FOURTH
      AMENDMENT TO CREDIT AGREEMENT

    


    


    


    BETWEEN

    


    


    


    THE
      EXPLORATION COMPANY OF DELAWARE, INC.

    TXCO
      ENERGY CORP.

    


    


    


    


    AND

    


    


    


    GUARANTY
      BANK, FSB

    AS
      LENDER

    


    


    


    Effective
      as of November 1, 2006

    


    


    __________________________________

    


    REVOLVING
      LINE OF CREDIT OF UP TO $50,000,000

    ___________________________________

    


    


    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    


    TABLE
      OF
      CONTENTS

    PAGE

     

    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

            	 1
	
              1.05

            	
              Number
                and Gender

            	 2
	
              ARTICLE
                II AMENDMENTS

            	 	 2
	
              2.01

            	
              Addition
                of Borrower

            	 2
	
              2.02

            	
              Amendment
                of Exhibit I

            	 2
	
              ARTICLE
                III CONDITIONS

            	 	 2
	
              3.01

            	
              Receipt
                of Documents

            	 2
	
              3.02

            	
              Accuracy
                of Representations and Warranties

            	 3
	
              3.03

            	
              Matters
                Satisfactory to Lender

            	 3
	
              ARTICLE
                IV REPRESENTATIONS AND WARRANTIES

            	 	 3
	
              ARTICLE
                V RATIFICATION

            	 	 3
	
              ARTICLE
                VI MISCELLANEOUS

            	 	 3
	
              6.01

            	
              Scope
                of Amendment

            	 3
	
              6.02

            	
              Agreement
                as Amended

            	 3
	
              6.03

            	
              Parties
                in Interest

            	 3
	
              6.04

            	
              Rights
                of Third Parties

            	 4
	
              6.05

            	
              ENTIRE
                AGREEMENT

            	 4
	
              6.06

            	
              GOVERNING
                LAW

            	 4
	
              6.07

            	
              JURISDICTION
                AND VENUE

            	 4


    

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    FOURTH
      AMENDMENT
      TO CREDIT AGREEMENT

     

    This
      FOURTH
      AMENDMENT TO CREDIT AGREEMENT
      (this
      "Fourth
      Amendment")
      is
      made and entered into effective as of November 1, 2006, between THE
      EXPLORATION COMPANY OF DELAWARE, INC.,
      a
      Delaware corporation, and TXCO
      ENERGY CORP.,
      a Texas
      corporation ("TXCO")
      (collectively, the "Borrower")
      and
GUARANTY
      BANK, FSB, a
      federal
      savings bank (the "Lender").

     

    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 June 30, 2004, as amended by Letter Agreement dated
      August 18, 2004, Letter of Credit Agreement dated October 7, 2004, Letter
      Agreement dated November 3, 2004, Letter Agreement dated March 15, 2005, First
      Amendment to Credit Agreement dated March 24, 2005, as further amended by Waiver
      and Second Amendment to Credit Agreement dated August 23, 2005, and as further
      amended by Third Amendment to Credit Agreement dated December 15, 2005 (the
      "Agreement"),
      to
      which reference is here made for all purposes;

     

    WHEREAS,
      the parties desire to include TXCO as a Borrower; 

     

    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 Fourth Amendment, the
      parties hereto agree as follows:

     

     

    ARTICLE
      I

    DEFINITIONS

     

    1.01 Terms
      Defined Above.
      As used
      herein, each of the terms "Agreement,"
      "Borrower,"
      "Fourth
      Amendment,"
      "Lender,"
      and
      "TXCO"
      and
      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 Fourth Amendment to Article or Section numbers shall be
      to
      Articles and Sections of this Fourth Amendment, unless expressly stated herein
      to the contrary. References in this Fourth Amendment to "hereby," "herein,"
      hereinafter," hereinabove," "hereinbelow," "hereof," and "hereunder" shall
      be to
      this Fourth Amendment in its entirety and not only to the particular Article
      or
      Section in which such reference appears.

