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THE WARRANT REPRESENTED HEREBY AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF
HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION. THIS WARRANT AND SUCH SECURITIES MAY NOT BE SOLD, ASSIGNED OR
OTHERWISE TRANSFERRED EXCEPT UPON SUCH REGISTRATION OR UPON DELIVERY TO THE
COMPANY OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY
CORPORATION STATING THAT SUCH SALE, ASSIGNMENT OR TRANSFER IS EXEMPT FROM
REGISTRATION UNDER SUCH ACT AND LAWS.

                           ---------------------------

               WARRANT FOR THE PURCHASE OF SHARES OF COMMON STOCK

No. W-___                                                          ______ Shares

     BY THIS WARRANT (this  "Warrant"),  GEXA CORP.,  a Texas  corporation  (the
"Company"), certifies that, for good and valuable consideration, the receipt and
sufficiency   of  which  are  hereby   acknowledged,   ____________________,   a
____________________, along with its registered assigns (collectively "Holder"),
is entitled to subscribe for and purchase from the Company, subject to the terms
and  conditions  set forth herein,  at any time after July 8, 2004,  ("Effective
Date"),  but prior to July 16, 2010, or, if such date is not a business day, the
next  succeeding  business  day (the  "Exercise  Period"),  ______  (subject  to
adjustment  as set forth  herein)  fully  paid and  non-assessable  shares  (the
"Shares") of the Company's Common Stock,  $0.01 par value per share (the "Common
Stock"), at a price per share equal to $1.00 (subject to adjustment as set forth
herein)  (the   "Exercise   Price"),   for  the  aggregate   purchase  price  of
$[______].00.

     1. Exercise of Warrant,  Company  Office.  This Warrant may be exercised at
any time or from time to time during the Exercise Period as to the entire number
or any lesser  number of whole  Shares,  by the surrender of this Warrant to the
Company at its office at 20 Greenway Plaza, Suite 600, Houston,  Texas 77046, or
such other place as is  designated  in writing by the  Company  pursuant to this
Section 1, together with (a) a duly executed  election in substantially the form
of Exhibit A attached hereto and made a part hereof for all purposes,  and (b) a
check drawn on Holder's bank, provided good funds exist in said account, payable
to the order of the Company in an amount equal to the Exercise Price  multiplied
by the  number of  Shares  of Common  Stock  being  purchased  pursuant  to such
election. For so long as this Warrant is outstanding, the Company shall continue
to  maintain an office in  Houston,  Texas,  where  notices,  presentations  and
demands  in  respect of this  Warrant  may be made upon it and shall  notify the
Holder in writing at least fifteen (15) days before changing the location of any
such office.

     2.  Stock  Ownership;  Stock  Certificates;  Partial  Exercise.  Upon  each
exercise of this Warrant,  the Holder shall be deemed to be the holder of record
of the Shares of Common Stock issuable upon such exercise, when such transfer is
effected on the stock  transfer  books of the Company.  In the event the Company
fails to record such  Warrant  exercise on the stock  transfer  books,  then the
Holder shall be deemed to be the holder of record of the Shares of Common Stock,
notwithstanding that the stock transfer books of the Company shall not have been
closed  or  certificates  representing  such  Shares  shall  not then  have been

<PAGE>

actually  delivered to the Holder.  As soon as possible after each such exercise
of this Warrant, the Company shall issue and deliver to the Holder a certificate
or  certificates  for the  Shares  issuable  upon such  exercise  issued in such
denominations  as may be specified by the Holder and  registered  in the name of
the Holder or, subject to Sections 3 and 10 hereof,  such other name or names as
shall be designated in the Holder's election to exercise. If this Warrant should
be exercised in part only, the Company shall, upon surrender of this Warrant for
cancellation,  execute  and deliver a new  Warrant  evidencing  the right of the
Holder to purchase  the balance of the Shares  subject to purchase  hereunder on
the terms and conditions set forth herein (including all changes and adjustments
that have occurred hereunder). The Company will, at the time of each exercise of
this Warrant, upon the request of the Holder hereof,  acknowledge in writing its
continuing  obligation  to afford to the  Holder  all rights to which the Holder
shall continue to be entitled  after such exercise in accordance  with the terms
of this  Warrant;  provided,  however,  that if the Holder of this Warrant shall
fail to make any such  request,  such  failure  shall not affect the  continuing
obligation of the Company to afford such rights to the Holder.

     3. Company Records; Transfer, Assignment, Exchanges.

     (a) Company Records.  This Warrant, and any warrants issued in substitution
hereof,  upon  complete  or  partial  transfer,   assignment  or  exercise  (the
"Warrants") shall be numbered and shall be registered in the warrant register of
the Company (the "Warrant Register") as they are issued. The Company shall treat
the  registered  holder of any Warrant on the  Warrant  Register as the owner in
fact  thereof  for  all  purposes,  except  that  if  any  Warrant  is  properly
transferred  or assigned and notice of such  transfer or  assignment is given to
the Company,  the Company  shall treat the  transferee  or assignee as the owner
thereof for all purposes.

     (b) Transfers, Assignments, and Exchanges. The Warrant shall be transferred
by the Company upon delivery  thereof duly endorsed by the Holder or by its duly
authorized  attorney or  representative,  or accompanied  by proper  evidence of
succession,  assignment  or  authority  to  transfer.  In  case of  transfer  by
executors,  administrators,  guardians  or  other  legal  representatives,  duly
authenticated  evidence of their authority shall be produced if requested by the
Company in its reasonable discretion. The Company shall immediately register all
assignments and transfers in the Warrant  Register and, upon any registration of
assignment  or transfer,  the Company shall deliver a new Warrant or Warrants to
the  person or entity  entitled  thereto on the terms and  conditions  set forth
herein (including all changes and adjustments that have occurred  hereunder).  A
Warrant, if properly  transferred or assigned,  may be exercised by a subsequent
Holder without having a new Warrant issued. The Warrants may be exchanged at the
option  of the  Holder  thereof  for  another  Warrant,  or other  Warrants,  of
different  denominations and representing in the aggregate the right to purchase
the same number of Shares of Common Stock on the terms and  conditions set forth
herein (including all changes and adjustments that have occurred hereunder) upon
surrender to the Company or its duly  authorized  agent.  All provisions of this
Section 3 shall be subject to Section 10 below.

                                       2
<PAGE>

     4.  Reservation of Shares.  The Company shall reserve and keep available at
all times solely for the purpose of  providing  for the exercise of this Warrant
the maximum  number of Shares of Common  Stock as to which this Warrant may then
be exercised.  All such Shares shall be duly  authorized  and free of preemptive
rights and, when issued upon such  exercise,  shall be validly  issued and fully
paid and non-assessable with no liability on the part of the holders thereof.

     5. Certain Adjustments.

     (a) Number of Shares;  Exercise Price. The number of Shares of Common Stock
which the Holder of this Warrant shall be entitled to receive upon each exercise
hereof shall be determined by  multiplying  the number of Shares of Common Stock
which would  otherwise  (but for the  provisions  of this Section 5) be issuable
upon such exercise,  as designated by the Holder hereof,  by a fraction of which
(i) the  numerator is $1.00 and (ii) the  denominator  is the Exercise  Price in
effect on the date of such  exercise.  The Exercise  Price shall be adjusted and
readjusted  from time to time as provided in this  Section 5 and, as so adjusted
or readjusted, shall remain in effect until a further adjustment or readjustment
thereof is required by this Section 5.

     (b)  Issuance  of  Additional  Shares  of  Stock  or  Certain   Convertible
Securities. If the Company shall issue any Common Stock without consideration or
for  consideration  per share less than $1.50 per share (the  "Minimum  Price"),
other than  shares of Common  Stock  issued or  issuable  pursuant  to  options,
warrants or other rights to purchase or acquire  Common Stock  outstanding as of
the date of this Warrant, the Exercise Price in effect immediately prior to each
such issuance shall immediately  (except as otherwise  expressly provided below)
be reduced in accordance with the following formula:

                  EP1      =        $[______].00.
                                    [(O+N)/(1-P)] - (O+N)

where:

                  EP1      =        the adjusted Exercise Price;

                  O                 = the total number of shares of Common Stock
                                    outstanding immediately prior to the
                                    issuance in question, on a fully diluted
                                    basis, excluding the original number of
                                    Shares issuable upon exercise of this
                                    Warrant;

                  N        =        the number of additional shares of Common
                                    Stock issued in such issuance; and

                  P        =        the numerical percentage ownership of the
                                    Common Stock of the Company, prior to such
                                    issuance of any additional shares of Common
                                    Stock, represented by the Shares of Common
                                    Stock issued or issuable upon exercise of
                                    this Warrant, such percentage being
                                    determined on a fully diluted basis
                                    inclusive of the Shares issued and issuable
                                    hereunder.

                                       3
<PAGE>

         For the purposes of any adjustment of the Exercise Price pursuant to
this Section 5(b), the following provisions shall be applicable:

     (A) Cash. In the case of the issuance of Common Stock for cash,  the amount
of the consideration received by the Company shall be deemed to be the amount of
the cash proceeds  received by the Company for such Common Stock after deducting
therefrom any discounts,  commissions,  taxes or other expenses allowed, paid or
incurred by the Company for any underwriting or otherwise in connection with the
issuance and sale thereof.

     (B)  Consideration  Other Than Cash.  In the case of the issuance of Common
Stock  (otherwise  than upon the  conversion of shares of capital stock or other
securities  of the Company) for a  consideration  in whole or in part other than
cash,  including securities acquired in exchange therefor (other than securities
of the Company that by their terms are exchangeable for such Common Stock),  the
consideration  other than cash  shall be deemed to be the fair value  thereof as
determined  in  good  faith  by  the  Board  of  Directors  of the  Company  and
irrespective  of any  accounting  treatment;  provided,  that such fair value as
determined  by the Board of  Directors  shall not exceed the  aggregate  Current
Market Price (as hereinafter defined) of the shares of Common Stock being issued
as of the date on which the Board of Directors  authorizes  the issuance of such
shares.

     (C) Options and Convertible Securities.  In the case of the issuance of (i)
options,  warrants or other rights to purchase or acquire  Common Stock (whether
or not at the time exercisable), (ii) securities by their terms convertible into
or  exchangeable  for Common Stock (whether or not at the time so convertible or
exchangeable), or (iii) options, warrants or rights to purchase such convertible
or  exchangeable  securities  (whether  or  not at the  time  exercisable),  the
subparagraphs  below shall apply.  The term "Fully  Diluted  Common Stock" shall
mean (i) the aggregate of all issued and  outstanding  shares of Common Stock of
the Company,  and (ii) the aggregate maximum number of shares of Common Stock as
determined in  subparagraph 1 below,  and (iii) the aggregate  maximum number of
shares of Common Stock as determined in subparagraph 2 below:

     (1) the aggregate maximum number of shares of Common Stock deliverable upon
exercise of such options, warrants or other rights to purchase or acquire Common
Stock shall be deemed to have been issued at the time such options,  warrants or
rights  were  issued  and  for  a  consideration   equal  to  the  consideration
(determined  in the manner  provided in subclauses  (A) and (B) above),  if any,
received by the Company  upon the issuance of such  options,  warrants or rights
plus the minimum purchase price provided in such options, warrants or rights for
the Common Stock covered thereby;

     (2) the aggregate maximum number of shares of Common Stock deliverable upon
conversion  of  or  in  exchange  for  any  such   convertible  or  exchangeable
securities,  or upon the  exercise  of  options,  warrants  or other  rights  to

                                       4
<PAGE>

purchase  or  acquire  such  convertible  or  exchangeable  securities  and  the
subsequent  conversion or exchange thereof,  shall be deemed to have been issued
at the time such  securities  were issued or such options,  warrants,  or rights
were issued and for a consideration equal to the consideration, if any, received
by the Company for any such securities and related  options,  warrants or rights
(excluding  any  cash  received  on  account  of  accrued  interest  or  accrued
dividends), plus the additional consideration (determined in the manner provided
in subclauses (A) and (B) above), if any, to be received by the Company upon the
conversion or exchange of such  securities,  or upon the exercise of any related
options,  warrants  or  rights  to  purchase  or  acquire  such  convertible  or
exchangeable securities and the subsequent conversion or exchange thereof;

     (3) on any change in the number of shares of Common Stock  deliverable upon
exercise of any such  options,  warrants or rights or  conversion or exchange of
such convertible or exchangeable  securities or any change in the  consideration
to be  received by the  Company  upon such  exercise,  conversion  or  exchange,
including,  but not  limited  to, a  change  resulting  from  the  anti-dilution
provisions  thereof,  the Exercise  Price as then in effect  shall  forthwith be
readjusted to such Exercise  Price as would have been obtained had an adjustment
been made upon the issuance of such  options,  warrants or rights not  exercised
prior to such change,  or of such  convertible  or  exchangeable  securities not
converted or exchanged prior to such change, upon the basis of such change;

     (4) on the  expiration or  cancellation  of any such  options,  warrants or
rights or the  termination of the right to convert or exchange such  convertible
or exchangeable securities,  if the Exercise Price shall have been adjusted upon
the issuance  thereof,  the Exercise Price shall forthwith be readjusted to such
Exercise Price as would have been obtained had an adjustment  been made upon the
issuance of such options,  warrants,  rights or such convertible or exchangeable
securities  on the basis of the  issuance of only the number of shares of Common
Stock actually issued upon the exercise of such options,  warrants or rights, or
upon the conversion or exchange of such convertible or exchangeable  securities;
and

     (5) if the Exercise Price shall have been adjusted upon the issuance of any
such options,  warrants,  rights or convertible or exchangeable  securities,  no
further  adjustment of the Exercise Price shall be made for the actual  issuance
of Common Stock upon the exercise, conversion or exchange thereof.

     (c) Stock Dividends,  Subdivisions,  Reclassifications or Combinations.  If
the Company  shall (i) declare a dividend or make a  distribution  on its Common
Stock  in  shares  of  its  Common  Stock,  (ii)  subdivide  or  reclassify  the
outstanding  shares of Common  Stock into a greater  number of shares,  or (iii)
combine or  reclassify  the  outstanding  Common Stock into a smaller  number of
shares,  the  Exercise  Price in effect at the time of the record  date for such
dividend or distribution or the effective date of such subdivision,  combination
or reclassification shall be proportionately adjusted so that the Holder of this
Warrant who exercises  this Warrant after such date shall be entitled to receive
the number of shares of Common Stock which he would have owned or been  entitled
to receive had this Warrant been exercised immediately prior to the date of such
stock  dividend,  subdivision,   reclassification  or  combination.   Successive
adjustments  in the Exercise  Price shall be made  whenever any event  specified
above shall occur.

                                       5
<PAGE>

     (d) Other  Distributions.  In case the Company  shall fix a record date for
the making of a distribution to all holders of shares of its Common Stock (i) of
shares  of any  class  other  than  its  Common  Stock  or (ii) of  evidence  of
indebtedness of the Company or any subsidiary or (iii) of assets (excluding cash
dividends  or  distributions,  and  dividends  or  distributions  referred to in
Section 5(c) above) or (iv) of rights or warrants  (excluding  those referred to
in Section 5(b)),  in each case the Exercise Price in effect  immediately  prior
thereto  shall be reduced to the price  determined by  multiplying  the Exercise
Price in  effect  immediately  prior to any such  distribution  by the  fraction
determined by dividing (A) an amount equal to the difference  resulting from (x)
fair market value price per share of Common Stock on such record date,  less (y)
the  fair  market  value  (as  determined  by  the  Board  of  Directors,  whose
determination  shall be conclusive) of said shares or evidences of  indebtedness
or assets or rights or  warrants to be so  distributed  divided by the number of
shares of Common Stock  outstanding  on such record date, by (B) the fair market
value price per share of Common Stock on such record date. Such adjustment shall
be made  successively  whenever  such a record date is fixed.  In the event that
such  distribution  is not so made,  the Exercise  Price then in effect shall be
readjusted,  effective as of the date when the Board of Directors determines not
to distribute such shares, evidence of indebtedness, assets, rights or warrants,
as the case may be, to the Exercise  Price which would then be in effect if such
record date had not been fixed.

     (e) Other  Dilutive  Events.  In case any event shall occur as to which the
provisions of this Section 5 are not strictly applicable but the failure to make
any adjustment  relating  thereto would not fairly  protect the purchase  rights
represented  by this  Warrant  in  accordance  with  the  essential  intent  and
principles  of this  Section  5,  then,  in each such case,  the  Company  shall
immediately make all adjustments  necessary to preserve,  without dilution,  the
purchase  rights  represented  by this  Warrant on a basis  consistent  with the
intent and principles  established in this Section 5 and shall also  immediately
appoint  a firm  of  independent  certified  public  accountants  of  recognized
national  standing  (which may be the  regular  auditors  of the Company if they
satisfy such standard),  which shall give their opinion that such adjustment, if
any,  preserves,  without  dilution,  the purchase  rights  represented  by this
Warrant on a basis consistent with the intent and principles established in this
Section 5. Upon receipt of such opinion,  the Company will immediately deliver a
copy thereof to the Holder of this Warrant.  The Company shall not, by amendment
of its  certificate  of  incorporation  or through  any  consolidation,  merger,
reorganization,  transfer of assets, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant,  and will at all times in good faith assist
in carrying  out all of such terms and in the taking of all such  actions as may
be necessary or appropriate in order to protect the rights of the Holder of this
Warrant against dilution or other impairment. Without limiting the generality of
the  foregoing,  the  Company (i) will not permit the par value of any shares of
stock  receivable upon the exercise of this Warrant to exceed the amount payable
therefor upon such exercise,  (ii) will take all such action as may be necessary
or  appropriate  in order that the Company  may validly and legally  issue fully
paid and nonassessable shares of stock on the exercise of the Warrants from time
to time  outstanding,  and (iii)  will not take any action  that  results in any
adjustment  of the Exercise  Price if the total number of shares of Common Stock
issued or issuable after such action,  upon the exercise of all of the Warrants,
would exceed the total number of shares of Common Stock then  authorized  by the
Company's certificate of incorporation and available for the purpose of issuance
upon such exercise.

                                       6
<PAGE>

     (f)  Notice.  Whenever  there  shall be an  adjustment  as provided in this
Section 5, the Company shall within three (3) days cause written  notice thereof
to be given to the Holder,  which  notice shall be  accompanied  by an officer's
certificate  setting forth the Exercise Price after such  adjustment and setting
forth  a  brief  statement  of the  facts  requiring  such  adjustment  and  the
computation  thereof.  However,  the  failure  by the  Company  to  satisfy  its
obligations  under this Section 5(f) shall not in any manner affect or alter the
rights of the Holder under this Warrant.

     (g) Fractional Shares. The Company shall not be required to issue fractions
of  shares  of  Common  Stock or other  capital  stock of the  Company  upon the
exercise of  Warrants.  If any  fraction  of a share would be issuable  upon the
exercise of any Warrant  (or  specified  portions  thereof),  the Company  shall
purchase  such  fraction for an amount in cash equal to the same fraction of the
fair value of such  share of Common  Stock (as  determined  in good faith by the
Board of  Directors  of the Company but not less than the fair market  value) on
the date of exercise of the Warrant.

     (h) Current  Market Price.  The Current Market Price at any date shall mean
the  average of the daily  closing  prices per share of Common  Stock for the 20
consecutive trading days prior to such date (as adjusted for any stock dividend,
split,  combination or reclassification  that took effect during such 20 trading
day period, as determined by the Board of Directors of the Company). The closing
price for each day shall be the last reported sale price regular way or, in case
no such  reported  sale takes place on such day, the average of the last closing
bid and asked  prices  regular  way,  in either case on the  principal  national
securities  exchange on which the Common Stock is listed or admitted to trading,
or if not listed or admitted to trading on any national securities exchange, the
closing  sale  price for such day  reported  by NASDAQ,  if the Common  Stock is
traded  over-the-counter  and quoted in the National  Market  System,  or if the
Common  Stock is so  traded,  but not so  quoted,  the  average  of the  closing
reported  bid and asked  prices of the Common Stock as reported by NASDAQ or any
comparable  system  or,  if the  Common  Stock is not  listed  on  NASDAQ or any
comparable  system, the average of the closing bid and asked prices as furnished
by two members of the National Association of Securities Dealers,  Inc. selected
from time to time by the Company for that  purpose.  If the Common  Stock is not
traded in such manner that the  quotations  referred to above are  available for
the period  required  hereunder,  the Current  Market  Price per share of Common
Stock  shall be  deemed  to be the  fair  value as  determined  by the  Board of
Directors  of the  Company  in good  faith and  irrespective  of any  accounting
treatment.

                                       7
<PAGE>

     (i)  Treasury  Stock.  For  the  purposes  of this  Section  5,  the  sale,
reissuance,  or other  disposition (but not a cancellation) of any of the shares
of Common Stock theretofore held in the Company's treasury shall be deemed to be
an issue thereof.

     (j) Valid Issuance. All Shares of Common Stock which may be issued upon the
exercise of this Warrant  will upon  issuance by the Company be duly and validly
issued,  fully paid and nonassessable and free from all taxes, liens and charges
with respect to the issuance thereof, and the Company shall take no action which
will cause a contrary result (including,  without  limitation,  any action which
would  cause the  Exercise  Price to be less than the par value,  if any, of the
Common Stock).

     6. Certain Corporate Events or Actions.

     (a) Consolidation, Merger, Etc. In case of any consolidation with or merger
of the Company with or into another  corporation  or other entity  (except for a
merger or consolidation in which the Company is the continuing corporation other
than as a subsidiary of another  corporation or other entity), or in case of any
sale, lease or conveyance to another corporation or other entity of the property
of the Company as an entirety or substantially  as an entirety,  such successor,
purchasing,  leasing or receiving  corporation or other entity,  as the case may
be,  shall,  prior to and as a condition to the  occurrence  of such event,  (i)
execute  with the Holder an agreement  providing  that the Holder shall have the
right thereafter to receive upon exercise of this Warrant the kind and amount of
shares of stock and other securities,  property, cash or any combination thereof
receivable  upon such  consolidation,  merger,  sale,  lease or  conveyance by a
holder of the number of shares of Common Stock for which this Warrant might have
been exercised  immediately prior to such consolidation,  merger, sale, lease or
conveyance and (ii) make effective provision in its certificate of incorporation
or otherwise, if needed, in order to effect such agreement. Such agreement shall
provide for adjustments  which shall be equivalent to the adjustments in Section
5.

     (b) Reclassification, Etc. In case of any reclassification or change of the
Shares of Common Stock  issuable upon exercise of this Warrant or in case of any
consolidation or merger of another  corporation or other entity with or into the
Company in which the  Company is the  continuing  corporation  (other  than as a
subsidiary  of another  corporation  or other  entity)  and in which  there is a
reclassification  or change  (including a change to the right to receive cash or
other  property) of the shares of Common Stock,  the Holder shall have the right
thereafter  to receive  upon  exercise  of this  Warrant  the kind and amount of
shares of stock and other securities,  property, cash or any combination thereof
receivable  upon such  reclassification,  change,  consolidation  or merger by a
holder of the number of shares of Common  Stock into  which this  Warrant  would
have  been  exercisable  immediately  prior  to such  reclassification,  change,
consolidation or merger. Thereafter, appropriate provision (as determined by the
Board of Directors  of the Company in good faith) shall be made for  adjustments
which shall be equivalent to the adjustments in Section 5.

     7. Certain  Notices.  In case at any time the Company shall propose or have
knowledge of any proposal:

                                       8
<PAGE>

     (a) to pay any dividend or make any  distribution on Shares of Common Stock
or to fix a record date for the making of any such dividend or  distribution  to
holders of Common Stock; or

     (b) to take,  or fix a record date for, any action that would result in any
adjustment to the Exercise Price pursuant to Section 5; or

     (c) to effect  any  reclassification  or change  of  outstanding  Shares of
Common Stock,  or  consolidation  or merger,  or sale,  lease or conveyance of a
majority of its property, of the type addressed in Section 6; or

     (d) to effect any  voluntary or  involuntary  liquidation,  dissolution  or
winding-up of the Company;

then, and in any one or more of such cases, the Company shall give written
notice thereof to the Holder at least 20 days prior to the date on which (i) the
books of the Company shall close, or a record date shall be set, for any such
action described in Section 7(a) or (b) or (ii) such reclassification, change,
consolidation, merger, sale, lease, conveyance, liquidation, dissolution or
winding-up shall be effective, as the case may be.

     8. Expenses.  The Company shall pay all reasonable  costs,  fees, taxes and
expenses payable in connection with the preparation,  issuance and delivery from
time to time of Warrants  and of Shares of Common Stock issued upon the exercise
of Warrants.  Notwithstanding  anything to the contrary  contained  herein,  the
Holder shall be liable to pay all stock transfer taxes, if any.

     9.  Securities  Act. In order to exercise  the  Warrant,  the Holder  shall
certify that it is acquiring the Shares of Common Stock for investment  only and
not with a view to distribution.  This Warrant and the Shares of Common Stock or
other  securities  issued upon  exercise of this  Warrant  shall be subject to a
stop-transfer order (except with respect to a transfer by the original Holder of
this Warrant to its partners) and the certificate or certificates evidencing any
such Shares or securities shall bear the following legend, unless in the opinion
of counsel to the Holder  exercising  any Warrant such legend is not required in
order to comply with the  Securities  Act of 1933,  as amended (the  "Securities
Act"),  which  opinion  shall be  satisfactory  to the  Company,  or unless  the
offering and sale of the Shares or other securities  issued upon exercise of the
Warrants have been  registered  under the Securities  Act, and in each such case
such restriction on transfer and legend shall be removed:

                  "THE SHARES (OR OTHER SECURITIES) REPRESENTED BY THIS
                  CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT
                  BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
                  OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION.
                  SUCH SECURITIES MAY NOT BE SOLD, ASSIGNED OR OTHERWISE
                  TRANSFERRED EXCEPT UPON SUCH REGISTRATION OR UPON DELIVERY TO
                  THE CORPORATION OF AN OPINION OF COUNSEL REASONABLY
                  SATISFACTORY TO THE CORPORATION STATING THAT SUCH SALE,
                  ASSIGNMENT OR TRANSFER IS EXEMPT FROM REGISTRATION UNDER SUCH
                  ACT AND LAWS."

                                       9
<PAGE>

     10. Loss of Warrant.  The Company will execute and deliver a new Warrant of
like tenor and date upon receipt by the Company of evidence  satisfactory  to it
of the loss,  theft,  destruction or mutilation of this Warrant,  and (i) in the
case of loss,  theft or  destruction,  upon  receipt by the Company of indemnity
satisfactory  to  the  Company,  or  (ii)  in  the  case  of  mutilation,   upon
presentation, surrender, and cancellation of this Warrant.

     11. No Rights or Liabilities as a  Stockholder.  Nothing  contained in this
Warrant shall be construed as conferring  upon the Holder hereof any rights as a
stockholder  of the Company or as imposing  any  obligation  upon such Holder to
purchase  any  securities  or as imposing  any  liability  upon such Holder as a
stockholder of the Company,  whether such obligation or liability is asserted by
the Company or by creditors of the Company at law or in equity.

     12.  Governing  Law.  This  Warrant  shall be governed by and  construed in
accordance with the internal laws of the State of Texas.

     13. Remedies. The Company stipulates that the remedies at law of the Holder
of this Warrant in the event of any default or threatened default by the Company
in the  performance  of or compliance  with any of the terms of this Warrant are
not and will not be adequate,  and that,  to the extent  permitted by applicable
law,  such  terms may be  specifically  enforced  by a decree  for the  specific
performance  of any agreement  contained  herein or by an  injunction  against a
violation of any of the terms hereof or otherwise;  provided,  however, that (i)
the Company shall not seek specific enforcement of its rights under this Warrant
unless the Holder is acting in  contravention  of its  obligations or outside of
its rights  under this Warrant and (ii) the Company  hereby  agrees to indemnify
and hold  harmless  the Holder from any costs,  liabilities,  losses or expenses
incurred by the Holder  caused by or  otherwise  associated  with a claim by the
Company for specific  enforcement of its rights under this Warrant if such claim
is  not a  claim  permitted  to be  made  pursuant  to  clause  (i)  immediately
preceding.

     14. Notices. All notices and other communications provided for herein shall
be  delivered  or  mailed  by  registered  or  certified  mail,  return  receipt
requested,  postage prepaid,  addressed (a) if to any Holder of any Warrant,  to
the address of such Holder as set forth in the Warrant Register or to such other
address as such Holder has notified the Company of in writing,  or (b) if to the
Company,  to the address set forth in Section 1 or to such other  address as the
Company has  notified  such Holder of pursuant to Section 1 and this Section 14;
provided,  however,  that the exercise of any Warrant  shall be effective in the
manner  provided in Section 1. All notices given  pursuant to this Warrant shall
be deemed to be effective upon receipt  thereof by the party to whom such notice
is  addressed.

     15. Miscellaneous. This Warrant and any term hereof may be changed, waived,
discharged  or terminated  only by an instrument in writing  signed by the party
against which  enforcement of such change,  waiver,  discharge or termination is
sought.  Any provision of this Warrant that shall be 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

                                       10
<PAGE>

jurisdiction shall not invalidate or render  unenforceable such provision in any
other  jurisdiction.  The Company  waives any provision of law that shall render
any provision of this Warrant illegal or  unenforceable in any respect except to
the extent otherwise  prohibited by law. The section and paragraph headings used
in this Warrant are inserted for convenience  only and shall not be used for any
interpretive purpose.

                            [Signature page follows]

                                       11
<PAGE>

         IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its Chief Executive Officer.

Dated: __________, 2004           GEXA CORP.,
                                  a Texas corporation

                                  By:_____________________________________
                                           Neil Leibman, Chief Executive Officer

                                       12
<PAGE>

                              EXHIBIT A TO WARRANT

To: ______________________

    ______________________

    ______________________

                              ELECTION TO EXERCISE

         The undersigned hereby exercises his, her or its rights to subscribe
for Shares of Common Stock covered by the within Warrant and tenders the Warrant
and payment herewith in the amount of $_____ in accordance with the terms
thereof, and requests that certificates for such shares in the following
denominations be issued in the name of, and delivered to, the person[s] at the
following address[es].

                 ________________________________________________

                 ________________________________________________

                 ________________________________________________
               (Print Address[es] and Social Security Number[s] or
                Employer Identification Number[s] as applicable)

and, if said number of shares shall not be all the shares covered by the within
Warrant, that a new Warrant for the balance remaining of the shares covered by
the within Warrant be registered in the name of, and delivered to, the
undersigned at the address stated below:

Date:____________                       Name:___________________________________
                                                        (Print)
                                             ___________________________________
                                                       (Signature)

                                     Address:___________________________________

                                             ___________________________________

                                      A-1CREDIT AGREEMENT

                                   Dated as of

                                  JULY 8, 2004

                                      among

                                   GEXA CORP.

