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<SEC-DOCUMENT>0000950134-04-004499.txt : 20040331
<SEC-HEADER>0000950134-04-004499.hdr.sgml : 20040331
<ACCEPTANCE-DATETIME>20040331162508
ACCESSION NUMBER:		0000950134-04-004499
CONFORMED SUBMISSION TYPE:	10-K
PUBLIC DOCUMENT COUNT:		11
CONFORMED PERIOD OF REPORT:	20031231
FILED AS OF DATE:		20040331

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			PRIMEENERGY CORP
		CENTRAL INDEX KEY:			0000056868
		STANDARD INDUSTRIAL CLASSIFICATION:	CRUDE PETROLEUM & NATURAL GAS [1311]
		IRS NUMBER:				840637348
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-07406
		FILM NUMBER:		04706223

	BUSINESS ADDRESS:	
		STREET 1:		ONE LANDMARK SQ
		CITY:			STAMFORD
		STATE:			CT
		ZIP:			06901
		BUSINESS PHONE:		2033585700

	MAIL ADDRESS:	
		STREET 1:		ONE LANDMARK SQ
		CITY:			STAMFORD
		STATE:			CT
		ZIP:			06901

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	KRM PETROLEUM CORP
		DATE OF NAME CHANGE:	19900614
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>d13330e10vk.htm
<DESCRIPTION>FORM 10-K
<TEXT>
<HTML>
<HEAD>
<TITLE>e10vk</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="center" style="font-size: 14pt"><B>U.S. SECURITIES AND EXCHANGE COMMISSION<BR>
Washington, D.C. 20549</B>


<P align="center" style="font-size: 10pt"><HR size="1" noshade width="18%" align="center">


<P align="center" style="font-size: 18pt"><B>FORM 10-K</B>

<DIV align="center">
<TABLE  cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="14%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="75%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="25%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="font-size: 10pt">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(Mark One)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 12pt">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>&#091;X&#093;</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 12pt">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>EXCHANGE ACT OF 1934</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 10pt">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>For the fiscal year ended December&nbsp;31, 2003</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><B>or</B>


<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="14%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="75%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="25%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="font-size: 12pt">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>&#091;</B>&nbsp;&nbsp;<B>&#093;</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 12pt">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>SECURITIES EXCHANGE ACT OF 1934</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>For the Transition Period From &nbsp;&nbsp;&nbsp;to &nbsp;&nbsp;&nbsp;</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><B>Commission File Number 0-7406</B>


<P align="center" style="font-size: 24pt"><B>PrimeEnergy Corporation</B>

<DIV align="center" style="font-size: 10pt">(Exact name of registrant as specified in its charter)</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><B>Delaware</B><BR>
(state or other jurisdiction of<BR>
incorporation or organization)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>84-0637348</B><BR>
(I.R.S. Employer<BR>
Identification No.)</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><B>One Landmark Square<BR>
Stamford, Connecticut</B><BR>
(Address of principal executive offices)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>06901</B><BR>
(Zip Code)</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">Registrant&#146;s telephone number, including area code: <B>(203)&nbsp;358-5700</B>



<P align="center" style="font-size: 10pt">Securities registered pursuant to Section&nbsp;12(b) of the Act:<BR>
<B>None</B>



<P align="center" style="font-size: 10pt">Securities registered pursuant to Section&nbsp;12(g) of the Act:<BR>
<B>Common Stock, par value $.10 per share</B><BR>
(Title of Class)


<P align="left" style="font-size: 10pt">Indicate whether Registrant (1)&nbsp;has filed all reports required to be filed by
Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
months (or for such shorter period that the Registrant was required to file
such reports), and (2)&nbsp;has been subject to such filing requirements for the
past 90&nbsp;days.



<DIV align="right" style="font-size: 10pt">Yes &#091; X&#093; No &#091; &nbsp;&#093;
</DIV>

<P align="left" style="font-size: 10pt">Indicate by check mark if disclosure of delinquent filers pursuant to Item&nbsp;405
of Regulation&nbsp;S-B is not contained herein, and will not be contained, to the
best of Registrant&#146;s knowledge, in definitive proxy or information statements
incorporated by reference in Part&nbsp;III of this Form 10-K or any amendment to
this Form 10-K. &#091; &nbsp;&#093;


<P align="left" style="font-size: 10pt">Indicate by check mark whether the Registrant is an accelerated filer as
defined in Exchange Act Rule&nbsp;12-b-2



<DIV align="right" style="font-size: 10pt">Yes &#091; &nbsp;&#093; No &#091;X&#093;
</DIV>


<P align="left" style="font-size: 10pt">The aggregate market value of the voting stock of the Registrant held by
non-affiliates, computed by reference to the average bid and asked price of
such common equity as of the last business day of the Registrant&#146;s most
recently completed second fiscal quarter, was $9,664,585.


<P align="left" style="font-size: 10pt">The number of shares outstanding of each class of the Registrant&#146;s Common Stock
as of March&nbsp;25, 2004 was: Common Stock, $0.10 par value, 3,612,472



<P align="center" style="font-size: 10pt"><B>DOCUMENTS INCORPORATED BY REFERENCE</B>


<DIV align="left" style="font-size: 10pt">Portions of the Registrant&#146;s proxy statement to be furnished to stockholders in
connection with its Annual Meeting of Stockholders to be held in June, 2004,
are incorporated by reference in Part&nbsp;III hereof.
</DIV>



<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="center" style="font-size: 24pt"><B>PrimeEnergy Corporation</B>



<P align="center" style="font-size: 10pt"><B>FORM 10-K ANNUAL REPORT<BR>
For the Fiscal Year Ended<BR>
December&nbsp;31, 2003</B>


<!-- link1 "PART I" -->

<P align="center" style="font-size: 10pt"><B>PART I</B>


<!-- link2 "Item&nbsp;1. BUSINESS" -->

<P align="left" style="font-size: 10pt"><B>Item&nbsp;1. BUSINESS.</B>



<P align="left" style="font-size: 10pt"><B>General</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Report contains forward-looking statements that are based on
management&#146;s current expectations, estimates and projections. Words such as
&#147;expects,&#148; &#147;anticipates,&#148; &#147;intends,&#148; &#147;plans,&#148; &#147;believes,&#148; &#147;projects&#148; and
&#147;estimates,&#148; and variations of such words and similar expressions are intended
to identify such forward-looking statements. These statements constitute
&#147;forward-looking statements&#148; within the meaning of Section&nbsp;27A of the
Securities Act of 1933, and are subject to the safe harbors created thereby.
These statements are not guarantees of future performance and involve risks and
uncertainties and are based on a number of assumptions that could ultimately
prove inaccurate and, therefore, there can be no assurance that they will prove
to be accurate. Actual results and outcomes may vary materially from what is
expressed or forecast in such statements due to various risks and
uncertainties. These risks and uncertainties include, among other things,
volatility of oil and gas prices, competition, risks inherent in the Company&#146;s
oil and gas operations, the inexact nature of interpretation of seismic and
other geological and geophysical data, imprecision of reserve estimates, the
Company&#146;s ability to replace and expand oil and gas reserves, and such other
risks and uncertainties described from time to time in the Company&#146;s periodic
reports and filings with the Securities and Exchange Commission. Accordingly,
stockholders and potential investors are cautioned that certain events or
circumstances could cause actual results to differ materially from those
projected.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;PrimeEnergy Corporation (the &#147;Company&#148;) was organized in March, 1973,
under the laws of the State of Delaware.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company is engaged in the oil and gas business through the
acquisition, exploration, development, and production of crude oil and natural
gas. The Company&#146;s properties are located primarily in
Texas, Oklahoma, West Virginia, the Gulf of Mexico, New Mexico, and Louisiana. The Company, through its
wholly-owned subsidiaries Prime Operating Company, Southwest Oilfield
Construction Company, Eastern Oil Well Service Company and EOWS Midland
Company, acts as operator and provides well servicing support operations for
many of the onshore oil and gas wells in which the Company has an interest, as
well as for third parties. The Company owns and operates properties in the
Gulf of Mexico through its sixty percent owned subsidiary F-W Oil Exploration
L.L.C. (&#147;FW&#148;). The Company is also active in the acquisition of producing oil
and gas properties through joint ventures with industry partners. The Company&#146;s
wholly-owned subsidiary, PrimeEnergy Management Corporation (&#147;PEMC&#148;), acts as
the managing general partner in 18 oil and gas limited partnerships (the
&#147;Partnerships&#148;) of which two are publicly held, and acts as the managing
trustee of two asset and income business trusts (&#147;the Trusts&#148;).


<P align="left" style="font-size: 10pt"><B>Exploration, Development and Acquisition Activities</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s activities include development and exploratory drilling. The
Company&#146;s strategy is to develop a balanced portfolio of drilling prospects
that includes lower risk wells with a high probability of success and higher
risk wells with greater economic potential.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
2003, the Company drilled 25 gross (10.504&nbsp;net) wells in its onshore
operating areas at a cost of approximately $7&nbsp;million. The Company also spent
$10&nbsp;million to acquire and develop properties in the Gulf of Mexico owned through FW.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
2004, the Company expects to spend approximately $16&nbsp;million on
development and exploratory drilling. The Company plans to spend
approximately 40% onshore and approximately 60% of its
drilling expenditures on higher risk and potentially more prolific
offshore prospects.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company believes that its diversified portfolio approach to its
drilling activities results in more consistent and predictable economic results
than might be experienced with a less diversified or higher risk drilling
program profile.


<P align="center" style="font-size: 10pt">2
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company attempts to assume the position of operator in all
acquisitions of producing properties. The Company will continue to evaluate
prospects for leasehold acquisitions and for exploration and development
operations in areas in which it owns interests and is actively pursuing the
acquisition of producing properties. In order to diversify and broaden its
asset base, the Company will consider acquiring the assets or stock in other
entities and companies in the oil and gas business. The main objective of the
Company in making any such acquisitions will be to acquire income producing
assets so as to increase the Company&#146;s net worth and increase the Company&#146;s oil
and gas reserve base.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company presently owns producing and non-producing properties located
primarily in Texas, Oklahoma, West Virginia, the Gulf of Mexico, New
Mexico, and Louisiana,
and owns a substantial amount of well servicing equipment. The Company does
not own any refinery or marketing facilities, and does not currently own or
lease any bulk storage facilities or pipelines other than adjacent to and used
in connection with producing wells and the interests in certain gas gathering
systems. All of the Company&#146;s oil and gas properties and interests are located
in the continental United States.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the past, the supply of gas has exceeded demand on a cyclical basis,
and the Company is subject to a combination of shut-in and/or reduced takes of
gas production during summer months. Prolonged shut-ins could result in
reduced field operating income from properties in which the Company acts as
operator.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exploration for oil and gas requires substantial expenditures particularly
in exploratory drilling in undeveloped areas, or &#147;wildcat drilling.&#148; As is
customary in the oil and gas industry, substantially all of the Company&#146;s
exploration and development activities are conducted through joint drilling and
operating agreements with others engaged in the oil and gas business.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Summaries of the Company&#146;s oil and gas drilling activities, oil and gas
production, and undeveloped leasehold, mineral and royalty interests are set
forth under Item&nbsp;2., &#147;Properties,&#148; below. Summaries of the
Company&#146;s oil and gas reserves, future net revenue and present value of future
net revenue are also set forth under Item&nbsp;2., &#147;Properties &#150;
Reserves&#148; below.


<P align="left" style="font-size: 10pt"><B>Well Operations</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s on-shore operations are conducted through a central office
in Houston, Texas, and district offices in Houston and Midland, Texas, Oklahoma
City, Oklahoma, and Charleston, West Virginia. The Company currently operates
1,533 oil and gas wells, 427 through the Houston office, 160 through the
Midland office, 458 through the Oklahoma City office and 450 through the
Charleston, West Virginia office. Substantially all of the wells operated by
the Company are wells in which the Company has an interest. The Company&#146;s
off-shore operations are conducted through FW, also in Houston, Texas.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company operates wells pursuant to operating agreements which govern
the relationship between the Company as operator and the other owners of
working interests in the properties, including the Partnerships, Trusts and
joint venture participants. For each operated well, the Company receives
monthly fees that are competitive in the areas of operations and also is
reimbursed for expenses incurred in connection with well operations.


<P align="left" style="font-size: 10pt"><B>The Partnerships ,Trusts and Joint Ventures</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since 1975, PEMC has sponsored a total of 59 limited partnerships, 22 of
which were offered publicly and 37 of which were offered in private placements
and two Delaware business trusts, both of which were offered publicly. The
Partnership and Trust interests were sold by broker-dealers which are members
of the National Association of Securities Dealers, Inc. through a managing
dealer. The total funds contributed to the Partnerships and Trusts was about
$157,550,000. The aggregate number of limited partners in the Partnerships and
beneficial owners of the Trusts now administered by PEMC is
approximately 4,600.
This number, as well as the number of remaining partnerships noted above, has
decreased in recent years as the Company continues to buy back limited partner
interests. The total funds invested by Joint
Venture Partners was $27.6&nbsp;million.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;PEMC, as managing general partner of the Partnerships and managing trustee
of the Trusts, is responsible for all Partnership and Trust activities,
including the review and analysis of oil and gas properties for acquisition,
the drilling of development wells and the production and sale of oil and gas
from productive wells. PEMC also provides administration, accounting and tax
preparation for the Partnerships and Trusts. PEMC is liable for all debts and
liabilities of the Partnerships and Trusts, to the extent that the assets of a
given limited partnership or trust are not sufficient to satisfy its
obligations. The Company stopped sponsoring partnerships and trusts in 1992.
Today there are only 18 partnerships and two trusts remaining.


<P align="center" style="font-size: 10pt">3
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt"><B>Regulation</B>



<P align="left" style="font-size: 10pt">Regulation of Transportation and Sale of Natural Gas:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Historically, the transportation and sale for resale of natural gas in
interstate commerce have been regulated pursuant to the Natural Gas Act of
1938, as amended (&#147;NGA&#148;), the Natural Gas Policy Act of 1978, as amended
(&#147;NGPA&#148;), and regulations promulgated there under by the Federal Energy
Regulatory Commission (&#147;FERC&#148;) and its predecessors. In the past, the federal
government has regulated the prices at which natural gas could be sold. While
sales by producers of natural gas can currently be made at uncontrolled market
prices, Congress could reenact price controls in the future. Deregulation of
wellhead natural gas sales began with the enactment of the NGPA. In 1989,
Congress enacted the Natural Gas Wellhead Decontrol Act, as amended (the
&#147;Decontrol Act&#148;). The Decontrol Act removed all NGA and NGPA price and
non-price controls affecting wellhead sales of natural gas effective January&nbsp;1,
1993.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since 1985, FERC has endeavored to make natural gas transportation more
accessible to natural gas buyers and sellers on an open and non-discriminatory
basis. FERC has stated that open access policies are necessary to improve the
competitive structure of the interstate natural gas pipeline industry and to
create a regulatory framework that will put natural gas sellers into more
direct contractual relations with natural gas buyers by, among other things,
unbundling the sale of natural gas from the sale of transportation and storage
services. Beginning in 1992, FERC issued Order No.&nbsp;636 and a series of related
orders (collectively, &#147;Order No.&nbsp;636&#148;) to implement its open access policies.
As a result of the Order No.&nbsp;636 program, the marketing and pricing of natural
gas have been significantly altered. The interstate pipelines&#146; traditional role
as wholesalers of natural gas has been eliminated and replaced by a structure
under which pipelines provide transportation and storage service on an open
access basis to others who buy and sell natural gas. Although FERC&#146;s orders do
not directly regulate natural gas producers, they are intended to foster
increased competition within all phases of the natural gas industry.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2000, FERC issued Order No.&nbsp;637 and subsequent orders (collectively,
&#147;Order No.&nbsp;637&#148;), which imposed a number of additional reforms designed to
enhance competition in natural gas markets. Among other things, Order No.&nbsp;637
revised FERC pricing policy by waiving price ceilings for short-term released
capacity for a two-year experimental period, and effected changes in FERC
regulations relating to scheduling procedures, capacity segmentation,
penalties, rights of first refusal and information reporting. Most major
aspects of Order No.&nbsp;637 have been upheld on judicial review, and most
pipelines&#146; tariff filings to implement the requirements of Order No.&nbsp;637 have
been accepted by the FERC and placed into effect.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Outer Continental Shelf Lands Act (&#147;OCSLA&#148;), which FERC implements as
to transportation and pipeline issues, requires that all pipelines operating on
or across the outer continental shelf (&#147;OCS&#148;) provide open access,
non-discriminatory transportation service. One of FERC&#146;s principal goals in
carrying out OCSLA&#146;s mandate is to increase transparency in the market to
provide producers and shippers on the OCS with greater assurance of open
access service on pipelines located on the OCS and non-discriminatory rates and
conditions of service on such pipelines.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;It should be noted that FERC currently is considering whether to
reformulate its test for defining non-jurisdictional gathering in the shallow
waters of the OCS and, if so, what form that new test should take. The stated
purpose of this initiative is to devise an objective test that furthers the
goals of the NGA by protecting producers from the unregulated market power of
third-party transporters of gas, while providing incentives for investment in
production, gathering and transportation infrastructure offshore. While we
cannot predict whether FERC&#146;s gathering test ultimately will be revised and,
if so, what form such revised test will take, any test that refunctionalizes as
FERC-jurisdictional transmission facilities currently classified as gathering
would impose an increased regulatory burden on the owner of those facilities by
subjecting the facilities to NGA certificate and abandonment requirements and
rate regulation.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We cannot accurately predict whether FERC&#146;s actions will achieve the goal
of increasing competition in markets in which our natural gas is sold.
Additional proposals and proceedings that might affect the natural gas industry
are pending before FERC 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 FERC will continue. However,
we do not believe that any action taken will affect us in a way that materially
differs from the way it affects other natural gas producers, gatherers and
marketers.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Intrastate natural gas transportation is subject to regulation by state
regulatory agencies. The basis for intrastate regulation of natural gas
transportation and the degree of regulatory oversight and scrutiny given to
intrastate natural gas pipeline rates and services varies from state to state.
Insofar as such regulation within a particular state will generally affect all
intrastate natural gas shippers within the state on a comparable basis, we
believe that the regulation of similarly situated intrastate natural gas
transportation in any states in which we


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<P align="left" style="font-size: 10pt">operate and ship natural gas on an intrastate basis will not affect our
operations in any way that is materially different from the effect of such
regulation on our competitors.



<P align="left" style="font-size: 10pt">Regulation of Transportation of Oil:



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales of crude oil, condensate and natural gas liquids are not currently
regulated and are made at negotiated prices. The transportation of oil in
common carrier pipelines is also subject to rate regulation. FERC regulates
interstate oil pipeline transportation rates under the Interstate Commerce Act.
In general, interstate oil pipeline rates must be cost-based, although
settlement rates agreed to by all shippers are permitted and market-based rates
may be permitted in certain circumstances. Effective January&nbsp;1, 1995, FERC
implemented regulations establishing an indexing system (based on inflation)
for transportation rates for oil that allowed for an increase or decrease in
the cost of transporting oil to the purchaser. A review of these regulations by
the FERC in 2000 was successfully challenged on appeal by an association of oil
pipelines. On remand, the FERC in February&nbsp;2003 increased the index slightly,
effective July&nbsp;2001. Intrastate oil pipeline transportation rates are subject
to regulation by state regulatory commissions. The basis for intrastate oil
pipeline regulation, and the degree of regulatory oversight and scrutiny given
to intrastate oil pipeline rates, varies from state to state. Insofar as
effective interstate and intrastate rates are equally applicable to all
comparable shippers, we believe that the regulation of oil transportation rates
will not affect our operations in any way that is materially different from the
effect of such regulation on our competitors.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Further, interstate and intrastate common carrier oil pipelines must
provide service on a non-discriminatory basis. Under this open access standard,
common carriers must offer service to all shippers requesting service on the
same terms and under the same rates. When oil pipelines operate at full
capacity, access is governed by prorationing provisions set forth in the
pipelines&#146; published tariffs. Accordingly, we believe that access to oil
pipeline transportation services generally will be available to us to the same
extent as to our competitors.


<P align="left" style="font-size: 10pt">Regulation of Production:



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The production of oil and natural gas is subject to regulation under a
wide range of local, state and federal statutes, rules, orders and regulations.
Federal, state and local statutes and regulations require permits for drilling
operations, drilling bonds and plugging and abandonment and reports concerning
operations. The states in which we own and operate properties have regulations
governing conservation matters, including provisions for the unitization or
pooling of oil and natural gas properties, the establishment of maximum
allowable rates of production from oil and natural gas wells, the regulation of
well spacing, and plugging and abandonment of wells. Many states also restrict
production to the market demand for oil and natural gas, and states have
indicated interest in revising
applicable regulations. The effect of these regulations is to limit the amount
of oil and natural gas that we can produce from our wells and to limit the
number of wells or the locations at which we can drill. Moreover, each state
generally imposes a production or severance tax with respect to the production
and sale of oil, natural gas and natural gas liquids within its jurisdiction.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Some of our offshore operations are conducted on federal leases that are
administered by Minerals Management Service (&#147;MMS&#148;) and are required to comply
with the regulations and orders promulgated by MMS under OCSLA. Among other
things, we are required to obtain prior MMS approval for any exploration plans
we pursue and our development and production plans for these leases. MMS
regulations also establish construction requirements for production facilities
located on our federal offshore leases and govern the plugging and abandonment
of wells and the removal of production facilities from these leases. Under
limited circumstances, MMS could require us to suspend or terminate our
operations on a federal lease.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;MMS also establishes the basis for royalty payments due under federal oil
and natural gas leases through regulations issued under applicable statutory
authority. State regulatory authorities establish similar standards for royalty
payments due under state oil and natural gas leases. The basis for royalty
payments established by MMS and the state regulatory authorities is generally
applicable to all federal and state oil and natural gas lessees. Accordingly,
we believe that the impact of royalty regulation on our operations should
generally be the same as the impact on our competitors.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The failure to comply with these rules and regulations can result in
substantial penalties. The regulatory burden on the oil and natural gas
industry increases our cost of doing business and, consequently, affects our
profitability. Our competitors in the oil and natural gas industry are subject
to the same regulatory requirements and restrictions that affect our
operations.


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<P align="left" style="font-size: 10pt"><B>Taxation</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s oil and gas operations are affected by federal income tax
laws applicable to the petroleum industry. The Company is permitted to deduct
currently, rather than capitalize, intangible drilling and development costs
incurred or borne by it. As an independent producer, the Company is also
entitled to a deduction for percentage depletion with respect to the first
1,000 barrels per day of domestic crude oil (and/or equivalent units of
domestic natural gas) produced by it, if such percentage depletion exceeds cost
depletion. Generally, this deduction is computed based upon the lesser of 100%
of the net income, or 15% of the gross income from a property, without
reference to the basis in the property. The amount of the percentage depletion
deduction so computed which may be deducted in any given year is limited to 65%
of taxable income. Any percentage depletion deduction disallowed due to the
65% of taxable income test may be carried forward indefinitely.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;See Notes 1 and 9 to the consolidated financial statements included in
this Report for a discussion of accounting for income taxes and availability of
federal tax net operating loss carryforwards and alternative minimum tax credit
carryforwards.


<P align="left" style="font-size: 10pt"><B>Competition and Markets</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The business of acquiring producing properties and non-producing leases
suitable for exploration and development is highly competitive. Competitors of
the Company, in its efforts to acquire both producing and non-producing
properties, include oil and gas companies, independent concerns, income programs
and individual producers and operators, many of which have financial resources,
staffs and facilities substantially greater than those available to the
Company. Furthermore, domestic producers of oil and gas must not only compete
with each other in marketing their output, but must also compete with producers
of imported oil and gas and alternative energy sources such as coal, nuclear
power and hydroelectric power. Competition among petroleum companies for
favorable oil and gas properties and leases can be expected to increase.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The availability of a ready market for any oil and gas produced by the
Company at acceptable prices per unit of production will depend upon numerous
factors beyond the control of the Company, including the extent of domestic
production and importation of oil and gas, the proximity of the Company&#146;s
producing properties to gas pipelines and the availability and capacity of such
pipelines, the marketing of other competitive fuels, fluctuation in demand,
governmental regulation of production, refining, transportation and sales,
general national and worldwide economic conditions, and use and allocation of
oil and gas and their substitute fuels. There is no assurance that the Company
will be able to market all of the oil or gas produced by it or that favorable
prices can be obtained for the oil and gas production.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Listed below are the percent of the Company&#146;s total oil and gas sales made
to each of the customers whose purchases represented more than 10% of the
Company&#146;s oil and gas sales.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="55%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="79%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Oil Purchasers:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Texon Distributing L.P.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">15.80</TD>
    <TD nowrap>%</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Plains All American Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">11.52</TD>
    <TD nowrap>%</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Gas Purchasers:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Unimark LLC</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">21.68</TD>
    <TD nowrap>%</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">El Paso Industrial Energy</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">10.60</TD>
    <TD nowrap>%</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although there are no long-term purchasing agreements with these
purchasers, the Company believes that they will continue to purchase its oil
and gas products and, if not, could be replaced by other purchasers.


<P align="left" style="font-size: 10pt"><B>Environmental Matters</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Various federal, state and local laws and regulations governing the
protection of the environment, such as the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended (&#147;CERCLA&#148;), the
Federal Water Pollution Control Act of 1972, as amended (the &#147;Clean Water
Act&#148;), and the Federal Clean Air Act, as amended (the &#147;Clean Air Act&#148;), affect
our operations and costs. In particular, our exploration, development and
production operations, our activities in connection with storage and
transportation of oil and other hydrocarbons and our use of facilities for
treating, processing or otherwise handling hydrocarbons and related wastes may
be subject to regulation under these and similar state legislation. These laws
and regulations:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>restrict the types, quantities and concentration of various substances that
can be released into the environment in connection with drilling and production
activities;</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>limit or prohibit drilling activities on certain lands lying within
wilderness, wetlands and other protected areas; and</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>impose substantial liabilities for pollution resulting from our
operations.
</TD>
</TR>
</TABLE>

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<P align="left" style="font-size: 10pt">Failure to comply with these laws and regulations may result in the assessment
of administrative, civil and criminal fines and penalties or the imposition of
injunctive relief. Changes in environmental laws and regulations occur
regularly, and any changes that result in more stringent and costly waste
handling, storage, transport, disposal or cleanup requirements could materially
adversely affect our operations and financial position, as well as those in the
oil and natural gas industry in general. While we believe that we are in
substantial compliance with current applicable environmental laws and
regulations and that continued compliance with existing requirements would not
have a material adverse impact on us, there is no assurance that this trend
will continue in the future.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As with the industry generally, compliance with existing regulations
increases our overall cost of business. The areas affected include:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>unit production expenses primarily related to the control and limitation of
air emissions and the disposal of produced water;</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="100%">&#150;&nbsp;&nbsp; capital costs to drill exploration and development wells primarily related to
the management and disposal of drilling fluids and other oil and natural gas
exploration wastes; and</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>capital costs to construct, maintain and upgrade equipment and facilities.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Superfund. CERCLA, also known as &#147;Superfund,&#148; imposes liability for
response costs and damages to natural resources, without regard to fault or the
legality of the original act, on some classes of persons that contributed to
the release of a &#147;hazardous substance&#148; into the environment. These persons
include the &#147;owner&#148; or &#147;operator&#148; of a disposal site and entities that disposed
or arranged for the disposal of the hazardous substances found at the site.
CERCLA also authorizes the Environmental Protection Agency (&#147;EPA&#148;) and, in some
instances, third parties to act in response to threats to the public health or
the environment and to seek to recover from the responsible classes of persons
the costs they incur. It is not uncommon for neighboring landowners and other
third parties to file claims for personal injury and property damage allegedly
caused by the hazardous substances released into the environment. In the course
of our ordinary operations, we may generate waste that may fall within CERCLA&#146;s
definition of a &#147;hazardous substance.&#148; We may be jointly and severally liable
under CERCLA or comparable state statutes for all or part of the costs required
to clean up sites at which these wastes have been disposed.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We currently own or lease properties that for many years have been used
for the exploration and production of oil and natural gas. Although we and our
predecessors have used operating and disposal practices that were standard in
the industry at the time, hydrocarbons or other wastes may have been disposed
or released on, under or from the properties owned or leased by us or on, under
or from other locations where these wastes have been taken for disposal. In
addition, many of these properties have been operated by third parties whose
actions with respect to the treatment and disposal or release of hydrocarbons
or other wastes were not under our control. These properties and wastes
disposed on these properties may be subject to CERCLA and analogous state laws.
Under these laws, we could be required:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>to remove or remediate previously disposed wastes, including wastes disposed
or released by prior owners or operators;</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>to clean up contaminated property, including contaminated groundwater; or to
perform remedial operations to prevent future contamination.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At this time, we do not believe that we are associated with any Superfund
site and we have not been notified of any claim, liability or damages under
CERCLA.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Oil Pollution Act of 1990. The Oil Pollution Act of 1990, as amended (the
&#147;OPA&#148;) and regulations there under impose liability on &#147;responsible parties&#148;
for damages resulting from oil spills into or upon navigable waters, ad
adjoining shorelines or in the exclusive economic zone of the United States.
Liability under OPA is strict, and under certain circumstances joint and
several, and potentially unlimited. A &#147;responsible party&#148; includes the owner or
operator of an onshore facility and the lessee or permittee of the area in
which an offshore facility is located. The OPA also requires the lessee or
permittee of the offshore area in which a covered offshore facility is located
to establish and maintain evidence of financial responsibility in the amount of
$35.0&nbsp;million ($10.0&nbsp;million if the offshore facility is located landward of
the seaward boundary of a state) to cover liabilities related to an oil spill
for which such person is statutorily responsible. The amount of required
financial responsibility may be increased above the minimum amounts to an
amount not exceeding $150.0&nbsp;million depending on the risk represented by the
quantity or quality of oil that is handled by the facility. We carry insurance
coverage to meet these obligations, which we believe is customary for
comparable companies in our industry. A failure to comply with OPA&#146;s
requirements or inadequate cooperation during a spill response action may
subject a responsible party to civil or criminal enforcement actions. We are
not aware of any action or event that would subject us to liability under OPA,


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<P align="left" style="font-size: 10pt">and we believe that compliance with OPA&#146;s financial responsibility and other
operating requirements will not have a material adverse effect on us.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;U.S. Environmental Protection Agency. U.S. Environmental Protection Agency
regulations address the disposal of oil and natural gas operational wastes
under three federal acts more fully discussed in the paragraphs that follow.
The Resource Conservation and Recovery Act of 1976, as amended (&#147;RCRA&#148;),
provides a framework for the safe disposal of discarded materials and the
management of solid and hazardous wastes. The direct disposal of operational
wastes into offshore waters is also limited under the authority of the Clean
Water Act. When injected underground, oil and natural gas wastes are regulated
by the Underground Injection Control program under Safe Drinking Water Act. If
wastes are classified as hazardous, they must be properly transported, using a
uniform hazardous waste manifest, documented, and disposed at an approved
hazardous waste facility. We have coverage under the Region VI National
Production Discharge Elimination System Permit for discharges associated with
exploration and development activities. We take the necessary steps to ensure
all offshore discharges associated with a proposed operation, including
produced waters, will be conducted in accordance with the permit.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Resource Conservation Recovery Act. RCRA, is the principal federal
statute governing the treatment, storage and disposal of hazardous wastes. RCRA
imposes stringent operating requirements, and liability for failure to meet
such requirements, on a person who is either a &#147;generator&#148; or &#147;transporter&#148; of
hazardous waste or an &#147;owner&#148; or &#147;operator&#148; of a hazardous waste treatment,
storage or disposal facility. At present, RCRA includes a statutory exemption
that allows most oil and natural gas exploration and production waste to be
classified as nonhazardous waste. A similar exemption is contained in many of
the state counterparts to RCRA. As a result, we are not required to comply with
a substantial portion of RCRA&#146;s requirements because our operations generate
minimal quantities of hazardous wastes. At various times in the past, proposals
have been made to amend RCRA to rescind the exemption that excludes oil and
natural gas exploration and production wastes from regulation as hazardous
waste. Repeal or modification of the exemption by administrative, legislative
or judicial process, or modification of similar exemptions in applicable state
statutes, would increase the volume of hazardous waste we are required to
manage and dispose of and would cause us to incur increased operating expenses.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Clean Water Act. The Clean Water Act imposes restrictions and controls on
the discharge of produced waters and other wastes into navigable waters.
Permits must be obtained to discharge pollutants into state and federal waters
and to conduct construction activities in waters and wetlands. Certain state
regulations and the general permits issued under the Federal National Pollutant
Discharge Elimination System program prohibit the discharge of produced waters
and sand, drilling fluids, drill cuttings and certain other substances related
to the oil and natural gas industry into certain coastal and offshore waters.
Further, the EPA has adopted regulations requiring certain oil and natural gas
exploration and production facilities to obtain permits for storm water
discharges. Costs may be associated with the treatment of wastewater or
developing and implementing storm water pollution prevention plans. The Clean
Water Act and comparable state statutes provide for civil, criminal and
administrative penalties for unauthorized discharges for oil and other
pollutants and impose liability on parties responsible for those discharges for
the costs of cleaning up any environmental damage caused by the release and for
natural resource damages resulting from the release. We believe that our
operations comply in all material respects with the requirements of the Clean
Water Act and state statutes enacted to control water pollution.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Safe Drinking Water Act. Underground injection is the subsurface
placement of fluid through a well, such as the reinjection of brine produced
and separated from oil and natural gas production. The Safe Drinking Water Act
of 1974, as amended establishes a regulatory framework for underground
injection, with the main goal being the protection of usable aquifers. The
primary objective of injection well operating requirements is to ensure the
mechanical integrity of the injection apparatus and to prevent migration of
fluids from the injection zone into underground sources of drinking water.
Hazardous-waste injection well operations are strictly controlled, and certain
wastes, absent an exemption, cannot be injected into underground injection
control wells. In Louisiana and Texas, no underground injection may take place
except as authorized by permit or rule. We currently own and operate various
underground injection wells. Failure to abide by our permits could subject us
to civil and/or criminal enforcement. We believe that we are in compliance in
all material respects with the requirements of applicable state underground
injection control programs and our permits.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Marine Protected Areas. Executive Order 13158, issued on May&nbsp;26, 2000,
directs federal agencies to safeguard existing Marine Protected Areas
(&#147;MPAs&#148;)in the United States and establish new MPAs. The order requires federal
agencies to avoid harm to MPAs to the extent permitted by law and to the
maximum extent practicable. It also directs the EPA to propose new regulations
under the Clean Water Act to ensure appropriate levels of protection for the
marine environment. This order has the potential to adversely affect our
operations by restricting areas in which we may carry out future development
and exploration projects and/or causing us to incur increased operating
expenses.


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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Marine Mammal and Endangered Species. Federal Lease Stipulations address
the reduction of potential taking of protected marine species (sea turtles,
marine mammals, Gulf Sturgen and other listed marine species). MMS permit
approvals will be conditioned on collection and removal of debris resulting
from activities related to exploration, development and production of offshore
leases. MMS has issued Notices to Lessees and Operators (&#147;NTL&#148;) 2003-G06
advising of requirements for posting of signs in prominent places on all
vessels and structures and of an observing training program.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consideration of Environmental Issues in Connection with Governmental
Approvals. Our operations frequently require licenses, permits and/or other
governmental approvals. Several federal statutes, including OCSLA, the National
Environmental Policy Act (&#147;NEPA&#148;), and the Coastal Zone Management Act (&#147;CZMA&#148;)
require federal agencies to evaluate environmental issues in connection with
granting such approvals and/or taking other major agency actions. OCSLA, for
instance, requires the U.S. Department of Interior (&#147;DOI&#148;) to evaluate whether
certain proposed activities would cause serious harm or damage to the marine,
coastal or human environment. Similarly, NEPA requires DOI and other federal
agencies to evaluate major agency actions having the potential to significantly
impact the environment. In the course of such evaluations, an agency would have
to prepare an environmental assessment and, potentially, an environmental
impact statement. CZMA, on the other hand, aids states in developing a coastal
management program to protect the coastal environment from growing demands
associated with various uses, including offshore oil and natural gas
development. In obtaining various approvals from the DOI, we must certify that
we will conduct our activities in a manner consistent with an applicable
program.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Lead-Based Paints. Various pieces of equipment and structures owned by us
may have been coated with lead-based paints as was customary in the industry at
the time these pieces of equipment were fabricated and constructed. These
paints may contain lead at a concentration high enough to be considered a
regulated hazardous waste when removed. If we need to remove such paints in
connection with maintenance or other activities and they qualify as a regulated
hazardous waste, this would increase the cost of disposal. High lead levels in
the paint might also require us to institute certain administrative and/or
engineering controls required by the Occupational Safety and Health Act and MMS
to ensure worker safety during paint removal.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Air Pollution Control. The Clean Air Act and state air pollution laws
adopted to fulfill its mandates provide a framework for national, state and
local efforts to protect air quality. Our operations utilize equipment that
emits air pollutants subject to federal and state air pollution control laws.
These laws require utilization of air emissions abatement equipment to achieve
prescribed emissions limitations and ambient air quality standards, as well as
operating permits for existing equipment and construction permits for new and
modified equipment. Air emissions associated with offshore activities are
projected using a matrix and formula supplied by MMS, which has primacy from
the Environmental Protection Agency for regulating such emissions.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Naturally Occurring Radioactive Materials (&#147;NORM&#148;). NORM are materials
not covered by the Atomic Energy Act, whose radioactivity is enhanced by
technological processing such as mineral extraction or processing through
exploration and production conducted by the oil and natural gas industry. NORM
wastes are regulated under the RCRA framework, but primary responsibility for
NORM regulation has been a state function. Standards have been developed for
worker protection; treatment, storage and disposal of NORM waste; management of
waste piles, containers and tanks; and limitations upon the release of NORM
contaminated land for unrestricted use. We believe that our operations are in
material compliance with all applicable NORM standards established by the
states, as applicable.


<P align="left" style="font-size: 10pt"><B>Employees</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At March&nbsp;23, 2004, the Company had 200 full-time and 10 part-time
employees, 15 of whom were employed by the Company at its principal offices in
Stamford, Connecticut, 23 in Houston, Texas, at the offices of Prime
Operating Company, Eastern Oil Well Service Company, EOWS Midland
Company and F-W Oil
Exploration L.L.C., and 172 employees who were primarily involved in the
district operations of the Company in Houston and Midland, Texas, Oklahoma
City, Oklahoma and Charleston, West Virginia.

<!-- link2 "Item&nbsp;2. Properties" -->

<P align="left" style="font-size: 10pt"><B>Item&nbsp;2. PROPERTIES.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s executive offices are located at One Landmark Square,
Stamford, Connecticut, in leased premises of about 6265 square feet. The
executive offices of Prime Operating Company,
Eastern Oil Well Service Company, EOWS Midland Company and F-W Oil
Exploration L.L.C. are located in leased
premises in Houston, Texas, and the offices of Southwest Oilfield Construction
Company are in Oklahoma City, Oklahoma.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company maintains district offices in Houston and Midland, Texas,
Oklahoma City, Oklahoma and Charleston, West Virginia, and has field offices in
Carrizo Springs and Midland, Texas, Kingfisher and Garvin, Oklahoma and Orma,
West Virginia.


<P align="center" style="font-size: 10pt">9
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Substantially all of the Company&#146;s oil and gas properties are subject to a
mortgage given to collateralize indebtedness of the Company, or are subject to
being mortgaged upon request by the Company&#146;s lender for additional collateral.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The information set forth below concerning the Company&#146;s properties,
activities, and oil and gas reserves include the Company&#146;s interests in
affiliated entities.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the exploratory and development drilling
experience with respect to wells in which the Company participated during the
five years ended December&nbsp;31, 2003.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="85%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="21%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>2001</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>2000</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>1999</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Gross</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Net</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Gross</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Net</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Gross</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Net</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Gross</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Net</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Gross</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Net</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Exploratory:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Oil</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">.300</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Gas</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.565</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">.602</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.279</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">.683</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Dry</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">.276</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">.510</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Development:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Oil</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.561</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">.500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Gas</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.478</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.59</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.926</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.134</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">.015</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Dry</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">.500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.585</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">.745</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Oil</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.56</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">.300</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Gas</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.042</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.84</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.528</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.413</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">.698</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Dry</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.585</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">.276</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.255</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.504</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17.89</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.613</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.689</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.253</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt"><B>Oil and Gas Production</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2003, the Company had ownership interests in the
following numbers of gross and net producing oil and gas wells and gross and
net producing acres (1).

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="55%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="57%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Gross</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Net</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Producing wells (1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Oil Wells</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">886</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">250.97</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Gas Wells</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,183</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">323.73</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Producing Acres</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">279,206</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">97,654</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>A gross well or gross acre is a well or an acre in which a working
interest is owned. A net well or net is the sum of the fractional revenue
interests owned in gross wells or gross acres. Wells are classified by
their primary product. Some wells produce both oil and gas.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table shows the Company&#146;s net production of crude oil and
natural gas for each of the five years ended December&nbsp;31, 2003. &#147;Net&#148;
production is net after royalty interests of others are deducted and is
determined by multiplying the gross production volume of properties in which
the Company has an interest by percentage of the leasehold, mineral or royalty
interest owned by the Company.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="75%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="20%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2001</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2000</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>1999</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Oil (barrels)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">370,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">321,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">306,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">298,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">264,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Gas (Mcf) </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,991,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,540,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,764,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,930,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,289,000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">10
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the Company&#146;s average sales price per barrel of
crude oil and average sales prices per one thousand cubic feet (&#147;Mcf&#148;) of gas,
together with the Company&#146;s average production costs per unit of production for
the five years ended December&nbsp;31, 2003.


<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="75%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="43%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2001</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2000</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>1999</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Average sales price
per barrel
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">28.90</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23.37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24.92</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28.34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15.71</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Average sales price
Per Mcf
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.06</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.76</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.32</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Average production
costs per net equivalent
barrel (1)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">12.42</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.88</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.76</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>




</DIV>




<P>
<HR size="1" width="18%" align="left" noshade>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="1%" nowrap align="right">(1)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Net equivalent barrels are computed at a rate of 6 Mcf per barrel.</TD>
</TR>

</TABLE>



<P align="left" style="font-size: 10pt"><B>Undeveloped Acreage</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the approximate gross and net undeveloped
acreage in which the Company has leasehold, mineral and royalty interests as of
December&nbsp;31, 2003. &#147;Undeveloped acreage&#148; is that 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 or not such acreage
contains proved reserves.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="65%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Leasehold</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Mineral</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Royalty</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Interests</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Interests</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Interests</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Gross</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Net</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Gross</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Net</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Gross</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Net</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>State</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Acres</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Acres</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Acres</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Acres</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Acres</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Acres</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Colorado</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">799</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Gulf of
Mexico</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">93,690</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,874</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV>Montana</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,984</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">786</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Nebraska</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,553</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">331</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">North Dakota</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">640</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Oklahoma</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,345</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,742</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">320</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Texas</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,383</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,086</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">680</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Wyoming</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">125</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5043</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">140</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">TOTAL</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">114,419</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56,699</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,019</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">466</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">926</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt"><B>Reserves</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s interests in proved developed and undeveloped oil and gas
properties have been evaluated by Ryder Scott Company, L.P. for each of the
five years ended December&nbsp;31, 2003. All of the Company&#146;s reserves are located
within the continental United States. The following table summarizes the
Company&#146;s oil and gas reserves at each of the respective dates (figures
rounded):

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="85%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15"><B>Reserve Category</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>&nbsp;</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Proved Developed</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Proved Undeveloped</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Total</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>As of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Oil</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Gas</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Oil</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Gas</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Oil</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Gas</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>12-31</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(bbls)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(Mcf)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(bbls)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(Mcf)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(bbls)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(Mcf)</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">1999</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,110,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,046,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">156,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,110,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,202,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">2000</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,362,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,029,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,362,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,029,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">2001</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,996,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,266,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">453,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,996,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,719,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">2002</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,319,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,917,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,319,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,917,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,865,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,045,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,960,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,905,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,005,000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The estimated future net revenue (using current prices and costs as of
those dates, exclusive of income taxes) and the present value of future net
revenue (at a 10% discount for estimated timing of cash flow) for the Company&#146;s
proved developed and proved undeveloped oil and gas reserves at the end of each
of the five years ended December&nbsp;31, 2003, are summarized as follows (figures
rounded):

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Proved Developed</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Proved Undeveloped</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Total</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Present Value</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Present Value</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Present Value</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>As of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Future Net</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Of Future</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Future Net</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Of Future</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Future Net</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Of Future</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>12-31</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Revenue</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Net Revenue</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Revenue</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Net Revenue</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Revenue</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Net Revenue</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">1999</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">41,103,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,057,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">258,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">151,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41,361,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,208,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">2000</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">199,376,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">113,137,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">199,376,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">113,137,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">2001</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">41,086,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,653,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">957,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">629,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,043,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,282,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">2002</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">97,600,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56,855,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">97,600,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56,855,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">141,194,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85,695,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,891,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,401,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">164,085,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">103,096,000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">11
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Proved developed&#148; oil and gas reserves are reserves that can be expected
to be recovered from existing wells with existing equipment and operating
methods. &#147;Proved undeveloped&#148; oil and gas reserves are 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.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In accordance with FASB Statement No.&nbsp;69, December&nbsp;31 market prices are
determined using the daily oil price or daily gas sales price (&#147;spot price&#148;)
adjusted for oilfield or gas gathering hub and wellhead price differentials
(e.g. grade, transportation, gravity, sulfur, and BS&#038;W) as appropriate. Also
in accordance with SEC and FASB specifications, changes in market prices
subsequent to December&nbsp;31 are not considered.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The spot price for gas at December&nbsp;31, 2003 and 2002 were $5.97 and $4.75
per MMBTU, respectively. The range of spot prices during the year 2003 was a
low of $3.96 and a high of $12.20 and the average was $5.48. The range during
the first quarter of 2004 has been from $5.08 to $7.01 with an average of $5.65.
The recent futures market prices have been in the around $5.50.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The NYMEX price for oil at December&nbsp;31, 2003 and 2002 was $32.55 and
$31.23 per barrel, respectively. The range of NYMEX prices during the year
2003 was a low of $22.00 and a high of $34.50 and the average was $27.67
Range during the first quarter of 2004 has been from $29.50 to $34.75 with an
average of $31.95 The recent futures market prices have fluctuated around
$37.00.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;While it may reasonably be anticipated that the prices received by the
Company for the sale of its production may be higher or lower than the prices
used in this evaluation, as described above, and the operating costs relating
to such production may also increase or decrease from existing levels, such
possible changes in prices and costs were, in accordance with rules adopted by
the SEC, omitted from consideration in making this evaluation for the SEC case.
Actual volumes produced, prices received and costs incurred by the Company may
vary significantly from the SEC case.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since January&nbsp;1, 2004, the Company has not filed any estimates of its oil
and gas reserves with, nor were any such estimates included in any reports to,
any federal authority or agency, other than the Securities and Exchange
Commission, except Form EIA-23, Annual Survey of Domestic Oil and Gas Reserves,
filed with The Energy Information Administration of the U.S. Department of
Energy.

<!-- link2 "Item&nbsp;3. LEGAL PROCEEDINGS" -->

<P align="left" style="font-size: 10pt"><B>Item&nbsp;3. LEGAL PROCEEDINGS</B>.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From time to time, the Company is party to certain legal actions and
claims arising in the ordinary course of business. While the outcome of these
events cannot be predicted with certainty, management does not expect these
matters to have a materially adverse effect on the financial position or
results of operations of the Company.

<!-- link2 "Item&nbsp;4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS" -->

<P align="left" style="font-size: 10pt"><B>Item&nbsp;4. SUBMISSION OF
MATTERS TO A VOTE OF SECURITY HOLDERS.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No matters were submitted during the fourth quarter of the fiscal year
ended December&nbsp;31, 2003 to a vote of the Company&#146;s security-holders through the
solicitation of proxies or otherwise.



<P align="center" style="font-size: 10pt">12
</DIV>


<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<!-- link1 "PART II" -->

<P align="center" style="font-size: 10pt"><B>PART II</B>


<!-- link2 "Item&nbsp;5. MARKET FOR REGISTRANT&#146;S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS" -->


<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="97%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt">
<TD valign="top"><B>Item&nbsp;5.&nbsp;</B></td><td><B>MARKET FOR
REGISTRANT&#146;S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES.</B></td></tr>
</table>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s Common Stock is traded in the NASDAQ Stock Market, trading
symbol &#147;PNRG&#148;. The high and low bid quotations for each quarterly period
during the two years ended December&nbsp;31, 2003, were as follows:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>High</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Low</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">First Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.43</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Second Quarter </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.05</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Third Quarter </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.56</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.50</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Fourth Quarter </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14.61</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.43</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>High</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Low</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">First Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">8.53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">7.90</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Second Quarter </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Third Quarter </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.01</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Fourth Quarter </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.00</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt">The above quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commissions, and may not represent actual transactions.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The number of record holders of the Company&#146;s Common Stock as of March&nbsp;25,
2004 was 998.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No dividends have been declared or paid during the past two years on the
Company&#146;s Common Stock. Provisions of the Company&#146;s line of credit agreement
restrict the Company&#146;s ability to pay dividends. Such dividends may be
declared out of funds legally available therefore, when and as declared by the
Company&#146;s Board of Directors.

<!-- link2 "Item&nbsp;6. SELECTED FINANCIAL DATA" -->

<P align="left" style="font-size: 10pt"><B>Item&nbsp;6. SELECTED FINANCIAL DATA</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table summarizes certain selected financial data to
highlight significant trends in the Company&#146;s financial condition and results
of operations for the periods indicated. The selected financial data should be
read in conjunction with the Financial Statements and related notes included
elsewhere in this Report.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="33%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2001</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2000</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>1999</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">48,428,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,934,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,408,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,182,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,520,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Income (loss)&nbsp;from operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">8,047,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,168,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,968,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,148,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,116,000</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net Income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,702,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,757,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,413,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,365,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,138,000</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Income (loss)&nbsp;per common share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.56</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.47</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.39</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.48</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net Cash provided by operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">19,622,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,644,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,313,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,498,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,677,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total Assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">58,255,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,887,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,816,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,094,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,475,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Long-term obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">26,925,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,734,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,958,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,213,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,217,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cash Dividends</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">None</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">None</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">None</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">None</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">None</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>


<!-- link2 "Item&nbsp;7. Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations" -->

<P align="left" style="font-size: 10pt"><B>Item&nbsp;7. MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This discussion should be read in conjunction with the financial
statements of the Company and notes thereto. The Company&#146;s subsidiaries are
defined in Note 1 of the financial statements.


<P align="left" style="font-size: 10pt"><B>Liquidity And Capital Resources</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash flow provided by operations for the year ended December&nbsp;31,
2003,increased by $10 million, compared to the prior year, primarily due
to a 14% increase in production and an increase in oil and gas prices
throughout the entire year, combined with changes in our working
capital accounts. We expect sufficient cash flow to be provided by
operations during
2004 because of higher projected production from new properties,
combined with oil and gas prices consistent with 2003 and steady operating,
general and administrative, interest and financing costs.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Excluding the effects of significant unforeseen expenses or other income,
our cash flow from operations fluctuates primarily because of variations in oil
and gas production and prices or changes in working capital accounts. Our oil
and gas production will vary based on actual well performance but may be
curtailed due to factors beyond our control. Hurricanes in the Gulf of Mexico
may shut down our production for the duration of the storm&#146;s presence in the
Gulf or damage production facilities so that we cannot produce from a
particular property for an extended amount of time. In addition, downstream
activities on major pipelines in the Gulf of Mexico can also cause us to
shut-in production for various lengths of time.


<P align="center" style="font-size: 10pt">13
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our realized oil and gas prices vary due to world political events, supply
and demand of products, product storage levels, and weather patterns. We sell
the vast majority of our production at spot market prices. Accordingly, product
price volatility will affect our cash flow from operations. To mitigate price
volatility we sometimes lock in prices for some portion of our production
through the use of financial instruments. Currently we have no such
arrangements in place.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We expect to continue to make significant capital expenditures over the
next several years as part of our long-term growth strategy. We have budgeted
$16 million for drilling expenditures in 2004. We project that we
will spend $10 million in the Gulf of Mexico and $6&nbsp;million on onshore wells.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If our exploratory drilling results in significant new discoveries, we
will have to expend additional capital in order to finance the completion,
development, and potential additional opportunities generated by our success.
We believe that, because of the additional reserves resulting from the success
and our record of reserve growth in recent years, we will be able to access
sufficient additional capital through additional bank financing.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Effective
February 2004, we agreed with our lenders to increase the borrowing base
from $28,999,996&nbsp;million to $47,066,662&nbsp;million and to extend the maturity of the loan facility
from March 2005 to March 2007. As of December&nbsp;31, 2003, $28,800,000&nbsp;million was borrowed under the
facility. The banks review the borrowing base semi-annually and, at their
discretion, may decrease or propose an increase to the borrowing base relative
to a redetermined estimate of proved oil and gas reserves. Our oil and gas
properties are pledged as collateral for the line of credit and we are subject
to certain financial covenants defined in the agreement. We are currently in
compliance with these financial covenants. If we do not comply with these
covenants on a continuing basis, the lenders have the right to refuse to
advance additional funds under the facility and/or declare all principal and
interest immediately due and payable.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;It is the goal of the Company to increase its oil and gas reserves and
production through the acquisition and development of oil and gas properties.
The Company also continues to explore and consider opportunities to further
expand its oilfield servicing revenues through additional investment in field
service equipment. However, the majority of the Company&#146;s capital spending is
discretionary, and the ultimate level of expenditures will be dependent on the
Company&#146;s assessment of the oil and gas business environment, the number and
quality of oil and gas prospects available, the market for oilfield services,
and oil and gas business opportunities in general.


<P align="left" style="font-size: 10pt"><B>Results of Operations:</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2003 as compared to 2002</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company had net income of $5,702,000 in 2003 as compared to $1,757,000
in 2002


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Oil
and gas sales </I>were $29,855,000 in 2003 as compared to $18,330,000 in
2002. A chart summarizing oil and gas production and revenue is
presented below.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="37%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Increase (Decrease)</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Barrels of Oil Produced</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">370,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">321,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Average Price Received</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">28.90</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">23.37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5.53</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Oil Revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">10,693,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">7,510,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,183,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Mcf of Gas Produced</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,991,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,540,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">451,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Average Price Received</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3.06</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.74</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Gas Revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">19,162,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">10,820,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">8,342,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total Oil &#038; Gas Revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">29,855,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">18,330,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">11,525,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>District operating income </I>increased to $16,630,000 in 2003 from
$15,308,000 in 2002. This increase reflects higher utilization of
equipment during 2003.


<P align="center" style="font-size: 10pt">14
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Lease operating expenses </I>increased by 25% to $12,783,000 in 2003 as
compared to $10,210,000 in 2002. The difference is attributable to
production taxes related to higher prices combined with costs on properties
added during 2003 and repairs made to marginal wells currently economic due to higher product price levels.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Administrative revenue</I>, which represents the reimbursement of general and
administrative overhead expended on behalf of the Partnerships and the
Company&#146;s joint venture partners remained unchanged. In both years, amounts
received from certain of the Partnerships were substantially less than the
amounts allocable to these Partnerships under the partnership agreements. The
lower amounts reflect PEMC&#146;s continuing efforts to reduce costs, both incurred
and allocated to the Partnerships.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Reporting and management fees </I>are earned from providing the accounting and
reporting functions for certain of the Partnerships.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company receives reimbursement for costs incurred related to the
evaluation and acquisition of properties on behalf of the Partnerships and
other joint venture partners. To the extent that these property acquisition
costs are expended at the district level, the reimbursements are recorded as a
reduction of total district operating expenses. When expenses are incurred at
the corporate headquarters level, such reimbursements are recorded as a
reduction of total general and administrative expenses. During 2003 and 2002,
the Company&#146;s total reimbursements for property acquisition costs were
approximately $327,000 and $450,000, respectively.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>General and administrative expenses </I>increased to $5,135,000 in 2003 as
compared to $ 4,888,000 in 2002 . This increase reflects the addition
of FW&#146;s costs and increased ownership in the Partnerships offset by savings
related to reduced personnel costs in the Connecticut office


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Depreciation and depletion </I>of oil and gas properties increased by 57 %
to $ 6,283,000 in 2003 from $3,988,000 in 2002. This increase is related to the
additional capital costs expended in 2003 combined with increased production.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Exploration costs</I> of $519,000 were incurred during 2003 drilling seven dry holes. Exploration costs of
$894,000 were incurred during 2002 drilling five dry holes.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Interest expense </I>increased to $880,000 in 2003 from $766,000 in 2002 due
to increased average outstanding debt. The average interest
rates paid on outstanding borrowings subject to interest at the bank&#146;s base
rate during 2003 and 2002 were 4.50%. During the same
periods, the average rates paid on outstanding borrowings bearing interest
based upon the LIBO rate were 3.84% and 3.59%. As of December&nbsp;31, 2003 and 2002,
the total outstanding borrowings were $27,280,000 and $24,500,000,
respectively.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Income
tax expense</I> of $2,446,000 in 2003 represents a 30% effective rate
as compared to the effective rate of 20% in 2002. Current tax expense in 2003
was $867,000 with the remainder being attributable to an increase in the
Company&#146;s deferred tax liability.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The primary reason that the Company&#146;s federal tax expense for 2003 is well below the statutory rate is that the Company is allowed to deduct currently,
rather than capitalize, intangible drilling costs as incurred. The current deduction of these costs, which are capitalized for financial accounting purposes,
is also the primary reason for the increase in the Company&#146;s deferred tax liability between 2002 and 2003.



<P align="center" style="font-size: 10pt">15
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2002 as compared to 2001</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company had net income of $1,757,000 in 2002 as compared to
$5,413,000 in 2001. The decrease in net income is primarily due to lower
commodity prices.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Oil and gas sales </I>were $18,330,000 in 2002 as compared to $22,998,000 in
2001 A chart summarizing oil and gas production and revenue, including the
Company&#146;s share of production and revenue from the Partnerships, follows.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="38%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2001</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Increase (Decrease)</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Barrels of Oil Produced</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">321,384</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">306,016</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,368</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Average Price Received</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">23.37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">24.92</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">($</TD>
    <TD align="right">1.55</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Oil Revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">7,510,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">7,626,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">($</TD>
    <TD align="right">117,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Mcf of Gas Produced</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,540,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,763,605</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(259,605</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Average Price Received</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3.0564</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">($</TD>
    <TD align="right">1.03</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Gas Revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">10,820,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">15,372,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">($</TD>
    <TD align="right">4,552,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total Oil &#038; Gas Revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">18,330,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">22,998,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">($</TD>
    <TD align="right">4,668,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>District operating income </I>decreased from $17,082,000 in 2001 to
$15,308,000 in 2002 This decrease is due to reduced utilization of equipment
combined with discounted rates in effect during the first half of 2002.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Lease operating expenses </I>decreased by 8% to $10,210,000 in 2002 as
compared to $11,083,000 in 2001. The difference is attributable to production
taxes related to lower prices combined with discounts on expenses due to the
weak price environment in the first half of 2002


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Administrative revenue</I>, which represents the reimbursement of general and
administrative overhead expended on behalf of the Partnerships and the
Company&#146;s joint venture partners decreased by 4% to $1,473,000 in 2002 as
compared to $1,535,000 in 2001. In both years, amounts received from certain
of the Partnerships were substantially less than the amounts allocable to these
Partnerships under the partnership agreements. The lower amounts reflect
PEMC&#146;s continuing efforts to reduce costs, both incurred and allocated to the
Partnerships.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Reporting and management fees </I>are earned from providing the accounting and
reporting functions for certain of the Partnerships.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company receives reimbursement for costs incurred related to the
evaluation and acquisition of properties on behalf of the Partnerships and
other joint venture partners. To the extent that these property acquisition
costs are expended at the district level, the reimbursements are recorded as a
reduction of total district operating expenses. When expenses are incurred at
the corporate headquarters level, such reimbursements are recorded as a
reduction of total general and administrative expenses. During 2002 and 2001,
the Company&#146;s total reimbursements for property acquisition costs were
approximately $450,000 and $558,000, respectively.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>General
and administrative expenses </I>increased to $4,888,000 in 2002 as
compared to $4,310,000 in 2001. This increase reflects the change in cost
reimbursement combined with an increase in the Company&#146;s share of general and
administrative expenses incurred by the Partnerships.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Depreciation and depletion </I>of oil and gas properties decreased by 12% to
$3,988,000 in 2002 as compared to $4,522,000 in 2001 as a result of increases
in estimates of proved reserves.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Exploration costs </I>of $894,000 were incurred during 2002 drilling five dry
holes. Exploration costs of $509,000 in 2001 consist primarily of the cost of
three dry holes drilled in 2001.


<P align="center" style="font-size: 10pt">16
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Interest expense </I>declined to $766,000 in 2002 as compared to $895,000 in
2001 due to a combination of lower interest rates and lower average outstanding
debt. The average interest rates paid on outstanding
borrowings subject to interest at the bank&#146;s base rate during 2002 and
2001 were 4.25% and 6.92%, respectively. During the same periods, the average
rates paid on outstanding borrowings bearing interest based upon the LIBO rate
were 3.58% and 5.98% As of December&nbsp;31, 2002 and 2001, the total outstanding
borrowings were$24,500,000 and $16,950,000, respectively.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income tax expense of $443,000 in 2002 represents a 20% effective rate as
compared to the effective rate of 24% in 2001. Current tax expense in 2002 was
$199,000 with the remainder being attributable to an increase in the Company&#146;s
deferred tax liability. The low current tax expense is primarily attributable
to federal tax credits for producing fuel from a nonconventional source,
percentage depletion deductions, larger depreciation deductions allowed for tax
purposes, and the utilization of federal net operating loss carry forward.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All of the Company&#146;s net operating loss carry forwards will have been used
or expired as of the end of 2002, and under current law the credit for
producing fuel from a nonconventional source will no longer be allowed after
2002, it is possible that the company&#146;s current and overall tax rates may be
significantly higher in future years

<!-- link2 "Item&nbsp;7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK" -->

<P align="left" style="font-size: 10pt"><B>Item&nbsp;7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company is exposed to interest rate risk on its line of credit, which
has variable rates based upon the lenders base rate, as defined, and the London
Inter-Bank Offered rate. Based on the balance outstanding at December&nbsp;31,
2003, a hypothetical 2% increase in the applicable interest rates would
increase interest expense by approximately $401,000.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Oil and gas prices have historically been extremely volatile, and have
been particularly so in recent years. The Company did not enter into
significant hedging transactions during 2003, and had no open hedging
transactions at December&nbsp;31, 2003. Declines in domestic oil and gas prices
could have a material adverse effect on the Company&#146;s revenues, operating
results, estimates of economically recoverable reserves and the net revenue
there from.

<!-- link2 "Item&nbsp;8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA" -->

<P align="left" style="font-size: 10pt"><B>Item&nbsp;8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Included on pages F-1 through F-26 of this Report. The Index to
Financial Statements is at page F-1 of this Report.

<!-- link2 "Item&nbsp;9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE" -->
<P align="left" style="font-size: 10pt"><B>Item&nbsp;9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None.


<P align="center" style="font-size: 10pt">17
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<!-- link2 "Item&nbsp;9A. Internal Controls and Procedures" -->
<P align="left" style="font-size: 10pt"><B>Item&nbsp;9A. INTERNAL CONTROLS AND PROCEDURES.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based upon an evaluation within the 90&nbsp;days prior to the filing date of
this report, our Chief Executive Officer and Chief Financial Officer have each
concluded that our disclosure controls and procedures as defined in Rules
13a-14 and 15d-14 of the Securities Exchange Act of 1934, as amended, are
effective, as of the evaluation date, in timely alerting them to material
information relating to our Company required to be included in our reports
filed or submitted under the Exchange Act. Since the date of the evaluation,
there have been no significant changes in our internal controls or in other
factors that could significantly affect such controls, including any corrective
actions with regard to significant deficiencies and material weaknesses.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our management, including the Chief Executive Officer and Chief Financial
Officer, does not expect that our disclosure controls and procedures or our
internal controls will prevent all errors and all fraud. A control system, no
matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met. Further,
the design of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their
costs. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, within the company have been detected. These
inherent limitations include the realities that judgments in decision-making
can be faulty, and that breakdowns can occur because of simple error or
mistake. Additionally, controls can be circumvented by the individual acts of
some persons or by collusion of two or more people. The design of any system of
controls also is based in part upon certain assumptions about the likelihood of
future events, and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions; over time,
controls may become inadequate because of changes in conditions, or the degree
of compliance with the policies or procedures may deteriorate. Because of the
inherent limitations in a cost-effective control system, misstatements due to
error or fraud may occur and not be detected. Accordingly, our disclosure
controls and procedures are designed to provide reasonable, not absolute,
assurance that the objectives of our disclosure control system are met and, as
set forth above, our Chief Executive Officer and Chief Financial Officer have
concluded, based on their evaluation as of the end of the period, that our
disclosure controls and procedures were sufficiently effective to provide
reasonable assurance that the objectives of our disclosure control system were
met.

<!-- link1 "PART III" -->

<P align="center" style="font-size: 10pt"><B>PART III</B>


<!-- link2 "Item&nbsp;10. Directors and Executive Officers of the Registrant" -->

<P align="left" style="font-size: 10pt"><B>Item&nbsp;10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Information relating to the Company&#146;s Directors, nominees for Directors
and executive officers is included in the Company&#146;s definitive proxy statement
relating the Company&#146;s Annual Meeting of Stockholders to be held
in June,&nbsp;2004,
which will be filed with the U.S. Securities and Exchange Commission within 120
days of December&nbsp;31, 2003 and which is incorporated herein by reference..

<!-- link2 "Item&nbsp;11. Executive Compensation" -->

<P align="left" style="font-size: 10pt"><B>Item&nbsp;11. EXECUTIVE COMPENSATION</B>.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Information relating to executive compensation is included in the
Company&#146;s definitive proxy statement relating to the Company&#146;s Annual Meeting
of Stockholders to be held in June,&nbsp;2004, which will be filed with the U.S.
Securities and Exchange Commission within 120&nbsp;days of December&nbsp;31, 2003 and
which is incorporated herein by reference.

<!-- link2 "Item&nbsp;12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters" -->

<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="97%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt">
<TD valign="top"><B>Item&nbsp;12.&nbsp;</B></td><td><B>SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.</B></td></tr>
</table>





<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Information relating to security ownership of certain beneficial owners
and management is included in the Company&#146;s definitive proxy statement relating
the Company&#146;s Annual Meeting of Stockholders to be held in June,&nbsp;2004, which
will be filed with the U.S. Securities and Exchange Commission within 120&nbsp;days
of December&nbsp;31, 2003 and which is incorporated herein by reference.

<!-- link2 "Item&nbsp;13. Certain Relationships and Related Party Transactions" -->
<P align="left" style="font-size: 10pt"><B>Item&nbsp;13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Information relating to certain transactions by Directors and executive
officers of the Company is included in the Company&#146;s definitive proxy statement
relating the Company&#146;s Annual Meeting of Stockholders to be held
in June,&nbsp;2004,
which will be filed with the U.S. Securities and Exchange Commission within 120
days of December&nbsp;31, 2003 and which is incorporated herein by reference.


<P align="center" style="font-size: 10pt">18
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<!-- link2 "Item&nbsp;14. Principal Accounting Fees and Services" -->

<P align="left" style="font-size: 10pt"><B>Item&nbsp;14. PRINCIPAL
ACCOUNTANT FEES AND SERVICES.</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Information relating to principal accountant fees and services is included in
the Company&#146;s definitive proxy statement relating to the Company&#146;s Annual
Meeting of Stockholders to be held in June,&nbsp;2004, which will be filed with the
U.S. Securities and Exchange Commission within 120&nbsp;days of December&nbsp;31, 2003
and which is incorporated herein by reference.



<P align="center" style="font-size: 10pt">19
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<!-- link1 "PART IV" -->

<P align="center" style="font-size: 10pt"><B>PART IV</B>


<!-- link2 "Item&nbsp;15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K" -->
<P align="left" style="font-size: 10pt"><B>Item&nbsp;15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.</B>



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The following documents are filed as part of this Report:</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" nowrap align="right">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Financial statements ( Index to Financial Statements at page F-1 of
this Report)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" nowrap align="right">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Financial Statement Schedules ( Index to Financial Statements &#150;
Supplementary Information )</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" nowrap align="right">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Exhibits</TD>
</TR>

</TABLE>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="8%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>No.</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Restated Certificate of Incorporation of PrimeEnergy Corporation.
(Incorporated herein by reference to Exhibit&nbsp;3.1 of PrimeEnergy Corporation Form&nbsp;10-KSB
for the year ended December&nbsp;31, 1999)</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Bylaws of PrimeEnergy Corporation. (Incorporated herein by
reference to Exhibit&nbsp;3.2 of PrimeEnergy Corporation Form&nbsp;10-KSB for
the year ended December&nbsp;31, 1999)</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.3.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Adoption Agreement #003 dated 4/23/2002, MassMutual Life Insurance
Company Flexinvest Prototype Non-Standardized 401(k) Profit Sharing
Plan; EGTRRA Amendment to the PrimeEnergy employees 401 (k)&nbsp;Savings
Plan; MassMutual Retirement Services Flexinvest Defined Contribution
Prototype Plan; Protected Benefit Addendum; Addendum to the
Administrative Services Agreement Loan Agreement; Addendum to
Administrative Services agreement GUST Restatement Provisions; General
Trust Agreement (filed herewith)(1)</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.17
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended Marketing Agreement between PrimeEnergy Management
Corporation and Charles E. Drimal, Jr. (Incorporated herein by
reference to Exhibit&nbsp;10.17 of PrimeEnergy Corporation Form&nbsp;10-KSB for
the year ended December&nbsp;31, 1994) (1)</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.18
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Composite copy of Non-Statutory Option Agreements (Incorporated
by reference to Exhibit&nbsp;10.18 of PrimeEnergy Corporation for 10-KSB for
the year ended December&nbsp;31, 1997) (1)</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.22
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Credit Agreement dated as of December&nbsp;19, 2002 between
PrimeEnergy Corporation, PrimeEnergy Management Corporation, Eastern
Oil Well Service Company, Southwest Oilfield Construction Company,
EOWS Midland Company and Guaranty Bank , FSB (incorporated by
reference to Exhibit&nbsp;10.22 of PrimeEnergy Corporation 10-K for the
year ended December&nbsp;31, 2002)</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.22.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">First Amendment to Credit Agreement dated as of effective as of
June&nbsp;1, 2003 between PrimeEnergy Corporation, PrimeEnergy Management
Corporation, Eastern Oil Well Service Company, Southwest Oilfield
Construction Company, EOWS Midland Company and Guaranty Bank , FSB
(filed herewith)</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.22.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Second Amendment to Credit Agreement effective as of September&nbsp;22,
2003 between PrimeEnergy Corporation, PrimeEnergy Management
Corporation, Eastern Oil Well Service Company, Southwest Oilfield
Construction Company, EOWS Midland Company, F-W Oil Exploration
Company L.L.C. and Guaranty Bank , FSB (filed herewith)</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.23
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Mortgage, Deed of Trust, Security Agreement, Financing Statement
and Assignment of Production from PrimeEenrgy Corporation and
PrimeEnergy Management Corporation for the benefit of Guaranty Bank,
FSB incorporated by reference to Exhibit&nbsp;10.23 of PrimeEnergy
Corporation 10-K for the year ended December&nbsp;31, 2002)</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">20
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt"><B>Item&nbsp;15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. continued</B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="8%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.23.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Ratification of and Amendment to Mortgage, Deed of trust,
Indenture, Security Agreement, Financing Statement and Assignment of
Production effective September&nbsp;22, 2003 by PrimeEnergy Corporation,
PrimeEnergy Management Corporation, Eastern Oil Well Service Company,
and Southwest Oilfield Construction Company for the benefit of
Guaranty Bank , FSB ( filed herewith)</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.24
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Act of Mortgage and Security Agreement, by PrimeEnergy
Corporation and PrimeEnergy Management Corporation to Guaranty Bank,
FSB incorporated by reference to Exhibit&nbsp;10.24 of PrimeEnergy
Corporation 10-K for the year ended December&nbsp;31, 2002)</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">21
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Subsidiaries. (filed herewith)</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">22
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consent of Ryder Scott &#038; Company L.P. Company. (filed herewith)</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">31.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certification of Chief Executive Officer pursuant to Rule
13(a)-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as
amended (filed herewith)</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">31.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certification of Chief Financial Officer pursuant to Rule
13(a)-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as
amended (filed herewith)</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">32.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certification of Chief Executive
Officer pursuant to 18 U.S.C. Section&nbsp;1350, adopted pursuant to
Section&nbsp;906 of the Sarbanes-Oxley Act of 2002 (filed herewith).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">32.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certification of Chief Financial
Officer pursuant to 18 U.S.C. Section&nbsp;1350, adopted pursuant to
Section&nbsp;906 of the Sarbanes-Oxley Act of 2002 (filed herewith).</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P>
<HR size="1" width="18%" align="left" noshade>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="1%" nowrap align="right">(1)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Management contract or compensatory plan or arrangement required to be
filed as an Exhibit to this Form 10-K.</TD>
</TR>

</TABLE>



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="5%" nowrap align="right">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Reports on Form 8-K:</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="5%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>None</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">21
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>

<!-- link1 "SIGNATURES" -->

<P align="center" style="font-size: 10pt"><B>SIGNATURES</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of Section&nbsp;13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned, thereunto duly authorized, on the 30th day of
March, 2004.


<TABLE width="75%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top">&nbsp;</TD>
    <TD colspan="3">PrimeEnergy Corporation<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD>&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000">/s/ CHARLES E. DRIMAL, JR.
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD>&nbsp;</TD>
    <TD colspan="3">Charles E. Drimal, Jr.&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD>&nbsp;</TD>
    <TD colspan="3">President&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated and on the 30th day of March, 2004.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="25%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="25%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="25%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/CHARLES E. DRIMAL, JR.
<HR size="1" noshade>
Charles E. Drimal, Jr.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" colspan="3">Director and President;<br>
The Principal Executive Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ BEVERLY A. CUMMINGS
<HR size="1" noshade>
Beverly A. Cummings
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" colspan="3">Director, Vice President and Treasurer;<br>
The Principal Financial and Accounting Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ CLINT HURT
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director</TD>
</TR>

<TR style="font-size: 1px">
    <TD valign="top"><HR size="1" noshade><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">James P. Boldrick
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Clint Hurt</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director</TD>
</TR>

<TR style="font-size: 1px">
    <TD valign="top"><HR size="1" noshade><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Samuel R. Campbell
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Jarvis Slade</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ JAN K. SMEETS</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director</TD>
</TR>

<TR style="font-size: 1px">
    <TD valign="top"><HR size="1" noshade><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">James E. Clark
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Jan K. Smeets</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ MATTHIAS ECKENSTEIN
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ GAINES WEHRLE</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director</TD>
</TR>

<TR style="font-size: 1px">
    <TD valign="top"><HR size="1" noshade><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Matthias Eckenstein
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Gaines Wehrle</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ H. GIFFORD FONG
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director</TD>
</TR>

<TR style="font-size: 1px">
    <TD valign="top"><HR size="1" noshade><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">H. Gifford Fong
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Michael Wehrle</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/
THOMAS S.T. GIMBEL
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD valign="top"><HR size="1" noshade><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Thomas S.T. Gimbel
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>




<P align="center" style="font-size: 10pt">22
</DIV>


<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="center" style="font-size: 10pt"><B>INDEX TO FINANCIAL STATEMENTS</B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->

<TR valign="bottom">
    <TD width="92%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Financial
Statements (Included herein at pages F-1 through F-26):</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Report of Independent Public Accountants</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-2</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Financial Statements</DIV></TD>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
</TR>



<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Consolidated Balance Sheets &#151; December&nbsp;31, 2003 and 2002</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-3</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Consolidated Statements of Operations &#151; for the years ended December&nbsp;31,
2003, 2002 and 2001</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Consolidated Statement of Stockholders&#146; Equity &#151; for the years ended
December&nbsp;31, 2003, 2002 and 2001</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-6</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Consolidated Statements of Cash Flows &#151; for the years ended December&nbsp;31,
2003, 2002 and 2001</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Notes to Consolidated Financial Statements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-8</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Supplementary Information:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-19</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Capitalized Costs Relating to Oil and Gas Producing Operations
December&nbsp;31, 2003, 2002 and 2001</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-21</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Costs Incurred in Oil and Gas Property Acquisition, Exploration and
Development Activities, years ended December&nbsp;31, 2003, 2002 and 2001</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-21</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Standardized Measure of Discounted Future Net Cash Flows Relating
to Proved Oil and Gas reserves, years ended December&nbsp;31, 2003,
2002 and 2001</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-22</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Standardized Measure of Discounted Future Net Cash Flows and Changes
Therein Relating to Proved Oil an Gas Reserves, years ended December&nbsp;31,
2003, 2002 and 2001</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-23</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Reserve Quantity Information, years ended December&nbsp;31, 2003, 2002
and 2001</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-24</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Results of Operations from Oil and Gas Producing Activities, years ended
December&nbsp;31, 2003, 2002 and 2001</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-25</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Notes to Supplementary Information</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-26</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">F-1
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="center" style="font-size: 10pt">REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



<P align="left" style="font-size: 10pt">To the Board of Directors and Stockholders of<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;PrimeEnergy
Corporation and Subsidiaries:

<P align="left" style="font-size: 10pt">We have audited the accompanying consolidated balance sheets of PrimeEnergy
Corporation and Subsidiaries as of December&nbsp;31, 2003 and 2002, and the related
consolidated statements of operations, stockholders&#146; equity, and cash flows for
the years ended December&nbsp;31 2003, 2002 and 2001. These financial statements are
the responsibility of the Corporation&#146;s management. Our responsibility is to
express an opinion on these financial statements based on our audits.


<P align="left" style="font-size: 10pt">We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. 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.


<P align="left" style="font-size: 10pt">In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of PrimeEnergy
Corporation and Subsidiaries as of December&nbsp;31, 2003 and 2002, and the
consolidated results of its operations and cash flows for the years ended
December&nbsp;31, 2003, 2002 and 2001 in conformity with accounting principles
generally accepted in the United States of America.



<P align="left" style="font-size: 10pt">PUSTORINO, PUGLISI &#038; CO., LLP<BR>
New York, New York<BR>
March&nbsp;30, 2004



<P align="center" style="font-size: 10pt">F-2
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="center" style="font-size: 10pt">PRIMEENERGY CORPORATION and SUBSIDIARIES


<!-- link1 "CONSOLIDATED BALANCE SHEETS" -->

<P align="center" style="font-size: 10pt">CONSOLIDATED BALANCE SHEETS, December&nbsp;31, 2003 and 2002


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">ASSETS:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Current assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,891,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,886,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Restricted cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,479,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">750,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Accounts receivable, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,108,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,126,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Due from related parties (less allowance for doubtful
accounts $800,000 in 2002)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">209,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,771,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Prepaid expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">336,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">239,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Other current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">297,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">322,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Deferred income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">374,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">309,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,694,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,403,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Property and equipment, at cost :</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Oil and gas properties (successful efforts method):</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Proved</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">91,012,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74,319,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Unproved</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,091,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,134,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Furniture, fixtures and equipment including leasehold
improvements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,389,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,949,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">103,492,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">84,402,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Accumulated depreciation, depletion and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(59,160,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(52,102,000</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Net property and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,332,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,300,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">229,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">206,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">58,255,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">44,909,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">The accompanying notes are an integral part of the consolidated financial statements.



<P align="center" style="font-size: 10pt">F-3
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="center" style="font-size: 10pt">PRIMEENERGY CORPORATION and SUBSIDIARIES


<P align="center" style="font-size: 10pt">CONSOLIDATED BALANCE SHEETS, December&nbsp;31, 2003 and 2002


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="68%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">LIABILITIES and STOCKHOLDERS&#146; EQUITY:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Current liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">8,528,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">6,100,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Current portion of other long-term obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">692,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">824,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Accrued liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Payroll,
Benefits, Interest and Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,504,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,779,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Due to related parties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">933,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,485,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Total current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,657,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,208,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Long-term bank debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,613,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,700,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other long-term obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Asset retirement obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">300,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Deferred income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,237,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,592,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Total liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,819,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,534,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Stockholders&#146; equity:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Preferred stock, $.10 par value, authorized 5,000,000 shares;
none issued</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Common stock, $.10 par value, authorized 10,000,000 shares;
issued 7,694,970 in 2003 and 2002</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">769,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">769,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Paid in capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,024,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,024,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Retained earnings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,378,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,676,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,171,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,469,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Treasury stock, at cost 4,065,768 common shares in 2003
and 4,001,964 in 2002</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(13,735,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(13,094,000</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Total stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,436,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,375,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Total liabilities and stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">58,255,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">44,909,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">The accompanying notes are an integral part of the consolidated financial statements.



<P align="center" style="font-size: 10pt">F-4
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="center" style="font-size: 10pt">PRIMEENERGY CORPORATION AND SUBSIDIARIES


<!-- link1 "CONSOLIDATED STATEMENTS of OPERATIONS" -->

<P align="center" style="font-size: 10pt">CONSOLIDATED STATEMENTS of OPERATIONS



<P align="center" style="font-size: 10pt">for the years ended December&nbsp;31, 2003, 2002 and 2001


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="55%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2001</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Revenue:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Oil and gas sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">29,855,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">18,330,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">22,998,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">District operating income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,630,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,308,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,082,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Administrative revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,474,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,473,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,535,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Reporting and management fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">234,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">275,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">297,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Gains/(losses) on derivative instruments net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(52,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(113,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">138,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">241,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">609,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">358,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48,428,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,934,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,408,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Costs and expenses:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Lease operating expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,783,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,210,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,083,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">District operating expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,781,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,020,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,368,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Depreciation and depletion of
oil and gas properties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,283,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,988,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,522,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Impairment of oil and gas properties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">753,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">General and administrative expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,135,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,888,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,310,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Exploration costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">519,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">894,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">509,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">880,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">766,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">895,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,381,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,766,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,440,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Income from operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,047,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,168,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,968,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other income:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Gain on sale and exchange of assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">101,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">166,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Income before provision for income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,148,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,200,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,134,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Provision for income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,446,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">443,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,721,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,702,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,757,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,413,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Basic net income per common share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.56</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.47</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.39</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Diluted net income per common share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.18</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">The accompanying notes are an integral part of the consolidated financial statements.



<P align="center" style="font-size: 10pt">F-5
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="center" style="font-size: 10pt">PRIMEENERGY CORPORATION and SUBSIDIARIES


<!-- link1 "CONSOLIDATED STATEMENT of STOCKHOLDERS&#146; EQUITY" -->

<P align="center" style="font-size: 10pt">CONSOLIDATED STATEMENT of STOCKHOLDERS&#146; EQUITY



<P align="center" style="font-size: 10pt">for the years ended December&nbsp;31, 2003, 2002 and 2001


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Additional</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Common Stock</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Paid In</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Retained</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Treasury</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Shares</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amount</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Capital</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Earnings</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Stock</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Total</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Balance at December&nbsp;31, 2000</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,607,970</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">761,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">10,902,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,506,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(9,193,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4,976,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Exercised stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">87,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">122,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">130,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Purchased 420,160 shares of
common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,156,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,156,000</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,413,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,413,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Balance at December&nbsp;31, 2001</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,694,970</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">769,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">11,024,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">7,919,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(12,349,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">7,363,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Purchased 92,862 shares of
common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(745,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(745,000</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,757,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,757,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Balance at December&nbsp;31, 2002</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,694,970</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">769,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">11,024,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">9,676,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(13,094,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">8,375,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Purchased 63,804 shares of
common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(641,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(641,000</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,702,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,702,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Balance at December&nbsp;31, 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,694,970</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">769,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">11,024,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">15,378,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(13,735,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">13,436,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">The accompanying notes are an integral part of the consolidated financial statements.



<P align="center" style="font-size: 10pt">F-6
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="center" style="font-size: 10pt">PRIMEENERGY CORPORATION and SUBSIDIARIES


<!-- link1 "CONSOLIDATED STATEMENTS of CASH FLOWS" -->

<P align="center" style="font-size: 10pt">CONSOLIDATED STATEMENTS of CASH FLOWS



<P align="center" style="font-size: 10pt">for the years ended December&nbsp;31, 2003, 2002 and 2001


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->

<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2001</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cash flows from operating activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,702,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,757,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,413,000</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Adjustments to reconcile net loss to net cash
provided
by operating activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Depreciation, depletion and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,525,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,231,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,599,000</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Impairment of oil and gas properties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">753,000</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Dry hole and abandonment costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">519,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">894,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">496,000</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Gain on sale of properties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(101,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(32,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(166,000</TD>
    <TD nowrap>)</TD>
</TR>


<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Provision for deferred income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,580,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">243,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,684,000</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Changes in assets and liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">(Increase) decrease in accounts receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,982,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(328,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,865,000</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">(Increase) decrease in due from related parties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,562,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">153,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(578,000</TD>
    <TD nowrap>)</TD>
</TR>


<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">(Increase) decrease in other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">682,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(874,000</TD>
    <TD nowrap>)</TD>
</TR>


<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">(Increase) decrease in prepaid expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(97,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(175,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48,000</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Increase (decrease)&nbsp;in accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,699,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">736,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,086,000</TD>
    <TD nowrap>)</TD>
</TR>


<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Increase (decrease)&nbsp;in accrued liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,712,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(19,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(559,000</TD>
    <TD nowrap>)</TD>
</TR>


<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Increase (decrease)&nbsp;in due to related parties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(500,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">502,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(282,000</TD>
    <TD nowrap>)</TD>
</TR>


<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net cash provided by operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,622,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,644,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,313,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cash flows from investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Proceeds from sale of properties and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">101,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">520,000</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Additions to property and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(19,835,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(14,442,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8,527,000</TD>
    <TD nowrap>)</TD>
</TR>


<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net cash used in investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(19,734,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(14,410,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8,007,000</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cash flows from financing activities</DIV></TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Purchase of stock for treasury</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(641,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(745,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,156,000</TD>
    <TD nowrap>)</TD>
</TR>


<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Repayment of long-term bank debt and other
long-term
obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(43,679,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(43,260,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(40,619,000</TD>
    <TD nowrap>)</TD>
</TR>


<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Increase in long-term bank debt and other
long-term obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,437,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,572,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,740,000</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Proceeds from exercised stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">130,000</TD>
    <TD>&nbsp;</TD>
</TR>


<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net cash provided by (used in) financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,117,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,567,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,905,000</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net increase (decrease)&nbsp;in cash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,005,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,801,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(599,000</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cash and cash equivalents, beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,886,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">684,000</TD>
    <TD>&nbsp;</TD>
</TR>


<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cash and cash equivalents, end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,891,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,886,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">85,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Supplemental disclosures:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Income taxes paid during the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">83,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,200,000</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net income tax refunds received during the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">745,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Interest paid during the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">880,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">766,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">901,000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">Supplemental information of noncash investing and financing activities:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2002, the Company recorded capital lease obligations in the amount of $59,000.


