporations to indemnify a
person serving as a director, officer, employee, or agent of the corporation or
a person who serves at the request of the corporation as a director, officer,
employee, or agent of another corporation, partnership, joint venture, trust or
other enterprise, and further specifies that the indemnification set forth in
Section 145 "shall not be deemed exclusive of any other rights to which those
seeking indemnification may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise"; and Section 145 further
empowers a corporation to "purchase and maintain insurance" on behalf of any of
such persons "against any liability asserted against [HIM/HER] and incurred by
[HIM/HER] in any such capacity, or arising out of [HIS/HER] status as such,
whether or not the corporation would have the power to indemnify [HIM/HER]
against such liability under" Section 145; and

WHEREAS, the Board of Directors has concluded that the Company's
directors and officers should be provided with maximum protection in order to
ensure that the most capable persons otherwise available will remain in, and in
the future be attracted to, such directorships and, furthermore, that it is
fair, reasonable, prudent and necessary for the Company to contractually
obligate itself to indemnify present and future directors and officers of the
Company and their respective estates in a reasonable and adequate manner and
that the Company assume for itself the responsibility and liability for expenses
and damages in connection with claims brought whether on account of any prior,
present or future alleged act, omission, injury, damage, or event; and

WHEREAS, the Company desires to have the Indemnitee serve or continue
to serve as a director and/or officer of the Company or its Affiliates free from
undue concern for damages by reason of [HIS/HER] being a director of the Company
or its Affiliates or by reason of [HIS/HER] decisions or actions on its behalf;
and the Indemnitee desires to serve, or to continue to serve, provided that
[HE/SHE] is furnished the indemnity provided for hereinafter, as a director
and/or officer of the Company or its Affiliates.

NOW, THEREFORE, in consideration of the mutually dependent covenants
and agreements contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto do
hereby agree as follows:

1. AGREEMENT TO SERVE: DEFINITIONS.

1.1 AGREEMENT TO SERVE. The Indemnitee will serve, and/or
continue to serve, the Company as a director and/or officer so long as [HE/SHE]
is duly elected and qualified in

<PAGE>

accordance with the provisions of the By-laws thereof or until such time as
[HE/SHE] resigns or is removed.

1.2 DEFINITIONS. Unless the context otherwise clearly indicates
to the contrary, the following terms as used herein shall have the respective
meanings set forth below:

(a) "Affiliates" shall mean any corporation, partnership,
or other enterprise which controls, is controlled by, or is under common control
with the Company; provided, that any corporation, partnership, or other
enterprise which is at least 30% beneficially owned by the Company or by any
corporation at least 51% of which is owned by the Company shall be deemed an
"Affiliate" of the Company.

(b) "Change in Control" shall be deemed to have occurred if
(i) any "person" (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended), other than a trustee or other
fiduciary holding securities under an employee benefit plan of the Company or a
corporation owned directly or indirectly by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company,
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act),
directly or indirectly of securities of the Company representing 35% or more of
the total voting power represented by the Company's then outstanding Voting
Securities, or (ii) during any period of two consecutive years, individuals who
at the beginning of such period constitute the Board of Directors of the Company
and any new director whose election by the Board of Directors or nomination for
election by the Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either were directors
at the beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute a majority thereof,
or (iii) the stockholders of the Company approve a merger or consolidation of
the Company with any other corporation, other than a merger or consolidation
which would result in the Voting Securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into Voting Securities of the surviving
entity) at least 80% of the total voting power represented by the Voting
Securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation, or the stockholders of the Company approve a plan
of complete liquidation of the Company or an agreement for the sale or
disposition by the Company (in one transaction or a series of transactions) of
all or substantially all the Company's assets.

(c) "Expenses" shall include attorneys' fees and all other
costs, travel expenses, fees of experts, transcript costs, filing fees, witness
fees, telephone and telefacsimile charges, postage, delivery service fees,
expenses and obligations of any nature whatsoever paid or incurred in connection
with investigating, defending, being a witness in or participating in (including
on appeal), or preparing to defend, be a witness in or participate in any claim
relating to any Indemnifiable Event.

(d) "Indemnifiable Event" shall mean any event or
occurrence that takes place either prior to or after the execution of this
Agreement related to the fact that the Indem-

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<PAGE>

nitee is or was a director, officer, employee, agent or fiduciary of the
Company, or is or was serving at the request of the Company as a director,
officer, employee, trustee, agent or fiduciary of the Company, or is or was
serving at the request of the Company as a director, officer, employee,
trustee, agent or fiduciary of another corporation, partnership, joint
venture, employee benefit plan, trust or other enterprise, or by reason of
anything done or not done by the Indemnitee in any such capacity.

(e) "Independent Directors" shall mean the Company's
directors exclusive of any director who is the Indemnitee.

(f) "Independent Legal Counsel" shall mean an attorney, who
shall not have otherwise performed services for the Company or the Indemnitee
within the last five years (other than in connection with seeking
indemnification under this Agreement). Independent Legal Counsel shall not be
any person who, under the applicable standards of professional conduct then
prevailing, would have a conflict of interest in representing either the Company
or the Indemnitee in an action to determine the Indemnitee's rights under this
Agreement, nor shall independent Legal Counsel be any person who has been
sanctioned or censured for ethical violations of applicable standards of
professional conduct.

(g) "Non-governmental" shall refer to any Person which is
not (i) the government of the United States of America or of any state,
district, territory, or possession thereof or of any county, parish, city, town,
township, or municipality within any such state, district, territory or
possession, or (ii) any agency, tribunal, council, instrumentality or public
body established by any Person described in (i).

(h) "Person" means any one (or more) individual or natural
person or any one (or more) corporation, firm, joint venture, partnership,
proprietorship, business venture, government, governmental body, agency or
instrumentality, estate, trust, association, or other legal entity whatsoever or
a group of same.

(i) "Policy" shall refer to any insurance policy or
coverage obtained with respect of potential liabilities of directors and
officers of the Company.

(j) "Potential Change in Control" shall be deemed to have
occurred if (i) the Company enters into an agreement or arrangement, the
consummation of which would result in the occurrence of a Change in Control;
(ii) any person (including the Company) publicly announces an intention to take
or to consider taking actions which if consummated would constitute a Change in
Control; (iii) any person, other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company acting in such capacity
or a corporation owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of stock of the
Company, who is or becomes the beneficial owner, directly or indirectly, of
securities of the Company representing 10% or more of the combined voting power
of the Company's then outstanding Voting Securities, increases [HIS/HER]
beneficial ownership of such securities by 5% or more over the percentage so
owned by such person on the date hereof;

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<PAGE>

or (iv) the Board adopt a resolution to the effect that, for purposes of this
Agreement, a Potential Change in Control has occurred.

(k) "Voting Securities" shall mean any securities of the
Company which vote generally in the election of directors.

2. INDEMNIFICATION. Subject to the provisions of Sections 8 and 9,
the Company shall indemnify the Indemnitee as follows:

2.1 OBLIGATION TO INDEMNIFY. The Company will pay on behalf of
the Indemnitee, and [HIS/HER] executors, administrators and heirs, any amount
which [HE/SHE] is or becomes legally obligated to pay because of (i) any claim
or claims from time to time threatened or made against [HIM/HER] by any Person
because of any act or omission or neglect or breach of duty, including any
actual or alleged error or misstatement or misleading statement, which [HE/SHE]
commits or suffers while acting in [HIS/HER] capacity as a director and/or
officer of the Company or an Affiliate, or (ii) being a party, or being
threatened to be made a party, to any threatened, pending, or completed action,
suit or proceeding, whether civil, criminal, administrative, or investigative,
by reason of the fact that [HE/SHE] is or was an officer, director, employee, or
agent of the Company or an Affiliate or is or was serving at the request of the
Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise. The payments which the
Company will be obligated to make hereunder shall include, INTER ALIA, damages,
charges, judgments, fines, penalties, settlements and costs, cost of
investigation and costs of defense of legal or equitable or criminal actions,
claims or proceedings and appeals therefrom, and costs of attachment,
supersedeas, bail, surety or other bonds.

2.2 FAILURE TO TIMELY PAY. If a claim under this Agreement is
not paid by the Company, or on its behalf, within sixty (60) days after a
written claim has been received by the Company, the Indemnitee may at any time
thereafter bring suit against the Company to recover the unpaid amount of the
claim and, if successful in whole or in part, the Indemnitee shall be entitled
to be paid also the expense (including reasonable attorney's fees) of
prosecuting such claim.

2.3 NOTICE OF CLAIM. The Indemnitee shall give to the Company
notice in writing as soon as practicable of any claim made against [HIM/HER] for
which indemnity will or could be sought under this Agreement. The Indemnitee
will further notify and cooperate with the Company in the selection of counsel
and in the incurrence of costs and expenses in defending or investigating any
claim for which indemnity may be sought hereunder. The Indemnitee shall give
the Company such information and cooperation as it may reasonably require and as
shall be within the Indemnitee's power.

3. ASSUMPTION OF LIABILITY BY COMPANY. If the Indemnitee is
deceased and is entitled to indemnification under any provision of this
Agreement, the Company shall indemnify the Indemnitee's estate and [HIS/HER]
spouse, heirs, administrators and executors against, and the Company shall
assume any and all costs, charges, and expenses (including attorneys' fees),
penalties and fines actually and reasonably incurred by or for the Indemnitee or
[HIS/HER] estate, in connection

-4-

<PAGE>

with the investigation, defense, settlement or appeal of any such action, suit
or proceeding. Further, when requested in writing by the spouse of the
Indemnitee, and/or the heirs, executors or administrators of the Indemnitee's
estate, the Company shall provide appropriate evidence of the Company's
agreement set out herein to indemnify the Indemnitee against and to assume
itself such costs, charges, liabilities and expenses.

4. PARTIAL INDEMNIFICATION. If the Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of the cost, charges and expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by [HIM/HER] in the investigation, defense, appeal or settlement of such suit,
action or proceeding but not, however, for all of the total amount thereof, the
Company shall nevertheless indemnify the Indemnitee as to the portion thereof to
which the Indemnitee is entitled.

5. DETERMINATION OF RIGHT TO INDEMNIFICATION. Anything contained
elsewhere herein to the contrary notwithstanding, any indemnification under the
terms of this Agreement shall (unless ordered by a court) be paid by the Company
promptly or in any event within 60 days of written request therefor, unless a
determination is made, as hereinafter provided, that indemnification is not
proper in the circumstances because of the provisions of Sections 8 or 9.

The determination as to whether or not the Indemnitee has met the
standard of conduct required to qualify and entitle [HIM/HER], partially or
fully, to indemnification under the provisions of any provision of Section 2
hereof may be made (i) either by the Board of Directors by a majority vote of a
quorum consisting of directors who were not parties of such action, suit or
proceeding; or (ii) by legal counsel (who may be the outside counsel regularly
employed by the Company); provided that the manner in which (and, if applicable,
the counsel by which) the right to indemnification is to be determined shall be
approved in advance in writing by both the highest ranking executive officer of
the Company who is not party to such action (sometimes hereinafter referred to
as "Senior Officer") and by the Indemnitee. In the event that such parties are
unable to agree on the manner in which the determination of the right to
indemnity is to be made, such determination may be made by Independent Legal
Counsel retained by the Company especially for such purpose; provided that such
Independent Legal Counsel shall be approved in advance in writing by both the
Senior Officer and the Indemnitee; and, provided further, that such Independent
Legal Counsel shall not be outside counsel regularly employed by the Company.
The fees and expenses of Independent Legal Counsel in connection with making the
determination contemplated hereunder shall be paid by the Company, and if
requested by such Independent Legal Counsel, the Company shall give such
Independent Legal Counsel an appropriate written agreement with respect to the
payment of their fees and expenses and such other matters as may be reasonably
requested by counsel.

Notwithstanding the foregoing, the Indemnitee may, either before or
within two (2) years after a determination has been made as provided above,
petition the Court of Chancery of Delaware or any other court of competent
jurisdiction to determine whether the Indemnitee is entitled to indemnification
under the provisions hereof under which [HE/SHE] claims the right to
indemnification, and such court shall thereupon have the exclusive authority to
make such

-5-

<PAGE>

determination unless and until such court dismisses or otherwise terminates
such action without having made such determination. The court shall, as
petitioned, make an independent determination of whether the Indemnitee is
entitled to indemnification as provided hereunder, irrespective of any prior
determination made by the Board of Directors, the stockholders or counsel.
If the court shall determine that the Indemnitee is entitled to
indemnification hereunder as to any claim, issue or matter involved in the
action, suit or proceeding with respect to which there has been no prior
determination pursuant hereto or with respect to which there has been a prior
determination pursuant hereto that the Indemnitee was not entitled to
indemnification hereunder, the Company shall pay all expenses (including
attorneys' fees) actually incurred by the Indemnitee in connection with such
judicial determination.

If the Person (including the Board of Directors, Independent Legal
Counsel, the stockholders or a court) making the determination hereunder shall
determine that the Indemnitee is entitled to indemnification as to some claims,
issues or matters involved in the action, suit or proceeding but not as to
others, such Person shall reasonably prorate the expenses (including attorneys'
fees), judgments, penalties, fines and amounts paid in settlement) with respect
to which indemnification is sought by the Indemnitee among such claims, issues
or matters.

If, and to the extent that, it is finally determined hereunder that
the Indemnitee is not entitled to indemnification, then the Indemnitee agrees to
reimburse the Company for all expenses advanced or prepaid hereunder, or the
proper proportion thereof, other than the expenses of obtaining the judicial
determination referred to above.

6. ADVANCES OF COSTS, CHARGES, AND EXPENSES. The costs, charges,
and expenses incurred by the Indemnitee in investigating, defending, or
appealing any threatened, pending or completed civil or criminal action, suit or
proceeding (administrative or investigative) covered hereunder, shall be paid by
the Company in advance (unless, in the opinion of regular outside counsel to the
Company, the provisions of Sections 8 or 9 preclude such advance payment) to
properly investigate, defend or appeal any such action, suit, or proceeding, and
any judgments, fines or amounts paid in settlement shall be paid by the Company
in advance, unless, in the opinion of such counsel, the provisions of Sections 8
and 9 preclude such advance payment, all with the understanding and agreement
hereby made and entered into by the Indemnitee and the Company, that in the
event it shall ultimately be determined as provided hereunder that the
Indemnitee was not entitled to be indemnified, or was not entitled to be fully
indemnified, that the Indemnitee shall repay to the Company such amount, or the
appropriate portion thereof, so paid or advanced.

7. OTHER RIGHTS AND REMEDIES. The indemnification and advance
payment of expenses as provided by any provision of this Agreement shall not be
deemed exclusive of any other rights to which the Indemnitee may be entitled
under any provision of law, any Policy (as an insured thereunder), the Company's
Certificate of Incorporation, any By-law, this or any other agreement, vote of
stockholders or disinterested directors, or otherwise, as to action in [HIS/HER]
official capacity, and shall continue after the Indemnitee has ceased to occupy
such position and shall inure to the benefit of the heirs, executors and
administrators of the Indemnitee.

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<PAGE>

8. CONSTRUCTION.

8.1 CONTRACTUAL LIABILITY. This Agreement shall not be
construed so as to give rise to a "contractual liability" which is excluded by
any Policy. Each and every term hereof is enforceable by the Indemnitee solely
as to amounts (a) in excess of the limits of the Policy with respect to costs,
charges and expenses (including attorney's fees), judgments, fines, penalties
and amounts paid in settlement for which coverage is in effect under the Policy,
and (b) used under the Policy as a "deductible" amount, and (c) which none of
the Policy and the other liability insurance policies of the Company clearly
covers for the Indemnitee as Insured thereunder; however, in any case in which
the Company believes the Policy or its other insurance should cover a loss, cost
or expense, the Company may make a contingent advance of monies pursuant to the
terms hereof without admission, waiver or prejudice to its position that the
Policy or the Company's other insurance covers the loss, cost or expense. In
amplification and clarification but not in limitation hereof, it is the intent
of the Company that this Agreement operate as "excess coverage" above the Policy
and other applicable insurance limits and that it operate as "first dollar"
coverage in all matters which are outside the scope of the Policy or within the
deductibles of the Policy and all other insurance maintained by the Company from
time to time, except as to the exclusions set forth in Section 9.

In amplification but not in limitation of the foregoing, there is
hereby expressly included "first dollar" coverage with respect to the following
matters if considered by the Policy to be exclusions:

(1) any act or omission in connection with the acquisition
or assumption by Affiliates or the Company of the stock, assets and/or business
of other corporations by merger, purchase of assets, bulk reinsurance and
otherwise;

(2) liabilities and expenses based on or arising out of any
action, suit or proceeding by a Nongovernmental Person involving the Racketeer
Influenced and Corrupt Organizations Act. 18 U.S.C. Section 1961 ET SEQ.; and

(3) any act or omission the sole applicable exclusion for
which by the Policy is on account of either (i) lack of appropriate notice,
(ii) the existence of prior insurance, (iii) the timing of the occurrence and
the claim, or (iv) other procedural defenses to coverage by the Policy.

8.2 PARTIAL INVALIDITY. If any provision or provisions of this
Agreement shall be held to be invalid, illegal, or unenforceable for any reason
whatsoever, (a) the validity, legality and enforceability of the remaining
provisions of this Agreement (including without limitation, all portion of any
paragraphs or sections of this Agreement containing any such provision held to
be invalid, illegal or unenforceable, that are not themselves invalid, illegal
or unenforceable) shall not in any way be affected or impaired thereby, and
(b) to the fullest extent possible, the provisions of this Agreement (including,
without limitation, all portions of any paragraph or section of this Agreement
containing any such provision held to be invalid, illegal or unenforceable, that
are

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<PAGE>

not themselves invalid, illegal or unenforceable) shall be construed so as to
give effect to the intent manifested by the provision held invalid, illegal
or unenforceable.

9. EXCLUSIONS AND LIMITATION. Notwithstanding anything contained
herein to the contrary:

9.1 The Company shall not be liable to the Indemnitee for, nor
obligated to furnish advances in connection with, any loss, cost or expense of
Indemnitee resulting from [HIS/HER] willful or negligent violation of Section
16(b) of the Securities Exchange Act of 1934 or of the Foreign Corrupt Practices
Act of 1977.

9.2 The Company shall not be liable to the Indemnitee for, and
shall not be obligated to furnish any advances except for repayable costs,
charges and expenses as hereinabove stated, in connection with, any loss, cost
or expense of the Indemnitee as the direct result of a final judgment for money
damages payable to the Company or any Affiliate for or on account of loss, cost
of expense directly or indirectly resulting from the Indemnitee's negligence or
misconduct within the meaning of Section 145(b) of Delaware Law.

9.3 Unless otherwise allowed by a court of competent
jurisdiction or in a separate action in the Chancery Court of Delaware, the
Company shall not be liable to the Indemnitee for, and the Indemnitee undertakes
to repay the Company for all advances which may have been made of, expenses of
investigation, defense or appeal of any matter the judgment of which is excluded
under subsection 9.2 next above.

9.4 Unless otherwise determined by a court of competent
jurisdiction or in a separate action in the Chancery Court of Delaware, a
settlement of any suit, action or proceeding shall be presumed to be an
"expense" in mitigation of the expenses of continued litigation and not the
compromise of a judgment on the merits of the action, suit or proceeding.

9.5 Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Securities Act") may be permitted to Directors of
the Company pursuant to the foregoing provisions, or otherwise, the Board of
Directors has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Company
of expenses incurred or paid by a director and/or officer of the Company in the
wholly or partially successful defense of any action, suit or proceeding) is
asserted by the Indemnitee in connection with Company securities which have been
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it hereunder is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue. In effect, therefore, absent a court
decision in the individual case or controlling precedent, the provisions of the
Agreement will not apply to liabilities of the Indemnitee arising under the
Securities Act unless and only to the extent that the Indemnitee is successful
in the defense of the action, suit or proceeding in question.

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<PAGE>

9.6 The Company shall not be liable under this Agreement to make
any payment in connection with any claim made against the Indemnitee:

(a) based upon or attributable to the Indemnitee or any
member of [HIS/HER] immediate family gaining in fact any personal profit or
advantage to which [HE/SHE] was not legally entitled;

(b) based upon or attributable to the dishonesty of the
Indemnitee seeking payment hereunder; provided that the Indemnitee shall be
protected under this Agreement as to any claims upon which suit may be brought
against [HIM/HER] by reason of any alleged dishonesty on [HIS/HER] part, unless
a judgment or other final adjudication thereof adverse to the Indemnitee shall
establish that [HE/SHE] committed acts of active and deliberate dishonesty, with
actual dishonest purpose or intent, which acts were material to the cause of
action so adjudicated;

(c) for bodily injury, sickness, disease or death of any
person, or damage to or destruction of any tangible property; including loss of
use thereof; or

(d) for which indemnification under this Agreement is
determined by a final adjudication of a court of competent jurisdiction to be
unlawful and violative of public policy.

10. CHANGE IN CONTROL. The Company agrees that if there is a Change
in Control of the Company (other than a Change in Control which has been
approved by a majority of the Company's Board of Directors who were directors
immediately prior to such Change in Control) then Independent Legal Counsel
shall be selected by the Indemnitee and approved by the Company (which approval
shall not be unreasonably withheld) and such Independent Legal Counsel shall
determine whether the officer or director is entitled to indemnity payments and
expense advances under this Agreement or any other agreement or Certificate of
Incorporation or Bylaws of the Company now or hereafter in effect relating to
claims for indemnifiable events. Such Independent Legal Counsel, among other
things, shall render its written opinion to the Company and the Indemnitee as to
whether and to what extent the Indemnitee will be permitted to be indemnified.
The Company agrees to pay the reasonable fees of the Independent Legal Counsel
and to indemnify fully such Independent Legal Counsel against any and all
expenses (including attorneys' fees), claims, liabilities and damages arising
out of or relating to this Agreement or the engagement of Independent Legal
Counsel pursuant hereto.

11. ESTABLISHMENT OF TRUST. In the event of a Potential Change in
Control, the Company shall, upon written request by the Indemnitee, create a
trust for the benefit of the Indemnitee and from time to time upon written
request of the Indemnitee shall fund such trust in an amount sufficient to
satisfy any and all Expenses reasonably anticipated at the time of each such
request to be incurred in connection with investigating, preparing for and
defending any claim relating to an Indemnifiable Event, and any and all
judgments, fines, penalties and settlement amounts of any and all claims
relating to an Indemnifiable Event from time to time actually paid or claimed,
reasonably anticipated or proposed to be paid. The amount or amounts to be
deposited in the trust pursuant to

-9-

<PAGE>

the foregoing funding obligation shall be determined by a majority vote of a
quorum of the Company's Independent Directors, in any case in which the
Independent Legal Counsel referred to above is involved. The terms of the
trust shall provide that upon a Change in Control (i) the trust shall not be
revoked or the principal thereof invaded, without the written consent of the
Indemnitee, (ii) the trustee shall advance, within five business days of a
request by the Indemnitee, any and all expenses to the Indemnitee (and the
Indemnitee hereby agrees to reimburse the trust under the circumstances under
which the Indemnitee would be required to reimburse the Company under this
Agreement, (iii) the trust shall continue to be funded by the Company in
accordance with the funding obligation set forth above, (iv) the trustee
shall promptly pay to the Indemnitee all amounts for which the Indemnitee
shall be entitled to indemnification pursuant to this Agreement or otherwise,
and (v) all unexpended funds in such trust shall revert to the Company upon a
final determination by the Independent Directors or a court of competent
jurisdiction, as the case may be, that the Indemnitee has been fully
indemnified under the terms of this Agreement. The trustee shall be chosen
by the Indemnitee. Nothing in this Section 11 shall relieve the Company of
any of its obligations under this Agreement. All income earned on the assets
held in the trust shall be reported as income by the Company for federal,
state, local and foreign tax purposes.

12. NON-EXCLUSIVITY, ETC. The rights of the Indemnitee hereunder
shall be in addition to any other rights the Indemnitee may have under the
Certificate of Incorporation or Bylaws of the Company or the Delaware Law or
otherwise. To the extent that a change in the Delaware Law (whether by statute
or judicial decision) permits greater indemnification by agreement than would be
afforded currently under the Certificate of Incorporation and Bylaws of the
Company and this Agreement, it is the intent of the parties hereto that the
Indemnitee shall enjoy by this Agreement the greater benefits so afforded by
such change.

13. NO CONSTRUCTION AS EMPLOYMENT AGREEMENT. Nothing contained
herein shall be construed as giving the Indemnitee any right to be retained in
the employ of the Company or any of its subsidiaries.

14. LIABILITY INSURANCE. To the extent the Company maintains a
Policy (or Policies) providing directors' and officers' liability insurance, the
Indemnitee shall be covered by such Policy (or Policies), in accordance with its
(or their) terms, to the maximum extent of the coverage available for any
Company director of officer.

15. PERIOD OF LIMITATIONS. No legal action shall be brought and no
cause of action shall be asserted by or in the right of the Company or any
affiliate of the Company against the Indemnitee, the Indemnitee's spouse, heirs,
executors, administrators or personal or legal representatives after the
expiration of two years from the date of accrual of such cause of action, and
any claim or cause of action of the Company or its affiliate shall be
extinguished and deemed released unless asserted by the timely filing of a legal
action within such two year period; provided, however, that if any shorter
period of limitations is otherwise applicable to any such cause of action such
shorter period shall govern.

-10-

<PAGE>

16. SUBROGATION. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of the Indemnitee, who shall execute all papers required and shall
do everything that may be necessary to secure such rights, including the
execution of such documents necessary to enable the Company effectively to bring
suits to enforce such rights.

17. NO DUPLICATION OF PAYMENTS. The Company shall not be liable
under this Agreement to make any payment in connection with any claim made
against the Indemnitee to the extent the Indemnitee has otherwise actually
received payment (under any Policy, Certificate of Incorporation or Bylaws of
the Company or otherwise) of the amounts otherwise indemnifiable hereunder.

18. IDENTICAL COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall for all purposes be deemed to be an
original and all of which shall constitute the same instrument, but only one of
which need be produced.

19. HEADINGS. The headings of the sections of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction thereof.

20. USE OF CERTAIN TERMS. As used in this Agreement, the words
"herein," "hereof," "hereunder," and other words of similar import refer to this
Agreement as a whole and not to any particular paragraph, subparagraph or other
subdivision.

21. MODIFICATION AND WAIVER. No supplement, modification or
amendment of this Agreement shall be binding unless executed in writing by both
of the parties hereto. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provisions hereof
(whether or not similar) nor shall such waiver constitute a continuing waiver.

22. NOTICE TO COMPANY. The Indemnitee agrees to promptly notify
Company in writing upon being served with any summons, subpoena, citation,
complaint, indictment, or other document relating to a suit, action or
proceeding which is or may be covered hereunder, either civil or criminal.

23. NOTICES. All notices, requests, demands, and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if (i) delivered by hand by Federal Express or other commercial
courier and receipted for by or on behalf of the party to whom said notice or
other communication shall have been directed, or if (ii) ailed by certified or
registered mail with postage prepaid, on the third business day after the date
on which it is so mailed:

(a) If to the Indemnitee, to address set forth following the
Indemnitee's signature to this Agreement or to such other address as may have
been furnished to Company by the Indemnitee by like notice;

-11-

<PAGE>

(b) If to Company, to

RAM Energy, Inc.
Meridian Tower
5100 East Skelly Drive, Suite 650
Tulsa, OK 74135

or to such other address as may have been furnished to the Indemnitee by Company
by like notice.

24. GOVERNING LAW. The parties agree that this Agreement shall be
construed and enforced in accordance with, and governed by, the laws of the
State of Delaware.

25. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
Company and its successors and assigns and shall inure to the benefit of the
Indemnitee and [HIS/HER] spouse, heirs, executors administrators and estate.

26. EFFECTIVE DATE. Irrespective of the date of execution, this
Agreement, and the terms and conditions hereof, shall be deemed to have become
and remained effective and binding upon the parties hereto continuously since
[________________].

IN WITNESS WHEREOF, the Company has executed this Agreement by its
duly authorized officers, and the Indemnitee has set [HIS/HER] hand and seal
hereto, on this _______ day of ________________, 1997.

