AMENDED AND RESTATED CONVERTIBLE SUBORDINATED NOTE

               AMENDED AND RESTATED CONVERTIBLE SUBORDINATED NOTE

NEITHER THE ISSUANCE AND SALE OF THE SECURITY REPRESENTED BY THIS NOTE NOR THE
SECURITIES INTO WHICH THIS NOTE IS CONVERTIBLE HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE
ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL, IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS
SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE
FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES. ANY
TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE,
INCLUDING SECTIONS 3(c)(iii) AND 13(a) HEREOF. THE PRINCIPAL AMOUNT REPRESENTED
BY THIS NOTE AND, ACCORDINGLY, THE SECURITIES ISSUABLE UPON CONVERSION HEREOF
MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT TO SECTION
3(c)(iii) OF THIS NOTE.

                          CONVERTIBLE SUBORDINATED NOTE

Issuance Date: November 17, 2005                       Principal: U.S. $25,000,000
Amended and Restated Date: September 26, 2006

      FOR VALUE RECEIVED, DUNE ENERGY, INC., a Delaware corporation (the
"Company"), hereby promises to pay to the order of ITERA HOLDINGS BV, a
Netherlands company, or registered assigns ("Holder") the amount set out above
as the Principal (as reduced pursuant to the terms hereof pursuant to
conversion, the "Principal"), as shall have been advanced from time to time from
the Holder to the Company (as may be set forth in Schedule A to this Note), when
due, whether upon the Maturity Date (as defined below), acceleration or
otherwise (in each case in accordance with the terms hereof) and to pay interest
("Interest") on any outstanding Principal at the rate set forth in Section 2
(the "Interest Rate"), from the date set out above as the Issuance Date (the
"Issuance Date") until the same becomes due and payable, whether upon an
Interest Date (as defined below), the Maturity Date, acceleration, conversion or
otherwise (in each case in accordance with the terms hereof). This Convertible
Subordinated Note (this "Note"), including all Convertible Subordinated Notes
issued in exchange, transfer or replacement hereof, and convertible subordinated
notes issued in connection with the payment of Interest as provided in Section 2
are, collectively, the "Notes". Reference to this "Note" and the "Notes" shall
be used interchangeably in this Note where applicable. Certain capitalized terms
are defined in Section 23.

      1. MATURITY. On the later of the Maturity Date or the date on which all of
the Senior Obligations have been paid in full and all commitments under the
Senior Credit Facility cancelled , the Holder shall surrender this Note to the

<PAGE>

Company and the Company shall pay to the Holder an amount in cash representing
all outstanding Principal, accrued and unpaid Interest and accrued and unpaid
Late Charges, if any. The Maturity Date shall be November 17, 2009 (the
"Maturity Date").

      2. INTEREST; INTEREST RATE.

             (a) The Interest Rate shall be as follows: (a) commencing on the
Issuance Date and continuing to (but not including) the first anniversary
thereof, the rate per annum equal to eleven and one-half percent (11-1/2%); (b)
with respect to the period commencing on the first anniversary of the Issuance
Date and continuing to (but not including) the second anniversary date thereof,
the rate per annum equal to twelve percent (12%); and (c) thereafter until the
Term Loan of the holder of the Senior Credit Facility is paid in full at the
rate per annum equal to twelve and one-half percent (12-1/2%). From the time the
Term Loan of the holder of the Senior Credit Facility is paid in full until the
Maturity Date, the rate per annum shall be equal to the Prime Rate plus five
percent (5%) (but not to exceed the maximum rate of twelve percent (12%) per
annum).

