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Exhibit 10.3    
    


EXECUTION VERSION  


CROSSTEX ENERGY SERVICES, L.P.  


$50,000,000  


 SENIOR SECURED NOTES  


 MASTER SHELF AGREEMENT  


 Dated as of June 3, 2003  










  



 
 

TABLE OF CONTENTS    
    


(Not
Part of Agreement) 



	 
	 
	 
	 
	 	Page

	1.	 	AUTHORIZATION OF ISSUE OF NOTES	 	1
	2.	 	PURCHASE AND SALE OF NOTES. 	 	1
	 	2A.	Facility	 	1
	 	2B.	Issuance Period	 	2
	 	2C.	Periodic Spread Information	 	2
	 	2D.	Request for Purchase	 	2
	 	2E.	Rate Quotes	 	2
	 	2F.	Acceptance	 	3
	 	2G.	Market Disruption	 	3
	 	2H.	Closing. 	 	3
	 	 	2H(1).	Series A Closing	 	3
	 	 	2H(2).	Subsequent Closings	 	4
	 	 	2H(3).	Rescheduled Closings	 	4
	 	2I.	Fees. 	 	4
	 	 	2I(1).	Facility Fee	 	4
	 	 	2I(2).	Issuance Fee	 	4
	 	 	2I(3).	Delayed Delivery Fee	 	4
	 	 	2I(4).	Cancellation Fee	 	5
	 	 	2I(5).	Renewal Fee	 	5
	3.	 	CONDITIONS OF CLOSING	 	5
	 	3A.	Certain Documents	 	5
	 	3B.	Opinion of Purchaser's Special Counsel	 	8
	 	3C.	Representations and Warranties; No Default	 	8
	 	3D.	Purchase Permitted by Applicable Laws	 	8
	 	3E.	Legal Matters	 	8
	 	3F.	Payment of Fees	 	8
	 	3G.	Proceedings	 	9
	 	3H.	Private Placement Numbers	 	9
	 	3I.	Title	 	9
	 	3J.	Collateral Agent's Liens	 	9
	 	3K.	Encumbrance of Real Property Interests	 	9
	4.	 	PREPAYMENTS	 	9
	 	4A.	Required Prepayments	 	9
	 	4B.	Optional Prepayment With Yield-Maintenance Amount	 	9
	 	4C.	Notice of Optional Prepayment	 	9
	 	4D.	Application of Prepayments	 	10
	 	4E.	Retirement of Notes	 	10
	5.	 	AFFIRMATIVE COVENANTS	 	10
	 	5A.	Reporting Requirements	 	10
	 	5B.	Information Required by Rule 144A	 	11
	 	5C.	Visitation Rights	 	11
	 	5D.	Covenant to Secure Notes Equally	 	12
	 	5E.	Preservation of Legal Existence, Etc. 	 	12
	 	5F.	Maintenance of Properties, Etc. 	 	12
	 	5G.	Compliance with Laws, Etc. 	 	12
	 	5H.	Payment of Taxes, Etc. 	 	12
	 	 	 	 	 	 





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	 	5I.	Maintenance of Insurance	 	12
	 	5J.	Keeping of Books	 	12
	 	5K.	Transactions with Affiliates	 	12
	 	5L.	Compliance with Environmental Laws	 	12
	 	5M.	Environmental Remediation and Indemnification	 	13
	 	5N.	Maintenance of Credit Facility	 	13
	 	5O.	Additional Covenants and Additional Defaults	 	13
	6.	 	NEGATIVE COVENANTS	 	14
	 	 	6A(1).	Current Ratio	 	14
	 	 	6A(2).	Interest Charge Coverage Ratio	 	14
	 	 	6A(3).	Leverage Ratio	 	14
	 	 	6A(4).	Minimum Tangible Net Worth	 	14
	 	6B.	Distributions, Etc. 	 	14
	 	6C.	     (1).	Liens, Etc. 	 	15
	 	 	6C(2).	Debt	 	16
	 	 	6C(3).	Investments in Other Persons	 	16
	 	 	6C(4).	Mergers, Acquisitions, Etc. 	 	17
	 	 	6C(5).	Sales, Etc. of Property	 	17
	 	6D.	Change in Nature of Business	 	18
	 	6E.	ERISA Plans	 	18
	 	6F.	Accounting Changes	 	18
	 	6G.	Creation of Subsidiaries	 	18
	 	6H.	Commodity Contracts	 	19
	 	6I.	Amendment of Company Partnership Agreement	 	19
	 	6J.	Bank Agreement	 	19
	7.	 	EVENTS OF DEFAULT. 	 	19
	 	7A.	Acceleration	 	19
	 	7B.	Rescission of Acceleration	 	21
	 	7C.	Notice of Acceleration or Rescission	 	22
	 	7D.	Other Remedies	 	22
	8.	 	REPRESENTATIONS, COVENANTS AND WARRANTIES	 	22
	 	8A.	Organization	 	22
	 	8B.	Financial Statements	 	23
	 	8C.	Actions Pending	 	23
	 	8D.	Outstanding Debt	 	23
	 	8E.	Title to Properties	 	23
	 	8F.	Taxes	 	24
	 	8G.	Conflicting Agreements and Other Matters	 	24
	 	8H.	Offering of Notes	 	24
	 	8I.	Use of Proceeds	 	24
	 	8J.	ERISA	 	25
	 	8K.	Governmental Consent	 	25
	 	8L.	Compliance with Laws	 	25
	 	8M.	Environmental Compliance	 	25
	 	8N.	Utility Company Status	 	26
	 	8O.	Investment Company Status	 	26
	 	8P.	Disclosure	 	26
	 	8Q.	Rule 144A	 	26
	 	8R.	Delivery of Bank Agreement	 	26
	 	8S.	Hostile Tender Offers	 	26
	 	 	 	 	 	 



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	 	8T.	Subsidiaries	 	26
	 	8U.	Ownership. 	 	26
	9.	 	REPRESENTATIONS OF THE PURCHASERS. 	 	27
	 	9A.	Nature of Purchase	 	27
	 	9B.	Source of Funds	 	27
	10.	 	DEFINITIONS; ACCOUNTING MATTERS	 	28
	 	10A.	Yield-Maintenance Terms. 	 	28
	 	10B.	Other Terms. 	 	29
	 	10C.	Computation of Time Periods	 	40
	 	10D.	Accounting Terms; Changes in GAAP. 	 	40
	 	10E.	Miscellaneous	 	41
	11.	 	MISCELLANEOUS. 	 	41
	 	11A.	Note Payments	 	41
	 	11B.	Expenses	 	41
	 	11C.	Consent to Amendments	 	42
	 	11D.	Form, Registration, Transfer and Exchange of Notes; Lost Notes	 	42
	 	11E.	Persons Deemed Owners; Participations	 	43
	 	11F.	Survival of Representations and Warranties; Entire Agreement	 	43
	 	11G.	Successors and Assigns	 	43
	 	11H.	Independence of Covenants	 	43
	 	11I.	Notices	 	43
	 	11J.	Payments Due on Non-Business Days	 	44
	 	11K.	Severability	 	44
	 	11L.	Descriptive Headings	 	44
	 	11M.	Satisfaction Requirement	 	44
	 	11N.	Governing Law	 	44
	 	11O.	Severalty of Obligations	 	44
	 	11P.	Counterparts	 	44
	 	11Q.	Binding Agreement	 	44
	 	11R.	Waiver of Jury Trial; Consent to Jurisdiction	 	45
	 	11S.	Maximum Interest Payable	 	45





PURCHASER
SCHEDULE

SCHEDULE 6C(2)—EXISTING DEBT

SCHEDULE 8G—LIST OF AGREEMENTS RESTRICTING DEBT

SCHEDULE 8T—LIST OF SUBSIDIARIES

SCHEDULE 10B(3)—EXISTING GUARANTORS

EXHIBIT A 1—FORM OF NOTE

EXHIBIT A-2—FORM OF SERIES A NOTE

EXHIBIT B—FORM OF REQUEST FOR PURCHASE

EXHIBIT C—FORM OF CONFIRMATION OF ACCEPTANCE

EXHIBIT D—FORM OF OPINION OF COMPANY'S COUNSEL

EXHIBIT E—FORM OF FUNDS DELIVERY INSTRUCTION LETTER

EXHIBIT F-1—FORM OF LIMITED PARTNER GUARANTY

EXHIBIT F-2—FORM OF SUBSIDIARY GUARANTY

EXHIBIT G—FORM OF COMPANY SECURITY AGREEMENT

EXHIBIT H—FORM OF GUARANTOR SECURITY AGREEMENT

EXHIBIT I—FORM OF INTERCREDITOR AND COLLATERAL AGENCY AGREEMENT

EXHIBIT J—FORM OF PARTNERS PLEDGE AGREEMENT

EXHIBIT K—FORM OF CROSSTEX TREATING SERVICES PLEDGE AGREEMENT



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EXHIBIT
L—FORM OF CROSSTEX ACQUISITION MANAGEMENT GP PLEDGE AGREEMENT 


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   CROSSTEX ENERGY SERVICES, L.P.

2501 Cedar Springs, Suite 600

Dallas, TX 75201  


As of June 3, 2003 


	To:
	Prudential
Investment Management, Inc.

  (herein called "Prudential")

Each Prudential Affiliate (as hereinafter defined)

  which becomes bound by certain provisions of this

  Agreement as hereinafter provided (together with

  Prudential, the "Purchasers")

c/o Prudential Capital Group

Gateway Center Four

100 Mulberry Street

Newark, NJ 07102-4069 



Ladies
and Gentlemen: 


        The
undersigned, Crosstex Energy Services, L.P. (the "Company"), hereby agrees with you as follows: 


        1.    AUTHORIZATION OF ISSUE OF NOTES.    The Company will authorize the issue of its senior secured promissory notes
(the "Notes") in the aggregate principal amount of $50,000,000, to be dated the date of issue thereof; to mature, in the case of each Note so issued, no
more than seven years after the date of original issuance thereof; to have an average life, in the case of each note so issued, of no more than five years after the date of original issuance thereof;
to bear interest on the unpaid balance thereof from the date thereof at the rate per annum, and to have such other particular terms, as shall be set forth, in the case of each Note so issued, in the
Confirmation of Acceptance with respect to such Note delivered pursuant to paragraph 2F; and to be substantially in the form of  Exhibit A-1 attached hereto. The term "Notes" as used herein
shall include each Note delivered pursuant to any provision of this
Agreement and each Note delivered in substitution or exchange for any such Note pursuant to any such provision. Notes which have (i) the same final
maturity, (ii) the same principal prepayment dates, (iii) the same principal prepayment amounts (as a percentage of the original principal amount of each Note), (iv) the same
interest rate, (v) the same interest payment periods, and (vi) the same original date of issuance are herein called a "Series" of Notes. Capitalized terms used herein have the meanings
specified in paragraph 10. 


        2.    PURCHASE AND SALE OF NOTES.    



        2A.    Facility.    Prudential is willing to consider, in its sole discretion and within limits which may be
authorized for purchase by Prudential Affiliates from time to time, the purchase of Notes pursuant to this Agreement. The willingness of Prudential to consider such purchase of Notes is herein called
the "Facility". At any time, the aggregate principal amount of Notes stated in paragraph 1, minus
the aggregate principal amount of Notes purchased and sold pursuant to this Agreement prior to such time, minus the aggregate principal amount of
Accepted Notes (as hereinafter defined) which have not yet been purchased and sold hereunder prior to such time is herein called the "Available Facility
Amount" at such time. NOTWITHSTANDING THE WILLINGNESS OF PRUDENTIAL TO CONSIDER PURCHASES OF NOTES BY PRUDENTIAL AFFILIATES, THIS AGREEMENT IS ENTERED
INTO ON THE EXPRESS UNDERSTANDING THAT NEITHER PRUDENTIAL NOR ANY PRUDENTIAL AFFILIATE SHALL BE OBLIGATED TO MAKE OR ACCEPT OFFERS TO PURCHASE NOTES, OR TO QUOTE RATES, SPREADS OR OTHER TERMS WITH
RESPECT TO SPECIFIC PURCHASES OF NOTES, AND THE FACILITY SHALL IN NO WAY BE CONSTRUED AS A COMMITMENT BY PRUDENTIAL OR ANY PRUDENTIAL AFFILIATE.


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        2B.    Issuance Period.    Notes may be issued and sold pursuant to this Agreement until the earlier of (i) (a)
if no Notes (other than the Series A Notes) have been previously issued hereunder, the second anniversary of the date of this Agreement or (b) upon receipt of the Renewal Fee provided
for in paragraph 2I(4) or the issuance of Notes, prior to the second anniversary date of this Agreement, the third anniversary of the date of this Agreement (or if any such anniversary is not a
Business Day, the Business Day next preceding such anniversary) and (ii) the thirtieth day after Prudential shall have given to the Company, or the Company shall have given to Prudential,
written notice stating that it elects to terminate the issuance and sale of Notes pursuant to this Agreement (or if such thirtieth day is not a Business Day, the Business Day next preceding such
thirtieth day). The period during which Notes may be issued and sold pursuant to this Agreement is herein called the "Issuance Period". 


        2C.    Periodic Spread Information.    Provided no Default or Event of Default exists, not later than 9:30 A.M.
(New York City local time) on a Business Day during the Issuance Period if there is an Available Facility Amount on such Business Day, the Company may request by telecopier or telephone, and
Prudential will, to the extent reasonably practicable, provide to the Company on such Business Day (or, if such request is received after 9:30 A.M. (New York City local time) on such Business
Day, on the following Business Day), information (by telecopier or telephone) with respect to various spreads at which Prudential Affiliates might be interested in purchasing Notes of different
average lives; provided, however, that the Company may not make such requests more frequently than once in every five Business Days or such other period
as shall be mutually agreed to by the Company and Prudential. The
amount and content of information so provided shall be in the sole discretion of Prudential but it is the intent of Prudential to provide information which will be of use to the Company in determining
whether to initiate procedures for use of the Facility. Information so provided shall not constitute an offer to purchase Notes, and neither Prudential nor any Prudential Affiliate shall be obligated
to purchase Notes at the spreads specified. Information so provided shall be representative of potential interest only for the period commencing on the day such information is provided and ending on
the earlier of the fifth Business Day after such day and the first day after such day on which further spread information is provided. Prudential may suspend or terminate providing information
pursuant to this paragraph 2C for any reason, including its determination that the credit quality of the Company has declined since the date of this Agreement. 


        2D.    Request for Purchase.    The Company may from time to time during the Issuance Period make requests for
purchases of Notes (each such request being a "Request for Purchase"). Each Request for Purchase shall be made to Prudential by telecopier or overnight
delivery service, and shall, unless otherwise expressly accepted by Prudential, (i) specify the aggregate principal amount of Notes covered thereby, which shall not be less than $10,000,000 and
not be greater than the Available Facility Amount at the time such Request for Purchase is made, (ii) specify the principal amounts, final maturities, principal prepayment dates and amounts and
interest payment periods (quarterly or semi-annual in arrears) of the Notes covered thereby, (iii) specify the use of proceeds of such Notes, (iv) specify the proposed day
for the closing of the purchase and sale of such Notes, which shall be a Business Day during the Issuance Period not less than 10 days and not more than 25 days after the making of such
Request for Purchase, (v) specify the number of the account and the name and address of the depository institution to which the purchase prices of such Notes are to be transferred on the
Closing Day for such purchase and sale, (vi) certify that the representations and warranties contained in paragraph 8 are true on and as of the date of such Request for Purchase and that
there exists on the date of such Request for Purchase no Event of Default or Default, (vii) specify the Designated Spread for such Notes and (viii) be substantially in the form of  Exhibit B attached hereto. Each Request for Purchase shall be in writing and shall be deemed made when received by Prudential. 


        2E.    Rate Quotes.    Not later than five Business Days after the Company shall have given Prudential a Request for
Purchase pursuant to paragraph 2D, Prudential may, but shall be under no obligation to, provide to the Company by telephone or telecopier, in each case between 9:30 A.M. and 


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1:30 P.M.
New York City local time (or such later time as Prudential may elect) interest rate quotes for the several principal amounts, maturities, principal prepayment schedules, and interest
payment periods of Notes specified in such Request for Purchase. Each quote shall represent the interest rate per annum payable on the outstanding principal balance of such Notes, at which a
Prudential Affiliate would be willing to purchase such Notes at 100% of the principal amount thereof. 


        2F.    Acceptance.    Within 30 minutes after Prudential shall have provided any interest rate quotes pursuant to
paragraph 2E or such other period as Prudential may specify to the Company (such period being the "Acceptance Window"), the Company may, subject
to paragraph 2G, elect to accept such interest rate quotes as to not less than $10,000,000 aggregate principal amount of the Notes specified in the related Request for Purchase. Such election
shall be made by an Authorized Officer of the Company notifying
Prudential by telephone or telecopier within the Acceptance Window that the Company elects to accept such interest rate quotes, specifying the Notes (each such Note being an
"Accepted Note") as to which such acceptance (an "Acceptance") relates. The day the Company notifies an
Acceptance with respect to any Accepted Notes is herein called the "Acceptance Day" for such Accepted Notes. Any interest rate quotes as to which
Prudential does not receive an Acceptance within the Acceptance Window shall expire, and no purchase or sale of Notes hereunder shall be made based on such expired interest rate quotes. Subject to
paragraph 2G and the other terms and conditions hereof, the Company agrees to sell to a Prudential Affiliate, and Prudential agrees to cause the purchase by a Prudential Affiliate of, the
Accepted Notes at 100% of the principal amount of such Notes. As soon as practicable following the Acceptance Day, the Company, Prudential and each Prudential Affiliate which is to purchase any such
Accepted Notes will execute a confirmation of such Acceptance substantially in the form of Exhibit C attached hereto (a
"Confirmation of Acceptance"). If the Company should fail to execute and return to Prudential within two Business Days following receipt thereof a
Confirmation of Acceptance with respect to any Accepted Notes, Prudential may at its election at any time prior to its receipt thereof cancel the closing with respect to such Accepted Notes by so
notifying the Company in writing. 


        2G.    Market Disruption.    Notwithstanding the provisions of paragraph 2F, if Prudential shall have provided
interest rate quotes pursuant to paragraph 2E and thereafter prior to the time an Acceptance with respect to such quotes shall have been notified to Prudential in accordance with
paragraph 2F the domestic market for U.S. Treasury securities or derivatives shall have closed or there shall have occurred a general suspension, material limitation, or significant disruption
of trading in securities generally on the New York Stock Exchange or in the domestic market for U.S. Treasury securities or derivatives, then such interest rate quotes shall expire, and no purchase or
sale of Notes hereunder shall be made based on such expired interest rate quotes. If the Company thereafter notifies Prudential of the Acceptance of any such interest rate quotes, such Acceptance
shall be ineffective for all purposes of this Agreement, and Prudential shall promptly notify the Company that the provisions of this paragraph 2G are applicable with respect to such
Acceptance. 


        2H.    Closing.    


        2H(1).    Series A Closing.    The Company hereby agrees to sell to the Purchasers and, subject to the terms
and conditions herein set forth, each Purchaser agrees to purchase from the Company under the Facility 6.95% Senior Secured Notes, Series A, due 2010 (the
"Series A Notes") in the aggregate principal amount set forth opposite its name on the Purchaser
Schedule attached hereto at 100% of such aggregate principal amount. The Series A Notes shall be substantially in the form of  Exhibit A-2 attached hereto. The Company
will deliver to Prudential, at the offices of Baker Botts L.L.P. at 2001 Ross Avenue,
Dallas, Texas 75201, one or more Notes registered in the name of the Purchasers, evidencing the aggregate principal amount of Series A Notes to be purchased by the Purchasers and in the
denomination or denominations specified in the Purchaser Schedule attached hereto against payment of the purchase price thereof by transfer of
immediately available funds to the credit of the Company's account #0880423630 at Union Bank of California, Los Angeles, California (ABA 


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No. 122000496)
on the date of closing, which shall be June 3, 2003, or any other date upon which the Company and Prudential may mutually agree in writing (the
"Series A Closing"). 


        2H(2).    Subsequent Closings.    Not later than 11:30 A.M. (New York City local time) on the Closing Day for
any Accepted Notes, the Company will deliver to each Purchaser listed in the Confirmation of Acceptance relating thereto at the offices of Baker Botts L.L.P., 2001 Ross Avenue, Dallas, Texas 75201 the
Accepted Notes to be purchased by such Purchaser in the form of one or more Notes in authorized denominations as such Purchaser may request for each Series of Accepted Notes to be purchased on the
Closing Day, dated the Closing Day and registered in such Purchaser's name (or in the name of its nominee), against payment of the purchase price thereof by transfer of immediately available funds for
credit to the Company's account specified in the Request for Purchase of such Notes. 


        2H(3).    Rescheduled Closings.    If the Company fails to tender to any Purchaser the Accepted Notes to be purchased
by such Purchaser on the scheduled Closing Day for such Accepted Notes as provided above in this paragraph 2H, or any of the conditions specified in paragraph 3 shall not have been
fulfilled by the time required on such scheduled Closing Day, the Company shall, prior to 1:00 P.M., New York City local time, on such scheduled Closing Day notify Prudential (which
notification shall be deemed received by each Purchaser) in writing whether (x) such closing is to be rescheduled (such rescheduled date to be a Business Day during the Issuance Period not less
than one Business Day and not more than 30 Business Days after such scheduled Closing Day (the "Rescheduled Closing Day") and certify to Prudential
(which certification shall be for the benefit of each Purchaser) that the Company reasonably believes that it will be able to comply with the conditions set forth in paragraph 3 on such
Rescheduled Closing Day and that the Company will pay the Delayed Delivery Fee in accordance with paragraph 2I(3) or (y) such closing is to be canceled as provided in
paragraph 2I(4). In the event that the Company shall fail to give such notice referred to in the preceding sentence, Prudential (on behalf of each Purchaser) may at its election, at any time
after 1:00 P.M., New York City local time, on such scheduled Closing Day, notify the Company in writing that such closing is to be canceled as provided in paragraph 2I(4).
Notwithstanding anything to the contrary appearing in this Agreement, the Company may elect to reschedule a closing with respect to any given Accepted Notes on not more than one occasion, unless
Prudential shall have otherwise consented in writing. 


        2I.    Fees.    


        2I(1).    Facility Fee.    In consideration for the time, effort and expense involved in the preparation, negotiation
and execution of this Agreement, at the time of the execution and delivery of this Agreement by the Company and Prudential, the Company will pay to Prudential in immediately available funds a fee (the
"Facility Fee") in the amount of $100,000. 


        2I(2).    Issuance Fee.    The Company will pay to each Purchaser in immediately available funds a fee (the
"Issuance Fee") on each Closing Day on or after June 6, 2003 in an amount equal to 0.25% of the aggregate principal amount of Notes sold to such
Purchaser on such Closing Day. 