<P align="center" style="font-size: 10pt">The accompanying notes are an integral part of the consolidated financial statements.



<P align="center" style="font-size: 10pt">F-7
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="center" style="font-size: 10pt">PRIMEENERGY CORPORATION and SUBSIDIARIES


<!-- link1 "NOTES to CONSOLIDATED FINANCIAL STATEMENTS" -->

<P align="center" style="font-size: 10pt">NOTES to CONSOLIDATED FINANCIAL STATEMENTS



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right"><B>1.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Description of Operations and Significant Accounting Policies</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Nature of Operations</I>:</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>PrimeEnergy Corporation (&#147;PEC&#148;), a Delaware corporation, was organized in
March&nbsp;1973. PrimeEnergy Management Corporation (&#147;PEMC&#148;), a wholly-owned
subsidiary, acts as the managing general partner, providing
administration, accounting and tax preparation services for 18 private and
publicly-held limited partnerships and 2 trusts (collectively, the
&#147;Partnerships&#148;). During the course of 2003 PrimeEnergy dissolved 20
private limited partnerships. PEC owns Eastern Oil Well Service Company
(&#147;EOWSC&#148;), EOWS Midland Company(&#147;EMID&#148;) and Southwest Oilfield
Construction Company (&#147;SOCC&#148;), all of which perform oil and gas field
servicing. PEC also owns Prime Operating Company (&#147;POC&#148;), which serves as
operator for most of the producing oil and gas properties owned by the
Company and affiliated entities. Field service revenues and the
administrative overhead fees earned as operator are reported as &#145;District
operating income&#146; on the consolidated statement of operations. During 2003
PEC acquired a sixty percent interest in F-W Oil Exploration LLC, (&#147;FW&#148;),
which ownes and operates properties in the Gulf of Mexico. PrimeEnergy
Corporation and its subsidiaries are herein referred to as the &#147;Company.&#148;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company is engaged in the development, acquisition and production of
oil and natural gas properties. The Company owns leasehold, mineral and
royalty interests in producing and non-producing oil and gas properties
across the United States, including Colorado, Kansas, Louisiana,
Mississippi, Montana, Nebraska, New Mexico, North Dakota, Oklahoma, Texas,
Utah, West Virginia and Wyoming and the Gulf of Mexico. The Company
operates 1,533 wells and owns non-operating interests in over 770
additional wells. Additionally, the Company provides well-servicing
support operations, site-preparation and construction services for oil and
gas drilling and re-working operations, both in connection with the
Company&#146;s activities and providing contract services for third parties.
The Company is publicly traded on the NASDAQ under the symbol &#147;PNRG.&#148;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The markets for the Company&#146;s products are highly competitive, as oil and
gas are commodity products and prices depend upon numerous factors beyond
the control of the Company, such as economic, political and regulatory
developments and competition from alternative energy sources.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Principles of Consolidation</I>:</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The consolidated financial statements include the accounts of
PrimeEnergy Corporation, its subsidiaries and the Partnerships, using
the proportionate consolidation method, whereby our proportionate
share of each entity's assets, liabilities, revenue and expenses are
included in the appropriate classifications in the consolidated
financial statements. Inter-company balances and transactions
are eliminated in preparing the consolidated financial statements.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Use of Estimates:</I></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Estimates of oil and gas reserves, as determined by independent petroleum
engineers, are continually subject to revision based on price, production
history and other factors. Depletion expense, which is computed based on
the units of production method, could be significantly impacted by changes
in such estimates. Additionally, FAS 144 requires that if the expected
future cash flow from an asset is less than its carrying cost, that asset
must be written down to its fair market value. As the fair market value of
an oil and gas property will usually be significantly less than the total
future net revenue expected from that property, small changes in the
estimated future net revenue from an asset could lead to the necessity of
recording a significant impairment of that asset.</TD>
</TR>



</TABLE>

<P align="center" style="font-size: 10pt">F-8
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>


<P align="center" style="font-size: 10pt">PRIMEENERGY CORPORATION and SUBSIDIARIES



<P align="center" style="font-size: 10pt">NOTES to CONSOLIDATED FINANCIAL STATEMENTS



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Property and Equipment</I></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company follows the &#147;successful efforts&#148; method of accounting for its
oil and gas properties. Under the successful efforts method, costs of
acquiring undeveloped oil and gas leasehold acreage, including lease
bonuses, brokers&#146; fees and other related costs are capitalized.
Provisions for impairment of undeveloped oil and gas leases are based on
periodic evaluations. Annual lease rentals and exploration expenses,
including geological and geophysical expenses and exploratory dry hole
costs, are charged against income as incurred. Costs of drilling and
equipping productive wells, including development dry holes and related
production facilities, are capitalized. Costs incurred by the Company
related to the exploration, development and acquisition of oil and gas
properties on behalf of the Partnerships or joint ventures are deferred
and charged to the related entity upon the completion of the acquisition.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>All other property and equipment are carried at cost. Depreciation and
depletion of oil and gas production equipment and properties are
determined under the unit-of-production method based on estimated proved
recoverable oil and gas reserves. Depreciation of all other equipment is
determined under the straight-line method using various rates based on
useful lives. The cost of assets and related accumulated depreciation is
removed from the accounts when such assets are disposed of, and any
related gains or losses are reflected in current earnings.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Asset Retirement Obligation:</I></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Effective January&nbsp;1, 2003, the Company adopted SFAS No.&nbsp;143, <I>Accounting for Asset
Retirement Obligations</I>. Our asset retirement obligation primarily
represents the estimated present value of the amount the Company will incur to
plug, abandon and remediate our producing properties (including removal of
our offshore platforms) at the end of their productive lives, in
accordance with applicable state laws. The Company determined our asset retirement
obligation by calculating the present value of estimated cash flows
related to the liability. The retirement obligation is recorded as a
liability at its estimated present value as of the asset&#146;s inception, with
an offsetting increase to producing properties. Periodic accretion of
discount of the estimated liability is recorded as an expense in the
income statement.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Our liability is determined using significant assumptions, including
current estimates of plugging and abandonment costs, annual inflation of
these costs, the productive life of wells and our risk-adjusted interest
rate. Changes in any of these assumptions can result in significant
revisions to the estimated asset retirement obligation. Revisions to the
asset retirement obligation are recorded with an offsetting change to
producing properties, resulting in prospective changes to depreciation,
depletion and amortization expense and accretion of discount. Because of
the subjectivity of assumptions and the relatively long life of most of
our wells, the costs to ultimately retire our wells may vary significantly
from previous estimates.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Income Taxes</I>:</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company records income taxes in accordance with Statement of Financial
Accounting Standards (&#147;SFAS&#148;) No.&nbsp;109, &#147;Accounting for Income Taxes.&#148;
SFAS No.&nbsp;109 is an asset and liability approach to accounting for income
taxes, which requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have
been recognized in the Company&#146;s financial statements or tax returns.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Deferred tax liabilities or assets are established for temporary
differences between financial and tax reporting bases and are subsequently
adjusted to reflect changes in the rates expected to be in effect when the
temporary differences reverse. A valuation allowance is established for
any deferred tax asset for which realization is not likely.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">F-9
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>


<P align="center" style="font-size: 10pt">PRIMEENERGY CORPORATION and SUBSIDIARIES



<P align="center" style="font-size: 10pt">NOTES to CONSOLIDATED FINANCIAL STATEMENTS



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>General and Administrative Expenses</I>:</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>General and administrative expenses represent costs and expenses
associated with the operation of the Company. Certain of the Partnerships
sponsored by the Company reimburse general and administrative expenses
incurred on their behalf.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Income Per Common Share</I>:</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Income per share of common stock has been computed based on the weighted
average number of common shares outstanding during the respective periods
in accordance with SFAS No.&nbsp;128, &#147;Earnings per Share&#148;.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Statements of cash flows:</I></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>For purposes of the consolidated statements of cash flows, the Company
considers short-term, highly liquid investments with original maturities
of less than ninety days to be cash equivalents.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Concentration of Credit Risk:</I></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company maintains significant banking relationships with financial
institutions in the State of Texas. The Company limits its risk by
periodically evaluating the relative credit standing of these financial
institutions. The Company&#146;s oil and gas production purchasers consist
primarily of independent marketers and major gas pipeline companies.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Hedging:</I>
The Company periodically enters into oil and gas financial instruments to
manage its exposure to oil and gas price volatility. The oil and gas
reference prices upon which the price hedging instruments are based
reflect various market indices that have a high degree of historical
correlation with actual prices received by the Company.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The financial instruments are accounted for in accordance with Financial
Accounting Standards (&#147;SFAS&#148;) No.&nbsp;133, &#147;Accounting for Derivative
Instruments and Hedging Activities&#148;, which established new accounting and
reporting requirements for derivative instruments and hedging activities.
SFAS No.&nbsp;133, as amended by SFAS No.&nbsp;138, requires that all derivative
instruments subject to the requirements of the statement be measured at
fair market value and recognized as assets or liabilities in the balance
sheet. The accounting for changes in the fair value of a derivative
depends on the intended use of the derivative and the resulting
designation is generally established at the inception of a derivative.
For derivatives designated as cash flow hedges and meeting the
effectiveness guidelines of SFAS No.&nbsp;133, changes in fair value, to the
extent effective, are recognized in other comprehensive income until the
hedged item is recognized in earnings. Hedge effectiveness is measured at
least quarterly based on the relative changes in fair value between the
derivative contract and the hedged item over time. Any change in fair
value of a derivative resulting from ineffectiveness or an excluded
component of the gain/loss is recognized immediately in the statement of
operations.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Recently Issued Accounting Standards</I>:</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In July&nbsp;2001, the Financial Accounting Standards Board (&#147;FASB&#148;)
issued SFAS No.&nbsp;141, &#147;Business Combinations.&#148; SFAS No.&nbsp;141 is intended to
improve the transparency of the accounting and reporting for business
combinations by requiring that all business combinations be accounted for
under a single method - the purchase method. SFAS 141 is effective for all
transactions completed after June&nbsp;30, 2001, except transactions using the
pooling-of-interests method that were initiated prior to July&nbsp;1, 2001. The
adoption of SFAS 141 did not have an impact on the Company&#146;s consolidated
financial statements.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">F-10
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>


<P align="center" style="font-size: 10pt">PRIMEENERGY CORPORATION and SUBSIDIARIES



<P align="center" style="font-size: 10pt">NOTES to CONSOLIDATED FINANCIAL STATEMENTS



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In July&nbsp;2001, the FASB issued SFAS No.&nbsp;142, &#147;Goodwill and Other
Intangible Assets.&#148; This statement applies to intangibles and goodwill
acquired after June&nbsp;30, 2001, as well as goodwill and intangibles
previously acquired. Under this statement, goodwill as well as other
intangibles determined to have an infinite life will no longer be
amortized; however, these assets will be reviewed for impairment on a
periodic basis. The adoption of SFAS 142 did not have an impact on the
Company&#146;s consolidated financial statements.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In August&nbsp;2001, the FASB issued SFAS No.&nbsp;143, &#147;Accounting for Asset
Retirement Obligations.&#148; SFAS No.&nbsp;143 requires the fair value of a
liability for an asset retirement obligation to be recognized in the
period in which it is incurred if a reasonable estimate of fair value can
be made. The associated asset retirement costs are capitalized as part of
the carrying amount of the long-lived asset. SFAS No.&nbsp;143 is effective for
fiscal years beginning after June&nbsp;15, 2002. The adoption of SFAS no 143
did not have a material effect on the Company&#146;s financial statements as of
December&nbsp;31, 2003.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In October&nbsp;2001, the FASB issued SFAS No.&nbsp;144, &#147;Accounting for the
Impairment or Disposal of Long-Lived Assets.&#148; SFAS No.&nbsp;144 requires that
long-lived assets be measured at the lower of carrying amount or fair
value less cost to sell, whether reported in continuing operations or in
discontinued operations. Therefore, discontinued operations will no longer
be measured at net realizable value or include amounts for operating
losses that have not yet occurred. SFAS No.&nbsp;144 is effective for financial
statements issued for fiscal years beginning after December&nbsp;15, 2001 and
generally, is to be applied prospectively. The adoption of SFAS 144 did
not have an impact on the Company&#146;s consolidated financial statements.
<BR>
<BR>
In April&nbsp;2002, the FASB issued SFAS No.&nbsp;145, &#147;Rescission of FASB
Statements No.&nbsp;4, 44 and 64, Amendment of FASB Statement No.&nbsp;13 and
Technical Corrections.&#148; Prior to the adoption of the provisions of SFAS
No.&nbsp;145, generally accepted accounting principles required gains or
losses on the early extinguishment of debt be classified in a company&#146;s
periodic consolidated statements of operations as extraordinary gains or
losses, net of associated income taxes, below the determination of income
or loss from continuing operations. SFAS No.&nbsp;145 changes generally
accepted accounting principles to require, except in the case of events or
transactions of a highly unusual and infrequent nature, gains or losses
from the early extinguishment of debt be classified as components of a
company&#146;s income or loss from continuing operations. The adoption of the
provisions of SFAS No.&nbsp;145 in 2003 did not affect the Company&#146;s financial
position or results of operations.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In June&nbsp;2002, the FASB issued SFAS No.&nbsp;146, &#147;Accounting for Costs
Associated with Exit or Disposal Activities.&#148; SFAS No.&nbsp;146 requires that a
liability for a cost associated with an exit or disposal activity be
recognized and measured initially at fair value only when the liability is
incurred. SFAS No.&nbsp;146 is effective for exit or disposal activities that
are initiated after December&nbsp;31, 2002. The adoption of SFAS No.&nbsp;146 in
2003 did not effect on the Company&#146;s financial position or results of
operations.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In November&nbsp;2002, the FASB issued Financial Interpretation No.&nbsp;45,
&#147;Guarantor&#146;s Accounting and Disclosure Requirements for Guarantees,
including Indirect Guarantee of Indebtedness of Others&#148; (FIN 45). FIN 45
requires that upon issuance of a guarantee, the guarantor must recognize a
liability for the fair value of the obligation it assumes under that
guarantee. FIN 45&#146;s provisions for initial recognition and
measurement should be applied on a prospective basis to guarantees issued or modified
after December&nbsp;31, 2002. The guarantor&#146;s previous accounting for
guarantees that were issued before the date of FIN 45&#146;s initial
application may not be revised or restated to reflect the effect of the
recognition and measurement provisions of the Interpretation. The
disclosure requirements are effective for financial statements of both
interim and annual periods that end after December&nbsp;15, 2002. The adoption
of FIN 45 did not have an impact on the Company&#146;s consolidated financial
statements.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">F-11
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>


<P align="center" style="font-size: 10pt">PRIMEENERGY CORPORATION and SUBSIDIARIES



<P align="center" style="font-size: 10pt">NOTES to CONSOLIDATED FINANCIAL STATEMENTS



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In December&nbsp;2002, the FASB issued SFAS 148, &#147;Accounting for Stock-Based
Compensation&#151;Transition and Disclosure.&#148; SFAS No.&nbsp;148 amends FASB
Statement No.&nbsp;123, &#147;Accounting for Stock-Based Compensation&#148; to provide
alternative methods of transition for a voluntary change to the fair value
based method of accounting for stock-based employee compensation. In
addition, this Statement amends the disclosure for stock-based employee
compensation and the effect of the method used on the reported results.
The provisions of SFAS 148 are effective for financial statements with
fiscal years ending after December&nbsp;15, 2002. The adoption of this
statement has not impacted the Company&#146;s financial position or results of
operations.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In January&nbsp;2003, the FASB issued Financial Interpretation No.&nbsp;46,
&#147;Consolidation of Variable Interest Entities&#151;an interpretation of ARB No.
51&#148; (FIN 46). FIN 46 is an interpretation of Accounting Research Bulletin
51, &#147;Consolidated Financial Statements&#148;, and addresses consolidation by
business enterprises of variable interest entities (VIE&#146;s). The primary
objective of FIN 46 is to provide guidance on the identification of, and
financial reporting for, entities over which control is achieved through
means other than voting rights; such entities are known as VIE&#146;s. FIN 46
requires an enterprise to consolidate a variable interest entity if that
enterprise has a variable interest that will absorb a majority of the
entity&#146;s expected losses if they occur, receive a majority of the entity&#146;s
expected residual return if they occur, or both. An enterprise shall
consider the rights and obligations conveyed by its variable interests in
making this determination. This guidance applies immediately to variable
interest entities created after January&nbsp;31, 2003, and to variable interest
entities in which an enterprise obtains an interest after that date. It
applies in the first fiscal year or interim period beginning after June
15, 2003, to variable interest entities in which an enterprise holds a
variable interest that it acquired before February&nbsp;1, 2003.. The adoption
of this interpretation did not have an effect on the Company&#146;s financial
position or results of operations.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right"><B>2.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Significant Acquisitions and Dispositions</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>As more fully described in Note 7, the Company is committed to offer to
repurchase the interests of the partners and trust unit holders in
certain of the Partnerships. The Company purchased such interests in an
amount totaling $695,673 in 2003, $1,203,500 in 2002 and $545,000 in
2001. The Company&#146;s proportionate share of assets, liabilities and results of operations related to the interests in the Partnerships are included in the consolidated financial statements.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>F-W Oil Exploration L.L.C. Acquisition:</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Effective August&nbsp;15, 2003 the Company acquired a sixty
percent interest in F-W Oil Exploration L.L.C., a licensed Gulf of
Mexico operator for a cost of $4,000,000. As of that date FW had
approximately 80,000&nbsp;net acres to develop and a 12.5% working interest in two producing blocks in the Gulf of Mexico. The Company&#146;s proportionate share of FW&#146;s assets, liabilities and results of operations for the effective period are included in the consolidated financial statements.</TD>
</TR>



<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right"><B>3.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Accounts Receivable</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Accounts receivable at December&nbsp;31, 2003 and 2002 consisted of the
following:</TD>
</TR>

</TABLE>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="62%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>December 31,</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Joint interest billing</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,174,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">571,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Trade receivables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,607,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,243,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Oil and gas sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,878,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,070,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">906,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">561,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,565,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,445,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Less, allowance for doubtful accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(457,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(319,000</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">7,108,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4,126,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">F-12
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="center" style="font-size: 10pt">PRIMEENERGY CORPORATION and SUBSIDIARIES

<P align="center" style="font-size: 10pt">NOTES to CONSOLIDATED FINANCIAL STATEMENTS

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right"><B>4.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Other Current Assets</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Other current assets at December&nbsp;31, 2003 and 2002 consisted of the
following:</TD>
</TR>

</TABLE>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="56%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>December 31,</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Tax overpayments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">73,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Field service inventory</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">278,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">249,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">297,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">322,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right"><B>5.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Long-Term Bank Debt</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>As of December&nbsp;2002 the Company entered in to a credit agreement with a
new primary lender. The Company and the lender agreed to amend and restate
in its entirety the credit agreement dated April&nbsp;26, 1995 between the
Company and its predecessor lender. This agreement will continue to
provide for borrowings under a Master Note. Advances under the agreement,
as amended, are limited to the borrowing base as defined in the agreement.
The borrowing base is re-determined by the lender on a semi-annual basis.
The current borrowing base is $25&nbsp;million and includes a Term Loan of $4
million. The Term Loan will be paid back in monthly installments of
$66,667 beginning January&nbsp;2003 and continuing until December&nbsp;19, 2004
when such Term Loan shall be paid in full. The credit agreement provides
for interest on outstanding borrowings at the bank&#146;s base rate, as
defined, payable monthly, or at rates 2% over the London Inter-Bank
Offered Rate (LIBO rate) payable at the end of the applicable interest
period</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company had been party to a series of credit agreements with its
former lender or its predecessors since 1983. The agreement, entered into
in April&nbsp;1995, provided for borrowings under a Master Note. Advances
under the agreement, as amended, were limited to the borrowing base as
defined in the agreement and re-determined by the lender on a semi-annual
basis. Since the beginning of 2000, the borrowing base ranged from $20
million to $23.7&nbsp;million. The credit agreement provided for interest on
outstanding borrowings at the bank&#146;s base rate, as defined, payable
monthly, or at rates ranging from 1 1/2% to 2% over the London
Inter-Bank Offered Rate (LIBO rate) depending upon the Company&#146;s
utilization of the available line of credit, payable at the end of the
applicable interest period. This credit agreement was assigned to the
Company&#146;s primary lender effective December&nbsp;2002.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The average interest rates paid on outstanding borrowings subject to
interest at the bank&#146;s base rate during 2003 and 2002 were 4.50%. During the same periods, the average rates paid on
outstanding borrowings bearing interest based upon the LIBO rate were
3.84% and 3.59% . As of December&nbsp;31, 2003 and 2002, the total outstanding
borrowings were $27,280,000 and $24,500,000, respectively, with an
additional $133,333 and $500,000 available. As of December&nbsp;31, 2003
$24,280,000 of total bank debt was paying interest at LIBO rate option per the
credit agreement.
<BR>
<BR>
As of September 2003 the credit agreement was amended to add FW as an
additional borrower. As of December&nbsp;31, 2003 the total
outstanding balance owed by FW to the lender was $3,800,000 with no
additional availability. FW&#146;s oil and gas properties are pledged as
security under the loan agreement as collateral for amounts due from
FW to the lender. The Company&#146;s proportionate share of amounts
owed by FW to the lender are included in the consolidated financial
statements. Total outstanding borrowings under the amended loan
agreement as of December&nbsp;31, 2003 were $28,800,000.

<BR>
<BR>
As of February 2004 the agreement was amended in conjunction with the
semi-annual borrowing base determination. Pursuant to this amendment
the borrowing base including the Term Loan was increased to
$47,066,662 and the maturities were extended to March&nbsp;31, 2007.
Advances to FW and FW&#146;s liability to the lender in accordance with this amendment are limited to $10,120,000.

<BR>
<BR>
The Company&#146;s oil and gas properties as well as certain receivables and
equipment are pledged as security under the loan agreement. The agreement
requires the Company to maintain, as defined, a minimum current ratio,
tangible net worth, debt coverage ratio and interest coverage ratio, and
restrictions are placed on the payment of dividends and the amount of
treasury stock the Company may purchase.</TD>
</TR>

</TABLE>



<P align="center" style="font-size: 10pt">F-13
</DIV>


<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="center" style="font-size: 10pt">PRIMEENERGY CORPORATION and SUBSIDIARIES



<P align="center" style="font-size: 10pt">NOTES to CONSOLIDATED FINANCIAL STATEMENTS



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right"><B>6.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Commitments</B></TD>
</TR>

</TABLE>



<P align="left" style="margin-left:3%; font-size: 10pt"><I>Operating Leases:</I>



<P align="left" style="margin-left:3%; font-size: 10pt">The Company has several noncancelable operating leases, primarily for
rental of office space, that have a term of more than one year.



<P align="left" style="margin-left:3%; font-size: 10pt"><I>Capital Leases:</I>



<P align="left" style="margin-left:3%; font-size: 10pt">The Company has two capital leases for office equipment in other long-term
obligations. Future minimum lease payments under operating and capital
leases are as follows:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="55%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="54%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Operating</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Capital</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Leases</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Leases</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">245,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">336,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">337,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">189,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Thereafter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">370,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total minimum payments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,477,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Less imputed interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Present value of minimum
Lease payments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">36,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt"><B>7. Contingent Liabilities</B>




<P align="left" style="margin-left:3%; font-size: 10pt">The Company, as managing general partner of the affiliated Partnerships,
is responsible for all Partnership activities, including the review and
analysis of oil and gas properties for acquisition, the drilling of
development wells and the production and sale of oil and gas from
productive wells. The Company also provides the administration,
accounting and tax preparation work for the Partnerships, and is liable
for all debts and liabilities of the affiliated Partnerships, to the
extent that the assets of a given limited Partnership are not sufficient
to satisfy its obligations.

<P align="left" style="margin-left:3%; font-size: 10pt">PrimeEnergy
Corporation and each of its subsidiaries are borrowers under a credit
agreement with the Company&#146;s lender, as more fully described in
Footnote&nbsp;5. The pledge of properties owned by FW is limited to
the amounts available to FW. The Company&#146;s assets are pledged as
security under that agreement to all outstanding borrowings including
FW&#146;s. The lender reviews the assets of FW in conjunction with the
semi-annual borrowing base determinations and limits amounts
available to FW to a level consistent with the ability of FW to repay
such borrowings. The Company is liable to the extent that the assets
of FW are not sufficient to satisfy FW&#146;s obligations under the
agreement. Based on the borrowing base determination as of February
2004 the maximum additional amount the Company would be committed to
pay is $4,048,000.

<P align="left" style="margin-left:3%; font-size: 10pt">The Company is subject to environmental laws and regulations. Management
believes that future expenses, before recoveries from third parties, if
any, will not have a material effect on the Company&#146;s financial condition.
This opinion is based on expenses incurred to date for remediation and
compliance with laws and regulations which have not been material to the
Company&#146;s results of operations.



<P align="left" style="margin-left:3%; font-size: 10pt">As a general partner, the Company is committed to offer to purchase the
limited partners&#146; interest in certain of its managed Partnerships at
various annual intervals. Under the terms of a partnership agreement, the
Company is not obligated to purchase an amount greater than 10% of the
total partnership interest outstanding. In addition, the Company will be
obligated to purchase interests tendered by the limited partners only to
the extent of one hundred fifty percent of the revenues received by it
from such partnership in the previous year. Purchase prices are based
upon annual reserve reports of independent petroleum engineering firms
discounted by a risk factor. Based upon historical production rates and
prices, management estimates that if all such offers were to be accepted,
the maximum annual future purchase commitment would be approximately
$500,000.



<P align="left" style="margin-left:3%; font-size: 10pt">The Company owns approximately a 27% interest in a limited partnership
which owns a shopping center in Alabama. The Company is a guarantor on a
mortgage secured by the shopping center. The Company believes the cash
flow from the center is sufficient to service the mortgage. The market
value of the center is currently substantially higher than the balance
owed on the mortgage. If the partnership were unable to pay its
obligations under the mortgage agreement, the maximum amount the Company
is committed to pay is $300,000.


<P align="center" style="font-size: 10pt">F-14
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="center" style="font-size: 10pt">PRIMEENERGY CORPORATION and SUBSIDIARIES



<P align="center" style="font-size: 10pt">NOTES to CONSOLIDATED FINANCIAL STATEMENTS,



<P align="left" style="font-size: 10pt"><B>8. Stock Options and Other Compensation</B>




<P align="left" style="margin-left:3%; font-size: 10pt">In May&nbsp;1989, non-statutory stock options were granted by the Company to
four key executive officers for the purchase of shares of common stock.
At December&nbsp;31, 2003 and 2002, options on 767,500 shares were outstanding
and exercisable at prices ranging from $1.00 to $1.25.



<P align="left" style="margin-left:3%; font-size: 10pt">On January&nbsp;27, 1983, the Company adopted the 1983 Incentive Stock Option
Plan. At December&nbsp;31, 2000, options on 87,000 shares were exercisable at
$1.50 per share. During July&nbsp;2001, all outstanding options under this
plan were exercised.



<P align="left" style="margin-left:3%; font-size: 10pt">PEMC has a marketing agreement with its President to provide assistance
and advice to PEMC in connection with the organization and marketing of
oil and gas partnerships and joint ventures and other investment
vehicles of which PEMC is to serve as general or managing partner. The
Company had a similar agreement with its former Chairman. Although that
agreement expired, the former Chairman was still entitled to receive
certain payments relating to partnerships formed during the time the
agreement was in effect. In October&nbsp;2002, the President and the former
Chairman sold and assigned all rights, title and interest related to
certain Partnerships formed under these marketing agreements to the
Company. The President is still entitled to a percentage of the Company&#146;s
carried interest depending on total capital raised and annual performance
of other Partnerships and joint ventures.


<P align="left" style="font-size: 10pt"><B>9. Income Taxes</B>




<P align="left" style="margin-left:3%; font-size: 10pt">The components of the provision for income taxes for the years ended
December&nbsp;31, 2003, 2002 and 2001 are as follows:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="55%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="22%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2001</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Federal:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Current</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">696,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">95,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">25,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Deferred</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,460,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">216,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,500,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">State:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Current</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">171,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">104,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Deferred</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">119,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">183,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,446,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">443,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,721,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">F-15
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="center" style="font-size: 10pt">PRIMEENERGY CORPORATION and SUBSIDIARIES



<P align="center" style="font-size: 10pt">NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued




<P align="left" style="margin-left:3%; font-size: 10pt">The components of net deferred tax assets (liabilities)&nbsp;are as follows:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="75%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Current assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Compensation and benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">196,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">184,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Allowance for doubtful accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">178,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">125,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">374,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">309,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Noncurrent assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">163,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">485,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Due from related parties reserve</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">312,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Percentage depletion carryforwards</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">297,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Alternative minimum tax credits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">393,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,040,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">556,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,134,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Noncurrent liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Basis differences relating to limited partnerships</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,351,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,211,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Depletion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,442,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,515,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,793,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,726,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net deferred tax liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,863,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,283,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>




<P align="left" style="margin-left:3%; font-size: 10pt">The total provision for income taxes for the years ended December&nbsp;31,
2003, 2002 and 2001 varies from the federal statutory tax rate as a result
of the following:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="85%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2001</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Expected tax expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,770,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">748,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,426,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">State income tax, net of federal benefit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">195,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">132,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">196,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Credit for producing fuel from a
non-conventional source</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(134,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(299,000</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Percentage depletion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(400,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(303,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(602,000</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(119,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Tax expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,446,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">443,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,721,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">F-16
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="center" style="font-size: 10pt">PRIMEENERGY CORPORATION and SUBSIDIARIES



<P align="center" style="font-size: 10pt">NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued




<P align="left" style="margin-left:3%; font-size: 10pt">For many years prior to 2003, the company&#146;s current taxes were lowered due
to the utilization of federal net operating loss and percentage depletion
carryforwards. With the filing of the 2002 federal income tax return, all
of these carryforwards have either been used or expired.



<P align="left" style="margin-left:3%; font-size: 10pt">In 2002 and prior tax years, the company was allowed a federal tax credit
for producing fuel from a nonconventional source. This credit expired at
the end of 2002. To the extent that the credit for producing fuel from a
nonconventional source could not be utilized due to the alternative
minimum tax, it became part of the Company&#146;s alternative minimum tax
credit, which may be carried forward indefinitely. The company expects to
utilize approximately $553,000 of the alternative minimum tax credits when
it files its return for 2003, and have a carry forward of $393,000 to the
2004 tax year. Due to the factors discussed above, it is possible that
the Company&#146;s current tax liabilities in the future will be significantly
greater than in past years.



<P align="left" style="margin-left:3%; font-size: 10pt">The primary reason that the Company&#146;s federal tax expense for 2003 is well
below the statutory rate is that the Company is allowed to deduct
currently, rather than capitalize, intangible drilling costs as incurred.
The current deduction of these costs, which are capitalized for financial
accounting purposes, is also the primary reason for the increase in the
Company&#146;s deferred tax liability between 2002 and 2003.


<P align="left" style="font-size: 10pt"><B>10. Segment Information and Major Customers</B>




<P align="left" style="margin-left:3%; font-size: 10pt">The Company operates in one industry - oil and gas exploration,
development, operation and servicing. The Company&#146;s oil and gas
activities are entirely in the United States.



<P align="left" style="margin-left:3%; font-size: 10pt">The Company sells its oil and gas production to a number of purchasers.
Listed below are the percent of the Company&#146;s total oil and gas sales made
to each of the customers whose purchases represented more than 10% of the
Company&#146;s oil and gas sales in the year 2003.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="85%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="38%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Oil Purchasers:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Gas Purchasers:</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Texon Distributing L.P.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">15.80%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Unimark LLC</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">21.68%</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Plains All American Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">11.52%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">El Paso Industrial Energy</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">10.60%</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>




<P align="left" style="margin-left:3%; font-size: 10pt">Although there are no long-term oil and gas purchasing agreements
with these purchasers, the Company believes that they will continue to
purchase its oil and gas products and, if not, could be replaced by other
purchasers.


<P align="left" style="font-size: 10pt"><B>11. Related Party Transactions</B>




<P align="left" style="margin-left:3%; font-size: 10pt">PEMC acts as the managing general partner, providing administration, accounting and tax preparation services for the Partnerships. Certain directors have
limited and general partnership interests in several of these Partnerships. As the managing general partner
in each of the Partnerships,
PEMC receives approximately 5% to 15% of the net revenues of each Partnership as a carried interest in the Partnerships&#146;
properties. As more fully described in Note&nbsp;7, the Company is committed to offer to repurchase the interests of the partners and trust unit holders in certain of the Partnerships. The Company purchased such
interests in an amount totaling $695,673 in 2003, $1,203,500 in 2002 and $545,000 in 2001.



<P align="left" style="margin-left:3%; font-size: 10pt">During 2003
the Company dissolved 20 of the 40&nbsp;partnerships in which the Company
owns General and Limited partnership interests. In conjunction with
the liquidation of these partnerships the Company offset the Due from
Affiliates account for its share of the remaining Partnerships&#146; assets and liabilities, net of the $800,000 previously reserved.



<P align="left" style="margin-left:3%; font-size: 10pt">The Partnership agreements allow PEMC to receive management fees for various services to the Partnerships as well as a reimbursement for property acquisition and development costs incurred on behalf of the Partnerships and general and administrative overhead, which is reported in the statements of operations as administrative revenue.


<P align="left" style="margin-left:3%; font-size: 10pt">Due to
related parties at December&nbsp;31, 2003 and 2002 primarily
represents receipts collected by the Company as agent, from oil and
gas sales net of expenses. The amount of such receipts due the
affiliated Partnerships was $933,000 and $1,485,000 at December&nbsp;31, 2003 and 2002, respectively. Receivables from related parties consist of reimbursable general and administrative costs, lease operating expenses and reimbursements for property acquisitions, development, and related costs.

<P align="center" style="font-size: 10pt">F-17
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="center" style="font-size: 10pt">PRIMEENERGY CORPORATION and SUBSIDIARIES



<P align="center" style="font-size: 10pt">NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued



<P align="left" style="margin-left:3%; font-size: 10pt">Treasury stock purchases in 2003 and 2002 included shares acquired from
related parties. Purchases from related parties include a total of
37,350 shares purchased for a total consideration of $398,838 in
2003, and 49,267 shares purchased for a total consideration of $394,000 in 2002.


<P align="left" style="font-size: 10pt"><B>12. Restricted Cash and Cash Equivalents</B>




<P align="left" style="margin-left:3%; font-size: 10pt">Restricted cash and cash equivalents includes $1,479,000 and $750,000 at
December&nbsp;31, 2003 and 2002, respectively, of cash primarily pertaining to
unclaimed royalty payments. There were corresponding accounts payable
recorded at December&nbsp;31, 2003 and 2002 for these liabilities.


<P align="left" style="font-size: 10pt"><B>13. Salary Deferral Plan</B>




<P align="left" style="margin-left:3%; font-size: 10pt">The Company maintains a salary deferral plan (the &#147;Plan&#148;) in accordance
with Internal Revenue Code Section&nbsp;401(k), as amended. The Plan provides
for discretionary and matching contributions which approximated $259,000
and $261,000 in 2003 and 2002, respectively.


<P align="left" style="font-size: 10pt"><B>14. Earnings per Share</B>




<P align="left" style="margin-left:3%; font-size: 10pt">Basic earnings per share are computed by dividing earnings available to
common stockholders by the weighted average number of common shares
outstanding during the period. Diluted earnings per share reflect per
share amounts that would have resulted if dilutive potential common stock
had been converted to common stock. The following reconciles amounts
reported in the financial statements:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="75%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="56%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11"><B>Year ended December 31, 2003</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Per share</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Net Income</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Shares</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amount</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net income per common share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,702,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,664,627</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.56</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Effect of dilutive securities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">683,409</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Diluted net income per common share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,702,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,348,036</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.31</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">F-18
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="center" style="font-size: 10pt">PRIMEENERGY CORPORATION and SUBSIDIARIES



<P align="center" style="font-size: 10pt">NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued



<P align="left" style="font-size: 10pt"><B>14. Earnings per Share continued</B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="75%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="56%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11"><B>Year ended December 31, 2002</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Per share</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Net Income</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Shares</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amount</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net income per common share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,757,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,738,753</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.47</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Effect of dilutive securities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">666,839</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Diluted net income per common share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,757,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,405,592</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.40</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="75%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="56%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11"><B>Year ended December 31, 2001</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Per share</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Net Income</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Shares</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amount</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net income per common share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,413,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,882,721</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.39</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Effect of dilutive securities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">709,384</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Diluted net income per common share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,413,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,592,105</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt"><B>15. Selected Quarterly Financial Information (Unaudited)</B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="25%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Fourth</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Third</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Second</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>First</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>31, 2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Quarter</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Quarter</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Quarter</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Quarter</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD align="right"><DIV style="margin-left:10px; text-indent:-10px">Revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">$</TD>
    <TD align="right" valign="top">48,428,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">$</TD>
    <TD align="right" valign="top">13,162,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">7,709,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10,934,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">11,865,000</TD>
    <TD valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="right"><DIV style="margin-left:10px; text-indent:-10px">Operating income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">8,047,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1,900,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2,041,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1,681,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2,425,000</TD>
    <TD valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD align="right"><DIV style="margin-left:10px; text-indent:-10px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">5,702,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1,045,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1,765,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1,067,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1,826,000</TD>
    <TD valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="right"><DIV style="margin-left:10px; text-indent:-10px">Net income per
common share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1.56</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">0.29</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">0.48</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">0.29</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">0.49</TD>
    <TD valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD align="right"><DIV style="margin-left:10px; text-indent:-10px">Diluted net income
per common share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1.31</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">0.24</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">0.41</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">0.25</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">0.42</TD>
    <TD valign="top">&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="24%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Fourth</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Third</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Second</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>First</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>31, 2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Quarter</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Quarter</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Quarter</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Quarter</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD align="right"><DIV style="margin-left:10px; text-indent:-10px">Revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">$</TD>
    <TD align="right" valign="top">35,934,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">$</TD>
    <TD align="right" valign="top">9,764,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">9,580,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">8,434,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">8,155,000</TD>
    <TD valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="right"><DIV style="margin-left:10px; text-indent:-10px">Operating income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2,168,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">752,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">795,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">593,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">85,000</TD>
    <TD valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD align="right"><DIV style="margin-left:10px; text-indent:-10px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1,757,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">585,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">642,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">475,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">70,000</TD>
    <TD valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="right"><DIV style="margin-left:10px; text-indent:-10px">Net income per
common share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">$</TD>
    <TD align="right" valign="top">0.47</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">$</TD>
    <TD align="right" valign="top">0.16</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">$</TD>
    <TD align="right" valign="top">0.17</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">$</TD>
    <TD align="right" valign="top">0.13</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">$</TD>
    <TD align="right" valign="top">0.02</TD>
    <TD valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD align="right"><DIV style="margin-left:10px; text-indent:-10px">Diluted net income
per common share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">$</TD>
    <TD align="right" valign="top">0.40</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">$</TD>
    <TD align="right" valign="top">0.13</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">$</TD>
    <TD align="right" valign="top">0.15</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">$</TD>
    <TD align="right" valign="top">0.11</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">$</TD>
    <TD align="right" valign="top">0.02</TD>
    <TD valign="top">&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">F-19




<P align="center" style="font-size: 10pt">
</DIV>


<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="center" style="font-size: 10pt"><B>PRIMEENERGY CORPORATION and SUBSIDIARIES</B>

<!-- link1 "SUPPLEMENTARY INFORMATION" -->

<P align="center" style="font-size: 10pt"><B>SUPPLEMENTARY INFORMATION</B>



<P align="center" style="font-size: 10pt"><B>(Unaudited)</B>



<P align="center" style="font-size: 10pt">F-20
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="center" style="font-size: 10pt">PRIMEENERGY CORPORATION and SUBSIDIARIES



<P align="center" style="font-size: 10pt">CAPITALIZED COSTS RELATING to OIL and GAS PRODUCING ACTIVITIES



<P align="center" style="font-size: 10pt">December&nbsp;31, 2003, 2002 and 2001



<P align="center" style="font-size: 10pt">(Unaudited)


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="85%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="49%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2001</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Developed oil and gas properties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">91,012,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">74,319,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">63,418,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Undeveloped oil and gas properties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,091,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,134,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">286,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">94,103,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75,453,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63,704,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Accumulated depreciation,
depletion and valuation allowance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53,196,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,912,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,924,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net capitalized costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">40,907,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">28,541,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">20,780,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">COSTS INCURRED in OIL and GAS PROPERTY ACQUISITION,<BR>
EXPLORATION and DEVELOPMENT ACTIVITIES



<P align="center" style="font-size: 10pt">Years ended December&nbsp;31, 2003, 2002 and 2001



<P align="center" style="font-size: 10pt">(Unaudited)


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="75%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="44%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2001</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Acquisition of Properties</DIV></TD>
    <TD colspan="12"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Developed</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,023,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,668,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">316,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Undeveloped</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">873,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">848,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">164,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Exploration Costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">519,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">894,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">509,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Development Costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,294,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,385,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,661,000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">See accompanying notes to supplementary information.



<P align="center" style="font-size: 10pt">F-21
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="center" style="font-size: 10pt">PRIMEENERGY CORPORATION and SUBSIDIARIES



<P align="center" style="font-size: 10pt">STANDARDIZED MEASURE of DISCOUNTED FUTURE<BR>
NET CASH FLOWS RELATING to PROVED OIL and GAS RESERVES



<P align="center" style="font-size: 10pt">Years ended December&nbsp;31, 2003, 2002 and 2001



<P align="center" style="font-size: 10pt">(Unaudited)


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="54%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2001</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Future cash inflows</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">302,876,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">201,750,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">102,916,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Future production and development costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(138,929,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(104,232,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(60,841,000</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Future income tax expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(47,696,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(24,230,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7,930,000</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Future net cash flows</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">116,251,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73,288,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,145,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">10% annual discount for estimated timing of cash flow</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(42,999,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(30,512,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(13,179,000</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Standardized measure of discounted future net cash
flows</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">73,252,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">42,776,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">20,966,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">See accompanying notes to supplementary information.



<P align="center" style="font-size: 10pt">F-22
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="center" style="font-size: 10pt">PRIMEENERGY CORPORATION and SUBSIDIARIES



<P align="center" style="font-size: 10pt">STANDARDIZED MEASURE of DISCOUNTED FUTURE<BR>
NET CASH FLOWS and CHANGES THEREIN RELATING<BR>
to PROVED OIL and GAS RESERVES



<P align="center" style="font-size: 10pt">Years ended December&nbsp;31, 2003, 2002 and 2001



<P align="center" style="font-size: 10pt">(Unaudited)



<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">The following are the principal sources of change in the standardized measure
of discounted future net cash flows during 2003, 2002 and 2001:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="51%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2001</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Sales of oil and gas produced, net of
production costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(17,072,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(8,120,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(11,915,000</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net changes in prices and production costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,732,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,488,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(92,118,000</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Extensions, discoveries and improved
recovery</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,133,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,462,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,335,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Revisions of previous quantity estimates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,491,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,192,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">422,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Reserves purchased, net of development
costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,667,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,824,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,082,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net change in development costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,217,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(311,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(594,000</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Accretion of discount</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,278,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,097,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,001,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net change in income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(15,705,000</TD>
    <TD>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(9,809,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,127,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(265,000</TD>
    <TD>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(13,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(384,000</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net change</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">30,476,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,810,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(59,044,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Standardized measure of discounted future
net cash flow:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,776,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,966,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80,010,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">End of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">73,252,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,776,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">20,966,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">See accompanying notes to supplementary information



<P align="center" style="font-size: 10pt">F-23
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="center" style="font-size: 10pt">PRIMEENERGY CORPORATION and SUBSIDIARIES



<P align="center" style="font-size: 10pt">RESERVE QUANTITY INFORMATION



<P align="center" style="font-size: 10pt">Years ended December&nbsp;31, 2003, 2002 and 2001



<P align="center" style="font-size: 10pt">(Unaudited)


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="90%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>2002</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>2001</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7"><HR size="1" noshade></TD>

    <TD>&nbsp;</TD>
    <TD colspan="7"><HR size="1" noshade></TD>

    <TD>&nbsp;</TD>

    <TD>&nbsp;</TD>
    <TD colspan="7"><HR size="1" noshade></TD>

    <TD>&nbsp;</TD>

</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Gas</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Oil</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Gas</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Oil</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Gas</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Oil</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(Mcf)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(bbls.)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(Mcf)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(bbls.)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(Mcf)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(bbls.)</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Proved developed and
undeveloped reserves:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,917,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,319,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,719,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,996,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,029,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,362,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Extensions, discoveries
and improved recovery</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,245,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">541,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,011,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">273,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,764,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">136,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Revisions of previous
estimates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">263,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">171,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,798,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">198,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,458,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(307,000</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Purchases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,571,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">243,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,929,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">173,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,148,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">111,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Production</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,991,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(370,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,540,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(321,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,764,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(306,000</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">End of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,005,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,905,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,917,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,319,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,719,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,996,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Proved developed reserves</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,045,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,865,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,917,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,319,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,226,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,996,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">See accompanying notes to supplementary information



<P align="center" style="font-size: 10pt">F-24
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="center" style="font-size: 10pt">PRIMEENERGY CORPORATION and SUBSIDIARIES



<P align="center" style="font-size: 10pt">RESULTS of OPERATIONS from OIL and GAS PRODUCING ACTIVITIES



<P align="center" style="font-size: 10pt">Years ended December&nbsp;31, 2003, 2002 and 2001



<P align="center" style="font-size: 10pt">(Unaudited)


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="85%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="61%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2001</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Revenue:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Oil and gas sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">29,855,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">18,330,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">22,998,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Costs and expenses:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Lease operating expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,783,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,210,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,083,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Exploration costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">519,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">894,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">509,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Depreciation and depletion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,283,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,988,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,522,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Write down of oil and gas properties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">753,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Income tax expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,446,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">443,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,721,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,031,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,535,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,588,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Results of operations from producing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">7,824,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,735,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4,410,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">(excluding corporate overhead and interest costs)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">See accompanying notes to supplementary information



<P align="center" style="font-size: 10pt">F-25
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="center" style="font-size: 10pt">PRIMEENERGY CORPORATION and SUBSIDIARIES



<P align="center" style="font-size: 10pt">NOTES to SUPPLEMENTARY INFORMATION



<P align="center" style="font-size: 10pt">(Unaudited)



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right"><B>1.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Presentation of Reserve Disclosure Information</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Reserve disclosure information is presented in accordance with the
provisions of Statement of Financial Accounting Standards No.&nbsp;69 (&#147;SFAS
69&#148;), &#147;Disclosures About Oil and Gas Producing Activities&#148;.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right"><B>2.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Determination of Proved Reserves</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The estimates of the Company&#146;s proved reserves were determined by an
independent petroleum engineer in accordance with the provisions of SFAS
69. The estimates of proved reserves are inherently imprecise and are
continually subject to revision based on production history, results of
additional exploration and development and other factors. Estimated
future net revenues were computed by reserves, less estimated future
development and production costs based on current costs.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right"><B>3.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Results of Operations from Oil and Gas Producing Activities</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The results of operations from oil and gas producing activities were
prepared in accordance with the provisions of SFAS 69. General and
administrative expenses, interest costs and other unrelated costs are not
deducted in computing results of operations from oil and gas activities.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right"><B>4.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Standardized Measure of discounted Future Net Cash Flows and
Changes Therein Relating to Proved Oil and Gas Reserves</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The standardized measure of discounted future net flows relating oil and
gas reserves and the changes of standardized measure of discounted future
net cash flows relating to proved oil and gas reserves were prepared in
accordance with the provisions of SFAS 69.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>

    <TD>Future cash inflows are computed as described in Note 2 by applying
current prices to year-end quantities of proved reserves.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Future production and development costs are computed estimating the
expenditures to be incurred in developing and producing the oil and gas
reserves at year-end, based on year-end costs and assuming continuation of
existing economic conditions.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Future income tax expenses are calculated by applying the year-end U.S.
tax rate to future pre-tax cash inflows relating to proved oil and gas
reserves, less the tax basis of properties involved. Future income tax
expenses give effect to permanent differences and tax credits and
allowances relating to the proved oil and gas reserves.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Future net cash flows are discounted at a rate of 10% annually (pursuant
to SFAS 69) to derive the standardized measure of discounted future net
cash flows. This calculation does not necessarily represent an estimate
of fair market value or the present value of such cash flows since future
prices and costs can vary substantially from year-end and the use of a 10%
discount figure is arbitrary.</TD>
</TR>

</TABLE>



<P align="center" style="font-size: 10pt">F-26
</DIV>
</BODY>
</HTML>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.3.1
<SEQUENCE>3
<FILENAME>d13330exv10w3w1.txt
<DESCRIPTION>ADOPTION AGREEMENT
<TEXT>
<PAGE>
                                                                  Exhibit 10.3.1


                        MASSMUTUAL LIFE INSURANCE COMPANY

                             FLEXINVEST(R) PROTOTYPE

                                NON-STANDARDIZED

                           401(k) PROFIT SHARING PLAN

(C) Copyright 2002 by Massachusetts Mutual Life Insurance Company. All rights
reserved. No reproduction of provisions in this document is permitted without
the express written consent of Massachusetts Mutual Life Insurance Company,
Springfield, Massachusetts 01111.

ADOPTION AGREEMENT #003
4/23/2002

<PAGE>

                                    NON-STANDARDIZED 401(k) PROFIT SHARING  PLAN
FL 8618.001

                             ADOPTION AGREEMENT FOR

                  MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY

                                  FLEXINVEST(R)

                     NON-STANDARDIZED 401(k) PROFIT SHARING

The undersigned Employer adopts the MassMutual Life Insurance Company
Flexinvest(R) Prototype Non-Standardized 401(k) Profit Sharing Plan and elects
the following provisions:

CAUTION: Failure to properly fill out this Adoption Agreement may result in
disqualification of the Plan.

A.       EMPLOYER INFORMATION

         (An amendment to the Adoption Agreement is not needed solely to reflect
         a change in the information in this Employer Information Section.)

1.       EMPLOYER'S NAME

                  PrimeEnergy Corporation

2.       EMPLOYER'S 9-DIGIT TAX IDENTIFICATION NUMBER 84-0637348

3.       TYPE OF ENTITY

                  a. [X]   Corporation

                           1. [ ] Tax-exempt or Non-profit

                  b. [ ]   Professional Service Corporation

                  c. [ ]   S Corporation

                  d. [ ]   Limited Liability Company that is taxed as:

                           1. [ ]   a partnership or sole proprietorship

                           2. [ ]   a Corporation

                           3. [ ]   an S Corporation

                  e. [ ]   Sole Proprietorship

                  f. [ ]   Partnership

                  g  [ ]   Municipality:      [ ] State       [ ] Local

                  h. [ ]   Other: _______________

                  AND, the Employer is a member of (select all that apply):

                  i. [X]   a controlled group

                  j. [ ]   an affiliated service group

4.       EMPLOYER FISCAL YEAR (the Employer's tax filing year):

                  Beginning on    January 1st             (e.g., January 1st)
                                  _______________________
                                          month      day

                  and ending on   December 31st
                                  _______________________
                                          month      day

B.       PLAN INFORMATION

         (An amendment to the Adoption Agreement is not needed solely to reflect
         a change in the information in this Plan Information section)

1.       PLAN NAME:

         PrimeEnergy Corporation Employees 401(k) Savings Plan

(C) 2002 MassMutual Life Insurance Company

                                       1

<PAGE>

                                     NON-STANDARDIZED 401(k) PROFIT SHARING PLAN
FL 8618.001

2.       EFFECTIVE DATE

         a. [ ]   This is a new Plan effective as of__________ (hereinafter
                  called the "Effective Date").
         b. [ ]   This is an amendment and restatement of a previously
                  established qualified plan of the Employer which was
                  originally effective as of_______ (hereinafter called the
                  "Effective Date"). The effective date of this amendment and
                  restatement is___.
         c. [ ]   This is a spin-off of a previously established qualified
                  plan known as (plan name) which was sponsored
                  by_____(Employer) and originally effective as of __________
                  (month, day, year). This amendment and restatement shall be
                  effective as of_______(month, day, year).
         d. [ ]   This is a merger of________(number) previously established
                  qualified plans known as________(respectively) which were
                  sponsored by_______(respectively) and originally effective as
                  of________ (month, day, year, respectively). This amendment
                  and restatement plan shall be effective as of__________
                  (month, day, year).
         e. [X]   FOR GUST RESTATEMENTS: This is an amendment and
                  restatement of a previously established qualified plan of the
                  Employer to bring the Plan into compliance with GUST (GATT,
                  USERRA, SBJPA and TRA '97). The original Plan effective date
                  was January 1, 1989 (hereinafter called the "Effective Date").
                  Except as specifically provided in the Plan, the effective
                  date of this amendment and restatement is January 1, 2002.
                  (May enter a restatement date that is the first day of the
                  current Plan Year. The Plan contains appropriate retroactive
                  effective dates with respect to provisions for the appropriate
                  laws.)

3.       PLAN YEAR means the 12 consecutive month period:

         Beginning on   January 1st
                        ________________________ (e.g., January 1st)
                                month      day
         and ending on  December 31st
                        ________________________
                                month      day

         EXCEPT that there will be a short Plan Year:

         a. [X]   N/A
         b. [ ]   beginning on______________________________(e.g., July 1, 2000)
                                     month day, year
                  and ending on_______________________________
                                   month    day,    year

         NOTE:    The Limitation Year for Code Section 415 purposes shall be the
                  same as the determination period for compensation (Section
                  F1).

4.       PLAN NUMBER assigned by the Employer
         a. [X]   001
         b. [ ]   002
         c. [ ]   003
         d. [ ]   Other 3 digit number: _____________

5.       PLAN ADMINISTRATOR'S NAME:
         (If none is specified below, the Employer will be deemed the Plan
         Administrator.)

         PrimeEnergy Corp.

6.       CONSTRUCTION OF PLAN:
         This Plan shall be governed by the laws of the state or commonwealth
         where the Employer's principal place of business is located unless
         another state or commonwealth is specified below:

         ________________________________
         (Name of State or Commonwealth)

7.       TRUSTEE(S) (if applicable) Shall a separate trust agreement be used
         with this plan?
         a. [ ]   No
         b. [ ]   Yes, the Flexinvest(R) Trust Agreement (required if the
                  Plan holds assets other than the group annuity contract or
                  individual life insurance policies).
         c. [X]   Yes, the Flexinvest(R) Loan Trust Agreement (required if
                  Plan allows Participant loans under Section K).

         NOTE:    If Yes is selected, an executed copy of the trust agreement
                  between the Trustee(s) and the Employer must be attached to
                  this Plan. The Plan and trust agreement will be read and
                  construed together. The responsibilities, rights and powers of
                  the Trustee(s) shall be those specified in the trust
                  agreement.

(C) 2002 MassMutual Life Insurance Company

                                       2

<PAGE>

                                     NON-STANDARDIZED 401(k) PROFIT SHARING PLAN

FL 8618.001

C.       ELIGIBILITY REQUIREMENTS

1.       ELIGIBLE EMPLOYEES (Plan Section 1.18)
         For all purposes of the Plan (unless elected otherwise in d. or e.
         below for Employer contributions)means all Employees (including Leased
         Employees) of the Employer who have satisfied eligibility requirements
         shall be eligible EXCEPT:
         NOTE:    If different exclusions apply to Elective Deferrals than to
                  other Employer contributions, complete part b. for the
                  Elective Deferral component of the Plan and part g. for
                  Employer contributions.
         a. [ ]   N/A. No exclusions.
         b. [X]   The following are excluded (select all that apply):
                  1. [ ]   Union Employees (as defined in Plan Section 1.18)
                  2. [X]   Non-resident aliens with no U.S. earned income
                           sources (as defined in Plan Section 1.18)
                  3. [X]   Employees who became Employees as the result of a
                           "Code Section 410(b)(6)(C) transaction" (as defined
                           in Plan Section 1.18)
                  4. [ ]   Salaried Employees
                  5. [ ]   Highly Compensated Employees
                  6. [ ]   Leased Employees
                  7. [X]   Other: all except employees of PrimeEnergy Corp.,
                           PrimeEnergy Management Corp., Prime
                           Operating Co., Eastern Oil Well Service Company,
                           Southwest Oilfield Construction Company and EOWS
                           Midland Company

         HOWEVER, different exclusions will apply (select one):
         c. [X]   N/A. The options elected in a. or b. above apply for all
                  purposes of the Plan.
         d. [ ]   For purposes of all Employer contributions (other than
                  Elective Deferrals)...
         e. [ ]   Only for purposes of Employer profit sharing contributions...

         IF d. or e. is selected, the following exclusions apply for such
         purposes (select f. or g.):
         t. [ ]   N/A. No exclusions.
         g. [ ]   The following are excluded (select all that apply):
                  1. [ ]   Union Employees (as defined in Plan Section
                           1.18).
                  2. [ ]   Non-resident aliens with no U.S. earned income
                           sources (as defined in Plan Section 1.18).
                  3. [ ]   Employees who became Employees as the result of a
                           "Code Section 410(b)(6)(C) transaction" (as
                           defined in Plan Section 1.18).
                  4. [ ]   Salaried Employees
                  5. [ ]   Highly Compensated Employees
                  6. [ ]   Leased Employees
                  7. [ ]   Other:______________________________

2.       THE FOLLOWING AFFILIATED EMPLOYERS (Plan Section 1.6) will adopt this
         Plan as Participating Employers (if there is more than one, or if
         Affiliated Employers adopt this Plan after the date the Adoption
         Agreement is executed, attach a list to this Adoption Agreement of such
         Affiliated Employers including their names, addresses, Employer
         identification numbers and types of entity).

         a. [ ]   N/A
         b. [X]   Name of Participating Employer: EOWS Midland Company

                           Taxpayer Identification Number: 06-1603694

         c. [X]   TYPE OF ENTITY
                  1. [X]   Corporation
                           a. [ ]   Tax-exempt or non-profit
                  2. [ ]   Professional Service Corporation
                  3. [ ]   S Corporation
                  4. [ ]   Limited Liability Company that is taxed as:
                           a. [ ]   a partnership or sole proprietorship
                           b. [ ]   a Corporation
                           c. [ ]   an S Corporation
                  5. [ ]   Sole Proprietorship
                  6. [ ]   Partnership
                  7. [ ]   Municipality:    [ ] State     [ ] Local
                  8. [ ]   Other:_______________________________
                  NOTE: Employees of an Affiliated Employer that does not adopt
                  this Adoption Agreement as a Participating Employer shall not
                  be Eligible Employees. This Plan could violate the Code
                  Section 410(b) coverage rules if all Affiliated Employers do
                  not adopt the Plan.

(C) 2002 MassMutual Life Insurance Company

                                       3

<PAGE>

                                     NON-STANDARDIZED 401(k) PROFIT SHARING PLAN
FL 8618.001

3.       CONDITIONS OF ELIGIBILITY (Plan Section 3.1)
         Any Eligible Employee will be eligible to participate in the
         Plan upon satisfaction of the following:
         NOTE: If the Year(s) of Service selected is or includes a fractional
               year, an Employee will not be required to complete any specified
               number of Hours of Service to receive credit for such fractional
               year. If expressed in months of service, an Employee will not be
               required to complete any specified number of Hours of Service in
               a particular month, unless elected in b.4. or i.4. below.

         ELIGIBILITY FOR ALL PURPOSES OF THE PLAN (EXCEPT AS ELECTED IN e.-k.
         BELOW FOR EMPLOYER CONTRIBUTIONS) (select a. or all that apply of b.,
         c., and d.):
         NOTE:    If different conditions apply to Elective Deferrals than to
                  other Employer contributions, complete this part a.-d. for
                  the Elective Deferral component of the Plan and e.-k. for
                  Employer contributions.
         a. [ ]   No age or service required. (Go to e.-g. below)
         b. [X]   Completion of the following service requirement which is
                  based on Years of Service (or Periods of Service if the
                  Elapsed Time Method is elected):
                  1. [ ]   No service requirement
                  2. [X]   1/2 Year of Service or Period of Service
                  3. [ ]   1 Year of Service or Period of Service
                  4. [ ]   ______ (not to exceed 1,000) Hours of Service within
                           _______ (not to exceed 12) months from the Eligible
                           Employee's employment commencement date. (If an
                           Employee does not complete the stated Hours of
                           Service during the specified time period, the
                           Employee is subject to the Year of Service
                           requirement in b.3. above.)
                  5. [ ]   Other:__________
                           (may not exceed one (1) Year of Service or Period
                           of Service)
         c. [X]   Attainment of age:
                  1. [X]   No age requirement
                  2. [ ]   20 1/2
                  3. [ ]   21
                  4. [ ]   Other:_______________(may not exceed 21)
         d. [ ]   The service and/or age requirements specified above shall
                  be waived with respect to any Eligible Employee who was
                  employed on_______(month, day, year) and such Eligible
                  Employee shall enter the Plan as of such date.

                  The requirements to be waived are (select one or both):
                  1. [ ]   service requirement (will let part-time Eligible
                           Employees in Plan)
                  2. [ ]   age requirement

         HOWEVER, DIFFERENT ELIGIBILITY CONDITIONS WILL APPLY (select one):
         e. [X]   N/A. The options elected in a.-d. above apply for all
                  purposes of the Plan.
         f. [ ]   For purposes of all Employer contributions (other than
                  Elective Deferrals)...
         g. [ ]   Only for purposes of Employer profit sharing
                  contributions...

         If f. OR g. IS SELECTED, the following eligibility conditions apply for
         such purposes:
         h. [ ]   No age or service requirements
         i. [ ]   Completion of the following service requirement which is
                  based on Years of Service (or Periods of Service if the
                  Elapsed Time Method is elected):
                  1. [ ]   No service requirement
                  2. [ ]   1/2 Year of Service or Period of Service
                  3. [ ]   1 Year of Service or Period of Service
                  4. [ ]   _____ (not to exceed 1,000) Hours of Service
                           within____(not to exceed 12) months from the Eligible
                           Employee's employment commencement date.
                  5. [ ]   1 1/2 Years of Service or Periods of Service
                  6. [ ]   2 Years of Service or Periods of Service
                  7. [ ]   Other:________________
                           (may not exceed two (2) Years of Service or Periods
                           of Service)
                  NOTE:    If more than one (1) Year of Service is elected 100%
                           immediate vesting is required.

(C) 2002 MassMutual Life Insurance Company

                                       4

<PAGE>

                                     NON-STANDARDIZED 401(k) PROFIT SHARING PLAN

FL 8618.001

         j. [ ]   Attainment of age:
                  1. [ ]   No age requirement
                  2. [ ]   20 1/2
                  3. [ ]   21
                  4. [ ]   Other:____________(may not exceed 21)
         k. [ ]   The service and/or age requirements specified above shall be
                  waived with respect to any Eligible Employee who was employed
                  on_____(month, day, year) and such Eligible Employee shall
                  enter the Plan as of such date.

                  The requirements to be waived are (select one or both):
                  1. [ ]   service requirement (will let part-time Eligible
                           Employees in Plan)
                  2. [ ]   age requirement

4.       ENTRY DATE (EFFECTIVE DATE OF PARTICIPATION) (Plan Section 3.2)
         An Eligible Employee who has satisfied the eligibility requirements
         will become a Participant for all purposes of the Plan (except as
         elected in g. through n. below for Employee contributions):
         NOTE:    If different entry dates apply to Elective Deferrals than to
                  other Employer contributions, complete this part a. through f.
                  for Employer contributions.
         a. [ ]   the day on which such requirements are satisfied.
         b. [X]   the first day of the month coinciding with or next
                  following the date on which such requirements are satisfied.
         c. [ ]   the first day of the Plan Year quarter coinciding with or
                  next following the date on which such requirements are
                  satisfied.
         d. [ ]   the earlier of the first day of the seventh month or the
                  first day of the Plan Year coinciding with or next following
                  the date on which such requirements are satisfied.
         e. [ ]   the first day of the Plan Year next following the date on
                  which such requirements are satisfied. (Eligibility must be
                  1/2 Year of Service (or Period of Service) or less and age
                  must be 20 1/2 or less.)
         f. [ ]   other:_____, provided that an Eligible Employee who has
                  satisfied the maximum age (21) and service requirements (one
                  (1) Year or Period of Service) and who is otherwise entitled
                  to participate, shall commence participation no later than the
                  earlier of (a) 6 months after such requirements are satisfied,
                  or (b) the first day of the first Plan Year after such
                  requirements are satisfied, unless the Employee separates from
                  service before such participation date.

         HOWEVER, different entry dates will apply (select one):
         g. [X]   N/A. The options elected in a. through f. above apply for all
                  purposes of the Plan.
         h. [ ]   For purposes of all Employer contributions (other than
                  Elective Deferrals).
         i. [ ]   Only for purposes of Employer profit sharing
                  contributions...

         IF h. OR i. IS SELECTED, the following entry dates apply for such
         purposes (select one):
         j. [ ]   the first day of the month coinciding with or next
                  following the date on which such requirements are satisfied.
         k. [ ]   the first day of the Plan Year quarter coinciding with or
                  next following the date on which such requirements are
                  satisfied.
         l. [ ]   the earlier of the first day of the seventh month or the
                  first day of the Plan Year coinciding with or next following
                  the date on which such requirements are satisfied.
         m. [ ]   the first day of the Plan Year next following the date on
                  which such requirements are satisfied. (Eligibility must be
                  1/2 (or 1 1/2 if 100% immediate Vesting is selected) Year of
                  Service (or Period of Service) or less and age must be 20 1/2
                  or less).
         n. [ ]   Other:______ , provided that an Eligible Employee who has
                  satisfied the maximum age (21) and service requirements (one
                  (1) Year or Period of Service (or more than one (1) year if
                  full and immediate vesting)) and who is otherwise entitled to
                  participate, shall commence participation no later than the
                  earlier of (a) 6 months after such requirements are satisfied,
                  or (b) the first day of the first Plan Year after such
                  requirements are satisfied, unless the Employee separates
                  from service before such participation date.

D.       SERVICE

1.       RECOGNITION OF SERVICE WITH PREDECESSOR EMPLOYER (Plan Sections 1.61
         and 1.91)
         a. [X]   No service with a predecessor employer shall be
                  recognized.
         b. [ ]   Service with _____ will be recognized except as follows
                  (select 1. or all that apply of 2. through 4.):
                  1. [ ]   N/A. no limitations.
                  2. [ ]   service will only be recognized for vesting purposes.
                  3. [ ]   service will only be recognized for eligibility
                           purposes.
                  4. [ ]   service prior to_______will not be recognized.

(C) 2002 MassMutual Life Insurance Company

                                       5

<PAGE>

                                     NON-STANDARDIZED 401(k) PROFIT SHARING PLAN
FL 8618.001

                  NOTE:    If the predecessor Employer maintained this qualified
                           Plan, then Years of Service (and/or Periods of
                           Service) with such predecessor Employer shall be
                           recognized pursuant to Plan Sections 1.61 and 1.91
                           and b.1. will apply.

2.       SERVICE CREDITING METHOD (Plan Sections 1.61 and 1.91)

         a.[X]    Hours of Service Method shall be used for all purposes, AND,
                  1. [X]   Eligibility to participate in the Plan: the
                           eligibility computation period after the initial
                           eligibility computation period shall (select one)...
                           a. [X]   shift to the Plan Year after the initial
                                    computation period.
                           b. [ ]   be based on the date an Employee first
                                    performs an Hour of Service (initial
                                    computation period) and subsequent
                                    computation periods shall be based on each
                                    anniversary date thereof.
                  2. [X]   Hours of Service for all employees will be
                           determined on the basis of (select one):
                           a. [X]   actual hours for which an Employee is paid
                                    or entitled to payment.
                           b. [ ]   days worked. An Employee will be credited
                                    with ten (10) Hours of Service if under the
                                    Plan such Employee would be credited with at
                                    least one (1) Hour of Service during the
                                    day.
                           c. [ ]   weeks worked. An Employee will be credited
                                    with forty-five (45) Hours of Service if
                                    under the Plan such Employee would be
                                    credited with at least one (1) Hour of
                                    Service during the week.
                           d. [ ]   semi-monthly payroll periods worked. An
                                    Employee will be credited with ninety-five
                                    (95) Hours of Service if under the Plan such
                                    Employee would be credited with at least one
                                    (1) Hour of Service during the semi-monthly
                                    payroll period.
                           e. [ ]   months worked. An Employee will be credited
                                    with one hundred ninety (190) Hours of
                                    Service if under the Plan such Employee
                                    would be credited with at least one (1) Hour
                                    of Service during the month.
         b. [ ]   Elapsed Time Method shall be used for all purposes.

(C) 2002 MassMutual Life Insurance Company

                                       6

<PAGE>

                                     NON-STANDARDIZED 401(k) PROFIT SHARING PLAN
FL 8618.001

E. VESTING (Plan Section 6.4(b))

1.       VESTING FOR EMPLOYER CONTRIBUTIONS (other than employer matching
         contributions). The vesting schedule, based on a Participant's Years of
         Service (or Periods of Service if the Elapsed Time Method is elected),
         shall be as follows:

         a. [ ]   100% upon entering Plan. (Required if eligibility
                  requirement is greater than one (1) Year of Service or Period
                  of Service.)

         b. [ ]   3 Year Cliff:                    c. [ ]    5 Year Cliff:
                    0-2 years         0%                      0-4 years       0%
                      3 years       100%                        5 years     100%

         d. [ ]   6 Year Graded:                   e. [ ]    4 Year Graded:
                    0-1 year          0%                     1 years         25%
                      2 years        20%                     2 years         50%
                      3 years        40%                     3 years         74%
                      4 years        60%                     4 years        100%
                      5 years        80%
                      6 years       100%

         f. [ ]   5 Year Graded:                   g. [ ]    7 Years Graded:
                      1 year         20%                     0-2 years       0 %
                      2 years        40%                       3 years      20 %
                      3 years        60%                       4 years      40 %
                      4 years        80%                       5 years      60 %
                      5 years       100%                       6 years      80 %
                                                               7 years     100 %

         h. [X]   Other (Must be at least as liberal as either c. or g. above):

<TABLE>
<CAPTION>
Years of Service      Percentage
<S>                   <C>
       1                   0%
       2                  25%
       3                  50%
       4                  75%
       5                 100%
</TABLE>

         VESTING FOR EMPLOYER MATCHING CONTRIBUTIONS

         The vesting schedule for Employer matching contributions, based on a
         Participant's Years of Service (or Periods of Service if the Elapsed
         Time Method is elected) shall be as follows:
         i. [X]   N/A. There are no matching contributions subject to a vesting
                  schedule OR the schedule in a. through h. above shall also
                  apply to matching contributions.

         j. [ ]   100% upon entering Plan. (Required if eligibility requirement
                  is greater than one (1) Year of Service or Period of Service.)

         k. [ ]   3 Year Cliff
         l. [ ]   5 Year Cliff
         m. [ ]   6 Year Graded
         n. [ ]   4 Year Graded
         o. [ ]   5 Year Graded
         P. [ ]   7 Year Graded
         q. [ ]   Other (Must be at least as liberal as either l. or p. above):

                      Years of Service             Percentage

                  _____________________        ___________________
                  _____________________        ___________________
                  _____________________        ___________________
                  _____________________        ___________________
                  _____________________        ___________________
                  _____________________        ___________________
                  _____________________        ___________________

(C) 2002 MassMutual Life Insurance Company

                                       7

<PAGE>

                                     NON-STANDARDIZED 401(k) PROFIT SHARING PLAN
FL 8618.001

2.       FOR AMENDED PLANS (Plan Section 6.4(f))
         If the vesting schedule has been amended to a less favorable schedule,
         enter the pre-amended schedule below:
         a. [X]   Vesting schedule has not been amended.
         b. [ ]   Vesting schedule has been amended; amended schedule is
                  more favorable in all years.
         c. [ ]   Vesting schedule has been amended; amended schedule is not
                  more favorable in all years. Prior vesting schedule was:

                     Years of Service               Percentage
                  _____________________        ___________________
                  _____________________        ___________________
                  _____________________        ___________________
                  _____________________        ___________________
                  _____________________        ___________________
                  _____________________        ___________________
                  _____________________        ___________________
                  _____________________        ___________________

3.       TOP-HEAVY VESTING (Plan Section 6.4(c))
         If this Plan becomes a Top-Heavy Plan, the following vesting schedule,
         based on number of Years of Service (or Periods of Service if the
         Elapsed Time Method is elected), shall apply and shall be treated as a
         Plan amendment pursuant to this Plan. Once effective, this schedule
         shall also apply to any contributions made before the Plan became a
         Top-Heavy Plan and shall continue to apply if the Plan ceases to be a
         Top-Heavy Plan unless an amendment is made to change the vesting
         schedule.

         a. [X]   N/A (the regular vesting schedule already satisfies one of
                  the minimum top heavy schedules).
         b. [ ]   6 Year Graded:
                    0-1 year         0%
                      2 years       20%
                      3 years       40%
                      4 years       60%
                      5 years       80%
                      6 years      100%

         c. [ ]   3 Year Cliff:
                    0-2 years        0%
                      3 years      100%
         d. [ ]   Other (Must be at least as liberal as either b. or c. above):

                      Years of Service             Percentage
                   _____________________        ___________________
                   _____________________        ___________________
                   _____________________        ___________________
                   _____________________        ___________________
                   _____________________        ___________________
                   _____________________        ___________________
                   _____________________        ___________________
                   _____________________        ___________________

         NOTE:    This Section does not apply to the account balances of any
                  Participant who does not have an Hour of Service after the
                  Plan has initially become Top-Heavy. Such Participant's
                  Account balance attributable to Employer contributions and
                  Forfeitures will be determined without regard to this Section.

4.       EXCLUDED VESTING SERVICE (select all that apply):

         a. [X]   No exclusions.
         b. [ ]   Service prior to the Effective Date of the Plan or a
                  predecessor plan.
         c. [ ]   Service prior to the time an Employee has attained age 18.
         d. [ ]   Service during which mandatory employee contributions were not
                  made.

(C) 2002 MassMutual Life Insurance Company

                                       8

<PAGE>

                                     NON-STANDARDIZED 401(k) PROFIT SHARING PLAN
FL 8618.001

5.       NORMAL RETIREMENT AGE ("NRA") (Plan Section 1.48) means the:
         a. [X]   date of a Participant's 65th birthday (not to exceed 65th).
         b. [ ]   later of a Participant's _____ birthday (not to exceed 65th)
                  or
                  1. [ ]   the ____ (not to exceed 5th) anniversary of the first
                           day of the Plan Year in which participation in the
                           Plan commenced.
                  2. [ ]   the _____ (not to exceed 5th) anniversary of the
                           Participant's date of hire with the Employer, but in
                           no event later than the 5th anniversary of the first
                           day of the Plan Year in which participation in the
                           Plan commenced.

6.       EARLY RETIREMENT DATE (Plan Section 1.15) means the (elect one):
         a. [ ]   N/A. No Early Retirement provision provided.
         b. [ ]   date on which a Participant...
         c. [X]   first day of the month coinciding with or next following the
                  date on which a Participant...

         AND, if b., or c. is selected...
         d. [ ]   attains age _______.
         e. [X]   attains age 55 and completes at least five  Years of Service
                  (or Periods of Service) for vesting purposes.

         f. [ ]   attains age______ and completes at least_______ Years of
                  Participation in the Plan.

7.       DETERMINATION OF DISABILITY
         a. [X]   If entitled to disability benefits under the Federal Social
                  Security Act.
         b. [ ]   Determined by the Company in accordance with its normal
                  personnel practice applied in a uniform and nondiscriminatory
                  manner.
         c. [ ]   Determined by the Company in accordance with the collective
                  bargaining agreement.
         d. [ ]   If entitled to disability benefits under the Company's
                  Long Term Disability Insurance Plan.
         e. [ ]   Not Applicable. Disability Retirement is not allowed.

F.       COMPENSATION

1.       COMPENSATION (Plan Section 1.11) with respect to any Participant means:
         a. [X]   Wages, tips and other compensation on Form W-2.
         b. [ ]   Section 3401(a) wages (wages for withholding purposes).
         c. [ ]   415 safe-harbor compensation.

         COMPENSATION shall be based on the following determination period
         (select one):
         d. [X]   the Plan Year.
         e. [ ]   the calendar year coinciding with or ending within the Plan
                  Year. AND,
         f. [X]   compensation paid during the determination period prior to
                  the Employee's Effective Date of Participation shall be
                  excluded.

         ADJUSTMENTS TO COMPENSATION
         g. [ ]   N/A. No adjustments.
         h. [X]   Compensation for Employer contribution and forfeiture
                  allocation purposes other than salary deferral and matching
                  contribution purposes shall be adjusted by: (select all that
                  apply)
                  1. [X]   including compensation which is not currently
                           includible in the Participant's gross income by
                           reason of the application of Code Sections 125
                           (cafeteria plan), 132(f)(4) (qualified transportation
                           fringe), 402(e)(3) (401(k) plan), 402(h)(1)(B)
                           (simplified employee pension plan), 414(h) (employer
                           pickup contributions under a governmental plan),
                           403(b) (tax sheltered annuity) or 457(b) (eligible
                           deferred compensation plan).
                  2. [ ]   excluding reimbursements or other expense allowances,
                           fringe benefits (cash or non-cash), moving expenses,
                           deferred compensation (other than deferrals specified
                           in 1. above) and welfare benefits.
                  3. [ ]   excluding Compensation paid during the determination
                           period while not a Participant in the component of
                           the Plan for which the definition is being used.
                  4. [ ]   excluding overtime.
                  5. [ ]   excluding bonuses.
                  6. [ ]   excluding commissions.
                  7. [ ]   other:________________________________.
                  NOTE:    Options 4., 5., 6. or 7. may not be selected if an
                           integrated allocation formula is selected (i.e., if
                           G(5)e is selected). In addition, if 4., 5., 6., or 7.
                           is selected, the definition of Compensation could
                           violate the nondiscrimination rules.

 (C) 2002 MassMutual Life Insurance Company

                                       9
<PAGE>

                                     NON-STANDARDIZED 401(k) PROFIT SHARING PLAN

FL 8618.001

         HOWEVER, FOR SALARY DEFERRAL AND MATCHING PURPOSES Compensation shall
         be adjusted by (for such purposes, the Plan automatically includes
         Elective Deferrals and other amounts in h.1. above) (select all that
         apply):

         i. [ ]   N/A. No adjustments.

         j. [X]   Same adjustment as in h.2. through h.7. above.

         k. [ ]   Compensation shall be adjusted by:

                  1.       [ ] excluding reimbursements or other expense
                               allowances, fringe benefits (cash or non-cash),
                               moving expenses, deferred compensation (other
                               than deferrals specified in h.l. above) to a
                               qualified plan and welfare benefits.

                  2.       [ ] excluding overtime

                  3.       [ ] excluding bonuses

                  4.       [ ] excluding commissions

                  5.       [ ] other:_______________________________

                  NOTE:    If 2., 3., 4. or 5. are elected, the average
                           includible Compensation percentage for eligible
                           Highly Compensated Employees cannot exceed the
                           average includible Compensation percentage for
                           eligible Non-highly Compensated Employees by more
                           than a de minimis amount as described in regulations
                           under Section 414(s) of the Code.

G.       CONTRIBUTIONS AND ALLOCATIONS

1.       SALARY REDUCTION ARRANGEMENT - ELECTIVE DEFERRALS (Plan Section 12.2)
         Each Participant may elect to have Compensation deferred by:

         a. [ ]   up to the maximum percentage allowable not to exceed the
                  limits of Code Section 401(k), 402(g), 404 and 415.

         b. [X]   up to 15%.

         For bonuses paid within the Plan Year MAY PARTICIPANTS make a special
         salary deferral election with respect to bonuses?

         c. [X]   No (same salary reduction election as other Compensation)

         d. [ ]   Yes, a Participant may elect to defer up to ____% of any
                  bonus.

         PARTICIPANTS MAY initially commence salary deferrals:

         e. [ ]   on their Entry Date or the first payroll period following
                  their Entry Date.

         f. [X]   on the first day of the month coincident with or next
                  following their Entry Date.

         g. [ ]   on the first day of each Plan Year quarter coincident with or
                  next following their Entry Date.

         h. [ ]   on the first day of the Plan Year or the first day of the 7th
                  month of the Plan Year coincident with or next following their
                  Entry Date.

         i. [ ]   other:________________________________________________________
                                  (specify a date or dates)

         PARTICIPANTS MAY modify salary deferral elections:

         j. [ ]   as of each payroll period

         k. [ ]   on the first day of each month

         l. [ ]   on the first day of each Plan Year quarter

         m. [ ]   on the first day of the Plan Year or the first day of the 7th
                  month of the Plan Year

         n. [X]   other: once per quarter
                         _______________________________________________________
                                  (specify a date or dates)

         AUTOMATIC ENROLLMENT: Shall Participants who do not affirmatively elect
         to receive cash or have a specified amount contributed to the Plan
         automatically have Compensation reduced?

         o. [X]   No.

         p. [ ]   Yes, by _______% of Compensation, provided that such
                  enrollment is permissible under the laws of the state in which
                  the Participants are employed in.

         SHALL THERE BE a special effective date for the salary deferral
         component of the Plan?

         q. [X]   No.

         r. [ ]   Yes, the effective date of the salary deferral component of
                  the Plan is ________ (enter month day, year).

2.       401 (k) SAFE HARBOR PLAN PROVISIONS (Plan Section 12.8) Will the ADP
         and/or ACP test safe harbor provisions be used? (select a., b. or c.)

         a. [X]   No. (If selected, skip to Section G3.)

         b. [ ]   Yes, but only the ADP Test Safe Harbor provisions will be
                  used. (No employer matching contributions or non-Safe Harbor
                  matching contribution formula elected.)

         c. [ ]   Yes, both the ADP and ACP Test Safe Harbor provisions will be
                  used.

(C) 2002 MassMutual Life Insurance Company

                                       10

<PAGE>

                                     NON-STANDARDIZED 401(k) PROFIT SHARING PLAN

FL 8618.001

                  IF c. above is selected, does the Plan permit matching
                  contributions in addition to any safe harbor contributions
                  elected in d. or e. below?

                  1. [ ]   No or N/A. Any matching contributions, other than any
                           Safe Harbor Matching Contributions elected in d.
                           below, will be suspended in any Plan Year in which
                           the safe harbor provisions are used.

                  2. [ ]   Yes, the Employer may make matching contributions in
                           addition to any Safe Harbor Matching contributions
                           elected in d. below. (If elected, complete the
                           provisions of the Adoption Agreement related to
                           matching contributions in Sections G3 and G4 that
                           will apply in addition to any elections made in d.
                           below.

                  NOTE:    Regardless of any election made in Section G3, the
                           Plan automatically provides that only Elective
                           Deferrals up to 6% of Compensation are taken into
                           account in applying the match set forth in Section G3
                           and that the maximum discretionary matching
                           contribution that may be made on behalf of any
                           Participant is 4% of Compensation.

         THE EMPLOYER WILL MAKE THE FOLLOWING ADP TEST SAFE HARBOR CONTRIBUTION
         FOR THE PLAN YEAR:

         NOTE: The ACP Test Safe Harbor is automatically satisfied if the only
         matching contribution made to the Plan is either (1) a Basic Matching
         Contribution or (2) an Enhanced Matching Contribution that does not
         provide a match on Elective Deferrals in excess of 6% of Compensation.

         d. [ ]   Safe Harbor Matching Contribution (select 1. or 2. AND 3.)

                  1. [ ]   BASIC MATCHING CONTRIBUTION. The Employer will make
                           Matching Contributions to the account of each
                           "Eligible Participant" in an amount equal to the sum
                           of 100% of the amount of the Participant's Elective
                           Deferrals that do not exceed 3% of the Participant's
                           Compensation, plus 50% of the amount of the
                           Participant's Elective Deferrals that exceed 3% of
                           the Participant's Compensation but that do not exceed
                           5% of the Participant's Compensation.

                  2. [ ]   ENHANCED MATCHING CONTRIBUTION. The Employer will
                           make Matching Contributions to the account of each
                           "Eligible Participant" in an amount equal to the sum
                           of:

                           a. [ ]   ___% (may not be less than 100%) of the
                                    Participant's Elective Deferrals that do not
                                    exceed _____% (if over 6% or if left blank,
                                    the ACP test will still apply) of the
                                    Participant's Compensation, plus, if
                                    applicable,

                           b. [ ]   ___% of the Participant's Elective Deferrals
                                    that exceed ___% of the Participant's
                                    Compensation but do not exceed ___% (if
                                    over 6% or if left blank, the ACP test will
                                    still apply) of the Participant's
                                    Compensation.

                           NOTE:    a. and b. must be completed so that, at any
                                    rate of Elective Deferrals, the matching
                                    contribution is at least equal to the
                                    matching contribution receivable if the
                                    Employer were making Basic Matching
                                    Contributions, but the rate of match cannot
                                    increase as deferrals increase. For example,
                                    if a. is completed to provide a match equal
                                    to 100% of deferrals up to 4% of
                                    Compensation, then b. need not be completed.

                  3. [ ]   The safe harbor matching contribution will be made on
                           the following basis (and Compensation for such
                           purpose will be based on the applicable period):

                           a. [ ]   the entire Plan Year.

                           b. [ ]   each payroll period.

                           c. [ ]   all payroll periods ending with or within
                                    each month.

                           d. [ ]   all payroll periods ending with or within
                                    the Plan Year quarter.

         e. [ ]   NONELECTIVE SAFE HARBOR CONTRIBUTIONS (select one)

                  1. [ ]   The Employer will make a Safe Harbor Non-elective
                           Contribution to the account of each "Eligible
                           Participant" in an amount equal to _____% (may not
                           be less than 3%) of the Employee's Compensation for
                           the Plan Year.

                  2. [ ]   The Employer will make a Safe Harbor Non-elective
                           Contribution to another defined contribution plan
                           maintained by the Employer (specify the name of the
                           other plan):_____.

f. [ ]   FOR PURPOSES OF THE ADP Test Safe Harbor contribution, the term
         "Eligible Participant" means any Participant who is eligible to make
         Elective Deferrals with the following exclusions:

         1. [ ]   Highly Compensated Employees.

         2. [ ]   Employees who have not satisfied the greatest minimum age and
                  service conditions permitted under Code Section 410(a).