RAM ENERGY, INC., a Delaware corporation

By
--------------------------------------
Larry E. Lee, President

INDEMNITEE:
--------------------------------------

-12-

<PAGE>

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

$72,000,000

AMENDED AND RESTATED CREDIT AGREEMENT

Among

RAMCO OPERATING COMPANY

as Borrower,

THE FINANCIAL INSTITUTIONS
NAMED IN THIS CREDIT AGREEMENT

as Banks,

and

UNION BANK OF CALIFORNIA, N. A.

as Agent

December 12, 1997

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

<PAGE>

TABLE OF CONTENTS

Page

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

Section 1.01. Certain Defined Terms. . . . . . . . . . . . . . . . . . . . . 2
Section 1.02. Computation of Time Periods. . . . . . . . . . . . . . . . . . 20
Section 1.03. Accounting Terms; Changes in GAAP. . . . . . . . . . . . . . . 20
Section 1.04. Types of Advances. . . . . . . . . . . . . . . . . . . . . . . 21
Section 1.05. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . 21

ARTICLE II

CREDIT FACILITIES

Section 2.01. Commitment for Advances. . . . . . . . . . . . . . . . . . . . 21
Section 2.02. Borrowing Base . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 2.03. Method of Borrowing. . . . . . . . . . . . . . . . . . . . . . 24
Section 2.04. Reduction of the Revolving Commitment. . . . . . . . . . . . . 27
Section 2.05. Prepayment of Advances . . . . . . . . . . . . . . . . . . . . 28
Section 2.06. Repayment of Advances. . . . . . . . . . . . . . . . . . . . . 30
Section 2.07. Letters of Credit. . . . . . . . . . . . . . . . . . . . . . . 30
Section 2.08. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 2.09. Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 2.10. Payments and Computations. . . . . . . . . . . . . . . . . . . 37
Section 2.11. Sharing of Payments, Etc.. . . . . . . . . . . . . . . . . . . 38
Section 2.12. Breakage Costs . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 2.13. Increased Costs. . . . . . . . . . . . . . . . . . . . . . . . 39
Section 2.14. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

ARTICLE III

CONDITIONS OF LENDING

Section 3.01. Conditions Precedent to Initial Advances . . . . . . . . . . . 42

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<PAGE>

Section 3.02. Conditions Precedent to All Borrowings . . . . . . . . . . . . 45

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

Section 4.01. Corporate Existence; Subsidiaries. . . . . . . . . . . . . . . 45
Section 4.02. Corporate Power. . . . . . . . . . . . . . . . . . . . . . . . 46
Section 4.03. Authorization and Approvals. . . . . . . . . . . . . . . . . . 46
Section 4.04. Enforceable Obligations. . . . . . . . . . . . . . . . . . . . 46
Section 4.05. Financial Statements . . . . . . . . . . . . . . . . . . . . . 46
Section 4.06. True and Complete Disclosure . . . . . . . . . . . . . . . . . 47
Section 4.07. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 4.08. Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . 48
Section 4.09. Investment Company Act . . . . . . . . . . . . . . . . . . . . 48
Section 4.10. Public Utility Holding Company Act . . . . . . . . . . . . . . 48
Section 4.11. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 4.12. Pension Plans. . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 4.13. Condition of Property; Casualties. . . . . . . . . . . . . . . 50
Section 4.14. No Burdensome Restrictions; No Defaults. . . . . . . . . . . . 50
Section 4.15. Environmental Condition. . . . . . . . . . . . . . . . . . . . 50
Section 4.16. Permits, Licenses, Etc.. . . . . . . . . . . . . . . . . . . . 51
Section 4.17. Gas Contracts. . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 4.18. Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 4.19. Solvency.. . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 4.20. Capitalization; Ownership. . . . . . . . . . . . . . . . . . . 52

ARTICLE V

AFFIRMATIVE COVENANTS

Section 5.01. Compliance with Laws, Etc. . . . . . . . . . . . . . . . . . . 52
Section 5.02. Maintenance of Insurance . . . . . . . . . . . . . . . . . . . 53
Section 5.03. Preservation of Corporate Existence, Etc.. . . . . . . . . . . 54
Section 5.04. Payment of Taxes, Etc. . . . . . . . . . . . . . . . . . . . . 54
Section 5.05. Visitation Rights. . . . . . . . . . . . . . . . . . . . . . . 54
Section 5.06. Reporting Requirements . . . . . . . . . . . . . . . . . . . . 54
Section 5.07. Maintenance of Property. . . . . . . . . . . . . . . . . . . . 58
Section 5.08. Bank Accounts. . . . . . . . . . . . . . . . . . . . . . . . . 58

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<PAGE>

Section 5.09. Title Opinions.. . . . . . . . . . . . . . . . . . . . . . . . 58
Section 5.10. Interest Hedge Arrangements. . . . . . . . . . . . . . . . . . 59
Section 5.11. Agreement to Pledge. . . . . . . . . . . . . . . . . . . . . . 59
Section 5.12. Independent Directors. . . . . . . . . . . . . . . . . . . . . 59

ARTICLE VI

NEGATIVE COVENANTS

Section 6.01. Liens, Etc.. . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 6.02. Debts, Guaranties, and Other Obligations . . . . . . . . . . . 61
Section 6.03. Agreements Restricting Liens and Distributions . . . . . . . . 62
Section 6.04. Merger or Consolidation; Asset Sales . . . . . . . . . . . . . 62
Section 6.05. Restricted Payments. . . . . . . . . . . . . . . . . . . . . . 62
Section 6.06. Investments. . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 6.07. Limitation on Speculative Hedging. . . . . . . . . . . . . . . 63
Section 6.08. Affiliate Transactions . . . . . . . . . . . . . . . . . . . . 63
Section 6.09. Compliance with ERISA. . . . . . . . . . . . . . . . . . . . . 64
Section 6.11. Sale-and-Leaseback . . . . . . . . . . . . . . . . . . . . . . 64
Section 6.12. No Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . 64
Section 6.13. Change of Business . . . . . . . . . . . . . . . . . . . . . . 64
Section 6.14. Organizational Documents, Name Change. . . . . . . . . . . . . 64
Section 6.15. General and Administrative Expenses. . . . . . . . . . . . . . 65
Section 6.16. Capital Expenditures.. . . . . . . . . . . . . . . . . . . . . 65
Section 6.17. Rental Expense.. . . . . . . . . . . . . . . . . . . . . . . . 65
Section 6.18. Accounts Payable.. . . . . . . . . . . . . . . . . . . . . . . 65
Section 6.19. Advance Payment Contracts. . . . . . . . . . . . . . . . . . . 65
Section 6.20. Current Ratio. . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 6.21. Interest Coverage Ratio. . . . . . . . . . . . . . . . . . . . 66
Section 6.22. Debt Service Ratio.. . . . . . . . . . . . . . . . . . . . . . 66

ARTICLE VII

REMEDIES

Section 7.01. Events of Default. . . . . . . . . . . . . . . . . . . . . . . 66
Section 7.02. Optional Acceleration of Maturity. . . . . . . . . . . . . . . 68
Section 7.03. Automatic Acceleration of Maturity . . . . . . . . . . . . . . 69
Section 7.04. Right of Set-off . . . . . . . . . . . . . . . . . . . . . . . 69

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<PAGE>

Section 7.05. Actions Under Credit Documents . . . . . . . . . . . . . . . . 70
Section 7.06. Non-exclusivity of Remedies. . . . . . . . . . . . . . . . . . 70

ARTICLE VIII

THE AGENT AND THE ISSUING BANK

Section 8.01. Authorization and Action . . . . . . . . . . . . . . . . . . . 70
Section 8.02. Agent's Reliance, Etc. . . . . . . . . . . . . . . . . . . . . 70
Section 8.03. The Agent and Its Affiliates . . . . . . . . . . . . . . . . . 71
Section 8.04. Bank Credit Decision . . . . . . . . . . . . . . . . . . . . . 71
Section 8.05. Indemnification. . . . . . . . . . . . . . . . . . . . . . . . 71
Section 8.06. Successor Agent and Issuing Bank . . . . . . . . . . . . . . . 72

ARTICLE IX

MISCELLANEOUS

Section 9.01. Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . . 73
Section 9.02. Notices, Etc.. . . . . . . . . . . . . . . . . . . . . . . . . 74
Section 9.03. No Waiver; Remedies. . . . . . . . . . . . . . . . . . . . . . 74
Section 9.04. Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . 74
Section 9.05. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . 74
Section 9.06. Bank Assignments and Participations. . . . . . . . . . . . . . 75
Section 9.07. Indemnification. . . . . . . . . . . . . . . . . . . . . . . . 77
Section 9.08. Execution in Counterparts. . . . . . . . . . . . . . . . . . . 77
Section 9.09. Survival of Representations, Etc . . . . . . . . . . . . . . . 78
Section 9.10. Severability . . . . . . . . . . . . . . . . . . . . . . . . . 78
Section 9.11. Business Loans . . . . . . . . . . . . . . . . . . . . . . . . 78
Section 9.12. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . 78

EXHIBITS:

Exhibit A - Form of Assignment and Acceptance
Exhibit B - Form of Compliance Certificate
Exhibit C-1 - Form of Guaranty
Exhibit C-2 - Form of Limited Guaranty
Exhibit D-1 - Form of Mortgage
Exhibit D-2 - Form of Mortgage Amendment

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<PAGE>

Exhibit E - Form of Notice of Borrowing
Exhibit F - Form of Notice of Conversion or Continuation
Exhibit G - Form of Pledge Agreement
Exhibit H-1 - Form of Revolving Note
Exhibit H-2 - Form of Term Note
Exhibit I - Form of Security Agreement
Exhibit J - Form of Transfer Letters
Exhibit K-1 - Form of Borrower's Oklahoma Counsel Opinion
Exhibit K-2 - Form of Agent's Counsel Opinion

SCHEDULES:

Schedule 1 - Borrower, Agent, and Bank Information
Schedule 4.01 - Subsidiaries
Schedule 4.07 - Existing Litigation
Schedule 5.08 - Bank Accounts
Schedule 6.01 - Permitted Existing Liens
Schedule 6.02 - Permitted Existing Debt
Schedule 6.06 - Permitted Investments

-v-

<PAGE>

AMENDED AND RESTATED CREDIT AGREEMENT

This Amended and Restated Credit Agreement dated as of December 12, 1997 is
among RAMCO Operating Company, a Delaware corporation, the Banks (as defined
below), and Union Bank of California, N.A., as Agent for the Banks.

The Borrower, the Banks, and the Agent agree as follows:

INTRODUCTION

A. RAMCO-NYL 1987 Limited Partnership, a Texas limited partnership (the
"Partnership"), the Banks and the Agent are parties to the Credit Agreement
dated as of November 27, 1996, as amended by Amendment No.1 dated as of May 30,
1997, and Amendment No. 2 dated as of August 5, 1997 (the "Existing Credit
Agreement").

B. The managing general partner and the limited partner of the
Partnership is RAMCO Operating Company, a Delaware corporation (the "Borrower"),
and the special general partner of the Partnership is Oklahoma Double R
Corporation, a Delaware corporation ("Double R"). Prior to its merger with and
into the Borrower, the limited partner of the Partnership was RB Operating
Company, an Oklahoma corporation and wholly-owned subsidiary of the Borrower
("Old RBOC"). Each of the Borrower, Double R and Old RBOC guaranteed the
Partnership's obligations under the Existing Credit Agreement and secured their
obligations under such guaranties by granting the Agent for its benefit and the
benefit of the Banks a security interest in substantially all of their assets.

C. Prior to the execution and delivery of this Agreement, the Partnership
has been dissolved, and all of the assets of the Partnership have been
distributed to the Borrower and Double R, its remaining partners. The assets
which would have otherwise been distributed to Double R were distributed to the
Borrower in partial satisfaction of certain debts owing by Double R to the
Borrower. The transactions described in this paragraph C are hereinafter
collectively referred to as the "Reorganization".

D. The Banks have consented to the Reorganization on the condition that
the Borrower assumes all of the obligations of the Partnership under the
Existing Credit Agreement and the other Credit Documents (as defined in the
Existing Credit Agreement) and that the parties hereto enter into an amendment
to effect certain amendments to the Existing Credit Agreement.

E. To evidence the credit facility requested hereunder, the Borrower, the
Agent and the Banks have agreed that this Agreement is an amendment and
restatement of the

<PAGE>

Existing Credit Agreement, not a new or substitute credit agreement or
novation of the Existing Credit Agreement, and each reference to an "Advance"
or a "Letter of Credit" shall include each Advance made and each Letter of
Credit issued heretofore under the Existing Credit Agreement as well as each
Advance made and each Letter of Credit issued hereafter under this Credit
Agreement.

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

Section 1.01. CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings (unless otherwise indicated,
such meanings to be equally applicable to both the singular and plural forms of
the terms defined):

"ACCEPTABLE SECURITY INTEREST" in any Property means a Lien which
(a) exists in favor of the Agent for the benefit of the Agent and the Banks;
(b) is superior to all Liens or rights of any other Person in the Property
encumbered thereby, except to the extent that the rights of another Person are
permitted hereunder; (c) secures the Obligations; and (d) is perfected and
enforceable.

"ADJUSTED REFERENCE RATE" means, for any day, the fluctuating rate per
annum of interest equal to the greater of (a) the Reference Rate in effect on
such day and (b) the Federal Funds Rate in effect on such day plus 1/2%.

"ADVANCE PAYMENT CONTRACT" means any contract whereby the Borrower or a
Guarantor either (a) receives or becomes entitled to receive (either directly or
indirectly through a third party for the Borrower's or such Guarantor's account
or benefit) any payment ("Advance Payment") to be applied toward the payment of
the purchase price of Hydrocarbons produced or to be produced from any Leases
owned by the Borrower or such Guarantor and which Advance Payment is paid or to
be paid in advance of actual delivery of such production to or for the account
of the purchaser regardless of such production or (b) grants to the purchaser an
option or right of refusal to take delivery of such production in lieu of
payment, and, in either of the foregoing instances, the Advance Payment is, or
is to be, applied as payment in full for such production when sold and delivered
or is, or is to become applied as payment for a portion only of the purchase
price thereof or for a percentage or a share of such production.

"ADVANCE" means any Revolving Advance or Term Advance.

"AFFILIATE" means, as to any Person, any other Person that, directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control

-2-

<PAGE>

with, such Person or any Subsidiary of such Person. The term "control"
(including the terms "controlled by" or "under common control with") means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through
ownership of Voting Securities, by contract, or otherwise.

"AGENT" means Union Bank of California, N.A., in its capacity as an agent
pursuant to Article VIII and any successor agent pursuant to Section 8.06.

"AGENT'S FEE LETTER" has the meaning specified in Section 2.08(b).

"AGREEMENT" means this Amended and Restated Credit Agreement, as the same
may be amended, supplemented, and otherwise modified from time to time.

"AMENDED AND RESTATED REVOLVING NOTE" means a promissory note of the
Borrower payable to the order of any Bank, in substantially the form of the
attached EXHIBIT H-1, evidencing indebtedness of the Borrower to such Bank
resulting from Revolving Advances owing to such Bank.

"AMENDED AND TERM NOTE" means a promissory note of the Borrower payable to
the order of any Bank in substantially the form of the attached EXHIBIT H-2,
evidencing indebtedness of the Borrower to such Bank resulting from any
Term Advance to such Bank.

"APPLICABLE LENDING OFFICE" means, with respect to each Bank, such Bank's
Domestic Lending Office in the case of a Reference Rate Advance and such Bank's
Eurodollar Lending Office in the case of a Eurodollar Rate Advance.

"APPLICABLE MARGIN" means:

(a) for each day that there is any principal amount outstanding under any
Term Advance, (i) for Revolving Advances, 0.50% per annum for Reference Rate
Advances and 2.50% per annum for Eurodollar Rate Advances and (ii) for Term
Advances (all of which shall be Reference Rate Advances), 3.50% per annum;

(b) for each day after the outstanding principal amount of all Term
Advances has been repaid in full, the following percentages based upon the ratio
of (i) the aggregate outstanding amount of Advances PLUS the Letter of Credit
Exposure on such day to (ii) the Borrowing Base as of such day:

-3-

<PAGE>
<TABLE>
Ratio of Outstanding
Revolving Advances PLUS
Letter of Credit Exposure to Applicable Margin Applicable Margin
Borrowing Base Reference Rate Advances Eurodollar Rate Advances
-------------- ----------------------- ------------------------
<S> <C> <C>
Less than .50 0.00% 1.50%
Less than or equal
to .50 and .75 0.25% 2.125%
Greater than .75 0.50% 2.50%
</TABLE>

"ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance entered into
by a Bank and an Eligible Assignee, and accepted by the Agent, in substantially
the form of the attached EXHIBIT A.

"BANKS" means the lenders listed on the signature pages of this Agreement
and each Eligible Assignee that shall become a party to this Agreement pursuant
to Section 9.06.

"BORROWER" means RAMCO Operating Company, a Delaware corporation.

"BORROWING BASE" means at any particular time, the Dollar amount determined
in accordance with Section 2.02 on account of Proven Reserves attributable to
Oil and Gas Properties of the Borrower and the Guarantors described in the most
recent Independent Engineering Report or Internal Engineering Report, as
applicable, delivered to the Agent and the Banks pursuant to Section 2.02.

"BUSINESS DAY" means a day of the year on which banks are not required or
authorized to close in Dallas, Texas, New York, New York, and Los Angeles,
California and, if the applicable Business Day relates to any Eurodollar Rate
Advances, on which dealings are carried on by banks in the London interbank
market.

"CAPITAL EXPENDITURES" means, for the Borrower and the Guarantors for any
period, the aggregate of all expenditures and costs paid by the Borrower and the
Guarantors during such period that are for items which are capital in nature,
including, without limitation, intangible drilling and development expenditures.

"CAPITAL LEASES" means, as applied to any Person, any lease of any Property
by such Person as lessee which would, in accordance with GAAP, be required to be
classified and accounted for as a capital lease on the balance sheet of such
Person.

"CASH COLLATERAL ACCOUNT" means a special interest bearing cash collateral
account pledged by the Borrower to the Agent for the ratable benefit of the
Banks containing cash deposited pursuant to Sections 2.05(b), 7.02(b), or
7.03(b) to be maintained at the Agent's

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<PAGE>

office in accordance with Section 2.07(g) and bear interest or be invested in
the Agent's reasonable discretion.

"CERCLA" means the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, state and local analogs, and all rules and
regulations and requirements thereunder in each case as now or hereafter in
effect.

"CLASS" has the meaning set forth in Section 1.04.

"CODE" means the Internal Revenue Code of 1986, as amended, and any
successor statute.

"COLLATERAL" means (a) all Collateral (as defined in each of the Mortgages,
the Security Agreements, and the Pledge Agreements) and (b) all amounts
contained in the Borrower's and the Guarantors' bank accounts.

"COMPLIANCE CERTIFICATE" means a compliance certificate in the form of the
attached EXHIBIT B signed by a Responsible Officer of the Borrower.

"CONTROLLED GROUP" means all members of a controlled group of corporations
and all businesses (whether or not incorporated) under common control which,
together with the Borrower, are treated as a single employer under Section 414
of the Code.

"CONVERT," "CONVERSION," and "CONVERTED" each refers to a conversion of
Revolving Advances of one Type into Revolving Advances of another Type pursuant
to Section 2.03(b).

"CREDIT DOCUMENTS" means this Agreement, the Notes, the Letter of Credit
Documents, the Guaranties, the Security Documents, any Interest Hedge Agreements
with a Bank, any Hydrocarbon Hedge Agreements with a Bank, the Agent's Fee
Letter, and each other agreement, instrument, or document executed at any time
in connection with the foregoing documents.

"DEBT," for any Person, means without duplication:

(a) indebtedness of such Person for borrowed money, including, without
limitation, obligations under letters of credit and agreements relating to the
issuance of letters of credit or acceptance financing;

(b) obligations of such Person evidenced by bonds, debentures, notes or
other similar instruments;

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<PAGE>

(d) obligations of such Person as lessee under Capital Leases;

(e) obligations of such person under any Interest Hedge Agreement or
Hydrocarbon Hedge Agreement;

(f) obligations of such Person under direct or indirect guaranties in
respect of, and obligations (contingent or otherwise) of such Person to purchase
or otherwise acquire, or otherwise to assure a creditor against loss in respect
of, indebtedness or obligations of others of the kinds referred to in
clauses (a) through (e) above;

(g) any obligations in connection with any volumetric or production
prepayments;

(h) indebtedness or obligations of others of the kinds referred to in
clauses (a) through (g) secured by any Lien on or in respect of any Property of
such Person; and

(i) all liabilities of such Person in respect of unfunded vested benefits
under any Plan.

"DEFAULT" means (a) an Event of Default or (b) any event or condition which
with notice or lapse of time or both would, unless cured or waived, become an
Event of Default.

"DISSOLUTION AGREEMENT" means the Dissolution Agreement dated as of
December 1, 1997 between the Borrower and Double R.

"DOLLAR EQUIVALENT" means for all purposes of this Agreement, the
equivalent in another currency of an amount in Dollars to be determined by
reference to the rate of exchange quoted by Union Bank of California, N.A., at
10:00 a.m. (Los Angeles, California time) on the date of determination, for the
spot purchase in the foreign exchange market of such amount of Dollars with such
other currency.

"DOLLARS" and "$" means lawful money of the United States of America.

"DOMESTIC LENDING OFFICE" means, with respect to any Bank, the office of
such Bank specified as its "Domestic Lending Office" opposite its name on
SCHEDULE 1 or such other office of such Bank as such Bank may from time to time
specify to the Borrower and the Agent.

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<PAGE>

"EBITDA" means, for the Borrower and the Guarantors for any period, (a)
Net Income for the Borrower and the Guarantors for such period PLUS (b) to
the extent deducted in determining Net Income, Interest Expense, taxes, and
depreciation and amortization for such period.

"EFFECTIVE DATE" means December 12, 1997.

"ELIGIBLE ASSIGNEE" means any commercial bank or other financial
institution approved by the Agent in its sole discretion.

"ENGINEERING REPORT" means either an Independent Engineering Report or an
Internal Engineering Report.

"ENVIRONMENT" or "ENVIRONMENTAL" shall have the meanings set forth in 43
U.S.C. Section 9601(8) (1988).

"ENVIRONMENTAL CLAIM" means any third party (including governmental
agencies and employees) action, lawsuit, claim, demand, regulatory action or
proceeding, order, decree, consent agreement or notice of potential or actual
responsibility or violation (including claims or proceedings under the
Occupational Safety and Health Acts or similar laws or requirements relating
to health or safety of employees) which seeks to impose liability under any
Environmental Law.

"ENVIRONMENTAL LAW" means all Legal Requirements arising from, relating
to, or in connection with the Environment, health, or safety, including
without limitation CERCLA, relating to (a) pollution, contamination, injury,
destruction, loss, protection, cleanup, reclamation or restoration of the
air, surface water, groundwater, land surface or subsurface strata, or other
natural resources; (b) solid, gaseous or liquid waste generation, treatment,
processing, recycling, reclamation, cleanup, storage, disposal or
transportation; (c) exposure to pollutants, contaminants, hazardous, or toxic
substances, materials or wastes; (d) the safety or health of employees; or
(e) the manufacture, processing, handling, transportation, distribution in
commerce, use, storage or disposal of hazardous, or toxic substances,
materials or wastes.

"ENVIRONMENTAL PERMIT" means any permit, license, order, approval or
other authorization under Environmental Law.

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

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<PAGE>

"EUROCURRENCY LIABILITIES" has the meaning assigned to that term in
Regulation D of the Federal Reserve Board (or any successor), as in effect
from time to time.

"EURODOLLAR LENDING OFFICE" means, with respect to any Bank, the office
of such Bank specified as its "Eurodollar Lending Office" opposite its name
on SCHEDULE 1 (or, if no such office is specified, its Domestic Lending
Office) or such other office of such Bank as such Bank may from time to time
specify to the Borrower and the Agent.

"EURODOLLAR RATE" means, for the Interest Period for each Eurodollar
Advance comprising part of the same Revolving Borrowing, an interest rate per
annum (rounded upward to the nearest whole multiple of 1/16 of 1% per annum)
equal to the rate per annum at which deposits in Dollars are offered by the
Los Angeles office of the Agent to prime banks in the London interbank market
at 11:00 a.m. (London time) two Business Days before the first day of such
Interest Period in an amount substantially equal to the Agent's Eurodollar
Rate Advance comprising part of such Revolving Borrowing and for a period
equal to such Interest Period.

"EURODOLLAR RATE ADVANCE" means an Advance which bears interest as
provided in Section 2.09(b).

"EURODOLLAR RATE RESERVE PERCENTAGE" of any Bank for the Interest Period
for any Eurodollar Rate Advance means the reserve percentage applicable
during such Interest Period (or if more than one such percentage shall be so
applicable, the daily average of such percentages for those days in such
Interest Period during which any such percentage shall be so applicable)
under regulations issued from time to time by the Federal Reserve Board for
determining the maximum reserve requirement (including, without limitation,
any emergency, supplemental, or other marginal reserve requirement) for such
Bank with respect to liabilities or assets consisting of or including
Eurocurrency Liabilities having a term equal to such Interest Period.

"EVENT OF DEFAULT" has the meaning specified in Section 7.01.

"EXPIRATION DATE" means, with respect to any Letter of Credit, the date
on which such Letter of Credit will expire or terminate in accordance with
its terms.

"FEDERAL FUNDS RATE" means, for any period, a fluctuating interest rate
per annum equal for each day during such period to the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day
(or, if such day is not a Business Day, for the next preceding Business Day)
by the Federal Reserve Bank of New York, or, if such rate is not so published
for any day which is a Business Day, the average of the quotations for any
such

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<PAGE>

day on such transactions received by the Agent from three Federal funds
brokers of recognized standing selected by it.

"FEDERAL RESERVE BOARD" means the Board of Governors of the Federal
Reserve System or any of its successors.

"FINANCIAL STATEMENTS" means the Partnership's audited balance sheet and
statements of income, retained earnings, and cash flow dated December 31,
1996 and the Partnership, the Borrower, Old RBOC and Gulf States' unaudited
combined balance sheet and statements of income, retained earnings, and cash
flow dated September 30, 1997 referred to in Section 4.05, copies of which
have been delivered to the Agent and the Banks.

"GAAP" means United States generally accepted accounting principles as in
effect from time to time, applied on a basis consistent with the requirements
of Section 1.03.

"GOVERNMENTAL AUTHORITY" means any foreign governmental authority, the
United States of America, any state of the United States of America and any
subdivision of any of the foregoing, and any agency, department, commission,
board, authority or instrumentality, bureau or court having jurisdiction over
any Bank, the Borrower, or any Guarantor or any of their respective
Properties.

"GUARANTORS" means Gulf States and any other Person who executes and
delivers a Guaranty.

"GUARANTIES" means the Guaranties each in substantially the form of the
attached EXHIBIT C-1 and executed by a Guarantor.

"GULF STATES" means RLP Gulf States, L.L.C., an Oklahoma limited
liability company.

"HAZARDOUS SUBSTANCE" means the substances identified as such pursuant to
CERCLA and those regulated under any other Environmental Law, including
without limitation pollutants, contaminants, petroleum, petroleum products,
radionuclides, and radioactive materials.

"HAZARDOUS WASTE" means the substances regulated as such pursuant to any
Environmental Law.

"HYDROCARBON HEDGE AGREEMENT" means a swap, collar, floor, cap, option,
forward sale or purchase or other contract (including sales contracts with
known prices) which is intended to reduce or eliminate the risk of
fluctuations in the price of the Hydrocarbons.

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<PAGE>

"HYDROCARBONS" means oil, gas, coal seam gas, casinghead gas, drip
gasoline, natural gasoline, condensate, distillate, and all other liquid and
gaseous hydrocarbons produced or to be produced in conjunction therewith from
a well bore and all products, by-products, and other substances derived
therefrom or the processing thereof, and all other minerals and substances
produced in conjunction with such substances, including, but not limited to,
sulfur, geothermal steam, water, carbon dioxide, helium, and any and all
minerals, ores, or substances of value and the products and proceeds
therefrom.

"INDEPENDENT ENGINEER" means Forrest A. Garb and Associates or any other
engineering firm that the Borrower may engage with the Agent's consent, such
consent not to be unreasonably withheld.

"INDEPENDENT ENGINEERING REPORT" means a report, in form and substance
satisfactory to the Agent and each of the Banks, prepared by an Independent
Engineer, addressed to the Agent and the Banks with respect to the Oil and
Gas Properties owned by the Borrower and the Guarantors (or to be acquired by
the Borrower and the Guarantors, as applicable) which are or are to be
included in the Borrowing Base, which report shall (a) specify the location,
quantity, and type of the estimated Proven Reserves attributable to such Oil
and Gas Properties, (b) contain a projection of the rate of production of
such Oil and Gas Properties, (c) contain an estimate of the net operating
revenues to be derived from the production and sale of Hydrocarbons from such
Proven Reserves based on product price and cost escalation assumptions
specified by the Agent, and (d) contain such other information as is
customarily obtained from and provided in such reports or is otherwise
reasonably requested by the Agent or any Bank.

"INTEREST EXPENSE" means, for the Borrower and the Guarantors for any
period, total interest, letter of credit fees, and other fees incurred in
connection with any Debt for such period, whether paid or accrued, including,
without limitation, all commissions, discounts and other fees and charges
owed with respect to letters of credit and bankers' acceptance financing and
net costs under Interest Hedge Agreements and Hydrocarbon Hedge Agreements,
all as determined in conformity with GAAP.