            (b) Interest on this Note shall commence accruing on the Issuance
Date and shall be computed on the basis of a 365-day year and actual days
elapsed and shall be payable in arrears on the first day of each Calendar
Quarter and on the Maturity Date during the period beginning on the Issuance
Date and ending on, and including, the Maturity Date (each, an "Interest Date").
So long as there is no Default or Event of Default as defined in the Senior
Credit Facility and provided the payment of Interest as provided herein would
not cause a Default or Event of Default as defined in the Senior Credit
Facility, and at such time as the Company is in compliance with Section 10.01
and Section 10.06 of the Credit Agreement, Interest shall be payable on each
Interest Date as follows: (1) fifty percent (50%) of the Interest shall be paid
in cash and (2) fifty percent (50%) shall be paid in convertible subordinated
notes each having the same terms and conditions of this Note except that the
principal amount of such convertible subordinated notes shall be the amount of
Interest which is the subject thereof and all payments of Interest in cash
thereas defined in shall be deferred until the Maturity Date. In the event there
is a Default or Event of Default as defined in the Senior Credit Facility or the
payment of Interest as provided herein would cause a Default or an Event of
Default as defined in the Senior Credit Facility, or until such time as the
Company is in compliance with Section 10.01 and Section 10.06 of the Credit
Agreement, Interest shall be payable on each Interest Date in convertible
subordinated notes, each having the same terms and conditions of this Note
except that the principal amount of such convertible subordinate notes shall be
the amount of Interest which is the subject thereof and all payments of cash
thereunder shall be deferred until the Maturity Date, except that payments of
Interest thereon may be made by additional convertible subordinated notes. Prior
to the payment of Interest on an Interest Date, Interest on this Note shall
accrue at the Interest Rate and be payable by way of inclusion of the Interest
in the Conversion Amount in accordance with Section 3(b)(i). From and after the


                                       2
<PAGE>

occurrence of an Event of Default, the Interest Rate shall be 14%. In the event
that such Event of Default is subsequently cured, the adjustment referred to in
the preceding sentence shall cease to be effective as of the date of such cure;
provided that the Interest as calculated at such increased rate during the
continuance of such Event of Default shall continue to apply to the extent
relating to the days after the occurrence of such Event of Default through and
including the date of cure of such Event of Default.

      3. CONVERSION OF NOTES. This Note and any Notes issued for the payment of
Interest shall be convertible into shares of the Company's common stock, par
value $0.001 per share (the "Common Stock"), on the terms and conditions set
forth in this Section 3.

            (a) Conversion Right. Subject to the provisions of Section 3(d), at
any time or times on or after the Issuance Date, the Holder shall be entitled to
convert any portion of the outstanding and unpaid Conversion Amount (as defined
below) in increments of at least $100,000 of Principal (or such lesser amount if
such amount represents the remaining Principal amount) into fully paid and
nonassessable shares of Common Stock in accordance with Section 3(c), at the
Conversion Rate (as defined below). The Company shall not issue any fraction of
a share of Common Stock upon any conversion. If the issuance would result in the
issuance of a fraction of a share of Common Stock, the Company shall round such
fraction of a share of Common Stock up to the nearest whole share. The Company
shall pay any and all taxes that may be payable with respect to the issuance and
delivery of Common Stock upon conversion of any Conversion Amount.

            (b) Conversion Rate. The number of shares of Common Stock issuable
upon conversion of any Conversion Amount pursuant to Section 3(a) shall be
determined by dividing (x) such Conversion Amount by (y) the Conversion Price
(as defined below) (the "Conversion Rate").

                  (i) "Conversion Amount" means the sum of (A) the portion of
            the Principal to be converted or otherwise with respect to which
            this determination is being made, (B) accrued and unpaid Interest
            with respect to such Principal and (C) accrued and unpaid Late
            Charges with respect to such Principal and Interest.

                  (ii) "Conversion Price" means, as of any Conversion Date (as
            defined below) or other date of determination, and subject to
            adjustment as provided herein, the lesser of (X) $2.65 or (Y) the
            price per share of any Equity Interests (including, but not limited
            to, Common Stock or equity convertible into Common Stock) sold by
            the Debtor in its next offering of such Equity Interests after the
            Amended and Restated Date. Notwithstanding the foregoing, in the
            event that Debtor bundles or attaches options or warrants in
            connection with the sale of Equity Interests, and such options or
            warrants are not the principal security sold by the Debtor in such
            offering, then the strike price of such options or warrants shall be
             ignored for purposes of this Section 3(b)(ii).