                                  as Borrower,

                HIGHBRIDGE/ZWIRN SPECIAL OPPORTUNITIES FUND, L.P.
                            as Administrative Agent,

                                       and

                            THE LENDERS PARTY HERETO

<PAGE>

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>

                                                                                                               Page

<S>                                                                                                              <C>
ARTICLE I Definitions and Accounting Matters......................................................................1

         Section 1.01      Terms Defined Above....................................................................1
         Section 1.02      Certain Defined Terms..................................................................1
         Section 1.03      Terms Generally; Rules of Construction................................................15
         Section 1.04      Accounting Terms and Determinations; GAAP.............................................16

ARTICLE II The Credits...........................................................................................16

         Section 2.01      Commitments...........................................................................16
         Section 2.02      Loans and Borrowings..................................................................16
         Section 2.03      Requests for Borrowings...............................................................17
         Section 2.04      Funding of Borrowings.................................................................17
         Section 2.05      Termination, and Reduction of Aggregate Maximum Credit Amounts........................18

ARTICLE III Payments of Principal and Interest; Prepayments; Fees................................................19

         Section 3.01      Repayment of Loans....................................................................19
         Section 3.02      Interest..............................................................................19
         Section 3.03      Prepayments...........................................................................19
         Section 3.04      Commitment Fees.......................................................................20
         Section 3.05      Anniversary Fees......................................................................20
         Section 3.06      Arranger Fees.........................................................................20

ARTICLE IV Payments; Pro Rata Treatment; Sharing of Set-offs.....................................................20

         Section 4.01      Payments Generally; Pro Rata Treatment; Sharing of Set-offs...........................20
         Section 4.02      Presumption of Payment by the Borrower................................................21
         Section 4.03      Certain Deductions by the Administrative Agent........................................22

ARTICLE V Increased Costs; Taxes.................................................................................22

         Section 5.01      Increased Costs.......................................................................22
         Section 5.02      Taxes.................................................................................22
         Section 5.03      Mitigation Obligations; Replacement of Lenders........................................23

ARTICLE VI Conditions Precedent..................................................................................24

         Section 6.01      Effective Date........................................................................24
         Section 6.02      Each Credit Event.....................................................................26

ARTICLE VII Representations and Warranties.......................................................................27

         Section 7.01      Organization; Powers..................................................................27
         Section 7.02      Authority; Enforceability.............................................................27
         Section 7.03      Approvals; No Conflicts...............................................................27
         Section 7.04      Financial Condition; No Material Adverse Change.......................................28
         Section 7.05      Litigation............................................................................28
         Section 7.06      Environmental Matters.................................................................29
         Section 7.07      Compliance with the Laws and Agreements; Permits; No Defaults.........................30
         Section 7.08      Investment Company Act................................................................30
         Section 7.09      Public Utility Holding Company Act....................................................30
         Section 7.10      Taxes.................................................................................31
         Section 7.11      ERISA.................................................................................31

</TABLE>

                                       i
<PAGE>
<TABLE>
<CAPTION>

<S>              <C>                                                                                            <C>
         Section 7.12      Disclosure; No Material Misstatements.................................................32
         Section 7.13      Insurance.............................................................................32
         Section 7.14      Restrictive Agreements................................................................33
         Section 7.15      Subsidiaries..........................................................................33
         Section 7.16      Location of Business and Offices......................................................33
         Section 7.17      Properties; Titles, Etc...............................................................33
         Section 7.18      Swap Agreements.......................................................................34
         Section 7.19      Use of Loans..........................................................................34
         Section 7.20      Solvency..............................................................................34
         Section 7.21      Casualty Events.......................................................................34
         Section 7.22      Material Agreements...................................................................34
         Section 7.23      Reliance..............................................................................35
         Section 7.24      Location of Bank Accounts.............................................................35
         Section 7.25      Intellectual Property.................................................................35
         Section 7.26      No Brokers............................................................................36
         Section 7.27      Customers and Suppliers...............................................................36
         Section 7.28      No Bankruptcy Filing..................................................................36
         Section 7.29      Schedules.............................................................................36
         Section 7.30      PUC and ERCOT Regulations.............................................................36
         Section 7.31      Small Business Concerns...............................................................36

ARTICLE VIII Affirmative Covenants...............................................................................37

         Section 8.01      Financial Statements; Other Information...............................................37
         Section 8.02      Notices of Material Events............................................................41
         Section 8.03      Existence; Conduct of Business........................................................42
         Section 8.04      Payment of Obligations................................................................42
         Section 8.05      Performance of Obligations under Loan Documents.......................................42
         Section 8.06      Operation and Maintenance of Properties...............................................42
         Section 8.07      Insurance.............................................................................42
         Section 8.08      Books and Records; Inspection Rights..................................................43
         Section 8.09      Compliance with Laws..................................................................43
         Section 8.10      Environmental Matters.................................................................43
         Section 8.11      Further Assurances....................................................................44
         Section 8.12      Fiscal Year...........................................................................44
         Section 8.13      Additional Guarantors.................................................................44
         Section 8.14      ERISA Compliance......................................................................45
         Section 8.15      Board Resolutions.....................................................................45
         Section 8.16      Congestion Charges....................................................................45
         Section 8.17      Key Personnel.........................................................................45
         Section 8.18      Material Agreement....................................................................46
         Section 8.19      Board of Directors....................................................................46
         Section 8.20      Fidelity Bonding......................................................................46

ARTICLE IX Negative Covenants....................................................................................46

         Section 9.01      Financial Covenants...................................................................46
         Section 9.02      Debt..................................................................................47
         Section 9.03      Liens.................................................................................48
         Section 9.04      Restricted Payments...................................................................48
         Section 9.05      Investments, Loans and Advances.......................................................48
         Section 9.06      Nature of Business....................................................................49
         Section 9.07      Limitation on Leases..................................................................49
         Section 9.08      Sale and Leasebacks...................................................................50
</TABLE>

                                       ii
<PAGE>
<TABLE>
<CAPTION>

<S>              <C>                                                                                            <C>
         Section 9.09      Proceeds of Notes.....................................................................50
         Section 9.10      ERISA Compliance......................................................................50
         Section 9.11      Sale or Discount of Receivables.......................................................51
         Section 9.12      Mergers, Etc..........................................................................51
         Section 9.13      Sale of Properties....................................................................51
         Section 9.14      Environmental Matters.................................................................52
         Section 9.15      Transactions with Affiliates..........................................................52
         Section 9.16      Material Agreements...................................................................52
         Section 9.17      Capital Expenditures..................................................................52
         Section 9.18      Subsidiaries..........................................................................52
         Section 9.19      Negative Pledge Agreements; Dividend Restrictions.....................................52
         Section 9.20      Swap Agreements.......................................................................53
         Section 9.21      Certain Activities....................................................................53
         Section 9.22      Designation of Unrestricted Subsidiary................................................53

ARTICLE X Events of Default; Remedies............................................................................54

         Section 10.01     Events of Default.....................................................................54
         Section 10.02     Remedies..............................................................................56

ARTICLE XI The Administrative Agent..............................................................................57

         Section 11.01     Appointment; Powers...................................................................57
         Section 11.02     Duties and Obligations of Administrative Agent........................................57
         Section 11.03     Action by Administrative Agent........................................................57
         Section 11.04     Reliance by Administrative Agent......................................................58
         Section 11.05     Subagents.............................................................................58
         Section 11.06     Resignation or Removal of Administrative Agent........................................58
         Section 11.07     Agents as Lenders.....................................................................59
         Section 11.08     No Reliance...........................................................................59
         Section 11.09     Authority of Administrative Agent to Release Collateral and Liens.....................59

ARTICLE XII Miscellaneous........................................................................................60

         Section 12.01     Notices...............................................................................60
         Section 12.02     Waivers; Amendments...................................................................60
         Section 12.03     Expenses, Indemnity; Damage Waiver....................................................61
         Section 12.04     Successors and Assigns................................................................63
         Section 12.05     Survival; Revival; Reinstatement......................................................65
         Section 12.06     Counterparts; Integration; Effectiveness..............................................66
         Section 12.07     Severability..........................................................................67
         Section 12.08     Right of Setoff.......................................................................67
         Section 12.09     GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS............................67
         Section 12.10     Headings..............................................................................69
         Section 12.11     Confidentiality.......................................................................69
         Section 12.12     Interest Rate Limitation..............................................................69
         Section 12.13     EXCULPATION PROVISIONS................................................................70
         Section 12.14     Collateral Matters; Swap Agreements...................................................71
         Section 12.15     No Third Party Beneficiaries..........................................................71
         Section 12.16     Securitization........................................................................71
         Section 12.17     USA Patriot Act Notice................................................................72
</TABLE>

                                      iii
<PAGE>

                         Annexes, Exhibits and Schedules
                         -------------------------------

Annex I                 List of Maximum Credit Amounts

Exhibit A               Form of Note
Exhibit B               Form of Borrowing Request
Exhibit C               Form of Warrant Agreement
Exhibit D               Form of Compliance Certificate
Exhibit E               Form of Legal Opinion of Porter & Hedges, LLP, special
                        counsel to the Borrower
Exhibit F-1             Security Instruments
Exhibit F-2             Form of Security Agreement
Exhibit G               Form of Assignment and Assumption
Exhibit H               Board Resolutions

Schedule 1.02           Approved Counterparties
Schedule 7.05           Litigation
Schedule 7.06           Environmental Matters
Schedule 7.13           Insurance
Schedule 7.15           Subsidiaries and Partnerships
Schedule 7.17           Real Property
Schedule 7.18           Swap Agreements
Schedule 7.22           Material Agreements
Schedule 7.24           Location of Bank Accounts
Schedule 7.25           Intellectual Property
Schedule 9.05           Investments
Schedule 9.22           Unrestricted Subsidiaries

                                       iv
<PAGE>

         This CREDIT AGREEMENT dated as of July 8, 2004, is among: Gexa Corp., a
corporation duly formed and existing under the laws of the State of Texas, (the
"Borrower"); each of the Lenders from time to time party hereto;
Highbridge/Zwirn Special Opportunities Fund, L.P. (in its individual capacity,
"HZ"), as administrative agent for the Lenders (in such capacity, together with
its successors in such capacity, the "Administrative Agent").

                                 R E C I T A L S

         A. The Borrower has requested that the Lenders provide certain loans to
and extensions of credit on behalf of the Borrower.

         B. The Lenders have agreed to make such loans and extensions of credit
subject to the terms and conditions of this Agreement.

         C. In consideration of the mutual covenants and agreements herein
contained and of the loans, extensions of credit and commitments hereinafter
referred to, the parties hereto agree as follows:

                                   ARTICLE I
                       Definitions and Accounting Matters

     Section 1.01 Terms  Defined  Above.  As used in this  Agreement,  each term
defined above has the meaning indicated above.

     Section  1.02  Certain  Defined  Terms.  As  used in  this  Agreement,  the
following terms have the meanings specified below:

         "Affiliate" means, with respect to a specified Person, another Person
that directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.

         "Aggregate Maximum Credit Amounts" at any time shall equal the sum of
the Maximum Credit Amounts of all Lenders.

         "Agreement" means this Credit Agreement, as the same may from time to
time be amended, modified, supplemented or restated.

         "Anniversary Fee" has the meaning assigned such term in Section 3.05.

         "Applicable Percentage" means, with respect to any Lender, the
percentage set forth on Annex I as may be modified from time to time as a result
of any Assignment and Assumption by any Lender.

         "Applicable Rate" means, for any day, with respect to any Loan, until
the Maturity Date, fourteen percent (14%) per annum, but in no event to exceed
the Highest Lawful Rate.

         "Approved Counterparty" means (a) any Lender or any Affiliate of a
Lender, (b) any other Person whose long term senior unsecured debt rating is
A-/A3 by S&P or Moody's (or their equivalent) or higher, or (c) with regard to
Swap Agreements in respect of commodities, and subject to the conditions set
forth therein, any other Person listed on Schedule 1.02.

                                       1
<PAGE>

         "Assignment and Assumption" means an assignment and assumption entered
into by a Lender and an assignee (with the consent of any party whose consent is
required by Section 12.04(b)), and accepted by the Administrative Agent, in the
form of Exhibit G or any other form approved by the Administrative Agent.

         "Availability" means, at any time, the difference between (i) the total
Commitments and (ii) the aggregate outstanding principal amount of all Loans.

         "Board" means the Board of Governors of the Federal Reserve System of
the United States of America or any successor Governmental Authority.

         "Board Resolution" means those certain resolutions of the Board of
Directors of the Borrower, a copy of which is attached hereto as Exhibit H.

         "Borrowing" means Loans made on the same date.

         "Borrowing Request" means a request by the Borrower for a Borrowing in
accordance with Section 2.03.

         "Business Day" means any day that is not a Saturday, Sunday or other
day on which commercial banks in New York City or Houston, Texas are authorized
or required by law to remain closed.

         "Capital Expenditures" means, in respect of any Person, for any period,
the aggregate (determined without duplication) of all expenditures and costs
that are capital in nature and any other expenditures that are capitalized on
the balance sheet of such Person in accordance with GAAP.

         "Capital Leases" means, in respect of any Person, all leases which
shall have been, or should have been, in accordance with GAAP, recorded as
capital leases on the balance sheet of the Person liable (whether contingent or
otherwise) for the payment of rent thereunder.

         "Cash and Cash Equivalents" means all cash, deposit or securities
account balances, certificates of deposit or other financial instruments
properly classified as cash or cash equivalents under GAAP.

         "Cash Collateral Account" means that certain account of Borrower's
maintenance with JPMorganChase Bank, Account 11610142263 which is utilized to
make deposits in order to cash collateralize certain letters of credit issued by
JPMorganChase Bank.

         "Casualty Event" means any loss, casualty or other insured damage to,
or any nationalization, taking under power of eminent domain or by condemnation
or similar proceeding of, any Property of the Borrower or any of its
Subsidiaries having a fair market value in excess of $100,000.

                                       2
<PAGE>

         "Catalyst Debt" means any loans or borrowed money under the Loan
Agreement dated as of July 16, 2003 between Borrower and the Catalyst Fund, Ltd.

         "Change in Control" "Change in Control" means (a) the acquisition of
ownership, directly or indirectly, beneficially or of record, by any Person or
group (within the meaning of the Securities Exchange Act of 1934 and the rules
of the SEC thereunder as in effect on the date hereof) other than Neil Leibman,
of Equity Interests representing more than 49% of the aggregate ordinary voting
power represented by the issued and outstanding Equity Interests of the
Borrower, (b) occupation of a majority of the seats (other than vacant seats) on
the board of directors of the Borrower by Persons who were neither (i) nominated
by the board of directors of the Borrower nor (ii) appointed by directors so
nominated, (c) the acquisition of ownership, directly or indirectly beneficially
or of record of any Equity Interest of any Restricted Subsidiary other than by
Borrower or a Restricted Subsidiary of Borrower (excluding Gexa/Ciro) or (d)
Neil Leibman owns Equity Interests of Borrower representing less than 25% of the
aggregate ordinary voting power represented by the issued and outstanding Equity
Interests of the Borrower.

         "Change in Law" means (a) the adoption of any law, rule or regulation
after the date of this Agreement, (b) any change in any law, rule or regulation
or in the interpretation or application thereof by any Governmental Authority
after the date of this Agreement or (c) compliance by any Lender (or, for
purposes of Section 5.01(a)), by any lending office of such Lender or by such
Lender's holding company, if any) with any request, guideline or directive
(whether or not having the force of law) of any Governmental Authority made or
issued after the date of this Agreement.

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

         "Collateral" means all accounts receivable, equipment, inventory, bank
accounts, general intangibles including, contracts, real estate and any other
asset or property of the Borrower and its Restricted Subsidiaries.

         "Commitment" means, with respect to each Lender, the commitment of such
Lender to make Loans hereunder, expressed as an amount representing the maximum
aggregate amount of such Lender's Loan hereunder. The amount representing each
Lender's Commitment is set forth on Annex I. The aggregate amount of the
Commitments of the Lenders is $15,000,000.

         "Commitment Fee Rate" means two percent (2%) per annum.

         "Consolidated Interest Expense" means, for any period, total interest
expense and prepayment charges (including that which is capitalized and that
which is attributable to capital leases, in accordance with GAAP) of the
Borrower and its Consolidated Subsidiaries on a consolidated basis with respect
to all outstanding Debt of the Borrower and its Consolidated Subsidiaries
including, without limitation, all commissions, discounts and other fees and
charges owed with respect to any letters of credit, amortization of debt,
discount, expense, other deferred financing costs, but excluding amounts payable
under the TXU Agreements. If any Consolidated Subsidiary is designated as an
Unrestricted Subsidiary in accordance with Section 9.22, then on and after the
date of such designation, Consolidated Interest Expense shall be computed for
all prior periods as if such Subsidiary was not a Consolidated Subsidiary during
such periods.

                                       3
<PAGE>

         "Consolidated Subsidiaries" means each Restricted Subsidiary of the
Borrower (whether now existing or hereafter created or acquired) the financial
statements of which shall be (or should have been) consolidated with the
financial statements of the Borrower in accordance with GAAP.

         "Consulting Agreement" means the Consulting Agreement between Spectrum
and Borrower dated as of August 1, 2003.

         "Control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise. For the
purposes of this definition, and without limiting the generality of the
foregoing, any Person that owns directly or indirectly 10% or more of the Equity
Interests having ordinary voting power for the election of the directors or
other governing body of a Person (other than as a limited partner of such other
Person) will be deemed to "control" such other Person. "Controlling" and
"Controlled" have meanings correlative thereto.

         "Debt" means, for any Person, the sum of the following (without
duplication): (a) all obligations of such Person for borrowed money or evidenced
by bonds, bankers' acceptances, debentures, notes or other similar instruments;
(b) all obligations of such Person (whether contingent or otherwise) in respect
of letters of credit, surety or other bonds and similar instruments; (c) all
accounts payable and all accrued expenses, liabilities or other obligations of
such Person to pay the deferred purchase price of Property or services; (d) all
obligations under Capital Leases; (e) all obligations under Synthetic Leases;
(f) all Debt (as defined in the other clauses of this definition) of others
secured by a Lien on any Property of such Person, whether or not such Debt is
assumed by such Person; (g) all Debt (as defined in the other clauses of this
definition) of others guaranteed by such Person or in which such Person
otherwise assures a creditor against loss of the Debt (howsoever such assurance
shall be made) to the extent of the lesser of the amount of such Debt and the
maximum stated amount of such guarantee or assurance against loss; (h) all
obligations or undertakings of such Person to maintain or cause to be maintained
the financial position or covenants of others or to purchase the Debt or
Property of others; (i) obligations to deliver commodities, goods or services,
including, without limitation, electricity, in consideration of one or more
advance payments, other than electricity balancing arrangements in the ordinary
course of business; (j) obligations to pay for goods or services whether or not
such goods or services are actually received or utilized by such Person; (k) any
Debt of a partnership for which such Person is liable either by agreement, by
operation of law or by a Governmental Requirement but only to the extent of such
liability; and (l) Disqualified Capital Stock. The Debt of any Person shall
include all obligations of such Person of the character described above to the
extent such Person remains legally liable in respect thereof notwithstanding
that any such obligation is not included as a liability of such Person under
GAAP.

         "Default" means any event or condition which constitutes an Event of
Default or that upon notice, lapse of time or both would, unless cured or
waived, become an Event of Default.

                                       4
<PAGE>

         "Disqualified Capital Stock" means any Equity Interest that, by its
terms (or by the terms of any security into which it is convertible or for which
it is exchangeable) or upon the happening of any event, matures or is
mandatorily redeemable for any consideration other than other Equity Interests
(which would not constitute Disqualified Capital Stock), pursuant to a sinking
fund obligation or otherwise, or is convertible or exchangeable for Debt or
redeemable for any consideration other than other Equity Interests (which would
not constitute Disqualified Capital Stock) at the option of the holder thereof,
in whole or in part, on or prior to the date that is one year after the earlier
of (a) the Maturity Date and (b) the date on which there are no Loans or other
obligations hereunder outstanding and all of the Commitments are terminated.

     "dollars" or "$" refers to lawful money of the United States of America.

         "EBITDA" means, for any period, the sum of (a) the consolidated net
income (or loss) of the Borrower and its Consolidated Subsidiaries for such
period determined in accordance with GAAP plus (b) to the extent included in the
determination of such net income (or loss), the consolidated charges for such
period for interest, depreciation, depletion and amortization plus (or, if there
is a benefit from income taxes, minus) (c) to the extent included in the
determination of such net income, the amount of the provision for or benefit
from income taxes; provided that in determining such consolidated net income and
such consolidated charges, there shall be excluded therefrom (to the extent
otherwise included therein) (i) the net income (but not loss) of, and charges
for interest, depreciation, depletion and amortization of, any Person which is
subject to any restriction, contractual or otherwise, which prevents the payment
of dividends or distributions or the making of dividends or distributions on
Equity Interests of such Person to the extent of such restrictions, (ii) pre-tax
gains or losses on the sale, transfer or other disposition of any property by
the Borrower or its Consolidated Subsidiaries (other than sales, transfers and
other dispositions in the ordinary course of business), (iii) all extraordinary
gains and extraordinary losses, prior to applicable income taxes, (iv) any item
constituting the cumulative effect of a change in accounting principles, prior
to applicable income taxes, (v) the net income (or loss) of any Person acquired
in a pooling-of-interests transaction for any period prior to the date of such
transaction; (vi) any gains on collections from insurance policies or
settlement; provided further that in determining EBITDA, there shall be
disregarded the after-tax effects of any non-cash or non-recurring gains, losses
or adjustments; provided further that if during such period the Borrower or any
of its Consolidated Subsidiaries acquires or disposes of any Person (or any
Equity Interest in any Person other than the Borrower) or all or substantially
all of the assets of any Person, the EBITDA attributable to such assets (or an
amount equal to the percentage of ownership of the Borrower or Consolidated
Subsidiary, as the case may be, in such Person so acquired or disposed times the
EBITDA of such Person) for such period determined on a pro forma basis (which
determination, in each case, shall be subject to approval of the Administrative
Agent, not to be unreasonably withheld) shall be included (in the case of an
acquisition) or excluded (in the case of a disposition) as EBITDA for such
period; except that during the portion of such period that follows such
acquisition or disposition, the computation in respect of EBITDA of such Person
or such assets, as the case may be, shall be made on the basis of actual (rather
than pro forma) results. If any Consolidated Subsidiary is designated as an
Unrestricted Subsidiary in accordance with Section 9.22, then on and after the
date of such designation, EBITDA shall be computed for all prior periods as if
such Subsidiary was not a Consolidated Subsidiary during such periods.

                                       5
<PAGE>

         "Effective Date" means the date on which the conditions specified in
Section 6.01 are satisfied (or waived in accordance with Section 12.02).

         "Environmental Laws" means any and all Governmental Requirements
pertaining in any way to health, safety the environment or the preservation or
reclamation of natural resources, in effect in any and all jurisdictions in
which the Borrower or any Subsidiary is conducting or at any time has conducted
business, or where any Property of the Borrower or any Subsidiary is located,
including without limitation, the Oil Pollution Act of 1990 ("OPA"), as amended,
the Clean Air Act, as amended, the Comprehensive Environmental, Response,
Compensation, and Liability Act of 1980 ("CERCLA"), as amended, the Federal
Water Pollution Control Act, as amended, the Occupational Safety and Health Act
of 1970, as amended, the Resource Conservation and Recovery Act of 1976
("RCRA"), as amended, the Safe Drinking Water Act, as amended, the Toxic
Substances Control Act, as amended, the Superfund Amendments and Reauthorization
Act of 1986, as amended, the Hazardous Materials Transportation Act, as amended,
and other environmental conservation or protection Governmental Requirements.
The terms "hazardous substance" and "release" (or "threatened release") have the
meanings specified in CERCLA, and the terms "solid waste" and "disposal" (or
"disposed") have the meanings specified in RCRA; provided, however, that (a) in
the event either OPA, CERCLA, RCRA or Section 91.1011 is amended so as to
broaden the meaning of any term defined thereby, such broader meaning shall
apply subsequent to the effective date of such amendment and (b) to the extent
the laws of the state or other jurisdiction in which any Property of the
Borrower or any Subsidiary is located establish a meaning for "hazardous
substance," "release," "solid waste," or "disposal" which is broader than that
specified in either OPA, CERCLA, RCRA or Section 91.1011, such broader meaning
shall apply.

         "Equity Interests" means shares of capital stock, partnership
interests, membership interests in a limited liability company, beneficial
interests in a trust or other equity ownership interests in a Person, and any
warrants, options or other rights entitling the holder thereof to purchase or
acquire any such Equity Interest.

         "ERCOT" means Electric Reliability Counsel of Texas.

         "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute.

         "ERISA Affiliate" means each trade or business (whether or not
incorporated) which together with the Borrower or a Subsidiary would be deemed
to be a "single employer" within the meaning of section 4001(b)(1) of ERISA or
subsections (b), (c), (m) or (o) of section 414 of the Code.

         "ERISA Event" means (a) a "Reportable Event" described in section 4043
of ERISA and the regulations issued thereunder, (b) the withdrawal of the
Borrower, a Subsidiary or any ERISA Affiliate from a Plan during a plan year in
which it was a "substantial employer" as defined in section 4001(a)(2) of ERISA,
(c) the filing of a notice of intent to terminate a Plan or the treatment of a
Plan amendment as a termination under section 4041 of ERISA, (d) the institution
of proceedings to terminate a Plan by the PBGC, (e) receipt of a notice of
withdrawal liability pursuant to Section 4202 of ERISA or (f) any other event or
condition which might constitute grounds under section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan.

                                       6
<PAGE>

         "Event of Default" has the meaning assigned such term in Section 10.01.

         "Excepted Liens" means: (a) Liens for Taxes, assessments or other
governmental charges or levies that are not delinquent or that are being
contested in good faith by appropriate action and for which adequate reserves
have been maintained in accordance with GAAP; (b) Liens in connection with
workers' compensation, unemployment insurance or other social security, old age
pension or public liability obligations that are not delinquent or that are
being contested in good faith by appropriate action and for which adequate
reserves have been maintained in accordance with GAAP; (c) statutory landlord's
liens, operators', vendors', carriers', warehousemen's, repairmen's, mechanics',
suppliers', workers', materialmen's, construction or other like Liens arising by
operation of law in the ordinary course of business or incident to the operation
and maintenance of Properties each of which is in respect of obligations that
are not delinquent or that are being contested in good faith by appropriate
action and for which adequate reserves have been maintained in accordance with
GAAP; (d) Liens arising solely by virtue of any statutory or common law
provision relating to banker's liens, rights of set-off or similar rights and
remedies and burdening only deposit accounts or other funds maintained with a
creditor depository institution, provided that no such deposit account is a
dedicated cash collateral account or is subject to restrictions against access
by the depositor in excess of those set forth by regulations promulgated by the
Board and no such deposit account is intended by Borrower or any of its
Restricted Subsidiaries to provide collateral to the depository institution; (e)
easements, restrictions, servitudes, permits, conditions, covenants, exceptions
or reservations in any Property of the Borrower or any Restricted Subsidiary for
the purpose the joint or common use of real estate, rights of way, facilities
and equipment, which in the aggregate do not materially impair the use of such
Property for the purposes of which such Property is held by the Borrower or any
Restricted Subsidiary or materially impair the value of such Property subject
thereto; (f) Liens on cash or securities pledged to secure performance of
letters of credit, tenders, surety and appeal bonds, government contracts,
performance and return of money bonds, bids, trade contracts, leases, statutory
obligations, regulatory obligations and other obligations of a like nature
incurred in the ordinary course of business and (g) judgment and attachment
Liens not giving rise to an Event of Default, provided that any appropriate
legal proceedings which may have been duly initiated for the review of such
judgment shall not have been finally terminated or the period within which such
proceeding may be initiated shall not have expired and no action to enforce such
Lien has been commenced; provided, further that Liens described in clauses (a)
through (d) shall remain "Excepted Liens" only for so long as no action to
enforce such Lien has been commenced and no intention to subordinate the first
priority Lien granted in favor of the Administrative Agent and the Lenders is to
be hereby implied or expressed by the permitted existence of such Excepted
Liens. In no event will any Lien on property of the Borrower or any Restricted
Subsidiary that secures any obligation of an Unrestricted Subsidiary be an
Excepted Lien.

         "Excluded Taxes" means, with respect to the Administrative Agent, any
Lender, or any other recipient of any payment to be made by or on account of any
obligation of the Borrower or any Guarantor hereunder or under any other Loan
Document, (a) income or franchise taxes imposed on (or measured by) its net
income by the United States of America or such other jurisdiction under the laws
of which such recipient is organized or in which its principal office is located
or, in the case of any Lender, in which its applicable lending office is

                                       7
<PAGE>

located, and (b) any branch profits taxes imposed by the United States of
America or any similar tax imposed by any other jurisdiction in which the
Borrower or any Guarantor is located.

         "Federal Funds Effective Rate" means, for any day, the weighted average
(rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published on the next succeeding Business
Day by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day that is a Business Day, the average (rounded upwards, if
necessary, to the next 1/100 of 1%) of the quotations for such day for such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it.

         "Financial Officer" means, for any Person, the chief financial officer,
principal accounting officer, treasurer or controller of such Person. Unless
otherwise specified, all references herein to a Financial Officer means a
Financial Officer of the Borrower.

         "Financial Statements" means the financial statement or statements of
the Borrower and its Consolidated Subsidiaries referred to in Section 7.04(a).

         "Fixed Charge Coverage Ratio" means, with respect to any Person for any
period, the ratio of (i) the TTM EBITDA of such Person for such period, to (ii)
the sum of (A) all principal of Debt (net of Debt in favor of TXU related to the
TXU Agreement) of such Person and its Consolidated Subsidiaries scheduled to be
paid during such period to the extent there is not an equivalent permanent
reduction in the commitments thereunder, plus (B) TTM Interest Expense and any
fees payable in respect of Debt (net of Debt in favor of TXU related to the TXU
Agreement) of such Person and its Consolidated Subsidiaries during such period,
plus (C) income taxes paid or payable by such Person and its Consolidated
Subsidiaries during such 12 month period, plus (D) cash dividends or
distributions paid by such Person and its Consolidated Subsidiaries (other than,
in the case of the Borrower, dividends or distributions paid to the Borrower or
its wholly-owned Subsidiaries) during such period, plus (E) all amounts paid or
payable by such Person and its Consolidated Subsidiaries on Capitalized Lease
Obligations having a scheduled due date during such period. In determining the
Fixed Charge Coverage Ratio for a particular period (1) pro forma effect will be
given to: (a) the incurrence, repayment or retirement of any Debt by such Person
and its Consolidated Subsidiaries since the first day of such period as if such
Debt was incurred, repaid or retired on the first day of such period and (b) the
acquisition (whether by purchase, merger or otherwise) or disposition (whether
by sale, merger or otherwise) of any property or assets acquired or disposed of
by such Person and its Consolidated Subsidiaries since the first day of such
period, as if such acquisition or disposition occurred on the first day of such
period; (2) interest on Debt bearing a floating interest rate will be computed
as if the rate as of the last day of the period had been the applicable rate for
the entire period; (3) if such Debt bears, at the option of such Person and its
Consolidated Subsidiaries, a fixed or floating rate of interest, interest
thereon will be computed by applying, at the option of such Person, either the
fixed or floating rate; and (4) interest on Debt under a revolving credit
facility will be computed based upon the average daily balance of such Debt
during such period.

                                       8
<PAGE>

         "General and Administrative Costs" means normal and customary expenses
and costs that are classified as general and administrative costs, including
consulting fees, salary, rent, supplies, travel and entertainment, shareholder
and board member expense, insurance, accounting and legal and related fees
required to manage the affairs of the Borrower.

         "GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time subject to the terms and
conditions set forth in Section 1.04.

         "Governmental Authority" means the government of the United States of
America, any other nation or any political subdivision thereof, whether state or
local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government over the Borrower, any Subsidiary, any of their Properties, the
Agent, or any Lender.

         "Governmental Requirement" means any law, statute, code, ordinance,
order, determination, rule, regulation, judgment, decree, injunction, franchise,
permit, certificate, license, authorization or other directive or requirement,
whether now or hereinafter in effect, including, without limitation,
Environmental Laws, energy regulations and occupational, safety and health
standards or controls, of any Governmental Authority.

         "Guarantor" means each Restricted Subsidiary that guarantees the
Indebtedness pursuant to Section 8.13(a).

         "Guaranty Agreement" means an agreement executed by the Guarantors in
substantially the form of Exhibit F-2 unconditionally guarantying on a joint and
several basis, payment of the Indebtedness, as the same may be amended, modified
or supplemented from time to time.

         "Highest Lawful Rate" means, with respect to each Lender, the maximum
nonusurious interest rate, if any, that at any time or from time to time may be
contracted for, taken, reserved, charged or received on the Notes or on other
Indebtedness under laws applicable to such Lender that are presently in effect
or, to the extent allowed by law, under such applicable laws which may hereafter
be in effect and which allow a higher maximum nonusurious interest rate than
applicable laws allow as of the date hereof.

         "Indebtedness" means any and all amounts owing or to be owing by the
Borrower, any Subsidiary or any Guarantor: (a) to the Administrative Agent or
any Lender under any Loan Document; (b) to any Lender or any Affiliate of a
Lender under any Swap Agreement between the Borrower or any Subsidiary and such
Lender or Affiliate of a Lender while such Person (or in the case of its
Affiliate, the Person affiliated therewith) is a Lender hereunder and (c) all
renewals, extensions and/or rearrangements of any of the above.

         "Indemnified Taxes" means Taxes other than Excluded Taxes.

         "Indemnitee" has the meaning assigned such term in Section 12.03(b).

         "Information" has the meaning assigned to such term in Section 12.11.

                                       9
<PAGE>

         "Interest Expense" means, for any period, the sum (determined without
duplication) of the aggregate gross interest expense of the Borrower and the
Consolidated Subsidiaries for such period, including to the extent included in
interest expense under GAAP: (a) amortization of debt discount, (b) capitalized
interest and (c) the portion of any payments or accruals under Capital Leases
allocable to interest expense, plus the portion of any payments or accruals
under Synthetic Leases allocable to interest expense whether or not the same
constitutes interest expense under GAAP.

