Document:

exh101.htm

    EXHIBIT
      10.1

    
      
        

      

    

     

    AMENDED
      AND RESTATED TERM LOAN AGREEMENT

     

    Dated
      as
      of July 25, 2007

     

    among

     

    TXCO
      RESOURCES INC.

     

    (formerly
      named THE EXPLORATION COMPANY OF DELAWARE, INC.), as Borrower,

     

    and

     

    OUTPUT
      ACQUISITION CORP.,

     

    TXCO
      ENERGY CORP.,

     

    TEXAS
      TAR
      SANDS INC. and

     

    OPEX
      ENERGY, LLC,

     

    as
      Guarantors,

     

    The
      Several Lenders

     

    from
      Time
      to Time Parties Hereto,

     

    BANK
      OF
      MONTREAL,

     

    as
      Administrative Agent,

     

    and

     

    BMO
      CAPITAL MARKETS CORP.,

     

    as
      Arranger

     

    
      
        
                 

        

        
          
          

          
            

          

        

         

      

    

    

    TABLE
      OF CONTENTS

    Page

    
      	
              ARTICLE I
                DEFINITIONS 

            	
              
                2

              

            

    

    
      	
               

            	
              1.1

            	
              Certain
                Defined Terms

            	
              2

            

    

    
      	
               

            	
              1.2

            	
              Other
                Interpretive
                Provisions 

            	
              25

            

    

    
      	
               

            	
              1.3

            	
              Accounting
                Principles 

            	
              25

            

    

     

    
      	
              ARTICLE II THE
                CREDIT  

            	
              
                26

              

            

    

    
      	
               

            	
              2.1

            	
              Amounts
                and Terms of the
                Loans 

            	
              26

            

    

    
      	
               

            	
              2.2

            	
              Maturity
                Date 

            	
              27

            

    

    
      	
               

            	
              2.3

            	
              Conversion
                and Continuation
                Elections 

            	
              27

            

    

    
      	
               

            	
              2.4

            	
              Optional
                Prepayments 

            	
              28

            

    

    
      	
               

            	
              2.5

            	
              [Intentionally
                omitted.] 

            	
              29

            

    

    
      	
               

            	
              2.6

            	
              Repayment 

            	
              29

            

    

    
      	
               

            	
              2.7

            	
              Interest 

            	
              29

            

    

    
      	
               

            	
              2.8

            	
              Fees 

            	
              30

            

    

    
      	
               

            	
              2.9

            	
              Computation
                of Fees and
                Interest 

            	
              30

            

    

    
      	
               

            	
              2.10

            	
              Payments
                by the Company; Loan Pro
                Rata 

            	
              30

            

    

    
      	
               

            	
              2.11

            	
              Payments
                by the Lenders to the Administrative
                Agent 

            	
              32

            

    

    
      	
               

            	
              2.12

            	
              Sharing
                of Payments,
                Etc 

            	
              32

            

    

     

    
      	
              ARTICLE III TAXES,
                YIELD
                PROTECTION AND ILLEGALITY

            	
              
                33

              

            

    

    
      	
               

            	
              3.1

            	
              Taxes 

            	
              33

            

    

    
      	
               

            	
              3.2

            	
              Illegality 

            	
              34

            

    

    
      	
               

            	
              3.3

            	
              Increased
                Costs and Reduction of
                Return 

            	
              35

            

    

    
      	
               

            	
              3.4

            	
              Funding
                Losses 

            	
              36

            

    

    
      	
               

            	
              3.5

            	
              Inability
                to Determine
                Rates 

            	
              36

            

    

    
      	
               

            	
              3.6

            	
              Certificates
                of
                Lenders 

            	
              36

            

    

    
      	
               

            	
              3.7

            	
              Substitution
                of
                Lenders 

            	
              36

            

    

    
      	
               

            	
              3.8

            	
              Survival 

            	
              37

            

    

     

    
      	
              ARTICLE
                IV SECURITY

            	
              37

            

    

    
      	
               

            	
              4.1

            	
              The
                Security 

            	37

    

    
      	
               

            	
              4.2

            	
              Agreement
                to Deliver Security
                Documents 

            	37

    

    
      	
               

            	
              4.3

            	
              Perfection
                and Protection of Security Interests
                and Liens      

            	37

    

    
      	
               

            	
              4.4

            	
              Offset 

            	38

    

    
      	
               

            	
              4.5

            	
              Guaranty 

            	38

    

    
      	
               

            	
              4.6

            	
              Maximum
                Liability 

            	39

    

    
      	
               

            	
              4.7

            	
              Production
                Proceeds 

            	39

    

     

    
      	
              ARTICLE V CONDITIONS
                PRECEDENT  

            	
              40

            

    

    
      	
               

            	
              5.1

            	
              Conditions
                of the Effective
                Date 

            	40

    

    
      	
               

            	
              5.2

            	
              [Intentionally
                omitted.] 

            	42

    

    
      	
               

            	
              5.3

            	
              Conditions
                to the Restatement Effective
                Time 

            	42

    

    

    
      
        
          
          

        

        
          i

          
            

          

        

         

      

    

    

    
      	
              Article VI REPRESENTATIONS
                AND WARRANTIES 

            	
              43

            

    

    
      	
               

            	
              6.1

            	
              Organization,
                Existence and
                Power 

            	43

    

    
      	
               

            	
              6.2

            	
              Corporate
                Authorization; No
                Contravention 

            	44

    

    
      	
               

            	
              6.3

            	
              Governmental
                Authorization 

            	44

    

    
      	
               

            	
              6.4

            	
              Binding
                Effect 

            	44

    

    
      	
               

            	
              6.5

            	
              Litigation 

            	44

    

    
      	
               

            	
              6.6

            	
              No
                Default 

            	45

    

    
      	
               

            	
              6.7

            	
              ERISA
                Compliance 

            	45

    

    
      	
               

            	
              6.8

            	
              Use
                of Proceeds; Margin
                Regulations 

            	45

    

    
      	
               

            	
              6.9

            	
              Title
                to Properties 

            	46

    

    
      	
               

            	
              6.10

            	
              Oil
                and Gas
                Reserves 

            	46

    

    
      	
               

            	
              6.11

            	
              Reserve
                Report 

            	46

    

    
      	
               

            	
              6.12

            	
              Gas
                Imbalances 

            	46

    

    
      	
               

            	
              6.13

            	
              Taxes 

            	47

    

    
      	
               

            	
              6.14

            	
              Financial
                Statements and
                Condition 

            	47

    

    
      	
               

            	
              6.15

            	
              Environmental
                Matters 

            	47

    

    
      	
               

            	
              6.16

            	
              Regulated
                Entities 

            	48

    

    
      	
               

            	
              6.17

            	
              No
                Burdensome
                Restrictions 

            	48

    

    
      	
               

            	
              6.18

            	
              Copyrights,
                Patents, Trademarks and Licenses,
                etc 

            	48

    

    
      	
               

            	
              6.19

            	
              Subsidiaries 

            	48

    

    
      	
               

            	
              6.20

            	
              Insurance 

            	48

    

    
      	
               

            	
              6.21

            	
              Full
                Disclosure 

            	48

    

    
      	
               

            	
              6.22

            	
              Solvency 

            	49

    

    
      	
               

            	
              6.23

            	
              Labor
                Matters 

            	49

    

    
      	
               

            	
              6.24

            	
              Midstream
                Contracts 

            	49

    

    
      	
               

            	
              6.25

            	
              Derivative
                Contracts 

            	49

    

    
      	
               

            	
              6.26

            	
              Exempt
                Subsidiaries;
                TTSI 

            	49

    

    
      	
               

            	
              6.27

            	
              [Intentionally
                omitted.] 

            	49

    

    
      	
               

            	
              6.28

            	
              [Intentionally
                omitted.] 

            	49

    

    
      	
               

            	
              6.29

            	
              Security
                Documents 

            	49

    

     

    
      	
              ARTICLE VII AFFIRMATIVE
                COVENANTS 

            	
              50

            

    

    
      	
               

            	
              7.1

            	
              Financial
                Statements 

            	51

    

    
      	
               

            	
              7.2

            	
              Certificates;
                Other Production and Reserve
                Information 

            	52

    

    
      	
               

            	
              7.3

            	
              Notices 

            	53

    

    
      	
               

            	
              7.4

            	
              Preservation
                of Company Existence,
                Etc 

            	53

    

    
      	
               

            	
              7.5

            	
              Maintenance
                of
                Property 

            	54

    

    
      	
               

            	
              7.6

            	
              Insurance 

            	54

    

    
      	
               

            	
              7.7

            	
              Payment
                of
                Obligations 

            	54

    

    
      	
               

            	
              7.8

            	
              Compliance
                with
                Laws 

            	54

    

    
      	
               

            	
              7.9

            	
              Compliance
                with
                ERISA 

            	55

    

    
      	
               

            	
              7.10

            	
              Inspection
                of Property and Books and
                Records 

            	55

    

    
      	
               

            	
              7.11

            	
              Environmental
                Laws 

            	55

    

    
      	
               

            	
              7.12

            	
              New
                Subsidiary
                Guarantors 

            	55

    

    
      	
               

            	
              7.13

            	
              Use
                of Proceeds 

            	55

    

    
      	
               

            	
              7.14

            	
              Further
                Assurances 

            	56

    

    
      	
               

            	
              7.15

            	
              [Intentionally
                omitted.] 

            	57

    

    

    
      
        
          
          

        

        
          ii

          
            

          

        

         

      

    

    

    
      	
               

            	
              7.16

            	
              Hedging
                Program 

            	57

    

     

    
      	
              ARTICLE VIII NEGATIVE
                COVENANTS  

            	
              57

            

    

    
      	
               

            	
              8.1

            	
              Limitation
                on Liens 

            	57

    

    
      	
               

            	
              8.2

            	
              Disposition
                of
                Assets 

            	60

    

    
      	
               

            	
              8.3

            	
              Consolidations
                and
                Mergers 

            	61

    

    
      	
               

            	
              8.4

            	
              Loans
                and
                Investments 

            	62

    

    
      	
               

            	
              8.5

            	
              Limitation
                on
                Indebtedness 

            	63

    

    
      	
               

            	
              8.6

            	
              Transactions
                with
                Affiliates 

            	65

    

    
      	
               

            	
              8.7

            	
              Margin
                Stock 

            	65

    

    
      	
               

            	
              8.8

            	
              Contingent
                Obligations 

            	65

    

    
      	
               

            	
              8.9

            	
              Restricted
                Payments 

            	66

    

    
      	
               

            	
              8.10

            	
              Derivative
                Contracts 

            	66

    

    
      	
               

            	
              8.11

            	
              Sale
                Leasebacks 

            	68

    

    
      	
               

            	
              8.12

            	
              Consolidated
                Leverage
                Ratio 

            	68

    

    
      	
               

            	
              8.13

            	
              Current
                Ratio 

            	68

    

    
      	
               

            	
              8.14

            	
              Minimum
                Interest Coverage
                Ratio 

            	68

    

    
      	
               

            	
              8.15

            	
              Minimum
                PV 10 to Consolidated Total Debt
                Ratio 

            	68

    

    
      	
               

            	
              8.16

            	
              Change
                in Business 

            	68

    

    
      	
               

            	
              8.17

            	
              Accounting
                Changes 

            	68

    

    
      	
               

            	
              8.18

            	
              Certain
                Contracts; Amendments; Multiemployer
                ERISA Plans 

            	68

    

    
      	
               

            	
              8.19

            	
              Midstream
                Contracts 

            	69

    

    
      	
               

            	
              8.20

            	
              First
                Lien Credit
                Agreement 

            	69

    

    
      	
               

            	
              8.21

            	
              Limitation
                on Amendments to Output Acquisition
                Documents 

            	69

    

    
      	
               

            	
              8.22

            	
              Forward
                Sales, Production Payments,
                Etc 

            	69

    

    
      	
               

            	
              8.23

            	
              Use
                of Proceeds 

            	70

    

     

    
      	
              ARTICLE IX EVENTS
                OF
                DEFAULT  

            	
              70

            

    

    
      	
               

            	
              9.1

            	
              Event
                of Default 

            	70

    

    
      	
               

            	
              9.2

            	
              Remedies 

            	72

    

    
      	
               

            	
              9.3

            	
              Rights
                Not
                Exclusive 

            	73

    

     

    
      	
              ARTICLE
                X THE ADMINISTRATIVE AGENT       

            	
              73

            

    

    
      	
               

            	
              10.1

            	
              Appointment
                and Authorization; Limitation of
                Agency 

            	73

    

    
      	
               

            	
              10.2

            	
              Delegation
                of
                Duties 

            	73

    

    
      	
               

            	
              10.3

            	
              Liability
                of Administrative
                Agent 

            	73

    

    
      	
               

            	
              10.4

            	
              Reliance
                by Administrative
                Agent 

            	74

    

    
      	
               

            	
              10.5

            	
              Notice
                of Default 

            	74

    

    
      	
               

            	
              10.6

            	
              Credit
                Decision 

            	75

    

    
      	
               

            	
              10.7

            	
              Indemnification 

            	75

    

    
      	
               

            	
              10.8

            	
              Administrative
                Agent in Individual
                Capacity 

            	76

    

    
      	
               

            	
              10.9

            	
              Successor
                Administrative
                Agent 

            	76

    

    
      	
               

            	10.10	
              Withholding
                Tax 

            	76

    

    
      	
                    
                

            	10.11	
              Arranger;
                Syndication
                Agent 

            	78

    

    
      	
                   
                

            	10.12	
              Release
                of
                Collateral 

            	78

    

     

    
      	
              ARTICLE XI
                MISCELLANEOUS  

            	
              78

            

    

    

    
      
        
          
          

        

        
          iii

          
            

          

        

         

      

    

     

    
      	
            	
              
                
                  11.1        
                    Amendments and
                    Waivers

                

              

            	78

    

    
      	
               

            	
              11.2

            	
              Notices 

            	79

    

    
      	
               

            	
              11.3

            	
              No
                Waiver; Cumulative
                Remedies 

            	80

    

    
      	
               

            	
              11.4

            	
              Costs
                and Expenses 

            	80

    

    
      	
               

            	
              11.5

            	
              Indemnity 

            	80

    

    
      	
               

            	
              11.6

            	
              Payments
                Set Aside 

            	81

    

    
      	
               

            	
              11.7

            	
              Successors
                and
                Assigns 

            	81

    

    
      	
               

            	
              11.8

            	
              Assignments,
                Participations,
                etc 

            	81

    

    
      	
               

            	
              11.9

            	
              Interest 

            	86

    

    
      	
                     
                

            	11.10	
              Indemnity
                and
                Subrogation 

            	86

    

    
      	
                     
                

            	11.11	
              Automatic
                Debits of
                Fees 

            	87

    

    
      	
                     
                

            	11.12	
              Notification
                of Addresses, Lending Offices,
                Etc 

            	87

    

    
      	
                     
                

            	11.13	
              Counterparts 

            	87

    

    
      	
                     
                

            	11.14	
              Severability 

            	87

    

    
      	
                     
                

            	11.15	
              No
                Third Parties
                Benefited 

            	87

    

    
      	
                    
                

            	11.16	
              Governing
                Law,
                Jurisdiction 

            	88

    

    
      	
                    
                

            	11.17	
              Submission
                To Jurisdiction;
                Waivers 

            	88

    

    
      	
                    
                

            	11.18	
              Entire
                Agreement 

            	88

    

    
      	
                    
                

            	11.19	
              NO
                ORAL AGREEMENTS 

            	88

    

    
      	
                    
                

            	11.20	
              Accounting
                Changes 

            	89

    

    
      	
                    
                

            	11.21	
              WAIVER
                OF JURY TRIAL, PUNITIVE DAMAGES,
                ETC 

            	89

    

    
      	
                    
                

            	11.22	
              Intercreditor
                Agreement 

            	89

    

    
      	
                    
                

            	11.23	
              USA
                PATRIOT Act 

            	89

    

    
      	
                    
                

            	11.24	
              Acknowledgments 

            	90

    

    
      	
                    
                

            	11.25	
              Survival
                of Representations and
                Warranties 

            	90

    

    
      	
                   
                

            	11.26	
              Release
                of Collateral and Guarantee
                Obligations 

            	90

    

    
      	
                   
                

            	11.27	
              Amendment
                and
                Restatement 

            	91

    

    
      	
                  
                

            	11.28	
              Amendment
                to the First Lien Credit
                Agreement 

            	92

    

     

    SCHEDULES

     

    Schedule
      1.1(a)                                      Commitments
      and Pro Rata Shares

    Schedule
      6.5                                           Litigation

    Schedule
      6.7                                           ERISA
      Compliance

    Schedule
      6.14(a)                                    Material
      Indebtedness

    Schedule
      6.15                                         Environmental
      Matters

    Schedule
      6.17                                         Burdensome
      Restrictions

    Schedule
      6.19                                         Subsidiaries
      and Minority Interests

    Schedule
      6.24                                         Midstream
      Contracts

    Schedule
      6.25                                         Existing
      Derivative Contracts

    Schedule
      6.29(a)                                    Security
      Agreement UCC Filing Jurisdictions

    Schedule
      6.29(b)                                    Mortgage
      Filing Jurisdictions

    Schedule
      8.1                                           Permitted
      Liens

    

    
      
        
          
          

        

        
          iv

          
            

          

        

         

      

    

    

    Schedule
      8.6                                           Transactions
      with Affiliates

     

    EXHIBITS

     

    Exhibit
      A                     Form
      of Notice of Borrowing

    Exhibit
      B                      Form
      of Notice of Conversion/Continuation

    Exhibit
      C                      Form
      of Compliance Certificate

    Exhibit
      D                      Form
      of Security Agreement

    Exhibit
      E                      
Form of Assignment and Acceptance

    Exhibit
      F                      
Form of Note

    Exhibit
      G                      Form
      of Guaranty Agreement

    Exhibit
      H                      Form
      of Intercreditor Agreement

     

    [NOTE: Schedules and Exhibits have been omitted and will be provided to
      the
      Securities And Exchange Commission upon request.]

    

    
      
        
          
          

        

        
          v

          
            

          

        

         

      

    

    

    AMENDED
      AND RESTATED TERM LOAN AGREEMENT

     

    This
      AMENDED AND RESTATED TERM LOAN AGREEMENT (this
      "Agreement") is entered into as of July 25, 2007,
      among TXCO RESOURCES INC. (formerly named THE EXPLORATION COMPANY OF DELAWARE,
      INC.), a Delaware corporation (the "Company"); OUTPUT
      ACQUISITION CORP., a Texas corporation ("Merger Sub");
      TXCO ENERGY CORP., a Texas corporation ("TXCOE");
      TEXAS TAR SANDS INC., a Texas corporation ("TTSI");
      OPEX ENERGY, LLC, a Texas limited liability company
      ("OPEX"); each of the financial institutions which is
      or which may from time to time become a signatory to this Agreement
      (individually, a "Lender" and collectively, the
      "Lenders"); and BANK OF MONTREAL, a Canadian chartered
      bank acting through certain of its United States branches and agencies,
      including its Chicago, Illinois branch, as administrative agent for the Lenders
      (in such capacity, together with its successors in such capacity, the
      "Administrative Agent"), and BMO CAPITAL MARKETS
      CORP., as arranger (in such capacity, the
      "Arranger").

     

    RECITALS

     

    WHEREAS,
      the Company entered into the Output Acquisition Documents (defined below),
      and
      on April 2, 2007 consummated the Output Acquisition (defined below) contemplated
      thereby; and

     

    WHEREAS,
      in connection therewith, each of the Company, the Original Guarantors, the
      Lenders and the Administrative Agent entered into that certain Term Loan
      Agreement dated as of April 2, 2007 (the "Existing Term Loan
      Agreement") pursuant to which the Lenders made term loans to the
      Company in an aggregate principal amount of $80,000,000; and

     

    WHEREAS,
      the Company has requested that the Lenders amend and restate the Existing Term
      Loan Agreement to provide for certain amendments to the Existing Term Loan
      Agreement, including an increase of the amount of the term loans to be made
      available to the Company under this Agreement by $20,000,000 for a total
      aggregate principal amount of $100,000,000; and

     

    WHEREAS,
      the Lenders are willing to amend and restate the Existing Term Loan Agreement
      to
      provide for such amendments on the terms set forth in this Agreement, which
      Agreement shall be effective upon satisfaction of certain conditions precedent
      set forth in this Agreement; and

     

    WHEREAS,
      the Company desires to refinance, renew, extend and continue the Existing
      Obligations (defined below); and

     

    WHEREAS,
      it is the intent of the parties hereto that this Agreement not constitute a
      novation of the obligations and liabilities existing under the Existing Term
      Loan Agreement or evidence payment of all or any of such obligations and
      liabilities; that this Agreement amend and restate in its entirety the Existing
      Term Loan Agreement and renew and extend the extensions of credit under the
      Existing Term Loan Agreement, as so amended and restated; and that from and
      after the Restatement Effective Time the Existing Term Loan Agreement be of
      no
      further force or effect except as to evidence the incurrence of the Existing
      Obligations and the representations and warranties made and the actions or
      omissions performed or required to be performed thereunder, in each case prior
      to the Restatement Effective Time. NOW, THEREFORE, in

     

    

    
      
        
          
          

        

        
          1

          
            

          

        

         

      

    

    

    consideration
      of the mutual agreements, provisions and covenants contained herein and other
      good and valuable consideration, the receipt and adequacy of which are hereby
      acknowledged, the parties hereto agree that the Existing Term Loan Agreement
      shall be and hereby is amended and restated in its entirety as
      follows:

     

    ARTICLE
      I

     

    DEFINITIONS

     

    1.1           Certain
      Defined Terms.  The
      following terms have the following meanings:

     

    "Adjusted
      Base Rate" shall mean, for any day and any Base Rate Loan, an
      interest rate per annum equal to the greater of (a) the Federal Funds Rate
      for
      such day plus one-half of one percent (0.5%) and (b) the Base Rate for such
      day;
      such rate to be computed on the basis of a year of 365 or 366 days, as the
      case
      may be, and actual days elapsed (including the first day but excluding the
      last
      day) during the period for which payable, but in no event shall such rate at
      any
      time exceed the Highest Lawful Rate.

     

    "Additional
      Loans" has the meaning specified in Section 2.1(b).

     

    "Administrative
      Agent" has the meaning specified in the preamble
      hereto.

     

    "Administrative
      Agent-Related Persons" means Administrative Agent, its Affiliates,
      and the officers, directors, employees, agents and attorneys-in-fact of the
      Administrative Agent and its Affiliates.

     

    "Administrative
      Questionnaire" has the meaning specified in Section 11.8(a).

     

    "Affected
      Lender" has the meaning specified in Section 3.7.