        2I(3).    Delayed Delivery Fee.    If the closing of the purchase and sale of any Accepted Note is delayed for any
reason (other than if the Company has satisfied all of the conditions in paragraph 3 with respect to the purchase of such Accepted Notes and the Purchasers fail to purchase such Accepted Notes)
beyond the original Closing Day for such Accepted Note, the Company will pay to the Purchaser of such
Accepted Note on the Cancellation Date or actual closing date of such purchase and sale a fee (the "Delayed Delivery Fee") calculated as follows: 


(BEY–MMY)
X DTS/360 X PA 


where
"BEY" means Bond Equivalent Yield, i.e., the bond equivalent yield per annum of such Accepted
Note, "MMY" means Money Market Yield, i.e., the yield per annum on a commercial paper 


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investment
of the highest quality selected by Prudential on the date Prudential receives notice of the delay in the closing for such Accepted Note having a maturity date or dates the same as, or
closest to, the Rescheduled Closing Day or Rescheduled Closing Days (a new alternative investment being selected by Prudential each time such closing is delayed);
"DTS" means Days to Settlement, i.e., the number of actual days elapsed from and including the original
Closing Day with respect to such Accepted Note to but excluding the date of such payment; and "PA" means Principal Amount,  i.e., the principal amount of
the Accepted Note for which such calculation is being made. In no case shall the Delayed Delivery Fee be less than zero.
Nothing contained herein shall obligate any Purchaser to purchase any Accepted Note on any day other than the Closing Day for such Accepted Note, as the same may be rescheduled from time to time in
compliance with paragraph 2H. 


        2I(4).    Cancellation Fee.    If the Company at any time notifies Prudential in writing that the Company is canceling
the closing of the purchase and sale of any Accepted Note, or if Prudential notifies the Company in writing under the circumstances set forth in the penultimate sentence of paragraph 2H(3) that
the closing of the purchase and sale of such Accepted Note is to be canceled, or if the closing of the purchase and sale of such Accepted Note is not consummated on or prior to the last day of the
Issuance Period (the date of any such notification, or the last day of the Issuance Period, as the case may be, being the "Cancellation Date"), the
Company will pay the Purchasers in immediately available funds an amount (the "Cancellation Fee") calculated as follows: 


PI
X PA 


where
"PI" means Price Increase, i.e., the quotient (expressed in decimals) obtained by dividing
(a) the excess of the ask price (as determined by Prudential) of the Hedge Treasury Note(s) on the Cancellation Date over the bid price (as determined by Prudential) of the Hedge Treasury
Notes(s) on the Acceptance Day for such Accepted Note by (b) such bid price; and "PA" has the meaning specified in paragraph 2I(3). The
foregoing bid and ask prices shall be as reported by TradeWeb LLC (or, if such data for any reason ceases to be available through TradeWeb LLC, any publicly available source of
similar market data). Each price shall be rounded to the second decimal place. In no case shall the Cancellation Fee be less than zero. 


        2I(5).    Renewal Fee.    If no Notes (other than the Series A Notes) are issued after the date hereof until
the second anniversary of the date of this Agreement, the Facility shall be terminated and the Issuance Period shall end on such anniversary date unless on or before such second anniversary the
Company shall pay to Prudential a renewal fee (the "Renewal Fee") in the aggregate amount of $10,000. In the event the Company pays the Renewal Fee, the
Facility shall remain in place and the Issuance Period shall extend until the third anniversary of the date of this Agreement (unless terminated earlier pursuant to paragraph 2B). 


        3.    CONDITIONS OF CLOSING.    The obligation of any Purchaser to purchase and pay for any Notes is subject to the
satisfaction, on or before the Closing Day for such Notes, of the following conditions: 


        3A.    Certain Documents.    Such Purchaser shall have received the following, each dated the date of the applicable
Closing Day unless otherwise specified: 



          (i)  The
Note(s) to be purchased by such Purchaser. 


         (ii)  A
certificate of the Secretary or an Assistant Secretary of the General Partner certifying (A) the existence of the Company and the General Partner,
(B) the Company Partnership Agreement, (C) the General Partner's organizational documents, (D) the resolutions of the General Partner approving this Agreement, the Notes, and the
other Loan Documents and the related transactions, and (E) all documents evidencing other necessary corporate, partnership or limited liability company action and governmental approvals, if
any, with respect to this Agreement, the Notes, and the other Loan Documents executed and delivered on or before such 



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Closing
Day (provided, that for any Closing Day occurring after the Series A Closing, the Company may certify that there has been no change to
any applicable authorization or approval since the date on which it was most recently delivered to such Purchaser under this clause (ii) as an alternative to the further delivery thereof). 



        (iii)  A
certificate of the Secretary or an Assistant Secretary of the General Partner certifying the names and true signatures of the officers of the General Partner
authorized to sign this Agreement, the Notes, the other Loan Documents and the other documents to be delivered hereunder on behalf of the Company
(provided, that for any Closing Day occurring after the Series A Closing, the Secretary or an Assistant Secretary and one other officer of the
General Partner may certify that there has been no change to the officers of the Company authorized to sign Accepted Notes and other documents to be
delivered therewith since the date on which a certificate setting forth the names and true signatures of such officers, as described above, was most recently delivered to such Purchaser under this
clause (iii), as an alternative to the further delivery thereof). 


        (iv)  Certificates
of the Secretary or an Assistant Secretary of each of the Guarantors certifying (A) the organizational documents of such Guarantor, (B) the
resolutions of the governing body of such Guarantor approving this Agreement, the Guaranty, and the other Loan Documents to which such Guarantor is a party and the related transactions, and
(C) all other documents evidencing other necessary corporate, partnership or limited liability company action and governmental approvals, if any, with respect to this Agreement, the Guaranty,
and the other Loan Documents to which such Guarantor is a party executed and delivered on or before such Closing Day (provided, that for any Closing Day
occurring after the Series A Closing, such Guarantor may certify that there has been no change to any applicable authorization or approval since the date on which it was most recently delivered
to such Purchaser under this clause (ii) as an alternative to the further delivery thereof). 


         (v)  Certificates
of the Secretary or an Assistant Secretary of each Guarantor certifying the names and true signatures of the officers of such Guarantor authorized to sign
the Guaranty, the other Loan Documents to which such Guarantor is a party and the other documents to be delivered hereunder on behalf of such Guarantor
(provided, that for any Closing Day occurring after the Series A Closing, the Secretary or an Assistant Secretary and one other officer of such
Guarantor may certify that there has been no change to the officers of such Guarantor authorized to sign any other documents to be delivered on such Closing Day since the date on which a certificate
setting forth the names and true signatures of such officers, as described above, was most recently delivered to such Purchaser under this clause (v), as an alternative to the further delivery
thereof). 


        (vi)  A
favorable opinion of Thompson & Knight LLP, special counsel to the Company and the Guarantors (or such other counsel designated by the Company and acceptable
to the Purchaser(s)) satisfactory to such Purchaser and substantially in the form of Exhibit D attached hereto and as to such other matters as
such Purchaser may reasonably request. The Company hereby directs such counsel to deliver such opinion, agrees that the issuance and sale of any Notes will constitute a reconfirmation of such
direction, and understands and agrees that each Purchaser receiving such an opinion will be and is hereby authorized to rely on such opinion. 


       (vii)  Certificates
of good standing, existence and authority for the Company, the General Partner and each of the Guarantors from each of the states in which the Company,
the General Partner and each of the Guarantors is either organized or does business. 


      (viii)  Solely
with respect to the Series A Closing, results of searches of the UCC Records of the Secretary of State of Delaware and the Secretary of State and
applicable counties of the States of Texas, heretofore obtained by the Collateral Agent and, in the case of the searches of the UCC 



6





 




Records,
reflecting no Liens against any of the Collateral as to which perfection of a Lien is accomplished by the filing of a financing statement other than Liens in favor of the Collateral Agent for
the benefit of the Holders and the Banks and Permitted Liens. 


        (ix)  The
Guaranties duly executed by all parties thereto. 


         (x)  The
Intercreditor Agreement duly executed by the Collateral Agent, the Banks, the Purchasers other than Prudential, the Company and the Guarantors. 


        (xi)  The
Security Agreements and the Pledge Agreements duly executed by all parties thereto. 


       (xii)  Amendments
to each of the existing Mortgages in form and substance satisfactory to the Purchasers. 


      (xiii)  Appropriate
UCC-1 or UCC-3 Financing Statements, naming the Collateral Agent as the secured party and covering the Collateral, for filing with
the appropriate authorities. 


      (xiv)  Solely
with respect to the Series A Closing, certificate(s) of insurance naming the Collateral Agent as loss payee or additional insured evidencing insurance
which meets the requirements of this Agreement and the Security Documents and which is in amount, form and substance and from an issuer satisfactory to the Required Holders. 



       (xv)  Certified
copy of an amendment to the Bank Agreement permitting the Company to enter into this Agreement and issue the Notes. 


      (xvi)  Additional
documents or certificates with respect to legal matters or corporate or other proceedings related to the transactions contemplated hereby as may be
reasonably requested by such Purchaser. 


     (xvii)  Written
instructions of the Company in the form of Exhibit E attached hereto. 


    (xviii)  Solely
with respect to the Duke Acquisition Closing, such Purchaser shall have received the following (other than the documents and instruments described in
subclause (a) below, which shall be delivered to the Collateral Agent) duly executed by all the parties thereto, in form and substance satisfactory to such Purchaser: 



         (a)  Mortgages,
other Security Documents and appropriate UCC-1 and UCC-3 Financing Statements for filing with the appropriate authorities covering the
Property being acquired by the Company pursuant to the Duke Acquisition Documents, together with, at the request of the Required Holders, a favorable opinion of outside counsel to the Company, in form
and substance reasonably satisfactory to the Required Holders, as to such matters relating to the foregoing documents as the Required Holders may reasonably request; 


         (b)  copies
of the Duke Acquisition Documents certified by a Responsible Officer (A) as being true and correct copies of such documents as of the Duke Acquisition
Closing, and (B) except as otherwise disclosed in writing and acceptable to such Purchaser (i) as being in full force and effect and no material term or condition thereof having been
amended, modified or waived after the execution thereof; and (ii) that to the knowledge of such Responsible Officer, none of the parties to the Duke Acquisition Documents shall have failed to
perform any material obligation or covenant required by the Duke Acquisition Documents to be performed or complied with by it on or before the Duke Acquisition Closing; 


         (c)  a
report by Barnes and Click, Inc. in form and substance satisfactory to such Purchaser, together with a certificate from a Responsible Officer certifying that
the Properties subject to such report are the same Properties that are the subject of the Duke Acquisition; 




7





 





         (d)  a
Phase I environmental review by Flat Rock Energy Partners covering those Properties to be acquired in connection with the Duke Acquisition in form and substance
satisfactory to such Purchaser; and 


         (e)  such
other documents, agreements or information as such Purchaser may reasonably request. 




      (xix)  Solely
with respect to the Duke Acquisition Closing, the Duke Acquisition shall, simultaneously with the issuance of the Notes in connection with the Duke Acquisition
Closing, have been consummated by the Company, and all other conditions to the Duke Acquisition shall have been satisfied in form and substance satisfactory to such Purchaser. 


       (xx)  Solely
with respect to the Duke Acquisition Closing, such Purchaser shall have received satisfactory evidence that arrangements have been made so that the Liens granted
to the Collateral Agent under the Security Documents relating to the Duke Acquisition are or will be Acceptable Security Interests and that all actions or filings necessary to protect, preserve and
validly perfect such Liens have been made, taken or obtained (or will be upon the filing and recording of the appropriate Security Documents), as the case may be, and are in full force and effect. 



      (xxi)  Solely
with respect to the Duke Acquisition Closing, such Purchaser shall be satisfied in its reasonable discretion as to the status of the Company's or Guarantor's,
as applicable, title to the Properties acquired pursuant to the Duke Acquisition. 


     (xxii)  Solely
with respect to the Duke Acquisition Closing, such Purchaser shall be satisfied in its sole discretion with its due diligence analysis and review of the
Properties acquired pursuant to the Duke Acquisition. 




        3B.    Opinion of Purchaser's Special Counsel.    Such Purchaser shall have received from Baker Botts L.L.P., who is
acting as special counsel for it in connection with this transaction, a favorable opinion satisfactory to such Purchaser as to such matters incident to the matters herein contemplated as it may
reasonably request. 


        3C.    Representations and Warranties; No Default.    The representations and warranties contained in
paragraph 8 hereof and in the other Loan Documents shall be true on and as of such Closing Day, except to the extent of changes caused by the transactions herein contemplated; there shall exist
on such Closing Day no Event of Default or Default; and the Company shall have delivered to such Purchaser an Officer's Certificate, dated such Closing Day, to both such effects. 



        3D.    Purchase Permitted by Applicable Laws.    The purchase of and payment for the Notes to be purchased by such
Purchaser on the terms and conditions herein provided (including the use of the proceeds of such Notes by the Company) shall not violate any applicable law or governmental regulation (including,
without limitation, Section 5 of the Securities Act or Regulation T, U or X of the Board of Governors of the Federal Reserve System) and shall not subject such Purchaser to any tax,
penalty, liability or other onerous condition under or pursuant to any applicable law or governmental regulation, and such Purchaser shall have received such certificates or other evidence as it may
request to establish compliance with this condition. 


        3E.    Legal Matters.    Counsel for such Purchaser, including any special counsel for the Purchasers retained in
connection with the purchase and sale of such Accepted Notes, shall be satisfied as to all legal matters relating to such purchase and sale, and such Purchaser shall have received from such counsel
favorable opinions as to such legal matters as it may request. 


        3F.    Payment of Fees.    The Company shall have paid to the Purchasers and Prudential any fees due them pursuant to
or in connection with this Agreement, including any Facility Fee due pursuant to paragraph 2I(1), any Issuance Fee due pursuant to paragraph 2I(2) and any Delayed Delivery Fee due
pursuant to paragraph 2I(3). In addition, all other fees which are due and payable on or before any 


8





 



Closing
Day shall have been paid, and without limiting the provisions of paragraph 11B, special counsel to the Purchasers shall have received its fees, charges and disbursements to the extent
reflected in a statement of such special counsel rendered to the Company at least one Business Day prior to such Closing Day. 



        3G.    Proceedings.    All corporate and other proceedings taken or to be taken in connection with the transactions
contemplated hereby and all documents incident thereto shall be satisfactory in substance and form to such Purchaser, and it shall have received all such counterpart originals or certified or other
copies of such documents as it may reasonably request. 


        3H.    Private Placement Numbers.    Private Placement numbers issued by Standard & Poor's CUSIP Service Bureau
(in cooperation with the Securities Valuation Office of the National Association of Insurance Commissioners) shall have been obtained for the Notes. 



        3I.    Title.    Prudential shall be satisfied in its reasonable discretion as to the status of the Company's or a
Guarantor's, as applicable, title to the Company's and its Subsidiaries' Properties. 


        3J.    Collateral Agent's Liens.    Prudential shall have received satisfactory evidence that the Liens granted to the
Collateral Agent under the Security Documents are Acceptable Security Interests and that all actions or filings necessary to protect, preserve and validly perfect such Liens have been made, taken or
obtained, as the case may be, and are in full force and effect. 



        3K.    Encumbrance of Real Property Interests.    Prudential shall be satisfied that the Security Documents encumber
substantially all of such real property interests held by the Company and its Subsidiaries as the Collateral Agent may require. 


        4.    PREPAYMENTS.    The Notes shall be subject to prepayment with respect to any required prepayments set forth in
such Notes as provided in paragraph 4A and with respect to the optional prepayments permitted by paragraph 4B. Any prepayment made by the Company pursuant to any other provision of this
paragraph 4 shall not reduce or otherwise affect its obligation to make any required prepayment as specified in paragraph 4A. 


        4A.    Required Prepayments.    The Notes of each Series shall be subject to required prepayments, if any, set forth
in the Notes of such Series. 


        4B.    Optional Prepayment With Yield-Maintenance Amount.    The Notes shall be subject to prepayment, in whole at any
time or from time to time in part (in integral multiples of $1,000,000 and in a minimum amount of $100,000), at the option of the Company, at 100% of the principal amount so prepaid plus interest
thereon to the prepayment date and the Yield-Maintenance Amount, if any, with respect to each such Note. Any partial prepayment of Notes pursuant to this paragraph 4B shall be applied in
satisfaction of required payments of principal of the Notes in inverse order of their scheduled due dates. 


        4C.    Notice of Optional Prepayment.    The Company shall give the Holder of each Note to be prepaid pursuant to
paragraph 4B irrevocable written notice of such prepayment not less than 10 Business Days prior to the prepayment date, specifying such prepayment date, specifying the aggregate principal
amount of the Notes to be prepaid on such date, identifying each Note held by such Holder, and the principal amount of each such Note, to be prepaid on such date and stating that such prepayment is to
be made pursuant to paragraph 4B. Notice of prepayment having been given as aforesaid, the principal amount of the Notes specified in such notice, together with interest thereon to the
prepayment date and together with the Yield-Maintenance Amount, if any, herein provided, shall become due and payable on such prepayment date. The Company shall, on or before the day on which it gives
written notice of any prepayment pursuant to paragraph 4A, give telephonic notice of the principal amount of the Notes to be prepaid and the prepayment date to each Holder which shall have 


9





 



designated
a recipient for such notices in the Purchaser Schedule attached hereto or by notice in writing to the Company. 


        4D.    Application of Prepayments.    Upon any partial prepayment of the Notes of any Series pursuant to
paragraph 4A, the amount so prepaid shall be allocated to all outstanding Notes of such Series (including, for the purpose of this paragraph 4D only, all Notes prepaid or otherwise
retired or purchased or otherwise acquired by the Company or any of its Subsidiaries or Affiliates other than by prepayment pursuant to paragraph 4A or 4B) in proportion to the respective
outstanding principal amounts thereof. Upon any partial prepayment of the Notes pursuant to 4B, the amount to be prepaid shall be applied pro rata to all outstanding Notes of all Series (including,
for the purpose of this paragraph 4D only, all Notes prepaid or otherwise retired or purchased or otherwise acquired by the Company or any of its Subsidiaries or Affiliates other than by
prepayment pursuant to paragraph 4A or 4B) according to the respective unpaid principal amounts thereof. 


        4E.    Retirement of Notes.    The Company shall not, and shall not permit any of its Subsidiaries or Affiliates to,
prepay or otherwise retire in whole or in part prior to their stated installment or final maturities (other than by prepayment pursuant to paragraphs 4A or 4B or upon acceleration of such final
maturity pursuant to paragraph 7A), or purchase or otherwise acquire, directly or indirectly, Notes held by any Holder. 


        5.    AFFIRMATIVE COVENANTS.    During the Issuance Period and so long thereafter as any Note or any amount under any
Loan Document shall remain unpaid, the Company agrees to comply with the following covenants. 



        5A.    Reporting Requirements.    The Company will furnish to each Holder: 



          (i)  Quarterly Financials. As soon as available and in any event within 45 days after the end of each of the first
three fiscal quarters of each fiscal year of the Company, an unaudited Consolidated balance sheet of the Company and its Subsidiaries as of the end of such quarter and unaudited Consolidated
statements of operations, changes in partners' capital and cash flows of the Company and its Subsidiaries for the period commencing at the end of the preceding fiscal year and ending with the end of
such quarter, setting forth in each case in comparative form the corresponding figures for the corresponding period of the preceding fiscal year, all in reasonable detail and duly certified (subject
to normal year-end audit adjustments and the absence of footnotes) by the chief financial officer or chief accounting officer of the General Partner as having been prepared in accordance
with GAAP, together with (i) a certificate of said officer stating that no Default or Event of Default has occurred and is continuing or, if a Default or Event of Default has occurred and is
continuing, a statement as to the nature thereof and the action that the Company proposes to take with respect thereto and (ii) a schedule in reasonable detail showing the computations used by
such officer in determining, as of the end of such fiscal quarter, compliance with the covenants contained in paragraphs 6A(1), 6A(2), 6A(3) and 6A(4); 



         (ii)  Audited Annual Financials. As soon as available and in any event within 120 days after the end of each fiscal
year of the Company, audited Consolidated and unaudited consolidating balance sheets of the Company and its Subsidiaries as of the end of such fiscal year and audited Consolidated and unaudited
consolidating statements of operations, changes in partners' capital and cash flows of the Company and its Subsidiaries for such fiscal year, in each case certified without qualification by KPMG LLP
or other independent public accountants of recognized national standing acceptable to the Required Holders, together with (a) a certificate of such accounting firm stating that, in the course
of the regular audit of the business of the Company and its Subsidiaries, which audit was conducted by such accounting firm in accordance with generally accepted auditing standards, such accounting
firm has obtained no knowledge that an Event of Default has occurred and is continuing with respect to paragraphs 6A(1), 6A(2), 6A(3) or 6A(4) if in the opinion of such accounting firm such an Event
of Default has occurred and is continuing, a 



10





 




statement
as to the nature thereof, (b) a schedule in form and substance reasonably satisfactory to the Required Holders of the computations used by such accounting firm in determining, as of
the end of such fiscal year, compliance with the covenants contained in paragraphs 6A(1), 6A(2), 6A(3) and 6A(4), (c) copies of any material accountant's letters received by management in
connection with such accounting firm's findings during its audit of the financial records of the Company during, or in respect of, such fiscal year; and (d) a schedule, in substantially the
form of Schedule 8T attached hereto, listing all its Subsidiaries as of the end of the fiscal year to which such financial statements relate; 


        (iii)  Defaults. Forthwith, but in any event within five Business Days, following the occurrence of any Default or Event of
Default, a certificate of a Responsible Officer setting forth the details thereof and the action that the Company is taking or proposes to take with respect thereto; 


        (iv)  Litigation. Promptly after the assertion or occurrence thereof or any Responsible Officer becoming aware of the
reasonable likelihood thereof, notice of any litigation, judicial reference proceeding, arbitration proceeding or regulatory proceeding affecting the Company or any Subsidiary or the property of the
Company or any Subsidiary, other than any such litigation or proceeding that, if adversely determined, could not reasonably be expected to have a Material Adverse Effect; 



         (v)  Environmental Proceedings. Promptly after the assertion or occurrence thereof or any Responsible Officer becoming aware
of the reasonable likelihood thereof, notice of any Environmental Proceeding against the Company or any Subsidiary, or of any noncompliance by the Company or any Subsidiary with any Environmental Law
or Environmental Permit, that could reasonably be expected (a) to have a Material Adverse Effect or (b) to cause any property owned or operated by the Company or any Subsidiary to be
subject to any material restriction on ownership, occupancy, use or transferability under any Environmental Law; 



        (vi)  Disputes. Forthwith upon any dispute or claim concerning Accounts and exceeding $1,000,000 in any instance, a
certificate of a Responsible Officer setting forth the details thereof; and 


       (vii)  Other Information. Promptly upon request, such additional information regarding the financial position or business
(including with respect to environmental matters) of the Company or any Subsidiary as any Holder may reasonably request from time to time. 




        5B.    Information Required by Rule 144A.    The Company will, upon the request of any Holder, provide such
Holder, and any qualified institutional buyer designated by such Holder, such financial and other information as such Holder may reasonably determine to be necessary in order to permit compliance with
the information requirements of Rule 144A under the Securities Act in connection with the resale of Notes, except at such times as the Company is subject to and in compliance with the reporting
requirements of section 13 or 15(d) of the Exchange Act. For the purpose of this paragraph 5B, the term "qualified institutional buyer"
shall have the meaning specified in Rule 144A under the Securities Act. 