     

    1.04 Articles
      and Sections.
      This
      Fourth Amendment, for convenience only, has been divided into Articles and
      Sections and it is understood that the rights, powers, privileges, duties,
      
       

    

     

    


    
      
        
          
          

        

        
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    and other legal relations of the parties hereto shall be
      determined from this Fourth 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   Addition
      of Borrower.
      The
      Borrower and the Lender hereby amend the Agreement to add TXCO as a
      Borrower. 

     

    2.02   Amendment
      of Exhibit I.
      Exhibit
      I, i.e., the Form of Promissory Note, is as set forth on Exhibit I to this
      Fourth Amendment.

     

    ARTICLE
      III

    CONDITIONS

     

    The
      obligation of the Lender 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 Fourth Amendment as requested by the
                Lender;

            


    

     

    
      	 	
              (b)

            	
              the
                Note;

            


    

     

    
      	 	
              (c)

            	
              copies
                of the Articles of Incorporation or Certificate of Incorporation
                and all
                amendments thereto and the bylaws and all amendments thereto of TXCO
                accompanied by a certificate issued by the secretary or an assistant
                secretary of TXCO to the effect that each such copy is correct and
                complete;

            


    

     

    
      	 	
              (d)

            	
              certificates
                of incumbency and signatures of all officers of TXCO who are authorized
                to
                execute Loan Documents on behalf of TXCO, each such certificate being
                executed by the secretary or an assistant secretary of
                TXCO;

            


    

     

    
      	 	
              (e)

            	
              copies
                of corporate resolutions approving the Loan Documents and authorizing
                the
                transactions contemplated herein and therein, duly adopted by the
                board
                of

            


    

     

    


    
      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

    

     

     

    
      	
            	
               

            	
              directors
                of TXCO accompanied by certificates of the secretary or an assistant
                secretary of TXCO to the effect that such copies are true and correct
                copies of resolutions duly adopted at a meeting or by unanimous consent
                of
                the board of directors of TXCO and that such resolutions constitute
                all
                the resolutions adopted with respect to such transactions, have not
                been
                amended, modified, or revoked in any respect, and are in full force
                and
                effect as of the date of such certificate;
                and

            

     

    
      	 	
              (f)

            	
              such
                other agreements, documents, items, instruments, opinions, certificates,
                waivers, consents, and evidence as the Lender may reasonably
                request.

            


    

     

    3.02  Accuracy
      of Representations and Warranties.
      The
      representations and warranties contained in Article IV of the Agreement and
      this
      Fourth Amendment shall be true and correct.

     

    3.03  Matters
      Satisfactory to Lender.
      All
      matters incident to the consummation of the transactions contemplated hereby
      shall be satisfactory to the Lender.

     

    ARTICLE
      IV

    REPRESENTATIONS
      AND WARRANTIES

     

    The
      Borrower hereby expressly re-makes, in favor of the Lender, 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 Fourth Amendment.

     

    ARTICLE
      VI

    MISCELLANEOUS

     

    6.01   Scope
      of Amendment.
      The
      scope of this Fourth Amendment is expressly limited to the matters addressed
      herein and this Fourth 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 Fourth 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 Fourth Amendment.

     

    6.03   Parties
      in Interest.
      All
      provisions of this Fourth Amendment shall be binding upon and shall inure to
      the
      benefit of the Borrower, the Lender and their respective successors and
      assigns.

     

    


    
      
        
          
          

        

        
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    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
      FOURTH 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 FOURTH 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
      FOURTH 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 FOURTH 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.

     

    


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    IN
      WITNESS WHEREOF, this Fourth Amendment to Credit Agreement is executed effective
      the date first hereinabove written.

     

    
      	 	
              BORROWER

               

              THE
                EXPLORATION COMPANY OF

              DELAWARE,
                INC.

               

               

               

              By:
                /s/
                P. Mark Stark 

                  P.
                Mark
                Stark

                  Vice
                President

               

              TXCO
                ENERGY CORP.

               

               

               

              By:
                /s/
                M. F. Russell

                  M.
                Frank Russell

                  Vice
                President

               

               

            
	 	 


    

    


    


    
      
        
          
          

        

        
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              LENDER

               

              GUARANTY
                BANK, FSB

               

               

               

              By:
                /s/
                David M. Butler

              David
                M. Butler

              Vice
                President

            


    

    


    
      
        
        

      

      
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