     

    "Affiliate"
      means, as to any Person, any other Person which, directly or indirectly, is
      in
      control of, is controlled by, or is under common control with, such Person.
      A
      Person shall be deemed to control another Person if the controlling Person
      possesses, directly or indirectly, the power to direct or cause the direction
      of
      the management and policies of the other Person, whether through the ownership
      of voting securities, by contract, or otherwise.

     

    "Agent-Related
      Persons" means with respect to each Agent, such Agent, its
      Affiliates, and each of the officers, directors, employees, agents and
      attorneys-in-fact of it and its Affiliates.

     

    "Agents"
      means, collectively, Bank of Montreal, in its capacity as the Administrative
      Agent and BMO Capital Markets Corp., in its capacity as Arranger.

     

    "Agent's
      Payment Office" means the address set forth on the signature pages
      hereto in relation to the Administrative Agent, or such other address as the
      Administrative Agent may from time to time specify.

     

    "Aggregate
      Exposure" means, with respect to any Lender at any time, an amount
      equal to (a) if at such time the Commitments have not been reduced to zero,
      the
      sum of the aggregate

     

    

    
      
        
          
          

        

        
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    unpaid
      principal amount of the Loans of such Lender and the aggregate amount of such
      Lender's Commitments at such time and (b) if at such time the Commitments have
      been reduced to zero, the sum of the aggregate unpaid principal amount of the
      Loans of such Lender.

     

    "Agreement"
      means this Amended and Restated Term Loan Agreement, as such may be further
      amended, amended and restated, supplemented or otherwise modified from time
      to
      time pursuant to the terms hereof and the Intercreditor Agreement.

     

    "Applicable
      Margin" means, with respect to any Base Rate Loan or LIBO Rate
      Loan on any day, an amount equal to the percentage for such day under the
      Pricing Grid for such type of Loan.

     

    "Applicable
      Percentage" means eighty percent (80%).

     

    "Arranger"
      has the meaning specified in the preamble hereto.

     

    "Assignee"
      has the meaning specified in Section 11.8(a).

     

    "Assignment
      and Acceptance" has the meaning specified in Section 11.8(a).

     

    "Attorney
      Costs" means and includes all reasonable fees and disbursements of
      any law firm or other external counsel.

     

    "Available
      Borrowing Base" means, at the particular time in question, the
      Borrowing Base (as defined in the First Lien Credit Agreement) in effect at
      such
      time minus the applicable Effective Amount (as defined in the First Lien Credit
      Agreement) at such time.

     

    "Bankruptcy
      Code" means the Federal Bankruptcy Reform Act of 1978 (11 U.S.C.
      §101, et seq.).

     

    "Base
      Rate" means, for any day, the rate of interest in effect for such
      day as publicly announced from time to time by Administrative Agent at its
      Chicago, Illinois office as its "base rate" for Dollar loans made in the United
      States.  (The "base rate" is a rate set by Administrative Agent based
      upon various factors including costs and desired return, general economic
      conditions and other factors, and is used as a reference point for pricing
      some
      loans, which may be priced at, above, or below such announced
      rate.)  Any change in the base rate announced by Administrative Agent
      shall take effect at the opening of business on the day specified in the public
      announcement of such change.

     

    "Base
      Rate Loan" means a Loan that bears interest based at the Adjusted
      Base Rate, plus the Applicable Margin.

     

    "Borrowing
      Base Period" has the meaning ascribed thereto in the First Lien
      Credit Agreement.

     

    "Business
      Day" means any day other than a Saturday, Sunday or other day on
      which commercial banks in Chicago, Illinois are authorized or required by law
      to
      close and, if the

     

    

    
      
        
          
          

        

        
          3

          
            

          

        

         

      

    

    

    applicable
      Business Day relates to any LIBO Rate Loan, means such a day on which dealings
      are carried on in the applicable offshore dollar interbank market.

     

    "Capital
      Adequacy Regulation" means any guideline, request or directive of
      any central bank or other Governmental Authority, or any other law, rule or
      regulation, whether or not having the force of law, in each case, regarding
      capital adequacy of any bank or of any corporation controlling a
      bank.

     

    "Capital
      Lease" means, when used with respect to any Person, any lease in
      respect of which the obligations of such Person constitute Capitalized Lease
      Obligations.

     

    "Capital
      Stock" means any and all shares, interests, participations or
      other equivalents (however designated) of capital stock of a corporation, any
      and all equivalent ownership interests in a Person (other than a corporation)
      and any and all warrants, rights or options to purchase any of the
      foregoing.

     

    "Capitalized
      Lease Obligations" means, when used with respect to any Person,
      without duplication, all obligations of such Person to pay rent or other amounts
      under any lease of (or other arrangement conveying the right to use) Property,
      or a combination thereof, which obligations shall have been or should be, in
      accordance with GAAP, capitalized on the books of such Person.

     

    "Cash
      Equivalents" means: (a) securities issued or fully guaranteed or
      insured by the United States Government or any agency thereof and backed by
      the
      full faith and credit of the United States having maturities of not more than
      12
      months from the date of acquisition; (b) certificates of deposit, time deposits,
      Eurodollar time deposits, or bankers' acceptances having in each case a tenor
      of
      not more than 12 months from the date of acquisition issued by and demand
      deposits with any U.S. commercial bank or any branch or agency of a non-U.S.
      commercial bank licensed to conduct business in the U.S. having combined capital
      and surplus of not less than $500,000,000 whose long term securities are rated
      at least A (or then equivalent grade) by S&P and A2 (or then equivalent
      grade) by Moody's at the time of acquisition; (c) commercial paper of an issuer
      rated at least A-1 by S&P or P-1 by Moody's at the time of acquisition, and
      in either case having a tenor of not more than 12 months; (d) repurchase
      agreements with a term of not more than seven days for underlying securities
      of
      the types described in clauses (a) and (b) above; and (e) money market mutual
      or
      similar funds having assets in excess of $100,000,000.

     

    "Change
      of Control" means (a) a purchase or acquisition, directly or
      indirectly, by any "person" or "group" within the meaning of Section 13(d)(3)
      and 14(d)(2) of the Exchange Act (a "Group"), of
      "beneficial ownership" (as such term is defined in Rule 13d-3 under the Exchange
      Act) of securities of the Company which, together with any securities owned
      beneficially by any "affiliates" or "associates" of such Group (as such terms
      are defined in Rule 12b-2 under the Exchange Act), shall represent more than
      thirty percent (30%) of the combined voting power of the Company's securities
      which are entitled to vote generally in the election of directors and which
      are
      outstanding on the date immediately prior to the date of such purchase or
      acquisition or (b) the first day on which a majority of the Board of Directors
      of the Company are not Continuing Directors (as herein defined).  As
      herein defined, "Continuing Directors" means any
      member of the Board of Directors of the Company who (x) is a member of such
      Board of

     

    

    
      
        
          
          

        

        
          4

          
            

          

        

         

      

    

    

    Directors
      as of the Restatement Effective Date or (y) was nominated for election or
      elected to such Board of Directors with the affirmative vote of a majority
      of
      the Continuing Directors who were members of such Board of Directors at the
      time
      of such nomination or election.

     

    "Code"
      means the Internal Revenue Code of 1986 and the regulations promulgated
      thereunder.

     

    "Collateral"
      means all Property which is subject to a Lien in favor of the Administrative
      Agent or which under the terms of any Security Document is purported to be
      subject to such Lien.

     

    "Commitment"
      means as to each Lender, such Lender's obligation to make Loans under this
      Agreement to the Borrower (i) on the Effective Date (by making Original Loans)
      in an aggregate principal amount not exceeding the amount set forth under the
      heading "Original Loan Commitment" opposite the name of such Lender on
      Schedule 1.1(a) hereto, or (ii) on the Restatement Effective Date (by making
      Additional Loans) in an aggregate principal amount not exceeding the amount
      set
      forth under the heading "Additional Loan Commitment" opposite the name
      of such Lender on Schedule 1.1(a) hereto, or (iii) if such Lender is a party
      to
      an Assignment and Acceptance, the amount set forth on the most recent Assignment
      and Acceptance of such Lender, in each case, as that amount has been or may
      be,
      as the case may be, reduced or terminated pursuant to this
      Agreement.

     

    "Commitment
      Letter" means, collectively, (i) the commitment letter dated
      February 13, 2007 by and among the Company, BMO Capital Markets Corp. and Bank
      of Montreal and (ii) the Supplemental Commitment Letter dated July19, 2007
      by
      and among the Company, BMO, Capital Markets Corp. and Bank of
      Montreal.

     

    "Company"
      means TXCO Resources Inc. (formerly named The Exploration Company of Delaware,
      Inc.), a Delaware corporation.

     

    "Company
      Audited Financial Statements" means the Company's consolidated
      financial statements as of and for the years ended December 31, 2006, 2005
      and
      2004, together with the unqualified independent auditors' report and opinion
      of
      Akin, Doherty, Klein & Feuge, P.C. thereon.

     

    "Company
      Materials" has the meaning specified in Section 7.1(d).

     

    "Compliance
      Certificate" means a certificate substantially in the form of
Exhibit "C".

     

    "Consolidated
      EBITDAX" means with respect to the Company and its Subsidiaries on
      a consolidated basis for any fiscal period, without duplication, (a)
      Consolidated Net Income plus (b) depreciation, depletion, amortization,
      adjustments resulting from the application of FAS 123R, FAS 133 and FAS 143
      and
      other non-cash losses or charges reducing Consolidated Net Income plus (c)
      Consolidated Interest Expense plus (d) income tax expense plus (e) exploration
      expenses minus (f) any other non-cash items increasing Consolidated Net Income
      plus or minus, respectively (g) other extraordinary or non-recurring losses
      or
      gains (cash or non-cash) to the extent taken into account by the Company in
      any
      public disclosures of its 

     

    

    
      
        
          
          

        

        
          5

          
            

          

        

         

      

    

    

    "EBITDAX"
      or "consolidated EBITDAX" for the relevant period.  For purposes of
      Sections 8.12 and 8.14, Consolidated
      EBITDAX shall be calculated (x) to
      give pro forma effect to the Output Acquisition, other Corporate Acquisitions
      and other acquisitions and Dispositions and related financing transactions
      as if
      such transaction(s) had been consummated on the first day of the relevant period
      of calculation and (y) based on (i) four times Consolidated EBITDAX for the
      first Fiscal Quarter following the Effective Date, (ii) two times Consolidated
      EBITDAX for the first two Fiscal Quarters following the Effective Date, (iii)
      four-thirds times Consolidated EBITDAX for the first three Fiscal Quarters
      following the Effective Date and (iv) thereafter, Consolidated EBITDAX on a
      rolling four quarter basis.

     

    "Consolidated
      Interest Expense" means, with respect to the Company and its
      Subsidiaries on a consolidated basis for any fiscal period, total interest
      expenses (including that portion attributable to Capitalized Lease Obligations
      and capitalized interest) of the Company and its Subsidiaries in such fiscal
      period which are classified as interest expense on the consolidated financial
      statements of the Company and its Subsidiaries, all as determined in conformity
      with GAAP.  For purposes of Sections 8.12
      and 8.14, Consolidated Interest Expense shall be
      calculated (x) to give pro forma effect to the Output Acquisition, other
      Corporate Acquisitions and other acquisitions and Dispositions and related
      financing transactions and other acquisitions and related financing
      transaction(s) as if such transactions had been consummated on the first day
      of
      the relevant period of calculation and (y) based on (i) four times Consolidated
      Interest Expense for the first Fiscal Quarter following the Effective Date,
      (ii)
      two times Consolidated Interest Expense for the first two Fiscal Quarters
      following the Effective Date, (iii) four-thirds times Consolidated Interest
      Expense for the first three Fiscal Quarters following the Effective Date and
      (iv) thereafter, Consolidated Interest Expense on a rolling four quarter
      basis.

     

    "Consolidated
      Leverage Ratio" means as at the last day of any period of four
      consecutive fiscal quarters of the Company, commencing with the Fiscal Quarter
      ended June 30, 2007 as the last quarter in the initial period of four
      consecutive fiscal quarters contemplated hereby, the ratio of (a) Consolidated
      Total Debt to (b) Consolidated EBITDAX for such period.

     

    "Consolidated
      Net Income" means, with respect to the Company and its
      Subsidiaries on a consolidated basis, for any fiscal period, the net income
      (or
      net loss) of the Company and its Subsidiaries for such period determined in
      accordance with GAAP, but excluding the effects of the application of FAS 133
      and 143.

     

    "Consolidated
      Total Debt" means, at any date, the aggregate principal amount
      (without duplication) of all Indebtedness under clauses (a), (b), (c), (d),
      (f),
      (g) and (i) of such definition of the Company and its Subsidiaries at such
      date,
      determined on a consolidated basis in accordance with GAAP.

     

    "Contingent
      Obligation" means, as to any Person, without duplication, any
      direct or indirect liability of that Person with or without recourse, (a) with
      respect to any Indebtedness, dividend, letter of credit or other similar
      obligation (the "primary obligations") of another
      Person (the "primary obligor"), including any
      obligation of that Person (i) to purchase, repurchase or otherwise acquire
      such
      primary obligations or any security therefor, (ii) to advance or provide funds
      for the payment or discharge of any such primary obligation, or to maintain
      working capital or equity capital of the 

     

    

    
      
        
          
          

        

        
          6

          
            

          

        

         

      

    

    

    primary
      obligor or otherwise to maintain the net worth or solvency or any balance sheet
      item, level of income or financial condition of the primary obligor, (iii)
      to
      purchase Property, securities or services primarily for the purpose of assuring
      the owner of any such primary obligation of the ability of the primary obligor
      to make payment of such primary obligation, or (iv) otherwise to assure or
      hold
      harmless the holder of any such primary obligation against loss in respect
      thereof (each, a "Guaranty Obligation"); (b) with
      respect to any Surety Instrument issued for the account of that Person or as
      to
      which that Person is otherwise liable for reimbursement of drawings or payments;
      (c) to purchase any materials, supplies or other Property from, or to obtain
      the
      services of, another Person if the relevant contract or other related document
      or obligation requires that payment for such materials, supplies or other
      Property, or for such services, shall be made regardless of whether delivery
      of
      such materials, supplies or other Property is ever made or tendered, or such
      services are ever performed or tendered, or (d) in respect of any Derivative
      Contract.  The amount of any Contingent Obligation shall, in the case
      of Guaranty Obligations, be deemed equal to the lesser of (i) the stated maximum
      amount, if any, of such Contingent Obligation and (ii) the maximum stated or
      determinable amount of the primary obligation in respect of which such Guaranty
      Obligation is made or, if not stated or if indeterminable, the maximum
      reasonably anticipated liability in respect thereof, and in the case of other
      Contingent Obligations, shall be equal to the lesser of (i) the stated maximum
      amount, if any, of such Contingent Obligation and (ii) the maximum reasonably
      anticipated liability in respect thereof.

     

    "Contractual
      Obligation" means, as to any Person, any provision of any security
      issued by such Person or of any agreement, undertaking, contract, indenture,
      mortgage, deed of trust or other instrument, document or agreement to which
      such
      Person is a party or by which it or any of its Property is bound.

     

    "Conversion/Continuation
      Date" means any date on which, under Section 2.3, the Company (a) converts Loans
      of one Interest
      Rate Type to another Interest Rate Type, or (b) continues as Loans of the same
      Interest Rate Type, but with a new Interest Period, Loans having Interest
      Periods expiring on such date.

     

    "Corporate
      Acquisition" means any transaction or series of related
      transactions for the purpose of or resulting, directly or indirectly, in (a)
      the
      acquisition of all or substantially all of the assets of a Person, or of any
      business or division of a Person, (b) the acquisition of in excess of 50% of
      the
      Capital Stock of a corporation (or similar entity), which stock has ordinary
      voting power for the election of the members of such entity's board of directors
      or persons exercising similar functions (other than stock having such power
      only
      by reason of the happening of a contingency), or the acquisition of in excess
      of
      50% of the Capital Stock of any Person not a corporation, which acquisition
      gives the acquiring Person the power to direct or cause the direction of the
      management and policies of such Person or (c) a merger or consolidation or
      any
      other combination with another Person (other than a Person that is a Guarantor,
      if the Company or a Guarantor is the surviving Person).

     

    "Credit
      Extension" means and includes the making, conversion or
      continuation of any Loan hereunder.

     

    "Current
      Assets" means, for any Person, all assets of such Person that, in
      accordance with GAAP, would be included as current assets on a 

     

    

    
      
        
          
          

        

        
          7

          
            

          

        

         

      

    

    

    balance
      sheet as of a date of calculation; provided, however, an amount equal to the
      Available Borrowing Base shall be included as current assets.

     

    "Current
      Liabilities" means, for any Person, all liabilities of such Person
      that, in accordance with GAAP, would be included as current liabilities on
      a
      balance sheet as of the date of calculation; provided, however, the current
      portion of the Loans which are not past due may be excluded from Current
      Liabilities.

     

    "Default"
      means any event or circumstance which, with the giving of notice, the lapse
      of
      time, or both, would (if not cured or otherwise remedied during such time)
      constitute an Event of Default.

     

    "Default
      Rate" has the meaning specified in Section 2.7(c).

     

    "Derivative
      Contract" means all futures contracts, forward contracts, swap,
      put, cap or collar contracts, option contracts, hedging contracts or other
      derivative contracts or similar agreements covering oil and gas commodities
      or
      prices or financial, monetary or interest rate instruments.

     

    "Disposition"
      has the meaning specified in Section 8.2.

     

    "Disqualified
      Stock" means, as to any Person, any Capital Stock of such Person
      that by its terms (or by the terms of any security into which it is convertible
      or for which it is exchangeable) or otherwise (including upon the occurrence
      of
      an event) requires the payment of dividends (other than dividends payable solely
      in Capital Stock which does not otherwise constitute Disqualified Stock) or
      matures or is required to be redeemed (pursuant to any sinking fund obligation
      or otherwise) or is convertible into or exchangeable for Indebtedness or is
      redeemable at the option of the holder thereof, in whole or in part, at any
      time
      on or prior to the date six months after the Maturity Date.

     

    "Dollars",
      "dollars" and "$" each mean
      lawful money of the United States.

     

    "Effective
      Amount" means on any date, the aggregate outstanding principal
      amount of all Loans after giving effect to any prepayments or repayments of
      such
      Loans occurring on such date.

     

    "Effective
      Date" means the date on which the Effective Time occurred, which
      date was April 2, 2007.

     

    "Effective
      Time" means the time as of which all conditions precedent set
      forth in Section 5.1 were satisfied or waived by
      all Lenders.

     

    "Environmental
      Claims" means all material claims by any Governmental Authority or
      other Person alleging potential liability or responsibility for violation of
      any
      Environmental Law, or for release or injury to the environment.

     

    "Environmental
      Laws" means all federal, state or local laws, statutes, common law
      duties, rules, regulations, ordinances and codes, together 

     

    

    
      
        
          
          

        

        
          8

          
            

          

        

         

      

    

    

    with
      all
      administrative orders, requests, licenses, authorizations and permits of, and
      agreements with, any Governmental Authorities, in each case relating to
      environmental and, as they relate to environmental protection, health, and
      safety matters.

     

    "ERISA"
      means the Employee Retirement Income Security Act of 1974, as amended, and
      regulations promulgated thereunder.

     

    "ERISA
      Affiliate" means any trade or business (whether or not
      incorporated) under common control with the Company within the meaning of
      Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code
      for
      purposes of provisions relating to Section 412 of the Code).

     

    "ERISA
      Event" means (a) a Reportable Event with respect to a Pension
      Plan; (b) a withdrawal by the Company or any ERISA Affiliate from a Pension
      Plan
      subject to Section 4063 of ERISA during a plan year in which it was a
      substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation
      of operations which is treated as such a withdrawal under Section 4062(e) of
      ERISA; (c) a complete or partial withdrawal by the Company or any ERISA
      Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan
      is
      in reorganization; (d) the filing of a notice of intent to terminate (other
      than
      pursuant to Section 4041(b) of ERISA), the treatment of a Plan amendment as
      a
      termination under Section 4041(c) or 4041A of ERISA, or the commencement of
      proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan;
      (e)
      an event or condition which might reasonably be expected to constitute grounds
      under Section 4042 of ERISA for the termination of, or the appointment of a
      trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the
      imposition of any liability under Title IV of ERISA, other than PBGC premiums
      due but not delinquent under Section 4007 of ERISA, upon the Company or any
      ERISA Affiliate.

     

    "Eurodollar
      Reserve Percentage" has the meaning specified in the definition of
      "LIBO Rate".

     

    "Event
      of Default" means any of the events or circumstances specified in
      Section 9.1.

     

    "Exchange
      Act" means the Securities Exchange Act of 1934.

     

    "Exempt
      Subsidiary" means (a) any of the following existing
      Subsidiaries:  Eagle Pass Well Service, L.L.C., TXCO Drilling Corp.,
      PPL Operating Inc., Maverick Gas Marketing, Ltd., Maverick Dimmit Pipeline,
      Ltd.
      or Paloma Pipeline, L.P.; and (b) any Subsidiary formed or acquired after the
      Effective Date that owns no Hydrocarbon Interests.

     

    "Existing
      Derivative Contracts" means the contracts listed on Schedule 6.25
      hereto.

     

    "Existing
      Obligations" means the "Obligations" (as defined in the Existing
      Term Loan Agreement) outstanding at the Restatement Effective Time.

     

    "Existing
      Term Loan Agreement" has the meaning specified in the recitals
      hereto.

     

    "FAS
      123R" means Financial Accounting Statement 123R promulgated by the
      Financial Accounting Standards Board.

     

    

    
      
        
          
          

        

        
          9

          
            

          

        

         

      

    

    

    "FAS
      133" means Financial Accounting Statement 133 promulgated by the
      Financial Accounting Standards Board.

     

    "FAS
      143" means Financial Accounting Statement 143 promulgated by the
      Financial Accounting Standards Board.

     

    "Federal
      Funds Rate" means, for any day, the rate set forth in the weekly
      statistical release designated as H.15(519), or any successor publication,
      published by the Federal Reserve Bank of New York (including any such successor,
      "H.15(519)") on the preceding Business Day opposite
      the caption "Federal Funds (Effective)"; or, if for
      any relevant day such rate is not so published on any such preceding Business
      Day, the rate for such day will be the arithmetic mean as determined by the
      Administrative Agent of the rates for the last transaction in overnight Federal
      funds arranged prior to 9:00 a.m. (New York, New York time) on that day by
      each
      of three leading brokers of Federal funds transactions in New York, New York
      selected by the Administrative Agent.

     

    "Fee
      Letter Agreement" means the letter agreement dated February 13,
      2007 among BMO Capital Markets Corp., Bank of Montreal and the
      Company.