"INTEREST HEDGE AGREEMENT" means an interest hedge, rate swap, or cap, or
similar arrangement between the Borrower and one or more financial
institutions providing for the exchange of nominal interest obligations
between the Borrower and such financial institution or the cap of the
interest rate on any Debt of the Borrower.

"INTEREST PERIOD" means, for each Eurodollar Rate Advance comprising part
of the same Revolving Borrowing, the period commencing on the date of such
Advance or the date of the Conversion of any Reference Rate Advance into such
an Advance and ending on the last day of the period selected by the Borrower
pursuant to the provisions below or by

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<PAGE>

Section 2.03 and, thereafter, each subsequent period commencing on the last
day of the immediately preceding Interest Period and ending on the last day
of the period selected by the Borrower pursuant to the provisions below or by
Section 2.03. The duration of each such Interest Period shall be one, two,
three, or six months, in each case as the Borrower may, upon notice received
by the Agent not later than 10:00 a.m. (Los Angeles California time) on the
third Business Day prior to the first day of such Interest Period select;
PROVIDED, HOWEVER, that:

(a) the Borrower may not select any Interest Period for any Revolving
Advance which ends after the Revolving Maturity Date;

(b) Interest Periods commencing on the same date for Advances comprising
part of the same Revolving Borrowing shall be of the same duration;

(c) whenever the last day of any Interest Period would otherwise occur
on a day other than a Business Day, the last day of such Interest Period
shall be extended to occur on the next succeeding Business Day, PROVIDED that
if such extension would cause the last day of such Interest Period to occur
in the next following calendar month, the last day of such Interest Period
shall occur on the next preceding Business Day; and

(d) any Interest Period which begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period) shall end on
the last Business Day of the calendar month in which it would have ended if
there were a numerically corresponding day in such calendar month.

"INTERNAL ENGINEERING REPORT" means a report, in form and substance
satisfactory to the Agent and each Bank, prepared by the Borrower and
certified by a Responsible Officer of the Borrower, addressed to the Agent
and the Banks with respect to the Oil and Gas Properties owned by the
Borrower and the Guarantors (or to be acquired by the Borrower and the
Guarantors, as applicable) which are or are to be included in the Borrowing
Base, which report shall (a) specify the location, quantity, and type of the
estimated Proven Reserves attributable to such Oil and Gas Properties, (b)
contain a projection of the rate of production of such Oil and Gas
Properties, (c) contain an estimate of the net operating revenues to be
derived from the production and sale of Hydrocarbons from such Proven
Reserves based on product price and cost escalation assumptions specified by
the Bank, and (d) contain such other information as is customarily obtained
from and provided in such reports or is otherwise reasonably requested by the
Agent or any Bank.

"INTERIM FINANCIAL STATEMENTS" means the Partnership's unaudited balance
sheet dated as of September 30, 1997 and the Partnership, the Borrower, Old
RBOC and Gulf States'

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combined unaudited balance sheet dated as of September 30, 1997 and the
related statements of income, retained earnings, and cash flow of the
Partnership, the Borrower, Old RBOC and Gulf States for the nine months then
ended, referred to in Section 4.05.

"ISSUING BANK" means Union Bank of California, N.A. and any successor
issuing bank pursuant to Section 8.06.

"LEASES" means all oil and gas leases, oil, gas and mineral leases, oil,
gas and casinghead leases or any other instruments, agreements, or
conveyances under and pursuant to which the owner thereof has or obtains the
right to enter upon lands and explore for, drill, and develop such lands for
the production of Hydrocarbons.

"LEGAL REQUIREMENT" means any law, statute, ordinance, decree,
requirement, order, judgment, rule, regulation (or official interpretation of
any of the foregoing) of, and the terms of any license or permit issued by,
any Governmental Authority, including, but not limited to, Regulations D, G,
T, U, and X.

"LETTER OF CREDIT" means, individually, any letter of credit issued by
the Issuing Bank which is subject to this Agreement and "LETTERS OF CREDIT"
means all such letters of credit collectively.

"LETTER OF CREDIT APPLICATION" means the Issuing Bank's standard form
letter of credit application for either a commercial or standby letter of
credit, as the case may be, which has been executed by the Borrower and
accepted by the Issuing Bank in connection with the issuance of a Letter of
Credit.

"LETTER OF CREDIT DOCUMENTS" means all Letters of Credit, Letter of
Credit Applications, and agreements, documents, and instruments entered into
in connection with or relating thereto.

"LETTER OF CREDIT EXPOSURE" means, at any time, the sum of (a) the
aggregate undrawn maximum face amount of each Letter of Credit at such time,
PLUS (b) the aggregate unpaid amount of all Reimbursement Obligations at such
time.

"LETTER OF CREDIT OBLIGATIONS" means any obligations of the Borrower
under this Agreement in connection with the Letters of Credit, including the
Reimbursement Obligations.

"LIEN" means any mortgage, lien, pledge, charge, deed of trust, security
interest, or encumbrance or other type of preferential arrangement to secure
or provide for the payment of any obligation of any Person, whether arising
by contract, operation of law, or otherwise

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<PAGE>

(including, without limitation, the interest of a vendor or lessor under any
conditional sale agreement, Capital Lease, or other title retention
agreement).

"LIMITED GUARANTIES" means the Limited Guaranties executed by each of the
Series B Preferred Stockholders each in substantially the form of the
attached EXHIBIT C-2.

"LIQUID INVESTMENTS" means:

(a) direct obligations of, or obligations the principal of and interest
on which are unconditionally guaranteed by, the United States maturing within
180 days from the date of any acquisition thereof;

(b) (i) negotiable or nonnegotiable certificates of deposit, time
deposits, or other similar banking arrangements maturing within 180 days from
the date of acquisition thereof ("bank debt securities"), issued by (A) the
Agent or (B) Liberty National Bank & Trust Company, any other bank or trust
company so long as such certificate of deposit is pledged to secure the
Borrower or any Guarantors ordinary course of business bonding requirements,
or any other bank or trust company which has primary capital of not less than
$500,000,000.00, if at the time of deposit or purchase, such bank debt
securities are rated not less than "AA" (or the then equivalent) by the
rating service of Standard & Poor's Corporation or of Moody's Investors
Service, Inc., and (ii) commercial paper issued by (A) the Agent or (B) any
other Person if at the time of purchase such commercial paper is rated not
less than "A-1" (or the then equivalent) by the rating service of Standard &
Poor's Corporation or not less than "P-1" (or the then equivalent) by the
rating service of Moody's Investors Service, Inc., or upon the discontinuance
of both of such services, such other nationally recognized rating service or
services, as the case may be, as shall be selected by the Borrower with the
consent of the Agent;

(c) repurchase agreements relating to investments described in clauses
(a) and (b) above with a market value at least equal to the consideration
paid in connection therewith, with any Person who regularly engages in the
business of entering into repurchase agreements and has a combined capital
surplus and undivided profit of not less than $500,000,000.00, if at the time
of entering into such agreement the debt securities of such Person are rated
not less than "AA" (or the then equivalent) by the rating service of Standard
& Poor's Corporation or of Moody's Investors Service, Inc.; and

(d) such other instruments (within the meaning of Article 9 of the Texas
Business and Commerce Code) as the Borrower may request and the Agent may
approve in writing, which approval will not be unreasonably withheld.

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"MAJORITY BANKS" means, at any time, Banks holding at least 66-2/3% of
the then aggregate unpaid principal amount of the Notes held by the Banks and
the Letter of Credit Exposure of the Banks at such time; provided that if no
such principal amount or Letter of Credit Exposure is then outstanding,
"Majority Banks" shall mean Banks having at least 66-2/3% of the aggregate
amount of the Revolving Commitments at such time.

"MATERIAL ADVERSE CHANGE" means (a) a material adverse change in the
business, assets (including the Oil and Gas Properties of the Borrower and
the Guarantors), financial condition, or results of operations of the
Borrower or any Guarantor or (b) a material adverse effect on the Borrower's
or any Guarantor's ability to perform its obligations under this Agreement,
any Note, any Guaranty, or any other Credit Document.

"MAXIMUM RATE" means the maximum nonusurious interest rate under
applicable law.

"MORTGAGE AMENDMENTS" means, collectively, each of the Mortgage
Amendments executed by any one or more of the Borrower or any of the
Guarantors in substantially the form of Exhibit D-2.

"MORTGAGES" means, collectively, each of (a) the Mortgages, Deeds of
Trust, Security Agreements, Assignments of Production and Financing
Statements executed by any one or more of the Partnership, the Borrower, or
any of the Guarantors in favor of the Agent for the ratable benefit of the
Agent and the Banks, as the same may be amended, modified or supplemented
from time-to-time, together with any assumptions or assignments of the
obligations thereunder by the Partnership, the Borrower or any Guarantor, in
substantially the form of the attached EXHIBIT D-1.

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

"NET CASH PROCEEDS" means, with respect to any sale, transfer, or other
disposition of any of the Borrower's or any Guarantor's Property (including
the sale or transfer of stock or other equity interest by the Borrower or
such Guarantor) all cash and Liquid Investments received by the Borrower or
any Guarantor from such sale, transfer or other disposition after (a) payment
of, or provision for, all brokerage commissions and other reasonable
out-of-pocket fees and expenses actually incurred; (b) payment of any
outstanding obligations relating to such Property paid in connection with,
and necessary for, any such sale, transfer, or other disposition; and (c) the
amount of reserves recorded in accordance with GAAP for indemnity or similar
obligations of the Borrower and the Guarantors directly related to such sale,
transfer or other disposition.

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"NET INCOME" means, for any Person and for any period of its
determination, the net income of such Person determined in accordance with
GAAP consistently applied, but excluding any gains and losses on sales and
retirements of assets and any noncash write-down of assets.

"NOTE" means an Amended and Restated Revolving Note or an Amended and
Restated Term Note.

"NOTICE OF BORROWING" means a notice of borrowing in the form of the
attached EXHIBIT E signed by a Responsible Officer of the Borrower.

"NOTICE OF CONVERSION OR CONTINUATION" means a notice of conversion or
continuation in the form of the attached EXHIBIT F signed by a Responsible
Officer of the Borrower.

"OBLIGATIONS" means all principal, interest, fees, reimbursements,
indemnifications, and other amounts payable by the Borrower and the
Guarantors to the Agent or the Banks under the Credit Documents.

"OIL AND GAS PROPERTIES" means fee mineral interests, term mineral
interests, Leases, subleases, farm-outs, royalties, overriding royalties, net
profit interests, carried interests, production payments and similar mineral
interests, and all unsevered and unextracted Hydrocarbons in, under, or
attributable to such oil and gas Properties and interests.

"PARTNERS" means RAMCO Partners, an Oklahoma general partnership.

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

"PERMITTED LIENS" means the Liens permitted to exist pursuant to Section
6.01.

"PERSON" means an individual, partnership, corporation (including a
business trust), joint stock company, limited liability corporation or
company, limited liability partnership, trust, unincorporated association,
joint venture or other entity, or a government or any political subdivision
or agency thereof or any trustee, receiver, custodian or similar official.

"PLAN" means an employee benefit plan (other than a Multiemployer Plan)
maintained for employees of the Borrower or any member of the Controlled
Group and covered by Title IV of ERISA or subject to the minimum funding
standards under Section 412 of the Code.

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<PAGE>

"PLEDGE AGREEMENTS" means the Amended and Restated Pledge Agreements each
in the form of the attached EXHIBIT G, executed by the Borrower, as the same
may be amended, modified or supplemented from time to time.

"PROPERTY" of any Person means any property or assets (whether real,
personal, or mixed, tangible or intangible) of such Person.

"PRO RATA SHARE" means, with respect to any Bank, either (a) the ratio
(expressed as a percentage) of such Bank's Revolving Commitments at such time
to the aggregate Revolving Commitments at such time or (b) if the Revolving
Commitments have been terminated, the ratio (expressed as a percentage) of
such Bank's aggregate outstanding Advances and Letter of Credit Exposure at
such time to the aggregate outstanding Advances and Letter of Credit Exposure
of all the Banks at such time.

"PROVED DEVELOPED PRODUCING RESERVES" means, with respect to any Oil and
Gas Properties, those quantities of Hydrocarbons, estimated with reasonable
certainty, as demonstrated by geological and engineering data, to be
economically recoverable from such Oil and Gas Properties by producing
methods under existing economic conditions using existing equipment and
operating methods from existing completion intervals open for production in
existing wells which shall have had at least 30 days of continuous production.

"PROVEN RESERVES" means, at any particular time, the estimated quantities
of Hydrocarbons which geological and engineering data demonstrate with
reasonable certainty to be recoverable in future years from known reservoirs
attributable to Oil and Gas Properties included or to be included in the
Borrowing Base under then existing economic and operating conditions (i.e.,
prices and costs as of the date the estimate is made). The prices used may
include consideration of changes in existing prices provided only by
contractual arrangements, but not on escalations based upon future conditions.

"RBOC" means RB Operating Company, a Delaware corporation and a
wholly-owned subsidiary of the Borrower, formerly known as RLP Operating
Company.

"REFERENCE RATE" means a fluctuating interest rate per annum as shall be
in effect from time to time equal to the rate of interest publicly announced
by Union Bank of California, N.A., as its reference rate, whether or not the
Borrower has notice thereof.

"REFERENCE RATE ADVANCE" means an Advance which bears interest as
provided in Section 2.09(a).

"REGISTER" has the meaning set forth in paragraph (c) of Section 9.06.

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<PAGE>

"REGULATIONS D, G, T, U, AND X" mean Regulations D, G, T, U, and X of the
Federal Reserve Board, as the same is from time to time in effect, and all
official rulings and interpretations thereunder or thereof.

"REIMBURSEMENT OBLIGATIONS" means all of the obligations of the Borrower
to reimburse the Issuing Bank for amounts paid by the Issuing Bank under
Letters of Credit as established by the Letter of Credit Applications and
Section 2.07(d).

"RELEASE" shall have the meaning set forth in CERCLA or under any other
Environmental Law.

"RENTAL EXPENSE" means, for any period, all amounts payable by the
Borrower and the Guarantors during such period under any lease, sublease, or
other instrument (other than a Capital Lease) pursuant to which the Borrower
or any of the Guarantors is entitled to use any Property of another Person,
all as determined in accordance with GAAP.

"REORGANIZATION" has the meaning set forth in the recitals to this
Agreement.

"REORGANIZATION DOCUMENTS" means the Dissolution Agreement and all of the
other documents which will be executed on or before the Effective Date with
respect to the Reorganization.

"RESCISSION" means the rescission of the transactions described in and
relating to the Section 29 Purchase Agreement.

"RESCISSION AGREEMENT" means the Rescission Agreement dated effective as
of July 1, 1997 between the Partnership and Partners.

"RESCISSION DOCUMENTS" means the Rescission Agreement and all of the
other documents which will be executed on or before the Effective Date with
respect to the Rescission.

"RESPONSE" shall have the meaning set forth in CERCLA or under any other
Environmental Law.

"RESPONSIBLE OFFICER" means, with respect to any Person, such Person's
Chief Executive Officer, President, Chief Financial Officer, or Vice
President.

"RESTRICTED PAYMENT" means, with respect to any Person, (a) any dividends
or other distributions (in cash, property, or otherwise) on, or any payment
for the purchase, redemption, or other acquisition of, any shares of any
capital stock or other equity interests

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(including partnership interests) of such Person, other than dividends
payable in such Person's stock or other equity interests or (b) principal or
interest payments (in cash, property or otherwise) on or redemptions of
subordinated debt of such Person.

"REVOLVING ADVANCE" means any advance by a Bank to the Borrower as part
of a Revolving Borrowing and refers to a Reference Rate Advance or a
Eurodollar Rate Advance.

"REVOLVING BORROWING" means, subject to Sections 2.03(c)(iii) and
2.05(e), a borrowing consisting of simultaneous Revolving Advances of the
same Type made by each Bank pursuant to Section 2.03(a), continued by each
Bank pursuant to Section 2.03(b), or Converted by each Bank to Revolving
Advances of a different Type pursuant to Section 2.03(b).

"REVOLVING COMMITMENT" means, for any Bank, the amount set opposite such
Bank's name on the signature pages hereof as its Revolving Commitment, or if
such Bank has entered into any Assignment and Acceptance, as set forth for
such Bank as its Revolving Commitment in the Register maintained by the Agent
pursuant to Section 9.06(c), as such amount may be reduced or terminated
pursuant to Section 2.04 or Article VII.

"REVOLVING MATURITY DATE" means the earlier of (a) December 31, 2002 or
(b) the earlier termination in whole of the Revolving Commitments pursuant to
Section 2.04 or Article VII.

"REVOLVING SHARE" means, at any time with respect to any Bank with a
Revolving Commitment, the ratio (expressed as a percentage) of such Bank's
Revolving Commitment at such time to the aggregate Revolving Commitments at
such time.

"SECTION 29 PURCHASE AGREEMENT" means the Purchase and Sale Agreement
dated June 30, 1997 by and between the Borrower, as seller, and Partners, as
buyer, as the same may be amended, modified and supplemented from time to
time as permitted herein and each other material agreement, instrument, or
document executed at any time in connection with the foregoing document.

"SECURITY AGREEMENTS" means the Amended and Restated Security Agreements,
each in substantially the form of the attached Exhibit I, one executed by
each of the Borrower and each of the Guarantors, as the same may be amended,
modified, or supplemented from time to time.

"SECURITY DOCUMENTS" means, collectively, (a) the Mortgages and the
Mortgage Amendments, (b) the Transfer Letters, (c) the Pledge Agreements, (d)
the Security Agreements and the bank account letters in the form of Exhibit A
to the Security

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Agreements, (e) each other agreement, instrument or document executed at any
time in connection with the Pledge Agreements, the Security Agreements, or
the Mortgages, and (e) each other agreement, instrument or document executed
at any time in connection with securing the Obligations.

"SOLVENT" means, with respect to any Person as of the date of any
determination, that on such date (a) the fair value of the Property of such
Person (both at fair valuation and at present fair saleable value) is greater
than the total liabilities, including contingent liabilities, of such Person,
(b) the present fair saleable value of the assets of such Person is not less
than the amount that will be required to pay the probable liability of such
Person on its debts as they become absolute and matured, (c) such Person is
able to realize upon its assets and pay its debts and other liabilities,
contingent obligations, and other commitments as they mature in the normal
course of business, (d) such Person does not intend to, and does not believe
that it will, incur debts or liabilities beyond such Person's ability to pay
as such debts and liabilities mature, and (e) such Person is not engaged in
business or a transaction, and is not about to engage in business or a
transaction, for which such Person's Property would constitute unreasonably
small capital after giving due consideration to current and anticipated
future capital requirements and current and anticipated future business
conduct and the prevailing practice in the industry in which such Person is
engaged. In computing the amount of contingent liabilities at any time, such
liabilities shall be computed at the amount which, in light of the facts and
circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability.

"SUBSIDIARY" of a Person means any corporation or other entity of which
more than 50% of the outstanding capital stock or other ownership interests
having ordinary voting power to elect a majority of the board of directors or
similar governing body of such corporation or other entity (irrespective of
whether at such time capital stock or other ownership interests of any other
class or classes of such corporation or other entity shall or might have
voting power upon the occurrence of any contingency) is at the time directly
or indirectly owned by such Person, by such Person and one or more
Subsidiaries of such Person or by one or more Subsidiaries of such Person.

"TERM ADVANCE" means all advances previously made by a Bank to the
Borrower pursuant to Section 2.01(b).

"TERM MATURITY DATE" means June 30, 1998.

"TERM SHARE" means, at any time with respect to any Bank with an
outstanding Term Advance, the ratio (expressed as a percentage) of such
Bank's outstanding Term Advances at such time to the aggregate outstanding
Term Advances at such time.

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<PAGE>

"TERMINATION EVENT" means (a) a Reportable Event described in Section 4043
of ERISA and the regulations issued thereunder (other than a Reportable Event
not subject to the provision for 30-day notice to the PBGC under such
regulations), (b) the withdrawal of the Borrower or any of its Affiliates from a
Plan during a plan year in which it was a "substantial employer" as defined in
Section 4001(a)(2) of ERISA, (c) the filing of a notice of intent to terminate a
Plan or the treatment of a Plan amendment as a termination under Section 4041 of
ERISA, (d) the institution of proceedings to terminate a Plan by the PBGC, or
(e) any other event or condition which constitutes grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
Plan.

"TRANSFER LETTERS" means, collectively, the letters in lieu of transfer
orders executed by the Borrower and any of the Guarantors executing a Mortgage
in the form of the attached EXHIBIT J, as each of the same may be amended,
modified or supplemented from time-to-time.

"TYPE" has the meaning set forth in Section 1.04.

"VOTING SECURITIES" means with respect to any corporation, capital stock of
the corporation having general voting power under ordinary circumstances to
elect directors of such corporation (irrespective of whether at the time stock
of any other class or classes shall have or might have special voting power or
rights by reason of the happening of any contingency).

Section 1.02. COMPUTATION OF TIME PERIODS. In this Agreement in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
means "to but excluding".

Section 1.03. ACCOUNTING TERMS; CHANGES IN GAAP.

(a) All accounting terms not specifically defined in this Agreement shall
be construed in accordance with GAAP applied on a consistent basis with those
applied in the preparation of the Financial Statements.

(b) Unless otherwise indicated, all financial statements of the Borrower,
all calculations for compliance with covenants in this Agreement and all
calculations of any amounts to be calculated under the definitions in
Section 1.01 shall be based upon the consolidated accounts of the Borrower and
the Guarantors in accordance with GAAP (or in compliance with the regulations
promulgated by the United States Securities and Exchange Commission regarding
financial reporting) and consistent with the principles applied in preparing the
Financial Statements.

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Section 1.04. TYPES OF ADVANCES. Advances are distinguished by "Type."
The "Type" of an Advance refers to the determination whether such Advance is a
Eurodollar Rate Advance or Reference Rate Advance. Advances are also
distinguished by "Class." The "Class" of an Advance refers to the determination
whether such Advance is a Revolving Advance or a Term Advance, as applicable.

Section 1.05. MISCELLANEOUS. Article, Section, Schedule, and Exhibit
references are to Articles and Sections of and Schedules and Exhibits to this
Agreement, unless otherwise specified.

ARTICLE II

CREDIT FACILITIES

Section 2.01. COMMITMENT FOR ADVANCES.

(a) REVOLVING ADVANCES. Each Bank severally agrees, on the terms and
conditions set forth in this Agreement, to make Revolving Advances to the
Borrower from time to time on any Business Day during the period from the
Effective Date until the Revolving Maturity Date in an aggregate outstanding
amount up to but not to exceed an amount equal to the lesser of (i) such Bank's
Revolving Commitment MINUS such Bank's Revolving Share of the Letter of Credit
Exposure and (ii) such Bank's Revolving Share of the Borrowing Base MINUS such
Bank's Revolving Share of the outstanding principal amount of the Term Advances
MINUS such Bank's Revolving Share of the Letter of Credit Exposure. Each
Revolving Borrowing shall, in the case of Revolving Borrowings consisting of
Reference Rate Advances, be in an aggregate amount not less than $1,000,000.00
and in integral multiples of $500,000.00 in excess thereof, and in the case of
Revolving Borrowings consisting of Eurodollar Rate Advances, be in an aggregate
amount not less than $2,000,000.00 or in integral multiples of $1,000,000.00 in
excess thereof, and in each case shall consist of Revolving Advances of the same
Type made on the same day by the Banks ratably according to their respective
Revolving Commitments. Within the limits of each Bank's Revolving Commitment,
and subject to the terms of this Agreement, the Borrower may from time to time
borrow, prepay, and reborrow Revolving Advances.

(b) TERM ADVANCES. On the Effective Date, each Bank has Term Advances in
the aggregate amount set forth opposite such Bank's name on the signature pages
hereof as its Term Advances. Each Bank severally agrees, on the terms and
conditions set forth in this Agreement, to continue its outstanding
Term Advances to the Borrower. The Borrower may not reborrow any amount of the
Term Advances that have been repaid.

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(c) NOTES. The indebtedness of the Borrower to each Bank resulting from
the Revolving Advances owing to such Bank shall be evidenced by an Amended and
Restated Revolving Note of the Borrower payable to the order of such Bank. The
indebtedness of the Borrower to each Bank resulting from the Term Advances owing
to such Bank shall be evidenced by an Amended and Restated Term Note of the
Borrower payable to the order of such Bank.

Section 2.02. BORROWING BASE.

(a) BORROWING BASE. The Borrowing Base as of the Effective Date has been
set by the Agent and the Banks and acknowledged by the Borrower as
$62,000,000.00.

(b) CALCULATION OF BORROWING BASE.

(i) The Borrower shall deliver to the Agent and each of the Banks on
or before each September 30, beginning September 30, 1998, an Independent
Engineering Report and such other information as may be reasonably
requested by any Bank with respect to the Oil and Gas Properties included
or to be included in the Borrowing Base. Within 30 days after the Agent
and the Banks' receipt of such Independent Engineering Report and other
information, the Agent shall deliver to each Bank the Agent's
recommendation for the redetermined Borrowing Base. Within 15 days after
the Banks' receipt of the Agent's recommendation, the Agent and the Banks
shall redetermine the Borrowing Base in accordance with Section 2.02(d) and
the Agent shall promptly notify the Borrower in writing of the amount of
the Borrowing Base as so redetermined.

(ii) The Borrower shall deliver to the Agent and each Bank on or
before each March 31, beginning March 31, 1998, an Internal Engineering
Report and such other information as may be reasonably requested by the
Agent or any Bank with respect to the Oil and Gas Properties included or to
be included in the Borrowing Base. Within 30 days after the Agent and the
Banks' receipt of such Internal Engineering Report and other information,
the Agent shall deliver to each Bank the Agent's recommendation for the
redetermined Borrowing Base. Within 15 days after the Banks' receipt of
the Agent's recommendation, the Agent and the Banks shall redetermine the
Borrowing Base in accordance with Section 2.02(d) and the Agent shall
promptly notify the Borrower in writing of the amount of the Borrowing Base
as so redetermined.

(iii) In the event that the Borrower does not furnish to the Agent and
the Banks the Independent Engineering Report, Internal Engineering Report
or other information specified in clauses (i) and (ii) above by the date
specified therein, the

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Agent and the Banks may nonetheless redetermine the Borrowing Base and
redesignate the Borrowing Base from time-to-time thereafter in their sole
discretion until the Agent and the Banks receive the relevant Independent
Engineering Report, Internal Engineering Report, or other information, as
applicable, whereupon the Agent and the Banks shall redetermine the
Borrowing Base as otherwise specified in this Section 2.02.

(iv) Each delivery of an Engineering Report by the Borrower to the
Agent and the Banks shall constitute a representation and warranty by the
Borrower to the Agent and the Banks that (A) the Borrower and the
Guarantors, as applicable owns the Oil and Gas Properties specified therein
free and clear of any Liens (except Permitted Liens), and (B) on and as of
the date of such Engineering Report each Oil and Gas Property described as
"proved developed" therein was developed for oil and gas, and the wells
pertaining to such Oil and Gas Properties that are described therein as
producing wells ("WELLS"), were each producing oil and gas in paying
quantities, except for Wells that were unitized as water or gas injection
wells or as water disposal wells.

(c) INTERIM REDETERMINATION. In addition to the Borrowing Base
redeterminations provided for in Section 2.02(b), the Agent and the Banks may,
either in their sole discretion or at the request of the Borrower and based on
such information as the Agent and the Banks deem relevant (but in accordance
with Section 2.02(d)), make one additional redetermination of the Borrowing Base
during any 12-month period. The party requesting the redetermination shall give
the other party at least 10 days' prior written notice that a redetermination of
the Borrowing Base pursuant to this paragraph (c) is to be performed. In
connection with any redetermination of the Borrowing Base under this Section
2.02(c), the Borrower shall provide the Agent and the Banks with such
information regarding the Borrower and the Guarantors' business (including,
without limitation, its Oil and Gas Properties, the Proven Reserves, and
production relating thereto) as the Agent or any Bank may request, including, in
the case of requests for an increase to the Borrowing Base of $1,000,000.00 or
more, an updated Independent Engineering Report. The Agent shall promptly
notify the Borrower in writing of each redetermination of the Borrowing Base
pursuant to this Section 2.02(c) and the amount of the Borrowing Base as so
redetermined.