        5C.    Visitation Rights.    At any reasonable time and from time to time, upon reasonable notice by the Holder
concerned, the Company will permit, and cause each Subsidiary to permit, any Holder, and any agents or representatives thereof, to examine and make copies of and abstracts from the records and books
of account of, and visit the properties of, the Company and its Subsidiaries and to discuss the affairs, finances and accounts of the Company and its Subsidiaries with any of their respective officers
or directors (or equivalent persons) or, provided the Company has been given reasonable opportunity to be present, with their independent certified
public accountants; provided, however, that, unless a Default or Event of Default has occurred and is continuing, the Holders' visitation rights shall
be limited to not more than four occasions in any calendar year. 


11





 



        5D.    Covenant to Secure Notes Equally.    The Company will, if it or any Subsidiary shall create or assume any Lien
upon any of its property or assets, whether now owned or hereafter acquired, other than Liens permitted by the provisions of paragraph 6C(1) (unless prior written consent to the creation or
assumption thereof shall have been obtained pursuant to paragraph 11C), make or cause to be made effective provision whereby the Notes will be secured by such Lien equally and ratably with any
and all other Debt thereby secured so long as any such other Debt shall be so secured. 


        5E.    Preservation of Legal Existence, Etc.    The Company will preserve and maintain, and cause each Subsidiary to
preserve and maintain, its legal existence, rights (charter and statutory) and franchises, except as otherwise permitted by paragraph 6C(4); provided, however, that neither the Company nor any
Subsidiary shall be required to preserve any such right or franchise if the general partner, board of directors or equivalent body of the Company or such Subsidiary determines that the preservation
thereof is no longer desirable in the conduct of the business of the Company or such Subsidiary, as applicable, and if the loss thereof is not disadvantageous in any material respect to the Holders. 


        5F.    Maintenance of Properties, Etc.    Except as otherwise permitted by paragraph 6C(5), the Company will
maintain and preserve, and cause each Subsidiary to maintain and preserve, all of its properties that are necessary for the conduct of its business in good working order and condition, ordinary wear
and tear excepted. 


        5G.    Compliance with Laws, Etc.    The Company will comply, and cause each Subsidiary to comply, with all
Governmental Rules the noncompliance with which could reasonably be expected to have a Material Adverse Effect. 


        5H.    Payment of Taxes, Etc.    The Company will pay and discharge, and cause each Subsidiary to pay and discharge,
before the same become delinquent, (a) all federal, state and other taxes, assessments and governmental charges or levies imposed upon or against it or its property and (b) all lawful
claims that, if unpaid, might by law become a Lien upon its property; provided, however, that neither the Company nor any Subsidiary shall be required to pay or discharge any such tax, assessment,
charge, levy or claim that is being contested in good faith and, in the case of any such tax, assessment, charge or levy, by proper proceedings and as to which, in all such cases, it is maintaining
appropriate reserves in accordance with GAAP. 


        5I.    Maintenance of Insurance.    The Company will maintain, and cause each Subsidiary to maintain, insurance with
responsible and reputable insurance companies or associations in such amounts and covering such risks (a) as is usually carried by companies engaged in similar businesses and owning similar
properties in the same general areas in which the Company or such Subsidiary, as applicable, operates and (b) as is reasonably acceptable to the Required Holders. 


        5J.    Keeping of Books.    The Company will keep, and cause each Subsidiary to keep, proper books of record and
account in which full and correct entries shall be made of all financial transactions and the Properties and business of the Company and each Subsidiary, in accordance with GAAP consistently applied. 


        5K.    Transactions with Affiliates.    The Company will conduct, and cause each Subsidiary to conduct, all
transactions otherwise permitted under the Loan Documents with any of its Affiliates (other than the Company or a Guarantor) on terms that are fair and reasonable and no less favorable to the Company
or such Subsidiary than it would obtain in a comparable arms' length transaction with a Person not an Affiliate. 


        5L.    Compliance with Environmental Laws.    The Company will (i) comply, and cause each Subsidiary and each
lessee or other Person operating or occupying any of its properties to comply, in all material respects with all applicable Environmental Laws and Environmental Permits, (ii) obtain and renew,
and cause each Subsidiary to obtain and renew, when needed all material Environmental 


12





 



Permits
necessary for its operations and properties, (iii) conduct, and cause each Subsidiary to conduct, any investigation, study, sampling and testing in accordance with the requirements of
all applicable Environmental Laws and (iv) undertake, and cause each Subsidiary to undertake, any cleanup, removal, remedial and other action necessary to remove and clean up all Hazardous
Materials from any of its properties, in accordance with the material requirements of all applicable Environmental Laws. 



        5M.    Environmental Remediation and Indemnification.    If at any time any Hazardous Material is discovered on, under
or about any Mortgaged Property or any other property owned or operated by the Company or any Subsidiary ("Other Property") and failure to remediate the
same would cause the Company or any Subsidiary to be in violation of any Environmental Law, the Company will inform the Holders of the same and of the Company's proposed remediation program, and the
Company or such Subsidiary will, at no cost and expense to the Collateral Agent or the Holders, and only to the extent of any legal requirement under applicable Environmental Laws for the Company or
such Subsidiary to do so, remediate or remove such Hazardous Materials from such Mortgaged Property or Other Property or the groundwater underlying such Mortgaged Property or Other Property in
accordance with (i) such remediation program as a prudent operator would undertake, (ii) the approval of the appropriate Governmental Persons, if any such approval is required under the
applicable Environmental Laws, and (iii) all applicable Environmental Laws. In addition to all other rights and remedies of the Collateral Agent and the Holders under the Loan Documents, if
such Hazardous Materials are not remediated or removed from the affected Mortgaged Property or Other Property or the groundwater underlying such Mortgaged Property or Other Property by the Company in
accordance with the preceding requirements, the Collateral Agent, at its sole discretion, may pay to have the same remediated or removed in accordance with the applicable remediation program, and the
Company will reimburse the Collateral Agent therefor within 10 Business Days of the Collateral Agent's written demand for payment. The Company and any Subsidiary shall have the right to contest any
notice or directive by any appropriate Governmental Person to remediate or remove Hazardous Materials from any Mortgaged Property or Other Property so long as the Company or such Subsidiary diligently
prosecutes such contest to completion and complies with any final order or determination. The Company shall be solely responsible for, and will indemnify and hold harmless the Collateral Agent and the
Holders and their respective directors, officers, employees, agents, successors and assigns from and against, any and all losses, damages, demands, claims, causes of action, judgments, actions,
assessments, penalties, costs, expenses and liabilities to the extent that they directly or indirectly arise out of or are attributable to the release of any Hazardous Materials at any Mortgaged
Property or Other Property, including the following: (a) all foreseeable and unforeseeable consequential damages; (b) the costs of any repair, cleanup or detoxification of any Mortgaged
Property or Other Property required by any applicable Environmental Laws, and the preparation and implementation of any closure, remedial or other plans required by any applicable Environmental Laws;
and (c) all reasonable costs and expenses incurred by the Collateral Agent or any Holder in connection with clauses (a) and (b) above, including reasonable attorneys' fees;  provided, however, that the Company shall not be liable for any of the foregoing if a final, nonappealable judgment by a court of competent jurisdiction
finds that such release of Hazardous Materials resulted from the gross negligence or willful misconduct of the Collateral Agent or a Holder. The indemnities provided in this paragraph 5M shall
survive the repayment or any other satisfaction of the Obligations of the Company under the Loan Documents. 


        5N.    Maintenance of Credit Facility.    The Company will at all times maintain a committed revolving credit facility
in an amount of not less than $20,000,000 with a remaining term of at least 12 months and maintain the Borrowing Base thereunder in an amount not less than $15,000,000. 



        5O.    Additional Covenants and Additional Defaults.    If the Company or any Subsidiary enters into, assumes or
otherwise becomes bound or obligated under any agreement (including amendments of the Bank Agreement) evidencing, securing, guaranteeing or otherwise relating to the Bank Obligations that contains one
or more Additional Covenants or Additional Defaults, the terms of this Agreement 


13





 



shall,
without any further action on the part of the Company or any of the holders of the Notes, be deemed to be amended automatically to include each Additional Covenant and each Additional Default
contained in such agreement. The Company further covenants to promptly execute and deliver at its expense (including the reasonable fees and expenses of counsel for the holders of the Notes) an
amendment to this Agreement in form and substance satisfactory to the Required Holder(s) evidencing the amendment of this Agreement to include such Additional Covenants and Additional Defaults,  provided
that the execution and delivery of such amendment shall not be a precondition to the effectiveness of such amendment as provided for in this
paragraph 5O, but shall merely be for the convenience of the parties hereto. 


        6.    NEGATIVE COVENANTS.    During the Issuance Period and so long thereafter as any Note or any amount under any
Loan Document shall remain unpaid, the Company agrees to comply with the following covenants. 


        6A(1).    Current Ratio.    The Company shall not, as of the end of any fiscal quarter commencing with the fiscal
quarter ended March 31, 2003, permit the ratio of (a) the consolidated current assets of the Company and its Subsidiaries to (b) the consolidated current liabilities of the
Company and its Subsidiaries (other than current maturities of long-term debt) to be less than 1.00 to 1.00; provided, however, that,
current assets shall include the unused portions of the commitments under the Bank Agreement so long as the Company is permitted to borrow under the Bank Agreement and current liabilities shall
exclude the current portion of the Debt of the Company under the Bank Agreement. 


        6A(2).    Interest Charge Coverage Ratio.    The Company shall not, as of the end of any fiscal quarter commencing
with the fiscal quarter ended March 31, 2003, permit the Interest Charge Coverage Ratio for the Company and its Subsidiaries on a Consolidated basis to be less than 3.50 to 1.00. 



        6A(3).    Leverage Ratio.    The Company shall not, as of the end of any fiscal quarter, permit the Leverage Ratio for
the Company and its Subsidiaries on a Consolidated basis to be greater than the following ratios for the following fiscal quarters: 



	Fiscal Quarters Ending
	 	Maximum Ratio

	March 31, 2003	 	4.00 to 1.00
	

June 30, 2003, September 30, 2003, December 31, 2003, and March 31, 2004	
 	

3.75 to 1.00
	

June 30, 2004 and thereafter	
 	

3.50 to 1.00






        6A(4).    Minimum Tangible Net Worth.    At all times the Company shall not permit its Tangible Net Worth to be less
than the sum of (a) $60,000,000 plus (b) 50% of any Equity Contribution Proceeds received after December 31, 2002. 


        6B.    Distributions, Etc.    The Company will not pay any management fee or similar fee of any sort to any Affiliate
thereof or to any other Person, declare or pay any dividends or distributions, purchase, redeem, retire, defease or otherwise acquire for value any of its equity interests or any warrants, rights or
options to acquire such equity interests, now or hereafter outstanding, return any capital to its equity holders as such, or make any distribution of Property, equity interests, warrants, rights,
options, obligations or securities to its equity-holders as such, or permit any Subsidiary to purchase, redeem, retire, defease or otherwise acquire for value any equity interests in the Company or
any warrants, rights or options to acquire such equity interests or to pay any such fee, except for the following: 



          (i)  provided
that no Default or Event of Default has occurred and is continuing or would be caused thereby, the Company may make cash distributions to the Partners during
any fiscal quarter 



14





 

in
amounts that do not exceed the Available Cash for the immediately preceding fiscal quarter; provided, further, that no more than $5,000,000 of such
cash distributions to the Partners in the aggregate during the term of this Agreement shall consist of proceeds from advances under the Bank Agreement; 


         (ii)  the
Company and its Subsidiaries may declare and pay dividends and other distributions payable solely in equity interests; and 



        (iii)  any
Subsidiary may pay dividends, or make other distributions, to the Company or any wholly owned Subsidiary. 




        6C(1).    Liens, Etc.    The Company will not create, incur, assume or suffer to exist, or permit any Subsidiary to
create, incur, assume or suffer to exist, any Lien, or enter into or permit to exist any agreement with any other Person not to create any Lien, on or with respect to any of its properties of any
character (including accounts receivable) whether now owned or hereafter acquired (a "negative pledge"), or sign or file, or permit any Subsidiary to
sign or file, under the Uniform Commercial Code of any jurisdiction, a financing statement that names the Company or any Subsidiary as debtor (except in connection with true leases), or sign, or
permit any Subsidiary to sign, any security agreement authorizing any secured party thereunder to file such a financing statement (except in connection with true leases), or assign, or permit any
Subsidiary to assign, any accounts (as defined in the New York Uniform Commercial Code), excluding, however, from the operation of the foregoing restrictions the following: 



          (i)  Liens
created by the Security Documents (provided, that the obligations of the Company to the Banks and Affiliates of
the Banks in respect of Interest Rate Contracts and Hydrocarbon Hedge Agreements may be secured by such Liens only so long as, with respect to each Bank or Affiliate thereof, the Bank remains a Bank
under the Bank Agreement); 


         (ii)  Permitted
Liens; 


        (iii)  Liens
securing obligations of such Person as lessee under Capital Leases permitted by paragraph 6C(2)(vii); 


        (iv)  purchase-money
Liens on property acquired or held by the Company or any Subsidiary in the ordinary course of business, to secure the purchase price of such property or
to secure Debt incurred solely for the purpose of financing the acquisition of such property to be subject to such Liens, or Liens existing on any such property at the time of acquisition thereof (or
at the time the Company acquires the Subsidiary owning such property), or renewals or refinancings of any of the foregoing Liens for the same or a lesser amount; provided,
however, that (a) no such Lien may extend to or cover any property other than the property being acquired and improvements and accessions thereto and proceeds thereof,
(b) no such renewal or refinancing may extend to or cover any property not previously subject to the Lien being renewed or refinanced and (c) the aggregate principal amount of Debt at
any time outstanding secured by such Liens may not exceed the amount permitted by paragraph 6C(2)(viii); 


         (v)  the
negative pledge contained in the Bank Agreement; 


        (vi)  customary
limitations and restrictions constituting negative pledges contained in, and limited to, specific leases, licenses, conveyances, partnership agreements and
co-owners' agreements, and similar conveyances and agreements, to the extent that any such Lien referred to in this clause does not materially impair the use of the Property covered by
such Lien for the purposes for which such Property is held or materially impair the value of such Property subject thereto; and 



15





 




       (vii)  Liens
incurred in the ordinary course of business of the Company or any Subsidiary with respect to obligations (other than Debt for borrowed money) that do not exceed
$500,000 in the aggregate at any one time outstanding. 




        6C(2).    Debt.    The Company will not create, incur, assume or suffer to exist, or permit any Subsidiary to create,
incur, assume or suffer to exist, any Debt other than the following: 



          (i)  Debt
under the Loan Documents; 


         (ii)  Debt
under the Bank Agreement Documents; 



        (iii)  Debt
existing on the date of this Agreement and described in Schedule 6C(2), including renewals and refinancings
of such Debt, so long as the principal amount thereof is not increased; 


        (iv)  Debt
under one or more Interest Rate Contracts or Hydrocarbon Hedge Agreements; 


         (v)  Debt
in respect of endorsement of negotiable instruments in the ordinary course of business; 


        (vi)  Debt
between the Company and any Subsidiary or between Subsidiaries, provided that (a) such Debt is noted on the
books and records of the Company and its Subsidiaries and (b) in the case of any Debt owed by the Company or any Subsidiary that is a Guarantor, such Debt is subordinated to the Obligations of
the Company or such Subsidiary under the Loan Documents on terms and conditions, and pursuant to documentation, in form and a substance satisfactory to the Required Holders in their sole discretion; 


       (vii)  Debt
in respect of Capital Leases not exceeding $5,000,000 in aggregate amount equivalent to principal at any time outstanding; 


      (viii)  Debt
secured by Liens permitted by paragraph 6C(1)(iv), not exceeding $3,000,000 in aggregate principal amount at any time outstanding; 



        (ix)  at
any time following the termination of the Revolver B Commitments under the Bank Agreement, termination of all Letters of Credit, repayment of all Revolver B Advances
under the Bank Agreement, reimbursement of all drawings under Letters of Credit and payment of all interest, fees and other amounts payable in respect of the Revolver B Advances under the Bank
Agreement, Debt of the Company or its Subsidiaries in respect of letter-of-credit facilities not exceeding $10,000,000 in the aggregate at any time outstanding; and 


         (x)  Debt
in addition to that described above, not exceeding $5,000,000 in aggregate principal amount at any time outstanding. 




        6C(3).    Investments in Other Persons.    The Company will not make, or permit any Subsidiary to make, any loan or
advance to any Person, or purchase or otherwise acquire, or permit any Subsidiary to purchase or otherwise acquire, any equity interests, warrants, rights, options, obligations or other securities of,
make any capital contribution to, or otherwise invest in, any Person (all of the foregoing collectively called "Investments");  provided, however, that
nothing in this section shall prevent the Company or any Subsidiary from doing any of the following: 



          (i)  acquiring
Permitted Investments; 


         (ii)  generating
and holding accounts receivable in the ordinary course of business; 


        (iii)  so
long as no Default has occurred and is continuing or would be caused thereby, making Investments in Persons that will not be Subsidiaries of the Company, for
consideration not exceeding $5,000,000 in the aggregate during the term of this Agreement; 



        (iv)  Investments
permitted by paragraph 6C(4)(i); 



16





 




         (v)  acquiring
Investments in connection with (a) the bankruptcy or reorganization of suppliers and customers or (b) the settlement of delinquent obligations
of, and other disputes with, customers and suppliers arising in the ordinary course of business; and 



        (vi)  so
long as no Default or Event of Default has occurred and is continuing or would be caused thereby, making loans and advances to officers or employees of the Company
or any Subsidiary, provided that the aggregate principal amount of such loans and advances, other than loans for the purpose of financing the purchase
of common units, subordinated units or other equity securities in the Limited Partner, shall not exceed $500,000 in aggregate principal amount at any time outstanding. 




        6C(4).    Mergers, Acquisitions, Etc.    The Company will not merge or consolidate with or into, or sell, lease,
transfer or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of its Property (whether now owned or hereafter acquired) to, or enter into any
Acquisition, or permit any Subsidiary to do any of the foregoing, except for the following: 



          (i)  so
long as no Default or Event of Default has occurred and is continuing or would be caused thereby, the Company or any Subsidiary may make any Acquisition;  provided, however, that any such Acquisition
shall be permitted only if, (a) before the effectiveness of such Acquisition and to the extent
required by the Required Holders, the Company delivers to the Holders (I) guaranties, mortgages, deeds of trust, security agreements, releases, UCC financing statements and UCC terminations,
duly executed by the parties thereto, in form and substance satisfactory to the Required Holders and accompanied by UCC searches, title investigations and legal opinions (except with respect to
priority) demonstrating that, upon the effectiveness of such Acquisition and the recording and filing of any necessary documentation, the Collateral Agent will have an Acceptable Security Interest on
the Property to be acquired, (II) such legal opinions in relation to the documents described in the foregoing subclause (I) as the Required Holders may reasonably request, and
(III) evidence of company authority to enter into, and environmental assessments with respect to, such Acquisition, (b) the Company or such Guarantor is the acquiring or surviving
entity, (c) no Default or Event of Default exists and the Acquisition would not reasonably be expected to cause a Default or Event of Default, (d) after giving
effect to such Acquisition on a pro forma basis, the Company would have been in compliance with all of the covenants contained in this Agreement, including, without limitation, paragraph 6A as
of the end of the most recent fiscal quarter, (e) the acquisition target is in the same or similar line of business as the Company and its Subsidiaries, (f) the terms of
paragraph 6G are satisfied, and (g) the aggregate amount of cash, Permitted Investments and the remaining unused portion of the Revolver A Commitment under the Bank Agreement is
sufficient to fund such Acquisition; 


         (ii)  so
long as no Default has occurred and is continuing or would be caused thereby, any Subsidiary may merge into or consolidate with any other Subsidiary or into the
Company; provided, however, that any such merger or consolidation shall be permitted only if, before the effectiveness of such merger or consolidation
and to the extent required by the Required Holders, the Company delivers to the Holders documents (or photocopies thereof) of the type described in the proviso to clause (i) above; and 


        (iii)  the
Company and its Subsidiaries may acquire Property in the ordinary course of business. 




        6C(5).    Sales, Etc. of Property.    The Company will not sell, lease, transfer or otherwise dispose of, or permit
any Subsidiary to sell, lease, transfer or otherwise dispose of, any of its Property, except for the following: 



          (i)  sales
of inventory in the ordinary course of business; 



17





 

         (ii)  sales,
leases, transfers and other dispositions in the ordinary course of business of worn-out or other Property that is no longer useful in the conduct of
the business of the Company or any Subsidiary; 


        (iii)  sales
or liquidations of Permitted Investments in the ordinary course of business; 


        (iv)  so
long as no Default has occurred and is continuing or would be caused thereby, sales and other transfers of Property from the Company to any Subsidiary or by any
Subsidiary to the Company or to any other Subsidiary, provided, however, that any such sale or other transfer of real property or equity interests shall
be permitted only if, before the effectiveness of such sale or other transfer and to the extent required by the Required Holders, the Company delivers to the Holders documents of the type described in
the proviso to paragraph 6C(4)(i); 


         (v)  sales
of Property resulting from the condemnation thereof; 


        (vi)  sales
or discounts of overdue Accounts in the ordinary course of business, in connection with the compromise or collection thereof; 


       (vii)  so
long as no Default has occurred and is continuing or would be caused thereby, sales, leases, transfers and other dispositions of Property in the ordinary course of
business for consideration not exceeding $3,000,000 in the aggregate in any fiscal year of the Company, provided that the net cash proceeds thereof are
used within 270 days of such sale to purchase Property of similar value, quality and business utility to the Property sold, leased, transferred or otherwise disposed of; and 


      (viii)  so
long as no Default or Event of Default has occurred and is continuing or would be caused thereby, sales of Property in the ordinary course of business for
consideration not exceeding $3,000,000 in the aggregate in any fiscal year of the Company. 




        6D.    Change in Nature of Business.    The Company will not make, or permit any Subsidiary to make, any material
change in the nature of their collective businesses as carried on as of the date hereof. 



        6E.    ERISA Plans.    The Company will not establish, maintain or contribute to, or permit any ERISA Affiliate to
establish, maintain or contribute to, any Plan or Welfare Plan, and the Company will not become obligated to, or permit any Subsidiary to become obligated to, contribute to any Multiemployer Plan. 


        6F.    Accounting Changes.    The Company will not make or permit, or permit any Subsidiary to make or permit, any
change in (i) any of its accounting policies affecting the presentation of financial statements or reporting practices, except as required or permitted by GAAP, or (ii) its fiscal year. 



        6G.    Creation of Subsidiaries.    The Company will not create, or permit any Subsidiary to create, any Subsidiary
unless (i) the creation of such Subsidiary is otherwise specifically permitted by the terms of this Agreement and (ii) within 15 days after the formation of such Subsidiary and to
the extent required by the Required Holders, such Subsidiary delivers to the Holders (a) guaranties, mortgages, deeds of trust, security agreements, releases, UCC financing statements and UCC
terminations, duly executed by the parties thereto, in form and substance satisfactory to the Required Holders and accompanied by UCC searches, title investigations and legal opinions (except with
respect to priority) demonstrating that, upon the recording and filing of any necessary documentation, the Collateral Agent will have an Acceptable Security Interest on the Property of such
Subsidiary, (b) such legal opinions in relation to the documents described in the foregoing subclause (a) as the Required Holders may reasonably request, and (c) evidence of
company authority on the part of the Company or the Subsidiary creating the new Subsidiary, and on the part of the new Subsidiary created, to enter into and perform its obligations under such
documents. 