     

    "First
      Lien Credit Agent" means the Administrative Agent (as defined in
      the First Lien Credit Agreement).

     

    "First
      Lien Credit Agreement" means the Amended and Restated Credit
      Agreement among the Loan Parties, the First Lien Credit Agent and BMO Capital
      Markets Corp., as arranger, and the other lenders from time to time party
      thereto dated as of April 2, 2007, as amended by the First Amendment to Amended
      and Restated Credit Agreement dated of even date herewith and as further
      amended, amended and restated, restated, supplemented or otherwise modified
      in
      accordance with the terms hereof and the terms of the Intercreditor
      Agreement.

     

    "First
      Lien Credit Documents" means the "Loan Documents" (as defined in
      the First Lien Credit Agreement).

     

    "First
      Lien Credit Lenders" means the "Lenders" (as defined in the First
      Lien Credit Agreement).

     

    "First
      Lien Loans" means the loans to be made from time to time under and
      in accordance with the First Lien Credit Documents.

     

    "First
      Lien Obligations" has the meaning ascribed thereto in the
      Intercreditor Agreement.

     

    "First
      Lien Secured Parties" means the "Secured Parties" (as defined in
      the First Lien Credit Agreement).

     

    "First
      Liens" has the meaning specified in Section 7.14(b).

     

    

    
      
        
          
          

        

        
          10

          
            

          

        

         

      

    

    

    "Fiscal
      Quarter" means each of the three-month periods coinciding with the
      fiscal quarters adopted by the Company for financial reporting
      purposes.

     

    "Foreign
      Lender" means any Lender that is organized under the laws of a
      jurisdiction other than the United States of America, any State thereof or
      the
      District of Columbia.

     

    "FRB"
      means the Board of Governors of the Federal Reserve System, and any Governmental
      Authority succeeding to any of its principal functions.

     

    "GAAP"
      means generally accepted accounting principles set forth from time to time
      in
      the opinions and pronouncements of the Accounting Principles Board and the
      American Institute of Certified Public Accountants and statements and
      pronouncements of the Financial Accounting Standards Board (or agencies with
      similar functions of comparable stature and authority within the U.S. accounting
      profession).

     

    "Governmental
      Authority" means any nation or government, any state or other
      political subdivision thereof, any central bank (or similar monetary or
      regulatory authority) thereof, any entity exercising executive, legislative,
      judicial, regulatory or administrative functions of or pertaining to government,
      and any corporation or other entity owned or controlled, through stock or
      capital ownership or otherwise, by any of the foregoing.

     

    "Granting
      Lender" has the meaning specified in Section 11.8(d).

     

    "Guarantor"
      means (a) each of the Original Guarantors, (b) from and after the Output Closing
      Time, OPEX and (c) any new Subsidiary which is required to execute the Guaranty
      under Section 7.12 upon the execution and delivery
      by such Person of the Guaranty.

     

    "Guaranty"
      means the Guaranty Agreement, dated April 2, 2007, as supplemented by the
      joinder thereto, dated as of April 2, 2007, of OPEX, substantially in the form
      of Exhibit "G" hereto executed by each Guarantor in favor of the
      Administrative Agent and the Lenders, as the same may be amended, amended and
      restated, supplemented or otherwise modified from time to time pursuant to
      the
      terms hereof (including, in the case of any Subsidiary required to execute
      the
      Guaranty pursuant to Section 7.12, by execution and
      delivery of a joinder thereto in the form of Annex 1 thereto).

     

    "Guaranty
      Obligation" has the meaning specified in the definition of
      "Contingent Obligation."

     

    "Highest
      Lawful Rate" means, as of a particular date, the maximum
      nonusurious interest rate that under applicable federal and state law may then
      be contracted for, charged or received by the Lenders in connection with the
      Obligations.

     

    "Hydrocarbon
      Interests" means leasehold and other real property interests in or
      under oil, gas and other liquid or gaseous hydrocarbon leases, mineral fee
      interests, overriding royalty and royalty interests, net profit interests,
      production payment interests relating to oil, gas or other liquid or gaseous
      hydrocarbons wherever located including any reserved or residual interest of
      whatever nature, covering lands in or offshore the continental United
      States.

     

    

    
      
        
          
          

        

        
          11

          
            

          

        

         

      

    

    

    "Indebtedness"
      of any Person means, without duplication, (a) all indebtedness for borrowed
      money; (b) all obligations issued, undertaken or assumed as the deferred
      purchase price of Property or services (other than trade payables entered into
      in the ordinary course of business on ordinary terms and not past due for more
      than 90 days after the due date thereof, other than those trade payables
      disputed in good faith); (c) all non-contingent reimbursement or payment
      obligations with respect to Surety Instruments; (d) all obligations evidenced
      by
      notes, bonds, debentures or similar instruments, including obligations so
      evidenced incurred in connection with the acquisition of Property, assets or
      businesses; (e) all indebtedness created or arising under any conditional sale
      or other title retention agreement, or incurred as financing, in either case
      with respect to Property acquired by the Person (even though the rights and
      remedies of the seller or bank under such agreement in the event of default
      are
      limited to repossession or sale of such Property) including, without limitation,
      production payments, net profit interests and other Hydrocarbon Interests
      subject to repayment out of future Oil and Gas production; (f) all obligations
      with respect to Capital Leases; (g) all non-contingent net obligations with
      respect to Derivative Contracts; (h) gas imbalances or obligations under
      take-or-pay or prepayment contracts with respect to any of the Oil and Gas
      Properties which would require the Company or any of its Subsidiaries to deliver
      Oil and Gas from any of the Oil and Gas Properties at some future time without
      then or thereafter receiving full payment therefor; (i) all indebtedness
      referred to in clauses (a) through (g) above secured by (or for which the holder
      of such Indebtedness has an existing right, contingent or otherwise, to be
      secured by) any Lien upon or in Property (including accounts and contracts
      rights) owned by such Person, even though such Person has not assumed or become
      liable for the payment of such Indebtedness; and (j) all Guaranty Obligations
      in
      respect of indebtedness or obligations of others of the kinds referred to in
      clauses (a) through (g) above.

     

    "Indemnified
      Liabilities" has the meaning specified in Section 11.5.

     

    "Indemnified
      Person" has the meaning specified in Section 11.5.

     

    "Independent
      Auditor" has the meaning specified in Section 7.1(a).

     

    "Independent
      Engineer" has the meaning specified in Section 7.2(c).

     

    "Initial
      Reserve Report" has the meaning specified in Section 6.11.

     

    "Insolvency
      Proceeding" means (a) any case, action or proceeding relating to
      bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution,
      winding-up or relief of debtors, or (b) any general assignment for the benefit
      of creditors, composition, marshaling of assets for creditors, or other, similar
      arrangement in respect of its creditors generally or any substantial portion
      of
      its creditors; undertaken under U.S. Federal, state or foreign law, including
      the Bankruptcy Code.

     

    "Intercreditor
      Agreement" means that certain Intercreditor Agreement dated as of
      the Effective Date among the Loan Parties, the First Lien Credit Agent, as
      first
      lien collateral agent, and the Administrative Agent, as second lien collateral
      agent in the form of Exhibit "H" hereto, as amended, amended and
      restated, restated, supplemented or otherwise modified from time to time
      pursuant to the terms hereof and thereof.

     

    

    
      
        
          
          

        

        
          12

          
            

          

        

         

      

    

    

    "Interest
      Payment Date" (a) as to any Base Rate Loan, means July 2, 2007 and
      the first Business Day following the end of each Fiscal Quarter ending
      thereafter prior to the Termination Date and each date on which such a Base
      Rate
      Loan is converted into another Interest Rate Type of Loan, and (b) as to any
      LIBO Rate Loan, the last day of the Interest Period applicable to such Loan;
      provided, however, that if any Interest Period for an LIBO Rate Loan exceeds
      three months, the date that falls three months after the beginning of such
      Interest Period is also an Interest Payment Date.

     

    "Interest
      Period" means, as to any LIBO Rate Loan, the period commencing on
      the Effective Date or the Restatement Effective Date, as applicable, or on
      the
      Conversion/Continuation Date on which such Loan is converted into or continued
      as a LIBO Rate Loan, and ending on the date one week (if determined by the
      Administrative Agent to be available), or one, two, three or six months
      thereafter (or such greater number of months as may be requested by the Company
      and determined by the Administrative Agent to be available) as selected by
      the
      Company in its Notice of Borrowing or Notice of Conversion/Continuation;
      provided, however, that:  (a) if any Interest Period would otherwise
      end on a day that is not a Business Day, that Interest Period shall be extended
      to the following Business Day unless, in the case of an LIBO Rate Loan, the
      result of such extension would be to carry such Interest Period into another
      calendar month, in which event such Interest Period shall end on the preceding
      Business Day; (b) any Interest Period pertaining to a LIBO Rate Loan that begins
      on the last Business Day of a calendar month (or on a day for which there is
      no
      numerically corresponding day in the calendar month at the end of such Interest
      Period) shall end on the last Business Day of the calendar month at the end
      of
      such Interest Period; and (c) no Interest Period for any Loan shall extend
      beyond the Termination Date.

     

    "Interest
      Rate Type" means, with respect to any Loan, the interest rate,
      being either the Base Rate or the LIBO Rate forming the basis upon which
      interest is charged against such Loan hereunder.

     

    "IRS"
      means the Internal Revenue Service, and any Governmental Authority succeeding
      to
      any of its principal functions under the Code.

     

    "Lenders"
      has the meaning specified in the preamble hereto.

     

    "Lending
      Office" means, as to any Lender, the office or offices of such
      Lender specified as its "Lending Office" or "Domestic Lending Office" or
      "Offshore Lending Office," as the case may be, on the signature pages hereof,
      or
      such other office or offices as such Lender may from time to time notify the
      Company and the Administrative Agent.

     

    "Letter
      of Credit" has the meaning ascribed thereto in the First Lien
      Credit Agreement.

     

    "LIBO
      Rate" means, for any Interest Period, with respect to LIBO Rate
      Loans, the rate of interest per annum (rounded upward to the next 1/16th of
      1%)
      determined by the Administrative Agent as follows:

     

    
      	
              LIBO
                Rate =

            	
              LIBOR

            	 
	 	
              1.00
                - Eurodollar Reserve Percentage

            	 
	 	 

    

    

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    
    

    

    
      	
              where,

            	
              "Eurodollar
                Reserve Percentage" means for any day for any Interest
                Period the maximum reserve percentage (expressed as a decimal, rounded
                upward to the next 1/100th of 1%) in effect on such day to which
                the
                Administrative Agent or any Lender is subject under regulations issued
                from time to time by the FRB for determining the maximum reserve
                requirement (including any emergency, supplemental or other marginal
                reserve requirement) with respect to Eurocurrency funding (currently
                referred to as "Eurocurrency liabilities");
                and

            

    

    

    "LIBOR"
      means relative to any Interest Period for LIBO Rate Loans:

     

    (a)           the
      rate per annum equal to the rate determined by the Administrative Agent to
      be
      the offered rate that appears on the page, currently page 3750, of the Telerate
      screen (or any successor thereto or substitute therefor) that displays an
      average British Bankers Association Interest Settlement Rate for deposits in
      Dollars (for delivery on the first day of such Interest Period) with a term
      equivalent to such Interest Period, determined as of approximately 11:00 a.m.
      (London time) two Business Days prior to the first day of such Interest Period,
      or

     

    (b)           if
      the rate referenced in the preceding clause (a) does not appear on such page
      or
      service or such page or service shall not be available, the rate per annum
      equal
      to the rate determined by the Administrative Agent to be the offered rate on
      such other page or other service that displays an average British Bankers
      Association Interest Settlement Rate for deposits in Dollars (for delivery
      on
      the first day of such Interest Period) with a term equivalent to such Interest
      Period, determined as of approximately 11:00 a.m. (London time) two Business
      Days prior to the first day of such Interest Period, or

     

    (c)           if
      the rates referenced in the preceding clauses (a) and (b) are not available,
      the
      rate per annum determined by the Administrative Agent as the rate of interest
      at
      which deposits in Dollars for delivery on the first day of such Interest Period
      in same day funds in the approximate amount of the LIBO Rate Loan being made,
      continued or converted by Bank of Montreal and with a term equivalent to such
      Interest Period would be offered by Bank of Montreal's London Branch to major
      banks in the London interbank eurodollar market at their request at
      approximately 4:00 p.m. (London time) two Business Days prior to the first
      day
      of such Interest Period.

     

    The
      LIBO
      Rate shall be adjusted automatically as to all LIBO Rate Loans then outstanding
      as of the effective date of any change in the Eurodollar Reserve
      Percentage.

     

    "LIBO
      Rate Loan" means a Loan that bears interest based on the LIBO Rate
      plus the Applicable Margin.

     

    "Lien"
      means any security interest, mortgage, deed of trust, pledge, hypothecation,
      assignment, charge or deposit arrangement, encumbrance, lien (statutory or
      other) or preferential arrangement of any kind or nature whatsoever in respect
      of any Property (including those created

     

    

    
      
        
          
          

        

        
          14

          
            

          

        

         

      

    

    

    by,
      arising under or evidenced by any conditional sale or other title retention
      agreement and the interest of a lessor under a Capital Lease), any financing
      lease having substantially the same economic effect as any of the foregoing,
      and
      any contingent or other agreement to provide any of the foregoing, but not
      including (a) the interest of a lessor under a lease on Oil and Gas Properties
      or (b) the interest of a lessor under an Operating Lease.

     

    "Liquidity"
      means, with respect to the Company and the Guarantors on a consolidated basis,
      the sum of (a) their unrestricted cash and unrestricted Cash Equivalents plus
      (b) the Available Borrowing Base.

     

    "Loan
      Documents" means this Agreement, the Notes, each Guaranty, the
      Security Documents, the Fee Letter Agreement, the Commitment Letter and all
      other documents delivered to the Administrative Agent or any Lender in
      connection herewith.

     

    "Loans"
      has the meaning specified in Section 2.1(b).

     

    "Loan
      Parties" means the Company and each Guarantor.

     

    "Margin
      Stock" means "margin stock" as such term is defined in Regulation
      T, U or X of the FRB.

     

    "Material
      Adverse Effect" means (a) a material adverse change in, or a
      material adverse effect upon the operations, business, properties or financial
      condition of the Company and its Subsidiaries, taken as a whole excluding
      events, developments or circumstances generally affecting the industry in which
      the Company and its Subsidiaries operate or arising from changes in general
      business or economic conditions, so long as the foregoing do not
      disproportionately adversely affect the Company and its Subsidiaries, taken
      as a
      whole; (b) a material impairment of the ability of the Company or any Guarantor
      to perform under any material Loan Document; or (c) a material adverse effect
      upon the legality, validity, binding effect or enforceability against the
      Company or any Guarantor of any material Loan Document.

     

    "Maturity
      Date" means April 2, 2012.

     

    "Merger
      Sub" means Output Acquisition Corp., a Texas
      corporation.

     

    "Midstream
      Contracts" means (a) the Firm Transportation Service Agreement by
      and between Maverick-Dimmit Pipeline, Ltd. and TXCOE dated April 1, 2007 and
      (b)
      the Marketing Services Agreement by and between Maverick Gas Marketing, Ltd.
      and
      TXCOE dated April 1, 2007.

     

    "Moody's"
      means Moody's Investors Service, Inc.

     

    "Mortgage
      Supplements" means each Supplement and Confirmation of Second Lien
      Mortgage, Deed of Trust, Security Agreement, Financing Statement and Assignment
      of Production by and from the Company and TXCOE, Merger Sub and OPEX for the
      benefit of the Administrative Agent dated as of the date hereof.

     

    

    
      
        
          
          

        

        
          15

          
            

          

        

         

      

    

    

    "Mortgaged
      Properties" means such Oil and Gas Properties upon which the
      Company and the Guarantors have granted the Administrative Agent for the benefit
      of the Lenders a valid, second Lien pursuant to the Mortgages, subject to
      Permitted Liens.

     

    "Mortgages"
      means the Second Lien Mortgages, Deeds of Trust, Security Agreements, Financing
      Statements and Assignments of Production from the Company and TXCOE, Merger
      Sub
      and OPEX, in favor of the Administrative Agent, for the benefit of the Secured
      Parties, covering the Oil and Gas Properties of the Company and the Guarantors
      party thereto, as each is supplemented by the Mortgage Supplements, and all
      further supplements, assignments, assumptions, amendments and restatements
      thereto (or any agreement in substitution therefor) that have been or are
      executed and delivered to the Administrative Agent for benefit of the Lenders
      pursuant to Article IV of this
      Agreement.

     

    "Multiemployer
      Plan" means a "multiemployer plan", within the meaning of Section
      4001(a)(3) of ERISA, to which the Company or any ERISA Affiliate makes, is
      making, or is obligated to make contributions or, during the preceding three
      calendar years, has made, or been obligated to make, contributions.

     

    "Net
      Cash Proceeds" means in connection with any Disposition or any
      Recovery Event, all proceeds thereof in the form of cash and Cash Equivalents
      of
      such Disposition or Recovery Event, net of (i) amounts required by the First
      Lien Credit Agreement to be applied to the repayment of the First Lien
      Obligations or the cash collateralization of outstanding Letters of Credit,
      (ii)
      reasonable and customary Attorney Costs, accountants' fees, investment banking
      fees, (iii) amounts required to be applied to the repayment of Indebtedness
      secured by a Lien expressly permitted hereunder on any Property which is the
      subject of such Disposition or Recovery Event, (iv) other reasonable and
      customary fees and expenses actually incurred in connection therewith (including
      survey costs, title insurance premiums, search and recording charges) and (v)
      net of taxes paid or reasonably estimated to be payable as a result thereof
      (after taking into account any available tax credits or deductions and any
      tax
      sharing arrangements).

     

    "Net
      Present Value" means the PV 10 Value of the Oil and Gas Properties
      and adjusted at the date of determination (on the same basis as the most recent
      Reserve Report previously delivered pursuant to Section 6.11 or Section 7.2(c)
      was prepared) for Dispositions and purchases of Hydrocarbon Interests occurring
      since the date of such report.  The Net Present Value shall be
      calculated by the Company as of each date of determination.

     

    "Net
      Proceeds of Production" means the amounts attributable to the
      Company's and the Guarantors' interest in the proceeds received from the sale
      of
      Oil and Gas produced from Mortgaged Properties after deduction of (a) royalties
      existing as of the effective date on which the Company or the applicable
      Guarantor first mortgaged its interests in such Mortgaged Properties in favor
      of
      the Lenders or their predecessors; (b) third party (including any Exempt
      Subsidiary) pipeline and transportation charges; (c) production, ad valorem
      and
      severance taxes chargeable against such production; (d) marketing costs; (e)
      overriding royalties existing as of the effective date on which the Company
      or
      the applicable Guarantor first mortgaged its interests in such Mortgaged
      Properties in favor of the Lenders or their predecessors; (f) other interests
      in
      and measured by production burdening the Mortgaged Properties existing as of
      the
      effective date on which the Company or the applicable Guarantor first mortgaged
      its interests in 

     

    

    
      
        
          
          

        

        
          16

          
            

          

        

         

      

    

    

    such
      Mortgaged Properties in favor of the Lenders or their predecessors; and (g)
      the
      current portion of direct operating or production costs which is allocable
      to
      such interest in such Mortgaged Properties.

     

    "Non-Recourse
      Debt" means Indebtedness of Exempt Subsidiaries (a) as to which
      neither the Company nor any Guarantor (i) provides credit support of any kind
      (including any undertaking, agreement or instrument that would constitute
      Indebtedness), (ii) is directly or indirectly liable as a guarantor or
      otherwise, or (iii) constitutes the lender with respect to such Indebtedness;
      and (b) no default with respect to which (including any rights that the holders
      thereof may have to take enforcement action against an Exempt Subsidiary) would
      permit upon notice, lapse of time or both any holder of any other Indebtedness
      of the Company or any Guarantor to declare a default on such other Indebtedness
      or cause the payment thereof to be accelerated or payable prior to its stated
      maturity date.

     

    "Notes"
      means the promissory notes, whether one or more, specified in Section 2.1(c), substantially in the same form as Exhibit
      "F", including any amendments, amendments and restatements, modifications,
      renewals or replacements of such promissory notes.

     

    "Notice
      of Borrowing" means a notice in substantially the form of
Exhibit "A".

     

    "Notice
      of Conversion/Continuation" means a notice in substantially the
      form of Exhibit "B".

     

    "NYMEX"
      means the New York Mercantile Exchange.

     

    "Obligations"
      means the unpaid principal of and interest (including interest accruing at
      the
      then applicable rate provided herein after the maturity of the Loans and
      interest accruing at the then applicable rate provided herein after the filing
      of any petition for an Insolvency Proceeding, or the commencement of any
      Insolvency Proceeding, whether or not a claim for post-filing or post-petition
      interest is allowed in such proceeding) on the Loans and all other advances,
      debts, liabilities, obligations, covenants and duties arising under any Loan
      Document owing by the Company or any Guarantor to any Lender, the Administrative
      Agent, any Qualifying Derivative Contract Counterparty or any Indemnified
      Person, whether direct or indirect (including those acquired by assignment),
      absolute or contingent, due or to become due, now existing or hereafter arising,
      whether on account of principal, interest, reimbursement obligations, fees,
      indemnities, costs, expenses (including all reasonable fees, charges and
      disbursements of counsel in accordance with Section 11.4) or otherwise.

     

    "Oil
      and Gas" means petroleum, natural gas and other related
      hydrocarbons or minerals or any of them and all other substances produced or
      extracted in association therewith.

     

    "Oil
      and Gas Liens" means (a) Liens arising under oil and gas leases,
      overriding royalty agreements, net profits agreements, royalty trust agreements,
      farm-out agreements, division orders, contracts for the sale, purchase,
      exchange, transportation, gathering or processing of Oil and Gas, unitizations
      and pooling designations, declarations, orders and agreements, development
      agreements, operating agreements, production sales contracts, area of mutual
      interest agreements, gas balancing or deferred production agreements, injection,
      repressuring and recycling agreements, salt 

     

    

    
      
        
          
          

        

        
          17

          
            

          

        

         

      

    

    

    water
      or
      other disposal agreements, seismic or geophysical permits or agreements, and
      other agreements that are customary in the oil and gas business and are entered
      into by the Company in the ordinary course of business; provided, however,
      in
      all instances that such Liens are limited to the assets that are the subject
      of
      the relevant agreement; and (b) Liens on pipelines or pipeline facilities that
      arise by operation of law.