(d) STANDARDS FOR REDETERMINATION. Each redetermination of the Borrowing
Base by the Agent and the Banks pursuant to this Section 2.02 shall be made (i)
in the sole discretion of the Agent and the Banks (but in accordance with the
other provisions of this Section 2.02(d)), (ii) in accordance with the Agent and
the Banks' customary internal standards and practices for valuing and
redetermining the value of Oil and Gas Properties in connection with reserve
based oil and gas loan transactions, (iii) in conjunction with the most recent
Independent Engineering Report or Internal Engineering Report, as applicable, or

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other information received by the Agent and the Banks relating to the Proven
Reserves of the Borrower and the Guarantors, and (iv) based upon the estimated
value of the Proven Reserves owned by the Borrower and the Guarantors as
determined by the Agent and the Banks. In valuing and redetermining the
Borrowing Base, the Agent and the Banks may also consider the business,
financial condition, and Debt obligations of the Borrower and the Guarantors and
such other factors as the Agent and the Banks customarily deem appropriate. In
that regard, the Borrower acknowledges that the determination of the Borrowing
Base contains an equity cushion (market value in excess of loan value), which is
essential for the adequate protection of the Agent and the Banks. No Proven
Reserves shall be included or considered for inclusion in the Borrowing Base
unless the Agent and the Banks shall have received, at the Borrower's expense,
evidence of title satisfactory in form and substance to the Agent that the Agent
has an Acceptable Security Interest in the Oil and Gas Properties relating
thereto pursuant to the Security Documents. At all times after the Bank has
given the Borrower notification of a redetermination of the Borrowing Base under
this Section 2.02, the Borrowing Base shall be equal to the redetermined amount
or such lesser amount designated by the Borrower and disclosed in writing to the
Agent and the Banks until the Borrowing Base is subsequently redetermined in
accordance with this Section 2.02.

(e) ASSET SALES. The Borrowing Base shall automatically reduce by the
loan value assigned to each Oil and Gas Property in the Borrowing Base (as
determined by the Banks in their sole discretion) and sold by the Borrower or
any of the Guarantors to a Person other than the Borrower or any of the
Guarantors.

Section 2.03. METHOD OF BORROWING.

(a) NOTICE. Each Revolving Borrowing shall be made pursuant to a Notice
of Borrowing (or by telephone notice promptly confirmed in writing by a Notice
of Borrowing), given not later than 10:00 a.m. (Los Angeles, California, time)
(i) on the third Business Day before the date of the proposed Revolving
Borrowing, in the case of a Eurodollar Rate Borrowing or (ii) on the Business
Day of the proposed Revolving Borrowing, in the case of a Reference Rate
Borrowing, by the Borrower to the Agent, which shall in turn give to each Bank
prompt notice of such proposed Revolving Borrowing by telecopier or telex. Each
Notice of a Borrowing shall be given by telecopier or telex, confirmed
immediately in writing, specifying the information required therein. In the
case of a proposed Revolving Borrowing comprised of Eurodollar Rate Advances,
the Agent shall promptly notify each Bank of the applicable interest rate under
Section 2.09(b). Each Bank shall, before 10:00 a.m. (Los Angeles, California,
time) on the date of such Revolving Borrowing, make available for the account of
its Applicable Lending Office to the Agent at its address referred to in
Section 9.02, or such other location as the Agent may specify by notice to the
Banks, in same day funds, in the case of a Revolving Borrowing, such Bank's
Revolving Share of such Revolving Borrowing. After the Agent's receipt of such
funds and upon fulfillment of the

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applicable conditions set forth in Article III, the Agent shall make such
funds available to the Borrower at its account with the Agent.

(b) CONVERSIONS AND CONTINUATIONS. The Borrower may elect to Convert or
continue any Revolving Borrowing under this Section 2.03 by delivering an
irrevocable Notice of Conversion or Continuation to the Agent at the Agent's
office no later than 10:00 a.m. (Los Angeles, California, time) (i) on the date
which is at least three Business Days in advance of the proposed Conversion or
continuation date in the case of a Conversion to or a continuation of a
Revolving Borrowing comprised of Eurodollar Rate Advances and (ii) on the
Business Day of the proposed conversion date in the case of a Conversion to a
Revolving Borrowing comprised of Reference Rate Advances. Each such Notice of
Conversion or Continuation shall be in writing or by telex or telecopier
confirmed immediately in writing specifying the information required therein.
Promptly after receipt of a Notice of Conversion or Continuation under this
Section, the Agent shall provide each Bank with a copy thereof and, in the case
of a Conversion to or a Continuation of a Revolving Borrowing comprised of
Eurodollar Rate Advances, notify each Bank of the applicable interest rate under
Section 2.09(b).

(i) Term Advances may only be Reference Rate Advances;

(ii) at no time shall there be more than three Interest Periods
applicable to outstanding Eurodollar Rate Advances and the Borrower may not
select Eurodollar Advances for any Revolving Borrowing at any time that a
Default has occurred and is continuing;

(iii) if any Bank shall, at least one Business Day before the date of
any requested Revolving Borrowing, Conversion, or continuation, notify the
Agent that the introduction of or any change in or in the interpretation of
any law or regulation makes it unlawful, or that any central bank or other
Governmental Authority asserts that it is unlawful, for such Bank or its
Eurodollar Lending Office to perform its obligations under this Agreement
to make Eurodollar Rate Advances or to fund or maintain Eurodollar Rate
Advances, the right of the Borrower to select Eurodollar Rate Advances from
such Bank shall be suspended until such Bank shall notify the Agent that
the circumstances causing such suspension no longer exist, and the Advance
made by such Bank in respect of such Revolving Borrowing, Conversion, or
continuation shall be a Reference Rate Advance;

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(iv) if the Agent is unable to determine the Eurodollar Rate for
Eurodollar Rate Advances comprising any requested Revolving Borrowing, the
right of the Borrower to select Eurodollar Rate Advances for such Revolving
Borrowing or for any subsequent Revolving Borrowing shall be suspended
until the Agent shall notify the Borrower and the Banks that the
circumstances causing such suspension no longer exist, and each Advance
comprising such Revolving Borrowing shall be a Reference Rate Advance;

(v) if the Majority Banks shall, at least one Business Day before the
date of any requested Revolving Borrowing, notify the Agent that the
Eurodollar Rate for Eurodollar Rate Advances comprising such Revolving
Borrowing will not adequately reflect the cost to such Banks of making or
funding their respective Eurodollar Rate Advances, as the case may be, for
such Revolving Borrowing, the right of the Borrower to select Eurodollar
Rate Advances for such Revolving Borrowing or for any subsequent Revolving
Borrowing shall be suspended until the Agent shall notify the Borrower and
the Banks that the circumstances causing such suspension no longer exist,
and each Advance comprising such Revolving Borrowing shall be a Reference
Rate Advance; and

(vi) if the Borrower shall fail to select the duration or continuation
of any Interest Period for any Eurodollar Rate Advances in accordance with
the provisions contained in the definition of "Interest Period" in
Section 1.01 and paragraph (b) above, the Agent shall forthwith so notify
the Borrower and the Banks and such Advances shall be made available to the
Borrower on the date of such Revolving Borrowing as Reference Rate Advances
or, if an existing Advance, Convert into Reference Rate Advances.

(d) NOTICES IRREVOCABLE. Each Notice of Borrowing and Notice of
Conversion or Continuation shall be irrevocable and binding on the Borrower. In
the case of any Revolving Borrowing which the related Notice of Borrowing
specifies is to be comprised of Eurodollar Rate Advances, the Borrower shall
indemnify each Bank against any loss, out-of-pocket cost, or expense incurred by
such Bank as a result of any failure by the Borrower to fulfill on or before the
date specified in such Notice of Borrowing for such Revolving Borrowing the
applicable conditions set forth in Article III including, without limitation,
any loss (including any loss of anticipated profits), cost, or expense incurred
by reason of the liquidation or reemployment of deposits or other funds acquired
by such Bank to fund the Advance to be made by such Bank as part of such
Revolving Borrowing when such Advance, as a result of such failure, is not made
on such date.

(e) AGENT RELIANCE. Unless the Agent shall have received notice from a
Bank before the date of any Revolving Borrowing that such Bank shall not make
available to the

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Agent such Bank's Revolving Share of a Revolving Borrowing, the Agent may
assume that such Bank has made its Revolving Share, as the case may be, of
such Revolving Borrowing available to the Agent on the date of such Revolving
Borrowing in accordance with paragraph (a) of this Section 2.03 and the Agent
may, in reliance upon such assumption, make available to the Borrower on such
date a corresponding amount. If and to the extent that such Bank shall not
have so made its Revolving Share, as the case may be, of such Revolving
Borrowing available to the Agent, such Bank and the Borrower severally agree
to immediately repay to the Agent on demand such corresponding amount,
together with interest on such amount, for each day from the date such amount
is made available to the Borrower until the date such amount is repaid to the
Agent, at (i) in the case of the Borrower, the interest rate applicable on
such day to Advances comprising such Revolving Borrowing and (ii) in the case
of such Bank, the Federal Funds Rate for such day. If such Bank shall repay
to the Agent such corresponding amount and interest as provided above, such
corresponding amount so repaid shall constitute such Bank's Advance as part
of such Revolving Borrowing for purposes of this Agreement even though not
made on the same day as the other Advances comprising such Revolving
Borrowing.

(f) BANK OBLIGATIONS SEVERAL. The failure of any Bank to make the Advance
to be made by it as part of any Revolving Borrowing shall not relieve any other
Bank of its obligation, if any, to make its Advance on the date of such
Revolving Borrowing. No Bank shall be responsible for the failure of any other
Bank to make the Advance to be made by such other Bank on the date of any
Revolving Borrowing.

Section 2.04. REDUCTION OF THE REVOLVING COMMITMENT.

(a) The Borrower shall have the right, upon at least three Business Days'
irrevocable notice to the Agent, to terminate in whole or reduce ratably in part
the unused portion of the Revolving Commitments; PROVIDED that each partial
reduction shall be in the aggregate amount of $1,000,000.00 or an integral
multiple of $1,000,000.00.

(b) The Revolving Commitments shall automatically and permanently reduce
by 1/16 of the Revolving Commitments outstanding on June 30, 1998 on each
January 31, April 30, July 31, and October 31 beginning with July 31, 1998.

(c) Any reduction and termination of the Revolving Commitments pursuant to
this Section 2.04 shall be applied ratably to each Bank's Revolving Commitment
and shall be permanent, with no obligation of the Banks to reinstate such
Revolving Commitments and the commitment fees provided for in Section 2.08(a)
shall thereafter be computed on the basis of the Revolving Commitments, as so
reduced. Additionally, each reduction or termination of Revolving Commitments
shall reduce the amount of any future scheduled

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Revolving Commitments reductions in the inverse order of such scheduled
Revolving Commitments reductions.

Section 2.05. PREPAYMENT OF ADVANCES.

(a) OPTIONAL. The Borrower may prepay Advances, after giving by
10:00 a.m. (Los Angeles, California, time) (i) in the case of Eurodollar Rate
Advances, at least two Business Days' or (ii) in case of Reference Rate
Advances, same Business Day's, irrevocable prior written notice to the Agent
stating the proposed date and aggregate principal amount of such prepayment. If
any such notice is given, the Borrower shall prepay Advances in whole or ratably
in part in an aggregate principal amount equal to the amount specified in such
notice, together with accrued interest to the date of such prepayment on the
principal amount prepaid and amounts, if any, required to be paid pursuant to
Section 2.12 as a result of such prepayment being made on such date; PROVIDED,
however, that each partial prepayment with respect to: (A) any Revolving
Advances shall be applied to Revolving Advances comprising part of the same
Revolving Borrowing; (B) any Reference Rate Advances shall be made in
$500,000.00 multiples and with respect to Revolving Advances only, in an
aggregate principal amount such that after giving effect thereto such Revolving
Borrowing shall have a principal amount outstanding of at least $1,000,000.00
and (C) any Revolving Borrowing comprised of Eurodollar Rate Advances shall be
made in $1,000,000.00 multiples and in an aggregate principal amount such that
after giving effect thereto such Revolving Borrowing shall have a principal
amount outstanding of at least $2,000,000.00. Full prepayments of the Term
Advances or any Revolving Borrowing are permitted without restriction of
amounts.

(b) BORROWING BASE DEFICIENCY. If the aggregate outstanding amount of
Advances plus the Letter of Credit Exposure ever exceeds the Borrowing Base, the
Borrower shall after receipt of written notice from the Agent, take one of the
following actions to remedy the Borrowing Base deficiency:

(i) prepay Advances or, if the Advances have been repaid in full,
make deposits into the Cash Collateral Account to provide cash collateral
for the Letter of Credit Exposure, such that the Borrowing Base deficiency
is cured within 10 days after the date such notice is received;

(ii) pledge as Collateral for the Obligations additional Oil and Gas
Properties acceptable to the Agent and each of Banks such that the
Borrowing Base deficiency is cured within 30 days after the date such
notice is received; or

(iii) prepay the Advances or, if the Advances have been repaid in full,
make deposits into the Cash Collateral Account to provide cash collateral
for the

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Letter of Credit Exposure in six monthly installments equal to one-sixth of
such Borrowing Base deficiency with the first such installment due 30 days
after the date such notice is received and each following installment due
30 days after the preceding installment.

Each prepayment pursuant to this Section 2.05(b) shall be accompanied by accrued
interest on the amount prepaid to the date of such prepayment and amounts, if
any, required to be paid pursuant to Section 2.12 as a result of such prepayment
being made on such date. Each prepayment under clauses (i) and (iii) of this
Section 2.05(b) shall be applied to the Revolving Advances and the Term Advances
as determined by the Agent and agreed to by the Banks in their sole discretion.

(c) REDUCTION OF REVOLVING COMMITMENTS. On the date of each reduction of
the aggregate Revolving Commitments pursuant to Section 2.04, the Borrower
agrees to make a prepayment in respect of the outstanding amount of the
Revolving Advances to the extent, if any, that the aggregate unpaid principal
amount of all Revolving Advances exceeds the Revolving Commitments, as so
reduced. Each prepayment pursuant to this Section 2.05(c) shall be accompanied
by accrued interest on the amount prepaid to the date of such prepayment and
amounts, if any, required to be paid pursuant to Section 2.12 as a result of
such prepayment being made on such date.

(d) MANDATORY. The Borrower shall repay the Advances by an amount equal
to the Net Cash Proceeds received by the Borrower or any Guarantor from the sale
by the Borrower of the Borrower's capital stock or other equity interest, the
issuance by the Borrower of any additional Debt (other than Debt permitted by
Section 6.02), or any of the Borrower or any Guarantor's Oil and Gas Properties,
upon receipt of such proceeds, whether at closing of such sale or thereafter.
Upon the repayment of Advances pursuant to this Section 2.05(d) by reason of the
sale of Oil and Gas Properties, the Borrowing Base shall automatically reduce by
the loan value assigned to the Oil and Gas Property or Oil and Gas Properties
sold. Each prepayment under this paragraph (d) shall be accompanied by accrued
interest on the amount prepaid to the date of such prepayment and amounts, if
any, required to be paid pursuant to Section 2.12 as a result of such prepayment
and shall be applied to the Revolving Advances and the Term Advances as
determined by the Agent and agreed to by the Banks in their sole discretion.

(e) ILLEGALITY. If any Bank shall notify the Agent and the Borrower that
the introduction of or any change in or in the interpretation of any law or
regulation makes it unlawful, or that any central bank or other Governmental
Authority asserts that it is unlawful for such Bank or its Eurodollar Lending
Office to perform its obligations under this Agreement to maintain any
Eurodollar Rate Advances of such Bank then outstanding hereunder, (i) the
Borrower shall, no later than 10:00 a.m. (Los Angeles, California, time)

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(A) if not prohibited by law, on the last day of the Interest Period for each
outstanding Eurodollar Rate Advance made by such Bank or (B) if required by
such notice, on the second Business Day following its receipt of such notice
prepay all of the Eurodollar Rate Advances of made by such Bank then
outstanding, together with accrued interest on the principal amount prepaid
to the date of such prepayment and amounts, if any, required to be paid
pursuant to Section 2.12 as a result of such prepayment being made on such
date, (ii) such Bank shall simultaneously make a Reference Rate Advance to
the Borrower on such date in an amount equal to the aggregate principal
amount of the Eurodollar Rate Advances prepaid to such Bank, and (iii) the
right of the Borrower to select Eurodollar Rate Advances from such Bank for
any subsequent Revolving Borrowing shall be suspended until such Bank gives
notice referred to above shall notify the Agent that the circumstances
causing such suspension no longer exist.

(f) NO ADDITIONAL RIGHT; RATABLE PREPAYMENT. The Borrower shall have no
right to prepay any principal amount of any Advance except as provided in this
Section 2.05, and all notices given pursuant to this Section 2.05 shall be
irrevocable and binding upon the Borrower. Each payment of any Revolving
Advance pursuant to this Section 2.05 shall be made in a manner such that all
Revolving Advances comprising part of the same Revolving Borrowing are paid in
whole or ratably in part.

Section 2.06. REPAYMENT OF ADVANCES. The Borrower shall repay to the
Agent for the ratable benefit of the Banks the outstanding principal amount of
each Revolving Advance on the Revolving Maturity Date. The Borrower shall repay
to the Agent for the ratable benefit of the Banks the outstanding principal
amount of each Term Advance on the Term Maturity Date.

Section 2.07. LETTERS OF CREDIT.

(a) COMMITMENT. From time to time from the Effective Date until the
Revolving Maturity Date, at the request of the Borrower, the Issuing Bank shall,
on the terms and conditions hereinafter set forth, issue, increase, or extend
the expiration date of Letters of Credit for the account of the Borrower on any
Business Day. No Letter of Credit shall be issued, increased, or extended:

(i) unless such issuance, increase, or extension would not cause the
Letter of Credit Exposure to exceed the lesser of (A) $5,000,000.00 or
(B) the lesser of (1) the aggregate Revolving Commitments LESS the
aggregate outstanding principal amount of all Revolving Advances and (2)
the Borrowing Base LESS the aggregate outstanding principal amount of all
Advances;

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(ii) unless such Letter of Credit has an Expiration Date not later
than the earlier of (A) 12 months after the date of issuance thereof (or,
if extendable beyond such period, unless such Letter of Credit is
cancelable upon at least 30 days' notice given by the Issuing Bank to the
beneficiary of such Letter of Credit) and (B) the Revolving Maturity Date;

(iii) unless such Letter of Credit Documents are in form and substance
acceptable to the Issuing Bank in its sole discretion;

(iv) unless such Letter of Credit is a standby letter of credit not
supporting the repayment of indebtedness for borrowed money of any Person;
and

(v) unless the Borrower has delivered to the Issuing Bank a completed
and executed Letter of Credit Application.

(b) PARTICIPATIONS. Upon the date of the issuance or increase of a Letter
of Credit, the Issuing Bank shall be deemed to have sold to each other Bank and
each other Bank shall have been deemed to have purchased from the Issuing Bank a
participation in the related Letter of Credit Obligations equal to such Bank's
Revolving Share at such date and such sale and purchase shall otherwise be in
accordance with the terms of this Agreement. The Issuing Bank shall promptly
notify each such participant Bank by telex, telephone, or telecopy of each
Letter of Credit issued, increased, or extended or converted and the actual
dollar amount of such Bank's participation in such Letter of Credit.

(c) ISSUING. Each Letter of Credit shall be issued, increased, or
extended pursuant to a Letter of Credit Application (or by telephone notice
promptly confirmed in writing by a Letter of Credit Application), given not
later than 10:00 a.m. (Los Angeles, California, time) on the fifth Business Day
before the date of the proposed issuance, increase, or extension of the Letter
of Credit, and the Agent shall give to each Bank prompt notice of thereof by
telex, telephone, or telecopy. Each Letter of Credit Application shall be given
by telecopier or telex, confirmed immediately in writing, specifying the
information required therein. After the Agent's receipt of such Letter of
Credit Application and upon fulfillment of the applicable conditions set forth
in Article III, the Agent shall issue, increase, or extend such Letter of Credit
for the account of the Borrower. Each Letter of Credit Application shall be
irrevocable and binding on the Borrower.

(d) REIMBURSEMENT. The Borrower hereby agrees to pay on demand to the
Issuing Bank an amount equal to any amount paid by the Issuing Bank under any
Letter of Credit. In the event the Issuing Bank makes a payment pursuant to a
request for draw presented under a Letter of Credit and such payment is not
promptly reimbursed by the Borrower upon demand, the Issuing Bank shall give the
Agent notice of the Borrower's

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failure to make such reimbursement and the Agent shall promptly notify each
Bank of the amount necessary to reimburse the Issuing Bank. Upon such notice
from the Agent, each Bank shall promptly reimburse the Issuing Bank for such
Bank's Revolving Share of such amount, and such reimbursement shall be deemed
for all purposes of this Agreement to be a Revolving Advance to the Borrower
transferred at the Borrower's request to the Issuing Bank. If such
reimbursement is not made by any Bank to the Issuing Bank on the same day on
which the Agent notifies such Bank to make reimbursement to the Issuing Bank
hereunder, such Bank shall pay interest on its Revolving Share thereof to the
Issuing Bank at a rate per annum equal to the Federal Funds Rate. The
Borrower hereby unconditionally and irrevocably authorizes, empowers, and
directs the Agent and the Banks to record and otherwise treat such
reimbursements to the Issuing Bank as Reference Rate Advances under a
Revolving Borrowing requested by the Borrower to reimburse the Issuing Bank
which have been transferred to the Issuing Bank at the Borrower's request.

(e) OBLIGATIONS UNCONDITIONAL. The obligations of the Borrower under this
Agreement in respect of each Letter of Credit shall be unconditional and
irrevocable, and shall be paid strictly in accordance with the terms of this
Agreement under all circumstances, including, without limitation, the following
circumstances:

(i) any lack of validity or enforceability of any Letter of Credit
Documents;

(ii) any amendment or waiver of, or any consent to, departure from any
Letter of Credit Documents;

(iii) the existence of any claim, set-off, defense, or other right
which the Borrower may have at any time against any beneficiary or
transferee of such Letter of Credit (or any Persons for whom any such
beneficiary or any such transferee may be acting), the Issuing Bank, or any
other person or entity, whether in connection with this Agreement, the
transactions contemplated in this Agreement or in any Letter of Credit
Documents, or any unrelated transaction;

(iv) any statement or any other document presented under such Letter
of Credit proving to be forged, fraudulent, invalid, or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect
to the extent the Issuing Bank would not be liable therefor pursuant to the
following paragraph (f); or

(v) payment by the Issuing Bank under such Letter of Credit against
presentation of a draft or certificate which does not comply with the terms
of such Letter of Credit;

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PROVIDED, HOWEVER, that nothing contained in this paragraph (e) shall be
deemed to constitute a waiver of any remedies of the Borrower in connection
with the Letters of Credit or the Borrower's rights under Section 2.07(f)
below.

(f) LIABILITY OF ISSUING BANK. The Borrower assumes all risks of the
acts or omissions of any beneficiary or transferee of any Letter of Credit
with respect to its use of such Letter of Credit. Neither the Issuing Bank
nor any of its officers or directors shall be liable or responsible for:

(i) the use which may be made of any Letter of Credit or any acts or
omissions of any beneficiary or transferee in connection therewith;

(ii) the validity, sufficiency, or genuineness of documents, or of any
endorsement thereon, even if such documents should prove to be in any or
all respects invalid, insufficient, fraudulent, or forged;

(iii) payment by the Issuing Bank against presentation of documents
which do not comply with the terms of a Letter of Credit, including failure
of any documents to bear any reference or adequate reference to the
relevant Letter of Credit; or

(iv) any other circumstances whatsoever in making or failing to make
payment under any Letter of Credit (INCLUDING THE ISSUING BANK'S OWN
NEGLIGENCE),

EXCEPT that the Borrower shall have a claim against the Issuing Bank, and the
Issuing Bank shall be liable to the Borrower, to the extent of any direct, as
opposed to consequential, damages suffered by the Borrower which the Borrower
proves were caused by (A) the Issuing Bank's willful misconduct or gross
negligence in determining whether documents presented under a Letter of
Credit comply with the terms of such Letter of Credit or (B) the Issuing
Bank's willful failure to make lawful payment under any Letter of Credit
after the presentation to it of a draft and certificate strictly complying
with the terms and conditions of such Letter of Credit. In furtherance and
not in limitation of the foregoing, the Issuing Bank may accept documents
that appear on their face to be in order, without responsibility for further
investigation, regardless of any notice or information to the contrary.

(g) CASH COLLATERAL ACCOUNT.

(i) If the Borrower is required to deposit funds in the Cash
Collateral Account pursuant to Sections 2.05(b), 7.02(b), or 7.03(b), then
the Borrower and the Agent shall establish the Cash Collateral Account and
the Borrower shall execute any

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documents and agreements, including the Agent's standard form assignment
of deposit accounts, that the Agent requests in connection therewith to
establish the Cash Collateral Account and grant the Agent a first priority
security interest in such account and the funds therein. The Borrower
hereby pledges to the Agent and grants the Agent a security interest in the
Cash Collateral Account, whenever established, all funds held in the Cash
Collateral Account from time to time, and all proceeds thereof as security
for the payment of the Obligations.

(ii) So long as no Event of Default Exists, (A) the Agent may apply
the funds held in the Cash Collateral Account only to the reimbursement of
any Letter of Credit Obligations, and (B) the Agent shall release to the
Borrower at the Borrower's written request any funds held in the Cash
Collateral Account in an amount up to but not exceeding the excess, if any
(immediately prior to the release of any such funds), of the total amount
of funds held in the Cash Collateral Account over the Letter of Credit
Exposure. During the existence of any Event of Default, the Agent may
apply any funds held in the Cash Collateral Account to the Obligations in
any order determined by the Agent, regardless of any Letter of Credit
Exposure which may remain outstanding. The Agent may in its sole
discretion at any time release to the Borrower any funds held in the Cash
Collateral Account.

(iii) The Agent shall exercise reasonable care in the custody and
preservation of any funds held in the Cash Collateral Account and shall be
deemed to have exercised such care if such funds are accorded treatment
substantially equivalent to that which the Agent accords its own property,
it being understood that the Agent shall not have any responsibility for
taking any necessary steps to preserve rights against any parties with
respect to any such funds.

Section 2.08. FEES.

(a) COMMITMENT FEES.

(i) The Borrower agrees to pay to the Agent for the account of each
Bank a commitment fee of .50% per annum on the average daily amount by
which (A) such Bank's Revolving Share of (1) the Borrowing Base MINUS (2)
the outstanding Term Advances exceeds (B) the sum of (1) such Bank's
outstanding Revolving Advances and (2) such Bank's Revolving Share of the
Letter of Credit Exposure, from the Effective Date until the Revolving
Maturity Date.

(ii) The commitment fees shall be due and payable quarterly in arrears
on the last day of each March, June, September, and December during the
term of this Agreement and on the Revolving Maturity Date.

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(b) AGENT FEES. The Borrower agrees to pay to the Agent the fees
described in the letter dated August 5, 1997 and the letter dated December
12, 1997, each from the Agent to the Borrower (collectively, the "Agent's Fee
Letter").

(c) LETTER OF CREDIT FEES. The Borrower agrees to pay to the Agent for
the pro rata benefit of the Banks a fee per annum for each Letter of Credit
issued hereunder equal to the Applicable Margin for Eurodollar Advances on
the face amount of such Letter of Credit, but with a minimum annual fee of
$500.00 on each Letter of Credit. Each such fee shall be payable annually in
advance on the date of the issuance, increase or extension of the Letter of
Credit, but, in the case of an increase or extension only, on the amount of
such increase or for the period of such extension.

Section 2.09. INTEREST. The Borrower shall pay interest on the unpaid
principal amount of each Advance made by each Bank from the date of such
Advance until such principal amount shall be paid in full, at the following
rates per annum:

(a) REFERENCE RATE ADVANCES. If such Advance is a Reference Rate
Advance, a rate per annum equal at all times to the Adjusted Reference Rate
in effect from time to time PLUS the Applicable Margin in effect from time to
time, payable in arrears on the last day of each month and on the date such
Reference Rate Advance shall be paid in full, PROVIDED that any amount of
principal which is not paid when due (whether at stated maturity, by
acceleration, or otherwise) shall bear interest from the date on which such
amount is due until such amount is paid in full, payable on demand, at a rate
per annum equal at all times to the Adjusted Reference Rate in effect from
time to time PLUS the Applicable Margin PLUS 3.00% per annum.

(b) EURODOLLAR RATE ADVANCES. If such Advance is a Eurodollar Rate
Advance, a rate per annum equal at all times during the Interest Period for
such Advance to the Eurodollar Rate for such Interest Period PLUS the
Applicable Margin in effect from time to time, payable on the last day of
such Interest Period, and, in the case of six-month Interest Periods, on the
day which occurs during such Interest Period three months from the first day
of such Interest Period, PROVIDED that any amount of principal which is not
paid when due (whether at stated maturity, by acceleration, or otherwise)
shall bear interest from the date on which such amount is due until such
amount is paid in full, payable on demand, at a rate per annum equal at all
times to the Adjusted Reference Rate in effect from time to time PLUS the
Applicable Margin PLUS 3.00% per annum.