18





 



        6H.    Commodity Contracts.    The Company will not, and will not permit any Subsidiary to, enter into, assume or
otherwise acquire an interest in (i) any contract or other obligation to purchase or sell any natural gas or other commodities or goods, or any hedged or unhedged commodity futures contract,
option or other derivative contract, that in any case would result in the Company or such Subsidiary having an "open" or "uncovered" position in natural gas or other commodities or goods, or in any
derivative of any thereof, exceeding $500,000 in the aggregate at the end of any day or (ii) any other futures or derivatives contract or obligation for speculative purposes. 



        6I.    Amendment of Company Partnership Agreement.    The Company will not amend, modify or supplement (i) the
definition of "Available Cash" without the prior written consent of the Required Holders or (ii) any other provision of the Company Partnership Agreement if such amendment, modification or
supplement would be materially adverse to the interests of the Holders without the prior written consent of the Required Holders. 


        6J.    Bank Agreement.    The Company will not amend, supplement or otherwise modify any term of the Bank Agreement
without the prior written consent of the Required Holders, which consent will not be unreasonably withheld, which amendment, supplement or modification would have the effect of (i) increasing
the aggregate commitments under the Bank Agreement above $100,000,000, (ii) increasing the rate of interest except with respect to imposing the default rate as provided for in the Bank
Agreement on the date hereof or any fees charged on the Bank Obligations or (iii) being materially adverse to the interests of the Holders. 


        7.    EVENTS OF DEFAULT.    



        7A.    Acceleration.    If any of the following events shall occur and be continuing for any reason whatsoever (and
whether such occurrence shall be voluntary or involuntary or come about or be effected by operation of law or otherwise): 



          (i)  the
Company defaults in the payment of any principal of, or Yield-Maintenance Amount payable with respect to, any Note when the same shall become due, either by the
terms thereof or otherwise as herein provided; or 


         (ii)  the
Company defaults in the payment of any interest on any Note for more than three Business Days after the date due; or 


        (iii)  the
Company, any Guarantor or any Material Subsidiary defaults (whether as primary obligor or as guarantor or other surety) in any payment of principal of or interest
on any other obligation for money borrowed (or any Capitalized Lease Obligation, any obligation under a conditional sale or other title retention agreement, any obligation issued or assumed as full or
partial payment for property whether or not secured by a purchase money mortgage or any obligation under notes payable or drafts accepted representing extensions of credit) beyond any period of grace
provided with respect thereto, or the Company, any Guarantor or any Material Subsidiary fails to perform or observe any other agreement, term or condition contained in any agreement under which any
such obligation is created (or if any other event thereunder or under any such agreement shall occur and be continuing) and the effect of such failure or other event is to cause, or to permit the
holder or holders of such obligation (or a trustee on behalf of such holder or holders) to cause, such obligation to become due (or to be repurchased by the Company, any Guarantor or any Material
Subsidiary) prior to any stated maturity, provided that the aggregate amount of all obligations as to which such a payment default shall occur and be
continuing or such a failure or other event causing or permitting acceleration (or resale to the Company, any Guarantor or any Material Subsidiary) shall occur and be continuing exceeds $3,000,000; or 


        (iv)  any
representation or warranty made by the Company, the General Partner, any Guarantor or any Subsidiary in any Loan Document or by the Company, the General Partner,
any Guarantor, or any Subsidiary or any of their officers in any writing furnished in connection with or 



19





 




pursuant
to any Loan Document shall be false in any material respect on the date as of which made; or 



         (v)  the
Company fails to perform or observe any term, covenant or agreement contained in paragraph 6 or paragraph 5A(iii), 5E, 5I or 5N; or 


        (vi)  the
Company, any Guarantor or any Subsidiary fails to perform or observe any other term, covenant, agreement or condition contained in any Loan Document on its part to
be performed or observed and such failure shall not be remedied within 30 days after written notice thereof has been given to the Company, such Guarantor or such Subsidiary, as applicable, by
the Required Holder(s); or 


       (vii)  the
Company, any Guarantor or any Subsidiary makes an assignment for the benefit of creditors or is generally not paying its debts as such debts become due; or 


      (viii)  any
decree or order for relief in respect of the Company, any Guarantor or any Subsidiary is entered under any bankruptcy, reorganization, compromise, arrangement,
insolvency, readjustment of debt, dissolution or liquidation or similar law, whether now or hereafter in effect (the "Bankruptcy Law"), of any
jurisdiction; or 


        (ix)  the
Company, any Guarantor or any Subsidiary petitions or applies to any tribunal for, or consents to, the appointment of, or taking possession by, a trustee, receiver,
custodian, liquidator or similar official of the Company, any Guarantor or any Subsidiary, or of any substantial part of the assets of the Company, any Guarantor or any Subsidiary, or commences a
voluntary case under the Bankruptcy Law of the United States or any proceedings (other than proceedings for the voluntary liquidation and dissolution of a Subsidiary) relating to the Company, any
Guarantor or any Subsidiary under the Bankruptcy Law of any other jurisdiction; or 


         (x)  any
such petition or application is filed, or any such proceedings are commenced, against the Company, any Guarantor or any Subsidiary and the Company, such Guarantor or
such Subsidiary by any act indicates its approval thereof, consent thereto or acquiescence therein, or an order, judgment or decree is entered appointing any such trustee, receiver, custodian,
liquidator or similar official, or approving the petition in any such proceedings, and such order, judgment or decree remains unstayed and in effect for more than 60 days; or 


        (xi)  any
order, judgment or decree is entered in any proceedings against the Company decreeing the dissolution of the Company and such order, judgment or decree remains
unstayed and in effect for more than 60 days; or 


       (xii)  any
order, judgment or decree is entered in any proceedings against the Company, any Guarantor or any Subsidiary decreeing a split-up of the Company, any
Guarantor or any Subsidiary which requires the divestiture of assets representing a substantial part, or the divestiture of the stock of a Subsidiary whose assets represent a substantial part, of the
consolidated assets of the Company and its Subsidiaries (determined in accordance with GAAP) or which requires the divestiture of assets, or stock of a Subsidiary, which shall have contributed a
substantial part of the consolidated net income of the Company and its Subsidiaries (determined in accordance with GAAP) for any of the three fiscal years then most recently ended, and such order,
judgment or decree remains unstayed and in effect for more than 60 days; or 


      (xiii)  (a)
any judgment or order for the payment of money in excess of $3,000,000 is rendered against the Company, any Guarantor or any Material Subsidiary by a court of
competent jurisdiction, and either (A) enforcement proceedings are commenced by any creditor upon such judgment or order or (B) there is any period of 30 consecutive days during which a
stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, is not in effect, unless such judgment or order has been vacated, satisfied, dismissed, or bonded pending 



20





 




appeal
or, in the case of a judgment or order the entire amount of which is covered by insurance (subject to applicable deductibles), is the subject of a binding agreement with the plaintiff and the
insurer covering payment therefor; or 



         (b)  any
non-monetary judgment or order is rendered against the Company, the Guarantor or any Material Subsidiary that could reasonably be expected to have a
Material Adverse Effect, and there is any period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, is not in effect; or 




      (xiv)  any
material provision of any Loan Document for any reason ceases to be valid and binding on, or enforceable against, the Company, any Guarantor or any Subsidiary, as
applicable (except to the extent such provision is released in writing by the Required Holders), or the Company, any Guarantor or any Subsidiary, as applicable, so states in writing; or 


       (xv)  any
Security Document for any reason (except pursuant to the terms thereof) ceases to create an Acceptable Security Interest on any material portion of the Collateral
purported to be covered by such Security Document, and the same, if curable, is not cured within 15 days after the Collateral Agent or the Required Holders notify the Company or the affected
Subsidiary, as applicable, of the same; or 


      (xvi)  a
Change of Control shall occur; 




then
(a) if such event is an Event of Default specified in clause (i) or (ii) of this paragraph 7A, any Holder may at its option,
by notice in writing to the Company, declare all of the Notes held by such Holder to be, and all of the Notes held by such Holder shall thereupon be and become, immediately due and payable at par
together with interest accrued thereon, without presentment, demand, protest or notice of any kind (including, without limitation, notice of intent to accelerate), all of which are hereby waived by
the Company, (b) if such event is an Event of Default specified in clause (viii), (ix) or (x) of this paragraph 7A with
respect to the Company, all of the Notes at the time outstanding shall automatically become immediately due and payable at par together with interest accrued thereon and together with the
Yield-Maintenance Amount, if any, with respect to each Note, without presentment, demand, protest or notice of any kind (including, without limitation, notice of intent to accelerate and notice of
acceleration of maturity), all of which are hereby waived by the Company, and (c) if such
event is any Event of Default other than as specified in preceding clause (b), the Required Holder(s) of the Notes may at its or their option by notice in writing to the Company, declare all of
the Notes to be, and all of the Notes shall thereupon be and become, immediately due and payable together with interest accrued thereon and together with the Yield-Maintenance Amount, if any, with
respect to each Note, without presentment, demand, protest or notice of any kind (including, without limitation, notice of intent to accelerate), all of which are hereby waived by the Company. 


        The
Company acknowledges, and the parties hereto agree, that each Holder has the right to maintain its investment in the Notes free from repayment by the Company (except as herein
specifically provided for) and that the provision for payment of the Yield-Maintenance Amount by the Company in the event that the Notes are prepaid or are accelerated as a result of an Event of
Default, is intended to provide compensation for the deprivation of such right under such circumstances. 


        7B.    Rescission of Acceleration.    At any time after any or all of the Notes shall have been declared immediately
due and payable pursuant to paragraph 7A, the Required Holder(s) may, by notice in writing to the Company, rescind and annul such declaration and its consequences if (i) the Company
shall have paid all overdue interest on the Notes, the principal of and Yield-Maintenance Amount, if any, payable with respect to any Notes which have become due otherwise than by reason of such
declaration, and interest on such overdue interest and overdue principal and Yield Maintenance Amount at the rate specified in the Notes, (ii) the Company shall not have paid any amounts which 


21





 



have
become due solely by reason of such declaration, (iii) all Events of Default and Defaults, other than non-payment of amounts which have become due solely by reason of such
declaration, shall have been cured or waived pursuant to paragraph 11C, and (iv) no judgment or decree shall have been entered for the payment of any amounts due pursuant to the Notes or
this Agreement. No such rescission or annulment shall extend to or affect any subsequent Event of Default or Default or impair any right arising therefrom. 


        7C.    Notice of Acceleration or Rescission.    Whenever any Note shall be declared immediately due and payable
pursuant to paragraph 7A or any such declaration shall be rescinded and annulled pursuant to paragraph 7B, the Company shall forthwith give written notice thereof to each Holder at the
time outstanding. 


        7D.    Other Remedies.    If any Event of Default or Default shall occur and be continuing, the Holder of any Note may
proceed to protect and enforce its rights under this Agreement, such Note and the other Loan Documents by exercising such remedies as are available to such Holder in respect thereof under applicable
law, either by suit in equity or by action at law, or both, whether for specific performance of any covenant or other agreement contained in this Agreement or in aid of the exercise of any power
granted in this Agreement. No remedy conferred in this Agreement upon any Holder is intended to be exclusive of any other remedy, and each and every such remedy shall be cumulative and shall be in
addition to every other remedy conferred herein or now or hereafter existing at law or in equity or by statute or otherwise. All amounts recovered by any Holder as the result of the exercise of such
remedies or from distributions or other payments under the Intercreditor Agreement (after application of amounts thereunder pursuant to the terms of Section 4.3 thereof) shall be applied in
accordance with the following priorities (with all partial payments of amounts owing within each category being allocated ratably in accordance with the amounts so owing to each Holder):  first, to the
payment of all fees, indemnities, costs and expenses then owing to the Holders under the Loan Documents;  second, after payment in full of the amounts set forth in clause first above, to the payment of the
Yield-Maintenance Amount, if any, then owing; third, after payment in full of the amounts set forth in clause  second above, to the payment of all accrued
and unpaid interest then owing to the Holders under the Loan Documents; and  fourth, after payment in full of the amounts set forth in clause third above,
to the payment of
principal then outstanding under the Notes 


        8.    REPRESENTATIONS, COVENANTS AND WARRANTIES.    The Company represents, covenants and warrants as follows (all
references to "Subsidiary" and "Subsidiaries" in this paragraph 8 shall be deemed omitted if the
Company has no Subsidiaries at the time the representations herein are made or repeated): 


        8A.    Organization.    The Company (a) is a limited partnership duly formed, validly existing and in good
standing under the laws of Delaware, (b) is duly qualified or licensed as a foreign limited partnership and is in good standing in Texas, New Mexico, Oklahoma and each other jurisdiction in
which it owns or leases property or in which the conduct of its business requires it to so qualify or be licensed, except to the extent that the failure to so qualify or be licensed could not
reasonably be expected to have a Material Adverse Effect, and (c) has all requisite limited partnership power and authority to own or lease and operate its properties and to carry on its
business as now conducted and as proposed to be conducted. Each Subsidiary is duly organized and validly existing in good standing under the laws of the jurisdiction in which it is organized, and each
Subsidiary has the corporate, partnership, limited liability company or similar power to own its respective property and to carry on its respective business as now being conducted. The execution,
delivery and performance by the Company of this Agreement, the Notes and the other Loan Documents to which it is a party are within the Company's powers and have been duly authorized by all necessary
action. The execution, delivery and performance by each Guarantor of each Loan Document to which it is a party are within such Guarantor's powers and have been duly authorized by all necessary action. 


22





 



        8B.    Financial Statements.    The Company has furnished Prudential and each Purchaser of the Series A Notes
and any Accepted Notes with the following financial statements, identified by a principal financial officer of the General Partner: (i) consolidating and Consolidated balance sheets of the
Company and its Subsidiaries as at December 31, 2002 and as at December 31 in each of the three fiscal years of the Company most recently completed after December 31, 2002, if
any, prior to the date as of which this representation is made or repeated to such Purchaser (other than fiscal years completed within 120 days prior to such date for which audited financial
statements have not been released) and consolidating and Consolidated statements of operations and cash flows and a Consolidated statement of changes in partners' capital of the Company and its
Subsidiaries for each such year, all such Consolidated statements having been reported on by KPMG LLP; and (ii) a Consolidated balance sheet of the Company and its Subsidiaries as at the end of
the quarterly period (if any) most recently
completed prior to such date and after the end of such fiscal year (other than quarterly periods completed within 45 days prior to such date for which financial statements have not been
released) and the comparable quarterly period in the preceding fiscal year and Consolidated statements of operations, cash flows and changes in partners' capital for the periods from the beginning of
the fiscal years in which such quarterly periods are included to the end of such quarterly periods, prepared by the Company. Such financial statements (including any related schedules and/or notes)
are true and correct in all material respects (subject, as to interim statements, to changes resulting from audits and year-end adjustments), have been prepared in accordance with GAAP
consistently followed throughout the periods involved and show all liabilities, direct and contingent, of the Company and its Subsidiaries required to be shown in accordance with such principles. The
balance sheets fairly present the condition of the Company and its Subsidiaries as at the dates thereof, and the statements of operations, cash flows and changes in partners' capital fairly present
the results of the operations of the Company and its Subsidiaries and their cash flows for the periods indicated. There has been no material adverse change in the business, property or assets,
condition (financial or otherwise) operations or prospects of the Company and its Subsidiaries taken as a whole since the end of the most recent fiscal year for which such audited financial statements
have been furnished. 


        8C.    Actions Pending.    There is no action, suit, investigation or proceeding pending or, to the knowledge of the
Company, threatened against the Company or any of its Subsidiaries, or any properties or rights of the Company or any of its Subsidiaries, by or before any court, arbitrator or administrative or
governmental body which might result in any material adverse change in the business, property or assets, condition (financial or otherwise), operations or prospects of the Company and its Subsidiaries
taken as a whole. There is no action, suit, investigation or proceeding pending or, to the knowledge of the Company, threatened against the Company or any of its Subsidiaries which purports to affect
the validity or enforceability of this Agreement, any Note or any other Loan Document. 


        8D.    Outstanding Debt.    Neither the Company nor any of its Subsidiaries has outstanding any Debt except as
permitted by paragraphs 6A(3) and 6C(2). There exists no default under the provisions of any instrument evidencing such Debt or of any agreement relating thereto. 


        8E.    Title to Properties.    The Company has and each of its Subsidiaries has good and indefeasible title to its
respective real properties (other than easements or properties which it leases) and good title to all of its respective personal properties and assets, including the properties and assets reflected in
the most recent audited balance sheet referred to in paragraph 8B (other than properties and assets disposed of in the ordinary course of business), subject to no Lien of any kind except Liens
permitted by paragraph 6C(1). Each of the Company and its Subsidiaries has good and defensible title to all easements and rights of way purported to be owned by it. All leases necessary in any
material respect for the conduct of the respective businesses of the Company and its Subsidiaries are valid and subsisting and are in full force and effect. The Company and each Subsidiary enjoys
peaceful and undisturbed possession of all easements and rights of way necessary in any material respect for the operation of its Properties. None of the Assigned Agreements, and none of the other
documents 


23





 



creating
or affecting any such leasehold, easement or right of way, contains any provisions that could reasonably be expected to have a Material Adverse Effect or to materially impair the operation of
the business of the Company and its Subsidiaries. 


        8F.    Taxes.    The Company and each of its Subsidiaries has filed, or there has been filed on its behalf, or an
extension has been obtained for the filing of, all federal, state and other material tax returns required to be filed before the making of this representation and warranty, and each has paid all taxes
shown thereon to be due, including interest, additions to taxes and penalties, or has provided adequate reserves in accordance with GAAP for the payment thereof. 



        8G.    Conflicting Agreements and Other Matters.    Neither the Company nor any of its Subsidiaries is a party to any
contract or agreement or subject to any charter or other restriction which materially and adversely affects its business, property or assets, condition (financial or otherwise) or operations. Neither
the execution nor delivery of this Agreement, the Notes or any other Loan Document, nor the offering, issuance and sale of the Notes, nor fulfillment of nor compliance with the terms and provisions
hereof and of the other Loan Documents will conflict with, or result in a breach of the terms, conditions or provisions of, or constitute a default under, or result in any violation of, or result in
the creation of any Lien upon any of the properties or assets of the Company or any of its Subsidiaries other than the Liens created in favor of the Collateral Agent for the ratable benefit of the
Holders and the Banks pursuant to, the Company Partnership Agreement or the charter or by-laws or other organizational documents of any of its Subsidiaries, any award of any arbitrator or
any agreement (including any agreement with partners or members), instrument, order, judgment, decree, statute, law, rule or regulation to which the Company or any of its Subsidiaries is subject.
Neither the Company nor any of its Subsidiaries is a party to, or otherwise subject to any provision contained in, any instrument evidencing Debt of the Company or such Subsidiary, any agreement
relating thereto or any other contract or agreement (including its limited partnership agreement or limited liability company agreement) which limits the amount of, or otherwise imposes restrictions
on the incurring of, Debt of the Company of the type to be evidenced by the Notes, or Debt of the Subsidiaries that are Guarantors of the type to be evidenced by the Guaranties, except as set forth in
the agreements listed in Schedule 8G attached hereto. 


        8H.    Offering of Notes.    Neither the Company nor any agent acting on its behalf has, directly or indirectly,
offered the Notes or any similar security of the Company for sale to, or solicited any offers to buy the Notes or any similar security of the Company from, or otherwise approached or negotiated with
respect thereto with, any Person other than institutional investors, and neither the Company nor any agent acting on its behalf has taken or will take any action which would subject the issuance or
sale of the Notes to the provisions of Section 5 of the Securities Act or to the provisions of any securities or Blue Sky law of any applicable jurisdiction. 


        8I.    Use of Proceeds.    The proceeds of the Series A Notes will be used to repay Debt under the Bank
Agreement. None of the proceeds of the sale of any Notes will be used, directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of purchasing or carrying any
"margin stock" as defined in Regulation U (12 CFR Part 221) of the Board of Governors of the Federal Reserve System ("margin stock") or
for the purpose of maintaining, reducing or retiring any Indebtedness which was originally incurred to purchase or carry any stock that is then currently a margin stock or for any other purpose which
might constitute the purchase of such Notes a "purpose credit" within the meaning of such Regulation U, unless the Company shall have delivered to the Purchaser which is purchasing such Notes,
on the Closing Day for such Notes, an opinion of counsel satisfactory to such Purchaser stating that the purchase of such Notes does not constitute a violation of such Regulation U. Neither the
Company nor any agent acting on its behalf has taken or will take any action which might cause this Agreement or the Notes to violate Regulation T, Regulation U or any other regulation
of the Board of Governors of the Federal Reserve System or to violate the Exchange Act, in each case as in effect now or as the same may hereafter be in effect. 


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        8J.    ERISA.    No accumulated funding deficiency (as defined in section 302 of ERISA and section 412
of the Code), whether or not waived, exists with respect to any Plan (other than a Multiemployer Plan). No liability to the PBGC has been or is expected by the Company or any ERISA Affiliate to be
incurred with respect to any Plan (other than a Multiemployer Plan) by the Company, any Subsidiary or any ERISA Affiliate which is or would be materially adverse to the business, property or assets,
condition (financial or otherwise) or operations of the Company and its Subsidiaries taken as a whole. Neither the Company, any Subsidiary nor any ERISA Affiliate has incurred or presently expects to
incur any withdrawal liability under Title IV of ERISA with respect to any Multiemployer Plan which is or would be materially adverse to the business, property or assets, condition (financial or
otherwise) or operations of the Company and its Subsidiaries taken as a whole. The execution and delivery of this Agreement and the issuance and sale of the Notes will be exempt from or will not
involve any transaction which is subject to the prohibitions of section 406 of ERISA and will not involve any transaction in connection with which a penalty could be imposed under
section 502(i) of ERISA or a tax could be imposed pursuant to section 4975 of the Code. The representation by the Company in the next preceding sentence is made in reliance upon
and subject to the accuracy of the representation of each Purchaser in paragraph 9B as to the source of funds to be used by it to purchase any Notes. 


        8K.    Governmental Consent.    Neither the nature of the Company or of any Subsidiary, nor any of their respective
businesses or properties, nor any relationship between the Company or any Subsidiary and any other Person, nor any circumstance in connection with the offering, issuance, sale or delivery of the
Notes is such as to require any authorization, consent, approval, exemption or any action by or notice to or filing with any court or administrative or governmental or regulatory body (other than
routine filings after the Closing Day for any Notes with the Securities and Exchange Commission and/or state Blue Sky authorities) in connection with the execution and delivery of this Agreement and
the other Loan Documents, the offering, issuance, sale or delivery of the Notes or fulfillment of or compliance with the terms and provisions hereof or of the other Loan Documents. 