     

    "Oil
      and Gas Properties" means Hydrocarbon Interests now or hereafter
      owned by the Company and the Guarantors and contracts executed in connection
      therewith and all tenements, hereditaments, appurtenances, and properties
      belonging, affixed or incidental to such Hydrocarbon Interests, including,
      without limitation, any and all Property, now owned by the Company and the
      Guarantors and situated upon or to be situated upon, and used, built for use,
      or
      useful in connection with the operating, working or developing of such
      Hydrocarbon Interests, including, without limitation, any and all Oil and Gas
      wells, buildings, structures, field separators, liquid extractors, plant
      compressors, pumps, pumping units, field gathering systems, tanks and tank
      batteries, fixtures, valves, fittings, machinery and parts, engines, boilers,
      apparatus, equipment, appliances, tools, implements, cables, wires, towers,
      taping, tubing and rods, surface leases, rights of way, easements and
      servitudes, and all additions, substitutions, replacements for, fixtures and
      attachments to any and all of the foregoing owned directly or indirectly by
      the
      Company and the Guarantors.

     

    "Operating
      Lease" means an operating lease determined in accordance with
      GAAP.

     

    "OPEX"
      means OPEX Energy, LLC a Texas limited liability company.

     

    "Organization
      Documents" means, for any corporation, the certificate or articles
      of incorporation, the bylaws, any certificate of determination or instrument
      relating to the rights of preferred shareholders of such corporation and any
      shareholder rights agreement and for any limited liability company means the
      limited liability company agreement, and all other documents, filings and
      instruments necessary to create and constitute such company, or for any limited
      partnership means the original agreement of limited partnership as amended
      from
      time to time.

     

    "Original
      Guarantor" means any of TXCOE, TTSI or Merger Sub, each of which
      is a wholly owned Subsidiary.

     

    "Originating
      Lender" has the meaning specified in Section 11.8(f).

     

    "Original
      Loans" has the meaning specified in Section 2.1(a).

     

    "Other
      Taxes" means any present or future stamp or documentary taxes or
      any other excise or property taxes, charges or similar levies which arise from
      any payment made hereunder or from the execution, delivery or registration
      of,
      or otherwise with respect to, this Agreement or any other Loan
      Documents.

     

    "Output"
      means Output Exploration, LLC, a Delaware limited liability
      company.

     

    "Output
      Acquisition" means the acquisition consumated on April 2, 2007 by
      the Company of all of the outstanding Capital Stock of Output 

     

    

    
      
        
          
          

        

        
          18

          
            

          

        

         

      

    

    

    pursuant
      to the Output Acquisition Agreement for an aggregate cash purchase price not
      to
      exceed $100,000,000 in cash and common stock of the Company, subject to usual
      and customary adjustments for transactions of such nature.

     

    "Output
      Acquisition Agreement" means the Agreement and Plan of Merger
      dated effective as of February 20, 2007 by and among the Company, Merger Sub
      and
      Output, as amended, amended and restated, supplemented, replaced or otherwise
      modified from time to time in accordance with this Agreement.

     

    "Output
      Acquisition Documents" means, collectively, the Output Acquisition
      Agreement and all schedules, exhibits, annexes and amendments thereto and all
      side letters and agreements affecting the terms thereof or entered into in
      connection therewith, in each case, as amended, amended and restated,
      supplemented or otherwise modified from time to time.

     

    "Output
      Closing Time" means the time as of which all conditions precedent
      set forth in Section 5.2 of the First Lien Credit Agreement were satisfied
      or
      waived by all Lenders.

     

    "Output
      Reserve Report" has the meaning specified in Section 6.11.

     

    "Participant"
      has the meaning specified in Section 11.8(f).

     

    "PBGC"
      means the Pension Benefit Guaranty Corporation, or any Governmental Authority
      succeeding to any of its principal functions under ERISA.

     

    "Pension
      Plan" means a pension plan (as defined in Section 3(2) of ERISA)
      subject to Title IV of ERISA, other than a Multiemployer Plan, which the Company
      or any of its Subsidiaries sponsors, maintains, or to which it makes, is making,
      or is obligated to make contributions, or in the case of a multiple employer
      plan (as described in Section 4064(a) of ERISA) has made contributions at any
      time during the immediately preceding five plan years.

     

    "Permitted
      Indebtedness" has the meaning specified in Section 8.5.

     

    "Permitted
      Liens" means the collective reference to (i) in the case of
      Collateral other than Pledged Stock, Liens permitted by Section 8.1 and (ii) in the case of Collateral consisting
      of
      Pledged Stock, (A) Liens permitted by Sections 8.1(b) and (j) and (B) non-consensual Liens permitted
      by Section 8.1 to the extent arising by operation
      of law.

     

    "Permitted
      Refinancing" means any modification, refinancing, refunding,
      renewal or extension of Indebtedness; provided, however, that (a) the principal
      amount thereof does not exceed the principal amount of the Indebtedness so
      modified, refinanced, refunded, renewed or extended except by an amount equal
      to
      unpaid accrued interest and premium thereon plus other reasonable amounts paid,
      and fees and expenses reasonably incurred, in connection therewith, (b) such
      modification, refinancing, refunding, renewal or extension has a final maturity
      date equal to or later than the final maturity date of the Indebtedness being
      modified, refinanced, refunded, renewed or extended, (c) if the Indebtedness
      being modified, refinanced, refunded, renewed or extended is subordinated in
      right of payment to the Obligations, such modification, refinancing, renewal
      or
      extension is subordinated in right of payment to the Obligations on terms at
      least as favorable to the Lenders as those contained in the documentation
      governing 

     

    

    
      
        
          
          

        

        
          19

          
            

          

        

         

      

    

    

    the
      original Indebtedness, taken as a whole and (d) the terms and conditions of
      any
      such modified, refinanced, refunded, renewed or extended Indebtedness are not
      materially less favorable to the Loan Parties or the Lenders than the terms
      and
      conditions of the Indebtedness being modified, refinanced, refunded, renewed
      or
      extended, taken as a whole.

     

    "Person"
      means an individual, partnership, corporation, limited liability company,
      business trust, joint stock company, trust, unincorporated association, joint
      venture or Governmental Authority.

     

    "Plan"
      means an employee benefit plan (as defined in Section 3(3) of ERISA) which
      is
      subject to ERISA, other than a Multiemployer Plan.

     

    "Platform"
      has the meaning specified in Section 7.1(d).

     

    "Pledged
      Stock" means "Pledged Stock" as such term is defined in the
      Security Agreement.

     

    "Premium"
      has the meaning specified in Section 2.4(b).

     

    "Pricing
      Grid" means the annualized rates (stated in terms of basis points
      ("bps")) set forth below which shall be computed as of each day during the
      term
      hereof for the Applicable Margin as follows:

     

    
      	
              Applicable
                Margin

            
	
              Base
                Rate Loan

              (bps)

            	
              LIBO
                Rate Loan

              (bps)

            
	
              350
                bps

            	
              450
                bps

            

    

    

    "Principal
      Business" means the business of the exploration for, and
      development, acquisition, production, and upstream marketing and transportation
      of Oil and Gas.

     

    "Projected
      Oil and Gas Production" means the projected production of oil or
      gas (measured by volume unit or BTU equivalent, not sales price) for the term
      of
      the contracts or a particular half-year, as applicable, from Oil and Gas
      Properties and interests owned by the Company and the Guarantors that have
      attributable to them Proved Developed Producing Reserves, as such production
      is
      projected in the most recent Reserve Report delivered pursuant to Section 7.2(c), after deducting projected production from any
      Oil and Gas Properties sold or under contract for sale that had been included
      in
      such report and after adding projected production from any Oil and Gas
      Properties or Hydrocarbon Interests that had not been reflected in such report
      but that are reflected in a separate or supplemental reports prepared on the
      same basis as the reports delivered pursuant to Section 7.2(c) above and otherwise are satisfactory to the
      Administrative Agent.

     

    "Pro
      Rata Share" means, as to any Lender at any time, the percentage
      equivalent (expressed as a decimal, rounded to the ninth decimal place) at
      such
      time of such Lender's Aggregate Exposure divided by the combined Aggregate
      Exposure of all Lenders.

     

    "Property"
      means any interest in any kind of property or asset, whether real, personal
      or
      mixed, tangible or intangible.

     

    

    
      
        
          
          

        

        
          20

          
            

          

        

         

      

    

    

    "Proved
      Developed Producing Reserves" means those Oil and Gas Properties
      designated as proved developed producing (in accordance with the Definitions
      for
      Oil and Gas Reserves approved by the Board of Directors of the Society of
      Petroleum Engineers, Inc. from time to time) in the Reserve Report.

     

    "Proved
      Reserves" means those Oil and Gas Properties designated as proved
      (in accordance with the Definitions for Oil and Gas Reserves approved by the
      Board of Directors of the Society of Petroleum Engineers, Inc. from time to
      time) in the Reserve Report.

     

    "Public
      Lender" has the meaning specified in Section 7.1(d).

     

    "PV
      10 Value" means, as of any date of determination, the present
      value of future cash flows from Proved Reserves included in the Company's and
      the Guarantors' Oil and Gas Properties as set forth in the most recent Reserve
      Report delivered pursuant to Section 6.11 or
      7.2(c), utilizing the average of the Three-Year Strip Price for crude oil (WTI
      Cushing) and natural gas (Henry Hub), quoted on the NYMEX (or its successor)
      and
      utilizing a 10% discount rate.  The PV-10 Value shall be adjusted to
      give effect to the Company's and the Guarantors' Derivative Contracts for the
      purpose of hedging prices of Oil and Gas and any Oil and Gas sales contracts
      not
      cancellable on 90 or fewer days' notice.  The PV 10 Value shall be
      calculated by the Company as of each date of determination.

     

    "Qualifying
      Derivative Contract" means any Derivative Contract between any
      Loan Party and any Qualifying Derivative Contract Counterparty.

     

    "Qualifying
      Derivative Contract Counterparty" means, with respect to a
      Qualifying Derivative Contract, any Person that was a Lender or an Affiliate
      thereof at the time such Qualifying Derivative Contract was originally entered
      into.

     

    "Qualifying
      Preferred Stock" shall mean, as applied to the Capital Stock of
      any Person, the Capital Stock of any class or classes (however designated)
      that
      is preferred with respect to the payment of dividends, or as to the distribution
      of assets upon any voluntary or involuntary liquidation or dissolution of such
      Person, over shares of Capital Stock of any other class of such Person;
      provided, however, that such stock (x) neither matures, nor provides for
      mandatory redemption, or redemption at the holder's option, prior to October
      31,
      2012 and (y) is not convertible into or exchangeable for Indebtedness or
      Disqualified Stock.

     

    "Quarterly
      Status Report" means a status report prepared quarterly by the
      Company in form, scope and content acceptable to the Administrative Agent for
      such quarter then ended (a) describing the Company's position regarding its
      Derivative Contracts including, as of the last Business Day of such quarter,
      a
      summary of its hedging positions under its Derivative Contracts, including
      the
      type, term, price, effective date and notional principal amount or volumes
      (in
      total and as a percentage of the Company's total anticipated production), "mark
      to market" and margin calculations, the hedged price(s), interest rate(s) or
      exchange rate(s), as applicable, and any collateral therefor and credit support
      agreements relating thereto and the counterparty to each Derivative Contract,
      and (b) containing a table that demonstrates the Company's compliance with
      the
      requirements set forth in Section 8.10.

     

    

    
      
        
          
          

        

        
          21

          
            

          

        

         

      

    

    

    "Recovery
      Event" means any settlement of or payment in respect of any
      Property of the Company or any Guarantor arising from a casualty insurance
      claim
      or any condemnation proceeding in an amount in excess of
      $1,000,000.

     

    "Register"
      means a register for the recordation of the names and addresses of the Lenders
      and the Commitments thereof, and the principal amount of the Loans owing to
      such
      Lender from time to time.

     

    "Related
      Funds" has the meaning specified in Section 11.8(a).

     

    "Replacement
      Lender" has the meaning specified in Section 3.7.

     

    "Reportable
      Event" means any of the events set forth in Section 4043(b) of
      ERISA or the regulations thereunder, other than any such event for which the
      30-day notice requirement under ERISA has been waived in regulations issued
      by
      the PBGC.

     

    "Required
      Lenders" means, at any time, subject to Section 11.1, the Administrative Agent and
      the Lenders holding
      more than 50% of the sum of the Effective Amount at such time or, if there
      is no
      Effective Amount at such time, the Administrative Agent and the Lenders holding
      more than 50% of the aggregate Commitments at such time.

     

    "Requirement
      of Law" means, as to any Person, any law (statutory or common),
      treaty, rule or regulation or determination of an arbitrator or of a
      Governmental Authority, in each case applicable to or binding upon the Person
      or
      any of its Property or to which the Person or any of its Property is
      subject.

     

    "Reserve
      Report" means (a) the Initial Reserve Report, (b) the Output
      Reserve Report and (c) each subsequent report delivered pursuant to Section
7.2(c), each of which shall be a report, in form,
      scope and content acceptable to the Administrative Agent, covering Proved
      Reserves attributable to the Company's and the Guarantors' Oil and Gas
      Properties and setting forth with respect thereto, (i) the total quantity of
      Proved Reserves (separately classified as to producing, shut in, behind pipe,
      and undeveloped), (ii) the estimated future net revenues and cumulative
      estimated future net revenues, (iii) the present discounted value of future
      net
      revenues, and (iv) such other information and data with respect to the Proved
      Reserves as the Administrative Agent may reasonably request.

     

    "Responsible
      Officer" means, with respect to any Person, the chief executive
      officer, president, chief financial officer or treasurer of the
      Person.

     

    "Restatement
      Effective Date" means the date on which the Restatement Effective
      Time occurs.

     

    "Restatement
      Effective Time" means the time as of which all conditions
      precedent set forth in Section 5.3 are satisfied or
      waived by all Lenders.

     

    "Restricted
      Payments" has the meaning specified in Section 8.9.

     

    "S&P"
      means Standard & Poor's Rating Services.

     

    

    
      
        
          
          

        

        
          22

          
            

          

        

         

      

    

    

    "SEC"
      means the Securities and Exchange Commission, or any Governmental Authority
      succeeding to any of its principal functions.

     

    "Secured
      Parties" has the meaning ascribed thereto in the Security
      Agreement.

     

    "Security
      Agreement" means the Security Agreement in substantially the form
      of Exhibit "D" executed by the Company and each Guarantor pledging
      to the Administrative Agent for benefit of the Secured Parties all of the
      Collateral of the Company and each Guarantor, as the same may be amended,
      amended and restated, supplemented or otherwise modified from time to time
      pursuant to the terms hereof (including, in the case of any Subsidiary required
      to execute the Security Agreement pursuant to Section 7.12, by execution and delivery of a joinder thereto
      in the form of Annex 2 thereto).

     

    "Security
      Documents" means the Intercreditor Agreement, the Mortgages, the
      Security Agreement, and related financing statements as the same may be amended
      from time to time and any and all other instruments now or hereafter executed
      in
      connection with or as security for the payment of the Indebtedness.

     

    "Solvent"
      means, as to any Person at any time, that (a) the fair value of all of the
      Property of such Person is greater than the amount of such Person's liabilities
      (including disputed, contingent and unliquidated liabilities) as such value
      is
      established and liabilities evaluated for purposes of Section 101(32) of the
      Bankruptcy Code; (b) the present fair salable value of all of the Property
      of
      such Person is not less than the amount that will be required to pay the
      probable liability of such Person on its debts as they become absolute and
      matured; (c) such Person does not intend to, and does not believe that it will,
      incur debts or liabilities beyond such Person's ability to pay as such debts
      and
      liabilities mature; and (d) such Person is not engaged in business or a
      transaction, and is not about to engage in business or a transaction, for which
      such Person's Property would constitute unreasonably small capital.

     

    "SPC"
      has the meaning specified in Section 11.8(d).

     

    "Special
      Damages" has the meaning specified in Section 11.21.

     

    "Subsidiary"
      of a Person means any corporation, association, partnership, joint venture
      or
      other business entity of which more than 50% of the voting stock or other equity
      interests (in the case of Persons other than corporations), is owned or
      controlled directly or indirectly, at the relevant time, by the Person, or
      one
      or more of the Subsidiaries of the Person, or a combination
      thereof.  Unless the context otherwise clearly requires, references
      herein to a "Subsidiary" refer to a Subsidiary of the Company.

     

    "Surety
      Instruments" means all letters of credit (including standby),
      banker's acceptances, bank guaranties, shipside bonds, surety bonds, performance
      bonds (including plugging and abandonment bonds) and similar
      instruments.

     

    "Syndication
      Agent" has the meaning specified in the preamble
      hereto.

     

    "Taxes"
      means any and all present or future taxes, levies, imposts, deductions, charges
      or withholdings that arise from any payment made 

     

    

    
      
        
          
          

        

        
          23

          
            

          

        

         

      

    

    

    hereunder,
      and all liabilities with respect thereto, excluding, in the case of the
      Administrative Agent, any Lender or any other recipient of any payment made
      or
      to be made by or on account of any obligation of the Company hereunder, (a)
      such
      taxes (including income or franchise taxes) imposed on or measured by its net
      income, gross receipts, taxable margin (as determined under Chapter 171 of
      the
      Texas Tax Code) or capital by the United States of America, or by the
      jurisdiction (or any political subdivision thereof) under the laws of which
      it
      is organized or in which its principal office is located or in which it
      maintains a lending office or conducts business (other than solely by reason
      of
      the transactions evidenced hereby or the taking of any action contemplated
      by
      the Loan Documents) or is otherwise located, (b) any branch profits taxes
      imposed by the United States or any similar tax imposed by any other
      jurisdiction (or any political subdivision thereof) in which the Administrative
      Agent, any Lender or any other recipient of any payment made or to be made
      by or
      on account of any obligation of the Company hereunder or the Company is
      organized or in which its principal office is located or in which it maintains
      a
      lending office, conducts business (other than solely by reason of the
      transactions evidenced hereby or the taking of any action contemplated by the
      Loan Documents)or is otherwise located, and (c) any withholding tax that is
      attributable to a Lender's failure to comply with Section 10.10.

     

    "Termination
      Date" means the earlier of (a) the Maturity Date and (b) the date
      on which all Obligations (other than those to Qualified Derivative Contract
      Counterparties in respect of Qualified Derivative Contracts) have been satisfied
      and all Commitments have terminated, in each case in accordance with the
      provisions of this Agreement.

     

    "Three-Year
      Strip Price" shall mean, as of any date of determination, (a) for
      the 36-month period commencing with the month immediately following the month
      in
      which the date of determination occurs, the monthly futures contract prices
      for
      crude oil and natural gas for the 36 succeeding months as quoted on the
      applicable commodities exchange as contemplated in the definition of "PV-10
      Value" and (b) for periods after such 36-month period, the average of such
      quoted prices for the period from and including the 25th month in such 36-month
      period through the 36th month in such period.

     

    "Transaction
      Documents" means, collectively, the Loan Documents and the Output
      Acquisition Documents.

     

    "TTSI"
      means Texas Tar Sands Inc., a Texas corporation.

     

    "TXCOE"
      means TXCO Energy Corp., a Texas corporation.

     

    "UCC"
      means the Uniform Commercial Code as adopted and in effect in any applicable
      jurisdiction.

     

    "Unfunded
      Pension Liability" means the excess of a Plan's benefit
      liabilities under Section 4001(a)(16) of ERISA, over the current value of that
      Plan's assets, determined in accordance with the assumptions used for funding
      the Pension Plan pursuant to Section 412 of the Code for the applicable plan
      year.

     

    "United
      States" and "U.S." each means the United States of
      America.

     

    

    
      
        
          
          

        

        
          24

          
            

          

        

         

      

    

    

    "Utilization
      Percentage" means, at any time, the percentage obtained by
      dividing (a) the Effective Amount (as defined in the First Lien Credit
      Agreement) at such time by (b) the Borrowing Base (as defined in the First
      Lien
      Credit Agreement) at such time.

     

    1.2           Other
      Interpretive Provisions.  The
      meanings of defined terms are equally applicable to the singular and plural
      forms of the defined terms.  Unless otherwise specified or the context
      clearly requires otherwise, the words "hereof", "herein",
      "hereunder" and similar words refer to this Agreement as a whole and
      not to any particular provision of this Agreement; and subsection, Section,
      Schedule and Exhibit references are to the applicable subsection or Section
      of,
      or Schedule or Exhibit to, this Agreement.  The term
      "documents" includes any and all instruments, documents, agreements,
      certificates, indentures, notices and other writings, however
      evidenced.  The term "including" is not limiting and means
      "including without limitation."  The term "or" has,
      except where otherwise indicated, the inclusive meaning represented by the
      phrase "and/or".  In the computation of periods of time from
      a specified date to a later specified date, the word "from" means
      "from and including"; the words "to" and "until" each
      mean "to but excluding", and the word "through" means "to
      and including."  Unless otherwise expressly provided herein, (a)
      references to agreements (including this Agreement) and other contractual
      instruments shall be deemed to include all subsequent amendments and other
      modifications thereto, but only to the extent such amendments and other
      modifications are not prohibited by the terms of any Loan Document, and (b)
      references to any statute or regulation are to be construed as including all
      statutory and regulatory provisions consolidating, amending, replacing,
      supplementing or interpreting the statute or regulation.  The
      recitals, captions and headings of this Agreement are for convenience of
      reference only and shall not affect the interpretation of this
      Agreement.  This Agreement and other Loan Documents may use several
      different limitations, tests or measurements to regulate the same or similar
      matters.  All such limitations, tests and measurements are cumulative
      and shall each be performed in accordance with their terms.  This
      Agreement and the other Loan Documents are the result of negotiations among
      and
      have been reviewed by counsel to the Administrative Agent, the Company and
      the
      other parties, and are the products of all parties.  Accordingly, they
      shall not be construed against the Lenders or the Administrative Agent merely
      because of the Administrative Agent's or Lenders' involvement in their
      preparation.  The terms "Lenders",
      "Administrative Agent", "First Lien Credit
      Lenders" and "First Lien Credit Agent"
      include their respective permitted successors.

     

    1.3           Accounting
      Principles.

     

    (a)           Unless
      the context otherwise clearly requires, all accounting terms not expressly
      defined herein shall be construed, and all financial computations required
      under
      this Agreement shall be made, in accordance with GAAP, consistently
      applied.  References to "consolidated", when it precedes any
      accounting term, means such term as it would apply to the Company and its
      Subsidiaries on a consolidated basis, determined in accordance with
      GAAP.

     

    (b)           References
      herein to "fiscal year" refer to such fiscal period of the
      Company.

     

    

    
      
        
          
          

        

        
          25

          
            

          

        

         

      

    

     

    ARTICLE
      II

     

    THE
      CREDIT

     

    2.1           Amounts
      and Terms of the Loans.

     

    (a)           Amounts
      and Terms of the Original Loans.