(c) ADDITIONAL INTEREST ON EURODOLLAR RATE ADVANCES. The Borrower shall
pay to each Bank, so long as any such Bank shall be required under
regulations of the Federal Reserve Board to maintain reserves with respect to
liabilities or assets consisting of or including Eurocurrency Liabilities,
additional interest on the unpaid principal amount of each

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Eurodollar Rate Advance of such Bank, from the effective date of such Advance
until such principal amount is paid in full, at an interest rate per annum
equal at all times to the remainder obtained by subtracting (A) the
Eurodollar Rate for the Interest Period for such Advance from (B) the rate
obtained by dividing such Eurodollar Rate by a percentage equal to 100% minus
the Eurodollar Rate Reserve Percentage of such Bank for such Interest Period,
payable on each date on which interest is payable on such Advance. Such
additional interest payable to any Bank shall be determined by such Bank and
notified to the Borrower through the Agent (such notice to include the
calculation of such additional interest, which calculation shall be
conclusive in the absence of manifest error).

(d) USURY RECAPTURE.

(i) If, with respect to any Bank, the effective rate of interest
contracted for under the Credit Documents, including the stated rates of
interest and fees contracted for hereunder and any other amounts contracted
for under the Credit Documents which are deemed to be interest, at any time
exceeds the Maximum Rate, then the outstanding principal amount of the
loans made by such Bank hereunder shall bear interest at a rate which would
make the effective rate of interest for such Bank under the Credit
Documents equal the Maximum Rate until the difference between the amounts
which would have been due at the stated rates and the amounts which were
due at the Maximum Rate (the "Lost Interest") has been recaptured by such
Bank.

(ii) If, when the loans made hereunder are repaid in full, the Lost
Interest has not been fully recaptured by such Bank pursuant to the
preceding paragraph, then, to the extent permitted by law, for the loans
made hereunder by such Bank the interest rates charged under Section 2.09
hereunder shall be retroactively increased such that the effective rate of
interest under the Credit Documents was at the Maximum Rate since the
effectiveness of this Agreement to the extent necessary to recapture the
Lost Interest not recaptured pursuant to the preceding sentence and, to the
extent allowed by law, the Borrower shall pay to such Bank the amount of
the Lost Interest remaining to be recaptured by such Bank.

(iii) NOTWITHSTANDING the foregoing or any other term in this Agreement
and the Credit Documents to the contrary, it is the intention of each Bank
and the Borrower to conform strictly to any applicable usury laws.
Accordingly, if any Bank contracts for, charges, or receives any
consideration which constitutes interest in excess of the Maximum Rate,
then any such excess shall be canceled automatically and, if previously
paid, shall at such Bank's option be applied to the outstanding amount of
the loans made hereunder by such Bank or be refunded to the Borrower.

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Section 2.10. PAYMENTS AND COMPUTATIONS.

(a) PAYMENT PROCEDURES. The Borrower shall make each payment under this
Agreement and under the Notes not later than 10:00 a.m. (Los Angeles,
California, time) on the day when due in Dollars to the Agent at 445 S.
Figueroa Street, Los Angeles, California 90071 (or such other location as the
Agent shall designate in writing to the Borrower), in same day funds and
shall send notice of such payments to the Agent at 500 N. Akard, Suite 4200,
Dallas, Texas 75201. The Agent shall promptly thereafter cause to be
distributed like funds relating to the payment of principal, interest or fees
ratably (other than amounts payable solely to the Agent, the Issuing Bank, or
a specific Bank pursuant to Section 2.08(b), 2.09(c), 2.12, 2.13, 2.14, 8.05,
or 9.07, but after taking into account payments effected pursuant to Section
9.04) (i) before the acceleration of the Advances pursuant to Section 7.02 or
7.03, (A) in the case of payments in respect of Revolving Advances and
Letters of Credit, in accordance with each Bank's Revolving Share and (B) in
the case of payments in respect of Term Advances, in accordance with each
Bank's Term Share and (ii) after the acceleration of the Advances pursuant to
Section 7.02 or 7.03, in accordance with each Bank's Pro Rata Share to the
Banks for the account of their respective Applicable Lending Offices, and
like funds relating to the payment of any other amount payable to any Bank or
the Issuing Bank to such Bank for the account of its Applicable Lending
Office, in each case to be applied in accordance with the terms of this
Agreement.

(b) COMPUTATIONS. All computations of interest based on the Reference
Rate and of fees shall be made by the Agent on the basis of a year of 365 or
366 days, as the case may be, and all computations of interest based on the
Eurodollar Rate and the Federal Funds Rate shall be made by the Agent, on the
basis of a year of 360 days, in each case for the actual number of days
(including the first day, but excluding the last day) occurring in the period
for which such interest or fees are payable. Each determination by the Agent
of an interest rate or fee shall be conclusive and binding for all purposes,
absent manifest error.

(c) NON-BUSINESS DAY PAYMENTS. Whenever any payment shall be stated to
be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day, and such extension of time shall in such case
be included in the computation of payment of interest or fees, as the case
may be; PROVIDED, however, that if such extension would cause payment of
interest on or principal of Eurodollar Rate Advances to be made in the next
following calendar month, such payment shall be made on the next preceding
Business Day.

(d) AGENT RELIANCE. Unless the Agent shall have received written notice
from the Borrower prior to the date on which any payment is due to the Banks
that the Borrower shall not make such payment in full, the Agent may assume
that the Borrower has made such payment in full to the Agent on such date and
the Agent may, in reliance upon such

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assumption, cause to be distributed to each Bank on such date an amount equal
to the amount then due such Bank. If and to the extent the Borrower shall
not have so made such payment in full to the Agent, each Bank shall repay to
the Agent forthwith on demand such amount distributed to such Bank, together
with interest, for each day from the date such amount is distributed to such
Bank until the date such Bank repays such amount to the Agent, at the Federal
Funds Rate for such day.

Section 2.11. SHARING OF PAYMENTS, ETC. If any Bank shall obtain any
payment (whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) on account of the Advances or Letter of Credit
Obligations made by it in excess of its Pro Rata Share, Term Share, or
Revolving Share, as applicable, of payments on account of the Advances or
Letter of Credit Obligations obtained by all the Banks, such Bank shall
notify the Agent and forthwith purchase from the other Banks such
participations in the Advances made by them or Letter of Credit Obligations
held by them as shall be necessary to cause such purchasing Bank to share the
excess payment ratably with each of them; PROVIDED, however, that if all or
any portion of such excess payment is thereafter recovered from such
purchasing Bank, such purchase from each Bank shall be rescinded and such
Bank shall repay to the purchasing Bank the purchase price to the extent of
such Bank's ratable share (according to the proportion of (a) the amount of
the participation sold by such Bank to the purchasing Bank as a result of
such excess payment to (b) the total amount of such excess payment) of such
recovery, together with an amount equal to such Bank's ratable share
(according to the proportion of (a) the amount of such Bank's required
repayment to the purchasing Bank to (b) the total amount of all such required
repayments to the purchasing Bank) of any interest or other amount paid or
payable by the purchasing Bank in respect of the total amount so recovered.
The Borrower agrees that any Bank so purchasing a participation from another
Bank pursuant to this Section 2.11 may, to the fullest extent permitted by
law, exercise all its rights of payment (including the right of set-off) with
respect to such participation as fully as if such Bank were the direct
creditor of the Borrower in the amount of such participation.

Section 2.12. BREAKAGE COSTS. If (a) any payment of principal of any
Eurodollar Rate Advance is made other than on the last day of the Interest
Period for such Advance, whether as a result of any payment pursuant to
Section 2.05, the acceleration of the maturity of the Notes pursuant to
Article VII, or otherwise, or (b) the Borrower fails to make a principal or
interest payment with respect to any Eurodollar Rate Advance on the date such
payment is due and payable, the Borrower shall, within 10 days of any written
demand sent by any Bank to the Borrower through the Agent, pay to the Agent
for the account of such Bank any amounts required to compensate such Bank for
any additional losses, out-of-pocket costs or expenses which it may
reasonably incur as a result of such payment or nonpayment, including,
without limitation, any loss (including loss of anticipated profits), cost or
expense

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incurred by reason of the liquidation or reemployment of deposits or other
funds acquired by any Bank to fund or maintain such Advance.

Section 2.13. INCREASED COSTS.

(a) EURODOLLAR RATE ADVANCES. If, due to either (i) the introduction of
or any change (other than any change by way of imposition or increase of
reserve requirements included in the Eurodollar Rate Reserve Percentage) in
or in the interpretation of any law or regulation or (ii) the compliance with
any guideline or request from any central bank or other Governmental
Authority (whether or not having the force of law), there shall be any
increase in the cost to any Bank of agreeing to make or making, funding, or
maintaining Eurodollar Rate Advances, then the Borrower shall from time to
time, upon demand by such Bank (with a copy of such demand to the Agent),
immediately pay to the Agent for the account of such Bank additional amounts
sufficient to compensate such Bank for such increased cost. A certificate as
to the amount of such increased cost and detailing the calculation of such
cost submitted to the Borrower and the Agent by such Bank shall be conclusive
and binding for all purposes, absent manifest error.

(b) CAPITAL ADEQUACY. If any Bank or the Issuing Bank determines in
good faith that compliance with any law or regulation or any guideline or
request from any central bank or other governmental authority (whether or not
having the force of law) affects or would affect the amount of capital
required or expected to be maintained by such Bank or the Issuing Bank or any
corporation controlling such Bank or the Issuing Bank and that the amount of
such capital is increased by or based upon the existence of such Bank's
commitment to lend or the Issuing Bank's commitment to issue the Letters of
Credit and other commitments of this type, then, upon 30 days' prior written
notice by such Bank or the Issuing Bank (with a copy of any such demand to
the Agent), the Borrower shall immediately pay to the Agent for the account
of such Bank or to the Issuing Bank, as the case may be, from time to time as
specified by such Bank or the Issuing Bank, additional amounts sufficient to
compensate such Bank or the Issuing Bank, in light of such circumstances, (i)
with respect to such Bank, to the extent that such Bank reasonably determines
such increase in capital to be allocable to the existence of such Bank's
commitment to lend under this Agreement and (ii) with respect to the Issuing
Bank, to the extent that the Issuing Bank reasonably determines such increase
in capital to be allocable to the issuance or maintenance of the Letters of
Credit. A certificate as to such amounts and detailing the calculation of
such amounts submitted to the Borrower by such Bank or the Issuing Bank shall
be conclusive and binding for all purposes, absent manifest error.

(c) LETTERS OF CREDIT. If any change in any law or regulation or in the
interpretation thereof by any court or administrative or Governmental
Authority charged with the administration thereof shall either (i) impose,
modify, or deem applicable any reserve,

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special deposit, or similar requirement against letters of credit issued by,
or assets held by, or deposits in or for the account of, the Issuing Bank or
(ii) impose on the Issuing Bank any other condition regarding the provisions
of this Agreement relating to the Letters of Credit or any Letter of Credit
Obligations, and the result of any event referred to in the preceding clause
(i) or (ii) shall be to increase the cost to the Issuing Bank of issuing or
maintaining any Letter of Credit (which increase in cost shall be determined
by the Issuing Bank's reasonable allocation of the aggregate of such cost
increases resulting from such event), then, upon demand by the Issuing Bank,
the Borrower shall pay to the Issuing Bank, from time to time as specified by
the Issuing Bank, additional amounts which shall be sufficient to compensate
the Issuing Bank for such increased cost. A certificate as to such increased
cost incurred by the Issuing Bank, as a result of any event mentioned in
clause (i) or (ii) above, and detailing the calculation of such increased
costs submitted by the Issuing Bank to the Borrower, shall be conclusive and
binding for all purposes, absent manifest error.

Section 2.14. TAXES.

(a) NO DEDUCTION FOR CERTAIN TAXES. Any and all payments by the
Borrower shall be made, in accordance with Section 2.10, free and clear of
and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding, in the case of each Bank, the Issuing Bank, and
the Agent, taxes imposed on its income, and franchise taxes imposed on it, by
the jurisdiction under the laws of which such Bank, the Issuing Bank, or the
Agent (as the case may be) is organized or any political subdivision of the
jurisdiction (all such non-excluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities being hereinafter referred to as
"Taxes") and, in the case of each Bank and the Issuing Bank, Taxes by the
jurisdiction of such Bank's Applicable Lending Office or any political
subdivision of such jurisdiction. If the Borrower shall be required by law
to deduct any Taxes from or in respect of any sum payable to any Bank, the
Issuing Bank, or the Agent, (i) the sum payable shall be increased as may be
necessary so that, after making all required deductions (including deductions
applicable to additional sums payable under this Section 2.14), such Bank,
the Issuing Bank, or the Agent (as the case may be) receives an amount equal
to the sum it would have received had no such deductions been made; PROVIDED,
however, that if the Borrower's obligation to deduct or withhold Taxes is
caused solely by such Bank's, the Issuing Bank's, or the Agent's failure to
provide the forms described in paragraph (d) of this Section 2.14 and such
Bank, the Issuing Bank, or the Agent could have provided such forms, no such
increase shall be required; (ii) the Borrower shall make such deductions; and
(iii) the Borrower shall pay the full amount deducted to the relevant
taxation authority or other authority in accordance with applicable law.

(b) OTHER TAXES. In addition, the Borrower agrees to pay any present or
future stamp or documentary taxes or any other excise or property taxes,
charges or similar levies

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which arise from any payment made or from the execution, delivery or
registration of, or otherwise with respect to, this Agreement, the Notes, or
the other Credit Documents (hereinafter referred to as "Other Taxes").

(c) INDEMNIFICATION. THE BORROWER INDEMNIFIES EACH BANK, THE ISSUING
BANK, AND THE AGENT FOR THE FULL AMOUNT OF TAXES OR OTHER TAXES (INCLUDING,
WITHOUT LIMITATION, ANY TAXES OR OTHER TAXES IMPOSED BY ANY JURISDICTION ON
AMOUNTS PAYABLE UNDER THIS SECTION 2.14) PAID BY SUCH BANK, THE ISSUING BANK,
OR THE AGENT (AS THE CASE MAY BE) AND ANY LIABILITY (INCLUDING INTEREST AND
EXPENSES) ARISING THEREFROM OR WITH RESPECT THERETO, WHETHER OR NOT SUCH
TAXES OR OTHER TAXES WERE CORRECTLY OR LEGALLY ASSERTED. EACH PAYMENT
REQUIRED TO BE MADE BY THE BORROWER IN RESPECT OF THIS INDEMNIFICATION SHALL
BE MADE TO THE AGENT FOR THE BENEFIT OF ANY PARTY CLAIMING SUCH
INDEMNIFICATION WITHIN 30 DAYS FROM THE DATE THE BORROWER RECEIVES WRITTEN
DEMAND THEREFOR FROM THE AGENT ON BEHALF OF ITSELF AS AGENT, THE ISSUING
BANK, OR ANY SUCH BANK. IF ANY BANK, THE AGENT, OR THE ISSUING BANK RECEIVES
A REFUND IN RESPECT OF ANY TAXES PAID BY THE BORROWER UNDER THIS PARAGRAPH
(C), SUCH BANK, THE AGENT, OR THE ISSUING BANK, AS THE CASE MAY BE, SHALL
PROMPTLY PAY TO THE BORROWER THE BORROWER'S SHARE OF SUCH REFUND.

(d) FOREIGN BANK WITHHOLDING EXEMPTION. Each Bank and Issuing Bank that
is not incorporated under the laws of the United States of America or a state
thereof agrees that it shall deliver to the Borrower and the Agent (i) two
duly completed copies of United States Internal Revenue Service Form 1001 or
4224 or successor applicable form, as the case may be, certifying in each
case that such Bank is entitled to receive payments under this Agreement and
the Notes payable to it, without deduction or withholding of any United
States federal income taxes, (ii) if applicable, an Internal Revenue Service
Form W-8 or W-9 or successor applicable form, as the case may be, to
establish an exemption from United States backup withholding tax, and (iii)
any other governmental forms which are necessary or required under an
applicable tax treaty or otherwise by law to reduce or eliminate any
withholding tax, which have been reasonably requested by the Borrower. Each
Bank which delivers to the Borrower and the Agent a Form 1001 or 4224 and
Form W-8 or W-9 pursuant to the next preceding sentence further undertakes to
deliver to the Borrower and the Agent two further copies of the said letter
and Form 1001 or 4224 and Form W-8 or W-9, or successor applicable forms, or
other manner of certification, as the case may be, on or before the date that
any such letter or form expires or becomes obsolete or after the occurrence
of any event requiring a change in the most recent letter and form previously
delivered by it to

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the Borrower and the Agent, and such extensions or renewals thereof as may
reasonably be requested by the Borrower and the Agent certifying in the case
of a Form 1001 or 4224 that such Bank is entitled to receive payments under
this Agreement without deduction or withholding of any United States federal
income taxes. If an event (including without limitation any change in
treaty, law or regulation) has occurred prior to the date on which any
delivery required by the preceding sentence would otherwise be required which
renders all such forms inapplicable or which would prevent any Bank from duly
completing and delivering any such letter or form with respect to it and such
Bank advises the Borrower and the Agent that it is not capable of receiving
payments without any deduction or withholding of United States federal income
tax, and in the case of a Form W-8 or W-9, establishing an exemption from
United States backup withholding tax, such Bank shall not be required to
deliver such letter or forms. The Borrower shall withhold tax at the rate
and in the manner required by the laws of the United States with respect to
payments made to a Bank failing to timely provide the requisite Internal
Revenue Service forms.

ARTICLE III

CONDITIONS OF LENDING

Section 3.01. CONDITIONS PRECEDENT TO INITIAL ADVANCES. This Agreement
shall become effective on the Effective Date, if on or prior to such date the
following conditions precedent shall have been satisfied:

(a) DOCUMENTATION. The Agent shall have received the following duly
executed by all the parties thereto, in form and substance satisfactory to
the Agent and the Banks, and, where applicable, in sufficient copies for each
Bank:

(i) this Agreement, an Amended and Restated Revolving Note and an
Amended and Restated Term Note payable to the order of each Bank in the
amount of its Revolving Commitment and outstanding principal amount of Term
Advances as of the Effective Date, respectively, the Guaranties, the
Limited Guaranties, the Pledge Agreement, the Security Agreements, and
Mortgages Amendments to each of the existing Mortgages encumbering
substantially all of the Borrower's and the Guarantors' Oil and Gas
Properties and all attached exhibits and schedules;

(ii) a favorable opinion of the Borrower's Oklahoma counsel, dated as
of the Effective Date and substantially in the form of the attached
EXHIBIT K-1 covering the matters discussed in such Exhibit and such other
matters as any Bank through the Agent may reasonably request;

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(iii) a favorable opinion of the Agent's counsel dated as of the
Effective Date and substantially in the form of the attached EXHIBIT K-2
covering the matters discussed in such Exhibit;

(iv) a certificate of the secretary or an assistant secretary of the
Borrower certifying its Certificate of Incorporation and Bylaws, the
resolutions of the board of directors of the Borrower authorizing this
Agreement and related transactions, and the incumbency and signatures of
the officers of the Borrower authorized to execute this Agreement and
related documents;

(v) a certificate of the secretary or an assistant secretary of each
Guarantor certifying the existence of such Guarantor, the certificate or
articles of incorporation and bylaws or other equivalent organizational
documents of such Guarantor, the resolutions of the board of directors or
other equivalent managing body of such Guarantor authorizing the Guaranty
of such Guarantor and related transactions, and the incumbency and
signatures of the officers of such Guarantor authorized to execute the
Guaranty of such Guarantor and related documents;

(vi) a certificate dated as of the Effective Date from the president
or chief financial officer of the Borrower stating that (A) all
representations and warranties of the Borrower set forth in this Agreement
are true and correct in all material respects; (B) no Default has occurred
and is continuing; and (C) the conditions in this Section 3.01 have been
met;

(vii) appropriate UCC-1 or UCC-3 Financing Statements covering the
Collateral for filing with the appropriate authorities;

(viii) stock certificates required in connection with the Pledge
Agreements and stock powers executed in blank for each such stock
certificate;

(ix) insurance certificates naming the Agent loss payee or additional
insured evidencing insurance which meets the requirements of this Agreement
and the Security Documents and which is satisfactory to insurance
consultants or brokers satisfactory to the Agent;

(x) certified copies of each of the Reorganization Documents, each
certified as of the Effective Date by a Responsible Officer of the Borrower
(A) as being true and correct copies of such documents as of the Effective
Date, (B) that to the knowledge of such Responsible Officer as having been
duly authorized by the Board of Directors of the Borrower, as managing
general partner of the Partnership, and by Double R, as special general
partner of the Partnership, and (C) that to the

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knowledge of such Responsible Officer as having been duly executed and
delivered by the Borrower, as managing general partner of the Partnership,
and by Double R, as special general partner of the Partnership;

(xi) certified copy of the Rescission Documents each certified as of
the Effective Date by a Responsible Officer of the Borrower (A) as being
true and correct copies of such documents as of the Effective Date, (B) as
having been duly authorized by the Board of Directors of the Borrower, as
managing general partner of the Partnership, and by the managing general
partner of Partners and (C) as having been duly executed and delivered by
the Borrower, as managing general partner of the Partnership, and by the
managing general partner of Partners; and

(xii) such other documents, governmental certificates, agreements, and
lien searches as the Agent or any Bank may reasonably request.

(b) REORGANIZATION. The Reorganization shall have been consummated and
all conditions to the Reorganization shall have been satisfied in form and
substance satisfactory to the Agent.

(c) RESCISSION. The Rescission shall have been consummated and all
conditions to the Rescission shall have been satisfied in form and substance
satisfactory to the Agent.

(d) PAYMENT OF FEES. On the date of this Agreement, the Borrower shall
have paid the fees required by Section 2.08(b) and all costs and expenses
which have been invoiced and are payable pursuant to Section 9.04.

(e) TITLE. The Agent shall be satisfied in its sole discretion with the
title to the Oil and Gas Properties included in the Borrowing Base and that
such Oil and Gas Properties constitute at least 60% of the present value of
the Proven Reserves of the Borrower and the Guarantors and 55% of the
present value of the Proved Developed Producing Reserves of the Borrower and
the Guarantors.

(f) AGENT'S LIENS. The Agent shall be satisfied that the Liens granted
to it under the Security Documents are Acceptable Security Interests and that
all actions or filings necessary to protect, preserve and validly perfect
such Liens have been made, taken or obtained, as the case may be, and are in
full force and effect.

(g) SECURITY INTERESTS. The Agent shall be satisfied that the Security
Documents encumber substantially all of Oil and Gas Properties of the
Borrower and the Guarantors.

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(h) MATERIAL ADVERSE CHANGE. No event or circumstance that could cause
a Material Adverse Change shall have occurred.

Section 3.02. CONDITIONS PRECEDENT TO ALL BORROWINGS. The obligation of
each Bank to make a Revolving Advance on the occasion of each Revolving
Borrowing and of the Issuing Bank to issue, increase, or extend any Letter of
Credit shall be subject to the further conditions precedent that on the date
of such Revolving Borrowing or the issuance, increase, or extension of such
Letter of Credit:

(a) the following statements shall be true (and each of the giving of
the applicable Notice of Borrowing or Letter of Credit Application and the
acceptance by the Borrower of the proceeds of such Revolving Borrowing or the
issuance, increase, or extension of such Letter of Credit shall constitute a
representation and warranty by the Borrower that on the date of such
Revolving Borrowing, the issuance, increase, or extension of such Letter of
Credit, such statements are true):

(i) the representations and warranties contained in Article IV of
this Agreement, the Security Documents, and the Guaranties are correct in
all material respects on and as of the date of such Revolving Borrowing or
the date of the issuance, increase, or extension of such Letter of Credit,
before and after giving effect to such Revolving Borrowing or to the
issuance, increase, or extension of such Letter of Credit and to the
application of the proceeds from such Borrowing, as though made on and as
of such date; and

(ii) no Default has occurred and is continuing or would result from
such Revolving Borrowing or from the application of the proceeds therefrom,
from the issuance, increase, or extension of such Letter of Credit; and

(b) the Agent shall have received such other approvals, opinions, or
documents reasonably deemed necessary or desirable by any Bank as a result of
circumstances occurring after the date of this Agreement, as any Bank through
the Agent may reasonably request.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

The Borrower represents and warrants as follows:

Section 4.01. CORPORATE EXISTENCE; SUBSIDIARIES. The Borrower is a
corporation duly organized and validly existing under the laws of Delaware
and in good standing and qualified

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to do business in each jurisdiction where its ownership or lease of Property
or conduct of its business requires such qualification. Each Guarantor is
duly organized, validly existing, and in good standing under the laws of its
jurisdiction of formation and in good standing and qualified to do business
in each jurisdiction where its ownership or lease of property or conduct of
its business requires such qualification and where a failure to be qualified
could reasonably be expected to cause a Material Adverse Change. The
Borrower and the Guarantors have the Subsidiaries listed on Schedule 4.01.

Section 4.02. CORPORATE POWER. The execution, delivery, and performance
by the Borrower of this Agreement, the Notes, and the other Credit Documents
to which it is a party and by the Guarantors of the Guaranties and the other
Credit Documents to which they are a party and the consummation of the
transactions contemplated hereby and thereby (a) are within the Borrower's
and the Guarantors' corporate powers, (b) have been duly authorized by all
necessary corporate action, (c) do not contravene (i) the Borrower's or any
Guarantor's certificate or articles of incorporation, bylaws or other similar
governance documents or (ii) any law or any contractual restriction binding
on or affecting the Borrower or any Guarantor, and (d) will not result in or
require the creation or imposition of any Lien prohibited by this Agreement.

Section 4.03. AUTHORIZATION AND APPROVALS. No consent, order,
authorization, or approval or other action by, and no notice to or filing
with, any Governmental Authority is required for the due execution, delivery,
and performance by the Borrower of this Agreement, the Notes, or the other
Credit Documents to which the Borrower is a party or by each Guarantor of its
Guaranty or the other Credit Documents to which it is a party or the
consummation of the transactions contemplated thereby. At the time of each
Revolving Borrowing, no authorization or approval or other action by, and no
notice to or filing with, any Governmental Authority will be required for
such Revolving Borrowing or the use of the proceeds of such Revolving
Borrowing.

Section 4.04. ENFORCEABLE OBLIGATIONS. This Agreement, the Notes, and
the other Credit Documents to which the Borrower is a party have been duly
executed and delivered by the Borrower and the Guaranties and the other
Credit Documents to which each Guarantor is a party have been duly executed
and delivered by the Guarantors. Each Credit Document is the legal, valid,
and binding obligation of the Borrower and each Guarantor which is a party to
it enforceable against the Borrower and each such Guarantor in accordance
with its terms, except as such enforceability may be limited by any
applicable bankruptcy, insolvency, reorganization, moratorium, or similar law
affecting creditors' rights generally and by general principles of equity.

Section 4.05. FINANCIAL STATEMENTS. The audited balance sheet of the
Partnership and the combined unaudited balance sheet of the Partnership, the
Borrower, and Old RBOC

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<PAGE>

as at December 31, 1996 and the related audited statements of income, cash
flow, and retained earnings of the Partnership and the related unaudited
combined statements of income, cash flow, and retained earnings of the
Partnership, the Borrower, and Old RBOC for the fiscal year then ended,
copies of which have been furnished to each Bank, and the balance sheet of
the Partnership and the combined balance sheet of the Partnership, the
Borrower, Old RBOC and Gulf States as at September 30, 1997, and the related
statements of income, cash flow, and retained earnings of the Partnership and
the related combined statements of income, cash flow, and retained earnings
of the Partnership, the Borrower, Old RBOC and Gulf States for the nine
months then ended, copies of which have been furnished to each Bank, fairly
present, subject, in the case of the balance sheets as at September 30, 1997,
and said statements of income, cash flow, and retained earnings for the nine
months then ended, to year-end audit adjustments, the financial condition of
the Partnership and the combined financial condition of the Partnership, the
Borrower, Old RBOC and Gulf States as at such dates and the results of
operations of the Partnership and the combined results of the operations of
the Partnership, the Borrower, Old RBOC and Gulf States for the periods ended
on such dates, and such balance sheets and statements of income, cash flow,
and retained earnings were prepared in accordance with GAAP. Since the date
of the Financial Statements, no event or circumstance that could cause a
Material Adverse Change has occurred.

Section 4.06. TRUE AND COMPLETE DISCLOSURE. All factual information
(excluding estimates) heretofore or contemporaneously furnished by or on
behalf of the Borrower or any of the Guarantors in writing to any Bank or the
Agent for purposes of or in connection with this Agreement, any other Credit
Document or any transaction contemplated hereby or thereby is, and all other
such factual information hereafter furnished by or on behalf of the Borrower
and the Guarantors in writing to the Agent or any of the Banks shall be, true
and accurate in all material respects on the date as of which such
information is dated or certified and does not contain any untrue statement
of a material fact or omit to state any material fact necessary to make the
statements contained therein not misleading at such time. All projections,
estimates, and pro forma financial information furnished by the Borrower were
prepared on the basis of assumptions, data, information, tests, or conditions
believed to be reasonable at the time such projections, estimates, and pro
forma financial information were furnished.

