Escrow Agreement - Dated March 31, 2000

ESCROW AGREEMENT


THIS ESCROW AGREEMENT, dated as of March _____, 2000 ("Escrow Agreement"), is by and among BARGO ENERGY COMPANY, a Texas corporation ("Issuer"); the persons listed on Exhibit A hereto (each an "Equity Investor" and collectively the "Equity Investors"); CHASE BANK OF TEXAS, NATIONAL ASSOCIATION, as administrative agent (in such capacity, the "Administrative Agent") for each of the lenders (the "Lenders") now or hereafter party to the hereinafter defined Credit Agreement; and CHASE BANK OF TEXAS, NATIONAL ASSOCIATION, acting for the benefit of the Issuer, each Equity Investor and the Administrative Agent (acting in such capacity, the "Escrow Agent").


BACKGROUND


A. Issuer, Equity Investors and Administrative Agent have entered into that certain Assignment, Acknowledgment, Agreement and Waiver dated as of March _____, 2000 (the "Underlying Agreement") whereby, pursuant to the terms thereof, Issuer, Equity Investors and Administrative Agent agreed to enter into this Escrow Agreement with the Escrow Agent.


B. In order to establish the escrow of the Escrow Items (hereinafter defined) and to effect the provisions of the Underlying Agreement, the parties hereto have entered into this Escrow Agreement.


STATEMENT OF AGREEMENT


NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, for themselves, their successors and assigns, hereby agree as follows:


1. DEFINITIONS. The following terms shall have the following meanings when used herein:


COMMON STOCK means the common stock, $0.01 par value, of the Issuer.


ESCROW ITEMS shall mean the Preferred Stock Certificates, the Warrants, the Transfer Agent Instructions, the Purchase Notice, and the Purchase Price deposited with Escrow Agent pursuant to this Escrow Agreement, together with any interest and other income thereon.


PREFERRED STOCK means the Cumulative Redeemable Preferred Stock, Series C, of the Issuer, $0.01 par value per share.


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PREFERRED STOCK CERTIFICATES means certificates representing shares of Preferred Stock one registered in the name of each Equity Investor, duly executed on behalf of the Issuer, with the number of shares represented by such certificates left blank.


PURCHASE NOTICE means notices executed by the Issuer under the Subscription Agreement accepting the subscription of the Equity Investors to purchase shares of Preferred Stock, Common Stock or Warrants to purchase Common Stock.


SUBSCRIPTION AGREEMENT shall mean the Subscription Agreement dated as of March _____, 2000, between the Issuer and each Equity Investor, relating to the purchase of shares of Preferred Stock and, at the election of the Equity Investor, Common Stock or Warrants by such Equity Investor from the Issuer, and any and all amendments, supplements, modifications, additions, renewals and/or restatements thereof.


SUBSCRIPTION FUNDS shall mean the purchase price of Preferred Stock and Common Stock or Warrants paid by each Equity Investor pursuant to the Subscription Agreement.


TRANSFER AGENT INSTRUCTIONS means a letter addressed to the transfer agent for the Common Stock of the Issuer instructing the transfer agent to issue certificates representing shares of Common Stock to each Equity Investor pursuant to the Subscription Agreement, and setting forth the number of shares of Common Stock issued to each Equity Investor.


WARRANT AGREEMENT means the warrant agreement to purchase shares of Common Stock of the Issuer one issued in the name of each Equity Investor, duly executed on behalf of the Issuer, with the number of shares of common stock issuable upon exercise of the warrants left blank.


WARRANTS means warrants, exercisable for ten years, to purchase shares of Common Stock of the Issuer for $0.01 per share.


2. APPOINTMENT OF AND ACCEPTANCE BY ESCROW AGENT. Issuer, each Equity Investor and Administrative Agent hereby appoint Escrow Agent to serve as escrow agent hereunder. Escrow Agent hereby accepts such appointment and, upon deposit of the Escrow Items in accordance with Section 3 below, agrees to hold and disburse the Escrow Items in accordance with this Escrow Agreement.


3. DEPOSITS INTO ESCROW OF ESCROW ITEMS.


(a) Issuer has delivered the Preferred Stock
Certificates, the Warrant Agreements and the Transfer
Agent Instructions to the Escrow Agent to be held on
behalf of the Issuer.


(b) Following receipt of the Purchase Notice from the
Administrative Agent (in accordance with the
Subscription Agreement) and provided (i) the
Expiration Date did not occur prior to such delivery
and (ii) the conditions


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precedent to the Equity Investor's obligations set
forth in Section 4.5 of the Subscription Notice have
been satisfied, each Equity Investor will deposit its
Subscription Funds with the Escrow Agent to the
following account on or before the Closing Date (as
defined in the Subscription Agreement):


Chase Bank of Texas, National Association
ABA# _________________
Account#________________
ATTN: ______________________________
Re: Bargo Energy Company


4. DISBURSEMENTS FROM ESCROW. The funds and documents deposited into Escrow pursuant hereto shall be distributed as follows:


(a) Upon receipt, prior to the Expiration Date (as defined in
the Subscription Agreement), of a certificate executed by an officer of
the Administrative Agent stating that the Tranche A Equity Subscription
Date has occurred and that amounts remain outstanding on the Tranche A
Loan, the Escrow Agent shall deliver the Purchase Notices to the
Administrative Agent. The Escrow Agent shall send copies of such
Purchase Notices and the Administrative Agent's certificate delivered
under this subsection (a) to the Issuer.


(b) Upon receipt of Subscription Funds from an Equity Investor
and a certificate executed by an officer of the Administrative Agent
which states the number of shares of Preferred Stock and Common Stock
or Warrants that the Equity Investor has purchased from the Issuer, the
Escrow Agent shall (i) deliver by wire transfer to the Administrative
Agent the amount of the Subscription Funds, (ii) complete the Preferred
Stock Certificate by filling in the number of shares of Preferred Stock
purchased by the Equity Investor (as indicated in the Administrative
Agent's certificate) and deliver to such Equity Investor the Preferred
Stock Certificate, (iii) if the Administrative Agent's certificate
states that the Equity Investor has purchased Common Stock, complete
the Transfer Agent Instructions by filling in the number of shares of
Common Stock purchased (as indicated in such the Administrative Agent's
certificate) and send to the transfer agent the Transfer Agent
Instructions instructing the transfer agent to issue certificates to
the Equity Investor representing shares of Common Stock and (iii) if
the Administrative Agent's certificate states that the Equity Investor
has purchased Warrants, complete the Warrant by filling in the number
of shares of Common Stock subject to the Warrants (as indicated in the
Administrative Agent's certificate) and send the Warrants to the Equity
Investor. The Escrow Agent shall send copies of the Preferred Stock
Certificates, Transfer Agent Instructions or Warrants sent to each
Equity Investor, as well as a copy of the Administrative Agent's
certificate delivered under this subsection (b) to the Issuer.


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(c) Upon receipt of a certificate executed by an officer of
the Administrative Agent stating that (a) the Tranche A Term Loan has
been paid in full or (b) the Expiration Date (as defined in the
Subscription Agreement) has occurred prior to Purchase Notices being
delivered to the Equity Investors, the Escrow Agent shall deliver all
Escrowed Items not previously distributed from Escrow to the Issuer.


5. SUSPENSION OF PERFORMANCE; DISBURSEMENT INTO COURT. If, at any time, there shall exist any dispute between Issuer, any Equity Investor or the Administrative Agent with respect to the holding or disposition of any portion of the Escrow Items or any other obligations of Escrow Agent hereunder, or if at any time Escrow ...