     

    (i)           Subject
      to the terms and conditions set forth in the Existing Term Loan Agreement,
      each
      Lender made term loans (together with any conversions or continuations thereof,
      the "Original Loans") to the Company on the Effective
      Date in an aggregate amount of $80,000,000.  Principal amounts paid on
      account of the Original Loans may not be reborrowed.

     

    (ii)           The
      Commitment of each Lender with respect to the Original Loans was permanently
      reduced to zero on the Effective Date.  Such Commitment reductions
      were made for the account of the Lenders pro rata in accordance with their
      respective Pro Rata Shares.

     

    (b)           Amounts
      and Terms of the Additional Loans.

     

    (i)           Each
      Lender severally agrees, on the terms and conditions set forth herein, to make
      additional term loans to the Company on the Restatement Effective Date (together
      with any conversions or continuations thereof, "Additional
      Loans" and, together with the Original Loans,
      "Loans"), so long as, as of the time at which the
      requested Additional Loan is to be made and after giving effect thereto, (i)
      the
      aggregate amount of all Additional Loans by such Lender at such time does not
      exceed such Lender's Pro Rata Share of the aggregate amount of Additional Loans
      of all Lenders at such time, and (ii) the aggregate amount of such Lender's
      Additional Loans does not exceed such Lender's Commitment with respect to the
      Additional Loans.  Principal amounts paid on account of the Additional
      Loans may not be reborrowed.

     

    (ii)           Upon
      the making of the Additional Loans on the Restatement Effective Date, the
      Commitment of each Lender with respect to the Additional Loans shall be
      permanently reduced to zero. Such Commitment reductions shall be made for the
      account of the Lenders pro rata in accordance with their respective Pro Rata
      Shares.

     

    (iii)           Provided
      the applicable conditions in Section 5.3 are met,
      each Lender will make the amount of its Pro Rata Share of the Additional Loans
      available to the Administrative Agent for the account of the Company at the
      Agent's Payment Office by 12:00 p.m. (Chicago, Illinois time) on the Restatement
      Effective Date in funds immediately available to the Administrative
      Agent.  The proceeds of all such Additional Loans will then be made
      available to the Company by the Administrative Agent by wire transfer to the
      account(s) specified by the Company in the Notice of Borrowing with respect
      to
      the Additional Loans.

     

    

    
      
        
          
          

        

        
          26

          
            

          

        

         

      

    

    

    (c)           The
      Company agrees that upon the request to the Administrative Agent by any Lender,
      the Company will promptly execute and deliver to such Lender a promissory note
      of the Company evidencing the Loans of such Lender, substantially in the form
      of
Exhibit "F" (a "Note"), with appropriate
      insertions as to date and principal amount; provided, however, that delivery
      of
      Notes shall not be a condition precedent to the occurrence of the Restatement
      Effective Date or the making of the Additional Loans on the Restatement
      Effective Date.  The amount of principal owing on any Lender's Note,
      if any, at any given time shall be the aggregate amount of all Loans theretofore
      made by such Lender minus all payments of principal theretofore received by
      such
      Lender on such Note.  Interest on each Note shall accrue and be due
      and payable as provided herein and therein.

     

    2.2           Maturity
      Date.  The
      Loans of each Lender shall mature on the Maturity Date.

     

    2.3           Conversion
      and Continuation Elections.

     

    (a)           Prior
      to the Termination Date, the Company may, upon irrevocable written notice to
      the
      Administrative Agent in accordance with Section 2.3(b) (i) elect, as of any Business Day in the case
      of Base Rate Loans, or as of the last day of the applicable Interest Period
      in
      the case of LIBO Rate Loans, to convert any such Loans into Loans of any other
      Interest Rate Type; or (ii) elect as of the last day of the applicable Interest
      Period, to continue any Loans having Interest Periods expiring on such day;
      provided, however, that if at any time a LIBO Rate Loan is reduced, by payment,
      prepayment, or conversion of part thereof to less than $1,000,000, such LIBO
      Rate Loan shall automatically convert into a Base Rate Loan.

     

    (b)           The
      Company shall deliver a Notice of Conversion/Continuation to be received by
      the
      Administrative Agent not later than 11:00 a.m. (Chicago, Illinois time) (i)
      at
      least three Business Days in advance of the Conversion/Continuation Date, if
      the
      Loans are to be converted into or continued as LIBO Rate Loans; and (ii) on
      the
      Conversion/Continuation Date, if the Loans are to be converted into Base Rate
      Loans, specifying: (A) the proposed Conversion/Continuation Date; (B) the
      aggregate amount of Loans to be converted or continued; (C) the Interest Rate
      Type of Loans resulting from the proposed conversion or continuation; and (D)
      other than in the case of conversions into Base Rate Loans, the duration of
      the
      requested Interest Period.

     

    (c)           If,
      upon the expiration of any Interest Period applicable to LIBO Rate Loans, the
      Company has failed to select in a timely manner a new Interest Period to be
      applicable to LIBO Rate Loans, or if any Default or Event of Default then
      exists, the Company shall be deemed to have elected to convert such LIBO Rate
      Loans into Base Rate Loans effective as of the expiration date of such Interest
      Period.

     

    (d)           The
      Administrative Agent will promptly notify each Lender of its receipt of a Notice
      of Conversion/Continuation, or, if no timely notice is provided by the Company,
      the Administrative Agent will promptly notify each Lender of the details of
      any
      automatic 

     

    

    
      
        
          
          

        

        
          27

          
            

          

        

         

      

    

    

    conversion.  All
      conversions and continuations shall be made ratably according to the respective
      Lender's Pro Rata Share of outstanding principal amounts of the Loans with
      respect to which the notice was given.

     

    (e)           The
      number of tranches outstanding of LIBO Rate Loans, whether under a conversion
      or
      continuation, shall not exceed eight (8) at any one time.

     

    2.4           Optional
      Prepayments.

     

    (a)           Subject
      to Section 3.4, the Company may, at any time or
      from time to time, subject to the concurrent payment of the
      Premium:

     

    (i)           prepay
      Base Rate Loans upon irrevocable notice to the Administrative Agent not fewer
      than one (1) Business Day prior to such prepayment, ratably as to each Lender,
      in whole or in part, in aggregate minimum principal amounts of $100,000 or
      integral multiples thereof (unless the Effective Amount is less than $100,000,
      in which case such prepayments shall be equal to the aggregate unpaid principal
      amount of the Loans) plus all interest and expenses then outstanding on such
      Base Rate Loans, and

     

    (ii)           prepay
      LIBO Rate Loans upon irrevocable notice to the Administrative Agent not fewer
      than three (3) Business Days prior to such prepayment, ratably as to each
      Lender, in whole or in part, in aggregate minimum principal amounts of $500,000
      or integral multiples thereof (unless the Effective Amount is less than
      $500,000, in which case such prepayments shall be equal to the aggregate unpaid
      principal amount of the Loans), plus all interest and expenses then outstanding
      on such LIBO Rate Loans.

     

    Notwithstanding
      the forgoing, no payment shall be made pursuant to this Section 2.4 if (x) after giving effect to such payment,
      such
      payment would cause the Utilization Percentage to exceed 75% or (y) an Event
      of
      Default (as defined in the First Lien Credit Agreement) has occurred and is
      continuing under the First Lien Credit Agreement.

     

    Such
      notice of prepayment shall specify the date and amount of such prepayment and
      the Interest Rate Type(s) of Loans to be prepaid.  Notwithstanding
      anything to the contrary set forth in this Section 2.4, any notice of prepayment delivered by the Company
      may state that such notice is conditioned upon the effectiveness of other
      financing arrangements, in which case such notice may be revoked by the Company
      if such condition is not satisfied, but subject to the Company's reimbursement
      obligations pursuant to Section 3.4 with respect to
      any funding losses incurred by any Lender as a result of such
      revocation.

     

    The
      Administrative Agent will promptly notify each Lender of its receipt of any
      such
      notice, and of such Lender's Pro Rata Share of such prepayment.  The
      payment amount specified in such notice shall be due and payable on the date
      specified therein, together with accrued interest to each such date on the
      amount prepaid, the applicable Premium, and any amounts required pursuant to
      Section 3.4.

     

    (b)           For
      purposes hereof, the "Premium" shall be a cash amount
      equal to the percentages of principal amount of the Loans being prepaid set
      forth below:

     

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

    
    

    

    
      	
              If
                prepaid after the Restatement Effective Date, but prior to the first
                anniversary of the Restatement Effective Date

            	
              1.0%

            
	
               

            	 
	
              If
                prepaid on or after the first anniversary of the Restatement Effective
                Date

            	
              0.0%

            

    

    

    2.5           [Intentionally
      omitted.].

     

    2.6           Repayment.

     

    (a)           The
      Company shall repay to the Administrative Agent for the benefit of the Lenders
      the outstanding principal balance of the Loans (and the outstanding principal
      of
      the Loans shall be due and payable) on the Maturity Date or on such date on
      which the Loans become due and payable pursuant to Section 2.4 or Article
      IX.

     

    (b)           Each
      Lender shall maintain in accordance with its usual practice an account or
      accounts evidencing Indebtedness of the Company to such Lender resulting from
      each Loan of such Lender from time to time, including the amounts of principal
      and interest payable and paid to such Lender from time to time under this
      Agreement.

     

    (c)           The
      Administrative Agent, on behalf of the Company, shall maintain the Register,
      and
      a subaccount therein for each Lender, in which shall be recorded (i) the amount
      of each Loan made hereunder, (ii) the amount of any principal or interest due
      and payable or to become due and payable from the Company to each Lender
      hereunder and (iii) both the amount of any sum received by the Administrative
      Agent hereunder from the Company and each Lender's share thereof.  The
      Register shall be available for inspection by each Loan Party, the
      Administrative Agent and any Lender at any reasonable time and from time to
      time
      upon reasonable prior notice.

     

    (d)           The
      entries made in the Register and the accounts of each Lender maintained pursuant
      to Section 2.6(b) shall, to the extent permitted by
      applicable law, be prima facie evidence of the existence and amounts of the
      obligations of the Company therein recorded; provided, however, that the failure
      of any Lender or the Administrative Agent to maintain the Register or any such
      account, or any error therein, shall not in any manner affect the obligation
      of
      the Company to repay (with applicable interest) the Loans made to the Company
      by
      such Lender in accordance with the terms of this Agreement or the Company's
      entitlement to credit for any payment of principal or interest on the
      Loans.

     

    2.7           Interest.

     

    (a)           (i)
      Each Original Loan shall bear interest on the principal amount thereof from
      the
      Effective Date or date of conversion or continuation pursuant to Section 2.3 of this Agreement, as the case may be, and (ii)
      each Additional Loan shall bear interest on the principal amount thereof from
      the Restatement Effective Date or date of conversion or continuation pursuant
      to
      Section 2.3 of this Agreement, as the case may be,
      at a rate per annum equal to the lesser of (x) the LIBO Rate or the Adjusted
      Base Rate, as the case may be, plus the Applicable Margin and (y) the Highest
      Lawful Rate.

     

    

    
      
        
          
          

        

        
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    (b)           Interest
      on each Loan shall be paid in arrears on each Interest Payment
      Date.  Interest shall also be paid on the date of any prepayment of
      Loans under Section 2.4 for the portion of the
      Loans so prepaid and upon payment (including prepayment) in full thereof and,
      during the existence of any Event of Default, interest shall be paid on demand
      of the Administrative Agent.

     

    (c)           Notwithstanding
      paragraph (a) of this Section 2.7, while any Event
      of Default under Section 9.1(a) or (b) exists or after
      acceleration, the Company shall
      pay interest (after as well as before entry of judgment thereon to the extent
      permitted by law) on the principal amount of all outstanding Loans, at a rate
      per annum equal to the lesser of (i) the Highest Lawful Rate and (ii) the rate
      otherwise applicable plus two percent (2%) ("Default
      Rate").

     

    2.8           Fees.
      The
      Company has paid or will pay (as applicable) fees to the parties and in the
      amounts specified in the Fee Letter Agreement and the Commitment
      Letter.

     

    2.9           Computation
      of Fees and Interest.

     

    (a)           All
      computations of interest for Base Rate Loans shall be made on the basis of
      a
      year of 365 or 366 days, as the case may be, and actual days
      elapsed.  All other computations of fees and interest shall be made on
      the basis of a 360-day year and actual days elapsed (which results in more
      interest being paid than if computed on the basis of a 365 day
      year).  Interest and fees shall accrue during each period during which
      interest or such fees are computed from the first day thereof to the last day
      thereof.

     

    (b)           Each
      determination of an interest rate by the Administrative Agent shall be
      conclusive and binding on the Company and the Lenders in the absence of manifest
      error.

     

    2.10           Payments
      by the Company; Loan Pro Rata.

     

    (a)           All
      payments to be made by the Company shall be made without set off, recoupment
      or
      counterclaim.  Except as otherwise expressly provided herein, all
      payments by the Company shall be made to the Administrative Agent for the
      account of the Lenders at the Agent's Payment Office, and shall be made in
      dollars and in immediately available funds, no later than 12:00 p.m. (Chicago,
      Illinois time) on the date specified herein.  Except to the extent
      otherwise expressly provided herein, (i) each payment by the Company of fees
      shall be made for the account of the Lenders pro rata in accordance with their
      respective Pro Rata Shares, (ii) each payment of principal of Loans shall be
      made for the account of the Lenders pro rata in accordance with their respective
      outstanding principal amount of such Loans, and (iii) each payment of interest
      on Loans shall be made for the account of the Lenders pro rata in accordance
      with their respective shares of the aggregate amount of interest due and payable
      to the Lenders.  The Administrative Agent will promptly distribute to
      each Lender its applicable share of such payment in like funds as
      received.  Any payment received by the Administrative Agent later than
      12:00 p.m. (Chicago, Illinois time) shall be deemed to have been received on
      the
      following Business Day and any applicable interest or fee shall continue to
      accrue.

     

    

    
      
        
          
          

        

        
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    (b)           Subject
      to the provisions set forth in the definition of "Interest
      Period" herein, whenever any payment is due on a day other than a
      Business Day, such payment shall be made on the following Business Day, and
      such
      extension of time shall in such case be included in the computation of interest
      or fees, as the case may be.

     

    (c)           Unless
      the Administrative Agent receives notice from the Company prior to the date
      on
      which any payment is due to the Lenders that the Company will not make such
      payment in full as and when required, the Administrative Agent may assume that
      the Company has made such payment in full to the Administrative Agent on such
      date in immediately available funds and the Administrative Agent may (but shall
      not be so required), in reliance upon such assumption, distribute to each Lender
      on such due date an amount equal to the amount then due such
      Lender.  If and to the extent the Company has not made such payment in
      full to the Administrative Agent, each Lender shall repay to the Administrative
      Agent on demand such amount distributed to such Lender, together with interest
      thereon at the Federal Funds Rate for each day from the date such amount is
      distributed to such Lender until the date repaid.

     

    (d)           Except
      to the extent otherwise expressly provided herein, the Loans hereunder shall
      be
      from the Lenders pro rata in accordance with their respective Pro Rata
      Shares.

     

    (e)           Notwithstanding
      anything to the contrary contained herein, after the occurrence and during
      the
      continuance of any Event of Default, each payment in respect of principal or
      interest on the Loans, each payment in respect of fees payable hereunder and
      any
      proceeds of Collateral, and Net Cash Proceeds received by the Administrative
      Agent and not required to be turned over to the First Lien Credit Agent pursuant
      to the Intercreditor Agreement shall be applied in the following
      order:

     

    (i)           first,
      to the payment or reimbursement of the Administrative Agent for all costs,
      expenses, disbursements and losses incurred by the Administrative Agent and
      which the Company is required to pay or reimburse pursuant to the Loan
      Documents;

     

    (ii)           second,
      to the payment or reimbursement of the Lenders for all costs, expenses,
      disbursements and losses incurred by such Persons and which any Loan Party
      is
      required to pay or reimburse pursuant to the Loan Documents;

     

    (iii)           third,
      to the payment or prepayment to the Lenders of all Obligations; and

     

    (iv)           fourth,
      to whomsoever shall be legally entitled thereto.

     

    If
      any
      Lender owes payments to the Administrative Agent hereunder, any amounts
      otherwise distributable under this Section 2.10(e)
      to such Lender shall be deemed to belong to the Administrative Agent to the
      extent of such unpaid payments, and the Administrative Agent shall apply such
      amounts to make such unpaid payments rather than distribute such amounts to
      such
      Lender.  All distributions of amounts described in paragraphs
second and third above shall be made by the Administrative
      Agent to each Lender based on its Pro Rata Share.

     

    

    
      
        
          
          

        

        
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    2.11           Payments
      by the Lenders to the Administrative Agent.

     

    (a)           Unless
      the Administrative Agent receives notice from a Lender on or prior to 12:00
      pm
      (Chicago, Illinois time) on the Restatement Effective Date that such Lender
      will
      not make available as and when required hereunder to the Administrative Agent
      for the account of the Company the amount of that Lender's Pro Rata Share of
      the
      Additional Loans, the Administrative Agent may assume that each Lender has
      made
      such amount available to the Administrative Agent in immediately available
      funds
      on the Restatement Effective Date and the Administrative Agent may (but shall
      not be so required), in reliance upon such assumption, make available to the
      Company on such date a corresponding amount.  If and to the extent any
      Lender shall not have made its full amount available to the Administrative
      Agent
      in immediately available funds and the Administrative Agent in such
      circumstances has made available to the Company such amount, that Lender shall
      on the Business Day following the Restatement Effective Date make such amount
      available to the Administrative Agent, together with interest at the Federal
      Funds Rate for each day during such period.  A notice of the
      Administrative Agent submitted to any Lender with respect to amounts owing
      under
      this Section 2.11(a) shall be conclusive, absent
      manifest error.  If such amount is so made available, such payment to
      the Administrative Agent shall constitute such Lender's Additional Loan on
      the
      Restatement Effective Date for all purposes of this Agreement.  If
      such amount is not made available to the Administrative Agent on the Business
      Day following the Restatement Effective Date, the Administrative Agent will
      notify the Company of such failure to fund and, upon demand by the
      Administrative Agent, the Company shall pay such amount to the Administrative
      Agent for the Administrative Agent's account, together with interest thereon
      for
      each day elapsed since the Restatement Effective Date, at a rate per annum
      equal
      to the interest rate applicable at the time to the Loans.

     

    (b)           The
      failure of any Lender to make any Additional Loan on the Restatement Effective
      Date shall not relieve any other Lender of any obligation hereunder to make
      an
      Additional Loan on the Restatement Effective Date, but no Lender shall be
      responsible for the failure of any other Lender to make the Additional Loan
      to
      be made by such other Lender on the Restatement Effective Date.

     

    2.12           Sharing
      of Payments, Etc.  If
      any Lender shall obtain on account of the Obligations held by it any payment
      (whether voluntary, involuntary, through the exercise of any right of set off,
      or otherwise) or receive any collateral in respect thereof in excess of the
      amount such Lender was entitled to receive pursuant to the terms hereof, such
      Lender shall immediately (a) notify the Administrative Agent of such fact,
      and
      (b) purchase from the other Lenders such participations in the Loans made by
      them as shall be necessary to cause such purchasing Lender to share the excess
      payment according to the terms hereof; provided, however, that if all or any
      portion of such excess payment is thereafter recovered from the purchasing
      Lender, such purchase shall to that extent be rescinded and each other Lender
      shall repay to the purchasing Lender the purchase price paid therefor, together
      with an amount equal to such paying Lender's ratable share (according to the
      proportion of (i) the amount of such paying Lender's required repayment to
      (ii)
      the total amount so recovered from the purchasing Lender) of any interest or
      other amount paid or payable by the purchasing Lender in respect of the total
      amount so recovered.  The Company agrees that any Lender so purchasing
      a participation from another 

     

    

    
      
        
          
          

        

        
          32

          
            

          

        

         

      

    

    

    Lender
      may, to the fullest extent permitted by law, exercise all of its rights of
      payment (including the right of set off) with respect to such participation
      as
      fully as if such Lender were the direct creditor of the Company in the amount
      of
      such participation.  The Administrative Agent will keep records (which
      shall be conclusive and binding in the absence of manifest error) of
      participations purchased under this Section 2.12
      and will in each case notify the Lenders following any such purchases or
      repayments.

     

    ARTICLE
      III

     

    TAXES,
      YIELD PROTECTION AND ILLEGALITY

     

    3.1           Taxes.

     

    (a)           Except
      as otherwise provided in Section 3.1(c) and Section
10.10, any and all payments
      by the Company to each
      Lender or the Administrative Agent under this Agreement and any other Loan
      Document shall be made free and clear of, and without deduction or withholding
      for any Taxes.  In addition, the Company shall pay all Other Taxes to
      the relevant Governmental Authority in accordance with applicable
      law.

     

    (b)           Subject
      to Section 3.1(f), the Company agrees to indemnify
      and hold harmless each Lender and the Administrative Agent for the full amount
      of Taxes or Other Taxes (including any Taxes or Other Taxes imposed by any
      jurisdiction on amounts payable under this Section 3.1) paid by the Lender or the Administrative Agent
      and any penalties, interest, additions to Tax and reasonable expenses arising
      therefrom or with respect thereto, whether or not such Taxes or Other Taxes
      were
      correctly or legally asserted.  Payment under this indemnification
      shall be made within 30 days after the date the affected Lender or the
      Administrative Agent makes written demand therefor with reasonable detail as
      to
      the particular imposition; provided, however, that neither the Administrative
      Agent nor any Lender shall be entitled to receive any payment with respect
      to
      Taxes or Other Taxes that are incurred or accrued more than 180 days prior
      to
      the date the Administrative Agent or Lender (as the case may be) gives notice
      and demand thereof to the Company.

     

    (c)           If
      the Company shall be required by law to deduct or withhold any Taxes or Other
      Taxes from or in respect of any amount payable hereunder to any Lender or the
      Administrative Agent, then: (i) the sum payable shall be increased as necessary
      so that after making all required deductions and withholdings (including
      deductions and withholdings applicable to additional sums payable under this
      Section 3.1), such Lender or the Administrative
      Agent, as the case may be, receives an amount equal to the sum it would have
      received had no such deductions or withholdings been made; (ii) the Company
      shall make such deductions and withholdings; and (iii) the Company shall pay
      the
      full amount deducted or withheld to the relevant taxing authority or other
      authority in accordance with applicable law.

     

    (d)           As
      soon as practicable after the date of any payment by the Company of Taxes or
      Other Taxes under Section 3.1(c) above, the Company
      shall furnish the Administrative Agent the original or a certified copy of
      any
      receipt issued by such taxing

     

    

    
      
        
          
          

        

        
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    authority
      or other authority evidencing payment thereof, a copy of any return reporting
      such payment or other evidence of such payment as the Administrative Agent
      may
      reasonably request.