Section 4.07. LITIGATION. Set forth on SCHEDULE 4.07 is an accurate
description of all of the Borrower's and the Guarantors' pending litigation
existing on the Effective Date. There is no pending or, to the best
knowledge of the Borrower, threatened action or proceeding affecting the
Borrower or any of the Guarantors before any court, Governmental Agency or
arbitrator, which could reasonably be expected to cause a Material Adverse
Change or which purports to affect the legality, validity, binding effect, or
enforceability of this Agreement, any Note, or any other Credit Document.

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Section 4.08. USE OF PROCEEDS. All Advances and Letters of Credit shall
be used to finance the acquisition and development of oil and gas reserves,
but in no event for the payment of dividends or other distributions to the
shareholders or partners of the Borrower or any Guarantor, except as
expressly permitted under Section 6.05 of this Agreement. The Borrower is
not engaged in the business of extending credit for the purpose of purchasing
or carrying margin stock (within the meaning of Regulation U). No proceeds
of any Advance will be used to purchase or carry any margin stock in
violation of Regulation G, T, U or X.

Section 4.09. INVESTMENT COMPANY ACT. Neither the Borrower nor any of
the Guarantors is an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act of
1940, as amended.

Section 4.10. PUBLIC UTILITY HOLDING COMPANY ACT. Neither the Borrower
nor any of the Guarantors 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," within the meaning of the Public
Utility Holding Company Act of 1935, as amended. Neither the Agent nor any
of the Banks, solely by virtue of the execution, delivery and performance of,
and the consummation of the transactions contemplated by, the Credit
Documents shall not be or become subject to regulation (a) as a "holding
company", or an "affiliate" of a "holding company," within the meaning of the
Public Utility Holding Company Act of 1935, as amended, (b) under the Federal
Power Act, as amended, (c) as a "public utility" or "public service
corporation" or the equivalent under the applicable law of any state, or (d)
under the applicable laws of any state relating to public utilities or public
service corporations.

Section 4.11. TAXES.

(a) REPORTS AND PAYMENTS. All Returns required to be filed by or on
behalf of the Borrower, the Guarantors, or any member of the Controlled Group
(hereafter collectively called the "Tax Group") have been duly filed on a
timely basis or appropriate extensions have been obtained and such Returns
are and will be true, complete and correct, except where the failure to so
file would not be reasonably expected to cause a Material Adverse Change; and
all Taxes shown to be payable on the Returns or on subsequent assessments
with respect thereto will have been paid in full on a timely basis, and no
other Taxes will be payable by the Tax Group with respect to items or periods
covered by such Returns, except in each case to the extent of (i) reserves
reflected in the Financial Statements and the Interim Financial Statements,
(ii) taxes that are being contested in good faith, or (iii) such Taxes, the
failure to pay which would not cause a Material Adverse Change. The reserves
for accrued Taxes reflected in the financial statements delivered to the
Banks under this Agreement are adequate in the aggregate for the payment of
all unpaid Taxes, whether or not disputed, for

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the period ended as of the date thereof and for any period prior thereto, and
for which the Tax Group may be liable in its own right, as withholding agent
or as a transferee of the assets of, or successor to, any Person, except for
such Taxes or reserves therefor, the failure to pay or provide for which does
not and could not cause a Material Adverse Change.

(b) TAXES DEFINITION. "Taxes" in this Section 4.11 shall mean all
taxes, charges, fees, levies, or other assessments imposed by any federal,
state, local, or foreign taxing authority, including without limitation,
income, gross receipts, excise, real or personal property, sales, occupation,
use, service, leasing, environmental, value added, transfer, payroll, and
franchise taxes (and including any interest, penalties, or additions to tax
attributable to or imposed on with respect to any such assessment).

(c) RETURNS DEFINITION. "Returns" in this Section 4.11 shall mean any
federal, state, local, or foreign report, estimate, declaration of estimated
Tax, information statement or return relating to, or required to be filed in
connection with, any Taxes, including any information return or report with
respect to backup withholding or other payments of third parties.

Section 4.12. PENSION PLANS. All Plans are in compliance in all
material respects with all applicable provisions of ERISA. No Termination
Event has occurred with respect to any Plan, and each Plan has complied with
and been administered in all material respects with applicable provisions of
ERISA and the Code. No "accumulated funding deficiency" (as defined in
Section 302 of ERISA) has occurred and there has been no excise tax imposed
under Section 4971 of the Code. No Reportable Event has occurred with
respect to any Multiemployer Plan, and each Multiemployer Plan has complied
with and been administered in all material respects with applicable
provisions of ERISA and the Code. The present value of all benefits vested
under each Plan (based on the assumptions used to fund such Plan) did not, as
of the last annual valuation date applicable thereto, exceed the value of the
assets of such Plan allocable to such vested benefits. Neither the Borrower
nor any member of the Controlled Group has had a complete or partial
withdrawal from any Multiemployer Plan for which there is any withdrawal
liability. As of the most recent valuation date applicable thereto, neither
the Borrower nor any member of the Controlled Group would become subject to
any liability under ERISA if the Borrower or any member of the Controlled
Group has received notice that any Multiemployer Plan is insolvent or in
reorganization. Based upon GAAP existing as of the Effective Date and
current factual circumstances, the Borrower has no reason to believe that the
annual cost during the term of this Agreement to the Borrower or any member
of the Controlled Group for post-retirement benefits to be provided to the
current and former employees of the Borrower or any member of the Controlled
Group under Plans that are welfare benefit plans (as defined in Section 3(a)
of ERISA) could, in the aggregate, reasonably be expected to cause a Material
Adverse Change.

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Section 4.13. CONDITION OF PROPERTY; CASUALTIES. The Borrower and each
of the Guarantors has good and indefeasible title to all of its Properties as
is customary in the oil and gas industry in all material respects, free and
clear of all Liens except for Permitted Liens. The material Properties used
or to be used in the continuing operations of the Borrower and each of the
Guarantors are in good repair, working order and condition. Since the date
of the Financial Statements, neither the business nor the material properties
of the Borrower and each of the Guarantors, taken as a whole, has been
materially and adversely affected as a result of any fire, explosion,
earthquake, flood, drought, windstorm, accident, strike or other labor
disturbance, embargo, requisition or taking of property or cancellation of
contracts, permits, or concessions by a Governmental Authority, riot,
activities of armed forces, or acts of God or of any public enemy.

Section 4.14. NO BURDENSOME RESTRICTIONS; NO DEFAULTS.

(a) Neither the Borrower nor any of the Guarantors is a party to any
indenture, loan, or credit agreement or any lease or other agreement or
instrument or subject to any charter or corporate restriction or provision of
applicable law or governmental regulation which could reasonably be expected
to cause a Material Adverse Change. The Borrower and the Guarantors are not
in default under or with respect to any contract, agreement, lease, or other
instrument to which the Borrower or any Guarantor is a party and which could
reasonably be expected to cause a Material Adverse Change. Neither the
Borrower nor any Guarantor has received any notice of default under any
material contract, agreement, lease, or other instrument to which the
Borrower or such Guarantor is a party.

(b) No Default has occurred and is continuing.

Section 4.15. ENVIRONMENTAL CONDITION.

(a) PERMITS, ETC. The Borrower and the Guarantors (i) have obtained all
Environmental Permits necessary for the ownership and operation of their
respective Properties and the conduct of their respective businesses; (ii)
have been and are in material compliance with all terms and conditions of
such Environmental Permits and with all other material requirements of
applicable Environmental Laws; (iii) have not received notice of any material
violation or alleged violation of any Environmental Law or Environmental
Permit; and (iv) are not subject to any actual or contingent Environmental
Claim, which could reasonably be expected to cause a Material Adverse Change.

(b) CERTAIN LIABILITIES. To the Borrower's actual knowledge, none of
the present or previously owned or operated Property of the Borrower or any
Guarantor or of any of their former Subsidiaries, wherever located, (i) has
been placed on or proposed to be placed on the National Priorities List, the
Comprehensive Environmental Response Compensation

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Liability Information System list, or their state or local analogs, or have
been otherwise investigated, designated, listed, or identified as a potential
site for removal, remediation, cleanup, closure, restoration, reclamation, or
other response activity under any Environmental Laws; (ii) is subject to a
Lien, arising under or in connection with any Environmental Laws, that
attaches to any revenues or to any Property owned or operated by the Borrower
or any of the Guarantors, wherever located, which could reasonably be
expected to cause a Material Adverse Change; or (iii) has been the site of
any Release of Hazardous Substances or Hazardous Wastes from present or past
operations which has caused at the site or at any third-party site any
condition that has resulted in or could reasonably be expected to result in
the need for Response that would cause a Material Adverse Change.

(c) CERTAIN ACTIONS. Without limiting the foregoing, (i) all necessary
notices have been properly filed, and no further action is required under
current Environmental Law as to each Response or other restoration or
remedial project undertaken by the Borrower or the Guarantors or any of their
former Subsidiaries on any of their presently or formerly owned or operated
Property and (ii) the present and, to the Borrower's best knowledge, future
liability, if any, of the Borrower and the Guarantors which could reasonably
be expected to arise in connection with requirements under Environmental Laws
will not result in a Material Adverse Change.

Section 4.16. PERMITS, LICENSES, ETC. The Borrower and the Guarantors
possess all authorizations, permits, licenses, patents, patent rights or
licenses, trademarks, trademark rights, trade names rights and copyrights
which are material to the conduct of their business. The Borrower and the
Guarantors manage and operate their business in all material respects in
accordance with all applicable Legal Requirements and good industry practices.

Section 4.17. GAS CONTRACTS. Neither the Borrower nor any of the
Guarantors, as of the date hereof, (a) is obligated in any material respect
by virtue of any prepayment made under any contract containing a
"take-or-pay" or "prepayment" provision or under any similar agreement to
deliver hydrocarbons produced from or allocated to any of the Borrower's and
the Guarantors' Oil and Gas Properties at some future date without receiving
full payment therefor at the time of delivery, or (b) except as has been
disclosed to the Agent, has produced gas, in any material amount, subject to,
and none of the Borrower's and the Guarantors' Oil and Gas Properties is
subject to, balancing rights of third parties or subject to balancing duties
under governmental requirements.

Section 4.18. LIENS. On the Effective Date, all governmental actions
and all other filings, recordings, registrations, third party consents and
other actions which are necessary to create and perfect the Liens provided
for in the Security Documents will have been made, obtained and taken in all
relevant jurisdictions.

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Section 4.19. SOLVENCY. Before and after giving effect to the making of
the initial Advances, the Borrower is Solvent.

Section 4.20. CAPITALIZATION; OWNERSHIP.

(a) Except as otherwise permitted by Section 6.14, the authorized
capital stock of the Borrower consists of 222 shares of common stock, par
value $225.00 per share, of which 101 shares are issued and outstanding as of
the Effective Date; 100,000 shares of Series A Preferred Stock, par value
$0.01 per share, of which 77,714 shares are issued and outstanding as of the
Effective Date; and 100,000 shares of Series B Preferred Stock, par value
$0.01 per share, of which 69,652 shares are issued and outstanding on the
Effective Date. The authorized capital stock of RBOC consists of 1,000
shares of common stock, par value $1.00 per share, of which 1,000 shares are
issued and outstanding. William W. Talley, II, individually and as trustee
of the William W. Talley II, 1982 Revocable Trust, Larry E. Lee, and M. Helen
Bennett, formerly Fisher, individually and as trustee of the M. Helen Fisher
1992 Trust, and William Stuart Price collectively own all of the Borrower's
issued and outstanding shares of common stock and Series B Preferred Stock.
All of the issued and outstanding stock of the Borrower and RBOC are duly and
validly issued and outstanding and are fully paid and nonassessable. None of
the outstanding shares of capital stock of the Borrower or RBOC has been
issued in violation of any preemptive rights of the current or past
shareholders of such entity.

(b) There are no shares of capital stock or other equity securities of
the Borrower or RBOC other than those indicated in the foregoing paragraph
and there are no outstanding rights against the Borrower, RBOC or their
shareholders relating to the capital stock of the Borrower or RBOC. There
are no voting trusts, voting agreements, proxies or any other agreements or
understandings with respect to the voting of any voting securities of the
Borrower or RBOC.

ARTICLE V

AFFIRMATIVE COVENANTS

So long as any Note or any amount under any Credit Document shall remain
unpaid, any Letter of Credit shall remain outstanding, or any Bank shall have
any Revolving Commitment hereunder, the Borrower agrees, unless the Majority
Banks shall otherwise consent in writing, to comply with the following
covenants.

Section 5.01. COMPLIANCE WITH LAWS, ETC. The Borrower shall comply, and
cause each of the Guarantors to comply, in all material respects with all
Legal Requirements.

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Without limiting the generality and coverage of the foregoing, the Borrower
shall comply, and shall cause each of the Guarantors to comply, in all
material respects, with all Environmental Laws and all laws, regulations, or
directives with respect to equal employment opportunity and employee safety
in all jurisdictions in which the Borrower, or any of the Guarantors do
business; PROVIDED, however, that this Section 5.01 shall not prevent the
Borrower, and shall cause each of the Guarantors to, or any of the Guarantors
from, in good faith and with reasonable diligence, contesting the validity or
application of any such laws or regulations by appropriate legal proceedings.
Without limitation of the foregoing, the Borrower shall, and shall cause
each of the Guarantors to, (a) maintain and possess all authorizations,
permits, licenses, trademarks, trade names, rights and copyrights which are
necessary to the conduct of its business and (b) obtain, as soon as
practicable, all consents or approvals required from any states of the United
States (or other Governmental Authorities) necessary to grant the Agent an
Acceptable Security Interest in the Borrower's and the Guarantors' Oil and
Gas Properties.

Section 5.02. MAINTENANCE OF INSURANCE.

(a) The Borrower shall, and shall cause each of the Guarantors to,
procure and maintain or shall cause to be procured and maintained
continuously in effect policies of insurance in form and amounts and issued
by companies, associations or organizations reasonably satisfactory to the
Agent covering such casualties, risks, perils, liabilities and other hazards
reasonably required by the Agent.

(b) All certified copies of policies or certificates thereof, and
endorsements and renewals thereof shall be delivered to and retained by the
Agent. All policies of insurance shall either have attached thereto a
Lender's Loss Payable Endorsement for the benefit of the Agent, as loss payee
in form reasonably satisfactory to the Agent or shall name the Agent as an
additional insured, as applicable. The Borrower shall furnish the Agent with
a certificate of insurance or a certified copy of all policies of insurance
required. All policies or certificates of insurance shall set forth the
coverage, the limits of liability, the name of the carrier, the policy
number, and the period of coverage. In addition, all policies of insurance
required under the terms hereof shall contain an endorsement or agreement by
the insurer that any loss shall be payable in accordance with the terms of
such policy notwithstanding any act of negligence of the Borrower, or a
Guarantor or any party holding under the Borrower or a Guarantor which might
otherwise result in a forfeiture of the insurance and the further agreement
of the insurer waiving all rights of setoff, counterclaim or deductions
against the Borrower and the Guarantors. All such policies shall contain a
provision that notwithstanding any contrary agreements between the Borrower,
the Guarantors, and the applicable insurance company, such policies will not
be canceled, allowed to lapse without renewal, surrendered or amended (which
provision shall include any reduction in the scope or limits of coverage)
without at least 30 days' prior written notice to the Agent. In the event

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that, notwithstanding the "lender's loss payable endorsement" requirement of
this Section 5.02, the proceeds of any insurance policy described above are
paid to the Borrower or a Guarantor, the Borrower shall deliver such proceeds
to the Agent immediately upon receipt.

Section 5.03. PRESERVATION OF CORPORATE EXISTENCE, ETC. The Borrower
shall preserve and maintain, and cause each of the Guarantors to preserve and
maintain, its corporate existence, rights, franchises, and privileges in the
jurisdiction of its incorporation, and qualify and remain qualified, and
cause each such Guarantor to qualify and remain qualified, as a foreign
corporation in each jurisdiction in which qualification is necessary or
desirable in view of its business and operations or the ownership of its
Properties, and, in each case, where failure to qualify or preserve and
maintain its rights and franchises could reasonably be expected to cause a
Material Adverse Change.

Section 5.04. PAYMENT OF TAXES, ETC. The Borrower shall pay and
discharge, and cause each of the Guarantors to pay and discharge, before the
same shall become delinquent, (a) all taxes, assessments, and governmental
charges or levies imposed upon it or upon its income or profits or Property
that are material in amount, prior to the date on which penalties attach
thereto and (b) all lawful claims that are material in amount which, if
unpaid, might by law become a Lien upon its Property; PROVIDED, HOWEVER, that
neither the Borrower nor any such Guarantor shall be required to pay or
discharge any such tax, assessment, charge, levy, or claim which is being
contested in good faith and by appropriate proceedings, and with respect to
which reserves in conformity with GAAP have been provided.

Section 5.05. VISITATION RIGHTS. At any reasonable time and from time
to time, upon reasonable notice, the Borrower shall, and shall cause the
Guarantors to, permit the Agent and any Bank or any of its agents or
representatives thereof, to (a) examine and make copies of and abstracts from
the records and books of account of, and visit and inspect at its reasonable
discretion the properties of, the Borrower and any such Guarantor, and (b)
discuss the affairs, finances and accounts of the Borrower and any such
Guarantor with any of their respective officers or directors.

Section 5.06. REPORTING REQUIREMENTS. The Borrower shall furnish to the
Agent and each Bank:

(a) ANNUAL FINANCIALS. (i) As soon as available and in any event not
later that 90 days after the end of each fiscal year of the Borrower and the
Guarantors, the Borrower's unaudited balance sheet as of the end of such
fiscal year and statements of income, cash flows, and retained earnings for
such fiscal year and the Borrower and the Guarantors' unaudited consolidated
balance sheet as of the end of such fiscal year and the Borrower and the
Guarantors' consolidated unaudited statements of income, cash flows, and
retained earnings for such fiscal year and (ii) as soon as available and in
any event not later than 120

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days after the end of each fiscal year of the Borrower, (A)(1) a copy of the
annual audit report for such year for each of the Borrower, including therein
the Borrower's balance sheet as of the end of such fiscal year and the
Borrower's statements of income, cash flows, and retained earnings, in each
case certified by Ernst & Young, L.L.P. or other independent certified public
accountants of national standing and including any management letters
delivered by such accountants to the Borrower or any Guarantor in connection
with such audit, (2) a certificate of such accounting firm to the Agent and
the Banks stating that, in the course of the regular audit of the business of
the Borrower, which audit was conducted by such accounting firm in accordance
with generally accepted auditing standards, such accounting firm has obtained
no knowledge that a Default has occurred and is continuing, or if, in the
opinion of such accounting firm, a Default has occurred and is continuing, a
statement as to the nature thereof, and (3) a Compliance Certificate executed
by the Chief Financial Officer or Chief Accounting Officer of the Borrower
and (B) a copy of the unaudited annual consolidating financial statements of
each of the Guarantors, including therein such Guarantor's balance sheet and
statements of income, cash flows, and retained earnings for such fiscal year;

(b) QUARTERLY FINANCIALS. As soon as available and in any event not
later than 45 days after the end of each of the first three quarters of each
fiscal year of the Borrower, (i) the Borrower's unaudited balance sheet and
the Borrower's statements of income, cash flows, and retained earnings for
the period commencing at the end of the previous year and ending with the end
of such quarter, all in reasonable detail and duly certified with respect to
such consolidated statements (subject to year-end audit adjustments) by the
Chief Financial Officer or Chief Accounting Officer of the Borrower as having
been prepared in accordance with GAAP and (ii) a Compliance Certificate
executed by the Chief Financial Officer or Chief Accounting Officer of the
Borrower;

(i) As soon as available but in any event on or before March 31 of
each year, an Independent Engineering Report dated as of January 1 for such
year.

(ii) As soon as available but in any event on or before September 30
of each year an Internal Engineering Report dated as of July 1 for such
year.

(iii) The Agent and the Banks acknowledge that the Engineering Reports
contain certain proprietary information including geological and
geophysical data, maps, models, and interpretations necessary for
determining the Borrowing Base and the creditworthiness of the Borrower and
the Guarantors. The Agent and the Banks agree to maintain the
confidentiality of such information except as required by law. The Agent
and the Banks may share such information with potential transferees of

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their interests under this Agreement if such transferees agree to maintain
the confidentiality of such information.

(d) QUARTERLY REPORTS. As soon as available and in any event within 60
days after the end of each quarter, such operational reports covering the Oil
and Gas Properties as the Agent or any Bank may reasonably request;

(e) MONTHLY REPORTS. As soon as available and in any event within 30
days after the end of each month, a report certified by a Responsible Officer
of the Borrower in form and substance satisfactory to the Bank prepared by
the Borrower (i) for each of the Borrower and the Guarantors' Oil and Gas
Properties detailing production, revenue, and price information and
associated operating expenses and further detailing any changes to any
producing reservoir, production equipment, or producing well which could
cause a Material Adverse Change and (ii) detailing which of the Borrower's
and the Guarantors' Oil and Gas Properties have been sold in the prior month;

(f) ANNUAL BUDGET. As soon as available and in any event within 90 days
before the end of each fiscal year, the Borrower's annual operating budget in
form and substance satisfactory to the Agent for the following fiscal year;

(g) DEFAULTS. As soon as possible and in any event within five days
after the occurrence of each Default known to a Responsible Officer of the
Borrower or any of the Guarantors which is continuing on the date of such
statement, a statement of the Chief Financial Officer of the Borrower setting
forth the details of such Default and the actions which the Borrower has
taken and proposes to take with respect thereto;

(h) SECURITIES LAW FILINGS. Promptly and in any event within 15 days
after the sending or filing thereof, copies of all final (as opposed to draft
or preliminary) proxy material, reports and other information which the
Borrower or any of the Guarantors sends to or files with the United States
Securities and Exchange Commission or sends to any equity holder of the
Borrower or a Guarantor;

(i) TERMINATION EVENTS. As soon as possible and in any event (i) within
30 days after the Borrower or any member of the Controlled Group knows or has
reason to know that any Termination Event described in clause (a) of the
definition of Termination Event with respect to any Plan has occurred, and
(ii) within 10 days after the Borrower or any of its Affiliates knows or has
reason to know that any other Termination Event with respect to any Plan has
occurred, a statement of the Chief Financial Officer of the Borrower
describing such Termination Event and the action, if any, which the Borrower
or such Affiliate proposes to take with respect thereto;

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(j) TERMINATION OF PLANS. Promptly and in any event within two Business
Days after receipt thereof by the Borrower or any member of the Controlled Group
from the PBGC, copies of each notice received by the Borrower or any such member
of the Controlled Group of the PBGC's intention to terminate any Plan or to have
a trustee appointed to administer any Plan;

(k) OTHER ERISA NOTICES. Promptly and in any event within five Business
Days after receipt thereof by the Borrower or any member of the Controlled Group
from a Multiemployer Plan sponsor, a copy of each notice received by the
Borrower or any member of the Controlled Group concerning the imposition or
amount of withdrawal liability pursuant to Section 4202 of ERISA;

(l) ENVIRONMENTAL NOTICES. Promptly upon the receipt thereof by the
Borrower or any of the Guarantors, a copy of any form of notice, summons or
citation received from the EPA, or any other Governmental Authority, concerning
(i) violations or alleged violations of Environmental Laws, which seeks to
impose liability therefor and could cause a Material Adverse Change, (ii) any
action or omission on the part of the Borrower or any Guarantor or any of their
former Subsidiaries in connection with Hazardous Waste or Hazardous Substances
which could reasonably result in the imposition of liability therefor that could
cause a Material Adverse Change, including without limitation any notice of
potential responsibility under CERCLA, or (iii) concerning the filing of a Lien
upon, against or in connection with the Borrower or any Guarantor or their
former Subsidiaries, or any of their leased or owned Property, wherever located;

(m) OTHER GOVERNMENTAL NOTICES. Promptly and in any event within five
Business Days after receipt thereof by the Borrower or any Guarantor, a copy of
any notice, summons, citation, or proceeding seeking to modify in any material
respect, revoke, or suspend any material contract, license, or agreement with
any Governmental Authority;

(n) MATERIAL CHANGES. Prompt written notice of any condition or event of
which the Borrower has knowledge, which condition or event has resulted or may
reasonably be expected to result in (i) a Material Adverse Change or (ii) a
breach of or noncompliance with any material term, condition, or covenant of any
material contract to which the Borrower or any of the Guarantors is a party or
by which they or their properties may be bound;

(o) DISPUTES, ETC. Prompt written notice of any claims, proceedings, or
disputes, or to the knowledge of the Borrower threatened, or affecting the
Borrower, or any of the Guarantors which, if adversely determined, could
reasonably be expected to cause a Material Adverse Change, or any material labor
controversy of which the Borrower or any of the Guarantors has knowledge
resulting in or reasonably considered to be likely to result in a strike against
the Borrower or any of the Guarantors; and

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(p) OTHER INFORMATION. Such other information respecting the business or
Properties, or the condition or operations, financial or otherwise, of the
Borrower or any of the Guarantors, as any Bank through the Agent may from time
to time reasonably request. The Agent agrees to provide the Banks with copies
of any material notices and information delivered solely to the Agent pursuant
to the terms of this Agreement.

Section 5.07. MAINTENANCE OF PROPERTY. The Borrower shall, and shall
cause each of the Guarantors to, maintain their owned, leased, or operated
Property in good condition and repair; and shall abstain, and cause each of the
Guarantors to abstain from, and not knowingly or willfully permit the commission
of waste or other injury, destruction, or loss of natural resources, or the
occurrence of pollution, contamination, or any other condition in, on or about
the owned or operated property involving the Environment that could reasonably
be expected to result in Response activities and that could reasonably be
expected to cause a Material Adverse Change.

Section 5.08. BANK ACCOUNTS. The Borrower and the Guarantors shall
maintain the bank accounts indicated on the attached SCHEDULE 5.08 for the
purposes indicated on such Schedule; shall cause each depositary institution
maintaining a lock box, collection, revenue or other account in which proceeds
of Collateral are deposited ("Revenue Accounts") to enter into an agreement with
the Agent in substantially the form of Exhibit A to the Security Agreements; and
agrees to deposit therein all proceeds of any sales of Hydrocarbons attributable
to the Borrower's and the Guarantors' Oil and Gas Properties unless and until
the Agent directs it to act otherwise. The Borrower or the Guarantors, as
applicable, may, prior to the occurrence and continuance of a Default or Event
of Default, make withdrawals from the Revenue Accounts to pay operating costs
and expenses or to other bank accounts used to pay operating costs and expenses.
After the occurrence and continuance of a Default or Event of Default, all
amounts deposited in the Revenue Accounts shall be retained by the Agent as
collateral for the Obligations. The Agent does not waive or relinquish any of
its rights or interests arising under the Credit Documents by permitting the
Borrower and the Guarantors to collect and deposit the proceeds of sales of
Hydrocarbons attributable to Borrower's Oil and Gas Properties. The Borrower
shall have no other bank accounts other than the accounts listed on SCHEDULE
5.08 and accounts for which the Agent has consented.

Section 5.09. TITLE OPINIONS. Not later than February 28, 1998 with
respect to Oil and Gas Properties included in the Collateral and prior to the
inclusion of any Oil and Gas Properties in the Borrowing Base, the Borrower
shall take such actions and execute and deliver such documents and
instruments as the Agent shall require to ensure that the Agent shall, at all
times, have received supplemental or new title opinions addressed to it
issued by counsel to the Borrower that is experienced in the examination of
title to Oil and Gas Properties (which title opinions shall be in form and
substance acceptable to the Agent in its sole discretion and shall include
opinions regarding the before payout and after payout ownership interests
held by the Borrower and the Guarantors for all wells located on the Oil and
Gas Properties

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covered thereby) as to the ownership of Oil and Gas Properties of the
Borrower and the Guarantors included in the Borrowing Base, and reflecting
that the Agent has an Acceptable Security Interest in such Oil and Gas
Properties of the Borrower and the Guarantors, constituting at least 67.5% of
the present value of the Proven Reserves of the Borrower and the Guarantors
and at least 65% of the present value of the Proved Developed Producing
Reserves of the Borrower and the Guarantors as determined by the Agent. If
the Agent shall determine that, as of the date of any Borrowing Base
determination, the Borrower shall have failed to comply with the preceding
sentence, the Agent may notify the Borrower in writing of such failure and,
within 30 days from and after receipt of such written notice by the Borrower,
the Borrower shall execute and deliver to the Agent satisfactory title
evidence (including supplemental or new title opinions meeting the foregoing
requirements) in form and substance acceptable to the Agent in its reasonable
business judgment as to the Borrower's and the Guarantor's ownership of such
Oil and Gas Properties and the Agent's Lien and security interest therein as
are required to maintain compliance with this Section 5.09.