            (c) Mechanics of Conversion.


                                       3
<PAGE>

                  (i) Optional Conversion. To convert any Conversion Amount into
            shares of Common Stock on any date (a "Conversion Date"), the Holder
            shall (A) transmit by facsimile (or otherwise deliver), for receipt
            on or prior to 11:59 p.m., Eastern Standard Time, on such date, a
            copy of an executed notice of conversion in the form attached hereto
            as Exhibit I (the "Conversion Notice") to the Company and (B) if
            required by Section 3(c)(iii), surrender this Note to a common
            carrier for delivery to the Company as soon as practicable on or
            following such date (or an indemnification undertaking with respect
            to this Note in the case of its loss, theft or destruction). On or
            before the first Business Day following the date of receipt of a
             Conversion Notice, the Company shall transmit by facsimile a
            confirmation of receipt pursuant to the form attached hereto as
            Exhibit II (the "Acknowledgement") of such Conversion Notice to the
            Holder and the Company's transfer agent (the "Transfer Agent"). On
            or before the second Business Day following the date of receipt of a
            Conversion Notice (the "Share Delivery Date"), the Company shall (X)
            credit such aggregate number of shares of Common Stock to which the
            Holder shall be entitled to the Holder's or its designee's balance
            account with Depository Trust Company ("DTC") through its Deposit
            Withdrawal Agent Commission system or (Y) if the Transfer Agent is
            not participating in DTC Fast Automated Securities Transfer Program,
            issue and deliver to the address as specified in the Conversion
            Notice, a certificate, registered in the name of the Holder or its
            designee, for the number of shares of Common Stock to which the
            Holder shall be entitled. If the Note(s) is physically surrendered
            for conversion as required by Section 3(c)(iii) and the outstanding
            Principal of the Note(s) is greater than the Principal portion of
            the Conversion Amount being converted, then the Company shall as
            soon as practicable and in no event later than three Business Days
            after receipt of the Note(s) and at its own expense, issue and
            deliver to the holder a new Note (in accordance with Section 19(d))
            representing the outstanding Principal not converted. The Person or
            Persons entitled to receive the shares of Common Stock issuable upon
            a conversion of the Note(s) shall be treated for all purposes as the
            record holder or holders of such shares of Common Stock on the
            Conversion Date.

                  (ii) Company's Failure to Timely Convert. If the Company shall
            fail to issue a certificate to the Holder or credit the Holder's
            balance account with DTC for the number of shares of Common Stock to
            which the Holder is entitled upon conversion of any Conversion
             Amount on or prior to the date which is five Business Days after the
            Conversion Date (a "Conversion Failure"), then (A) the Company shall
            pay damages to the Holder for each date of such Conversion Failure
            in an amount equal to 1.0% of the product of (I) the sum of the
            number of shares of Common Stock not issued to the Holder on or
            prior to the Share Delivery Date and to which the Holder is
            entitled, and (II) the Closing Sale Price of the Common Stock on the
            Share Delivery Date and (B) the Holder, upon written notice to the
            Company, may void its Conversion Notice with respect to, and retain


                                       4
<PAGE>

            or have returned, as the case may be, any portion of the Note(s)
            that has not been converted pursuant to such Conversion Notice;
            provided that the voiding of a Conversion Notice shall not affect
            the Company's obligations to make any payments which have accrued
            prior to the date of such notice pursuant to this Section 3(c)(ii)
            or otherwise.

                  (iii) Book-Entry. Notwithstanding anything to the contrary set
            forth herein, upon conversion of any portion of the Note(s) in
            accordance with the terms hereof, the Holder shall not be required
            to physically surrender the Note(s) to the Company unless (A) the
            full Conversion Amount represented by the Note(s) is being converted
            or (B) the Holder has provided the Company with prior written notice
            (which notice may be included in a Conversion Notice) requesting
            physical surrender and reissue of the Note(s). The Holder and the
            Company shall maintain records showing the Principal, Interest and
            Late Charges converted and the dates of such conversions or shall
            use such other method, reasonably satisfactory to the Holder and the
            Company, so as not to require physical surrender of the Note(s) upon
            conversion.