         "Investment" means, for any Person: (a) the acquisition (whether for
cash, Property, services or securities or otherwise) of Equity Interests of any
other Person or any agreement to make any such acquisition (including, without
limitation, any "short sale" or any sale of any securities at a time when such
securities are not owned by the Person entering into such short sale); (b) the
making of any deposit with, or advance, loan or other extension of credit to,
any other Person (including the purchase of Property from another Person subject
to an understanding or agreement, contingent or otherwise, to resell such
Property to such Person, but excluding any such advance, loan or extension of
credit having a term not exceeding ninety (90) days representing the purchase
price of inventory or supplies sold by such Person in the ordinary course of
business); (c) the purchase or acquisition (in one or a series of transactions)
of Property of another Person that constitutes a business unit or segment of a
business or (d) the entering into of any guarantee of, or other contingent
obligation (including the deposit of any Equity Interests to be sold) with
respect to, Debt or other liability of any other Person and (without
duplication) any amount committed to be advanced, lent or extended to such
Person.

         "Lenders" means the Persons listed on Annex I, any Person that shall
have become a party hereto pursuant to an Assignment and Assumption, other than
any such Person that ceases to be a party hereto pursuant to an Assignment and
Assumption.

         "Liabilities" has the meaning assigned such term in Section 12.16.

         "Lien" means any interest in Property securing an obligation owed to,
or a claim by, a Person other than the owner of the Property, whether such
interest is based on the common law, statute or contract, and whether such
obligation or claim is fixed or contingent, and including but not limited to the
lien or security interest arising from a mortgage, encumbrance, pledge, security
agreement, conditional sale or trust receipt or a lease, consignment or bailment
for security purposes. The term "Lien" shall include easements, restrictions,
servitudes, permits, conditions, covenants, exceptions or reservations. For the
purposes of this Agreement, the Borrower and its Subsidiaries shall be deemed to
be the owner of any Property which it has acquired or holds subject to a
conditional sale agreement, or leases under a financing lease or other
arrangement pursuant to which title to the Property has been retained by or
vested in some other Person in a transaction intended to create a financing.

     "Loan  Documents"  means this  Agreement,  the Notes,  the  Warrant and the
Security Instruments.

         "Loans" means the loans made by the Lenders to the Borrower pursuant to
this Agreement.

                                       10
<PAGE>

         "Material Adverse Effect" means a material adverse effect on (a) the
business, operations, Property, condition (financial or otherwise), management,
shareholders' equity, prospects, or results of operations of the Borrower and
the Subsidiaries taken as a whole, (b) the ability of the Borrower, any
Subsidiary or any Guarantor to perform any of its obligations under any Loan
Document, (c) the validity or enforceability of any Loan Document or (d) the
rights and remedies of or benefits available to the Administrative Agent or any
Lender under any Loan Document.

         "Material Agreements" has the meaning assigned such term in Section
7.22.

         "Material Indebtedness" means Debt (other than the Loans), or
obligations in respect of (i) one or more Swap Agreements, of any one or more of
the Borrower and its Restricted Subsidiaries, (ii) the TXU Agreement or (iii)
Debt with a principal balance in excess of $250,000. For purposes of determining
Material Indebtedness, the "principal amount" of the obligations of the Borrower
or any Restricted Subsidiary in respect of any Swap Agreement at any time shall
be the maximum aggregate amount (giving effect to any netting agreements) that
the Borrower or such Restricted Subsidiary would be required to pay if such Swap
Agreement were terminated at such time.

         "Maturity Date" means the date that is three years after the Effective
Date.

         "Maximum Credit Amount" means, as to each Lender, the amount set forth
opposite such Lender's name on Annex I under the caption "Maximum Credit
Amounts", as the same may be modified from time to time pursuant to any
assignment permitted by Section 12.04(b).

     "Moody's" means Moody's Investors  Service,  Inc. and any successor thereto
that is a nationally recognized rating agency.

         "Mortgaged Property" means any Property owned by the Borrower or any
Guarantor which is subject to the Liens existing and to exist under the terms of
the Security Instruments.

         "Multiemployer Plan" means a Plan which is a multiemployer plan as
defined in section 3(37) or 4001 (a)(3) of ERISA.

         "Non-Recourse Debt" means Debt of a Subsidiary:

         (1) as to which neither the Borrower nor any Restricted Subsidiary (a)
provides credit support of any kind (including any guarantee, undertaking,
agreement or instrument that would constitute Debt), (b) is directly or
indirectly liable as a guarantor or otherwise or (c) is the lender;

         (2) no default with respect to which (including any rights that the
holders thereof may have to take enforcement action against an Unrestricted
Subsidiary) would permit upon notice, lapse of time or both any holder of Debt
of the Borrower or any Restricted Subsidiary to declare a default on such
Material Indebtedness or cause the payment thereof to be accelerated or payable
prior to its stated maturity; and

                                       11
<PAGE>

         (3) as to which the lenders of such Non-Recourse Debt have acknowledged
or been notified in writing that they will not have any recourse to the
Borrower, any Restricted Subsidiary or any assets of any of them.

         "Notes" means the promissory notes of the Borrower described in Section
2.02(c) and being substantially in the form of Exhibit A, together with all
amendments, modifications, replacements, extensions and rearrangements thereof.

         "Other Taxes" means any and all present or future stamp or documentary
taxes or any other excise or Property taxes, charges or similar levies arising
from any payment made hereunder or from the execution, delivery or enforcement
of, or otherwise with respect to, this Agreement and any other Loan Document.

         "Participant" has the meaning set forth in Section 12.04(c)(i).

         "Patriot Act" has the meaning set forth in Section 12.17.

         "PBGC" means the Pension Benefit Guaranty Corporation, or any successor
thereto.

         "Person" means any natural person, corporation, limited liability
company, trust, joint venture, association, company, partnership, Governmental
Authority or other entity.

         "Plan" means any employee pension benefit plan, as defined in section
3(2) of ERISA, which (a) is currently or hereafter sponsored, maintained or
contributed to by the Borrower, a Subsidiary or an ERISA Affiliate or (b) was at
any time during the six calendar years preceding the date hereof, sponsored,
maintained or contributed to by the Borrower or a Subsidiary or an ERISA
Affiliate.

         "Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible, including, without
limitation, cash, securities, accounts and contract rights.

         "PUC" means the Texas Public Utility Commission.

         "Qualified Cash" means, as of any date of determination, the amount of
unrestricted Cash and Cash Equivalents of the Borrower and its Consolidated
Subsidiaries but excluding any letters of credit or cash securing any letters of
credit.

         "Rating Agencies" has the meaning assigned such term in Section 12.16.

         "Redemption" means with respect to any Debt, the repurchase,
redemption, prepayment, repayment or defeasance (or the segregation of funds
with respect to any of the foregoing) of such Debt. "Redeem" has the correlative
meaning thereto.

         "Register" has the meaning assigned such term in Section 12.04(b)(iv).

         "Regulation D" means Regulation D of the Board, as the same may be
amended, supplemented or replaced from time to time.

                                       12
<PAGE>

         "Related Parties" means, with respect to any specified Person, such
Person's Affiliates and the respective directors, officers, employees, agents
and advisors (including attorneys, accountants and experts) of such Person and
such Person's Affiliates.

         "Related Party Debt" means Debt of the Borrower owed to certain Related
Parties that in the aggregate does not exceed $650,000.

         "Remedial Work" has the meaning assigned such term in Section 8.10(a).

         "Responsible Officer" means, as to any Person, the Chief Executive
Officer, the President, any Financial Officer or any Vice President of such
Person. Unless otherwise specified, all references to a Responsible Officer
herein shall mean a Responsible Officer of the Borrower.

         "Restricted Payment" means any dividend or other distribution (whether
in cash, securities or other Property) with respect to any Equity Interests in
the Borrower, or any payment (whether in cash, securities or other Property),
including any sinking fund or similar deposit, on account of the purchase,
redemption, retirement, acquisition, cancellation or termination of any such
Equity Interests in the Borrower or any option, warrant or other right to
acquire any such Equity Interests in the Borrower.

         "Restricted Subsidiaries" mean all Subsidiaries of Borrower that are
not Unrestricted Subsidiaries.

         "SEC" means the Securities and Exchange Commission or any successor
Governmental Authority.

         "Securitization" has the meaning assigned such term in Section 12.16.

         "Securitization Parties" has the meaning assigned such term in Section
12.16.

         "Security Instruments" means Guaranty Agreements, if any, security
agreements and other agreements, instruments or certificates described or
referred to in Exhibit F-1, and any and all other agreements, instruments or
certificates now or hereafter executed and delivered by the Borrower or any
other Person in connection with, or as security for the payment or performance
of the Indebtedness, the Notes, this Agreement, as such agreements may be
amended, modified, supplemented or restated from time to time.

         "S&P" means Standard & Poor's Ratings Group, a division of The
McGraw-Hill Companies, Inc., and any successor thereto that is a nationally
recognized rating agency.

         "Solvent" means, with respect to any Person, that (i) the aggregate
fair market value of its assets exceeds its liabilities, (ii) it has sufficient
cash flow to enable it to pay its debts as they mature, and (iii) it does not
have unreasonably small capital to conduct its business.

         "Spectrum" means Spectrum Risk Management L.P., a Texas limited
partnership, or any other Person retained by Borrower, reasonably acceptable to
Administrative Agent to advise Borrower or Risk Management and Borrower's
compliance with its policies.

                                       13
<PAGE>

         "Subsidiary" means: (a) any Person of which at least a majority of the
outstanding Equity Interests having by the terms thereof ordinary voting power
to elect a majority of the board of directors, manager or other governing body
of such Person (irrespective of whether or not at the time Equity Interests of
any other class or classes of such Person shall have or might have voting power
by reason of the happening of any contingency) is at the time directly or
indirectly owned or controlled by the Borrower or one or more of its
Subsidiaries or by the Borrower and one or more of its Subsidiaries and (b) any
partnership of which the Borrower or any of its Subsidiaries is a general
partner. Unless otherwise indicated herein, each reference to the term
"Subsidiary" shall mean a Subsidiary of the Borrower.

         "Swap Agreement" means any agreement with respect to any swap, forward,
future or derivative transaction or option or similar agreement, whether
exchange traded, "over-the-counter" or otherwise, involving, or settled by
reference to, one or more rates, currencies, commodities, equity or debt
instruments or securities, or economic, financial or pricing indices or measures
of economic, financial or pricing risk or value or any similar transaction or
any combination of these transactions; provided that no phantom stock or similar
plan providing for payments only on account of services provided by current or
former directors, officers, employees or consultants of the Borrower or the
Subsidiaries shall be a Swap Agreement.

         "Synthetic Leases" means, in respect of any Person, all leases which
shall have been, or should have been, in accordance with GAAP, treated as
operating leases on the financial statements of the Person liable (whether
contingently or otherwise) for the payment of rent thereunder and which were
properly treated as indebtedness for borrowed money for purposes of U.S. federal
income taxes, if the lessee in respect thereof is obligated to either purchase
for an amount in excess of, or pay upon early termination an amount in excess
of, 80% of the residual value of the Property subject to such operating lease
upon expiration or early termination of such lease.

         "Taxes" means any and all present or future taxes, levies, imposts,
duties, deductions, charges or withholdings imposed by any Governmental
Authority.

         "Termination Date" means the earlier of the Maturity Date and the date
of termination of the Commitments.

         "Total Debt" means, at any date, all Debt of the Borrower and the
Consolidated Subsidiaries on a consolidated basis.

         "Transactions" means, with respect to (a) the Borrower, the execution,
delivery and performance by the Borrower of this Agreement and each other Loan
Document to which it is a party, the borrowing of Loans, the use of the proceeds
thereof, and the grant of Liens by the Borrower on Mortgaged Properties pursuant
to the Security Instruments and (b) each Guarantor, the execution, delivery and
performance by such Guarantor of each Loan Document to which it is a party, the
guaranteeing of the Indebtedness and the other obligations under the Guaranty
Agreement by such Guarantor and such Guarantor's grant of the security interests
and provision of collateral thereunder, and the grant of Liens by such Guarantor
on Mortgaged Properties pursuant to the Security Instruments.

                                       14
<PAGE>

         "TTM EBITDA" means, as of any date of determination and with respect to
a Person, the EBITDA of such Person and its Consolidated Subsidiaries for the 12
month period most recently ended.

         "TTM Interest Expense" means, as of any date of determination and with
respect to Borrower, the Consolidated Interest Expense of Borrower for the 12
month period most recently ended.

         "TXU" means collectively, TXU Portfolio Management Company LP, a Texas
limited partnership ("TXUPM") and TXU Energy Trading Company LP, a Texas limited
partnership ("TXUET").

         "TXU Agreement" means collectively, the Energy Marketing Support
Agreement (the "EMSA") dated as of April 8, 2003 by and between TXUPM and
Borrower ("Support Agreement") the Master Power Purchase and Sale Agreement or
other Power Purchase Agreements between TXU or any of their Affiliates and
Borrower together with any confirmations executed in connection therewith.

         "TXU Liens" means the Liens granted to TXU pursuant to the EMSA.

         "Unrestricted Subsidiary" means (i) any Subsidiary that has been
designated as an Unrestricted Subsidiary by the Borrower in accordance with
Section 9.22, and (ii) each subsidiary of such Unrestricted Subsidiary.

         "Warrant Agreement" means the Warrant Agreement from Borrower in favor
of Lender in the form attached hereto as Exhibit C, as the same may be amended,
modified or supplemented from time to time.

         "Wholly-Owned Subsidiary" means any Subsidiary of which all of the
outstanding Equity Interests (other than any directors' qualifying shares
mandated by applicable law), on a fully-diluted basis, are owned by the Borrower
or one or more of the Wholly-Owned Subsidiaries or by the Borrower and one or
more of the Wholly-Owned Subsidiaries.

     Section 1.03 Terms  Generally;  Rules of  Construction.  The definitions of
terms herein  shall apply  equally to the singular and plural forms of the terms
defined.  Whenever  the  context may  require,  any  pronoun  shall  include the
corresponding  masculine,  feminine  and  neuter  forms.  The  words  "include",
"includes" and "including" shall be deemed to be followed by the phrase "without
limitation".  The word "will"  shall be  construed  to have the same meaning and
effect as the word  "shall".  Unless  the  context  requires  otherwise  (a) any
definition of or reference to any agreement, instrument or other document herein
shall be construed as referring to such agreement,  instrument or other document
as from time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth herein),
(b) any reference  herein to any law shall be construed as referring to such law
as amended, modified,  codified or reenacted, in whole or in part, and in effect
from time to time, (c) any reference  herein to any Person shall be construed to
include  such  Person's  successors  and assigns  (subject  to the  restrictions
contained herein), (d) the words "herein",  "hereof" and "hereunder",  and words
of similar import, shall be construed to refer to this Agreement in its entirety
and  not  to  any  particular   provision  hereof,   (e)  with  respect  to  the
determination of any time period, the word "from" means "from and including" and
the word "to" means "to and including" and (f) any reference herein to Articles,
Sections,  Annexes,  Exhibits  and  Schedules  shall  be  construed  to refer to
Articles  and  Sections  of,  and  Annexes,  Exhibits  and  Schedules  to,  this
Agreement.  No provision of this  Agreement or any other Loan Document  shall be
interpreted  or construed  against any Person solely  because such Person or its
legal representative drafted such provision.

                                       15
<PAGE>

     Section 1.04 Accounting Terms and  Determinations;  GAAP.  Unless otherwise
specified  herein,  all accounting  terms used herein shall be interpreted,  all
determinations  with respect to accounting  matters hereunder shall be made, and
all financial  statements and certificates  and reports as to financial  matters
required to be furnished to the  Administrative  Agent or the Lenders  hereunder
shall be prepared,  in accordance with GAAP,  applied on a basis consistent with
the  Financial  Statements  except for changes in which  Borrower's  independent
certified  public  accountants  concur and that are disclosed to  Administrative
Agent  on the  next  date on  which  financial  statements  are  required  to be
delivered to the Lenders pursuant to Section 8.01(a);  provided that, unless the
Borrower and the Lenders shall otherwise agree in writing,  no such change shall
modify or affect the manner in which  compliance  with the  covenants  contained
herein is computed such that all such computations shall be conducted  utilizing
financial information presented consistently with prior periods.

                                   ARTICLE II
                                   The Credits

     Section 2.01  Commitments.  Subject to the terms and  conditions  set forth
herein, each Lender agrees to make Loans to the Borrower during the Availability
Period  in an  aggregate  principal  amount  that  will not  result  in (a) such
Lender's Cash Loans  exceeding  such  Lender's  Commitment or (b) the total Cash
Loans exceeding the total  Commitments.  Within the foregoing limits and subject
to the terms and conditions set forth herein, the Borrower may borrow, repay and
reborrow the Loans.

     Section 2.02 Loans and Borrowings.

     (a) Borrowings;  Several Obligations.  Each Loan shall be made as part of a
Borrowing  consisting of Loans made by the Lenders  ratably in  accordance  with
their  respective  Commitments.  The  failure  of any  Lender  to make  any Loan
required to be made by it shall not relieve any other Lender of its  obligations
hereunder;  provided  that the  Commitments  are several and no Lender  shall be
responsible for any other Lender's failure to make Loans as required.

     (b) Minimum Amounts;  Limitation on Number of Borrowings.  At the time that
each Loan is made,  such  Borrowing  shall be in an aggregate  amount that is an
integral  multiple  of  $100,000  and not less than  $500,000;  provided  that a
Borrowing  may be in an  aggregate  amount  that is equal to the  entire  unused
balance of the total Commitments

     (c) Notes.  The Loans made by each Lender  shall be  evidenced  by a single
promissory note of the Borrower in  substantially  the form of Exhibit A, dated,
in the case of (i) any Lender party hereto as of the date of this Agreement,  as
of the date of this  Agreement,  or (ii) any Lender that  becomes a party hereto
pursuant  to an  Assignment  and  Assumption,  as of the  effective  date of the
Assignment  and  Assumption,  payable to the order of such Lender in a principal
amount  equal to its  Maximum  Credit  Amount  as in effect  on such  date,  and

                                       16
<PAGE>

otherwise duly completed.  In the event that any Lender's  Maximum Credit Amount
increases or decreases for any reason (whether pursuant to Section 2.05, Section
12.04(b) or  otherwise),  the Borrower shall deliver or cause to be delivered on
the effective date of such increase or decrease, a new Note payable to the order
of such Lender in a principal  amount equal to its Maximum  Credit  Amount after
giving effect to such increase or decrease, and otherwise duly completed. In the
event that the principal amount of the Loans outstanding at any time are greater
than the total Maximum Credit Amount Borrower shall from time to time deliver or
cause to be  delivered  on any such date a new Note payable to the order of each
Lender in a principal  amount equal to the sum of (i) its Maximum  Credit Amount
plus (ii) the Applicable  Percentage of the amount by which the Loans exceed the
Maximum Credit Amount at such time, and otherwise duly  completed.  The date and
amount of each Loan made by each Lender, and all payments made on account of the
principal  thereof,  shall be recorded by such Lender on its books for its Note,
and,  prior to any  transfer,  may be  endorsed  by such  Lender  on a  schedule
attached  to such Note or any  continuation  thereof or on any  separate  record
maintained  by such  Lender.  Failure to make any such  notation  or to attach a
schedule shall not affect any Lender's or the  Borrower's  rights or obligations
in respect of such Loans or affect the  validity of such  transfer by any Lender
of its Note.

     Section 2.03 Requests for  Borrowings To request a Borrowing,  the Borrower
shall notify the Administrative Agent of such request in writing, not later than
12:00  noon,  New York City  time,  three  Business  Day  before the date of the
proposed  Borrowing.  Each such Borrowing Request shall be irrevocable and shall
be in  substantially  the form of  Exhibit B and  signed by the  Borrower.  Each
Borrowing  Request shall specify the following  information  in compliance  with
Section 2.02:

     (i) the aggregate amount of the requested Borrowing;

     (ii) the date of such Borrowing, which shall be a Business Day;

     (iii) the current total Loans (without  regard to the requested  Borrowing)
and the pro forma total Loans (giving effect to the requested Borrowing); and

     (iv) the location and number of the  Borrower's  account to which funds are
to be disbursed, which shall comply with the requirements of Section 2.04.

Each Borrowing Request shall constitute a representation that the amount of the
requested Borrowing shall not cause the total Cash Loans to exceed the total
Commitments.

Promptly following receipt of a Borrowing Request in accordance with this
Section 2.03, the Administrative Agent shall advise each Lender of the details
thereof and of the amount of such Lender's Loan to be made as part of the
requested Borrowing.

     Section 2.04 Funding of Borrowings.

     (a) Funding by Lenders.  Each Lender  shall make each Loan to be made by it
hereunder on the proposed date thereof by wire transfer of immediately available
funds by 1:00 p.m.,  New York City time,  to the  account of the  Administrative

                                       17
<PAGE>

Agent most recently  designated by it for such purpose by notice to the Lenders.
The  Administrative  Agent will make such Loans  available  to the  Borrower  by
promptly crediting the amounts so received,  in like funds, to an account of the
Borrower maintained with JPMorganChase Bank in Houston,  Texas and designated by
the Borrower in the applicable Borrowing Request. Nothing herein shall be deemed
to obligate any Lender to obtain the funds for its Loan in any particular  place
or manner or to constitute a  representation  by any Lender that it has obtained
or will obtain the funds for its Loan in any particular place or manner.

     (b) Presumption of Funding by the Lenders.  Unless the Administrative Agent
shall have  received  notice  from a Lender  prior to the  proposed  date of any
Borrowing that such Lender will not make available to the  Administrative  Agent
such Lender's share of such Borrowing,  the Administrative Agent may assume that
such  Lender  has made such  share  available  on such date in  accordance  with
Section 2.04(a) and may, in reliance upon such assumption, make available to the
Borrower a corresponding amount. In such event, if a Lender has not in fact made
its share of the applicable  Borrowing  available to the  Administrative  Agent,
then  the  applicable  Lender  and the  Borrower  severally  agree to pay to the
Administrative Agent forthwith on demand such corresponding amount with interest
thereon,  for each day from and including the date such amount is made available
to the  Borrower  to but  excluding  the date of payment  to the  Administrative
Agent,  at (i) in the case of such  Lender,  the  greater of the  Federal  Funds
Effective Rate and a rate determined by the  Administrative  Agent in accordance
with banking industry rules on interbank compensation or (ii) in the case of the
Borrower,  the interest rate applicable to such  Borrowing.  If such Lender pays
such amount to the Administrative  Agent, then such amount shall constitute such
Lender's Loan included in such Borrowing.

     Section  2.05  Termination,  and  Reduction  of  Aggregate  Maximum  Credit
Amounts.

     (a) Scheduled Termination of Commitments. Unless previously terminated, the
Commitments  shall  terminate on the Maturity Date. If at any time the Aggregate
Maximum  Credit Amounts is terminated or reduced to zero,  then the  Commitments
shall terminate on the effective date of such termination or reduction.

     (b) Optional Termination and Reduction of Aggregate Credit Amounts.

     (i) The  Borrower may at any time  terminate,  or from time to time reduce,
the Aggregate  Maximum Credit  Amounts;  provided that (A) each reduction of the
Aggregate  Maximum  Credit  Amounts  shall be in an amount  that is an  integral
multiple of $1,000,000  and not less than  $1,000,000 and (B) the Borrower shall
not terminate or reduce the Aggregate  Maximum  Credit  Amounts if, after giving
effect to any  concurrent  prepayment  of the Loans in  accordance  with Section
3.03, the total Loans would exceed the total Commitments.

     (ii) The Borrower shall notify the Administrative  Agent of any election to
terminate  or  reduce  the  Aggregate   Maximum  Credit  Amounts  under  Section
2.05(b)(i)  at least three  Business  Days prior to the  effective  date of such
termination  or  reduction,  specifying  such  election and the  effective  date
thereof.  Promptly  following receipt of any notice,  the  Administrative  Agent
shall advise the Lenders of the contents  thereof.  Each notice delivered by the
Borrower  pursuant  to  this  Section  2.05(b)(ii)  shall  be  irrevocable.  Any
termination  or reduction  of the  Aggregate  Maximum  Credit  Amounts  shall be
permanent and may not be  reinstated.  Each  reduction of the Aggregate  Maximum
Credit  Amounts shall be made ratably among the Lenders in accordance  with each
Lender's Applicable Percentage.

                                       18
<PAGE>

                                  ARTICLE III
              Payments of Principal and Interest; Prepayments; Fees

     Section  3.01  Repayment  of Loans.  The  Borrower  hereby  unconditionally
promises to pay to the  Administrative  Agent for the account of each Lender the
then unpaid principal amount of each Loan on the Termination Date.

     Section 3.02 Interest.

     (a)  Loans.  The  Loans  for each  Borrowing  shall  bear  interest  at the
Applicable Rate, but in no event to exceed the Highest Lawful Rate.

     (b) Interest Payment Dates.  Accrued interest on each Loan shall be payable
in arrears on the last day of each calendar month and on the  Termination  Date;
provided that in the event of any  repayment or prepayment of any Loan,  accrued
interest on the principal  amount repaid or prepaid shall be payable on the date
of such repayment or prepayment.

     (c) Interest Rate Computations. All interest hereunder shall be computed on
the  basis of a year of 360 days,  unless  such  computation  would  exceed  the
Highest  Lawful Rate, in which case interest shall be computed on the basis of a
year of 365 days (or 366 days in a leap year), and in each case shall be payable
for the actual number of days elapsed (including the first day but excluding the
last day).

     (d) Post-Default and Borrowing Base Deficiency  Rate.  Notwithstanding  the
foregoing,  if an Event of Default has  occurred  and is  continuing,  or if any
principal of or interest on any Loan or any fee or other  amount  payable by the
Borrower or any Guarantor hereunder or under any other Loan Document is not paid
when due, whether at stated maturity,  upon acceleration or otherwise,  then all
Loans outstanding,  in the case of an Event of Default, and such overdue amount,
in the case of a failure to pay amounts when due, shall bear interest,  after as
well as before judgment, at a rate per annum equal to four percent (4%) plus the
Applicable Rate, but in no event to exceed the Highest Lawful Rate.

     Section 3.03 Prepayments.

     (a) Optional Prepayments. The Borrower shall have the right at any time and
from time to time to prepay any Borrowing in whole or in part,  subject to prior
notice in accordance with Section 3.03(c).

     (b) Mandatory Prepayments.  If any time Borrower or its Subsidiaries,  on a
consolidated  basis,  have Cash or Cash  Equivalents  in  excess of  $1,200,000,
Borrower will make  prepayment on the Loans then  outstanding in an amount equal
to the amount of such Cash and Cash  Equivalents  being held by Borrower and its
Subsidiaries  on the fifteenth  and/or the last day of any month during the term
of this Agreement,  on a consolidated  basis, in excess of $1,200,000 within one
(1) Business Day of such occurrence. Notwithstanding the preceding, in the event
that the  Administrative  Agent or the  Lenders  reasonably  believe  that it is
necessary to protect their interests in the Collateral, they may notify Borrower
that such mandatory prepayments be made on a daily basis.

                                       19
<PAGE>

     (c) Notice and Terms of Optional  Prepayment.  Each prepayment permitted or
required  hereunder  shall require not less than three (3) Business  Day's prior
notice to the Administrative  Agent (except with respect to mandatory repayments
which shall only require one (1) Business  Day's prior  notice) and the Lenders,
which notice shall specify the  prepayment  date (which shall be a Business Day)
and the amount of the  prepayment.  Each such notice  shall be  irrevocable  and
effective only upon receipt by the  Administrative  Agent and the Lenders.  Each
prepayment of a Borrowing  shall be applied ratably to the Loans included in the
prepaid  Borrowing.  Prepayments shall be accompanied by accrued interest to the
extent required by Section 3.02.

     (d) No Premium or Penalty.  Prepayments  permitted  under this Section 3.03
shall be without premium or penalty.

     Section  3.04   Commitment   Fees.  The  Borrower  agrees  to  pay  to  the
Administrative  Agent for the account of each  Lender a  commitment  fee,  which
shall accrue at the  applicable  Commitment Fee Rate on the average daily amount
of the unused amount of the Commitment of such Lender during the period from and
including  the date of this  Agreement to but excluding  the  Termination  Date.
Accrued  commitment  fees  shall be payable in arrears on the last day of March,
June,  September  and  December  of  each  year  and  on the  Termination  Date,
commencing on the first such date to occur after the date hereof. All commitment
fees  shall  be  computed  on the  basis  of a year  of 360  days,  unless  such
computation  would exceed the Highest  Lawful Rate, in which case interest shall
be computed on the basis of a year of 365 days (or 366 days in a leap year), and
shall be payable for the actual number of days elapsed  (including the first day
but excluding the last day).

     Section  3.05  Anniversary   Fees.  The  Borrower  agrees  to  pay  to  the
Administrative  Agent,  for the  account  of each  Lender,  an annual fee in the
amount of the product of one percent (1%)  multiplied by the Commitment  payable
on the first  anniversary  of the execution  date of this  Agreement and on each
anniversary  date  thereafter  during the term of this  Agreement  ("Anniversary
Fee"). In the event the  Termination  Date does not coincide with an anniversary
date,  Borrower shall pay the pro-rated portion of the Anniversary Fee, based on
the number of days elapsed since the last  anniversary  date, on the Termination
Date.

     Section  3.06   Arranger   Fees.   The  Borrower   agrees  to  pay  to  the
Administrative Agent, for the account of each Lender, a fee in the amount of the
product  of two  percent  (2%)  multiplied  by  the  Commitment  payable  on the
Effective Date.

                                   ARTICLE IV
               Payments; Pro Rata Treatment; Sharing of Set-offs.

     Section 4.01 Payments Generally; Pro Rata Treatment; Sharing of Set-offs.

     (a) Payments by the Borrower. The Borrower shall make each payment required
to be made by it hereunder (whether of principal,  interest, fees, or of amounts
payable under Section 5.01,  Section 5.02 or otherwise) prior to 12:00 noon, New
York City time, on the date when due, in immediately  available  funds,  without

                                       20
<PAGE>

defense, deduction,  recoupment, set-off or counterclaim. Fees, once paid, shall
not be refundable under any circumstances.  Any amounts received after such time
on any date may, in the  discretion of the  Administrative  Agent,  be deemed to
have  been  received  on the  next  succeeding  Business  Day  for  purposes  of
calculating   interest  thereon.   All  such  payments  shall  be  made  to  the
Administrative  Agent at its offices  specified  in Section  12.01,  except that
payments pursuant to Section 5.01,  Section 5.02 and Section 12.03 shall be made
directly  to the  Persons  entitled  thereto.  The  Administrative  Agent  shall
distribute any such payments  received by it for the account of any other Person
to the appropriate  recipient promptly following receipt thereof. If any payment
hereunder shall be due on a day that is not a Business Day, the date for payment
shall be extended to the next  succeeding  Business Day, and, in the case of any
payment accruing  interest,  interest thereon shall be payable for the period of
such extension. All payments hereunder shall be made in dollars.

     (b) Application of Insufficient Payments. If at any time insufficient funds
are  received  by and  available  to the  Administrative  Agent to pay fully all
amounts of principal,  interest and fees then due hereunder, such funds shall be
applied  (i) first,  towards  payment of interest  and fees then due  hereunder,
ratably among the parties  entitled  thereto in  accordance  with the amounts of
interest and fees then due to such parties, and (ii) second,  towards payment of
principal  then due  hereunder,  ratably among the parties  entitled  thereto in
accordance with the amounts of principal then due to such parties.

     (c) Sharing of Payments by Lenders.  If any Lender shall, by exercising any
right of set-off or counterclaim or otherwise,  obtain payment in respect of any
principal of or interest on any of its Loans resulting in such Lender  receiving
payment of a greater proportion of the aggregate amount of its Loans and accrued
interest  thereon than the  proportion  received by any other  Lender,  then the
Lender receiving such greater proportion shall purchase (for cash at face value)
participations in the Loans of other Lenders to the extent necessary so that the
benefit  of all  such  payments  shall  be  shared  by the  Lenders  ratably  in
accordance  with the  aggregate  amount of principal of and accrued  interest on
their  respective  Loans;  provided  that  (i) if any  such  participations  are
purchased  and  all or any  portion  of  the  payment  giving  rise  thereto  is
recovered,  such  participations  shall  be  rescinded  and the  purchase  price
restored  to the  extent  of such  recovery,  without  interest,  and  (ii)  the
provisions  of this  Section  4.01(c)  shall  not be  construed  to apply to any
payment  made by the  Borrower  pursuant to and in  accordance  with the express
terms of this Agreement or any payment obtained by a Lender as consideration for
the assignment of or sale of a participation in any of its Loans to any assignee
or  participant,  other than to the  Borrower  or any  Subsidiary  or  Affiliate
thereof (as to which the  provisions of this Section  4.01(c) shall apply).  The
Borrower  consents to the foregoing and agrees, to the extent it may effectively
do so under applicable law, that any Lender  acquiring a participation  pursuant
to the  foregoing  arrangements  may  exercise  against the  Borrower  rights of
set-off and counterclaim with respect to such  participation as fully as if such
Lender  were  a  direct   creditor  of  the  Borrower  in  the  amount  of  such
participation.