         3. [ ]   Other: _______(must be a category that could be excluded under
                  the permissive or mandatory disaggregation rules of
                  Regulations 1.401(k)-1(b)(3) and 1.401(m)-1(b)(3)).

(C) 2002 MassMutual Life Insurance Company

                                       11

<PAGE>

                                     NON-STANDARDIZED 401(k) PROFIT SHARING PLAN

FL 8618.001

                  SPECIAL EFFECTIVE DATE OF ADP AND ACP TEST SAFE HARBOR
                  PROVISIONS

                  4. [ ]   N/A. The safe harbor provisions are effective as of
                           the later of the Effective Date of this Plan or, if
                           this is an amendment or restatement, the effective
                           date of the amendment or restatement.

                  5. [ ]   The ADP and/or ACP Test Safe Harbor provisions are
                           effective for the Plan Year beginning _________(enter
                           the first day of the Plan Year for which the
                           provisions are (or, for GUST updates, were) effective
                           and, if necessary, enter any other special effective
                           dates that apply with respect to the provisions).

3.       FORMULA FOR DETERMINING EMPLOYER MATCHING CONTRIBUTIONS (Plan Section
         12.1(a)(2))(Choose one):

         NOTE:    Regardless of any election below, if the ACP test safe harbor
                  is being used (i.e., Section G2.c. is selected), then the Plan
                  automatically provides that only Elective Deferrals up to 6%
                  of Compensation are taken into account in applying the match
                  set forth below and that the maximum discretionary matching
                  contribution that may be made on behalf of any Participant is
                  4% of Compensation.

         a. [ ]   N/A. There will not be any matching contributions (Skip to
                  Section G5)

         b. [X]   The Employer...(select 1. or 2.)

                  1. [X]   may make matching contributions equal to a
                           discretionary percentage, to be determined by the
                           Employer, of the Participant's Elective Deferrals.

                  2. [ ]   will make matching contributions equal to ________%
                           (e.g., 50) of the Participant's Elective Deferrals,
                           plus:

                           a. [ ] N/A.

                           b. [ ] an additional discretionary percentage, to be
                                  determined by the Employer.

                  AND, in determining the matching contribution above, only
                  Elective Deferrals up to the percentage or dollar amount
                  specified below will be matched: (select 3. and/or 4. OR 5.)

                  3. [ ]   ______% of a Participant's Compensation.

                  4. [ ]   $________.

                  5. [X]   a discretionary percentage of a Participant's
                           Compensation or a discretionary dollar amount, the
                           percentage or dollar amount to be determined by the
                           Employer on a uniform basis to all Participants.

         c. [ ]   The Employer may make matching contributions equal to a
                  discretionary percentage, to be determined by the Employer, of
                  each tier, to be determined by the Employer, of the
                  Participant's Elective Deferrals.

         d. [ ]   The Employer will make matching contributions equal to the sum
                  of:

<TABLE>
<CAPTION>
     Elective Deferrals and
Participant Matched Contributions   Percentage Match            Limit
- ---------------------------------   ----------------           ------
<S>                                 <C>                <C>     <C>
Over 1% up to 2% of Compensation         ______%       up to   ______
Over 2% up to 3% of Compensation         ______%       up to   ______
Over 3% up to 4% of Compensation         ______%       up to   ______
Over 4% up to 5% of Compensation         ______%       up to   ______
Over 5% up to 6% of Compensation         ______%       up to   ______
Over 6% up to 7% of Compensation         ______%       up to   ______
Over 7% up to 8% of Compensation         ______%       up to   ______
Over 8% up to 9% of Compensation         ______%       up to   ______
Over 9% up to 10% of Compensation        ______%       up to   ______
Over 10% of Compensation                 ______%       up to   ______
</TABLE>

         e.[ ]    The Employer will make matching contributions equal to the
                  percentage of Elective Deferrals determined under the
                  following schedule based on a Participant's Years of Service
                  for Vesting purposes (or Periods of Service if the Elapsed
                  Time Method is selected):

(C) 2002 MassMutual Life Insurance Company

                                       12

<PAGE>

                                     NON-STANDARDIZED 401(k) PROFIT SHARING PLAN

FL 8618.001

<TABLE>
<CAPTION>
Participant's Total Service    Matching Percentage              Limit
- ---------------------------    -------------------             ------
<S>                            <C>                     <C>     <C>
          ______                     ______%           up to   ______
          ______                     ______%           up to   ______
          ______                     ______%           up to   ______
          ______                     ______%           up to   ______
          ______                     ______%           up to   ______
          ______                     ______%           up to   ______
</TABLE>

         NOTE:    If c., d., or e. above is elected, the Plan may violate the
                  Code Section 40l(a)(4) nondiscrimination requirements if the
                  rate of matching contributions increases as a Participant's
                  Elective Deferrals or Years of Service (or Periods of Service)
                  increase.

         PERIOD OF DETERMINING MATCHING CONTRIBUTIONS

         Matching contributions will be determined based on Elective Deferrals
         made during the following pay period (and any Compensation or dollar
         limitation used in determining the match will be based on the
         applicable period):

         f. [ ]   the entire Plan Year (must elect if Participant is required to
                  be actively employed on last day of Plan Year to receive
                  matching contributions).

         g. [X]   each payroll period.

         h. [ ]   all payroll periods ending within each month.

         i. [ ]   all payroll periods ending with or within the Plan Year
                  quarter.

         THE MATCHING CONTRIBUTION MADE ON BEHALF OF ANY PARTICIPANT for any
         Plan Year will not exceed:

         j. [X]   N/A, no dollar limit is imposed.

         k. [ ]   $_______.

         MATCHING CONTRIBUTIONS WILL BE MADE ON BEHALF OF:

         l. [X]   all Participants.

         m. [ ]   only eligible Non-Highly Compensated Employees.

         WILL THE MATCHING CONTRIBUTIONS BE QUALIFIED MATCHING CONTRIBUTIONS?

         n. [X]   No.

         o. [ ]   Yes. If elected, ALL matching contributions will be fully
                  Vested and will be subject to restrictions on withdrawals. In
                  addition, Qualified Matching Contributions may be used in
                  either the ADP or ACP test.

4        ONLY PARTICIPANTS WHO SATISFY THE FOLLOWING CONDITIONS WILL BE ELIGIBLE
         TO SHARE IN THE ALLOCATION OF MATCHING CONTRIBUTIONS: REQUIREMENTS FOR
         PARTICIPANTS WHO ARE ACTIVELY EMPLOYED AT THE END OF THE PLAN YEAR.

         a. [ ]   N/A.

         b. [X]   No service requirement (must be elected if the match is not
                  based on the entire Plan Year).

         c. [ ]   A Participant must complete a Year of Service (or Period of
                  Service if the Elapsed Time Method is elected).
                  (May cause Plan to violate coverage requirements under Code
                  Section 410(b)).

         REQUIREMENTS FOR PARTICIPANTS WHO ARE NOT ACTIVELY EMPLOYED AT THE END
         OF THE PLAN YEAR (except as otherwise provided in h. through j. below).

         d. [ ]   A Participant must complete more than _____ Hours of Service
                  (not more than 1,000). If the Elapsed Time Method is
                  elected,____ months of service (not more than six (6)).

         e. [ ]   A Participant must complete a Year of Service (or Period of
                  Service if the Elapsed Time Method is elected).

         f. [ ]   Participants will NOT share in such allocations, regardless of
                  service.

         g. [X]   Participants will share in such allocations, regardless of
                  service (must be elected if the match is not based on the
                  entire Plan Year).

         PARTICIPANTS WHO ARE NOT ACTIVELY EMPLOYED AT THE END OF THE PLAN YEAR
         due to the following shall be eligible to share in the allocation of
         matching contributions regardless of the above conditions (select all
         that apply):

         h. [ ]   Death.

         i. [ ]   Total and Permanent Disability.

         j. [ ]   Attainment of Early or Normal Retirement.

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                                     NON-STANDARDIZED 401(k) PROFIT SHARING PLAN

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5.       FORMULA FOR DETERMINING EMPLOYER'S PROFIT SHARING CONTRIBUTION (Plan
         Section 12. 1(a)(3)) (d. may be selected in addition to b. or c.)

         a. [ ]   N/A. No Employer Profit Sharing Contributions may be made
                  (other than top heavy minimum contributions) (Skip to Section
                  G6.)

         b. [X]   Discretionary, to be determined by the Employer, not limited
                  to current or accumulated Net Profits.

         c. [ ]   Prevailing Wage Contribution. The Employer will make a
                  Prevailing Wage Contribution on behalf of each Participant who
                  performs services subject to the Service Contract Act,
                  Davis-Bacon Act or similar Federal, State, or Municipal
                  Prevailing Wage statutes. The Prevailing Wage Contribution
                  shall be an amount equal to the balance of the fringe benefit
                  payment for health and welfare for each Participant (after
                  deducting the cost of cash differential payments for the
                  Participant) based on the hourly contribution rate for the
                  Participant's employment classification, as designated on
                  Schedule A as attached to this Adoption Agreement.
                  Notwithstanding anything in the Plan to the contrary, the
                  Prevailing Wage Contribution shall be fully Vested.
                  Furthermore, the Prevailing Wage Contribution shall not be
                  subject to any age or service requirements set forth in
                  Section C, nor to any service or employment conditions set
                  forth in Section G7.

         CONTRIBUTION ALLOCATIONS

         If b. above is selected, the Employer's discretionary profit sharing
         contribution for a Plan Year will be allocated as follows:

         d. [X]   NON-INTEGRATED ALLOCATION

                  1. [X]   In the same ratio as each Participant's Compensation
                           bears to the total of such Compensation of all
                           Participants.

                  2. [ ]   In the same dollar amount to all Participants (per
                           capita).

                  3. [ ]   In the same dollar amount per Hour of Service
                           completed by each Participant.

                  4. [ ]   In the same proportion that each Participant's points
                           bears to the total of such points of all
                           Participants. A Participant's points with respect to
                           any Plan Year shall be computed as follows (select
                           all that apply):

                           a. [ ]   _____ point(s) shall be allocated for each
                                    Year of Service (or Period of Service if the
                                    Elapsed Time Method is elected). However,
                                    the maximum Years of Service (or Periods of
                                    Service) taken into account shall not exceed
                                    _____ (leave blank if no limit on service
                                    applies).

                           b. [ ]   _____ point(s) shall be allocated for each
                                    full $_____ (may not exceed $200) of
                                    Compensation.

                           c. [ ]   _____ point(s) shall be allocated for each
                                    year of age as of the end of the Plan Year.

         e. [ ]   INTEGRATED ALLOCATION

                  In accordance with Plan Section 4.3(b)(2) based on a
                  Participant's Compensation in excess of:

                  1. [ ]   The Taxable Wage Base.

                  2. [ ]   _____% (not to exceed 100%) of the Taxable Wage Base.
                           (See Note below)

                  3. [ ]   80% of the Taxable Wage Base plus $1.00.

                  4. [ ]   $________ (not greater than the Taxable Wage Base).
                           (See Note below)

                  NOTE:    The integration percentage of 5.7% shall be reduced
                           to:

                           1. 4.3% if 2. or 4. above is more than 20% and less
                              than or equal to 80% of the Taxable Wage Base.

                           2. 5.4% if 3. is elected or if 2. or 4. above is more
                              than 80% of the Taxable Wage Base.

         f. [ ]   OFFSET OF ALLOCATIONS for Prevailing Wage Contributions

                  1. [ ]   No or N/A. (if c. above is selected, then the
                           Prevailing Wage Contribution will be added to amounts
                           allocated pursuant to d. or e. above).

                  2. [ ]   Yes, the amounts allocated or contributed on behalf
                           of a Participant for a Plan Year pursuant to d. or e.
                           above be reduced by the Prevailing Wage Contribution
                           made on behalf of a Participant for the Plan Year
                           pursuant to c. above.

6.       QUALIFIED NON-ELECTIVE CONTRIBUTIONS (Plan Section 12.1(a)(4))

         NOTE:    Regardless of any election made in this Section, the Plan
                  automatically permits Qualified Non-Elective Contributions to
                  correct a failed ADP or ACP test.

         a. [X]   N/A. There will be no additional Qualified Non-Elective
                  Contributions except as otherwise provided in the Plan.

         b. [ ]   The Employer will make a Qualified Non-Elective Contribution
                  equal to % __________of the total Compensation of those
                  Participants eligible to share in the allocations.

         c. [ ]   The Employer may make a Qualified Non-Elective Contribution in
                  an amount to be determined by the Employer, to be allocated in
                  proportion to the Compensation of those Participants eligible
                  to share in the allocations (pro rata).

         d. [ ]   The Employer may make a Qualified Non-Elective Contribution in
                  an amount to be determined by the Employer, to be allocated
                  equally to all Participants eligible to share in the
                  allocations (per capita).

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                                     NON-STANDARDIZED 401(k) PROFIT SHARING PLAN
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                  AND, if b., c. or d. is selected, the Qualified Non-Elective
                  Contributions above will be made on behalf of:
                  1. [ ]   all Participants.
                  2. [ ]   only Non-Highly Compensated Employees.

7.       REQUIREMENTS TO SHARE IN ALLOCATIONS OF EMPLOYER DISCRETIONARY PROFIT
         SHARING CONTRIBUTIONS AND QUALIFIED NON-ELECTIVE CONTRIBUTIONS (PLAN
         SECTION 12.1(A)(4)) IF ELECTED ABOVE
         a. [ ] N/A. Plan does not permit such contributions.
         b. [X] Requirements for Participants who are actively employed at the
                end of the Plan Year.
                  1. [ ]   No service requirement.
                  2. [X]   A Participant must complete a Year of Service (or
                           Period of Service if the Elapsed Time Method is
                           elected). (Could cause Plan to violate coverage
                           requirements under Code Section 410(b).)

         REQUIREMENTS FOR PARTICIPANTS WHO ARE NOT ACTIVELY EMPLOYED AT THE END
         OF THE PLAN YEAR (except as otherwise provided in g. through i. below).
         c. [ ]   A Participant must complete more than______Hours of Service
                  (not more than 1,000). If the Elapsed Time Method is elected,
                  a Participant must complete ________(not more than six (6))
                  months of service.
         d. [ ]   A Participant must complete a Year of Service (or Period
                  of Service if the Elapsed Time Method is elected).
         e. [X]   Participants will NOT share in such allocations, regardless of
                  service.
         f. [ ]   Participants will share in such allocations, regardless of
                  service.

         PARTICIPANTS WHO ARE NOT ACTIVELY EMPLOYED AT THE END OF THE PLAN YEAR
         due to the following will be eligible to share in the allocations
         regardless of the above conditions (select all that apply):
         g. [X]   Death.
         h. [X]   Total and Permanent Disability.
         i. [X]   Attainment of Early or Normal Retirement.

8.       REQUIREMENTS TO SHARE IN ALLOCATIONS OF FORFEITURES OF EMPLOYER PROFIT
         SHARING AND MATCHING CONTRIBUTIONS
         a. [X]   N/A. Plan does not permit such contributions.
         b. [ ]   Requirements for Participants who are actively employed at
                  the end of the Plan Year.
                  1. [ ]   No service requirement.
                  2. [ ]   A Participant must complete a Year of Service (or
                           Period of Service if the Elapsed Time Method is
                           elected). (Could cause Plan to violate coverage
                           requirements under Code Section 410(b).)

         REQUIREMENTS FOR PARTICIPANTS WHO ARE NOT ACTIVELY EMPLOYED AT THE END
         OF THE PLAN YEAR (except as otherwise provided in g. through i. below).
         c. [ ]   A Participant must complete more than ______ Hours of Service
                  (not more than 1000). If the Elapsed Time Method is elected, a
                  Participant must complete _____ months of service (not more
                  than six (6)).
         d. [ ]   A Participant must complete a Year of Service (or Period of
                  Service is the Elapsed Time Method is elected).
         e. [ ]   Participants will NOT share in such allocations, regardless of
                  service.
         f. [ ]   Participants will share in such allocations, regardless
                  of service.

         PARTICIPANTS WHO ARE NOT ACTIVELY EMPLOYED AT THE END OF THE PLAN YEAR
         due to the following will be eligible to share in the allocations
         regardless of the above conditions (select all that apply):
         g. [ ]   Death.
         h. [ ]   Total and Permanent Disability.
         i. [ ]   Attainment of Early or Normal Retirement.

9.       FORFEITURES (Plan Sections 4.3(e))
         Forfeitures of profit sharing contributions will be...
         a. [ ]   applied first to reduce expenses related to the administration
                  of the Plan and then to reduce any Employer contributions.
                  (Elect this only it plan expenses are billed to the Employer)
         b. [X]   applied to reduce any Employer contributions. (Elect this
                  only if plan expenses are deducted from Participant accounts)
         c. [ ]   added to any Employer discretionary profit sharing
                  contribution.
         d. [ ]   reallocated to all Participants eligible to share in the
                  allocations in the same proportion that each Participant's
                  Compensation for the Plan Year bears to the Compensation of
                  all Participants for such year (pro rata).
         e. [ ]   N/A. Contributions are fully vested.

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                                     NON-STANDARDIZED 401(k) PROFIT SHARING PLAN
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         Forfeitures of matching contributions will be...
         f. [ ]   N/A. Matching contributions are 100% vested or no matching
                  contributions.
         g. [ ]   applied first to reduce expenses related to the
                  administration of the Plan and then to reduce any Employer
                  contributions. (Elect only if plan expenses are billed to the
                  Employer)
         h. [X]   applied to reduce the Employer matching contributions.
         i. [ ]   added to the Employer matching contributions and allocated
                  as an additional matching contribution.

10.      LIMITATIONS ON ALLOCATIONS (Plan Section 4.4)
         If any Participant is covered under another qualified defined
         contribution plan maintained by the Employer, other than a Master or
         Prototype Plan, or if the Employer maintains a welfare benefit fund, as
         defined in Code Section 419(e), or an individual medical account, as
         defined in Code Section 415(1)(2), under which amounts are treated as
         Annual Additions with respect to any Participant in this Plan:
         a. [X]   N/A. The Employer does not maintain another qualified
                  defined contribution plan.
         b. [ ]   The provisions of Plan Section 4.4(b) will apply as if the
                  other plan were a Master or Prototype Plan (contributions
                  under this plan will be reduced to the Maximum Permissible
                  Amount).
         c. [ ]   Specify the method under which the plans will limit total
                  Annual Additions to the Maximum Permissible Amount, and will
                  properly reduce any Excess Amounts, in a manner that precludes
                  Employer discretion:
                  ______________________________________________________________

H.       DISTRIBUTIONS

1.       FORM OF DISTRIBUTIONS (Plan Sections 6.5 and 6.6)
         Distributions under the Plan may be made in (select all that apply)...
         a. [X]   lump-sums.
         b. [X]   substantially equal installments.
         c. [X]   partial withdrawals.

         AND, pursuant to Plan Section 6.12,
         d. [ ]   no annuities are allowed (Plan Section 6.12(b) will apply and
                  the joint and survivor rules of Code Sections 401(a)(11) and
                  417 will not apply to the Plan).
         e. [ ]   annuities are allowed as the normal form of distribution (Plan
                  Section 6.12 will not apply and the joint and survivor rules
                  of Code Section 401(a)(11) and 417 will automatically apply).
                  If elected the Pre-Retirement Survivor Annuity will be equal
                  to 100% of Participant's interest in the Plan.
         f. [X]   joint and 100% survivor annuities are allowed but are not the
                  normal form of distribution (Plan Section 6.12(c) will apply
                  and the joint and survivor rules of Code Section 401(a)(11)
                  and 417 will only apply if an annuity form of distribution is
                  elected by a Participant).

         AND, if e. or f. is elected, the normal form of the Qualified Joint and
         Survivor Annuity will be a joint and 50% survivor annuity unless
         otherwise elected below:
                  1. [X]  N/A.
                  2. [ ]   Joint and 100% survivor annuity.
                  3. [ ]   Joint and 75% survivor annuity.
                  4. [ ]   Joint and 66 2/3% survivor annuity.

         AND, distributions may be made in ...
         g. [X]   cash only (except for insurance or annuity contracts).
         h. [ ]   cash or property (property is limited to Employer stock
                  only).

         NOTE:    Carry forward of joint and survivor annuity rules. If this
                  Plan has accepted a plan-to-plan transfer (other than a direct
                  rollover) of assets from a plan which permitted annuities as
                  the normal form of distribution, the joint and survivor
                  annuity rules shall apply to the Participant's entire interest
                  in the Plan.

2.       CONDITIONS FOR DISTRIBUTIONS UPON TERMINATION OF EMPLOYMENT
         Distributions upon termination of employment pursuant to Plan Section
         6.4(a) of the Plan will not be made unless the following conditions
         have been satisfied:
         a. [ ]   No distributions may be made until a Participant has reached
                  Early or Normal Retirement Date.
         b. [X]   Distributions may be made as soon as administratively feasible
                  at the Participant's election.
         c. [ ]   The Participant has incurred ________ (elect either one (1) or
                  five (5) consecutive 1-Year Break(s) in Service (or Period(s)
                  of Severance if the Elapsed Time Method is elected).
         d. [ ]   Distributions may be made at the Participant's election as
                  soon as administratively feasible after the end of the Plan
                  Year coincident with or next following termination of
                  employment.
         e. [ ]   Distribution from a Participant's Elective Deferral, Transfer
                  and Rollover Accounts may be made immediately at the
                  Participant's election and all other accounts will be
                  distributed as elected above.

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                                     NON-STANDARDIZED 401(k) PROFIT SHARING PLAN
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3.       INVOLUNTARY DISTRIBUTIONS (Automatic cash-outs)
         Will involuntary distributions of amounts less than $5,000 be made in
         accordance with the provisions of Sections 6.4, 6.5 and 6.6?
         a. [X]   Yes
         b. [ ]   No

4.       MINIMUM DISTRIBUTION TRANSITIONAL RULES (Plan Section 6.5(e))
         NOTE:    This Section does not apply to (1) a new Plan or (2) an
                  amendment or restatement of an existing Plan that never
                  contained the provisions of Code Section 401(a)(9) as in
                  effect prior to the amendments made by the Small Business Job
                  Protection Act of 1996 (SBJPA).
         The "required beginning date" for a Participant who is not a "five
         percent (5%) owner" is
         a. [ ]   N/A. (This is a new Plan or this Plan has never included
                  the pre-SBJPA provisions.)
         b. [ ]   April 1st of the calendar year following the year in which the
                  Participant attains age 70 1/2. (The pre-SBJPA rules will
                  continue to apply.)
         c. [X]   April 1st of the calendar year following the later of the
                  year in which the Participant attains age 70 1/2 or
                  retires (the post-SBJPA rules), with the following exceptions
                  (select one or both and if no election is made, both will
                  apply effective as of January 1, 1996):
                  1. [X]   A Participant who was already receiving required
                           minimum distributions under the pre-SBJPA rules as of
                           January 1, 1996 (not earlier than January 1, 1996)
                           may elect to stop receiving distributions and have
                           them recommence in accordance with the post-SBJPA
                           rules. Upon the recommencement of distributions, if
                           the Plan permits annuities as a form of distribution
                           then the following will apply:
                           a. [ ]   N/A. Annuity distributions are not
                                    permitted.
                           b. [ ]   Upon the recommencement of distributions,
                                    the original Annuity Starting Date will be
                                    retained.
                           c. [X]   Upon the recommencement of distributions, a
                                    new Annuity Starting Date is created.

                  2. [X]   A Participant who had not begun receiving required
                           minimum distributions as of January 1, 1996 (not
                           earlier than January 1, 1996) may elect to defer
                           commencement of distributions until retirement. The
                           option to defer the commencement of distributions
                           (i.e., to elect to receive in-service distributions
                           upon attainment of age 70 1/2) will apply to all such
                           Participants unless the option b below is elected:
                           a. [X]   N/A.
                           b. [ ]   The in-service distribution option is
                                    eliminated with respect to Participants who
                                    attain age 70 1/2 in or after the calendar
                                    year that begins after the later of (1)
                                    December 31, 1998, or (2) the adoption date
                                    of the amendment and restatement to bring
                                    the Plan into compliance with SBJPA. (This
                                    option may only be elected if the amendment
                                    to eliminate the in-service distribution is
                                    adopted no later than the last day of the
                                    remedial amendment period that applies to
                                    the Plan for changes under SBJPA.)

5.       LIFE EXPECTANCIES (Plan Section 6.5(f) for minimum distributions
         required pursuant to Code Section 401(a)(9)) shall...
         a. [X]   be recalculated if the Participant so elects.
         b. [ ]   be automatically recalculated.
         c. [ ]   not be recalculated.

6.       HARDSHIP DISTRIBUTIONS (Plan Sections 6.11 and/or 12.9)
         a. [ ]   No hardship distributions are permitted.
         b. [X]   Hardship distributions are permitted, from the following
                  accounts (contribution sources) (select all that apply):
                  1. [X]   All accounts.
                  2. [ ]   Participant's Elective Deferral Account.
                  3. [ ]   Participant's Account attributable to Employer
                           matching contributions.
                  4. [ ]   Participant's Account attributable to Employer
                           profit sharing contributions.
                  5. [ ]   Participant's Rollover Account.
                  6. [ ]   Participant's Transfer Account.

         NOTE:  Distributions from a Participant's Elective Deferral Account are
                limited to the portion of such account attributable to such
                Participant's Elective Deferrals. Hardship distributions are not
                permitted from a Participant's Qualified Non-Elective Account
                (including any 401(k) Safe Harbor Contributions) or Qualified
                Matching Contribution Account.

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         AND, shall the safe harbor hardship rules of Plan Section 12.9 apply to
         distributions made from all accounts? (NOTE: The safe harbor hardship
         rules automatically apply to hardship distributions from the
         Participant's Elective Deferral Account.)
         c. [ ]   No or N/A. The provisions of Plan Section 6.11 apply to
                  hardship distributions made from all accounts other than a
                  Participant's Elective Deferral Account.
         d. [X]   Yes. The provisions of Plan Section 12.9 apply to all hardship
                  distributions.

7.       IN-SERVICE DISTRIBUTIONS (Plan Section 6.10)
         a. [ ]   In-service distributions may not be made (except as
                  otherwise elected under Hardship Distributions above).
         b. [X]   In-service distributions may be made to a Participant who
                  has not separated from service as elected below:
                  1. [ ]   All accounts provided the following conditions are
                           satisfied (select all that apply):
                           NOTE:    Participant's Elective Deferral, Qualified
                                    Non-Elective Account Contribution Qualified
                                    Matching Contribution, and 401(k) Safe
                                    Harbor Contributions Accounts may not be
                                    distributed prior to age 59 1/2.
                           a. [ ]   the Participant has attained age_____.
                           b. [ ]   the Participant has reached Normal
                                    Retirement Age.
                           c. [ ]   the Participant has been a Participant
                                    in the Plan for at least ____ years (may not
                                    be less than five (5)).
                           d. [ ]   the amounts being distributed have
                                    accumulated in the Plan for at least two (2)
                                    years.
                  2. [X]   Participant's accounts attributable to Employer
                           matching and profit sharing contributions provided
                           the following conditions are satisfied (select all
                           that apply):
                           a. [X]   the Participant has attained age 70 1/2.
                           b. [ ]   the Participant has reached Normal
                                    Retirement Age.
                           c. [ ]   the Participant has been a Participant
                                    in the Plan for at least ____ years (may not
                                    be less than five (5)).
                           d. [ ]   the amounts being distributed have
                                    accumulated in the Plan for at least two (2)
                                    years.
                  3. [X]   Participant's Elective Deferral, Qualified
                           Non-Elective Contribution and Qualified Matching
                           Contribution Accounts provided the following
                           conditions are satisfied (select all that apply):
                           NOTE:    May not be distributed prior to age 59 1/2.
                           a. [X]   the Participant has attained age 59 1/2 .
                           b. [ ]   the Participant has reached Normal
                                    Retirement Age.
                           c. [ ]   the Participant has been a Participant in
                                    the Plan for at least _______years (may not
                                    be less than five (5)).
                           d. [ ]   the amounts being distributed have
                           accumulated in the Plan for at least two (2) years.
                  4. [X]   Participant's Rollover and Transfer Accounts provided
                           the following conditions are satisfied (select all
                           that apply):
                           NOTE:    Transfer Accounts may not be eligible
                                    for in-service distributions depending on
                                    the source of the transferred amount (i.e.
                                    defined benefit and money purchase plan
                                    sources).
                           a. [ ]   the Participant has attained age ______.
                           b. [ ]   the Participant has reached Normal
                                    Retirement Age.
                           c. [ ]   the Participant has been a Participant
                                    in the Plan for at least ______ years (may
                                    not be less than five (5)).
                           d. [ ]   the amounts being distributed have
                                    accumulated in the Plan for at least two (2)
                                    years.
                           e. [X]   May be distributed any time.

         NOTE:    Employee after-tax contributions (and related earnings) may be
                  distributed at the Participant's request.

I.       NONDISCRIMINATION TESTING

1.       HIGHLY COMPENSATED EMPLOYEE (Plan Section 1.31)

         NOTE:    If this is a GUST restatement be sure to complete the
                  questions in Section M.

         Top-Paid Group Election - Will the top-paid group election be used in
         determining Highly Compensated Employees?
         a. [X]   Yes
         b. [ ]   No

         Calendar Year Data Election - Will the calendar year data election be
         used in determining Highly Compensated Employees? (for non-calendar
         Plan Years)
         c. [ ]   Yes
         d. [ ]   No

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2.       ADP AND ACP TESTS (Plan Sections 12.4 and 12.6). The ADP ratio and ACP
         ratio for Non-Highly Compensated Employees will be based on the
         following:
         a. [ ]   N/A. This Plan satisfies the ADP and ACP Test Safe Harbor
                  rules by making a Basic Matching Contribution or an Enhanced
                  Matching Contribution for all Plan Years beginning on or after
                  the Effective Date of the Plan or, in the case of an amendment
                  and restatement, for all Plan Years to which the amendment and
                  restatement relates.
         b. [X]   PRIOR YEAR TESTING ELECTION: The prior year ratio will be
                  used for the ADP AND ACP tests. (Note: If this election is
                  made for the first year the Code Section 401(k) or 401(m)
                  feature is added to this Plan (unless this Plan is a successor
                  plan), the amount taken into account as the ADP and ACP of
                  Non-Highly Compensated Employees for the preceding Plan Year
                  will be 3%).
         c. [ ]   CURRENT YEAR TESTING: The current year ratio will be used
                  for the ADP and ACP tests.

         NOTE:    Effective with respect to Plan Years beginning after the date
                  the GUST restatement is adopted, the Plan must use the same
                  testing method for both the ADP and ACP tests.

J.       TOP-HEAVY REQUIREMENTS

1.       TOP-HEAVY DUPLICATIONS FOR EMPLOYERS MAINTAINING A DEFINED BENEFIT PLAN
         (Plan Section 4.3(i)): When a Non-Key Employee is a Participant in this
         Plan and a Defined Benefit Plan maintained by the Employer, indicate
         which method shall be utilized to avoid duplication of Top-Heavy
         minimum benefits (if b., c., d. or e. is elected, f. must be
         completed).
         a. [X]   N/A. The Employer does not maintain a Defined Benefit Plan.
                  (Go to next Section J 1g)
         b. [ ]   5% defined contribution minimum under this Plan.
         c. [ ]   2% defined benefit minimum
         d. [ ]   The full Top-Heavy minimum contribution will be provided
                  in each plan (if selected, Plan Section 4.3(i) shall not
                  apply).
         e. [ ]   Specify the method under which the Plans will provide
                  Top-Heavy minimum benefits for Non-Key Employees that will
                  preclude Employer discretion and avoid inadvertent omissions:
                  ______________________________________________________________

         NOTE:    If b., c., d. or e. is selected and the Defined Benefit Plan
                  and this Plan do not benefit the same Participants, the
                  uniformity requirement of the Section 401(a)(4) Regulations
                  may be violated.

         AND, the "Present Value of Accrued Benefit" (Plan Section 9.2) for
                  Top-Heavy purposes shall be based on...
         f. [ ]   Interest Rate:________________________________________________
                  Mortality Table:______________________________________________

         TOP-HEAVY DUPLICATIONS FOR EMPLOYERS MAINTAINING A DEFINED CONTRIBUTION
         PLAN (Plan Section 4.3(f)): When a Non-Key Employee is a Participant in
         this Plan and another defined contribution plan maintained by the
         Employer, indicate which method shall be utilized to avoid duplication
         of Top-Heavy minimum benefits:
         g. [X]   N/A. The Employer does not maintain another qualified
                  defined contribution plan.
         h. [ ]   A minimum, non-integrated contribution of 3% of each Non-Key
                  Employee's 415 Compensation shall be provided in the Money
                  Purchase Plan.
         i. [ ]   A minimum, non-integrated contribution of 3% of each Non-Key
                  Employee's 415 Compensation shall be made to this Plan (or
                  other plan subject to Code Section 412).
         j. [ ]   Specify the method under which the Plans will provide
                  Top-Heavy minimum benefits for Non-Key Employees that will
                  preclude Employer discretion and avoid inadvertent omissions,
                  including any adjustments required under Code Section 415:
                  ______________________________________________________________

K.       LOANS

1.       LOANS TO PARTICIPANTS (Plan Section 7.2) All loans shall be treated as
         Participant Directed investments.

         NOTE:    Department of Labor Regulations require the adoption of a
                  separate written loan program setting forth the requirements
                  outlined in Section 7.2 of the Plan.

         a. [ ]   Loans are not permitted.
         b. [X]   Loans are permitted.

(C) 2002 MassMurual Life Insurance Company

                                       19

<PAGE>

FL 8618.001                          NON-STANDARDIZED 401(k) PROFIT SHARING PLAN

         IF loans are permitted (select all that apply):

         c. [ ]   loans will only be made for hardship or financial necessity.

         d. [X]   a Participant may only have two (not to exceed 5) loan(s)
                  outstanding at any time.

         e. [X]   the minimum loan will be $ 1.000 (may not exceed $ 1,000).

         f. [X]   the repayment period for loans to purchase a principal
                  residence can exceed 5 years.

         g. [ ]   all outstanding loan balances will become due and payable in
                  their entirety upon the occurrence of a distributable event
                  (other than satisfaction of the conditions for an in-service
                  distribution).

         h. [X]   loans will only be permitted from the following accounts
                  (select all that apply):

                  1. [X]   All accounts.

                  2. [ ]   Participant's Elective Deferral Account.

                  3. [ ]   Qualified Matching Contribution Account and/or
                           portion of Participant's Account attributable to
                           Employer matching contributions.

                  4. [ ]   Participant's Account attributable to Employer profit
                           sharing contributions.

                  5. [ ]   Qualified Non-Elective Contribution Account.

                  6. [ ]   Participant's Rollover Account.

                  7. [ ]   Participant's Transfer Account.

                  8. [ ]   Participant's Voluntary Contribution Account.

         i. [X]   The following accounts shall be included for calculating the
                  maximum loan amount calculation (i.e. 50% of the vested
                  account balance):

                  1. [X]   All accounts.

                  2. [ ]   Participant's Elective Deferral Account.

                  3. [ ]   Qualified Matching Contribution Account and/or
                           portion of Participant's Account attributable to
                           Employer matching contributions.

                  4. [ ]   Participant's Account attributable to Employer profit
                           sharing contributions.

                  5. [ ]   Qualified Non-Elective Contribution Account.

                  6. [ ]   Participant's Rollover Account.

                  7. [ ]   Participant's Transfer Account.

                  8. [ ]   Participant's Voluntary Contribution Account.

L.       MISCELLANEOUS

1.       DIRECTED INVESTMENT ACCOUNTS (Plan Section 4.10) instructions will be
         made by the:

         a. [ ]   Administrator for all contributions.

         b. [X]   Participant for all contributions.

         c. [ ]   Administrator for Company contributions, and Participant for
                  Participant contributions (including Elective Deferrals).

         d. [ ]   Participant for Rollover Account and Transfer Accounts only,
                  Administrator for all other contributions.

         e. [ ]   Other (specify):___

         AND, is it intended that the Plan comply with ERISA Section 404(c) with
         respect to the accounts subject to Participant investment direction?
         (Must elect "No" if any Employer investment selection applies).

         f. [ ]   No

         g. [X]   Yes

         AND, will voting rights on directed investments be passed through to
         Participants?

         h. [X]   No. Employer stock is not an alternative OR Plan is not
                  intended to comply with Act Section 404(c).

         i. [ ]   Yes, for Employer stock only.

2.       TRANSFERS AND ROLLOVERS (Plan Section 4.6)

         a. [X]   Transfers from qualified plans and rollovers will be accepted
                  by this Plan.

         b. [ ]   Transfers from qualified plans and rollovers will not be
                  accepted by this Plan.

         AND, if a. is elected, transfers and rollovers may be accepted...

         c. [X]   from any Eligible Employee, even if not yet a Participant.

         d. [ ]   from Participants only.

3.       AFTER-TAX VOLUNTARY EMPLOYEE CONTRIBUTIONS (Plan Section 4.8)

         a. [X]   After-tax voluntary Employee contributions will not be
                  allowed.

         b. [ ]   After-tax voluntary Employee contributions will be allowed.

         If b. is elected, each Participant may elect to have Compensation
         reduced by...

                  1. [ ]   up to___________%

                  2. [ ]   up to the maximum percentage allowable not to exceed
                           Code Section 415.

(C) 2002 MassMutual Life Insurance Company

                                       20
<PAGE>

FL 8618.001                          NON-STANDARDIZED 401(k) PROFIT SHARING PLAN

         If b. is elected, may the Employer make matching contributions with
         respect to the after-tax voluntary Employee contributions (Participant
         Matched Contributions)?

                  3. [ ]   No

                  4. [ ]   Yes, based on the matching formula with respect to
                           Elective Deferrals.

                  5. [ ]   Yes, based on the matching formula and provisions
                           elected below:

                           a. [ ]   The Employer ... (select 1.or 2.)

                                    1. [ ]   may make matching contributions
                                             equal to a discretionary
                                             percentage, to be determined by the
                                             Employer, of the Participant's
                                             after-tax voluntary Employee
                                             contributions.

                                    2. [ ]   will make matching contributions
                                             equal to _______% (e.g., 50) of the
                                             Participant's after-tax voluntary
                                             Employee contributions, plus:

                                             a. [ ]   N/A.

                                             b. [ ]   an additional
                                                      discretionary percentage,
                                                      to be determined by the
                                                      Employer.

                                    AND, in determining the matching
                                    contribution above, only after-tax voluntary
                                    Employee contributions up to the percentage
                                    or dollar amount specified below will be
                                    matched:

                                    (select 3. and/or 4. OR 5.)

                                    3. [ ]   _____% of a Participant's
                                             Compensation.

                                    4. [ ]   $____.

                                    5. [ ]   a discretionary percentage of a
                                             Participant's Compensation or a
                                             discretionary dollar amount to be
                                             determined by the Employer each
                                             Plan Year on a uniform basis to all
                                             Participants.

                           b. [ ]   The Employer may make matching contributions
                                    equal to a discretionary percentage, to be
                                    determined by the Employer, of each tier, to
                                    be determined by the Employer, of the
                                    Participant's after-tax voluntary Employee
                                    contributions.

                           c. [ ]   The Employer will make matching
                                    contributions equal to the sum of:

<TABLE>
<CAPTION>
  After-tax Voluntary Employee
        Contributions and
Participant Matched Contributions   Percentage Match           Limit
- ---------------------------------   ----------------           -----
<S>                                 <C>                <C>     <C>
Over 1 % up to 2% of Compensation              _____%  up to    ____
Over 2% up to 3% of Compensation               _____%  up to    ____
Over 3% up to 4% of Compensation               _____%  up to    ____
Over 4% up to 5% of Compensation               _____%  up to    ____
Over 5% up to 6% of Compensation               _____%  up to    ____
Over 6% up to 7% of Compensation               _____%  up to    ____
Over 7% up to 8% of Compensation               _____%  up to    ____
Over 8% up to 9% of Compensation               _____%  up to    ____
Over 9% up to 10% of Compensation              _____%  up to    ____
Over 10% of Compensation                       _____%  up to    ____
</TABLE>

                           PERIOD OF DETERMINING MATCHING CONTRIBUTIONS
                           Matching contributions will be determined based on
                           after-tax voluntary Employee contributions made
                           during the following pay period (and any Compensation
                           or dollar limitation used in determining the match
                           will be based on the applicable period):

                           d. [ ]   the entire Plan Year (must elect if
                                    Participant is required to be actively
                                    employed on last day of Plan Year to receive
                                    matching contributions).

                           e. [ ]   each payroll period.

                           f. [ ]   all payroll periods ending within each
                                    month.

                           g. [ ]   all payroll periods ending with or within
                                    the Plan Year quarter.

(C) 2002 MassMutual Life Insurance Company

                                       21
<PAGE>

FL 8618.001                          NON-STANDARDIZED 401(k) PROFIT SHARING PLAN

                           THE MATCHING CONTRIBUTION MADE ON BEHALF OF ANY
                           PARTICIPANT for any Plan Year will not exceed:

                           h. [ ]   N/A, no dollar limit is imposed.

                           i. [ ] $ ______.

                           MATCHING CONTRIBUTIONS WILL BE MADE ON BEHALF OF:

                           j. [ ]   all Participants.

                           k. [ ]   only eligible Non-Highly Compensated
                                    Employees.

4.       LIFE INSURANCE (Plan Section 7.1)

         a. [ ]   Life insurance may not be purchased.

         b. [X]   Life insurance may be purchased.

5.       FORFEITURE RESTORATION (Plan Section 4.3(d)) A reinstated Participant
         must repay the full amount distributed to him attributable to Employer
         contributions (excluding Employee deferrals) at termination of
         employment prior to restoration of any forfeited nonvested account
         balance:

         a. [ ]   Yes.

         b. [X]   No.

         c. [ ]   Not applicable ((100%) vesting or no Employer contributions).

6.       HIGHLY COMPENSATED EMPLOYEE (Plan Section 1.31)

         TOP-PAID GROUP ELECTION. Will the top-paid group election be made? (The
         election made below for the latest year will continue to apply to
         subsequent Plan Years unless a different election is made.)

         a. [ ]   Yes, for the Plan Year beginning in:___ .

         b. [X]   No, for the Plan Year beginning in: 2002.

         CALENDAR YEAR DATA ELECTION. Will the calendar year data election be
         used? (The election made below for the latest year will continue to
         apply to subsequent Plan Years unless a different election is made.)

         c. [X]   Yes, for the Plan Year beginning in: 2002 .

         d. [ ]   No, for the Plan Year beginning in:___.

M.       GUST TRANSITION RULES

         The following questions only apply if this is a GUST restatement (i.e.,
         Section B2e. is selected). If this is not a GUST restatement, then this
         Plan will not be considered an individually designed plan merely
         because the following questions are deleted from the Adoption
         Agreement.

1.       COMPENSATION
         The family aggregation rules of Code Section 401(a)(l7) as in effect
         under Code Section 414(q)(6) prior to the enactment of SBJPA do not
         apply to this Plan effective as of:

         a. [X]   The first day of the first Plan Year beginning after 1996.

         b. [ ]   ____(may not be prior to the first day of the first Plan Year
                  beginning in 1997 and may not be later than the first day of
                  the Plan Year following the Plan Year in which this GUST
                  restatement is adopted).
         NOTE:    If family aggregation continued to apply after 1996, the Plan
                  is not a safe harbor plan for Code Section 401(a)(4) purposes
                  and the Employer may not rely on the opinion letter issued by
                  the Internal Revenue Service that this Plan is qualified under
                  Code Section 401.

2.       LIMITATION ON ALLOCATIONS AND TOP HEAVY RULES

         If any Participant is a Participant in this Plan and a qualified
         defined benefit plan maintained by the Employer, then the limitations
         of Code Section 4l5(e) do not apply to this Plan effective with respect
         to Limitation Years beginning on or after:

         a. [X]   N/A. The Employer does not maintain, and has never maintained,
                  a qualified defined benefit plan OR the provisions of Code
                  Section 415(e) have already been removed from this Plan.

         b. [ ]   ______(may not be prior to the first Limitation Year beginning
                  in 2000 and may not be later than the first Limitation Year
                  beginning after the Limitation Year in which this GUST
                  restatement is adopted).

         NOTE:    If the Code Section 415(e) limits continued to apply to
                  Limitation Years beginning after 1999, the Plan is not a safe
                  harbor plan for Code Section 40l(a)(4) purposes.

(C) 2002 MassMutual Life Insurance Company

                                       22
<PAGE>

FL 8618.001                          NON-STANDARDIZED 401(k) PROFIT SHARING PLAN

         AND, if b. is selected with a date that is later than the effective
         date of this GUST restatement, then with respect to the Limitation Year
         in which this restatement is adopted, if any Participant is a
         Participant in this Plan and a qualified defined benefit plan
         maintained by the Employer, specify the method under which the plans
         involved will provide top-heavy minimum benefits for Non-Key Employees
         and will satisfy the limitations of Code Section 415(e) in a manner
         that precludes Employer discretion:

         c. [ ]   N/A. The effective date of the GUST restatement is the date
                  the provisions of Code Section 415(e) no longer apply to this
                  Plan.

         d. [ ]   ____

         NOTE:    If the Top-Heavy minimum benefit is only provided in one plan
                  and the Defined Benefit Plan and this Plan do not benefit the
                  same Participants, the uniformity requirement of the Section
                  401(a)(4) Regulations may be violated.

3.       INVOLUNTARY DISTRIBUTIONS

         If the Plan provides for involuntary distributions (i.e., H3.a. is
         elected) then the increase in the involuntary amount threshold from
         $3,500 to $5,000 became effective with respect to distributions made on
         or after:

         a. [ ]   N/A. The plan doesn't provide for involuntary distributions
                  less than $5,000.

         b. [X]   August 6, 1997, or if later__________ (leave blank if not
                  applicable).

4.       MINIMUM DISTRIBUTIONS

         The proposed Code Section 401(a)(9) Regulations issued in January 2001
         apply with respect to distributions under the Plan made on or after
         January 1, 2001, unless a later date is specified below:

         a. [X]   N/A.

         b. [ ]   ____(may be any date in 2001 or the first day of any calendar
                  year after 2001).

         AND, if b. is selected, for years prior to the date specified above,
         life expectancies for minimum distributions required pursuant to Code
         Section 401(a)(9) shall...

         c. [ ]   be recalculated at the Participant's election.

         d. [ ]   be recalculated.

         e. [ ]   not be recalculated.

5.       NONDISCRIMINATION TESTING ELECTIONS.

         a. Top-Paid Group Elections - The top-paid group election for
            determining Highly Compensated Employees was made for Plan Year
            beginning in:

                  [X]  1997  [X]  1998  [X]  1999  [X]  2000  [X]  Other  2001

         b. Calendar Year Data Election - The calendar year data election for
            determining Highly Compensated Employees for non-calendar Plan Years
            made for Plan Years beginning in:

                  [ ]  1997  [ ]  1998  [ ]  1999  [ ]  2000  [ ]  Other__

         c. Prior Year ADP Testing Election - The prior year testing election
            for the ADP test was made for Plan Years beginning in:

                  [X]  1997  [X]  1998  [X]  1999  [X]  2000  [X]  Other  2001

         d. Current Year ADP Testing Election - The current year testing
            election for the ADP test was made for Plan Years beginning in:

                  [ ]  1997  [ ]  1998  [ ]  1999  [ ]  2000  [ ]  Other__

         e. Prior Year ACP Testing Election - The prior year testing election
            for the ACP test was made for Plan Years beginning in:

                  [X]  1997  [X]  1998  [X]  1999  [X]  2000  [X]  Other  2001

         f. Current Year ACP Testing Election - The current year testing
            election for the ACP test was made for the Plan Year beginning in:

                  [ ]  1997  [ ]  1998  [ ]  1999  [ ]  2000  [ ]  Other__

(C) 2002 MassMutual Life Insurance Company

                                       23
<PAGE>

FL 8618.001                          NON-STANDARDIZED 401(k) PROFIT SHARING PLAN

This Adoption Agreement can only be utilized by plan sponsors who invest in a
MassMutual product. If the Plan no longer invests assets in a MassMutual
product, this copywritten plan document is no longer valid with respect to such
Plan.

The adopting Employer may rely on an opinion letter issued by the Internal
Revenue Service as evidence that the plan is qualified under Code Section 401
only to the extent provided in Announcement 2001-77, 2001-30 1.R.B.

The Employer may not rely on the opinion letter in certain other circumstances
or with respect to certain qualification requirements, which are specified in
the opinion letter issued with respect to the plan and in Announcement 2001-77.

In order to have reliance in such circumstances or with respect to such
qualification requirements, application for a determination letter must be made
to Employee Plans Determinations of the Internal Revenue Service.

This Adoption Agreement may be used only in conjunction with Basic Plan Document
#03. This Adoption Agreement and the Basic Plan Document shall together be known
as MassMutual Flexinvest(R) Prototype Non-Standardized 401(k) Profit Sharing
Plan #03-003.

The adoption of this Plan, its qualification by the IRS, and the related tax
consequences are the responsibility of the Employer and its independent tax and
legal advisors. The Employer shall rely on independent tax counsel to the extent
deemed necessary to complete this document.

MassMutual will notify the adopting Employer of any amendments made to the Plan
or of the discontinuance or abandonment of the Plan provided this Plan has been
acknowledged by MassMutual or its authorized representative. Furthermore, in
order to be eligible to receive such notification, the adopting Employer agrees
to notify MassMutual of any change in address.

This Plan may not be used and shall not be deemed to be a Prototype Plan, unless
an authorized representative of MassMutual has acknowledged the use of the Plan.
Such acknowledgment is for administerial purposes only. It acknowledges that the
Employer is using the Plan but does not represent that this Plan, including the
choices selected on the Adoption Agreement, has been reviewed by a
representative of the sponsor or constitutes a qualified retirement plan.

MassMutual

By: /s/ LORI A. BLAUCHEMIN
    ----------------------

With regard to any questions regarding the provisions of the Plan, adoption of
the Plan, or the effect of an opinion letter from the IRS, call or write:

Name:     MassMutual Retirement Services Compliance Department

Address:  1295 State Street
          Springfield, Massachusetts 01111-0001

Telephone:(413)788-8411

(C) 2002 MassMutual Life Insurance Company

                                       24
<PAGE>

FL 8618.001                          NON-STANDARDIZED 401(k) PROFIT SHARING PLAN

The following Employers have adopted PrimeEnergy Corporation Employees 401(k)
Savings Plan as Participating Employers:

/s/ Virginia Crowe Forese
- --------------------------
Signature

PERSONNEL MANAGER
Print Name & Title

EOWS Midland Company
EIN#: 06-1603694
Type of Entity: Corporation

/s/ Virginia Crowe Forese
- --------------------------
Signature

PERSONNEL MANAGER
Print Name & Title

Eastern Oil Well Service Company
EIN #: 06-1313613
Type of Entity: Corporation

/s/ Virginia Crowe Forese
- --------------------------
Signature

PERSONNEL MANAGER
Print Name & Title

Prime Operating Company
EIN #: 76-0355677
Type of Entity: Corporation:

/s/ Virginia Crowe Forese
- --------------------------
Signature

PERSONNEL MANAGER
Print Name & Title

Southwest Oilfield Construction Company
EIN #: 73-1411394
Type of Entity: Corporation

/s/ Virginia Crowe Forese
- --------------------------
Signature

PERSONNEL MANAGER
Print Name & Title

PrimeEnergy Management Corporation
EIN #: 13-2929065
Type of Entity: Corporation

(C) 2002 MassMutual Life Insurance Company

                                       26
<PAGE>

FL 8618.001                          NON-STANDARDIZED 401(k) PROFIT SHARING PLAN

The Employer and Trustee hereby cause this Plan to be executed on August 1,
2003. Furthermore, this Plan may not be used unless acknowledged by MassMutual
Life Insurance Company or its authorized representative.

EMPLOYER: PRIMEENERGY CORPORATION

By: /s/ Virgina Crowe Forese
    --------------------------

    Personnel manager
    Printed Name and Title

The signature of the Trustee (if applicable) appears on a separate trust
agreement attached to the Plan.

 (C) 2002 MassMutual Life Insurance Company

                                       27
<PAGE>

                                     EGTRRA
                                AMENDMENT TO THE

             PRIMEENERGY CORPORATION EMPLOYEES 401(K) SAVINGS PLAN

<PAGE>

EGTRRA - EMPLOYER

                               ARTICLE I
                               PREAMBLE

1.1      Adoption and effective date of amendment. This amendment of the plan is
         adopted to reflect certain provisions of the Economic Growth and Tax
         Relief Reconciliation Act of 2001 ("EGTRRA"). This amendment is
         intended as good faith compliance with the requirements of EGTRRA and
         is to be construed in accordance with EGTRRA and guidance issued
         thereunder. Except as otherwise provided, this amendment shall be
         effective as of the first day of the first plan year beginning after
         December 31, 2001. If this amendment is effective prior to the
         effective date of the GUST Prototype Plan Document, this amendment will
         be deemed to be incorporated into the GUST Prototype Plan Document as
         if it was adopted as of the effective date of the GUST Prototype Plan
         Document.

1.2      Supersession of inconsistent provisions. This amendment shall supersede
         the provisions of the plan to the extent those provisions are
         inconsistent with the provisions of this amendment.

                                   ARTICLE II
                          ADOPTION AGREEMENT ELECTIONS

         THE QUESTIONS IN THIS ARTICLE II ONLY NEED TO BE COMPLETED IN ORDER TO
         OVERRIDE THE DEFAULT PROVISIONS SET FORTH BELOW. IF ALL OF THE DEFAULT
         PROVISIONS WILL APPLY, THEN THESE QUESTIONS SHOULD BE SKIPPED.

         UNLESS THE EMPLOYER ELECTS OTHERWISE IN THIS ARTICLE II, THE FOLLOWING
         DEFAULTS APPLY:

         1)       THE VESTING SCHEDULE FOR MATCHING CONTRIBUTIONS WILL BE A 6
                  YEAR GRADED SCHEDULE (IF THE PLAN CURRENTLY HAS A GRADED
                  SCHEDULE THAT DOES NOT SATISFY EGTRRA) OR A 3 YEAR CLIFF
                  SCHEDULE (IF THE PLAN CURRENTLY HAS A CLIFF SCHEDULE THAT DOES
                  NOT SATISFY EGTRRA), AND SUCH SCHEDULE WILL APPLY TO ALL
                  MATCHING CONTRIBUTIONS (EVEN THOSE MADE PRIOR TO 2002).

         2)       ROLLOVERS ARE AUTOMATICALLY EXCLUDED IN DETERMINING WHETHER
                  THE $5,000 THRESHOLD HAS BEEN EXCEEDED FOR AUTOMATIC CASH-OUTS
                  (IF THE PLAN PROVIDES FOR AUTOMATIC CASH-OUTS). THIS IS
                  APPLIED TO ALL PARTICIPANTS REGARDLESS OF WHEN THE
                  DISTRIBUTABLE EVENT OCCURRED.

         3)       THE SUSPENSION PERIOD AFTER A HARDSHIP DISTRIBUTION IS MADE
                  WILL BE 6 MONTHS AND THIS WILL ONLY APPLY TO HARDSHIP
                  DISTRIBUTIONS MADE AFTER 2001.

         4)       CATCH-UP CONTRIBUTIONS WILL BE ALLOWED.

2.1      VESTING SCHEDULE FOR MATCHING CONTRIBUTIONS

         If there are matching contributions subject to a vesting schedule that
         does not satisfy EGTRRA. then unless otherwise elected below, for
         participants who complete an hour of service in a plan year beginning
         after December 31, 2001. the following vesting schedule will apply to
         all matching contributions subject to a vesting schedule:

         If the plan has a graded vesting schedule (i.e., the vesting schedule
         includes a vested percentage that is more than 0% and less than 100%)
         the following will apply:

<TABLE>
<CAPTION>
Years of vesting service        Nonforfeitable percentage
<S>                             <C>
          2                                 20%
          3                                 40%
          4                                 60%
          5                                 80%
          6                                100%
</TABLE>

         If the plan does not have a graded vesting schedule, then matching
         contributions will be nonforfeitable upon the completion of 3 years of
         vesting service.

                                       1

<PAGE>

EGTRRA - EMPLOYER

         In lieu of the above vesting schedule, the employer elects the
following schedule:
         a.       [ ]      3 year cliff (a participant's accrued benefit derived
                           from employer matching contributions shall
                           be nonforfeitable upon the participant's completion
                           of three years of vesting service).
         b.       [ ]      6 year graded schedule (20% after 2 years of vesting
                           service and an additional 20% for each year
                           thereafter).
         c.       [ ]      Other (must be at least as liberal as a. or the b.
                           above):

<TABLE>
<CAPTION>
Years of vesting service       Nonforfeitable percentage
<S>                            <C>
   __________________                 _________%
   __________________                 _________%
   __________________                 _________%
   __________________                 _________%
   __________________                 _________%
</TABLE>

         The vesting schedule set forth herein shall only apply to participants
         who complete an hour of service in a plan year beginning after December
         31. 2001, and, unless the option below is elected, shall apply to ALL
         matching contributions subject to a vesting schedule.
         d.       [ ]      The vesting schedule will only apply to matching
                           contributions made in plan years beginning after
                           December 31, 2001 (the prior schedule will apply to
                           matching contributions made in prior plan years).

2.2      EXCLUSION OF ROLLOVERS IN APPLICATION OF INVOLUNTARY CASH-OUT
         PROVISIONS. If the plan includes involuntary cash-out provisions, then
         unless one of the options below is elected, effective for distributions
         made after December 31, 2001, rollover contributions will be excluded
         in determining the value of the participant's nonforfeitable account
         balance for purposes of the plan's involuntary cash-out rules.
         a.       [X]      Rollover contributions will not be excluded.
         b.       [ ]      Rollover contributions will be excluded only with
                           respect to distributions made after _____. (Enter a
                           date no earlier than December 31, 2001.)
         c.       [ ]      Rollover contributions will only be excluded with
                           respect to participants who separated from service
                           after _____. (Enter a date. The date may be earlier
                           than December 31, 2001.)

2.3      SUSPENSION PERIOD OF HARDSHIP DISTRIBUTIONS. If the plan provides for
         hardship distributions upon satisfaction of the safe harbor (deemed)
         standards as set forth in Treas. Reg. Section 1.401(k)-1(d)(2)(iv),
         then, unless the option below is elected, the suspension period
         following a hardship distribution shall only apply to hardship
         distributions made after December 31, 2001.
                  [X]      With regard to hardship distributions made during
                           2001, a participant shall be prohibited from making
                           elective deferrals and employee contributions under
                           this and all other plans until the later of January
                           1, 2002, or 6 months after receipt of the
                           distribution.

2.4      CATCH-UP CONTRIBUTIONS (FOR 401(k) PROFIT SHARING PLANS ONLY): The plan
         permits catch-up contributions (Article VI) unless the option below is
         elected.
                  [ ]      The plan does not permit catch-up contributions to be
                           made.

                                   ARTICLE III
                       VESTING OF MATCHING CONTRIBUTIONS

3.1      Applicability. This Article shall apply to participants who complete an
         Hour of Service after December 31, 2001. with respect to accrued
         benefits derived from employer matching contributions made in plan
         years beginning after December 31, 2001. Unless otherwise elected by
         the employer in Section 2.1 above, this Article shall also apply to all
         such participants with respect to accrued benefits derived from
         employer matching contributions made in plan years beginning prior to
         January 1, 2002.

3.2      Vesting schedule. A participant's accrued benefit derived from employer
         matching contributions shall vest as provided in Section 2.1 of this
         amendment.

                                   ARTICLE IV
                             INVOLUNTARY CASH-OUTS

4.1      Applicability and effective date. If the plan provides for involuntary
         cash-outs of amounts less than $5,000, then unless otherwise elected in
         Section 2.2 of this amendment, this Article shall apply for
         distributions made after December 31, 2001, and shall apply to all
         participants.

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EGTRRA - EMPLOYER

4.2      Rollovers disregarded in determining value of account balance for
         involuntary distributions. For purposes of the Sections of the plan
         that provide for the involuntary distribution of vested accrued
         benefits of $5,000 or less, the value of a participant's nonforfeitable
         account balance shall be determined without regard to that portion of
         the account balance that is attributable to rollover contributions (and
         earnings allocable thereto) within the meaning of Sections 402(c),
         403(a)(4), 403(b)(8), 408(d)(3)(A)(ii), and 457(e)(16) of the Code. If
         the value of the participant's nonforfeitable account balance as so
         determined is $5,000 or less, then the plan shall immediately
         distribute the participant's entire nonforfeitable account balance.

                                    ARTICLE V
                             HARDSHIP DISTRIBUTIONS

5.1      Applicability and effective date. If the plan provides for hardship
         distributions upon satisfaction of the safe harbor (deemed) standards
         as set forth in Treas. Reg. Section 1.401(k)-1(d)(2)(iv), then this
         Article shall apply for calendar years beginning after 2001.

5.2      Suspension period following hardship distribution. A participant who
         receives a distribution of elective deferrals after December 31, 2001,
         on account of hardship shall be prohibited from making elective
         deferrals and employee contributions under this and all other plans of
         the employer for 6 months after receipt of the distribution.
         Furthermore, if elected by the employer in Section 2.3 of this
         amendment, a participant who receives a distribution of elective
         deferrals in calendar year 2001 on account of hardship shall be
         prohibited from making elective deferrals and employee contributions
         under this and all other plans until the later of January 1, 2002, or 6
         months after receipt of the distribution.

                                   ARTICLE VI
                             CATCH-UP CONTRIBUTIONS

Catch-up Contributions. Unless otherwise elected in Section 2.4 of this
amendment, all employees who are eligible to make elective deferrals under this
plan and who have attained age 50 before the close of the calendar year shall be
eligible to make catch-up contributions in accordance with, and subject to the
limitations of, Section 414(v) of the Code. Such catch-up contributions shall
not be taken into account for purposes of the provisions of the plan
implementing the required limitations of Sections 402(g) and 415 of the Code.
The plan shall not be treated as failing to satisfy the provisions of the plan
implementing the requirements of Section 401(k)(3). 401(k)(11), 401 (k)(12),
410(b), or 416 of the Code, as applicable, by reason of the making of such
catch-up contributions.

                                   ARTICLE VII
                         INCREASE IN COMPENSATION LIMIT

Increase in Compensation Limit. The annual compensation of each participant
taken into account in determining allocations for any plan year beginning after
December 31, 2001, shall not exceed $200,000, as adjusted for cost-of-living
increases in accordance with Section 401(a)(17)(B)of the Code. Annual
compensation means compensation during the plan year or such other consecutive
12-month period over which compensation is otherwise determined under the plan
(the determination period).

                                  ARTICLE VIII
                                   PLAN LOANS

Plan loans for owner-employees or shareholder-employees. If the plan permits
loans to be made to participants, then effective for plan loans made after
December 31, 2001, plan provisions prohibiting loans to any owner-employee or
shareholder-employee shall cease to apply.

                                   ARTICLE IX
             LIMITATIONS ON CONTRIBUTIONS (IRC SECTION 415 LIMITS)

9.1      Effective date. This Section shall be effective for limitation years
         beginning after December 31, 2001.

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EGTRRA - EMPLOYER

9.2      Maximum annual addition. Except to the extent permitted under Article
         VI of this amendment and Section 414(v) of the Code, if applicable, the
         annual addition that may be contributed or allocated to a participant's
         account under the plan for any limitation year shall not exceed the
         lesser of:

         a.       $40,000, as adjusted for increases in the cost-of-living under
                  Section 415(d) of the Code, or

         b.       100 percent of the participant's compensation, within the
                  meaning of Section 415(c)(3) of the Code, for the limitation
                  year.

         The compensation limit referred to in b. shall not apply to any
         contribution for medical benefits after separation from service (within
         the meaning of Section 401(h) or Section 419A(f)(2)of the Code) which
         is otherwise treated as an annual addition.

                                    ARTICLE X
                        MODIFICATION OF TOP-HEAVY RULES

10.1     Effective date. This Article shall apply for purposes of determining
         whether the plan is a top-heavy plan under Section 416(g) of the Code
         for plan years beginning after December 31, 2001, and whether the plan
         satisfies the minimum benefits requirements of Section 416(c) of the
         Code for such years. This Article amends the top-heavy provisions of
         the plan.

10.2     Determination of top-heavy status.

10.2.1   Key employee. Key employee means any employee or former employee
         (including any deceased employee) who at any time during the plan year
         that includes the determination date was an officer of the employer
         having annual compensation greater than $130,000 (as adjusted under
         Section 416(i)(1) of the Code for plan years beginning after December
         31, 2002), a 5-percent owner of the employer, or a 1-percent owner of
         the employer having annual compensation of more than $ 150,000. For
         this purpose, annual compensation means compensation within the meaning
         of Section 415(c)(3) of the Code. The determination of who is a key
         employee will be made in accordance with Section 416(i)(1) of the Code
         and the applicable regulations and other guidance of general
         applicability issued thereunder.

10.2.2   Determination of present values and amounts. This Section 10.2.2 shall
         apply for purposes of determining the present values of accrued
         benefits and the amounts of account balances of employees as of the
         determination date.

         a.       Distributions during year ending on the determination date.
                  The present values of accrued benefits and the amounts of
                  account balances of an employee as of the determination date
                  shall be increased by the distributions made with respect to
                  the employee under the plan and any plan aggregated with the
                  plan under Section 416(g)(2) of the Code during the 1-year
                  period ending on the determination date. The preceding
                  sentence shall also apply to distributions under a terminated
                  plan which, had it not been terminated, would have been
                  aggregated with the plan under Section 416(g)(2)(A)(i) of the
                  Code. In the case of a distribution made for a reason other
                  than separation from service, death, or disability, this
                  provision shall be applied by substituting "5-year period" for
                  "1-year period."

         b.       Employees not performing services during year ending on the
                  determination date. The accrued benefits and accounts of any
                  individual who has not performed services for the employer
                  during the 1-year period ending on the determination date
                  shall not be taken into account.

10.3     Minimum benefits.

10.3.1   Matching contributions. Employer matching contributions shall be taken
         into account for purposes of satisfying the minimum contribution
         requirements of Section 416(c)(2) of the Code and the plan. The
         preceding sentence shall apply with respect to matching contributions
         under the plan or if the plan provides that the minimum contribution
         requirement shall be met in another plan, such other plan. Employer
         matching contributions that are used to satisfy the minimum
         contribution requirements shall be treated as matching contributions
         for purposes of the actual contribution percentage test and other
         requirements of Section 401(m) of the Code.

10.3.2   Contributions under other plans. The employer may provide, in an
         addendum to this amendment, that the minimum benefit requirement shall
         be met in another plan (including another plan that consists solely of
         a cash or deferred arrangement which meets the requirements of Section
         401(k)(12) of the Code and matching

                                       4

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EGTRRA - EMPLOYER

         contributions with respect to which the requirements of Section 401
         (m)(11) of the Code are met). The addendum should include the name of
         the other plan, the minimum benefit that will be provided under such
         other plan, and the employees who will receive the minimum benefit
         under such other plan.

                                   ARTICLE XI
                                DIRECT ROLLOVERS

11.1     Effective date. This Article shall apply to distributions made after
         December 31, 2001.

11.2     Modification of definition of eligible retirement plan. For purposes of
         the direct rollover provisions of the plan, an eligible retirement plan
         shall also mean an annuity contract described in Section 403(b) of the
         Code and an eligible plan under Section 457(b) of the Code which is
         maintained by a state, political subdivision of a state, or any agency
         or instrumentality of a state or political subdivision of a state and
         which agrees to separately account for amounts transferred into such
         plan from this plan. The definition of eligible retirement plan shall
         also apply in the case of a distribution to a surviving spouse, or to a
         spouse or former spouse who is the alternate payee under a qualified
         domestic relation order, as defined in Section 414(p) of the Code.

11.3     Modification of definition of eligible rollover distribution to exclude
         hardship distributions. For purposes of the direct rollover provisions
         of the plan, any amount that is distributed on account of hardship
         shall not be an eligible rollover distribution and the distributee may
         not elect to have any portion of such a distribution paid directly to
         an eligible retirement plan.

11.4     Modification of definition of eligible rollover distribution to include
         after-tax employee contributions. For purposes of the direct rollover
         provisions in the plan, a portion of a distribution shall not fail to
         be an eligible rollover distribution merely because the portion
         consists of after-tax employee contributions which are not includible
         in gross income. However, such portion may be transferred only to an
         individual retirement account or annuity described in Section 408(a) or
         (b) of the Code, or to a qualified defined contribution plan described
         in Section 401(a) or 403(a) of the Code that agrees to separately
         account for amounts so transferred, including separately accounting for
         the portion of such distribution which is includible in gross income
         and the portion of such distribution which is not so includible.

                                   ARTICLE XII
                           ROLLOVERS FROM OTHER PLANS

Rollovers from other plans. The employer, operationally and on a
nondiscriminatory basis, may limit the source of rollover contributions that may
be accepted by this plan.

                                  ARTICLE XIII
                          REPEAL OF MULTIPLE USE TEST

Repeal of Multiple Use Test. The multiple use test described in Treasury
Regulation Section 1.401(m)-2 and the plan shall not apply for plan years
beginning after December 31, 2001.

                                   ARTICLE XIV
                               ELECTIVE DEFERRALS

14.1     Elective Deferrals - Contribution Limitation. No participant shall be
         permitted to have elective deferrals made under this plan, or any other
         qualified plan maintained by the employer during any taxable year, in
         excess of the dollar limitation contained in Section 402(g) of the Code
         in effect for such taxable year, except to the extent permitted under
         Article VI of this amendment and Section 414(v) of the Code, if
         applicable.

                                   ARTICLE XV
                          SAFE HARBOR PLAN PROVISIONS

Modification of Top-Heavy Rules. The top-heavy requirements of Section 416 of
the Code and the plan shall not apply in any year beginning after December 31,
2001, in which the plan consists solely of a cash or deferred arrangement which
meets the requirements of Section 401(k)(12) of the Code and matching
contributions with respect to which the requirements of Section 401(m)(11) of
the Code are met.

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EGTRRA - EMPLOYER

                                   ARTICLE XVI
                   DISTRIBUTION UPON SEVERANCE OF EMPLOYMENT

16.1     Effective date. This Article shall apply for distributions and
         transactions made after December 31, 2001, regardless of when the
         severance of employment occurred.

16.2     New distributable event. A participant's elective deferrals, qualified
         nonelective contributions, qualified matching contributions, and
         earnings attributable to these contributions shall be distributed on
         account of the participant's severance from employment. However, such a
         distribution shall be subject to the other provisions of the plan
         regarding distributions, other than provisions that require a
         separation from service before such amounts may be distributed.

This amendment has been executed this 1st day of August, 2003.

Name of Employer: PrimeEnergy Corporation

By: Virginia Crowe Forese
    ---------------------
          EMPLOYER

Name of Plan: PrimeEnergy Corporation Employees 401(k) Savings Plan

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                  MASSMUTUAL RETIREMENT SERVICES FLEXINVEST(R)
                       DEFINED CONTRIBUTION PROTOTYPE PLAN

<PAGE>

                                             DEFINED CONTRIBUTION PROTOTYPE PLAN

                               TABLE OF CONTENTS

<TABLE>
<S>                                                                                                    <C>
                                                 ARTICLE I
                                                DEFINITIONS

                                                ARTICLE II
                                              ADMINISTRATION

2.1      POWERS AND RESPONSIBILITIES OF THE EMPLOYER..............................................     12
2.2      DESIGNATION OF ADMINISTRATIVE AUTHORITY..................................................     13
2.3      ALLOCATION AND DELEGATION OF RESPONSIBILITIES............................................     13
2.4      POWERS AND DUTIES OF THE ADMINISTRATOR...................................................     13
2.5      RECORDS AND REPORTS......................................................................     14
2.6      APPOINTMENT OF ADVISERS..................................................................     14
2.7      INFORMATION FROM EMPLOYER................................................................     14
2.8      PAYMENT OF EXPENSES......................................................................     15
2.9      MAJORITY ACTIONS.........................................................................     15
2.10     CLAIMS PROCEDURE.........................................................................     15
2.11     CLAIMS REVIEW PROCEDURE..................................................................     15

                                                ARTICLE III
                                                ELIGIBILITY

3.1      CONDITIONS OF ELIGIBILITY................................................................     15
3.2      EFFECTIVE DATE OF PARTICIPATION..........................................................     16
3.3      DETERMINATION OF ELIGIBILITY.............................................................     16
3.4      TERMINATION OF ELIGIBILITY...............................................................     16
3.5      REHIRED EMPLOYEES AND BREAKS IN SERVICE..................................................     16
3.6      ELECTION NOT TO PARTICIPATE..............................................................     17
3.7      CONTROL OF ENTITIES BY OWNER-EMPLOYEE....................................................     17

                                        ARTICLE IV CONTRIBUTION AND
                                                ALLOCATION

4.1      FORMULA FOR DETERMINING EMPLOYER'S CONTRIBUTION..........................................     17
4.2      TIME OF PAYMENT OF EMPLOYER'S CONTRIBUTION...............................................     18
4.3      ALLOCATION OF CONTRIBUTION, FORFEITURES AND EARNINGS.....................................     18
4.4      MAXIMUM ANNUAL ADDITIONS.................................................................     22
4.5      ADJUSTMENT FOR EXCESS ANNUAL ADDITIONS...................................................     26
4.6      ROLLOVERS................................................................................     26
4.7      PLAN TO PLAN TRANSFERS FROM QUALIFIED PLANS..............................................     27
4.8      VOLUNTARY EMPLOYEE CONTRIBUTIONS.........................................................     27
4.9      QUALIFIED VOLUNTARY EMPLOYEE CONTRIBUTIONS...............................................     28
4.10     DIRECTED INVESTMENT ACCOUNT..............................................................     28
4.11     QUALIFIED MILITARY SERVICE...............................................................     30
</TABLE>

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                                             DEFINED CONTRIBUTION PROTOTYPE PLAN

<TABLE>
<S>                                                                                                    <C>
                                                 ARTICLE V
                                                VALUATIONS

5.1      VALUATION OF THE PLAN FUND...............................................................     30
5.2      METHOD OF VALUATION......................................................................     30

                                                ARTICLE VI
                                DETERMINATION AND DISTRIBUTION OF BENEFITS

6.1      DETERMINATION OF BENEFITS UPON RETIREMENT................................................     30
6.2      DETERMINATION OF BENEFITS UPON DEATH.....................................................     31
6.3      DETERMINATION OF BENEFITS IN EVENT OF DISABILITY.........................................     32
6.4      DETERMINATION OF BENEFITS UPON TERMINATION...............................................     32
6.5      DISTRIBUTION OF BENEFITS.................................................................     33
6.6      DISTRIBUTION OF BENEFITS UPON DEATH......................................................     38
6.7      TIME OF DISTRIBUTION.....................................................................     40
6.8      DISTRIBUTION FOR MINOR OR INCOMPETENT BENEFICIARY........................................     40
6.9      LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN...........................................     40
6.10     IN-SERVICE DISTRIBUTION..................................................................     40
6.11     ADVANCE DISTRIBUTION FOR HARDSHIP........................................................     41
6.12     SPECIAL RULE FOR CERTAIN PROFIT SHARING PLANS............................................     42
6.13     QUALIFIED DOMESTIC RELATIONS ORDER DISTRIBUTION..........................................     42
6.14     DIRECT ROLLOVERS.........................................................................     42
6.15     TRANSFER OF ASSETS FROM A MONEY PURCHASE PLAN............................................     43
6.16     ELECTIVE TRANSFERS OF BENEFITS TO OTHER PLANS............................................     43

                                                ARTICLE VII
                                         PLAN ADMINISTRATOR DUTIES

7.1      LIFE INSURANCE...........................................................................     44
7.2      LOANS TO PARTICIPANTS....................................................................     45
7.3      MAJORITY ACTIONS.........................................................................     46
7.4      ADMINISTRATOR'S COMPENSATION, EXPENSES AND TAXES.........................................     46
7.5      ANNUAL REPORT OF THE ADMINISTRATOR.......................................................     46
7.6      AUDIT....................................................................................     46
7.7      RESIGNATION, REMOVAL AND SUCCESSION OF ADMINISTRATOR OR TRUSTEE..........................     47
7.8      TRANSFER OF INTEREST.....................................................................     47
7.9      ADMINISTRATOR AND TRUSTEE INDEMNIFICATION................................................     47
7.10     EMPLOYER SECURITIES AND REAL PROPERTY....................................................     47
7.11     COLLECTIVE INVESTMENT FUND...............................................................     48

                                               ARTICLE VIII
                                    AMENDMENT, TERMINATION AND MERGERS

8.1      AMENDMENT................................................................................     48
8.2      TERMINATION..............................................................................     49
8.3      MERGER, CONSOLIDATION OR TRANSFER OF ASSETS..............................................     49
</TABLE>

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                                             DEFINED CONTRIBUTION PROTOTYPE PLAN

<TABLE>
<S>                                                                                                    <C>
                                                ARTICLE IX
                                           TOP-HEAVY PROVISIONS

9.1      TOP-HEAVY PLAN REQUIREMENTS..............................................................     49
9.2      DETERMINATION OF TOP-HEAVY STATUS........................................................     49

                                                 ARTICLE X
                                               MISCELLANEOUS

10.1     EMPLOYER ADOPTIONS.......................................................................     50
10.2     PARTICIPANTS RIGHTS......................................................................     51
10.3     ALIENATION...............................................................................     51
10.4     CONSTRUCTION OF PLAN.....................................................................     51
10.5     GENDER AND NUMBER........................................................................     51
10.6     LEGAL ACTION.............................................................................     51
10.7     PROHIBITION AGAINST DIVERSION OF FUNDS...................................................     52
10.8     EMPLOYER'S, ADMINISTRATOR'S AND TRUSTEE'S PROTECTIVE CLAUSE..............................     52
10.9     INSURER'S PROTECTIVE CLAUSE..............................................................     52
10.10    RECEIPT AND RELEASE FOR PAYMENTS.........................................................     52
10.11    ACTION BY THE EMPLOYER...................................................................     52
10.12    NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY.......................................     52
10.13    HEADINGS.................................................................................     53
10.14    APPROVAL BY INTERNAL REVENUE SERVICE.....................................................     53
10.15    UNIFORMITY...............................................................................     53
10.16    PAYMENT OF BENEFITS......................................................................     53
10.17    BONDING..................................................................................     53

                                                ARTICLE XI
                                          PARTICIPATING EMPLOYERS

11.1     ELECTION TO BECOME A PARTICIPATING EMPLOYER..............................................     53
11.2     REQUIREMENTS OF PARTICIPATING EMPLOYERS..................................................     54
11.3     DESIGNATION OF AGENT.....................................................................     54
11.4     EMPLOYEE TRANSFERS.......................................................................     54
11.5     PARTICIPATING EMPLOYER'S CONTRIBUTION AND FORFEITURES....................................     54
11.6     AMENDMENT................................................................................     54
11.7     DISCONTINUANCE OF PARTICIPATION..........................................................     54
11.8     ADMINISTRATOR'S AUTHORITY................................................................     54

                                                ARTICLE XII
                                        CASH OR DEFERRED PROVISIONS

12.1     FORMULA FOR DETERMINING EMPLOYER'S CONTRIBUTION..........................................     55
12.2     PARTICIPANT'S SALARY REDUCTION ELECTION..................................................     55
12.3     ALLOCATION OF CONTRIBUTION, FORFEITURES AND EARNINGS.....................................     57
12.4     ACTUAL DEFERRAL PERCENTAGE TESTS.........................................................     59
12.5     ADJUSTMENT TO ACTUAL DEFERRAL PERCENTAGE TESTS...........................................     60
12.6     ACTUAL CONTRIBUTION PERCENTAGE TESTS.....................................................     63
</TABLE>

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                                             DEFINED CONTRIBUTION PROTOTYPE PLAN

<TABLE>
<S>                                                                                                    <C>
12.7     ADJUSTMENT TO ACTUAL CONTRIBUTION PERCENTAGE TESTS.......................................     65
12.8     SAFE HARBOR PROVISIONS...................................................................     67
12.9     ADVANCE DISTRIBUTION FOR HARDSHIP........................................................     69
</TABLE>

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                                             DEFINED CONTRIBUTION PROTOTYPE PLAN

                                    ARTICLE I
                                  DEFINITIONS

         As used in this Plan, the following words and phrases shall have the
meanings set forth herein unless a different meaning is clearly required by the
context:

         1.1      "ACP" means the "Actual Contribution Percentage" determined
pursuant to Section 12.6(e).

         1.2      "ACT" means the Employee Retirement Income Security Act of
1974 ("ERISA"), as it may be amended from time to time.

         1.3      "ADP" means the "Actual Deferral Percentage" determined
pursuant to Section 12.4(e).

         1.4      "ADMINISTRATOR" means the Employer unless another person or
entity has been designated by the Employer pursuant to Section 2.2 to administer
the Plan on behalf of the Employer.

         1.5      "ADOPTION AGREEMENT" means the separate agreement which is
executed by the Employer and sets forth the elective provisions of this Plan and
Trust as specified by the Employer.

         1.6      "AFFILIATED EMPLOYER" means any corporation which is a member
of a controlled group of corporations (as defined in Code Section 414(b)) which
includes the Employer; any trade or business (whether or not incorporated) which
is under common control (as defined in Code Section 414(c)) with the Employer;
any organization (whether or not incorporated) which is a member of an
affiliated service group (as defined in Code Section 414(m)) which includes the
Employer; and any other entity required to be aggregated with the Employer
pursuant to Regulations under Code Section 414(o).

         1.7      "ANNIVERSARY DATE" means the first day of each Plan Year as
defined in Section B.3 of the Adoption Agreement.

         1.8      "ANNUITY STARTING DATE" means, with respect to any
Participant, the first day of the first period for which an amount is paid as an
annuity, or, in the case of a benefit not payable in the form of an annuity, the
first day on which all events have occurred which entitles the Participant to
such benefit.

         1.9      "BENEFICIARY" means the person (or entity) to whom all or a
portion of a deceased Participant's interest in the Plan is payable, subject to
the restrictions of Sections 6.2 and 6.6.

         1.10     "CODE" means the Internal Revenue Code of 1986, as amended.

         1.11     "COMPENSATION" with respect to any Participant means one of
the following as elected in Section F of the Adoption Agreement:

                           (a)      Information required to be reported under
                                    Code Sections 6041, 6051 and 6052 (WAGES,
                                    TIPS AND OTHER COMPENSATION AS REPORTED ON
                                    FORM W-2). Compensation means wages, within
                                    the meaning of Code Section 3401(a), and all
                                    other payments of compensation to an
                                    Employee by the Employer (in the course of
                                    the Employer's trade or business) for which
                                    the Employer is required to furnish the
                                    Employee a written statement under Code
                                    Sections 604l(d), 6051(a)(3) and 6052.
                                    Compensation must be determined without
                                    regard to any rules under Code Section 3401
                                    (a) that limit the remuneration included in
                                    wages based on the nature or location of the
                                    employment or the services performed (such
                                    as the exception for agricultural labor in
                                    Code Section 3401(a)(2)).

                           (b)      CODE SECTION 3401 (a) WAGES. Compensation
                                    means an Employee's wages within the meaning
                                    of Code Section 3401(a) for the purposes of
                                    income tax withholding at the source but
                                    determined without regard to any rules that
                                    limit the remuneration included in wages
                                    based on the nature or location of the
                                    employment or the services performed (such
                                    as the exception for agricultural labor in
                                    Code Section 3401 (a)(2)).

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                                             DEFINED CONTRIBUTION PROTOTYPE PLAN

                           (c)      415 SAFE-HARBOR COMPENSATION. Compensation
                                    means wages, salaries, and fees for
                                    professional services and other amounts
                                    received (without regard to whether or not
                                    an amount is paid in cash) for personal
                                    services actually rendered in the course of
                                    employment with the Employer maintaining the
                                    Plan to the extent that the amounts are
                                    includible in gross income (including, but
                                    not limited to, commissions paid
                                    salespersons, compensation for services on
                                    the basis of a percentage of profits,
                                    commissions on insurance premiums, tips,
                                    bonuses, fringe benefits, and
                                    reimbursements, or other expense allowances
                                    under a nonaccountable plan (as described in
                                    Regulation 1.62-2(c))), and excluding the
                                    following:

                  (1)      Employer contributions to a plan of deferred
                  compensation which are not includible in the Employee's gross
                  income for the taxable year in which contributed, or Employer
                  contributions under a simplified employee pension plan to the
                  extent such contributions are excludable from the Employee's
                  gross income, or any distributions from a plan of deferred
                  compensation;

                  (2)      Amounts realized from the exercise of a nonqualified
                  stock option, or when restricted stock (or property) held by
                  the Employee either becomes freely transferable or is no
                  longer subject to a substantial risk of forfeiture;

                  (3)      Amounts realized from the sale, exchange or other
                  disposition of stock acquired under a qualified stock option;
                  and

                  (4)      Other amounts which receive special tax benefits, or
                  contributions made by the Employer (whether or not under a
                  salary reduction agreement) towards the purchase of an annuity
                  contract described in Code Section 403(b) (whether or not the
                  contributions are actually excludable from the gross income of
                  the Employee).

                  However, Compensation for any Self-Employed Individual shall
be equal to Earned Income. Compensation shall include only that Compensation
which is actually paid to the Participant during the determination period.
Except as otherwise provided in this Plan, the determination period shall be the
period elected by the Employer in the Adoption Agreement. If the Employer makes
no election, the determination period shall be the Plan Year.

                  Notwithstanding the above, if elected in Section F of the
Adoption Agreement, Compensation shall include all of the following types of
elective contributions and all of the following types of deferred compensation:

                  (a)      Elective contributions that are made by the Employer
         on behalf of a Participant that are not includible in gross income
         under Code Sections 125, 402(e)(3), 402(h)(l)(B), 403(b), and for Plan
         Years beginning on or after January 1, 2001 (or as of a date, no
         earlier than January 1, 1998, as specified in an addendum to the
         Adoption Agreement), 132(f)(4);

                  (b)      Compensation deferred under an eligible deferred
         compensation plan within the meaning of Code Section 457(b); and

                  (c)      Employee contributions (under governmental plans)
         described in Code Section 414(h)(2) that are picked up by the employing
         unit and thus are treated as Employer contributions.

                  For Plan Years beginning on or after January 1, 1989, and
before January 1, 1994, the annual Compensation of each Participant taken into
account for determining all benefits provided under the Plan for any Plan Year
shall not exceed $200,000. This limitation shall be adjusted by the Secretary at
the same time and in the same manner as under Code Section 415(d), except that
the dollar increase in effect on January 1 of any calendar year is effective for
Plan Years beginning in such calendar year and the first adjustment to the
$200,000 limitation is effective on January 1, 1990.