      4. RIGHTS UPON EVENT OF DEFAULT.

            Event of Default. Each of the following events shall constitute an
"Event of Default":

            (a) in the event the Senior Obligations have been paid in full and
all commitments under the Senior Credit Facility cancelled,, then the suspension
from trading or failure of the Common Stock to be listed on the Principal Market
for a period of five consecutive Trading Days or for more than an aggregate of
seven Trading Days in any 365-day period;

            (b) the Company's (A) failure to cure a Conversion Failure by
delivery of the required number of shares of Common Stock within twenty (20)
Business Days after the applicable Conversion Date or (B) notice, written or
oral, to any holder of the Notes, including by way of public announcement or
through any of its agents, at any time, of its intention not to comply with a
request for conversion of any Notes into shares of Common Stock that is tendered
in accordance with the provisions of the Notes;

            (c) the Company's failure to pay to the Holder any amount of
Principal, Interest, Late Charges or other amounts when and as due under the
Notes, the Term Loan Agreement or any other agreement, document, certificate or
other instrument delivered in connection with the transactions contemplated
hereby and thereby to which the Holder is a party, except, in the case of a
failure to pay Interest and Late Charges when and as due, in which case only if
such failure continues for a period of at least five Business Days;

            (d) the Company or any of its Subsidiaries, pursuant to or within
the meaning of Title 11, U.S. Code, or any similar Federal or state law for the
relief of debtors (collectively, "Bankruptcy Law"), (A) commences a voluntary


                                       5
<PAGE>

case, (B) consents to the entry of an order for relief against it in an
involuntary case, (C) consents to the appointment of a receiver, trustee,
assignee, liquidator or similar official (a "Custodian"), (D) makes a general
assignment for the benefit of its creditors or (E) admits in writing that it is
generally unable to pay its debts as they become due;

            (e) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that (A) is for relief against the Company or any of
its Subsidiaries in an involuntary case, (B) appoints a Custodian of the Company
or any of its Subsidiaries or (C) orders the liquidation of the Company or any
of its Subsidiaries;

            (f) in the event the Senior Obligations have been paid in full and
all commitments under the Senior Credit Facility cancelled, then a final
judgment or judgments for the payment of money aggregating in excess of $500,000
are rendered against the Company or any of its Subsidiaries and which judgments
are not, within 60 days after the entry thereof, bonded, discharged or stayed
pending appeal, or are not discharged within 60 days after the expiration of
such stay; provided, however, that any judgment which is covered by insurance or
an indemnity from a credit worthy party shall not be included in calculating the
$500,000 amount set forth above so long as the Company provides the Holder a
written statement from such insurer or indemnity provider (which written
statement shall be reasonably satisfactory to the Holder) to the effect that
such judgment is covered by insurance or an indemnity and the Company will
receive the proceeds of such insurance or indemnity within 30 days of the
issuance of such judgment;

            (g) any representation or warranty made or deemed made by or on
behalf of the Company or in connection with this Note, the Notes related to the
payment of Interest, the Term Loan Agreement, or any other agreement, document,
certificate or other instrument delivered in connection with the transactions
contemplated thereby and hereby, shall prove to have been materially incorrect
when made or deemed made;