        8L.    Compliance with Laws.    The Company and its Subsidiaries and all of their respective properties and facilities
have complied at all times and in all respects with all federal, state, local and regional statutes, laws, ordinances and judicial or administrative orders, judgments, rulings and regulations,
including those relating to protection of the environment except, in any such case, where failure to comply would not result in a Material Adverse Effect. 


        8M.    Environmental Compliance.    


        (a)   The
operations and properties of the Company and of each Subsidiary comply in all material respects with all applicable Environmental Laws and Environmental Permits. All
past noncompliance by the Company or any Subsidiary with such Environmental Laws and Environmental Permits has been resolved without ongoing material obligations or costs. To the best of the Company's
knowledge, no circumstances exist that could reasonably be expected to (i) form the basis of an Environmental Proceeding against the Company or any Subsidiary, or any property thereof, that
could reasonably be expected to have a Material Adverse Effect or (ii) cause any such property to be subject to any material restriction on ownership, occupancy, use or transferability under
any Environmental Law. 


        (b)   None
of the properties currently or, to the best of the Company's knowledge, formerly owned or operated by the Company or any Subsidiary is listed or, to the best of the
Company's knowledge, proposed for listing on the National Priorities List under CERCLA, on CERCLIS or on any analogous foreign, state or local list or, to the best of the Company's knowledge, is
adjacent to any such property. There are not now, and to the best of the Company's knowledge never have been, any underground or aboveground storage tanks, or any surface impoundments, septic tanks,
pits, sumps or lagoons, in which any Hazardous Material is being or has been treated, stored or disposed of on any property currently or, to the best of the Company's knowledge, formerly owned or
operated by the Company or any Subsidiary, in each case in any manner not in compliance in all material respects with all applicable 


25





 



Environmental
Laws. There is no asbestos or asbestos-containing material on any property currently or, to the Company's knowledge, formerly owned or operated by the Company or any Subsidiary, except
in compliance in all material respects with all applicable Environmental Laws. No Hazardous Material has been released, discharged or disposed of on any property owned or operated by the Company or
any Subsidiary, except (i) in compliance in all material respects with all applicable Environmental Laws and (ii) as has been remediated in compliance in all material respects with all
applicable Environmental Laws. 


        (c)   Neither
the Company nor any Subsidiary is engaged in or has completed, either individually or together with any other potentially responsible party, any investigation,
assessment or remedial or response action relating to any actual or threatened release, discharge or disposal of any Hazardous Material at any site, location or operation that the Company or any
Subsidiary never owned, leased or operated, either voluntarily or pursuant to the order of any Governmental Person or the requirements of any Environmental Law. All Hazardous Materials generated,
used, treated, handled or stored at, or transported to or from, any property owned or operated by the Company or any Subsidiary have been disposed of in a manner reasonably expected not to result in
material liability to the Company or any Subsidiary. 


        8N.    Utility Company Status.    Neither the Company nor any Subsidiary is a (i) "holding company," a
"subsidiary company" of a "holding company" or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company," as such terms are defined in the Public Utility Holding
Company Act of 1935, as amended or (ii) public utility within the meaning of the Federal Power Act, as amended. 


        8O.    Investment Company Status.    Neither the Company nor any Subsidiary is an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended, or an "investment adviser" within the meaning of the Investment Advisers Act of 1940, as
amended. 


        8P.    Disclosure.    Neither this Agreement nor any other document, certificate or statement furnished to any
Purchaser by or on behalf of the Company in connection herewith contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained
herein and therein, taken as a whole, not misleading. There is no fact peculiar to the Company or any of its Subsidiaries which materially adversely affects or in the future may reasonably be expected
(so far as the Company can now foresee) to materially adversely affect the business, property or assets, condition (financial or otherwise) or operations of the Company or any of its Subsidiaries and
which has not been set forth in this Agreement. 


        8Q.    Rule 144A.    The Notes are not of the same class as securities of the Company, if any, listed on a
national securities exchange, registered under Section 6 of the Exchange Act or quoted in a U.S. automated inter-dealer quotation system. 


        8R.    Delivery of Bank Agreement.    The Company has delivered to each Purchaser a true, correct and complete copy of
the Bank Agreement, including all amendments and waivers of any provision thereof. 



        8S.    Hostile Tender Offers.    None of the proceeds of the sale of any Notes will be used to finance a Hostile
Tender Offer. 


        8T.    Subsidiaries.    As of the date hereof, the Company has no Subsidiaries other than those described in  Schedule 8T.



        8U.    Ownership.    



        (a)   The
General Partner is the sole general partner of the Company, and the Limited Partner is the sole limited partner of the Company. As of the date hereof, (i) the
General Partner is the legal and 


26





 



beneficial
owner of 0.001% of the partnership interests in the Company, and (ii) the Limited Partner is the legal and beneficial owner of 99.999% of the partnership interests in the Company and
100% of the membership interests of the General Partner. No part of the partnership interests in the Company or the membership interests of the General Partner is subject to any Lien, other than
preferential rights of the Partners under the Company Partnership Agreement and Liens in favor of the Collateral Agent. 


        (b)   As
of the date hereof, the equity interests in the Subsidiaries are legally and beneficially owned by the Persons, and by such Persons in the percentages, specified in  Schedule 8T. No part of such
equity interests is subject to any Lien, other than in favor of the Collateral Agent. 



        8V.    Natural Gas Act.    Neither the Company nor any Subsidiary is subject to the jurisdiction of the Federal Energy
Regulatory Commission under the Natural Gas Act of 1938, as amended. 


        9.    REPRESENTATIONS OF THE PURCHASERS.    Each Purchaser represents as follows: 


        9A.    Nature of Purchase.    Such Purchaser is not acquiring the Notes purchased by it hereunder with a view to or
for sale in connection with any distribution thereof within the meaning of the Securities Act, provided that the disposition of such Purchaser's
property shall at all times be and remain within its control. Such Purchaser is an "accredited investor" within the meaning of Regulation D under the Securities Act. Such Purchaser understands
that the Notes have not been registered under the Securities Act and may be resold only if registered pursuant to the provisions of the Securities Act or if an exemption from registration is
available, except under circumstances where neither such registration nor such exemption is required by law, and that the Company is not required to register the Notes. 



        9B.    Source of Funds.    At least one of the following statements is an accurate representation as to each source of
funds (the "Source") to be used by such Purchaser to pay the purchase price of the Notes to be purchased by such Purchaser hereunder: 



          (i)  the
Source is an "insurance company general account" (as the term is defined in the United States Department of Labor's Prohibited Transaction Exemption
("PTE") 95-60) in respect of which the reserves and liabilities (as defined by the annual statement for life insurance companies approved by
the National Association of Insurance Commissioners (the "NAIC Annual Statement")) for the general account contract(s) held by or on behalf of any
employee benefit plan together with the amount of the reserves and liabilities for the general account contract(s) held by or on behalf of any other employee benefit plans maintained by the same
employer (or affiliate thereof as defined in PTE 95-60) or by the same employee organization in the general account do not exceed 10% of the total reserves and liabilities of the general
account (exclusive of separate account liabilities) plus surplus as set forth in the NAIC Annual Statement filed with such Purchaser's state of domicile; or 


         (ii)  the
Source is a separate account that is maintained solely in connection with such Purchaser's fixed contractual obligations under which the amounts payable, or
credited, to any employee benefit plan (or its related trust) that has any interest in such separate account (or to any participant or beneficiary of such plan (including any annuitant)) are not
affected in any manner by the investment performance of the separate account; or 


        (iii)  the
Source is either (a) an insurance company pooled separate account, within the meaning of PTE 90-1 or (b) a bank collective investment
fund, within the meaning of the PTE 91-38 and, except as disclosed by such Purchaser to the Company in writing pursuant to this clause (iii), no employee benefit plan or group of
plans maintained by the same employer or employee organization beneficially owns more than 10% of all assets allocated to such pooled separate account or collective investment fund; or 



27





 




        (iv)  the
Source constitutes assets of an "investment fund" (within the meaning of Part V of PTE 84-14 (the "QPAM
Exemption")) managed by a "qualified professional asset manager" or "QPAM" (within the meaning of Part V of the QPAM Exemption), no employee benefit plan's assets that
are included in such investment fund, when combined with the assets of all other employee benefit plans established or maintained by the same employer or by an affiliate (within the meaning of
Section V(c)(1) of the QPAM Exemption) of such employer or by the same employee organization and managed by such QPAM, exceed 20% of the total client assets managed by such QPAM, the conditions
of Part I(c) and (g) of the QPAM Exemption are satisfied, neither the QPAM nor a person controlling or controlled by the QPAM (applying the definition of "control" in Section V(e)
of the QPAM Exemption) owns a 5% or more interest in the Company and (a) the identity of such QPAM and (b) the names of all employee benefit plans whose assets are included in such
investment fund have been disclosed to the Company in writing pursuant to this clause (iv); or 


         (v)  the
Source constitutes assets of a "plan(s)" (within the meaning of Section IV of PTE 96-23 (the "INHAM
Exemption")) managed by an "in-house asset
manager" or "INHAM" (within the meaning of Part IV of the INHAM exemption), the conditions of Part I(a), (g) and (h) of the INHAM Exemption are satisfied, neither the INHAM
nor a person controlling or controlled by the INHAM (applying the definition of "control" in Section IV(h) of the INHAM Exemption) owns a 5% or more interest in the Company and (a) the
identity of such INHAM and (b) the name(s) of the employee benefit plan(s) whose assets constitute the Source have been disclosed to the Company in writing pursuant to this clause (v);
or 


        (vi)  the
Source is a governmental plan; or 


       (vii)  the
Source is one or more employee benefit plans, or a separate account or trust fund comprised of one or more employee benefit plans, each of which has been
identified to the Company in writing pursuant to this clause (vii); or 


      (viii)  the
Source does not include assets of any employee benefit plan, other than a plan exempt from the coverage of ERISA. 




As
used in this paragraph 9B, the terms "employee benefit plan," "governmental plan," and "separate account" shall have the respective meanings assigned to such terms in Section 3 of
ERISA. 


        10.    DEFINITIONS; ACCOUNTING MATTERS.    For the purpose of this Agreement, the terms defined in paragraphs 10A and
10B (or within the text of any other paragraph) shall have the respective meanings specified therein and all accounting matters shall be subject to determination as provided in paragraph 10D. 


        10A.    Yield-Maintenance Terms.    


        "Called Principal" means, with respect to any Note, the principal of such Note that is to be prepaid pursuant to paragraph 4B or is
declared to be immediately due and payable pursuant to paragraph 7A, as the context requires. 


        "Designated Spread" shall mean 1.00% in the case of each Series A Note and 0% in the case of each Note of any other Series unless
the Confirmation of Acceptance with respect to the Notes of such Series specifies a different Designated Spread in which case it shall mean, with respect to each Note of such Series, the Designated
Spread so specified. 


        "Discounted Value" means, with respect to the Called Principal of any Note, the amount obtained by discounting all Remaining Scheduled
Payments with respect to such Called Principal from their respective scheduled due dates to the Settlement Date with respect to such Called Principal, in accordance with accepted financial practice
and at a discount factor (as converted to reflect the 


28





 



periodic
basis on which interest on such Note is payable, if payable other than on a semi-annual basis) equal to the Reinvestment Yield with respect to such Called Principal. 



        "Reinvestment Yield" means, with respect to the Called Principal of any Note, the Designated Spread over the yield to maturity implied by
(i) the yields reported as of 10:00 a.m. (New York City local time) on the Business Day next preceding the Settlement Date with respect to such Called Principal for actively traded U.S.
Treasury securities having a maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date on the Treasury Yield Monitor page of Standard & Poor's
MMS—Treasury Market Insight (or, if Standard & Poor's shall cease to report such yields in MMS—Treasury Market Insight or shall cease to be Prudential Capital Group's
customary source of information for calculating yield-maintenance amounts on privately placed notes, then such source as is then Prudential Capital Group's customary source of such information), or if
such yields shall not be reported as of such time or the yields reported as of such time shall not be ascertainable, (ii) the Treasury Constant Maturity Series yields reported, for the latest
day for which such yields shall have been so reported as of the Business Day next preceding the Settlement Date with respect to such Called Principal, in Federal Reserve Statistical Release
H.15(519) (or any comparable successor publication) for actively traded U.S. Treasury securities having a constant maturity equal to the Remaining Average Life of such Called Principal as of
such Settlement Date. Such implied yield shall be determined, if necessary, by (a) converting U.S. Treasury bill quotations to bond equivalent yields in accordance with accepted financial
practice and (b) interpolating linearly between yields reported for various maturities. The Reinvestment Yield shall be rounded to that number of decimal places as appears in the coupon of the
applicable Note. 


        "Remaining Average Life" means, with respect to the Called Principal of any Note, the number of years (calculated to the nearest
one-twelfth year) obtained by dividing (i) such Called Principal into (ii) the sum of the products obtained by multiplying (a) each Remaining Scheduled Payment of such
Called Principal (but not of interest thereon) by (b) the number of years (calculated to the nearest one-twelfth year) which will elapse between the Settlement Date with respect to
such Called Principal and the scheduled due date of such Remaining Scheduled Payment. 



        "Remaining Scheduled Payments" means, with respect to the Called Principal of any Note, all payments of such Called Principal and interest
thereon that would be due on or after the Settlement Date with respect to such Called Principal if no payment of such Called Principal were made prior to its scheduled due date. 


        "Settlement Date" means, with respect to the Called Principal of any Note, the date on which such Called Principal is to be prepaid
pursuant to paragraph 4B or is declared to be immediately due and payable pursuant to paragraph 7A, as the context requires. 



        "Yield-Maintenance Amount" means, with respect to any Note, an amount equal to the excess, if any, of the Discounted Value of the Called
Principal of such Note over the sum of (i) such Called Principal plus (ii) interest accrued thereon as of (including interest due on) the Settlement Date with respect to such Called
Principal. The Yield-Maintenance Amount shall in no event be less than zero. 


        10B.    Other Terms.    


        "Acceptable Security Interest" in any Property means a Lien which (a) exists in favor of the Collateral Agent for its benefit and
the ratable benefit of the Holders, the Administrative Agent, the Banks and the Bank Affiliates that are parties to any Hydrocarbon Hedge Agreement or Interest Rate Contract with the Company or any of
its Subsidiaries, (b) is superior to all other Liens, except Permitted Liens, (c) secures the Obligations and, if outstanding, the Bank Obligations and obligations of the Company to the
Banks and Affiliates of the Banks in respect of Interest Rate Contracts and Hydrocarbon Hedge Agreements (so long as, with respect to the Bank or Affiliate thereof, the Bank remains a Bank under the
Bank Agreement) and (d) is perfected and enforceable. 


29






 



        "Acceptance" shall have the meaning specified in paragraph 2F. 


        "Acceptance Day" shall have the meaning specified in paragraph 2F. 


        "Acceptance Window" shall have the meaning specified in paragraph 2F. 


        "Accepted Note" shall have the meaning specified in paragraph 2F. 



        "Accounts" means the unpaid portion of the obligations to the Company and its Subsidiaries of customers of the Company and its
Subsidiaries to pay for goods sold and shipped or services rendered (net of commissions to agents). 


        "Acquisition" means the direct or indirect purchase or acquisition, whether in one or more related transactions, by the Company or any of
its Subsidiaries of any Person or group of Persons (or any equity interest in any Person or group of Persons) or any related group of assets, liabilities or securities of any Person or group of
Persons, other than acquisitions of Property in the ordinary course of business. 



        "Additional Covenant" shall mean any affirmative or negative covenant or similar restriction applicable to the Company or any Subsidiary
(regardless of whether such provision is labeled or otherwise characterized as a covenant) the subject matter of which either (i) is similar to that of any covenant in paragraph 5 or 6
of this Agreement, or related definitions in paragraph 10 of this Agreement, but contains one or more percentages, amounts or formulas that is more restrictive than those set forth herein or
more beneficial to the holder or holders of the Indebtedness created or evidenced by the document in which such covenant or similar restriction is contained (and such covenant or similar restriction
shall be deemed an Additional Covenant only to the extent that is more restrictive or more beneficial) or (ii) is different from the subject matter of any covenants in paragraph 5 or 6
of this Agreement, or related definitions in paragraph 10 of this Agreement. 


        "Additional Default" shall mean any provision contained in any document or instrument creating or evidencing Debt of the Company or any
Subsidiary which permits the holder or holders of Debt to accelerate (with the passage of time or giving of notice or both) the maturity thereof or otherwise requires the Company or any Subsidiary to
purchase such Debt prior to the stated maturity thereof and which either (i) is similar to any Default or Event of Default contained in paragraph 7 of this Agreement, or related
definitions in paragraph 10 of this Agreement, but contains one or more percentages, amounts or formulas that is more restrictive or has a shorter grace period than those set forth herein or is
more beneficial to the holders of such other Debt (and such provision shall be deemed an Additional Default only to the extent that it is more restrictive, has a shorter grace period or is more
beneficial) or (ii) is different from the subject matter of any Default or Event of Default contained in paragraph 7 of this Agreement, or related definitions in paragraph 10 of
this Agreement. 


        "Administrative Agent" means Union Bank of California, N.A., in its capacity as administrative agent pursuant to the Bank Agreement and
any successor administrative agent appointed pursuant to the provisions thereof. 



        "Affiliate" means, as to any Person, any other Person that, directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person or any Subsidiary of such Person. The term "control" (including the terms "controlled by" or "under common control with") means the
possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise. 


        "Agreement" has the meaning specified in paragraph 11C. 


        "Agreement in Principle" means that certain letter dated March 11, 2003 from Prudential to the Company. 


30





 

        "Approved Consultant's Report" means a report by Barnes & Click, Inc., Purvin & Gertz, Oil & Gas
Advisors, Inc. or another consultant selected by the Company and reasonably acceptable to the Required Holders confirming that the assumptions used by the Company in the adjustment of EBITDA in
connection with any Acquisition are reasonable. 


        "Assigned Agreements" means (a) the "Assigned Agreements" as defined in the Company Security Agreement and (b) the "Assigned
Agreements" as defined in the Guarantor Security Agreement. 


        "Authorized Officer" shall mean (i) in the case of the Company, the chief executive officer, chief financial officer or any vice
president of the General Partner designated as an "Authorized Officer" of the Company for the purpose of this Agreement in an Officer's Certificate executed by the General Partner's chief executive
officer or chief financial officer and delivered to Prudential, and (ii) in the case of Prudential, any officer of Prudential designated as its "Authorized Officer" in the  Purchaser Schedule or any
officer of Prudential designated as its "Authorized Officer" for the purpose of this Agreement in a certificate executed by
one of its Authorized Officers. Any action taken under this Agreement on behalf of the Company by any individual who on or after the date of this Agreement shall have been an Authorized Officer of the
Company and whom Prudential in good faith believes to be an Authorized Officer of the Company at the time of such action shall be binding on the Company even though such individual shall have ceased
to be an Authorized Officer of the Company, and any action taken under this Agreement on behalf of Prudential by any individual who on or after the date of this Agreement shall have been an Authorized
Officer of Prudential and whom the Company in good faith believes to be an Authorized Officer of Prudential at the time of such action shall be binding on Prudential even though such individual shall
have ceased to be an Authorized Officer of Prudential. 


        "Available Cash" for any fiscal quarter has the meaning set forth in the Company Partnership Agreement. 


        "Available Facility Amount" shall have the meaning specified in paragraph 2A. 



        "Bank Agreement" means the Second Amended and Restated Credit Agreement dated as of November 26, 2002 among the Company, the Banks,
Union Bank of California, N.A., as Administrative Agent, and The Royal Bank of Canada, as Syndication Agent, as amended by that certain First
Amendment thereto dated June 3, 2003, and as further amended, modified or supplemented from time-to-time. 


        "Bank Agreement Documents" means the "Credit Documents" as defined in the Bank Agreement on the date hereof. 



        "Bank Obligations" means the "Obligations," as such term is defined in the Bank Agreement on the date hereof. 


        "Bankruptcy Law" shall have the meaning specified in clause (viii) of paragraph 7A. 


        "Banks" means the lenders listed on the signature pages of the Bank Agreement and each Eligible Assignee (as defined in the Bank
Agreement) that shall become a party to the Bank Agreement pursuant to the terms thereof. 



        "Borrowing Base" means the amount that is available to be advanced to the Company under a committed, revolving credit facility (without
regard to outstanding advances thereunder). 


        "Business Day" means any day other than (i) a Saturday or a Sunday, (ii) a day on which commercial banks in New York City
are required or authorized to be closed and (iii) for purposes of paragraph 2C hereof only, a day on which Prudential is not open for business. 



        "Cancellation Date" shall have the meaning specified in paragraph 2I(3). 


31





 



        "Cancellation Fee" shall have the meaning specified in paragraph 2I(3). 


        "Capital Leases" means, as applied to any Person, any lease of any Property by such Person as lessee which would, in accordance with GAAP,
be required to be classified and accounted for as a capital lease on the balance sheet of such Person. 


        "CERCLA" means the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, state and local analogs, and
all rules and regulations and requirements thereunder in each case as now or hereafter in effect. 


        "CERCLIS" means the Comprehensive Environmental Response, Compensation and Liability Information System maintained by the U.S.
Environmental Protection Agency. 


        "Change of Control" means (a) the General Partner is no longer the sole general partner of the Company, (b) the Limited
Partner is no longer the sole limited partner of the Company, or (c) individuals who, at the beginning of any period of 12 consecutive months, constitute the General Partner's Board of
Directors cease for any reason (other than death or disability) to constitute a majority of the General Partner's Board of Directors then in office. 


        "Closing Day" means, with respect to the Series A Notes, the Series A Closing and, with respect to any Accepted Note, the
Business Day specified for the closing of the purchase and sale of such Accepted Note in the Request for Purchase of such Accepted Note, provided that (i) if the Company and the Purchasers
which are obligated to purchase such Note agree in writing on an earlier Business Day for such closing, the "Closing Day" for such Accepted Note shall
be such earlier Business Day, and (ii) if the closing of the purchase and sale of such Accepted Note is rescheduled pursuant to paragraph 2H, the Closing Day for such Accepted Note, for
all purposes of this Agreement except references to "original Closing Day" in paragraph 2I(3), shall mean the Rescheduled Closing Day with respect to such Accepted Note. 



        "Code" means the Internal Revenue Code of 1986, as amended, and any successor statute. 


        "Collateral" means all Collateral as defined in each of the Security Agreements, in each of the Pledge Agreements and in each of the
Mortgages. 


        "Collateral Agent" means Union Bank of California, N.A., in its capacity as collateral agent pursuant to the Intercreditor Agreement and
any successor collateral agent appointed pursuant to the provisions thereof. 



        "Company Partnership Agreement" means the Amended and Restated Agreement of Limited Partnership of the Company dated December 17,
2002 between the General Partner and the Limited Partner, as the same may be amended, modified or supplemented from time-to-time as permitted by this Agreement. 


        "Company Security Agreement" means the Amended and Restated Borrower Security Agreement between the Company and the Collateral Agent in
form and substance reasonably satisfactory to the Collateral Agent and the Required Holders, substantially in the form of Exhibit G attached
hereto, as amended by the First Amendment thereto dated as of June 3, 2003, and as it may be further amended, modified or supplemented from time-to-time. 