                  For Plan Years beginning on or after January 1, 1994,
Compensation in excess of $150,000 (or such other amount provided in the Code)
shall be disregarded for all purposes other than for purposes of salary deferral
elections. Such amount shall be adjusted by the Commissioner for increases in
the cost-of-living in accordance with Code Section 401(a)(17)(B). The
cost-of-living adjustment in effect for a calendar year applies to any
determination period beginning in such calendar year. If a determination period
consists of fewer than twelve (12) months, the $150,000 annual Compensation
limit will be multiplied by a fraction, the numerator of which is the number of
months in the determination period, and the denominator of which is twelve (12).

                  If Compensation for any prior determination period is taken
into account in determining a Participant's allocations for the current Plan
Year, the Compensation for such prior determination period is subject to the
applicable annual Compensation limit in effect for that prior period. For this
purpose, in determining allocations in Plan Years beginning on or after January
1, 1989, the annual compensation limit in effect for determination periods
beginning before that date is $200,000. In

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addition, in determining allocations in Plan Years beginning on or after January
1, 1994, the annual Compensation limit in effect for determination periods
beginning before that date is $150,000.

                  Notwithstanding the foregoing, the family member aggregation
rules of Code Sections 401(a)(17) and 414(q)(6) as in effect prior to the
enactment of the Small Business Job Protection Act of 1996 shall not apply to
this Plan effective with respect to Plan Years beginning after December 31,
1996.

                  If Section F.l.f. of the Adoption Agreement is elected and,
the Employer elects to exclude a class of Employees from the Plan, then
Compensation for any Employee who becomes eligible or ceases to be eligible to
participate during a determination period shall only include Compensation while
the Employee is an Eligible Employee.

                  If, in connection with the adoption of any amendment, the
definition of Compensation has been modified, then, except as otherwise provided
herein, for Plan Years prior to the Plan Year which includes the adoption date
of such amendment, Compensation means compensation determined pursuant to the
terms of the Plan then in effect.

         1.12     "CONTRACT" OR "POLICY" means any life insurance policy,
retirement income policy, or annuity contract (group or individual) issued by
the Insurer. In the event of any conflict between the terms of this Plan and the
terms of any contract purchased hereunder, the Plan provisions shall control.

         1.13     "DESIGNATED INVESTMENT ALTERNATIVE" means a specific
investment identified by name by the Employer (or such other Fiduciary who has
been given the authority to select investment options) as an available
investment under the Plan to which Plan assets may be invested by the Trustee or
Administrator pursuant to the investment direction of a Participant.

         1.14     "DIRECTED INVESTMENT OPTION" means a Designated Investment
Alternative and any other investment permitted by the Plan and the Participant
Direction Procedures to which Plan assets may be invested pursuant to the
investment direction of a Participant.

         1.15     "EARLY RETIREMENT DATE" means the date specified in the
Adoption Agreement on which a Participant or Former Participant has satisfied
the requirements specified in the Adoption Agreement (Early Retirement Age). A
Participant shall become fully Vested upon satisfying such requirements if the
Participant is still employed at the Early Retirement Age.

         1.16     "EARNED INCOME" means the net earnings from self-employment in
the trade or business with respect to which the Plan is established, for which
the personal services of the individual are a material income-producing factor.
Net earnings will be determined without regard to items not included in gross
income and the deductions allocable to such items. Net earnings are reduced by
contributions made by the Employer to a qualified plan to the extent deductible
under Code Section 404. In addition, net earnings shall be determined with
regard to the deduction allowed to the taxpayer by Code Section 164(f), for
taxable years beginning after December 31,1989.

         1.17     "ELECTIVE DEFERRALS" means the Employer's contributions to the
Plan that are made pursuant to a Participant's deferral election pursuant to
Section 12.2, excluding any such amounts distributed as "excess annual
additions" pursuant to Section 4.5. Elective Deferrals shall be subject to the
requirements of Sections 12.2(b) and 12.2(c) and shall, except as otherwise
provided herein, be required to satisfy the nondiscrimination requirements of
Regulation 1.401 (k)-l (b)(2), the provisions of which are specifically
incorporated herein by reference.

         1.18     "ELIGIBLE EMPLOYEE" means any Eligible Employee as elected in
Section C of the Adoption Agreement and as provided herein. With respect to a
non-standardized Adoption Agreement, an individual shall not be an "Eligible
Employee" if such individual is not reported on the payroll records of the
Employer as a common law employee. In particular, it is expressly intended that
individuals not treated as common law employees by the Employer on its payroll
records are not "Eligible Employees" and are excluded from Plan participation
even if a court or administrative agency determines that such individuals are
common law employees and not independent contractors. Furthermore, with respect
to a non-standardized Adoption Agreement, Employees of an Affiliated Employer
will not be treated as "Eligible Employees" prior to the date the Affiliated
Employer adopts the Plan as a Participating Employer.

                  Except as otherwise provided in this paragraph, if the
Employer does not elect in Section C of the Adoption Agreement to include
Employees who became Employees as the result of a "Code Section 410(b)(6)(C)
transaction," then such Employees will only be "Eligible Employees" after the
expiration of the transition period beginning on the date of the transaction and
ending on the last day of the first Plan Year beginning after the date of the
transaction. A "Code Section 410(b)(6)(C) transaction" is an asset or stock
acquisition, merger, or similar transaction involving a change in the Employer
of the Employees of a trade or business that is subject to the special rules set
forth in Code Section 410(b)(6)(C). However, regardless of any election made in
the Adoption Agreement, if a separate entity becomes an Affiliate Employer as
the result of a "Code Section 410(b)(6)(C) transaction," then Employees of such
separate entity will not be treated as "Eligible Employees" prior to the date
the entity adopts the Plan as a Participating Employer or, with respect to a
standardized Adoption Agreement, if earlier, the expiration of the transition
period set forth above.

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                  If, in Section C of the Adoption Agreement, the Employer
elects to exclude union employees, then Employees whose employment is governed
by a collective bargaining agreement between the Employer and "employee
representatives" under which retirement benefits were the subject of good faith
bargaining and if two percent (2%) or less of the Employees covered pursuant to
that agreement are professionals as defined in Regulation 1.410(b)-9, shall not
be eligible to participate in this Plan. For this purpose, the term "employee
representatives" does not include any organization more than half of whose
members are employees who are owners, officers, or executives of the Employer.

                  If, in Section C of the Adoption Agreement, the Employer
elects to exclude non-resident aliens, then Employees who are non-resident
aliens (within the meaning of Code Section 7701(b)(l)(B)) who received no earned
income (within the meaning of Code Section 911 (d)(2)) from the Employer which
constitutes income from sources within the United States (within the meaning of
Code Section 861(a)(3)) shall not be eligible to participate in this Plan.

         1.19     "EMPLOYEE" means any person who is employed by the Employer.
The term "Employee" shall also include any person who is an employee of an
Affiliated Employer and any Leased Employee deemed to be an Employee as provided
in Code Section 414(n) or (o).

         1.20     "EMPLOYER" means the entity specified in Section A of the
Adoption Agreement, any successor which shall maintain this Plan and any
predecessor which has maintained this Plan. In addition, unless the context
means otherwise, the term "Employer" shall include any Participating Employer
(as defined in Section 11.1) which shall adopt this Plan.

         1.21     "ENTRY DATE" means the date elected in Section C.4. of the
Adoption Agreement on which an Employee commences participation in the Plan
after satisfying the eligibility requirements elected in Section C of the
Adoption Agreement.

         1.22     "EXCESS AGGREGATE CONTRIBUTIONS" means, with respect to any
Plan Year, the excess of:

                  (a)      The aggregate "Contribution Percentage Amounts" (as
         defined in Section 12.6) actually made on behalf of Highly Compensated
         Participants for such Plan Year and taken into account in computing the
         numerator of the ACP, over

                  (b)      The maximum "Contribution Percentage Amounts"
         permitted by the ACP test in Section 12.6 (determined by reducing
         contributions made on behalf of Highly Compensated Participants in
         order of their "Contribution Percentages" beginning with the highest of
         such percentages).

Such determination shall be made after first taking into account corrections of
any Excess Deferrals pursuant to Section 12.2 and then taking into account
adjustments of any Excess Contributions pursuant to Section 12.5.

         1.23     "EXCESS ANNUAL ADDITIONS" means the excess of the
Participant's "Annual Additions" for the Limitation Year over the "Maximum
Permissible Amount.

         1.24     "EXCESS COMPENSATION" means, with respect to a Plan that is
integrated with Social Security (permitted disparity), a Participant's
Compensation which is in excess of the integration level elected in Section G of
the Adoption Agreement.

                  However, if Compensation is based on less than a twelve (12)
month determination period, Excess Compensation shall be determined by reducing
the integration level by a fraction, the numerator of which is the number of
full months in the short period and the denominator of which is twelve (12).

         1.25     "EXCESS CONTRIBUTIONS" means, with respect to any Plan Year,
the excess of:

                  (a)      The aggregate amount of Employer contributions
         actually made on behalf of Highly Compensated Participants for such
         Plan Year and taken into account in computing the numerator of the ADP,
         over

                  (b)      The maximum amount of such contributions permitted by
         the ADP test in Section 12.4 (determined by hypothetically reducing
         contributions made on behalf of Highly Compensated Participants in
         order of the actual deferral ratios, beginning with the highest of such
         ratios).

                  In determining the amount of Excess Contributions to be
distributed and/or recharacterized with respect to an affected Highly
Compensated Participant as determined herein, such amount shall be reduced by
any Excess Deferrals previously distributed to such affected Highly Compensated
Participant for the Participant's taxable year ending with or within such Plan
Year.

         1.26     "EXCESS DEFERRALS" means, with respect to any taxable year of
a Participant, those elective deferrals (within the meaning of Code Section
402(g)) that are includible in the Participant's gross income under Code Section
402(g) to the extent such Participant's elective deferrals for the taxable year
exceed the dollar limitation under such Code Section. Excess Deferrals shall be
treated as an "Annual Addition" pursuant to Section 4.4 when contributed to the
Plan unless distributed to the affected

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                                             DEFINED CONTRIBUTION PROTOTYPE PLAN

Participant not later than the first April 15th following the close of the
Participant's taxable year in which the Excess Deferral was made. Additionally,
for purposes of Sections 4.3(f) and 9.2, Excess Deferrals shall continue to be
treated as Employer contributions even if distributed pursuant to Section
12.2(e). However, Excess Deferrals of Non-Highly Compensated Participants are
not taken into account for purposes of Section 12.4.

         1.27     "FIDUCIARY" means any person who (a) exercises any
discretionary authority or discretionary control respecting management of the
Plan or exercises any authority or control respecting management or disposition
of its assets, (b) renders investment advice for a fee or other compensation,
direct or indirect, with respect to any monies or other property of the Plan or
has any authority or responsibility to do so, or (c) has any discretionary
authority or discretionary responsibility in the administration of the Plan.

         1.28     "FISCAL YEAR" means the Employer's tax accounting year.

         1.29     "FLEXINVEST MULTIPLE EMPLOYER PLAN FOR FORMER EMPLOYEES" means
the multiple employer plan sponsored by Massachusetts Mutual Life Insurance
Company ("MassMutual") in which the Employer may agree to participate pursuant
to executing a Participating Employer Agreement with MassMutual.

         1.30     "FORFEITURE" means, with respect to a Former Participant who
has severed employment, that portion of the Participant's Account that is not
Vested.

                  (a)      The last day of the Plan Year in which a Former
         Participant who has severed employment with the Employer incurs five
         (5) consecutive 1-Year Breaks in Service, or

                  (b)      The distribution of the entire Vested portion of the
         Participant's Account of a Former Participant who has severed
         employment with the Employer. For purposes of this provision, if the
         Former Participant has a Vested benefit of zero, then such Former
         Participant shall be deemed to have received a distribution of such
         Vested benefit as of the year in which the severance of employment
         occurs.

         1.31     "FORMER PARTICIPANT" means a person who has been a
Participant, but who has ceased to be a Participant for any reason.

         1.32     "414(s) COMPENSATION" means any definition of compensation
that satisfies the nondiscrimination requirements of Code Section 414(s) and the
Regulations thereunder. The period for determining 414(s) Compensation must be
either the Plan Year or the calendar year ending with or within the Plan Year.
An Employer may further limit the period taken into account to that part of the
Plan Year or calendar year in which an Employee was a Participant in the
component of the Plan being tested. The period used to determine 414(s)
Compensation must be applied uniformly to all Participants for the Plan Year.

         1.33     "415 COMPENSATION" means, with respect to any Participant,
such Participant's (a) Wages, tips and other compensation on Form W-2, (b)
Section 3401 (a) wages or (c) 415 safe-harbor compensation as elected in the
Adoption Agreement for purposes of Compensation. 415 Compensation shall be based
on the full Limitation Year regardless of when participation in the Plan
commences. Furthermore, regardless of any election made in Section F of the
Adoption Agreement, with respect to Limitation Years beginning after December
31,1997,415 Compensation shall include any elective deferral (as defined in Code
Section 402(g)(3)) and any amount which is contributed or deferred by the
Employer at the election of the Participant and which is not includible in the
gross income of the Participant by reason of Code Section 125, 457, and, for
Limitation Years beginning on or after January 1,2001 (or as of a date, no
earlier than January 1, 1998, as specified in an addendum to the Adoption
Agreement), 132(f)(4). For Limitation Years beginning prior to January 1, 1998,
415 Compensation shall exclude such amounts.

                  Except as otherwise provided herein, if, in connection with
the adoption of any amendment, the definition of 415 Compensation has been
modified, then for Plan Years prior to the Plan Year which includes the adoption
date of such amendment, 415 Compensation means compensation determined pursuant
to the terms of the Plan then in effect.

         1.34     "HIGHLY COMPENSATED EMPLOYEE" means, effective for Plan Years
beginning after December 31,1996, an Employee described in Code Section 414(q)
and the Regulations thereunder, and generally means any Employee who:

                  (a)      was a "five percent (5%) owner" as defined in Section
         1.37(c) at any time during the "determination year" or the "look-back
         year"; or

                  (b)      for the "look-back year" had 415 Compensation from
         the Employer in excess of $80,000 and, if elected in Section L of the
         Adoption Agreement, was in the Top-Paid Group for the "look-back year."
         The $80,000 amount is adjusted at the same time and in the same manner
         as under Code Section 415(d), except that the base period is the
         calendar quarter ending September 30, 1996.

                  The "determination year" means the Plan Year for which testing
is being performed and the "look-back year" means the immediately preceding
twelve (12) month period. However, if the calendar year data election is made in
Section L of

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                                             DEFINED CONTRIBUTION PROTOTYPE PLAN

the Adoption Agreement, for purposes of (b) above, the "look-back year" shall be
the calendar year beginning within the twelve (12) month period immediately
preceding the "determination year." Notwithstanding the preceding sentence, if
the calendar year data election is effective with respect to a Plan Year
beginning in 1997, then for such Plan Year the "look-back year" shall be the
calendar year ending with or within the Plan Year for which testing is being
performed, and the "determination year" shall be the period of time, if any,
which extends beyond the "look-back year" and ends on the last day of the Plan
Year for which testing is being performed.

                  A highly compensated former employee is based on the rules
applicable to determining highly compensated employee status as in effect for
that "determination year," in accordance with Regulation 1.414(q)-1T, A-4 and
IRS Notice 97-45 (or any superseding guidance).

                  In determining whether an employee is a Highly Compensated
Employee for a Plan Year beginning in 1997, the amendments to Code Section
414(q) stated above are treated as having been in effect for years beginning in
1996.

                  For purposes of this Section, for Plan Years beginning prior
to January 1, 1998, the determination of 415 Compensation shall be made by
including amounts that would otherwise be excluded from a Participant's gross
income by reason of the application of Code Sections 125, 402(e)(3),
402(h)(l)(B) and, for Plan Years beginning on or after January 1, 2001 (or as of
a date, no earlier than January 1, 1998, as specified in an addendum to the
Adoption Agreement), 132(f)(4), and, in the case of Employer contributions made
pursuant to a salary reduction agreement, Code Section 403(b).

                  In determining who is a Highly Compensated Employee, Employees
who are non-resident aliens and who received no earned income (within the
meaning of Code Section 91 l(d)) from the Employer constituting United States
source income within the meaning of Code Section 861(a)(3) shall not be treated
as Employees. Additionally, all Affiliated Employers shall be taken into account
as a single employer and Leased Employees within the meaning of Code Sections
414(n)(2) and 414(o)(2) shall be considered Employees unless such Leased
Employees are covered by a plan described in Code Section 414(n)(5) and are not
covered in any qualified plan maintained by the Employer. The exclusion of
Leased Employees for this purpose shall be applied on a uniform and consistent
basis for all of the Employer's retirement plans.

         1.35     "HIGHLY COMPENSATED PARTICIPANT" means any Highly Compensated
Employee who is eligible to participate in the component of the Plan being
tested.

         1.36     "HOUR OF SERVICE" means (1) each hour for which an Employee is
directly or indirectly compensated or entitled to compensation by the Employer
for the performance of duties during the applicable computation period (these
hours will be credited to the Employee for the computation period in which the
duties are performed); (2) each hour for which an Employee is directly or
indirectly compensated or entitled to compensation by the Employer (irrespective
of whether the employment relationship has terminated) for reasons other than
performance of duties (such as vacation, holidays, sickness, incapacity
(including disability), jury duty, lay-off, military duty or leave of absence)
during the applicable computation period (these hours will be calculated and
credited pursuant to Department of Labor regulation 2530.200b-2 which is
incorporated herein by reference); (3) each hour for which back pay is awarded
or agreed to by the Employer without regard to mitigation of damages (these
hours will be credited to the Employee for the computation period or periods to
which the award or agreement pertains rather than the computation period in
which the award, agreement or payment is made). The same Hours of Service shall
not be credited both under (1) or (2), as the case may be, and under (3).

                  Notwithstanding (2) above, (i) no more than 501 Hours of
Service are required to be credited to an Employee on account of any single
continuous period during which the Employee performs no duties (whether or not
such period occurs in a single computation period); (ii) an hour for which an
Employee is directly or indirectly paid, or entitled to payment, on account of a
period during which no duties are performed is not required to be credited to
the Employee if such payment is made or due under a plan maintained solely for
the purpose of complying with applicable workers' compensation, or unemployment
compensation or disability insurance laws; and (iii) Hours of Service are not
required to be credited for a payment which solely reimburses an Employee for
medical or medically related expenses incurred by the Employee. Furthermore, for
purposes of (2) above, a payment shall be deemed to be made by or due from the
Employer regardless of whether such payment is made by or due from the Employer
directly, or indirectly through, among others, a Plan Fund, or insurer, to which
the Employer contributes or pays premiums and regardless of whether
contributions made or due to the Plan Fund, insurer, or other entity are for the
benefit of particular Employees or are on behalf of a group of Employees in the
aggregate.

                  Hours of Service will be credited for employment with all
Affiliated Employers and for any individual considered to be a Leased Employee
pursuant to Code Section 414(n) or 414(o) and the Regulations thereunder.
Furthermore, the provisions of Department of Labor regulations 2530.200b-2(b)
and (c) are incorporated herein by reference.

                  Hours of Service will be determined on the basis of the method
elected in Section D of the Adoption Agreement.

         1.37     "INSURER" means Massachusetts Life Insurance Company or MML
Pension Insurance Company, or any other legal reserve insurance company which
shall issue one or more Contracts or Policies under the Plan. The Insurer's
liability shall be limited to the terms of the issued Contract and Policies.

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         1.38     "INVESTMENT MANAGER" means a Fiduciary as described in Act
Section 3(38).

         1.39     "JOINT AND SURVIVOR ANNUITY" means an annuity for the life of
a Participant with a survivor annuity for the life of the Participant's spouse
which is not less than fifty percent (50%), nor more than one-hundred percent
(100%) of the amount of the annuity payable during the joint lives of the
Participant and the Participant's spouse which can be purchased with the
Participant's Vested interest in the Plan reduced by any outstanding loan
balances pursuant to Section 7.6.

         1.40     "KEY EMPLOYEE" means an Employee as defined in Code Section
416(i) and the Regulations thereunder. Generally, any Employee or former
Employee (as well as each of such Employee's or former Employee's Beneficiaries)
is considered a Key Employee if, the individual at any time during the Plan Year
that contains the "Determination Date" (as defined in Section 9.2(c)) or any of
the preceding four (4) Plan Years, has been included in one of the following
categories:

                  (a)      an officer of the Employer (as that term is defined
         within the meaning of the Regulations under Code Section 416) having
         annual 415 Compensation greater than fifty percent (50%) of the amount
         in effect under Code Section 415(b)(l)(A) for any such Plan Year;

                  (b)      one of the ten Employees having annual 415
         Compensation from the Employer for a Plan Year greater than the dollar
         limitation in effect under Code Section 415(c)(l)(A) for the calendar
         year in which such Plan Year ends and owning (or considered as owning
         within the meaning of Code Section 318) both more than one-half percent
         (1/2%) interest and the largest interests in the Employer;

                  (c)      a "five percent (5%) owner" of the Employer. "Five
         percent (5%) owner" means any person who owns (or is considered as
         owning within the meaning of Code Section 318) more than five percent
         (5%) of the value of the outstanding stock of the Employer or stock
         possessing more than five percent (5%) of the total combined voting
         power of all stock of the Employer or, in the case of an unincorporated
         business, any person who owns more than five percent (5%) of the
         capital or profits interest in the Employer; and

                  (d)      a "one percent (1%) owner" of the Employer having
         annual 415 Compensation from the Employer of more than $ 150,000. "One
         percent (1 %) owner" means any person who owns (or is considered as
         owning within the meaning of Code Section 318) more than one percent (1
         %) of the value of the outstanding stock of the Employer or stock
         possessing more than one percent (1%) of the total combined voting
         power of all stock of the Employer or, in the case of an unincorporated
         business, any person who owns more than one percent (1%) of the capital
         or profits interest in the Employer.

                  In determining percentage ownership hereunder, employers that
would otherwise be aggregated under Code Sections 414(b), (c), (m) and (o) shall
be treated as separate employers. In determining whether an individual has 415
Compensation of more than $I50,000,415 Compensation from each employer required
to be aggregated under Code Sections 414(b), (c), (m) and (o) shall be taken
into account. Furthermore, for purposes of this Section, for Plan Years
beginning prior to January 1, 1998, the determination of 415 Compensation shall
be made by including amounts that would otherwise be excluded from a
Participant's gross income by reason of the application of Code Sections
125,402(e)(3), 402(h)(l )(B) and, for Plan Years beginning on or after January
1, 2001 (or as of a date, no earlier than January 1, 1998, as specified in an
addendum to the Adoption Agreement), 132(f)(4), and, in the case of Employer
contributions made pursuant to a salary reduction agreement, Code Section
403(b).

         1.41     "LATE RETIREMENT DATE" means the date of a Participant's
actual retirement after having reached the Normal Retirement Date.

         1.42     "LEASED EMPLOYEE" means, effective with respect to Plan Years
beginning on or after January 1, 1997, any person (other than an Employee of the
recipient Employer) who, pursuant to an agreement between the recipient Employer
and any other person or entity ("leasing organization"), has performed services
for the recipient (or for the recipient and related persons determined in
accordance with Code Section 414(n)(6)) on a substantially full time basis for a
period of at least one year, and such services are performed under primary
direction or control by the recipient Employer. Contributions or benefits
provided a Leased Employee by the leasing organization which are attributable to
services performed for the recipient Employer shall be treated as provided by
the recipient Employer. Furthermore, Compensation for a Leased Employee shall
only include Compensation from the leasing organization that is attributable to
services performed for the recipient Employer.

                  A Leased Employee shall not be considered an employee of the
recipient Employer if: (a) such employee is covered by a money purchase pension
plan providing: (1) a nonintegrated employer contribution rate of at least ten
percent (10%) of compensation, as defined in Code Section 415(c)(3), but for
Plan Years beginning prior to January 1, 1998, including amounts contributed
pursuant to a salary reduction agreement which are excludable from the
employee's gross income under Code Sections 125, 402(e)(3), 402(h)(l)(B),
403(b), or for Plan Years beginning on or after January 1, 2001 (or as of a
date, no earlier than January 1, 1998, as specified in an addendum to the
Adoption Agreement), 132(f)(4), (2) immediate participation, and (3) full and
immediate vesting; and (b) leased employees do not constitute more than twenty
percent (20%) of the recipient Employer's nonhighly compensated workforce.

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         1.43     "LIMITATION YEAR" means the determination period used to
determine Compensation. However, the Employer may elect a different Limitation
Year in the Adoption Agreement or by adopting a written resolution to such
effect. All qualified plans maintained by the Employer must use the same
Limitation Year. Furthermore, unless there is a change to a new Limitation Year,
the Limitation Year will be a twelve (12) consecutive month period. In the case
of an initial Limitation Year, the Limitation Year will be the twelve (12)
consecutive month period ending on the last day of the period specified in the
Adoption Agreement (or written resolution). If the Limitation Year is amended to
a different twelve (12) consecutive month period, the new "Limitation Year" must
begin on a date within the "Limitation Year" in which the amendment is made.

         1.44     "NET PROFIT" means, with respect to any Fiscal Year, the
Employer's net income or profit for such Fiscal Year determined upon the basis
of the Employer's books of account in accordance with generally accepted
accounting principles, without any reduction for taxes based upon income, or for
contributions made by the Employer to this Plan and any other qualified plan.

         1.45     "NON-ELECTIVE CONTRIBUTION" means the Employer's contributions
to the Plan other than Elective Deferrals, any Qualified Non-Elective
Contributions and any Qualified Matching Contributions. Employer matching
contributions which are not Qualified Matching Contributions shall be considered
a Non-Elective Contribution for purposes of the Plan.

         1.46     "NON-HIGHLY COMPENSATED PARTICIPANT" means any Participant who
is not a Highly Compensated Employee. However, if pursuant to Sections 12.4 or
12.6 the prior year testing method is used to calculate the ADP or the ACP, a
Non-Highly Compensated Participant shall be determined using the definition of
Highly Compensated Employee in effect for the preceding Plan Year.

         1.47     "NON-KEY EMPLOYEE" means any Employee or former Employee (and
such Employee's or former Employee's Beneficiaries) who is not, and has never
been, a Key Employee.

         1.48     "NORMAL RETIREMENT AGE" means the age elected in the Adoption
Agreement at which time a Participant's Account shall be nonforfeitable (if the
Participant is employed by the Employer on or after that date).

         1.49     "NORMAL RETIREMENT DATE" means the date a Participant attains
Normal Retirement Age as elected in Section E.5 of the Adoption Agreement.

         1.50     "1-YEAR BREAK IN SERVICE" means, if the Hour of Service Method
is elected in the Adoption Agreement, the applicable computation period during
which an Employee or former Employee has not completed more than 500 Hours of
Service. Further, solely for the purpose of determining whether an Employee has
incurred a 1-Year Break in Service, Hours of Service shall be recognized for
"authorized leaves of absence" and "maternity and paternity leaves of absence."
For this purpose, Hours of Service shall be credited for the computation period
in which the absence from work begins, only if credit therefore is necessary to
prevent the Employee from incurring a 1 -Year Break in Service, or, in any other
case, in the immediately following computation period. The Hours of Service
credited for a "maternity or paternity leave of absence" shall be those which
would normally have been credited but for such absence, or, in any case in which
the Administrator is unable to determine such hours normally credited, eight (8)
Hours of Service per day. The total Hours of Service required to be credited for
a "maternity or paternity leave of absence" shall not exceed the number of Hours
of Service needed to prevent the Employee from incurring a 1-Year Break in
Service.

                  "Authorized leave of absence" means an unpaid, temporary
cessation from active employment with the Employer pursuant to an established
nondiscriminatory policy, whether occasioned by illness, military service, or
any other reason.

                  A "maternity or paternity leave of absence" means an absence
from work for any period by reason of the Employee's pregnancy, birth of the
Employee's child, placement of a child with the Employee in connection with the
adoption of such child, or any absence for the purpose of caring for such child
for a period immediately following such birth or placement.

                  If the Elapsed Time Method is elected in Section D.2 of the
Adoption Agreement, a "1-Year Break in Service" means a twelve (12) consecutive
month period beginning on the severance from service date or any anniversary
thereof and ending on the next succeeding anniversary of such date; provided,
however, that the Employee or former Employee does not perform an Hour of
Service for the Employer during such twelve (12) consecutive month period.

         1.51     "OWNER-EMPLOYEE" means a sole proprietor who owns the entire
interest in the Employer or a partner (or member in the case of a limited
liability company treated as a partnership or sole proprietorship for federal
income tax purposes) who owns more than ten percent (10%) of either the capital
interest or the profits interest in the Employer and who receives income for
personal services from the Employer.

         1.52     "PARTICIPANT" means any Eligible Employee who has satisfied
the requirements of Section 3.2, became a member on an Entry Date and has not
for any reason become ineligible to participate further in the Plan.

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                                             DEFINED CONTRIBUTION PROTOTYPE PLAN

         1.53     "PARTICIPANT DIRECTED ACCOUNT" means that portion of a
Participant's interest in the Plan with respect to which the Participant has
directed the investment in accordance with the Participant Direction Procedures.

         1.54     "PARTICIPANT DIRECTION PROCEDURES" means such instructions,
guidelines or policies, the terms of which are incorporated herein, as shall be
established pursuant to Section 4.10 and observed by the Administrator and
applied and provided to Participants who have Participant Directed Accounts.

         1.55     "PARTICIPANT'S ACCOUNT" means the account established and
maintained by the Administrator for each Participant with respect to such
Participant's total interest under the Plan resulting from (a) the Employer's
contributions in the case of a Profit Sharing Plan or Money Purchase Plan, and
(b) the Employer's Non-Elective Contributions in the case of a 401 (k) Profit
Sharing Plan. Separate accountings shall be maintained with respect to that
portion of a Participant's Account attributable to Employer matching,
contributions and to Employer discretionary contributions made pursuant to
Section 12.1(a)(3).

         1.56     "PARTICIPANT'S COMBINED ACCOUNT" means the total aggregate
amount of a Participant's interest under the Plan resulting from Employer
contributions (including Elective Deferrals).

         1.57     "PARTICIPANT'S ELECTIVE DEFERRAL ACCOUNT" means the account
established and maintained by the Administrator for each Participant with
respect to such Participant's total interest in the Plan resulting from Elective
Deferrals. Amounts in the Participant's Elective Deferral Account are
nonforfeitable when made and are subject to the distribution restrictions of
Section 12.2(c).

         1.58     "PARTICIPANT'S MATCHED CONTRIBUTIONS" means any Employee
after-tax contributions subject to an Employer matching contribution elected in
Section 1.3 of the Adoption Agreement.

         1.59     "PARTICIPANT'S ROLLOVER ACCOUNT" means the account established
and maintained by the Administrator for each Participant with respect to such
Participant's interest in the Plan resulting from amounts transferred from
another qualified plan or "conduit" Individual Retirement Account in accordance
with Section 4.6.

         1.60     "PARTICIPANT'S TRANSFER ACCOUNT" means the account established
and maintained by the Administrator for each Participant with respect to the
total interest in the Plan resulting from amounts transferred to this Plan from
a direct plan-to-plan transfer in accordance with Section 4.7.

         1.61     "PERIOD OF SERVICE" means the aggregate of all periods
commencing with an Employee's first day of employment or reemployment with the
Employer or an Affiliated Employer and ending on the first day of a Period of
Severance. The first day of employment or reemployment is the first day the
Employee performs an Hour of Service. An Employee will also receive partial
credit for any Period of Severance of less than twelve (12) consecutive months.
Fractional periods of a year will be expressed in terms of days.

                  Periods of Service with any Affiliated Employer shall be
recognized. Furthermore, Periods of Service with any predecessor employer that
maintained this Plan shall be recognized. Periods of Service with any other
predecessor employer shall be recognized as elected in Section D.1 of the
Adoption Agreement.

                  In determining Periods of Service for purposes of vesting
under the Plan, Periods of Service will be excluded as elected in Section E.4 of
the Adoption Agreement and as specified in Section 3.5.

                  In the event the method of crediting service is amended from
the Hour of Service Method to the Elapsed Time Method, an Employee will receive
credit for a Period of Service consisting of:

                  (a)     A number of years equal to the number of Years of
         Service credited to the Employee before the computation period during
         which the amendment occurs; and

                  (b)     The greater of (1) the Periods of Service that would
         be credited to the Employee under the Elapsed Time Method for service
         during the entire computation period in which the transfer occurs or
         (2) the service taken into account under the Hour of Service Method as
         of the date of the amendment.

                  In addition, the Employee will receive credit for service
subsequent to the amendment commencing on the day after the last day of the
computation period in which the transfer occurs.

         1.62     "PERIOD OF SEVERANCE" means a continuous period of time during
which an Employee is not employed by the Employer. Such period begins on the
date the Employee retires, quits or is discharged, or if earlier, the twelve
(12) month anniversary of the date on which the Employee was otherwise first
absent from service.

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                                             DEFINED CONTRIBUTION PROTOTYPE PLAN

                  In the case of an individual who is absent from work for
"maternity or paternity" reasons, the twelve (12) consecutive month period
beginning on the first anniversary of the first day of such absence shall not
constitute a one year Period of Severance. For purposes of this paragraph, an
absence from work for "maternity or paternity" reasons means an absence (a) by
reason of the pregnancy of the individual, (b) by reason of the birth of a child
of the individual, (c) by reason of the placement of a child with the individual
in connection with the adoption of such child by such individual, or (d) for
purposes of caring for such child for a period beginning immediately following
such birth or placement.

         1.63     "PLAN" means this instrument (hereinafter referred to as the
MassMutual Flexinvest(R) Plan Document [#01] and the Adoption Agreement as
adopted by the Employer, including all amendments thereto and any addendum which
is specifically permitted pursuant to the terms of the Plan.

         1.64     "PLAN FUND" means the assets of the Plan as shall exist from
time to time. Not withstanding any provisions to the contrary, if Plan Funds are
composed of assets outside of the contract, all references to Administrator
shall be replaced with Trustee.

         1.65     "PLAN YEAR" means the Plan's accounting year as specified in
Section B.3 of the Adoption Agreement.

         1.66     "PRE-RETIREMENT SURVIVOR ANNUITY" means an immediate annuity
for the life of a Participant's spouse, the payments under which must be equal
to the benefit which can be provided with the percentage, as specified in the
Adoption Agreement, of the Participant's Vested interest in the Plan as of the
date of death. If no election is made in Section H.1 of the Adoption Agreement,
the percentage shall be equal to fifty percent (50%). Furthermore, if less than
one hundred percent (100%) of the Participant's Vested interest in the Plan is
used to provide the Pre-Retirement Survivor Annuity, a proportionate share of
each of the Participant's accounts shall be used to provide the Pre-Retirement
Survivor Annuity.

         1.67     "QUALIFIED MATCHING CONTRIBUTION" means any Employer matching
contributions that are made pursuant to Sections 12.1(a)(2) if elected in G.3 of
the Adoption Agreement, 12.5 and 12.7.

         1.68     "QUALIFIED MATCHING CONTRIBUTION ACCOUNT" means the account
established hereunder to which Qualified Matching Contributions are allocated.
Amounts in the Qualified Matching Contribution Account are nonforfeitable when
made and are subject to the distribution restrictions of Section 12.2(c).

         1.69     "QUALIFIED NON-ELECTIVE CONTRIBUTION" means the Employer's
contributions to the Plan that are made pursuant to Sections 12.1(a)(4) if
elected in Section G.6 of the Adoption Agreement, 12.5 and 12.7.

         1.70     "QUALIFIED NON-ELECTIVE CONTRIBUTION ACCOUNT" means the
account established hereunder to which Qualified Non-Elective Contributions are
allocated. Amounts in the Qualified Non-Elective Contribution Account are
nonforfeitable when made and are subject to the distribution restrictions of
Section 12.2(c).

         1.71     "QUALIFIED VOLUNTARY EMPLOYEE CONTRIBUTION ACCOUNT" means the
account established hereunder to which a Participant's tax deductible qualified
voluntary employee contributions made pursuant to Section 4.9 are allocated.

         1.72     "REGULATION" means the Income Tax Regulations as promulgated
by the Secretary of the Treasury or a delegate of the Secretary of the Treasury,
and as amended from time to time.

         1.73     "RETIRED PARTICIPANT" means a person who has been a
Participant, but who has become entitled to retirement benefits under the Plan.

         1.74     "RETIREMENT DATE" means the date as of which a Participant
retires for reasons other than Total and Permanent Disability, regardless of
whether such retirement occurs on a Participant's Normal Retirement Date, Early
Retirement Date or Late Retirement Date (see Section 6.1).

         1.75     "SELF-EMPLOYED INDIVIDUAL" means an individual who has Earned
Income for the taxable year from the trade or business for which the Plan is
established, and, also, an individual who would have had Earned Income but for
the fact that the trade or business had no net profits for the taxable year. A
Self-Employed Individual shall be treated as an Employee.

         1.76     "SHAREHOLDER-EMPLOYEE" means a Participant who owns (or is
deemed to own pursuant to Code Section 318(a)(1)) more than five percent (5%)
of the Employer's outstanding capital stock during any year in which the
Employer elected to be taxed as a Small Business Corporation (S Corporation)
under the applicable Code sections relating to Small Business Corporations.

         1.77     "SHORT PLAN YEAR" means, if specified in Section B.3 of the
Adoption Agreement, a Plan Year of less than a twelve (12) month period. If
there is a Short Plan Year, the following rules shall apply in the
administration of this Plan. In determining whether an Employee has completed a
Year of Service (or Period of Service if the Elapsed Time Method is used) for
benefit accrual purposes in the Short Plan Year, the number of the Hours of
Service (or months of service if the Elapsed Time Method is used) required shall
be proportionately reduced based on the number of days (or months) in the Short
Plan Year. The

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                                             DEFINED CONTRIBUTION PROTOTYPE PLAN

determination of whether an Employee has completed a Year of Service (or Period
of Service) for vesting and eligibility purposes shall be made in accordance
with Department of Labor regulation 2530.203-2(c). In addition, if this Plan is
integrated with Social Security, then the integration level shall be
proportionately reduced based on the number of months in the Short Plan Year.

         1.78     "SPOUSE OR SURVIVING SPOUSE" means the Spouse or Surviving
Spouse of the Participant, provided that a former spouse will be treated as the
Spouse or Surviving Spouse and a current spouse will not be treated as the
Spouse or Surviving Spouse to the extent provided under a qualified domestic
relations order as described in Code Section 414(p).

         1.79     "SUPER TOP-HEAVY PLAN" means a plan which would be a Top-Heavy
Plan if sixty percent (60%) is replaced with ninety percent (90%) in Section
9.2(a). However, effective as of the first Plan Year beginning after December
31, 1999, no Plan shall be considered a Super Top-Heavy Plan.

         1.80     "TAXABLE WAGE BASE" means, with respect to any Plan Year, the
contribution and benefit base under Section 230 of the Social Security Act at
the beginning of such Plan Year.

         1.81     "TERMINATED PARTICIPANT" means a person who has been a
Participant, but whose employment has been terminated other than by death, Total
and Permanent Disability or retirement.

         1.82     "TOP-HEAVY PLAN" means a plan described in Section 9.2(a).

         1.83     "TOP-HEAVY PLAN YEAR" means a Plan Year commencing after
December 31, 1983, during which the Plan is a Top-Heavy Plan.

         1.84     "TOP-PAID GROUP" shall be determined pursuant to Code Section
414(q) and the Regulations thereunder and generally means the top twenty percent
(20%) of Employees who performed services for the Employer during the applicable
year, ranked according to the amount of 415 Compensation received from the
Employer during such year. All Affiliated Employers shall be taken into account
as a single employer, and Leased Employees shall be treated as Employees if
required pursuant to Code Section 414(n) or (o). Employees who are non-resident
aliens who received no earned income (within the meaning of Code Section 91
l(d)(2)) from the Employer constituting United States source income within the
meaning of Code Section 861(a)(3) shall not be treated as Employees.
Furthermore, for the purpose of determining the number of active Employees in
any year, the following additional Employees may also be excluded, however, such
Employees shall still be considered for the purpose of identifying the
particular Employees in the Top-Paid Group:

                  (a)      Employees with less than six (6) months of service;

                  (b)      Employees who normally work less than 17 1/2 hours
                           per week;

                  (c)      Employees who normally work less than six (6) months
                           during a year; and

                  (d)      Employees who have not yet attained age twenty-one
                           (21).

                  In addition, if ninety percent (90%) or more of the Employees
of the Employer are covered under agreements the Secretary of Labor finds to be
collective bargaining agreements between Employee representatives and the
Employer, and the Plan covers only Employees who are not covered under such
agreements, then Employees covered by such agreements shall be excluded from
both the total number of active Employees as well as from the identification of
particular Employees in the Top-Paid Group.

                  The foregoing exclusions set forth in this Section shall be
applied on a uniform and consistent basis for all purposes for which the Code
Section 414(q) definition is applicable. Furthermore, in applying such
exclusions, the Employer may substitute any lesser service, hours or age.

         1.85     "TOTAL AND PERMANENT DISABILITY" means the inability to engage
in any substantial gainful activity by reason of any medically determinable
physical or mental impairment that can be expected to result in death or which
has lasted or can be expected to last for a continuous period of not less than
twelve (12) months. The disability of a Participant shall be determined by a
licensed physician chosen by the Administrator. However, if the condition
constitutes total disability under the federal Social Security Acts, the
Administrator may rely upon such determination that the Participant is Totally
and Permanently Disabled for the purposes of this Plan. The determination shall
be applied uniformly to all Participants.

         1.86     "TRUSTEE" means the person or entity named by the Employer or
any successors thereto. The Trustee shall have no responsibility or liability
for the maintenance and compliance of the Plan. The provisions of the separate
trustee agreement shall govern the Trustee's duties and responsibilities.

         1.87     "VALUATION DATE" means each day the New York Stock Exchange is
open for business.

         1.88     "VESTED" means the nonforfeitable portion of any account
maintained on behalf of a Participant.

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                                             DEFINED CONTRIBUTION PROTOTYPE PLAN

         1.89     "VOLUNTARY CONTRIBUTION ACCOUNT" means the account established
and maintained by the Administrator for each Participant with respect to such
Participant's total interest in the Plan resulting from the Participant's
after-tax voluntary Employee contributions made pursuant to Section 4.7.

                  Amounts recharacterized as after-tax voluntary Employee
contributions pursuant to Section 12.5 shall remain subject to the limitations
of Section 12.2. Therefore, a separate accounting shall be maintained with
respect to that portion of the Voluntary Contribution Account attributable to
after-tax voluntary Employee contributions made pursuant to Section 4.8.

         1.90     "YEAR OF PARTICIPATION" means a Plan Year in which an Eligible
Employee has completed at least 1,000 Hours of Service (or the number of hours
elected in Section D.2.a.3.f. of the Adoption Agreement) with the Employer.

         1.91     "YEAR OF SERVICE" means the computation period of twelve (12)
consecutive months, herein set forth, and during which an Employee has completed
at least 1,000 Hours of Service.

                  For purposes of eligibility for participation, the initial
computation period shall begin with the date on which the Employee first
performs an Hour of Service (employment commencement date). The initial
computation period beginning after a 1-Year Break in Service shall be measured
from the date on which an Employee again performs an Hour of Service. Unless
otherwise elected in Section D.2.a.1 of the Adoption Agreement, the succeeding
computation periods shall begin on the anniversary of the Employee's employment
commencement date. However, unless otherwise elected in Section D.2.a.1 of the
Adoption Agreement, if one (1) Year of Service or less is required as a
condition of eligibility, then the computation period after the initial
computation period shall shift to the current Plan Year which includes the
anniversary of the date on which the Employee first performed an Hour of
Service, and subsequent computation periods shall be the Plan Year. If there is
a shift to the Plan Year, an Employee who is credited with the number of Hours
of Service to be credited with a Year of Service in both the initial eligibility
computation period and the first Plan Year which commences prior to the first
anniversary of the Employee's initial eligibility computation period will be
credited with two (2) Years of Service for purposes of eligibility to
participate.

                  If two (2) Years of Service are required as a condition of
eligibility, a Participant will only have completed two (2) Years of Service for
eligibility purposes upon completing two (2) consecutive Years of Service
without an intervening 1-Year Break-in-Service.

                  For vesting purposes, and all other purposes not specifically
addressed in this Section, the computation period shall be the Plan Year.
However, if the Elapsed Time Method is elected, the vesting computation period
shall be the date an Employee first performs an Hour of Service and each
anniversary thereof.

                  In determining Years of Service for purposes of vesting under
the Plan, Years of Service will be excluded as elected in Section E.4 of the
Adoption Agreement and as specified in Section 3.7.

                  Years of Service and 1 -Year Breaks in Service for eligibility
purposes will be measured on the same eligibility computation period. Years of
Service and 1 -Year Breaks in Service for vesting purposes will be measured on
the same vesting computation period.

                  Years of Service with any Affiliated Employer shall be
recognized. Furthermore, Years of Service with any predecessor employer that
maintained this Plan shall be recognized. Years of Service with any other
predecessor employer shall be recognized as elected in the Adoption Agreement.

                  In the event the method of crediting service is amended from
the Elapsed Time Method to the Hour of Service Method, an Employee will receive
credit for Years of Service equal to:

                  (a)      The number of Years of Service equal to the number of
         1 -year Periods of Service credited to the Employee as of the date of
         the amendment; and

                  (b)      In the computation period which includes the date of
         the amendment, a number of Hours of Service (using the Hours of Service
         equivalency method elected in Section D.2.a.2 of the Adoption
         Agreement) to any fractional part of a year credited to the Employee
         under this Section as of the date of the amendment.

                                   ARTICLE II
                                 ADMINISTRATION

2.1      POWERS AND RESPONSIBILITIES OF THE EMPLOYER

                  (a)      In addition to the general powers and
         responsibilities otherwise provided for in this Plan, the Employer
         shall be empowered to appoint and remove the Administrator and Trustee
         (if applicable) from time to time as it deems necessary for the proper
         administration of the Plan to ensure that the Plan is being operated
         for the exclusive benefit of the Participants and their Beneficiaries
         in accordance with the terms of the Plan, the Code, and the

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         Act. The Employer may appoint counsel, specialists, advisers, agents
         (including any nonfiduciary agent) and other persons as the Employer
         deems necessary or desirable in connection with the exercise of its
         fiduciary duties under this Plan. The Employer may compensate such
         agents or advisers from the assets of the Plan as fiduciary expenses
         (but not including any business (settlor) expenses of the Employer), to
         the extent not paid by the Employer.

                  (b)      The Employer shall establish a "funding policy and
         method," i.e., it shall determine whether the Plan has a short run need
         for liquidity (e.g., to pay benefits) or whether liquidity is a long
         run goal and investment growth (and stability of same) is a more
         current need, or shall appoint a qualified person to do so. If the
         Administrator has discretionary authority, the Employer or its delegate
         shall communicate such needs and goals to the Administrator, who shall
         coordinate such Plan needs with its investment policy. The
         communication of such a "funding policy and method" shall not, however,
         constitute a directive to the Trustee as to the investment of the Plan
         Funds. Such "funding policy and method" shall be consistent with the
         objectives of this Plan and with the requirements of Title I of the
         Act.

                  (c)      The Employer may appoint, at its option, an
         Investment Manager, investment adviser, or other agent to provide
         direction to the Administrator with respect to any or all of the Plan
         assets. Such appointment shall be given by the Employer in writing in a
         form acceptable to the Administrator and shall specifically identify
         the Plan assets with respect to which the Investment Manager or other
         agent shall have the authority to direct the investment.

                  (d)      The Employer shall periodically review the
         performance of any Fiduciary or other person to whom duties have been
         delegated or allocated by it under the provisions of this Plan or
         pursuant to procedures established hereunder. This requirement may be
         satisfied by formal periodic review by the Employer or by a qualified
         person specifically designated by the Employer, through day-to-day
         conduct and evaluation, or through other appropriate ways.

2.2      DESIGNATION OF ADMINISTRATIVE AUTHORITY

                  The Employer may appoint one or more Administrators. If the
Employer does not appoint an Administrator, the Employer will be the
Administrator. Any person, including, but not limited to, the Employees of the
Employer, shall be eligible to serve as an Administrator. Any person so
appointed shall signify acceptance by filing written acceptance with the
Employer. An Administrator may resign by delivering a written resignation to the
Employer or be removed by the Employer by delivery of written notice of removal,
to take effect at a date specified therein, or upon delivery to the
Administrator if no date is specified. Upon the resignation or removal of an
Administrator, the Employer may designate in writing a successor to this
position. The Insurer shall not be appointed or considered the Administrator of
the Plan.

2.3      ALLOCATION AND DELEGATION OF RESPONSIBILITIES

                  If more than one person is appointed as Administrator, the
responsibilities of each Administrator may be specified by the Employer and
accepted in writing by each Administrator. In the event that no such delegation
is made by the Employer, the Administrators may allocate the responsibilities
among themselves, in which event the Administrators shall notify the Employer of
such action and specify the responsibilities of each Administrator. The
Administrator thereafter shall accept and rely upon any documents executed by
the appropriate Administrator until such time as the Employer or the
Administrators file with the Administrator a written revocation of such
designation.

2.4      POWERS AND DUTIES OF THE ADMINISTRATOR

                  The primary responsibility of the Administrator is to
administer the Plan for the exclusive benefit of the Participants and their
Beneficiaries, subject to the specific terms of the Plan. The Administrator
shall administer the Plan in accordance with its terms and shall have the power
and discretion to construe the terms of the Plan and determine all questions
arising in connection with the administration, interpretation, and application
of the Plan. Benefits under this Plan will be paid only if the Administrator
decides in its discretion that the applicant is entitled to them. Any such
determination by the Administrator shall be conclusive and binding upon all
persons. The Administrator may establish procedures, correct any defect, supply
any information, or reconcile any inconsistency in such manner and to such
extent as shall be deemed necessary or advisable to carry out the purpose of the
Plan; provided, however, that any procedure, discretionary act, interpretation
or construction shall be done in a nondiscriminatory manner based upon uniform
principles consistently applied and shall be consistent with the intent that the
Plan continue to be deemed a qualified plan under the terms of Code Section
401(a), and shall comply with the terms of the Act and all regulations issued
pursuant thereto. The Administrator shall have all powers necessary or
appropriate to accomplish its duties under this Plan.

                  The Administrator shall be charged with the duties of the
general administration of the Plan and the powers necessary to carry out such
duties as set forth under the terms of the Plan, including, but not limited to,
the following:

                  (a)      the discretion to determine all questions relating to
         the eligibility of an Employee to participate or remain a Participant
         hereunder and to receive benefits under the Plan;

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                                             DEFINED CONTRIBUTION PROTOTYPE PLAN

                  (b)      the authority to review and settle all claims against
         the Plan, including claims where the settlement amount cannot be
         calculated or is not calculated in accordance with the Plan's benefit
         formula. This authority specifically permits the Administrator to
         settle, in compromise fashion, disputed claims for benefits and any
         other disputed claims made against the Plan;

                  (c)      to compute, certify, and direct the payment of the
         amount and the kind of benefits to which any Participant shall be
         entitled hereunder;

                  (d)      to authorize all discretionary or otherwise directed
         disbursements from the Plan Fund;

                  (e)      to maintain all necessary records for the
         administration of the Plan;

                  (f)      to interpret the provisions of the Plan and to make
         and publish such rules for regulation of the Plan that are consistent
         with the terms hereof;

                  (g)      to determine the size and type of any Contract to be
         purchased from any Insurer, and to designate the Insurer from which
         such Contract shall be purchased;

                  (h)      to compute and certify to the Employer and to the
         Trustee from time to time the sums of money necessary or desirable to
         be contributed to the Plan;

                  (i)      to consult with the Employer regarding the short and
         long-term liquidity needs of the Plan in order that the Administrator
         can exercise any investment discretion, in a manner designed to
         accomplish specific objectives;

                  (j)      to prepare and implement a procedure for notifying
         Participants and Beneficiaries of their rights to elect Joint and
         Survivor Annuities and Pre-Retirement Survivor Annuities if required by
         the Plan, Code and Regulations thereunder;

                  (k)      to assist Participants regarding their rights,
         benefits, or elections available under the Plan;

                  (l)      to act as the named Fiduciary responsible for
         communicating with Participants as needed to maintain Plan compliance
         with Act Section 404(c) (if the Employer intends to comply with Act
         Section 404(c)) including, but not limited to, the receipt and
         transmission of Participants' directions as to the investment of their
         accounts under the Plan and the formation of policies, rules, and
         procedures pursuant to which Participants may give investment
         instructions with respect to the investment of their accounts; and

                  (m)      to determine the validity of, and take appropriate
         action with respect to, any qualified domestic relations order received
         by it.

2.5      RECORDS AND REPORTS

                  The Administrator shall keep a record of all actions taken and
shall keep all other books of account, records, and other data that may be
necessary for proper administration of the Plan and shall be responsible for
supplying all information and reports to the Internal Revenue Service,
Department of Labor, Participants, Beneficiaries and others as required by law.

2.6      APPOINTMENT OF ADVISERS

                  The Administrator may appoint counsel, specialists, advisers,
agents (including nonfiduciary agents) and other persons as the Administrator
deems necessary or desirable in connection with the administration of this Plan,
including but not limited to agents and advisers to assist with the
administration and management of the Plan, and thereby to provide, among such
other duties as the Administrator may appoint, assistance with maintaining Plan
records and the providing of investment information to the Plan's investment
fiduciaries and, if applicable, to Plan Participants.

2.7      INFORMATION FROM EMPLOYER

                  The Employer shall supply full and timely information to the
Administrator on all pertinent facts as the Administrator may require in order
to perform its functions hereunder as may be pertinent to his duties under the
Plan. The Administrator may rely upon such information as is supplied by the
Employer and shall have no duty or responsibility to verify such information.

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                                             DEFINED CONTRIBUTION PROTOTYPE PLAN

2.8      PAYMENT OF EXPENSES

                  All expenses of administration may be paid out of the Plan
Fund unless paid by the Employer. Such expenses shall include any expenses
incident to the functioning of the Administrator, or any person or persons
retained or appointed by any Named Fiduciary incident to the exercise of their
duties under the Plan, including, but not limited to, fees of accountants,
counsel, Investment Managers, agents (including nonfiduciary agents) appointed
for the purpose of assisting the Administrator in carrying out the instructions
of Participants as to the directed investment of their accounts (if permitted)
and other specialists and their agents, the costs of any bonds required pursuant
to Act Section 412, and other costs of administering the Plan. Until paid, the
expenses shall constitute a liability of the Plan Fund.

2.9      MAJORITY ACTIONS

                  Except where there has been an allocation and delegation of
administrative authority pursuant to Section 2.3, if there is more than one
Administrator, then they shall act by a majority of their number, but may
authorize one or more of them to sign all papers on their behalf.

2.10     CLAIMS PROCEDURE

                  Claims for benefits under the Plan may be filed in writing
with the Administrator. Written notice of the disposition of a claim shall be
furnished to the claimant within ninety (90) days after the application is
filed, or such period as is required by applicable law or Department of Labor
regulation. In the event the claim is denied, the reasons for the denial shall
be specifically set forth in the notice in language calculated to be understood
by the claimant, pertinent provisions of the Plan shall be cited, and, where
appropriate, an explanation as to how the claimant can perfect the claim will be
provided. In addition, the claimant shall be furnished with an explanation of
the Plan's claims review procedure.

2.11     CLAIMS REVIEW PROCEDURE

                  Any Employee, former Employee, or Beneficiary of either, who
has been denied a benefit by a decision of the Administrator pursuant to Section
2.10 shall be entitled to request the Administrator to give further
consideration to the claim by filing with the Administrator a written request
for a hearing. Such request, together with a written statement of the reasons
why the claimant believes such claim should be allowed, shall be filed with the
Administrator no later than sixty (60) days after receipt of the written
notification provided for in Section 2.10. The Administrator shall then conduct
a hearing within the next sixty (60) days, at which the claimant may be
represented by an attorney or any other representative of such claimant's
choosing and expense and at which the claimant shall have an opportunity to
submit written and oral evidence and arguments in support of the claim. At the
hearing (or prior thereto upon five (5) business days written notice to the
Administrator) the claimant or the claimant's representative shall have an
opportunity to review all documents in the possession of the Administrator which
are pertinent to the claim at issue and its disallowance. Either the claimant or
the Administrator may cause a court reporter to attend the hearing and record
the proceedings. In such event, a complete written transcript of the proceedings
shall be furnished to both parties by the court reporter. The full expense of
any such court reporter and such transcripts shall be borne by the party causing
the court reporter to attend the hearing. A final decision as to the allowance
of the claim shall be made by the Administrator within sixty (60) days of
receipt of the appeal (unless there has been an extension of sixty (60) days due
to special circumstances, provided the delay and the special circumstances
occasioning it are communicated to the claimant within the sixty (60) day
period). Such communication shall be written in a manner calculated to be
understood by the claimant and shall include specific reasons for the decision
and specific references to the pertinent Plan provisions on which the decision
is based. Notwithstanding the preceding, to the extent any of the time periods
specified in this Section are amended by law or Department of Labor regulation,
then the time frames specified herein shall automatically be changed in
accordance with such law or regulation.

                  If the Administrator, pursuant to the claims review procedure,
makes a final written determination denying a Participant's or Beneficiary's
benefit claim, then in order to preserve the claim, the Participant or
Beneficiary must file an action with respect to the denied claim not later than
one hundred eighty (180) days following the date of the Administrator's final
determination.

                                   ARTICLE III
                                   ELIGIBILITY

3.1      CONDITIONS OF ELIGIBILITY

                  Any Eligible Employee shall be eligible to participate
hereunder on the date such Employee has satisfied the conditions of eligibility
elected in Section C of the Adoption Agreement.

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                                             DEFINED CONTRIBUTION PROTOTYPE PLAN

3.2      EFFECTIVE DATE OF PARTICIPATION

                  An Eligible Employee who has satisfied the conditions of
eligibility pursuant to Section 3.1 shall become a Participant effective as of
the Entry Date. If said Employee is not employed on such date, but is reemployed
before a 1-Year Break in Service has occurred, then such Employee shall become a
Participant on the date of reemployment or, if later, the date that the Employee
would have otherwise entered the Plan had the Employee not terminated
employment.

                  Unless specifically provided otherwise in Section C of the
Adoption Agreement, an Eligible Employee who satisfies the Plan's eligibility
requirement conditions by reason of recognition of service with a predecessor
employer will become a Participant as of the day the Plan credits service with a
predecessor employer or, if later, the date the Employee would have otherwise
entered the Plan had the service with the predecessor employer been service with
the Employer.

                  If an Employee, who has satisfied the Plan's eligibility
requirements and would otherwise have become a Participant, shall go from a
classification of a noneligible Employee to an Eligible Employee, such Employee
shall become a Participant on the date such Employee becomes an Eligible
Employee or, if later, the date that the Employee would have otherwise entered
the Plan had the Employee always been an Eligible Employee.

                  If an Employee, who has satisfied the Plan's eligibility
requirements and would otherwise become a Participant, shall go from a
classification of an Eligible Employee to a noneligible class of Employees, such
Employee shall become a Participant in the Plan on the date such Employee again
becomes an Eligible Employee, or, if later, the date that the Employee would
have otherwise entered the Plan had the Employee always been an Eligible
Employee. However, if such Employee incurs a 1-Year Break in Service,
eligibility will be determined under the Break in Service rules set forth in
Section 3.5.

3.3      DETERMINATION OF ELIGIBILITY

                  The Administrator shall determine the eligibility of each
Employee for participation in the Plan based upon information furnished by the
Employer. Such determination shall be conclusive and binding upon all persons,
as long as the same is made pursuant to the Plan and the Act. Such determination
shall be subject to review pursuant to Section 2.11.

3.4      TERMINATION OF ELIGIBILITY

                  In the event a Participant shall go from a classification of
an Eligible Employee to an ineligible Employee, such Former Participant shall
continue to vest in the Plan for each Year of Service (or Period of Service, if
the Elapsed Time Method is used) completed while an ineligible Employee, until
such time as the Participant's Account is forfeited or distributed pursuant to
the terms of the Plan. Additionally, the Former Participant's interest in the
Plan shall continue to share in the earnings of the Plan Fund in the same manner
as Participants.

3.5      REHIRED EMPLOYEES AND BREAKS IN SERVICE

                  (a)      If any Participant becomes a Former Participant due
         to severance from employment with the Employer and is reemployed by the
         Employer before a 1-Year Break in Service occurs, the Former
         Participant shall become a Participant as of the reemployment date.

                  (b)      If any Participant becomes a Former Participant due
         to severance from employment with the Employer and is reemployed after
         a 1-Year Break in Service has occurred, Years of Service (or Periods
         of Service if the Elapsed Time Method is being used) shall include
         Years of Service (or Periods of Service if the Elapsed Time Method is
         being used) prior to the 1-Year Break in Service subject to the
         following rules:

                  (1)      in the case of a Former Participant who under the
                  Plan does not have a nonforfeitable right to any interest in
                  the Plan resulting from Employer contributions, Years of
                  Service (or Periods of Service) before a period of 1-Year
                  Breaks in Service will not be taken into account if the number
                  of consecutive 1-Year Breaks in Service equals or exceeds the
                  greater of (A) five (5) or (B) the aggregate number of
                  pre-break Years of Service (or Periods of Service). Such
                  aggregate number of Years of Service (or Periods of Service)
                  will not include any Years of Service (or Periods of Service)
                  disregarded under the preceding sentence by reason of prior 1
                  -Year Breaks in Service;

                  (2)      A Former Participant who has not had Years of Service
                  (or Periods of Service) before a 1-Year Break in Service
                  disregarded pursuant to (1) above, shall participate in the
                  Plan as of the date of reemployment, or if later, as of the
                  date the Former Participant would otherwise enter the Plan
                  pursuant to Sections 3.1 and 3.2 taking into account all
                  service not disregarded.

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                                             DEFINED CONTRIBUTION PROTOTYPE PLAN

                  (c)      After a Former Participant who has severed employment
         with the Employer incurs five (5) consecutive 1-Year Breaks in
         Service, the Vested portion of such Former Participant's Account
         attributable to pre-break service shall not be increased as a result of
         post-break service.

                  (d)      If any Participant becomes a Former Participant due
         to severance of employment with the Employer and is reemployed by the
         Employer before five (5) consecutive 1-Year Breaks in Service, and such
         Former Participant had received a distribution of the entire Vested
         interest prior to reemployment, then the forfeited account shall be
         reinstated only if the Former Participant repays the full amount
         attributable to Employer contributions (excluding Employee deferrals)
         which had been distributed unless otherwise elected in Section L5 of
         the Adoption Agreement. Such repayment must be made before the earlier
         of five (5) years after the first date on which the Participant is
         subsequently reemployed by the Employer or the close of the first
         period of five (5) consecutive 1-Year Breaks in Service commencing
         after the distribution. If a distribution occurs for any reason other
         than a severance of employment, the time for repayment may not end
         earlier than five (5) years after the date of distribution. In the
         event the Former Participant does repay the full amount distributed,
         the undistributed forfeited portion of the Participant's Account must
         be restored in full, unadjusted by any gains or losses occurring
         subsequent to the Valuation Date preceding the distribution. The source
         for such reinstatement may be Forfeitures occurring during the Plan
         Year. If such source is insufficient, then the Employer will contribute
         an amount which is sufficient to restore the Participant's Account,
         provided, however, that if a discretionary contribution is made for
         such year, such contribution will first be applied to restore any such
         accounts and the remainder shall be allocated in accordance with the
         terms of the Plan. If a non-Vested Former Participant was deemed to
         have received a distribution and such Former Participant is reemployed
         by the Employer before five (5) consecutive 1-Year Breaks in Service,
         then such Participant will be deemed to have repaid the deemed
         distribution as of the date of reemployment.

3.6      ELECTION NOT TO PARTICIPATE

                  An Employee may, subject to the approval of the Employer,
elect voluntarily not to participate in the Plan. The election not to
participate must be irrevocable and communicated to the Employer, in writing,
within a reasonable period of time before the Employee's first becoming eligible
under any plan of the Employer.

3.7      CONTROL OF ENTITIES BY OWNER-EMPLOYEE

                  Effective with respect to Plan Years beginning after December
31,1996, if this Plan provides contributions or benefits for one or more
Owner-Employees, the contributions on behalf of any Owner-Employee shall be made
only with respect to the Earned Income for such Owner-Employee which is derived
from the trade or business with respect to which such Plan is established.

                                   ARTICLE IV
                          CONTRIBUTION AND ALLOCATION

4.1      FORMULA FOR DETERMINING EMPLOYER'S CONTRIBUTION

                  (a)      For a Money Purchase Plan:

                  (1)      The Employer will make contributions on the following
                  basis. On behalf of each Participant eligible to share in
                  allocations, for each year of such Participant's participation
                  in this Plan, the Employer will contribute the amount elected
                  in Section G.I of the Adoption Agreement. All contributions by
                  the Employer will be made in cash. In the event a funding
                  waiver is obtained, this Plan shall be deemed to be an
                  individually designed plan.

                  (2)      Notwithstanding the foregoing, with respect to an
                  Employer which is not a tax-exempt entity, the Employer's
                  contribution for any Fiscal Year shall not exceed the maximum
                  amount allowable as a deduction to the Employer under the
                  provisions of Code Section 404. However, to the extent
                  necessary to provide the Top-Heavy minimum allocations, the
                  Employer shall make a contribution even if it exceeds the
                  amount that is deductible under Code Section 404.

                  (b)      For a Profit Sharing Plan:

                  (1)      For each Plan Year, the Employer may (or will in the
                  case of a Prevailing Wage contribution) contribute to the Plan
                  such amount as elected by the Employer in Section G.1 of the
                  Adoption Agreement.

                  (2)      Additionally, the Employer will contribute to the
                  Plan the amount necessary, if any, to provide the Top-Heavy
                  minimum allocations, even if it exceeds current or accumulated
                  Net Profit or the amount that is deductible under Code Section
                  404.

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                                             DEFINED CONTRIBUTION PROTOTYPE PLAN

4.2      TIME OF PAYMENT OF EMPLOYER'S CONTRIBUTION

                  Unless otherwise provided by contract or law, the Employer may
make its contribution to the Plan for a particular Plan Year at such time as the
Employer, in its sole discretion, determines. If the Employer makes a
contribution for a particular Plan Year after the close of that Plan Year, the
Employer will designate to the Administrator the Plan Year for which the
Employer is making its contribution.

4.3      ALLOCATION OF CONTRIBUTION, FORFEITURES AND EARNINGS

                  (a)      The Administrator shall establish and maintain an
         account in the name of each Participant to which the Administrator
         shall credit as of each Anniversary Date, or other Valuation Date, all
         amounts allocated to each such Participant as set forth herein.

                  (b)      The Employer shall provide the Administrator with all
         information required by the Administrator to make a proper allocation
         of the Employer's contribution, if any, for each Plan Year. Within a
         reasonable period of time after the date of receipt by the
         Administrator of such information, the Administrator shall allocate any
         contributions as follows:

                  (1)      For a Money Purchase Plan (other than a Money
                  Purchase Plan which is integrated by allocation):

                           (i)      The Employer's contribution shall be
                           allocated to each Participant's Account in the manner
                           set forth in Section 4.1 herein and as specified in
                           Section G.1 of the Adoption Agreement.

                           (ii)     However, regardless of the preceding, a
                           Participant shall only be eligible to share in the
                           allocations of the Employer's contribution for the
                           year if the conditions set forth in Section G.2 of
                           the Adoption Agreement are satisfied, unless a top
                           heavy contribution is required pursuant to Section
                           4.3(f). If no election is made in the Adoption
                           Agreement, then a Participant shall be eligible to
                           share in the allocation of the Employer's
                           contribution for the year if the Participant
                           completes more than five hundred (500) Hours of
                           Service (or three (3) Months of Service if the
                           Elapsed Time method is chosen in the Adoption
                           Agreement) during the Plan Year or who is employed on
                           the last day of the Plan Year. Furthermore, with
                           respect to a non-standardized Adoption Agreement,
                           regardless of any election in the Adoption Agreement
                           to the contrary, for the Plan Year in which this Plan
                           terminates, a Participant shall only be eligible to
                           share in the allocation of the Employer's
                           contributions for the Plan Year if the Participant is
                           employed at the end of the Plan Year and has
                           completed a Year of Service (or Period of Service if
                           the Elapsed Time Method is elected).

                  (2)      For an integrated Profit Sharing Plan allocation or a
                  Money Purchase Plan which is integrated by allocation:

                           (i)      Except as provided in Section 4.3(f) for
                           Top-Heavy purposes and subject to the "Overall
                           Permitted Disparity Limits," the Employer's
                           contribution shall be allocated to each Participant's
                           Account in a dollar amount equal to 5.7% of the sum
                           of each Participant's Compensation plus Excess
                           Compensation. If the Employer does not contribute
                           such amount for all Participants, each Participant
                           will be allocated a share of the contribution in the
                           same proportion that each such Participant's
                           Compensation plus Excess Compensation for the Plan
                           Year bears to the total Compensation plus the total
                           Excess Compensation of all Participants for that
                           year. However, in the case of any Participant who has
                           exceeded the "Cumulative Permitted Disparity Limit,"
                           the allocation set forth in this paragraph shall be
                           based on such Participant's Compensation rather than
                           Compensation plus Excess Compensation.

                           Regardless of the preceding, 4.3% shall be
                           substituted for 5.7% above if Excess Compensation is
                           based on more than 20% and less than or equal to 80%
                           of the Taxable Wage Base. If Excess Compensation is
                           based on less than 100% and more than 80% of the
                           Taxable Wage Base, then 5.4% shall be substituted for
                           5.7% above.

                           (ii)     The balance of the Employer's contribution
                           over the amount allocated above, if any, shall be
                           allocated to each Participant's Account in the same
                           proportion that each such Participant's Compensation
                           for the Year bears to the total Compensation of all
                           Participants for such year.

                           (iii)    However, regardless of the preceding, a
                           Participant shall only be eligible to share in the
                           allocations of the Employer's Contribution for the
                           year if the conditions set forth in Section G of the
                           Adoption Agreement are satisfied, unless a
                           contribution is required pursuant to Section 4.3(f).

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                                             DEFINED CONTRIBUTION PROTOTYPE PLAN

                  (3)      For a Profit Sharing Plan with a non-integrated
                  allocation formula or a Prevailing Wage contribution:

                           (i)      The Employer's contribution shall be
                           allocated to each Participant's Account in accordance
                           with the allocation method elected in Section G of
                           the Adoption Agreement.

                           (ii)     However, regardless of the preceding, a
                           Participant shall only be eligible to share in the
                           allocations of the Employer's contribution for the
                           year if the conditions set forth in Section G of the
                           Adoption Agreement are satisfied, unless a top heavy
                           contribution is required pursuant to Section 4.3(f).

                  (4)      "Overall Permitted Disparity Limits":

                           "Annual Overall Permitted Disparity Limit":
                           Notwithstanding the preceding paragraphs, if in any
                           Plan Year this Plan "benefits" any Participant who
                           "benefits" under another qualified plan or simplified
                           employee pension, as defined in Code Section 408(k),
                           maintained by the Employer that either provides for
                           or imputes permitted disparity (integrates), then
                           such plans will be considered to be one plan and will
                           be considered to comply with the permitted disparity
                           rules if the extent of the permitted disparity of all
                           such plans does not exceed 100%. For purposes of the
                           preceding sentence, the extent of the permitted
                           disparity of a plan is the ratio, expressed as a
                           percentage, which the actual benefits, benefit rate,
                           offset rate, or employer contribution rate, whatever
                           is applicable under the Plan, bears to the limitation
                           under Code Section 401(1) applicable to such Plan.

                           "Cumulative Permitted Disparity Limit": With respect
                           to a Participant who "benefits" or "has benefited"
                           under a defined benefit or target benefit plan of the
                           Employer, effective for Plan Years beginning on or
                           after January 1, 1994, the cumulative permitted
                           disparity limit for the Participant is thirty five
                           (35) total cumulative permitted disparity years.
                           Total cumulative permitted disparity years means the
                           number of years credited to the Participant for
                           allocation or accrual purposes under the Plan, any
                           other qualified plan or simplified employee pension
                           plan (whether or not terminated) ever maintained by
                           the Employer, while such plan either provides for or
                           imputes permitted disparity. For purposes of
                           determining the Participant's cumulative permitted
                           disparity limit, all years ending in the same
                           calendar year are treated as the same year. If the
                           Participant has not "benefited" under a defined
                           benefit or target benefit plan which neither provides
                           for nor imputes permitted disparity for any year
                           beginning on or after January 1, 1994, then such
                           Participant has no cumulative disparity limit.

                           For purposes of this Section, "benefiting" means
                           benefiting under the Plan for any Plan Year during
                           which a Participant received or is deemed to receive
                           an allocation in accordance with Regulation
                           1.410(b)-3(a).

                  (c)      Participants' Accounts shall be debited for any
         insurance or annuity premiums paid, if any, and credited with any
         dividends or interest received on Contracts.

                  (d)      On or before each Anniversary Date, any amounts which
         became Forfeitures since the last Anniversary Date may be made
         available to reinstate previously forfeited account balances of Former
         Participants, if any, in accordance with Section 3.5(d) or used to
         satisfy any contribution that may be required pursuant to Section 6.9.
         The remaining Forfeitures, if any, shall be treated in accordance with
         Section G of the Adoption Agreement. If no election is made in Section
         G of the Adoption Agreement, any remaining Forfeitures will be used to
         reduce any future Employer contributions under the Plan. However, if
         the Plan provides for an integrated allocation, then any remaining
         Forfeitures will be added to the Employer's contributions under the
         Plan. Regardless of the preceding sentences, in the event the
         allocation of Forfeitures provided herein shall cause the "Annual
         Additions" (as defined in Section 4.4) to any Participant's Account to
         exceed the amount allowable by the Code, an adjustment shall be made in
         accordance with Section 4.5. Except, however, a Participant shall only
         be eligible to share in the allocations of Forfeitures for the year if
         the conditions set forth in Section G of the Adoption Agreement are
         satisfied, unless a top heavy contribution is required pursuant to
         Section 4.3(e).

                  (e)      Minimum Allocations Required for Top-Heavy Plan
         Years: Notwithstanding the foregoing, for any Top-Heavy Plan Year, the
         sum of the Employer's contributions and Forfeitures allocated to the
         Participant's Combined Account of each Non-Key Employee shall be equal
         to at least three percent (3%) of such Non-Key Employee's 415
         Compensation (reduced by contributions and forfeitures, if any,
         allocated to each Non-Key Employee in any defined contribution plan
         included with this Plan in a "required aggregation group" (as defined
         in Section 9.2(f)). However, if (i) the sum of the Employer's
         contributions and Forfeitures allocated to the Participant's Combined
         Account of each Key Employee for such Top-Heavy Plan Year is less than
         three percent (3%) of each Key Employee's 415 Compensation and (ii)
         this Plan is not required to be included in a "required aggregation
         group" (as defined in Section 9.2(f)) to enable a defined benefit plan
         to meet the requirements of Code Section 401(a)(4) or 410, the sum of
         the

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                                             DEFINED CONTRIBUTION PROTOTYPE PLAN

         Employer's contributions and Forfeitures allocated to the Participant's
         Combined Account of each Non-Key Employee shall be equal to the largest
         percentage allocated to the Participant's Combined Account of any Key
         Employee.

                           If this is an integrated Plan, then for any Top-Heavy
         Plan Year the Employer's contribution shall be allocated as follows and
         shall still be required to satisfy the other provisions of this
         subsection:

                  (1)      An amount equal to three percent (3%) multiplied by
                  each Participant's Compensation for the Plan Year shall be
                  allocated to each Participant's Account. If the Employer does
                  not contribute such amount for all Participants, the amount
                  shall be allocated to each Participant's Account in the same
                  proportion that such Participant's total Compensation for the
                  Plan Year bears to the total Compensation of all Participants
                  for such year.

                  (2)      The balance of the Employer's contribution over the
                  amount allocated under subparagraph (1) hereof shall be
                  allocated to each Participant's Account in a dollar amount
                  equal to three percent (3%) multiplied by a Participant's
                  Excess Compensation. If the Employer does not contribute such
                  amount for all Participants, each Participant will be
                  allocated a share of the contribution in the same proportion
                  that such Participant's Excess Compensation bears to the total
                  Excess Compensation of all Participants for that year. For
                  purposes of this paragraph, in the case of any Participant who
                  has exceeded the cumulative permitted disparity limit
                  described in Section 4.3(b)(4), such Participant's total
                  Compensation will be taken into account.

                  (3)      The balance of the Employer's contribution over the
                  amount allocated under subparagraph (2) hereof shall be
                  allocated to each Participant's Account in a dollar amount
                  equal to 2.7% multiplied by the sum of each Participant's
                  total Compensation plus Excess Compensation. If the Employer
                  does not contribute such amount for all Participants, each
                  Participant will be allocated a share of the contribution in
                  the same proportion that such Participant's total Compensation
                  plus Excess Compensation for the Plan Year bears to the total
                  Compensation plus Excess Compensation of all Participants for
                  that year. For purposes of this paragraph, in the case of any
                  Participant who has exceeded the cumulative permitted
                  disparity limit described in Section 4.3(b)(4), such
                  Participant's total Compensation rather than Compensation plus
                  Excess Compensation will be taken into account.

                  Regardless of the preceding, 1.3% shall be substituted for
                  2.7% above if Excess Compensation is based on more than 20%
                  and less than or equal to 80% of the Taxable Wage Base. If
                  Excess Compensation is based on less than 100% and more than
                  80% of the Taxable Wage Base, then 2.4% shall be substituted
                  for 2.7% above.

                  (4)      The balance of the Employer's contributions over the
                  amount allocated above, if any, shall be allocated to each
                  Participant's Account in the same proportion that such
                  Participant's total Compensation for the Plan Year bears to
                  the total Compensation of all Participants for such year.

                           For each Non-Key Employee who is a Participant in
         this Plan and another defined contribution plan maintained by the
         Employer, the minimum three percent (3%) allocation specified above
         shall be provided as specified in Section J of the Adoption Agreement.

                  (f)      For purposes of the minimum allocations set forth
         above, the percentage allocated to the Participant's Combined Account
         of any Key Employee shall be equal to the ratio of the sum of the
         Employer's contributions and Forfeitures allocated on behalf of such
         Key Employee divided by the 415 Compensation for such Key Employee.

                  (g)      For any Top-Heavy Plan Year, the minimum allocations
         set forth in this Section shall be allocated to the Participant's
         Combined Account of all Non-Key Employees who are Participants and who
         are employed by the Employer on the last day of the Plan Year,
         including Non-Key Employees who have (1) failed to complete a Year of
         Service; or (2) declined to make mandatory contributions (if required)
         or, in the case of a cash or deferred arrangement, Elective Deferrals
         to the Plan.

                  (h)      Notwithstanding anything herein to the contrary, in
         any Plan Year in which the Employer maintains both this Plan and a
         defined benefit pension plan included in a "required aggregation group"
         (as defined in Section 9.2(f)) which is Top-Heavy, the Employer will
         not be required (unless otherwise elected in the Adoption Agreement) to
         provide a Non-Key Employee with both the full separate minimum defined
         benefit plan benefit and the full separate defined contribution plan
         allocations. In such case, the Top-Heavy minimum benefits will be
         provided as elected in the Adoption Agreement and, if applicable, as
         follows:

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                                             DEFINED CONTRIBUTION PROTOTYPE PLAN

                  (1)      If the 5% defined contribution minimum is elected in
                  the Adoption Agreement:

                           (i)      The requirements of Section 9.1 will apply
                           except that each Non-Key Employee who is a
                           Participant in the Profit Sharing Plan or Money
                           Purchase Plan and who is also a Participant in the
                           Defined Benefit Plan will receive a minimum
                           allocation of five percent (5%) of such Participant's
                           415 Compensation from the applicable defined
                           contribution plan(s).

                           (ii)     For each Non-Key Employee who is a
                           Participant only in the defined benefit plan the
                           Employer will provide a minimum non-integrated
                           benefit equal to two percent (2%) of such
                           Participant's highest five (5) consecutive year
                           average 415 Compensation for each Year of Service
                           while a participant in the plan, in which the Plan is
                           Top-Heavy, not to exceed ten (10).

                           (iii)    For each Non-Key Employee who is a
                           Participant only in this defined contribution plan,
                           the Employer will provide a minimum allocation equal
                           to three percent (3%) of such Participant's 415
                           Compensation.

                  (2)      If the 2% defined benefit minimum is elected in the
                  Adoption Agreement, then for each Non-Key Employee who is a
                  Participant only in the defined benefit plan, the Employer
                  will provide a minimum non-integrated benefit equal to two
                  percent (2%) of such Participant's highest five (5)
                  consecutive year average of 415 Compensation for each Year of
                  Service while a participant in the plan, in which the Plan is
                  Top-Heavy, not to exceed ten (10).

                  (i)      For the purposes of this Section, 415 Compensation
         will be limited to the same dollar limitations set forth in Section
         1.11 adjusted in such manner as permitted under Code Section 415(d).

                  (j)      Notwithstanding anything in this Section to the
         contrary, all information necessary to properly reflect a given
         transaction may not be available until after the date specified herein
         for processing such transaction, in which case the transaction will be
         reflected when such information is received and processed. Subject to
         express limits that may be imposed under the Code, the processing of
         any contribution, distribution or other transaction may be delayed for
         any legitimate business reason (including, but not limited to, failure
         of systems or computer programs, failure of the means of the
         transmission of data, force majeure, the failure of a service provider
         to timely receive values or prices, and correction for errors or
         omissions or the errors or omissions of any service provider). The
         processing date of a transaction will be binding for all purposes of
         the Plan.

                  (k)      Notwithstanding anything in this Section to the
         contrary, the provisions of this subsection apply for any Plan Year if
         the Plan fails to satisfy the "ratio percentage test" due to a last day
         of the Plan Year allocation condition or an Hours of Service (or months
         of service) allocation condition. A plan satisfies the "ratio
         percentage test" if, on the last day of the Plan Year, the "benefiting
         ratio" of the Non-Highly Compensated Employees who are "includible" is
         at least 70% of the "benefiting ratio" of the Highly Compensated
         Employees who are "includible." The "benefiting ratio" of the
         Non-Highly Compensated Employees is the number of "includible"
         Non-Highly Compensated Employees "benefiting" under the Plan divided by
         the number of "includible" Employees who are Non-Highly Compensated
         Employees. The "benefiting ratio" of the Highly Compensated Employees
         is the number of Highly Compensated Employees "benefiting" under the
         Plan divided by the number of "includible" Highly Compensated
         Employees. "Includible" Employees are all Employees other than: (1)
         those Employees excluded from participating in the plan for the entire
         Plan Year by reason of the collective bargaining unit exclusion or the
         nonresident alien exclusion described in the Code or by reason of the
         age and service requirements of Article III; and (2) any Employee who
         incurs a separation from service during the Plan Year and fails to
         complete at least 501 Hours of Service (or three (3) months of service
         if the Elapsed Time Method is being used) during such Plan Year.

                  For purposes of this subsection, an Employee is "benefiting"
         under the Plan on a particular date if, under the Plan, the Employee is
         entitled to an Employer contribution or an allocation of Forfeitures
         for the Plan Year.

                  If this subsection applies, then the then the following rules
         will apply:

                  (1)      The group of Participants eligible to share in the
                  Employer's contributions or Forfeitures for the Plan Year will
                  be expanded to include the minimum number of Participants who
                  would not otherwise be eligible as are necessary to satisfy
                  the applicable test specified above. The specific Participants
                  who shall become eligible under the terms of this paragraph
                  shall be those who have not separated from service prior to
                  the last day of the Plan Year and, when compared to similarly
                  situated Participants, have completed the greatest number of
                  Hours of Service in the Plan Year.

                  (2)      If after application of paragraph (1) above, the
                  applicable test is still not satisfied, then the group of
                  Participants eligible to share in the Employer's contributions
                  or Forfeitures for the Plan Year shall be further expanded to
                  include the minimum number of Participants who have separated
                  from service prior to the last day of the Plan Year as are
                  necessary to satisfy the applicable test. The specific
                  Participants who shall

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                                             DEFINED CONTRIBUTION PROTOTYPE PLAN

                  become eligible to share shall be those Participants, when
                  compared to similarly situated Participants, who have
                  completed the greatest number of Hours of Service in the Plan
                  Year before separation from service.

                  Nothing in this subsection shall permit the reduction of a
         Participant's accrued benefit. Therefore any amounts that have
         previously been allocated to Participants may not be reallocated to
         satisfy these requirements. In such event, the Employer shall make an
         additional contribution equal to the amount such affected Participants
         would have received had they been included in the allocations, even if
         it exceeds the amount that would be deductible under Code Section 404.
         Such allocation adjustment must be made by the last day of the Plan
         Year.

4.4      MAXIMUM ANNUAL ADDITIONS

                  (a)(1)   If a Participant does not participate in, and has
         never participated in another qualified plan maintained by the
         Employer, or a welfare benefit fund (as defined in Code Section 419(e))
         maintained by the Employer, or an individual medical account (as
         defined in Code Section 415(1)(2)) maintained by the Employer, or a
         simplified employee pension (as defined in Code Section 408(k))
         maintained by the Employer which provides "Annual Additions," the
         amount of "Annual Additions" which may be credited to the Participant's
         accounts for any Limitation Year shall not exceed the lesser of the
         "Maximum Permissible Amount" or any other limitation contained in this
         Plan. If the Employer contribution that would otherwise be contributed
         or allocated to the Participant's accounts would cause the "Annual
         Additions" for the Limitation Year to exceed the "Maximum Permissible
         Amount," the amount contributed or allocated will be reduced so that
         the "Annual Additions" for the Limitation Year will equal the "Maximum
         Permissible Amount," and any amount in excess of the "Maximum
         Permissible Amount" which would have been allocated to such Participant
         may be allocated to other Participants.

                  (2)      Prior to determining the Participant's actual 415
                  Compensation for the Limitation Year, the Employer may
                  determine the "Maximum Permissible Amount" for a Participant
                  on the basis of a reasonable estimation of the Participant's
                  415 Compensation for the Limitation Year, uniformly determined
                  for all Participants similarly situated.

                  (3)      As soon as is administratively feasible after the end
                  of the Limitation Year the "Maximum Permissible Amount" for
                  such Limitation Year shall be determined on the basis of the
                  Participant's actual 415 Compensation for such Limitation
                  Year.