            (h) any event or condition occurs that results in the Senior
Obligations becoming due prior to its scheduled maturity or that enables or
permits the holder or holders of the Senior Obligations or any trustee or agent
on its or their behalf (with or without the giving of notice, the lapse of time
or both) to cause all of the Senior Obligations to become due, or to require the
Redemption (as defined in the Credit Agreement) of all of the Senior Obligations
or any offer to Redeem (as defined in the Credit Agreement) to be made in
respect of all of the Senior Obligations, prior to its scheduled maturity or
require the Company to make an offer in respect thereof; provided that to the
extent that any such event or condition is cured or waived under the Senior
Credit Facility, then such event or condition shall not constitute and Event of
Default under this Note (in the event the Senior Obligations have been paid in
full and all commitments under the Senior Credit Facility cancelled, the terms
and conditions set forth in the Credit Agreement shall continue to be applicable
and deemed incorporated herein by reference as if the Senior Obligations were
still outstanding); or


                                       6
<PAGE>

            (i) the Company shall fail to observe or perform any covenant,
condition or agreement contained in Sections 5 (so long as the Senior
Obligations have been paid in full and all commitments under the Senior Credit
Facility cancelled), 6, 7 and 8 of this Note or any other provision of this Note
not otherwise encompassed by Section 4 hereof, the Notes related to the payment
of Interest, the Term Loan Agreement, or any other agreement, document,
certificate or other instrument delivered in connection with the transactions
contemplated thereby and hereby to which the Holder is a party, except, in the
case of a breach of a covenant or other term or condition which is curable, only
if such breach continues for a period of at least twenty (20) consecutive
Business Days.

      5. RIGHTS UPON CHANGE OF CONTROL.

In the event the Senior Obligations have been paid in full and all commitments
under the Senior Credit Facility cancelled, then the following shall apply:

            (a) Change of Control. Each of the following events shall constitute
a "Change of Control":

                  (i) the consolidation, merger or other business combination
            (including, without limitation, a reorganization or
            recapitalization) of the Company with or into another Person (other
            than (A) a consolidation, merger or other business combination
            (including, without limitation, reorganization or recapitalization)
            in which holders of the Company's voting power immediately prior to
            the transaction continue after the transaction to hold, directly or
            indirectly, the voting power of the surviving entity or entities
            necessary to elect a majority of the members of the board of
            directors (or their equivalent if other than a corporation) of such
            entity or entities, or (B) pursuant to a merger effected solely for
            the purpose of changing the jurisdiction of incorporation of the
            Company);

                  (ii) the sale or transfer of all or substantially all of the
            Company's assets; or

                  (iii) a purchase, tender or exchange offer made to and
            accepted by the holders of more than the 50% of the outstanding
            shares of Common Stock.

No sooner than 15 days nor later than 10 days prior to the consummation of a
Change of Control, but not prior to the public announcement of such Change of
Control, the Company shall deliver written notice thereof via facsimile and
overnight courier to the Holder (a "Change of Control Notice").

            (b) Assumption. Prior to the consummation of any Change of Control,
the Company will secure from any Person purchasing the Company's assets or
Common Stock or any successor resulting from such Change of Control (in each
case, an "Acquiring Entity") a written agreement (in form and substance
satisfactory to the holders of Notes representing at least a majority of the
aggregate principal amount of the Notes then outstanding) to deliver to each


                                       7
<PAGE>

Holder of Notes in exchange for such Notes, a security of the Acquiring Entity
evidenced by a written instrument substantially similar in form and substance to
the Notes, including, without limitation, having a principal amount and interest
rate equal to the principal amounts and the interest rates of the Notes held by
such holder, and satisfactory to the holders of Notes representing at least a
majority of the principal amount of the Notes then outstanding. In the event
that an Acquiring Entity is directly or indirectly controlled by a company or
entity whose common stock or similar equity interest is listed, designated or
quoted on a securities exchange or trading market, the Holders of Notes
representing at least a majority of the aggregate principal amount of the Notes
then outstanding may elect to treat such Person as the Acquiring Entity for
purposes of this Section 5(b).

            (c) Mandatory Prepayment Option. At any time during the period
beginning after the Holder's receipt of a Change of Control Notice and ending on
the date of the consummation of such Change of Control (or, in the event a
Change of Control Notice is not delivered at least 10 days prior to a Change of
Control, at any time on or after the date which is 10 days prior to a Change of
Control and ending 10 days after the consummation of such Change of Control),
the Holder may require the Company to pay the outstanding Principal and all
accrued Interest and Late Charges in full.