     Section  4.02   Presumption   of  Payment  by  the  Borrower.   Unless  the
Administrative  Agent shall have received  notice from the Borrower prior to the
date on which any payment is due to the Administrative  Agent for the account of
the Lenders that the Borrower  will not make such  payment,  the  Administrative

                                       21
<PAGE>

Agent  may  assume  that the  Borrower  has made  such  payment  on such date in
accordance herewith and may, in reliance upon such assumption, distribute to the
Lenders the amount due. In such event, if the Borrower has not in fact made such
payment,   then  each  of  the  Lenders   severally   agrees  to  repay  to  the
Administrative  Agent  forthwith  on demand  the amount so  distributed  to such
Lender with  interest  thereon,  for each day from and  including  the date such
amount  is  distributed  to it to but  excluding  the  date  of  payment  to the
Administrative  Agent,  at the greater of the Federal Funds Effective Rate and a
rate determined by the Administrative  Agent in accordance with banking industry
rules on interbank compensation.

Section 4.03 Certain Deductions by the Administrative Agent. If any Lender shall
fail to make any payment required to be made by it pursuant to Section 2.04(b)
or Section 4.02 then the Administrative Agent may, in its discretion
(notwithstanding any contrary provision hereof), apply any amounts thereafter
received by the Administrative Agent for the account of such Lender to satisfy
such Lender's obligations under such Sections until all such unsatisfied
obligations are fully paid.

                                   ARTICLE V
                             Increased Costs; Taxes

     Section 5.01 Increased Costs.

     (a) Capital  Requirements.  If any Lender determines that any Change in Law
regarding capital requirements has or would have the effect of reducing the rate
of return on such Lender's  capital or on the capital of such  Lender's  holding
company,  if any, as a consequence  of this Agreement or the Loans made by, to a
level below that which such Lender or such Lender's  holding  company could have
achieved but for such Change in Law (taking  into  consideration  such  Lender's
policies  and the  policies of such  Lender's  holding  company  with respect to
capital adequacy),  then from time to time the Borrower will pay to such Lender,
as the case may be, such  additional  amount or amounts as will  compensate such
Lender or such Lender's holding company for any such reduction suffered.

     (b)  Certificates.  A certificate  of a Lender  setting forth the amount or
amounts necessary to compensate such Lender or its holding company,  as the case
may be,  as  specified  in the  immediately  preceding  subsection  (a) shall be
delivered to the Borrower and shall be conclusive  absent  manifest  error.  The
Borrower  shall pay such Lender the amount shown as due on any such  certificate
within 10 days after receipt thereof.

     (c) Effect of Failure or Delay in Requesting Compensation. Failure or delay
on the part of any Lender to demand  compensation  pursuant to this Section 5.01
shall  not   constitute  a  waiver  of  such  Lender's   right  to  demand  such
compensation.

     Section 5.02 Taxes.

     (a)  Payments  Free of Taxes.  Any and all payments by or on account of any
obligation  of the Borrower or any Guarantor  under any Loan  Document  shall be
made free and clear of and without  deduction for any Indemnified Taxes or Other
Taxes;  provided  that if the  Borrower  or any  Guarantor  shall be required to
deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum
payable  shall be  increased  as  necessary  so that after  making all  required
deductions  (including  deductions  applicable to additional  sums payable under
this Section 5.02(a)),  the Administrative  Agent or Lender (as the case may be)
receives  an  amount  equal  to the  sum it  would  have  received  had no  such
deductions  been  made,  (ii) the  Borrower  or such  Guarantor  shall make such
deductions  and (iii) the Borrower or such  Guarantor  shall pay the full amount
deducted to the relevant  Governmental  Authority in accordance  with applicable
law.

                                       22
<PAGE>

     (b)  Payment of Other Taxes by the  Borrower.  The  Borrower  shall pay any
Other Taxes to the relevant Governmental Authority in accordance with applicable
law.

     (c)  Indemnification  by the  Borrower.  The Borrower  shall  indemnify the
Administrative  Agent  and each  Lender  within  10 days  after  written  demand
therefore,  for the full amount of any Indemnified  Taxes or Other Taxes paid by
the Administrative  Agent or such Lender, as the case may be, on or with respect
to any  payment by or on account of any  obligation  of the  Borrower  hereunder
(including   Indemnified  Taxes  or  Other  Taxes  imposed  or  asserted  on  or
attributable  to amounts  payable  under this Section  5.02) and any  penalties,
interest and  reasonable  expenses  arising  therefrom or with respect  thereto,
whether or not such  Indemnified  Taxes or Other Taxes were correctly or legally
imposed or asserted by the relevant Governmental Authority. A certificate of the
Administrative  Agent or a Lender as to the amount of such  payment or liability
under  this  Section  5.02  shall be  delivered  to the  Borrower  and  shall be
conclusive absent manifest error.

     (d)  Evidence  of  Payments.  As soon as  practicable  after any payment of
Indemnified  Taxes  or  Other  Taxes  by  the  Borrower  or  a  Guarantor  to  a
Governmental  Authority,  the Borrower shall deliver to the Administrative Agent
the  original  or a  certified  copy of a receipt  issued  by such  Governmental
Authority  evidencing such payment,  a copy of the return reporting such payment
or other evidence of such payment reasonably  satisfactory to the Administrative
Agent.

     Section 5.03 Mitigation Obligations;  Replacement of Lenders. If any Lender
requests  compensation under Section 5.01, or if the Borrower is required to pay
any  additional  amount to any  Lender  or any  Governmental  Authority  for the
account of any Lender  pursuant  to Section  5.02,  then such  Lender  shall use
reasonable  efforts to  designate  a  different  lending  office for  funding or
booking its Loans hereunder or to assign its rights and obligations hereunder to
another of its  offices,  branches or  affiliates,  if, in the  judgment of such
Lender,  such  designation or assignment  (i) would  eliminate or reduce amounts
payable  pursuant to Section  5.01 or Section  5.02,  as the case may be, in the
future  and (ii)  would not  subject  such  Lender to any  unreimbursed  cost or
expense and would not otherwise be  disadvantageous to such Lender. The Borrower
hereby agrees to pay all reasonable costs and expenses incurred by any Lender in
connection with any such designation or assignment.

                                       23
<PAGE>

                                   ARTICLE VI
                              Conditions Precedent

     Section 6.01 Effective  Date. The  obligations of the Lenders to make Loans
hereunder  shall  not  become  effective  until  the date on  which  each of the
following conditions is satisfied (or waived in accordance with Section 12.02):

     (a) The  Administrative  Agent and the Lenders shall have received all fees
and other amounts due and payable on or prior to the Effective Date,  including,
to the extent invoiced,  reimbursement or payment of all out-of-pocket  expenses
required to be reimbursed or paid by the Borrower hereunder.

     (b) The  Administrative  Agent  shall have  received a  certificate  of the
Secretary  or an  Assistant  Secretary  of  the  Borrower  and  each  Restricted
Subsidiary  setting forth (i) resolutions of its board of directors with respect
to the  authorization  of the Borrower or such Restricted  Subsidiary to execute
and  deliver  the Loan  Documents  to which it is a party and to enter  into the
transactions  contemplated in those documents, (ii) the officers of the Borrower
or such  Subsidiary  (y) who are  authorized to sign the Loan Documents to which
the Borrower or such  Subsidiary is a party and (z) who will,  until replaced by
another  officer  or  officers  duly  authorized  for that  purpose,  act as its
representative  for the  purposes of signing  documents  and giving  notices and
other  communications  in connection  with this  Agreement and the  transactions
contemplated hereby, (iii) specimen signatures of such authorized officers,  and
(iv) the articles or certificate of incorporation and bylaws of the Borrower and
such  Restricted   Subsidiary,   certified  as  being  true  and  complete.  The
Administrative  Agent and the Lenders may conclusively  rely on such certificate
until the  Administrative  Agent receives notice in writing from the Borrower to
the contrary.

     (c) The  Administrative  Agent  shall  have  received  certificates  of the
appropriate State agencies with respect to the existence, qualification and good
standing of the Borrower and each Restricted Subsidiary.

     (d) The Administrative  Agent shall have received a compliance  certificate
which  shall  be  substantially  in the form of  Exhibit  D,  duly and  properly
executed by a Responsible Officer and dated as of the date of Effective Date.

     (e) The  Administrative  Agent shall have  received  from each party hereto
counterparts (in such number as may be requested by the Administrative Agent) of
this Agreement signed on behalf of such party.

     (f) The  Administrative  Agent  shall have  received  duly  executed  Notes
payable to the order of each Lender in a principal  amount  equal to its Maximum
Credit Amount dated as of the date hereof.

     (g)  The  Borrower  shall  have  delivered  to the  Administrative  Agent a
Borrowing Request.

                                       24
<PAGE>

     (h) The  Administrative  Agent shall have  received from each party thereto
duly executed counterparts of the Warrant by the Borrower in favor of the Lender
as of the date of this Agreement.

     (i) The  Administrative  Agent shall have  received from each party thereto
duly  executed  counterparts  (in  such  number  as  may  be  requested  by  the
Administrative  Agent) of the Security Instruments  described on Exhibit F-1. In
connection  with the  execution  and delivery of the Security  Instruments,  the
Administrative Agent shall:

     (i) be reasonably  satisfied  that the Security  Instruments  create senior
subordinated  perfected Liens  (subordinate only to the Liens related to the TXU
Liens and if any of the Excepted Liens are senior,  such Excepted  Liens) on the
Collateral;  such Liens being  subject  only to  Excepted  Liens  identified  in
clauses  (a) to (d)  and  (f) of the  definition  thereof,  but  subject  to the
provisos at the end of such definition; and

     (ii) have received certificates,  together with undated, blank stock powers
for each such certificate, representing all of the issued and outstanding Equity
Interests of each of the Restricted Subsidiaries.

     (j) The  Administrative  Agent  shall have  received an opinion of Porter &
Hedges,  L.L.P.,  special counsel to the Borrower,  substantially in the form of
Exhibit E hereto.

     (k) The Administrative Agent shall have received a certificate of insurance
coverage of the Borrower  evidencing that the Borrower is carrying  insurance in
accordance with Section 7.13.

     (l) The  Administrative  Agent  shall  be  reasonably  satisfied  with  the
environmental condition of the Properties of the Borrower and its Subsidiaries.

     (m) The  Administrative  Agent  shall  have  received  a  certificate  of a
Responsible  Officer of the Borrower  certifying  that the Borrower has received
all consents and approvals required by Section 7.03.

     (n)  The  Administrative  Agent  shall  have  received  (i)  the  financial
statements  referred  to in Section  7.04(a),  and (ii)  copies of all  material
contracts or agreements, including, the Material Agreements.

     (o) The  Administrative  Agent shall have received  appropriate  UCC search
certificates  reflecting  no  prior  Liens  encumbering  the  Properties  of the
Borrower  and the  Restricted  Subsidiaries,  other than the TXU Liens,  and the
Excepted  Liens and the results of searches for any tax Lien and  judgment  Lien
filed against  Borrower or any  Restricted  Subsidiary  or its  Property,  which
results,  except as otherwise agreed to in writing by the Administrative  Agent,
shall not show any such Liens.

     (p) The  Administrative  Agent shall be satisfied with  Borrower's  current
hedging policies.

                                       25
<PAGE>

     (q) The  Administrative  Agent  shall be  satisfied  that there has been no
Material  Adverse Effect to the Borrower and its Restricted  Subsidiaries  since
December 31, 2003 on a consolidated basis.

     (r) A certificate of the Financial Officer of the Borrower certifying as to
the Solvency of Borrower and each Restricted Subsidiary.

     (s) The Administrative  Agent shall have completed their business and legal
due diligence  with respect to the Borrower and each  Restricted  Subsidiary and
the results thereof shall be acceptable to the Administrative  Agent in its sole
and absolute discretion.

     (t) Since  February 10, 2004,  there shall not have been any  disruption or
adverse change in the financial or capital markets.

     (u) The  Administrative  Agent  shall have  received  payoff  letters  with
respect to the Catalyst Debt.

     (v) The  Administrative  Agent shall have received such other  documents as
the  Administrative  Agent or special  counsel to the  Administrative  Agent may
reasonably request.

         The Administrative Agent shall notify the Borrower and the Lenders of
the Effective Date, and such notice shall be conclusive and binding.
Notwithstanding the foregoing, the obligations of the Lenders to make Loans
hereunder shall not become effective unless each of the foregoing conditions is
satisfied (or waived pursuant to Section 12.02) at or prior to 2:00 p.m., New
York City time, on August 1, 2004 (and, in the event such conditions are not so
satisfied or waived, the Commitments shall terminate at such time).

     Section 6.02 Each Credit  Event.  The  obligation  of each Lender to make a
Loan on the  occasion  of any  Borrowing  (including  the initial  funding),  is
subject to the satisfaction of the following conditions:

     (a) At the time of and  immediately  after giving effect to such Borrowing,
no Default shall have occurred and be continuing.

     (b) At the time of and immediately after giving effect to such Borrowing no
Material Adverse Effect shall have occurred.

     (c) The  representations  and warranties of the Borrower and the Guarantors
set forth in this  Agreement and in the other Loan  Documents  shall be true and
correct  on and as of the date of such  Borrowing  except to the extent any such
representations  and  warranties  are  expressly  limited to an earlier date, in
which case, on and as of the date of such Borrowing,  such  representations  and
warranties  shall continue to be true and correct as of such  specified  earlier
date.

     (d) The making of such Loan would not conflict with, or cause any Lender or
the Issuing Bank to violate or exceed, any applicable Governmental  Requirement,
and no Change in Law shall have occurred,  and no litigation shall be pending or
threatened,  which does or, with respect to any threatened litigation, seeks to,
enjoin,  prohibit  or  restrain,  the  making  or  repayment  of any Loan or any
participations  therein or the consummation of the transactions  contemplated by
this Agreement or any other Loan Document.

                                       26
<PAGE>

     (e) The  Administrative  Agent  and the  Lenders  will  be  satisfied  with
Borrower's current market exposure with respect to electricity purchase and sale
commitments in their sole unfettered discretion as of the date of such Borrowing
Request.

     (f) The  receipt  by the  Administrative  Agent of a  Borrowing  Request in
accordance with Section 2.03.

         Each request for a Borrowing shall be deemed to constitute a
representation and warranty by the Borrower on the date thereof as to the
matters specified in Section 6.02(a) through (d).

                                  ARTICLE VII
                         Representations and Warranties

         The Borrower represents and warrants to the Lenders that:

     Section  7.01   Organization;   Powers.   Each  of  the  Borrower  and  the
Subsidiaries is duly organized,  validly existing and in good standing under the
laws of the  jurisdiction  of its  organization,  has all  requisite  power  and
authority, and has all material governmental licenses, authorizations,  consents
and approvals  necessary,  to own its assets and to carry on its business as now
conducted, and is qualified to do business in, and is in good standing in, every
jurisdiction where such qualification is required.

     Section 7.02 Authority;  Enforceability.  The  Transactions  are within the
Borrower's and each Subsidiaries' corporate or company powers and have been duly
authorized by all necessary  corporate or company and, if required,  stockholder
or member action (including, without limitation, any action required to be taken
by any class of directors of the Borrower,  whether interested or disinterested,
in order  to  ensure  the due  authorization  of the  Transactions).  Each  Loan
Document  to which the  Borrower  and each  Subsidiary  is a party has been duly
executed and  delivered by the Borrower and such  Subsidiary  and  constitutes a
legal,  valid and binding  obligation  of the Borrower and such  Subsidiary,  as
applicable,  enforceable  in  accordance  with its terms,  subject to applicable
bankruptcy,  insolvency,  reorganization,  moratorium  or other  laws  affecting
creditors'  rights  generally  and  subject  to  general  principles  of equity,
regardless of whether considered in a proceeding in equity or at law.

     Section 7.03 Approvals;  No Conflicts.  The Transactions (a) do not require
any consent or approval of, registration or filing with, or any other action by,
any Governmental Authority or any other third Person (including  shareholders or
any class of directors, whether interested or disinterested,  of the Borrower or
any other Person), nor is any such consent,  approval,  registration,  filing or
other action necessary for the validity or  enforceability  of any Loan Document
or the consummation of the  transactions  contemplated  thereby,  except such as
have been  obtained  or made and are in full  force and  effect  other  than the
recording and filing of the Security  Instruments as required by this Agreement,
(b) will not violate any applicable law or regulation or the charter, by-laws or
other organizational documents of the Borrower or any Subsidiary or any order of
any  Governmental  Authority,  (c) will not violate or result in a default under

                                       27
<PAGE>

any indenture,  agreement or other  instrument  binding upon the Borrower or any
Subsidiary or its Properties,  or give rise to a right thereunder to require any
payment to be made by the  Borrower or such  Subsidiary,  (d) will not result in
the  creation or  imposition  of any Lien on any Property of the Borrower or any
Subsidiary  (other than the Liens created by the Loan  Documents) and (e) do not
and will not  result in any  default,  non-compliance,  suspension,  revocation,
impairment,   forfeiture  or  nonrenewal  of  any  material   permit,   license,
authorization or approval applicable to its operations or any of its Properties.

     Section 7.04 Financial Condition; No Material Adverse Change.

     (a) The Borrower has heretofore  furnished to the Administrative  Agent and
each  Lender  its   consolidated   balance  sheet  and   statements  of  income,
stockholders  equity  and cash  flows (i) as of and for the  fiscal  year  ended
December 31, 2003,  reported on by Hein & Associates L.L.P.,  independent public
accountants,  and (ii) as of and for the fiscal  quarter  and the portion of the
fiscal year ended March 31, 2004, certified by its chief financial officer. Such
financial  statements  present fairly, in all material  respects,  the financial
position  and  results  of  operations  and cash flows of the  Borrower  and its
Consolidated  Subsidiaries  as of such dates and for such periods in  accordance
with GAAP, subject to year-end audit adjustments and the absence of footnotes in
the case of the unaudited quarterly financial statements.

     (b) Since  December 31, 2003,  (i) there has been no event,  development or
circumstance  that has had or could  reasonably  be  expected to have a Material
Adverse  Effect and (ii) the business of the Borrower and its  Subsidiaries  has
been  conducted  only in the  ordinary  course  consistent  with  past  business
practices.

     (c) Neither the Borrower nor any  Consolidated  Subsidiary  has on the date
hereof  any  material  Debt  (including   Disqualified  Capital  Stock)  or  any
contingent   liabilities,   off-balance   sheet   liabilities  or  partnerships,
liabilities for taxes, unusual forward or long-term commitments or unrealized or
anticipated  losses from any unfavorable  commitments,  except as referred to or
reflected or provided for in the Financial Statements.

     (d) The Borrower has heretofore  furnished to the Administrative  Agent and
each Lender (i) projected consolidated monthly income statements,  together with
selected consolidated balance sheet data and cash flow data, with respect to the
Borrower and its Subsidiaries  for the period from April 1, 2004,  through March
30, 2005, and (ii) projected  consolidated  annual income  statements,  together
with  selected  balance  sheet  data and cash flow  data,  with  respect  to the
Borrower and its  Subsidiaries for the fiscal years ending in 2004 through 2006,
which projected consolidated financial statements and data shall be updated from
time to time pursuant to Section  8.01(m) and shall be prepared using the format
used to prepare such projected financial  statements and data. Such projections,
as so  updated,  are  believed  by the  Borrower  at the  time  furnished  to be
reasonable,  have been  prepared on a reasonable  basis and in good faith by the
Borrower,  and have been based on  assumptions  believed  by the  Borrower to be
reasonable  at the time  made and upon  the  best  information  then  reasonably
available  to the  Borrower,  and the  Borrower  is not  aware  of any  facts or
information that would lead it to believe that such projections,  as so updated,
are incorrect or misleading in any material respect.

     Section 7.05 Litigation.

                                       28
<PAGE>

     (a) Except as set forth on  Schedule  7.05,  there are no  actions,  suits,
investigations  or  proceedings  by or before  any  arbitrator  or  Governmental
Authority  pending  against or, to the  knowledge  of the  Borrower,  threatened
against or affecting the Borrower or any Subsidiary including, any such actions,
investigations or proceedings before the PUC or that relate to Borrower's or any
Subsidiaries'  status as a retail  electric  provider  or that  involve any Loan
Document or the Transactions.

     (b)  Since  the date of this  Agreement,  there  has been no  change in the
status of the matters  disclosed in Schedule 7.05 that,  individually  or in the
aggregate,  has  resulted  in, or  materially  increased  the  likelihood  of, a
Material Adverse Effect.

     (c) As of the  Effective  Date,  none of the  Borrower  nor any  Restricted
Subsidiary holds any commercial tort claims in respect of which a claim has been
filed in a court of law or a written  notice by an attorney  has been given to a
potential defendant.

     Section 7.06 Environmental Matters. Except as set forth on Schedule 7.06:

     (a)  neither  any  Property  of the  Borrower  or any  Subsidiary  nor  the
operations  conducted  thereon  violate any order or requirement of any court or
Governmental Authority or any Environmental Laws.

     (b) no  Property  of the  Borrower  or any  Subsidiary  nor the  operations
currently  conducted thereon or, to the knowledge of the Borrower,  by any prior
owner or operator of such Property or operation,  are in violation of or subject
to any existing,  pending or threatened action, suit, investigation,  inquiry or
proceeding by or before any court or  Governmental  Authority or to any remedial
obligations under  Environmental Laws which could reasonably be expected to have
a Material Adverse Effect.

     (c) all  notices,  permits,  licenses,  exemptions,  approvals  or  similar
authorizations,  if any, required to be obtained or filed in connection with the
operation or use of any and all  Property of the  Borrower and each  Subsidiary,
including,  without limitation, past or present treatment,  storage, disposal or
release of a hazardous substance or solid waste into the environment,  have been
duly obtained or filed,  and the Borrower and each  Subsidiary are in compliance
with the terms and conditions of all such notices, permits, licenses and similar
authorizations.

     (d) all hazardous  substances and solid waste, if any, generated at any and
all  Property  of  the  Borrower  or  any  Subsidiary  have  in  the  past  been
transported,  treated and disposed of in accordance with  Environmental Laws and
so as not to pose an imminent and  substantial  endangerment to public health or
welfare or the  environment,  and, to the  knowledge of the  Borrower,  all such
transport  carriers  and  treatment  and disposal  facilities  have been and are
operating  in  compliance  with  Environmental  Laws  and so as not to  pose  an
imminent  and  substantial  endangerment  to  public  health or  welfare  or the
environment,  and are not the  subject of any  existing,  pending or  threatened
action,  investigation  or inquiry by any  Governmental  Authority in connection
with any Environmental Laws.

                                       29
<PAGE>

     (e)  neither  the  Borrower  nor any  Subsidiary  has any known  contingent
liability or Remedial Work in connection with any release or threatened  release
of any hazardous substance or solid waste into the environment.

     Section 7.07 Compliance with the Laws and Agreements; Permits; No Defaults.

     (a) Each of the  Borrower and each  Subsidiary  is in  compliance  with all
Governmental  Requirements  applicable to it or its Property and all  agreements
and other instruments  binding upon it or its Property,  and possesses and is in
compliance with all licenses,  permits,  franchises,  exemptions,  approvals and
other  governmental  authorizations  necessary for the ownership of its Property
and the  conduct of its  business  except  where such  non-compliance  would not
reasonably be expected to have a Material Adverse Effect.

     (b) Neither the Borrower nor any Subsidiary is in default nor has any event
or  circumstance  occurred that, but for the expiration of any applicable  grace
period or the giving of notice,  or both,  would  constitute  a default or would
require the Borrower or a Subsidiary to Redeem or make any offer to Redeem under
any  indenture,  note,  credit  agreement  or  instrument  pursuant to which any
Material  Indebtedness is outstanding or by which the Borrower or any Subsidiary
or any of their Properties is bound.

     (c) No condition  exists or event has occurred which, in itself or with the
giving  of  notice or lapse of time or both,  would  result  in the  suspension,
revocation,  impairment,  forfeiture  or  non-renewal  of any  permit,  license,
authorization,  approval,  entitlement or accreditation  that is material to the
retail  electricity  business of Borrower and its Subsidiaries,  and there is no
claim  that any  thereof  is not in full  force and  effect.  No Loan  Party has
received  any  written  notices  or,  to  Borrower's  knowledge,  oral  notices,
concerning,  and there are no existing orders of, proceedings pending before, or
other requirements of, any Governmental Authority,  including the Public Utility
Commission  of  Texas  and the  Federal  Energy  Regulatory  Commission  and any
comparable  state or local  Governmental  Authority,  which could  reasonably be
expected to materially  interfere with, limit or otherwise restrict the business
of the Borrower and its Subsidiaries  (other than such orders and proceedings of
general  applicability  to  Persons  in the retail  electricity  sale  similarly
situated to the  Borrower and its  Subsidiaries)  or which could or will require
Borrower and its  Subsidiaries to refund or otherwise  return any portion of the
proceeds received or to be received from the sale of electricity by Borrower and
its Subsidiaries except for refunds or returns that are not,  individually or in
the aggregate, material.

     (d) No Default has occurred and is continuing.

     Section  7.08  Investment   Company  Act.  Neither  the  Borrower  nor  any
Subsidiary  is  an  "investment   company"  or  a  company  "controlled"  by  an
"investment company," within the meaning of, or subject to regulation under, the
Investment Company Act of 1940, as amended.

     Section 7.09 Public Utility Holding  Company Act.  Neither the Borrower nor
any Subsidiary is a "holding  company," or a "subsidiary  company" of a "holding
company," or an "affiliate" of a "holding company" or of a "subsidiary  company"
of a "holding  company," or a "public utility" within the meaning of, or subject
to regulation under, the Public Utility Holding Company Act of 1935, as amended.

                                       30
<PAGE>

     Section 7.10 Taxes.  Each of the Borrower and its  Subsidiaries  has timely
filed or caused to be filed all Tax returns  and  reports  required to have been
filed and has paid or caused to be paid all Taxes  required to have been paid by
it,  except  Taxes  that  are  being  contested  in good  faith  by  appropriate
proceedings and for which the Borrower or such  Subsidiary,  as applicable,  has
set aside on its books adequate  reserves in accordance  with GAAP. The charges,
accruals  and  reserves on the books of the  Borrower  and its  Subsidiaries  in
respect of Taxes and other  governmental  charges are, in the reasonable opinion
of the Borrower,  adequate.  No Tax Lien has been filed and, to the knowledge of
the Borrower,  no claim is being  asserted with respect to any such Tax or other
such governmental charge.

     Section 7.11 ERISA.

     (a) The Borrower,  the  Subsidiaries and each ERISA Affiliate have complied
in all material  respects with ERISA and, where  applicable,  the Code regarding
each Plan.

     (b) Each Plan is, and has been,  maintained in substantial  compliance with
ERISA and, where applicable, the Code.

     (c) No act,  omission or  transaction  has  occurred  which could result in
imposition  on the Borrower,  any  Subsidiary  or any ERISA  Affiliate  (whether
directly  or  indirectly)  of (i) either a civil  penalty  assessed  pursuant to
subsections (c), (i) or (l) of section 502 of ERISA or a tax imposed pursuant to
Chapter 43 of Subtitle D of the Code or (ii) breach of fiduciary  duty liability
damages under section 409 of ERISA.

     (d) No Plan (other than a defined  contribution  plan) or any trust created
under any such Plan has been terminated since September 2, 1974. No liability to
the PBGC (other than for the payment of current  premiums that are not past due)
by the Borrower,  any Subsidiary or any ERISA  Affiliate has been or is expected
by the  Borrower,  any  Subsidiary  or any ERISA  Affiliate to be incurred  with
respect to any Plan. No ERISA Event with respect to any Plan has occurred.

     (e) Full payment when due has been made of all amounts  which the Borrower,
the Subsidiaries or any ERISA Affiliate is required under the terms of each Plan
or  applicable  law to have  paid as  contributions  to such Plan as of the date
hereof,  and 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.

     (f) The actuarial present value of the benefit  liabilities under each Plan
which is subject to Title IV of ERISA does not, as of the end of the  Borrower's
most  recently  ended  fiscal  year,  exceed  the  current  value of the  assets
(computed on a plan  termination  basis in accordance with Title IV of ERISA) of
such Plan allocable to such benefit  liabilities.  The term  "actuarial  present
value of the benefit  liabilities"  shall have the meaning  specified in section
4041 of ERISA.

     (g)  Neither  the  Borrower,  the  Subsidiaries  nor  any  ERISA  Affiliate
sponsors,  maintains,  or  contributes to an employee  welfare  benefit plan, as
defined in section 3(1) of ERISA, including,  without limitation,  any such plan
maintained to provide  benefits to former  employees of such entities,  that may
not be terminated by the  Borrower,  a Subsidiary or any ERISA  Affiliate in its
sole discretion at any time without any material liability.

                                       31
<PAGE>

     (h)  Neither  the  Borrower,  the  Subsidiaries  nor  any  ERISA  Affiliate
sponsors, maintains or contributes to, or has at any time in the six-year period
preceding  the  date  hereof  sponsored,   maintained  or  contributed  to,  any
Multiemployer Plan.

     (i) Neither the  Borrower,  the  Subsidiaries  nor any ERISA  Affiliate  is
required to provide security under section  401(a)(29) of the Code due to a Plan
amendment that results in an increase in current liability for the Plan.

     Section  7.12  Disclosure;  No Material  Misstatements.  The  Borrower  has
disclosed  to  the   Administrative   Agent  and  the  Lenders  all  agreements,
instruments  and  corporate  or  other  restrictions  to  which it or any of its
Subsidiaries is subject,  and all other matters known to it, that,  individually
or in the  aggregate,  could  reasonably  be  expected  to result in a  Material
Adverse Effect. None of the other reports, financial statements, certificates or
other information furnished by or on behalf of the Borrower or any Subsidiary to
the Administrative Agent or the Lenders or any of their Affiliates in connection
with the  negotiation  of this Agreement or any other Loan Document or delivered
hereunder or under any other Loan Document (as modified or supplemented by other
information so furnished) contains any material misstatement of fact or omits to
state any material fact necessary to make the statements  therein,  in the light
of the circumstances under which they were made, not misleading;  provided that,
with respect to projected  financial  information,  the Borrower represents only
that such information was prepared in good faith based upon assumptions believed
to be reasonable  at the time.  There is no fact peculiar to the Borrower or any
Subsidiary  which could reasonably be expected to have a Material Adverse Effect
or in the  future is  reasonably  likely to have a Material  Adverse  Effect and
which  has not been set forth in this  Agreement  or the Loan  Documents  or the
other  documents,  certificates and statements  furnished to the  Administrative
Agent by or on behalf of the  Borrower  or any  Subsidiary  prior to, or on, the
date hereof in connection with the transactions contemplated hereby.

     Section 7.13 Insurance.  Schedule 7.13 attached hereto contains an accurate
and complete description of all material policies of fire, liability,  workmen's
compensation  and  other  forms  of  insurance  that  are  owned  or held by the
Borrower.  All such  policies are in full force and effect,  all  premiums  with
respect thereto covering all periods up to and including the date of the closing
have been paid, and no notice of  cancellation  or termination has been received
with respect to any such policy.  Such policies are  sufficient  for  compliance
with all  Governmental  Requirements and of all agreements to which the Borrower
is a party; are valid,  outstanding and enforceable  policies;  provide adequate
insurance coverage in at least such amounts and against at least such risks (but
including in any event public  liability) as are usually  insured against in the
same general area by companies engaged in the same or a similar business for the
assets and  operations  of the Borrower  (notwithstanding  the  preceding,  with
respect to workers'  compensation  insurance,  Borrower will carry at a minimum,
the statutorily  required amount of such  insurance);  will remain in full force
and effect through the  respective  dates set forth in Schedule 7.13 without the
payment  of  additional  premiums;  and will not in any way be  affected  by, or
terminate or lapse by reason of, the transactions contemplated by this Agreement
and the Loan Documents. Neither the Borrower nor any Subsidiary has been refused

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<PAGE>

any insurance with respect to its assets or operations,  nor has it been limited
below usual and customary policy limits, by an insurance carrier to which it has
applied for any insurance or with which it has carried insurance during the last
three  years.  The  Administrative  Agent and the  Lenders  have  been  named as
additional  insureds in respect of such  liability  insurance  policies  and the
Administrative  Agent has been named as loss payee with respect to Property loss
insurance.