        "Confirmation of Acceptance" shall have the meaning specified in paragraph 2F. 


        "Consolidated" refers to the consolidation of the accounts of the Company and its Subsidiaries in accordance with GAAP, including, when
used in reference to the Company, principles of consolidation consistent with those applied in the preparation of the financial statements referred to in paragraphs 5A and 8B. 



        "Debt" for any Person, means, without duplication, 


32





 




         (a)  indebtedness
of such Person for borrowed money; 


         (b)  obligations
of such Person evidenced by bonds, debentures, notes or other similar instruments; 



         (c)  obligations
of such Person to pay the deferred purchase price of Property or services (other than trade payables which are not more than 90 days past due, except
for any such trade payables which are being contested in good faith and by appropriate proceedings); 


         (d)  all
indebtedness created or arising under any conditional-sale or other title-retention agreement with respect to property acquired by such Person (even
though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property); 


         (e)  obligations
of such Person as lessee under Capital Leases; 


          (f)  obligations
of such Person under any Hydrocarbon Hedge Agreement or Interest Rate Contract; 


         (g)  reimbursement
obligations of such Person in respect of letters of credit, acceptance facilities, drafts or similar instruments issued or accepted by banks and other
financial institutions for the account of such Person; 


         (h)  obligations
of such Person under direct or indirect guaranties in respect of, and obligations (contingent or otherwise) of such Person to purchase or otherwise acquire,
or otherwise to assure a creditor against loss in respect of, another's indebtedness or obligations of the kinds referred to in clauses (a) through (g) above; and 


          (i)  another's
indebtedness or obligations of the kinds referred to in clauses (a) through (h) secured by any Lien on or in respect of any Property of such
Person; provided that the amount of such Debt, if such Person has not assumed the same or become liable therefore, shall in no event be deemed to be greater than the fair market value from time to
time of the Property subject to such Lien. 





        "Default Rate" means, for any Note at any time upon the occurrence of an Event of Default and until such Event of Default has been cured
or waived in writing, a rate of interest per annum from time to time equal to the lesser of (i) the maximum rate permitted by applicable law and (ii) the greater of (a) 2% over
the coupon rate for such Note over the rate of interest in effect immediately prior to such Event of Default and (b) 2.0% over the rate of interest publicly announced by The Bank of New York
from time to time in New York City as its Prime Rate. 


        "Delayed Delivery Fee" shall have the meaning specified in paragraph 2I(3). 


        "Duke" means Duke Energy Field Services, L.P. 


        "Duke Acquisition" means the acquisition by the Company of certain Properties owned by Duke as further described in the Duke Purchase
Agreement. 


        "Duke Acquisition Closing" means the day upon which Accepted Notes are issued by the Company in connection with its consummation of the
Duke Acquisition. 


        "Duke Acquisition Documents" means the Duke Purchase Agreement and all other agreements, instruments or documents executed in connection
therewith or otherwise related to the Duke Acquisition. 


        "Duke Purchase Agreement" means a purchase and sale agreement between the Company and Duke providing for the sale by Duke of the
Properties described therein in form and substance satisfactory to the Purchasers, as such agreement may be amended, modified or supplemented. 


33





 

        "EBITDA" means, for the Company and its Subsidiaries on a Consolidated basis for any period, (a) Net Income for such period plus
(b) to the extent deducted in determining Net Income, Interest Expense, taxes, depreciation, amortization and other non-cash items for such period, losses directly related to Enron
Corp. and its Affiliates, and up to $500,000 in expenses incurred during the fiscal quarters ended March 31, 2002 and June 30, 2002. EBITDA shall be calculated, on a pro forma basis,
after giving effect to, without duplication, (a) any Acquisition or (b) any construction of Property, in each case, occurring during the period commencing on the first day of such period
to and including the date of such transaction (the "Reference Period") and whether or not such acquired or constructed Property were operated during
such Reference Period, as if such Acquisition or construction or acquisition of Property occurred on the first day of the Reference Period. In making the calculation contemplated by the preceding
sentence, EBITDA generated by such acquired Person or by such acquired or constructed Property shall be determined in good faith by the Company based on reasonable assumptions and may take into
account pro forma expenses that would have been incurred by the Company and its Subsidiaries in the operation of such acquired Person or acquired or constructed Property during such period computed on
the basis of personnel expenses for employees retained or to be retained by the Company and its Subsidiaries in the operation of such acquired Person or acquired or constructed Property and
non-personnel costs and expenses incurred by the Company and its Subsidiaries in the operation of the Company's business at similarly situated facilities of the Company or any of its
Subsidiaries; provided, however, that if the amount of EBITDA attributable thereto exceeds 10% of the EBITDA for the Company and its Subsidiaries on a
Consolidated basis prior to such adjustment, then the pro forma EBITDA attributable thereto shall be supported by an Approved Consultant's Report. 


        "Environmental Law" means any Governmental Rule relating to pollution or protection of the environment or any natural resource, to any
Hazardous Material or to health or safety, including any Governmental Rule relating to the use, handling, transportation, treatment, storage, disposal, release or discharge of any Hazardous Material. 


        "Environmental Permit" means any Governmental Action required under any Environmental Law. 


        "Environmental Proceeding" means any action, suit, written demand, demand letter, claim, notice of noncompliance or violation, notice of
liability or potential liability, investigation, proceeding, consent order or consent agreement relating in any way to any Environmental Law, any Environmental Permit or any Hazardous Material or
arising from alleged injury or threat to health, safety or the environment, including (a) by any Governmental Person for enforcement, cleanup, removal, response, remedial or
other action or damages and (b) by any Person for damages, contribution, indemnification, cost recovery, compensation or injunctive relief. 


        "Equity Contribution Proceeds" means all cash and Permitted Investments received by the Company or any of its Subsidiaries from any equity
contribution by the Partners. 


        "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder. 


        "ERISA Affiliate" means any Person that for purposes of Title IV of ERISA is a member of the Company's controlled group, or is under
common control with the Company, within the meaning of Section 414 of the Code and the regulations promulgated and rulings issued thereunder. 


        "Event of Default" means any of the events specified in paragraph 7A, provided that there has been satisfied any requirement in
connection with such event for the giving of notice, or the lapse of time, or the happening of any further condition, event or act, and "Default" shall
mean any of such events, whether or not any such requirement has been satisfied. 


        "Exchange Act" means the Securities Exchange Act of 1934, as amended. 


34





 



        "Facility" shall have the meaning specified in paragraph 2A. 


        "Facility Fee" shall have the meaning specified in paragraph 2I(1). 


        "Funded Debt" of any Person means Debt of such Person as described in clauses (a), (b), (d) and (e) of the definition of
"Debt" in this paragraph 10B. 


        "GAAP" means United States generally accepted accounting principles as in effect from time to time, applied on a basis consistent with the
requirements of paragraph 10D. 


        "General Partner" means Crosstex Energy Services GP, LLC, a Delaware limited liability company. 


        "Governmental Action" means any authorization, approval, consent, waiver, exception, license, filing, registration, permit, notarization
or other requirement of any Governmental Person. 


        "Governmental Person" means, whether domestic or foreign, any national, federal, state or local government, any political subdivision
thereof, or any governmental, quasi-governmental, judicial, public or statutory instrumentality, authority, body or entity, including any central bank and any comparable authority. 


        "Governmental Rule" means any treaty, law, rule, regulation, ordinance, order, code, interpretation, judgment, writ, injunction, decree,
determination, award, directive, guideline, request, policy or similar form of decision of any Governmental Person, referee or arbitrator. 


        "Guarantor" means as of the date hereof, the Limited Partner and each of the Persons listed on  Schedule 10B(3), and thereafter, each of the present and future
direct and indirect Material Subsidiaries of the Company, and
"Guarantors" means all such Guarantors collectively. 


        "Guarantor Security Agreement" means the Amended and Restated Subsidiary Security Agreement between each of the Guarantors and the
Collateral Agent, in substantially the form of Exhibit H attached hereto, as amended by the First Amendment thereto, dated as of June 3,
2003, and as further amended, modified or supplemented from time-to-time. 


        "Guaranty" means (a) the Guaranty executed by the Limited Partner and (b) each of the Guaranties executed by each Guarantor,
in substantially the respective forms of Exhibits F-1 and F-2 attached hereto, as each may be amended from
time-to-time, and "Guaranties" shall mean all such Guaranties collectively. 


        "Hazardous Material" means any substance or material described as a toxic or hazardous substance, waste or material or as a pollutant,
contaminant or infectious waste, or words of similar import, in any Environmental Law, including asbestos, petroleum (including crude oil and any fraction thereof, natural gas, natural-gas
liquid, liquefied natural gas and synthetic gas usable for fuel, and any mixture of any of the foregoing), polychlorinated biphenyls, urea formaldehyde, radon gas, radioactive matter, and chemicals
that may cause cancer or reproductive toxicity. 


        "Hedge Treasury Note(s)" means, with respect to any Accepted Note, the United States Treasury Note or Notes whose duration (as determined
by Prudential) most closely matches the duration of such Accepted Note. 


        "Holder" means a holder of Notes and "Holders" means the holders of the Notes from time to
time. 


        "Hostile Tender Offer" means, with respect to the use of proceeds of any Note, any offer to purchase, or any purchase of, shares of
capital stock of any corporation or equity interests in any other entity, or securities convertible into or representing the beneficial ownership of, or rights to acquire, any such shares or equity
interests, if such shares, equity interests, securities or rights are of a class which is publicly traded on any securities exchange or in any over-the-counter market, other
than purchases of such shares, equity interests, securities or rights representing less than 5% of the equity 


35





 



interests
or beneficial ownership of such corporation or other entity for portfolio investment purposes, and such offer or purchase has not been duly approved by the board of directors of such
corporation or the equivalent governing body of such other entity prior to the date on which the Company makes the Request for Purchase of such Note. 


        "Hydrocarbon Hedge Agreement" means a swap, collar, floor, cap, option or other derivative contract which is intended to reduce or
eliminate the risk of fluctuations in the price of Hydrocarbons. 


        "Hydrocarbons" means oil, gas, coal seam gas, casinghead gas, drip gasoline, natural gasoline, condensate, distillate, and all other
liquid and gaseous hydrocarbons produced or to be produced in conjunction therewith from a well bore and all products, by-products, and other substances derived therefrom or the processing
thereof, and all other minerals and substances produced in conjunction with such substances, including, but not limited to, sulfur, geothermal steam, water, carbon dioxide, helium, and any and all
minerals, ores, or substances of value and the products and proceeds therefrom. 


        "including" means, unless the context clearly requires otherwise, "including without limitation". 


        "INHAM Exemption" shall have the meaning set forth in paragraph 9B. 



        "Intercreditor Agreement" means the Intercreditor and Collateral Agency Agreement in substantially the form of  Exhibit I attached hereto, as it may be amended,
modified or supplemented from time-to-time in accordance with its terms. 


        "Interest Charge Coverage Ratio" means, for the Company and its Subsidiaries on a Consolidated basis, as of the end of any fiscal quarter,
the ratio of (a) EBITDA for the four-fiscal quarter period then ended to (b) Interest Expense for the four-fiscal quarter period then ended. 



        "Interest Expense" means, for the Company and its Subsidiaries determined on a Consolidated basis, for any period, the total interest,
letter of credit fees, and other fees incurred in connection with any Debt for such period, whether paid or accrued, including, without limitation, all commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers' acceptance financing, all as determined in conformity with GAAP and on a pro forma basis at any time that EBITDA is being determined on such
a basis. 


        "Interest Rate Contract" means an interest rate protection agreement, interest rate future, interest rate option, interest rate swap,
interest rate cap, collar or other interest rate hedge arrangement, to or under which the Company or any Subsidiary is or becomes a party. 


        "Issuance Period" shall have the meaning specified in paragraph 2B. 


        "Letter of Credit" means, individually, any letter of credit issued by the issuing Bank which is subject to the Bank Agreement and
"Letters of Credit" means all such letters of credit collectively. 


        "Leverage Ratio" means, for the Company and its Subsidiaries on a Consolidated basis, as of the end of any fiscal quarter, the ratio of
(a) Funded Debt for the Company and its Subsidiaries on a Consolidated basis as of the end of such fiscal quarter to (b) EBITDA for the four fiscal quarters then ended. 


        "Lien" means, with respect to any Property, (a) any lien, charge, option, claim, deed of trust, mortgage, security interest, pledge
or other encumbrance, or any other type of preferential arrangement of any kind, in respect of such Property, including any easement, right of way or other encumbrance on title to real property, or
(b) the interest of a vendor or lessor under any conditional-sale agreement, capital lease or other title-retention agreement relating to such Property. 


        "Limited Partner" means Crosstex Energy, L.P., a Delaware limited partnership. 


36





 



        "Loan Documents" means, collectively, the Agreement in Principle, this Agreement, the Notes, the Security Documents, the Guaranties, the
Intercreditor Agreement, each Confirmation of Acceptance and each other agreement, instrument or document executed at any time in connection with the foregoing documents, as each such Loan Document
may be amended, modified or supplemented from time-to-time. 


        "Material Adverse Effect" shall mean a material adverse effect on (a) the business, assets, condition (financial or otherwise),
operations, performance, properties or prospects of the Company and its Subsidiaries taken as a whole, or (b) the validity or enforceability of any Loan Document or the rights or remedies of
the Holders or the Collateral Agent under any Loan Document. 


        "Material Subsidiaries" means shall mean a Subsidiary of the Company having: (a) assets of $3,000,000 or more or (b) EBITDA
(calculated on a separate basis) of $500,000 or more. 


        "Maximum Rate" means the maximum nonusurious interest rate under applicable law. 


        "Moody's" means Moody's Investors Service, Inc. and any successor thereto. 



        "Mortgaged Property" means the aggregate of all of the "Mortgaged Property" and
"Trust Property" as defined in all of the Mortgages. 


        "Mortgages" means, collectively, each mortgage, deed of trust or other similar agreement executed by the Company or any Subsidiary in
favor of the Collateral Agent for its benefit and the ratable benefit of the Banks and the Holders, in form and substance reasonably satisfactory to the Collateral Agent and the Required Holder(s), as
the same may be amended, modified or supplemented from time-to-time. 


        "Multiemployer Plan" means a "multiemployer plan," as defined in Section 4001(a)(3) of ERISA and subject to Title IV thereof, to
which the Company or any ERISA Affiliate is making or accruing an obligation to make contributions, or has within any of the preceding five plan years made or accrued an
obligation to make contributions, such plan being maintained pursuant to one or more collective-bargaining agreements. 


        "Multiple Employer Plan" means a "single employer plan," as defined in Section 4001(a)(15) of ERISA and subject to Title IV
thereof, that (a) is maintained by the Company or an ERISA Affiliate and at least one Person other than the Company and its ERISA Affiliates or (b) was so maintained previously, but is
not currently maintained by the Company or its ERISA Affiliates, and in respect of which the Company or an ERISA Affiliate would still have liability under Section 4063, 4064 or 4069 of ERISA
in the event such plan has been or were to be terminated. 


        "NAIC Annual Statement" shall have the meaning set forth in paragraph 9B. 


        "Net Income" means, for any period for which such amount is being determined, the Consolidated net income of the Company and its
Subsidiaries, as determined in accordance with GAAP consistently applied, excluding, however, any net gain or loss from extraordinary items, including but not limited to any net gain or loss during
such period arising from the sale, exchange, or other disposition of capital assets other than in the ordinary course of business. 


        "Notes" shall have the meaning specified in paragraph 1. 


        "Obligations" means (a) the principal, interest, fees, Yield-Maintenance Amount, charges, expenses, attorneys' fees and
disbursements, indemnities and any other amounts payable by the Company and the Guarantors to the Collateral Agent and the Holders under the Loan Documents and (b) any amount in respect to any
of the foregoing that the Collateral Agent or any Holder, in its sole discretion, elects to pay or advance on behalf of the Company or any Guarantor after the occurrence and during the continuance of
an Event of Default. 


37





 



        "Officer's Certificate" means a certificate signed in the name of the Company by an Authorized Officer of the Company. 


        "Partners" means the General Partner and the Limited Partner. 


        "PBGC" means the Pension Benefit Guaranty Corporation. 


        "Permitted Investments" means investments having a maturity of not greater than 3 months from the date of acquisition thereof in
(a) obligations issued or unconditionally guaranteed by the United States of America or issued by any agency thereof and backed by the full faith and credit of the United States of America,
(b) demand deposits and certificates of deposit (located in the United States of America) of any Bank or any other commercial bank organized under the laws of the United States of America or
any state thereof and having combined capital and surplus of at least $500,000,000, (c) commercial paper with a rating of at least "Prime-l" by Moody's or "A-l" by S&P
or (d) other investments agreed to from time to time between the Company and the Required Holders. 


        "Permitted Liens" means such of the following as to which no enforcement, collection, execution, levy or foreclosure proceeding has been
commenced: (a) Liens for taxes, assessments and governmental charges or levies, to the extent the same are being contested in good faith by proper proceedings and appropriate reserves are being
maintained for the same; (b) Liens imposed by law, such as materialmen's, mechanics', carriers', workmen's, repairmen's and bankers' Liens and other similar Liens arising in the ordinary course
of business securing obligations that are not overdue for a period of more than 60 days or that are being contested in good faith and by proper proceedings and as to which appropriate reserves
are being maintained; (c) pledges or deposits to secure obligations under workers' compensation laws or similar legislation or to secure public or statutory obligations; (d) easements,
rights of way, landlord's liens and other encumbrances on title to real property that do not render title to the property encumbered thereby unmarketable or materially and adversely affect the value
of such property or the use of such property by the Company or any Subsidiary for its current purposes; (e) deposits to secure the performance of bids, trade contracts (other than for borrowed
money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of like nature incurred in the ordinary course of business; and (f) Liens arising by
reason of any judgment or order of any Governmental Person, referee or arbitrator if appropriate legal proceedings for the review of such judgment or order are being diligently prosecuted and
execution or enforcement thereof is stayed pending appeal. 


        "Person" means an individual, partnership, corporation (including a business trust), limited liability partnership, limited liability
company, joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof or any trustee, receiver, custodian or
similar official. 


        "PICA" means The Prudential Insurance Company of America. 



        "Pipeline Entities" means Crosstex Pipeline, LLC, a Texas limited liability company, and Crosstex Pipeline Partners, Ltd., a Texas
limited partnership. 


        "Plan" means a Single Employer Plan or a Multiple Employer Plan. 


        "Pledge Agreements" means (a) the Amended and Restated Pledge Agreement among the Partners and the Collateral Agent in
substantially the form of Exhibit J attached hereto, (b) the Amended and Restated Pledge Agreement between Crosstex Treating Services, GP,
LLC and the Collateral Agent in substantially the form of Exhibit K attached hereto, each as amended by the respective First Amendments thereto
dated as of June 3, 2003, and (c) the Pledge Agreement, dated as of June 3, 2003, between Crosstex Acquisition Management GP and the Collateral Agent in substantially the form of  Exhibit L attached hereto, in each case as the same may hereafter be amended, modified or supplemented from time-to-time. 


38





 



        "Property" of any Person means any property or assets (whether real, personal, or mixed, tangible or intangible) of such Person. 


        "Prudential" means Prudential Investment Management, Inc. 


        "Prudential Affiliate" means (i) any corporation or other entity controlling, controlled by, or under common control with,
Prudential either directly or through subsidiaries and (ii) any managed account or investment fund which is managed by Prudential or a Prudential Affiliate described in clause (i) of
this definition. For purposes of this definition, the terms "control", "controlling" and "controlled" shall mean the ownership, directly or through subsidiaries, of a majority of a corporation's or
other entity's Voting Stock or equivalent voting securities or interests. 


        "Purchasers" means PICA and Pruco Life Insurance Company with respect to the Series A Notes and, with respect to any Accepted
Notes, Prudential and/or the Prudential Affiliate(s) which are purchasing such Accepted Notes. 


        "QPAM Exemption" shall have the meaning set forth in paragraph 9B. 


        "Renewal Fee" shall have the meaning specified in paragraph 2I(5). 


        "Request for Purchase" shall have the meaning specified in paragraph 2D. 


        "Required Holder(s)" means the Holder or Holders of at least 50.1% of the aggregate principal amount of the Notes outstanding at such
time. 


        "Rescheduled Closing Day" shall have the meaning specified in paragraph 2H(3). 


        "Responsible Officer" means the Chief Executive Officer, President, Chief Financial Officer, any Senior Vice President, any Vice
President, Treasurer or Assistant Treasurer of the General Partner. 


        "S&P" means Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc., and any successor
thereto. 


        "SEC" means the Securities and Exchange Commission (or any governmental body or agency succeeding to the function of the Securities and
Exchange Commission.) 


        "Securities Act" means the Securities Act of 1933, as amended. 


        "Security Agreements" means, collectively, the Company Security Agreement and the Guarantor Security Agreement. 


        "Security Documents" means, collectively, (a) the Pledge Agreements, (b) the Security Agreements, (c) the Mortgages,
(d) each other agreement, instrument or document executed at any time in connection with the Pledge Agreements, Security Agreements or the Mortgages, and (e) each other agreement,
instrument or document executed at any time in connection with securing the Obligations. 


        "Series" shall have the meaning specified in paragraph 1. 


        "Series A Closing" shall have the meaning specified in paragraph 2H(1). 


        "Series A Note(s)" shall have the meaning specified in paragraph 2H(1). 



        "Single Employer Plan" means a single employer plan, as defined in Section 4001(a)(15) of ERISA and subject to Title IV thereof,
that (a) is maintained by the Company or an ERISA Affiliate and no Person other than the Company and its ERISA Affiliates or (b) was so maintained previously, but is not currently
maintained by the Company or its ERISA Affiliates, and in respect of which the Company or an ERISA Affiliate would still have liability under Section 4069 of ERISA in the event such plan has
been or were to be terminated. 


39





 



        "Subsidiary" of a Person means any corporation or other entity of which more than 50% of the outstanding capital stock or other equity
ownership interests having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether at such time capital stock of any other class or classes or
other equity ownership interests of such corporation shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned by such Person, by such Person
and one or more Subsidiaries of such Person or by one or more Subsidiaries of such Person. 



        "Tangible Net Worth" means the excess of total assets over total liabilities, total assets and total liabilities each to be determined in
accordance with GAAP, excluding, however, from the determination of total assets (a) goodwill, organizational expenses, research and development
expenses, trademarks, trade names, copyrights, patents, patent applications, licenses and rights in any thereof, and other similar intangibles, including the value of contracts for the marketing of
natural gas, (b) all unamortized debt discount and expense, (c) all reserves carried and not deducted from assets, (d) treasury stock and capital stock, obligations or other
securities of, or capital contributions to, or investments in, any Subsidiary, (e) securities that are not readily marketable (other than securities of the Pipeline Entities and other Person
engaged in lines of business in which the Company is engaged), (f) cash held in a sinking or other analogous fund established for the purpose of redemption, retirement or prepayment of capital
stock or Debt, (g) any write-up in the book value of any asset resulting from a revaluation thereof, (h) notes receivable from current or former officers, employees or
equity-holders of the Company or any Subsidiary, (i) cash pledged or deposited for the purposes described in clauses (c) and (e) of the definition of
"Permitted Liens" in this paragraph 10B and (j) any items not included in clauses (a) through (i) above that are treated as
intangibles in conformity with GAAP. 