      6. RIGHTS UPON OTHER CORPORATE EVENTS.

      Prior to the consummation of any recapitalization, reorganization,
consolidation, merger, spin-off or other business combination (other than a
Change of Control which shall be applicable in the event the Senior Obligations
have been paid in full and all commitments under the Senior Credit Facility
cancelled) pursuant to which holders of Common Stock are entitled to receive
securities or other assets with respect to or in exchange for Common Stock (a
"Corporate Event"), the Company shall make appropriate provision to insure that
the Holder will thereafter have the right to receive upon a conversion of this
Note, (i) in addition to the shares of Common Stock receivable upon such
conversion, such securities or other assets to which the Holder would have been
entitled with respect to such shares of Common Stock had such shares of Common
Stock been held by the Holder upon the consummation of such Corporate Event or
(ii) in lieu of the shares of Common Stock otherwise receivable upon such
conversion, such securities or other assets received by the holders of Common
Stock in connection with the consummation of such Corporate Event in such
amounts as the Holder would have been entitled to receive had this Note
initially been issued with conversion rights for the form of such consideration
(as opposed to shares of Common Stock) at a conversion rate for such
consideration commensurate with the Conversion Rate. Provision made pursuant to
the preceding sentence shall be in a form and substance satisfactory to the
Holders of Notes representing at least a majority of the aggregate principal
amount of the Notes then outstanding.

      7. NONCIRCUMVENTION. The Company hereby covenants and agrees that the
Company will not, by amendment of its Certificate of Incorporation or Bylaws or
through any reorganization, transfer of assets, consolidation, merger,


                                       8
<PAGE>

dissolution, issue or sale of securities, or any other voluntary action, avoid
or seek to avoid the observance or performance of any of the terms of this Note,
and will at all times in good faith carry out all of the provisions of this Note
and take all action as may be required to protect the rights of the Holder of
this Note.

      8. RESERVATION OF AUTHORIZED SHARES.

             (a) Reservation. The Company shall initially reserve out of its
authorized and unissued Common Stock a number of shares of Common Stock for each
of the Notes equal to 125% of the Conversion Rate with respect to the Conversion
Amount of each such Note as of the Issuance Date. Thereafter, the Company, so
long as any of the Notes are outstanding, shall take all action necessary to
reserve and keep available out of its authorized and unissued Common Stock,
solely for the purpose of effecting the conversion of the Notes, 110% of the
number of shares of Common Stock as shall from time to time be necessary to
effect the conversion of all of the Notes then outstanding; provided that at no
time shall the number of shares of Common Stock so reserved be less than the
number of shares required to be reserved by the previous sentence (without
regard to any limitations on conversions) (the "Required Reserve Amount"). The
initial number of shares of Common Stock reserved for conversions of the Notes
and each increase in the number of shares so reserved shall be allocated pro
rata among the Holders of the Notes based on the principal amount of the Notes
held by each Holder at the time of Issuance Date or increase in the number of
reserved shares, as the case may be (the "Authorized Share Allocation"). In the
event that a holder shall sell or otherwise transfer any of such holder's Notes,
each transferee shall be allocated a pro rata portion of such holder's
Authorized Share Allocation. Any shares of Common Stock reserved and allocated
to any Person which ceases to hold any Notes shall be allocated to the remaining
holders of Notes, pro rata based on the principal amount of the Notes then held
by such holders.

            (b) Insufficient Authorized Shares. If at any time while any of the
Notes remain outstanding the Company does not have a sufficient number of
authorized and unreserved shares of Common Stock to satisfy its obligation to
reserve for issuance upon conversion of the Notes at least a number of shares of
Common Stock equal to the Required Reserve Amount (an "Authorized Share
Failure"), then the Company shall as soon as practicable take all action
reasonably necessary to increase the Company'