Section 5.10. INTEREST HEDGE ARRANGEMENTS. The Borrower shall have
entered into hedging transactions as reasonably agreed upon by the Agent and the
Borrower to fix, cap or collar the interest rate on the Revolving Advances at an
interest rates to be agreed to by the Agent and the Borrower.

Section 5.11. AGREEMENT TO PLEDGE. The Borrower shall, and shall cause
each Guarantor to, grant to the Agent an Acceptable Security Interest in any
Property of the Borrower or any Guarantor now owned or hereafter acquired
promptly after receipt of a written request from the Agent.

Section 5.12. INDEPENDENT DIRECTORS. If at any time hereafter while any
Term Advances remain outstanding, the Borrower shall, within 90 days after
receipt of a written request therefor from the Agent, obtain at least two
independent, outside directors and such directors shall constitute at least 30%
of the total directors of the Borrower, provided that, if the Term Advances are
repaid in full during such 90 days, the Borrower shall not be required to comply
with such request.

Section 5.13. RBOC. No later than ten days after RBOC receives any
assets, the Borrower will cause RBOC to execute and deliver to the Agent a
Guaranty in substantially the form of Exhibit C-1, a Security Agreement in
substantially the form of Exhibit I, and such other documents, governmental
certificates, agreement as the Agent may reasonably request, together with such
evidence of corporate authority to enter into such Credit Documents as the Agent
may reasonably request, including without limitation, opinions of legal counsel
regarding such corporate authority and the enforceability of such Credit
Documents.

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ARTICLE VI

NEGATIVE COVENANTS

So long as any Note or any amount under any Credit Document shall remain
unpaid, any Letter of Credit shall remain outstanding, or any Bank shall have
any Revolving Commitment, the Borrower agrees, unless the Majority Banks
otherwise consent in writing, to comply with the following covenants.

Section 6.01. LIENS, ETC. The Borrower shall not create, assume, incur,
or suffer to exist, or permit any of the Guarantors to create, assume, incur, or
suffer to exist, any Lien on or in respect of any of its Property whether now
owned or hereafter acquired, or assign any right to receive income, except that
the Borrower and the Guarantors may create, incur, assume, or suffer to exist:

(a) Liens securing the Obligations;

(b) Liens specified in the attached SCHEDULE 6.01 on the Property owned by
the Borrower and the Guarantors which is specified therein securing only the
Debt disclosed to be secured by such Liens therein;

(c) Liens securing purchase money Debt or Capital Leases to the extent
such Debt is permitted under Section 6.02(f); PROVIDED that (i) each such Lien
only encumbers the property acquired in connection with the creation of such
Debt or Capital Lease and all proceeds therefrom and (ii) the fair market value
of the collateral securing any such Debt may exceed the outstanding principal
amount of such Debt only to the extent such excess is within customary
commercial bank lending and collateralization requirements;

(d) Liens for taxes, assessments, or other governmental charges or levies
not yet due or that (provided foreclosure, sale, or other similar proceedings
shall not have been initiated) are being contested in good faith by appropriate
proceedings, and such reserve as may be required by GAAP shall have been made
therefor;

(e) Liens in favor of vendors, carriers, warehousemen, repairmen,
mechanics, workmen, materialmen, construction, or similar Liens arising by
operation of law in the ordinary course of business in respect of obligations
that are not yet due or that are being contested in good faith by appropriate
proceedings, provided such reserve as may be required by GAAP shall have been
made therefor;

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(f) Liens to operators and non-operators under joint operating agreements
arising in the ordinary course of the business of the Borrower or the relevant
Guarantor to secure amounts owing, which amounts are not yet due or are being
contested in good faith by appropriate proceedings, if such reserve as may be
required by GAAP shall have been made therefor;

(g) easements, rights-of-way, restrictions, and other similar
encumbrances, and minor defects in the chain of title that are customarily
accepted in the oil and gas financing industry, none of which interfere with the
ordinary conduct of the business of Borrower or any Guarantor or materially
detract from the value or use of the Property to which they apply; and

(h) Liens of record under terms and provisions of the leases, unit
agreements, assignments, and other transfer of title documents in the chain of
title under which the Borrower or the relevant Guarantor acquired the Property,
which have been disclosed to the Agent.

Section 6.02. DEBTS, GUARANTIES, AND OTHER OBLIGATIONS. The Borrower
shall not, and shall not permit any of the Guarantors to, create, assume, suffer
to exist, or in any manner become or be liable in respect of, any Debt except:

(a) Debt of the Borrower and the Guarantors under the Credit Documents;

(b) Debt of the Borrower and the Guarantors and disclosed in the attached
SCHEDULE 6.02 and any extensions, rearrangements, and modifications thereof
which do not increase the principal amount thereof or the interest rate charged
thereon above a market rate of interest;

(c) Debt of RBOC or Gulf States owing to the Borrower; PROVIDED that such
Debt is incurred in the ordinary course of business and is subordinated to the
Obligations in a manner satisfactory to the Agent and does not exceed
$3,000,000.00 in the aggregate principal outstanding;

(d) Debt in the form of obligations for the deferred purchase price of
property or services incurred in the ordinary course of business which are not
yet due and payable or are being contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP have been
established;

(e) Debt existing under Interest Hedge Agreements and Hydrocarbon Hedge
Agreements; and

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(f) Debt not otherwise permitted under this Section 6.02 in an aggregate
principal amount outstanding at any time not to exceed $500,000.00.

Section 6.03. AGREEMENTS RESTRICTING LIENS AND DISTRIBUTIONS. The
Borrower shall not, nor shall it permit any of the Guarantors to, enter into any
agreement (other than a Credit Document) which except with respect to specific
Property encumbered to secure payment of Debt related to such Property, imposes
restrictions upon the creation or assumption of any Lien upon its Properties,
revenues or assets, whether now owned or hereafter acquired.

Section 6.04. MERGER OR CONSOLIDATION; ASSET SALES. The Borrower shall
not, and shall not permit any of the Guarantors to:

(a) merge or consolidate with or into any other Person; or

(b) sell, lease, transfer, or otherwise dispose of any of its Property
outside of the ordinary course of business or any of its Oil and Gas Properties,
except (i) sales of Hydrocarbons in the ordinary course of business, (ii) sales
of assets (other than Oil and Gas Properties) outside the ordinary course of
business in an aggregate amount for any fiscal year not to exceed $100,000.00,
(iii) sales of Oil and Gas Properties outside the ordinary course of business in
a transaction or related series of transactions with aggregate consideration of
$100,000.00 or less or an aggregate consideration for all such transactions of
$300,000.00 or less; PROVIDED that the Borrower shall have made any prepayments
required by Section 2.05(d) contemporaneously with the closing of any such asset
sale; and (v) sales of equipment no longer used or useful in the Borrower or the
Guarantors' business or equipment salvaged in connection with any plugging or
abandonment of any well.

Section 6.05. RESTRICTED PAYMENTS. The Borrower shall not, and shall not
permit any of the Guarantors to, make or pay any Restricted Payment other than
any Restricted Payment made in connection with the redemption of the Borrower's
Series A Preferred Stock and Series B Preferred Stock; PROVIDED, however that
(a) no Default or Event of Default has occurred and is continuing, (b) each of
the Borrower's Series B Preferred Stockholders shall have executed and delivered
to the Agent for the benefit of the Banks a Limited Guaranty and (c) any
promissory notes issued by the Borrower to the Series B Preferred Stockholders
in an amount equal to the redemption amount of such Series B Preferred
Stockholder's Series B Preferred Stock shall be (i) in form and substance and
(ii) subordinated to the Obligations under the Credit Agreement on terms
satisfactory to the Agent.

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Section 6.06. INVESTMENTS. The Borrower shall not, and shall not permit
any of the Guarantors to, make or permit to exist any loans, advances, or
capital contributions to, or make any investment in, or purchase or commit to
purchase any stock or other securities or evidences of indebtedness of or
interests in any Person, except:

(a) Liquid Investments;

(b) trade and customer accounts receivable which are for goods furnished
or services rendered in the ordinary course of business and are payable in
accordance with customary trade terms;

(c) oil and gas farm-ins, oil and gas development joint ventures and
limited partnerships, and similar transactions, in each case in the ordinary
course of business; and

(d) loans, advances, or capital contributions to, or investment in, or
purchases or commitments to purchase any stock or other securities or evidences
of indebtedness of or interests in any Person, specified in the attached
SCHEDULE 6.06.

Section 6.07. LIMITATION ON SPECULATIVE HEDGING. The Borrower shall not,
and shall not permit any of the Guarantors to, purchase, assume, or hold a
speculative position in any commodities market or futures market.

Section 6.08. AFFILIATE TRANSACTIONS.

(a) Except as expressly permitted elsewhere in this Agreement or
otherwise approved in writing by the Agent, the Borrower shall not, and shall
not permit any of the Guarantors to, make, directly or indirectly: (i) any
investment in any Affiliate; (ii) any transfer, sale, lease, assignment, or
other disposal of any assets to any such Affiliate or any purchase or
acquisition of assets from any such Affiliate; or (iii) any arrangement or
other transaction directly or indirectly with or for the benefit of an such
Affiliate (including without limitation, guaranties and assumptions of
obligations of an Affiliate); PROVIDED that the Borrower and the Guarantors
may enter into any arrangement or other transaction with any such Affiliate
providing for the leasing of property, the rendering or receipt of services
or the purchase or sale of inventory and other assets in the ordinary course
of business if the monetary or business consideration arising therefrom would
be substantially as advantageous to the Borrower and the Guarantors as the
monetary or business consideration which it would obtain in a comparable
arm's length transaction with a Person not such an Affiliate.

(b) After the occurrence and during the continuance of any Default or
Event of Default, the Borrower shall not, and shall not permit any Guarantor to,
make any payment to any shareholder of the Borrower, including any payments for
directors fees, salaries,

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bonuses, loan payments, reimbursements, or otherwise (other than base salary,
which shall in no event exceed 85% of the base annual salary as of the
Effective Date, and reimbursements of actual out-of-pocket expenses incurred
in the ordinary course of business payable to William W. Talley II and Larry
E. Lee).

Section 6.09. COMPLIANCE WITH ERISA. The Borrower shall not, and shall
not permit any of the Guarantors to, (a) terminate, or permit any Affiliate to
terminate, any Plan so as to result in any material (in the opinion of the
Majority Banks) liability of the Borrower or any of its Affiliates to the PBGC
or (b) permit to exist any occurrence of any Reportable Event (as defined in
Title IV of ERISA), or any other event or condition, which presents a material
(in the opinion of the Majority Banks) risk of such a termination by the PBGC of
any Plan.

Section 6.11. SALE-AND-LEASEBACK. The Borrower shall not, nor shall it
permit any of the Guarantors to, sell or transfer to a Person any property,
whether now owned or hereafter acquired, if at the time or thereafter the
Borrower or a Guarantor shall lease as lessee such property or any part thereof
or other property which the Borrower or a Guarantor intends to use for
substantially the same purpose as the property sold or transferred.

Section 6.12. NO SUBSIDIARIES. The Borrower shall not, and shall not
permit any Guarantor to, have any Subsidiaries, except those Subsidiaries listed
on Schedule 4.01.

Section 6.13. CHANGE OF BUSINESS. The Borrower shall not, nor shall it
permit any of the Guarantors to, materially change the character of their
business as presently and normally conducted or engage in any type of business
not related to their business as presently and normally conducted.

Section 6.14. ORGANIZATIONAL DOCUMENTS, NAME CHANGE. The Borrower shall
not, nor shall it permit any of the Guarantors to, amend, supplement, modify or
restate their articles or certificate of incorporation and bylaws or other
equivalent organizational documents without the prior the written consent of the
Agent, which consent shall not be unreasonably withheld provided that such
amendments, supplements, modifications or restatements are in form and substance
reasonably satisfactory to the Agent. The Borrower shall not, nor shall it
permit any of the Guarantors to, change their name without giving the Agent
reasonable notice thereof. The Borrower agrees that at any time, at the
Borrower's expense, the Borrower will, or will cause any of the Guarantors to,
promptly execute and deliver all further instruments and documents, and take all
further action, that may be reasonably necessary or that the Agent or any Bank
may reasonably request, in order to perfect and protect any security interest
granted or purported to be granted hereby or to enable the Agent to exercise and
enforce its rights and remedies hereunder with respect to any Collateral.

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Section 6.15. GENERAL AND ADMINISTRATIVE EXPENSES. The Borrower shall not
permit the combined general and administrative expenses of the Borrower and the
Guarantors (which shall include directors fees, salaries, and other ordinary
course of business payments to the Borrower's shareholders, but which shall not
include expenses incurred in connection with this Agreement to the extent not
capitalized and expenses incurred in connection with the prosecution or defense
of any litigation), net of billings for third party reimbursements, to be more
than $4,400,000.00 for any four fiscal quarter period ending after the Effective
Date. The Borrower shall provide the Agent sufficient detail (including details
on all cash compensation and payments to all equity holders of the Borrower) to
support the incurrence of all of its general and administrative expenses. Upon
the occurrence of a Default, the permitted general and administrative expenses
shall be reduced by one-third but such reduction shall not adversely affect the
operations of the Borrower and the Guarantors.

Section 6.16. CAPITAL EXPENDITURES. The Borrower shall not permit the
consolidated Capital Expenditures of the Borrower and the Guarantors to exceed
in any fiscal year the amount agreed to for such fiscal year between the
Borrower, the Agent and the Majority Banks, which amount shall be based upon the
Borrower's operating budget for such fiscal year. Notwithstanding the
foregoing, the Borrower and the Guarantors may incur ordinary course of business
Capital Expenditures in connection with routine maintenance of capital assets
and Capital Expenditures of up to $50,000.00 for any single item or project not
included in the Borrower's operating budget as approved by the Agent and the
Majority Banks.

Section 6.17. RENTAL EXPENSE. The Borrower shall not permit the
consolidated Rental Expense of the Borrower and the Guarantors to exceed
$500,000.00 in any fiscal year of the Borrower.

Section 6.18. ACCOUNTS PAYABLE. The Borrower shall not, and shall not
permit any Guarantor to, to have any trade payable be due more than 90 days,
except for trade payable subject to a bona fide dispute and for which adequate
reserves are maintained in accordance with GAAP.

Section 6.19. ADVANCE PAYMENT CONTRACTS. The Borrower shall not, and
shall not permit any Guarantor to, enter into or be a party to any Advance
Payment Contract with respect to any Oil and Gas Properties that are Collateral.

Section 6.20. CURRENT RATIO. The Borrower shall not permit the ratio of
the consolidated current assets of the Borrower and the Guarantors to the
consolidated current liabilities of the Borrower and the Guarantors to be less
than 1.00 to 1.00 at any time.

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Section 6.21. INTEREST COVERAGE RATIO. The Borrower shall not permit as
of the last day of any fiscal quarter the ratio of (a) consolidated EBITDA for
the Borrower and the Guarantors for the four fiscal quarters ending on such date
to (b) Interest Expense for such period to be less than (i) 2.25 to 1.00 from
the Effective Date through December 31, 1997 and (ii) 2.50 to 1.00 thereafter.

Section 6.22. DEBT SERVICE RATIO. The Borrower shall not permit as of the
last day of any fiscal quarter the ratio of (a) consolidated EBITDA for the
Borrower and the Guarantors for the four fiscal quarters ending on such date to
(b) consolidated scheduled and required principal payments on Debt for the
Borrower and the Guarantors and Interest Expense for such period to be less than
1.25 to 1.00.

ARTICLE VII

REMEDIES

Section 7.01. EVENTS OF DEFAULT. The occurrence of any of the following
events shall constitute an "Event of Default" under any Credit Document:

(a) PAYMENT. The Borrower shall fail to pay when due any principal,
interest, fees, reimbursements, indemnifications, or other amounts payable
hereunder, under the Notes, or under any other Credit Document;

(b) REPRESENTATION AND WARRANTIES. Any representation or warranty made or
deemed to be made (i) by the Borrower in this Agreement or in any other Credit
Document, (ii) by the Borrower (or any of its officers) in connection with this
Agreement or any other Credit Document, or (iii) by any Guarantor in any Credit
Document shall prove to have been incorrect in any material respect when made or
deemed to be made;

(c) COVENANT BREACHES. (i) The Borrower shall (A) fail to perform or
observe any covenant contained in Section 5.02(a), 5.05, or 5.08 or Article VI
of this Agreement or (B) fail to perform or observe any other term or covenant
set forth in this Agreement or in any other Credit Document which is not covered
by clause (i)(A) above or any other provision of this Section 7.01 if such
failure shall remain unremedied for 30 days after written notice of such default
shall have been given to such Person by the Agent or any Bank or for 10 days
after such Person had actual knowledge of such default PROVIDED that such Person
did not give written notice thereof to the Agent within such 10 days or (ii) any
Guarantor shall fail to perform or observe any covenant contained in its
Guaranty;

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(d) CROSS-DEFAULTS. (i) The Borrower or any Guarantor shall fail to pay
any principal of or premium or interest on its Debt which is outstanding in a
principal amount of at least $100,000.00 individually or when aggregated with
all such Debt of the Borrower or the Guarantors so in default (but excluding
Debt evidenced by the Notes) when the same becomes due and payable (whether by
scheduled maturity, required prepayment, acceleration, demand or otherwise), and
such failure shall continue after the applicable grace period, if any, specified
in the agreement or instrument relating to such Debt; (ii) any other event shall
occur or condition shall exist under any agreement or instrument relating to
Debt which is outstanding in a principal amount of at least $100,000.00
individually or when aggregated with all such Debt of the Borrower and the
Guarantors so in default, and shall continue after the applicable grace period,
if any, specified in such agreement or instrument, if the effect of such event
or condition is to accelerate, or to permit the acceleration of, the maturity of
such Debt; or (iii) any such Debt shall be declared to be due and payable, or
required to be prepaid (other than by a regularly scheduled required
prepayment), prior to the stated maturity thereof;

(e) INSOLVENCY. The Borrower or any of the Guarantors shall generally not
pay its debts as such debts become due, or shall admit in writing its inability
to pay its debts generally, or shall make a general assignment for the benefit
of creditors; or any proceeding shall be instituted by or against the Borrower
or any of the Guarantors seeking to adjudicate it a bankrupt or insolvent, or
seeking liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or seeking the
entry of an order for relief or the appointment of a receiver, trustee or other
similar official for it or for any substantial part of its property and, in the
case of any such proceeding instituted against the Borrower or any such
Guarantor, either such proceeding shall remain undismissed for a period of 30
days or any of the actions sought in such proceeding shall occur; or the
Borrower or any of the Guarantors shall take any corporate action to authorize
any of the actions set forth above in this paragraph (e);

(f) JUDGMENTS. Any judgment or order for the payment of money in excess
of $100,000.00 shall be rendered against the Borrower or any of the Guarantors
and either (i) enforcement proceedings shall have been commenced by any creditor
upon such judgment or order or (ii) there shall be any period of 30 consecutive
days during which a stay of enforcement of such judgment or order, by reason of
a pending appeal or otherwise, shall not be in effect;

(g) TERMINATION EVENTS. Any Termination Event with respect to a Plan
shall have occurred, and, 30 days after notice thereof shall have been given to
the Borrower by the Agent, (i) such Termination Event shall not have been
corrected and (ii) the then present value of such Plan's vested benefits exceeds
the then current value of assets accumulated in

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such Plan by more than the amount of $100,000.00 (or in the case of a
Termination Event involving the withdrawal of a "substantial employer" (as
defined in Section 4001(a)(2) of ERISA), the withdrawing employer's
proportionate share of such excess shall exceed such amount);

(h) PLAN WITHDRAWALS. The Borrower or any member of the Controlled Group
as employer under a Multiemployer Plan shall have made a complete or partial
withdrawal from such Multiemployer Plan and the plan sponsor of such
Multiemployer Plan shall have notified such withdrawing employer that such
employer has incurred a withdrawal liability in an annual amount exceeding
$100,000.00;

(i) BORROWING BASE. Any failure to cure any Borrowing Base deficiency in
accordance with Section 2.05;

(j) GUARANTIES. Any provision of any Guaranty shall for any reason cease
to be valid and binding on the applicable Guarantor or the applicable Guarantor
shall so state in writing;

(k) SECURITY DOCUMENTS. Any Security Document shall at any time and for
any reason cease to create the Lien on the property purported to be subject to
such agreement in accordance with the terms of such agreement, or cease to be in
full force and effect, or shall be contested by the Borrower or any Guarantor;

(l) CHANGE OF CONTROL. Any change in the ownership of the Borrower from
the ownership on the Effective Date; or

(m) MANAGEMENT. Either William W. Talley II or Larry E. Lee shall cease
to serve actively as an officer of the Borrower by reason of resignation, action
by the board of directors or owners of the Borrower, or otherwise.

Section 7.02. OPTIONAL ACCELERATION OF MATURITY. If any Event of Default
(other than an Event of Default pursuant to paragraph (e) of Section 7.01) shall
have occurred and be continuing, then, and in any such event,

(a) the Agent (i) shall at the request, or may with the consent, of the
Majority Banks, by notice to the Borrower, declare the obligation of each Bank
and the Issuing Bank to make extensions of credit hereunder, including making
Advances and issuing Letters of Credit, to be terminated, whereupon the same
shall forthwith terminate, and (ii) shall at the request, or may with the
consent, of the Majority Banks, by notice to the Borrower, declare all
principal, interest, fees, reimbursements, indemnifications, and all other
amounts payable under this Agreement, the Notes, and the other Credit Documents
to be forthwith due and

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payable, whereupon all such amounts shall become and be forthwith due and
payable in full, without notice of intent to demand, demand, presentment for
payment, notice of nonpayment, protest, notice of protest, grace, notice of
dishonor, notice of intent to accelerate, notice of acceleration, and all
other notices, all of which are hereby expressly waived by the Borrower;

(b) the Borrower shall, on demand of the Agent at the request or with the
consent of the Majority Banks, deposit with the Agent into the Cash Collateral
Account an amount of cash equal to the Letter of Credit Exposure as security for
the Obligations; and

(c) the Agent shall at the request of, or may with the consent of, the
Majority Banks proceed to enforce its rights and remedies under the Security
Documents, the Guaranties, and any other Credit Document for the ratable benefit
of the Banks by appropriate proceedings.

Section 7.03. AUTOMATIC ACCELERATION OF MATURITY. If any Event of Default
pursuant to paragraph (e) of Section 7.01 shall occur,

(a) (i) the obligation of each Bank and the Issuing Bank to make
extensions of credit hereunder, including making Advances and issuing Letters of
Credit, shall terminate, and (ii) all principal, interest, fees, reimbursements,
indemnifications, and all other amounts payable under this Agreement, the Notes,
and the other Credit Documents shall become and be forthwith due and payable in
full, without notice of intent to demand, demand, presentment for payment,
notice of nonpayment, protest, notice of protest, grace, notice of dishonor,
notice of intent to accelerate, notice of acceleration, and all other notices,
all of which are hereby expressly waived by the Borrower;

(b) the Borrower shall deposit with the Agent into the Cash Collateral
Account an amount of cash equal to the outstanding Letter of Credit Exposure as
security for the Obligations; and

Section 7.04. RIGHT OF SET-OFF. Upon the occurrence and during the
continuance of any Event of Default, the Agent and each Bank is hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other indebtedness at any
time owing by the Agent or such Bank to or for the credit or the account of the
Borrower against any and all of the obligations of the Borrower now or hereafter

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existing under this Agreement, the Notes held by the Agent or such Bank, and the
other Credit Documents, irrespective of whether or not the Agent or such Bank
shall have made any demand under this Agreement, such Notes, or such other
Credit Documents, and although such obligations may be unmatured. The Agent and
each Bank agrees to promptly notify the Borrower after any such set-off and
application made by the Agent or such Bank, provided that the failure to give
such notice shall not affect the validity of such set-off and application. The
rights of the Agent and each Bank under this Section 7.04 are in addition to any
other rights and remedies (including, without limitation, other rights of
set-off) which the Agent or such Bank may have.

Section 7.05. ACTIONS UNDER CREDIT DOCUMENTS. Following an Event of
Default, the Agent shall at the request, or may with the consent, of the
Majority Banks, take any and all actions permitted under the other Credit
Documents, including enforcing its rights under the Security Documents and the
Guaranty for the ratable benefit of the Banks.

Section 7.06. NON-EXCLUSIVITY OF REMEDIES. No remedy conferred upon the
Agent is intended to be exclusive of any other remedy, and each remedy shall be
cumulative of all other remedies existing by contract, at law, in equity, by
statute or otherwise.

ARTICLE VIII

THE AGENT AND THE ISSUING BANK

Section 8.01. AUTHORIZATION AND ACTION. Each Bank hereby appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers under this Agreement as are delegated to the Agent by the terms
hereof and of the other Credit Documents, together with such powers as are
reasonably incidental thereto. As to any matters not expressly provided for by
this Agreement or any other Credit Document (including, without limitation,
enforcement or collection of the Notes), the Agent shall not be required to
exercise any discretion or take any action, but shall be required to act or to
refrain from acting (and shall be fully protected in so acting or refraining
from acting) upon the instructions of the Majority Banks, and such instructions
shall be binding upon all Banks and all holders of Notes; PROVIDED, however,
that the Agent shall not be required to take any action which exposes the Agent
to personal liability or which is contrary to this Agreement, any other Credit
Document, or applicable law.

Section 8.02. AGENT'S RELIANCE, ETC. Neither the Agent nor any of its
directors, officers, agents, or employees shall be liable for any action taken
or omitted to be taken (INCLUDING THE AGENT'S OWN NEGLIGENCE) by it or them
under or in connection with this Agreement or the other Credit Documents, except
for its or their own

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gross negligence or willful misconduct. Without limitation of the generality
of the foregoing, the Agent: (a) may treat the payee of any Note as the
holder thereof until the Agent receives written notice of the assignment or
transfer thereof signed by such payee and in form satisfactory to the Agent;
(b) may consult with legal counsel (including counsel for the Borrower),
independent public accountants, and other experts selected by it 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 Bank and shall not be responsible
to any Bank for any statements, warranties, or representations made in or in
connection with this Agreement or the other Credit Documents; (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 this Agreement or any other
Credit Document on the part of the Borrower or the Guarantors or to inspect
the property (including the books and records) of the Borrower or the
Guarantors; (e) shall not be responsible to any Bank for the due execution,
legality, validity, enforceability, genuineness, sufficiency, or value of
this Agreement or any other Credit Document; and (f) shall incur no liability
under or in respect of this Agreement or any other Credit Document by acting
upon any notice, consent, certificate, or other instrument or writing (which
may be by telecopier or telex) believed by it to be genuine and signed or
sent by the proper party or parties.

Section 8.03. THE AGENT AND ITS AFFILIATES. With respect to its
Commitments, the Advances made by it and the Notes issued to it, the Agent shall
have the same rights and powers under this Agreement as any other Bank and may
exercise the same as though it were not the Agent. The term "Bank" or "Banks"
shall, unless otherwise expressly indicated, include the Agent in its individual
capacity. The Agent and its Affiliates may accept deposits from, lend money to,
act as trustee under indentures of, and generally engage in any kind of business
with, the Borrower or any of the Guarantors, and any Person who may do business
with or own securities of the Borrower or any such Guarantor, all as if the
Agent were not an agent hereunder and without any duty to account therefor to
the Banks.

Section 8.04. BANK CREDIT DECISION. Each Bank acknowledges that it has,
independently and without reliance upon the Agent or any other Bank and based on
the Financial Statements and the Interim Financial Statements and such other
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Bank also acknowledges
that it shall, independently and without reliance upon the Agent or any other
Bank and based on such documents and information as it shall deem appropriate at
the time, continue to make its own credit decisions in taking or not taking
action under this Agreement.

Section 8.05. INDEMNIFICATION. THE BANKS SEVERALLY AGREE TO INDEMNIFY THE
AGENT AND THE ISSUING BANK AND EACH AFFILIATE THEREOF AND THEIR RESPECTIVE
DIRECTORS, OFFICERS, EMPLOYEES,

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AND AGENTS (TO THE EXTENT NOT REIMBURSED BY THE BORROWER), ACCORDING TO THEIR
RESPECTIVE PRO RATA SHARES FROM AND AGAINST ANY AND ALL LIABILITIES,
OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS,
EXPENSES, OR DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER WHICH MAY BE
IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST THE AGENT AND THE ISSUING BANK
IN ANY WAY RELATING TO OR ARISING OUT OF THIS AGREEMENT OR ANY ACTION TAKEN
OR OMITTED BY THE AGENT OR THE ISSUING BANK UNDER THIS AGREEMENT OR ANY OTHER
CREDIT DOCUMENT (INCLUDING THE AGENT'S AND THE ISSUING BANK'S OWN
NEGLIGENCE), PROVIDED THAT NO BANK SHALL BE LIABLE FOR ANY PORTION OF SUCH
LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS,
SUITS, COSTS, EXPENSES, OR DISBURSEMENTS RESULTING FROM THE AGENT'S AND THE
ISSUING BANK'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. WITHOUT LIMITATION OF
THE FOREGOING, EACH BANK AGREES TO REIMBURSE THE AGENT PROMPTLY UPON DEMAND
FOR ITS RATABLE SHARE OF ANY OUT-OF-POCKET EXPENSES (INCLUDING COUNSEL FEES)
INCURRED BY THE AGENT IN CONNECTION WITH THE PREPARATION, EXECUTION,
DELIVERY, ADMINISTRATION, MODIFICATION, AMENDMENT, OR ENFORCEMENT (WHETHER
THROUGH NEGOTIATIONS, LEGAL PROCEEDINGS, OR OTHERWISE) OF, OR LEGAL ADVICE IN
RESPECT OF RIGHTS OR RESPONSIBILITIES UNDER, THIS AGREEMENT OR ANY OTHER
CREDIT DOCUMENT, TO THE EXTENT THAT THE AGENT IS NOT REIMBURSED FOR SUCH BY
THE BORROWER.