        "Transferee" means any direct or indirect transferee of all or any part of any Note purchased by any Purchaser under this Agreement. 


        "Voting Stock" means, with respect to any corporation, any shares of stock of such corporation whose holders are entitled under ordinary
circumstances to vote for the election of directors of such corporation (irrespective of whether at the time stock of any other class or classes shall have or might have voting power by reason of the
happening of any contingency). 


        10C.    Computation of Time Periods.    In the Loan Documents in the computation of periods of time from a specified
date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each mean "to but excluding". 


        10D.    Accounting Terms; Changes in GAAP.    



          (i)  All
accounting terms not specifically defined in this Agreement shall be construed in accordance with GAAP applied on a consistent basis with those applied in the
preparation of the Financial Statements. 


         (ii)  Unless
otherwise indicated, all financial statements of the Company and its Subsidiaries, all calculations for compliance with covenants in this Agreement and all
calculations of any amounts to be calculated under the definitions in this Agreement shall be based upon the Consolidated accounts of the Company and its Subsidiaries in accordance with GAAP and
consistent with the principles applied in preparing the most recent audited financial statements delivered pursuant to clause (ii) or paragraph 5A or, if no such statements have been so
delivered, the most recent audited financial statements referred to in clause (i) of paragraph 8B. If at any time any change in GAAP would affect the computation of any financial ratio
or requirement set forth in any Loan Document, and either the Company or the Required Holders shall so request, the Required Holders and the Company shall negotiate in good faith to amend such ratio
or requirement to preserve the original intent thereof in light of such change in GAAP, provided that, 



40





 




until
so amended, (i) such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and (ii) the Company shall provide to the Holders
financial statements and other documents required under this Agreement or as reasonably requested hereunder setting forth a reconciliation between calculations of such ratio or requirement made before
and after giving effect to such change in GAAP. 




        10E.    Miscellaneous.    Paragraph, Schedule and Exhibit references are to paragraphs of and Schedules and Exhibits
to this Agreement, unless otherwise specified. 


        11.    MISCELLANEOUS.    



        11A.    Note Payments.    The Company agrees that, so long as any Purchaser shall hold any Note, it will make payments
of principal of, interest on, and any Yield-Maintenance Amount payable with respect to, such Note, which comply with the terms of this Agreement, by wire transfer of immediately available funds for
credit (not later than 12:00 noon, New York City local time, on the date due) to the account or accounts of such Purchaser, if any, as are specified in the Purchaser
Schedule, attached hereto or to the applicable Confirmation of Acceptance, or, in the case of any Purchaser not named in the Purchaser
Schedule or any Purchaser wishing to change the account specified for it in the Purchaser
Schedule, such account or accounts in the United States as such Purchaser may from time to time designate in writing, notwithstanding any contrary provision herein or in any
Note with respect to the place of payment. Each Purchaser agrees that, before disposing of any Note, it will make a notation thereon (or on a schedule attached thereto) of all principal payments
previously made thereon and of the date to which interest thereon has been paid. The Company agrees to afford the benefits of this paragraph 11A to any Transferee which shall have made the same
agreement as the Purchasers have made in this paragraph 11A. No Holder shall be required to present or surrender any Note or make any notation thereon, except that upon written request of the
Company made concurrently with or reasonably promptly after payment or prepayment in full of any Note, the applicable Holder shall surrender such Note for cancellation, reasonably promptly after any
such request, to the Company at its principal executive office. 


        11B.    Expenses.    The Company agrees, whether or not the transactions contemplated hereby shall be consummated, to
pay, and save Prudential, each Purchaser and any Transferee harmless against liability for the payment of, all out-of-pocket expenses arising in connection with such
transactions, including: 



          (i)  (A)
all stamp and documentary taxes and similar charges, (B) costs of obtaining a private placement number for the Notes and (C) fees and expenses of
brokers, agents, dealers, investment banks or other intermediaries or placement agents, in each case as a result of the execution and delivery of this Agreement or the issuance of the Notes; 


         (ii)  document
production and duplication charges and the fees and expenses of any special counsel engaged by Prudential or such Purchaser or such Transferee in connection
with (A) this Agreement and the transactions contemplated hereby and (B) any subsequent proposed waiver, amendment or modification of, or proposed consent under, this Agreement, whether
or not such the proposed action shall be effected or granted; 


        (iii)  the
costs and expenses, including attorneys' and financial advisory fees, incurred by Prudential or such Purchaser or such Transferee or the Collateral Agent
(a) in enforcing (or determining whether or how to enforce) any rights under the Loan Documents or (b) in responding to any subpoena or other legal process or informal investigative
demand issued in connection with the Loan Documents or the transactions contemplated thereby or issued by reason of Prudential or such Purchaser's or such Transferee's having acquired any Note,
including without limitation costs and expenses incurred in any workout, restructuring or renegotiation proceeding or bankruptcy case; 



41





 




        (iv)  any
judgment, liability, claim, order, decree, cost, fee, expense, action or obligation resulting from the consummation of the transactions contemplated by the Loan
Documents, including the use of the proceeds of the Notes by the Company; and 


         (v)  the
fees and expenses of the Collateral Agent. 




        The
obligations of the Company under this paragraph 11B shall survive the transfer of any Note or portion thereof or interest therein by any Purchaser or Transferee and the
payment of any Note. 


        11C.    Consent to Amendments.    This Agreement may be amended, and the Company may take any action herein
prohibited, or omit to perform any act herein required to be performed by it, if the Company shall obtain the written consent to such amendment, action or omission to act, of the Required Holder(s)  except that, (i) with the written consent of the Holders of all Notes of a particular Series, and
if an Event of Default shall have occurred and be continuing, of the Holders of all Notes of all Series, at the time outstanding (and not without such written consents), the Notes of such Series may
be amended or the provisions thereof waived to change the maturity thereof, to change or affect the principal thereof, or to change or affect the time of payment of, or increase the rate of, interest
on or any Yield-Maintenance Amount payable with respect to the Notes of such Series, (ii) without the written consent of all of the Holders at
the time outstanding, no amendment to or waiver of the provisions of this Agreement shall change or affect the provisions of paragraph 7A or this paragraph 11C insofar as such provisions
relate to proportions of the principal amount of the Notes, or the rights of any individual Holder, required with respect to any declaration of Notes to be due and payable or with respect to any
consent, amendment, waiver or declaration, (iii) with the written consent of Prudential (and not without the written consent of Prudential) the
provisions of paragraph 2 may be amended or waived (except insofar as any such amendment or waiver would affect any rights or obligations with respect to the purchase and sale of Notes which
shall have become Accepted Notes prior to such amendment or waiver), and (iv) with the written consent of all of the Purchasers which shall have
become obligated to purchase Accepted Notes of any Series (and not without the written consent of all such Purchasers), any of the provisions of paragraphs 2 and 3 may be amended or waived insofar as
such amendment or waiver would affect only rights or obligations with respect to the purchase and sale of the Accepted Notes of such Series or the terms and provisions of such Accepted Notes. Each
Holder of any Note at the time or thereafter outstanding shall be bound by any consent authorized by this paragraph 11C, whether or not such Note shall have been marked to indicate such
consent, but any Notes issued thereafter may bear a notation referring to any such consent. No course of dealing between the Company and any Holder nor any delay in exercising any rights hereunder or
under any Note shall operate as a waiver of any rights of any Holder of such Note. As used herein and in the Notes, the term "this Agreement" and
references thereto shall mean this Agreement as it may from time to time be amended or supplemented. 


        11D.    Form, Registration, Transfer and Exchange of Notes; Lost Notes.    The Notes are issuable as registered notes
without coupons in denominations of at least $100,000, except as may be necessary to reflect any principal amount not evenly divisible by $100,000. The Company shall keep at its principal office a
register in which the Company shall provide for the registration of Notes and of transfers of Notes. Upon surrender for registration of transfer of any Note at the principal office of the Company, the
Company shall, at its expense, execute and deliver one or more new Notes of like tenor and of a like aggregate principal amount, registered in the name of such transferee or transferees. At the option
of the Holder of any Note, such Note may be exchanged for other Notes of like tenor and of any authorized denominations, of a like aggregate principal amount, upon surrender of the Note to be
exchanged at the principal office of the Company. Whenever any Notes are so surrendered for exchange, the Company shall, at its expense, execute and deliver the Notes which the Holder making the
exchange is entitled to receive. Each installment of principal payable on each installment date upon each new Note issued upon any such transfer or exchange shall be in the same proportion to the
unpaid principal amount of such new Note as the installment of principal payable on such date on the 


42





 



Note
surrendered for registration of transfer or exchange bore to the unpaid principal amount of such Note. No reference need be made in any such new Note to any installment or installments of
principal previously due and paid upon the Note surrendered for registration of transfer or exchange. Every Note surrendered for registration of transfer or exchange shall be duly endorsed, or be
accompanied by a written instrument of transfer duly executed, by the Holder of such Note or such Holder's attorney duly authorized in writing. Any Note or Notes issued in exchange for any Note or
upon transfer thereof shall carry the rights to unpaid interest and interest to accrue which were carried by the Note so exchanged or transferred, so that neither gain nor loss of interest shall
result from any such transfer or exchange. Upon receipt of written notice from the Holder of any Note of the loss, theft, destruction or mutilation of such Note and, in the case of any such loss,
theft or destruction, upon receipt of such Holder's unsecured indemnity agreement, or in the case of any such mutilation upon surrender and cancellation of such Note, the Company will make and deliver
a new Note, of like tenor, in lieu of the lost, stolen, destroyed or mutilated Note. 


        11E.    Persons Deemed Owners; Participations.    Prior to due presentment for registration of transfer, the Company
may treat the Person in whose name any Note is registered as the owner and holder of such Note for the purpose of receiving payment of principal of and interest on, and any Yield-Maintenance Amount
payable with respect to, such Note and for all other purposes whatsoever, whether or not such Note shall be overdue, and the Company shall not be affected by notice to the contrary. Subject to the
preceding sentence, the Holder of any Note may from time to time grant participations in all or any part of such Note to any Person on such terms and conditions as may be determined by such Holder in
its sole and absolute discretion. 


        11F.    Survival of Representations and Warranties; Entire Agreement.    All representations and warranties contained
herein or made in writing by or on behalf of the Company in connection herewith shall survive the execution and delivery of this Agreement and the Notes, the transfer by any Purchaser of any Note or
portion thereof or interest therein and the payment of any Note, and may be relied upon by any Transferee, regardless of any investigation made at any time by or on behalf of any Purchaser or any
Transferee. Subject to the preceding sentence, this Agreement and the other Loan Documents
embody the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and supersede all prior agreements and understandings relating to such subject
matter. 


        11G.    Successors and Assigns.    All covenants and other agreements in this Agreement contained by or on behalf of
any of the parties hereto shall bind and inure to the benefit of the respective successors and assigns of the parties hereto (including, without limitation, any Transferee) whether so expressed or
not. 


        11H.    Independence of Covenants.    All covenants hereunder shall be given independent effect so that if a
particular action or condition is prohibited by any one of such covenants, the fact that it would be permitted by an exception to, or otherwise be in compliance within the limitations of, another
covenant shall not avoid the occurrence of a Default or Event of Default if such action is taken or such condition exists. 



        11I.    Notices.    All written communications provided for hereunder (other than communications provided for under
paragraph 2) shall be sent by first class mail or nationwide overnight delivery service (with charges prepaid) and (i) if to any Purchaser, addressed as specified for such communications
in the Purchaser Schedule attached hereto (in the case of the Series A Notes) or the Purchaser
Schedule attached to the applicable Confirmation of Acceptance (in the case of any Notes issued after the date hereof) or at such other address as any such Purchaser shall have
specified to the Company in writing, (ii) if to any other Holder of any Note, addressed to it at such address as it shall have specified in writing to the Company, or, if any such Holder shall
not have so specified an address, then addressed to such Holder in care of the last Holder of such Note which shall have so specified an 


43





 



address
to the Company and (iii) if to the Company, addressed to it at 2501 Cedar Springs, Suite 600, Dallas, Texas 75201, Attention: William W. Davis, provided,
however, that any such communication to the Company may also, at the option of the Person sending such communication, be delivered by any other means either to the Company at
its address specified above or to any Authorized Officer of the Company. Any communication pursuant to paragraph 2 shall be made by the method specified for such communication in
paragraph 2, and shall be effective to create any rights or obligations under this Agreement only if, in the case of a telephone communication, an Authorized Officer of the party conveying the
information and of the party receiving the information are parties to the telephone call, and in the case of a telecopier communication, the communication is signed by an Authorized Officer of the
party conveying the information, addressed to the attention of an Authorized Officer of the party receiving the information, and in fact received at the telecopier terminal the number of which is
listed for the party receiving the communication in the Purchaser Schedule or at such other telecopier terminal as the party receiving the information
shall have specified in writing to the party sending such information. 


        11J.    Payments Due on Non-Business Days.    Anything in this Agreement or the Notes to the contrary
notwithstanding, any payment of principal of or interest on, or Yield-Maintenance Amount payable with respect to, any Note that is due on a date other than a Business Day shall be made on the next
succeeding Business Day. If the date for any payment is extended to the next succeeding Business
Day by reason of the preceding sentence, the period of such extension shall not be included in the computation of the interest payable on such Business Day. 


        11K.    Severability.    Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability
in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 



        11L.    Descriptive Headings.    The descriptive headings of the several paragraphs of this Agreement are inserted for
convenience only and do not constitute a part of this Agreement. 


        11M.    Satisfaction Requirement.    If any agreement, certificate or other writing, or any action taken or to be
taken, is by the terms of this Agreement required to be satisfactory to Prudential, any Purchaser, to any Holder or to the Required Holder(s), then (unless stated otherwise) the determination of such
satisfaction shall be made by Prudential, such Purchaser, such Holder or the Required Holder(s), as the case may be, in the sole and exclusive judgment (exercised in good faith) of the Person or
Persons making such determination. 


        11N.    Governing Law.    THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE
PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF NEW YORK. 


        11O.    Severalty of Obligations.    The sales of Notes to the Purchasers are to be several sales, and the obligations
of Prudential and the Purchasers under this Agreement are several obligations. No failure by Prudential or any Purchaser to perform its obligations under this Agreement shall relieve any other
Purchaser or the Company of any of its obligations hereunder, and neither Prudential nor any Purchaser shall be responsible for the obligations of, or any action taken or omitted by, any other such
Person hereunder. 


        11P.    Counterparts.    This Agreement may be executed in any number of counterparts, each of which shall be an
original, but all of which together shall constitute one instrument. 



        11Q.    Binding Agreement.    When this Agreement is executed and delivered by the Company and Prudential, it shall
become a binding agreement between the Company and Prudential. This Agreement shall also inure to the benefit of each Purchaser which shall have executed and delivered a 


44





 



Confirmation
of Acceptance, and each such Purchaser shall be bound by this Agreement to the extent provided in such Confirmation of Acceptance. 



        11R.    Waiver of Jury Trial; Consent to Jurisdiction.    



          (i)  THE
COMPANY, PRUDENTIAL AND EACH HOLDER HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION OF ANY
CLAIM WHICH IS BASED HEREON, OR ARISES OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT, THE NOTES OR THE OTHER LOAN DOCUMENTS, OR ANY TRANSACTIONS RELATING HERETO OR THERETO, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR ACTIONS OF THE COMPANY, PRUDENTIAL OR THE HOLDERS. THE COMPANY ACKNOWLEDGES THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR
PRUDENTIAL AND EACH PURCHASER TO BECOME A PARTY TO THIS AGREEMENT AND TO PURCHASE NOTES HEREUNDER. 


         (ii)  ANY
LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT, THE NOTES, THE OTHER LOAN DOCUMENTS OR ANY TRANSACTIONS RELATING HERETO OR THERETO, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR ACTIONS OF THE COMPANY, PRUDENTIAL OR THE HOLDERS MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR THE UNITED STATES OF
AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND THE COMPANY HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID
COURTS. THE COMPANY, PRUDENTIAL AND EACH HOLDER HEREBY IRREVOCABLY WAIVE ANY OBJECTIONS, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH THEY MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS. 


        (iii)  The
Company hereby irrevocably consents to service of process on it at the address provided for notices in paragraph 11I. Any and all service of process and any
other notice in any such action, suit or proceeding shall be effective against the Company if given by registered or certified mail, return receipt requested, or by any other means or mail which
requires a signed receipt, postage prepaid, mailed to the Company as provided in the preceding sentence. 




        11S.    Maximum Interest Payable.    The Company, Prudential, each Purchaser and any other Holders specifically intend
and agree to limit contractually the amount of interest payable under this Agreement, the Notes, the other Loan Documents and all other instruments and agreements related hereto and thereto to the
maximum amount of interest lawfully permitted to be charged under applicable law. Therefore, none of the terms of this Agreement, the Notes, the other Loan Documents or any instrument pertaining to or
relating to this Agreement, the Notes or the other Loan Documents shall ever be construed to create a contract to pay interest at a rate in excess of the maximum rate permitted to be charged under
applicable law, and neither Company, any guarantor nor any other party liable or to become liable hereunder or under the Notes, any guaranty, any other Loan Document or any other instruments and
agreements related hereto and thereto shall ever be liable for interest in excess of the amount determined at such maximum rate, and the provisions of this paragraph 11S shall control over all
other provisions of this Agreement, any Notes, the other Loan Documents, any guaranty or any other instrument pertaining to or relating to the transactions herein contemplated. If any amount of
interest taken or received by Prudential, any Purchaser or any Holder shall be in excess of said maximum amount of interest which, under applicable law, could lawfully have been collected by
Prudential, such Purchaser or such Holder incident to such transactions, then such excess shall be deemed to have been the result of a mathematical error by all parties hereto and shall be refunded 


45





 

promptly
by the Person receiving such amount to the party paying such amount, or, at the option of the recipient, credited ratably against the unpaid principal amount of the Note or Notes held by
Prudential, such Purchaser or such Holder, respectively. All amounts paid or agreed to be paid in connection with such transactions which would under applicable law be deemed "interest" shall, to the
extent permitted by such applicable law, be amortized, prorated, allocated and spread throughout the stated term of this Agreement and the Notes. "Applicable
law" as used in this paragraph means that law in effect from time to time which permits the charging and collection of the highest permissible lawful, nonusurious rate of
interest on the transactions herein contemplated, and "maximum rate" as used in this paragraph means, with respect to each of the Notes, the maximum
lawful, nonusurious rates of interest (if any) which under applicable law may be charged to the Company from time to time with respect to such Notes. 


46








        If you are in agreement with the foregoing, please sign the form of acceptance on the enclosed counterpart of this letter and return the same to the Company, whereupon this letter shall
become a binding agreement between the Company and you. 



	 	 	Very truly yours,
	

 	
 	
CROSSTEX ENERGY SERVICES, L.P.
	

 	
 	

By:	

Crosstex Energy Services GP, LLC,

its general partner
	

 	
 	

By:	

 Name:

Title:









	The foregoing Agreement is hereby accepted

as of the date first above written.
	
PRUDENTIAL INVESTMENT MANAGEMENT, INC.
	

By:	
 	

 Vice President	
 	

 
	
THE PRUDENTIAL INSURANCE COMPANY

OF AMERICA
	

By:	
 	

 Vice President	
 	

 
	
PRUCO LIFE INSURANCE COMPANY
	

By:	
 	

 Vice President	
 	

 








  



 
 

FORM OF PURCHASER SCHEDULE
  
    INFORMATION SCHEDULE    
    



	 
	 
	 	Aggregate

Principal

Amount of Notes

to be Purchased
	 	Note

Denomination(s)

	 	THE PRUDENTIAL INSURANCE COMPANY OF AMERICA	 	$	29,000,000	 	$	29,000,000 (RA-1)
	

(1)	

All payments on account of Notes held by such purchaser shall be made by wire transfer of immediately available funds for credit to:	
 	
 	

 	
 	
 	

 
	

 	

Account No.: 890-0304-391

The Bank of New York

New York, NY

(ABA No.: 021-000-018)	
 	
 	

 	
 	
 	

 
	

 	

Each such wire transfer shall set forth the name of the Company, a reference to "6.95% Senior Secured Notes, Series A, due June 1, 2010, Security No. !INV 8455!, PPN 22767# AA 1", and the due date and application (as among principal, interest and
Yield-Maintenance Amount) of the payment being made.	
 	
 	

 	
 	
 	

 
	

(2)	

Address for all notices relating to payments:	
 	
 	

 	
 	
 	

 
	

 	

The Prudential Insurance Company of America

c/o Investment Operations Group

Gateway Center Two, 10th Floor

100 Mulberry Street

Newark, New Jersey 07102-4077	
 	
 	

 	
 	
 	

 
	

 	

Attention: Manager, Billings and Collections	
 	
 	

 	
 	
 	

 
	

(3)	

Address for all other communications and notices:	
 	
 	

 	
 	
 	

 
	

 	

The Prudential Insurance Company of America

c/o Prudential Capital Group

2200 Ross Avenue, Suite 4200E

Dallas, Texas 75201	
 	
 	

 	
 	
 	

 
	

 	

Attention: Managing Director	
 	
 	

 	
 	
 	

 
	

(4)	

Recipient of telephonic prepayment notices:	
 	
 	

 	
 	
 	

 
	

 	

Manager, Trade Management Group	
 	
 	

 	
 	
 	

 
	

 	

Telephone: (973) 367-3141

Facsimile: (800) 224-2278	
 	
 	

 	
 	
 	

 
	

(5)	

Tax Identification No.: 22-1211670	
 	
 	

 	
 	
 	

 
	

(6)	

Authorized Officers:	
 	
 	

 	
 	
 	

 






Randall
M. Kob

Ric E. Abel

Jay D. Squiers

Brian N. Thomas 




PS-1





 





	 
	 
	 	Aggregate

Principal

Amount of Notes

to be Purchased
	 	Note

Denomination(s)

	 	PRUCO LIFE INSURANCE COMPANY	 	$	1,000,000	 	$	1,000,000 (RA-2)
	

(1)	

All payments on account of Notes held by such purchaser shall be made by wire transfer of immediately available funds for credit to:	
 	
 	

 	
 	
 	

 
	

 	

Account No.: 890-0304-421

The Bank of New York

New York, NY

(ABA No.: 021-000-018)	
 	
 	

 	
 	
 	

 
	

 	

Each such wire transfer shall set forth the name of the Company, a reference to "6.95% Senior Secured Notes, Series A, due June 1, 2010, Security No. !INV 8455!, PPN 22767# AA 1", and the due date and application (as among principal, interest and
Yield-Maintenance Amount) of the payment being made.	
 	