     Section 7.14  Restrictive  Agreements.  Neither the Borrower nor any of the
Restricted  Subsidiaries  is a party to any material  agreement  or  arrangement
(other than the TXU Agreements and JPMorganChase Bank documents),  or subject to
any order,  judgment,  writ or decree,  that  either  restricts  or  purports to
restrict its ability to grant Liens to the Administrative  Agent and the Lenders
on or in respect of their  Properties  to secure the  Indebtedness  and the Loan
Documents or that prohibits any  Restricted  Subsidiary  from making  Restricted
Payments to Borrower.

     Section  7.15  Subsidiaries.  Except  as set  forth  on  Schedule  7.15 the
Borrower has no Subsidiaries. All of the issued and outstanding Equity Interests
of  such   Subsidiaries  have  been  validly  issued  and  are  fully  paid  and
nonassessable and the holders thereof are not entitled to any preemptive,  first
refusal or other similar rights.  Except as indicated on Schedule 7.15, all such
Equity  Interests  as owned by the  Borrower or one or more of its  wholly-owned
Subsidiaries,  free and  clear of all  Liens  other  than the TXU  Liens and the
Excepted  Liens.  There are no  outstanding  debt or equity  securities or other
outstanding  obligations of the Borrower or any of its Subsidiaries  convertible
and or exchangeable  for, or warrants,  options or other rights for the purchase
or  acquisition  from  the  Borrower  or any of its  Subsidiaries  of,  or other
obligations  of any  Subsidiary  to issue,  directly or  indirectly,  any Equity
Interest of any Subsidiary of the Borrower.

     Section 7.16 Location of Business and Offices. The Borrower's  jurisdiction
of  organization  is Texas;  the name of the  Borrower  as listed in the  public
records  of  its   jurisdiction  of   organization   is  Gexa  Corp.;   and  the
organizational  identification  number of the  Borrower in its  jurisdiction  of
organization is 76-0670175 (or, in each case, as set forth in a notice delivered
to the  Administrative  Agent  pursuant to Section  8.01(p) in  accordance  with
Section 12.01).  The Borrower's  principal place of business and chief executive
offices are located at the address  specified in Section  12.01 (or as set forth
in a notice delivered  pursuant to Section 8.01(p) and Section  12.01(c)).  Each
Subsidiary's jurisdiction of organization,  name as listed in the public records
of its jurisdiction of organization, organizational identification number in its
jurisdiction  of  organization,  and the  location  of its  principal  place  of
business and chief executive  office is stated on Schedule 7.15 (or as set forth
in a notice delivered pursuant to Section 8.01(p)).

     Section 7.17 Properties; Titles, Etc.

     (a) Borrower and each  Subsidiary has good and  marketable  title to, valid
leasehold  interests  in, or valid  licenses  to use,  all  property  and assets
material  to its  business,  free and  clear of all  Liens,  except  TXU  Liens,
Excepted Liens and with respect to any  Unrestricted  Subsidiary,  such Liens as
such  Unrestricted  Subsidiary may have on such properties and assets.  All such
properties  and assets  constituting  personality  are in good working order and
condition, ordinary wear and tear excepted.

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<PAGE>

     (b) Part A of Schedule 7.17 sets forth a complete and accurate  list, as of
the Effective Date, of the location,  by state and street  address,  of all real
property  owned or leased by Borrower  or any  Subsidiary.  As of the  Effective
Date,  Borrower or a  Subsidiary  has valid  leasehold  interests  in the Leases
described on Part A of Schedule 7.17 to which it is a party.  Part A of Schedule
7.17 sets forth with respect to each such lease  described on Part A of Schedule
7.17, the  commencement  date,  termination  date,  renewal options (if any) and
annual base rents.  Each Lease described on Part A of Schedule 7.17 is valid and
enforceable in accordance with its terms in all material respects and is in full
force and effect.  Except as could not reasonably be expected to have a Material
Adverse Effect,  to the best knowledge of Borrower,  no other party to any Lease
described on Part A of Schedule  7.17 is in default of its  obligations  (or any
other party to any such lease) has at any time  delivered or received any notice
of default which  remains  uncured under any such lease and, as of the Effective
Date, no event has occurred  which,  with the giving of notice or the passage of
time or both, would constitute a default under any such lease.

     Section 7.18 Swap  Agreements.  Schedule  7.18, as of the date hereof,  and
after the date  hereof,  each report  required to be  delivered  by the Borrower
pursuant to Section  8.01(f),  sets forth,  a true and complete list of all Swap
Agreements  of the Borrower and each  Subsidiary,  the  material  terms  thereof
(including the type, term, effective date, termination date and notional amounts
or volumes), the net mark to market value thereof, all credit support agreements
relating   thereto   (including  any  margin   required  or  supplied)  and  the
counterparty to each such agreement.

     Section  7.19 Use of Loans.  The proceeds of the Loans shall be used to pay
off the existing  Catalyst Debt and Related Party Debt,  provide working capital
for normal  routine  operations of the Borrower and for providing a cash reserve
to  collateralize  letters of credit that Borrower is required to post with TXU.
The Borrower and its Subsidiaries are not engaged principally,  or as one of its
or their  important  activities,  in the  business of  extending  credit for the
purpose, whether immediate, incidental or ultimate, of buying or carrying margin
stock (within the meaning of Regulation T, U or X of the Board).  No part of the
proceeds of any Loan will be used for any purpose which  violates the provisions
of Regulations T, U or X of the Board.

     Section 7.20 Solvency. After giving effect to the transactions contemplated
by this Agreement and before and after giving effect to each Loan,  Borrower is,
and the Subsidiaries on a consolidated basis are, Solvent.

     Section 7.21 Casualty Events. Since December 31, 2003, neither the business
nor any  Properties of the Borrower or any Subsidiary  have been  materially and
adversely  affected  as a result  of any  fire,  explosion,  earthquake,  flood,
drought,  windstorm,  accident,  strike  or other  labor  disturbance,  embargo,
requisition  or taking of  Property or  cancellation  of  contracts,  permits or
concessions by any domestic or foreign Governmental Authority,  riot, activities
or armed forces or acts of God or of any public enemy.

     Section 7.22  Material  Agreements.  Set forth on Schedule 7.22 hereto is a
complete and correct list of all material  agreements  and other  instruments of
the  Borrower  setting  forth each  counterparty  thereto  (other  than the Loan
Documents) relating to the purchase,  transmission,  marketing, sale (other than
retail customer or small business sales  contracts) and supply of electricity or
other material  contract to which Borrower is a party or by which its Properties
is bound (collectively  "Material Agreements") and copies of such documents have
been provided to the Administrative Agent. All such agreements are in full force
and effect and Borrower is not in material default thereunder,  nor is there any
uncured  default by any  Affiliate  predecessor  in interest to Borrower  or, to
Borrower's knowledge,  by any predecessor in interest to Borrower (other than an
Affiliate  predecessor) or counterparty  thereto,  nor has Borrower  altered any
material item of such agreements without the prior written consent of Lenders.

                                       34
<PAGE>

     Section  7.23  Reliance.  In  connection  with the  negotiation  of and the
entering into this Agreement, the Borrower acknowledges and represents that none
of the Lenders,  the  Administrative  Agent, or any representative of any of the
foregoing is acting as a fiduciary or financial or investment advisor for it; it
is not  relying  upon  any  representations  (whether  written  or oral) of such
Persons  it  has  consulted  with  its  own  legal,  regulatory,  tax,  business
investment,  financial  and  accounting  advisors  to the  extent it has  deemed
necessary,  and it has made its own investment,  hedging,  and trading decisions
based upon its own  judgment  and upon any advice  from such  advisors as it has
deemed   necessary  and  not  upon  any  view  expressed  by  any  Lender,   the
Administrative Agent, or any representative of any of the foregoing;  it has not
been given by any Lender, the Administrative Agent, or any representative of any
of the foregoing  (directly or indirectly  through any other Person) any advice,
counsel,  assurance,  guarantee, or representation whatsoever as to the expected
or  projected  success,  profitability,  return,  performance,  result,  effect,
consequence, or benefit (either legal, regulatory,  tax, financial,  accounting,
or otherwise) of this Agreement or the transactions  contemplated hereby; and it
is  entering  into this  Agreement  and the  other  Loan  Documents  with a full
understanding  of all of the risks hereof and thereof  (economic and otherwise),
and it is capable of assuming and willing to assume  (financially and otherwise)
those risks.

     Section 7.24 Location of Bank Accounts. Schedule 7.24 sets forth a complete
and accurate  list as of the Effective  Date of all deposit,  checking and other
bank accounts,  all securities  and other  accounts  maintained  with any broker
dealer and all other  similar  accounts  maintained  by each  Borrower  and each
Subsidiary, together with a description thereof (i.e., the bank or broker dealer
at which such deposit or other account is maintained  and the account number and
the purpose thereof).

     Section 7.25 Intellectual  Property.  Except as set forth on Schedule 7.25,
Borrower and each  Subsidiary owns or licenses or otherwise has the right to use
all licenses,  permits,  patents,  patent  applications,  trademarks,  trademark
applications,  service marks,  tradenames,  copyrights,  copyright applications,
franchises,  authorizations,  non-governmental  licenses  and  permits and other
intellectual property rights that are material to the operation of its business,
without  infringement  upon or conflict with the rights of any other Person with
respect  thereto.  Set forth on Schedule 7.25 is a complete and accurate list as
of the Effective Date of all such material licenses,  permits,  patents,  patent
applications,  trademarks,  trademark applications,  service marks,  tradenames,
copyrights, copyright applications, franchises, authorizations, non-governmental
licenses and permits and other intellectual property rights of Borrower and each
Subsidiary.  To the best knowledge of Borrower,  no slogan or other  advertising
device,  product,  process,  method,  substance,  part  or  other  material  now
employed,  or now  contemplated  to be employed,  by Borrower or any  Subsidiary
infringes  upon or conflicts  with any rights owned by any other Person,  and no
claim or litigation regarding any of the foregoing is pending or threatened.

                                       35
<PAGE>

     Section  7.26 No Brokers.  No Person is entitled  to any  brokerage  fee or
finders fee or similar fee or commission in connection  with arranging the Loans
for which the  Administrative  Agent or the Lenders would be liable and Borrower
shall indemnify and hold Administrative  Agent and the Lenders harmless from any
such brokerage fee, finders fee or similar fee or commission.

     Section 7.27  Customers  and  Suppliers.  There exists no actual or, to the
knowledge of the Borrower,  threatened  termination,  cancellation or limitation
of, or adverse  modification to or adverse change in, the business  relationship
between (i) Borrower or any Subsidiary, on the one hand, and any customer or any
group  thereof,  on the  other  hand,  whose  agreements  with  Borrower  or any
Subsidiary  are  individually  or in the  aggregate  material to the business or
operations of Borrower or any Subsidiary, or (ii) Borrower or any Subsidiary, on
the one hand, and any material supplier  thereof,  on the other hand, except for
terminations or  cancellations of  relationships  that are promptly  replaced by
relationships  that are no less  favorable to the  applicable  Person than those
being terminated or cancelled.

     Section 7.28 No Bankruptcy  Filing.  Neither Borrower nor any Subsidiary is
contemplating  either the filing of a petition by it under any state, federal or
foreign  bankruptcy  or  insolvency  laws or the  liquidation  of all or a major
portion of such  Person's  assets or  property,  and  neither  Borrower  nor any
Subsidiary has any knowledge of any Person  contemplating the filing of any such
petition against it.

     Section  7.29  Schedules.  All of the  information  which is required to be
scheduled  to this  Agreement  is set forth on  Schedules  attached  hereto,  is
correct  and  accurate  and  does not omit to  state  any  information  material
thereto.

     Section  7.30 PUC and  ERCOT  Regulations.  Borrower  and  each  Restricted
Subsidiary are in compliance  with applicable  ERCOT  protocols  including those
regarding  customer  registration  and  scheduling.   Borrower  is  a  qualified
scheduling  entity  under  the ERCOT  protocols.  Borrower  and each  Restricted
Subsidiary are in compliance in all material  respects with the Customer Service
and Protection  Regulations including regulations concerning customer switching,
billing and  payment,  disconnection  of service,  and  information  provided to
customers of Subchapter B of Chapter 25 of the PUC Regulations 16 TAC Section 25
as well as regulations  concerning Quality of Service of Subchapter C of Chapter
25 of the PUC Regulations 16 TAC Section 25. Borrower is certified by the PUC as
a retail electric provider.

     Section  7.31  Small  Business  Concerns.   Borrower,   together  with  its
"affiliates"  (as that term is deemed in Title 13, United States Code of Federal
Regulations  Section 121.401) is a "Small Concern" within the meaning of Section
107.700 of Title 13 of the United  States Code of Federal  Regulations.  Neither
Borrower nor any Subsidiary shall use directly or indirectly the proceeds of the
Loan for any purpose for which a Small Business Investment Company is prohibited
from  providing  funds  by the  Small  Business  Investment  Act of 1958 and the
regulations  thereunder,  including  Sections 107.720 and 107.730 of Title 13 of
the United States Code of Federal Regulations.

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<PAGE>

                                  ARTICLE VIII
                              Affirmative Covenants

         Until the Commitments have expired or been terminated and the principal
of and interest on each Loan and all fees payable hereunder and all other
amounts payable under the Loan Documents shall have been paid in full, the
Borrower covenants and agrees with the Lenders that:

     Section 8.01 Financial  Statements;  Other  Information.  The Borrower will
furnish to the Administrative Agent and the Lenders:

     (a) Annual Financial Statements.  As soon as available, but in any event in
accordance  with then applicable law and not later than 90 days after the end of
each  fiscal  year  of  the  Borrower,  its  audited  consolidated  (and  if any
Unrestricted  Subsidiary existed during such year, its unaudited  consolidating)
balance sheet and related  statements of  operations,  stockholders'  equity and
cash  flows as of the end of and for such  year,  setting  forth in each case in
comparative  form the figures for the previous  fiscal year,  all reported on by
Hein & Associates or other independent public accountants of recognized national
standing  (without a "going  concern" or like  qualification  or  exception  and
without  any  qualification  or  exception  as to the scope of such audit or the
treatment of any item) to the effect that such consolidated financial statements
present fairly in all material  respects the financial  condition and results of
operations of the Borrower and its  Consolidated  Subsidiaries on a consolidated
basis  in  accordance  with  GAAP  consistently  applied.   Notwithstanding  the
preceding,  in the  event  that  Borrower  has  Unrestricted  Subsidiaries  that
generate any material  revenues or expenses or have any material  liabilities or
assets,  the  Administrative  Agent will  determine  at such time the  financial
statements that will satisfy  Borrower's  obligations  under this Section in its
reasonable discretion.

     (b) Quarterly Financial Statements.  As soon as available, but in any event
in accordance  with then applicable law and not later than 45 days after the end
of each of the first three fiscal  quarters of each fiscal year of the Borrower,
its  consolidated  (and  if any  Unrestricted  Subsidiary  existed  during  such
quarter,  its unaudited  consolidating)  balance sheet and related statements of
operations,  stockholders'  equity  and cash flows as of the end of and for such
fiscal quarter and the then elapsed portion of the fiscal year, setting forth in
each  case in  comparative  form the  figures  for the  corresponding  period or
periods of (or, in the case of the balance sheet, as of the end of) the previous
fiscal year, all certified by one of its Financial Officers as presenting fairly
in all material  respects the  financial  condition and results of operations of
the  Borrower  and its  Consolidated  Subsidiaries  on a  consolidated  basis in
accordance  with GAAP  consistently  applied,  subject to normal  year-end audit
adjustments and the absence of footnotes.  Notwithstanding the preceding, in the
event that  Borrower has  Unrestricted  Subsidiaries  that generate any material
revenues  or  expenses  or  have  any  material   liabilities  or  assets,   the
Administrative  Agent will determine at such time the financial  statements that
will  satisfy  Borrower's  obligations  under  this  Section  in its  reasonable
discretion.

     (c) Certificate of Financial  Officer - Compliance.  Concurrently  with any
delivery of financial statements under Section 8.01(a) or Section 8.01(b), (i) a
certificate of a Financial Officer in substantially the form of Exhibit D hereto
(A)  certifying  as to whether a Default  has  occurred  and,  if a Default  has

                                       37
<PAGE>

occurred,  specifying the details thereof and any action taken or proposed to be
taken with respect thereto,  (B) setting forth reasonably detailed  calculations
demonstrating  compliance  with Section 9.01, and (C) stating whether any change
in GAAP or in the application thereof has occurred since the date of the audited
financial  statements  referred  to in Section  7.04 and, if any such change has
occurred,  specifying  the  effect of such  change on the  financial  statements
accompanying  such certificate,  and (ii) a copy of the certification  signed by
the  principal  executive  officer and the  principal  financial  officer of the
Borrower  (each,  a  "Certifying  Officer") as required by Rule 13A-14 under the
Securities  Exchange Act of 1934 and a copy of the internal controls  disclosure
statement  by such  Certifying  Officers as  required  by Rule 13A-15  under the
Securities  Exchange  Act of 1934 and Final  Rules  Release  No.  33-8238 of the
United  States  Securities  and  Exchange  Commission,  each as  included in the
Borrower's  Annual Report on Form 10-K or Quarterly Report on Form 10-Q, for the
applicable fiscal period.

     (d)  Certificate  of  Accounting  Firm -  Defaults.  Concurrently  with any
delivery of financial  statements  under Section  8.01(a),  a certificate of the
accounting firm that reported on such financial  statements stating whether they
obtained  knowledge  during the course of their  examination  of such  financial
statements  of any  Default  (which  certificate  may be  limited  to the extent
required by accounting rules or guidelines).

     (e) Certificate of Financial  Officer - Consolidating  Information.  If, at
any  time,  all of  the  Subsidiaries  of  the  Borrower  are  not  Consolidated
Subsidiaries,  then concurrently with any delivery of financial statements under
Section 8.01(a) or Section 8.01(b), a certificate of a Financial Officer setting
forth consolidating spreadsheets that show all Consolidated Subsidiaries and the
eliminating entries, in such form as would be presentable to the auditors of the
Borrower.

     (f) Certificate of Financial  Officer - Swap Agreements.  Concurrently with
any delivery of financial  statements under Section 8.01(a) and Section 8.01(b),
a certificate of a Financial Officer, in form and substance  satisfactory to the
Administrative  Agent,  setting forth as of the last Business Day of such fiscal
quarter or fiscal year, a true and complete  list of all Swap  Agreements of the
Borrower and each Restricted  Subsidiary,  the material terms thereof (including
the type,  term,  effective  date,  termination  date and  notional  amounts  or
volumes),  the  net  mark-to-market  value  therefore,  any new  credit  support
agreements  relating thereto not listed on Schedule 7.18, any margin required or
supplied under any credit support  document,  and the  counterparty to each such
agreement.  In addition,  Borrower shall furnish,  within fifteen  Business Days
following each calendar month, the Administrative Agent and the Lenders with the
Borrower's and its Subsidiaries hedge book in a format reasonably  acceptable to
the Administrative Agent.

     (g)  Certificate  of Insurer - Insurance  Coverage.  Concurrently  with any
delivery of  financial  statements  under  Section  8.01(a),  a  certificate  of
insurance  coverage from each insurer with respect to the insurance  required by
Section 8.07, in form and substance  satisfactory to the  Administrative  Agent,
and, if requested by the  Administrative  Agent or any Lender, all copies of the
applicable policies.

     (h) Other Accounting Reports. Promptly upon receipt thereof, a copy of each
other report or letter  submitted to the Borrower or any of its  Subsidiaries by

                                       38
<PAGE>

independent  accountants in connection with any annual, interim or special audit
made by them of the books of the Borrower or any such Subsidiary,  and a copy of
any response by the Borrower or any such  Subsidiary,  or the Board of Directors
of the Borrower or any such Subsidiary, to such letter or report.

     (i) Cash Flow/Daily  Supply and Demand Forecast.  Promptly after the end of
each  calendar  month,  a  current  liquidity  model  of the  Borrower  and  its
Subsidiaries  as of the end of such calendar  month and as of the fiscal year to
date.  Daily, the Daily Supply and Demand Forecast Report for the current day in
the form previously provided to the Administrative Agent.

     (j) SEC and Other Filings; Reports to Shareholders. Promptly after the same
become  publicly  available,  copies of all  periodic and other  reports,  proxy
statements and other  materials filed by the Borrower or any Subsidiary with the
SEC, or with any national securities exchange, or distributed by the Borrower to
its shareholders generally, as the case may be.

     (k) Notices  Under  Material  Instruments.  Promptly  after the  furnishing
thereof, copies of any financial statement,  report or notice furnished to or by
any Person pursuant to the terms of any preferred stock designation,  indenture,
loan or credit or other  similar  agreement,  other than this  Agreement  or any
other  material  agreement  and not  otherwise  required to be  furnished to the
Administrative  Agent or the  Lenders  pursuant to any other  provision  of this
Section 8.01.

     (l) Monthly  Statements.  As soon as available,  and in any event within 45
days after the end of each fiscal  month of the  Borrower  and its  Consolidated
Subsidiaries,  internally  prepared  consolidated  balance sheets,  consolidated
statements of operations and retained  earnings and  consolidated  statements of
cash flows as at the end of such fiscal month, and for the period  commencing at
the end of the immediately preceding fiscal year and ending with the end of such
fiscal month, all in reasonable  detail and certified by a Financial  Officer of
the Borrower as fairly  presenting,  in all  material  respects,  the  financial
position of the Borrower and its Subsidiaries as at the end of such fiscal month
and the results of operations,  retained earnings and cash flows of the Borrower
and its Subsidiaries for such fiscal month, in accordance with GAAP applied in a
manner  consistent  with that of the most recent  audited  financial  statements
furnished  to the  Administrative  Agent  and the  Lenders,  subject  to  normal
year-end  audit  adjustments  and the absence of  footnotes;  provided that such
financial  statements  prepared  after the end of the 12th fiscal  month of each
fiscal year shall be in consolidated and consolidating form and may be delivered
within 45 days  after the end of such month and be  subject  to  year-end  audit
adjustments.  Such  statements  shall be accompanied  by the "monthly  reporting
package"   prepared  by  Borrower  in  the  form  previously   provided  to  the
Administrative  Agent  together  with a  summary  analysis  in  memorandum  form
prepared  by a Financial  Officer of  Borrower  as to the results of  Borrower's
business and analysis of any variances from the budget  approved by the Board of
Directors  of Borrower  and provided to  Administrative  Agent with  explanation
therefor during the previous month.

     (m) Financial Projections.  On or before December 1 of each year, financial
projections,  supplementing  and superceding  the financial  projections for the
period  referred to in Section  7.04(d)(i),  prepared on a monthly  basis in the
form contemplated by Section 7.04(d)(i) and otherwise reasonably satisfactory to
the  Administrative  Agent, for the immediately  succeeding  fiscal year for the
Borrower and its Restricted  Subsidiaries on a consolidated basis and (ii) on or
before the last day of each fiscal quarter, financial projections, supplementing
and superceding the financial  projections for the period referred to in Section
7.04(d)(ii),  in the form  contemplated  by Section  7.04(d)(ii)  and  otherwise

                                       39
<PAGE>

reasonably   satisfactory  to  the  Administrative  Agent,  for  each  remaining
quarterly  period in such fiscal  year,  all such  financial  projections  to be
prepared on a reasonable basis and in good faith, and to be based on assumptions
believed  by the  Borrower to be  reasonable  at the time made and from the best
information then available to the Borrower.

     (n) Other Reports. (i) as soon as available and in any event within 45 days
after the end of each fiscal month of the Borrower and its Subsidiaries, reports
in form and detail  satisfactory to the Administrative  Agent and certified by a
Financial  Officer of the  Borrower  as being  accurate  of the  listing of each
account  receivable  in excess of $5,000 and a summary  listing of all  accounts
receivable  of the Borrower  and its  Subsidiaries  as of such day,  which shall
include  the  amount of each such  account  receivable  or  category  of account
receivable, showing separately, with respect to accounts receivable that consist
of trade and electricity  sales  receivables only, those which are more than 30,
60 and 90 days  old and a  description  of all  Liens,  set-offs,  defenses  and
counterclaims  with respect  thereto,  together  with a  reconciliation  of such
schedule with the schedule  delivered to the  Administrative  Agent  pursuant to
this  clause (n) for the  immediately  preceding  fiscal  month,  and such other
information as the Administrative Agent may reasonably request,  (ii) as soon as
available  and in any event within 45 days after the end of each fiscal month of
the Borrower and its  Subsidiaries,  reports in form and detail  satisfactory to
the Administrative Agent and certified by a Financial Officer of the Borrower as
being  accurate and  complete a listing of all accounts  payable of the Borrower
and its  Subsidiaries  as of each such day which  shall  include the amount and,
with respect to trade payables only, age of each account payable, and such other
information as the Administrative Agent may reasonably request,  (iii) within 45
days after the end of each fiscal month, a certificate of a Financial Officer of
Borrower  certifying that all insurance  premiums payable during such month with
respect  to  insurance  required  to be  maintained  by  the  Borrower  and  the
Subsidiaries  hereunder were timely paid, identifying the insurance company that
was paid, the amount that was owed and the amount that was paid, (iv) as soon as
available  and in any event within 45 days after the end of each fiscal month of
the Borrower and its Subsidiaries, reports in form and substance satisfactory to
the  Administrative  Agent  describing  the amounts that have been paid from and
added to the Cash Collateral Account during such month, (v) as soon as available
and in any  event  within  45 days  after  the end of each  fiscal  month of the
Borrower  and its  Subsidiaries,  reports  that  include  a  calculation  of the
Borrower's and each  Subsidiaries'  cash  disbursements and cash receipts during
such month.

     (o) Notice of Litigation/Casualty Events. Prompt written notice, and in any
event within three Business Days, of the delivery of any demand,  letter, or the
filing of any  lawsuit or  arbitration  proceeding  with an  expected  potential
liability in excess of $100,000,  or the occurrence of any Casualty Event or the
commencement  of any action or proceeding  that could  reasonably be expected to
result in a demand notice, lawsuit, arbitration proceeding, or Casualty Event.

     (p) Information  Regarding  Borrower and Guarantors.  Prompt written notice
(and in any event  within ten (10) days prior  thereto) of any change (i) in the
Borrower or any Restricted Subsidiary's corporate name or in any trade name used
to identify  such Person in the conduct of its  business or in the  ownership of

                                       40
<PAGE>

its  Properties,  (ii)  in the  location  of  the  Borrower  or  any  Restricted
Subsidiary's chief executive office or principal place of business, (iii) in the
Borrower or any Restricted  Subsidiary's  identity or corporate  structure or in
the  jurisdiction in which such Person is  incorporated  or formed,  (iv) in the
Borrower or any Restricted  Subsidiary's  jurisdiction  of  organization or such
Person's   organizational   identification   number  in  such   jurisdiction  of
organization,  and (v) in the Borrower or any  Restricted  Subsidiary's  federal
taxpayer identification number.

     (q) Notices of Certain Changes.  Promptly, but in any event within five (5)
Business Days after the execution thereof, copies of any amendment, modification
or supplement to the  certificate or articles of  incorporation,  certificate of
formation,  by-laws,  limited liability company  agreement,  any preferred stock
designation  or any other  organic  document of the  Borrower or any  Restricted
Subsidiary.

     (r) Other Requested Information.  Promptly following any request therefore,
such other  information  regarding  (i) the  operations,  business  affairs  and
financial  condition  of the  Borrower  or any  Subsidiary  (including,  without
limitation,  any Plan or Multiemployer Plan and any reports or other information
required to be filed under  ERISA),  or (ii)  compliance  with the terms of this
Agreement or any other Loan Document,  in each case, as the Administrative Agent
or the Lenders may reasonably request.

     (s) TXU Reports.  Promptly after the end of each calendar month all monthly
reports or notices that Borrower or any Subsidiary is required to provide to TXU
for the prior month together with any notices or significant  communication that
Borrower or any Subsidiary has received from TXU.

     (t) Spectrum  Report.  Borrower shall cause Spectrum to deliver the monthly
report   prepared  by  Spectrum  for  Borrower  to  the   Administrative   Agent
contemporaneously with Spectrum's delivery of such report to Borrower.

     Section 8.02 Notices of Material  Events.  The Borrower will furnish to the
Administrative Agent and the Lenders prompt written notice of the following:

     (a) the  occurrence of any Default or the occurrence of any event that with
notice or lapse of time, or both, would constitute and Event of Default;

     (b) the filing or commencement of, or the threat in writing of, any action,
suit,  proceeding,  investigation  or arbitration by or before any arbitrator or
Governmental  Authority  against or  affecting  the  Borrower  or any  Affiliate
thereof not previously  disclosed in writing to the Administrative  Agent or the
Lenders or any material  adverse  development in any action,  suit,  proceeding,
investigation or arbitration  previously  disclosed to the Administrative  Agent
that,  if  adversely  determined,  could  reasonably  be expected to result in a
Material Adverse Effect;

     (c) the  filing  or  commencement  of any  action,  suite,  proceeding,  or
arbitration by or on behalf of the Borrower or any of its Affiliates claiming or
asserting damages in favor of the Borrower of its Affiliates valued in excess of
$100,000;

                                       41
<PAGE>

     (d) the  occurrence  of any ERISA  Event that,  alone or together  with any
other ERISA Events that have occurred, could reasonably be expected to result in
liability of the Borrower and its  Subsidiaries in an aggregate amount exceeding
$100,000;

     (e) any other  development that results in, or could reasonably be expected
to result in, a Material Adverse Effect.

Each notice delivered under this Section 8.02 shall be accompanied by a
statement of a Responsible Officer setting forth the details of the event or
development requiring such notice and any action taken or proposed to be taken
with respect thereto.

     Section 8.03  Existence;  Conduct of Business.  The Borrower will, and will
cause each Restricted Subsidiary to, do or cause to be done all things necessary
to preserve, renew and keep in full force and effect its legal existence and the
rights, licenses,  permits, privileges and franchises material to the conduct of
its business and maintain,  if necessary,  its  qualification  to do business in
each other  jurisdiction in which its Properties are located or the ownership of
its Properties  requires such  qualification;  provided that the foregoing shall
not prohibit any merger,  consolidation,  liquidation or  dissolution  permitted
under Section 9.12.

     Section 8.04 Payment of Obligations. The Borrower will, and will cause each
Subsidiary to, pay its  obligations  (including Tax  liabilities of the Borrower
and all of its  Subsidiaries  and any  agreement  material  to the  business  or
operations  of the  Borrower  or its  Affiliates)  before the same shall  become
delinquent  or in default,  except where (a) the  validity or amount  thereof is
being  contested in good faith by appropriate  proceedings,  (b) the Borrower or
such  Subsidiary  has set  aside on its books  adequate  reserves  with  respect
thereto in accordance with GAAP and (c) the failure to make payment pending such
contest could not reasonably be expected to result in a Material  Adverse Effect
or  result  in the  seizure  or  levy of any  Property  of the  Borrower  or any
Subsidiary.

     Section 8.05 Performance of Obligations under Loan Documents.  The Borrower
will pay the Notes according to the reading,  tenor and effect thereof,  and the
Borrower will,  and will cause each  Subsidiary to, do and perform every act and
discharge all of the  obligations  to be performed and  discharged by them under
the Loan Documents,  including, without limitation, this Agreement or the Senior
Credit Facility, at the time or times and in the manner specified.

     Section 8.06 Operation and Maintenance of Properties.  The Borrower, at its
own  expense,  will,  and will  cause  each  Subsidiary  to use  reasonable  and
customary  efforts to maintain and preserve,  and cause each of its Subsidiaries
use  reasonable  and  customary  efforts to maintain  and  preserve,  all of its
properties  which are necessary or useful in the proper  conduct of its business
in good repair and condition  including any  equipment,  machines or facilities,
ordinary wear and tear excepted,  and comply, and cause each of its Subsidiaries
to comply,  at all times with the material  provisions of all material leases to
which it is a party as lessee or under which it occupies property.