                  (b)(l)   This subsection applies if, in addition to this Plan,
         a Participant is covered under another qualified defined contribution
         plan maintained by the Employer that is a "Master or Prototype Plan," a
         welfare benefit fund (as defined in Code Section 419(e)) maintained by
         the Employer, an individual medical account (as defined in Code Section
         415(1)(2)) maintained by the Employer, or a simplified employee pension
         (as defined in Code Section 408(k)) maintained by the Employer, which
         provides "Annual Additions," during any Limitation Year. The "Annual
         Additions" which may be credited to a Participant's accounts under this
         Plan for any such Limitation Year shall not exceed the "Maximum
         Permissible Amount" reduced by the "Annual Additions" credited to a
         Participant's accounts under the other plans and welfare benefit funds,
         individual medical accounts, and simplified employee pensions for the
         same Limitation Year. If the "Annual Additions" with respect to the
         Participant under other defined contribution plans and welfare benefit
         funds maintained by the Employer are less than the "Maximum Permissible
         Amount" and the Employer contribution that would otherwise be
         contributed or allocated to the Participant's accounts under this Plan
         would cause the "Annual Additions" for the Limitation Year to exceed
         this limitation, the amount contributed or allocated will be reduced so
         that the "Annual Additions" under all such plans and welfare benefit
         funds for the Limitation Year will equal the "Maximum Permissible
         Amount," and any amount in excess of the "Maximum Permissible Amount"
         which would have been allocated to such Participant may be allocated to
         other Participants. If the "Annual Additions" with respect to the
         Participant under such other defined contribution plans, welfare
         benefit funds, individual medical accounts and simplified employee
         pensions in the aggregate are equal to or greater than the "Maximum
         Permissible Amount," no amount will be contributed or allocated to the
         Participant's account under this Plan for the Limitation Year.

                  (2)      Prior to determining the Participant's actual 415
                  Compensation for the Limitation Year, the Employer may
                  determine the "Maximum Permissible Amount" for a Participant
                  on the basis of a reasonable estimation of the Participant's
                  415 Compensation for the Limitation Year, uniformly determined
                  for all Participants similarly situated.

                  (3)      As soon as is administratively feasible after the end
                  of the Limitation Year, the "Maximum Permissible Amount" for
                  the Limitation Year will be determined on the basis of the
                  Participant's actual 415 Compensation for the Limitation Year.

                  (4)      If, pursuant to Section 4.4(b)(2) or Section 4.5, a
                  Participant's "Annual Additions" under this Plan and such
                  other plans would result in an "Excess Amount" for a
                  Limitation Year, the "Excess Amount" will be deemed to consist
                  of the "Annual Additions" last allocated, except that "Annual
                  Additions" attributable to a simplified employee pension will
                  be deemed to have been allocated first, followed by "Annual
                  Additions" to

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                                             DEFINED CONTRIBUTION PROTOTYPE PLAN

                  a welfare benefit fund or individual medical account, and then
                  by "Annual Additions" to a plan subject to Code Section 412,
                  regardless of the actual allocation date.

                  (5)      If an "Excess Amount" was allocated to a Participant
                  on an allocation date of this Plan which coincides with an
                  allocation date of another plan, the "Excess Amount"
                  attributed to this Plan will be the product of:

                           (i)      the total "Excess Amount" allocated as of
                           such date, times

                           (ii)     the ratio of (1) the "Annual Additions"
                           allocated to the Participant for the Limitation Year
                           as of such date under this Plan to (2) the total
                           "Annual Additions" allocated to the Participant for
                           the Limitation Year as of such date under this and
                           all the other qualified defined contribution plans.

                  (6)      Any "Excess Amount" attributed to this Plan will be
                  disposed of in the manner described in Section 4.5.

                  (c)      If the Participant is covered under another qualified
         defined contribution plan maintained by the Employer which is not a
         "Master or Prototype Plan," "Annual Additions" which may be credited to
         the Participant's Combined Account under this Plan for any Limitation
         Year will be limited in accordance with Section 4.4(b), unless the
         Employer provides other limitations in the Adoption Agreement.

                  (d)      For any Limitation Year beginning prior to the date
         the Code Section 415(e) limits are repealed with respect to this Plan
         (as specified in the Adoption Agreement for the GUST transitional
         rules), if the Employer maintains, or at any time maintained, a
         qualified defined benefit plan covering any Participant in this Plan,
         then the sum of the Participant's "Defined Benefit Plan Fraction" and
         "Defined Contribution Plan Fraction" may not exceed 1.0. In such event,
         the rate of accrual in the defined benefit plan will be reduced to the
         extent necessary so that the sum of the "Defined Contribution Fraction"
         and "Defined Benefit Fraction" will equal 1.0. However, in Section J of
         the Adoption Agreement the Employer may specify an alternative method
         under which the plans involved will satisfy the limitations of Code
         Section 415(e), including increased Top-Heavy minimum benefits so that
         the combined limitation is 1.25 rather than 1.0.

                  (e)      For purposes of applying the limitations of Code
         Section 415, the transfer of funds from one qualified plan to another
         is not an "Annual Addition." In addition, the following are not
         Employee contributions for the purposes of Section 4.4(f)(l)(b): (1)
         rollover contributions (as defined in Code Sections 402(c), 403(a)(4),
         403(b)(8) and 408(d)(3)); (2) repayments of loans made to a Participant
         from the Plan; (3) repayments of distributions received by an Employee
         pursuant to Code Section 41 l(a)(7)(B) (cash-outs); (4) repayments of
         distributions received by an Employee pursuant to Code Section 411
         (a)(3)(D) (mandatory contributions); and (5) Employee contributions to
         a simplified employee pension excludable from gross income under Code
         Section 408(k)(6).

                  (f)      For purposes of this Section, the following terms
         shall be defined as follows:

                  (1)      "Annual Additions" means the sum credited to a
                  Participant's accounts for any Limitation Year of (a) Employer
                  contributions, (b) Employee contributions (except as provided
                  below), (c) forfeitures, (d) amounts allocated, after March
                  31, 1984, to an individual medical account, as defined in Code
                  Section 415(1)(2), which is part of a pension or annuity plan
                  maintained by the Employer, (e) amounts derived from
                  contributions paid or accrued after December 31, 1985, in
                  taxable years ending after such date, which are attributable
                  to post-retirement medical benefits allocated to the separate
                  account of a key employee (as defined in Code Section
                  419A(d)(3)) under a welfare benefit fund (as defined in Code
                  Section 419(e)) maintained by the Employer and (f) allocations
                  under a simplified employee pension. Except, however, the
                  Compensation percentage limitation referred to in paragraph
                  (f)(9)(ii) shall not apply to: (1) any contribution for
                  medical benefits (within the meaning of Code Section
                  419A(f)(2)) after separation from service which is otherwise
                  treated as an "Annual Addition," or (2) any amount otherwise
                  treated as an "Annual Addition" under Code Section 415(1)( 1).
                  Notwithstanding the foregoing, for Limitation Years beginning
                  prior to January 1, 1987, only that portion of Employee
                  contributions equal to the lesser of Employee contributions in
                  excess of six percent (6%) of 415 Compensation or one-half of
                  Employee contributions shall be considered an "Annual
                  Addition."

                                    For this purpose, any Excess Amount applied
                  under Section 4.5 in the Limitation Year to reduce Employer
                  contributions shall be considered "Annual Additions" for such
                  Limitation Year.

                  (2)      "Defined Benefit Fraction" means a fraction, the
                  numerator of which is the sum of the Participant's "Projected
                  Annual Benefits" under all the defined benefit plans (whether
                  or not terminated) maintained by the Employer, and the
                  denominator of which is the lesser of one hundred twenty-five
                  percent (125%) of the dollar limitation determined for the
                  Limitation Year under Code Sections 415(b)(l )(A) as adjusted
                  by Code

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                                             DEFINED CONTRIBUTION PROTOTYPE PLAN

                  Section 415(d) or one hundred forty percent (140%) of the
                  "Highest Average Compensation" including any adjustments under
                  Code Section 415(b).

                                    Notwithstanding the above, if the
                  Participant was a Participant as of the first day of the first
                  Limitation Year beginning after December 31,1986, in one or
                  more defined benefit plans maintained by the Employer which
                  were in existence on May 6, 1986, the denominator of this
                  fraction will not be less than one hundred twenty-five percent
                  (125%) of the sum of the annual benefits under such plans
                  which the Participant had accrued as of the end of the close
                  of the last Limitation Year beginning before January 1, 1987,
                  disregarding any changes in the terms and conditions of the
                  plan after May 5, 1986. The preceding sentence applies only if
                  the defined benefit plans individually and in the aggregate
                  satisfied the requirements of Code Section 415 for all
                  Limitation Years beginning before January 1, 1987.

                                    Notwithstanding the foregoing, for any
                  Top-Heavy Plan Year, one hundred percent (100%) shall be
                  substituted for one hundred twenty-five percent (125%) unless
                  the extra Top-Heavy minimum allocation or benefit is being
                  made pursuant to the Employer's specification in the Adoption
                  Agreement. However, for any Plan Year in which this Plan is a
                  Super Top-Heavy Plan, one hundred percent (100%) shall always
                  be substituted for one hundred twenty-five percent (125%).

                  (3)      Defined Contribution Dollar Limitation means $30,000
                  as adjusted under Code Section 415(d).

                  (4)      Defined Contribution Fraction means a fraction, the
                  numerator of which is the sum of the "Annual Additions" to the
                  Participant's accounts under all the defined contribution
                  plans (whether or not terminated) maintained by the Employer
                  for the current and all prior "Limitation Years," (including
                  the "Annual Additions" attributable to the Participant's
                  nondeductible voluntary employee contributions to any defined
                  benefit plans, whether or not terminated, maintained by the
                  Employer and the "Annual Additions" attributable to all
                  welfare benefit funds (as defined in Code Section 419(e)),
                  individual medical accounts (as defined in Code Section
                  415(1)(2)), and simplified employee pensions (as defined in
                  Code Section 408(k)) maintained by the Employer), and the
                  denominator of which is the sum of the "Maximum Aggregate
                  Amounts" for the current and all prior Limitation Years in
                  which the Employee had service with the Employer (regardless
                  of whether a defined contribution plan was maintained by the
                  Employer). The maximum aggregate amount in any Limitation Year
                  is the lesser of one hundred twenty-five percent (125%) of the
                  dollar limitation determined under Code Section 415(c)(l)(A)
                  as adjusted by Code Section 415(d) or thirty-five percent
                  (35%) of the Participant's 415 Compensation for such year.

                                    If the Employee was a Participant as of the
                  end of the first day of the first Limitation Year beginning
                  after December 31, 1986, in one or more defined contribution
                  plans maintained by the Employer which were in existence on
                  May 5, 1986, the numerator of this fraction will be adjusted
                  if the sum of this fraction and the "Defined Benefit Fraction"
                  would otherwise exceed 1.0 under the terms of this Plan. Under
                  the adjustment, an amount equal to the product of (1) the
                  excess of the sum of the fractions over 1.0 times (2) the
                  denominator of this fraction, will be permanently subtracted
                  from the numerator of this fraction. The adjustment is
                  calculated using the fractions as they would be computed as of
                  the end of the last Limitation Year beginning before January
                  1, 1987, and disregarding any changes in the terms and
                  conditions of the plan made after May 5, 1986, but using the
                  Code Section 415 limitation applicable to the first Limitation
                  Year beginning on or after January 1, 1987.

                                    For Limitation Years beginning prior to
                  January 1, 1987, the "Annual Additions" shall not be
                  recomputed to treat all Employee contributions as "Annual
                  Additions."

                                    Notwithstanding the foregoing, for any
                  Top-Heavy Plan Year, one hundred percent (100%) shall be
                  substituted for one hundred twenty-five percent (125%) unless
                  the extra Top-Heavy minimum allocation or benefit is being
                  made pursuant to the Employer's specification in the Adoption
                  Agreement. However, for any Plan Year in which this Plan is a
                  Super Top-Heavy Plan, one hundred percent (100%) shall always
                  be substituted for one hundred twenty-five percent (125%).

                  (5)      "Employer" means the Employer that adopts this Plan
                  and all Affiliated Employers, except that for purposes of this
                  Section, the determination of whether an entity is an
                  Affiliated Employer shall be made by applying Code Section
                  415(h).

                  (6)      "Excess Amount" means the excess of the Participant's
                  "Annual Additions" for the Limitation Year over the "Maximum
                  Permissible Amount."

                  (7)      "Highest Average Compensation" means the average
                  Compensation for the three (3) consecutive Years of Service
                  with the Employer while a Participant in the Plan that
                  produces the highest average. A Year of Service with the
                  Employer is the twelve (12) consecutive month period ending on
                  the last day of the Limitation Year.

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                                             DEFINED CONTRIBUTION PROTOTYPE PLAN

                  (8)      "Master or Prototype Plan" means a plan the form of
                  which is the subject of a favorable opinion letter from the
                  Internal Revenue Service.

                  (9)      "Maximum Permissible Amount" means the maximum Annual
                  Addition that may be contributed or allocated to a
                  Participant's accounts under the Plan for any "Limitation
                  Year," which shall not exceed the lesser of:

                           (i)      the "Defined Contribution Dollar
                           Limitation," or

                           (ii)     twenty-five percent (25%) of the
                           Participant's 415 Compensation for the "Limitation
                           Year."

                                    The Compensation Limitation referred to in
                           (ii) shall not apply to any contribution for medical
                           benefits (within the meaning of Code Sections 401 (h)
                           or 419A(f)(2)) which is otherwise treated as an
                           "Annual Addition."

                                    If a short Limitation Year is created
                           because of an amendment changing the Limitation Year
                           to a different twelve (12) consecutive month period,
                           the "Maximum Permissible Amount" will not exceed the
                           "Defined Contribution Dollar Limitation multiplied by
                           a fraction, the numerator of which is the number of
                           months in the short Limitation Year and the
                           denominator of which is twelve (12).

                  (10)     "Projected Annual Benefit" means the annual
                  retirement benefit (adjusted to an actuarially equivalent
                  "straight life annuity" if such benefit is expressed in a form
                  other than a "straight life annuity" or qualified joint and
                  survivor annuity) to which the Participant would be entitled
                  under the terms of the plan assuming:

                           (i)      the Participant will continue employment
                           until Normal Retirement Age (or current age, if
                           later), and

                           (ii)     the Participant's 415 Compensation for the
                           current Limitation Year and all other relevant
                           factors used to determine benefits under the Plan
                           will remain constant for all future Limitation Years.

                  For purposes of this subsection, "straight life annuity" means
                  an annuity that is payable in equal installments for the life
                  of the Participant that terminates upon the Participant's
                  death.

                  (g)      Notwithstanding anything contained in this Section to
         the contrary, the limitations, adjustments and other requirements
         prescribed in this Section shall at all times comply with the
         provisions of Code Section 415 and the Regulations thereunder.

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                                             DEFINED CONTRIBUTION PROTOTYPE PLAN

4.5      ADJUSTMENT FOR EXCESS ANNUAL ADDITIONS

                  Allocation of "Annual Additions" (as defined in Section 4.4)
to a Participant's Combined Account for a Limitation Year generally will cease
once the limits of Section 4.4 have been reached for such Limitation Year.
However, if as a result of the allocation of Forfeitures, a reasonable error in
estimating a Participant's annual 415 Compensation, a reasonable error in
determining the amount of elective deferrals (within the meaning of Code Section
402(g)(3)) that may be made with respect to any Participant under the limits of
Section 4.4, or other facts and circumstances to which Regulation 1.415-6(b)(6)
shall be applicable, the "Annual Additions" under this Plan would cause the
maximum provided in Section 4.4 to be exceeded, the "Excess Amount" will be
disposed of in one of the following manners, as uniformly determined by the Plan
Administrator for all Participants similarly situated:

                  (a)      Any after-tax voluntary Employee contributions (plus
         attributable gains), to the extent they would reduce the Excess Amount,
         will be distributed to the Participant;

                  (b)      Any Participant Matched Contribution (plus
         attributable gains) to the extent they would reduce the Excess Amount,
         will be distributed to the Participant;

                  (c)      If, after the application of subparagraph (a), an
         "Excess Amount" still exists, any Elective Deferrals (and for
         Limitation Years beginning after December 31,1995, any gains
         attributable to such Elective Deferrals), to the extent they would
         reduce the Excess Amount, will be distributed to the Participant;

                  (d)      If, after the application of subparagraphs (a), (b)
         and (c), an "Excess Amount" still exists, and the Participant is
         covered by the Plan at the end of the Limitation Year, the "Excess
         Amount" in the Participant's Account will be used to reduce Employer
         contributions (including any allocation of Forfeitures) for such
         Participant in the next Limitation Year, and each succeeding Limitation
         Year if necessary;

                  (e)      If, after the application of subparagraphs (a), (b)
         and (c), an "Excess Amount" still exists, and the Participant is not
         covered by the Plan at the end of a Limitation Year, the "Excess
         Amount" will be held unallocated in a suspense account. The suspense
         account will be applied to reduce future Employer contributions
         (including allocation of any Forfeitures) for all remaining
         Participants in the next Limitation Year, and each succeeding
         Limitation Year if necessary; and

                  (f)      If a suspense account is in existence at any time
         during a Limitation Year pursuant to this Section, no investment gains
         and losses shall be allocated to such suspense account. If a suspense
         account is in existence at any time during a particular Limitation
         Year, all amounts in the suspense account must be allocated and
         reallocated to Participants' Accounts before any Employer contributions
         may be made to the Plan for that Limitation Year. Except as provided in
         (a), (b) and (c) above, "Excess Amounts" may not be distributed to
         Participants or Former Participants.

4.6      ROLLOVERS

                  (a)      If elected in Section L.2 of the Adoption Agreement
         and with the consent of the Administrator and the Insurer, the Plan may
         accept a "rollover," provided the "rollover" will not jeopardize the
         tax-exempt status of the Plan or create adverse tax consequences for
         the Employer. The amounts rolled over shall be set up in a separate
         account herein referred to as a "Participant's Rollover Account." Such
         account shall be fully Vested at all times and shall not be subject to
         forfeiture for any reason. For purposes of this Section, the term
         Participant shall include any Eligible Employee who is not yet a
         Participant, if, pursuant to Section L.2 of the Adoption Agreement,
         "rollovers" are permitted to be accepted from Eligible Employees. In
         addition, for purposes of this Section the term Participant shall also
         include former Employees maintaining an account balance in the Plan if
         the Employer and Administrator consent to accept "rollovers" of
         distributions made to former Employees from any plan of the Employer.


                  (b)      Amounts in a Participant's Rollover Account shall be
         held by the Administrator pursuant to the provisions of this Plan and
         may not be withdrawn by, or distributed to the Participant, in whole or
         in part, except as elected in Section H.5 of the Adoption Agreement and
         subsection (c) below. The Administrator shall have no duty or
         responsibility to inquire as to the propriety of the amount, value or
         type of assets transferred, nor to conduct any due diligence with
         respect to such assets; provided, however, that such assets are
         otherwise eligible to be held by the Administrator under the terms of
         this Plan.

                  (c)      At Normal Retirement Date, or such other date when
         the Participant or Eligible Employee or such Participant's or Eligible
         Employee's Beneficiary shall be entitled to receive benefits, the
         Participant's Rollover Account shall be used to provide additional
         benefits to the Participant or the Participant's Beneficiary. Any
         distribution of amounts held in a Participant's Rollover Account shall
         be made in a manner which is consistent with and satisfies the
         provisions of Sections 6.5 and 6.6, including, but not limited to, all
         notice and consent requirements of Code Sections 411(a)(ll) and 417 and
         the Regulations thereunder. Furthermore, such amounts shall be
         considered to be part of a

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                                             DEFINED CONTRIBUTION PROTOTYPE PLAN

         Participant's benefit in determining whether an involuntary cash-out of
         benefits may be made without Participant consent.

                  (d)      For purposes of this Section, the term "qualified
         plan" shall mean any tax qualified plan under Code Section 401 (a), or
         any other plans from which distributions are eligible to be rolled over
         into this Plan pursuant to the Code. The term "rollover" means: (i)
         amounts transferred to this Plan in a direct rollover made pursuant to
         Code Section 401 (a)(31) from another "qualified plan"; (ii)
         distributions received by an Employee from other "qualified plans"
         which are eligible for tax-free rollover to a "qualified plan" and
         which are transferred by the Employee to this Plan within sixty (60)
         days following receipt thereof; (iii) amounts transferred to this Plan
         from a conduit individual retirement account provided that the conduit
         individual retirement account has no assets other than assets which (A)
         were previously distributed to the Employee by another "qualified plan"
         (B) were eligible for tax-free rollover to a "qualified plan" and (C)
         were deposited in such conduit individual retirement account within
         sixty (60) days of receipt thereof; (iv) amounts distributed to the
         Employee from a conduit individual retirement account meeting the
         requirements of clause (iii) above, and transferred by the Employee to
         this Plan within sixty (60) days of receipt thereof from such conduit
         individual retirement account; and (v) any other amounts which are
         eligible to be rolled over to this Plan pursuant to the Code.

                  (e)      Prior to accepting any "rollovers" to which this
         Section applies, the Administrator or the Insurer may require the
         Employee to establish (by providing opinion of counsel or otherwise)
         that the amounts to be rolled over to this Plan meet the requirements
         of this Section.

4.7      PLAN-TO-PLAN TRANSFERS FROM QUALIFIED PLANS

                  (a)      With the consent of the Administrator and the
         Insurer, amounts may be transferred (within the meaning of Code Section
         414(1)) to this Plan from other tax qualified plans under Code Section
         401 (a), provided the plan from which such funds are transferred
         permits the transfer to be made and the transfer will not jeopardize
         the tax- exempt status of the Plan or create adverse tax consequences
         for the Employer. Prior to accepting any transfers to which this
         Section applies, the Administrator or the Insurer may require an
         opinion of counsel that the amounts to be transferred meet the
         requirements of this Section. The amounts transferred shall be set up
         in a separate account herein referred to as a "Participant's Transfer
         Account." Furthermore, for Vesting purposes, the Participant's Transfer
         Account shall be treated as a separate "Participant's Account."

                  (b)      Amounts in a Participant's Transfer Account shall be
         held by the Administrator pursuant to the provisions of this Plan and
         may not be withdrawn by, or distributed to the Participant, in whole or
         in part, except as elected in Section H.5 of the Adoption Agreement and
         subsection (d) below, provided the restrictions of subsection (c) below
         and Section 6.15 are satisfied. The Administrator shall have no duty or
         responsibility to inquire as to the propriety of the amount, value or
         type of assets transferred, nor to conduct any due diligence with
         respect to such assets; provided, however, that such assets are
         otherwise eligible to be held by the Administrator under the terms of
         this Plan.

                  (c)      Except as permitted by Regulations (including
         Regulation 1.411 (d)-4), amounts attributable to elective contributions
         (as defined in Regulation 1.401(k)-l(g)(3)), including amounts treated
         as elective contributions, which are transferred from another qualified
         plan in a plan-to-plan transfer (other than a direct rollover) shall be
         subject to the distribution limitations provided for in Regulation
         1.401 (k)-l (d).

                  (d)      At Normal Retirement Date, or such other date when
         the Participant or the Participant's Beneficiary shall be entitled to
         receive benefits, the Participant's Transfer Account shall be used to
         provide additional benefits to the Participant or the Participant's
         Beneficiary. Any distribution of amounts held in a Participant's
         Transfer Account shall be made in a manner which is consistent with and
         satisfies the provisions of Sections 6.5 and 6.6, including, but not
         limited to, all notice and consent requirements of Code Sections 411
         (a)(11) and 417 and the Regulations thereunder. Furthermore, such
         amounts shall be considered to be part of a Participant's benefit in
         determining whether an involuntary cash-out of benefits may be made
         without Participant consent.

                  (e)      Notwithstanding anything herein to the contrary, a
         transfer directly to this Plan from another qualified plan (or a
         transaction having the effect of such a transfer) shall only be
         permitted if it will not result in the elimination or reduction of any
         "Section 41 l(d)(6) protected benefit" as described in Section 8.1(e).

4.8      VOLUNTARY EMPLOYEE CONTRIBUTIONS

                  (a)      If elected in Section L.3 of the Adoption Agreement,
         each Participant may, in accordance with nondiscriminatory procedures
         established by the Administrator, elect to make after-tax voluntary
         Employee contributions to this Plan. Such contributions must generally
         be deposited to the Plan Fund within a reasonable period of time after
         being received by the Employer.

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                                             DEFINED CONTRIBUTION PROTOTYPE PLAN

                  (b)      The balance in each Participant's Voluntary
         Contribution Account shall be fully Vested at all times and shall not
         be subject to Forfeiture for any reason.

                  (c)      A Participant may elect at any time to withdraw
         after-tax voluntary Employee contributions from such Participant's
         Voluntary Contribution Account and the actual earnings thereon in a
         manner which is consistent with and satisfies the provisions of Section
         6.5, including, but not limited to, all notice and consent requirements
         of Code Sections 401 (a)(11) and 417 and the Regulations thereunder. If
         the Administrator maintains sub-accounts with respect to after-tax
         voluntary Employee contributions (and earnings thereon) which were made
         on or before a specified date, a Participant shall be permitted to
         designate which sub-account shall be the source for the withdrawal.
         Forfeitures of Employer contributions shall not occur solely as a
         result of an Employee's withdrawal of after-tax voluntary Employee
         contributions.

                  In the event a Participant has received a hardship
         distribution pursuant to Regulation 1.401(k)-l(d)(2)(iii)(B) from any
         plan maintained by the Employer, then the Participant shall be barred
         from making any after-tax voluntary Employee contributions for a period
         of twelve (12) months after receipt of the hardship distribution.

                  (d)      At Normal Retirement Date, or such other date when
         the Participant or the Participant's Beneficiary is entitled to receive
         benefits, the Participant's Voluntary Contribution Account shall be
         used to provide additional benefits to the Participant or the
         Participant's Beneficiary.

                  (c)      To the extent a Participant has previously made
         mandatory Employee contributions under prior provisions of this Plan,
         such contributions will be treated as after-tax voluntary Employee
         contributions.

                  (f)      A separate account will be maintained for the
         nondeductible Employee contributions of each Participant.

4.9      QUALIFIED VOLUNTARY EMPLOYEE CONTRIBUTIONS

                  (a)      If this is an amendment to a Plan that previously
         permitted deductible voluntary Employee contributions, then each
         Participant who made "Qualified Voluntary Employee Contributions"
         within the meaning of Code Section 219(e)(2) as it existed prior to the
         enactment of the Tax Reform Act of 1986, shall have such contributions
         held in a separate Qualified Voluntary Employee Contribution Account
         which shall be fully Vested at all times. Such contributions, however,
         shall not be permitted for taxable years beginning after December 31,
         1986.

                  (b)      A Participant may, upon written request delivered to
         the Administrator, make withdrawals from such Participant's Qualified
         Voluntary Employee Contribution Account. Any distribution shall be made
         in a manner which is consistent with and satisfies the provisions of
         Section 6.5, including, but not limited to, all notice and consent
         requirements of Code Sections 401 (a)(11) and 417 and the Regulations
         thereunder.

                  (c)      At Normal Retirement Date, or such other date when
         the Participant or the Participant's Beneficiary is entitled to receive
         benefits, the Qualified Voluntary Employee Contribution Account shall
         be used to provide additional benefits to the Participant or the
         Participant's Beneficiary.

4.10     DIRECTED INVESTMENT ACCOUNT

                  (a)      If elected in Section L.1 of the Adoption Agreement,
         all Participants may direct the Administrator as to the investment of
         all or a portion of their individual account balances as set forth in
         the Adoption Agreement and within limits set by the Employer.
         Participants may direct the Administrator, in writing (or in such other
         form which is acceptable to the Administrator), to invest their
         accounts in specific assets, specific funds or other investments
         permitted under the Plan and the Participant Direction Procedures. That
         portion of the account of any Participant that is subject to investment
         direction of such Participant will be considered a Participant Directed
         Account.

                  (b)      The Administrator will establish a Participant
         Direction Procedure, to be applied in a uniform and nondiscriminatory
         manner, setting forth the permissible investment options under this
         Section, how often changes between investments may be made, and any
         other limitations and provisions that the Administrator may impose on a
         Participant's right to direct investments.

                  (c)      The Administrator may, in its discretion, include or
         exclude by amendment or other action from the Participant Direction
         Procedures such instructions, guidelines or policies as it deems
         necessary or appropriate to ensure proper administration of the Plan,
         and may interpret the same accordingly.

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                  (d)      As of each Valuation Date, all Participant Directed
         Accounts shall be charged or credited with the net earnings, gains,
         losses and expenses as well as any appreciation or depreciation in the
         market value using publicly listed fair market values when available or
         appropriate as follows:

                  (1)      to the extent the assets in a Participant Directed
                  Account are accounted for as pooled assets or investments, the
                  allocation of earnings, gains and losses of each Participant's
                  Account shall be based upon the total amount of funds so
                  invested in a manner proportionate to the Participant's share
                  of such pooled investment; and

                  (2)      to the extent the assets in a Participant Directed
                  Account are accounted for as segregated assets, the allocation
                  of earnings, gains on and losses from such assets shall be
                  made on a separate and distinct basis.

                  (e)      Investment directions will be processed as soon as
         administratively practicable after proper investment directions are
         received from the Participant. No guarantee is made by the Plan,
         Employer or Administrator that investment directions will be processed
         on a daily basis, and no guarantee is made in any respect regarding the
         processing time of an investment direction. Notwithstanding any other
         provision of the Plan, the Employer or Administrator reserves the right
         to not value an investment option on any given Valuation Date for any
         reason deemed appropriate by the Employer or Administrator.
         Furthermore, the processing of any investment transaction may be
         delayed for any legitimate business reason (including, but not limited
         to, failure of systems or computer programs, failure of the means of
         the transmission of data, force majeure, the failure of a service
         provider or Insurer to timely receive values or prices, and correction
         for errors or omissions or the errors or omissions of any service
         provider). The processing date of a transaction will be binding for all
         purposes of the Plan and considered the applicable Valuation Date for
         an investment transaction.

                  (f)      If the Employer has elected in the Adoption Agreement
         that it intends to operate any portion of this Plan as an Act Section
         404(c) plan, the Participant Direction Procedures should provide an
         explanation of the circumstances under which Participants and their
         Beneficiaries may give investment instructions, including but not
         limited to, the following:

                  (1)      the conveyance of instructions by the Participants
                  and their Beneficiaries to invest Participant Directed
                  Accounts in a Directed Investment Option;

                  (2)      the name, address and phone number of the Fiduciary
                  (and, if applicable, the person or persons designated by the
                  Fiduciary to act on its behalf) responsible for providing
                  information to the Participant or a Beneficiary upon request
                  relating to the Directed Investment Options;

                  (3)      applicable restrictions on transfers to and from any
                  Designated Investment Alternative;

                  (4)      any restrictions on the exercise of voting, tender
                  and similar rights related to a Directed Investment Option by
                  the Participants or their Beneficiaries;

                  (5)      a description of any transaction fees and expenses
                  which affect the balances in Participant Directed Accounts in
                  connection with the purchase or sale of a Directed Investment
                  Option; and

                  (6)      general procedures for the dissemination of
                  investment and other information relating to the Designated
                  Investment Alternatives as deemed necessary or appropriate,
                  including but not limited to a description of the following:

                           (i)      the investment vehicles available under the
                           Plan, including specific information regarding any
                           Designated Investment Alternative;

                           (ii)     any designated Investment Managers; and

                           (iii)    a description of the additional information
                           that may be obtained upon request from the Fiduciary
                           designated to provide such information.

                  (g)      With respect to those assets in a Participant's
         Directed Account, the Participant or Beneficiary shall direct the
         Administrator or Trustee with regard to any voting, tender and similar
         rights associated with the ownership of such assets (hereinafter
         referred to as the "Stock Rights") as follows based on the election
         made in Section L. 1 of the Adoption Agreement:

                  (1)      each Participant or Beneficiary shall direct the
                  Administrator or Trustee to vote or otherwise exercise such
                  Stock Rights in accordance with the provisions, conditions and
                  terms of any such Stock Rights;

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                                             DEFINED CONTRIBUTION PROTOTYPE PLAN

                  (2)      such directions shall be provided to the
                  Administrator or Trustee by the Participant or Beneficiary in
                  accordance with the procedure as established by the
                  Administrator and the Trustee shall vote or otherwise exercise
                  such Stock Rights with respect to which it has received
                  directions to do so under this Section; and

                  (3)      to the extent to which a Participant or Beneficiary
                  does not instruct the Administrator or Trustee to vote or
                  otherwise exercise such Stock Rights, such Participants or
                  Beneficiaries shall be deemed to have directed the Trustee
                  that such Stock Rights remain nonvoted and unexercised.

                  (h)      Any information regarding investments available under
         the Plan, to the extent not required to be described in the Participant
         Direction Procedures, may be provided to Participants in one or more
         documents (or in any other form, including, but not limited to,
         electronic media) which are separate from the Participant Direction
         Procedures and are not thereby incorporated by reference into this
         Plan.

4.11     QUALIFIED MILITARY SERVICE

                  Notwithstanding any provisions of this Plan to the contrary,
effective as of the later of December 12, 1994, or the Effective Date of the
Plan, contributions, benefits and service credit with respect to qualified
military service will be provided in accordance with Code Section 414(u).
Furthermore, loan repayments may be suspended under this Plan as permitted under
Code Section 414(u)(4).

                                    ARTICLE V
                                   VALUATIONS

5.1      VALUATION OF THE PLAN FUND

                  For Plan assets other than the individual and group contracts,
the Administrator shall direct the Trustee, as of each Anniversary Date, to
determine the net worth of the assets comprising the Plan Fund as it exists on
the Valuation Date.

                  For Plan assets held in individual and group contracts, the
Administrator shall as of each Anniversary Date, determined the net worth of the
assets comprising the Plan Fund as it exists on the Anniversary Date. In
determining such net worth, the Administrator shall value the assets comprising
the Plan Fund at their contractual value as of the Anniversary Date and shall
deduct all applicable expenses under the contract(s). In determining such net
worth, the Administrator shall value the assets comprising the Plan Fund at
their fair market value (or their contractual value in the case of a Contract or
Policy) as of the Anniversary Date and shall deduct all expenses for which the
Administrator has not yet been paid by the Employer or the Plan Fund. The
Administrator may update the value of any shares held in a Participant Directed
Account by reference to the number of shares held on behalf of the Participant,
priced at the market value as of the Anniversary Date.

5.2      METHOD OF VALUATION

                  In determining the fair market value of securities held in the
Plan Fund which are listed on a registered stock exchange, the Administrator
shall direct the Trustee to value the same at the prices they were last traded
on such exchange preceding the close of business on the Valuation Date. If such
securities were not traded on the Valuation Date, or if the exchange on which
they are traded was not open for business on the Valuation Date, then the
securities shall be valued at the prices at which they were last traded prior to
the Valuation Date. Any unlisted security held in the Plan Fund shall be valued
at its bid price next preceding the close of business on the Valuation Date,
which bid price shall be obtained from a registered broker or an investment
banker. In determining the fair market value of assets other than securities for
which trading or bid prices can be obtained, the Trustee may appraise such
assets itself, or in its discretion, employ one or more appraisers for that
purpose and rely on the values established by such appraiser or appraisers.

                                   ARTICLE VI
                   DETERMINATION AND DISTRIBUTION OF BENEFITS

6.1      DETERMINATION OF BENEFITS UPON RETIREMENT

                  Every Participant may terminate employment with the Employer
and retire for purposes hereof on the Participant's Normal Retirement Date or
Early Retirement Date. However, a Participant may postpone the termination of
employment with the Employer to a later date, in which event the participation
of such Participant in the Plan, including the right to receive allocations
pursuant to Section 4.3, shall continue until such Participant's Retirement
Date. Upon a Participant's Retirement Date, or if elected in Section H.5 of the
Adoption Agreement, the attainment of Normal Retirement Date without termination
of employment with the Employer, or as soon thereafter as is practicable, the
Administrator shall direct the distribution, at the election of the Participant,
of the Participant's entire Vested interest in the Plan in accordance with
Section 6.5.

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6.2      DETERMINATION OF BENEFITS UPON DEATH

                  (a)      Upon the death of a Participant before the
         Participant's Retirement Date or other termination of employment, all
         amounts credited to such Participant's Combined Account shall become
         fully Vested. The Administrator shall direct, in accordance with the
         provisions of Sections 6.6 and 6.7, the distribution of the deceased
         Participant's Vested accounts to the Participant's Beneficiary in any
         form listed in Section 6.5(b).

                  (b)      Upon the death of a Former Participant, the
         Administrator shall direct, in accordance with the provisions of
         Sections 6.6 and 6.7, the distribution of any remaining Vested amounts
         credited to the accounts of such deceased Former Participant to such
         Former Participant's Beneficiary.

                  (c)      The Administrator and Insurer may require such proper
         proof of death and such evidence of the right of any person to receive
         payment of the value of the account of a deceased Participant or Former
         Participant as the Administrator may deem desirable. The
         Administrator's determination of death and of the right of any person
         to receive payment shall be conclusive.

                  (d)      Unless otherwise elected in the manner prescribed in
         Section 6.6, the Beneficiary of the Pre-Retirement Survivor Annuity
         shall be the Participant's surviving spouse. Except, however, the
         Participant may designate a Beneficiary other than the spouse for the
         Pre-Retirement Survivor Annuity if:

                  (1)      the Participant and the Participant's spouse have
                  validly waived the Pre-Retirement Survivor Annuity in the
                  manner prescribed in Section 6.6, and the spouse has waived
                  the right to be the Participant's Beneficiary,

                  (2)      the Participant is legally separated or has been
                  abandoned (within the meaning of local law) and the
                  Participant has a court order to such effect (and there is no
                  "qualified domestic relations order" as defined in Code
                  Section 414(p) which provides otherwise),

                  (3)      the Participant has no spouse, or

                  (4)      the spouse cannot be located.

                           In such event, the designation of a Beneficiary shall
         be made on a form satisfactory to the Administrator. A Participant may
         at any time revoke a designation of a Beneficiary or change a
         Beneficiary by filing written (or in such other form as permitted by
         the IRS) notice of such revocation or change with the Administrator.
         However, the Participant's spouse must again consent in writing (or in
         such other form as permitted by the IRS) to any change in Beneficiary
         unless the original consent acknowledged that the spouse had the right
         to limit consent only to a specific Beneficiary and that the spouse
         voluntarily elected to relinquish such right.

                  (e)      A Participant may, at any time, designate a
         Beneficiary for death benefits, if any, payable under the Plan that are
         in excess of the Pre-Retirement Survivor Annuity without the waiver or
         consent of the Participant's spouse. In the event no valid designation
         of Beneficiary exists, or if the Beneficiary is not alive at the time
         of the Participant's death, the death benefit will be paid in the
         following order of priority, unless the Employer specifies a different
         order of priority in an addendum to the Adoption Agreement, to:

                  (1)      The Participant's surviving spouse;

                  (2)      The Participant's children, including adopted
                  children, per stirpes

                  (3)      The Participant's surviving parents, in equal shares;
                  or

                  (4)      The Participant's estate.

         If the Beneficiary does not predecease the Participant, but dies prior
         to distribution of the death benefit, the death benefit will be paid to
         the Beneficiary's estate.

                  (f)      Notwithstanding anything in this Section to the
         contrary, if a Participant has designated the spouse as a Beneficiary,
         then a divorce decree or a legal separation that relates to such spouse
         shall revoke the Participant's designation of the spouse as a
         Beneficiary unless the decree or a qualified domestic relations order
         (within the meaning of Code Section 414(p)) provides otherwise or a
         subsequent Beneficiary designation is made.

                  (g)      If the Plan provides an insured death benefit and a
         Participant dies before any insurance coverage to which the Participant
         is entitled under the Plan is effected, the death benefit from such
         insurance coverage shall be limited to the premium which was or
         otherwise would have been used for such purpose.

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                                             DEFINED CONTRIBUTION PROTOTYPE PLAN

                  (h)      In the event of any conflict between the terms of
         this Plan and the terms of any Contract issued hereunder, the Plan
         provisions shall control.

6.3      DETERMINATION OF BENEFITS IN EVENT OF DISABILITY

                  Total and Permanent Disability shall be determined by the
method elected in Section E7 of the Adoption Agreement. In the event of a
Participant's Total and Permanent Disability prior to the Participant's
Retirement Date or other termination of employment, all amounts credited to such
Participant's Combined Account shall become fully Vested. In the event of a
Participant's Total and Permanent Disability, the Administrator, in accordance
with the provisions of Sections 6.5 and 6.7, shall direct the distribution to
such Participant of all Vested amounts credited to such Participant's Combined
Account in any form listed under Section 6.5(b).

6.4     DETERMINATION OF BENEFITS UPON TERMINATION

                  (a)      If a Participant's employment with the Employer is
         terminated for any reason other than death, Total and Permanent
         Disability, or retirement, then such Participant shall be entitled to
         such benefits as are provided herein.

                           Distribution of the vested account due to a
         Terminated Participant shall be made on the occurrence of an event
         which would result in the distribution had the Terminated Participant
         remained in the employ of the Employer (upon the Participant's death,
         Total and Permanent Disability, Early or Normal Retirement). However,
         at the election of the Participant, the Administrator shall direct that
         the entire Vested portion of the Terminated Participant's Combined
         Account be payable to such Terminated Participant provided the
         conditions, if any, set forth in Section H.2 of the Adoption Agreement
         have been satisfied. Any distribution under this paragraph shall be
         made in a manner which is consistent with and satisfies the provisions
         of Section 6.5, including but not limited to, all notice and consent
         requirements of Code Sections 411(a)(11) and 417 and the Regulations
         thereunder.

                           Regardless of whether distributions in kind are
         permitted, in the event the amount of the Vested portion of the
         Terminated Participant's Combined Account equals or exceeds the fair
         market value of any insurance Contracts, the Administrator, when agreed
         to by the Terminated Participant, shall assign, transfer, and set over
         to such Terminated Participant all Contracts on such Terminated
         Participant's life in such form or with such endorsements, so that the
         settlement options and forms of payment are consistent with the
         provisions of Section 6.5. In the event that the Terminated
         Participant's Vested portion does not at least equal the fair market
         value of the Contracts, if any, the Terminated Participant may pay over
         to the Administrator the sum needed to make the distribution equal to
         the value of the Contracts being assigned or transferred, or the
         Administrator, pursuant to the Participant's election, may borrow the
         cash value of the Contracts from the Insurer so that the value of the
         Contracts is equal to the Vested portion of the Terminated
         Participant's Combined Account and then assign the Contracts to the
         Terminated Participant.

                           Notwithstanding the above, unless otherwise elected
         in Section H.3 of the Adoption Agreement, if the value of a Terminated
         Participant's Vested benefit derived from Employer and Employee
         contributions does not exceed $5,000 (or, $3,500 for distributions made
         prior to the later of the first day of the first Plan Year beginning on
         or after August 5, 1997, or the date specified in Section M.3.b of the
         Adoption Agreement) the Administrator shall direct that the entire
         Vested benefit be paid to such Participant in a single lump-sum without
         regard to the consent of the Participant or the Participant's spouse.
         Furthermore, the determination of whether the $5,000 (or, if
         applicable, $3,500) threshold has been exceeded is generally based on
         the value of the Vested benefit as of the Valuation Date preceding the
         date of the distribution. However, if the "lookback rule" applies, the
         applicable threshold is deemed to be exceeded if the Vested benefit
         exceeded the applicable threshold at the time of any prior
         distribution. The "lookback rule" generally applies to all
         distributions made prior to March 22, 1999. With respect to
         distributions made on or after March 22, 1999, the "lookback rule"
         applies if either (1) the provisions of Section 6.12 do not apply or
         (2) a Participant has begun to receive distributions pursuant to an
         optional form of benefit under which at least one scheduled periodic
         distribution has not yet been made, and if the value of the
         Participant's benefit, determined at the time of the first distribution
         under that optional form of benefit exceeded the applicable threshold.
         However, the Plan does not fail to satisfy the requirements of this
         paragraph if, prior to the adoption of this Prototype Plan, the
         "lookback rule" was applied to all distributions. Notwithstanding the
         preceding, the "lookback rule" will not apply to any distributions made
         on or after October 17, 2000.

                  (b)      The Vested portion of any Participant's Account shall
         be a percentage of such Participant's Account determined on the basis
         of the Participant's number of Years of Service (or Periods of Service
         if the Elapsed Time Method is elected) according to the vesting
         schedule specified in Section E.1 of the Adoption Agreement. However, a
         Participant's entire interest in the Plan shall be non-forfeitable upon
         the Participant's Normal Retirement Age (if the Participant is employed
         by the Employer on or after such date).

                  (c)      For any Top-Heavy Plan Year, the minimum Top-Heavy
         vesting schedule elected by the Employer in Section E.3 of the Adoption
         Agreement will automatically apply to the Plan. The minimum Top-Heavy
         vesting schedule applies to all benefits within the meaning of Code
         Section 411(a)(7) except those attributable to Employee

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                                             DEFINED CONTRIBUTION PROTOTYPE PLAN

        contributions, including benefits accrued before the effective date of
        Code Section 416 and benefits accrued before the Plan became Top-Heavy.
        Further, no decrease in a Participant's Vested percentage shall occur in
        the event the Plan's status as Top-Heavy changes for any Plan Year.
        However, this Section does not apply to the account balances of any
        Employee who does not have an Hour of Service after the Plan has
        initially become Top-Heavy and the Vested percentage of such Employee's
        Participant's Account shall be determined without regard to this Section
        6.4(c).

                           If in any subsequent Plan Year the Plan ceases to be
         a Top-Heavy Plan, then unless a specific Plan amendment is made to
         provide otherwise, the Administrator will continue to use the vesting
         schedule in effect while the Plan was a Top-Heavy Plan.

                  (d)      Upon the complete discontinuance of the Employer's
         contributions to the Plan (if this is a profit sharing plan) or upon
         any full or partial termination of the Plan, all amounts then credited
         to the account of any affected Participant shall become 100% Vested and
         shall not thereafter be subject to Forfeiture.

                  (e)      If this is an amended or restated Plan, then
         notwithstanding the vesting schedule specified in Section E.1 of the
         Adoption Agreement, the Vested percentage of a Participant's Account
         shall not be less than the Vested percentage attained as of the later
         of the effective date or adoption date of this amendment and
         restatement. The computation of a Participant's nonforfeitable
         percentage of such Participant's interest in the Plan shall not be
         reduced as the result of any direct or indirect amendment to this
         Article, or due to changes in the Plan's status as a Top Heavy Plan.
         Furthermore, if the Plan's vesting schedule is amended, then the
         amended schedule will only apply to those Participants who complete an
         Hour of Service after the effective date of the amendment.

                  (f)      If the Plan's vesting schedule is amended, or if the
         Plan is amended in any way that directly or indirectly affects the
         computation of the Participant's nonforfeitable percentage or if the
         Plan is deemed amended by an automatic change to a Top-Heavy vesting
         schedule, then each Participant with at least three (3) Years of
         Service (or Periods of Service if the Elapsed Time Method is elected)
         as of the expiration date of the election period may elect to have such
         Participant's nonforfeitable percentage computed under the Plan without
         regard to such amendment or change. If a Participant fails to make such
         election, then such Participant shall be subject to the new vesting
         schedule. The Participant's election period shall commence on the
         adoption date of the amendment and shall end sixty (60) days after the
         latest of:

                  (1)      the adoption date of the amendment,

                  (2)      the effective date of the amendment, or

                  (3)      the date the Participant receives written notice of
                  the amendment from the Employer or Administrator.

                  (g)      In determining Years of Service or Periods of Service
                  for purposes of vesting under the Plan, Years of Service or
                  Periods of Service shall be excluded as elected in Section E.4
                  of the Adoption Agreement.

6.5      DISTRIBUTION OF BENEFITS

                  (a)(l)   Unless otherwise elected as provided below, a
         Participant who is married on the Annuity Starting Date and who does
         not die before the Annuity Starting Date shall receive the value of all
         Plan benefits in the form of a Joint and Survivor Annuity. The Joint
         and Survivor Annuity is an annuity that commences immediately and shall
         be equal in value to a single life annuity. Such joint and survivor
         benefits following the Participant's death shall continue to the spouse
         during the spouse's lifetime at a rate equal to either fifty percent
         (50%), seventy-five percent (75%) (or, sixty-six and two-thirds percent
         (66 2/3%) if the Insurer used to provide the annuity does not offer a
         joint and seventy-five percent (75%) annuity), or one hundred percent
         (100%) of the rate at which such benefits were payable to the
         Participant. Unless otherwise elected in Section H.1 of the Adoption
         Agreement, a joint and fifty percent (50%) survivor annuity shall be
         considered the designated qualified Joint and Survivor Annuity and the
         normal form of payment for the purposes of this Plan. However, the
         Participant may, without spousal consent, elect an alternative Joint
         and Survivor Annuity, which alternative shall be equal in value to the
         designated qualified Joint and Survivor Annuity. An unmarried
         Participant shall receive the value of such Participant's benefit in
         the form of a life annuity. Such unmarried Participant, however, may
         elect to waive the life annuity. The election must comply with the
         provisions of this Section as if it were an election to waive the Joint
         and Survivor Annuity by a married Participant, but without fulfilling
         the spousal consent requirement. The Participant may elect to have any
         annuity provided for in this Section distributed upon the attainment of
         the "earliest retirement age" under the Plan. The "earliest retirement
         age" is the earliest date on which, under the Plan, the Participant
         could elect to receive retirement benefits.

                  (2)      Any election to waive the Joint and Survivor Annuity
                  must be made by the Participant in writing (or in such other
                  form as permitted by the IRS) during the election period and
                  be consented to in writing (or in such other form as permitted
                  by the IRS) by the Participant's spouse. If the spouse is
                  legally incompetent to give consent, the spouse's legal
                  guardian, even if such guardian is the Participant, may give
                  consent. Such

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                  election shall designate a Beneficiary (or a form of benefits)
                  that may not be changed without spousal consent (unless the
                  consent of the spouse expressly permits designations by the
                  Participant without the requirement of further consent by the
                  spouse). Such spouse's consent shall be irrevocable and must
                  acknowledge the effect of such election and be witnessed by a
                  Plan representative or a notary public. Such consent shall not
                  be required if it is established to the satisfaction of the
                  Administrator that the required consent cannot be obtained
                  because there is no spouse, the spouse cannot be located, or
                  other circumstances that may be prescribed by Regulations. The
                  election made by the Participant and consented to by such
                  Participant's spouse may be revoked by the Participant in
                  writing (or in such other form as permitted by the IRS)
                  without the consent of the spouse at any time during the
                  election period. A revocation of a prior election shall cause
                  the Participant's benefits to be distributed as a Joint and
                  Survivor Annuity. The number of revocations shall not be
                  limited. Any new election must comply with the requirements of
                  this paragraph. A former spouse's waiver shall not be binding
                  on a new spouse.

                  (3)      The election period to waive the Joint and Survivor
                  Annuity shall be the ninety (90) day period ending on the
                  Annuity Starting Date.

                  (4)      For purposes of this Section, spouse or surviving
                  spouse means the spouse or surviving spouse of the
                  Participant, provided that a former spouse will be treated as
                  the spouse or surviving spouse and a current spouse will not
                  be treated as the spouse or surviving spouse to the extent
                  provided under a qualified domestic relations order as
                  described in Code Section 414(p).

                  (5)      With regard to the election, except as otherwise
                  provided herein, the Administrator shall provide to the
                  Participant no less than thirty (30) days and no more than
                  ninety (90) days before the Annuity Starting Date a written
                  (or such other form as permitted by the IRS) explanation of:

                           (i)      the terms and conditions of the Joint and
                           Survivor Annuity,

                           (ii)     the Participant's right to make and the
                           effect of an election to waive the Joint and Survivor
                           Annuity,

                           (iii)    the right of the Participant's spouse to
                           consent to any election to waive the Joint and
                           Survivor Annuity, and

                           (iv)     the right of the Participant to revoke such
                           election, and the effect of such revocation.

                  (6)      Any distribution provided for in this Section made on
                  or after December 31, 1996, may commence less than thirty (30)
                  days after the notice required by Code Section 417(a)(3) is
                  given provided the following requirements are satisfied:

                           (i)      the Administrator clearly informs the
                           Participant that the Participant has a right to a
                           period of thirty (30) days after receiving the notice
                           to consider whether to waive the Joint and Survivor
                           Annuity and to elect (with spousal consent) a form of
                           distribution other than a Joint and Survivor Annuity;

                           (ii)     the Participant is permitted to revoke any
                           affirmative distribution election at least until the
                           Annuity Starting Date or, if later, at any time prior
                           to the expiration of the seven (7) day period that
                           begins the day after the explanation of the Joint and
                           Survivor Annuity is provided to the Participant;

                           (iii)    the Annuity Starting Date is after the time
                           that the explanation of the Joint and Survivor
                           Annuity is provided to the Participant. However, the
                           Annuity Starting Date may be before the date that any
                           affirmative distribution election is made by the
                           Participant and before the date that the distribution
                           is permitted to commence under (iv) below; and

                           (iv)     distribution in accordance with the
                           affirmative election does not commence before the
                           expiration of the seven (7) day period that begins
                           the day after the explanation of the Joint and
                           Survivor Annuity is provided to the Participant.

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                  (b)      In the event a married Participant duly elects
         pursuant to paragraph (a)(2) above not to receive the benefit in the
         form of a Joint and Survivor Annuity, or if such Participant is not
         married, in the form of a life annuity, the Administrator, pursuant to
         the election of the Participant, shall direct the distribution to a
         Participant or Beneficiary any amount to which the Participant or
         Beneficiary is entitled under the Plan in one or more of the following
         methods which are permitted pursuant to Section H. 1 of the Adoption
         Agreement:

                  (1)      One lump-sum payment in cash or in property that is
                  allocated to the accounts of the Participant at the time of
                  the distribution;

                  (2)      Partial withdrawals;

                  (3)      Installment payments made in monthly, quarterly,
                  semiannual, or annual cash installments. The period over which
                  such payment is to be made shall not extend beyond the
                  Participant's life expectancy (or the life expectancy of the
                  Participant and the Participant's designated Beneficiary).
                  After installments commence, the Participant shall have the
                  right to reduce the period over which such periodic
                  installments shall be made.

                  (4)      Purchase of or providing an annuity. However, such
                  annuity may not be in any form that will provide for payments
                  over a period extending beyond either the life of the
                  Participant (or the lives of the Participant and the
                  Participant's designated Beneficiary) or the life expectancy
                  of the Participant (or the life expectancy of the Participant
                  and the Participant's designated Beneficiary).

                  (c)      Benefits may not be paid without the Participant's
         and the Participant's spouse's consent if the present value of the
         Participant's Joint and Survivor Annuity derived from Employer and
         Employee contributions exceeds, $5,000 (or $3,500, for distributions
         made prior to the later of the first day of the first Plan Year
         beginning after August 5, 1997, or the date specified in Section M.3.b
         of the Adoption Agreement) and the benefit is "immediately
         distributable." The Administrator may also directly rollover such
         benefits into an Individual Retirement Account ("IRA") for Participants
         who fail to affirmatively elect another form of distribution or who
         cannot be located after a diligent search. However, spousal consent is
         not required if the distribution will made in the form a Qualified
         Joint and Survivor Annuity and the benefit is "immediately
         distributable." A benefit is "immediately distributable" if any part of
         the benefit could be distributed to the Participant (or surviving
         spouse) before the Participant attains (or would have attained if not
         deceased) the later of the Participant's Normal Retirement Age or age
         62.

                  If the value of the Participant's benefit derived from
         Employer and Employee contributions does not exceed, and has never
         exceeded at the time of any prior distribution, $5,000 (or, if
         applicable, $3,500), then the Administrator will distribute such
         benefit in a lump-sum without such Participant's consent. The
         Administrator may also directly rollover such benefits into an
         Individual Retirement Account (IRA') for Participants who fail to
         affirmatively elect another form of distribution or who can not be
         located after a diligent search. No distribution may be made under the
         preceding sentence after the Annuity Starting Date unless the
         Participant and the Participant's spouse consent in writing (or in such
         other form as permitted by the IRS) to such distribution. Any consent
         required under this paragraph must be obtained not more than ninety
         (90) days before commencement of the distribution and shall be made in
         a manner consistent with Section 6.5(a)(2). Notwithstanding the
         preceding, the "lookback rule" (which provides that if the present
         value at the time of a prior distribution exceeded the applicable
         dollar threshold, then the present value at any subsequent time is
         deemed to exceed the threshold) will not apply to any distributions
         made on or after October 17, 2000.

                  (d)      The following rules will apply with respect to the
         consent requirements set forth in subsection (c):

                  (1)      No consent shall be valid unless the Participant has
                  received a general description of the material features and an
                  explanation of the relative values of the optional forms of
                  benefit available under the Plan that would satisfy the notice
                  requirements of Code Section 417;

                  (2)      The Participant must be informed of the right to
                  defer receipt of the distribution. If a Participant fails to
                  consent, it shall be deemed an election to defer the
                  commencement of payment of any benefit. However, any election
                  to defer the receipt of benefits shall not apply with respect
                  to distributions that are required under Section 6.5(e);

                  (3)      Notice of the rights specified under this paragraph
                  shall be provided no less than thirty (30) days and no more
                  than ninety (90) days before the Annuity Starting Date;

                  (4)      Written (or such other form as permitted by the IRS)
                  consent of the Participant to the distribution must not be
                  made before the Participant receives the notice and must not
                  be made more than ninety (90) days before the Annuity Starting
                  Date; and

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                  (5)      No consent shall be valid if a significant detriment
                  is imposed under the Plan on any Participant who does not
                  consent to the distribution.

                  (e)      Notwithstanding any provision in the Plan to the
         contrary, for Plan Years beginning after December 31, 1996, the
         distribution of a Participant's benefits, whether under the Plan or
         through the purchase of an annuity Contract, shall be made in
         accordance with the following requirements and shall otherwise comply
         with Code Section 401(a)(9) and the Regulations thereunder (including
         Regulation 1.401(a)(9)-2):

                  (1)      A Participant's benefits will be distributed or must
                  begin to be distributed not later than the Participant's
                  "required beginning date." Alternatively, distributions to a
                  Participant must begin no later than the Participant's
                  "required beginning date" and must be made over the life of
                  the Participant (or the lives of the Participant and the
                  Participant's designated Beneficiary) or the life expectancy
                  of the Participant (or the life expectancies of the
                  Participant and the Participant's designated Beneficiary) in
                  accordance with Regulations. However, if the distribution is
                  to be in the form of a joint and survivor annuity or single
                  life annuity, then distributions must begin no later than the
                  "required beginning date" and must be made over the life of
                  the Participant (or the lives of the Participant and the
                  Participant's designated Beneficiary) in accordance with
                  Regulations.

                  (2)      The "required beginning date" for a Participant who
                  is a "five percent (5%) owner" with respect to the Plan Year
                  ending in the calendar year in which such Participant attains
                  age 70 1/2 means April 1st of the calendar year following the
                  calendar year in which the Participant attains age 70 1/2.
                  Once distributions have begun to a "five percent (5%) owner"
                  under this subsection, they must continue to be distributed,
                  even if the Participant ceases to be a "five percent (5%)
                  owner" in a subsequent year.

                  (3)      The "required beginning date" for a Participant other
                  than a "five percent (5%) owner" means, unless the Employer
                  has elected to continue the pre-SBJPA rules in Section H.4.b
                  of the Adoption Agreement, April 1st of the calendar year
                  following the later of the calendar year in which the
                  Participant attains age 70 1/2 or the calendar year in which
                  the Participant retires.

                  (4)      If the election is made to continue the pre-SBJPA
                  rules, then except as provided below, the "required beginning
                  date" is April 1 st of the calendar year following the
                  calendar year in which a Participant attains age 70 1/2.

                           (i)      However, the "required beginning date" for a
                           Participant who had attained age 70 1/2 before
                           January 1, 1988, and was not a five percent (5%)
                           owner (within the meaning of Code Section 416) at any
                           time during the Plan Year ending with or within the
                           calendar year in which the Participant attained age
                           66 1/2 or any subsequent Plan Year, is April 1 st of
                           the calendar year following the calendar in which the
                           Participant retires.

                           (ii)     Notwithstanding (i) above, the "required
                           beginning date" for a Participant who was a five
                           percent (5%) owner (within the meaning of Code
                           Section 416) at any time during the five (5) Plan
                           Year period ending in the calendar year in which the
                           Participant attained age 70 1/2 is April 1st of the
                           calendar year in which the Participant attained age
                           70 1/2. In the case of a Participant who became a
                           five percent (5%) owner during any Plan Year after
                           the calendar year in which the Participant attained
                           age 70 1/2, the "required beginning date" is April
                           1st of the calendar year following the calendar year
                           in which such subsequent Plan Year ends.

                  (5)      If this is an amendment or restatement of a plan that
                  contained the pre-SBJPA rules and an election is made to use
                  the post-SBJPA rules, then the transition rules elected in
                  Section H.4.C of the Adoption Agreement will apply.

                  (6)      Except as otherwise provided herein, "five percent
                  (5%) owner" means, for purposes of this Section, a Participant
                  who is a five percent (5%) owner as defined in Code Section
                  416 at any time during the Plan Year ending with or within the
                  calendar year in which such owner attains age 70 1/2.

                  (7)      Distributions to a Participant and such Participant's
                  Beneficiaries will only be made in accordance with the
                  incidental death benefit requirements of Code Section
                  401(a)(9)(G) and the Regulations thereunder.

                  (8)      For purposes of this Section, the life expectancy of
                  a Participant and/or a Participant's spouse (other than in the
                  case of a life annuity) shall or shall not be redetermined
                  annually as elected in the Adoption Agreement and in
                  accordance with Regulations. If the Participant or the
                  Participant's spouse may elect, pursuant to the Adoption
                  Agreement, to have life expectancies recalculated, then the
                  election, once made shall be irrevocable. If no election is
                  made by the time distributions must commence, then the life
                  expectancy of the Participant and the Participant's spouse
                  shall not be subject to recalculation. Life expectancy and
                  joint

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                  and last survivor life expectancy shall be computed using the
                  return multiples in Tables V and VI of Regulation Section
                  1.72-9.

                  (9)      With respect to distributions under the Plan made for
                  calendar years beginning on or after January 1, 2001, or if
                  later, the date specified in Section M of the Adoption
                  Agreement, the Plan will apply the minimum distribution
                  requirements of Code Section 401(a)(9) in accordance with the
                  Regulations under section 401(a)(9) that were proposed on
                  January 17, 2001, notwithstanding any provision of the Plan to
                  the contrary. This amendment shall continue in effect until
                  the end of the last calendar year beginning before the
                  effective date of final Regulations under section 401(a)(9)
                  or such other date as may be specified in guidance published
                  by the Internal Revenue Service.

                  However, if the date specified in Section M of the Adoption
                  Agreement is a date in 2001 other than January 1, 2001, then
                  with respect to distributions under the Plan made on or after
                  such date for calendar years beginning on or after January 1,
                  2001, the Plan will apply the minimum distribution
                  requirements of Code Section 401 (a)(9) in accordance with
                  the Regulations under section 401 (a)(9) that were proposed
                  on January 17, 2001, notwithstanding any provision of the Plan
                  to the contrary. If the total amount of required minimum
                  distributions made to a participant for 2001 prior to the
                  specified date are equal to or greater than the amount of
                  required minimum distributions determined under the 2001
                  Proposed Regulations, then no additional distributions are
                  required for such participant for 2001 on or after such date.
                  If the total amount of required minimum distributions made to
                  a participant for 2001 prior to the specified date are less
                  than the amount determined under the 2001 Proposed
                  Regulations, then the amount of required minimum distributions
                  for 2001 on or after such date will be determined so that the
                  total amount of required minimum distributions for 2001 is the
                  amount determined under the 2001 Proposed Regulations. This
                  amendment shall continue in effect until the end of the last
                  calendar year beginning before the effective date of final
                  Regulations under section 401(a)(9) or such other date as may
                  be specified in guidance published by the Internal Revenue
                  Service.

                  (f)      All annuity Contracts under this Plan shall be
         non-transferable when distributed. Furthermore, the terms of any
         annuity Contract purchased and distributed to a Participant or spouse
         shall comply with all of the requirements of this Plan.

                  (g)      Subject to the spouse's right of consent afforded
         under the Plan, the restrictions imposed by this Section shall not
         apply if a Participant has, prior to January 1, 1984, made a written
         designation to have retirement benefits paid in an alternative method
         acceptable under Code Section 401(a) as in effect prior to the
         enactment of the Tax Equity and Fiscal Responsibility Act of 1982
         (TEFRA).

                  (h)      If a distribution is made to a Participant who has
         not severed employment and who is not fully Vested in the Participant's
         Account, and the Participant may increase the Vested percentage in such
         account, then at any relevant time the Participant's Vested portion of
         the account will be equal to an amount ("X") determined by the formula:

                           X equals P (AB plus D) - D

                           For purposes of applying the formula: P is the Vested
         percentage at the relevant time, AB is the account balance at the
         relevant time, D is the amount of distribution, and the relevant time
         is the time at which, under the Plan, the Vested percentage in the
         account cannot increase.

                           However, the Employer may attach an addendum to the
         Adoption Agreement to provide that a separate account shall be
         established for the Participant's interest in the Plan as of the time
         of the distribution, and at any relevant time the Participant's Vested
         portion of the separate account will be equal to an amount determined
         as follows: P (AB plus (R x D)) - (R x D) where R is the ratio of the
         account balance at the relevant time to the account balance after
         distribution and the other terms have the same meaning as in the
         preceding paragraph. Any amendment to change the formula in accordance
         with the preceding sentence shall not be considered an amendment which
         causes this Plan to become an individually designed Plan.

                  (i)      If this is a Plan amendment that eliminates or
         restricts the ability of a Participant to receive payment of the
         Participant's interest in the Plan under a particular optional form of
         benefit, then the amendment shall not apply to any distribution with an
         annuity starting date earlier than the earlier of: (i) the 90th day
         after the date the Participant receiving the distribution has been
         furnished a summary that reflects the amendment and that satisfies the
         Act requirements at 29 CFR 2520.104b-3 relating to a summary of
         material modifications or (ii) the first day of the second Plan Year
         following the Plan Year in which the amendment is adopted.

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6.6      DISTRIBUTION OF BENEFITS UPON DEATH

                  (a)      Unless otherwise elected as provided below, a Vested
         Participant who dies before the Annuity Starting Date and who has a
         surviving spouse shall have the Pre-Retirement Survivor Annuity paid to
         the surviving spouse. The Participant's spouse may direct that payment
         of the Pre-Retirement Survivor Annuity commence within a reasonable
         period after the Participant's death. If the spouse does not so direct,
         payment of such benefit will commence at the time the Participant would
         have attained the later of Normal Retirement Age or age 62. However,
         the spouse may elect a later commencement date. Any distribution to the
         Participant's spouse shall be subject to the rules specified in Section
         6.6(h).

                  (b)      Any election to waive the Pre-Retirement Survivor
         Annuity before the Participant's death must be made by the Participant
         in writing (or in such other form as permitted by the IRS) during the
         election period and shall require the spouse's irrevocable consent in
         the same manner provided for in Section 6.5(a)(2). Further, the
         spouse's consent must acknowledge the specific nonspouse Beneficiary.
         Notwithstanding the foregoing, the nonspouse Beneficiary need not be
         acknowledged, provided the consent of the spouse acknowledges that the
         spouse has the right to limit consent only to a specific Beneficiary
         and that the spouse voluntarily elects to relinquish such right.

                  (c)      The election period to waive the Pre-Retirement
         Survivor Annuity shall begin on the first day of the Plan Year in which
         the Participant attains age 35 and end on the date of the Participant's
         death. An earlier waiver (with spousal consent) may be made provided a
         written (or such other form as permitted by the IRS) explanation of the
         Pre-Retirement Survivor Annuity is given to the Participant and such
         waiver becomes invalid at the beginning of the Plan Year in which the
         Participant turns age 35. In the event a Participant separates from
         service prior to the beginning of the election period, the election
         period shall begin on the date of such separation from service.

                  (d)      With regard to the election, the Administrator shall
         provide each Participant within the applicable election period, with
         respect to such Participant (and consistent with Regulations), a
         written (or such other form as permitted by the IRS) explanation of the
         Pre-Retirement Survivor Annuity containing comparable information to
         that required pursuant to Section 6.5(a)(5). For the purposes of this
         paragraph, the term "applicable period" means, with respect to a
         Participant, whichever of the following periods ends last:

                  (1)      The period beginning with the first day of the Plan
                  Year in which the Participant attains age 32 and ending with
                  the close of the Plan Year preceding the Plan Year in which
                  the Participant attains age 35;

                  (2)      A reasonable period after the individual becomes a
                  Participant;

                  (3)      A reasonable period ending after the Plan no longer
                  fully subsidizes the cost of the Pre-Retirement Survivor
                  Annuity with respect to the Participant; or

                  (4)      A reasonable period ending after Code Section
                  401(a)(11) applies to the Participant.

                           For purposes of applying this subsection, a
         reasonable period ending after the enumerated events described in (2),
         (3) and (4) is the end of the two (2) year period beginning one (1)
         year prior to the date the applicable event occurs, and ending one (1)
         year after that date. In the case of a Participant who separates from
         service before the Plan Year in which age 35 is attained, notice shall
         be provided within the two (2) year period beginning one (1) year prior
         to separation and ending one (1) year after separation. If such a
         Participant thereafter returns to employment with the Employer, the
         applicable period for such Participant shall be redetermined.

                  (e)      The Pre-Retirement Survivor Annuity provided for in
         this Section shall apply only to Participants who are credited with an
         Hour of Service on or after August 23, 1984. Former Participants who
         are not credited with an Hour of Service on or after August 23, 1984,
         shall be provided with rights to the Pre-Retirement Survivor Annuity in
         accordance with Section 303(e)(2) of the Retirement Equity Act of 1984.

                  (f)      If the value of the Pre-Retirement Survivor Annuity
         derived from Employer and Employee contributions does not exceed, and
         has never exceeded at the time of any prior distribution, $5,000 (or,
         $3,500 for distributions made prior to the later of the first day of
         the first Plan Year beginning after August 5, 1997, or the date
         specified in Section M of the Adoption Agreement) the Administrator
         shall direct the distribution of such amount to the Participant's
         spouse as soon as practicable. No distribution may be made under the
         preceding sentence after the Annuity Starting Date unless the spouse
         consents in writing (or in such other form as permitted by the IRS). If
         the value exceeds, or has ever exceeded at the time of any prior
         distribution, $5,000 (or, if applicable, $3,500), an immediate
         distribution of the entire amount may be made to the surviving spouse,
         provided such surviving spouse consents in writing (or in such other
         form as permitted by the IRS) to such distribution. Any consent
         required under this paragraph must be obtained not more than ninety
         (90) days before commencement of the distribution and shall be made in
         a manner consistent with Section 6.5(a)(2). Notwithstanding the
         preceding, the "lookback rule" (which provides that if the present
         value at the time of a prior distribution exceeded the applicable
         dollar threshold, then the present value at

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                                             DEFINED CONTRIBUTION PROTOTYPE PLAN

         any subsequent time is deemed to exceed the threshold) will not apply
         to any distributions made on or after October 17, 2000.

                  (g)      Death benefits may be paid to a Participant's
         Beneficiary in one of the following optional forms of benefits subject
         to the rules specified in Section 6.6(h). Such optional forms of
         distributions may be elected by the Participant in the event there is
         an election to waive the Pre-Retirement Survivor Annuity, and for any
         death benefits in excess of the Pre-Retirement Survivor Annuity.
         However, if no optional form of distribution was elected by the
         Participant prior to death, then the Participant's Beneficiary may
         elect the form of distribution:

                  (1)      One lump-sum payment in cash or in Employer stock.

                  (2)      Partial withdrawals.

                  (3)      Installment payments made monthly, quarterly,
                  semi-annually, or annually. The period over which such
                  payments are to be made shall not extend beyond the
                  Beneficiary's life expectancy. After installments commence,
                  the Beneficiary shall have the right to reduce the period over
                  which such periodic installments shall be made, and the cash
                  amount of such periodic installments shall be adjusted
                  accordingly.

                  (4)      In the form of an annuity over the life expectancy of
                  the Beneficiary.

                  (h)      Notwithstanding any provision in the Plan to the
         contrary, distributions upon the death of a Participant shall be made
         in accordance with the following requirements and shall otherwise
         comply with Code Section 401(a)(9) and the Regulations thereunder.

                  (1)      If it is determined, pursuant to Regulations, that
                  the distribution of a Participant's interest has begun and the
                  Participant dies before the entire interest has been
                  distributed, the remaining portion of such interest shall be
                  distributed at least as rapidly as under the method of
                  distribution elected pursuant to Section 6.5 as of the date of
                  death.

                  (2)      If a Participant dies before receiving any
                  distributions of the interest in the Plan or before
                  distributions are deemed to have begun pursuant to
                  Regulations, then the death benefit shall be distributed to
                  the Participant's Beneficiaries in accordance with the
                  following rules subject to the elections made in the Adoption
                  Agreement and subsections 6.6(h)(3) and 6.6(i) below:

                           (i)      The entire death benefit shall be
                           distributed to the Participant's Beneficiaries by
                           December 31st of the calendar year in which the fifth
                           anniversary of the Participant's death occurs;

                           (ii)     The 5-year distribution requirement of (i)
                           above shall not apply to any portion of the deceased
                           Participant's interest which is payable to or for the
                           benefit of a designated Beneficiary. In such event,
                           such portion shall be distributed over the life of
                           such designated Beneficiary (or over a period not
                           extending beyond the life expectancy of such
                           designated Beneficiary) provided such distribution
                           begins not later than December 31st of the calendar
                           year immediately following the calendar year in which
                           the Participant died (or such later date as may be
                           prescribed by Regulations);

                           (iii)    However, in the event the Participant's
                           spouse (determined as of the date of the
                           Participant's death) is the designated Beneficiary,
                           the provisions of (ii) above shall apply except that
                           the requirement that distributions commence within
                           one year of the Participant's death shall not apply.
                           In lieu thereof, distributions must commence on or
                           before the later of: (1) December 31st of the
                           calendar year immediately following the calendar year
                           in which the Participant died; or (2) December 31st
                           of the calendar year in which the Participant would
                           have attained age 70 1/2. If the surviving spouse
                           dies before distributions to such spouse begin, then
                           the 5-year distribution requirement of this Section
                           shall apply as if the spouse was the Participant.

                  (3)      Notwithstanding subparagraph (2) above, or any
                  elections made in Section H.1 of the Adoption Agreement, if a
                  Participant's death benefits are to be paid in the form of a
                  Pre-Retirement Survivor Annuity, then distributions to the
                  Participant's surviving spouse must commence on or before the
                  later of: (1) December 31st of the calendar year immediately
                  following the calendar year in which the Participant died; or
                  (2) December 31st of the calendar year in which the
                  Participant would have attained age 70 1/2.

                  (i)      For purposes of Section 6.6(h)(2), the election by a
         designated Beneficiary to be excepted from the 5-year distribution
         requirement must be made no later than December 31st of the calendar
         year following the calendar year of the Participant's death. Except,
         however, with respect to a designated Beneficiary who is the
         Participant's surviving spouse, the election must be made by the
         earlier of: (1) December 31st of the calendar year immediately
         following the calendar year in which the Participant died or, if later,
         December 31st of the calendar year in which the

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         Participant would have attained age 70 1/2; or (2) December 31st of the
         calendar year which contains the fifth anniversary of the date of the
         Participant's death. An election by a designated Beneficiary must be in
         writing (or in such other form as permitted by the IRS) and shall be
         irrevocable as of the last day of the election period stated herein. In
         the absence of an election by the Participant or a designated
         Beneficiary, the 5-year distribution requirement shall apply.

                  (j)      For purposes of this Section, the life expectancy of
         a Participant and a Participant's spouse (other than in the case of a
         life annuity) shall or shall not be redetermined annually as elected in
         Section M of the Adoption Agreement and in accordance with Regulations.
         If the Participant may elect, pursuant to the Adoption Agreement, to
         have life expectancies recalculated, then the election, once made shall
         be irrevocable. If no election is made by the time distributions must
         commence, then the life expectancy of the Participant and the
         Participant's spouse shall be subject to recalculation. Life expectancy
         and joint and last survivor life expectancy shall be computed using the
         return multiples in Tables V and VI of Regulation Section 1.72-9.

                  (k)      For purposes of this Section, any amount paid to a
         child of the Participant will be paid to the legal representative on
         behalf of the child.

                  (l)      Subject to the spouse's right of consent afforded
         under the Plan, the restrictions imposed by this Section shall not
         apply if a Participant has, prior to January 1, 1984, made a written
         designation to have death benefits paid in an alternative method
         acceptable under Code Section 401 (a) as in effect prior to the
         enactment of the Tax Equity and Fiscal Responsibility Act of 1982
         (TEFRA).

6.7      TIME OF DISTRIBUTION

                  Except as limited by Sections 6.5 and 6.6, whenever a
distribution is to be made, or a series of payments are to commence, the
distribution or series of payments may be made or begun on such date or as soon
thereafter as is practicable. However, unless a Former Participant elects in
writing to defer the receipt of benefits (such election may not result in a
death benefit that is more than incidental), the payment of benefits shall begin
not later than the sixtieth (60th) day after the close of the Plan Year in which
the latest of the following events occurs: (a) the date on which the Participant
attains the earlier of age 65 or the Normal Retirement Age specified herein; (b)
the tenth (10th) anniversary of the year in which the Participant commenced
participation in the Plan; or (c) the date the Participant terminates service
with the Employer.

                  Notwithstanding the foregoing, the failure of a Participant
and, if applicable, the Participant's spouse, to consent to a distribution that
is "immediately distributable" (within the meaning of Section 6.5(d)), shall be
deemed to be an election to defer the commencement of payment of any benefit
sufficient to satisfy this Section.

6.8      DISTRIBUTION FOR MINOR OR INCOMPETENT BENEFICIARY

                  In the event a distribution is to be made to a minor or
incompetent Beneficiary, then the Administrator may direct that such
distribution be paid to the legal guardian, or if none in the case of a minor
Beneficiary, to a parent of such Beneficiary, or to the custodian for such
Beneficiary under the Uniform Gift to Minors Act or Gift to Minors Act, if such
is permitted by the laws of the state in which said Beneficiary resides. Such a
payment to the legal guardian, custodian or parent of a minor or incompetent
Beneficiary shall fully discharge the Trustee, Employer, and Plan from further
liability on account thereof.

6.9      LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN

                  In the event that all, or any portion, of the distribution
payable to a Participant or Beneficiary hereunder shall, at the later of the
Participant's attainment of age 62 or Normal Retirement Age, remain unpaid
solely by reason of the inability of the Administrator, after sending a
registered letter, return receipt requested, to the last known address, and
after further diligent effort, to ascertain the whereabouts of such Participant
or Beneficiary, the amount so distributable shall be treated as a Forfeiture
pursuant to the Plan. Notwithstanding the foregoing, if the value of a
Participant's Vested benefit derived from Employer and Employee contributions
does not exceed $5,000, then the amount distributable may be treated as a
Forfeiture at the time it is determined that the whereabouts of the Participant
or the Participant's Beneficiary can not be ascertained. In the event a
Participant or Beneficiary is located subsequent to the Forfeiture, such benefit
shall be restored, first from Forfeitures, if any, and then from an additional
Employer contribution, if necessary. Upon Plan termination, the portion of the
distributable amount that is an "eligible rollover distribution" as defined in
Plan Section 6.14(b)(l) may be paid directly to an individual retirement account
described in Code Section 408(a) or an individual retirement annuity described
in Code Section 408(b). However, regardless of the preceding, a benefit that is
lost by reason of escheat under applicable state law is not treated as a
Forfeiture for purposes of this Section nor as an impermissible forfeiture under
the Code.

6.10     IN-SERVICE DISTRIBUTION

                  For Profit Sharing Plans and 401(k) Profit Sharing Plans, if
elected in Section H.5.b of the Adoption Agreement, at such time as the
conditions set forth in the Adoption Agreement have been satisfied, then the
Administrator, at the

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election of a Participant who has not severed employment with the Employer,
shall direct the distribution of up to the entire Vested amount then credited to
the accounts maintained on behalf of such Participant. In the event that the
Administrator makes such a distribution, the Participant shall continue to be
eligible to participate in the Plan on the same basis as any other Employee. Any
distribution made pursuant to this Section shall be made in a manner consistent
with Section 6.5, including, but not limited to, all notice and consent
requirements of Code Sections 411(a)(11) and 417 and the Regulations
thereunder.

                  SEQUENCE AND CONDITIONS FOR WITHDRAWAL. A Participant shall
request the Administrator to effect a cash withdrawal and such amounts shall be
debited from his Participant's Account. Unless otherwise elected in writing, the
Administrator shall withdraw amounts in the following sequence and upon the
following conditions:

                  First, (if permitted by Section H), a Participant may withdraw
                  all or part of the value from his contribution accounts for
                  Participant Nondeductible Voluntary Contributions and for
                  Participant Matched Contributions.

                  Second, (if permitted by Section H), a Participant may
                  withdraw all or part of the value of his contribution account
                  of Rollover Contributions.

                  Third, (if permitted by Section H), a Participant may withdraw
                  all or part of the full value of his vested interest
                  determined under Section E in his contribution accounts for:
                  Company Matching Contributions; Company Profit-Sharing
                  Contributions; and transfers from Employer-provided benefits
                  from other plans.

                  If a Participant receives a withdrawal attributable to Company
                  contributions, the Participant's future vested interest after
                  the distribution shall be equal to an amount ("X") determined
                  by the formula:

                                 X=P(AB + D) - D

                  For purposes of applying the formula; P is the nonforfeitable
                  percentage at the relevant time, AB is the account balance at
                  the relevant time, and D is the amount of the withdrawl.

                  Fourth, (if permitted by Section H), a Participant may
                  withdraw all or part of the value of his account for Elective
                  Deferrals, Company Qualified Matching Contributions and
                  Company Qualified Nonelectivc Contributions if the Participant
                  is age 59 1/2 or older.

                  Employee after-tax contributions (and related earnings) under
Money Purchase, Profit Sharing or 401(k) Plans may be distributed at the
Participant's request.

6.11     ADVANCE DISTRIBUTION FOR HARDSHIP

                  (a)      For Profit Sharing Plans and 401(k) Plans (except to
         the extent Section 12.9 applies), if elected in Section H.6 of the
         Adoption Agreement, the Administrator, at the election of the
         Participant, shall direct the distribution to any Participant in any
         one Plan Year up to the lesser of 100% of the Vested interest of the
         Participant's Combined Account valued as of the last Valuation Date or
         the amount necessary to satisfy the immediate and heavy financial need
         of the Participant. Withdrawal under this Section shall be authorized
         only if the distribution is for an immediate and heavy financial need.
         The Administrator will determine whether there is an immediate and
         heavy financial need based on the facts and circumstances. An immediate
         and heavy financial need includes a distribution for one of the
         following:

                  (1)      Medical expenses described in Code Section 213(d)
                  incurred by the Participant, the Participant's spouse, or any
                  of the Participant's dependents (as defined in Code Section
                  152) or necessary for these persons to obtain medical care as
                  described in Code Section 213(d);

                  (2)      Costs directly related to the purchase (excluding
                  mortgage payments) of a principal residence for the
                  Participant;

                  (3)      Payment of tuition, related educational fees, and
                  room and board expenses, for the next twelve (12) months of
                  post-secondary education for the Participant, the
                  Participant's spouse, children, or dependents (as defined in
                  Code Section 152); or

                  (4)      Payments necessary to prevent the eviction of the
                  Participant from the Participant's principal residence or
                  foreclosure on the mortgage on that residence.

                  (b)      Any distribution made pursuant to this Section shall
         be made in a manner which is consistent with and satisfies the
         provisions of Section 6.5, including, but not limited to, all notice
         and consent requirements of Code Sections 411(a)(11) and 417 and the
         Regulations thereunder.

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6.12     SPECIAL RULE FOR CERTAIN PROFIT SHARING PLANS

                  (a)      The provisions of this Section apply to a Participant
         in a Profit Sharing Plan or 401(k) Profit Sharing Plan to the extent
         elected in Section H.1 of the Adoption Agreement.

                  (b)      If an election is made to not offer life annuities as
         a form of distribution, then a Participant shall be prohibited from
         electing benefits in the form of a life annuity and the Joint and
         Survivor Annuity provisions of Section 6.5 shall not apply.

                  (c)      Notwithstanding anything in Sections 6.2 and 6.6 to
         the contrary, upon the death of a Participant, the automatic form of
         distribution will be a lump-sum rather than a Qualified Pre-Retirement
         Survivor Annuity. Furthermore, the Participant's spouse will be the
         Beneficiary of the Participant's entire Vested interest in the Plan
         unless an election is made to waive the spouse as Beneficiary. The
         other provisions in Section 6.2 shall be applied by treating the death
         benefit in this subsection as though it is a Qualified Pre-Retirement
         Survivor Annuity.

                  (d)      Except to the extent otherwise provided in this
         Section, the provisions of Sections 6.2, 6.5 and 6.6 regarding spousal
         consent shall be inoperative with respect to this Plan.

                  (e)      If a distribution is one to which Code Sections 401
         (a)(11) and 417 do not apply, such distribution may commence less than
         thirty (30) days after the notice required under Regulation
         1.411(a)-11(c) is given, provided that:

                  (1)      the Plan Administrator clearly informs the
                  Participant that the Participant has a right to a period of at
                  least thirty (30) days after the notice to consider the
                  decision of whether or not to elect a distribution (and, if
                  applicable, a particular distribution option), and

                  (2)      the Participant, after receiving the notice,
                  affirmatively elects a distribution.

6.13     QUALIFIED DOMESTIC RELATIONS ORDER DISTRIBUTION

                  All rights and benefits, including elections, provided to a
Participant in this Plan shall be subject to the rights afforded to any
"alternate payee" under a "qualified domestic relations order." Furthermore, a
distribution to an "alternate payee" shall be permitted if such distribution is
authorized by a "qualified domestic relations order," even if the affected
Participant has not reached the "earliest retirement age" under the Plan. For
the purposes of this Section, "alternate payee," "qualified domestic relations
order" and "earliest retirement age" shall have the meanings set forth under
Code Section 414(p).

6.14     DIRECT ROLLOVERS

                  (a)      Notwithstanding any provision of the Plan to the
         contrary that would otherwise limit a "distributee's" election under
         this Section, a "distributee" may elect, at the time and in the manner
         prescribed by the Administrator, to have any portion of an "eligible
         rollover distribution" paid directly to an "eligible retirement plan"
         specified by the "distributee" in a "direct rollover."