     

    (e)           Each
      Lender shall use its reasonable efforts (consistent with legal and regulatory
      restrictions) to select a jurisdiction for its Lending Office or change the
      jurisdiction of its Lending Office so as to avoid the imposition of any Taxes
      or
      Other Taxes, or to eliminate or reduce any additional payment under this Section
      3.1 or to avoid the obligation to deduct or
      withhold for taxes under Section 10.10 by the
      Company if such selection or change in the judgment of such Lender is not
      materially disadvantageous to such Lender.

     

    (f)           No
      Lender that is required to comply with Section 10.10 shall be entitled to any indemnification under
      this Section 3.1 if the obligation with respect to
      which indemnification is sought would not have arisen but for a failure of
      the
      affected Lender to comply with such Section 10.10.

     

    (g)           If
      the Administrative Agent or a Lender determines that it has received a refund
      of
      any Taxes or Other Taxes as to which it has been indemnified by the Company
      or
      with respect to which the Company has paid additional amounts pursuant to this
      Section 3.1, it shall pay over such refund to the
      Company (but only to the extent of indemnity payments made, or additional
      amounts paid, by the Company under this Section 3.1
      with respect to the Taxes or Other Taxes giving rise to such refund), without
      interest (other than any interest paid by the relevant Governmental Authority
      with respect to such refund); provided, however, that the Company, upon the
      reasonable request of the Administrative Agent or such Lender, agrees to repay
      the amount paid over to the Company (plus any penalties, interest or other
      charges imposed by the relevant Governmental Authority) to the Administrative
      Agent or such Lender in the event the Administrative Agent or such Lender is
      required to repay such refund to such Governmental Authority.

     

    3.2           Illegality.

     

    (a)           If
      any Lender determines that the introduction of any Requirement of Law, or any
      change in any Requirement of Law, or in the interpretation or administration
      of
      any Requirement of Law, has made it unlawful, or that any central bank or other
      Governmental Authority has asserted that it is unlawful, for any Lender or
      its
      applicable Lending Office to make LIBO Rate Loans, then, on notice thereof
      by
      the Lender to the Company through the Administrative Agent, any obligation
      of
      that Lender to make LIBO Rate Loans shall be suspended until such Lender
      notifies the Administrative Agent and the Company that the circumstances giving
      rise to such determination no longer exist.

     

    (b)           If
      a Lender determines that it is unlawful to maintain any LIBO Rate Loan, the
      Company shall, upon its receipt of notice of such fact and demand from such
      Lender (with a copy to the Administrative Agent), prepay in full such LIBO
      Rate
      Loans of that Lender then outstanding, together with interest accrued thereon
      and amounts required under Section 3.4, either on
      the last day of the Interest Period 

     

    

    
      
        
          
          

        

        
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    thereof,
      if the Lender may lawfully continue to maintain such LIBO Rate Loans to such
      day, or immediately, if the Lender may not lawfully continue to maintain such
      LIBO Rate Loan.  If the Company is required to so prepay any LIBO Rate
      Loan, then concurrently with such prepayment, the Company shall borrow from
      the
      affected Lender, in the amount of such repayment, a Base Rate Loan.

     

    (c)           If
      the obligation of any Lender to make or maintain LIBO Rate Loans has been so
      terminated or suspended, all Loans which would otherwise be made by the Lender
      as LIBO Rate Loans shall be instead Base Rate Loans.

     

    (d)           Before
      giving any notice to the Administrative Agent under this Section 3.2, the affected Lender shall designate a different
      Lending Office with respect to its LIBO Rate Loans if such designation will
      avoid the need for giving such notice or making such demand and will not, in
      the
      judgment of such Lender, be illegal or otherwise disadvantageous to such
      Lender.

     

    3.3           Increased
      Costs and Reduction of Return.

     

    (a)           If
      any Lender determines that, due to either (i) the introduction of or any change
      (other than any change by way of imposition of or increase in reserve
      requirements included in the calculation of the LIBO Rate) in or in the
      interpretation of any law or regulation or (ii) the compliance by that Lender
      with any guideline or request from any central bank or other Governmental
      Authority (whether or not having the force of law), there shall be any increase
      in the cost to such Lender of agreeing to make or making, funding or maintaining
      any LIBO Rate Loans, then the Company shall be liable for, and shall from time
      to time, upon demand (with a copy of such demand to be sent to the
      Administrative Agent), pay to the Administrative Agent for the account of such
      Lender, additional amounts as are sufficient to compensate such Lender for
      such
      increased costs.

     

    (b)           If
      any Lender shall have determined that (i) the introduction of any Capital
      Adequacy Regulation, (ii) any change in any Capital Adequacy Regulation, (iii)
      any change in the interpretation or administration of any Capital Adequacy
      Regulation by any central bank or other Governmental Authority charged with
      the
      interpretation or administration thereof, or (iv) compliance by such Lender
      (or
      its Lending Office) or any Affiliate controlling such Lender with any Capital
      Adequacy Regulation, affects or would affect the amount of capital required
      or
      expected to be maintained by such Lender or any Affiliate controlling such
      Lender and (taking into consideration such Lender's or such Affiliate's policies
      with respect to capital adequacy and such Lender's desired return on capital)
      further determines that the amount of such capital is increased as a consequence
      of its Commitment, Loans, other Credit Extensions, or Obligations under this
      Agreement, then, upon demand of such Lender to the Company through the
      Administrative Agent, the Company shall pay to such Lender, from time to time
      as
      specified by such Lender, additional amounts sufficient to compensate such
      Lender for such increase.

     

    3.4           Funding
      Losses.  The
      Company shall reimburse each Lender and hold each Lender harmless from any
      loss
      or expense which such 

     

    

    
      
        
          
          

        

        
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    Lender
      may sustain or incur as a consequence of (a) the failure of the Company to
      make
      on a timely basis any payment of principal of any LIBO Rate Loan; (b) the
      failure of the Company to continue a LIBO Rate Loan or to convert a Base Rate
      Loan to a LIBO Rate Loan after the Company has given (or is deemed to have
      given) a Notice of Conversion/Continuation (including by reason of the failure
      to satisfy any condition precedent thereto); (c) the failure of the Company
      to
      make any prepayment in accordance with any notice delivered under Section 2.4 (whether pursuant to a permitted revocation
      of
      notice of prepayment or otherwise); (d) the prepayment (including pursuant
      to
      Section 2.4) or other payment (including after
      acceleration thereof) of a LIBO Rate Loan on a day that is not the last day
      of
      the relevant Interest Period; or (e) the automatic conversion under Section
2.3 of any LIBO Rate Loan to a Base Rate Loan on
      a day
      that is not the last day of the relevant Interest Period; including any such
      loss or expense arising from the liquidation or reemployment of funds obtained
      by it to maintain its LIBO Rate Loans or from fees payable to terminate the
      deposits from which such funds were obtained.  For purposes of
      calculating amounts payable by the Company to the Lenders under this Section
3.4 and under Section 3.3(a), each LIBO Rate
      Loan made by a Lender (and each
      related reserve, special deposit or similar requirement) shall be conclusively
      deemed to have been funded at the LIBOR used in determining the LIBO Rate for
      such LIBO Rate Loan by a matching deposit or other borrowing in the interbank
      eurodollar market for a comparable amount and for a comparable period, whether
      or not such LIBO Rate Loan is in fact so funded.

     

    3.5           Inability
      to Determine Rates.  If
      the Administrative Agent determines that for any reason adequate and reasonable
      means do not exist for determining the LIBO Rate for any requested Interest
      Period with respect to a proposed LIBO Rate Loan, or that the LIBO Rate
      applicable pursuant to Section 2.7(b) for any
      requested Interest Period with respect to a proposed LIBO Rate Loan does not
      adequately and fairly reflect the cost to the Lenders of funding such Loan,
      the
      Administrative Agent will promptly so notify the Company and each
      Lender.  Thereafter, the obligation of the Lenders to make or maintain
      LIBO Rate Loans hereunder shall be suspended until the Administrative Agent
      upon
      the instruction of the Lenders revokes such notice in writing.  Upon
      receipt of such notice, the Company may revoke any Notice of
      Conversion/Continuation then submitted by it.  If the Company does not
      revoke such notice, the Lenders shall make, convert or continue the Loans,
      as
      proposed by the Company, in the amount specified in the applicable notice
      submitted by the Company, but such Loans shall be made, converted or continued
      as Base Rate Loans instead of LIBO Rate Loans.

     

    3.6           Certificates
      of Lenders.  Any
      Lender claiming reimbursement or compensation under this Article III shall deliver to the Company (with a copy
      to the Administrative Agent) a certificate setting forth in reasonable detail
      the amount payable to such Lender hereunder and such certificate shall be
      conclusive and binding on the Company in the absence of manifest error;
      provided, however, that such Lender shall only be entitled to collect amounts
      incurred within 180 days prior to such notice.

     

    3.7           Substitution
      of Lenders.  Upon
      (i) the receipt by the Company from any Lender of a claim for compensation
      under
      this Article III, (ii) the refusal of any Lender to
      execute any amendment, waiver or consent requiring the consent of all Lenders
      or
      all affected Lenders as to which Required Lenders have otherwise agreed or
      (iii)
      the occurrence and during the continuation of default by a Lender with respect
      to funding its 

     

    

    
      
        
          
          

        

        
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    Commitment
      (such Lender, an "Affected Lender"), the Company may
      (a) obtain a replacement bank or financial institution reasonably satisfactory
      to the Administrative Agent to acquire and assume all or a ratable part of
      all
      of such Affected Lender's Loans (a "Replacement
      Lender"), or (b) request one more of the other Lenders to acquire
      and assume all or part of such Affected Lender's Loans, but none of the Lenders
      shall have any obligation to do so; provided, however, that (x) in the case
      of
      clauses (a) and (b), the Company or such assignee shall have paid to the
      Affected Lender in immediately available funds an amount equal to the sum of
      the
      principal of and interest accrued to the date of such payment on the outstanding
      Loans of such Affected Lender plus all fees and other amounts accrued for the
      account of such Affected Lender with respect thereto (including any amounts
      under Section 3.4) and (y) in the case of clause
      (a), the Company shall have received the prior written consent of the
      Administrative Agent, which consent shall not unreasonably be withheld or
      delayed.

     

    3.8           Survival.  The
      agreements and obligations of the Company in this Article III shall survive the payment of all other
      Obligations.

     

    ARTICLE
      IV

     

    SECURITY

     

    4.1           The
      Security.  The
      Obligations will be and continue to be secured by the Security
      Documents.

     

    4.2           Agreement
      to Deliver Security Documents.  The
      Company shall, and shall cause the Guarantors to, deliver, to further secure
      the
      Obligations whenever requested by the Administrative Agent in its sole and
      absolute discretion, deeds of trust, mortgages, chattel mortgages, security
      agreements, pledge agreements, financing statements and other Security Documents
      in form and substance satisfactory to the Administrative Agent for the purpose
      of granting, confirming, and perfecting second priority Liens or security
      interests in the Collateral.  The Company shall deliver and shall
      cause the Guarantors to deliver whenever reasonably requested by the
      Administrative Agent, title opinions or other evidence of title reasonably
      satisfactory to the Administrative Agent with respect to the Mortgaged
      Properties designated by the Administrative Agent, based upon abstract or record
      examinations reasonably acceptable to the Administrative Agent and (a)
      evidencing that the Company or a Guarantor, as applicable, has good and
      indefeasible title to the Mortgaged Properties, free and clear of all Liens
      except Permitted Liens, (b) confirming that such Mortgaged Properties are
      subject to Security Documents securing the Obligations that constitute and
      create legal, valid and duly perfected second priority deed of trust or mortgage
      Liens in such Mortgaged Properties and interests, and assignments of and
      security interests in the Oil and Gas attributable to such Mortgaged Properties
      comprised of Oil and Gas Properties and interests and the proceeds thereof,
      in
      each case subject only to Permitted Liens, and (c) covering such other matters
      as the Administrative Agent may reasonably request.

     

    4.3           Perfection
      and Protection of Security Interests and Liens.  The
      Company shall, and shall cause the Guarantors to, from time to time deliver
      to
      the Administrative Agent any financing statements, amendment, assignment and
      continuation statements, extension agreements and other documents, properly
      completed and executed (and acknowledged when required) by the Company or a
      Guarantor, as applicable, in form and substance 

     

    

    
      
        
          
          

        

        
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    reasonably
      satisfactory to the Administrative Agent, which the Administrative Agent
      reasonably requests for the purpose of perfecting, confirming, or protecting
      any
      Liens or other rights in Collateral securing any Obligations.

     

    4.4           Offset.  To
      secure the repayment of the Obligations, and subject to Section 2.2 of the Security Agreement, the Company hereby
      grants the Administrative Agent and each Lender a security interest, a Lien,
      and
      a right of offset, each of which shall be in addition to all other interests,
      Liens, and rights of the Administrative Agent and the Lenders at common law,
      under the Loan Documents, or otherwise, and each of which shall be upon and
      against (a) any and all moneys, securities or other Property (and the proceeds
      therefrom) of the Company now or hereafter held or received by or in transit
      to
      the Administrative Agent or any Lender from or for the account of the Company,
      whether for safekeeping, custody, pledge, transmission, collection or otherwise,
      (b) any and all deposits (general or special, time or demand, provisional or
      final) of the Company with the Administrative Agent or any Lender, and (c)
      any
      other credits and claims of the Company at any time existing against the
      Administrative Agent or any Lender, including claims under certificates of
      deposit.  Each Lender agrees to notify the Company and the
      Administrative Agent promptly after any such offset and application made by
      such
      Lender.  During the existence of any Event of Default, the
      Administrative Agent or any Lender is hereby authorized to foreclose upon,
      offset, appropriate, and apply, at any time and from time to time, without
      notice to the Company, any and all items hereinabove referred to against the
      Obligations then due and payable.

     

    4.5           Guaranty.

     

    (a)           Each
      Guarantor has executed and delivered to the Administrative Agent, and each
      Subsidiary of the Company created, acquired or coming into existence after
      the
      Restatement Effective Date that is required under Section 7.12 to become a Guarantor shall execute and deliver
      to the Administrative Agent, a Guaranty setting forth therein an absolute and
      unconditional guaranty of the timely repayment of, and the due and punctual
      performance of the Obligations of the Company hereunder.  The Company
      will cause each such Subsidiary to deliver to the Administrative Agent,
      simultaneously with its delivery of such a Guaranty, written evidence reasonably
      satisfactory to the Administrative Agent and its counsel that such Subsidiary
      has taken all corporate, limited liability company or partnership action
      necessary to duly approve and authorize its execution, delivery and performance
      of such Guaranty and any Security Documents and other documents which it is
      required to execute.

     

    (b)           Guaranty
      Representations.  To induce the Lenders and the Administrative
      Agent to enter into this Agreement, the Company and each Guarantor represents
      and warrants to each such Person, (i) in the case of the Original Guarantors,
      as
      of and after giving effect to the making of the Original Loans at the Effective
      Time, and as of and after giving effect to the making of the Additional Loans
      at
      the Restatement Effective Time, and (ii) in the case of OPEX after giving effect
      to the Output Acquisition and the making of the Original Loans at the Output
      Closing Time, as of the Output Closing Time, and as of and after giving effect
      to the making of the Additional Loans at the Restatement Effective
      Time:

     

    

    
      
        
          
          

        

        
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    (i)           Benefit
      to Guarantors.  The board of directors, manager or general
      partner, where applicable, of each Guarantor has determined that such
      Guarantor's execution, delivery and performance of this Agreement may reasonably
      be expected to directly or indirectly benefit such Guarantor and is in the
      best
      interests of such Guarantor.

     

    (ii)           Reasonable
      Consideration for Guaranties.  The direct or indirect value of the
      consideration received and to be received by such Guarantor in connection
      herewith is reasonably worth at least as much as the liability and obligations
      of each Guarantor hereunder and its Guaranty, and the incurrence of such
      liability and obligations in return for such consideration may reasonably be
      expected to benefit such Guarantor, directly or indirectly.

     

    (iii)           No
      Insolvencies.  Neither the Company nor any Guarantor is
      "insolvent" (that is, the sum of such Person's absolute and contingent
      liabilities, including the Obligations, does not exceed the fair value of such
      Person's assets, including any rights of contribution, reimbursement or
      indemnity).  Each of the Company and each Guarantor has capital which
      is not unreasonably small  for the businesses in which such Person is
      engaged and intends to be engaged.  None of  the Company nor
      any Guarantor has incurred (whether hereby or otherwise), nor does the Company
      or Guarantor intend to incur or believe that it will incur, liabilities which
      will be beyond its ability to pay as such liabilities mature.

     

    4.6           Maximum
      Liability.  If
      and to the extent required in order for the obligations of any Guarantor to
      be
      enforceable under applicable federal, state and other laws relating to the
      insolvency of debtors, the maximum liability of such Guarantor hereunder shall
      be limited to the greatest amount which can lawfully be guaranteed by such
      Guarantor under such laws, after giving effect to any rights of contribution,
      reimbursement and subrogation arising under the Guaranty.

     

    4.7           Production
      Proceeds.  Notwithstanding
      that, by the terms of the various Security Documents, the Company and the
      Guarantors are and will be assigning to the Administrative Agent all of the
      Net
      Proceeds of Production accruing to the Mortgaged Properties covered thereby,
      so
      long as no Event of Default has occurred and is continuing, the Administrative
      Agent, on behalf of the Lenders, grants each of the Company and the Guarantors
      a
      revocable license to continue to receive from the purchasers of production
      all
      such Net Proceeds of Production, subject, however, to the Liens created under
      the Security Documents, which Liens are hereby affirmed and
      ratified.  During the continuance of an Event of Default described
      under Sections 9.1(g) or (h), this license
      shall be automatically revoked, and
      during the continuance of any other Event of Default, this license shall be
      revocable in the sole discretion of the Administrative Agent, by notice to
      the
      Company, and the Administrative Agent may exercise all rights and remedies
      granted under the Security Documents, including the right to obtain possession
      of all Net Proceeds of Production then held by the Company and the Guarantors
      or
      to receive directly from the purchasers of production all other Net Proceeds
      of
      Production.  In no case shall any failure, whether purposeful or
      inadvertent, by the Administrative Agent to collect directly any such Net
      Proceeds of Production constitute in any way a waiver, remission or release
      of
      any of its rights under the Security Documents, nor shall any release of any
      Net
      Proceeds of Production by the Administrative 

     

    

    
      
        
          
          

        

        
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    Agent
      to
      the Company and the Guarantors constitute a waiver, remission, or release of
      any
      other Net Proceeds of Production or of any rights of the Administrative Agent
      to
      collect other Net Proceeds of Production thereafter.

     

    ARTICLE
      V

     

    CONDITIONS
      PRECEDENT

     

    5.1           Conditions
      of the Effective Date.  The
      effectiveness of the Existing Term Loan Agreement was subject to the condition
      that on or before April 2, 2007 the Administrative Agent received all of the
      following, in form and substance satisfactory to the Administrative Agent (or,
      in the case of clauses (g), (i) or (r), the conditions specified therein having
      been satisfied):

     

    (a)           Credit
      Agreement and Related Documents.  The Existing Term Loan
      Agreement, the Notes, the Guaranty and the Security Documents, duly executed
      and
      delivered by each of the Company and the Original Guarantors (as
      applicable);

     

    (b)           First
      Lien Credit Documents.  Evidence that (i) each of the First Lien
      Credit Documents has been duly executed and delivered by each of the parties
      thereto; and (ii) the Intercreditor Agreement has been duly executed and
      delivered by each of the parties thereto other than the Administrative
      Agent;

     

    (c)           Resolutions;
      Incumbency; Organization Documents. (i) Resolutions of the board of
      directors of the Company and the sole director of each Original Guarantor
      authorizing the transactions contemplated hereby, certified as of the Effective
      Time by the Secretary or an Assistant Secretary of such Person; (ii)
      Certificates of the Secretary or an Assistant Secretary of the Company and
      the
      Secretary or an Assistant Secretary of each Original Guarantor certifying the
      names and true signatures of the officers of such Person authorized to execute,
      deliver and perform, as applicable, the Existing Term Loan Agreement, the
      Security Documents, the Guaranty, and all other Loan Documents to be delivered
      by it hereunder; and (iii) the Organization Documents of the Company and of
      each
      Original Guarantor as in effect on the Effective Time, certified by the
      Secretary or Assistant Secretary of the such Person as of the Effective
      Time;

     

    (d)           Good
      Standing.  A good standing certificate for the Company and each
      Original Guarantor from its state of incorporation or formation, and evidencing
      its qualification to do business in (i) Texas for the Company and the Original
      Guarantors and (ii) in each other jurisdiction where its ownership, lease or
      operation of Properties or the conduct of its business requires such
      qualification, in each case as of a recent date;

     

    (e)           Payment
      of Fees.  Evidence of payment by the Company of all accrued and
      unpaid fees, costs and expenses owed pursuant to the Existing Company Credit
      Agreement (as defined in the First Lien Credit Agreement), the First Lien Credit
      Agreement and under the Existing Term Loan Agreement, including the Fee Letter
      Agreement, in each case to the extent then due and payable at the Effective
      Time, including any such costs, fees and expenses arising under or referenced
      in
      Sections 2.8 and 11.4;

     

    (f)           [Intentionally
      omitted.]

     

    

    
      
        
          
          

        

        
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    (g)           [Intentionally
      omitted.]

     

    (h)           [Intentionally
      omitted.]

     

    (i)           [Intentionally
      omitted.]

     

    (j)           Insurance
      Certificates.  Insurance certificates in form and substance
      reasonably satisfactory to the Administrative Agent, from the Company's
      insurance carriers reflecting the current insurance policies required under
      Section 7.6 including any necessary endorsements to
      reflect the Administrative Agent as loss payee for the ratable benefit of the
      Lenders, with the right to receive (absent a payment default) at least 30 days
      prior notice of cancellation of any such policy;

     

    (k)           Other
      Documents.  Such other approvals, opinions, documents or materials
      as the Administrative Agent may reasonably request, including those in
      connection with the Output Acquisition;

     

    (l)           Opinions
      of Counsel.  An opinion of Fulbright & Jaworski LLP covering
      such matters with respect to the Company, the Original Guarantors and OPEX
      as
      the Administrative Agent may reasonably require dated as of the Effective Time;
      (b) Gordon Arata McCollam Duplantis & Eagan LLP with respect to matters of
      Louisiana law in form and substance reasonably satisfactory to the
      Administrative Agent and (c) Conner & Winters with respect to matters of
      Oklahoma law in form and substance reasonably satisfactory to the Administrative
      Agent;

     

    (m)           Output
      Acquisition.  (i) Evidence that all conditions precedent under the
      Output Acquisition Agreement other than performance of the Company's funding
      obligations under Section 2.4(c) thereof have been
      satisfied or waived by all parties thereto; and (ii) true and correct copies
      (in
      a form reasonably satisfactory to the Administrative Agent), certified as to
      authenticity by a Responsible Officer of the Company, of the Output Acquisition
      Documents;

     

    (n)           Reserve
      Reports.  The Initial Reserve Report and the Output Reserve
      Report;

     

    (o)           Lien
      Searches.  Evidence of the results of a recent lien search in each
      of the jurisdictions in which UCC financing statements or other filings or
      recordations should be made to evidence or perfect security interests in any
      assets of the Company, each Original Guarantor, or OPEX, and such search shall
      reveal no Liens on any of the Property of the Company, any Original Guarantor,
      Output or OPEX, except for Permitted Liens;

     

    

    
      
        
          
          

        

        
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      (p)           [Intentionally
        omitted.]