     Section 8.07  Insurance.  The Borrower will, and will cause each Subsidiary
to,  maintain,   with  financially  sound  and  reputable  insurance  companies,
insurance (including comprehensive general liability and hazard) in such amounts
and  against  such risks as is  required  by an  Governmental  Authority  having

                                       42
<PAGE>

jurisdiction with respect thereto and as are customarily maintained by companies
engaged  in the same or  similar  businesses  operating  in the same or  similar
locations  but in any event it will maintain at a minimum the types of insurance
and in such  amounts  as  reflected  on  Schedule  7.13 or as may be  reasonably
satisfactory to the Administrative Agent. The loss payable clauses or provisions
in said  insurance  policy or policies  insuring any of the  collateral  for the
Loans shall be endorsed in favor of and made payable to the Administrative Agent
as its  interests  may appear and such  policies  shall name the  Administrative
Agent and the Lenders as "additional insureds" and provide that the insurer will
endeavor  to give at least  30 days  prior  notice  of any  cancellation  to the
Administrative Agent.

     Section 8.08 Books and Records;  Inspection  Rights. The Borrower will, and
will cause each  Subsidiary to, keep proper books of record and account in which
full,  true and correct  entries are made of all  dealings and  transactions  in
relation to its business and activities.  The Borrower will, and will cause each
Subsidiary to, permit any representatives designated by the Administrative Agent
or the  Lenders,  upon  reasonable  prior  notice,  to  visit  and  inspect  its
Properties,  to examine and make  extracts  from its books and  records,  and to
discuss its affairs,  finances and condition  with its officers and  independent
accountants, all at such reasonable times and as often as reasonably requested.

     Section 8.09  Compliance  with Laws. The Borrower will, and will cause each
Subsidiary to, comply in all material respects with all laws, rules, regulations
and orders of any Governmental Authority applicable to it or its Property.

     Section 8.10 Environmental Matters.

     (a) The Borrower shall at its sole expense: (i) comply, and shall cause its
Properties and operations and each Subsidiary and each  Subsidiary's  Properties
and  operations  to  comply,  in  all  material  respects  with  all  applicable
Environmental  Laws; (ii) not dispose of or otherwise  release,  and shall cause
each Subsidiary not to dispose of or otherwise release,  hazardous substance, or
solid waste on, under,  about or from any of the Borrower's or its Subsidiaries'
Properties or any other  Property to the extent caused by the  Borrower's or any
of  its   Subsidiaries'   operations   except  in  compliance   with  applicable
Environmental Laws; (iii) timely obtain or file, and shall cause each Subsidiary
to timely obtain or file, all notices, permits, licenses, exemptions, approvals,
registrations  or  other  authorizations,  if  any,  required  under  applicable
Environmental  Laws to be obtained or filed in connection  with the operation or
use of the Borrower's or its  Subsidiaries'  Properties;  (iv) promptly commence
and  diligently  prosecute to  completion,  and shall cause each  Subsidiary  to
promptly  commence and  diligently  prosecute  to  completion,  any  assessment,
evaluation,  investigation,  monitoring,  containment, cleanup, removal, repair,
restoration,  remediation  or  other  remedial  obligations  (collectively,  the
"Remedial  Work") in the event  any  Remedial  Work is  required  or  reasonably
necessary under applicable  Environmental  Laws because of or in connection with
the actual or suspected past, present or future disposal or other release of any
hazardous  substance  or  solid  waste  on,  under,  about  or  from  any of the
Borrower's  or its  Subsidiaries'  Properties,  which  failure to  commence  and
diligently  prosecute  to  completion  could  reasonably  be  expected to have a
Material Adverse Effect;  and (v) establish and implement,  and shall cause each
Subsidiary to establish and  implement,  such  procedures as may be necessary to
continuously  determine  and assure that the  Borrower's  and its  Subsidiaries'
obligations under this Section 8.10(a) are timely and fully satisfied.

                                       43
<PAGE>

     (b) The Borrower will promptly, but in no event later than five days of the
occurrence  of a  triggering  event,  notify  the  Administrative  Agent and the
Lenders in writing of any  threatened  action,  investigation  or inquiry by any
Governmental  Authority or any threatened  demand or lawsuit by any landowner or
other third party against the Borrower or its  Subsidiaries or their  Properties
of which the Borrower has knowledge in connection  with any  Environmental  Laws
(excluding  routine  testing and corrective  action) if the Borrower  reasonably
anticipates that such action will result in liability  (whether  individually or
in the aggregate) in excess of $200,000, not fully covered by insurance, subject
to normal deductibles.

     Section 8.11 Further Assurances.

     (a) The Borrower at its expense will,  and will cause each  Subsidiary  to,
promptly  execute  and  deliver  to the  Administrative  Agent  all  such  other
documents, agreements and instruments reasonably requested by the Administrative
Agent to comply with,  cure any defects or accomplish the conditions  precedent,
covenants and agreements of the Borrower or any Subsidiary,  as the case may be,
in the Loan  Documents,  including  the Notes,  or to further  evidence and more
fully describe the collateral  intended as security for the Indebtedness,  or to
correct any omissions in this Agreement or the Security Instruments, or to state
more fully the obligations secured therein,  or to perfect,  protect or preserve
any Liens created pursuant to this Agreement or any of the Security  Instruments
or the priority thereof,  or to make any recordings,  file any notices or obtain
any consents,  all as may be reasonably  necessary or  appropriate,  in the sole
discretion of the Administrative Agent, in connection therewith.

     (b) The Borrower hereby authorizes the Administrative  Agent to file one or
more financing or continuation statements,  and amendments thereto,  relative to
all or any part of the Mortgaged  Property without the signature of the Borrower
or any other Guarantor  where permitted by law. A carbon,  photographic or other
reproduction of the Security Instruments or any financing statement covering the
Mortgaged  Property  or any part  thereof  shall be  sufficient  as a  financing
statement where permitted by law.

     Section  8.12 Fiscal  Year.  Cause the fiscal year of the  Borrower and its
Subsidiaries   to  end  on  December  31  of  each   calendar  year  unless  the
Administrative  Agent consents to a change in such fiscal year (and  appropriate
related changes to this Agreement).

     Section 8.13 Additional Guarantors.

     (a) The  Borrower  shall  promptly  cause  each  Restricted  Subsidiary  to
guarantee the  Indebtedness  pursuant to the Guaranty  Agreement.  In connection
with any such  guaranty,  the  Borrower  shall,  or shall cause such  Restricted
Subsidiary  to, (i) execute and deliver a supplement to the Guaranty  Agreement,
(ii)  pledge  all  of  the  Equity  Interests  of  such  Restricted   Subsidiary
(including,   without  limitation,   delivery  of  original  stock  certificates
evidencing the Equity Interests of such Restricted Subsidiary,  together with an
appropriate  undated stock powers for each certificate duly executed in blank by
the  registered  owner  thereof)  and  (iii)  execute  and  deliver  such  other
additional  closing   documents,   certificates  and  legal  opinions  as  shall
reasonably be requested by the Administrative Agent.

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<PAGE>

     (b)  The  Borrower  will at all  times  cause  the  material  tangible  and
intangible  assets of the Borrower and each Restricted  Subsidiary to be subject
to a Lien of the Security Instruments.

     Section 8.14 ERISA Compliance.  The Borrower will promptly furnish and will
cause the  Subsidiaries  and any ERISA  Affiliate  to  promptly  furnish  to the
Administrative  Agent (i)  promptly  after the  filing  thereof  with the United
States Secretary of Labor,  the Internal Revenue Service or the PBGC,  copies of
each  annual and other  report  with  respect to each Plan or any trust  created
thereunder,  (ii) immediately upon becoming aware of the occurrence of any ERISA
Event or of any "prohibited  transaction,"  as described in section 406 of ERISA
or in section 4975 of the Code, in connection with any Plan or any trust created
thereunder,  a written notice signed by the President or the principal Financial
Officer,  the Subsidiary or the ERISA Affiliate,  as the case may be, specifying
the nature  thereof,  what  action the  Borrower,  the  Subsidiary  or the ERISA
Affiliate is taking or proposes to take with respect  thereto,  and, when known,
any action taken or proposed by the Internal Revenue Service,  the Department of
Labor or the PBGC with  respect  thereto,  and (iii)  immediately  upon  receipt
thereof,  copies of any notice of the PBGC's intention to terminate or to have a
trustee  appointed to administer any Plan. With respect to each Plan (other than
a  Multiemployer  Plan),  the Borrower will, and will cause each  Subsidiary and
ERISA  Affiliate  to,  (i)  satisfy  in full  and in a  timely  manner,  without
incurring any late payment or underpayment  charge or penalty and without giving
rise to any lien, all of the  contribution  and funding  requirements of section
412 of the Code (determined  without regard to subsections (d), (e), (f) and (k)
thereof) and of section 302 of ERISA (determined without regard to sections 303,
304 and 306 of  ERISA),  and (ii)  pay,  or  cause to be paid,  to the PBGC in a
timely  manner,  without  incurring any late payment or  underpayment  charge or
penalty, all premiums required pursuant to sections 4006 and 4007 of ERISA.

     Section 8.15 Board  Resolutions.  Borrower and its Subsidiaries will at all
times comply with the Board Resolutions.

     Section 8.16 Congestion Charges. Neither Borrower nor its Subsidiaries will
conduct  their day to day business  operations  such that they may become liable
for any fines  charges  or other  penalties  associated  with  ERCOT or PUC line
congestion regulations.

     Section 8.17 Key Personnel.  Each of Neil Leibman,  Rod Danielson and James
A. Burke  (collectively  "Key  Personnel")  will remain full time  employees  of
Borrower or Borrower shall find replacements for such Key Personnel with similar
experience of the Key Personnel being  replaced.  Borrower will maintain so long
as any amount remains outstanding under this Agreement Key Man Life Insurance of
at least $3,000,000 in a form acceptable to Administrative Agent on Neil Leibman
with  reputable  insurance  companies.  Borrower will  collaterally  assign such
policies to Administrative Agent and have Administrative Agent named as the loss
payee  thereunder.  Borrower shall have a period of 120 days after the Effective
Date to cause the  preceding  to occur.  The Key  Personnel  shall not and shall
cause each Key Personnel's  Affiliates to not directly or indirectly participate
in the  ownership,  management,  operation  or control of, or be connected as an
officer,   management  employee,   partner,  director  or  contractor  providing
management or consulting services with, or have any financial interest in or aid
or assist  anyone in the  conduct  of, any  business  in the State of Texas that
either conducts a retail electricity  business or provides or sells a service or
product that is the same, substantially similar to or otherwise competitive with
the products and services provided or sold by Borrower and its Subsidiaries.

                                       45
<PAGE>

     Section 8.18 Material  Agreement.  The Borrower will keep in full force and
effect the  Consulting  Agreement and the TXU Agreements and will ensure that no
defaults  occur and continue  thereunder and will enforce the terms of each such
contract in accordance with their written terms.

     Section 8.19 Board of Directors.  Borrower shall provide to  Administrative
Agent the same  information  as all other  members of the Board of  Directors of
Borrower  have been  provided.  The  designee of  Administrative  Agent shall be
provided prior notice of all meetings of the Board of Directors of Borrower (and
committees  thereof),  in accordance  with the Company's  bylaws whether held in
person,  telephonically,  or  otherwise,  and such  designee may attend any such
meetings  it elects  to attend  and will  receive  copies of all  communications
pertaining to the Board of Directors of Borrower and any committees.

     Section 8.20 Fidelity  Bonding.  Borrower shall maintain  officer  fidelity
bonding in the amount of at least $500,000.00 with reputable insurers,  however,
such amount shall be subject to reasonable change based on review of the cost of
such premiums.

                                   ARTICLE IX
                               Negative Covenants

         Until the Commitments have expired or terminated and the principal of
and interest on each Loan and all fees payable hereunder and all other amounts
payable under the Loan Documents have been paid in full, the Borrower covenants
and agrees with the Lenders that it shall not:

     Section 9.01 Financial Covenants.

     (a) Leverage Ratio.  Permit the ratio of Debt (excluding Debt under the TXU
Agreements) of the Borrower and its Consolidated Subsidiaries as of the last day
of each fiscal  quarter set forth  below to TTM EBITDA of the  Borrower  and its
Consolidated  Subsidiaries  as of the  last  day of such  fiscal  quarter  to be
greater than the applicable ratio set forth below:

         Fiscal Quarter End                                   Leverage Ratio
         Effective Date through June 30, 2004                 1.9 to 1.0
         July 1, 2004 and thereafter                          1.5 to 1.0

     (b) Fixed Charge Coverage Ratio.  Permit the Fixed Charge Coverage Ratio of
the Borrower and its Consolidated Subsidiaries as of the last day of each fiscal
quarter to be less than the applicable ratio set forth below:

   Fiscal Quarter End                           Fixed Charge Coverage Ratio:
   Effective Date through September 30, 2004    1.5 to 1.0
   October 1, 2004 and thereafter               1.3 to 1.0

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<PAGE>

     (c) Interest Coverage Ratio. Permit the ratio of TTM EBITDA of the Borrower
and its Consolidated  Subsidiaries as of the last day of each fiscal quarter set
forth  below  to TTM  Interest  Expense  of the  Borrower  and its  Consolidated
Subsidiaries  as of the last day of such  fiscal  quarter  to be lower  than the
applicable ratio set forth below:

         Fiscal Quarter End                          Interest Coverage Ratio
         Effective Date through December 31, 2004    6.0 to 1.0
         January 1, 2005 and thereafter              4.7 to 1.0

(d) Consolidated EBITDA. Permit TTM EBITDA of the Borrower and its Consolidated
Subsidiaries at the end of each fiscal quarter to be less than the applicable
amount set forth below:

         Fiscal Quarter End                          Consolidated EBITDA
         June 30, 2004                               $8,000,000
         September 30, 2004                          $9,700,000
         October 1, 2004                            $11,000,000
         through June 30, 2005
         July 1, 2005 and thereafter                $12,000,000

     (e) Current Ratio.  Permit, the ratio of consolidated current assets (which
shall include an amount equal to Availability  but shall exclude an amount equal
to any increase (but not decrease)  resulting  from the  application of FASB 133
from and after December 31, 2002) to consolidated current liabilities (excluding
(i) all  Debt  and  accrued  interest  expense  otherwise  included  as  current
liabilities  and (ii) an amount  equal to any  increase  (but not  decrease)  in
current  liabilities  resulting from the  application of FASB 133 from and after
December 31, 2002) of the Borrower and its Consolidated  Subsidiaries to be less
than 1.0 to 1.0 at the end of any fiscal quarter of the Borrower.

     (f)  General  and  Administrative  Costs.  Permit the amount of General and
Administrative  Costs of the Borrower and its Consolidated  Subsidiaries for any
fiscal  quarter  to  exceed  6% of the sales of  Borrower  and its  Consolidated
Subsidiaries for such quarter.

     Section  9.02  Debt.  The  Borrower  will  not,  and  will not  permit  any
Restricted  Subsidiary  to, incur,  create,  assume or suffer to exist any Debt,
except:

     (a) the Notes or other Indebtedness arising under the Loan Documents or any
guaranty  of or  suretyship  arrangement  for the  Notes or  other  Indebtedness
arising under the Loan Documents.

     (b) Debt of the Borrower and its  Restricted  Subsidiaries  existing on the
date hereof that is reflected in the Financial Statements.

     (c) Debt arising under the TXU Agreements.

                                       47
<PAGE>

     (d) accounts payable and accrued expenses, liabilities or other obligations
to pay the deferred  purchase  price of Property or services,  from time to time
incurred in the  ordinary  course of business  that are not greater  than thirty
(30) days past the date of invoice or delinquent or that are being  contested in
good faith by  appropriate  action  and for which  adequate  reserves  have been
maintained in accordance with GAAP.

     Section  9.03  Liens.  The  Borrower  will  not,  and will not  permit  any
Restricted  Subsidiary to, create,  incur, assume or permit to exist any Lien on
any of its Properties (now owned or hereafter acquired), except:

     (a) Liens securing the payment of any Indebtedness.

     (b) Excepted Liens.

     (c) TXU Liens.

     (d) Liens  granted  in favor of  JPMorganChase  Bank  associated  with cash
collateral supporting certain letters of credit of the Borrower.

     Section 9.04 Restricted Payments.

     (a) Restricted Payments. (i) Declare or pay any Restricted Payment,  direct
or  indirect,  on  account  of any  Equity  Interests  of the  Borrower,  now or
hereafter outstanding,  (ii) make any Restricted Payment of any Equity Interests
of the Borrower, now or hereafter outstanding, (iii) make any payment to retire,
or to obtain the surrender of, any outstanding warrants, options or other rights
for the purchase or acquisition of shares of any Equity Interests of Borrower or
any Subsidiary,  now or hereafter  outstanding  other than the Equity  Interests
from  employees of Borrower  provided such purchase does not exceed  $100,000 in
any single  transaction  and such  transactions  do not exceed  $200,000  in the
aggregate,  or (iv) other than payments under employment agreements entered into
in the ordinary course of business, pay any management fees or any other fees or
expenses  (including  the  reimbursement  thereof  by  Borrower  or  any  of its
Subsidiaries) pursuant to any management, consulting or other services agreement
to any Affiliates of the Borrower  (excluding any  Subsidiaries of the Borrower)
other than  payments to Gexa/Ciro for billing  services;  provided such payments
are  made  in  connection  with  arms-length  transactions  entered  into in the
ordinary  course of business  and are on terms no less  favorable to Borrower or
any  Subsidiary  than Borrower  could receive from other third party  providers;
provided,  however,  (A) any Subsidiary of the Borrower may pay dividends to the
Borrower,  (B) the  Borrower  may pay  dividends  in the form of  common  stock,
provided  that no such payment  shall be made if an Event of Default  shall have
occurred and be  continuing or would result from the making of any such payment,
(C) the  exercise  price of any  options,  interests or other rights to purchase
common stock of the Borrower may be paid in common stock of the Borrower and (D)
any  Subsidiary may make any payment or transfer any of its property to Borrower
upon 15 days prior  written  notice to the  Administrative  Agent and subject to
Liens in favor of the Administrative Agent, if any.

     Section 9.05  Investments,  Loans and Advances.  The Borrower will not, and
will  not  permit  any  Restricted  Subsidiary  to,  make or  permit  to  remain
outstanding  any  Investments  in or to any Person,  except  that the  foregoing
restriction shall not apply to:

                                       48
<PAGE>

     (a) Investments reflected in the Financial Statements or that are disclosed
to the  Administrative  Agent in Schedule 9.05. (b) Purchases of electricity for
resale.

     (c) Accounts receivable arising in the ordinary course of business.

     (d) Direct  obligations  of the United  States or any  agency  thereof,  or
obligations  guaranteed by the United States or any agency thereof, in each case
maturing within one year from the date of creation thereof.

     (e)  Commercial  paper  maturing  within one year from the date of creation
thereof rated in the highest grade by S&P or Moody's.

     (f)  Deposits  maturing  within one year from the date of creation  thereof
with,  including  certificates  of  deposit  issued by, any Lender or any office
located  in the  United  States  of any  other  bank or trust  company  which is
organized under the laws of the United States or any state thereof, has capital,
surplus and undivided profits  aggregating at least $100,000,000 (as of the date
of such bank or trust company's most recent  financial  reports) and has a short
term deposit  rating of no lower than A2 or P2, as such rating is set forth from
time to time, by S&P or Moody's, respectively.

     (g) Deposits in money market funds  investing  exclusively  in  Investments
described in Section 9.05(d), Section 9.05(e) or Section 9.05(f).

     (h) Deposits  securing  Letters of Credit issued by JPMorgan  Chase Bank in
favor of TXU.

     (i)  Investments in  Unrestricted  Subsidiaries  in an amount not to exceed
$10,000  per  Unrestricted  Subsidiary  and  $20,000  in the  aggregate  for all
Unrestricted Subsidiaries.

     Section  9.06 Nature of Business.  Neither the Borrower nor any  Restricted
Subsidiary  will allow any  material  change to be made in the  character of its
business of procuring  and  marketing  electricity  to be provided  primarily to
residential and small commercial users in the State of Texas. From and after the
date hereof,  the Borrower and its Restricted  Subsidiaries  will not change the
nature of its business or expand its operations outside of the state of Texas or
make any other  expenditure  (whether such expenditure is capital,  operating or
otherwise)  in or related to, an expansion of its business  outside of the state
of Texas without the approval of Lenders.

     Section 9.07 Limitation on Leases.  Neither the Borrower nor any Restricted
Subsidiary will create,  incur, assume or suffer to exist any obligation for the
payment of rent or hire of Property of any kind whatsoever (real or personal but
excluding  Capital  Leases),  under leases or lease agreements which would cause
the aggregate  amount of all payments made by the Borrower and the  Subsidiaries
pursuant to all such leases or lease agreements,  including, without limitation,
any  residual  payments  at the end of any lease,  to exceed  $2,500,000  in any
period of twelve consecutive calendar months during the life of such leases.

                                       49
<PAGE>

     Section  9.08 Sale and  Leasebacks.  The  Borrower  will not enter into any
arrangement,  directly or indirectly, with any Person whereby the Borrower shall
sell or transfer any of its Property,  whether now owned or hereafter  acquired,
and whereby the Borrower shall then or thereafter rent or lease such Property or
any  part  thereof  or  other  Property  that the  Borrower  intends  to use for
substantially the same purpose or purposes as the Property sold or transferred.

     Section 9.09  Proceeds of Notes.  The Borrower will not permit the proceeds
of the Notes to be used for any purpose  other than those  permitted  by Section
7.19.  Neither the Borrower nor any Person  acting on behalf of the Borrower has
taken or will take any action  which  might cause any of the Loan  Documents  to
violate Regulations T, U or X or any other regulation of the Board or to violate
Section  7 of the  Securities  Exchange  Act of 1934 or any  rule or  regulation
thereunder,  in each case as now in effect or as the same may  hereinafter be in
effect. If requested by the  Administrative  Agent, the Borrower will furnish to
the Administrative  Agent and each Lender a statement to the foregoing effect in
conformity  with the  requirements of FR Form U-1 or such other form referred to
in Regulation U, Regulation T or Regulation X of the Board, as the case may be.

     Section 9.10 ERISA  Compliance.  The Borrower and the Subsidiaries will not
at any time:

     (a) engage in, or permit any ERISA  Affiliate to engage in, any transaction
in connection with which the Borrower, a Subsidiary or any ERISA Affiliate could
be subjected to either a civil penalty assessed pursuant to subsections (c), (i)
or (l) of section  502 of ERISA or a tax  imposed by Chapter 43 of Subtitle D of
the Code.

     (b) terminate,  or permit any ERISA  Affiliate to terminate,  any Plan in a
manner, or take any other action with respect to any Plan, which could result in
any liability of the Borrower, a Subsidiary or any ERISA Affiliate to the PBGC.

     (c) fail to make,  or permit  any  ERISA  Affiliate  to fail to make,  full
payment  when due of all  amounts  which,  under  the  provisions  of any  Plan,
agreement relating thereto or applicable law, the Borrower,  a Subsidiary or any
ERISA Affiliate is required to pay as contributions thereto.

     (d) permit to exist, or allow any ERISA  Affiliate to permit to exist,  any
accumulated  funding  deficiency  within the  meaning of section 302 of ERISA or
section 412 of the Code, whether or not waived, with respect to any Plan.

     (e) permit,  or allow any ERISA Affiliate to permit,  the actuarial present
value of the benefit  liabilities  under any Plan maintained by the Borrower,  a
Subsidiary or any ERISA  Affiliate which is regulated under Title IV of ERISA to
exceed the current value of the assets (computed on a plan termination  basis in
accordance  with  Title IV of  ERISA)  of such Plan  allocable  to such  benefit
liabilities. The term "actuarial present value of the benefit liabilities" shall
have the meaning specified in section 4041 of ERISA.

     (f)  contribute to or assume an obligation to contribute  to, or permit any
ERISA  Affiliate to contribute to or assume an obligation to contribute  to, any
Multiemployer Plan.

                                       50
<PAGE>

     (g) acquire,  or permit any ERISA Affiliate to acquire,  an interest in any
Person that causes such Person to become an ERISA  Affiliate with respect to the
Borrower or a Subsidiary or with respect to any ERISA  Affiliate of the Borrower
or a Subsidiary if such Person sponsors,  maintains or contributes to, or at any
time  in  the  six-year  period   preceding  such   acquisition  has  sponsored,
maintained,  or contributed to, 1. any Multiemployer  Plan, or 2. any other Plan
that is subject to Title IV of ERISA under which the actuarial  present value of
the benefit  liabilities under such Plan exceeds the current value of the assets
(computed on a plan  termination  basis in accordance with Title IV of ERISA) of
such Plan allocable to such benefit liabilities.

     (h) incur,  or permit any ERISA  Affiliate  to incur,  a liability to or on
account of a Plan under sections 515, 4062, 4063, 4064, 4201 or 4204 of ERISA.

     (i)  contribute to or assume an obligation to contribute  to, or permit any
ERISA  Affiliate to contribute to or assume an obligation to contribute  to, any
employee  welfare benefit plan, as defined in section 3(1) of ERISA,  including,
without  limitation,  any such plan  maintained  to provide  benefits  to former
employees of such entities, that may not be terminated by such entities in their
sole discretion at any time without any material liability.

     (j) amend,  or permit any ERISA  Affiliate to amend, a Plan resulting in an
increase in current liability such that the Borrower,  a Subsidiary or any ERISA
Affiliate is required to provide security to such Plan under section  401(a)(29)
of the Code.

     Section 9.11 Sale or Discount of Receivables.  Except for the settlement of
billing  accounts in the  ordinary  course of business or  discounts  granted to
settle  collection  of accounts  receivable  or the sale of  defaulted  accounts
arising in the ordinary  course of business in connection with the compromise or
collection thereof and not in connection with any financing transaction, neither
the  Borrower  nor any  Restricted  Subsidiary  will  discount  or sell (with or
without recourse) any of its notes receivable or accounts receivable.

     Section  9.12  Mergers,  Etc.  Neither  the  Borrower  nor  any  Restricted
Subsidiary  will merge into or with or  consolidate  with any other  Person,  or
sell,  lease or otherwise  dispose of (whether in one transaction or in a series
of transactions)  all or  substantially  all of its Property to any other Person
(any  such  transaction,  a  "consolidation");   provided  that  any  Restricted
Subsidiary may participate in a consolidation  with the Borrower  (provided that
the Borrower  shall be the  continuing  or surviving  corporation)  or any other
Subsidiary,  provided one of such Subsidiaries is a Wholly-Owned Subsidiary, and
the surviving Person shall be a Wholly-Owned Subsidiary

     Section 9.13 Sale of Properties. The Borrower will not, and will not permit
any Restricted  Subsidiary to, sell,  assign,  convey or otherwise  transfer any
Property (including any Equity Interest in any Restricted Subsidiary) except for
(a) the sale of electricity in the ordinary course of business;  (b) the sale or
transfer  of  equipment  that is no longer  necessary  for the  business  of the
Borrower or such  Restricted  Subsidiary or is replaced by equipment of at least
comparable value and use; and (c) the sale or transfer any Property that, in the
aggregate  during  any  calendar  year,  has a fair  market  value of less  than
$100,000.

                                       51
<PAGE>

     Section 9.14  Environmental  Matters.  The Borrower  will not, and will not
permit any Subsidiary to, cause or permit any of its Property to be in violation
of, or do  anything or permit  anything  to be done which will  subject any such
Property to any Remedial Work under any Environmental  Laws, assuming disclosure
to the applicable  Governmental Authority of all relevant facts,  conditions and
circumstances,  if any,  pertaining  to such Property  where such  violations or
remedial  obligations  could  reasonably be expected to have a Material  Adverse
Effect.

     Section 9.15 Transactions with Affiliates.  The Borrower will not, and will
not permit any Subsidiary  to, enter into any  transaction,  including,  without
limitation,  any purchase,  sale, lease or exchange of Property or the rendering
of any service, with any Affiliate or employee, advisor,  consultant,  director,
officer or shareholder of Borrower or any Subsidiary  (other than the Guarantors
and Wholly-Owned  Subsidiaries of the Borrower) unless such  transactions are in
the  ordinary  course of business and  necessary  or  desirable  for the prudent
operation of the business of Borrower and its Subsidiaries and are upon fair and
reasonable  terms no less  favorable  to it than it would obtain in a comparable
arm's length transaction with a Person not an Affiliate.

     Section  9.16  Material  Agreements.  The  Borrower  will not, and will not
permit any  Restricted  Subsidiary to, enter into any contract or agreement that
involves an individual  commitment from such Person of more than $150,000 in the
aggregate in any twelve month period other than (i) confirmations  under the TXU
Power  Purchase  Agreement  and  (ii)  Swap  Agreements   permitted  under  this
Agreement.  Neither Borrower nor any Restricted Subsidiary will waive or fail to
enforce the  provisions  of any  Material  Agreement,  employment  agreement  or
non-compete agreement to which it or any Subsidiary is a party without the prior
written consent of the Administrative Agent and the Lenders.

     Section 9.17  Capital  Expenditures.  The  Borrower  will not, and will not
permit any of its Restricted  Subsidiaries to, make any Capital  Expenditures in
the  aggregate  in an amount  greater  than the capital  budget  approved by the
Administrative  Agent with respect to the applicable Capital Expenditure for the
applicable  year  unless  otherwise  approved by the  Administrative  Agent such
approval not to be unreasonably withheld. In the event that Administrative Agent
has not approved the capital  budget for a particular  year,  Borrower  shall be
permitted to make Capital  Expenditures for items in amounts that are no greater
than the previously approved capital budget with respect to such items.

     Section 9.18  Subsidiaries.  The Borrower will not, and will not permit any
Restricted Subsidiary to, create or acquire any additional Restricted Subsidiary
unless the Borrower  gives written  notice to the  Administrative  Agent of such
creation or acquisition  and complies with Section  8.13(a).  The Borrower shall
not,  and shall  not  permit  any  Restricted  Subsidiary  to,  sell,  assign or
otherwise dispose of any Equity Interests in any Restricted Subsidiary.  Neither
the Borrower nor any Restricted  Subsidiary shall have any Subsidiaries that are
organized  under the laws other  than the United  States of America or any state
thereof or the District of Columbia.

     Section  9.19  Negative  Pledge  Agreements;   Dividend  Restrictions.  The
Borrower will not, and will not permit any  Restricted  Subsidiary  to,  create,
incur, assume or suffer to exist any contract, agreement or understanding (other
than this Agreement,  the Security  Instruments,  or the Senior Credit Facility)
that in any way  prohibits or restricts  the  granting,  conveying,  creation or
imposition  of any Lien on any of its  Property  in favor of the  Administrative
Agent and the  Lenders  or  restricts  any  Restricted  Subsidiary  from  paying
dividends or making  distributions  to the Borrower or any  Guarantor,  or which
requires the consent of or notice to other Persons in connection therewith.

                                       52
<PAGE>

     Section 9.20 Swap  Agreements.  The Borrower  will not, and will not permit
any  Subsidiary  to, enter into any Swap  Agreements  with any Person other than
Swap  Agreements  entered into in the ordinary  course of business in respect of
electricity (i) with an Approved  Counterparty and (ii) the notional volumes for
which (when aggregated with other commodity Swap Agreements then in effect other
than basis  differential  swaps on volumes already hedged pursuant to other Swap
Agreements)  are not more than, as of the date such Swap  Agreement is executed,
104% of the reasonably  anticipated  projected  electricity volume that Borrower
will sell during each month  during the period  which such Swap  Agreement is in
effect (ie. cover its then current market exposure).  In no event shall any Swap
Agreement  entered into by Borrower or any Subsidiary  contain any  requirement,
agreement or covenant for the Borrower or any  Subsidiary to post  collateral or
margin to secure their obligations under such Swap Agreement (other than the TXU
Agreements) or to cover market exposures or be speculative in nature.

     Section 9.21  Certain  Activities.  The  Borrower  shall not, and shall not
permit any Subsidiary to, without the written  consent of each Lender,  (a) take
any action not in the ordinary  course of the  business of the Borrower  (unless
such action could not reasonably be expected to have a Material Adverse Effect),
(b) file or settle any litigation or arbitral proceedings, or release claim, for
amount in excess of $100,000  in the  aggregate,  (c) either  singly or jointly,
directly  or  indirectly,  commence,  join any other  Person in  commencing,  or
authorize a trustee or other Person  acting on its behalf or on behalf of others
to commence, any voluntary bankruptcy, reorganization,  arrangement, insolvency,
liquidation,  or  receivership  under the laws of the United States or any state
thereof, or (d) make a general assignment for the benefit of its creditors.