                  (b)      For purposes of this Section, the following
         definitions shall apply:

                  (1)      An "eligible rollover distribution" means any
                  distribution described in Code Section 402(c)(4) and generally
                  includes any distribution of all or any portion of the balance
                  to the credit of the distributee, except that an "eligible
                  rollover distribution" does not include: any distribution that
                  is one of a series of substantially equal periodic payments
                  (not less frequently than annually) made for the life (or life
                  expectancy) of the "distributee" or the joint lives (or joint
                  life expectancies) of the "distributee" and the
                  "distributee's" designated beneficiary, or for a specified
                  period of ten (10) years or more; any distribution to the
                  extent such distribution is required under Code Section
                  401(a)(9); the portion of any other distribution(s) that is
                  not includible in gross income (determined without regard to
                  the exclusion for net unrealized appreciation with respect to
                  employer securities); for distributions made after December
                  31, 1998, any hardship distribution described in Code Section
                  401(k)(2)(B)(i)(IV); and any other distribution reasonably
                  expected to total less than $200 during a year.

                  (2)      An "eligible retirement plan" is an individual
                  retirement account described in Code Section 408(a), an
                  individual retirement annuity described in Code Section
                  408(b), an annuity plan described in Code Section 403(a), or a
                  qualified plan described in Code Section 401 (a), that accepts
                  the "distributee's" "eligible rollover distribution." However,
                  in the case of an "eligible rollover distribution" to the
                  surviving spouse, an "eligible retirement plan" is an
                  individual retirement account or individual retirement
                  annuity.

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                  (3)      A "distributee" includes an Employee or former
                  Employee. In addition, the Employee's or former Employee's
                  surviving spouse and the Employee's or former Employee's
                  spouse or former spouse who is the alternate payee under a
                  qualified domestic relations order, as defined in Code Section
                  414(p), are distributees with regard to the interest of the
                  spouse or former spouse.

                  (4)      A "direct rollover" is a payment by the Plan to the
                  "eligible retirement plan" specified by the "distributee."

6.15     TRANSFER OF ASSETS FROM A MONEY PURCHASE PLAN

                  (a)      This Section shall be effective as of the following
                  date:

                  (1)      for Plans not entitled to extended reliance as
                  described in Revenue Ruling 94-76, the first day of the first
                  Plan Year beginning on or after December 12, 1994, or if
                  later, 90 days after December 12, 1994; or

                  (2)      for Plans entitled to extended reliance as described
                  in Revenue Ruling 94-76, as of the first day of the first Plan
                  Year following the Plan Year in which the extended reliance
                  period applicable to the Plan ends. However, in the event of a
                  transfer of assets to the Plan from a money purchase plan that
                  occurs after the date of the most recent determination letter,
                  the effective date of the amendment shall be the date
                  immediately preceding the date of such transfer of assets.

                  (b)      Notwithstanding any provision of this Plan to the
         contrary, to the extent that any optional form of benefit under this
         Plan permits a distribution prior to the Employee's retirement, death,
         disability, or severance from employment, and prior to Plan
         termination, the optional form of benefit is not available with respect
         to benefits attributable to assets (including the post-transfer
         earnings thereon) and liabilities that are transferred, within the
         meaning of Code Section 414(1), to this Plan from a money purchase
         pension plan qualified under Code Section 401(a) (other than any
         portion of those assets and liabilities attributable to after-tax
         voluntary Employee contributions or to a direct or indirect rollover
         contribution).

6.16     ELECTIVE TRANSFERS OF BENEFITS TO OTHER PLANS

                  (a)      If a voluntary, fully-informed election is made by a
         Participant, then if the conditions set forth herein are satisfied, a
         Participant's entire benefit may be transferred between qualified plans
         (other than any direct rollover described in Q&A-3 of Regulation
         1.401(a)(31)-1). As an alternative to the transfer, the Participant may
         elect to retain the Participant's "Section 411(d)(6) protected
         benefits" under the Plan (or, if the plan is terminating, to receive
         any optional form of benefit for which the Participant is eligible
         under the plan as required by Code Section 411(d)(6)). A transfer
         between qualified plans may only be made pursuant to this subsection if
         the following additional requirements are met:

                           (i)      The transfer occurs at a time at which the
                           participant's benefits are distributable. A
                           Participant's benefits are distributable on a
                           particular date if, on that date, the Participant is
                           eligible, under the terms of the Plan, to receive an
                           immediate distribution of these benefits (e.g., in
                           the form of an immediately commencing annuity) from
                           that plan under provisions of the plan not
                           inconsistent with Code Section 401 (a);

                           (ii)     For transfers that occur on or after January
                           1, 2002, the transfer occurs at a time at which the
                           Participant is not eligible to receive an immediate
                           distribution of the participant's entire
                           nonforfeitable accrued benefit in a single-sum
                           distribution that would consist entirely of an
                           eligible rollover distribution within the meaning of
                           Code Section 401(a)(31)(C);

                           (iii)    The participant is fully Vested in the
                           transferred benefit in the transferee plan;

                           (iv)     In the case of a transfer from a defined
                           contribution plan to a defined benefit plan, the
                           defined benefit plan provides a minimum benefit, for
                           each Participant whose benefits are transferred,
                           equal to the benefit, expressed as an annuity payable
                           at normal retirement age, that is derived solely on
                           the basis of the amount transferred with respect to
                           such Participant; and

                           (v)      The amount of the benefit transferred,
                           together with the amount of any contemporaneous Code
                           Section 401(a)(31) direct rollover to the transferee
                           plan, equals the Participant's entire nonforfeitable
                           accrued benefit under the Plan.

                  (b)      If a voluntary, fully-informed election is made by a
         Participant, then if the conditions set forth herein are satisfied, a
         Participant's entire benefit may be transferred between qualified
         defined contribution plans (other than any direct rollover described in
         Q&A-3 of Regulation 1.401(a)(31)-l). As an alternative to the transfer,
         the Participant may elect to retain the Participant's "Section
         411(d)(6) protected benefits" under the Plan (or, if the plan is

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                                             DEFINED CONTRIBUTION PROTOTYPE PLAN

         terminating, to receive any optional form of benefit for which the
         Participant is eligible under the plan as required by Code Section
         411(d)(6)). A transfer between qualified plans may only be made
         pursuant to this subsection if the following additional requirements
         are met:

                           (i)      To the extent the benefits are transferred
                           from a money purchase pension plan, the transferee
                           plan must be a money purchase pension plan. To the
                           extent the benefits being transferred are part of a
                           qualified cash or deferred arrangement under Code
                           Section 401(k), the benefits must be transferred to
                           a qualified cash or deferred arrangement under Code
                           Section 401(k). Benefits transferred from a
                           profit-sharing plan other than from a qualified cash
                           or deferred arrangement, or from a stock bonus plan
                           other than an employee stock ownership plan, may be
                           transferred to any type of defined contribution plan;
                           and

                           (ii)     The transfer must be made either in
                           connection with an asset or stock acquisition,
                           merger, or other similar transaction involving a
                           change in employer of the employees of a trade or
                           business (i.e., an acquisition or disposition within
                           the meaning of Regulation 1.410(b)-2(f)) or in
                           connection with the Participant's change in
                           employment status to an employment status with
                           respect to which the Participant is not entitled to
                           additional allocations under the Plan.

                                   ARTICLE VII
                            PLAN ADMINISTRATOR DUTIES

7.1      LIFE INSURANCE

                  (a)      The Administrator pursuant to instructions from the
         Employer shall ratably apply for and pay all premiums on Contracts on
         the lives of the Participants or, in the case of Profit Sharing Plan
         (including a 401(k) plan), on the life of any person in whom the
         Participant has an insurable interest or on the joint lives of a
         Participant and any person in whom the Participant has an insurable
         interest. Any initial or additional Contract purchased on behalf of a
         Participant shall have a face amount of not less than the limitation of
         the Insurer. If a life insurance Contract is to be purchased for a
         Participant or Former Participant, then the aggregate premium for
         ordinary life insurance for each Participant or Former Participant must
         be less than 50% of the aggregate contributions and Forfeitures
         allocated to the Participant's or Former Participant's Combined
         Account. For purposes of this limitation, ordinary life insurance
         Contracts are Contracts with both non-decreasing death benefits and
         non-increasing premiums. If term insurance or universal life insurance
         is purchased, then the aggregate premium must be 25% or less of the
         aggregate contributions and Forfeitures allocated to the Participant's
         or Former Participant's Combined Account. If both term insurance and
         ordinary life insurance are purchased, then the premium for term
         insurance plus one-half of the premium for ordinary life insurance may
         not in the aggregate exceed 25% of the aggregate Employer contributions
         and Forfeitures allocated to the Participant's or Former Participant's
         Combined Account. Notwithstanding the preceding, the limitations
         imposed herein with respect to the purchase of life insurance shall not
         apply, in the case of a Profit Sharing Plan (including a 401(k) plan),
         to the portion of the Participant's Account that has accumulated for at
         least two (2) Plan Years or to the entire Participant's Account if the
         Participant has been a Participant in the Plan for at least five (5)
         years. Amounts transferred to this Plan in accordance with Section
         4.6(e)(ii), (iii) or (v) and a Participant's or Former Participant's
         Voluntary Contribution Account may be used to purchase Contracts
         without limitation.

                  (b)      The Administrator must distribute the Contracts to
         the Participant or Former Participant or convert the entire value of
         the Contracts at or before retirement into cash or provide for a
         periodic income so that no portion of such value may be used to
         continue life insurance protection beyond commencement of benefits.
         Furthermore, if a Contract is purchased on the joint lives of the
         Participant and another person and such other person predeceases the
         Participant, then the Contract may not be maintained under this Plan.

                  (c)      Notwithstanding anything herein above to the
         contrary, amounts credited to a Participant's Qualified Voluntary
         Employee Contribution Account pursuant to Section 4.9, shall not be
         applied to the purchase of life insurance Contracts. Furthermore, no
         life insurance Contracts shall be required to be obtained on an
         individual's life if, for any reason (other than the nonpayment of
         premiums) the Insurer will not issue a Contract on such individual's
         life.

                  (d)      The Employer will be the owner of any life insurance
         Contract purchased under the terms of this Plan. The Contract must
         provide that the proceeds will be payable to the Administrator;
         however, the Administrator shall be required to pay over all proceeds
         of the Contract to the Participant's designated Beneficiary in
         accordance with the distribution provisions of Article VI. A
         Participant's spouse will be the designated Beneficiary pursuant to
         Section 6.2, unless a qualified election has been made in accordance
         with Sections 6.5 and 6.6 of the Plan, if applicable. Under no
         circumstances shall the Plan retain any part of the proceeds that are
         in excess of the cash surrender value immediately prior to death.
         However, the Administrator shall not pay the proceeds in a method that
         would violate the requirements of the Retirement Equity Act of 1984, as
         stated in Article VI of the Plan, or Code Section 401(a)(9) and the
         Regulations thereunder. In the event of any conflict between the terms
         of this Plan and the terms of any insurance Contract purchased
         hereunder, the Plan provisions shall control.

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                  (e)      No policy loans shall be permitted except to pay
         premiums on life insurance policies in the event the Employer fails to
         make a contribuiton in time to pay a premium due on any contract.

7.2      LOANS TO PARTICIPANTS

                  (a)      The Trustee (or the Administrator if the Trustee is a
         nondiscretionary Trustee) may,in the Trustee's (or, if applicable, the
         Administrator's) sole discretion, make loans to Participants or
         Beneficiaries under the following circumstances: (1) loans shall be
         made available to all Participants and Beneficiaries on a reasonably
         equivalent basis; (2) loans shall not be made available to Highly
         Compensated Employees in an amount greater than the amount made
         available to other Participants; (3) loans shall bear a reasonable rate
         of interest; (4) loans shall be adequately secured; and (5) loans shall
         provide for periodic repayment over a reasonable period of time.

                  (b)      Loans shall not be made to any Shareholder-Employee
         or Owner-Employee (including an Owner- Employee's family members as
         defined in Code Section 267(c)(4)) unless an exemption for such loan is
         obtained pursuant to Act Section 408 or such loan would otherwise not
         be a prohibited transaction pursuant to Code Section 4975 and Act
         Section 408.

                  (c)      Loans made pursuant to this Section (when added to
         the outstanding balance of all other loans made by the Plan to the
         Participant) may, in accordance with a uniform and nondiscriminatory
         policy established by the Administrator, be limited to the lesser of:

                  (1)      $50,000 reduced by the excess (if any) of the highest
                  outstanding balance of loans from the Plan to the Participant
                  during the one year period ending on the day before the date
                  on which such loan is made, over the outstanding balance of
                  loans from the Plan to the Participant on the date on which
                  such loan was made, or

                  (2)      one-half (1/2) of the present value of the
                  non-forfeitable accrued benefit of the Participant under this
                  Plan and all other plans of the Employer.

                  (d)      No Participant loans shall take into account the
         present value of such Participant's Qualified Voluntary Employee
         Contribution Account.

                  (e)      Loans shall be required to provide for level
         amortization with payments to be made not less frequently than
         quarterly, over a period not to exceed five (5) years. However, loans
         used to acquire any dwelling unit which, within a reasonable time, is
         to be used (determined at the time the loan is made) as the "principal
         residence" of the Participant shall provide for periodic repayment over
         a reasonable period of time that may exceed five (5) years. For this
         purpose, "principal residence" has the same meaning as "principal
         residence" under Code Section 1034. Notwithstanding the foregoing, loan
         repayments may be suspended under this Plan as permitted under Code
         Section 414(u)(4) for qualified military service.

                  (f)      If the Vested interest of a Participant is used to
         secure any loan made pursuant to this Section, then the written (or
         such other form as permitted by the IRS) consent of the Participant's
         spouse shall be required in a manner consistent with Section 6.5(a),
         provided the spousal consent requirements of such Section apply to the
         Plan. Such consent must be obtained within the 90-day period prior to
         the date the loan is made. Any security interest held by the Plan by
         reason of an outstanding loan to the Participant or Former Participant
         shall be taken into account in determining the amount of the death
         benefit or Pre-Retirement Survivor Annuity. However, unless the loan
         program established pursuant to this Section provides otherwise, no
         spousal consent shall be required under this paragraph if the total
         interest subject to the security is not in excess of $5,000 (or, $3,500
         effective for loans made prior to the later of the first day of the
         first Plan Year beginning after August 5, 1997, or the date specified
         in the Adoption Agreement).

                  (g)      The Administrator shall be authorized to establish a
         participant loan program to provide for loans under the Plan. The loan
         program shall be established in accordance with Department of Labor
         Regulation Section 2550.408(b)-1(d)(2) providing for loans by the Plan
         to parties-in-interest under said Plan, such as Participants or
         Beneficiaries. In order for the Administrator to implement such loan
         program, a separate written document forming a part of this Plan must
         be adopted, which document shall specifically include, but need not be
         limited to, the following:

                  (1)      the identity of the person or positions authorized to
                  administer the Participant loan program;

                  (2)      a procedure for applying for loans;

                  (3)      the basis on which loans will be approved or denied;

                  (4)      limitations, if any, on the types and amounts of
                  loans offered;

                  (5)      the procedure under the program for determining a
                  reasonable rate of interest;

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                  (6)      the types of collateral which may secure a
                  Participant loan; and

                  (7)      the events constituting default and the steps that
                  will be taken to preserve Plan assets in the event such
                  default.

                  (h)      Notwithstanding anything in this Plan to the
         contrary, if a Participant or Beneficiary defaults on a loan made
         pursuant to this Section that is secured by the Participant's interest
         in the Plan, then a Participant's interest may be offset by the amount
         subject to the security to the extent there is a distributable event
         permitted by the Code or Regulations.

                  (i)      Notwithstanding anything in this Section to the
         contrary, if this is an amendment and restatement of an existing Plan,
         any loans made prior to the date this amendment and restatement is
         adopted shall be subject to the terms of the Plan in effect at the time
         such loan was made.

7.3      MAJORITY ACTIONS

                  Except where there has been an allocation and delegation of
powers, if there shall be more than one Trustee, they shall act by a majority of
their number, but may authorize one or more of them to sign papers on their
behalf.

7.4      ADMINISTRATOR'S COMPENSATION, EXPENSES AND TAXES

                  The Administrator shall be paid such reasonable compensation
as set forth in the Administrator's fee schedule (if the Administrator has such
a schedule) or as agreed upon in writing by the Employer and the Administrator.
However, an individual serving as Administrator who already receives full-time
compensation from the Employer shall not receive compensation from this Plan. In
addition, the Administrator shall be reimbursed for any reasonable expenses,
including reasonable counsel fees incurred by it as Administrator. Such
compensation and expenses shall be paid from the Plan Fund unless paid or
advanced by the Employer. All taxes of any kind whatsoever that may be levied or
assessed under existing or future laws upon, or in respect of, the Plan Fund or
the income thereof, shall be paid from the Plan Fund.

7.5      ANNUAL REPORT OF THE ADMINISTRATOR

                  (a)      Within a reasonable period of time after the later of
         the Anniversary Date or receipt of the Employer's contribution for each
         Plan Year, the Administrator, or its agent, shall furnish to the
         Employer a written statement of account with respect to the Plan Year
         for which such contribution was made setting forth:

                  (1)      the net income, or loss, of the Plan Fund;

                  (2)      the gains, or losses, realized by the Plan Fund upon
                  sales or other disposition of the assets;

                  (3)      the increase, or decrease, in the value of the Plan
                  Fund;

                  (4)      all payments and distributions made from the Plan
                  Fund; and

                  (5)      such further information as the Administrator deems
                  appropriate.

                  (b)      The Employer, promptly upon its receipt of each such
         statement of account, shall acknowledge receipt thereof in writing and
         advise the Administrator of its approval or disapproval thereof.
         Failure by the Employer to disapprove any such statement of account
         within thirty (30) days after its receipt thereof shall be deemed an
         approval thereof. The approval by the Employer of any statement of
         account shall be binding on the Employer and the Administrator as to
         all matters contained in the statement to the same extent as if the
         account of the Administrator had been settled by judgment or decree in
         an action for a judicial settlement of its account in a court of
         competent jurisdiction in which the Administrator, the Employer and all
         persons having or claiming an interest in the Plan were parties.
         However, nothing contained in this Section shall deprive the
         Administrator of its right to have its accounts judicially settled if
         the Administrator so desires.

7.6      AUDIT

                  (a)      If an audit of the Plan's records shall be required
         by the Act and the regulations thereunder for any Plan Year, the
         Administrator shall engage on behalf of all Participants an independent
         qualified public accountant for that purpose. Such accountant shall,
         after an audit of the books and records of the Plan in accordance with
         generally accepted auditing standards, within a reasonable period after
         the close of the Plan Year, furnish to the Administrator a report of
         the audit setting forth the accountant's opinion as to whether any
         statements, schedules or lists, that are required by Act Section 103 or
         the Secretary of Labor to be filed with the Plan's annual report, are
         presented fairly in conformity with generally accepted accounting
         principles applied consistently.

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                  (b)      All auditing and accounting fees shall be an expense
         of and may, at the election of the Employer, be paid from the Plan
         Fund.

                  (c)      If some or all of the information necessary to enable
         the Administrator to comply with Act Section 103 is maintained by a
         bank, insurance company, or similar institution, regulated, supervised,
         and subject to periodic examination by a state or federal agency, then
         it shall transmit and certify the accuracy of that information to the
         Administrator as provided in Act Section 103(b) within one hundred
         twenty (120) days after the end of the Plan Year or such other date as
         may be prescribed under regulations of the Secretary of Labor.

7.7      RESIGNATION, REMOVAL AND SUCCESSION OF ADMINISTRATOR OR TRUSTEE

                  (a)      Unless otherwise agreed to by both the Administrator
         or Trustee and the Employer, an Administrator or Trustee may resign at
         any time by delivering to the Employer, at least thirty (30) days
         before its effective date, a written notice of resignation.

                  (b)      Unless otherwise agreed to by both the Administrator
         or Trustee and the Employer, the Employer may remove a Trustee at any
         time by delivering to the Administrator or Trustee, at least thirty
         (30) days before its effective date, a written notice of such
         Administrator or Trustee's removal.

                  (c)      Upon the death, resignation, incapacity, or removal
         of any Administrator or Trustee, a successor may be appointed by the
         Employer; and such successor, upon accepting such appointment in
         writing and delivering same to the Employer, shall, without further
         act, become vested with all the powers and responsibilities of the
         predecessor as if such successor had been originally named as an
         Administrator or Trustee herein. Until such a successor is appointed,
         any remaining Administrator or Trustees shall have full authority to
         act under the terms of the Plan.

                  (d)      The Employer may designate one or more successors
         prior to the death, resignation, incapacity, or removal of an
         Administrator or Trustee. In the event a successor is so designated by
         the Employer and accepts such designation, the successor shall, without
         further act, become vested with all the powers and responsibilities of
         the predecessor as if such successor had been originally named as
         Administrator or Trustee herein immediately upon the death,
         resignation, incapacity, or removal of the predecessor.

                  (e)      Whenever any Administrator or Trustee hereunder
         ceases to serve as such, the Administrator or Trustee shall furnish to
         the Employer and Administrator a written statement of account with
         respect to the portion of the Plan Year during which the individual or
         entity served as Administrator or Trustee. This statement shall be
         either (i) included as part of the annual statement of account for the
         Plan Year required under Section 7.5 or (ii) set forth in a special
         statement. Any such special statement of account should be rendered to
         the Employer no later than the due date of the annual statement of
         account for the Plan Year. The procedures set forth in Section 7.5 for
         the approval by the Employer of annual statements of account shall
         apply to any special statement of account rendered hereunder and
         approval by the Employer of any such special statement in the manner
         provided in Section 7.5 shall have the same effect upon the statement
         as the Employer's approval of an annual statement of account. No
         successor to the Administrator or Trustee shall have any duty or
         responsibility to investigate the acts or transactions of any
         predecessor who has rendered all statements of account required by
         Section 7.5 and this subparagraph.

7.8      TRANSFER OF INTEREST

                  Notwithstanding any other provision contained in this Plan,
the Trustee at the direction of the Administrator shall transfer the interest,
if any, of a Participant to another trust forming part of a pension, profit
sharing, or stock bonus plan that meets the requirements of Code Section 401(a),
provided that the trust to which such transfers are made permits the transfer to
be made.

7.9      ADMINISTRATOR AND TRUSTEE INDEMNIFICATION

                  The Employer agrees to indemnify and hold harmless the
Administrator and Trustee (if applicable) against any and all claims, losses,
damages, expenses and liabilities they may incur in the exercise and performance
of their powers and duties hereunder, unless the same are determined to be due
to gross negligence or willful misconduct.

7.10     EMPLOYER SECURITIES AND REAL PROPERTY

                  The Trustee shall be empowered to acquire and hold "qualifying
Employer securities" and "qualifying Employer real property," as those terms are
defined in the Act. However, no more than one hundred percent (100%), in the
case of a Profit Sharing Plan or 401(k) Plan, or ten percent (10%), in the case
of a Money Purchase Plan, of the fair market value of all the assets in the Plan
Fund may be invested in "qualifying Employer securities" and "qualifying
Employer real property."

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                  Notwithstanding the preceding, for Plan Years beginning after
December 31, 1998, if the Plan does not permit Participants to direct the
investment of their Participants' Elective Deferral Accounts, then the Trustee
shall only be permitted to acquire or hold "qualifying Employer securities" and
"qualifying Employer real property" to the extent permitted under Act Section
407.

7.11     COLLECTIVE INVESTMENT FUND

                  The investment of Plan assets in a separate investment account
which purchases units of a collective investment fund, and the commingling of
the Plan's assets with other plans' assets for investment purposes is allowed
under this Plan. The named Trustee of the collective investment fund shall be
the investment manager of the Plan assets placed in the collective investment
fund and the governing documents of any such collective investment fund in which
Plan assets are invested shall be incorporated and considered part of this Plan
document.

                                  ARTICLE VIII
                       AMENDMENT, TERMINATION AND MERGERS

8.1      AMENDMENT

                  (a)      The Employer shall have the right at any time to
         amend this Plan subject to the limitations of this Section. However,
         any amendment that affects the rights, duties or responsibilities of
         the Administrator may only be made with the Administrator's written
         consent. Any such amendment shall become effective as provided therein
         upon its execution. The Administrator shall not be required to execute
         any such amendment unless the amendment affects the duties of the
         Administrator hereunder.

                  (b)      The Employer may (1) change the choice of options in
         the Adoption Agreement, (2) add any addendum to the Adoption Agreement
         that is specifically permitted pursuant to the terms of the Plan; (3)
         add overriding language to the Adoption Agreement when such language is
         necessary to satisfy Code Sections 415 or 416 because of the required
         aggregation of multiple plans, and (4) add certain model amendments
         published by the Internal Revenue Service which specifically provide
         that their adoption will not cause the Plan to be treated as an
         individually designed plan. An Employer that amends the Plan for any
         other reason, including a waiver of the minimum funding requirement
         under Code Section 412(d), will no longer participate in this Prototype
         Plan and this Plan will be considered to be an individually designed
         plan. Notwithstanding the preceding, the attachment to the Adoption
         Agreement of any addendum specifically authorized by the Plan or a list
         of any "Section 411(d)(6) protected benefits" which must be preserved
         shall not be considered an amendment to the Plan.

                  (c)      The Employer expressly delegates authority to the
         sponsor of this Prototype Plan, the right to amend each Employer's Plan
         by submitting a copy of the amendment to each Employer who has adopted
         this Prototype Plan, after first having received a ruling or favorable
         determination from the Internal Revenue Service that the Prototype Plan
         as amended qualifies under Code Section 401(a) and the Act (unless a
         ruling or determination is not required by the IRS).

                  (d)      No amendment to the Plan shall be effective if it
         authorizes or permits any part of the Plan Fund (other than such part
         as is required to pay taxes and administration expenses) to be used for
         or diverted to any purpose other than for the exclusive benefit of the
         Participants or their Beneficiaries or estates; or causes any reduction
         in the amount credited to the account of any Participant; or causes or
         permits any portion of the Plan Fund to revert to or become property of
         the Employer.

                  (e)      Except as permitted by Regulations (including
         Regulation 1.411(d)-4) or other IRS guidance, no Plan amendment or
         transaction having the effect of a Plan amendment (such as a merger,
         plan transfer or similar transaction) shall be effective if it
         eliminates or reduces any "Section 411(d)(6) protected benefit" or
         adds or modifies conditions relating to "Section 411(d)(6) protected
         benefits" which results in a further restriction on such benefits
         unless such "Section 411(d)(6) protected benefits" are preserved with
         respect to benefits accrued as of the later of the adoption date or
         effective date of the amendment. "Section 411(d)(6) protected
         benefits" are benefits described in Code Section 411(d)(6)(A), early
         retirement benefits and retirement-type subsidies, and optional forms
         of benefit. A Plan amendment that eliminates or restricts the ability
         of a Participant to receive payment of the Participant's interest in
         the Plan under a particular optional form of benefit will be
         permissible if the amendment satisfies the conditions in (1) and (2)
         below:

                           (1)      The amendment provides a single-sum
                           distribution form that is otherwise identical to the
                           optional form of benefit eliminated or restricted.
                           For purposes of this condition (1), a single-sum
                           distribution form is otherwise identical only if it
                           is identical in all respects to the eliminated or
                           restricted optional form of benefit (or would be
                           identical except that it provides greater rights to
                           the Participant) except with respect to the timing of
                           payments after commencement.

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                           (2)      The amendment is not effective unless the
                           amendment provides that the amendment shall not apply
                           to any distribution with an Annuity Starting Date
                           earlier than the earlier of: (i) the ninetieth (90th)
                           day after the date the Participant receiving the
                           distribution has been furnished a summary that
                           reflects the amendment and that satisfies the Act
                           requirements at 29 CFR 2520.104b-3 (relating to a
                           summary of material modifications) or (ii) the first
                           day of the second Plan Year following the Plan Year
                           in which the amendment is adopted.

8.2      TERMINATION

                  (a)      The Employer shall have the right at any time to
         terminate the Plan by delivering to the Administrator written notice of
         such termination. Upon any full or partial termination, all amounts
         credited to the affected Participants' Combined Accounts shall become
         100% Vested and shall not thereafter be subject to forfeiture, and all
         unallocated amounts, including Forfeitures, shall be allocated to the
         accounts of all Participants in accordance with the provisions hereof.

                  (b)      Upon the full termination of the Plan, the Employer
         shall direct the distribution of the assets to Participants in a manner
         that is consistent with and satisfies the provisions of Section 6.5.
         Distributions to a Participant shall be made in cash (or in property if
         permitted in the Adoption Agreement) or through the purchase of
         irrevocable nontransferable deferred commitments from the Insurer.
         Except as permitted by Regulations, the termination of the Plan shall
         not result in the reduction of "Section 41l(d)(6) protected benefits"
         as described in Section 8.l(e).

8.3      MERGER, CONSOLIDATION OR TRANSFER OF ASSETS

                  This Plan may be merged or consolidated with, or its assets
and/or liabilities may be transferred to any other plan only if the benefits
which would be received by a Participant of this Plan, in the event of a
termination of the plan immediately after such transfer, merger or
consolidation, are at least equal to the benefits the Participant would have
received if the Plan had terminated immediately before the transfer, merger or
consolidation and such transfer, merger or consolidation does not otherwise
result in the elimination or reduction of any "Section 411(d)(6) protected
benefits" as described in Section 8.1(e).

                                   ARTICLE IX
                              TOP-HEAVY PROVISIONS

9.1      TOP-HEAVY PLAN REQUIREMENTS

                  For any Top-Heavy Plan Year, the Plan shall provide the
special vesting requirements of Code Section 416(b) pursuant to Section 6.4 of
the Plan and the special minimum allocation requirements of Code Section 416(c)
pursuant to Section 4.3(f) of the Plan. Except as otherwise provided in the
Plan, the minimum allocation shall be an Employer Non-Elective Contribution and,
if no vesting schedule has been selected in Section E.3 of the Adoption
Agreement, shall be subject to the 6 Year Graded vesting schedule described in
Section E.3.b of the Adoption Agreement.

9.2      DETERMINATION OF TOP-HEAVY STATUS

                  (a)      This Plan shall be a Top-Heavy Plan for any plan year
         beginning after December 31, 1983, if any of the following conditions
         exists:

                  (1)      if the "Top-Heavy ratio" for this Plan exceeds sixty
                  percent (60%) and this Plan is not part of any "required
                  aggregation group" or "permissive aggregation group";

                  (2)      if this Plan is a part of a "required aggregation
                  group" but not part of a "permissive aggregation group" and
                  the "Top-Heavy ratio" for the group of plans exceeds sixty
                  percent (60%); or

                  (3)      if this Plan is a part of a "required aggregation
                  group" and part of a "permissive aggregation group" and the
                  "Top-Heavy ratio" for the "permissive aggregation group"
                  exceeds sixty percent (60%).

                  (b)      "Top-Heavy ratio" means, with respect to a
         "determination date":

                  (1)      If the Employer maintains one or more defined
                  contribution plans (including any simplified employee pension
                  plan (as defined in Code Section 408(k))) and the Employer has
                  not maintained any defined benefit plan which during the
                  5-year period ending on the "determination date" has or has
                  had accrued benefits, the Top-Heavy ratio for this plan alone
                  or for the "required aggregation group" or "permissive
                  aggregation group" as appropriate is a fraction, the numerator
                  of which is the sum of the account balances of all Key
                  Employees as of the "determination date" (including any part
                  of any account balance distributed in the 5-year period ending
                  on the "determination date"), and the denominator of which is
                  the sum of all account balances (including any part of any
                  account balance distributed in the 5-year period ending on the
                  "determination date"), both computed in accordance with Code
                  Section 416 and the Regulations

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                  thereunder. Both the numerator and denominator of the
                  Top-Heavy ratio are increased to reflect any contribution not
                  actually made as of the "determination date," but which is
                  required to be taken into account on that date under Code
                  Section 416 and the Regulations thereunder.

                  (2)      If the Employer maintains one or more defined
                  contribution plans (including any simplified employee pension
                  plan) and the Employer maintains or has maintained one or more
                  defined benefit plans which during the 5-year period ending on
                  the "determination date" has or has had any accrued benefits,
                  the Top-Heavy ratio for any "required aggregation group" or
                  "permissive aggregation group" as appropriate is a fraction,
                  the numerator of which is the sum of account balances under
                  the aggregated defined contribution plan or plans for all Key
                  Employees, determined in accordance with (1) above, and the
                  present value of accrued benefits under the aggregated defined
                  benefit plan or plans for all Key Employees as of the
                  "determination date," and the denominator of which is the sum
                  of the account balances under the aggregated defined
                  contribution plan or plans for all participants, determined in
                  accordance with (1) above, and the "present value" of accrued
                  benefits under the defined benefit plan or plans for all
                  participants as of the "determination date," all determined in
                  accordance with Code Section 416 and the Regulations
                  thereunder. The accrued benefits under a defined benefit plan
                  in both the numerator and denominator of the Top-Heavy ratio
                  are increased for any distribution of an accrued benefit made
                  in the five-year period ending on the determination date.

                  (3)      For purposes of (1) and (2) above, the value of
                  account balances and the present value of accrued benefits
                  will be determined as of the most recent "valuation date" that
                  falls within or ends with the 12-month period ending on the
                  "determination date," except as provided in Code Section 416
                  and the Regulations thereunder for the first and second plan
                  years of a defined benefit plan. The account balances and
                  accrued benefits of a participant (i) who is not a Key
                  Employee but who was a Key Employee in a prior year, or (ii)
                  who has not been credited with at least one Hour of Service
                  with any Employer maintaining the plan at any time during the
                  5-year period ending on the "determination date" will be
                  disregarded. The calculation of the Top-Heavy ratio, and the
                  extent to which distributions, rollovers, and transfers are
                  taken into account will be made in accordance with Code
                  Section 416 and the Regulations thereunder. Deductible
                  Employee contributions will not be taken into account for
                  purposes of computing the Top-Heavy ratio. When aggregating
                  plans the value of account balances and accrued benefits will
                  be calculated with reference to the "determination dates" that
                  fall within the same calendar year.

                  The accrued benefit of a participant other than a Key Employee
                  shall be determined under (i) the method, if any, that
                  uniformly applies for accrual purposes under all defined
                  benefit plans maintained by the employer, or (ii) if there is
                  no such method, as if such benefit accrued not more rapidly
                  than the slowest accrual rate permitted under the fractional
                  rule of Code Section 411(b)(1)(C).

                  (c)      "Determination date" means, for any Plan Year
         subsequent to the first Plan Year, the last day of the preceding Plan
         Year. For the first Plan Year of the Plan, "determination date" means
         the last day of that Plan Year.

                  (d)      "Permissive aggregation group" means the "required
         aggregation group" of plans plus any other plan or plans of the
         Employer which, when considered as a group with the required
         aggregation group, would continue to satisfy the requirements of Code
         Sections 401(a)(4) and 410.

                  (e)      "Present value" means the present value based only on
         the interest and mortality rates specified in the Adoption Agreement.

                  (f)      "Required aggregation group" means: (1) each
         qualified plan of the Employer in which at least one Key Employee
         participates or participated at any time during the determination
         period (regardless of whether the plan has terminated), and (2) any
         other qualified plan of the Employer which enables a plan described in
         (1) to meet the requirements of Code Sections 401(a)(4) or 410.

                  (g)      "Valuation date" means the "Determination Date."

                                    ARTICLE X
                                  MISCELLANEOUS

10.1     EMPLOYER ADOPTIONS

                  (a)      Any organization may become the Employer hereunder by
         executing the Adoption Agreement in a form satisfactory to the
         Administrator, and it shall provide such additional information as the
         Administrator may require. The consent of the Administrator to act as
         such shall be signified by its execution of the Adoption Agreement or a
         separate agreement (including, if elected in the Adoption Agreement, a
         separate trust agreement).

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                  (b)      Except as otherwise provided in this Plan, the
         affiliation of the Employer and the participation of its Participants
         shall be separate and apart from that of any other employer and its
         participants hereunder.

10.2     PARTICIPANT'S RIGHTS

                  This Plan shall not be deemed to constitute a contract between
the Employer and any Participant or to be a consideration or an inducement for
the employment of any Participant or Employee. Nothing contained in this Plan
shall be deemed to give any Participant or Employee the right to be retained in
the service of the Employer or to interfere with the right of the Employer to
discharge any Participant or Employee at any time regardless of the effect which
such discharge shall have upon the Employee as a Participant of this Plan.

10.3     ALIENATION

                  (a)      Subject to the exceptions provided below and as
         otherwise permitted by the Code and the Act, no benefit which shall be
         payable to any person (including a Participant or the Participant's
         Beneficiary) shall be subject in any manner to anticipation,
         alienation, sale, transfer, assignment, pledge, encumbrance, or charge,
         and any attempt to anticipate, alienate, sell, transfer, assign,
         pledge, encumber, or charge the same shall be void; and no such benefit
         shall in any manner be liable for, or subject to, the debts, contracts,
         liabilities, engagements, or torts of any such person, nor shall it be
         subject to attachment or legal process for or against such person, and
         the same shall not be recognized except to such extent as may be
         required by law.

                  (b)      Subsection (a) shall not apply to the extent a
         Participant or Beneficiary is indebted to the Plan by reason of a loan
         made pursuant to Section 7.2. At the time a distribution is to be made
         to or for a Participant's or Beneficiary's benefit, such portion of the
         amount to be distributed as shall equal such indebtedness shall be paid
         to the Plan, to apply against or discharge such indebtedness. Prior to
         making a payment, however, the Participant or Beneficiary must be given
         notice by the Administrator that such indebtedness is to be so paid in
         whole or part from the Participant's interest in the Plan. If the
         Participant or Beneficiary does not agree that the indebtedness is a
         valid claim against the Participant's interest in the Plan, the
         Participant or Beneficiary shall be entitled to a review of the
         validity of the claim in accordance with procedures provided in
         Sections 2.10 and 2.11.

                  (c)      Subsection (a) shall not apply to a "qualified
         domestic relations order" defined in Code Section 414(p), and those
         other domestic relations orders permitted to be so treated by the
         Administrator under the provisions of the Retirement Equity Act of
         1984. The Administrator shall establish a written procedure to
         determine the qualified status of domestic relations orders and to
         administer distributions under such qualified orders. Further, to the
         extent provided under a "qualified domestic relations order," a former
         spouse of a Participant shall be treated as the spouse or surviving
         spouse for all purposes under the Plan.

                  (d)      Notwithstanding any provision of this Section to the
         contrary, an offset to a Participant's accrued benefit against an
         amount that the Participant is ordered or required to pay the Plan with
         respect to a judgment, order, or decree issued, or a settlement entered
         into, on or after August 5, 1997, shall be permitted in accordance with
         Code Sections 401(a)(13)(C) and (D).

10.4     CONSTRUCTION OF PLAN

                  This Plan and Trust shall be construed and enforced according
to the Code, the Act and the laws of the state or commonwealth in which the
Employer's (or if there is a corporate Trustee, the Trustee's) principal office
is located (unless otherwise designated in the Adoption Agreement), other than
its laws respecting choice of law, to the extent not pre-empted by the Act.

10.5     GENDER AND NUMBER

                  Wherever any words are used herein in the masculine, feminine
or neuter gender, they shall be construed as though they were also used in
another gender in all cases where they would so apply, and whenever any words
are used herein in the singular or plural form, they shall be construed as
though they were also used in the other form in all cases where they would so
apply.

10.6     LEGAL ACTION

                  In the event any claim, suit, or proceeding is brought
regarding the Plan established hereunder to which the Employer or the
Administrator may be a party, and such claim, suit, or proceeding is resolved in
favor of the Employer or the Administrator, they may be entitled to be
reimbursed from the Plan Fund for any and all costs, attorney's fees, and other
expenses pertaining thereto incurred by them for which they shall have become
liable.

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10.7     PROHIBITION AGAINST DIVERSION OF FUNDS

                  (a)      Except as provided below and otherwise specifically
         permitted by law, it shall be impossible by operation of the Plan by
         termination of either, by power of revocation or amendment, by the
         happening of any contingency, by collateral arrangement or by any other
         means, for any part of the corpus or income of any Plan Fund maintained
         pursuant to the Plan or any funds contributed thereto to be used for,
         or diverted to, purposes other than the exclusive benefit of
         Participants, Former Participants, or their Beneficiaries.

                  (b)      In the event the Employer shall make a contribution
         under a mistake of fact pursuant to Act Section 403(c)(2)(A), the
         Employer may demand repayment of such contribution at any time within
         one (1) year following the time of payment and the Administrator shall
         return such amount to the Employer within the one (1) year period.
         Earnings of the Plan attributable to the contributions may not be
         returned to the Employer but any losses attributable thereto must
         reduce the amount so returned.

                  No Contract will be purchased under the Plan unless such
         Contract of separate definite written agreement between the Employer
         and the Insurer provides that: (1) no value under contracts providing
         benefits under the Plan or credits determined by the Insurer (on
         account of dividends, earnings, or other experience rating credits, or
         surrender or cancellation credits) with respect to such Contracts may
         be paid or returned to the Employer or diverted to or used for other
         than the exclusive benefit of the Participants or their Beneficiaries.
         Premiums or other consideration received by the insurance company must
         be allocated to Participants' accounts under the Plan.

                  (c)      Except as specifically stated in the Plan, any
         contribution made by the Employer to the Plan (if the Employer is not
         tax-exempt) is conditioned upon the deductibility of the contribution
         by the Employer under the Code and, to the extent any such deduction is
         disallowed, the Employer may, within one (1) year following a final
         determination of the disallowance, whether by agreement with the
         Internal Revenue Service or by final decision of a court of competent
         jurisdiction, demand repayment of such disallowed contribution and the
         Administrator shall return such contribution within one (1) year
         following the disallowance. Earnings of the Plan attributable to the
         contribution may not be returned to the Employer, but any losses
         attributable thereto must reduce the amount so returned.

10.8     EMPLOYER'S, ADMINISTRATOR'S AND TRUSTEE'S PROTECTIVE CLAUSE

                  The Employer, Administrator and Trustee, and their successors,
shall not be responsible for the validity of any Contract issued hereunder or
for the failure on the part of the Insurer to make payments provided by any such
Contract, or for the action of any person which may delay payment or render a
Contract null and void or unenforceable in whole or in part.

10.9     INSURER'S PROTECTIVE CLAUSE

                  Except as otherwise agreed upon in writing between the
Employer and the Insurer, an Insurer which issues any Contracts hereunder shall
not have any responsibility for the validity of this Plan or for the tax or
legal aspects of this Plan. The Insurer shall be protected and held harmless in
acting in accordance with any written direction of the Administrator or Trustee,
and shall have no duty to see to the application of any funds paid to the
Administrator, nor be required to question any actions directed by the
Administrator. Regardless of any provision of this Plan, the Insurer shall not
be required to take or permit any action or allow any benefit or privilege
contrary to the terms of any Contract which it issues hereunder, or the rules of
the Insurer.

10.10    RECEIPT AND RELEASE FOR PAYMENTS

                  Any payment to any Participant, the Participant's legal
representative, Beneficiary, or to any guardian or committee appointed for such
Participant or Beneficiary in accordance with the provisions of this Plan,
shall, to the extent thereof, be in full satisfaction of all claims hereunder
against the Administrator and the Employer.

10.11    ACTION BY THE EMPLOYER

                  Whenever the Employer under the terms of the Plan is permitted
or required to do or perform any act or matter or thing, it shall be done and
performed by a person duly authorized by its legally constituted authority.

10.12    NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY

                  The "named Fiduciaries" of this Plan are (1) the Employer, (2)
the Administrator, (3) the Trustee (if the Trustee has discretionary authority
as elected in the Adoption Agreement or as otherwise agreed upon by the Employer
and the Trustee), and (4) any Investment Manager appointed hereunder. The named
Fiduciaries shall have only those specific powers, duties, responsibilities, and
obligations as are specifically given them under the Plan including, but not
limited to, any agreement allocating or delegating their responsibilities, the
terms of which are incorporated herein by reference. In general, the Employer
shall have the sole responsibility for making the contributions provided for
under the Plan; and shall have the sole authority to

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appoint and remove the Trustee and the Administrator; to formulate the Plan's
"funding policy and method"; and to amend the elective provisions of the
Adoption Agreement or terminate, in whole or in part, the Plan. The
Administrator shall have the sole responsibility for the administration of the
Plan, which responsibility is specifically described in the Plan. If the Trustee
has discretionary authority, it shall have the sole responsibility of management
of the assets held under the Plan, except those assets, the management of which
has been assigned to an Investment Manager or Administrator, who shall be solely
responsible for the management of the assets assigned to it, all as specifically
provided in the Plan. Each named Fiduciary warrants that any directions given,
information furnished, or action taken by it shall be in accordance with the
provisions of the Plan, authorizing or providing for such direction, information
or action. Furthermore, each named Fiduciary may rely upon any such direction,
information or action of another named Fiduciary as being proper under the Plan,
and is not required under the Plan to inquire into the propriety of any such
direction, information or action. It is intended under the Plan that each named
Fiduciary shall be responsible for the proper exercise of its own powers,
duties, responsibilities and obligations under the Plan. No named Fiduciary
shall guarantee the Plan Fund in any manner against investment loss or
depreciation in asset value. Any person or group may serve in more than one
Fiduciary capacity.

10.13    HEADINGS

                  The headings and subheadings of this Plan have been inserted
for convenience of reference and are to be ignored in any construction of the
provisions hereof.

10.14    APPROVAL BY INTERNAL REVENUE SERVICE

                  Notwithstanding anything herein to the contrary, if, pursuant
to a timely application filed by or on behalf of the Plan, the Commissioner of
the Internal Revenue Service or the Commissioner's delegate should determine
that the Plan does not initially qualify as a tax-exempt plan under Code
Sections 401 and 501, and such determination is not contested, or if contested,
is finally upheld, then if the Plan is a new plan, it shall be void ab initio
and all amounts contributed to the Plan, by the Employer, less expenses paid,
shall be returned within one (1) year and the Plan shall terminate, and the
Trustee shall be discharged from all further obligations. If the
disqualification relates to a Plan amendment, then the Plan shall operate as if
it had not been amended. If the Employer's Plan fails to attain or retain
qualification, such Plan will no longer participate in this prototype plan and
will be considered an individually designed plan.

10.15    UNIFORMITY

                  All provisions of this Plan shall be interpreted and applied
in a uniform, nondiscriminatory manner.

10.16    PAYMENT OF BENEFITS

                  Except as otherwise provided in the Plan, benefits under this
Plan shall be paid, subject to Sections 6.10, 6.11 and 12.9, only upon death,
Total and Permanent Disability, normal or early retirement, termination of
employment, or termination of the Plan.

10.17    BONDING

                  The Administrator, and any other fiduciary, officer of the
Company and Employee of the Company who handles funds of the Plan shall be
bonded as required by ERISA. Such bond shall protect the Plan against loss by
reason of acts of fraud or dishonesty by such persons directly or through the
connivance of others. The amount of the bond shall not be less than 10 percent
of the value of the Contract at the beginning of the Year nor more than
$500,000. In no event shall the bond be less than $1000. If the Secretary of
U.S. Department of Labor prescribes an amount in excess if $500,000, however, a
bond in the prescribed amount shall be obtained.

                                   ARTICLE XI
                             PARTICIPATING EMPLOYERS

11.1     ELECTION TO BECOME A PARTICIPATING EMPLOYER

                  Notwithstanding anything herein to the contrary, with the
consent of the Employer, any Affiliated Employer may adopt the Employer's Plan
and all of the provisions hereof, and participate herein and be known as a
Participating Employer, by a properly executed document evidencing said intent
and will of such Participating Employer. Regardless of the preceding, an entity
that ceases to be an Affiliated Employer may continue to be a Participating
Employer through the end of the transition period for certain dispositions set
forth in Code Section 410(b)(6)(C). In the event a Participating Employer is not
an Affiliated Employer and the transition period in the preceding sentence, if
applicable, has expired, then this Plan will be considered an individually
designed plan.

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11.2     REQUIREMENTS OF PARTICIPATING EMPLOYERS

                  (a)      Each Participating Employer shall be required to
         select the same Adoption Agreement provisions as those selected by the
         Employer other than the Plan Year, the Fiscal Year, and such other
         items that must, by necessity, vary among employers.

                  (b)      The Administrator may, but shall not be required to,
         commingle, hold and invest as one Plan Fund all contributions made by
         Participating Employers, as well as all increments thereof. However,
         the assets of the Plan shall, on an ongoing basis, be available to pay
         benefits to all Participants and Beneficiaries under the Plan without
         regard to the Employer or Participating Employer who contributed such
         assets.

                  (c)      Unless the Employer otherwise directs, any expenses
         of the Plan which are to be paid by the Employer or borne by the Trust
         Fund shall be paid by each Participating Employer in the same
         proportion that the total amount standing to the credit of all
         Participants employed by such Employer bears to the total standing to
         the credit of all Participants.

11.3     DESIGNATION OF AGENT

                  Each Participating Employer shall be deemed to be a part of
this Plan; provided, however, that with respect to all of its relations with the
Trustee and Administrator for purposes of this Plan, each Participating Employer
shall be deemed to have designated irrevocably the Employer as its agent. Unless
the context of the Plan clearly indicates otherwise, the word "Employer" shall
be deemed to include each Participating Employer as related to its adoption of
the Plan.

11.4     EMPLOYEE TRANSFERS

                  In the event an Employee is transferred between Participating
Employers, accumulated service and eligibility shall be carried with the
Employee involved. No such transfer shall effect a termination of employment
hereunder, and the Participating Employer to which the Employee is transferred
shall thereupon become obligated hereunder with respect to such Employee in the
same manner as was the Participating Employer from whom the Employee was
transferred.

11.5     PARTICIPATING EMPLOYER'S CONTRIBUTION AND FORFEITURES

                  Any contribution or Forfeiture subject to allocation during
each Plan Year shall be allocated among all Participants of all Participating
Employers in accordance with the provisions of this Plan. However, if a
Participating Employer is not an Affiliated Employer (due to the transition rule
for certain dispositions set forth in Code Section 410(b)(6)(C)) then any
contributions made by such Participating Employer will only be allocated among
the Participants eligible to share of the Participating Employer. On the basis
of the information furnished by the Employer, the Administrator may keep
separate books and records concerning the affairs of each Participating Employer
hereunder and as to the accounts and credits of the Employees of each
Participating Employer. The Administrator may, but need not, register Contracts
so as to evidence that a particular Participating Employer is the interested
Employer hereunder, but in the event of an Employee transfer from one
Participating Employer to another, the employing Participating Employer shall
immediately notify the Administrator thereof.

11.6     AMENDMENT

                  Amendment of this Plan by the Employer at any time when there
shall be a Participating Employer that is an Affiliated Employer hereunder shall
only be by the written action of each and every Participating Employer and with
the consent of the Administrator where such consent is necessary in accordance
with the terms of this Plan.

11.7     DISCONTINUANCE OF PARTICIPATION

                  Any Participating Employer that is an Affiliated Employer
shall be permitted to discontinue or revoke its participation in the Plan at any
time. At the time of any such discontinuance or revocation, satisfactory
evidence thereof and of any applicable conditions imposed shall be delivered to
the Administrator. The Administrator shall thereafter transfer, deliver and
assign Contracts and other Plan Fund assets allocable to the Participants of
such Participating Employer to such new administrator as shall have been
designated by such Participating Employer, in the event that it has established
a separate qualified retirement plan for its employees provided, however, that
no such transfer shall be made if the result is the elimination or reduction of
any "Section 411(d)(6) protected benefits" as described in Section 8.1(e). If
no successor is designated, the Administrator shall retain such assets for the
Employees of said Participating Employer pursuant to the provisions of Article
VII hereof. In no such event shall any part of the corpus or income of the Plan
Fund as it relates to such Participating Employer be used for or diverted to
purposes other than for the exclusive benefit of the employees of such
Participating Employer.

11.8     ADMINISTRATOR'S AUTHORITY

                  The Administrator shall have authority to make any and all
necessary rules or regulations, binding upon all Participating Employers and all
Participants, to effectuate the purpose of this Article.

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                                   ARTICLE XII
                           CASH OR DEFERRED PROVISIONS

                  Except as specifically provided elsewhere in this Plan, the
provisions of this Article shall apply with respect to any 401 (k) Profit
Sharing Plan regardless of any provisions in the Plan to the contrary.

12.1     FORMULA FOR DETERMINING EMPLOYER'S CONTRIBUTION

                  (a)      For each Plan Year, the Employer will (or may with
         respect to any discretionary contributions) contribute to the Plan:

                  (1)      The amount of the total salary reduction elections of
                  all Participants made pursuant to Section 12.2(a), which
                  amount shall be deemed Elective Deferrals, plus

                  (2)      If elected in Section G.3 of the Adoption Agreement,
                  a matching contribution equal to the percentage, if any,
                  specified in Section G.3 of the Adoption Agreement of the
                  Elective Deferrals of each Participant eligible to share in
                  the allocations of the matching contribution, which amount
                  shall be deemed an Employer's matching contribution or
                  Qualified Matching Contribution as elected in Section G.3 of
                  the Adoption Agreement, plus

                  (3)      If elected in Section G.3 of the Adoption Agreement a
                  Prevailing Wage Contribution or a discretionary amount
                  determined each year by the Employer, which amount if any,
                  shall be deemed an Employer's Non-Elective Contribution, plus

                  (4)      If elected in Section G6 of the Adoption Agreement, a
                  Qualified Non-Elective Contribution.

                  (b)      Notwithstanding the foregoing, if the Employer is not
         a tax-exempt entity, then the Employer's contributions for any Fiscal
         Year may generally not exceed the maximum amount allowable as a
         deduction to the Employer under the provisions of Code Section 404.
         However, to the extent necessary to provide the Top-Heavy minimum
         allocations, the Employer shall make a contribution even if it exceeds
         current or accumulated Net Profit or the amount that is deductible
         under Code Section 404. All contributions by the Employer shall be made
         in cash or in Employer securities as is acceptable to the
         Administrator, Trustee and Insurer.

12.2     PARTICIPANT'S SALARY REDUCTION ELECTION

                  (a)      Each Participant may elect to defer a portion of
         Compensation which would have been received in the Plan Year, but for
         the salary reduction election, subject to the limitations of this
         Section and Section G.I .p of the Adoption Agreement. A salary
         reduction election (or modification of an earlier election) may not be
         made with respect to Compensation which is currently available on or
         before the date the Participant executed such election, or if later,
         the later of the date the Employer adopts this cash or deferred
         arrangement or the date such arrangement first became effective. Any
         elections made pursuant to this Section shall become effective as soon
         as is administratively feasible. If the automatic election option is
         elected in the Adoption Agreement, then in the event a Participant
         fails to make a deferral election and does not affirmatively elect to
         receive cash, such Participant shall be deemed to have made a deferral
         election equal to the percentage of Compensation set forth in the
         Adoption Agreement. The automatic election may, in accordance with
         procedures established by the Administrator, be applied to all
         Participants or to Eligible Employees who become Participants after a
         certain date. For purposes of this Section, the annual dollar
         limitation of Code Section 401(a)(17) ($150,000 as adjusted) shall not
         apply.

                           Additionally, if elected in Section G.l.d of the
         Adoption Agreement, each Participant may elect to defer a different
         percentage or amount of any cash bonus to be paid by the Employer
         during the Plan Year. A deferral election may not be made with respect
         to cash bonuses which are currently available on or before the date the
         Participant executes such election.

                           The amount by which Compensation and/or cash bonuses
         are reduced shall be that Participant's Elective Deferrals and shall be
         treated as an Employer contribution and allocated to that Participant's
         Elective Deferral Account.

                           Once made, a Participant's election to reduce
         Compensation shall remain in effect until modified or terminated.
         Modifications may be made as specified in Section G.I of the Adoption
         Agreement, and terminations may be made at any time. Any modification
         or termination of an election will become effective as soon as is
         administratively feasible.

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                  (b)      The balance in each Participant's Elective Deferral
         Account, Qualified Matching Contribution Account and Qualified
         Non-Elective Contribution Account shall be fully Vested at all times
         and, except as otherwise provided herein, shall not be subject to
         Forfeiture for any reason.

                  (c)      Amounts held in a Participant's Elective Deferral
         Account, Qualified Matching Contribution Account and Qualified
         Non-Elective Account may only be distributable as provided in (4), (5)
         or (6) below or as provided under the other provisions of this Plan,
         but in no event prior to the earlier of the following events or any
         other events permitted by the Code or Regulations:

                  (1)      the Participant's separation from service, Total and
                  Permanent Disability, or death;

                  (2)      the Participant's attainment of age 59 1/2;

                  (3)      the proven financial hardship of the Participant,
                  subject to the limitations of Section 12.9;

                  (4)      the termination of the Plan without the existence at
                  the time of Plan termination of another defined contribution
                  plan or the establishment of a successor defined contribution
                  plan by the Employer or an Affiliated Employer within the
                  period ending twelve months after distribution of all assets
                  from the Plan maintained by the Employer. For this purpose, a
                  defined contribution does not include an employee stock
                  ownership plan (as defined in Code Section 4975(e)(7) or 409),
                  a simplified employee pension plan (as defined in Code Section
                  408(k)), or a SIMPLE individual retirement account plan (as
                  defined in Code Section 408(p));

                  (5)      the date of the sale by the Employer to an entity
                  that is not an Affiliated Employer of substantially all of the
                  assets (within the meaning of Code Section 409(d)(2)) with
                  respect to a Participant who continues employment with the
                  corporation acquiring such assets; or

                  (6)      the date of the sale by the Employer or an Affiliated
                  Employer of its interest in a subsidiary (within the meaning
                  of Code Section 409(d)(3)) to an entity that is not an
                  Affiliated Employer with respect to a Participant who
                  continues employment with such subsidiary.

                  Distributions that are made because of (4), (5), or (6) above
         must be made in a lump-sum.

                  (d)      A Participant's "elective deferrals" made under this
         Plan and all other plans, contracts or arrangements of the Employer
         maintaining this Plan during any calendar year shall not exceed the
         dollar limitation imposed by Code Section 402(g), as in effect at the
         beginning of such calendar year. This dollar limitation shall be
         adjusted annually pursuant to the method provided in Code Section
         415(d) in accordance with Regulations. For this purpose, "elective
         deferrals" means, with respect to a calendar year, the sum of all
         employer contributions made on behalf of such Participant pursuant to
         an election to defer under any qualified cash or deferred arrangement
         as described in Code Section 401(k), any salary reduction simplified
         employee pension (as defined in Code Section 408(k)(6)), any SIMPLE IRA
         plan described in Code Section 408(p), any eligible deferred
         compensation plan under Code Section 457, any plans described under
         Code Section 50l(c)(18), and any Employer contributions made on the
         behalf of a Participant for the purchase of an annuity contract under
         Code Section 403(b) pursuant to a salary reduction agreement. "Elective
         deferrals" shall not include any deferrals properly distributed as
         excess "Annual Additions" pursuant to Section 4.5.

                  (e)      If a Participant participating in plans of more than
         one employer has Excess Deferrals for a taxable year, the Participant
         may, not later than March 1st following the close of such taxable year,
         notify the Administrator in writing of such excess and request that the
         Participant's Elective Deferrals under this Plan be reduced by an
         amount specified by the Participant. In such event, the Administrator
         shall direct the distribution of such excess amount (and any "Income"
         allocable to such excess amount) to the Participant not later than the
         first April 15th following the close of the Participant's taxable year.
         Any distribution of less than the entire amount of Excess Deferrals and
         "Income" shall be treated as a pro rata distribution of Excess
         Deferrals and "Income." The amount distributed shall not exceed the
         Participant's Elective Deferrals under the Plan for the taxable year.
         Any distribution on or before the last day of the Participant's taxable
         year must satisfy each of the following conditions:

                  (1)      the Participant shall designate the distribution as
                  Excess Deferrals;

                  (2)      the distribution must be made after the date on which
                  the Plan received the Excess Deferrals; and

                  (3)      the Plan must designate the distribution as a
                  distribution of Excess Deferrals.

                           Regardless of the preceding, if a Participant has
         Excess Deferrals solely from elective deferrals made under this Plan or
         any other plan maintained by the Employer, a Participant will be deemed
         to have notified the

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         Administrator of such excess amount and the Administrator shall direct
         the distribution of such Excess Deferrals in a manner consistent with
         the provisions of this subsection.

                           Any distribution made pursuant to this subsection
         shall be made first from unmatched Elective Deferrals and, thereafter,
         from Elective Deferrals which are matched. Matching contributions which
         relate to Excess Deferrals that are distributed pursuant to this
         Section 12.2(e) shall be treated as a Forfeiture to the extent required
         pursuant to Code Section 401(a)(4) and the Regulations thereunder.

                  For the purpose of this subsection, "Income" means the amount
         of income or loss allocable to a Participant's Excess Deferrals.
         However, "Income" for the period between the end of the taxable year of
         the Participant and the date of the distribution (the "gap period") is
         not required to be distributed.

                  (f)      Notwithstanding the preceding, a Participant's Excess
         Deferrals shall be reduced, but not below zero, by any distribution
         and/or recharacterization of Excess Deferrals pursuant to Section
         12.5(a) for the Plan Year beginning with or within the taxable year of
         the Participant.

                  (g)      In the event a Participant has received a hardship
         distribution pursuant to Regulation 1.401 (k)-1 (d)(2)(iii)(B) from any
         other plan maintained by the Employer or from the Participant's
         Elective Deferral Account pursuant to Section 12.9, after-tax employee
         contributions or Participant Matched Contributions, then such
         Participant shall not be permitted to elect to have Elective Deferrals
         contributed to the Plan for a period of twelve (12) months following
         the receipt of the distribution. Furthermore, the dollar limitation
         under Code Section 402(g) shall be reduced, with respect to the
         Participant's taxable year following the taxable year in which the
         hardship distribution was made, by the amount of such Participant's
         Elective Deferrals, if any, made pursuant to this Plan (and any other
         plan maintained by the Employer) for the taxable year of the hardship
         distribution.

                  (h)      At Normal Retirement Date, or such other date when
         the Participant shall be entitled to receive benefits, the fair market
         value of the Participant's Elective Deferral Account shall be used to
         provide benefits to the Participant or the Participant's Beneficiary.

                  (i)      If during a Plan Year, it is projected that the
         aggregate amount of Elective Deferrals to be allocated to all Highly
         Compensated Participants under this Plan would cause the Plan to fail
         the tests set forth in Section 12.4, then the Administrator may
         automatically reduce the deferral amount of affected Highly Compensated
         Participants, beginning with the Highly Compensated Participant who has
         the highest actual deferral ratio until it is anticipated the Plan will
         pass the tests or until the actual deferral ratio equals the actual
         deferral ratio of the Highly Compensated Participant having the next
         highest actual deferral ratio. This process may continue until it is
         anticipated that the Plan will satisfy one of the tests set forth in
         Section 12.4. Alternatively, the Employer may specify a maximum
         percentage of Compensation that may be deferred by Highly Compensated
         Participants.

                  (j)      The Employer and the Administrator shall establish
         procedures necessary to implement the salary reduction elections
         provided for herein. Such procedures may contain limits on salary
         deferral elections such as limiting elections to whole percentages of
         Compensation or to equal dollar amounts per pay period that an election
         is in effect.

12.3     ALLOCATION OF CONTRIBUTION, FORFEITURES AND EARNINGS

                  (a)      The Administrator shall establish and maintain an
         account in the name of each Participant to which the Administrator
         shall credit all amounts allocated to each such Participant as set
         forth herein.

                  (b)      The Employer shall provide the Administrator with all
         information required by the Administrator to make a proper allocation
         of Employer contributions for each Plan Year. Within a reasonable
         period of time after the date of receipt by the Administrator of such
         information, the Administrator shall allocate contributions as follows:

                  (1)      With respect to Elective Deferrals made pursuant to
                  Section 12.1(a)(l), to each Participant's Elective Deferral
                  Account in an amount equal to each such Participant's Elective
                  Deferrals for the year.

                  (2)      With respect to the Employer's matching contribution
                  made pursuant to Section 12.1(a)(2), to each Participant's
                  Account, or Participant's Qualified Matching Contribution
                  Account, as elected in Section G.3 of the Adoption Agreement,
                  in accordance with Section 12.1(a)(2).

                  Except, however, in order to be entitled to receive any
                  Employer matching contribution, a Participant must satisfy the
                  conditions for sharing in the Employer matching contribution
                  as set forth in the Adoption Agreement. Furthermore,
                  regardless of any election in Section G.4 of the Adoption
                  Agreement to the contrary, for the Plan Year in which this
                  Plan terminates, a Participant shall only be eligible to share
                  in the allocation of the Employer's contributions for the Plan
                  Year if the Participant is employed at the end of the Plan
                  Year and has completed a Year of Service (or Period of Service
                  if the Elapsed Time Method is elected).

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                  (3)      With respect to the Employer's Non-Elective
                  Contribution made pursuant to Section 12.1(a)(3), to each
                  Participant's Account in accordance with the provisions of
                  Section 4.3(b)(2) or (3) whichever is applicable.

                  (4)      With respect to the Employer's Qualified Non-Elective
                  Contribution made pursuant to Section 12.1(a)(4), to each
                  Participant's (excluding Highly Compensated Employees, if
                  elected in Section G.6 of the Adoption Agreement) Qualified
                  Non-Elective Contribution Account in accordance with the
                  Adoption Agreement.

                  (c)      Notwithstanding anything in the Plan to the contrary,
         in determining whether a Non-Key Employee has received the required
         minimum allocation pursuant to Section 4.3(e) such Non-Key Employee's
         Elective Deferrals and matching contributions used to satisfy the ADP
         tests in Section 12.4 or the ACP tests in Section 12.6 shall not be
         taken into account.

                  (d)      Notwithstanding anything herein to the contrary,
         Participants who terminated employment during the Plan Year shall share
         in the salary deferral contributions made by the Employer for the year
         of termination without regard to the Hours of Service credited.

                  (e)      Notwithstanding anything herein to the contrary
         (other than Sections 4.3(f) and 12.3(f), Participants shall only share
         in the allocations of the Employer's matching contribution made
         pursuant to Section 12.1(a)(2), the Employer's Non-Elective
         Contributions made pursuant to Section 12.1(a)(3), the Employer's
         Qualified Non-Elective Contribution made pursuant to Section
         12.1(a)(4), and Forfeitures as provided in Section G.2 of the Adoption
         Agreement. If no election is made in the Adoption Agreement, then a
         Participant shall be eligible to share in the allocation of the
         Employer's contribution for the year if the Participant completes more
         than 500 Hours of Service (or three (3) Months of Service if the
         Elapsed Time method is chosen in Section D.2.b of the Adoption
         Agreement) during the Plan Year or who is employed on the last day of
         the Plan Year. Furthermore, regardless of any election in the Adoption
         Agreement to the contrary, for the Plan Year in which this Plan
         terminates, a Participant shall only be eligible to share in the
         allocation of the Employer's contributions for the Plan Year if the
         Participant is employed at the end of the Plan Year and has completed a
         Year of Service (or Period of Service if the Elapsed Time Method is
         elected).

                  (f)      Notwithstanding anything in this Section to the
         contrary, the provisions of this subsection apply for any Plan Year if
         the Plan fails to satisfy the "ratio percentage test" due to a last day
         of the Plan Year allocation condition or an Hours of Service (or months
         of service) allocation condition. A plan satisfies the "ratio
         percentage test" if, on the last day of the Plan Year, the "benefiting
         ratio" of the Non-Highly Compensated Employees who are "includible" is
         at least 70% of the "benefiting ratio" of the Highly Compensated
         Employees who are "includible." The "benefiting ratio" of the
         Non-Highly Compensated Employees is the number of "includible"
         Non-Highly Compensated Employees "benefiting" under the Plan divided by
         the number of "includible" Employees who are Non-Highly Compensated
         Employees. The "benefiting ratio" of the Highly Compensated Employees
         is the number of Highly Compensated Employees "benefiting" under the
         Plan divided by the number of "includible" Highly Compensated
         Employees. "Includible" Employees are all Employees other than: (1)
         those Employees excluded from participating in the plan for the entire
         Plan Year by reason of the collective bargaining unit exclusion or the
         nonresident alien exclusion described in the Code or by reason of the
         age and service requirements of Article III; and (2) any Employee who
         incurs a separation from service during the Plan Year and fails to
         complete at least 501 Hours of Service (or three (3) months of service
         if the Elapsed Time Method is being used) during such Plan Year.

                  For purposes of this subsection, an Employee is "benefiting"
         under the Plan on a particular date if, under the Plan, the Employee is
         entitled to an Employer contribution or an allocation of Forfeitures
         for the Plan Year.

                  If this subsection applies, then the then the following rules
         will apply:

                  (1)      The group of Participants eligible to share in the
                  Employer's contributions or Forfeitures for the Plan Year will
                  be expanded to include the minimum number of Participants who
                  would not otherwise be eligible as are necessary to satisfy
                  the applicable test specified above.The specific Participants
                  who shall become eligible under the terms of this paragraph
                  shall be those who have not separated from service prior to
                  the last day of the Plan Year and, when compared to similarly
                  situated Participants, have completed the greatest number of
                  Hours of Service in the Plan Year.

                  (2)      If after application of paragraph (1) above, the
                  applicable test is still not satisfied, then the group of
                  Participants eligible to share in the Employer's contribution
                  or Forfeitures for the Plan Year shall be further expanded to
                  include the minimum of Participants who have separated from
                  service prior to the last day of the Plan Year as are
                  necessary to satisfy the applicable test. The specific
                  Participants who shall become eligible to share shall be those
                  Participants, when compared to similarly situated
                  Participants, who have completed the greatest number of Hours
                  of Service in the Plan Year before separation from service.

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                                             DEFINED CONTRIBUTION PROTOTYPE PLAN

                  Nothing in this subsection shall permit the reduction of a
         Participant's accrued benefit. Therefore any amounts that have
         previously been allocated to Participants may not be reallocated to
         satisfy these requirements. In such event, the Employer shall make an
         additional contribution equal to the amount such affected Participants
         would have received had they been included in the allocations, even if
         it exceeds the amount that would be deductible under Code Section 404.
         Such allocation adjustment must be made by the last day of the Plan
         Year.

12.4     ACTUAL DEFERRAL PERCENTAGE TESTS

                  (a)      Except as otherwise provided herein, this subsection
         applies if the Prior Year Testing method is elected in Section I.2 of
         the Adoption Agreement. The "Actual Deferral Percentage" (hereinafter
         "ADP") for a Plan Year for Participants who are Highly Compensated
         Employees (hereinafter "HCEs") for each Plan Year and the prior year's
         ADP for Participants who were Non-Highly Compensated Employees
         (hereinafter "NHCEs") for the prior Plan Year must satisfy one of the
         following tests:

                  (1)      The ADP for a Plan Year for Participants who are HCEs
                  for the Plan Year shall not exceed the prior year's ADP for
                  Participants who were NHCEs for the prior Plan Year multiplied
                  by 1.25; or

                  (2)      The ADP for a Plan Year for Participants who are HCEs
                  for the Plan Year shall not exceed the prior year's ADP for
                  Participants who were NHCEs for the prior Plan Year multiplied
                  by 2.0, provided that the ADP for Participants who are HCEs
                  docs not exceed the prior year's ADP for Participants who were
                  NHCEs in the prior Plan Year by more than two (2) percentage
                  points.

                  Notwithstanding the above, for purposes of applying the
                  foregoing tests with respect to the first Plan Year in which
                  the Plan permits any Participant to make Elective Deferrals,
                  the ADP for the prior year's NHCEs shall be deemed to be three
                  percent (3%) unless the Employer has elected in Section I.2.c
                  of the Adoption Agreement to use the current Plan Year's ADP
                  for these Participants. However, the provisions of this
                  paragraph may not be used if the Plan is a successor plan or
                  is otherwise prohibited from using such provisions pursuant to
                  IRS Notice 98-1 (or superseding guidance).

                  (b)      Notwithstanding the foregoing, if the Current Year
         Testing method is elected in Section 1.2.C of the Adoption Agreement,
         the ADP tests in (a)(1) and (a)(2), above shall be applied by comparing
         the current Plan Year's ADP for Participants who are HCEs with the
         current Plan Year's ADP (rather than the prior Plan Year's ADP) for
         Participants who are NHCEs for the current Plan Year. Once made, this
         election can only be changed if the Plan meets the requirements for
         changing to the Prior Year Testing method set forth in IRS Notice 98-1
         (or superseding guidance). Furthermore, this Plan must use the same
         testing method for both the ADP and ACP tests for Plan Years beginning
         on or after the date the Employer adopts its GUST restated plan.

                  (c)      This subsection applies to prevent the multiple use
         of the test set forth in subsection (a)(2) above. Any HCE eligible to
         make Elective Deferrals pursuant to Section 12.2 and to make after-tax
         voluntary Employee contributions or to receive matching contributions
         under this Plan or under any other plan maintained by the Employer or
         an Affiliated Employer, shall have either the actual deferral ratio
         adjusted in the manner described in Section 12.5 or the actual
         contribution ratio adjusted in the manner described in Section 12.7 so
         that the "Aggregate Limit" is not exceeded pursuant to Regulation
         1.401(m)-2. The amounts in excess of the "Aggregate Limit" shall be
         treated as either an Excess Contribution or an Excess Aggregate
         Contribution. The ADP and ACP of the HCEs are determined after any
         corrections required to meet the ADP and ACP tests and are deemed to be
         the maximum permitted under such tests for the Plan Year. Multiple use
         does not occur if either the ADP or ACP of the HCEs does not exceed
         1.25 multiplied by the ADP and ACP of the NHCEs.

                           "Aggregate Limit" means the sum of (i) 125 percent of
         the greater of the ADP of the NHCEs for the prior Plan Year or the ACP
         of such NHCEs under the plan subject to Code Section 401(m) for the
         Plan Year beginning with or within the prior Plan Year of the cash or
         deferred arrangement and (ii) the lesser of 200% or two (2) plus the
         lesser of such ADP or ACP. "Lesser" is substituted for "greater" in (i)
         above, and "greater" is substituted for "lesser" after "two (2) plus
         the" in (ii) above if it would result in a larger Aggregate Limit. If
         the Employer has elected in Section I.2.c of the Adoption Agreement to
         use the Current Year Testing method, then in calculating the "Aggregate
         Limit" for a particular Plan Year, the NHCEs ADP and ACP for that Plan
         Year, instead of the prior Plan Year, is used.

                  (d)      A Participant is an HCE for a particular Plan Year if
         the Participant meets the definition of an HCE in effect for that Plan
         Year. Similarly, a Participant is an NHCE for a particular Plan Year if
         the Participant does not meet the definition of an HCE in effect for
         that Plan Year.

                  (e)      For the purposes of this Section and Section 12.5,
         ADP means, for a specific group of Participants for a Plan Year, the
         average of the ratios (calculated separately for each Participant in
         such group) of (1) the amount of Employer contributions actually paid
         over to the Plan on behalf of such Participant for the Plan Year to (2)
         the Participant's 414(s) Compensation for such Plan Year. Employer
         contributions on behalf of any participant shall include: (1) any
         Elective Deferrals made pursuant to the Participant's deferral election
         (including Excess Deferrals of

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         HCEs), but excluding (i) Excess Deferrals of NHCEs that arise solely
         from Elective Deferrals made under the plan or plans of this Employer
         and (ii) Elective Deferrals that are taken into account in the ACP
         tests set forth in Section 12.6 (provided the ADP test is satisfied
         both with and without exclusion of these Elective Deferrals); and (2)
         at the election of the Employer, Qualified Non-Elective Contributions
         and Qualified Matching Contributions to the extent such contributions
         are not used to satisfy the ACP test.

                           The actual deferral ratio for each Participant and
         the ADP for each group shall be calculated to the nearest one-hundredth
         of one percent. Elective Deferrals allocated to each Highly Compensated
         Participant's Elective Deferral Account shall not be reduced by Excess
         Deferrals to the extent such excess amounts are made under this Plan or
         any other plan maintained by the Employer.

                  (f)      For purposes of this Section and Section 12.5, a
         Highly Compensated Participant and a Non-Highly Compensated Participant
         shall include any Employee eligible to make salary deferrals pursuant
         to Section 12.2 for the Plan Year. Such Participants who fail to make
         Elective Deferrals shall be treated for ADP purposes as Participants on
         whose behalf no Elective Deferrals are made.

                  (g)      In the event this Plan satisfies the requirements of
         Code Sections 401(a)(4), 401(k), or 410(b) only if aggregated with one
         or more other plans, or if one or more other plans satisfy the
         requirements of such sections of the Code only if aggregated with this
         Plan, then this Section shall be applied by determining the ADP of
         Employees as if all such plans were a single plan. Any adjustments to
         the NHCE ADP for the prior year will be made in accordance with IRS
         Notice 98-1 and any superseding guidance, unless the Employer has
         elected in the Adoption Agreement to use the Current Year Testing
         method. Plans may be aggregated in order to satisfy Code Section 401(k)
         only if they have the same Plan Year and use the same ADP testing
         method.

                  (h)      The ADP for any Participant who is an HCE for the
         Plan Year and who is eligible to have Elective Deferrals (and Qualified
         Non-Elective Contributions or Qualified Matching Contributions, or
         both, if treated as Elective Deferrals for purposes of the ADP test)
         allocated to such Participant's accounts under two (2) or more
         arrangements described in Code Section 401(k), that are maintained by
         the Employer, shall be determined as if such Elective Deferrals (and,
         if applicable, such Qualified Non-Elective Contributions or Qualified
         Matching Contributions, or both) were made under a single arrangement
         for purposes of determining such HCE's actual deferral ratio. However,
         if the cash or deferred arrangements have different Plan Years, this
         paragraph shall be applied by treating all cash or deferred
         arrangements ending with or within the same calendar year as a single
         arrangement. Notwithstanding the foregoing, certain plans shall be
         treated as separate if mandatorily disaggregated under Regulations
         under Code Section 401.

                  (i)      For purposes of determining the ADP and the amount of
         Excess Contributions pursuant to Section 12.5, only Elective Deferrals,
         Qualified Non-Elective Contributions and Qualified Matching
         Contributions contributed to the Plan prior to the end of the twelve
         (12) month period immediately following the Plan Year to which the
         contributions relate shall be considered.

                  (j)      Notwithstanding anything in this Section to the
         contrary, the provisions of this Section and Section 12.5 may be
         applied separately (or will be applied separately to the extent
         required by Regulations) to each "plan" within the meaning of
         Regulation 1.401 (k)-1 (g)(11) and Regulation 1.401 (k). Furthermore,
         for Plan Years beginning after December 31, 1998, the provisions of
         Code Section 401(k)(3)(F) may be used to exclude from consideration all
         Non-Highly Compensated Employees who have not satisfied the minimum age
         and service requirements of Code Section 410(a)(1)(A).

12.5     ADJUSTMENT TO ACTUAL DEFERRAL PERCENTAGE TESTS

                  (a)      In the event (or, with respect to subsection (c) when
         the Prior Year Testing method is being used, if it is anticipated) that
         for Plan Years beginning after December 31, 1996, the Plan does not
         satisfy one of the tests set forth in Section 12.4, the Administrator
         shall adjust Excess Contributions or the Employer shall make
         contributions pursuant to the options set forth below or any
         combination thereof. However, if the Prior Year testing method is being
         used and it is anticipated that the Plan might not satisfy one of such
         tests, then the Employer may make contributions pursuant to the options
         set forth in subsection (c) below.

                  (b)      On or before the fifteenth day of the third month
         following the end of each Plan Year, but in no event later than the
         close of the following Plan Year, the Highly Compensated Participant
         allocated the largest amount of Elective Deferrals shall have a portion
         of such Elective Deferrals (and "Income" allocable to such amounts)
         distributed (and/or, at the Participant's election, recharacterized as
         a after-tax voluntary Employee contribution pursuant to Section 4.8)
         until the total amount of Excess Contributions has been distributed, or
         until the amount of the Participant's Elective Deferrals equals the
         Elective Deferrals of the Highly Compensated Participant having the
         next largest amount of Elective Deferrals allocated. This process shall
         continue until the total amount of Excess Contributions has been
         distributed. Any distribution and/or recharacterization of Excess
         Contributions shall be made in the following order:

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                                             DEFINED CONTRIBUTION PROTOTYPE PLAN

                  (1)      With respect to the distribution of Excess
                  Contributions, such distribution:

                           (i)      may be postponed but not later than the
                           close of the Plan Year following the Plan Year to
                           which they are allocable;

                           (ii)     shall be made first from unmatched Elective
                           Deferrals and, thereafter, simultaneously from
                           Elective Deferrals which are matched and matching
                           contributions which relate to such Elective
                           Deferrals. Matching contributions which relate to
                           Excess Contributions shall be forfeited unless the
                           related matching contribution is distributed as an
                           Excess Aggregate Contribution pursuant to Section
                           12.7;

                           (iii)    shall be adjusted for "Income"; and

                           (iv)     shall be designated by the Employer as a
                           distribution of Excess Contributions (and "Income").

                  (2)      With respect to the recharacterization of Excess
                  Contributions pursuant to (a) above, such recharacterized
                  amounts:

                           (i)      shall be deemed to have occurred on the date
                           on which the last of those Highly Compensated
                           Participants with Excess Contributions to be
                           recharacterized is notified of the recharacterization
                           and the tax consequences of such recharacterization;

                           (ii)     shall not exceed the amount of Elective
                           Deferrals on behalf of any Highly Compensated
                           Participant for any Plan Year;

                           (iii)    shall be treated as after-tax voluntary
                           Employee contributions for purposes of Code Section
                           401(a)(4) and Regulation 1.401(k)-1(b). However, for
                           purposes of Sections 4.3(e) and 9.2 (Top-Heavy
                           rules), recharacterized Excess Contributions continue
                           to be treated as Employer contributions that are
                           Elective Deferrals. Excess Contributions (and
                           "Income" attributable to such amounts)
                           recharacterized as after-tax voluntary Employee
                           contributions shall continue to be nonforfeitable and
                           subject to the same distribution rules provided for
                           in Section 12.2(c); and

                           (iv)     are not permitted if the amount
                           recharacterized plus after-tax voluntary Employee
                           contributions actually made by such Highly
                           Compensated Participant, exceed the maximum amount of
                           after-tax voluntary Employee contributions
                           (determined prior to application of Section 12.6)
                           that such Highly Compensated Participant is permitted
                           to make under the Plan in the absence of
                           recharacterization.

                  (3)      Any distribution and/or recharacterization of less
                  than the entire amount of Excess Contributions shall be
                  treated as a pro rata distribution and/or recharacterization
                  of Excess Contributions and "Income."

                  (4)      For the purpose of this Section, "Income" means the
                  income or losses allocable to Excess Contributions. However,
                  "Income" for the period between the end of the Plan Year and
                  the date of the distribution (the "gap period") is not
                  required to be distributed.

                  (5)      Excess Contributions shall be treated as Employer
                  contributions for purposes of Code Sections 404 and 415 even
                  if distributed from the Plan.

                  (c)      Notwithstanding the above, within twelve (12) months
         after the end of the Plan Year, the Employer may make a special
         Qualified Non-Elective Contribution or Qualified Matching Contribution
         in accordance with one of the following provisions which contributions
         shall be allocated to the Qualified Non-Elective Contribution Account
         or Qualified Matching Contribution Account of each Non-Highly
         Compensated Participant eligible to share in the allocation in
         accordance with such provision. The Employer shall provide the
         Administrator with written notification of the amount of the
         contribution being made and to which provision it relates.

                  (1)      A Qualified Non-Elective Contribution may be made on
                  behalf of Non-Highly Compensated Participants in an amount
                  sufficient to satisfy (or to prevent an anticipated failure
                  of) one of the tests set forth in Section 12.4. Such
                  contribution shall be allocated in the same proportion that
                  each Non-Highly Compensated Participant's 414(s) Compensation
                  for the year (or prior year if the Prior Year Testing method
                  is being used) bears to the total 414(s) Compensation of all
                  Non-Highly Compensated Participants for such year.

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                                             DEFINED CONTRIBUTION PROTOTYPE PLAN

                  (2)      A Qualified Non-Elective Contribution may be made on
                  behalf of Non-Highly Compensated Participants in an amount
                  sufficient to satisfy (or to prevent an anticipated failure
                  of) one of the tests set forth in Section 12.4. Such
                  contribution shall be allocated in the same proportion that
                  each Non-Highly Compensated Participant's 414(s) Compensation
                  for the year (or prior year if the Prior Year Testing method
                  is being used) bears to the total 414(s) Compensation of all
                  Non-Highly Compensated Participants for such year. However,
                  for purposes of this contribution, Non-Highly Compensated
                  Participants who are not employed at the end of the Plan Year
                  (or at the end of the prior Plan Year if the Prior Year
                  Testing method is being used) shall not be eligible to share
                  in the allocation and shall be disregarded.

                  (3)      A Qualified Non-Elective Contribution may be made on
                  behalf of Non-Highly Compensated Participants in an amount
                  sufficient to satisfy (or to prevent an anticipated failure
                  of) one of the tests set forth in Section 12.4. Such
                  contribution shall be allocated in equal amount (per capita).

                  (4)      A Qualified Non-Elective Contribution may be made on
                  behalf of Non-Highly Compensated Participants in an amount
                  sufficient to satisfy (or to prevent an anticipated failure
                  of) one of the tests set forth in Section 12.4. Such
                  contribution shall be allocated in equal amounts (per capita).
                  However, for purposes of this contribution, Non-Highly
                  Compensated Participants who are not employed at the end of
                  the Plan Year (or at the end of the prior Plan Year if the
                  Prior Year Testing method is being used) shall not be eligible
                  to share in the allocation and shall be disregarded.

                  (5)      A Qualified Non-Elective Contribution may be made on
                  behalf of Non-Highly Compensated Participants in an amount
                  sufficient to satisfy (or to prevent an anticipated failure
                  of) one of the tests set forth in Section 12.4. Such
                  contribution shall be allocated to the Qualified Non-Elective
                  Contribution Account of the Non-Highly Compensated Participant
                  having the lowest 414(s) Compensation, until one of the tests
                  set forth in Section 12.4 is satisfied (or is anticipated to
                  be satisfied), or until such Non-Highly Compensated
                  Participant has received the maximum "Annual Addition"
                  pursuant to Section 4.4. This process shall continue until one
                  of the tests set forth in Section 12.4 is satisfied (or is
                  anticipated to be satisfied).

                  (6)      A Qualified Non-Elective Contribution may be made on
                  behalf of Non-Highly Compensated Participants in an amount
                  sufficient to satisfy (or to prevent an anticipated failure
                  of) one of the tests set forth in Section 12.4. Such
                  contribution shall be allocated to the Qualified Non-Elective
                  Contribution Account of the Non-Highly Compensated Participant
                  having the lowest 414(s) Compensation, until one of the tests
                  set forth in Section 12.4 is satisfied (or is anticipated to
                  be satisfied), or until such Non-Highly Compensated
                  Participant has received the maximum "Annual Addition"
                  pursuant to Section 4.4. This process shall continue until one
                  of the tests set forth in Section 12.4 is satisfied (or is
                  anticipated to be satisfied). However, for purposes of this
                  contribution, Non-Highly Compensated Participants who are not
                  employed at the end of the Plan Year (or at the end of the
                  prior Plan Year if the Prior Year Testing method is being
                  used) shall not be eligible to share in the allocation and
                  shall be disregarded.