 	

 	
 	
 	

 
	

(2)	

Address for all notices relating to payments:	
 	
 	

 	
 	
 	

 
	

 	

Pruco Life Insurance Company

c/o The Prudential Insurance Company of America

c/o Investment Operations Group

Gateway Center Two, 10th Floor

100 Mulberry Street

Newark, New Jersey 07102-4077	
 	
 	

 	
 	
 	

 
	

 	

Attention: Manager, Billings and Collections	
 	
 	

 	
 	
 	

 
	

(3)	

Address for all other communications and notices:	
 	
 	

 	
 	
 	

 
	

 	

Pruco Life Insurance Company

c/o Prudential Capital Group

2200 Ross Avenue, Suite 4200E

Dallas, Texas 75201	
 	
 	

 	
 	
 	

 
	

 	

Attention: Managing Director	
 	
 	

 	
 	
 	

 
	

(4)	

Recipient of telephonic prepayment notices:	
 	
 	

 	
 	
 	

 
	

 	

Manager, Trade Management Group	
 	
 	

 	
 	
 	

 
	

 	

Telephone: (973) 367-3141

Facsimile: (800) 224-2278	
 	
 	

 	
 	
 	

 
	

(5)	

Tax Identification No.: 22-1944557	
 	
 	

 	
 	
 	

 
	

(6)	

Authorized Officers:	
 	
 	

 	
 	
 	

 






Randall
M. Kob

Ric E. Abel

Jay D. Squiers

Brian N. Thomas 




PS-2





 





	 	PRUDENTIAL INVESTMENT MANAGEMENT, INC.	 	 	 	 
	

(1)	

All payments to Prudential shall be made by wire transfer of immediately available funds for credit to:	
 	

 	
 	

 
	

 	

Account No.: 890-0496-916	
 	

 	
 	

 
	

 	

The Bank of New York

New York, NY

(ABA No.: 021-000-018)	
 	

 	
 	

 
	

(2)	

Address for all other communications and notices:	
 	

 	
 	

 
	

 	

Prudential Investment Management, Inc.

c/o Prudential Capital Group

2200 Ross Avenue, Suite 4200E

Dallas, TX 75201	
 	

 	
 	

 
	

 	

Attention: Managing Director	
 	

 	
 	

 
	

(3)	

Tax Identification No.: 22-2540245	
 	

 	
 	

 
	

(4)	

Authorized Officers:	
 	

 	
 	

 
	

 	

Randall M. Kob

Ric E. Abel

Jay D. Squiers

Brian N. Thomas

or any other Vice President of Prudential	
 	

 	
 	

 




PS-3







 
 

SCHEDULE 6C(2)    
    


 
 

EXISTING DEBT    
    


Promissory
Note in the amount of $800,000 dated June 7, 2002 made payable by Crosstex Energy Services, Ltd. to the order of Florida Gas Transmission Company 







 
 

SCHEDULE 8G    
    


 
 

LIST OF AGREEMENTS RESTRICTING DEBT    
    


The
Bank Agreement 







 
 

SCHEDULE 8T    
    


 
 

LIST OF SUBSIDIARIES    
    



	Subsidiary
 
	 	Owner(s)
	 	Interest(s)

	Crosstex Gulf Coast Transmission Ltd.	 	Company	 	99.999% limited partnership interest
	

 	
 	

Crosstex Energy Services GP, LLC	
 	

..001% general partnership interest
	

	Crosstex Gulf Coast Marketing Ltd.	 	Company	 	99.999% limited partnership interest
	

 	
 	

Crosstex Energy Services GP, LLC	
 	

..001% general partnership interest
	

	Crosstex Pipeline, LLC	 	Company	 	100% membership interest
	

	Crosstex CCNG Marketing Ltd.	 	Company	 	99.999% limited partnership interest
	

 	
 	

Crosstex Energy Services GP, LLC	
 	

..001% general partnership interest
	

	Crosstex CCNG Gathering Ltd.	 	Company	 	99.999% limited partnership interest
	

 	
 	

Crosstex Energy Services GP, LLC	
 	

..001% general partnership interest
	

	Crosstex CCNG Processing Ltd.	 	Company	 	99.999% limited partnership interest
	

 	
 	

Crosstex Energy Services GP, LLC	
 	

..001% general partnership interest
	

	Crosstex CCNG Transmission Ltd.	 	Company	 	99.999% limited partnership interest
	

 	
 	

Crosstex Energy Services GP, LLC	
 	

..001% general partnership interest
	

	Crosstex Pipeline Partners, Ltd.	 	Company	 	Approximately 21% limited partnership interest
	

 	
 	

Crosstex Pipeline, LLC	
 	

Approximately 1% general partnership interest
	

 	
 	

Various others	
 	

Approximately 78% limited partnership interest
	

	Crosstex Treating Services, L.P.	 	Company	 	99.999% limited partnership interest
	

 	
 	

Crosstex Treating Services GP, LLC	
 	

..001% general partnership interest
	

	Crosstex Acquisition Management GP, LLC	 	Company	 	100% membership interest
	

	Crosstex Alabama Gathering System, L.P.	 	Company	 	99.999% limited partnership interest
	 	 	 	 	 








	

 	
 	

Crosstex Acquisition Management GP, LLC	
 	

..001% general partnership interest
	

	Crosstex Mississippi Industrial Gas Sales, L.P.	 	Company	 	99.999% limited partnership interest
	

 	
 	

Crosstex Acquisition Management GP, LLC	
 	

..001% general partnership interest
	

	Crosstex Mississippi Pipeline, L.P.	 	Company	 	99.999% limited partnership interest
	

 	
 	

Crosstex Acquisition Management GP, LLC	
 	

..001% general partnership interest
	

	Crosstex Seminole Gas, L.P.	 	Company	 	99.999% limited partnership interest
	

 	
 	

Crosstex Acquisition Management GP, LLC	
 	

..001% general partnership interest
	

	Crosstex Acquisition Management, L.P.	 	Company	 	99.999% limited partnership interest
	

 	
 	

Crosstex Acquisition Management GP, LLC	
 	

..001% general partnership interest
	

	Crosstex Treating Services GP, LLC	 	Company	 	100% membership interests









 
 

SCHEDULE 10B(3)    
    


 
 

EXISTING GUARANTORS    
    


Crosstex
Energy, L.P.

Crosstex Gulf Coast Transmission Ltd.

Crosstex Gulf Coast Marketing Ltd.

Crosstex CCNG Marketing Ltd.

Crosstex CCNG Gathering Ltd.

Crosstex CCNG Processing Ltd.

Crosstex CCNG Transmission Ltd.

Crosstex Treating Services, L.P.

Crosstex Alabama Gathering System, L.P.

Crosstex Mississippi Industrial Gas Sales, L.P.

Crosstex Mississippi Pipeline, L.P.

Crosstex Seminole Gas, L.P.

Crosstex Acquisition Management, L.P. 







 
 

EXHIBIT A-1    
    


 
 

[FORM OF NOTE]    
    


 
 

CROSSTEX ENERGY SERVICES, L.P.
  
        % SENIOR SECURED NOTE, SERIES    , DUE 20      



No. R-           

ORIGINAL PRINCIPAL AMOUNT:

ORIGINAL ISSUE DATE:

INTEREST RATE:

INTEREST PAYMENT DATES:

FINAL MATURITY DATE:

PRINCIPAL INSTALLMENT DATES AND AMOUNTS:



        FOR
VALUE RECEIVED, the undersigned, CROSSTEX ENERGY SERVICES, L.P. (herein called the "Company"), a limited partnership formed and
existing under the laws of the State of Delaware, hereby promises to pay to                  , or registered assigns, the principal sum
of              DOLLARS [on
the Final Maturity Date specified above] [, payable in installments on the Principal Installment Dates and in the amounts specified above, and on the Final Maturity Date
specified above in an amount equal to the unpaid balance of the principal hereof,] with interest (computed on the basis of a 360-day
year—30-day month) (a) on the unpaid balance thereof from the date hereof at the Interest Rate per annum specified above, payable on each Interest Payment Date specified
above and on the Final Maturity Date specified above, commencing with the Interest Payment Date next succeeding the date hereof, until the principal hereof shall have become due and payable, and
(b) on the occurrence and during the continuance of an Event of Default, at the Default Rate with respect to any outstanding principal
hereof, any overdue payment of interest and any overdue payment of any Yield-Maintenance Amount, payable quarterly as aforesaid (or, at the option of the registered holder hereof, on demand). 


        Payments
of principal of, interest on and any Yield-Maintenance Amount payable with respect to this Note are to be made at the main office of The Bank of New York in New York City or at
such other place as the holder hereof shall designate to the Company in writing, in lawful money of the United States of America. 


        This
Note is one of a series of Senior Secured Notes (herein called the "Notes") issued pursuant to a Master Shelf Agreement, dated as of
June 3, 2003 (herein called the "Agreement"), between the Company and Prudential Investment Management, Inc. and is entitled to the
benefits thereof and of the other Loan Documents. As provided in the Agreement, this Note is subject to prepayment, in whole or from time to time in part, on the terms specified in the agreement.
Capitalized terms used and not otherwise defined herein have the meanings specified in the Agreement. 


        This
Note is a registered Note and, as provided in the Agreement, upon surrender of this Note for registration of transfer, duly endorsed, or accompanied by a written instrument of
transfer duly executed, by the registered holder hereof or such holder's attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of,
the transferee. Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment
and for all other purposes, and the Company shall not be affected by any notice to the contrary. 


        [The Company agrees to make required prepayments of principal on the dates and in the amounts specified in the Agreement.]
[This Note is [also] subject to optional prepayment, in whole or from time to time in part, on the terms specified in the
Agreement.]





 



        In
case an Event of Default, as defined in the Agreement, shall occur and be continuing, the principal of this Note may be declared or otherwise become due and payable in the manner and
with the effect provided in the Agreement. 


        The
Company and any and all endorsers, guarantors and sureties severally waive grace, demand, presentment for payment, notice of dishonor or default, notice of intent to accelerate,
notice of acceleration (to the extent set forth in the Agreement), protest and diligence in collecting. 


        Should
any indebtedness represented by this Note be collected at law or in equity, or in bankruptcy or other proceedings, or should this Note be placed in the hands of attorneys for
collection, the Company agrees to pay, in addition to the principal, premium, if any, and interest due and payable hereon, all costs of collecting or attempting to collect this Note, including
reasonable attorneys' fees and expenses (including those incurred in connection with any appeal). 


        The
Company, and the purchaser and the registered holder of this Note specifically intend and agree to limit contractually the amount of interest payable under this Note to the maximum
amount of interest lawfully permitted to be charged under applicable law. Therefore, none of the terms of this Note shall ever be construed to create a contract to pay interest at a rate in excess of
the maximum rate permitted to be charged under applicable law, and neither the Company nor any other party liable or to become liable hereunder shall ever be liable for interest in excess of the
amount determined at such maximum rate, and the provisions of paragraph 11S of the Agreement shall control over any contrary provision of this Note. 


A-1-2





 

        THIS NOTE IS INTENDED TO BE PERFORMED IN THE STATE OF NEW YORK AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAW OF SUCH
STATE.



	

 	
 	

CROSSTEX ENERGY SERVICES, L.P.
	

 	
 	

By:	

Crosstex Energy Services GP, LLC,

its general partner
	

 	
 	

By:	

 
	 	 	 	

	 	 	Name:

Title:	 




A-1-3







 
 

EXHIBIT A-2


 
 

[FORM OF SERIES A NOTE]    
    


THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES

ACT OF 1933, AS AMENDED, AND MAY BE TRANSFERRED ONLY

PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION


CROSSTEX
ENERGY SERVICES, L.P. 


6.95%
SENIOR SECURED NOTE, SERIES A, DUE 2010 



	No. RA-	 	PPN: 22767# AA 1
	ORIGINAL PRINCIPAL AMOUNT:	 	$                        
	ORIGINAL ISSUE DATE:	 	June 3, 2003
	INTEREST RATE:	 	6.95%
	INTEREST PAYMENT DATES:	 	March 1, June 1, September 1 and December 1 of each year commencing September 1, 2003
	FINAL MATURITY DATE:	 	June 1, 2010
	PRINCIPAL INSTALLMENT DATES AND AMOUNTS: As set forth in Schedule A





        FOR
VALUE RECEIVED, the undersigned, CROSSTEX ENERGY SERVICES, L.P. (herein called the "Company"), a limited partnership formed and
existing under the laws of the State of Delaware, hereby promises to pay to                        , or registered assigns, the
principal sum of                        DOLLARS, payable in installments on the
Principal Installment Dates and in the amounts specified above, and on the Final Maturity Date specified above in an amount equal to the unpaid balance of the principal hereof, with interest (computed
on the basis of a 360-day year—30-day month) (a) on the unpaid balance thereof from the date hereof at the Interest Rate per annum specified above, payable
on each Interest Payment Date specified above and on the Final Maturity Date specified above, commencing with the Interest Payment Date next succeeding the date hereof, until the principal hereof
shall have become due and payable, and (b) on the occurrence and during the continuance of an Event of Default, at the Default Rate with respect to any outstanding principal hereof, any overdue
payment of interest and any overdue payment of any Yield-Maintenance Amount, payable quarterly as aforesaid (or, at the option of the registered holder hereof, on demand). 


        Payments
of principal of, interest on and any Yield-Maintenance Amount payable with respect to this Note are to be made at the main office of The Bank of New York in New York City or at
such other place as the holder hereof shall designate to the Company in writing, in lawful money of the United States of America. 


        This
Note is one of a series of Senior Secured Notes (herein called the "Notes") issued pursuant to a Master Shelf Agreement, dated as of
June 3, 2003 (herein called the "Agreement"), between the Company and Prudential Investment Management, Inc. and is entitled to the
benefits thereof and of the other Loan Documents. As provided in the Agreement, this Note is subject to prepayment, in whole or
from time to time in part, on the terms specified in the agreement. Capitalized terms used and not otherwise defined herein have the meanings specified in the Agreement. 


        This
Note is a registered Note and, as provided in the Agreement, upon surrender of this Note for registration of transfer, duly endorsed, or accompanied by a written instrument of
transfer duly executed, by the registered holder hereof or such holder's attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of,
the transferee. Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment
and for all other purposes, and the Company shall not be affected by any notice to the contrary. 





 



        The
Company agrees to make required prepayments of principal on the dates and in the amounts specified in the Agreement. This Note is also subject to optional prepayment, in whole or
from time to time in part, on the terms specified in the Agreement. 



        In
case an Event of Default, as defined in the Agreement, shall occur and be continuing, the principal of this Note may be declared or otherwise become due and payable in the manner and
with the effect provided in the Agreement. 


        The
Company and any and all endorsers, guarantors and sureties severally waive grace, demand, presentment for payment, notice of dishonor or default, notice of intent to accelerate,
notice of acceleration (to the extent set forth in the Agreement), protest and diligence in collecting. 


        Should
any indebtedness represented by this Note be collected at law or in equity, or in bankruptcy or other proceedings, or should this Note be placed in the hands of attorneys for
collection, the Company agrees to pay, in addition to the principal, premium, if any, and interest due and payable hereon, all costs of collecting or attempting to collect this Note, including
reasonable attorneys' fees and expenses (including those incurred in connection with any appeal). 


        The
Company, and the purchaser and the registered holder of this Note specifically intend and agree to limit contractually the amount of interest payable under this Note to the maximum
amount of interest lawfully permitted to be charged under applicable law. Therefore, none of the terms of this Note shall
ever be construed to create a contract to pay interest at a rate in excess of the maximum rate permitted to be charged under applicable law, and neither the Company nor any other party liable or to
become liable hereunder shall ever be liable for interest in excess of the amount determined at such maximum rate, and the provisions of paragraph 11S of the Agreement shall control over any
contrary provision of this Note. 


        THIS NOTE IS INTENDED TO BE PERFORMED IN THE STATE OF NEW YORK AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAW OF SUCH
STATE.



	 	 	CROSSTEX ENERGY SERVICES, L.P.
	

 	
 	

By:	

Crosstex Energy Services GP, LLC,

its general partner
	

 	
 	

By:	

 
	 	 	 	
 Name:

Title:




A-2-2





 
 
 

Schedule A
  
    Principal Installment Dates and Amounts



	Payment Date
	 	Principal Payment

	6/1/06	 	$1,764,706
	9/1/06	 	  1,764,706
	12/1/06	 	  1,764,706
	3/1/07	 	  1,764,706
	6/1/07	 	  1,764,706
	9/1/07	 	  1,764,706
	12/1/07	 	  1,764,706
	3/1/08	 	  1,764,706
	6/1/08	 	  1,764,706
	9/1/08	 	  1,764,706
	12/1/08	 	  1,764,706
	3/1/09	 	  1,764,706
	6/1/09	 	  1,764,706
	9/1/09	 	  1,764,706
	12/1/09	 	  1,764,706
	3/1/10	 	  1,764,706






Note:
Each of the principal installment amounts listed above is in the aggregate for all Series A Notes. 


A-2-3







 
 

EXHIBIT B    
    


 
 

[To be placed on Company Letterhead]
  
    [FORM OF REQUEST FOR PURCHASE]
  
    REQUEST FOR PURCHASE
  
    CROSSTEX ENERGY SERVICES, L.P.    
    


        Reference is made to the Master Shelf Agreement (the "Agreement"), dated as of June 3, 2003, between
Crosstex Energy Services, L.P. (the "Company") and Prudential Investment Management, Inc. and the Purchasers of Notes thereunder. All terms used
herein that are defined in the Agreement have the respective meanings specified in the Agreement. 


        Pursuant
to paragraph 2D of the Agreement, the Company hereby makes the following Request for Purchase: 



	1.	 	Aggregate principal amount of the Notes covered hereby (the "Notes")	 	$          
	

2.	
 	

Individual specifications of the Notes:	
 	

 






	Principal

Amount
 
	 	Final Maturity

Date
	 	Principal

Installment

Dates and

Amounts
	 	Interest

Payment

Period

	

 	
 	

 	
 	

 	
 	

Quarterly






	

3.	
 	

Use of proceeds of the Notes:
	

4.	
 	

Proposed day for the closing of the purchase and sale of the Notes:
	5.	 	The purchase price of the Notes is to be transferred to:






	Name and Address

of Bank
	 	Number of

Account
	 	Name and

Telephone No.

of Bank Officer

	

 	
 	

 	
 	

 






	

6.	
 	

The Company certifies (a) that the representations and warranties contained in paragraph 8 of the Agreement and in the other Loan Documents are true on and as of the date of this Request for Purchase except to the extent of changes caused
by the transactions contemplated in the Agreement and (b) that there exists on the date of this Request for Purchase no Event of Default or Default.








	

Dated:	
 	

 	

 	
 	

 
	

 	
 	

 	

CROSSTEX ENERGY SERVICES, L.P.
	

 	
 	

 	

By:	
 	

Crosstex Energy Services GP, LLC,

its general partner
	

 	
 	

 	

By:	
 	

 
	 	 	 	 	 	 	
 Authorized Officer











 
 

EXHIBIT C    
    


 
 

[FORM OF CONFIRMATION OF ACCEPTANCE]    
    


CONFIRMATION OF ACCEPTANCE  


CROSSTEX ENERGY SERVICES, L.P.



        Reference
is made to the Master Shelf Agreement (the "Agreement"), dated as of June 3, 2003, between Crosstex Energy Services, L.P.
(the "Company") and Prudential Investment Management, Inc. and the Purchasers of Notes thereunder. All terms used herein that are defined in the Agreement have the respective meanings specified
in the Agreement. 


        Each
of the undersigned institutions which is named below as a Purchaser of any Accepted Notes hereby confirms the representations as to such Accepted Notes set forth in
paragraph 9 of the Agreement, and agrees to be bound by the provisions of paragraphs 2F and 2H of the Agreement relating to the purchase and sale of such Accepted Notes. 



        Pursuant
to paragraph 2F of the Agreement, an Acceptance with respect to the following Accepted Notes is hereby confirmed: 



	I.	 	Aggregate principal amount $                  
	 	 	 	(A)	(a) Name of Purchaser:
	 	 	 	 	(b) Principal amount:
	 	 	 	 	(c) Final maturity date:
	 	 	 	 	(d) Principal installment dates and amounts:
	 	 	 	 	(e) Interest rate:
	 	 	 	 	(f) Interest payment period:
	 	 	 	 	(g) Payment and notice instructions: As set forth on attached Purchaser Schedule
	 	 	 	 	(h) Designated spread:
	 	 	 	(B)	(a) Name of Purchaser:
	 	 	 	 	(b) Principal amount:
	 	 	 	 	(c) Final maturity date:
	 	 	 	 	(d) Principal installment dates and amounts:
	 	 	 	 	(e) Interest rate:
	 	 	 	 	(f) Interest payment period:
	 	 	 	 	(g) Payment and notice instructions: As set forth on attached Purchaser Schedule
	 	 	 	 	(h) Designated spread:
	 	 	 	[(C),(D)....: same information as to any other Purchaser]
	II.	 	Closing Day:
	III.	 	Facility Fee:







 


	Dated:	 	 	 
	

 	
 	

CROSSTEX ENERGY SERVICES, L.P.
	

 	
 	

By:	

Crosstex Energy Services GP, LLC,

its general partner
	

 	
 	

By:	

 
	 	 	 	

	 	 	Name:	 
	 	 	Title:	 
	

 	
 	

PRUDENTIAL INVESTMENT

MANAGEMENT, INC.
	

 	
 	

By:	

 
	 	 	 	
 Vice President





[Signature block for each named Purchaser other than Prudential]


C-2







 
 

EXHIBIT E    
    


 
 

[FORM OF FUNDS DELIVERY INSTRUCTION LETTER]    
    


[Company's Letterhead]


[Names and Addresses of Purchasers]


Re:
Funds Delivery Instruction



Ladies
and Gentlemen: 


        As
contemplated by paragraph 2 of the Master Shelf Agreement, dated as of June 3, 2003, among Prudential Investment Management, Inc., the undersigned and you, the
undersigned hereby instructs you to deliver, on the date of closing, the proceeds of the Notes in the manner required by paragraph 2 to the undersigned's account identified below: 



Account
Name:

Account No.:

Bank:

Bank City & State:

Bank ABA No.:

Reference: 




        This
instruction has been executed and delivered by an authorized representative of the undersigned. 



	 	 	Very truly yours,
	

 	
 	

CROSSTEX ENERGY SERVICES, L.P.
	

 	
 	

By:	

Crosstex Energy Services GP, LLC,

its general partner
	

 	
 	

By:	

 
	 	 	 	
 Name:

Title:











QuickLinks



Exhibit 10.3



TABLE OF CONTENTS



FORM OF PURCHASER SCHEDULE INFORMATION SCHEDULE




SCHEDULE 6C(2)


EXISTING DEBT



SCHEDULE 8G


LIST OF AGREEMENTS RESTRICTING DEBT




SCHEDULE 8T


LIST OF SUBSIDIARIES



SCHEDULE 10B(3)


EXISTING GUARANTORS



EXHIBIT A-1


[FORM OF NOTE]

CROSSTEX ENERGY SERVICES, L.P. % SENIOR SECURED NOTE, SERIES , DUE 20



EXHIBIT A-2


[FORM OF SERIES A NOTE]

Schedule A Principal Installment Dates and Amounts



EXHIBIT B


[To be placed on Company Letterhead] [FORM OF REQUEST FOR PURCHASE] REQUEST FOR PURCHASE CROSSTEX ENERGY SERVICES, L.P.




EXHIBIT C


[FORM OF CONFIRMATION OF ACCEPTANCE]




EXHIBIT E


[FORM OF FUNDS DELIVERY INSTRUCTION LETTER]