     Section 9.22  Designation  of  Unrestricted  Subsidiary.  The  Subsidiaries
listed on Schedule  9.22 are  Unrestricted  Subsidiaries.  The Borrower will not
designate any additional  Subsidiary an  Unrestricted  Subsidiary  without first
obtaining the prior written  consent of the Lenders in their sole and unfettered
discretion.  In electing to grant such  consent  the  Lenders may  consider  the
following factors but are not limited to making any determination  based on such
factors:

     (i) whether such Subsidiary or any of its  subsidiaries has any Debt except
Non-Recourse Debt;

     (ii) whether such  Subsidiary or any of its  subsidiaries is a party to any
agreement, arrangement,  understanding or other transaction with the Borrower or
any  Restricted  Subsidiary,  except  those  agreements  and other  transactions
entered  into in writing in the  ordinary  course of  business  at prices and on
terms and  conditions  not less  favorable to the  Borrower and each  Restricted
Subsidiary than could be obtained on an arm's-length  basis from unrelated third
parties;

                                       53
<PAGE>

     (iii) at the time of such  designation and immediately  after giving effect
thereto, no Default shall have occurred and be continuing;

     (iv) whether such  Subsidiary or any of its  subsidiaries  owns any Debt or
Equity  Interest of, or is the  beneficiary  of any Lien on any property of, the
Borrower or any Restricted Subsidiary;

     (v) separateness of such Subsidiary and any of its subsidiaries; and

     (vi) such other matters as the Lenders may determine.

         Prior to such designation, the Borrower will deliver a certificate to
the Lenders identifying the names of such Subsidiary and all of its subsidiaries
and will provide such information regarding such Subsidiary as Administrative
Agent or any Lender may request. Lenders will notify Borrower within 20 Business
Days after the delivery of all such information that they or the Administrative
Agent may have requested as to whether they will grant their consent to permit
such Subsidiary to be an Unrestricted Subsidiary.

                                   ARTICLE X
                           Events of Default; Remedies

     Section 10.01 Events of Default.  One or more of the following events shall
constitute an "Event of Default":

     (a) the  Borrower  shall fail to pay any  principal of any Loan when and as
the same shall become due and  payable,  whether at the due date thereof or at a
date fixed for prepayment thereof or otherwise.

     (b) the  Borrower  shall fail to pay any interest on any Loan or any fee or
any other amount (other than an amount referred to in Section  10.01(a)) payable
under any Loan Document,  when and as the same shall become due and payable, and
such failure shall continue unremedied for a period of one Business Day.

     (c) any  representation  or warranty made or deemed made by or on behalf of
the Borrower or any Subsidiary in or in connection with any Loan Document or any
amendment  or  modification  of any Loan  Document  or  waiver  under  such Loan
Document, or in any report,  certificate,  financial statement or other document
furnished  pursuant to or in connection  with any Loan Document or any amendment
or modification thereof or waiver thereunder, shall prove to have been incorrect
when made or deemed made.

     (d) the  Borrower  or any  Subsidiary  shall fail to observe or perform any
covenant,  condition or agreement contained in Section 8.01(k), Section 8.01(p),
Section 8.02, Section 8.03, Section 8.07, Section 8.14 or in ARTICLE IX.

     (e) the  Borrower  or any  Subsidiary  shall fail to observe or perform any
covenant,  condition or agreement  contained in this Agreement (other than those
specified  in Section  10.01(a),  Section  10.01(b) or Section  10.01(d)) or any
other Loan Document,  and such failure shall continue unremedied for a period of
30 days after the earlier to occur of (i) notice thereof from the Administrative
Agent to the Borrower  (which notice will be given at the request of any Lender)
or (ii) a  Responsible  Officer of the  Borrower  or such  Subsidiary  otherwise
becoming aware of such default.

                                       54
<PAGE>

     (f) the  Borrower  or any  Restricted  Subsidiary  shall  fail to make  any
payment  (whether of principal or interest and  regardless of amount) in respect
of any Material Indebtedness, when and as the same shall become due and payable.

     (g) any event or condition occurs that results in any Material Indebtedness
becoming due prior to its scheduled maturity or that enables or permits (with or
without  the giving of notice,  the lapse of time or both) the holder or holders
of any Material  Indebtedness  or any trustee or agent on its or their behalf to
cause any  Material  Indebtedness  to become due,  or to require the  Redemption
thereof  or any  offer to  Redeem to be made in  respect  thereof,  prior to its
scheduled maturity or require the Borrower or any Subsidiary to make an offer in
respect thereof.

     (h) an involuntary proceeding shall be commenced or an involuntary petition
shall be filed  seeking  (i)  liquidation,  reorganization  or other  relief  in
respect of the Borrower or any Subsidiary or its debts, or of a substantial part
of its  assets,  under any  Federal,  state or foreign  bankruptcy,  insolvency,
receivership  or similar law now or hereafter in effect or (ii) the  appointment
of a receiver, trustee, custodian, sequestrator, conservator or similar official
for the Borrower or any Subsidiary or for a substantial part of its assets, and,
in any such case, such proceeding or petition shall continue  undismissed for 60
days or an order or decree  approving or ordering any of the foregoing  shall be
entered.

     (i) the  Borrower or any  Subsidiary  shall (i)  voluntarily  commence  any
proceeding or file any petition  seeking  liquidation,  reorganization  or other
relief under any Federal, state or foreign bankruptcy, insolvency,  receivership
or similar law now or hereafter in effect,  (ii) consent to the  institution of,
or fail to  contest  in a timely  and  appropriate  manner,  any  proceeding  or
petition  described  in  Section  10.01(h),  (iii)  apply for or  consent to the
appointment  of a receiver,  trustee,  custodian,  sequestrator,  conservator or
similar official for the Borrower or any Subsidiary or for a substantial part of
its assets, (iv) file an answer admitting the material allegations of a petition
filed against it in any such proceeding,  (v) make a general  assignment for the
benefit of creditors or (vi) take any action for the purpose of effecting any of
the foregoing.

     (j) the Borrower or any Subsidiary  shall become  unable,  admit in writing
its inability or fail generally to pay its debts as they become due.

     (k) one or more  judgments for the payment of money in an aggregate  amount
in excess of $50,000  shall be rendered  against the  Borrower,  any  Restricted
Subsidiary or any combination thereof and the same shall remain undischarged for
a period of 30 consecutive  days during which execution shall not be effectively
stayed, or any action shall be legally taken by a judgment creditor to attach or
levy upon any assets of the Borrower or any Restricted Subsidiary to enforce any
such judgment.

     (l) the Loan Documents after delivery thereof shall for any reason,  except
to the  extent  permitted  by the terms  thereof,  cease to be in full force and
effect and valid, binding and enforceable in accordance with their terms against

                                       55
<PAGE>

the Borrower or a Guarantor party thereto or shall be repudiated by any of them,
or cease to create a valid and perfected Lien of the priority  required  thereby
on any of the collateral  purported to be covered thereby,  except to the extent
permitted by the terms of this  Agreement,  or the Borrower or any Subsidiary or
any of their Affiliates shall so state in writing.

     (m) an ERISA Event shall have occurred that, in the opinion of the Lenders,
when taken  together  with all other  ERISA  Events  that have  occurred,  could
reasonably be expected to result in a Material Adverse Effect.

     (n) a Change in Control shall occur.

     (o) a Material Adverse Effect shall occur and be continuing.

     (p) any provision of any Subsidiary Guaranty for any reason is not a legal,
valid,  binding and enforceable  obligation of the Subsidiary Guarantor shown as
being a party  thereto  or any  Subsidiary  or the  Borrower  shall  so state in
writing.

     Section 10.02 Remedies.

     (a) In the case of an Event of Default  other than one described in Section
10.01(h),  Section 10.01(i) or Section  10.01(j),  at any time thereafter during
the continuance of such Event of Default,  the Administrative  Agent may, and at
the request of the Lenders, shall, by notice to the Borrower,  declare the Notes
and the Loans then  outstanding  to be due and payable in whole (or in part,  in
which case any principal not so declared to be due and payable may thereafter be
declared to be due and  payable),  and  thereupon  the principal of the Loans so
declared to be due and payable,  together with accrued  interest thereon and all
fees and other obligations of the Borrower and the Guarantors  accrued hereunder
and under the Notes and the other Loan  Documents,  shall become due and payable
immediately,   without  presentment,   demand,  protest,  notice  of  intent  to
accelerate, notice of acceleration or other notice of any kind, all of which are
hereby  waived by the  Borrower and each  Guarantor;  and in case of an Event of
Default described in Section 10.01(h), Section 10.01(i) or Section 10.01(j), the
Commitments shall automatically terminate and the Notes and the principal of the
Loans then outstanding,  together with accrued interest thereon and all fees and
the other  obligations of the Borrower and the Guarantors  accrued hereunder and
under the Notes and the other Loan Documents, shall automatically become due and
payable,  without presentment,  demand, protest or other notice of any kind, all
of which are hereby waived by the Borrower and each Guarantor.

     (b)  In  the  case  of  the   occurrence  of  an  Event  of  Default,   the
Administrative  Agent and the Lenders  will have all other  rights and  remedies
available at law and equity.

     (c) All proceeds  realized from the  liquidation  or other  disposition  of
collateral  or  otherwise  received  after  maturity  of the  Notes,  whether by
acceleration or otherwise, shall be applied: first, to reimbursement of expenses
and  indemnities  provided for in this  Agreement and the Security  Instruments;
second, to accrued interest on the Notes;  third, to fees;  fourth,  pro rata to
principal outstanding on the Notes and Indebtedness referred to in clause (b) of
the definition of "Indebtedness"  owing to a Lender or an Affiliate of a Lender;
and any excess  shall be paid to the  Borrower or as  otherwise  required by any
Governmental Requirement.

                                       56
<PAGE>

                                   ARTICLE XI
                            The Administrative Agent

     Section 11.01 Appointment;  Powers.  Each of the Lenders hereby irrevocably
appoints the Administrative Agent as its agent and authorizes the Administrative
Agent to take such  actions  on its behalf and to  exercise  such  powers as are
delegated  to the  Administrative  Agent by the terms  hereof and the other Loan
Documents,  together with such actions and powers as are  reasonably  incidental
thereto.

     Section  11.02  Duties  and  Obligations  of   Administrative   Agent.  The
Administrative  Agent  shall not have any  duties or  obligations  except  those
expressly set forth in the Loan  Documents.  Without  limiting the generality of
the  foregoing,  (a)  the  Administrative  Agent  shall  not be  subject  to any
fiduciary or other implied duties,  regardless of whether a Default has occurred
and is continuing,  (b) the Administrative Agent shall not have any duty to take
any  discretionary  action  or  exercise  any  discretionary  powers,  except as
provided in Section  11.03,  and (c) except as expressly set forth  herein,  the
Administrative  Agent  shall  not have any duty to  disclose,  and  shall not be
liable for the failure to disclose,  any information relating to the Borrower or
any of its Subsidiaries  that is communicated to or obtained by the bank serving
as  Administrative  Agent  or  any  of  its  Affiliates  in  any  capacity.  The
Administrative Agent shall be deemed not to have knowledge of any Default unless
and until written  notice  thereof is given to the  Administrative  Agent by the
Borrower  or a  Lender,  and shall  not be  responsible  for or have any duty to
ascertain or inquire into (i) any statement,  warranty or representation made in
or in  connection  with this  Agreement  or any other  Loan  Document,  (ii) the
contents of any  certificate,  report or other document  delivered  hereunder or
under any other Loan Document or in connection herewith or therewith,  (iii) the
performance or observance of any of the covenants,  agreements or other terms or
conditions  set forth herein or in any other Loan  Document,  (iv) the validity,
enforceability,  effectiveness or genuineness of this Agreement,  any other Loan
Document or any other agreement, instrument or document, (v) the satisfaction of
any condition set forth in ARTICLE VI or elsewhere herein, other than to confirm
receipt of items expressly required to be delivered to the Administrative  Agent
or  as  to  those  conditions   precedent   expressly  required  to  be  to  the
Administrative Agent's satisfaction,  (vi) the existence,  value,  perfection or
priority of any collateral  security or the financial or other  condition of the
Borrower and its  Subsidiaries  or any other obligor or guarantor,  or (vii) any
failure by the Borrower or any other  Person  (other than itself) to perform any
of its obligations hereunder or under any other Loan Document or the performance
or observance  of any  covenants,  agreements  or other terms or conditions  set
forth herein or therein.

     Section 11.03 Action by  Administrative  Agent.  The  Administrative  Agent
shall  not have  any  duty to take any  discretionary  action  or  exercise  any
discretionary   powers,   except   discretionary  rights  and  powers  expressly
contemplated  hereby  that the  Administrative  Agent is required to exercise in
writing as directed by the  Lenders  and in all cases the  Administrative  Agent
shall be fully  justified  in failing or refusing to act  hereunder or under any
other Loan Documents unless it shall (a) receive written  instructions  from the
Lenders  specifying  the  action  to be  taken  and  (b) be  indemnified  to its
satisfaction by the Lenders against any and all liability and expenses which may
be incurred by it by reason of taking or continuing to take any such action. The
instructions  as  aforesaid  and any action  taken or  failure  to act  pursuant
thereto by the Administrative Agent shall be binding on all of the Lenders. If a

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Default has occurred and is continuing, then the Administrative Agent shall take
such action with  respect to such Default as shall be directed by the Lenders in
the written  instructions  (with  indemnities)  described in this Section 11.03,
provided  that,  unless and until the  Administrative  Agent shall have received
such directions,  the  Administrative  Agent may (but shall not be obligated to)
take such  action,  or refrain  from taking such  action,  with  respect to such
Default as it shall deem advisable in the best  interests of the Lenders.  In no
event,  however,  shall the Administrative  Agent be required to take any action
which  exposes  the  Administrative  Agent  to  personal  liability  or which is
contrary  to  this  Agreement,   the  Loan  Documents  or  applicable  law.  The
Administrative Agent shall not be liable for any action taken or not taken by it
with  the  consent  or  at  the  request  of  the  Lenders,  and  otherwise  the
Administrative Agent shall not be liable for any action taken or not taken by it
hereunder  or under any other  Loan  Document  or under  any other  document  or
instrument  referred  to or  provided  for herein or  therein  or in  connection
herewith or therewith INCLUDING ITS OWN ORDINARY NEGLIGENCE,  except for its own
gross negligence or willful misconduct.

     Section 11.04 Reliance by Administrative  Agent. The  Administrative  Agent
shall be entitled to rely upon,  and shall not incur any  liability  for relying
upon, any notice, request, certificate, consent, statement, instrument, document
or other writing believed by it to be genuine and to have been signed or sent by
the proper  Person.  The  Administrative  Agent also may rely upon any statement
made to it orally or by  telephone  and  believed by it to be made by the proper
Person,  and shall not incur any liability  for relying  thereon and each of the
Borrower and the Lenders  hereby waives the right to dispute the  Administrative
Agent's  record of such  statement,  except in the case of gross  negligence  or
willful  misconduct by the Administrative  Agent. The  Administrative  Agent may
consult with legal  counsel (who may be counsel for the  Borrower),  independent
accountants  and other  experts  selected by it, and shall not be liable for any
action  taken or not  taken by it in  accordance  with  the  advice  of any such
counsel, accountants or experts. The Administrative Agent may deem and treat the
payee of any Note as the holder thereof for all purposes hereof unless and until
a written notice of the assignment or transfer thereof permitted hereunder shall
have been filed with the Administrative Agent.

     Section 11.05 Subagents.  The Administrative  Agent may perform any and all
its duties  and  exercise  its  rights and powers by or through  any one or more
sub-agents  appointed by the Administrative  Agent. The Administrative Agent and
any such  sub-agent  may perform any and all its duties and  exercise its rights
and powers through their respective Related Parties. The exculpatory  provisions
of the preceding  Sections of this ARTICLE XI shall apply to any such  sub-agent
and to the Related Parties of the  Administrative  Agent and any such sub-agent,
and  shall  apply  to  their  respective   activities  in  connection  with  the
syndication of the credit  facilities  provided for herein as well as activities
as Administrative Agent.

     Section 11.06 Resignation or Removal of Administrative Agent. Only with the
consent of the  Borrower,  such  consent not to be  unreasonably  withheld,  and
subject to the appointment and acceptance of a successor Administrative Agent as
provided  in this  Section  11.06,  the  Administrative  Agent may  resign.  The
Administrative   Agent  shall  notify  the  Lenders   prior  to  any   permitted
resignation.  The Administrative  Agent may be removed at any time with cause by
all of the  Lenders.  The Lenders may remove the  Administrative  Agent  without
cause  only with the  consent  of the  Borrower.  Upon any such  resignation  or
removal, the Lenders shall have the right, in consultation with the Borrower, to
appoint a successor. If no successor shall have been so appointed by the Lenders
and shall have  accepted  such  appointment  within 30 days  after the  retiring
Administrative  Agent gives notice of its resignation or removal of the retiring
Administrative  Agent, then the retiring  Administrative Agent may, on behalf of

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the Lenders,  appoint a successor  Administrative  Agent. Upon the acceptance of
its  appointment  as the  Administrative  Agent  hereunder by a successor,  such
successor  shall  succeed  to and become  vested  with all the  rights,  powers,
privileges  and duties of the retiring  Administrative  Agent,  and the retiring
Administrative  Agent  shall be  discharged  from  its  duties  and  obligations
hereunder.  The fees payable by the Borrower to a successor Administrative Agent
shall be the same as those payable to its predecessor  unless  otherwise  agreed
between  the  Borrower  and such  successor.  After the  Administrative  Agent's
resignation hereunder, the provisions of this ARTICLE XI and Section 12.03 shall
continue in effect for the benefit of such retiring  Administrative  Agent,  its
sub-agents and their respective  Related Parties in respect of any actions taken
or  omitted  to be taken by any of them  while it was  acting as  Administrative
Agent.

     Section 11.07 Agents as Lenders.  The party  serving as the  Administrative
Agent  hereunder  shall have the same  rights and  powers in its  capacity  as a
Lender as any other  Lender and may  exercise the same as though it were not the
Administrative  Agent,  and such party and its  Affiliates  may accept  deposits
from,  lend  money to and  generally  engage  in any kind of  business  with the
Borrower  or any  Subsidiary  or other  Affiliate  thereof as if it were not the
Administrative Agent hereunder.

     Section  11.08  No  Reliance.   Each  Lender   acknowledges  that  it  has,
independently  and without reliance upon the  Administrative  Agent or any other
Lender and based on such documents and information as it has deemed appropriate,
made its own credit  analysis and decision to enter into this Agreement and each
other Loan Document to which it is a party.  Each Lender also  acknowledges that
it will, independently and without reliance upon the Administrative Agent or any
other Lender and based on such  documents and  information as it shall from time
to time deem  appropriate,  continue to make its own  decisions in taking or not
taking action under or based upon this Agreement,  any other Loan Document,  any
related  agreement  or any  document  furnished  hereunder  or  thereunder.  The
Administrative  Agent shall not be  required  to keep itself  informed as to the
performance  or  observance by the Borrower or any of its  Subsidiaries  of this
Agreement,  the Loan Documents or any other document referred to or provided for
herein  or  to  inspect  the   Properties  or  books  of  the  Borrower  or  its
Subsidiaries.  Except for notices,  reports and other  documents and information
expressly  required to be furnished to the Lenders by the  Administrative  Agent
hereunder, the Administrative Agent shall not have any duty or responsibility to
provide any Lender with any credit or other information  concerning the affairs,
financial condition or business of the Borrower (or any of its Affiliates) which
may come into the  possession  of such Agent or any of its  Affiliates.  In this
regard,  each Lender  acknowledges that Vinson & Elkins L.L.P. is acting in this
transaction as special counsel to the  Administrative  Agent only, except to the
extent  otherwise  expressly  stated in any legal opinion or any Loan  Document.
Each other party hereto will  consult  with its own legal  counsel to the extent
that it deems  necessary in connection  with the Loan  Documents and the matters
contemplated therein.

     Section 11.09 Authority of Administrative  Agent to Release  Collateral and
Liens.  Each Lender hereby  authorizes the  Administrative  Agent to release any
collateral that is permitted to be sold or released pursuant to the terms of the
Loan  Documents.  Each Lender  hereby  authorizes  the  Administrative  Agent to
execute and deliver to the Borrower,  at the  Borrower's  sole cost and expense,
any and all  releases of Liens,  termination  statements,  assignments  or other
documents  reasonably  requested by the Borrower in connection  with any sale or
other  disposition  of Property to the extent such sale or other  disposition is
permitted by the terms of Section 9.13 or is otherwise  authorized  by the terms
of the Loan Documents.

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                                  ARTICLE XII
                                  Miscellaneous

     Section 12.01 Notices.

     (a)  Except  in the case of  notices  and  other  communications  expressly
permitted  to be given by  telephone  (and  subject  to Section  12.01(b)),  all
notices and other  communications  provided  for herein  shall be in writing and
shall be delivered by hand or overnight courier service,  mailed by certified or
registered mail or sent by telecopy, as follows:

     (i) if to the Borrower,  to it at 20 Greenway  Plaza,  Suite 600,  Houston,
Texas 77046, Attention of Chief Financial Officer (Telecopy No. 713-961-7997);

     (ii) if to the Administrative  Agent, to it at 745 5th Avenue,  18th Floor,
New  York,  New York  10151,  Attention  of  Morris  W.  Macleod  (Telecopy  No.
646/344-4676); and

     (iii) if to any other Lender, to it at its address (or telecopy number) set
forth on its applicable signature page.

     (b)  Notices  and other  communications  to the  Lenders  hereunder  may be
delivered or  furnished  by  electronic  communications  pursuant to  procedures
approved by the  Administrative  Agent;  provided that the  foregoing  shall not
apply to notices  pursuant to ARTICLE II, ARTICLE III,  ARTICLE IV and ARTICLE V
unless otherwise agreed by the  Administrative  Agent and the applicable Lender.
The Administrative Agent or the Borrower may, in its discretion, agree to accept
notices and other  communications  to it hereunder by electronic  communications
pursuant to procedures approved by it; provided that approval of such procedures
may be limited to particular notices or communications.

     (c) Any party hereto may change its address or telecopy  number for notices
and other  communications  hereunder by notice to the other parties hereto.  All
notices and other  communications  given to any party hereto in accordance  with
the provisions of this Agreement  shall be deemed to have been given on the date
of receipt.

     Section 12.02 Waivers; Amendments.

     (a) No failure on the part of the  Administrative  Agent or any Lender,  to
exercise and no delay in  exercising,  and no course of dealing with respect to,
any right, power or privilege,  or any abandonment or discontinuance of steps to
enforce such right,  power or privilege,  under any of the Loan Documents  shall
operate as a waiver  thereof,  nor shall any single or partial  exercise  of any
right,  power or privilege under any of the Loan Documents preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies of the  Administrative  Agent and the Lenders  hereunder
and under the other Loan  Documents are  cumulative and are not exclusive of any
rights or remedies that they would otherwise have. No waiver of any provision of
this  Agreement  or any other Loan  Document or consent to any  departure by the
Borrower  therefrom  shall in any event be  effective  unless  the same shall be
permitted  by  Section  12.02(b),  and then  such  waiver  or  consent  shall be
effective  only in the  specific  instance  and for the purpose for which given.
Without limiting the generality of the foregoing, the making of a Loan shall not
be  construed  as  a  waiver  of  any   Default,   regardless   of  whether  the
Administrative  Agent or any  Lender may have had  notice or  knowledge  of such
Default at the time.

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     (b)  Neither  this  Agreement  nor any  provision  hereof nor any  Security
Instrument nor any provision  thereof may be waived,  amended or modified except
pursuant to an agreement or agreements  in writing  entered into by the Borrower
and the Lenders or by the Borrower and the Administrative Agent with the consent
of all of the Lenders.

     Section 12.03 Expenses, Indemnity; Damage Waiver.

     (a)  The  Borrower  shall  pay (i) all  reasonable  out-of-pocket  expenses
incurred by the  Administrative  Agent and its  Affiliates,  including,  without
limitation,  the reasonable fees, charges and disbursements of counsel and other
outside  consultants  for  the  Administrative  Agent,  the  reasonable  travel,
photocopy,  mailing, courier, telephone and other similar expenses, and the cost
of  environmental  audits and surveys and  appraisals,  in  connection  with the
syndication  of the credit  facilities  provided  for herein,  the  preparation,
negotiation,  execution,  delivery and administration (both before and after the
execution hereof and including advice of counsel to the Administrative  Agent as
to the  rights  and  duties of the  Administrative  Agent and the  Lenders  with
respect  thereto)  of  this  Agreement  and the  other  Loan  Documents  and any
amendments,  modifications  or waivers of or consents  related to the provisions
hereof  or  thereof  (whether  or not the  transactions  contemplated  hereby or
thereby shall be consummated),  (ii) all costs, expenses, Taxes, assessments and
other charges incurred by the  Administrative  Agent or any Lender in connection
with any filing, registration,  recording or perfection of any security interest
contemplated by this Agreement or any Security  Instrument or any other document
referred  to  therein,   (iii)  all  out-of-pocket   expenses  incurred  by  the
Administrative   Agent  or  any  Lender,   including   the  fees,   charges  and
disbursements of any counsel for any the Administrative  Agent or any Lender, in
connection  with the  enforcement or protection of its rights in connection with
this  Agreement  or any other Loan  Document,  including  its rights  under this
Section 12.03,  including,  without limitation,  all such out-of-pocket expenses
incurred  during any workout,  restructuring  or negotiations in respect of such
Loans.

     (b) THE BORROWER SHALL INDEMNIFY THE ADMINISTRATIVE AGENT, AND EACH LENDER,
AND EACH RELATED PARTY OF ANY OF THE  FOREGOING  PERSONS (EACH SUCH PERSON BEING
CALLED AN "INDEMNITEE") AGAINST, AND HOLD EACH INDEMNITEE HARMLESS FROM, ANY AND
ALL LOSSES,  CLAIMS,  DAMAGES,  LIABILITIES AND RELATED EXPENSES,  INCLUDING THE
FEES,  CHARGES AND DISBURSEMENTS OF ANY COUNSEL FOR ANY INDEMNITEE,  INCURRED BY
OR ASSERTED  AGAINST ANY INDEMNITEE  ARISING OUT OF, IN CONNECTION WITH, OR AS A
RESULT OF (i) THE  EXECUTION  OR  DELIVERY OF THIS  AGREEMENT  OR ANY OTHER LOAN

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DOCUMENT OR ANY  AGREEMENT OR  INSTRUMENT  CONTEMPLATED  HEREBY OR THEREBY,  THE
PERFORMANCE  BY THE PARTIES  HERETO OR THE PARTIES TO ANY OTHER LOAN DOCUMENT OF
THEIR RESPECTIVE  OBLIGATIONS HEREUNDER OR THEREUNDER OR THE CONSUMMATION OF THE
TRANSACTIONS CONTEMPLATED HEREBY OR BY ANY OTHER LOAN DOCUMENT, (ii) THE FAILURE
OF THE BORROWER OR ANY SUBSIDIARY TO COMPLY WITH THE TERMS OF ANY LOAN DOCUMENT,
INCLUDING  THIS  AGREEMENT,  OR WITH ANY  GOVERNMENTAL  REQUIREMENT,  (iii)  ANY
INACCURACY  OF ANY  REPRESENTATION  OR ANY BREACH OF ANY WARRANTY OR COVENANT OF
THE  BORROWER OR ANY  GUARANTOR  SET FORTH IN ANY OF THE LOAN  DOCUMENTS  OR ANY
INSTRUMENTS, DOCUMENTS OR CERTIFICATIONS DELIVERED IN CONNECTION THEREWITH, (iv)
ANY LOAN OR THE USE OF THE PROCEEDS THEREFROM,  (v) ANY OTHER ASPECT OF THE LOAN
DOCUMENTS,  (vi)  THE  OPERATIONS  OF THE  BUSINESS  OF  THE  BORROWER  AND  ITS
SUBSIDIARIES BY THE BORROWER AND ITS SUBSIDIARIES,  (vii) ANY ASSERTION THAT THE
LENDERS  WERE NOT  ENTITLED TO RECEIVE  THE  PROCEEDS  RECEIVED  PURSUANT TO THE
SECURITY INSTRUMENTS, (viii) ANY ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR
ANY SUBSIDIARY OR ANY OF THEIR  PROPERTIES,  INCLUDING WITHOUT  LIMITATION,  THE
PRESENCE,  GENERATION,  STORAGE,  RELEASE,  THREATENED RELEASE,  USE, TRANSPORT,
DISPOSAL,  ARRANGEMENT  OF DISPOSAL OR  TREATMENT  OF SOLID  WASTES OR HAZARDOUS
SUBSTANCES ON ANY OF THEIR PROPERTIES,  (ix) THE BREACH OR NON-COMPLIANCE BY THE
BORROWER OR ANY SUBSIDIARY WITH ANY ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER
OR ANY  SUBSIDIARY,  (x) THE PAST OWNERSHIP BY THE BORROWER OR ANY SUBSIDIARY OF
ANY OF THEIR  PROPERTIES  OR PAST  ACTIVITY  ON ANY OF THEIR  PROPERTIES  WHICH,
THOUGH  LAWFUL  AND FULLY  PERMISSIBLE  AT THE  TIME,  COULD  RESULT IN  PRESENT
LIABILITY,  (xi) THE  PRESENCE,  USE,  RELEASE,  STORAGE,  TREATMENT,  DISPOSAL,
GENERATION,   THREATENED  RELEASE,  TRANSPORT,   ARRANGEMENT  FOR  TRANSPORT  OR
ARRANGEMENT FOR DISPOSAL OF SOLID WASTES OR HAZARDOUS SUBSTANCES ON OR AT ANY OF
THE PROPERTIES OWNED OR OPERATED BY THE BORROWER OR ANY SUBSIDIARY OR ANY ACTUAL
OR ALLEGED  PRESENCE OR RELEASE OF  HAZARDOUS  MATERIALS ON OR FROM ANY PROPERTY
OWNED  OR  OPERATED  BY THE  BORROWER  OR ANY OF  ITS  SUBSIDIARIES,  (xii)  ANY
ENVIRONMENTAL  LIABILITY  RELATED  IN  ANY  WAY TO  THE  BORROWER  OR ANY OF ITS
SUBSIDIARIES,  OR (xiii) ANY OTHER ENVIRONMENTAL,  HEALTH OR SAFETY CONDITION IN
CONNECTION  WITH THE LOAN DOCUMENTS,  OR (xiv) ANY ACTUAL OR PROSPECTIVE  CLAIM,
LITIGATION,  INVESTIGATION  OR  PROCEEDING  RELATING  TO ANY  OF THE  FOREGOING,
WHETHER  BASED ON CONTRACT,  TORT OR ANY OTHER THEORY AND  REGARDLESS OF WHETHER
ANY  INDEMNITEE  IS A PARTY  THERETO,  AND SUCH  INDEMNITY  SHALL EXTEND TO EACH
INDEMNITEE  NOTWITHSTANDING  THE SOLE OR CONCURRENT  NEGLIGENCE OF EVERY KIND OR
CHARACTER WHATSOEVER,  WHETHER ACTIVE OR PASSIVE,  WHETHER AN AFFIRMATIVE ACT OR
AN  OMISSION,  INCLUDING  WITHOUT  LIMITATION,  ALL TYPES OF  NEGLIGENT  CONDUCT
IDENTIFIED  IN  THE  RESTATEMENT  (SECOND)  OF  TORTS  OF  ONE  OR  MORE  OF THE
INDEMNITEES OR BY REASON OF STRICT LIABILITY IMPOSED WITHOUT FAULT ON ANY ONE OR

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<PAGE>

MORE OF THE  INDEMNITEES;  PROVIDED  THAT SUCH  INDEMNITY  SHALL NOT,  AS TO ANY
INDEMNITEE,  BE  AVAILABLE  TO THE EXTENT  THAT SUCH  LOSSES,  CLAIMS,  DAMAGES,
LIABILITIES  OR  RELATED  EXPENSES  ARE  DETERMINED  BY  A  COURT  OF  COMPETENT
JURISDICTION BY FINAL AND NONAPPEALABLE JUDGMENT TO HAVE RESULTED FROM THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNITEE.

     (c) To the extent that the Borrower fails to pay any amount  required to be
paid by it to the  Administrative  Agent under  Section  12.03(a)  or (b),  each
Lender  severally  agrees  to pay to such  Administrative  Agent  such  Lender's
Applicable   Percentage   (determined   as  of  the  time  that  the  applicable
unreimbursed  expense or  indemnity  payment is sought) of such  unpaid  amount;
provided that the  unreimbursed  expense or  indemnified  loss,  claim,  damage,
liability  or related  expense,  as the case may be, was incurred by or asserted
against such Administrative Agent in its capacity as such.