                  (7)      A Qualified Matching Contribution may be made on
                  behalf of Non-Highly Compensated Participants in an amount
                  sufficient to satisfy (or to prevent an anticipated failure
                  of) one of the tests set forth in Section 12.4. Such
                  contribution shall be allocated to the Qualified Matching
                  Contribution Account of each Non-Highly Compensated
                  Participant in the same proportion that each Non-Highly
                  Compensated Participant's Elective Deferrals for the year
                  bears to the total Elective Deferrals of all Non-Highly
                  Compensated Participants.

                  (8)      A Qualified Matching Contribution may be made on
                  behalf of Non-Highly Compensated Participants in an amount
                  sufficient to satisfy (or to prevent an anticipated failure
                  of) one of the tests set forth in Section 12.4. Such
                  contribution shall be allocated to the Qualified Matching
                  Contribution Account of each Non-Highly Compensated
                  Participant in the same proportion that each Non-Highly
                  Compensated Participant's Elective Deferrals for the year
                  bears to the total Elective Deferrals of all Non-Highly
                  Compensated Participants. However, for purposes of this
                  contribution, Non-Highly Compensated Participants who are not
                  employed at the end of the Plan Year (or at the end of the
                  prior Plan Year if the Prior Year Testing method is being
                  used) shall not be eligible to share in the allocation and
                  shall be disregarded.

                  (9)      A Qualified Matching Contribution may be made on
                  behalf of Non-Highly Compensated Participants in an amount
                  sufficient to satisfy (or to prevent an anticipated failure
                  of) one of the tests set forth in Section 12.4. Such
                  contribution shall be allocated to the Qualified Matching
                  Contribution Account of the Non-Highly Compensated Participant
                  having the lowest Elective Deferrals until one of the tests
                  set forth in Section 12.4 is satisfied (or is anticipated to
                  be satisfied), or until such Non-Highly Compensated
                  Participant has received the maximum "Annual Addition"
                  pursuant to Section 4.4. This process shall continue until one
                  of the tests set forth in Section 12.4 is satisfied (or is
                  anticipated to be satisfied).

                  (10)     A Qualified Matching Contribution may be made on
                  behalf of Non-Highly Compensated Participants in an amount
                  sufficient to satisfy (or to prevent an anticipated failure
                  of) one of the tests set forth

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                                             DEFINED CONTRIBUTION PROTOTYPE PLAN

                  in Section 12.4. Such contribution shall be allocated to the
                  Qualified Matching Contribution Account of the Non-Highly
                  Compensated Participant having the lowest Elective Deferrals
                  until one of the tests set forth in Section 12.4 is satisfied
                  (or is anticipated to be satisfied), or until such Non-Highly
                  Compensated Participant has received the maximum "Annual
                  Addition" pursuant to Section 4.4. This process shall continue
                  until one of the tests set forth in Section 12.4 is satisfied
                  (or is anticipated to be satisfied). However, for purposes of
                  this contribution, Non-Highly Compensated Participants who are
                  not employed at the end of the Plan Year (or at the end of the
                  prior Plan Year if the Prior Year Testing method is being
                  used) shall not be eligible to share in the allocation and
                  shall be disregarded.

                  (d)      if during a Plan Year, it is projected that the
         aggregate amount of Elective Deferrals to be allocated to all Highly
         Compensated Participants under this Plan would cause the Plan to fail
         the tests set forth in Section 12.4, then the Administrator may
         automatically reduce the deferral amount of affected Highly Compensated
         Participants, beginning with the Highly Compensated Participant who has
         the highest actual deferral ratio until it is anticipated the Plan will
         pass the tests or until the actual deferral ratio equals the actual
         deferral ratio of the Highly Compensated Participant having the next
         highest actual deferral ratio. This process may continue until it is
         anticipated that the Plan will satisfy one of the tests set forth in
         Section 12.4. Alternatively, the Employer may specify a maximum
         percentage of Compensation that may be deferred by Highly Compensated
         Participants.

                  (e)      Any Excess Contributions (and "Income") which are
         distributed on or after 2 1/2 months after the end of the Plan Year
         shall be subject to the ten percent (10%) Employer excise tax imposed
         by Code Section 4979.

12.6     ACTUAL CONTRIBUTION PERCENTAGE TESTS

                  (a)      Except as otherwise provided herein, this subsection
         applies if the Prior Year Testing method is elected in Section I.2.b of
         the Adoption Agreement. The "Actual Contribution Percentage"
         (hereinafter "ACP") for Participants who are Highly Compensated
         Employees (hereinafter "HCEs") for each Plan Year and the prior year's
         ACP for Participants who were Non-Highly Compensated Employees
         (hereinafter "NHCEs") for the prior Plan Year must satisfy one of the
         following tests:

                  (1)      The ACP for a Plan Year for Participants who are HCEs
                  for the Plan Year shall not exceed the prior year's ACP for
                  Participants who were NHCEs for the prior Plan Year multiplied
                  by 1.25; or

                  (2)      The ACP for a Plan Year for Participants who are HCEs
                  for the Plan Year shall not exceed the prior year's ACP for
                  Participants who were NHCEs for the prior Plan Year multiplied
                  by 2.0, provided that the ACP for Participants who are HCEs
                  does not exceed the prior year's ACP for Participants who were
                  NHCEs in the prior Plan Year by more than two (2) percentage
                  points.

                  Notwithstanding the above, for purposes of applying the
                  foregoing tests with respect to the first Plan Year in which
                  the Plan permits any Participant to make Employee
                  contributions, provides for matching contributions, or both,
                  the ACP for the prior year's NHCEs shall be deemed to be three
                  percent (3%) unless the Employer has elected in Section I.2.c
                  of the Adoption Agreement to use the current Plan Year's ACP
                  for these Participants. However, the provisions of this
                  paragraph may not be used if the Plan is a successor plan or
                  is otherwise prohibited from using such provisions pursuant to
                  IRS Notice 98-1 (or superseding guidance).

                  (b)      Notwithstanding the preceding, if the Current Year
         Testing method is elected in the Adoption Agreement, the ACP tests in
         (a)(1) and (a)(2), above shall be applied by comparing the current Plan
         Year's ACP for Participants who are HCEs with the current Plan Year's
         ACP (rather than the prior Plan Year's ACP) for Participants who are
         NHCEs for the current Plan Year. Once made, this election can only be
         changed if the Plan meets the requirements for changing to the Prior
         Year Testing method set forth in IRS Notice 98-1 (or superseding
         guidance). Furthermore, this Plan must use the same testing method for
         both the ADP and ACP tests for Plan Years beginning on or after the
         date the Employer adopts its GUST restated plan.

                  (c)      This subsection applies to prevent the multiple use
         of the test set forth in subsection (a)(2) above. Any HCE eligible to
         make Elective Deferrals pursuant to Section 12.2 and to make after-tax
         voluntary Employee contributions or to receive matching contributions
         under this Plan or under any other plan maintained by the Employer or
         an Affiliated Employer, shall have either the actual deferral ratio
         adjusted in the manner described in Section 12.5 or the actual
         contribution ratio reduced in the manner described in Section 12.7 so
         that the "Aggregate Limit" is not exceeded pursuant to Regulation
         1,401(m)-2. The amounts in excess of the "Aggregate Limit" shall be
         treated as either an Excess Contribution or an Excess Aggregate
         Contribution. The ADP and ACP of the HCEs are determined after any
         corrections required to meet the ADP and ACP tests and are deemed to be
         the maximum permitted under such test for the Plan Year. Multiple use
         does not occur if either the ADP or ACP of the HCEs does not exceed
         1.25 multiplied by the ADP and ACP of the NHCEs.

         "Aggregate Limit" means the sum of (i) 125 percent of the greater of
         the ADP of the NHCEs for the Plan Year or the ACP of such NHCEs under
         the plan subject to Code Section 401 (m) for the Plan Year beginning
         with or within the

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         prior Plan Year of the cash or deferred arrangement and (ii) the lesser
         of 200% or two plus the lesser of such ADP or ACP. "Lesser" is
         substituted for "greater" in (i) above, and "greater" is substituted
         for "lesser" after "two plus the" in (ii) above if it would result in a
         larger Aggregate Limit. If the Employer has elected in the Adoption
         Agreement to use the Current Year Testing method, then in calculating
         the "Aggregate Limit" for a particular Plan Year, the NHCEs ADP and ACP
         for that Plan Year, instead of the prior Plan Year, is used.

                  (d)      A Participant is a Highly Compensated Employee for a
         particular Plan Year if the Participant meets the definition of a
         Highly Compensated Employee in effect for that Plan Year. Similarly, a
         Participant is a Non-highly Compensated Employee for a particular Plan
         Year if the Participant does not meet the definition of a Highly
         Compensated Employee in effect for that Plan Year.

                  (e)      For the purposes of this Section and Section 12.7,
         ACP for a specific group of Participants for a Plan Year means the
         average of the "Contribution Percentages" (calculated separately for
         each Participant in such group). For this purpose, "Contribution
         Percentage" means the ratio (expressed as a percentage) of the
         Participant's "Contribution Percentage Amounts" to the Participant's
         414(s) Compensation. The actual contribution ratio for each Participant
         and the ACP for each group, shall be calculated to the nearest
         one-hundredth of one percent of the Participant's 414(s) Compensation.

                  (f)      "Contribution Percentage Amounts" means the sum of
         (i) nondeductible (after-tax) voluntary Employee contributions, (ii)
         Employer "Matching Contributions" made pursuant to Section 12.1(a)(2)
         (including Qualified Matching Contributions to the extent such
         Qualified Matching Contributions are not used to satisfy the tests set
         forth in Section 12.4), (iii) Excess Contributions recharacterized as
         nondeductible (after-tax) voluntary Employee contributions pursuant to
         Section 12.5, (iv) Qualified Non-Elective Contributions (to the extent
         not used to satisfy the tests set forth in Section 12.4) and
         Participant Matched Contributions. However, "Contribution Percentage
         Amounts" shall not include "Matching Contributions" that are forfeited
         either to correct Excess Aggregate Contributions or due to Code Section
         401(a)(4) and the Regulations thereunder because the contributions to
         which they relate are Excess Deferrals, Excess Contributions, or Excess
         Aggregate Contributions. In addition, "Contribution Percentage Amounts"
         may include Elective Deferrals provided the ADP test in Section 12.4 is
         met before the Elective Deferrals are used in the ACP test and
         continues to be met following the exclusion of those Elective Deferrals
         that are used to meet the ACP test.

                  (g)      For purposes of determining the ACP and the amount of
         Excess Aggregate Contributions pursuant to Section 12.7, only Employer
         "Matching Contributions" (excluding "Matching Contributions" forfeited
         or distributed pursuant to Section 12.2(e), 12.5(b), or 12.7(b)) and
         Participant Matched Contributions contributed to the Plan prior to the
         end of the succeeding Plan Year shall be considered. In addition, the
         Administrator may elect to take into account, with respect to Employees
         eligible to have Employer "Matching Contributions" made pursuant to
         Section 12.1(b) or nondeductible (after-tax) voluntary Employee
         contributions made pursuant to Section 4.8 allocated to their accounts,
         elective deferrals (as defined in Regulation 1.402(g)-l(b)), qualified
         non-elective contributions (as defined in Code Section 401(m)(4)(C))
         and Participant Matched Contributions contributed to any plan
         maintained by the Employer. Such elective deferrals and qualified
         non-elective contributions shall be treated as Employer matching
         contributions subject to Regulation 1.401(m)-1(b)(2) which is
         incorporated herein by reference. The Plan Year must be the same as the
         plan year of the plan to which the elective deferrals and the qualified
         non-elective contributions are made.

                  (h)      In the event that this Plan satisfies the
         requirements of Code Sections 401(a)(4), 401 (m), or 410(b) only if
         aggregated with one or more other plans, or if one or more other plans
         satisfy the requirements of such sections of the Code only if
         aggregated with this Plan, then this Section shall be applied by
         determining the ACP of Employees as if all such plans were a single
         plan. Plans may be aggregated in order to satisfy Code section 401(m)
         only if they have the same Plan Year.

                           Any adjustments to the NHCE ACP for the prior year
         will be made in accordance with IRS Notice 98-1 and any superseding
         guidance, unless the Employer has elected in Section 1.2.c of the
         Adoption Agreement to use the Current Year Testing method. Plans may be
         aggregated in order to satisfy Code Section 401(k) only if they have
         the same Plan Year and use the same ACP testing method.

                  (i)      For the purposes of this Section, if an HCE is a
         Participant under two (2) or more plans (other than an employee stock
         ownership plan as defined in Code Section 4975(e)(7)) which are
         maintained by the Employer or an Affiliated Employer to which "Matching
         Contributions," nondeductible (after-tax) voluntary Employee
         contributions, or Participant Matched Contributions, are made, all such
         contributions on behalf of such HCE shall be aggregated for purposes of
         determining such HCP's actual contribution ratio. However, if the plans
         have different plan years, this paragraph shall be applied by treating
         all plans ending with or within the same calendar year as a single
         plan.

                  (j)      For purposes of this Section and Section 12.7, a
         Highly Compensated Participant and a Non-Highly Compensated Participant
         shall include any Employee eligible to have "Matching Contributions"
         made pursuant to Section 12.1(a)(2) (whether or not a deferral election
         was made or suspended pursuant to Section 12.2(g)) allocated to such
         Participant's account for the Plan Year or to make salary deferrals
         pursuant to Section 12.2 (if the Employer uses

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         salary deferrals to satisfy the provisions of this Section) or
         after-tax voluntary Employee contributions pursuant to Section 4.8
         (whether or not nondeductible voluntary Employee contributions are
         made) or Participant Matched Contributions allocated to the
         Participant's account for the Plan Year.

                  (k)      For purposes of this Section and Section 12.7,
         "Matching Contribution" means an Employer contribution made to the
         Plan, or to a contract described in Code Section 403(b), on behalf of a
         Participant on account of a nondeductible (after-tax) voluntary
         Employee contribution made by such Participant, Participant Matched
         Contributions or on account of a Participant's elective deferrals under
         a plan maintained by the Employer.

                  (l)      For purposes of determining the ACP and the amount of
         Excess Aggregate Contributions pursuant to Section 12.7, only Elective
         Deferrals, Qualified Non-Elective Contributions, "Matching
         Contributions" and Qualified Matching Contributions contributed to the
         Plan prior to the end of the twelve (12) month period immediately
         following the Plan Year to which the contributions relate shall be
         considered.

                  (m)      Notwithstanding anything in this Section to the
         contrary, the provisions of this Section and Section 12.7 may be
         applied separately (or will be applied separately to the extent
         required by Regulations) to each "plan" within the meaning of
         Regulation 1.401(k)-1(g)(11) and Regulation 1.401(m). Furthermore, for
         Plan Years beginning after December 31, 1998, the provisions of Code
         Section 401(k)(3)(F) may be used to exclude from consideration all
         Non-Highly Compensated Employees who have not satisfied the minimum age
         and service requirements of Code Section 410(a)(l)(A).

12.7     ADJUSTMENT TO ACTUAL CONTRIBUTION PERCENTAGE TESTS

                  (a)      In the event (or, with respect to subsection (g)
         below when the Prior Year Testing method is being used, if it is
         anticipated) that for Plan Years beginning after December 31,1996, the
         Plan does not satisfy one of the tests set forth in Section 12.6, the
         Administrator shall adjust Excess Aggregate Contributions or the
         Employer shall make contributions pursuant to the options set forth
         below or any combination thereof. However, if the Prior Year testing
         method is being used and it is anticipated that the Plan might not
         satisfy one of such tests, then the Employer may make contributions
         pursuant to the options set forth in subsection (c) below.

                  (b)      On or before the fifteenth day of the third month
         following the end of the Plan Year, but in no event later than the
         close of the following Plan Year the Highly Compensated Participant
         having the largest allocation of "Contribution Percentage Amounts"
         shall have a portion of such "Contribution Percentage Amounts" (and
         "Income" allocable to such amounts) distributed or, if non-Vested,
         Forfeited (including "Income" allocable to such Forfeitures) until the
         total amount of Excess Aggregate Contributions has been distributed, or
         until the amount of the Participant's "Contribution Percentage Amounts"
         equals the "Contribution Percentage Amounts" of the Highly Compensated
         Participant having the next largest amount of "Contribution Percentage
         Amounts." This process shall continue until the total amount of Excess
         Aggregate Contributions has been distributed or forfeited. Any
         distribution and/or Forfeiture of "Contribution Percentage Amounts"
         shall be made in the following order:

                  (1)      Employer matching contributions distributed and/or
                  forfeited pursuant to Section 12.5(b)(l);

                  (2)      After-tax voluntary Employee contributions including
                  Excess Contributions recharacterized as after-tax voluntary
                  Employee contributions pursuant to Section 12.5(b)(2);

                  (3)      Participant Matched Contributions;

                  (4)      Remaining Employer matching contributions.

                  (c)      Any distribution or Forfeiture of less than the
         entire amount of Excess Aggregate Contributions (and "Income") shall be
         treated as a pro rata distribution of Excess Aggregate Contributions
         and "Income." Distribution of Excess Aggregate Contributions shall be
         designated by the Employer as a distribution of Excess Aggregate
         Contributions (and "Income"). Forfeitures of Excess Aggregate
         Contributions shall be treated in accordance with Section 4.3. However,
         no such Forfeiture of Excess Aggregate Contributions maybe allocated to
         a Highly Compensated Participant whose contributions are reduced
         pursuant to this Section.

                  (d)      For the purpose of this Section, "Income" means the
         income or losses allocable to Excess Aggregate Contributions, which
         amount shall be allocated at the same time and in the same manner as
         income or losses are allocated. However, "Income" for the period
         between the end of the Plan Year and the date of the distribution (the
         "gap period") is not required to be distributed.

                  (e)      Excess Aggregate Contributions attributable to
         amounts other than nondeductible voluntary Employee contributions,
         including forfeited matching contributions, shall be treated as
         Employer contributions for purposes of Code Sections 404 and 415 even
         if distributed from the Plan.

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                  (f)      The determination of the amount of Excess Aggregate
         Contributions with respect to any Plan Year shall be made after first
         determining the Excess Contributions, if any, to be treated as
         nondeductible (after-tax) voluntary Employee contributions due to
         recharacterization for the plan year of any other qualified cash or
         deferred arrangement (as defined in Code Section 401(k)) maintained by
         the Employer that ends with or within the Plan Year or which are
         treated as after-tax voluntary Employee contributions due to
         recharacterization pursuant to Section 12.5.

                  (g)      Notwithstanding the above, within twelve (12) months
         after the end of the Plan Year (or, if the Prior Year Testing method is
         used, within twelve (12) months after the end of the prior Plan Year),
         the Employer may make a special Qualified Non-Elective Contribution or
         Qualified Matching Contribution in accordance with one of the following
         provisions which contribution shall be allocated to the Qualified
         Non-Elective Contribution Account or Qualified Matching Contribution
         Account of each Non-Highly Compensated eligible to share in the
         allocation in accordance with such provision. The Employer shall
         provide the Administrator with written notification of the amount of
         the contribution being made and for which provision it is being made
         pursuant to.

                  (1)      A Qualified Non-Elective Contribution may be made on
                  behalf of Non-Highly Compensated Participants in an amount
                  sufficient to satisfy (or to prevent an anticipated failure
                  of) one of the tests set forth in Section 12.6. Such
                  contribution shall be allocated in the same proportion that
                  each Non-Highly Compensated Participant's 414(s) Compensation
                  for the year (or prior year if the Prior Year Testing method
                  is being used) bears to the total 414(s) Compensation of all
                  Non-Highly Compensated Participants for such year.

                  (2)      A Qualified Non-Elective Contribution may be made on
                  behalf of Non-Highly Compensated Participants in an amount
                  sufficient to satisfy (or to prevent an anticipated failure
                  of) one of the tests set forth in Section 12.6. Such
                  contribution shall be allocated in the same proportion that
                  each Non-Highly Compensated Participant's 414(s) Compensation
                  for the year (or prior year if the Prior Year Testing method
                  is being used) bears to the total 414(s) Compensation of all
                  Non-Highly Compensated Participants for such year. However,
                  for purposes of this contribution, Non-Highly Compensated
                  Participants who are not employed at the end of the Plan Year
                  (or at the end of the prior Plan Year if the Prior Year
                  Testing method is being used) shall not be eligible to share
                  in the allocation and shall be disregarded.

                  (3)      A Qualified Non-Elective Contribution may be made on
                  behalf of Non-Highly Compensated Participants in an amount
                  sufficient to satisfy (or to prevent an anticipated failure
                  of) one of the tests set forth in Section 12.6. Such
                  contribution shall be allocated in equal amounts (per capita).

                  (4)      A Qualified Non-Elective Contribution may be made on
                  behalf of Non-Highly Compensated Participants in an amount
                  sufficient to satisfy (or to prevent an anticipated failure
                  of) one of the tests set forth in Section 12.6. Such
                  contribution shall be allocated in equal amounts (per capita).
                  However, for purposes of this contribution, Non-Highly
                  Compensated Participants who are not employed at the end of
                  the Plan Year (or at the end of the prior Plan Year if the
                  Prior Year Testing method is being used) shall not be eligible
                  to share in the allocation and shall be disregarded.

                  (5)      A Qualified Non-Elective Contribution may be made on
                  behalf of Non-Highly Compensated Participants in an amount
                  sufficient to satisfy (or to prevent an anticipated failure
                  of) one of the tests set forth in Section 12.6. Such
                  contribution shall be allocated to the Qualified Non-Elective
                  Contribution Account of the Non-Highly Compensated Participant
                  having the lowest 414(s) Compensation, until one of the tests
                  set forth in Section 12.6 is satisfied (or is anticipated to
                  be satisfied), or until such Non-Highly Compensated
                  Participant has received the maximum "Annual Addition"
                  pursuant to Section 4.4. This process shall continue until one
                  of the tests set forth in Section 12.6 is satisfied (or is
                  anticipated to be satisfied).

                  (6)      A Qualified Non-Elective Contribution may be made on
                  behalf of Non-Highly Compensated Participants in an amount
                  sufficient to satisfy (or to prevent an anticipated failure
                  of) one of the tests set forth in Section 12.6. Such
                  contribution shall be allocated to the Qualified Non-Elective
                  Contribution Account of the Non-Highly Compensated Participant
                  having the lowest 414(s) Compensation, until one of the tests
                  set forth in Section 12.6 is satisfied (or is anticipated to
                  be satisfied), or until such Non-Highly Compensated
                  Participant has received the maximum "Annual Addition"
                  pursuant to Section 4.4. This process shall continue until one
                  of the tests set forth in Section 12.6 is satisfied (or is
                  anticipated to be satisfied). However, for purposes of this
                  contribution, Non-Highly Compensated Employees who are not
                  employed at the end of the Plan Year (or at the end of the
                  prior Plan Year if the Prior Year Testing method is being
                  used) shall not be eligible to share in the allocation and
                  shall be disregarded.

                  (7)      A "Matching Contribution" may be made on behalf of
                  Non-Highly Compensated Participants in an amount sufficient to
                  satisfy (or to prevent an anticipated failure of) one of the
                  tests set forth in Section 12.6. Such contribution shall be
                  allocated on behalf of each Non-Highly Compensated Participant
                  in the same proportion that each Non-Highly Compensated
                  Participant's Elective Deferrals for the year bears to the
                  total Elective Deferrals of all Non-Highly Compensated
                  Participants. The Employer shall designate, at the time the

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                  contribution is made, whether the contribution made pursuant
                  to this provision shall be a Qualified Matching Contribution
                  allocated to a Participant's Qualified Matching Contribution
                  Account or an Employer Non-Elective Contribution allocated to
                  a Participant's Non-Elective Account.

                  (8)      A "Matching Contribution" may be made on behalf of
                  Non-Highly Compensated Participants in an amount sufficient to
                  satisfy (or to prevent an anticipated failure of) one of the
                  tests set forth in Section 12.6. Such contribution shall be
                  allocated on behalf of each Non-Highly Compensated Participant
                  in the same proportion that each Non-Highly Compensated
                  Participant's Elective Deferrals for the year bears to the
                  total Elective Deferrals of all Non-Highly Compensated
                  Participants. The Employer shall designate, at the time the
                  contribution is made, whether the contribution made pursuant
                  to this provision shall be a Qualified Matching Contribution
                  allocated to a Participant's Qualified Matching Contribution
                  Account or an Employer Non- Elective Contribution allocated to
                  a Participant's Non-Elective Account. However, for purposes of
                  this contribution, Non-Highly Compensated Participants who are
                  not employed at the end of the Plan Year (or at the end of the
                  prior Plan Year if the Prior Year Testing method is being
                  used) shall not be eligible to share in the allocation and
                  shall be disregarded.

                  (9)      A "Matching Contribution" may be made on behalf of
                  Non-Highly Compensated Participants in an amount sufficient to
                  satisfy (or to prevent an anticipated failure of) one of the
                  tests set forth in Section 12.4. Such contribution shall be
                  allocated on behalf of the Non-Highly Compensated Participant
                  having the lowest Elective Deferrals until one of the tests
                  set forth in Section 12.4 is satisfied (or is anticipated to
                  be satisfied), or until such Non-Highly Compensated
                  Participant has received the maximum "Annual Addition"
                  pursuant to Section 4.4. This process shall continue until one
                  of the tests set forth in Section 12.4 is satisfied (or is
                  anticipated to be satisfied). The Employer shall designate, at
                  the time the contribution is made, whether the contribution
                  made pursuant to this provision shall be a Qualified Matching
                  Contribution allocated to a Participant's Qualified Matching
                  Contribution Account or an Employer Non-Elective Contribution
                  allocated to a Participant's Non-Elective Account.

                  (10)     A "Matching Contribution" may be made on behalf of
                  Non-Highly Compensated Participants in an amount sufficient to
                  satisfy (or to prevent an anticipated failure of) one of the
                  tests set forth in Section 12.4. Such contribution shall be
                  allocated on behalf of the Non-Highly Compensated Participant
                  having the lowest Elective Deferrals until one of the tests
                  set forth in Section 12.4 is satisfied (or is anticipated to
                  be satisfied), or until such Non-Highly Compensated
                  Participant has received the maximum "Annual Addition"
                  pursuant to Section 4.4. This process shall continue until one
                  of the tests set forth in Section 12.4 is satisfied (or is
                  anticipated to be satisfied). The Employer shall designate, at
                  the time the contribution is made, whether the contribution
                  made pursuant to this provision shall be a Qualified Matching
                  Contribution allocated to a Participant's Qualified Matching
                  Contribution Account or an Employer Non-Elective Contribution
                  allocated to a Participant's Non-Elective Account. However,
                  for purposes of this contribution, Non-Highly Compensated
                  Participants who are not employed at the end of the Plan Year
                  (or at the end of the prior Plan Year if the Prior Year
                  Testing method is being used) shall not be eligible to share
                  in the allocation and shall be disregarded.

                  (h)      Any Excess Aggregate Contributions (and "Income")
         which are distributed on or after 2 1/2 months after the end of the
         Plan Year shall be subject to the ten percent (10%) Employer excise tax
         imposed by Code Section 4979.

12.8     SAFE HARBOR PROVISIONS

                  (a)      The provisions of this Section will apply if the
         Employer has elected, in Section G.2 of the Adoption Agreement, to use
         the "ADP Test Safe Harbor" or "ACP Test Safe Harbor." If the Employer
         has elected to use the "ADP Test Safe Harbor" for a Plan Year, then the
         provisions relating to the ADP test described in Section 12.4 and in
         Code Section 401(k)(3) do not apply for such Plan Year. In addition, if
         the Employer has also elected to use the "ACP Test Safe Harbor" for a
         Plan Year, then the provisions relating to the ACP test described in
         Section 12.6 and in Code Section 401(m)(2) do not apply for such Plan
         Year. Furthermore, to the extent any other provision of the Plan is
         inconsistent with the provisions of this Section, the provisions of
         this Section will govern.

                  (b)      For purposes of this Section, the following
         definitions apply:

                  (1)      "ACP Test Safe Harbor" means the method described in
                  subsection (c) below for satisfying the ACP test of Code
                  Section 401(m)(2).

                  (2)      "ACP Test Safe Harbor Matching Contributions" means
                  "Matching Contributions" described in subsection (d)(1).

                  (3)      "ADP Test Safe Harbor" means the method described in
                  subsection (c) for satisfying the ADP test of Code Section 40
                  l(k)(3).

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                  (4)      "ADP Test Safe Harbor Contributions" means "Matching
                  Contributions" and nonelective contributions described in
                  subsection (c)(l) below.

                  (5)      "Compensation" means Compensation as defined in
                  Section 1.11, except, for purposes of this Section, no dollar
                  limit, other than the limit imposed by Code Section
                  401(a)(17), applies to the Compensation of a Non-Highly
                  Compensated Employee. However, solely for purposes of
                  determining the Compensation subject to a Participant's
                  deferral election, the Employer may use an alternative
                  definition to the one described in the preceding sentence,
                  provided such alternative definition is a reasonable
                  definition within the meaning of Regulation 1.414(s)-l(d)(2)
                  and permits each Participant to elect sufficient Elective
                  Deferrals to receive the maximum amount of "Matching
                  Contributions" (determined using the definition of
                  Compensation described in the preceding sentence) available to
                  the Participant under the Plan.

                  (6)      "Eligible Participant" means a Participant who is
                  eligible to make Elective Deferrals under the Plan for any
                  part of the Plan Year (or who would be eligible to make
                  Elective Deferrals but for a suspension due to a hardship
                  distribution described in Section 12.9 or to statutory'
                  limitations, such as Code Sections 402(g) and 415) and who is
                  not excluded as an "Eligible Participant" under the 401(k)
                  Safe Harbor elections in Section G.2.f of the Adoption
                  Agreement.

                  (7)      "Matching Contributions" means contributions made by
                  the Employer on account of an "Eligible Participant's"
                  Elective Deferrals.

                  (c)      The provisions of this subsection apply for purposes
         of satisfying the "ADP Test Safe Harbor."

                  (1)      The "ADP Test Safe Harbor Contribution" is the
                  contribution elected by the Employer in Section G.2 of the
                  Adoption Agreement to be used to satisfy the "ADP Test Safe
                  Harbor." However, if no contribution is elected in Section G.2
                  of the Adoption Agreement, the Employer will contribute to the
                  Plan for the Plan Year a "Basic Matching Contribution" on
                  behalf of each "Eligible Employee." The "Basic Matching
                  Contribution" is equal to (i) one-hundred percent (100%) of
                  the amount of an "Eligible Participant's" Elective Deferrals
                  that do not exceed three percent (3%) of the Participant's
                  "Compensation" for the Plan Year, plus (ii) fifty percent
                  (50%) of the amount of the Participant's Elective Deferrals
                  that exceed three percent (3%) of the Participant's
                  "Compensation" but do not exceed five percent (5%) of the
                  Participant's "Compensation."

                  (2)      Except as provided in subsection (e) below, for
                  purposes of the Plan, a Basic Matching Contribution or an
                  Enhanced Matching Contribution will be treated as a Qualified
                  Matching Contribution and a Nonelective Safe Harbor
                  Contribution will be treated as a Qualified Non-Elective
                  Contribution. Accordingly, the "ADP Test Safe Harbor
                  Contribution" will be fully Vested and subject to the
                  distribution restrictions set forth in Section 12.2(c) (i.e.,
                  may generally not be distributed earlier than separation from
                  service, death, disability, an event described in Section
                  401(k)(l), or, in case of a profit sharing plan, the
                  attainment of age 59 1/2.). In addition, such contributions
                  must satisfy the "ADP Test Safe Harbor" without regard to
                  permitted disparity under Code Section 401(1).

                  (3)      At least thirty (30) days, but not more than ninety
                  (90) days, before the beginning of the Plan Year, the Employer
                  will provide each "Eligible Participant" a comprehensive
                  notice of the Participant's rights and obligations under the
                  Plan, written in a manner calculated to be understood by the
                  average Participant. However, if an Employee becomes eligible
                  after the 90th day before the beginning of the Plan Year and
                  does not receive the notice for that reason, the notice must
                  be provided no more than ninety (90) days before the Employee
                  becomes eligible but not later than the date the Employee
                  becomes eligible.

                  (4)      In addition to any other election periods provided
                  under the Plan, each "Eligible Participant" may make or modify
                  a deferral election during the thirty (30) day period
                  immediately following receipt of the notice described in
                  subsection (3) above. Furthermore, if the "ADP Test Safe
                  Harbor" is a "Matching Contribution" each "Eligible Employee"
                  must be permitted to elect sufficient Elective Deferrals to
                  receive the maximum amount of "Matching Contributions"
                  available to the Participant under the Plan.

                  (d)      The provisions of this subsection apply if the
         Employer has elected to satisfy the "ACP Test Safe Harbor."

                  (1)      In addition to the "ADP Test Safe Harbor
                  Contributions," the Employer will make any "Matching
                  Contributions" in accordance with elections made in the
                  Adoption Agreement. Such additional "Matching Contributions"
                  will be considered "ACP Test Safe Harbor Matching
                  Contributions."

                  (2)      Notwithstanding any election in the Adoption
                  Agreement to the contrary, an "Eligible Participant's"
                  Elective Deferrals in excess of six percent (6%) of
                  "Compensation" may not be taken into account in

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                                       68

<PAGE>

                                             DEFINED CONTRIBUTION PROTOTYPE PLAN

                  applying "ACP Test Safe Harbor Matching Contributions." In
                  addition, effective with respect to Plan Years beginning after
                  December 31,1999, any portion of an "ACP Test Safe Harbor
                  Matching Contribution" attributable to a discretionary
                  "Matching Contribution" may not exceed four percent (4%) of an
                  "Eligible Participant's" "Compensation."

                  (e)      The Plan is required to satisfy the ACP test of Code
         Section 401(m)(2), using the current year testing method, if the Plan
         permits after-tax voluntary Employee contributions or if matching
         contributions that do not satisfy the "ACP Test Safe Harbor" may be
         made to the Plan. In such event, only "ADP Test Safe Harbor
         Contributions" or "ACP Test Safe Harbor Contributions" that exceed the
         amount needed to satisfy the "ADP Test Harbor" or "ACP Test Safe
         Harbor" (if the Employer has elected to use the "ACP Test Safe Harbor")
         may be treated as Qualified Nonelective Contributions or Qualified
         Matching Contributions in applying the ACP test. In addition, in
         applying the ACP test, elective contributions may not treated as
         matching contributions under Code Section 401(m)(3). Furthermore, in
         applying the ACP test, the Employer may elect to disregard with respect
         to all "Eligible Participants" (1) all "Matching Contributions" if the
         only "Matching Contributions" made to the Plan satisfy the "ADP Test
         Safe Harbor Contribution" (the "Basic Matching Contribution" or the
         "Enhanced Matching Contribution") and (2) if the "ACP Test Safe Harbor"
         is satisfied, "Matching Contributions" that do not exceed four percent
         (4%) of each Participant's "Compensation."

12.9     ADVANCE DISTRIBUTION FOR HARDSHIP

                  (a)      The Administrator, at the election of a Participant,
         shall distribute to the Participant in any one Plan Year up to the
         lesser of (1) 100% of the accounts as elected in Section H.6 of the
         Adoption Agreement valued as of the last Valuation Date or (2) the
         amount necessary to satisfy the immediate and heavy financial need of
         the Participant. Any distribution made pursuant to this Section shall
         be deemed to be made as of the first day of the Plan Year or, if later,
         the Valuation Date immediately preceding the date of distribution, and
         the account from which the distribution is made shall be reduced
         accordingly. Withdrawal under this Section shall be authorized only if
         the distribution is for one of the following or any other item
         permitted under Regulation 1.401(k)-l(d)(2)(iv):

                  (1)      Medical expenses described in Code Section 213(d)
                  incurred by the Participant, the Participant's spouse, or any
                  of the Participant's dependents (as defined in Code Section
                  152) or necessary for these persons to obtain medical care as
                  described in Code Section 213(d);

                  (2)      Costs directly related to the purchase (excluding
                  mortgage payments) of a principal residence for the
                  Participant;

                  (3)      Payment of tuition and related educational fees, and
                  room and board expenses, for the next twelve (12) months of
                  post-secondary education for the Participant, the
                  Participant's spouse, children, or dependents (as defined in
                  Code Section 152); or

                  (4)      Payments necessary to prevent the eviction of the
                  Participant from the Participant's principal residence or
                  foreclosure on the mortgage on that residence.

                  (b)      No distribution shall be made pursuant to this
         Section unless the Administrator, based upon the Participant's
         representation and such other facts as are known to the Administrator,
         determines that all of the following conditions are satisfied:

                  (1)      The distribution is not in excess of the amount of
                  the immediate and heavy financial need of the Participant
                  (including any amounts necessary to pay any federal, state, or
                  local taxes or penalties reasonably anticipated to result from
                  the distribution);

                  (2)      The Participant has obtained all distributions, other
                  than hardship distributions, and all nontaxable loans
                  currently available under all plans maintained by the Employer
                  (to the extent the loan would not increase the hardship);

                  (3)      The Plan, and all other plans maintained by the
                  Employer, provide that the Participant's elective deferrals
                  and nondeductible (after-tax) voluntary Employee contributions
                  will be suspended for at least twelve (12) months after
                  receipt of the hardship distribution; and

                  (4)      The Plan, and all other plans maintained by the
                  Employer, provide that the Participant may not make elective
                  deferrals for the Participant's taxable year immediately
                  following the taxable year of the hardship distribution in
                  excess of the applicable limit under Code Section 402(g) for
                  such next taxable year less the amount of such Participant's
                  elective deferrals for the taxable year of the hardship
                  distribution.

                  (c)      Notwithstanding the above, distributions from the
         Participant's Elective Deferral Account, Qualified Matching
         Contribution Account and Qualified Non-Elective Account pursuant to
         this Section shall be limited

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                                       69

<PAGE>

                                             DEFINED CONTRIBUTION PROTOTYPE PLAN

         solely to the Participant's Elective Deferrals and any income
         attributable thereto credited to the Participant's Elective Deferral
         Account as of December 31, 1988. Furthermore, if a hardship
         distribution is permitted from more than one account type, the
         Administrator may determine any ordering of a Participant's hardship
         distribution from such accounts.

                  (d)      Any distribution made pursuant to this Section shall
         be made in a manner which is consistent with and satisfies the
         provisions of Section 6.5, including, but not limited to, all notice
         and consent requirements of Code Sections 411(a)(11) and 417 and the
         Regulations thereunder.

(C) Copyright 2001 MassMutual Life Insurance Company

                                       70

<PAGE>

                                                             Contract No. 8618-1

                           PROTECTED BENEFIT ADDENDUM

WHEREAS, the PrimeEnergy Corporation (the "Employer") established the
PrimeEnergy Corporation Employees 401 (k) Savings Plan (the "Plan") for the sole
and exclusive benefit of its eligible participants and their beneficiaries under
the terms and provisions of the Internal Revenue Code of 1986, as amended; and

WHEREAS, the Employer has amended and restated the Plan effective January 1,
2002 (the "Effective Date"); and

WHEREAS, the Employer acknowledges that certain optional forms of benefits
accrued up to the Effective Date must be preserved and not reduced or eliminated
as a result of the restatement of the Plan;

NOW THEREFORE, in accordance with Section 8.1(b) of the MassMutual Retirement
Services Flexinvest(R) Defined Contribution Prototype Plan document, which is
being used in connection with the Plan, the Employer has listed below benefits
that will be preserved, notwithstanding any other provision of the Plan to the
contrary.

         1.       Annuities will be allowed but are not the normal form of
distribution.

Any other "Section 411(d)(6) protected benefits" applicable to the Plan shall
not be considered reduced or eliminated merely because they are not specifically
listed above.

IN WITNESS WHEREOF, the Employer has caused this instrument to be executed the
day and year indicated below.

                                        PRIMEENERGY CORPORATION

Date:  8/1/03                           By: /s/ VIRGINIA CROWE FORESE
                                            ------------------------------------
                                                     Signature and Title
                                                     Personnel Manager

<PAGE>

                ADDENDUM TO THE ADMINISTRATIVE SERVICES AGREEMENT
                                  LOAN PROGRAM

Legal Name of Plan Sponsor: PrimeEnergy Corporation
Contract and Plan Number: 8618-1
Plan Name: PrimeEnergy Corporation Employees 401(k) Savings Plan

The provisions set forth in this Loan Program shall be read and construed as
part of the Document; however, the loan program shall supercede any conflicting
provisions found in the Document. The Loan program shall be administered in
accordance with Department of Labor regulations Section 2550.408(b)-1(d) and may
be amended, from time to time, by the loan program administrator. In addition,
the Loan Program shall not be administered in accordance with the proposed loans
regulations set forth under Internal Revenue Code Section 72(p) until they are
finalized.

GENERAL LOAN STRUCTURE:

The maximum number of loans per participant is:               2

The interest rate on participant loans is:                    Prime Rate plus 2%
         Options are: Prime Rate plus 2%, Prime Rate plus 1%, Prime Rate plus
         other (must be reasonable rate), Fixed Rate

Are loans subject to spousal consent requirements?                No

Are loans subject to hardship requirements?                       No

Will the Plan allow for a Cure Period?                            Yes
         If yes, the maximum cure period will be used (i.e. the last day of the
         calendar quarter following the calendar quarter for the last missed
         installment payment) or specify cure period length: _________days
         (cannot exceed 90)

What is the maximum repayment period (years) for
loans used to purchase a primary residence?                        30 (shall not
                                                                      exceed 30)

Are loans repaid through periodic payroll withholding?             Yes

Are Participants permitted to pre-pay loans?                       Yes

LOAN PROGRAM ADMINISTRATOR:

- -        The following findividual(s) is/are authorized to administer the
         Participant Loan Program:
         (Attach an additional page for Loan Program Administrators as needed)

<TABLE>
<CAPTION>
Administrator(s) Name          Virginia Crowe-Forese
<S>                            <C>
Address Line 1                  1 Landmark Square, 11th floor
Address Line 2                   Stamford, CT 06901
Phone Number:                    203-358-5702
Fax Number:
E-mail Address:
</TABLE>

                                                                          8618-1
<PAGE>

LOAN PROCEDURES

- -        Loans are available without regard to any individual's race, color,
         religion, sex, age or national origin in a nondiscriminatory basis. The
         availability of loans, maximum loanable amounts and security is defined
         in the Plan Document.

         Upon initiation of a loan request, MassMutual will provide the
         (Participant or Plan Sponsor) with a loan check and loan paperwork.

         The Plan Sponsor is responsible for monitoring loan suspensions, cure
         period, and loan defaults through the TRC. Plan Sponsor is also
         responsible for notifying MassMutual of these events.

LOAN PROCEDURES WHEN HARDSHIP IS REQUIRED (IF APPLICABLE)

- -        Upon initiation of a loan request, MassMutual will provide the
         (Participant or Plan Sponsor) with loan paperwork for signature by the
         Participant. Upon receipt of the completed loan paperwork by MassMutual
         a loan check will be issued.

         The Plan Sponsor is responsible for monitoring loan suspensions, cure
         period, and loan defaults through the TRC. Plan Sponsor is also
         responsible for notifying MassMutual of these events.

LOAN PROCEDURES WHEN SPOUSAL CONSENT IS REQUIRED (IF APPLICABLE)

- -        Upon initiation of a loan request, MassMutual will provide the
         (Participant or Plan Sponsor) with loan paperwork for signature by the
         Participant and spouse then notarized by a notary public. Upon receipt
         of the completed loan paperwork by MassMutual a loan check will be
         issued.

         The Plan Sponsor is responsible for monitoring loan suspensions, cure
         period, and loan defaults through the TRC. Plan Sponsor is also
         responsible for notifying MassMutual of these events.

LOAN REPAYMENTS

- -        Loan payments may be suspended during a leave of absence of up to one
         year, if the Participant's pay from the Employer is insufficient to
         service the loan. The outstanding loan balance, including interest that
         accrued during the leave of absence, must be repaid within five years
         as provided by Internal Revenue Code Section 72(p)(2)(B), or by the due
         date of the loan if the purpose of the loan was for the acquisition of
         the primary residence of the Participant. After the leave of absence
         has ended, participants may either reamortize the loan, they may
         make-up any missed payments (with accrued interest) through a lump sum
         payment, and then continue normal installments payments, or payoff the
         total existing loan (with accrued interest).

         However, loan repayments made after a loan has defaulted must be done
         through a lump sum payment.

         If the leave of absence is on account of the Participant performing
         service in the uniformed services (as defined in Chapter 43 of Title 38
         United States Code), whether or not such service is qualified military
         service, such suspension shall not be taken into account for purposes
         of meeting requirements of sections 72(p), 401(a) or 4975(d)(1) of the
         Internal Revenue Code, and the Participant is entitled to reemployment
         rights under such chapter with respect to such service. For example, if
         the loan were due in five years, the five-year period would be
         calculated by extending the period by the length of the leave of
         absence.

         At the election of the Loan Program Administrator and on a
         non-discriminatory basis loans that have not been defaulted may be
         re-amortized.

         The participant may make additional payments or full payment on the
         loan at anytime. Each additional payment must be in increments of the
         loan amortization schedule. The repayment cannot be in the form a
         personal check issued by the Participant.

                                                                          8618-1
<PAGE>

LOAN DEFAULT/FEDERAL REPORTING

- -        A default occurs when:

         (A)      A Participant has not made a loan repayment by the required
                  payment date.

                  (1)      A loan is in default when a scheduled installment
                           payment has not been received by the end of the Cure
                           Period. If payment has not been received within the
                           Cure Period, the Loan Administrator will notify the
                           Participant and MassMurual that the loan is in
                           default. If payment is not received within such
                           stipulated time period, the following will take
                           place:

                           (a)      The entire unpaid balance on a loan,
                                    including any accrued interest, will be
                                    considered to be in default as of the date
                                    of the first missed payment.

                           (b)      If permitted by the Plan, the loan may be
                                    treated as in-service withdrawal. Such
                                    withdrawal will be subject to Federal Income
                                    tax and may also be subject to the 10%
                                    additional tax on early distributions from
                                    qualified plans. Forms 1099-R will be timely
                                    issued to the Participant and the IRS
                                    reflecting the Distribution (e.g., the
                                    outstanding loan balance plus accrued
                                    interest).

                           (c)      The amount of any default loan not treated
                                    as an in-service withdrawal will be treated
                                    as if received by the participant, and will
                                    be subject to Federal Income tax, and may
                                    also be subject to the 10% additional tax on
                                    early distributions from qualified plan.
                                    Such tax consequences will not affect the
                                    Participant's obligation to repay the loan.
                                    Forms 1099-R will be timely issued to the
                                    Participant and the IRS reflecting the
                                    outstanding loan balance plus accrued
                                    interest; however, the loan will continue to
                                    be outstanding and will not be offset
                                    against the Participant's vested account
                                    balance until he or she terminates service,
                                    retires, dies, or becomes disabled.
                                    Accordingly, if the Participant fails to
                                    repay the loan, his or her account will be
                                    offset by the outstanding loan balance when
                                    he or she terminates service, retires, dies
                                    or becomes disabled.

                           (d)      To the extent necessary, any other
                                    collateral pledged as additional security
                                    will be foreclosed upon.

         (B)      Participant has died: The outstanding loan balance will be
                  reported to the IRS and to the Participant's estate as a
                  taxable distribution from the Plan.

         (C)      The Plan and Trust is terminated; any outstanding loans
                  remaining as of such date will be defaulted. Forms 1099-R will
                  be issued to the Participant and the IRS reflecting the
                  outstanding loan balance plus accrued interest.

In all other respects, the Agreement shall remain unchanged by this Addendum.

For the Plan Sponsor:

/s/ VIRGINIA CROWE FORESE                          8/1/03
- ----------------------------                 --------------------
         Signature                                  Date

PERSONNEL MANAGER
- ----------------------------
   Printed Name and Title

Legal Name of Plan Sponsor: PrimeEnergy Corporation

Contract and Plan Number: 8618-1

For Mass Manual

/s/ LAURA M. GASTON                          June 13, 2003
- ---------------------------------------      --------------------
Laura M. Gaston, Second Vice President               Date

                                                                          8618-1
<PAGE>

                  ADDENDUM TO ADMINISTRATIVE SERVICES AGREEMENT
                           GUST RESTATEMENT PROVISIONS

Effective January 1, 2002, the following constitutes an addendum to the
Administrative Services Agreement (the "Agreement") between the Plan Sponsor and
MassMutual.

INVESTMENT SERVICES:

Rollover contributions will be invested:

[ ]  The same as all other contributions in the Plan
[ ]  The same as Participant Contributions and Elective Deferrals
 X   The same as Company Matching and Company Profit-Sharing Contributions
 X   By a separate election of the Participant
[ ]  Not applicable. Plan does not accept rollover contributions

The Plan Sponsor may suspend investment rights granted to Participants by
providing prior written notice to such affected Participants and MassMutual
Financial Services. Upon such notice, the Plan Sponsor or trustees, if
applicable, shall control the investment of plan assets within the Participants'
Accounts in accordance with their fiduciary obligations until such time as
subsequent written notice is provided to the Participants and the MassMutual
Financial Services specifying that Participants shall designate in writing the
investment funds in which contributions are to be invested.

LIFE INSURANCE:

If Policies will be purchased at the request of the Participant, the premium for
the Policies will be paid with:

 X   Elective Deferrals
 X   Company Matching Contributions
 X   Company Profit Sharing Contributions
[ ]  N/A Policies are not permitted in the Plan(s)

IN ALL OTHER RESPECTS, THE AGREEMENT SHALL REMAIN UNCHANGED BY THIS ADDENDUM.

For the Plan Sponsor:

/s/ VIRGINIA CROWE FORESE                           8/1/03
- ----------------------------                 ----------------------
          Signature                                  Date

Legal Name of Plan Sponsor: PrimeEnergy Corporation

Account Number: FL 8618

For MassMutual

/s/ Laura M. Gaston,                             June 13, 2003
- ---------------------------------------      ----------------------
Laura M. Gaston, Second Vice President               Date

<PAGE>

                                                          Contract No. FL 8618-1

                             GENERAL TRUST AGREEMENT

         THIS AGREEMENT made as of January 1, 2002, by and between PrimeEnergy
Corporation (the "Company") organized and existing under the laws of the State
of Connecticut and the undersigned Trustees, (the "Trustees").

                              W I T N E S S E T H:

         WHEREAS, the Company has adopted the PrimeEnergy Corporation Employees
401(k) Savings Plan (the "Plan") for the exclusive benefit of Participants and
their beneficiaries and desires hereby to create a Trust (the "Trust") to hold
certain assets of the Plan and to provide for their investment and
administration; and

         WHEREAS, the Company intends that the Trust shall constitute a part of
the Plan and shall be approved under Section 501 of the Internal Revenue Code
(the "Code") as a tax-exempt employees' Trust; and

         WHEREAS, certain officers of the Company have been authorized and
directed to enter into this Agreement;

                                   ARTICLE I
                             ESTABLISHMENT OF TRUST

1.1      The purpose of this Trust Agreement is to hold assets outside the
         FLEXINVEST Contract (the "Contract") maintained under the plan, and as
         applicable, to permit Plan Participants to borrow sums held under the
         Contract.

1.2      A copy of the Contract shall be forwarded upon execution of this
         Agreement to the Trustees, and any subsequent amendments to the
         Contract shall similarly be forwarded to the Trustees.

1.3      If the provisions of this Agreement and the Contract differ, the
         Contract shall control.

1.4      All terms defined in the Plan, unless otherwise expressly provided in
         this Trust Agreement, shall have the same meanings herein as are set
         forth in the Plan.

1.5      All references to "Section" shall refer to a portion of this Trust
         Agreement, unless otherwise indicated.

- ----------------------
         THIS TRUST AGREEMENT IS A SPECIMEN DOCUMENT WHICH SHOULD BE REVIEWED BY
         YOUR LEGAL REPRESENTATIVE BEFORE ADOPTION. MASSACHUSETTS MUTUAL DOES
         NOT REPRESENT THAT THIS DOCUMENT IS APPROPRIATE FOR YOUR PLAN.

04/30/93

<PAGE>

                                   ARTICLE II
                         THE TRUSTEES' RESPONSIBILITIES

2.1      APPOINTMENT OF TRUSTEE(S) AND ADMINISTRATOR. The Company shall have
         exclusive authority to appoint the Trustee(s) and to appoint a Plan
         Administrator. Each person so appointed shall serve at the discretion
         of the Company. A new incumbent shall be appointed as soon as possible
         in the event that an appointee is removed or resigns from his position.
         Any successor shall signify his acceptance by filing a written
         acceptance with the Company. If there is more than one Trustee or more
         than one Plan Administrator, all acts and decisions shall be by a vote
         of a majority.

         The signature of any one Trustee or any one Plan Administrator,
         however, shall be sufficient evidence to any party that a document or
         Contract is authorized by the Trustees or by the Administrators in
         accordance with the terms of this Plan and Trust. Neither Massachusetts
         Mutual ("the Insurer") nor its affiliates shall be appointed Trustee or
         Plan Administrator by the Company.

2.2      ALLOCATION OF RESPONSIBILITIES. The Company, the Trustee, and the Plan
         Administrator shall have only those specific powers and
         responsibilities that are specifically given them under the Plan and
         Trust. If there is more than one Trustee, the Trustee(s) may allocate
         any of their duties hereunder among themselves by written appointment
         and signed acceptance. The Trustee and Plan Administrator may appoint
         other persons or entities to perform any of their functions including
         fiduciary functions. Such appointment shall be made and accepted by the
         appointee in writing and shall be effective upon such acceptance. The
         Trustee, the Plan Administrator and any such appointee may employ
         advisors and other persons necessary or convenient to help them carry
         out their duties including their fiduciary duties. The Trustee or Plan
         Administrator shall supervise the work and review the performance of
         each such appointee. The Trustee or Plan Administrator shall have the
         right to remove any such appointee from his position. Any person, group
         of persons or entity may serve in more than one fiduciary capacity.

         The Company shall have the right to direct the Trustee as to how any of
         the powers set forth in Section 2.5 shall be exercised, including the
         right to direct the Trustee as to the investment of Trust assets to the
         extent not prohibited by Section 503 of the Code or other laws
         applicable to qualified pension or profit-sharing plans and related
         trusts. The Company shall, in directing investments, or in directing
         the Trustee as to how to exercise any of the powers set forth in
         Section 2.5, be bound to follow the rule of prudence set forth in
         Section 2.6 as fully and to the same extent as if it were the Trustee.

         If the Company gives the Trustee any direction to implement Section
         2.5(a) or (k), the Company shall not be liable for any loss occasioned
         by any party he has directed the Trustee to enter into agreement with
         as an investment manager if the Company has used prudence in making
         such selection of such party. In the absence of any applicable
         instruction, the Trustee shall invest and reinvest Trust assets and
         otherwise handle and deal with these assets and exercise the powers
         granted to him as provided in Section 2.5, but no investment or
         reinvestment of such assets shall otherwise be restricted to properties
         and securities authorized for investment by Trustees under any present
         or future State law.

2.3      RECEIPT OF CONTRIBUTIONS. The Company shall have exclusive
         responsibility to determine and make contributions required by the
         Plan. The Trustee shall be under no obligation to investigate any
         matters pertaining to the amount of the contributions made by the
         Company pursuant to the Plan and shall be under no obligation to make
         any affirmative action to collect from the Company any contribution for
         the Plan. The Trustee may accept any certification made to him from the
         Company pertaining to any contribution.

2.4      TRUSTEE'S POWERS AND DUTIES. The Trustee shall have the power and duty
         to manage and control the assets of the Trust in accordance with the
         terms of this Trust and Plan. The Trustee, unless an investment manager
         has been appointed pursuant to Section 2.2, shall periodically review
         and, if necessary, revise the funding policy of the Plan. The Trustee
         shall act upon written instruction signed by an officer of the Company.

                                       -2-

<PAGE>

         The Trustees shall have the discretion to construe the terms and
         provisions of this Plan. Any construction adopted by the Trustees in
         good faith shall be binding upon Participants and the Plan
         Administrator.

2.5      INVESTMENT OF TRUST ASSETS: Subject to the provisions of Section 2.6,
         the Trustee shall have the following powers and authority with respect
         to the Trust assets:

         (a)      to purchase contracts issued by the Insurer; provided that if
                  the Trustee is a named fiduciary and if the Trustee lodges
                  funds with the Insurer to be invested in a separate investment
                  account which does not provide for a guarantee of principal or
                  interest, then the Trustee may request that the Insurer accept
                  limited responsibility as an investment manager with respect
                  to the funds so held; and provided, further, that the Insurer
                  shall be obligated to follow the rule of prudence set out in
                  Section 2.6;

         (b)      to invest in the shares of any regulated investment company or
                  companies;

         (c)      to invest or reinvest in any property which in his opinion is
                  a prudent investment for the Trust as described in Section 2.6
                  provided that he may, to the extent he considers necessary or
                  advisable, hold any portion of the fund in bank deposits
                  insured by the United States Government, in cash or in such
                  other types of investments as shall be selected by him,
                  without liability for interest, pending investment or payment
                  of expenses or benefits;

         (d)      to retain, manage, improve, repair, operate and control any
                  Trust assets;

         (e)      to sell, convey, transfer, exchange, partition, grant options
                  with respect to, lease for any term (even though such terms
                  may extend beyond the duration of this Trust), mortgage,
                  pledge or otherwise deal with or dispose of any Trust asset in
                  such manner (including public or private sale, where
                  applicable), for such consideration and upon such terms and
                  conditions as the Trustee, in his discretion, shall determine;

         (f)      to vote either in person or by general or limited proxy or to
                  refrain from voting any corporate stock or other securities
                  for any purpose;

         (g)      to deposit any securities with or under the direction of any
                  committee formed to protect said securities and participate
                  in, consent to or carry out any reorganization, consolidation,
                  merger, liquidation, readjustment of the financial structure,
                  or sale of assets of any corporation or other organization,
                  and to exercise conversion and subscription rights, and hold
                  any property received pursuant to any such transaction as
                  Trust assets;

         (h)      if a corporation, to keep any securities or other property in
                  the name of some other person, partnership, or corporation, as
                  its nominee, or in his own name without disclosure in any case
                  of his fiduciary capacity;

         (i)      to pay, compromise or abandon any claim or other matter
                  directly or indirectly affecting the Trust assets;

         (j)      if a bank is serving as Trustee hereunder, to commingle part
                  or all of the assets of the Trust in any group trust
                  maintained by the bank as Trustee, whether now existing or
                  hereafter created, for the collective investment of funds held
                  under Employees' pension or profit-sharing plans or trusts
                  which are qualified with the meaning of and exempt from tax
                  under the Code, and the provisions of any such group trust are
                  made a part of this Plan;

         (k)      provided the Trustee is a named fiduciary, to enter into an
                  agreement with any bank, trust company or other fiduciary as
                  an investment manager (to the extent required by law and
                  regulation) to hold, manage and invest the assets of the
                  Trust, it being understood that the Trustee shall not be
                  liable for any loss occasioned by any such investment manager
                  selected by him, provided that the Trustee has used prudence
                  in making the selection, and that any such investment manager
                  shall be obligated to follow the rule of prudence set out in
                  Section 2.6;

                                      -3-

<PAGE>

         (1)      to employ agents of any kind, nature and description, and
                  delegate to them such ministerial and limited discretionary
                  duties as the Trustee sees fit; and to that end, to execute
                  such contracts, documents, instruments or other papers as may
                  be requested by any such agent to whom such duties have been
                  delegated;

         (m)      to execute, acknowledge, and deliver all instruments he
                  considers necessary or proper for any of the foregoing
                  purposes; and

         (n)      to exercise any of the powers and rights of an individual
                  owner with respect to any property held as a Trust asset and
                  to do all other acts in his judgment necessary or desirable
                  for the proper administration of the Trust assets although the
                  power to do such acts is not specifically set forth herein,
                  subject to the rules in Section 2.6.

When instructed by the Plan Administrator, the Trustee shall invest all or any
portion of the individual Account of any Participant in accordance with the
direction of the Employer or such Participant. Such directed investments shall
be accounted for separately for each Participant. Except as otherwise provided
herein, the Trustee shall not have any discretion, with respect to such directed
investment. Each participant who directs the investment of his Account shall be
solely and absolutely responsible for the investment or reinvestment of all
directed investment assets held on his behalf in Trust, and except as otherwise
as provided herein, the Trustees shall not question any such direction, review
any securities or other such assets, or make suggestions with respect to the
investment, retention or disposition of any such assets; provided the investment
is consistent with Section 404(c) of the Employee Retirement Income Security Act
of 1974 ( 29 U.S.C. Section 1104(c)), and other applicable federal law.

No person dealing with the Trustee need see to the application of any money paid
or property delivered to or on the order of the Trustee or inquire into his
authority to enter into any transaction.

2.6      PRUDENT MAN RULE. In making investments hereunder, the Trustee shall
         conduct himself faithfully in the interest of the Participants and
         shall exercise sound discretion. He shall discharge his duties with the
         care, skill, prudence and diligence under the circumstances prevailing
         from time to time that a prudent man acting in a like capacity and
         familiar with such matters would use in the conduct of an enterprise of
         a like character with like aims. He shall cause the investments to be
         diversified so as to minimize the risk of large losses, unless under
         the circumstances it is clearly prudent not to do so. The incidents of
         ownership of all Trust investments shall be within the jurisdiction of
         the United States. The Trustee shall make no investment prohibited by
         Section 406 of the Employee Retirement Income Security Act of 1974 (29
         U.S.C. Section 1106), unless a statutory or administrative exemption
         applies.

2.7      VALUATION OF PARTICIPANTS ACCOUNT. The Trustee shall maintain for each
         Participant a Participant's Account. The Participant's account balance
         shall be invested and valued, subject to the provisions of the Plan.

2.8      PLAN ADMINISTRATOR'S POWERS AND DUTIES. The Plan Administrator shall be
         responsible for the day-to-day administration of this Plan, and for the
         exercise of all fiduciary responsibilities provided for in the Plan
         that are not assigned to other parties pursuant to the terms of the
         Plan. The Plan Administrator's duties shall include, but not be
         limited, to the following:

         (a)      To construe and interpret the provisions of the Plan;

         (b)      To decide all questions of eligibility for Plan participation
                  and for the payment of benefits;

         (c)      To provide appropriate parties, including government agencies,
                  with such returns, reports, schedules, descriptions, and
                  individual statements as are required by law within the times
                  prescribed by law; and to furnish to the Company, upon
                  request, copies of any or all such materials, and further, to
                  make copies of such instruments, reports, and descriptions as
                  are required by law to be available for examination by

                                       -4-

<PAGE>

         Participants and their Beneficiaries who are or may be entitled to
         benefits under the Plan in such places and in such manner as required
         by law (the Plan Administrator may charge a reasonable fee for copies);

         (d)      To furnish to each Participant and each Beneficiary receiving
                  benefits under the Plan a copy of a summary plan description
                  and a summary of any material modifications thereof at the
                  time and in the manner prescribed by law;

         (e)      To obtain from the Company, the Employees, the Insurer and the
                  Trustee such information as shall be necessary for the proper
                  administration of the Plan;

         (f)      To determine the amount, manner, and time of payment of
                  benefits hereunder;

         (g)      Subject to the approval of the Company only as to any
                  additional expense, to appoint and retain such agents,
                  counsel, and accountants as may be necessary for the purpose
                  of properly administering the Plan;

         (h)      To take all actions and to communicate to the Trustee in
                  writing all necessary information to carry out the terms of
                  the Plan and Trust Agreement;

         (i)      To notify the Trustee in writing of the termination of the
                  Plan or the complete discontinuance of Company contributions;

         (j)      To direct the Trustee to distribute assets of the Trust to
                  each Participant and Beneficiary in accordance with the terms
                  of this Plan; and

         (k)      To do such other acts reasonably required to administer the
                  Plan in accordance with its provisions, or as may be provided
                  for or required by law.

2.9      PARTICIPANT DATA. Each Participant and each Beneficiary must furnish to
         the Plan Administrator such evidence, data or information as the Plan
         Administrator believes necessary or desirable for purposes of
         administering the Plan. The payment of benefits for the benefit of each
         Participant under this Plan is conditioned upon the Participant or
         Beneficiary providing complete and accurate evidence, data or
         information when requested. The Plan Administrator shall advise any
         Participant or Beneficiary of the effect of failure to comply with his
         request for information.

2.10     EMPLOYER CENSUS REPORT. The Company shall furnish the Plan
         Administrator on or before each Valuation Date all census data required
         to administer the Plan.

2.11     SERVICE OF LEGAL PROCESS. The Plan Administrator is designated as the
         agent authorized to receive service of legal process on behalf of the
         Plan, unless the Company designates some other party in writing in the
         summary plan description.

                                      -5-

<PAGE>

                                   ARTICLE III
                                PARTICIPANT LOANS

3.1      If authorized in the Adoption Agreement, the Trustees may, upon written
         application of the Participant, authorize a loan or loans to the
         Participant subject to the limitations of the Plan.

3.2      With respect to any property held by the Trustees representing
         participant accounts as part of the Trust Fund the Trustees shall have
         the power:

         (a)      To grant loans to Participants in accordance with Plan
                  provisions;

         (b)      To invest under the Contract any loan repayment moneys
                  received by the Trustees; and

         (c)      To do all other acts that the Trustees may deem necessary or
                  proper to carry out any of the powers set forth in this
                  Article II or otherwise in the best interests of the Trust
                  Fund.

         (d)      At all times the action of the Trustees in implementing or
                  operation the loan must be in accordance with the applicable
                  Internal Revenue Service and Department of Labor regulations.

3.3      If this Plan is a successor plan, as of the effective date and at the
         direction of the Trustees, all outstanding loan notes and security
         agreements issued under the prior plan shall be transferred to this
         Plan, as a trustee to trustee transfer of assets, without renegotiation
         or modification.

3.4      As of such valuation dates as the Company may fix from time to time,
         but not less frequently than once every twelve (12) months, the
         Trustees shall report to the Company the outstanding balance of loans
         and the fair market value of the other assets held in the Trust Fund.

                                   ARTICLE IV
                      EXPENSES AND COMPENSATION OF TRUSTEES

4.1      The Company shall pay the reasonable compensation of counsel and any
         other agents engaged by the Trustees to assist them in the management
         and administration of the Trust, and shall pay each Trustee reasonable
         compensation for services rendered on behalf of the Trust, unless a
         Trustee is a full-time employee of the Company.

                                    ARTICLE V
                  SETTLEMENT OF ACCOUNTS, ENFORCEMENT OF TRUST
                              AND LEGAL PROCEDURES

5.1      The Trustees shall keep full accounts of all of their receipts and
         disbursements. The financial statements, books and records with respect
         to the Trust Fund shall be open to inspection by the Company or its
         representative at all reasonable times during business hours of the
         Trustees and may be audited not more frequently than once in each
         fiscal year by an independent certified public accountant engaged by
         the Company.

5.2      Within ninety (90) days after the close of each Plan Year, or any
         termination of the duties of the Trustees, the Trustees shall prepare,
         sign and deliver in duplicate to the Company an account of their acts
         and transactions as Trustees. If the Company finds the account to be
         correct, the Company shall sign the instrument of settlement annexed to
         one counterpart of the account and return such counterpart to the
         Trustees, whereupon the account shall become an account stated as
         between the Trustees and the Company. An account or an amended account
         shall also become an account stated as between the Trustees and the
         Company if within ninety (90) days after receipt of the account or any
         amended account, the Company has not signed and returned a counterpart
         to the Trustees, nor filed notice of any objection to any act or
         transaction of the Trustees. If any objection has been

                                      -6-
<PAGE>

         filed, and if the Company is satisfied that it should be withdrawn or
         if the account is adjusted to its satisfaction, the Company shall in
         writing filed with the Trustees signify its approval of the account and
         it shall become an account stated as between the Trustees and the
         Company.

5.3      When an account becomes an account stated, such account shall be
         finally settled, and the Trustees shall be completely discharged and
         released, as if such account had been settled and allowed by a judgment
         or decree of a court of competent jurisdiction.

5.4      The Trustees or the Company shall have the right to apply at any time
         to a court of competent jurisdiction for judicial settlement of any
         account of the Trustees not previously settled as herein above
         provided.

                                   ARTICLE VI
                      RESIGNATION AND REMOVAL OF A TRUSTEE

6.1      A Trustee may resign at any time by filing a written resignation to the
         Company and furnishing a copy to the Insurer. Such resignation shall
         take effect sixty (60) days from the date of such filing or upon
         appointment of a successor pursuant to Section 7.3, whichever occurs
         first.

6.2      The Company may remove a Trustee at any time by delivering to the
         Trustee a written notice of his removal and an appointment of a
         successor pursuant to Section 6.3. Such removal shall not take effect
         prior to sixty (60) days from such delivery unless the Trustee agrees
         to an earlier effective date, except that removal for cause shall be
         effective on the date set forth in the notice.

6.3      The appointment of a successor to a Trustee shall take effect upon
         delivery to the departing Trustee of (a) an instrument in writing
         appointing such successor, executed by the Company and (b) an
         acceptance in writing, executed by such successor, both acknowledged in
         the same form as this Agreement. The Company shall send notice of such
         appointment to each remaining Trustee and to the Insurer.

6.4      All of the provisions set forth herein with respect to the Trustees
         shall relate to each successor Trustee with the same force and effect
         as if such successor had been originally named as a Trustee hereunder.

6.5      If a successor is not appointed within sixty (60) days after a Trustee
         gives notice of his resignation pursuant to Section 7.1, the Trustees
         may apply to any court of competent jurisdiction for appointment of a
         successor.

6.6      Upon the resignation or removal of a Trustee and the appointment of a
         successor, and after the final account of the Trustee has been settled
         as provided in Article VI, the Trustee shall transfer and deliver his
         responsibilities with regard to the Trust Fund to such successor.

                                   ARTICLE VII
                       AMENDMENT AND TERMINATION OF TRUST

7.1      This Trust shall continue for such time as may be necessary to
         accomplish the purpose for which it was created but may be terminated
         at any time by the Company. In the event the Plan is terminated this
         Trust shall also be terminated. Notice of any termination shall be
         given to the Trustees by an instrument in writing executed by and
         acknowledged in the same form as this Agreement. The Company shall send
         a copy of such notice to each Trustee and to the Insurer.

7.2      The powers and responsibilities of the Trustees set forth in this
         Agreement shall continue so long as any assets of the Trust Fund remain
         in their hands.

7.3      Subject to approval by the Insurer, the Company shall have the right at
         any time to amend this Agreement in whole or in part except that the
         duties and responsibilities of the Trustees shall not be increased
         without the Trustees' written consent. No such amendment shall divert
         any part of the Trust Fund for purposes other than the

                                       -7-

<PAGE>

         exclusive benefit of Participants or their beneficiaries. The Company
         shall send a copy of any amendment to each Trustee and to the Insurer.
         Any amendment shall become effective upon (a) delivery to the Trustees
         of the written instrument of amendment and (b) endorsement by the
         Trustees on the instrument of their receipt thereof, together with
         their consent thereto, if such consent is required.

                                   ARTICLE VIII
                                  MISCELLANEOUS

8.1      This Agreement and the Trust hereby created shall be construed and
         regulated in accordance with the laws of the State of Connecticut.

8.2      The titles to Articles and headings of Sections in this Agreement are
         placed herein for convenience of reference only and in the case of any
         conflict the text of this Agreement, rather than such titles or
         headings, shall control.

IN WITNESS WHEREON, the Company has caused this Agreement to be executed by its
duly authorized officers and its seal to be hereunto affixed as of the day and
year written above, and each Trustee has executed this agreement below.

                                    PRIMEENERGY CORPORATION
                                    -----------------------
                                          Company Name

CORPORATE SEAL                By:   /s/ VIRGINIA CROWE FORESE
                                    -------------------------------
                                           Signature & Title
                                           PERSONNEL MANAGER

ATTEST

                                     ------------------------------   ----------
                                           Trustee's Signature           Date
/s/ VIRGINIA CROWE FORESE
- ----------------------------         ------------------------------   ----------
      Secretary                            Trustee's Signature           Date

                                      -8-

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.22.1
<SEQUENCE>4
<FILENAME>d13330exv10w22w1.txt
<DESCRIPTION>FIRST AMENDMENT TO CREDIT AGREEMENT
<TEXT>
<PAGE>
                                                                 Exhibit 10.22.1


                       FIRST AMENDMENT TO CREDIT AGREEMENT


        This FIRST AMENDMENT TO CREDIT AGREEMENT (this "First Amendment") is
made and entered into effective as of June 1, 2003, between PRIMEENERGY
CORPORATION, a Delaware corporation ("PEC"). PRIMEENERGY MANAGEMENT CORPORATION,
a New York corporation, PRIME OPERATING COMPANY, a Texas corporation, EASTERN
OIL WELL SERVICE COMPANY, a West Virginia corporation, SOUTHWEST OILFIELD
CONSTRUCTION COMPANY, an Oklahoma corporation, and EOWS MIDLAND COMPANY, a Texas
corporation (collectively, the "Borrower"), with each other lender that is a
signatory hereto or becomes a signatory hereto as provided in Section 9.1,
(individually, together with its successors and assigns, a "Lender" and
collectively together, with their respective successors and assigns, the
"Lenders") and GUARANTY BANK, FSB, a federal savings bank, as agent for the
Lenders (in such capacity, together with its successors in such capacity
pursuant to the terms hereof, the "Agent").

                               W I T N E S S E T H

        WHEREAS, the above named parties did execute and exchange counterparts
of that certain Credit Agreement dated December 19, 2002 (the "Agreement"), to
which reference is here made for all purposes;

        WHEREAS, the parties subject to and bound by the Agreement are desirous
of amending the Agreement in the particulars hereinafter set forth;

        NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties to the Agreement, as set forth therein, and the mutual covenants
and agreements of the parties hereto, as set forth in this First Amendment, the
parties hereto agree as follows:

                                    ARTICLE I
                                   DEFINITIONS

        1.01 Terms Defined Above. As used herein, each of the terms "Agent."
"Agreement." "Borrower." "First Amendment." and "Lenders" shall have the meaning
assigned to such term hereinabove.

        1.02 Terms Defined in Agreement. As used herein, each term defined in
the Agreement shall have the meaning assigned thereto in the Agreement, unless
expressly provided herein to the contrary.

        1.03 References. References in this First Amendment to Article or
Section numbers shall be to Articles and Sections of this First Amendment,
unless expressly stated herein to the contrary. References in this First
Amendment to "hereby," "herein," hereinafter," hereinabove," "hereinbelow,"
"hereof," and "hereunder" shall be to this First Amendment in its entirety and
not only to the particular Article or Section in which such reference appears.

        1.04 Articles and Sections. This First Amendment, for convenience only,
has been divided into Articles and Sections and it is understood that the
rights, powers, privileges, duties, and other

                                       1
<PAGE>


legal relations of the parties hereto shall be determined from this First
Amendment as an entirety and without regard to such division into Articles and
Sections and without regard to headings prefixed to such Articles and
Sections.

        1.05 Number and Gender. Whenever the context requires, reference herein
made to the single number shall be understood to include the plural and likewise
the plural shall be understood to include the singular. Words denoting sex shall
be construed to include the masculine, feminine, and neuter, when such
construction is appropriate, and specific enumeration shall not exclude the
general, but shall be construed as cumulative. Definitions of terms defined in
the singular and plural shall be equally applicable to the plural or singular,
as the case may be.

                                   ARTICLE II
                                   AMENDMENTS

        The Borrower and the Lender hereby amend the Agreement in the following
particulars:

        2.01 Amendment of Section 1.2. Section 1.2 of the Agreement is hereby
amended as follows:

        The following definition are added to read as follows:

        The definitions of "Term Loan" and "Term Notes" are hereby deleted from
        the Agreement.

        "Reducing Revolving Term Loan" shall mean the Reducing Revolving Term
        Loan described in Section 2.1B.

        "Reducing Revolving Term Loan Available Commitment" shall mean on the
        date of this First Amendment, the sum of $3,599,998. Such amount shall
        reduce by $66,667 per month beginning July 1, 2003.

        "Reducing Revolving Term Loan Balance" shall mean, at any time, the
        outstanding principal balance of the Reducing Revolving Term Notes at
        such time.

        "Reducing Revolving Term Notes" shall mean, collectively, each of the
        promissory notes of the Borrower payable to a Lender in the amount of
        the Reducing Revolving Term Loan Facility Amount of such Lender in the
        form attached hereto as Exhibit I(a) with all blanks in such form
        completed appropriately, together with all renewals, extensions for any
        period, increases, and rearrangements thereof.

        2.02 Amendment of Section 2.1B. Section 2.1B of the Agreement is hereby
amended to read as follows:

        B. Reducing Revolving Term Loan

           (a)    The Reducing Revolving Term Loan shall be in the total amount
                  of $3,599,998, with interest payable monthly by the Borrower
                  to the Lenders beginning on the first day of the month
                  following the month in which borrowings were made under this
                  facility, and continuing on the first day of

                                       2

<PAGE>

                  each calendar month thereafter until the Reducing Revolving
                  Term Loan Balance is zero and/or until December 19, 2004, when
                  all sums owing under this facility are due and payable.

           (b)    The Borrower may only borrow under the Reducing Revolving Term
                  Loan up to the amount of the Reducing Revolving Term Loan
                  Available Commitment. Principal payments of the greater of
                  $66,667 per month or an amount necessary to reduce the
                  Reducing Revolving Term Loan Balance to the Reducing Revolving
                  Term Loan Available Commitment will be required should the
                  amount of borrowings equal to or exceed the Reducing Revolving
                  Term Loan Available Commitment.

           (c)    Upon the terms and conditions (including, without limitation,
                  the right of the Lenders to decline to make any Loan so long
                  as any Default or Event of Default exists) and relying on the
                  representations and warranties contained in this Agreement,
                  each Lender severally agrees, during the Commitment Period, to
                  make Loans, in immediately available funds at the Applicable
                  Lending Office or the Principal Office, to or for the benefit
                  of the Borrower in an aggregate principal amount not to exceed
                  at any time outstanding the lessor of the Facility Amount of
                  such Lender or the Percentage Share of such Lender of the
                  Reducing Revolving Term Loan Balance then in effect. Loans
                  shall be made from time to time on any Business Day designated
                  by the Borrower following receipt by the Agent of a Borrowing
                  Request.

           (d)    Subject to the terms of this Agreement, during the Commitment
                  Period, the Borrower may borrow, repay, and reborrow up to the
                  amount of the Reducing Revolving Term Loan Available
                  Commitment in effect at that time, and convert Loans of one
                  type or with one Interest Period into Loans of another type or
                  with a different Interest Period. Except for prepayments made
                  pursuant to Section 2.10, each borrowing, conversion, and
                  prepayment of principal of Loans shall be in an amount at
                  least equal to $100,000. Each borrowing, prepayment, or
                  conversion of or into a Loan of a different type or, in the
                  case of a LIBO Rate Loan, having a different Interest Period,
                  shall be deemed a separate borrowing, conversion, and
                  prepayment for purposes of the foregoing, one for each type of
                  Loan or Interest Period. Anything in this Agreement to the
                  contrary notwithstanding, the aggregate principal amount of
                  LIBO Rate Loans having the same Interest Period shall be at
                  least equal to $100,000; and if any LIBO Rate Loan would
                  otherwise be in a lesser principal amount for any period, such
                  Loan shall be a Floating Rate Loan during such period.

           (e)    The Loans shall be made and maintained at the Applicable
                  Lending Office or the Principal Office and shall be evidenced
                  by the Notes.

           (f)    Not later than 2:00 p.m., Central Standard or Daylight Savings
                  Time, as the case may be, on the date specified for each
                  borrowing, each Lender shall make available an amount equal to
                  its Percentage Share of the borrowing to

                                       3

<PAGE>

                  be made on such date to the Agent, at an account designated by
                  the Agent, in immediately available funds, for the account of
                  the Borrower. The amount so received by the Agent shall,
                  subject to the terms and conditions hereof, be made available
                  to the Borrower in immediately available funds at the
                  Principal Office by the end of that Business Day. All Loans by
                  each Lender shall be maintained at the Applicable Lending
                  Office of such Lender and shall be evidenced by the Note of
                  such Lender.

           (g)    The failure of any Lender to make any Loan required to be made
                  by it hereunder shall not relieve any other Lender of its
                  obligation to make any Loan required to be made by it, and no
                  Lender shall be responsible for the failure of any other
                  Lender to make any Loan.

        2.03 Amendment of Section 2.12. Section 2.12 of the Agreement is hereby
amended as follows:

        "2.12 Commitment Fee. In addition to interest on the Note as provided
        herein and all other fees payable hereunder and to compensate the Lender
        for maintaining funds available, the Borrower shall pay to the Agent for
        the account of the Lenders, in immediately available funds, on the first
        day of July, 2003, and on the first day of each third calendar month
        thereafter during the Commitment Period, a fee in the amount of .375%
        per annum, calculated on the basis of a year of 365 or 366 days, as the
        case may be, for the actual days elapsed (including the first day but
        excluding the last day), on the average daily amount of the Available
        Commitment and the Reducing Revolving Term Loan Available Commitment
        during the preceding quarterly period."

        2.04 Amendment of Exhibit I(A). Exhibit I(A), as revised, shall be as
attached to this First Amendment.

                                   ARTICLE III
                                   CONDITIONS

        The obligation of the Lenders to amend the Agreement as provided herein
is subject to the fulfillment of the following conditions precedent:

        3.01 Receipt of Documents. The Lender shall have received, reviewed, and
approved the following documents and other items, appropriately executed when
necessary and in form and substance satisfactory to the Lender:

           (a)    multiple counterparts of this First Amendment as requested by
                  the Lender;

           (b)    Reducing Revolving Term Note; and

           (c)    such other agreements, documents, items, instruments,
                  opinions, certificates, waivers, consents, and evidence as the
                  Lender may reasonably request.

                                       4

<PAGE>

        3.02 Accuracy of Representations and Warranties. The representations and
warranties contained in Article IV of the Agreement and this First Amendment
shall be true and correct.

        3.03 Matters Satisfactory to Lenders. All matters incident to the
consummation of the transactions contemplated hereby shall be satisfactory to
the Lenders.

                                   ARTICLE IV
                         REPRESENTATIONS AND WARRANTIES

        The Borrower hereby expressly re-makes, in favor of the Lenders, all of
the representations and warranties set forth in Article IV of the Agreement, and
represents and warrants that all such representations and warranties remain true
and unbreached.

                                    ARTICLE V
                                  RATIFICATION

        Each of the parties hereto does hereby adopt, ratify, and confirm the
Agreement and the other Loan Documents, in all things in accordance with the
terms and provisions thereof, as amended by this First Amendment.

                                   ARTICLE VI
                                 MISCELLANEOUS

        6.01 Scope of Amendment. The scope of this First Amendment is expressly
limited to the matters addressed herein and this First Amendment shall not
operate as a waiver of any past, present, or future breach, Default, or Event of
Default under the Agreement, except to the extent, if any, that any such breach,
Default, or Event of Default is remedied by the effect of this First Amendment.

        6.02 Agreement as Amended. All references to the Agreement in any
document heretofore or hereafter executed in connection with the transactions
contemplated in the Agreement shall be deemed to refer to the Agreement as
amended by this First Amendment.

        6.03 Parties in Interest. All provisions of this First Amendment shall
be binding upon and shall inure to the benefit of the Borrower, the Lender and
their respective successors and assigns.

        6.04 Rights of Third Parties. All provisions herein are imposed solely
and exclusively for the benefit of the Lender and the Borrower, and no other
Person shall have standing to require satisfaction of such provisions in
accordance with their terms and any or all of such provisions may be freely
waived in whole or in part by the Lender at any time if in its sole discretion
it deems it advisable to do so.

        6.05 ENTIRE AGREEMENT. THIS FIRST AMENDMENT CONSTITUTES THE ENTIRE
AGREEMENT BETWEEN THE PARTIES HERETO WITH RESPECT TO THE SUBJECT HEREOF AND
SUPERSEDES ANY PRIOR AGREEMENT, WHETHER WRITTEN OR ORAL, BETWEEN SUCH PARTIES
REGARDING THE SUBJECT HEREOF. FURTHERMORE IN THIS REGARD, THIS FIRST AMENDMENT,
THE AGREEMENT, THE NOTE, THE SECURITY INSTRUMENTS, AND THE OTHER WRITTEN
DOCUMENTS REFERRED TO IN THE AGREEMENT OR EXECUTED IN

                                       5
<PAGE>

CONNECTION WITH OR AS SECURITY FOR THE NOTE REPRESENT, COLLECTIVELY, THE FINAL
AGREEMENT AMONG THE PARTIES THERETO 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.

        6.06 GOVERNING LAW. THIS FIRST AMENDMENT, THE AGREEMENT AND THE NOTE
SHALL BE DEEMED TO BE CONTRACTS MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS. THE PARTIES ACKNOWLEDGE AND
AGREE THAT THIS AGREEMENT AND THE NOTE AND THE TRANSACTIONS CONTEMPLATED HEREBY
BEAR A NORMAL, REASONABLE, AND SUBSTANTIAL RELATIONSHIP TO THE STATE OF TEXAS.

        6.07 JURISDICTION AND VENUE. ALL ACTIONS OR PROCEEDINGS WITH RESPECT TO,
ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED TO, OR FROM
THIS FIRST AMENDMENT, THE AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE LITIGATED
IN COURTS HAVING SITUS IN HARRIS COUNTY, TEXAS. EACH OF THE BORROWER AND THE
LENDER HEREBY SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE, OR FEDERAL COURT
LOCATED IN HARRIS COUNTY, TEXAS, AND HEREBY WAIVES ANY RIGHTS IT MAY HAVE TO
TRANSFER OR CHANGE THE JURISDICTION OR VENUE OF ANY LITIGATION BROUGHT AGAINST
IT BY THE BORROWER OR THE LENDER IN ACCORDANCE WITH THIS SECTION.

        IN WITNESS WHEREOF, this First Amendment to Credit Agreement is executed
effective the date first hereinabove written.