       

      (q)           Filings,
        Registrations and Recordings.  Each document (including, without
        limitation, any UCC financing statement) required by the Security Documents
        or
        under law or reasonably requested by the Administrative Agent to be filed,
        registered or recorded in order to create in favor of the Administrative
        Agent,
        for the benefit of the Lenders,
        a second priority perfected Lien on the Collateral described in any Security
        Document to which the Company or any Original Guarantor is (or, upon
        consummation of the Output Acquisition, to which OPEX will be) a party, prior
        and superior in right to any other Person (other than with respect to Permitted
        Liens (other than Liens described in Section 8.1(j)), shall have been filed, registered or recorded
        or shall have been delivered to the Administrative Agent in proper form for
        filing, registration or recordation;

    

     

    (r)           Approvals.  All
      government and third party approvals (including any consents) necessary in
      connection with the Output Acquisition, the continuing operations of the Company
      and its Subsidiaries and the transactions contemplated by the Transaction
      Documents shall have been obtained and be in full force and effect, and all
      applicable waiting periods shall have expired without any action being taken
      or
      threatened by any competent authority which would restrain, prevent or otherwise
      impose adverse conditions on the Output Acquisition or the financing
      contemplated hereby;

     

    (s)           Solvency.  A
      certificate from a Responsible Officer of the Company certifying that, on a
      consolidated basis, the Company and its Subsidiaries (i) as of the Effective
      Time, are, and (ii) after giving effect to the transactions contemplated hereby,
      including the Output Acquisition, will be, Solvent;

     

    (t)           Pledged
      Stock; Stock Powers; Acknowledgment and Consent; Pledged
      Notes.  The First Lien Credit Agent, on behalf of itself, for the
      benefit of the First Lien Secured Parties, and as agent and bailee for the
      Administrative Agent, for the benefit of the Secured Parties, shall have
      received the certificates representing the shares of Capital Stock of the
      Original Guarantors pledged pursuant to the Security Agreement, together with
      an
      undated stock power for each such certificate executed in blank by a duly
      authorized officer of the pledgor thereof; and

     

    (u)           Notice
      of Borrowing.  A Notice of Borrowing in the form of Exhibit
      "A" with respect to the Credit Extensions comprised of the Original Loans
      contemplated by Section 2.1(a).

     

    5.2           [Intentionally
      omitted.].

     

    5.3           Conditions
      to the Restatement Effective Time.  The
      effectiveness of this Agreement is subject to the condition that on or before
      the Restatement Effective Time the Administrative Agent shall have received
      all
      of the following, in form and substance satisfactory to the Administrative
      Agent
      and each Lender:

     

    (a)           Amended
      and Restated Term Loan Agreement.  This Agreement, duly executed
      and delivered by each of the Company and the Guarantors party
      thereto;

    

    
      
        
          
          

        

        
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        (b)           First
          Lien Credit Agreement Amendment.  A true, correct and complete
          copy, certified from a Responsible Officer of the Company of the First
          Amendment
          to the First Lien Credit Agreement, which shall have been duly executed
          and
          delivered by each of the Company and the Guarantors party thereto;

         

      

    

    (c)           Resolutions;
      Incumbency; Organization Documents.  (i) Resolutions of the board
      of directors of the Company and the sole director or manager and members of
      each
      Guarantor authorizing the transactions contemplated hereby, certified as of
      the
      Restatement Effective Time by the Secretary or an Assistant Secretary of such
      Person; (ii) Certificates of the Secretary of the Company and the Secretary
      of
      each Guarantor certifying the names and true signatures of the officers of
      such
      Person authorized to execute, deliver and perform, as applicable, this
      Agreement; (iii) the Organization Documents of the Company as in effect on
      the
      Restatement Effective Time, certified by the Secretary or Assistant Secretary
      of
      each such Person as of the Restatement Effective Time; and (iv) confirmation
      that no modifications have been made to the Organizational Documents of each
      of
      the Guarantors since the Effective Date;

     

    (d)           Opinions
      of Counsel.  An opinion of Fulbright & Jaworski LLP covering
      such matters with respect to the Company and the Guarantors as the
      Administrative Agent may reasonably require dated as of the Restatement
      Effective Time; (b) Gordon Arata McCollam Duplantis & Eagan LLP with respect
      to the relevant Mortgage Supplement under Louisiana law in form and substance
      reasonably satisfactory to the Administrative Agent and (c) Conner & Winters
      with respect to the relevant Mortgage Supplement under Oklahoma law in form
      and
      substance reasonably satisfactory to the Administrative Agent;

     

    (e)           Payment
      of Fees.  Evidence of payment by the Company of all accrued and
      unpaid fees, costs and expenses owed pursuant to this Agreement, including
      the
      Fee Letter Agreement and the Commitment Letter, in each case to the extent
      then
      due and payable at the Restatement Effective Time, including any such costs,
      fees and expenses arising under or referenced in Sections 2.8 and 11.4;
      and

     

    (f)           Notice
      of Borrowing.  The Administrative Agent shall have received a
      Notice of Borrowing in the form of Exhibit "A" with respect to the Credit
      Extensions comprised of the Additional Loans hereunder contemplated by Section
      2.1(b).

     

    ARTICLE
      VI

     

    REPRESENTATIONS
      AND WARRANTIES

     

    To
      induce
      the Lenders and the Administrative Agent to enter into this Agreement, the
      Company and each Guarantor represents and warrants to each such Person, as
      of
      and after giving effect to the making of the Additional Loans at the Restatement
      Effective Time:

     

    6.1           Organization,
      Existence and Power.  Each
      of the Company and its Subsidiaries: (a) is duly organized, validly existing
      and
      in good standing under the laws of the jurisdiction of its formation; (b) has
      (i) the power and authority and (ii) all material governmental licenses,
      authorizations, consents and approvals, in each case, to own its assets, carry
      on its business and to execute, deliver, and perform its obligations under
      the
      Loan Documents; (c) is duly qualified as a foreign corporation, limited
      partnership or limited liability company and is licensed and in good standing
      under the laws of each jurisdiction where its ownership, lease or operation
      of
      Property or the conduct of its business requires such qualification or license;
      and (d) is in

     

    

    
      
        
          
          

        

        
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    compliance
      in all material respects with all Requirements of Law, except, in the case
      of
      clauses (b)(ii), (c) and (d), where failure to do so would not reasonably be
      expected to have a Material Adverse Effect.

     

    6.2           Corporate
      Authorization; No Contravention.  The
      execution, delivery and performance by the Company and the Guarantors of this
      Agreement and each other Loan Document to which such Person is a party have
      been
      duly authorized by all necessary organizational action, and do not and will
      not:
      (a) contravene the terms of any of that Person's Organization Documents; (b)
      contravene the First Lien Credit Agreement; (c) conflict with or result in
      any
      breach or contravention of, or the creation of any Lien under, any document
      evidencing any material Contractual Obligation to which such Person is a party
      that would be prior to the Liens granted to the Administrative Agent for the
      benefit of the Lenders, except to the extent such breach or contravention (but
      not creation of Liens) would not reasonably be expected to have a Material
      Adverse Effect, or any order, injunction, writ or decree of any Governmental
      Authority to which such Person or its Property is subject; or (d) violate in
      any
      material respect any Requirement of Law.

     

    6.3           Governmental
      Authorization.  No
      approval, consent, exemption, authorization, or other action by, or notice
      to,
      or filing with, any Governmental Authority is necessary in connection with
      the
      execution, delivery or performance by, or enforcement against, the Company
      or
      any of the Guarantors of this Agreement or any other Loan Document to which
      it
      is a party, except for the filings necessary to obtain and maintain perfection
      of Liens, routine filings related to the Company and the operation of its
      business, such filings as may be necessary in connection with the Lenders'
      exercise of remedies hereunder and such other approvals, consents, exemptions,
      authorizations, actions or filings, the failure of which to obtain would not
      reasonably be expected to have a Material Adverse Effect.

     

    6.4           Binding
      Effect.  This
      Agreement and each other Loan Document to which the Company or any Guarantor
      is
      a party constitute the legal, valid and binding obligations of the Company
      and
      each Guarantor to the extent it is a party thereto, enforceable against such
      Person in accordance with their respective terms, except as enforceability
      may
      be limited by applicable bankruptcy, insolvency, or similar laws affecting
      the
      enforcement of creditors' rights generally or by equitable principles relating
      to enforceability.

     

    6.5           Litigation.  Unless
      specifically disclosed in Schedule 6.5 attached hereto, there are no actions,
      suits, proceedings, claims or disputes pending, or to the knowledge of the
      Company, threatened or contemplated, at law, in equity, in arbitration or before
      any Governmental Authority, against the Company or its Subsidiaries or any
      of
      their respective Properties which (i) as of the Restatement Effective Date
      purport to affect or pertain to this Agreement or any other Loan Document,
      or
      any of the transactions contemplated hereby or thereby; or (ii) would reasonably
      be expected to have a Material Adverse Effect.  No injunction, writ,
      temporary restraining order or any order of any nature has been issued by any
      court or other Governmental Authority purporting to enjoin or restrain the
      execution, delivery or performance of this Agreement or any other Loan Document,
      or directing that the transactions provided for herein or therein not be
      consummated as herein or therein provided.

     

    

    
      
        
          
          

        

        
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                6.6           No
      Default.  Neither the Company nor any Subsidiary is in
      default under or with respect to any other Contractual Obligation in any respect
      which, individually or together with all such defaults, would reasonably be
      expected to have a Material Adverse Effect.

     

    6.7           ERISA
      Compliance.  Except
      as specifically disclosed in Schedule 6.7:

     

    (a)           Each
      Plan of the Company is in compliance in all material respects with the
      applicable provisions of ERISA, the Code and other federal or state
      law.  Each Plan that is intended to be qualified under Code Section
      401(a) is either (i) a prototype plan entitled to rely on the opinion letter
      issued by the IRS as to the qualified status of such plan under Section 401
      of
      the Code to the extent provided in Revenue Procedure 2005-16, or (ii) the
      recipient of, or has made or will make timely application for, a determination
      letter from the IRS to the effect that such Plan is qualified, and the plans
      and
      trusts related thereto are exempt from federal income Taxes under Sections
      401(a) and 501(a), respectively, of the Code.  To the knowledge of the
      Company, nothing has occurred which would cause the loss of such
      qualification.  The Company and each ERISA Affiliate have made all
      required contributions to any Plan subject to Section 412 of the Code, and
      no
      application for a funding waiver or an extension of any amortization period
      pursuant to Section 412 of the Code has been made with respect to any
      Plan.

     

    (b)           There
      are no pending or, to the knowledge of the Company, threatened claims, actions
      or lawsuits, or actions by any Governmental Authority, with respect to any
      Plan
      of the Company which has resulted or would reasonably be expected to result
      in a
      Material Adverse Effect.  There has been no prohibited transaction or
      violation of the fiduciary responsibility rules with respect to any such Plan
      which has resulted or could reasonably be expected to result in a Material
      Adverse Effect.

     

    (c)           (i)
      No ERISA Event has occurred or is reasonably expected to occur; (ii) no Pension
      Plan of the Company has any Unfunded Pension Liability; (iii) neither the
      Company nor any ERISA Affiliate has incurred, or reasonably expects to incur,
      any liability under Title IV of ERISA with respect to any Pension Plan (other
      than premiums due and not delinquent under Section 4007 of
      ERISA);  (iv) neither the Company nor any ERISA Affiliate has
      incurred, or reasonably expects to incur, any liability (and no event has
      occurred which, with the giving of notice under Section 4219 of ERISA, would
      result in such liability) under Section 4201 or 4243 of ERISA with respect
      to a
      Multiemployer Plan; and (v) neither the Company nor any ERISA Affiliate has
      engaged in a transaction that could be subject to Section 4069 or 4212(c) of
      ERISA.

     

    6.8           Use
      of Proceeds; Margin Regulations.  The
      proceeds of the Loans shall be or were used (as applicable) solely for the
      purposes set forth in and permitted by Section 7.13.  Neither the Company nor any
      Subsidiary is generally engaged in the business of purchasing or selling Margin
      Stock or extending credit for the purpose of purchasing or carrying Margin
      Stock.

     

    

    
      
        
          
          

        

        
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      6.9           Title
        to Properties.  The
        Company and each Guarantor (a) have good and indefeasible title to the Mortgaged
        Properties subject to no Liens, except Permitted Liens, and, except for such
        defects in title as would not, individually or in the aggregate, reasonably
        be
        expected to have
        a
        Material Adverse Effect and (b) have good and indefeasible title to, or valid
        leasehold interests in, all other Property necessary in the ordinary conduct
        of
        their respective businesses.

    

     

    6.10           Oil
      and Gas Reserves.  The
      Company and each Guarantor is and will hereafter be, in all material respects,
      the owner of the Oil and Gas that it purports to own from time to time in and
      under its Oil and Gas Properties, together with the right to produce the
      same.  The Oil and Gas Properties are not subject to any Lien other
      than as set forth in the financial statements referred to in Section 6.14, as disclosed in such financial statements to
      the
      Lenders in writing prior to Restatement Effective Time and Permitted
      Liens.  All Oil and Gas has been and will hereafter be produced, sold
      and delivered by the Company and the Guarantors in accordance in all material
      respects with all applicable laws and regulations of every Governmental
      Authority except such laws and regulations, the failure to comply with which
      could not reasonably be expected to have a Material Adverse Effect; each of
      the
      Company and the Guarantors has complied in all material respects (from the
      time
      of acquisition by the Company or a Subsidiary) and will hereafter comply in
      all
      material respects with all material terms of each oil, gas and mineral lease
      comprising its Oil and Gas Properties; and all such oil, gas and mineral leases
      under which the Company or a Guarantor is a lessee or co-lessee have been and
      will hereafter be maintained in full force and effect; provided, however, that
      nothing in this Section 6.10 shall prevent the
      Company or any Guarantor from disposing of any Property in accordance with
      Section 8.2.  To the knowledge of the
      Company and the Guarantors, all of the Hydrocarbon Interests comprising its
      Oil
      and Gas Properties are and will hereafter be enforceable in all material
      respects in accordance with their terms, except as such may be modified by
      applicable bankruptcy law or an order of a court in equity and except to the
      extent the failure to be enforceable could not reasonably be expected to have
      a
      Material Adverse Effect.

     

    6.11           Reserve
      Report.  The
      Company has heretofore delivered to the Administrative Agent a true and complete
      copy of (i) a report dated effective as of December 31, 2006, prepared by
      DeGolyer and MacNaughton and a report dated effective as of December 31, 2006
      prepared by William M. Cobb & Associates, Inc. (collectively, the
      "Initial Reserve Report") covering certain of the
      Company's Oil and Gas Properties and (ii) a report dated effective as of October
      1, 2006 prepared by the Company covering certain Oil and Gas Properties of
      Output and OPEX (the "Output Reserve
      Report").  To the knowledge of the Company, (w) the
      assumptions stated or used in the preparation of each Reserve Report are
      reasonable as of the date thereof, (x) all information furnished by the Company
      or any Guarantor to the Independent Engineer for use in the preparation of
      any
      Reserve Report was accurate in all material respects, (y) there has been no
      material adverse change in the amount of the estimated Proved Reserves shown
      in
      any Reserve Report since the date thereof, except for changes which have
      occurred as a result of production in the ordinary course of business, and
      (z)
      each Reserve Report does not, in any case, omit any material statement or
      information necessary to cause the same not to be materially misleading to
      the
      Lenders.

     

    6.12           Gas
      Imbalances.  Except
      as disclosed to the Administrative Agent in writing prior to the Restatement
      Effective Time, there are no gas imbalances, take or pay or other prepayments
      with respect to any of the Oil and Gas Properties in excess of $2,000,000 in
      the
      aggregate that would require the Company or any Guarantor to deliver Oil and
      Gas
      produced from any of the Oil and Gas Properties at some future time without
      then
      or thereafter receiving full payment therefor.

     

    

    
      
        
          
          

        

        
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        6.13           Taxes.  The
      Company and its Subsidiaries have filed all federal Tax returns and reports
      required to be filed, and have paid all federal Taxes, assessments, fees and
      other governmental charges levied or imposed upon them or their Properties,
      income or assets otherwise due and payable, except those which are being
      contested in good faith by appropriate proceedings and for which adequate
      reserves have been provided in accordance with GAAP.  The Company and
      its Subsidiaries have filed all material state and other non-federal Tax returns
      and reports required to be filed, and have paid all state and other non-federal
      Taxes, assessments, fees and other governmental charges levied or imposed upon
      them or their Properties, income or assets prior to delinquency thereof, except
      those (a) which are not overdue by more than 30 days and (b) which are being
      contested in good faith by appropriate proceedings and for which adequate
      reserves have been provided in accordance with GAAP.  To the Company's
      knowledge, there is no proposed Tax assessment against the Company or any
      Subsidiary that would, if made, reasonably be expected to have a Material
      Adverse Effect.

     

    6.14           Financial
      Statements and Condition.

     

    (a)           The
      Company Audited Financial Statements and the Company's unaudited consolidated
      financial statements for the three months ended March 31, 2007 incorporated in
      the Company's Form 10-Q filed with the SEC on May 10, 2007 (i) were prepared
      in
      accordance with GAAP consistently applied throughout the periods covered
      thereby, except as otherwise expressly noted therein; (ii) fairly present in
      all
      material respects the consolidated financial condition of the Company and its
      Subsidiaries, as of the dates thereof and results of operations for the periods
      covered thereby (subject, in the case of the Company's unaudited consolidated
      financial statements referred to above, to normal year-end audit adjustments
      and
      the absence of footnotes); and (iii) except as specifically disclosed in
      Schedule 6.14(a) or  in the case of the Company and its Subsidiaries,
      in the Company Audited Financial Statements or the Company's unaudited
      consolidated financial statements referred to above, the Company and its
      Subsidiaries do not have any material Indebtedness or other material
      liabilities, direct or contingent, as of the date hereof, including liabilities
      for Taxes, material commitments or Contingent Obligations.

     

    (b)           During
      the period from December 31, 2006 to and including the date hereof there has
      been no Disposition by the Company or any Subsidiaries of any material part
      of
      its business or Property, other than Dispositions permitted by Section 8.2(a), (b), (c),
(d)
      or (e).

     

    6.15           Environmental
      Matters.  Each
      of the Company and its Subsidiaries is in compliance with all Environmental
      Laws
      and there exist no Environmental Claims on or with respect to its respective
      business, operations and Properties, except as specifically disclosed in
      Schedule 6.15 or such non-compliance with Environmental Laws, or Environmental
      Claims as would not, individually or in the aggregate, reasonably be expected
      to
      have a Material Adverse Effect.

     

    

    
      
        
          
          

        

        
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      6.16           Regulated
        Entities.  None
        of the Company, the Guarantors, any Person controlling the Company, or any
        Guarantor, is an "investment company" within the meaning of the
        Investment
Company Act of 1940.  None of the Company, any
      Person controlling the Company or any Subsidiary, is subject to regulation
      under
      the Federal Power Act, the Interstate Commerce Act, any state public utilities
      code, or any other federal or state statute or regulation limiting its ability
      to incur Indebtedness.

     

    6.17           No
      Burdensome Restrictions.  Except
      as set forth on Schedule 6.17, neither the Company nor any Subsidiary is a
      party
      to or bound by any Contractual Obligation, or subject to any restriction in
      any
      Organization Document, or any Requirement of Law, which would reasonably be
      expected to have a Material Adverse Effect.

     

    6.18           Copyrights,
      Patents, Trademarks and Licenses, etc.  The
      Company and each Subsidiary own or are licensed or otherwise have the right
      to
      use all of the material patents, trademarks, service marks, trade names,
      copyrights, contractual franchises, authorizations and other rights that are
      reasonably necessary for the operation of their respective businesses, without
      material conflict with the rights of any other Person.  To the
      knowledge of the Company, no slogan or other advertising device, product,
      process, method, substance, part or other material now employed, or now
      contemplated to be employed, by the Company or any Subsidiary infringes upon
      any
      rights held by any other Person, except to the extent such infringement could
      not reasonably be expected to have a Material Adverse Effect.  Except
      as specifically disclosed in Schedule 6.5, no claim or litigation regarding
      any
      of the foregoing is pending or, to the knowledge of the Company, threatened,
      and
      no patent, invention, device, application, principle or any statute, law, rule,
      regulation, standard or code is pending or, to the knowledge of the Company,
      proposed, which, in either case, would reasonably be expected to have a Material
      Adverse Effect.

     

    6.19           Subsidiaries.  As
      of the Restatement Effective Time, the Company has no Subsidiary other than
      those specifically disclosed in part (a) of Schedule 6.19 hereto and has no
      material equity investments in any other Person other than those specifically
      disclosed in part (b) of Schedule 6.19.  The capitalization of each
      Subsidiary and the ownership of its Capital Stock is set forth on Schedule
      6.19
      hereto.

     

    6.20           Insurance.  The
      Properties of the Company and each Subsidiary are insured with financially
      sound
      and reputable insurance companies that are not Affiliates of the Company, in
      such amounts, with such deductibles and covering such risks as are customarily
      carried by companies engaged in similar businesses and owning similar Properties
      in localities where the Company or such Subsidiary operates, except where the
      failure to do so could not reasonably be expected to have a Material Adverse
      Effect.

     

    6.21           Full
      Disclosure.  None
      of the representations or warranties made by the Company or any Guarantor in
      the
      Loan Documents as of the date such representations and warranties are made
      or
      deemed made, and none of the statements contained in any exhibit, report,
      written statement or certificate furnished by or on behalf of the Company or
      any
      Guarantor in connection with the Loan Documents, taken as whole, contains any
      untrue statement of a material fact known to the Company or omits any material
      fact known to the Company required to be stated therein or necessary to make
      the
      statements made therein, in light of the circumstances under which they are
      made, not materially misleading as of the time when made or
      delivered.