Section 8.06. SUCCESSOR AGENT AND ISSUING BANK. The Agent or the Issuing
Bank may resign at any time by giving written notice thereof to the Banks and
the Borrower and may be removed at any time with or without cause by the
Majority Banks upon receipt of written notice from the Majority Banks to such
effect. Upon receipt of notice of any such resignation or removal, the Majority
Banks shall have the right to appoint a successor Agent or Issuing Bank only
with the consent of the Borrower, which consent shall not be unreasonably
withheld. If no successor Agent or Issuing Bank shall have been so appointed by
the Majority Banks with the consent of the Borrower, and shall have accepted
such appointment, within 30 days after the retiring Agent's or Issuing Bank's
giving of notice of resignation or the Majority Banks' removal of the retiring
Agent or Issuing Bank, then the retiring Agent or Issuing Bank may, on behalf of
the Banks and the Borrower, appoint a successor Agent or Issuing Bank, which
shall be, in the case of a successor agent, a commercial bank organized under
the laws of the United States of America or of any State thereof and having a
combined capital and surplus of at least $500,000,000.00 and, in the case of the
Issuing Bank, a Bank. Upon the acceptance of any appointment as Agent or

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Issuing Bank by a successor Agent or Issuing Bank, such successor Agent or
Issuing Bank shall thereupon succeed to and become vested with all the rights,
powers, privileges, and duties of the retiring Agent or Issuing Bank, and the
retiring Agent or Issuing Bank shall be discharged from its duties and
obligations under this Agreement and the other Credit Documents, except that the
retiring Issuing Bank shall remain the Issuing Bank with respect to any Letters
of Credit outstanding on the effective date of its resignation or removal and
the provisions affecting the Issuing Bank with respect to such Letters of Credit
shall inure to the benefit of the retiring Issuing Bank until the termination of
all such Letters of Credit. After any retiring Agent's or Issuing Bank's
resignation or removal hereunder as Agent or Issuing Bank, the provisions of
this Article VIII shall inure to its benefit as to any actions taken or omitted
to be taken by it while it was Agent or Issuing Bank under this Agreement and
the other Credit Documents.

ARTICLE IX

MISCELLANEOUS

Section 9.01. AMENDMENTS, ETC. No amendment or waiver of any provision of
this Agreement, the Notes, or any other Credit Document, nor consent to any
departure by the Borrower or any Guarantor therefrom, shall in any event be
effective unless the same shall be in writing and signed by the Majority Banks
and the Borrower, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given; PROVIDED,
however, that no amendment, waiver, or consent shall, unless in writing and
signed by all the Banks, do any of the following: (a) waive any of the
conditions specified in Section 3.01 or 3.02, (b) increase the Revolving
Commitment of the Banks, (c) reduce the principal of, or interest on, the Notes
or any fees or other amounts payable hereunder or under any other Credit
Document, (d) postpone any date fixed for any payment of principal of, or
interest on, the Notes or any fees or other amounts payable hereunder or extend
the Revolving Maturity Date or the Term Maturity Date, (e) change the percentage
of Banks which shall be required for the Banks or any of them to take any action
hereunder or under any other Credit Document, (f) amend Section 2.11 or this
Section 9.01, (g) amend the definition of "Majority Banks," (h) release any
Guarantor from its obligations under any Guaranty, or (i) release any collateral
securing the Obligations, except for releases of Collateral sold as permitted by
this Agreement; and PROVIDED, further, that no amendment, waiver or consent
shall, unless in writing and signed by the Agent or the Issuing Bank in addition
to the Banks required above to take such action, affect the rights or duties of
the Agent or the Issuing Bank, as the case may be, under this Agreement or any
other Credit Document.

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Section 9.02. NOTICES, ETC. All notices and other communications shall be
in writing (including, without limitation, telecopy or telex) and mailed by
certified mail, return receipt requested, telecopied, telexed, hand delivered,
or delivered by a nationally recognized overnight courier, at the address for
the appropriate party specified in SCHEDULE 1 or at such other address as shall
be designated by such party in a written notice to the other parties. All such
notices and communications shall, when so mailed, telecopied, telexed, or hand
delivered or delivered by a nationally recognized overnight courier, be
effective when received if mailed, when telecopy transmission is completed, when
confirmed by telex answer-back, or when delivered by such messenger or courier,
respectively, except that notices and communications to the Agent pursuant to
Article II or VIII shall not be effective until received by the Agent.

Section 9.03. NO WAIVER; REMEDIES. No failure on the part of any Bank,
the Agent, or the Issuing Bank to exercise, and no delay in exercising, any
right hereunder or under any Note shall operate as a waiver thereof; nor shall
any single or partial exercise of any such right 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 9.04. COSTS AND EXPENSES. The Borrower agrees to pay on demand
(a) all reasonable out-of-pocket costs and expenses of the Agent in connection
with the preparation, execution, delivery, administration, modification, and
amendment of this Agreement, the Notes, the Guaranties, and the other Credit
Documents including, without limitation, the reasonable fees and out-of-pocket
expenses of counsel for the Agent with respect to advising the Agent as to its
rights and responsibilities under this Agreement, and (b) all out-of-pocket
costs and expenses, if any, of the Agent, the Issuing Bank, and each Bank
(including, without limitation, reasonable counsel fees and expenses of the
Agent, the Issuing Bank, and each Bank) in connection with the enforcement
(whether through negotiations, legal proceedings, or otherwise) of this
Agreement, the Notes, the Guaranties, and the other Credit Documents.

Section 9.05. BINDING EFFECT. This Agreement shall become effective when
it shall have been executed by the Borrower and the Agent, and when the Agent
shall have, as to each Bank, either received a counterpart hereof executed by
such Bank or been notified by such Bank that such Bank has executed it and
thereafter shall be binding upon and inure to the benefit of the Borrower, the
Agent, the Issuing Bank, and each Bank and their respective successors and
assigns, except that the Borrower shall not have the right to assign its rights
or delegate its duties under this Agreement or any interest in this Agreement
without the prior written consent of each Bank.

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<PAGE>

Section 9.06. BANK ASSIGNMENTS AND PARTICIPATIONS.

(a) ASSIGNMENTS. Any Bank may assign to one or more banks or other
entities all or any portion of its rights and obligations under this Agreement
(including, without limitation, all or a portion of its Commitments, the
Advances owing to it, the Notes held by it, and the participation interest in
the Letter of Credit Obligations held by it); PROVIDED, HOWEVER, that (i) each
such assignment shall be of a constant, and not a varying, percentage of such
Bank's rights and obligations assigned under this Agreement, (ii) the amount of
the Commitments and Advances of such Bank being assigned pursuant to each such
assignment (determined as of the date of the Assignment and Acceptance with
respect to such assignment) shall be, if to an entity other than a Bank, not
less than $5,000,000.00 and shall be an integral multiple of $1,000,000.00,
(iii) each such assignment shall be to an Eligible Assignee, (iv) the parties to
each such assignment shall execute and deliver to the Agent, for its acceptance
and recording in the Register, an Assignment and Acceptance, together with the
Notes subject to such assignment, and (v) each Eligible Assignee (other than the
Eligible Assignee of the Agent) shall pay to the Agent a $2,500 administrative
fee. Upon such execution, delivery, acceptance and recording, from and after
the effective date specified in each Assignment and Acceptance, which effective
date shall be at least three Business Days after the execution thereof, (A) the
assignee thereunder shall be a party hereto for all purposes and, to the extent
that rights and obligations hereunder have been assigned to it pursuant to such
Assignment and Acceptance, have the rights and obligations of a Bank hereunder
and (B) such Bank thereunder shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights and be released from its obligations under this Agreement
(and, in the case of an Assignment and Acceptance covering all or the remaining
portion of such Bank's rights and obligations under this Agreement, such Bank
shall cease to be a party hereto).

(b) TERM OF ASSIGNMENTS. By executing and delivering an Assignment and
Acceptance, the Bank thereunder and the assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Acceptance, such Bank makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency of
value of this Agreement or any other instrument or document furnished pursuant
hereto; (ii) such Bank makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrower or the
Guarantors or the performance or observance by the Borrower or the Guarantors of
any of their obligations under this Agreement or any other instrument or
document furnished pursuant hereto; (iii) such assignee confirms that it has
received a copy of this Agreement, together with copies of the financial
statements referred to in Section 4.05 and such other documents and information
as it has deemed appropriate to make its own credit analysis and decision

-75-

<PAGE>

to enter into such Assignment and Acceptance; (iv) such assignee will,
independently and without reliance upon the Agent, such Bank or any other
Bank and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not
taking action under this Agreement; (v) such assignee appoints and authorizes
the Agent to take such action as agent on its behalf and to exercise such
powers under this Agreement as are delegated to the Agent by the terms
hereof, together with such powers as are reasonably incidental thereto; and
(vi) such assignee agrees that it will perform in accordance with their terms
all of the obligations which by the terms of this Agreement are required to
be performed by it as a Bank.

(c) THE REGISTER. The Agent shall maintain at its address referred to in
Section 9.02 a copy of each Assignment and Acceptance delivered to and accepted
by it and a register for the recordation of the names and addresses of the Banks
and the Commitments of, and principal amount of the Advances owing to, each Bank
from time to time (the "Register"). The entries in the Register shall be
conclusive and binding for all purposes, absent manifest error, and the
Borrower, the Agent, the Issuing Bank, and the Banks may treat each Person whose
name is recorded in the Register as a Bank hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the Borrower or
any Bank at any reasonable time and from time to time upon reasonable prior
notice.

(d) PROCEDURES. Upon its receipt of an Assignment and Acceptance executed
by a Bank and an Eligible Assignee, together with the Notes subject to such
assignment, the Agent shall, if such Assignment and Acceptance has been
completed and is in substantially the form of the attached EXHIBIT A, (i) accept
such Assignment and Acceptance, (ii) record the information contained therein in
the Register, and (iii) give prompt notice thereof to the Borrower. Within five
Business Days after its receipt of such notice, the Borrower shall execute and
deliver to the Agent in exchange for the surrendered Notes (A) if such Eligible
Assignee has acquired a Revolving Commitment, a new Revolving Note to the order
of such Eligible Assignee in an amount equal to the Revolving Commitment assumed
by it pursuant to such Assignment and Acceptance and, if such Eligible Assignee
has acquired any Term Advances, a new Term Note to the order of such Eligible
Assignee in an amount equal to the outstanding principal amount of the Term
Advances assigned to such Eligible Assignee and (B) if such Bank has retained
any Revolving Commitment hereunder, a new Revolving Note to the order of such
Bank in an amount equal to the Revolving Commitment retained by it hereunder
and, if such Bank has retained any Term Advances, a new Term Note to the order
of such Bank in an amount equal to the outstanding principal amount of the Term
Advances retained by such Bank. Such new Notes shall be dated the effective
date of such Assignment and Acceptance and shall otherwise be in substantially
the form of the attached EXHIBIT H-1 AND H-2, respectively.

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<PAGE>

(e) PARTICIPATIONS. Each Bank may sell participations to one or more
banks or other entities in or to all or a portion of its rights and obligations
under this Agreement (including, without limitation, all or a portion of its
Commitments, the Advances owing to it, its participation interest in the Letter
of Credit Obligations, and the Notes held by it); PROVIDED, HOWEVER, that
(i) such Bank's obligations under this Agreement (including, without limitation,
its Commitments to the Borrower hereunder) shall remain unchanged, (ii) such
Bank shall remain solely responsible to the other parties hereto for the
performance of such obligations, (iii) such Bank shall remain the holder of any
such Notes for all purposes of this Agreement, (iv) the Borrower, the Agent, and
the Issuing Bank and the other Banks shall continue to deal solely and directly
with such Bank in connection with such Bank's rights and obligations under this
Agreement, and (v) such Bank shall not require the participant's consent to any
matter under this Agreement, except for change in the principal amount of the
Notes, reductions in fees or interest, releasing all or substantially all of any
collateral, or extending the Revolving Maturity Date or the Term Maturity Date.
The Borrower hereby agrees that participants shall have the same rights under
Sections 2.12, 2.13, 2.14(c), and 9.07 as a Bank to the extent of their
respective participations.

Section 9.07. INDEMNIFICATION. THE BORROWER SHALL INDEMNIFY THE AGENT,
THE BANKS, THE ISSUING BANK, AND EACH AFFILIATE THEREOF AND THEIR RESPECTIVE
DIRECTORS, OFFICERS, EMPLOYEES, AND AGENTS FROM, AND DISCHARGE, RELEASE, AND
HOLD EACH OF THEM HARMLESS AGAINST, ANY AND ALL LOSSES, LIABILITIES, CLAIMS, OR
DAMAGES WHICH MAY BE IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST THEM IN ANY
WAY RELATING TO OR ARISING OUT OF THIS AGREEMENT OR ANY ACTION TAKEN OR OMITTED
BY THEM UNDER THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT (INCLUDING ANY SUCH
LOSSES, LIABILITIES, CLAIMS, DAMAGES, OR EXPENSE INCURRED BY REASON OF THE
PERSON BEING INDEMNIFIED'S OWN NEGLIGENCE), BUT EXCLUDING ANY SUCH LOSSES,
LIABILITIES, CLAIMS, DAMAGES, OR EXPENSES INCURRED BY REASON OF THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF THE PERSON TO BE INDEMNIFIED.

Section 9.08. EXECUTION IN COUNTERPARTS. This Agreement may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.

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<PAGE>

Section 9.09. SURVIVAL OF REPRESENTATIONS, ETC. All representations and
warranties contained in this Agreement or made in writing by or on behalf of the
Borrower in connection herewith shall survive the execution and delivery of this
Agreement and the Credit Documents, the making of the Advances and any
investigation made by or on behalf of the Banks, none of which investigations
shall diminish any Bank's right to rely on such representations and warranties.
All obligations of the Borrower provided for in Sections 2.12, 2.13, 2.14(c),
9.04, and 9.07 and all of the obligations of the Banks in Section 8.05 shall
survive any termination of this Agreement and repayment in full of the
Obligations.

Section 9.10. SEVERABILITY. In case one or more provisions of this
Agreement or the other Credit Documents shall be invalid, illegal or
unenforceable in any respect under any applicable law, the validity, legality,
and enforceability of the remaining provisions contained herein or therein shall
not be affected or impaired thereby.

Section 9.11. BUSINESS LOANS. The Borrower warrants and represents that
the Loans evidenced by the Notes are and shall be for business, commercial,
investment, or other similar purposes and not primarily for personal, family,
household, or agricultural use, as such terms are used in Chapter One ("Chapter
One") of the Texas Credit Code. At all such times, if any, as Chapter One shall
establish a Maximum Rate, the Maximum Rate shall be the "indicated rate ceiling"
(as such term is defined in Chapter One) from time to time in effect.

Section 9.12. GOVERNING LAW. This Agreement, the Notes and the other
Credit Documents shall be governed by, and construed and enforced in accordance
with, the laws of the State of Texas. Without limiting the intent of the parties
set forth above, (a) Chapter 15, Subtitle 3, Title 79, of the Revised Civil
Statutes of Texas, 1925, as amended (relating to revolving loans and revolving
tri-party accounts), shall not apply to this Agreement, the Notes, or the
transactions contemplated hereby and (b) to the extent that any Bank may be
subject to Texas law limiting the amount of interest payable for its account,
such Bank shall utilize the indicated (weekly) rate ceiling from time to time in
effect as provided in Article 5069-1.04 of the Revised Civil Statutes of Texas,
as amended. Each Letter of Credit shall be governed by the Uniform Customs and
Practice for Documentary Credits, International Chamber of Commerce Publication
No. 500 (1993 version).

-78-

<PAGE>

THE BORROWER, THE BANKS, THE ISSUING BANK AND THE AGENT HEREBY IRREVOCABLY
WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN RESPECT OF ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER CREDIT DOCUMENT, OR ANY
OF THE TRANSACTIONS CONTEMPLATED HEREBY, AND IRREVOCABLY SUBMIT TO THE
NONEXCLUSIVE JURISDICTION OF THE COURTS OF HARRIS COUNTY, TEXAS, AND THE
SOUTHERN DISTRICT OF TEXAS FOR THE RESOLUTION OF ANY DISPUTES UNDER THIS
AGREEMENT AND THE CREDIT DOCUMENTS, AND HEREBY IRREVOCABLY WAIVE ANY CLAIM THAT
SUCH JURISDICTION IS IMPRACTICAL OR INCONVENIENT.

THIS WRITTEN AGREEMENT AND THE CREDIT DOCUMENTS, AS DEFINED IN THIS
AGREEMENT, REPRESENT THE FINAL AGREEMENT AMONG 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 AMONG THE PARTIES.

EXECUTED as of the date first above written.

BORROWER:

RAMCO OPERATING COMPANY

By: /s/ LARRY E. LEE
---------------------------------
Larry E. Lee
President

-79-

<PAGE>

AGENT:

UNION BANK OF CALIFORNIA, N.A.

By: /s/ TONY R. WEBER
--------------------------------------
Tony R. Weber
Senior Vice President and Manager

By: /s/ CARL STUTZMAN
--------------------------------------
Carl Stutzman
Vice President

BANKS:

REVOLVING COMMITMENT UNION BANK OF CALIFORNIA, N.A.
$32,500,000.00
TERM COMMITMENT
$3,500,000.00 By: /s/ TONY R. WEBER
--------------------------------------
Tony R. Weber
Senior Vice President and Manager

By: /s/ CARL STUTZMAN
--------------------------------------
Carl Stutzman
Vice President

-80-

<PAGE>

EXHIBIT H-1

FORM OF AMENDED AND RESTATED REVOLVING NOTE

$___________________ ______________ __,____

For value received, the undersigned RAMCO Operating Company, a Delaware
corporation ("Borrower"), hereby promises to pay to the order of
__________________________ ("Bank") the principal amount of
____________________ Dollars ($__________) or, if less, the aggregate
outstanding principal amount of the Revolving Advances (as defined in the
Credit Agreement referred to below) made by the Bank to the Borrower,
together with interest on the unpaid principal amount of the Revolving
Advances from the date of such Revolving Advances until such principal amount
is paid in full, at such interest rates, and at such times, as are specified
in the Credit Agreement.

This Note is one of the Amended and Restated Revolving Notes referred to
in, and is entitled to the benefits of, and is subject to the terms of, the
Amended and Restated Credit Agreement dated as of December 12, 1997 (as the
same may be amended or modified from time to time, the "Credit Agreement"),
among the Borrower, the banks party thereto (the "Banks") and Union Bank of
California, N.A., as agent for the Banks (the "Agent"). Capitalized terms
used in this Note that are defined in the Credit Agreement and not otherwise
defined in this Note have the meanings assigned to such terms in the Credit
Agreement. The Credit Agreement, among other things, (a) provides for the
making of the Revolving Advances by the Bank to the Borrower in an aggregate
amount not to exceed at any time outstanding the Dollar amount first above
mentioned, the indebtedness of the Borrower resulting from each such
Revolving Advance being evidenced by this Note and (b) contains provisions
for acceleration of the maturity of this Note upon the happening of certain
events stated in the Credit Agreement and for prepayments of principal prior
to the maturity of this Note upon the terms and conditions specified in the
Credit Agreement.

Both principal and interest are payable in lawful money of the United
States of America to the Agent at the location or address specified by the
Agent to the Borrower in same day funds. The Bank shall record payments of
principal made under this Note, but no failure of the Bank to make such
recordings shall affect the Borrower's repayment obligations under this Note.

<PAGE>

This Note is secured by the Security Documents and guaranteed under the
Guaranties.

Except as specifically provided in the Credit Agreement, the Borrower
hereby waives presentment, demand, protest, notice of intent to accelerate,
notice of acceleration, and any other notice of any kind. No failure to
exercise, and no delay in exercising, any rights hereunder on the part of the
holder of this Note shall operate as a waiver of such rights.

This Note shall be governed by, and construed and enforced in accordance
with, the laws of the state of Texas (except that Tex. Rev. Civ. Stat. Ann.
Art. 5069, Ch. 15, which regulates certain revolving credit loan accounts
shall not apply to this Note).

RAMCO OPERATING COMPANY

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

<PAGE>

EXHIBIT H-2

FORM OF AMENDED AND RESTATED TERM NOTE

$________________ ________________ __, ____

For value received, the undersigned RAMCO Operating Company, a Delaware
corporation ("Borrower"), hereby promises to pay to the order of
__________________________ ("Bank") the principal amount of
____________________ Dollars ($__________) or, if less, the aggregate
outstanding principal amount of the Term Advances (as defined in the Credit
Agreement referred to below) made by the Bank to the Borrower, together with
interest on the unpaid principal amount of each such Term Advance from the
date of such Term Advance until such principal amount is paid in full, at
such interest rates, and at such times, as are specified in the Credit
Agreement.

This Note is one of the Amended and Restated Term Notes referred to in,
and is entitled to the benefits of, and is subject to the terms of, the
Amended and Restated Credit Agreement dated as of December 12, 1997 (as the
same may be amended or modified from time to time, the "Credit Agreement"),
among the Borrower, the banks party thereto (the "Banks") and Union Bank of
California, N.A., as agent for the Banks (the "Agent"). Capitalized terms
used in this Note that are defined in the Credit Agreement and not otherwise
defined in this Note have the meanings assigned to such terms in the Credit
Agreement. The Credit Agreement, among other things, (a) provides for the
continuing of the Term Advances by the Bank to the Borrower in an aggregate
amount not to exceed at any time outstanding the Dollar amount first above
mentioned, the indebtedness of the Borrower resulting from each such Term
Advance being evidenced by this Note and (b) contains provisions for
acceleration of the maturity of this Note upon the happening of certain
events stated in the Credit Agreement and for prepayments of principal prior
to the maturity of this Note upon the terms and conditions specified in the
Credit Agreement.

<PAGE>

This Note is secured by the Security Documents and guaranteed under the
Guaranties.

RAMCO OPERATING COMPANY

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

<PAGE>

EXHIBIT 21

SUBSIDIARIES OF RAM ENERGY, INC.

Subsidiary State of Organization
- ---------- ---------------------

RLP Gulf States, L.L.C. Oklahoma

RB Operating Company Delaware

Carlton Resources Corporation Delaware

Magic Circle Energy Corporation Delaware

MCENA, Inc. Oklahoma

Onyx Properties Corporation Oklahoma

Olympic Energy Corporation Oklahoma

Magic Circle Acquisition Corporation Oklahoma

Carmen Development Corporation Oklahoma

Carmen Field Limited Partnership Oklahoma

<PAGE>

EXHIBIT 23.1

Consent of Independent Auditors

We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated December 15, 1997, except for the matters
discussed in the last paragraph of Note 11, as to which the date is
December , 1997 with respect to the consolidated financial statements of
RAM Energy, Inc. and to the use of our report dated December 15, 1997 with
respect to the financial statements of RAMCO-NYL 1987 Limited Partnership,
in the Registration Statement (Form S-1) and related Prospectuses of
RAM Energy, Inc. for the registration of 3,680,000 shares of its common
stock and $100,000,000 of Senior Notes.

Oklahoma City, Oklahoma
December __, 1997

The foregoing consent is in the form that will be signed upon completion of
the reorganization of the capital accounts of RAM Energy, Inc. as described
in the last paragraph of Note 11 to the financial statements referred to
above.

ERNST & YOUNG LLP

Oklahoma City, Oklahoma
December 17, 1997

<PAGE>

EXHIBIT 23.2

Consent of Independent Auditors

We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated December 16, 1997, with respect to the
consolidated financial statements of Carlton Resources Corporation included
in the Registration Statement (Form S-1) and related Prospectuses of RAM
Energy, Inc. for the registration of 3,680,000 shares of its common stock and
$100,000,000 of Senior Notes.

ERNST & YOUNG LLP

Tulsa, Oklahoma
December 17, 1997

<PAGE>

EXHIBIT 23.3

CONSENT OF DIRECTOR NOMINEE

The undersigned hereby consents to the reference to his name under the
caption "Management" and elsewhere in the Prospectuses forming a part of the
Registration Statement of RAM Energy, Inc. on Form S-1, and consents to serve
as a director of RAM Energy, Inc. effective January 1, 1998.

/s/ JOHN M. REARDON
-------------------------------------
JOHN M. REARDON

December 17, 1997
- -----------------

<PAGE>

EXHIBIT 23.4

CONSENT OF DIRECTOR NOMINEE

/s/ GERALD R. MARSHALL
-------------------------------------
GERALD R. MARSHALL

Oklahoma City, Oklahoma
December 17, 1997
- -----------------

<PAGE>

EXHIBIT 23.6

CONSENT OF INDEPENDENT PETROLEUM ENGINEER

As independent petroleum engineers, we hereby consent to the use of our
report and to all references to our firm included in or made a part of the
Registration Statement of RAM Energy, Inc. on Form S-1.

FORREST A. GARB & ASSOCIATES, INC.
Independent Petroleum Engineers

December 17, 1997
- -----------------

<PAGE>

EXHIBIT 23.7

CONSENT OF INDEPENDENT PETROLEUM ENGINEER

As independent petroleum engineers and geologists, we hereby consent to
the use of our review and to all references to our firm included in or made a
part of the Registration Statement of RAM Energy, Inc. on Form S-1.

NETHERLAND, SEWELL & ASSOCIATES, INC.
Independent Petroleum Engineers

Dallas, Texas
December 17, 1997

<PAGE>
EXHIBIT 24

POWER OF ATTORNEY

We, the undersigned officers and directors of RAM Energy, Inc.*
(hereinafter, the "Company"), hereby severally constitute William W. Talley II,
Larry E. Lee and John M. Longmire and each of them, severally, our true and
lawful attorneys-in-fact with full power to them and each of them to sign for
us, and in our names as officers or directors, or both, of the Company, a
Registration Statement on Form S-1, and any amendments thereto (including
post-effective amendments), and any registration statement that is to be
effective upon filing with the Securities and Exchange Commission pursuant to
Rule 462(b) under the Securities Act of 1933, as amended, for the purpose of
registering under the Securities Act of 1933 shares of the Company's Common
Stock, par value $.01 per share, and % Senior Notes due 2008 granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and to perform each and every act and thing requisite and necessary to be
done in and about the premises, as fully to all intents and purposes as he might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, may lawfully do or cause to be done
by virtue hereof.

DATED this 17th day of December, 1997.

<TABLE>
<S> <C>
RAM ENERGY, INC.* RB OPERATING COMPANY

By /S/ LARRY E. LEE By /S/ LARRY E. LEE
- ------------------------------------------------- -------------------------------------------------
Larry E. Lee Larry E. Lee
President and Chief Executive Officer and Director President and Chief Executive Officer and Director
(Principal Executive Officer) of RAM Energy, Inc.* (Principal Executive Officer) of RAM Energy, Inc.*
and RB Operating Company and RB Operating Company

RLP GULF STATES, L.L.C.

/S/ WILLIAM W. TALLEY II By RAM Energy, Inc., Manager
- -------------------------------------------------
William W. Talley II
Chairman of the Board and Director of RAM Energy,
Inc.* and RB Operating Company
By /S/ LARRY E. LEE
-------------------------------------------------
Larry E. Lee
President and Chief Executive Officer and Director
(Principal Executive Officer) of RAM Energy, Inc.*
and RB Operating Company

/S/ JOHN M. LONGMIRE /S/ LARRY E. LEE
- ------------------------------------------------- -------------------------------------------------
John M. Longmire Larry E. Lee
Senior Vice President, Secretary, Treasurer and President and Chief Executive Officer and Director
Chief Financial Officer (Principal Financial (Principal Executive Officer) of RAM Energy, Inc.*
Officer and Principal Accounting Officer) of RAM and RB Operating Company
Energy, Inc.* and RB Operating Company

/S/ M. HELEN BENNETT
- -------------------------------------------------
M. Helen Bennett
Director of RAM Energy, Inc.* and RB Operating
Company
</TABLE>

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