                                             BORROWER

                                             PRIMEENERGY CORPORATION
                                             PRIMEENERGY MANAGEMENT CORPORATION,
                                             PRIME OPERATING COMPANY, EASTERN
                                             OIL WELL SERVICE COMPANY, SOUTHWEST
                                             OILFIELD CONSTRUCTION COMPANY EOWS
                                             MIDLAND COMPANY

                                             By: /s/ Beverly A.  Cummings
                                                 -------------------------------
                                                      Beverly A.  Cummings
                                                      Executive Vice President,
                                                      Treasurer, and
                                                      Chief Financial Officer

                                       6

<PAGE>


                                            AGENT AND LENDER

                                            GUARANTY BANK, FSB


                                             By: /s/ Richard E. Menchaca
                                                 -------------------------------
                                                     Richard E. Menchaca
                                                     Senior Vice President

                                       7

<PAGE>

                                  EXHIBIT I(A)
                  [FORM OF REDUCING REVOLVING TERM NOTE]

                             REDUCING REVOLVING TERM
                                PROMISSORY NOTE
$3,599,998                      Houston, Texas                       June 1,2003

        FOR VALUE RECEIVED and WITHOUT GRACE, the undersigned ("Maker") promises
to pay to the order of GUARANTY BANK, FSB ("Payee"), at its banking quarters in
Houston, Harris County, Texas, the sum of THREE MILLION, FIVE HUNDRED AND
NINETY-NINE THOUSAND, NINE HUNDRED AND NINETY-EIGHT DOLLARS ($3,599,998), or so
much thereof as may be advanced against this Note pursuant to the Credit
Agreement dated of even date herewith by and between Maker and Payee (as
amended, restated, or supplemented from time to time, the "Credit Agreement"),
together with interest at the rates and calculated as provided in the Credit
Agreement.

        Reference is hereby made to the Credit Agreement for matters governed
thereby, including, without limitation, certain events which will entitle the
holder hereof to accelerate the maturity of all amounts due hereunder.
Capitalized terms used but not defined in this Note shall have the meanings
assigned to such terms in the Credit Agreement.

        This Note is issued pursuant to, is the "Note" under, and is payable as
provided in the Credit Agreement. Subject to compliance with applicable
provisions of the Credit Agreement, Maker may at any time pay the full amount or
any part of this Note without the payment of any premium or fee, but such
payment shall not, until this Note is fully paid and satisfied, excuse the
payment as it becomes due of any payment on this Note provided for in the Credit
Agreement.

        Without being limited thereto or thereby, this Note is secured by the
Security Instruments.

        THIS NOTE SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE STATE OF
TEXAS WITHOUT GIVING EFFECT TO PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW;
PROVIDED, HOWEVER, THAT CHAPTER 345 OF THE TEXAS FINANCE CODE (WHICH REGULATES
CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING TRIPARTY ACCOUNTS) SHALL
NOT APPLY TO THIS NOTE.

                           (PAGE ONE OF TWO PAGE NOTE)

                                       ii


<PAGE>

                                             PRIMEENERGY CORPORATION PRIMEENERGY
                                             MANAGEMENT CORPORATION, PRIME
                                             OPERATING COMPANY, EASTERN OIL WELL
                                             SERVICE COMPANY, SOUTHWEST OILFIELD
                                             CONSTRUCTION COMPANY
                                             EOWS MIDLAND COMPANY

                                             By: /s/ Beverly A. Cummings
                                                --------------------------------
                                                  Beverly A. Cummings
                                                  Executive Vice President,
                                                  Treasurer, and Chief Financial
                                                  Officer

                                      iii

<PAGE>

                             REDUCING REVOLVING TERM
                                PROMISSORY NOTE

$3,599,998                      Houston, Texas                      June 1, 2003

        FOR VALUE RECEIVED and WITHOUT GRACE, the undersigned ("Maker") promises
to pay to the order of GUARANTY BANK, FSB ("Payee"), at its banking quarters in
Houston, Harris County, Texas, the sum of THREE MILLION, FIVE HUNDRED AND
NINETY-NINE THOUSAND, NINE HUNDRED AND NINETY-EIGHT DOLLARS ($3,599,998), or so
much thereof as may be advanced against this Note pursuant to the Credit
Agreement dated of even date herewith by and between Maker and Payee (as
amended, restated, or supplemented from time to time, the "Credit Agreement"),
together with interest at the rates and calculated as provided in the Credit
Agreement.

        Reference is hereby made to the Credit Agreement for matters governed
thereby, including, without limitation, certain events which will entitle the
holder hereof to accelerate the maturity of all amounts due hereunder.
Capitalized terms used but not defined in this Note shall have the meanings
assigned to such terms in the Credit Agreement.

        This Note is issued pursuant to, is the "Note" under, and is payable as
provided in the Credit Agreement. Subject to compliance with applicable
provisions of the Credit Agreement, Maker may at any time pay the full amount or
any part of this Note without the payment of any premium or fee, but such
payment shall not, until this Note is fully paid and satisfied, excuse the
payment as it becomes due of any payment on this Note provided for in the Credit
Agreement.

        Without being limited thereto or thereby, this Note is secured by the
Security Instruments.

        THIS NOTE SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE STATE OF
TEXAS WITHOUT GIVING EFFECT TO PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW;
PROVIDED, HOWEVER, THAT CHAPTER 345 OF THE TEXAS FINANCE CODE (WHICH REGULATES
CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING TRIPARTY ACCOUNTS) SHALL
NOT APPLY TO THIS NOTE.

                           (PAGE ONE OF TWO PAGE NOTE)

<PAGE>

                                             PRIMEENERGY CORPORATION PRIMEENERGY
                                             MANAGEMENT CORPORATION, PRIME
                                             OPERATING COMPANY, EASTERN OIL WELL
                                             SERVICE COMPANY, SOUTHWEST OILFIELD
                                             CONSTRUCTION COMPANY
                                             EOWS MIDLAND COMPANY


                                             By: /s/ Beverly A. Cummings
                                                --------------------------------
                                                  Beverly A. Cummings
                                                  Executive Vice President,
                                                  Treasurer, and Chief Financial
                                                  Officer

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.22.2
<SEQUENCE>5
<FILENAME>d13330exv10w22w2.txt
<DESCRIPTION>SECOND AMENDMENT TO CREDIT AGREEMENT
<TEXT>
<PAGE>
                                                                 Exhibit 10.22.2

                      SECOND AMENDMENT TO CREDIT AGREEMENT

                                     BETWEEN

                             PRIMEENERGY CORPORATION
                       PRIMEENERGY MANAGEMENT CORPORATION
                             PRIME OPERATING COMPANY
                        EASTERN OIL WELL SERVICE COMPANY
                     SOUTHWEST OILFIELD CONSTRUCTION COMPANY
                              EOWS MIDLAND COMPANY
                           F-W OIL EXPLORATION L.L.C.

                                       AND

                          GUARANTY BANK, FSB, AS AGENT
                                  AND A LENDER

                       EFFECTIVE AS OF SEPTEMBER 22, 2003

             REDUCING REVOLVING LINE OF CREDIT OF UP TO $50,000,000
                   REDUCING REVOLVING TERM LOAN OF $3,666,665

<PAGE>

                                  TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                         PAGE
                                                                                         ----
<S>                                                                                      <C>
ARTICLE I       DEFINITIONS.........................................................      1
  1.01          Terms Defined Above.................................................      1
  1.02          Terms Defined in Agreement..........................................      1
  1.03          References..........................................................      1
  1.04          Articles and Sections...............................................      2
  1.05          Number and Gender...................................................      2
ARTICLE II      AMENDMENTS..........................................................      2
  2.01          Amendment of Section 2.9(a).........................................      2
  2.02          Addition of Section 2.25............................................      2
  2.03          Amendment of Section 6.6............................................      2
  2.04          Amendment of Section 6.7............................................      2
  2.05          Amendment of Section 6.8............................................      3
ARTICLE III     CONDITIONS..........................................................      3
  3.01          Receipt of Documents................................................      3
  3.02          Accuracy of Representations and Warranties..........................      4
  3.03          Matters Satisfactory to Lenders.....................................      4
ARTICLE IV      REPRESENTATIONS AND WARRANTIES......................................      4
ARTICLE V       RATIFICATION........................................................      5
ARTICLE VI      MISCELLANEOUS.......................................................      5
  6.01          Scope of Amendment..................................................      5
  6.02          Agreement as Amended................................................      5
  6.03          Parties in Interest.................................................      5
  6.04          Rights of Third Parties.............................................      5
  6.05          ENTIRE AGREEMENT....................................................      5
  6.06          GOVERNING LAW.......................................................      5
  6.07          JURISDICTION AND VENUE..............................................      6
</TABLE>

                                       i

<PAGE>


                      SECOND AMENDMENT TO CREDIT AGREEMENT


        This SECOND AMENDMENT TO CREDIT AGREEMENT (this "Second Amendment") is
made and entered into effective as of September 22, 2003, between PRIMEENERGY
CORPORATION, a Delaware corporation ("PEC"), PRIMEENERGY MANAGEMENT CORPORATION,
a New York corporation, PRIME OPERATING COMPANY, a Texas corporation, EASTERN
OIL WELL SERVICE COMPANY, a West Virginia corporation, SOUTHWEST OILFIELD
CONSTRUCTION COMPANY, an Oklahoma corporation, EOWS MIDLAND COMPANY, a Texas
corporation, and F-W OIL EXPLORATION L.L.C., a Delaware limited liability
company ("FWOE") (collectively, the "Borrower"), with each other lender that is
a signatory hereto or becomes a signatory hereto as provided in Section 9.1,
(individually, together with its successors and assigns, a "'Lender" and
collectively together, with their respective successors and assigns, the
"Lenders") and GUARANTY BANK, FSB, a federal savings bank, as agent for the
Lenders (in such capacity, together with its successors in such capacity
pursuant to the terms hereof, the "Agent").

                               W I T N E S S E T H

        WHEREAS, the above named parties did execute and exchange counterparts
of that certain Credit Agreement dated December 19, 2002, as amended by First
Amendment to Credit Agreement dated effective as of June 1, 2003 (the
"Agreement"), to which reference is here made for all purposes;

        WHEREAS, Borrower has acquired a majority interest in FWOE and FWOE has
been added to the Agreement as a Borrower effective the date of this Second
Amendment;

        WHEREAS, the parties subject to and bound by the Agreement are desirous
of amending the Agreement in the particulars hereinafter set forth;

        NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties to the Agreement, as set forth therein, and the mutual covenants
and agreements of the parties hereto, as set forth in this Second Amendment, the
parties hereto agree as follows:

                                    ARTICLE I
                                  DEFINITIONS

        1.01 Terms Defined Above. As used herein, each of the terms "Agent,"
"Agreement," "Borrower," "Lenders" and "Second Amendment." shall have the
meaning assigned to such term hereinabove.

        1.02 Terms Defined in Agreement. As used herein, each term defined in
the Agreement shall have the meaning assigned thereto in the Agreement, unless
expressly provided herein to the contrary.

        1.03 References. References in this Second Amendment to Article or
Section numbers shall be to Articles and Sections of this Second Amendment,
unless expressly stated herein to the contrary. References in this Second
Amendment to "hereby," "herein," hereinafter," hereinabove,"

                                       1
<PAGE>

"hereinbelow," "hereof." and "hereunder" shall be to this Second Amendment in
its entirety and not only to the particular Article or Section in which such
reference appears.

        1.04 Articles and Sections. This Second Amendment, for convenience only,
has been divided into Articles and Sections and it is understood that the
rights, powers, privileges, duties, and other legal relations of the parties
hereto shall be determined from this Second Amendment as an entirety and without
regard to such division into Articles and Sections and without regard to
headings prefixed to such Articles and Sections.

        1.05 Number and Gender. Whenever the context requires, reference herein
made to the single number shall be understood to include the plural and likewise
the plural shall be understood to include the singular. Words denoting sex shall
be construed to include the masculine, feminine, and neuter, when such
construction is appropriate, and specific enumeration shall not exclude the
general, but shall be construed as cumulative. Definitions of terms defined in
the singular and plural shall be equally applicable to the plural or singular,
as the case may be.

                                   ARTICLE II
                                   AMENDMENTS

        The Borrower and the Lender hereby amend the Agreement in the following
particulars:

        2.01 Amendment of Section 2.9(a). Section 2.9(a) of the Agreement is
hereby amended to read as follows:

        "2.9 Borrowing Base Determinations, (a) The Borrowing Base as of
        September 9, 2003, is acknowledged by the Borrower and the Lenders to be
        $25,800,000."

        2.02 Addition of Section 2.25. Section 2.25 is added to the Agreement
        as follows:

        "2.25 Limitation of Liability of FWOE. FWOE's liability to the Lender on
        the Note and other Obligations under the Agreement is limited to
        $3,800,000."

        2.03 Amendment of Section 6.6. Section 6.6 of the Agreement shall be
        amended to add the following sentence:

        "6.6 Loans or Advances. ... Notwithstanding the above, the Borrower may
        make a loan to FWOE in the amount of $1,312,500 pursuant to the terms of
        the Subscription Agreement dated August 27, 2003, by and between FWOE,
        F-W Oil Interests, Inc., Frank C. Wade and PEC."

        2.04 Amendment of Section 6.7. Section 6.7 of the Agreement shall be
amended to add the following sentence:

        "6.7 Investments. ... Notwithstanding the above, the Borrower may make
        an investment in FWOE in the amount of $4,166,000 pursuant to the terms
        of the Subscription Agreement dated August 27, 2003, by and between
        FWOE, F-W Oil Interests, Inc., Frank C. Wade and PEC."

                                       2

<PAGE>

        2.05 Amendment of Section, 6.8. Section 6.8 of the Agreement shall be
amended to add the following sentence:

        "6.8 Dividends and Distributions. ... Notwithstanding the above, FWOE
        may make distributions to PEC (1) in the amount of $2,187,500, and (2)
        in the amount of $1,312,500 in payment of the Promissory Note dated
        August 27, 2003 and (3) to F-W Oil Interests, Inc. and Frank C. Wade in
        amounts due in settlement of accounting matters as a result of the
        Subscription Agreement dated August 27, 2003, between PEC and FWOE et
        al."

                                  ARTICLE III
                                   CONDITIONS

        The obligation of the Lenders to amend the Agreement as provided herein
 is subject to the fulfillment of the following conditions precedent:

        3.01 Receipt of Documents. The Lender shall have received, reviewed, and
approved the following documents and other items, appropriately executed when
necessary and in form and substance satisfactory to the Lender:

        (a)      multiple counterparts of this Second Amendment as requested by
                 the Lender;

        (b)      Mortgage, Deed of Trust, Indenture, Security Agreement.
                 Assignment of Production and Financing Statement from FWOE
                 covering all Oil and Gas Properties of FWOE and all
                 improvements, personal property, and fixtures related thereto;

        (c)      Financing Statements from FWOE, as debtor, constituent to the
                 instrument described in clause (b) above;

        (d)      undated letters, in form and substance satisfactory to the
                 Agent, from FWOE to each purchaser of production and disburser
                 of the proceeds of production from or attributable to the
                 Mortgaged Properties, together with additional letters with the
                 addressees left blank, authorizing and directing the addressees
                 to make future payments attributable to production from the
                 Mortgaged Properties directly to the Agent;

        (e)      Security Agreement from FWOE pledging contract rights, etc.;

        (f)      Financing Statements from FWOE, as debtor, constituent to the
                 instrument described in clause (e) above;

        (g)      payment by FWOE to Guaranty Bank, FSB of $19,000 as a Facility
                 Fee for the increase in the Borrowing Base of $3,800,000;

        (h)      Ratification of and Amendment to Mortgage, Deed of Trust,
                 Indenture, Security Agreement, Financing Statement and
                 Assignment of Production;

                                       3

<PAGE>

        (i)      Financing Statements from the Borrower, as debtor, constituent
                 to the instrument described in clause (h) above;

        (j)      pledge of membership interest of Borrower in FWOE together with
                 blank power of sale;

        (k)      copies of the formation documents of FWOE and all amendments
                 thereto, accompanied by a certificate dated the Closing Date
                 issued by the secretary or an assistant secretary or another
                 authorized representative of FWOE to the effect that each such
                 copy is correct and complete;

        (l)      a certificate of incumbency dated the Closing Date, including
                 specimen signatures of all officers or other representatives of
                 FWOE who are authorized to execute Loan Documents on behalf of
                 FWOE, such certificate being executed by an authorized
                 representative of FWOE;

        (m)      copies of resolutions of FWOE, adopted by the board of managers
                 of FWOE approving the Loan Documents to which FWOE is a party
                 and authorizing the transactions contemplated herein and
                 therein, accompanied by a certificate dated the date of the
                 Second Amendment issued by an authorized representative of FWOE
                 to the effect that such copies are true and correct copies of
                 resolutions duly adopted and that such resolutions constitute
                 all the resolutions adopted with respect to such transactions,
                 have not been amended, modified, or rescinded in any respect,
                 and are in full force and effect as of the date of such
                 certificate;

        (n)      Note in the form of Exhibit I hereto; and

        (o)      such other agreements, documents, items, instruments, opinions,
                 certificates, waivers, consents, and evidence as the Agent may
                 reasonably request.

        3.02 Accuracy of Representations and Warranties. The representations and
warranties contained in Article IV of the Agreement and this Second Amendment
shall be true and correct.

        3.03 Matters Satisfactory to Lenders. All matters incident to the
consummation of the transactions contemplated hereby shall be satisfactory to
the Lenders.

        3.04 Amendment of Exhibit I. Exhibit I, i.e. the Form of Promissory
Note, shall be as set forth on Exhibit I to this Second Amendment.

                                   ARTICLE IV
                         REPRESENTATIONS AND WARRANTIES

        The Borrower hereby expressly re-makes, in favor of the Lenders, all of
the representations and warranties set forth in Article IV of the Agreement, and
represents and warrants that all such representations and warranties remain true
and unbreached.

                                       4

<PAGE>

                                    ARTICLE V
                                  RATIFICATION

        Each of the parties hereto does hereby adopt, ratify, and confirm the
Agreement and the other Loan Documents, in all things in accordance with the
terms and provisions thereof, as amended by this Second Amendment.

                                   ARTICLE VI
                                  MISCELLANEOUS

        6.01 Scope of Amendment. The scope of this Second Amendment is expressly
limited to the matters addressed herein and this Second Amendment shall not
operate as a waiver of any past, present, or future breach, Default, or Event of
Default under the Agreement, except to the extent, if any, that any such breach,
Default, or Event of Default is remedied by the effect of this Second Amendment.

        6.02 Agreement as Amended. All references to the Agreement in any
document heretofore or hereafter executed in connection with the transactions
contemplated in the Agreement shall be deemed to refer to the Agreement as
amended by this Second Amendment.

        6.03 Parties in Interest. All provisions of this Second Amendment shall
be binding upon and shall inure to the benefit of the Borrower, the Lender and
their respective successors and assigns.

        6.04 Rights of Third Parties. All provisions herein are imposed solely
and exclusively for the benefit of the Lender and the Borrower, and no other
Person shall have standing to require satisfaction of such provisions in
accordance with their terms and any or all of such provisions may be freely
waived in whole or in part by the Lender at any time if in its sole discretion
it deems it advisable to do so.

        6.05 ENTIRE AGREEMENT. THIS SECOND AMENDMENT CONSTITUTES THE ENTIRE
AGREEMENT BETWEEN THE PARTIES HERETO WITH RESPECT TO THE SUBJECT HEREOF AND
SUPERSEDES ANY PRIOR AGREEMENT, WHETHER WRITTEN OR ORAL, BETWEEN SUCH PARTIES
REGARDING THE SUBJECT HEREOF. FURTHERMORE IN THIS REGARD, THIS SECOND AMENDMENT,
THE AGREEMENT, THE NOTE, THE SECURITY INSTRUMENTS, AND THE OTHER WRITTEN
DOCUMENTS REFERRED TO IN THE AGREEMENT OR EXECUTED IN CONNECTION WITH OR AS
SECURITY FOR THE NOTE REPRESENT, COLLECTIVELY, THE FINAL AGREEMENT AMONG THE
PARTIES THERETO 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.

        6.06 GOVERNING LAW. THIS SECOND AMENDMENT, THE AGREEMENT AND THE NOTE
SHALL BE DEEMED TO BE CONTRACTS MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS. THE PARTIES ACKNOWLEDGE AND
AGREE THAT THIS AGREEMENT AND THE NOTE AND THE TRANSACTIONS CONTEMPLATED

                                       5

<PAGE>

HEREBY BEAR A NORMAL, REASONABLE, AND SUBSTANTIAL RELATIONSHIP TO THE STATE OF
TEXAS.

        6.07 JURISDICTION AND VENUE. ALL ACTIONS OR PROCEEDINGS WITH RESPECT TO,
ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED TO, OR FROM
THIS SECOND AMENDMENT, THE AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE LITIGATED
IN COURTS HAVING SITUS IN HARRIS COUNTY, TEXAS. EACH OF THE BORROWER AND THE
LENDER HEREBY SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE, OR FEDERAL COURT
LOCATED IN HARRIS COUNTY, TEXAS, AND HEREBY WAIVES ANY RIGHTS IT MAY HAVE TO
TRANSFER OR CHANGE THE JURISDICTION OR VENUE OF ANY LITIGATION BROUGHT AGAINST
IT BY THE BORROWER OR THE LENDER IN ACCORDANCE WITH THIS SECTION.

                  (REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)

                                       6

<PAGE>

        IN WITNESS WHEREOF, this Second Amendment to Credit Agreement is
executed effective the date first hereinabove written.

                                             BORROWER

                                             PRIMEENERGY CORPORATION PRIMEENERGY
                                             MANAGEMENT CORPORATION, PRIME
                                             OPERATING COMPANY, EASTERN OIL WELL
                                             SERVICE COMPANY, SOUTHWEST OILFIELD
                                             CONSTRUCTION COMPANY EOWS MIDLAND
                                             COMPANY

                                             By:
                                                --------------------------------
                                                    Beverly A. Cummings
                                                    Executive Vice President,
                                                    Treasurer, and Chief
                                                    Financial Officer

                                             F-W OIL EXPLORATION L.L.C.

                                             By:
                                                --------------------------------
                                                    Jim R. Brock
                                                    President and CFO

                                       7

<PAGE>


                                             AGENT AND LENDER

                                             GUARANTY BANK, FSB

                                             By:
                                                --------------------------------
                                                     Richard E. Menchaca
                                                     Senior Vice President

                                       8

<PAGE>

                                   EXHIBIT I
                                 [FORM OF NOTE]

                                PROMISSORY NOTE

$50,000,000                      Houston, Texas                September 22,2003

        FOR VALUE RECEIVED and WITHOUT GRACE, the undersigned ("Maker") promises
to pay to the order of GUARANTY BANK, FSB ("Payee"), at its banking quarters in
Houston, Harris County, Texas, the sum of FIFTY MILLION DOLLARS ($50,000,000),
or so much thereof as may be advanced against this Note pursuant to the Credit
Agreement dated of even date herewith by and between Maker and Payee (as
amended, restated, or supplemented from time to time, the "Credit Agreement"),
together with interest at the rates and calculated as provided in the Credit
Agreement.

        Reference is hereby made to the Credit Agreement for matters governed
thereby, including, without limitation, certain events which will entitle the
holder hereof to accelerate the maturity of all amounts due hereunder.
Capitalized terms used but not defined in this Note shall have the meanings
assigned to such terms in the Credit Agreement.

        This Note is issued pursuant to, is the "Note" under, and is payable as
provided in the Credit Agreement. Subject to compliance with applicable
provisions of the Credit Agreement, Maker may at any time pay the full amount or
any part of this Note without the payment of any premium or fee, but such
payment shall not, until this Note is fully paid and satisfied, excuse the
payment as it becomes due of any payment on this Note provided for in the Credit
Agreement.

        Without being limited thereto or thereby, this Note is secured by the
Security Instruments.

        THIS NOTE SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE STATE OF
TEXAS WITHOUT GIVING EFFECT TO PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW;
PROVIDED, HOWEVER, THAT CHAPTER 345 OF THE TEXAS FINANCE CODE (WHICH REGULATES
CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING TRIPARTY ACCOUNTS) SHALL
NOT APPLY TO THIS NOTE.

                           (PAGE ONE OF TWO PAGE NOTE)


<PAGE>


                                             PRIMEENERGY CORPORATION
                                             PRIMEENERGY MANAGEMENT CORPORATION,
                                             PRIME OPERATING COMPANY, EASTERN
                                             OIL WELL SERVICE COMPANY, SOUTHWEST
                                             OILFIELD CONSTRUCTION COMPANY EOWS
                                             MIDLAND COMPANY

                                             By:
                                                --------------------------------
                                                    Beverly A. Cummings
                                                    Executive Vice President,
                                                    Treasurer, and Chief
                                                    Financial Officer

                                             F-W OIL EXPLORATION L.L.C.

                                             By:
                                                --------------------------------
                                                    Jim R. Brock
                                                    President and CFO

                          (PAGE TWO OF TWO PAGE NOTE)

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.23.1
<SEQUENCE>6
<FILENAME>d13330exv10w23w1.txt
<DESCRIPTION>RATIFICATION OF AND AMENDMENT TO MORTGAGE, DEED
<TEXT>
<PAGE>

                                                                 EXHIBIT 10.23.1

                  MORTGAGE, DEED OF TRUST, SECURITY AGREEMENT,
                FINANCING STATEMENT AND ASSIGNMENT OF PRODUCTION

          (THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS)

                  This Mortgage, Deed of Trust, Security Agreement, Financing
Statement, and Assignment of Production (this "Deed of Trust") is executed
pursuant to the Credit Agreement dated as of as of December 19, 2002, as
amended, by and among F-W OIL EXPLORATION L.L.C., a Delaware limited liability
company (herein, "Mortgagor), PRIMEENERGY CORPORATION, a Delaware corporation
("Prime"), PRIMEENERGY MANAGEMENT CORPORATION, a New York corporation ("PEMC"),
PRIME OPERATING COMPANY, a Texas corporation ("POC"), EASTERN OIL WELL SERVICE
COMPANY, a West Virginia corporation ("Eastern"), EOWS MIDLAND COMPANY, a Texas
corporation ("EOWS") and SOUTHWEST OILFIELD CONSTRUCTION COMPANY, an Oklahoma
corporation ("Southwest") (Mortgagor, Prime, PEMC, POC, Eastern, EOWS, and
Southwest herein collectively, "Borrowers"), and GUARANTY BANK, FSB, a federal
savings bank, individually as a Lender and as Agent for the lenders signatory
thereto from time to time (the "Lenders") (as amended, restated, or supplemented
from time to time, the "Credit Agreement"). Capitalized terms used but not
defined herein shall have the meanings assigned to such terms in the Credit
Agreement.

                  Mortgagor, acting herein by and through its proper officers
who have heretofore been duly authorized, whose mailing address is 9821 Katy
Freeway, Suite 1050, Houston, Texas 77024, hereby agrees as follows:

                                    ARTICLE 1

                                      GRANT

                  1.1 Lien. Mortgagor, for valuable consideration, the receipt
of which is hereby acknowledged, and in consideration of the debt and trust
hereinafter mentioned, has granted, bargained, sold, conveyed, transferred and
assigned, and by these presents does grant, bargain, sell, convey, transfer and
assign to Arthur R. Gralla, Jr., Trustee, whose address is c/o Guaranty Bank,
FSB, 333 Clay Street, Suite 4400, Houston, Texas 77002-4103, and his successors
and substitutes in trust, as hereinafter provided (the "Trustee"), for the
benefit of Guaranty Bank, FSB, as Agent for the lenders, with banking quarters
in Houston, Harris County, Texas, the mailing address for which is 333 Clay
Street, Suite 4400, Houston, Texas 77002-4103 ("Mortgagee"), the following
described Property:

                  (a) all right, title, and interest, whether now owned and
         existing or hereafter acquired or arising, of Mortgagor in and to the
         leases, rights of way, easements, or other documents described in
         Exhibit A attached hereto and incorporated herein for all purposes or
         described or referred to in the documents described in Exhibit A,
         without regard to any surface acreage and/or depth limitations set
         forth in Exhibit A, and all renewals and extensions thereof and all new
         leases, rights of way, easements, or other documents (i) in which an
         interest is acquired by Mortgagor after the termination or expiration
         of any lease, right of way, easement, or

<PAGE>

         other document described or referred to in Exhibit A, and (ii) that
         covers all or any part of the Property described in and covered by such
         terminated or expired lease, right of way, easement, or other document,
         to the extent, and only to the extent, such new leases, rights of way,
         easements, or other documents may cover such Property (all of the
         foregoing in this subsection (a) being the "Leases");

                  (b) all right, title, and interest, whether now owned and
         existing or hereafter acquired or arising, of Mortgagor in and to the
         lands subject to the Leases or otherwise described or referred to in
         Exhibit A, without regard to any surface acreage and/or depth
         limitations set forth in Exhibit A (the "Lands"), including, without
         limitation, the oil, gas, mineral, and leasehold estates in and to the
         Lands;

                  (c) all right, title, and interest, whether now owned and
         existing or hereafter acquired or arising, of Mortgagor in and to any
         of the oil, gas, and minerals in, on, or under the Lands, including,
         without limitation, all contractual rights, fee interests, leasehold
         interests, overriding royalty interests, non-participating royalty
         interests, mineral interests, production payments, net profits
         interests, or any other interest measured by or payable out of
         production of oil, gas, or other minerals from the Leases and/or Lands;

                  (d) all of the foregoing interests of Mortgagor as such
         interests may be enlarged by the discharge of any payments out of
         production or by the removal of any charges or encumbrances;

                  (e) all right, title, and interest, whether now owned and
         existing or hereafter acquired or arising, of Mortgagor in, to, and
         under or derived from any present or future operating, farmout,
         bidding, pooling, unitization, and communitization agreements,
         assignments, and subleases, whether or not described in Exhibit A, to
         the extent, and only to the extent, that such agreements, assignments,
         and subleases cover or include any right, title, and interest, whether
         now owned and existing or hereafter acquired or arising, of Mortgagor
         in and to all or any portion of the Leases and/or the Lands, and all
         units created by any such pooling, unitization, and communitization
         agreements and all units formed under orders, regulations, rules, or
         other official acts of any Governmental Authority having jurisdiction,
         to the extent and only to the extent that such units cover or include
         all or any portion of the Leases and/or the Lands;

                  (f) all right, title, and interest, whether now owned and
         existing or hereafter acquired or arising, of Mortgagor in, to, and
         under or derived from all presently existing and future advance payment
         agreements, oil, casinghead gas, and gas sales, exchange, and
         processing contracts and agreements, including, without limitation,
         those contracts and agreements that are described or referred to in
         Exhibit A, to the extent, and only to the extent, those contracts and
         agreements cover or include all or any portion of the Leases and/or the
         Lands; and

                                       2
<PAGE>

                (g) all right, title, and interest, whether now owned and
        existing or hereafter acquired or arising, of Mortgagor in, to, and
        under or derived from all existing and future permits, licenses,
        easements, and similar rights and privileges that relate to or are
        appurtenant to any of the Leases and/or the Lands.

                  1.2 Security Interest. Mortgagor, for the same consideration,
hereby grants to Mortgagee a continuing security interest in all improvements
and all personal Property of any kind or character defined in and subject to the
provisions of the Uniform Commercial Code ("UCC"), including, but not limited
to, substitutions and replacements for, accessions to, and the proceeds and
products from any and all of such improvements and personal Property, as well as
any and all "as- extracted collateral" as such term is defined in the UCC,
whether now owned and existing or hereafter acquired or arising, and situated on
any of the Lands, including, but not limited to, pipe, casing, tubing, rods,
storage tanks, boilers, loading racks, pumps, foundations, warehouses, and all
other personal Property and equipment of every kind and character upon,
incident, appurtenant, or belonging to and used in connection with the interest
of Mortgagor, whether now owned and existing or hereafter acquired or arising,
in the Lands and/or the Leases, including all oil, gas, and other minerals
produced or to be produced to the account of Mortgagor from the Lands and all
accounts receivable, general intangibles, and contract rights of Mortgagor in
connection with the Lands and/or the Leases and all proceeds, products,
substitutions, and exchanges thereof (the Lands, the Leases, and the real and
personal Property interests described in this Section being the "Mortgaged
Property").

                  1.3 Assignment of Security. Mortgagor, for the same
consideration, hereby grants to Mortgagee any and all rights of Mortgagor to
Liens securing payment of proceeds from the sale of production from the
Mortgaged Property.

                  1.4 After-Acquired Property. Mortgagor, for the same
consideration, hereby grants, bargains, sells, conveys, transfers, and assigns
to the Trustee or grants to Mortgagee a continuing security interest in, as the
case may be, all additional right, title, or interest which Mortgagor may
hereafter acquire or become entitled to in the interests, Properties, Lands,
Leases, and premises aforesaid, and in the oil, gas, or other minerals in and
under or produced from or attributable to any of the Lands or Leases, which
additional right, title, and interest, when acquired, shall constitute
"Mortgaged Property," the same as if expressly described and conveyed herein.

                  1.5 Habendum. TO HAVE AND TO HOLD all and singular the
Mortgaged Property and all other Property which, by the terms hereof, has or may
hereafter become subject to the Liens of this Deed of Trust, together with all
rights, hereditaments, and appurtenances in anywise belonging thereto, to the
Trustee or Mortgagee, as the case may be, or the successors or assigns of either
of them forever.

                                       3
<PAGE>

                                    ARTICLE 2

                              INDEBTEDNESS SECURED

                  This conveyance is made, IN TRUST, HOWEVER, to secure and
enforce the payment of the following indebtedness, obligations, and liabilities:

                  2.1 Specific Obligations. The Obligations, including, without
limitation, the indebtedness evidenced by (a) the Credit Agreement, (b) the
Promissory Note dated December 19, 2002, executed by Borrowers to the order of
the Lenders pursuant to the Credit Agreement in the aggregate face amount of up
to $50,000,000, bearing interest and being payable as provided therein or as
provided in the Credit Agreement, with a final maturity of December 19, 2004,
and (c) Promissory Note dated June 1, 2003, executed by Borrowers to the order
of the Lenders pursuant to the Credit Agreement in the face amount of
$3,599,998, bearing interest and being payable as provided therein or as
provided in the Credit Agreement, with a final maturity of December 19, 2004.

                  2.2 Additional Indebtedness.

                  (a) Payment of and performance of any and all present or
         future obligations of Borrowers under Commodity Hedge Agreements, as
         defined in the Credit Agreement.

                  (b) Payment of and performance of any and all present or
         future obligations of Borrowers under any Rate Management Transaction,
         as defined in the Credit Agreement, entered into by and between
         Borrowers and a Lender.

                  (c) Payment of and performance of any and all present or
         future obligations of Borrowers under any guaranty in favor of Lenders
         of any of the Borrowers' subsidiary's obligations under Commodity Hedge
         Agreements and Rate Management Transactions and all present or future
         obligations of Borrowers or Borrowers' subsidiaries under Commodity
         Hedge Agreements and Rate Management Transactions.

                  2.3 Other and Further Indebtedness. This Deed of Trust is
intended to secure a revolving credit line as set forth in the Credit Agreement.
If intermediate paydowns by Borrowers reduce the outstanding Indebtedness to
zero, it is intended that the Liens created under this Deed of Trust shall
remain in full force and effect as long as any Commitment exists. In addition,
it is contemplated that Borrowers may from time to time borrow additional sums
of money from or otherwise be or become obligated to Lenders. This Deed of Trust
is given to secure any and all indebtedness of Borrowers, present or future,
either direct or indirect, primary or secondary, fixed or contingent, which
Borrowers may now or hereafter owe, or as to which Borrowers may in any manner
become obligated to Lenders for payment, including, without limitation,
indebtedness arising by way of guaranty as to obligations of another to Lenders
and indebtedness originally owed to a party other than Lenders but which becomes
owing to Lenders as the result of Lenders having

                                       4
<PAGE>

acquired the right to payment thereof. This Deed of Trust shall likewise secure
not only the above described indebtedness, but any and all renewals for any
period, extensions, and rearrangements of all or any portion thereof; and the
Liens under this Deed of Trust shall be cumulative of all other Liens and
security of any and every other kind or character whatsoever securing the
above-described indebtedness. Notwithstanding the foregoing, it is not the
intention of the parties hereto to extend the Liens of this Deed of Trust so as
to violate, or give rise to an allegation of violation of, any provision of any
statute, regulation, rule, ordinance or order of any applicable jurisdiction, or
any agency or subdivision of any of such jurisdictions. In this connection, this
Deed of Trust shall not, solely as to the relevant indebtedness, serve as
security for any indebtedness when for it to do so would violate any provision
of any statute, regulation, rule, ordinance or order of any applicable
jurisdiction, or any agency or subdivision of any of such jurisdictions.

                  2.4 Indebtedness. The word "Indebtedness" wherever used in
this Deed of Trust shall refer to all present and future debts, obligations, and
liabilities described or referred to in this Article 2, subject, however, to the
limitations provided hereinabove in this Article 2.

                                    ARTICLE 3

                                   WARRANTIES

                  3.1 Warranty of Title. Mortgagor hereby binds itself, its
legal representatives, successors, and assigns, to warrant and forever defend
all and singular the Mortgaged Property to the Trustee and the successors and
assigns of the Trustee forever against every Person whomsoever lawfully claiming
or to claim the same or any part thereof. Notwithstanding that this Deed of
Trust covers all of the right, title, and interest, whether now owned and
existing or hereafter acquired or arising, of Mortgagor in and to the Mortgaged
Property, Mortgagor, for itself, its legal representatives, successors, and
assigns, further covenants, represents, and warrants that Mortgagor has good and
indefeasible title to the Mortgaged Property and that the interests of Mortgagor
in and to the Leases and/or Lands described in Exhibit A are not greater than
the working interest nor less than the net revenue interest, overriding royalty
interest, net profit interest, production payment interest, royalty interest, or
other interest payable out of or measured by production set forth in connection
with each oil and gas well described in Exhibit A. In the event Mortgagor owns
any other or greater interest, such additional interest is nonetheless included
in, covered by, and subject to the liens and security interests created by this
Deed of Trust.

                  3.2 Additional Warranties. In consideration of the
Indebtedness, Mortgagor, for itself, its legal representatives, successors, and
assigns, covenants, represents, and warrants that:

                  (a) Leases in Effect. All of the Leases specifically described
         or referred to in Exhibit A are in full force and effect. All
         covenants, express or implied, in respect of the Leases specifically
         described or referred to in Exhibit A, or of any assignment of any of
         such Leases, which may affect the validity of any of such Leases, have
         been performed insofar as such Leases pertain to the Lands.

                                       5
<PAGE>

                  (b) Interests Free of Liens. The interests of Mortgagor in the
         Mortgaged Property are free and clear of all Liens except for Permitted
         Liens. All gross production taxes and all taxes as to which non-payment
         could result in a Lien against any of the Mortgaged Property have been
         paid.

                  (c) Representations and Warranties. As of the date hereof, all
         representations and warranties of Mortgagor set forth in the Credit
         Agreement are true and correct in all material respects, except to the
         extent such representations and warranties relate solely to an earlier
         date, and all such representations and warranties are hereby remade by
         Mortgagor to Mortgagee.

                                    ARTICLE 4

                             COVENANTS OF MORTGAGOR

                  In consideration of the Indebtedness, Mortgagor, for itself,
its legal representatives, successors, and assigns, covenants and agrees as
follows:

                  4.1 Maintenance of Leases. Mortgagor will keep and continue
all Leases, estates, and interests herein described and all contracts and
agreements relating thereto in full force and effect in accordance with the
terms thereof and will not permit the same to lapse or otherwise become impaired
for failure to comply with the obligations thereof, whether express or implied.
In this connection, Mortgagor shall not release any of the Leases without the
prior written consent of Mortgagee.

                  4.2 Maintenance of Property. Mortgagor will keep and maintain
all improvements, personal Property, and equipment now or hereafter situated on
the Lands and constituting a portion of the Mortgaged Property and used or
obtained in connection therewith in good repair and condition, ordinary wear and
tear excepted, and will not tear down or remove the same or permit the same to
be torn down or removed without the prior consent of Mortgagee, except in the
usual course of operations as may be required for replacement when otherwise in
compliance with the provisions of this Deed of Trust and the Credit Agreement.

                  4.3 Pooling or Unitization. Mortgagor will not, without the
prior written consent of Mortgagee, pool or unitize all or any part of the
Mortgaged Property where the pooling or unitization would result in the
diminution of the net revenue interest of Mortgagor in production from the
pooled or unitized lands attributable to the Mortgaged Property constituting a
portion of such pooled or unitized lands. Immediately after the formation of any
pool or unit in accordance herewith, Mortgagor will furnish to Mortgagee a
conformed copy of the pooling agreement, declaration of pooling, or other
instrument creating the pool or unit. The interest of Mortgagor included in any
pool or unit attributable to the Mortgaged Property or any part thereof shall
become a part of the Mortgaged Property and shall be subject to the Liens hereof
in the same manner and with the same effect as though the pool or unit and the
interest of Mortgagor therein were specifically described in Exhibit A. In the
event any proceedings of any Governmental Authority which could

                                       6
<PAGE>

result in pooling or unitizing all or any part of the Mortgaged Property are
commenced. Mortgagor shall give immediate written notice thereof to Mortgagee.
Any pooling or unitization of all or any part of the Mortgaged Property in
violation of this Section shall be of no force or effect against the Trustee or
Mortgagee.

                  4.4 Operation of Mortgaged Property. Mortgagor will operate
or. to the extent that the right of operation is vested in others, will exercise
its best efforts to require the operator to operate the Mortgaged Property and
all wells now or hereafter located thereon continuously and in a prudent and
workmanlike manner in accordance with the best usage of the field and in
accordance with all applicable Requirements of Law. Mortgagor will comply with
all terms and conditions of the Leases and each assignment or contract
obligating Mortgagor in any way with respect to the Mortgaged Property; but
nothing herein shall be construed to empower Mortgagor to bind the Trustee or
Mortgagee to any contract or obligation or render the Trustee or Mortgagee in
any way responsible or liable for bills or obligations incurred by Mortgagor.

                  4.5 Compliance with Operating Agreements. Mortgagor agrees to
promptly pay all bills for labor and materials incurred in the operation of the
Mortgaged Property and will promptly pay its share of all costs and expenses
incurred under any joint operating agreement affecting the Mortgaged Property or
any portion thereof; will furnish Mortgagee, as and when requested, full
information as to the status of any joint account maintained with others under
any such operating agreement; will not take any action to incur any liability or
Lien thereunder; and will not enter into any new operating agreement or any
amendment of any existing operating agreement affecting the Mortgaged Property
without the prior written consent of Mortgagee. Furthermore. Mortgagor will not
consent or agree to participate in any proposed operation under any presently
existing operating agreement affecting the Mortgaged Property unless Mortgagor
obtains the prior written consent of Mortgagee and, if requested by Mortgagee,
deposits with the operator or Mortgagee, where Mortgagor is a non-operator, or
with Mortgagee, where Mortgagor is an operator, Mortgagor's share of the
estimated cost of the proposed operation prior to electing to participate in the
operation. To the extent that Mortgagor is unable to consent to any proposed
operation with respect to any of the Mortgaged Property, prior to electing not
to participate in the proposed operation, Mortgagor will use its best efforts,
to the extent practicable and to the extent allowed to do so under the relevant
operating agreement or other applicable contract, to farmout to others
acceptable to Mortgagee, on the best terms obtainable and acceptable to
Mortgagee, the interest or relevant portion of the interest of Mortgagor in the
proposed operation.

                  4.6 Access to Mortgaged Property. Mortgagor will permit
Mortgagee and its accredited agents, representatives, attorneys and employees,
at the expense of Mortgagor, at all times to go upon, examine, inspect, conduct
environmental audits and other testing of, and remain on, the Mortgaged
Property, and to go upon the derrick floor of any well at any time drilled or
being drilled thereon, and will furnish Mortgagee, upon request, all pertinent
information regarding the development and operation of the Mortgaged Property.

                  4.7 Waivers. Mortgagor hereby expressly waives, to the full
extent permitted by applicable law, any and all rights or privileges of
marshalling of assets, sale in inverse order of alienation, notices,
appraisements, redemption, and any prerequisite in the event of foreclosure of
the

                                       7
<PAGE>

Liens created herein. Mortgagee at all times shall have the right to release any
part of the Mortgaged Property now or hereafter subject to the Liens of this
Deed of Trust, any part of the proceeds of production or other income herein
or hereafter assigned or pledged, or any other security it now has or may
hereafter have securing the Indebtedness, without releasing any other part of
the Mortgaged Property, proceeds, or income, and without affecting the Liens
hereof as to the part or parts of the Mortgaged Property, proceeds, or income
not so released or the right to receive future proceeds and income.

                  4.8 Compliance with Laws. Mortgagor will comply with all
Requirements of Law applicable to the Mortgaged Property and the operations
conducted thereon, including, without limitation, the Natural Gas Policy Act of
1978, as amended, and Environmental Laws; and cause all employees, crew members,
agents, contractors, sub-contractors, and future lessees (pursuant to
appropriate lease provisions) of Mortgagor, while such Persons are acting within
the scope of their relationship with Mortgagor, to comply with all such
Requirements of Law as may be necessary or appropriate to enable Mortgagor to so
comply.

                  4.9 Hazardous Substances Indemnification. MORTGAGOR HEREBY
INDEMNIFIES AND HOLDS MORTGAGEE AND THE LENDERS AND THEIR RESPECTIVE
SHAREHOLDERS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT, AND
AFFILIATES AND THE TRUSTEE HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS, LOSSES,
DAMAGES, LIABILITIES, FINES, PENALTIES, CHARGES, ADMINISTRATIVE AND JUDICIAL
PROCEEDINGS AND ORDERS, JUDGMENTS, REMEDIAL ACTIONS, REQUIREMENTS AND
ENFORCEMENT ACTIONS OF ANY KIND, AND ALL COSTS AND EXPENSES INCURRED IN
CONNECTION THEREWITH (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES AND
EXPENSES), ARISING DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, FROM (a) THE
PRESENCE OF ANY HAZARDOUS SUBSTANCES ON, UNDER, OR FROM ANY MORTGAGED PROPERTY,
WHETHER PRIOR TO OR DURING THE TERM HEREOF, (b) ANY ACTIVITY CARRIED ON OR
UNDERTAKEN ON OR OFF ANY MORTGAGED PROPERTY, WHETHER PRIOR TO OR DURING THE TERM
HEREOF, AND WHETHER BY MORTGAGOR OR ANY PREDECESSOR IN TITLE, EMPLOYEE, AGENT,
CONTRACTOR, OR SUBCONTRACTOR OF MORTGAGOR OR ANY OTHER PERSON AT ANY TIME
OCCUPYING OR PRESENT ON ANY MORTGAGED PROPERTY, IN CONNECTION WITH THE HANDLING,
TREATMENT, REMOVAL, STORAGE, DECONTAMINATION, CLEANUP, TRANSPORTATION, OR
DISPOSAL OF ANY HAZARDOUS SUBSTANCES AT ANY TIME LOCATED OR PRESENT ON OR UNDER
SUCH PROPERTY, (c) ANY RESIDUAL CONTAMINATION ON OR UNDER ANY MORTGAGED
PROPERTY, (d) ANY CONTAMINATION OF ANY MORTGAGED PROPERTY OR NATURAL RESOURCES
ARISING IN CONNECTION WITH THE GENERATION, USE, HANDLING, STORAGE,
TRANSPORTATION, OR DISPOSAL OF ANY HAZARDOUS SUBSTANCE BY MORTGAGOR OR ANY
EMPLOYEE, AGENT, CONTRACTOR, OR SUBCONTRACTOR OF MORTGAGOR WHILE SUCH PERSONS
ARE ACTING WITHIN THE SCOPE OF THEIR RELATIONSHIP WITH MORTGAGOR, IRRESPECTIVE
OF WHETHER ANY OF SUCH ACTIVITIES WERE OR WILL BE UNDERTAKEN IN ACCORDANCE WITH
APPLICABLE REQUIREMENTS OF LAW, OR (e) THE PERFORMANCE AND ENFORCEMENT OF THIS
DEED OF TRUST OR ANY OTHER ACT OR OMISSION IN CONNECTION WITH OR RELATED TO THIS
DEED OF TRUST OR THE TRANSACTIONS CONTEMPLATED HEREBY, INCLUDING, WITHOUT
LIMITATION, ANY OF THE FOREGOING IN THIS SECTION ARISING FROM NEGLIGENCE,
WHETHER SOLE OR CONCURRENT, ON THE PART OF MORTGAGEE OR ANY LENDER OR ANY OF
THEIR RESPECTIVE SHAREHOLDERS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
ATTORNEYS-IN-FACT, OR AFFILIATES OR THE TRUSTEE; WITH THE FOREGOING INDEMNITY
SURVIVING SATISFACTION OF THE INDEBTEDNESS, THE TERMINATION OF THE CREDIT
AGREEMENT, AND THE RELEASE OF THE LIENS CREATED HEREBY.

                                       8
<PAGE>

                  4.10 Site Assessments. Mortgagee (by its officers, employees
and agents) at any time and from time to time, either prior to or after the
occurrence of an Event of Default, may contract, at the expense of Mortgagor,
for the services of Persons (the "Site Reviewers") to perform environmental site
assessments and other tests ("Site Assessments") on all or any portion of the
Mortgaged Property for the purpose of determining whether any environmental
condition exists on any Mortgaged Property which could reasonably be expected to
result in any liability, cost, or expense to Mortgagee or any owner, occupier,
or operator of such Mortgaged Property. The Site Assessments may be performed at
any time or times, upon reasonable notice, and under reasonable conditions
established by Mortgagor which do not impede the performance of the Site
Assessments. The Site Reviewers are hereby authorized to enter upon all or any
portion of the Mortgaged Property for such purposes. The Site Reviewers are
further authorized to perform both above and below the ground testing for
environmental damage or the presence of Hazardous Substances on the Mortgaged
Property and such other tests on the Mortgaged Property as may be necessary to
conduct the Site Assessments in the reasonable opinion of the Site Reviewers.
Mortgagor will supply to the Site Reviewers such historical and operational
information regarding the Mortgaged Property as may be reasonably requested by
the Site Reviewers to facilitate the Site Assessments and will make available
for meetings with the Site Reviewers appropriate personnel having knowledge of
such matters. On request, Mortgagee shall make the results of such Site
Assessments available to Mortgagor, which, prior to an Event of Default, may at
its election participate under reasonable procedures in the direction of such
Site Assessments and the description of tasks of the Site Reviewers. The cost of
performing all Site Assessments shall be paid by Mortgagor upon demand of
Mortgagee and any such obligations shall be Indebtedness secured by this Deed of
Trust.

                  4.11 Uneconomic Wells. Should proceeds from the sale of
production from any oil and/or gas well constituting part of the Mortgaged
Property (net of production, severance and windfall profit taxes and royalties,
overriding royalties and other payments out of or measured by production) not
exceed the expense of operation of such well (including, but not limited to,
operator's overhead, payments to contractors and suppliers, and annual taxes
assessed on the basis of the value of the Property prorated on a monthly basis,
but expressly excluding any portion of the cost of drilling or completing the
relevant well or the cost of non-routine workover or remedial operations) for a
period in excess of three consecutive calendar months, then, upon receipt by
Mortgagor of written notification from Mortgagee, Mortgagor will (a) take all
necessary steps to abandon the relevant well, or (b) provide from sources other
than proceeds from the sale of production attributable to the Mortgaged Property
(i.e., through borrowings or contractual commitments obtained from third parties
not in violation of any provision of this Deed of Trust or any other Loan
Document) the funds required to pay the share of Mortgagor of the expenses
associated with the continuing operation of such well.

                  4.12 Performance of Gas Contracts. Mortgagor will perform and
observe in all material respects all of its obligations under each contract
relating to the sale of gas produced from or attributable to the Mortgaged
Property and will not, except in good faith and as the result of arm's length
negotiations and with prior written notice to Mortgagee, change, modify, amend
or waive any of the terms or provisions of any such contract or take any other
action which would release any other party from its obligations or liabilities
under any such contract.

                                       9
<PAGE>

                  4.13 Covenants Running with the Land. All covenants and
agreements herein contained shall constitute covenants running with the Land.

                                    ARTICLE 5

                   DEFEASANCE, FORECLOSURE AND OTHER REMEDIES

                  5.1 Defeasance. Should the Indebtedness be paid, then the
conveyance of the Mortgaged Property shall become of no further force and
effect, and, at the request and expense of Mortgagor, the Lien granted hereunder
shall be released, without recourse or warranty; otherwise, it shall remain in
full force and effect.

                  5.2 Events of Default. The occurrence of any Event of Default
under the Credit Agreement shall constitute an Event of Default under this Deed
of Trust.

                  5.3 Acceleration and Exercise of Power of Sale.

                  (a) Upon the occurrence of an Event of Default specified in
         Sections 7.1(f) or 7.1(g) of the Credit Agreement, the aggregate
         principal amount of all Indebtedness then outstanding and all interest
         accrued thereon shall automatically become immediately due and payable,
         without presentment, demand, protest, notice of protest, default or
         dishonor, notice of intent to accelerate maturity, notice of
         acceleration of maturity, or other notice of any kind, all of which are
         hereby expressly waived by Mortgagor to the full extent permitted by
         applicable law. Upon the occurrence of any other Event of Default,
         Mortgagee may declare the aggregate principal amount of all
         Indebtedness then outstanding and all interest accrued thereon
         immediately due and payable, whereupon the same shall become
         immediately due and payable without presentment, demand, protest,
         notice of protest, default or dishonor, notice of intent to accelerate
         maturity, notice of acceleration of maturity, or other notice of any
         kind, all of which are hereby expressly waived by Mortgagor to the full
         extent permitted by applicable law.

                  (b) Upon the occurrence of any Event of Default or at any time
         thereafter while the Indebtedness or any part thereof remains unpaid,
         it shall be the duty of the Trustee, on request of Mortgagee (which
         request is hereby presumed), to enforce this Trust and, after
         advertising the time and place of the sale for at least 21 days prior
         to the day of sale, by posting or causing to be posted a written or
         printed notice thereof at the courthouse door and by filing a copy of
         such notice in the office of the county clerk of each county in which
         the Mortgaged Property or any part thereof may be situated, and serving
         written notice of the proposed sale on each debtor obligated to pay the
         Indebtedness according to the records of Mortgagee, by postage prepaid,
         certified United States mail, at the most recent address for such
         debtor as shown by the records of Mortgagee, at least 21 days prior to
         the day of sale, to sell the

                                       10
<PAGE>

         Mortgaged Property, either as a whole or in parcels, as the Trustee may
         deem proper, at public venue at the courthouse of the county in which
         the Mortgaged Property or any part thereof may be situated (and being
         the county designated in the notice of sale) on the first Tuesday of
         any month between the hours of 10:00 a.m. and 4:00 p.m., to the highest
         bidder for cash, and after such sale to execute and deliver to the
         purchaser or purchasers good and sufficient deeds and assignments,
         conveying such Property so sold to the purchaser or purchasers with
         general warranty of title made on behalf of Mortgagor. The Trustee, or
         his successor or substitute, is hereby authorized and empowered to
         appoint any one or more Persons as his attorneys-in-fact or agents to
         act as Trustee under him and in his name, place and stead, such
         appointment to be evidenced by a written instrument executed by the
         Trustee, or his successor or substitute, to perform any one or more act
         or acts necessary or incident to any sale under the power of sale
         hereunder, including, without limitation, the posting and filing of any
         notices, the conduct of the sale and the execution and delivery of any
         instruments conveying the Mortgaged Property as a result of the sale.
         but in the name and on behalf of the Trustee, or his successor or
         substitute; and all acts done or performed by such attorneys-in-fact or
         agents shall be valid, lawful and binding as if done or performed by
         the Trustee, or his successor or substitute. No single sale or series
         of sales by the Trustee shall extinguish the Lien or exhaust the power
         of sale hereunder except with respect to the items of Property sold,
         but such Lien and power shall exist for so long as and may be exercised
         in any manner by law or as herein provided as often as the
         circumstances require to give Mortgagee full relief hereunder. The
         purchaser at any such sale shall not assume, nor shall the heirs, legal
         representatives, successors or assigns of such purchaser, be deemed to
         have assumed, by reason of the acquisition of Property or rights
         mortgaged hereunder, any liability or obligation of any lessee or
         operator of the Mortgaged Property, or any part thereof, arising by
         reason of any occurrence taking place prior to such sale. It shall not
         be necessary to have present, or to exhibit at any such sale, any of
         the personal Property subject to the Lien hereof.

                  5.4 Rights as Secured Party. Upon the occurrence of any Event
of Default, Mortgagee shall be entitled to all of the rights, powers, and
remedies afforded a secured party by the UCC with respect to the personal
Property and fixtures and as-extracted collateral in which Mortgagee has been
granted a security interest hereby, or Mortgagee may proceed in accordance with
the provisions hereof as to both the real and personal Property covered hereby.

                  5.5 Application of Proceeds of Sale. The Trustee is authorized
to receive the proceeds of each sale of Mortgaged Property and apply the same as
follows:

                  FIRST: to the payment of all necessary costs and expenses
                  incident to the execution of this Deed of Trust, including,
                  but not limited to, a fee to the Trustee of 5% of the amount
                  realized at the sale, if required by the Trustee;

                                       11
<PAGE>

                  SECOND: to any and all Indebtedness then hereby secured,
                  application to be made in such order and in such manner as
                  Mortgagee may, in its discretion, elect;

                  THIRD: the balance, if any, to Mortgagor or its successors or
                  assigns, or other Person legally entitled thereto.

                  5.6 Substitute Trustee. In the event of the death of the
Trustee, or his removal from the State of Texas, or his failure, refusal, or
inability for any reason to make any such sale or to perform any of the trusts
herein declared, or at any time, whether with or without cause, Mortgagee may
appoint, in writing, a substitute trustee who shall thereupon succeed to all the
estates, rights, powers, and trusts herein granted to and vested in the Trustee.
In the same events as first above stated, and in the same manner, successive
substitute Trustees may thereafter be appointed.

                  5.7 Statements by Trustee. It is agreed that in any deed or
deeds given by any Trustee any and all statements of fact or other recitals
therein made as to the identity of the holder or holders of the Indebtedness, or
as to default in the payments thereof or any part thereof, or as to the breach
of any covenants herein contained, or as to the request to sell, notice of sale,
time, place, terms and manner of sale, and receipt, application, and
distribution of the money realized therefrom, or as to the due and proper
appointment of a substitute trustee, and, without being limited by the
foregoing, as to any other or additional act or thing having been done by
Mortgagee or the Trustee, shall be taken by all courts of law and equity as
prima facie evidence that the statements or recitals state facts and are without
further question to be so accepted. Mortgagor does hereby ratify and confirm any
and all acts that the Trustee may lawfully do in the premises by virtue of the
terms and conditions of this Deed of Trust.

                  5.8 Suit to Collect and Foreclose. Mortgagee, at its election,
or the Trustee, upon written request of Mortgagee, may proceed by suit or suits,
at law or in equity, to enforce the payment of the Indebtedness in accordance
with the terms hereof and of the notes, guaranties, or other documents
evidencing it, and to foreclose the Lien of this Deed of Trust as against all or
any portion of the Mortgaged Property and to have such Property sold under the
judgment or decree of a court of competent jurisdiction.

                  5.9 Mortgagee or Trustee as Purchaser. Mortgagee or the
Trustee may be a purchaser of all or any portion of the Mortgaged Property at
any sale thereof, whether such sale be under the power of sale hereinabove
vested in the Trustee, upon any other foreclosure of the Lien hereof, or
otherwise. Mortgagee or the Trustee so purchasing shall, upon any such purchase,
acquire title to the Mortgaged Property so purchased, free of the Lien of this
Deed of Trust and free of all rights of redemption in Mortgagor.

                  5.10 Entry and Operation. Upon the occurrence of any Event of
Default, then in each and every such case and in addition to the other rights
and remedies hereunder, the Trustee or Mortgagee, whether or not the
Indebtedness shall have become due and payable, may, but shall not be obligated
to, enter into and upon and take possession of all or any portion of the
Mortgaged Property and may exclude Mortgagor, its agents and servants wholly
therefrom and have, hold, use,

                                       12
<PAGE>

operate, manage, and control all or any portion of the Mortgaged Property and
produce the oil, gas, and other minerals therefrom and market the same, all at
the sole risk and expense of Mortgagor and at the expense of the Mortgaged
Property, applying the net proceeds so derived, first, to the cost of
maintenance and operation of such Mortgaged Property; second, to the payment of
the Indebtedness, application to be made first to interest and then to
principal; and the balance thereof, if any, shall be paid to Mortgagor. Upon
such payment of all such costs and Indebtedness, the Mortgaged Property shall be
returned to Mortgagor in its then condition, and neither the Trustee nor
Mortgagee shall be liable to Mortgagor for any damage or injury to the Mortgaged
Property except such as may be caused through the fraud or willful misconduct of
the Trustee or Mortgagee, as the case may be.

                  5.11 Power of Attorney to Mortgagee. Mortgagor does hereby
designate Mortgagee as the agent of Mortgagor to act in the name, place, and
stead of Mortgagor in the exercise of each and every remedy set forth herein and
in conducting any and all operations and taking any and all action reasonably
necessary to do so, recognizing such agency in favor of Mortgagee to be coupled
with the interests of Mortgagee under this Deed of Trust and, thus, irrevocable
so long as this Deed of Trust is in force and effect.

                  5.12 Remedies Cumulative and Non-Exclusive. The rights of
entry, sale, or suit, as hereinabove or hereinafter conferred, are cumulative of
all other rights and remedies herein or by law or in equity provided, and shall
not be deemed to deprive Mortgagee or the Trustee of any such other legal or
equitable rights or remedies, by judicial proceedings or otherwise, appropriate
to enforce the conditions, covenants, and terms of this Deed of Trust and the
other Loan Documents. The employment of any remedy hereunder or otherwise shall
not prevent the concurrent or subsequent employment of any other appropriate
remedy or remedies.

                                    ARTICLE 6

                            ASSIGNMENT OF PRODUCTION

                  6.1 Assignment. In addition to the conveyance to the Trustee
herein made, Mortgagor does hereby transfer, assign, deliver and convey unto
Mortgagee, its successors and assigns, all of the oil, gas, and other minerals
produced, saved, or sold from the Mortgaged Property and attributable to the
interests of Mortgagor therein subsequent to 7:00 a.m. on the first day of the
month in which this Deed of Trust is executed, together with the proceeds of any
sale thereof. Mortgagor hereby directs any purchaser now or hereafter taking any
production from the Mortgaged Property to pay to Mortgagee such proceeds derived
from the sale thereof and to continue to make payments directly to Mortgagee
until notified in writing by Mortgagee to discontinue the same. The purchaser of
any such production shall not be required to see to the application of the
proceeds thereof by Mortgagee, and payment made to Mortgagee shall be binding
and conclusive as between such purchaser and Mortgagor. Mortgagor further agrees
to perform all such acts and to execute all such further assignments, transfer
and division orders, and other instruments as may be required or desired by
Mortgagee or any other party to have such proceeds and revenues so paid to
Mortgagee.

                                       13
<PAGE>

                  6.2 Postponement of Payment. For its convenience, Mortgagee
has elected not to exercise immediately its right to receive payment to it
directly of the proceeds of any sale of the oil, gas and other minerals produced
or sold from the Mortgaged Property and the purchasers may continue to make such
payment or delivery of the proceeds to Mortgagor until such time as Mortgagor
and the purchasers have received notice that an Event of Default has occurred
and is continuing, and that the purchasers are directed to make payment or
delivery of the proceeds directly to Mortgagee. Such failure by Mortgagee to
exercise its rights immediately shall not in any way waive the right of
Mortgagee to receive any of the proceeds, or to make any such demand, or to
affect any such assignment as to any proceeds not theretofore paid or delivered
to Mortgagor. In this regard, if any of the proceeds are paid or delivered
directly to Mortgagee and then, at the request of Mortgagee, the proceeds are.
for a period or periods of time, paid or delivered to Mortgagor, Mortgagee shall
nevertheless have the right, effective upon written notice, to require that
future proceeds be again paid or delivered directly to it. Mortgagee shall never
be required to send any such notice to all purchasers, and may direct such
notice only to those purchasers as it may, in its discretion, desire. It shall
never be necessary for Mortgagee to institute legal proceedings to enforce the
assignment of hydrocarbons, proceeds, or other rents, profits, or income
contained in this instrument. It shall not be necessary for Mortgagee to obtain
possession of the Mortgaged Property as a prerequisite to Mortgagee's right to
collect or receive any hydrocarbons, other minerals, proceeds, or other rents,
profits, or income assigned to Mortgagee under this instrument. Mortgagor and
Mortgagee expressly agree and it is the express intention of Mortgagor and
Mortgagee that in no event will any reduction in the obligations be measured by
the fair market value of the hydrocarbons, other minerals, proceeds, or other
rents, profits, or income assigned to Mortgagee under this instrument.

                  6.3 Change of Purchaser. Should any purchaser taking the
production from the Mortgaged Property fail to make prompt payment to Mortgagee
in accordance with the provisions of Section 6.1, Mortgagee shall have the
right, at the expense of Mortgagor, to demand a change of connection and to
designate another purchaser with whom a new connection may be made, without any
liability on the part of Mortgagee in making such selection, so long as ordinary
care is used in the making thereof. Promptly upon such demand, Mortgagor shall
take all necessary and appropriate action to effect such change of connection.

                  6.4 Application of Proceeds. Mortgagor authorizes and empowers
Mortgagee to receive, hold, and collect all sums of money paid to Mortgagee in
accordance with the provisions of Section 6.1, and to apply the same as
hereinafter provided, all without any liability or responsibility on the part of
Mortgagee, save and except as to good faith in so receiving and applying such
sums. Mortgagee may apply all sums received by Mortgagee pursuant to Section 6.1
to the payment of the Indebtedness, application to be made in such manner as
Mortgagee may elect, regardless of whether the application so made shall exceed
the payments of principal and interest then due as provided in the Loan
Documents. After such application has been so made by Mortgagee, the balance of
any such sums shall be paid to Mortgagor.

                  6.5 No Postponement of Installments on Indebtedness. It is
understood and agreed that should such payments provided for by Section 6.1 be
less than the sum or sums then due on the Indebtedness, such sum or sums then
due shall nevertheless be paid by Mortgagor in

                                       14
<PAGE>

accordance with the provisions of the Loan Documents, and neither the assignment
made pursuant to Section 6.1 nor any other provisions hereof shall in any manner
be construed to affect the terms and provisions of the Loan Documents. Likewise,
neither the assignment made pursuant to Section 6.1 nor any other provisions
hereof shall in any manner be construed to affect the Liens, rights, title, and
remedies herein granted securing the Indebtedness or the liability of Mortgagor
therefor. The rights under this Article VI are cumulative of all other rights,
remedies, and powers granted under this Deed of Trust and are cumulative of any
other security which Mortgagee now holds or may hereafter hold to secure the
payment of the Indebtedness.

                  6.6 Turnover to Mortgagee. Should Mortgagor receive any of the
proceeds of any sale of oil, gas, or other minerals produced, saved, or sold
from the Mortgaged Property, which under the terms hereof should have been
remitted to Mortgagee, Mortgagor will immediately remit same in full to
Mortgagee.

                  6.7 Release of Proceeds Upon Payment of Indebtedness. Upon
payment in full of all Indebtedness and the termination of the Commitment, the
remainder of such proceeds held by Mortgagee, if any, shall be paid over to
Mortgagor upon demand, and a release of the interest hereby assigned will be
made, without recourse or warranty, by Mortgagee to Mortgagor at its request and
its expense.

                  6.8 Duty of Mortgagee. Mortgagee shall not be liable for any
failure to collect, or for any failure to exercise diligence in collecting, any
funds assigned hereunder. Mortgagee shall be accountable only for funds actually
received.

                  6.9 Power of Attorney to Mortgagee. Mortgagor does hereby
designate Mortgagee as the agent of Mortgagor to act in the name, place, and
stead of Mortgagor for the purpose of taking any and all actions deemed by
Mortgagee necessary for the realization by Mortgagee of the benefits of the
assignment of production provided herein, recognizing such agency in favor of
Mortgagee to be coupled with the interests of Mortgagee under this Deed of Trust
and, thus, irrevocable so long as this Deed of Trust is in force and effect.

                                    ARTICLE 7

                                 MISCELLANEOUS

                  7.1 Further Assurances. Upon request of Mortgagee, Mortgagor
will promptly correct any defects, errors, or omissions in the execution or
acknowledgment of this Deed of Trust or any other Loan Document, and execute,
acknowledge, and deliver such other assurances and instruments as shall, in the
opinion of Mortgagee, be necessary to fulfill the terms of this Deed of Trust.

                  7.2 Interest. Any provision in any document that may be
executed in connection herewith to the contrary notwithstanding, Mortgagee shall
in no event be entitled to receive or

                                       15
<PAGE>

collect, nor shall any amounts received hereunder be credited so that Mortgagee
shall be paid, as interest a sum greater than that authorized by law. If any
possible construction of this Deed of Trust or any Loan Document seems to
indicate any possibility of a different power given to Mortgagee or any
authority to ask for, demand, or receive any larger rate of interest, this
clause shall override and control, and proper adjustments shall be made
accordingly.

                  7.3 Agreement as Entirety. This Deed of Trust, for convenience
only, has been divided into Articles, Sections, and subsections. The rights,
powers, privileges, duties, and other legal relations of Mortgagor, the Trustee,
and Mortgagee shall be determined from this Deed of Trust as an entirety and
without regard to the aforesaid division into Articles, Sections, and
subsections and without regard to headings affixed to such Articles, Sections,
or subsections.

                  7.4 Number and Gender. Whenever the context requires,
reference herein made to the single number shall be understood to include the
plural, and the plural shall likewise be understood to include the singular.
Words denoting sex shall be construed to include the masculine, feminine, and
neuter when such construction is appropriate; and specific enumeration shall not
exclude the general, but shall be construed as cumulative.

                  7.5 Rights and Remedies Cumulative. All rights, powers,
immunities, remedies, and Liens of Mortgagee existing and to exist hereunder or
under any other instruments or at law or in equity and all other or additional
security shall be cumulative and not exclusive, each of the other. Mortgagee
shall, in addition to the rights and remedies herein expressly provided, be
entitled to such other remedies as may now or hereafter exist at law or in
equity for securing and collecting the Indebtedness, for enforcing the covenants
herein, and for foreclosing the Liens hereof. Resort by Mortgagee to any right
or remedy provided for hereunder or at law or in equity shall not prevent
concurrent or subsequent resort to the same or any other right or remedy. No
security heretofore, herewith, or subsequently taken by Mortgagee shall in any
manner impair or affect the security given by this Deed of Trust or any security
by endorsement or otherwise presently or previously given; and all security
shall be taken, considered, and held as cumulative.

                  7.6 Parties in Interest. This Deed of Trust shall be binding
upon the parties and their respective heirs, administrators, legal
representatives, successors, and assigns and shall inure to the benefit of the
Mortgagee and its legal representatives, successors, and assigns. The terms used
to designate any of the parties herein shall be deemed to include the heirs,
administrators, legal representatives, successors, and assigns of such parties.
The term "Mortgagee" shall also include any lawful owner, holder, or pledgee of
any Indebtedness.

                  7.7 Supplements. Without in any manner limiting the effect of
Section 1.4 or any other provisions of this Deed of Trust as to the binding
effect of this Deed of Trust on after-acquired rights of Mortgagor, it is
contemplated by the parties hereto that from time to time additional interests
and properties may or will be added to the interests and properties subject to
the Liens, rights, titles, and interests created by this Deed of Trust by means
of supplemental indentures identifying this Deed of Trust and describing such
interests and properties to be so added and included. Upon the execution of any
such supplemental indenture, the Liens, rights, titles, and interests created
herein shall immediately attach to and be effective with respect to any such
interests

                                       16
<PAGE>

and properties so described, the same as if such interests and properties had
been specifically described herein, and such interests and properties being
included in the term "Mortgaged Property," as used herein.

                  7.8 Invalidity. In the event that any one or more of the
provisions contained in this Deed of Trust shall for any reason be held invalid,
illegal, or unenforceable in any respect, such invalidity, illegality, or
unenforceability shall not affect any other provision of this Deed of Trust or
any other Loan Document.

                  7.9 Construction. All titles or headings to Articles,
Sections, subsections, or other divisions of this Deed of Trust or the exhibits
hereto are only for the convenience of the parties and shall not be construed to
have any effect or meaning with respect to the other content of such Articles,
Sections, subsections, or other divisions, such other content being controlling
as to the agreement among the parties hereto. Article, Section, subsection, and
Exhibit references herein are to such Articles, Sections, subsections, and
Exhibits of this Deed of Trust unless otherwise specified. The words "hereby,"
"herein," "hereinabove," "hereinafter," "hereinbelow," "hereof," and "hereunder"
when used in this Deed of Trust shall refer to this Deed of Trust as a whole and
not to any particular Article, Section, subsection, or provision of this Deed of
Trust.

                  7.10 Fixtures, Minerals and Accounts. Without in any manner
limiting the generality of any of the foregoing hereof, some portions of the
personal Property described hereinabove are or are to become fixtures on the
Lands. In addition, the security interest created hereby under applicable
provisions of the UCC attaches to minerals, including oil and gas, and accounts
resulting from the sale thereof, at the wellhead or minehead located on the
Lands.

                  7.11 Financing Statement Filings. This Deed of Trust may be
filed as provided in Article 9 of the UCC to assure that the security interests
granted by this Deed of Trust are perfected. In this connection, this Deed of
Trust may be presented to a filing officer under the UCC to be filed in the real
estate records as a Financing Statement covering minerals and fixtures. Further,
Mortgagor authorizes Mortgagee to execute and file at any time and from time to
time any and all Financing Statements and amendments thereto in any UCC
jurisdiction, pursuant to Article 9 of the UCC, as Mortgagee deems necessary in
its sole discretion, in conjunction with this Deed of Trust, and Mortgagor
expressly authorizes execution and filing of such Financing Statements by
Mortgagee without need of signature or execution by Mortgagor.

                  7.12 Addresses. For purposes of filing this Deed of Trust as a
financing statement, the addresses for Mortgagor, as the debtor, and Mortgagee,
as the secured party, are as set forth hereinabove.

                  7.13 Counterparts. For the convenience of the parties, this
Deed of Trust may be executed in multiple counterparts, each of which for all
purposes shall be deemed, and may be enforced from time to time as, a chattel
mortgage, real estate mortgage, deed of trust, security agreement, assignment or
contract, or as one or more thereof. For recording purposes, various
counterparts have been executed, and there may be attached to each such
counterpart an Exhibit A containing only the description of the Mortgaged
Property, or portions thereof, which relates to the

                                       17
<PAGE>

county or state in which the particular counterpart is to be recorded. A
complete, original counterpart of this Deed of Trust with a complete Exhibit A
may be obtained from Mortgagee. Each of the counterparts hereof so executed
shall for all purposes be deemed to be an original, and all such counterparts
shall together constitute but one and the same instrument.

                  7.14 No Waiver by Mortgagee. No course of dealing on the part
of Mortgagee, its officers or employees, nor any failure or delay by Mortgagee
with respect to exercising any of its rights or remedies hereunder shall operate
as a waiver thereof nor shall the exercise or partial exercise of any such right
or remedy shall preclude the exercise of any other right or remedy.

                  7.15 Governing Agreement. This Deed of Trust is made pursuant
and subject to the terms and provisions of the Credit Agreement. In the event of
a conflict between the terms and provisions of this Deed of Trust and those of
the Credit Agreement, the terms and provisions of the Credit Agreement shall
govern and control. The inclusion in this Deed of Trust of provisions not
addressed in the Credit Agreement shall not be deemed a conflict, and all such
additional provisions contained herein shall be given full force and effect.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       18
<PAGE>

                  IN WITNESS WHEREOF, this Deed of Trust is executed on the date
of the acknowledgment below but effective as of the 22nd day of September, 2003.

                                       MORTGAGOR AND BORROWERS (DEBTOR):

                                       F-W OIL EXPLORATION L.L.C.

                                       By:______________________________________
                                                  Jim R. Brock
                                                  President and CFO

                                       PRIMEENERGY CORPORATION
                                       PRIMEENERGY MANAGEMENT CORPORATION
                                       PRIME OPERATING COMPANY
                                       EOWS MIDLAND COMPANY
                                       EASTERN OIL WELL SERVICE COMPANY
                                       SOUTHWEST OIL FIELD CONSTRUCTION COMPANY,
                                       each company represented by

                                       _________________________________________
                                       Beverly A. Cummings
                                       Executive Vice President, Treasurer,
                                       and Chief Financial Officer of each of
                                       the companies listed above

                                       19
<PAGE>

STATE OF CONNECTICUT                 Section
                                     Section
COUNTY OF___________________         Section

         BEFORE ME, the undersigned authority, on this day personally appeared
BEVERLY A. CUMMINGS, Executive Vice President, Treasurer, and Chief Financial
Officer of each of PRIMEENERGY CORPORATION, a Delaware corporation, PRIMEENERGY
MANAGEMENT CORPORATION, a New York corporation, PRIME OPERATING COMPANY, a Texas
corporation, EASTERN OIL WELL SERVICE COMPANY, a West Virginia corporation, EOWS
MIDLAND COMPANY, a Texas corporation, and SOUTHWEST OILFIELD CONSTRUCTION
COMPANY, an Oklahoma corporation, on behalf of each of said corporations, known
to me to be the person whose name is subscribed to the foregoing instrument, and
acknowledged to me that she executed the same for the purposes and consideration
therein expressed, as the act and deed of each of such corporations, and in the
capacity therein stated for each of said corporations.

         GIVEN UNDER MY HAND AND SEAL OF OFFICE this _____________ day of
September, 2003.

                                       _________________________________________
                                       NOTARY PUBLIC in and for_________________

THE STATE OF TEXAS                          Section
                                            Section
COUNTY OF HARRIS                            Section

         BEFORE ME, the undersigned authority, on this day personally appeared
JIM R. BROCK, President and CFO of F-W OIL EXPLORATION L.L.C., a Delaware
limited liability company, known to me to be the person whose name is subscribed
to the foregoing instrument, and acknowledged to me that he executed the same
for the purposes and consideration therein expressed, as the act and deed of
such savings bank, and in the capacity therein stated.

         GIVEN UNDER MY HAND AND SEAL OF OFFICE this ____________ day of
September, 2003.

                                  ______________________________________________
                                  NOTARY PUBLIC in and for the State of Texas

                                       20
<PAGE>

                                    EXHIBIT A
                                       TO
                  MORTGAGE, DEED OF TRUST, SECURITY AGREEMENT,
                FINANCING STATEMENT AND ASSIGNMENT OF PRODUCTION

         The designation "Working Interest" or "WI" when used in this Exhibit
means an interest owned in an oil, gas, and mineral lease that determines the
cost-bearing percentage of the owner of such interest. The designation "Net
Revenue Interest" or "NRI" means that portion of the production attributable to
the owner of a working interest after deduction for all royalty burdens,
overriding royalty burdens or other burdens on production, except severance,
production, and other similar taxes. The designation "Overriding Royalty
Interest" or "ORRI" means an interest in production which is free of any
obligation for the expense of exploration, development, and production, bearing
only its pro rata share of severance, production, and other similar taxes and,
in instances where the document creating the overriding royalty interest so
provides, costs associated with compression, dehydration, other treating or
processing, or transportation of production of oil, gas, or other minerals
relating to the marketing of such production. The designation "Royalty Interest"
or "RI" means an interest in production which results from an ownership in the
mineral fee estate or royalty estate in the relevant land and which is free of
any obligation for the expense of exploration, development, and production,
bearing only its pro rata share of severance, production, and other similar
taxes and, in instances where the document creating the royalty interest so
provides, costs associated with compression, dehydration, other treating or
processing or transportation of production of oil, gas, or other minerals
relating to the marketing of such production.

         Any reference in this Exhibit to wells or units is for warranty of
interest administrative convenience, and identification and shall not limit or
restrict the right, title, interest, or properties covered by this Deed of
Trust. All right, title, and interest of Mortgagor in the properties described
herein are and shall be subject to this Deed of Trust, regardless of the
presence of any units or wells not described herein.

         The references to book or volume and page herein refer to the recording
location of each respective Mortgaged Property described herein in the county
where the land covered by the Mortgaged

                                      A-i

<PAGE>

                                    EXHIBIT A
                                       TO
                  MORTGAGE, DEED OF TRUST, SECURITY AGREEMENT,
                FINANCING STATEMENT AND ASSIGNMENT OF PRODUCTION

                         OIL, GAS AND MINERAL INTERESTS

                                      A-ii


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>7
<FILENAME>d13330exv21.txt
<DESCRIPTION>SUBSIDIARIES
<TEXT>
<PAGE>

                                                                      EXHIBIT 21

                                  Subsidiaries

PrimeEnergy Management Corporation, a New York corporation 100% owned by
Corporation

Prime Operating Company, a Texas corporation 100% owned by PrimeEnergy
Corporation

Eastern Oil Well service Company, a West Virginia corporation 100% owned by
PrimeEnergy Corporation

Southwest Oilfield Construction Company, an Oklahoma corporation, 100% owned by
PrimeEnergy Corporation

E O W S Midland Company, a Texas corporation, 100% owned by PrimeEnergy
Corporation

F-W Oil Exploration L.L.C., a Delaware limited liability company 60% owned by
PrimeEnergy Corporation

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-22
<SEQUENCE>8
<FILENAME>d13330exv22.txt
<DESCRIPTION>CONSENT OF RYDER SCOTT & COMPANY L.P.
<TEXT>
<PAGE>
                                                                      Exhibit 22


             (RYDER SCOTT COMPANY PETROLEUM CONSULTANTS LETTERHEAD)




                      CONSENT OF RYDER SCOTT COMPANY, L.P.

         We consent to the use on the Form 10-K of PrimeEnergy Corporation of
our reserve report and all schedules, exhibits, and attachments thereto
incorporated by reference of Form 10-K and to any reference made to us on Form
10-K as a result of such incorporation.


                                             Very truly yours,

                                             /s/ Ryder Scott Company, L.P.
                                             RYDER SCOTT COMPANY, L.P.


Denver, Colorado
March 29, 2004



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>9
<FILENAME>d13330exv31w1.txt
<DESCRIPTION>CERTIFICATION OF CHIEF EXECUTIVE OFFICER
<TEXT>
<PAGE>
                                                                    EXHIBIT 31.1

                                 CERTIFICATIONS

I, Charles E. Drimal, Jr., certify that:

1.   I have reviewed this annual report on Form 10-K of PrimeEnergy Corporation;

2.   Based on my knowledge, this annual report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this annual report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report;

4.   The registrant's other certifying officer(s) and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

     (a)  Designed such disclosure controls and procedures, to ensure that
          material information relating to the registrant, including its
          consolidated subsidiaries, is made known to us by others within those
          entities, particularly during the period in which this report is being
          prepared;

     (b)  Evaluated the effectiveness of the registrant's disclosure controls
          and procedures as of a date within 90 days prior to the filling date
          of this annual report (the "Evaluation Date"); and

     (c)  Presented in this annual report our conclusion about the effectiveness
          of the disclosure controls and procedures based on our evaluation as
          of the Evaluation Date;

5.   The registrant's other certifying officer(s) and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of the registrant's board of directors (or persons performing the
     equivalent functions):

     (a)  All significant deficiencies in the design or operation of internal
          controls which could adversely affect the registrant's ability to
          record, process, summarize and report financial data and have
          identified for the registrant's auditors and material weaknesses in
          internal controls; and

     (b)  Any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          controls; and

6.   The registrant's other certifying officers and I have indicated in this
     annual report whether there were significant changes in internal controls
     or in other factors that could significantly affect internal controls
     subsequent to the date of our most recent evaluation, including any
     corrective actions with regard to significant deficiencies and material
     weaknesses.


           March 30, 2004                     /s/ Charles E. Drimal Jr.
                                              ----------------------------------
                                              Charles E. Drimal Jr
                                              Chief Executive Officer
                                              PrimeEnergy Management Corporation
                                              Managing General Partner



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>10
<FILENAME>d13330exv31w2.txt
<DESCRIPTION>CERTIFICATION OF CHIEF FINANCIAL OFFICER
<TEXT>
<PAGE>


                                                                    EXHIBIT 31.2

                                 CERTIFICATIONS

I, Beverly A. Cummings, certify that:

1.   I have reviewed this annual report on Form 10-K of PrimeEnergy Corporation;

2.   Based on my knowledge, this annual report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this annual report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report;

4.   The registrant's other certifying officer(s) and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

     a.   Designed such disclosure controls and procedures, to ensure that
          material information relating to the registrant, including its
          consolidated subsidiaries, is made known to us by others within those
          entities, particularly during the period in which this report is being
          prepared;

     b.   Evaluated the effectiveness of the registrant's disclosure controls
          and procedures as of a date within 90 days prior to the filling date
          of this annual report (the "Evaluation Date"); and

     c.   Presented in this annual report our conclusion about the effectiveness
          of the disclosure controls and procedures based on our evaluation as
          of the Evaluation Date;

5.   The registrant's other certifying officer(s) and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of the registrant's board of directors (or persons performing the
     equivalent functions):

     a.   All significant deficiencies in the design or operation of internal
          controls which could adversely affect the registrant's ability to
          record, process, summarize and report financial data and have
          identified for the registrant's auditors and material weaknesses in
          internal controls; and

     b.   Any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          controls; and

6.   The registrant's other certifying officers and I have indicated in this
     annual report whether there were significant changes in internal controls
     or in other factors that could significantly affect internal controls
     subsequent to the date of our most recent evaluation, including any
     corrective actions with regard to significant deficiencies and material
     weaknesses.


           March 30, 2004                     /s/ Beverly A. Cummings
                                              ----------------------------------
                                              Beverly A Cummings
                                              Chief Financial Officer
                                              PrimeEnergy Management Corporation
                                              Managing General Partner




</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>11
<FILENAME>d13330exv32w1.txt
<DESCRIPTION>CERTIFICATION OF CEO PURSUANT TO SECTION 906
<TEXT>
<PAGE>
                                                                    EXHIBIT 32.1

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the annual report of PrimeEnergy Corporation (the "Company")
on Form 10-K for the period ending December 31, 2003, as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Charles
E. Drimal Jr., Chief Executive Officer of the Company, certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that:

         (1)      The Report fully complies with the requirements of section
                  13(a) or 15(d) of the Securities Exchange Act of 1934; and

         (2)      The information contained in the Report fairly presents, in
                  all material respects, the financial condition and result of
                  operations of the Company.



/s/ Charles E. Drimal Jr.
- -----------------------------
Chief Executive Officer
March 30, 2004




</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.2
<SEQUENCE>12
<FILENAME>d13330exv32w2.txt
<DESCRIPTION>CERTIFICATION OF CFO PURSUANT TO SECTION 906
<TEXT>
<PAGE>



                                                                    EXHIBIT 32.2

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the annual report of PrimeEnergy Corporation (the "Company")
on Form 10-K for the period ending December 31, 2003, as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Beverly
A. Cummings, Chief Financial Officer of the Company certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that:

         (1)      The Report fully complies with the requirements of section
                  13(a) or 15(d) of the Securities Exchange Act of 1934; and

         (2)      The information contained in the Report fairly presents, in
                  all material respects, the financial condition and result of
                  operations of the Company.




/s/ Beverly A. Cummings
- ------------------------------
Chief Financial Officer
March 30, 2004



</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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