     (d) To the extent permitted by applicable law, the Borrower shall and shall
cause each  Subsidiary to not assert,  and hereby waives,  any claim against any
Indemnitee, on any theory of liability, for special, indirect,  consequential or
punitive  damages  (as opposed to direct or actual  damages)  arising out of, in
connection  with, or as a result of, this Agreement,  any other Loan Document or
any agreement or instrument  contemplated  hereby or thereby,  the Transactions,
any Loan or the use of the proceeds thereof.

     (e) All amounts  due under this  Section  12.03  shall be payable  promptly
after written demand therefore.

     Section 12.04 Successors and Assigns.

     (a) The provisions of this Agreement shall be binding upon and inure to the
benefit  of the  parties  hereto and their  respective  successors  and  assigns
permitted  hereby,  except  that (i) the  Borrower  may not assign or  otherwise
transfer any of its rights or  obligations  hereunder  without the prior written
consent of each Lender (and any attempted assignment or transfer by the Borrower
without  such  consent  shall be null and void) and (ii) no Lender may assign or
otherwise transfer its rights or obligations hereunder except in accordance with
this Section 12.04.  Nothing in this Agreement,  expressed or implied,  shall be
construed  to confer  upon any Person  (other  than the  parties  hereto,  their
respective successors and assigns permitted hereby,  Participants (to the extent
provided in Section 12.04(c)) and, to the extent expressly  contemplated hereby,
the Related  Parties of each of the  Administrative  Agent and the  Lenders) any
legal or equitable right, remedy or claim under or by reason of this Agreement.

     (b) (i) Subject to the  conditions set forth in Section  12.04(b)(ii),  any
Lender  may assign to one or more  assignees  all or a portion of its rights and
obligations  under this Agreement  (including all or a portion of its Commitment
and the Loans at the time owing to it) without the prior written  consent of the
Borrower:

     (ii) Assignments shall be subject to the following conditions:

     A. except in the case of an  assignment  to a Lender or an  Affiliate  of a
Lender or an assignment of the entire remaining amount of the assigning Lender's
Commitment, the amount of the Commitment of the assigning Lender subject to each
such  assignment  (determined as of the date the Assignment and Assumption  with
respect to such assignment is delivered to the  Administrative  Agent) shall not
be less than $500,000 unless each of the Borrower and the  Administrative  Agent
otherwise  consent,  provided,  however,  no assignment from any Lender shall be
permitted  without the consent of the Borrower and the  Administrative  Agent if
such  assignment  will  result in their being more than eight (8) Lenders at any
one time,  provided that no such consent of the Borrower shall be required if an
Event of Default has occurred and is continuing;

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<PAGE>

     B.  each  partial   assignment   shall  be  made  as  an  assignment  of  a
proportionate  part of all the assigning  Lender's rights and obligations  under
this Agreement;

     C.  the  parties  to each  assignment  shall  execute  and  deliver  to the
Administrative  Agent an Assignment and  Assumption,  together with a processing
and recordation fee of $3,000; and

     D.  the  assignee,  if it  shall  not be a  Lender,  shall  deliver  to the
Administrative Agent any information  reasonably requested by the Administrative
Agent;

     (iii)  Subject to Section  12.04(b)(iv)  and the  acceptance  and recording
thereof,  from and after the effective  date  specified in each  Assignment  and
Assumption the assignee thereunder shall be a party hereto and, to the extent of
the interest  assigned by such  Assignment and  Assumption,  have the rights and
obligations  of  a  Lender  under  this  Agreement,  and  the  assigning  Lender
thereunder  shall, to the extent of the interest assigned by such Assignment and
Assumption,  be released from its obligations  under this Agreement (and, in the
case of an Assignment  and  Assumption  covering all of the  assigning  Lender's
rights and  obligations  under this  Agreement,  such Lender shall cease to be a
party hereto but shall  continue to be entitled to the benefits of Section 5.01,
Section  5.02 and  Section  12.03).  Any  assignment  or transfer by a Lender of
rights or  obligations  under  this  Agreement  that does not  comply  with this
Section 12.04 shall be treated for purposes of this  Agreement as a sale by such
Lender of a  participation  in such rights and  obligations  in accordance  with
Section 12.04(c).

     (iv) The Administrative  Agent,  acting for this purpose as an agent of the
Borrower,  shall  maintain at one of its offices a copy of each  Assignment  and
Assumption  delivered to it and a register for the  recordation of the names and
addresses of the Lenders, and the Maximum Credit Amount of, and principal amount
of the Loans  owing to, each  Lender  pursuant to the terms  hereof from time to
time (the "Register").  The entries in the Register shall be conclusive, and the
Borrower,  the Administrative Agent, and the Lenders may treat each Person whose
name is  recorded  in the  Register  pursuant  to the  terms  hereof as a Lender
hereunder  for all  purposes of this  Agreement,  notwithstanding  notice to the
contrary.  The Register shall be available for  inspection by the Borrower,  and
any Lender,  at any reasonable time and from time to time upon reasonable  prior
notice.  In  connection  with any changes to the  Register,  if  necessary,  the
Administrative Agent will reflect the revisions on Annex I and forward a copy of
such revised Annex I to the Borrower and each Lender.

     (v) Upon its receipt of a duly completed Assignment and Assumption executed
by an assigning Lender and an assignee, the assignee's providing any information
reasonably  requested by the Administrative,  the processing and recordation fee

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referred  to in Section  12.04(b)  and any  written  consent to such  assignment
required  by Section  12.04(b),  the  Administrative  Agent  shall  accept  such
Assignment and Assumption and record the  information  contained  therein in the
Register. No assignment shall be effective for purposes of this Agreement unless
it has been recorded in the Register as provided in this Section 12.04(b).

     (c)  Any  Lender  may,   without  the  consent  of  the   Borrower  or  the
Administrative Agent, sell participations to one or more banks or other entities
(a  "Participant")  in all or a portion of such Lender's  rights and obligations
under this Agreement (including all or a portion of its Commitment and the Loans
owing to it);  provided that A. such Lender's  obligations  under this Agreement
shall remain  unchanged,  B. such Lender shall remain solely  responsible to the
other  parties  hereto  for the  performance  of  such  obligations  and C.  the
Borrower, the Administrative Agent, and the other Lenders shall continue to deal
solely and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement.  Any agreement or instrument pursuant to which
a Lender sells such a participation  shall provide that such Lender shall retain
the  sole  right  to  enforce  this  Agreement  and to  approve  any  amendment,
modification  or waiver of any provision of this  Agreement;  provided that such
agreement  or  instrument  may provide  that such  Lender will not,  without the
consent  of the  Participant,  agree to any  amendment,  modification  or waiver
described  in the proviso to Section  12.02 that affects  such  Participant.  In
addition  such  agreement  must  provide  that the  Participant  be bound by the
provisions  of Section  12.03.  Subject to Section  12.04(c)(ii),  the  Borrower
agrees that each  Participant  shall be entitled to the benefits of Section 5.01
and Section  5.02 to the same extent as if it were a Lender and had acquired its
interest by assignment pursuant to Section 12.04(b).  To the extent permitted by
law, each Participant also shall be entitled to the benefits of Section 12.08 as
though it were a Lender,  provided  such  Participant  agrees to be  subject  to
Section 4.01(c) as though it were a Lender.

     (ii) A  Participant  shall not be entitled  to receive any greater  payment
under  Section 5.01 or Section 5.02 than the  applicable  Lender would have been
entitled to receive with respect to the participation  sold to such Participant,
unless  the  sale of the  participation  to such  Participant  is made  with the
Borrower's prior written consent.

     (d) Any Lender may at any time pledge or assign a security  interest in all
or any portion of its rights under this Agreement to secure  obligations of such
Lender,  including any pledge or assignment to secure  obligations  to a Federal
Reserve Bank,  and this Section  12.04(d)  shall not apply to any such pledge or
assignment of a security interest; provided that no such pledge or assignment of
a security interest shall release a Lender from any of its obligations hereunder
or substitute any such pledgee or assignee for such Lender as a party hereto.

     (e) HZ does not  currently  have any intention to assign any Loans and will
endeavor to maintain its position  during the terms of this  Agreement such that
it can make  decisions with respect to this Agreement in an efficient and timely
manner.  Notwithstanding  the  preceding,  HZ  will  have  the  ability  to make
assignments  of any Loans as it deems  appropriate  including but not limited to
assignments to Bernard National Loan Investors LTD and/or Bernard Leveraged Loan
Investor, LTD.

     Section 12.05 Survival; Revival; Reinstatement.

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<PAGE>

     (a) All covenants,  agreements,  representations and warranties made by the
Borrower  herein  and in the  certificates  or other  instruments  delivered  in
connection  with or pursuant to this  Agreement or any other Loan Document shall
be  considered  to have been relied upon by the other  parties  hereto and shall
survive  the  execution  and  delivery of this  Agreement  and the making of any
Loans,  regardless of any  investigation  made by any such other party or on its
behalf and notwithstanding  that the Administrative Agent or any Lender may have
had notice or knowledge of any Default or incorrect  representation  or warranty
at the time any credit is extended  hereunder,  and shall continue in full force
and effect as long as the  principal  of or any accrued  interest on any Loan or
any fee or any other amount  payable  under this  Agreement is  outstanding  and
unpaid  and so long as the  Commitments  have not  expired  or  terminated.  The
provisions of Section 5.01,  Section 5.02 and Section 12.03 and ARTICLE XI shall
survive and remain in full force and effect  regardless of the  consummation  of
the  transactions  contemplated  hereby,  the  repayment  of the Loans,  and the
Commitments or the termination of this Agreement, any other Loan Document or any
provision hereof or thereof.

     (b) To the extent that any payments on the  Indebtedness or proceeds of any
collateral  are   subsequently   invalidated,   declared  to  be  fraudulent  or
preferential,  set  aside or  required  to be  repaid  to a  trustee,  debtor in
possession,  receiver or other Person under any  bankruptcy  law,  common law or
equitable  cause,  then to such extent,  the  Indebtedness so satisfied shall be
revived and continue as if such  payment or proceeds  had not been  received and
the Administrative  Agent's and the Lenders' Liens, security interests,  rights,
powers and remedies  under this  Agreement and each Loan Document shall continue
in  full  force  and  effect.  In  such  event,  each  Loan  Document  shall  be
automatically  reinstated  and the  Borrower  shall  take such  action as may be
reasonably  requested by the Administrative Agent and the Lenders to effect such
reinstatement.

     Section 12.06 Counterparts; Integration; Effectiveness.

     (a) This  Agreement  may be  executed  in  counterparts  (and by  different
parties  hereto on different  counterparts),  each of which shall  constitute an
original,  but all of  which  when  taken  together  shall  constitute  a single
contract.

     (b) This  Agreement,  the other  Loan  Documents  and any  separate  letter
agreements with respect to fees payable to the  Administrative  Agent constitute
the entire contract among the parties  relating to the subject matter hereof and
thereof and supersede any and all previous agreements and  understandings,  oral
or written,  relating to the subject  matter hereof and thereof.  This Agreement
and the other Loan  Documents  represent the final  agreement  among the parties
hereto  and  thereto  and  may  not  be   contradicted  by  evidence  of  prior,
contemporaneous  or  subsequent  oral  agreements  of the parties.  There are no
unwritten oral agreements between the parties.

     (c) Except as  provided  in  Section  6.01,  this  Agreement  shall  become
effective when it shall have been executed by the Administrative  Agent and when
the  Administrative  Agent shall have received  counterparts  hereof which, when
taken  together,  bear the signatures of each of the other parties  hereto,  and
thereafter  shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns. Delivery of an executed counterpart
of a signature page of this Agreement by telecopy shall be effective as delivery
of a manually executed counterpart of this Agreement.

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<PAGE>

     Section 12.07  Severability.  Any provision of this  Agreement or any other
Loan Document held to be invalid,  illegal or  unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such invalidity,
illegality or  unenforceability  without  affecting  the validity,  legality and
enforceability of the remaining provisions hereof or thereof; and the invalidity
of a particular provision in a particular jurisdiction shall not invalidate such
provision in any other jurisdiction.

     Section  12.08 Right of Setoff.  If an Event of Default shall have occurred
and be continuing,  each Lender and each of its Affiliates is hereby  authorized
at any time and from time to time,  to the fullest  extent  permitted by law, to
set off and apply any and all  deposits  (general  or  special,  time or demand,
provisional  or final) at any time held and  other  obligations  (of  whatsoever
kind, including,  without limitations  obligations under Swap Agreements) at any
time owing by such  Lender or  Affiliate  to or for the credit or the account of
the Borrower or any  Subsidiary  against any of and all the  obligations  of the
Borrower or any Subsidiary  owed to such Lender now or hereafter  existing under
this Agreement or any other Loan Document,  irrespective  of whether or not such
Lender  shall  have made any  demand  under  this  Agreement  or any other  Loan
Document and although  such  obligations  may be  unmatured.  The rights of each
Lender  under this  Section  12.08 are in addition to other  rights and remedies
(including other rights of setoff) which such Lender or its Affiliates may have.

     Section 12.09 GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS.

     (a) THIS  AGREEMENT  AND THE NOTES SHALL BE GOVERNED  BY, AND  CONSTRUED IN
ACCORDANCE  WITH,  THE LAWS OF THE STATE OF NEW YORK  EXCEPT TO THE EXTENT  THAT
UNITED STATES FEDERAL LAW PERMITS ANY LENDER TO CONTRACT FOR,  CHARGE,  RECEIVE,
RESERVE OR TAKE INTEREST AT THE RATE ALLOWED BY THE LAWS OF THE STATE WHERE SUCH
LENDER IS  LOCATED.  CHAPTER  346 OF THE TEXAS  FINANCE  CODE  (WHICH  REGULATES
CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING  TRI-PARTY  ACCOUNTS) SHALL
NOT APPLY TO THIS AGREEMENT OR THE NOTES.

     (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THE LOAN DOCUMENTS SHALL
BE BROUGHT  IN THE  COURTS OF THE STATE OF NEW YORK OR OF THE  UNITED  STATES OF
AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF
THIS  AGREEMENT,  EACH  PARTY  HEREBY  ACCEPTS  FOR  ITSELF  AND (TO THE  EXTENT
PERMITTED BY LAW) IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
JURISDICTION OF THE AFORESAID COURTS.  EACH PARTY HEREBY  IRREVOCABLY WAIVES ANY
OBJECTION,  INCLUDING,  WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE
OR BASED ON THE GROUNDS OF FORUM NON  CONVENIENS,  WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE  BRINGING  OF ANY  SUCH  ACTION  OR  PROCEEDING  IN SUCH  RESPECTIVE
JURISDICTIONS.  THIS SUBMISSION TO JURISDICTION  IS  NON-EXCLUSIVE  AND DOES NOT
PRECLUDE A PARTY FROM  OBTAINING  JURISDICTION  OVER ANOTHER  PARTY IN ANY COURT
OTHERWISE HAVING JURISDICTION.

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<PAGE>

     (c) THE BORROWER HEREBY IRREVOCABLY  DESIGNATES,  APPOINTS AND EMPOWERS AND
HEREBY  CONFERS  AN  IRREVOCABLE  SPECIAL  POWER,  AMPLE AND  SUFFICIENT,  TO CT
Corporation  System,  WITH OFFICES ON THE DATE HEREOF AT 111 Eighth Avenue,  New
York,  NY 10011 AS ITS  DESIGNEE,  APPOINTEE  AND AGENT WITH RESPECT TO ANY SUCH
ACTION OR PROCEEDING IN NEW YORK TO RECEIVE,  ACCEPT AND  ACKNOWLEDGE FOR AND ON
ITS  BEHALF,  AND IN  RESPECT  OF ITS  PROPERTY,  SERVICE  OF ANY AND ALL  LEGAL
PROCESS,  SUMMONS,  NOTICES  AND  DOCUMENTS  WHICH  MAY BE  SERVED  IN ANY  SUCH
PROCEEDING  AND AGREES  THAT THE FAILURE OF SUCH AGENT TO GIVE ANY ADVICE OF ANY
SUCH SERVICE OF PROCESS TO THE BORROWER  SHALL NOT IMPAIR OR AFFECT THE VALIDITY
OF SUCH SERVICE OR OF ANY CLAIM BASED THEREON.  IF FOR ANY REASON SUCH DESIGNEE,
APPOINTEE  AND AGENT SHALL CEASE TO BE  AVAILABLE  TO ACT AS SUCH,  THE BORROWER
AGREES TO  DESIGNATE A NEW  DESIGNEE,  APPOINTEE  AND AGENT IN TEXAS  REASONABLY
SATISFACTORY  TO THE  ADMINISTRATIVE  AGENT ON THE TERMS AND FOR THE PURPOSES OF
THIS PROVISION. EACH PARTY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY
OF THE AFOREMENTIONED  COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF
COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,  POSTAGE  PREPAID,  TO IT AT THE
ADDRESS  SPECIFIED  IN  SECTION  12.01 OR SUCH  OTHER  ADDRESS  AS IS  SPECIFIED
PURSUANT TO SECTION 12.01 (OR ITS  ASSIGNMENT AND  ASSUMPTION),  SUCH SERVICE TO
BECOME  EFFECTIVE  THIRTY (30) DAYS AFTER SUCH  MAILING.  NOTHING  HEREIN  SHALL
AFFECT  THE  RIGHT OF A PARTY OR ANY  HOLDER OF A NOTE TO SERVE  PROCESS  IN ANY
OTHER MANNER  PERMITTED  BY LAW OR TO COMMENCE  LEGAL  PROCEEDINGS  OR OTHERWISE
PROCEED AGAINST ANOTHER PARTY IN ANY OTHER JURISDICTION.

     (d) EACH PARTY HEREBY (i) IRREVOCABLY AND  UNCONDITIONALLY  WAIVES,  TO THE
FULLEST EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING
RELATING TO THIS  AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY  COUNTERCLAIM
THEREIN;  (ii) IRREVOCABLY  WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW,
ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH  LITIGATION  ANY  SPECIAL,
EXEMPLARY,  PUNITIVE OR  CONSEQUENTIAL  DAMAGES,  OR DAMAGES  OTHER THAN,  OR IN
ADDITION  TO,  ACTUAL  DAMAGES;  (iii)  CERTIFIES  THAT NO PARTY  HERETO NOR ANY
REPRESENTATIVE  OR  AGENT OF  COUNSEL  FOR ANY  PARTY  HERETO  HAS  REPRESENTED,
EXPRESSLY  OR  OTHERWISE,  OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (iv) ACKNOWLEDGES THAT IT
HAS BEEN  INDUCED  TO ENTER  INTO THIS  AGREEMENT,  THE LOAN  DOCUMENTS  AND THE
TRANSACTIONS  CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION 12.09.

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<PAGE>

     Section  12.10  Headings.  Article  and Section  headings  and the Table of
Contents used herein are for convenience of reference only, are not part of this
Agreement  and  shall  not  affect  the   construction  of,  or  be  taken  into
consideration in interpreting, this Agreement.

     Section 12.11  Confidentiality.  Each of the  Administrative  Agent and the
Lenders agrees to maintain the  confidentiality  of the  Information (as defined
below),  except that Information may be disclosed (a) to its and its Affiliates'
directors,  officers, employees and agents, including accountants, legal counsel
and other advisors (it being understood that the Persons to whom such disclosure
is made will be  informed of the  confidential  nature of such  Information  and
instructed to keep such Information  confidential),  (b) to the extent requested
by any regulatory  authority,  (c) to the extent  required by applicable laws or
regulations or by any subpoena or similar legal process,  (d) to any other party
to this  Agreement  or any  other  Loan  Document,  (e) in  connection  with the
exercise of any remedies hereunder or under any other Loan Document or any suit,
action or  proceeding  relating to this  Agreement or any other Loan Document or
the enforcement of rights  hereunder or thereunder,  (f) subject to an agreement
containing provisions  substantially the same as those of this Section 12.11, to
(i) any  assignee  of or  Participant  in,  or any  prospective  assignee  of or
Participant  in, any of its rights or  obligations  under this Agreement or (ii)
any actual or prospective  counterparty  (or its advisors) to any Swap Agreement
relating  to the  Borrower  and its  obligations,  (g) with the  consent  of the
Borrower or (h) to the extent such  Information (i) becomes  publicly  available
other  than as a  result  of a breach  of this  Section  12.11  or (ii)  becomes
available to the Administrative Agent or any Lender on a non-confidential  basis
from a source other than the Borrower.  For the purposes of this Section  12.11,
"Information" means all information received from the Borrower or any Subsidiary
relating to the Borrower or any Subsidiary and their businesses,  other than any
such information that is available to the Administrative  Agent or any Lender on
a  non-confidential  basis prior to  disclosure by the Borrower or a Subsidiary;
provided  that,  in the case of  information  received  from the Borrower or any
Subsidiary after the date hereof,  such information is clearly identified at the
time  of  delivery  as  confidential.   Any  Person  required  to  maintain  the
confidentiality  of  Information  as  provided  in this  Section  12.11 shall be
considered  to have  complied  with its  obligation  to do so if such Person has
exercised  the same  degree  of care to  maintain  the  confidentiality  of such
Information as such Person would accord to its own confidential information.

     Section 12.12 Interest Rate Limitation.  It is the intention of the parties
hereto that each Lender shall conform  strictly to usury laws  applicable to it.
Accordingly, if the transactions contemplated hereby would be usurious as to any
Lender under laws  applicable to it (including  the laws of the United States of
America  and the  State of Texas or any  other  jurisdiction  whose  laws may be
mandatorily  applicable to such Lender  notwithstanding  the other provisions of
this Agreement),  then, in that event,  notwithstanding anything to the contrary
in any of the Loan Documents or any agreement entered into in connection with or
as security  for the Notes,  it is agreed as follows:  (i) the  aggregate of all
consideration which constitutes interest under law applicable to any Lender that
is contracted for, taken, reserved, charged or received by such Lender under any
of the Loan  Documents or agreements  or otherwise in connection  with the Notes
shall  under  no  circumstances  exceed  the  maximum  amount  allowed  by  such
applicable  law,  and  any  excess  shall  be  canceled   automatically  and  if
theretofore paid shall be credited by such Lender on the principal amount of the
Indebtedness  (or, to the extent that the principal  amount of the  Indebtedness
shall have been or would thereby be paid in full, refunded by such Lender to the
Borrower);  and (ii) in the event that the maturity of the Notes is  accelerated

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by reason of an  election  of the  holder  thereof  resulting  from any Event of
Default under this  Agreement or  otherwise,  or in the event of any required or
permitted  prepayment,  then such consideration that constitutes  interest under
law  applicable  to any Lender may never  include  more than the maximum  amount
allowed by such applicable  law, and excess  interest,  if any,  provided for in
this Agreement or otherwise shall be canceled automatically by such Lender as of
the date of such  acceleration or prepayment and, if theretofore  paid, shall be
credited by such Lender on the principal amount of the Indebtedness  (or, to the
extent that the principal  amount of the  Indebtedness  shall have been or would
thereby be paid in full, refunded by such Lender to the Borrower). All sums paid
or agreed to be paid to any Lender for the use, forbearance or detention of sums
due hereunder  shall, to the extent  permitted by law applicable to such Lender,
be amortized,  prorated,  allocated and spread throughout the stated term of the
Loans evidenced by the Notes until payment in full so that the rate or amount of
interest on account of any Loans  hereunder  does not exceed the maximum  amount
allowed  by such  applicable  law.  If at any time and from time to time (i) the
amount of  interest  payable to any Lender on any date shall be  computed at the
Highest Lawful Rate applicable to such Lender pursuant to this Section 12.12 and
(ii) in  respect of any  subsequent  interest  computation  period the amount of
interest  otherwise  payable  to such  Lender  would be less than the  amount of
interest  payable to such Lender  computed at the Highest Lawful Rate applicable
to such Lender, then the amount of interest payable to such Lender in respect of
such subsequent interest computation period shall continue to be computed at the
Highest Lawful Rate applicable to such Lender until the total amount of interest
payable to such Lender shall equal the total amount of interest which would have
been payable to such Lender if the total  amount of interest  had been  computed
without giving effect to this Section  12.12.  To the extent that Chapter 303 of
the Texas  Finance Code is relevant for the purpose of  determining  the Highest
Lawful  Rate  applicable  to a  Lender,  such  Lender  elects to  determine  the
applicable  rate ceiling  under such Chapter by the weekly  ceiling from time to
time in  effect.  Chapter  346 of the Texas  Finance  Code does not apply to the
Borrower's obligations hereunder.

     Section  12.13   EXCULPATION   PROVISIONS.   EACH  OF  THE  PARTIES  HERETO
SPECIFICALLY AGREES THAT IT HAS A DUTY TO READ THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS  AND AGREES THAT IT IS CHARGED WITH NOTICE AND  KNOWLEDGE OF THE TERMS
OF THIS  AGREEMENT AND THE OTHER LOAN  DOCUMENTS;  THAT IT HAS IN FACT READ THIS
AGREEMENT AND IS FULLY  INFORMED AND HAS FULL NOTICE AND KNOWLEDGE OF THE TERMS,
CONDITIONS  AND  EFFECTS  OF THIS  AGREEMENT;  THAT IT HAS BEEN  REPRESENTED  BY
INDEPENDENT  LEGAL COUNSEL OF ITS CHOICE  THROUGHOUT THE NEGOTIATIONS  PRECEDING
ITS EXECUTION OF THIS AGREEMENT AND THE OTHER LOAN  DOCUMENTS;  AND HAS RECEIVED
THE ADVICE OF ITS ATTORNEY IN ENTERING  INTO THIS  AGREEMENT  AND THE OTHER LOAN
DOCUMENTS;  AND THAT IT RECOGNIZES  THAT CERTAIN OF THE TERMS OF THIS  AGREEMENT
AND THE OTHER LOAN DOCUMENTS RESULT IN ONE PARTY ASSUMING THE LIABILITY INHERENT
IN SOME  ASPECTS  OF THE  TRANSACTION  AND  RELIEVING  THE  OTHER  PARTY  OF ITS
RESPONSIBILITY  FOR SUCH LIABILITY.  EACH PARTY HERETO AGREES AND COVENANTS THAT
IT WILL NOT CONTEST THE VALIDITY OR ENFORCEABILITY OF ANY EXCULPATORY  PROVISION
OF THIS  AGREEMENT AND THE OTHER LOAN  DOCUMENTS ON THE BASIS THAT THE PARTY HAD
NO  NOTICE  OR  KNOWLEDGE  OF  SUCH  PROVISION  OR  THAT  THE  PROVISION  IS NOT
"CONSPICUOUS."

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     Section  12.14  Collateral  Matters;  Swap  Agreements.  The benefit of the
Security  Instruments  and of the provisions of this  Agreement  relating to any
collateral  securing the  Indebtedness  shall also extend to and be available to
those Lenders or their Affiliates that are  counterparties to any Swap Agreement
with the Borrower or any of its  Subsidiaries  on a pro rata basis in respect of
any obligations of the Borrower or any of its Subsidiaries which arise under any
such  Swap  Agreement  that is in  effect  at such  time as such  Person  or its
Affiliate is a Lender,  but only while such Person or its Affiliate is a Lender.
No Lender or any  Affiliate of a Lender  shall have any voting  rights under any
Loan Document as a result of the existence of  obligations  owed to it under any
such Swap Agreements.

     Section 12.15 No Third Party Beneficiaries.  This Agreement, the other Loan
Documents,  and the agreement of the Lenders to make Loans  hereunder are solely
for the  benefit  of the  Borrower,  and no  other  Person  (including,  without
limitation,   any   Subsidiary  of  the  Borrower,   any  obligor,   contractor,
subcontractor,  supplier or materialman) shall have any rights, claims, remedies
or  privileges   hereunder  or  under  any  other  Loan  Document   against  the
Administrative Agent or any Lender for any reason whatsoever. There are no third
party beneficiaries.

     Section 12.16  Securitization.  The Borrower hereby  acknowledges  that the
Lenders   and   their   Affiliates   may  sell  or   securitize   the  Loans  (a
"Securitization")  through the pledge of the Loans as  collateral  security  for
loans to the Lenders or their Affiliates or through the sale of the Loans or the
issuance  of direct or  indirect  interests  in the  Loans,  which  loans to the
Lenders or their  Affiliates  or direct or indirect  interests  will be rated by
Moody's,  S&P or one or more other rating agencies (the "Rating Agencies").  The
Borrower  shall  cooperate  with the Lenders and their  Affiliates to effect the
Securitization including, without limitation, by (a) amending this Agreement and
the other Loan Documents, and executing such additional documents, as reasonably
requested by the Lenders in connection  with the  Securitization,  provided that
(i) any such  amendment or  additional  documentation  does not impose  material
additional  costs on the  Borrower  and (ii) any such  amendment  or  additional
documentation  does not materially  adversely  affect the rights,  or materially
increase the obligations,  of the Borrower under the Loan Documents or change or
affect in a manner adverse to the Borrower the financial terms of the Loans, (b)
providing  such  information  as may be  reasonably  requested by the Lenders in
connection with the rating of the Loans or the Securitization, and (c) providing
in  connection  with any  rating  of the Loans a  certificate  (i)  agreeing  to
indemnify the Lenders and their Affiliates,  any of the Rating Agencies,  or any
party providing credit support or otherwise  participating in the Securitization
(collectively,  the "Securitization Parties") for any losses, claims, damages or
liabilities (the  "Liabilities") to which the Lenders,  their Affiliates or such
Securitization  Parties may become subject insofar as the Liabilities  arise out
of or are based upon any untrue  statement  or alleged  untrue  statement of any
material fact  contained in any Loan Document or in any writing  delivered by or
on behalf of the  Borrower or any  Affiliate  of the  Borrower to the Lenders in
connection with any Loan Document or arise out of or are based upon the omission
or alleged  omission  to state  therein a material  fact  required  to be stated
therein,  or necessary in order to make the statements  therein, in light of the
circumstances  under which they were made,  not  misleading,  and such indemnity
shall survive any transfer by the Lenders or their  successors or assigns of the
Loans and (ii)  agreeing to reimburse the Lenders and their  Affiliates  for any
legal or other expenses  reasonably  incurred by such Persons in connection with
defending the Liabilities.

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     Section  12.17 USA Patriot Act Notice.  Each  Lender  hereby  notifies  the
Borrower that pursuant to the  requirements of the USA Patriot Act (Title III of
Pub. L. 107-56  (signed into law October 26, 2001)) (the "Patriot  Act"),  it is
required to obtain,  verify and record information that identifies the Borrower,
which  information  includes  the name and  address  of the  Borrower  and other
information  that will allow such Lender to identify the Borrower in  accordance
with the Patriot Act.

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         The parties hereto have caused this Agreement to be duly executed as of
the day and year first above written.

BORROWER:                  GEXA CORP.

                           By: /s/ Neil M. Leibman
                               -------------------------------------------------

                           Name:  Neil M. Leibman
                                 ----------------------------------------------

                           Title: Chief Executive Officer
                                 -----------------------------------------------

                                 Signature Page

                                       1
<PAGE>

ADMINISTRATIVE AGENT:         HIGHBRIDGE/ZWIRN SPECIAL
                              OPPORTUNITIES FUND, L.P.,
                              as Administrative Agent

                              By: Highbridge/Zwirn  Partners,  LLC, as general
                                  partner

                              By: /s/ Daniel B. Zwirn
                                  ----------------------------------------
                              Name: Daniel B. Zwirn
                                    --------------------------------------
                              Title: Managing Principal
                                     -------------------------------------

                                 Signature Page
                                        2
<PAGE>

LENDER:  .                      HIGHBRIDGE/ZWIRN SPECIAL
                                OPPORTUNITIES FUND, L.P.

                                By:  Highbridge/Zwirn  Partners, LLC, as general
                                     partner

                                By: /s/ Perry A. Gruss
                                    --------------------------------------------
                                Name: Perry A. Gruss
                                     ------------------------------------------
                                Title: Chief Financial Officer
                                      ------------------------------------------

                                Address:          745 5th Avenue, 18th Floor
                                                  New York, New York  10151
                                Attention:        Morris W. Macleod
                                Telecopy:         (646) 720-9039

                                 Signature Page
                                       3

<PAGE>

                                     ANNEX I
                         LIST OF MAXIMUM CREDIT AMOUNTS

Aggregate Maximum Credit Amounts
<TABLE>
<CAPTION>

              Name of Lender                      Applicable Percentage                Maximum Credit Amount
 ------------------------------------------ ---------------------------------- --------------------------------------
<S>                                                  <C>                                <C>
 Highbridge/Zwirn Special Opportunities              100%                               $15,000,000
 Fund, L.P.
 ------------------------------------------ ---------------------------------- --------------------------------------
 TOTAL                                               100.00%                            $15,000,000
 ------------------------------------------ ---------------------------------- --------------------------------------
</TABLE>

                                     Annex I

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