     

    

    
      
        
          
          

        

        
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      6.22           Solvency.  The
      Company and its Subsidiaries, taken as a whole are, and after giving effect
      to
      (a) the incurrence of all Indebtedness and obligations being incurred in
      connection herewith, and (b) all rights of contribution of such Person against
      other Loan Parties under the Guaranty, at law, in equity or
      otherwise,  will be and will continue to be, Solvent.

     

    6.23           Labor
      Matters.  Except
      to the extent such matters do not to constitute a Material Adverse Effect,
      (a)
      no actual or threatened strikes, labor disputes, slowdowns, walkouts, work
      stoppages, or other concerted interruptions of operations that involve any
      employees employed at any time in connection with the business activities or
      operations at the Property of the Company or any Subsidiary exist, (b) hours
      worked by and payment made to the employees of the Company have not been in
      violation of the Fair Labor Standards Act or any other applicable laws
      pertaining to labor matters, (c) all payments due from the Company or any
      Subsidiary for employee health and welfare insurance, including, without
      limitation, workers compensation insurance, have been paid or accrued as a
      liability on its books, and (d) the business activities and operations of the
      Company and each Subsidiary are in compliance with the Occupational Safety
      and
      Health Act and other applicable health and safety laws.

     

    6.24           Midstream
      Contracts.  As
      of the Restatement Effective Time, the Company's and the Guarantors' marketing,
      gathering, transportation, processing and treating facilities and equipment,
      together with the Midstream Contracts, and any other marketing, gathering,
      transportation, processing and treating contracts in effect among, inter alia,
      the Company, any Guarantor and any other Person, are, except as set forth on
      Schedule 6.24, sufficient to market, gather, transport, process or treat, as
      applicable, reasonably anticipated volumes of production of Oil and Gas from
      the
      Company's and the Guarantors' Oil and Gas Properties.  Any such
      contracts with Affiliates as of the Restatement Effective Time are disclosed
      on
      Schedule 6.24 hereto.

     

    6.25           Derivative
      Contracts.  Neither
      the Company nor any Subsidiary is party to any Derivative Contract other than
      (a) as of the Restatement Effective Time, the Existing Derivative Contracts
      or
      (b) after the Restatement Effective Time, Derivative Contracts permitted by
      Section 8.10.

     

    6.26           Exempt
      Subsidiaries; TTSI.  Neither
      any Exempt Subsidiary nor TTSI owns any Hydrocarbon Interests with which Proved
      Reserves are associated.

     

    6.27           [Intentionally
      omitted.]

     

    6.28           [Intentionally
      omitted.]

     

    6.29           Security
      Documents.

     

    (a)           The
      Security Agreement created in favor of the Administrative Agent, for the benefit
      of the Secured Parties, a legal, valid, binding and enforceable security
      interest in the Collateral described therein and proceeds and products
      thereof.  In the case of the Pledged Stock described in the Security
      Agreement, when any stock certificates representing such Pledged Stock are
      delivered to the First Lien Credit Agent, as agent and bailee for the
      Administrative Agent, and in the case of the other Collateral described in
      the
      Security Agreement which may be perfected by filing a financing statement,
      when
      financing statements in appropriate form are filed in the offices specified
      on
      Schedule

     

    

    
      
        
          
          

        

        
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    6.29(a)
      (which financing statements may be filed by the Administrative Agent) and such
      other filings as are specified on Schedule 3 to the Security Agreement have
      been
      completed (all of which filings may be filed by the Administrative Agent),
      the
      Security Agreement shall constitute a fully perfected Lien on, and security
      interest in, all right, title and interest of the Loan Parties in such
      Collateral and the proceeds and products thereof, as security for the
      Obligations, in each case prior and superior in right to any other Person
      (except Permitted Liens).

     

    (b)           Each
      of the Mortgages created in favor of the Administrative Agent, for the benefit
      of the Secured Parties, a legal, valid, binding and enforceable Lien on the
      Mortgaged Properties described therein and proceeds and products thereof; and
      when the Mortgage Supplements are filed in the offices specified on Schedule
      6.29(b) (in the case of Mortgage Supplements to be executed and delivered on
      the
      Restatement Effective Date) or in the recording office designated by the Company
      (in the case of any Mortgage to be executed and delivered pursuant to Section
7.14(b)), each Mortgage shall constitute a fully
      perfected Lien on, and security interest in, all right, title and interest
      of
      the Loan Parties in the Mortgaged Properties described therein and the proceeds
      and products thereof, as security for the Obligations, in each case prior and
      superior in right to any other Person (other than Persons holding Liens or
      other
      encumbrances or rights permitted by the relevant Mortgage).

     

    (c)           Notwithstanding
      that the aggregate principal amount of the Loans hereunder exceeds the aggregate
      principal amount of "Loans" under the Existing Term Loan Agreement and any
      other
      changes from the Existing Term Loan Agreement reflected herein, from and after
      the Restatement Effective Date:

     

    (i)           this
      Agreement replaces or refinances the Existing Term Loan Agreement and
      constitutes the "Credit Agreement" (as defined in each of the Security
      Agreement, the Mortgages and the Guaranty); and

     

    (ii)           the
      Administrative Agent constitutes the "Administrative Agent" (as defined in
      each
      of the Security Agreement, the Mortgages and the Guaranty).

     

    ARTICLE
      VII

     

    AFFIRMATIVE
      COVENANTS

     

    So
      long
      as any Lender shall have any Commitment hereunder, or any Loan or other
      Obligation shall remain unpaid or unsatisfied:

     

    

    
      
        
          
          

        

        
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      7.1           Financial
        Statements.  The
        Company and each Guarantor shall, and shall cause each of its Subsidiaries
        to
        deliver to the Administrative Agent who will deliver to each
        Lender:

       

      (a)           as
        soon as available, but not later than 90 days after the end of each fiscal
        year,
        a copy of the annual audited consolidated balance sheet of the Company and
        its
        Subsidiaries as at the end of such year, and the related consolidated statements
        of operations and retained earnings, comprehensive income and cash flows
        for
        such year, setting forth in each case in comparative form the figures for
        the
        previous fiscal year; the Company's
        financial statements shall be accompanied by the unqualified opinion (or,
        if
        qualified, of a non-material nature (e.g. FASB changes of accounting principles)
        or nothing indicative of going concern or material misrepresentation nature)
        and
        a copy of the management letter of Akin, Doherty, Klein & Feuge P.C. or
        other independent public accounting firm acceptable to the Administrative
        Agent
        (the "Independent Auditor"), which report shall state
        that such consolidated financial statements present fairly in all material
        respects the consolidated financial position of the Company and its Subsidiaries
        at the end of such periods and the results of their operations and their
        cash
        flows for the periods indicated in conformity with GAAP; and

    

     

    (b)           as
      soon as available, but not later than 60 days after the close of each of the
      first three Fiscal Quarters in any fiscal year, a copy of the unaudited
      consolidated balance sheet of the Company as of the end of such quarter and
      the
      related consolidated statements of operations and retained earnings,
      comprehensive income and cash flows for the period commencing on the first
      day
      and ending on the last day of such period, setting forth in each case in
      comprehensive form the figures for the comparable period in the previous fiscal
      year and certified by a Responsible Officer as fairly presenting in all material
      respects, in accordance with GAAP (subject to normal year-end audit adjustments
      and the absence of footnotes), the consolidated financial position of the
      Company and its Subsidiaries at the end of such periods and the results of
      their
      operations and their cash flows.

     

    (c)           Documents
      required to be delivered pursuant to Section 7.1(a)
      or Section 7.1(b) may be delivered electronically
      and if so delivered, shall be deemed to have been delivered on the date (i)
      on
      which the Company posts such documents, or provides a link thereto on the
      Company's website on the Internet and (ii) on which such documents are posted
      on
      the Company's behalf on an Internet or intranet website, if any, to which each
      Lender and the Administrative Agent have access (whether a commercial,
      third-party website or whether sponsored by the Administrative Agent); provided,
      however, that (x) the Company shall deliver paper copies of such documents
      to
      the Administrative Agent or any Lender that requests the Company to deliver
      such
      paper copies until a written request to cease delivering paper copies is given
      by the Administrative Agent or such Lender and (y) the Company shall notify
      the
      Administrative Agent and each Lender (by telecopier or electronic mail) of
      the
      posting of any such documents and provide to the Administrative Agent by
      electronic mail electronic versions (i.e., soft copies) of such
      documents.  Notwithstanding anything contained herein, in every
      instance the Company shall be required to provide paper copies of the Compliance
      Certificates required by Section 7.2(b) to the
      Administrative Agent.

     

    (d)           The
      Company hereby acknowledges that (i) the Administrative Agent will make
      available to the Lenders materials and/or information provided by or on behalf
      of the Company hereunder (collectively, "Company
      Materials") by posting the Company Materials on IntraLinks or
      another similar electronic system (the "Platform") and
      (ii) certain of the Lenders may be "public-side" Lenders (i.e., Lenders that
      do
      not wish to receive material non-public information with respect to the Company
      or its securities) (each, a "Public
      Lender").  The Company hereby agrees that (w) all
      Company Materials that are to be made available to Public Lenders shall be
      clearly and conspicuously 

     

    

    
      
        
          
          

        

        
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    marked
      "PUBLIC" which, at a minimum, shall mean that the word "PUBLIC" shall appear
      prominently on the first page thereof; (x) by marking Company Materials
      "PUBLIC," the Company shall be deemed to have authorized the Administrative
      Agent and the Lenders to treat such Company Materials as either publicly
      available information or not material information (although it may be sensitive
      and proprietary) with respect to the Company or its securities for purposes
      of
      United States Federal and state securities laws; (y) all Company Materials
      marked "PUBLIC" are permitted to be made available through a portion of the
      Platform designated "Public Investor"; and (z) the Administrative Agent shall
      be
      entitled to treat Company's Materials that are not marked "PUBLIC" as being
      suitable only for posting on a portion of the Platform not designated "Public
      Investor."

     

    7.2           Certificates;
      Other Production and Reserve Information.  The
      Company shall furnish to the Administrative Agent and each Lender:

     

    (a)           as
      soon as available, but not later than 60 days after the close of each of the
      first three Fiscal Quarters in any fiscal year and not later than 90 days after
      the close of each Fiscal Year, a Quarterly Status Report in a form reasonably
      acceptable to the Lenders, as of the last day of the immediately preceding
      quarter;

     

    (b)           concurrently
      with the delivery of the financial statements referred to in Sections 7.1(a) and (b), and the
      reports referred to in Section 7.2(a), a Compliance
      Certificate executed by a Responsible Officer;

     

    (c)           on
      or before (i) April 1 of each year during the term of this Agreement, a Reserve
      Report effective as of January 1 of such year prepared by DeGolyer and
      MacNaughton, William M. Cobb & Associates, Inc., Netherland Sewell &
Associates, Inc., or other independent petroleum engineer acceptable to the
      Administrative Agent (the "Independent Engineer") and
      (ii) October 1 of each year during the term of this Agreement, a Reserve Report
      effective as of July 1 of such year prepared by the Company in substantially
      the
      same form as the January 1 Reserve Report and certified by a Responsible Officer
      as true and correct in all material respects, in each case in form reasonably
      acceptable to the Administrative Agent;

     

    (d)           promptly
      upon the request of the Administrative Agent, at the request of any Lender,
      copies of all geological, engineering and related data contained in the
      Company's files or readily accessible to the Company relating to its and the
      Guarantors' Oil and Gas Properties as may reasonably be requested;

     

    (e)           [Intentionally
      omitted];

    

    
      
        
          
          

        

        
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      (f)           promptly
        upon its completion in each fiscal year of the Company commencing with the
        2007
        fiscal year through and including the 2010 fiscal year, and not later than
        the
        date of delivery of the annual financial statements for the prior fiscal
        year, a
        copy of the annual budget of the Company and its Subsidiaries on a consolidated
        basis for such fiscal year, projecting total Oil and Gas revenue, total revenue,
        total operating costs and expenses, Consolidated Net Income, Consolidated
        Interest Expense, Consolidated
        EBITDAX and total capital expenditures, by fiscal quarter; it being understood
        that such projections are not to be viewed as facts, that actual results
        may
        vary and that such variances may be material;

    

     

    (g)           copies
      of all Derivative Contracts then in effect not later than January 1 and July
      1
      of each year beginning July 2, 2007; and

     

    (h)           promptly,
      such additional information regarding the business, financial or corporate
      affairs of the Company or any Subsidiary as the Administrative Agent, at the
      request of any Lender, may from time to time reasonably request.

     

    7.3           Notices.  The
      Company shall promptly notify the Administrative Agent and each Lender in
      writing:

     

    (a)           of
      the occurrence of any Default or Event of Default;

     

    (b)           of
      any matter that has resulted or may reasonably be expected to result in a
      Material Adverse Effect, including arising out of or resulting from (i) a
      material breach or non performance of, or any default under, a Contractual
      Obligation of the Company or any Subsidiary or any allegation thereof; (ii)
      any
      material dispute, litigation, investigation, proceeding or suspension between
      the Company or any Subsidiary and any Governmental Authority; or (iii) the
      commencement of, or any material development in, any material litigation or
      proceeding affecting the Company or any Subsidiary, including pursuant to any
      applicable Environmental Laws; and

     

    (c)           of
      the formation or acquisition of any Subsidiary.

     

    Each
      notice under this Section 7.3 shall be accompanied
      by a written statement by a Responsible Officer setting forth details of the
      occurrence referred to therein, and, in the case of notices delivered pursuant
      to Sections 7.3(a) or (b), stating what
      action the Company or any affected
      Subsidiary proposes to take with respect thereto and at what
      time.  Each notice under Section 7.3(a)
      shall describe with particularity any and all clauses or provisions of this
      Agreement or other Loan Document that have been (or foreseeably will be)
      breached or violated.

     

    7.4           Preservation
      of Company Existence, Etc.  The
      Company and each Guarantor shall, and shall cause each of its respective
      Subsidiaries to:

     

    (a)           preserve
      and maintain in full force and effect its legal existence, and maintain its
      good
      standing under the laws of its state or jurisdiction of formation, except in
      a
      transaction permitted by Section 8.3 or where the
      failure to do so could not reasonably be expected to have a Material Adverse
      Effect;

     

    

    
      
        
          
          

        

        
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      (b)           preserve
        and maintain in full force and effect all governmental rights, privileges,
        qualifications, permits, licenses and franchises necessary or desirable in
        the
        normal conduct of its business except where the failure to do so could not
        reasonably be expected to have a Material Adverse Effect;

       

    

    (c)           use
      reasonable efforts, in the ordinary course of business, to preserve its business
      organization and goodwill except where the failure to do so could not reasonably
      be expected to have a Material Adverse Effect; and

     

    (d)           preserve
      or renew all of its registered patents, trademarks, trade names and service
      marks, the non preservation of which would reasonably be expected to have a
      Material Adverse Effect.

     

    7.5           Maintenance
      of Property.  The
      Company and each Guarantor shall, and shall cause each of its respective
      Subsidiaries to, maintain and preserve all its Property which is used or useful
      in its business in good working order and condition, ordinary wear and tear
      excepted and to use the standard of care typical in the industry in the
      operation and maintenance of its facilities, except where the failure to do
      so
      would not reasonably be expected to have a Material Adverse Effect; provided,
      however, that nothing in this Section 7.5 shall
      prevent the Company or any Guarantor from making any Disposition permitted
      by
      Section 8.2.

     

    7.6           Insurance.  The
      Company and each Guarantor shall, and shall cause each of its respective
      Subsidiaries to, maintain, with financially sound and reputable independent
      insurers, insurance with respect to its Properties and business against loss
      or
      damage of the kinds customarily insured against by Persons engaged in the same
      or similar business, of such types and in such amounts as are customarily
      carried under similar circumstances by such other Persons except where the
      failure to do so would not reasonably be expected to have a Material Adverse
      Effect.

     

    7.7           Payment
      of Obligations.  Unless
      being contested in good faith by appropriate proceedings and adequate reserves
      in accordance with GAAP are being maintained by the Company or such Subsidiary,
      the Company and each Guarantor shall, and shall cause each of its respective
      Subsidiaries to, pay and discharge prior to delinquency, all their respective
      obligations and liabilities, including: (a) all Tax liabilities, assessments
      and
      governmental charges or levies upon it or its Properties or assets; (b) all
      lawful claims which, if unpaid, would by law become a Lien upon its Property;
      and (c) all Indebtedness, as and when due and payable, but subject to any
      subordination provisions contained in any instrument or agreement evidencing
      such Indebtedness; except, in each case, where the failure to do so would not
      reasonably be expected to have a Material Adverse Effect.

     

    7.8           Compliance
      with Laws.  The
      Company and each Guarantor shall, and shall cause each of its respective
      Subsidiaries to, comply in all material respects with all Requirements of Law
      of
      any Governmental Authority having jurisdiction over it or its business
      (including the Federal Fair Labor Standards Act), except (a) such as may be
      contested in good faith or as to which a bona fide dispute may exist or (b)
      where the failure to do so would not reasonably be expected to have a Material
      Adverse Effect.

     

    

    
      
        
          
          

        

        
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      7.9           Compliance
        with ERISA.  The
        Company and each Guarantor shall, and shall cause each of its ERISA Affiliates
        to: (a) maintain each Plan of the Company in compliance in all material respects
        with the applicable provisions of ERISA, the Code and other federal or state
        law; (b) cause each such Plan which is qualified under Section 401(a) of
        the
        Code to maintain such qualification; and (c) make all required
        contributions to any such Plan subject to Section 412 of the Code.

    

     

    7.10           Inspection
      of Property and Books and Records.  The
      Company and each Guarantor shall, and shall cause each of its respective
      Subsidiaries to, maintain proper books of record and account, in which full,
      true and correct entries in conformity with GAAP consistently applied shall
      be
      made of all financial transactions and matters involving the assets and business
      of the Company and such Subsidiary.  The Company and each Guarantor
      shall permit representatives and independent contractors of the Administrative
      Agent or any Lender to visit and inspect any of their respective Properties,
      to
      examine their respective corporate, financial and operating records, and make
      copies thereof or abstracts therefrom, and to discuss their respective affairs,
      finances and accounts with their respective managers, directors, officers,
      and
      independent public accountants, all at the expense of the Company and at such
      reasonable times during normal business hours and as often as may be reasonably
      desired, upon reasonable advance notice to the Company; provided, however,
      that,
      excluding any such visits and inspections during the continuance of an Event
      of
      Default, only the Administrative Agent, on behalf of the Lenders, may exercise
      the rights under this Section 7.10 and such
      exercise shall not occur more frequently than once per fiscal year; provided
      further, however, when an Event of Default exists the Administrative Agent
      or
      any Lender may do any of the foregoing at the expense of the Company at any
      time
      during normal business hours and without advance notice.

     

    7.11           Environmental
      Laws.  The
      Company and each Guarantor shall, and shall cause each of its respective
      Subsidiaries to, conduct its respective operations and keep and maintain their
      respective Properties in compliance with all Environmental Laws, except where
      the failure to do so would not reasonably be expected to have a Material Adverse
      Effect.

     

    7.12           New
      Subsidiary Guarantors.  If,
      at any time after the Output Closing Time, there exists any Subsidiary that
      is
      not either a Guarantor or an Exempt Subsidiary, then the Company and each
      Guarantor shall, on the date any such Subsidiary is acquired or formed, (a)
      cause each such Subsidiary to execute and deliver a joinder to the Guaranty
      to
      the Administrative Agent, (b) pledge or cause to be pledged to the
      Administrative Agent for the benefit of the Lenders all of the outstanding
      Capital Stock thereof pursuant to a Security Document satisfactory to the
      Administrative Agent, to be held by the First Lien Credit Agent on behalf of
      itself, for the benefit of the First Lien Secured Parties, and the
      Administrative Agent, for the benefit of the Secured Parties, and (c) cause
      such
      Subsidiary to execute and deliver such Security Documents as may be required
      pursuant to Sections 4.2, 4.5(a) or 7.14(b).  Upon
      the execution and delivery by
      any Subsidiary of a joinder to the Guaranty, such Subsidiary shall automatically
      and immediately, and without any further action on the part of any Person,
      (i)
      become a Guarantor for all purposes of this Agreement and (ii) be deemed to
      have
      made the representations and warranties, as applied to and including such new
      Subsidiary, set forth in this Agreement.

     

    7.13           Use
      of Proceeds.  The
      Company and each Guarantor shall, and shall cause each of its respective
      Subsidiaries to, use the proceeds of the Loans only for the following purposes:
      (a) with respect to the Original Loans, at the Output Closing Time, together
      with proceeds of the First Lien Loans, to fund the Company's payment obligations
      under Section 2.4 of the Output Acquisition Agreement (other than fees and
      expenses 

     

    

    
      
        
          
          

        

        
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    incurred
      in connection with the Output Acquisition) in an aggregate amount not to exceed
      $96,000,000, subject to usual and customary adjustments for transactions of
      such
      nature and (b) with respect to the Additional Loans, for general corporate
      purposes.

     

    7.14           Further
      Assurances.

     

    (a)           The
      Company and each Guarantor shall promptly (and in no event later than 20 days
      (or such late date as may be agreed by the Administrative Agent) after becoming
      aware of the need therefor) cure any defects in the creation and issuance of
      the
      Notes and the execution and delivery of this Agreement, the Security Documents
      or any other instruments referred to or mentioned herein or
      therein.  The Company and the Guarantors shall, at the Company's
      expense, promptly (and in no event later than 20 days (or such late date as
      may
      be agreed by the Administrative Agent) after becoming aware of the need
      therefor) do all acts and things, and execute and file or record, all
      instruments reasonably requested by the Administrative Agent, to establish,
      perfect, maintain and continue the perfected security interest of the Lenders
      in
      or the Lien of the Lenders on the Mortgaged Properties.

     

    (b)           The
      Company shall promptly (and in no event later than ten Business Days after
      the
      need arises) execute and cause its Subsidiaries that are Guarantors to execute
      such additional Security Documents in form and substance reasonably satisfactory
      to Administrative Agent, granting to Administrative Agent fully perfected Liens
      on Oil and Gas Properties that are not then part of the Mortgaged Properties,
      subject only to the Liens securing the Collateral in respect of the First Lien
      Credit Documents (the "First Liens") and other
      Permitted Liens, sufficient to cause the Mortgaged Properties to include at
      all
      times eighty-five percent (85%) of the Net Present Value of the Proved Reserves
      and at least ninety percent (90%) of the Net Present Value of the Proved
      Developed Producing Reserves, in each case as set forth in the most recent
      Reserve Report.  In addition, the Company and each Guarantor shall
      furnish to the Administrative Agent title due diligence in form satisfactory
      to
      the Administrative Agent and will furnish all other documents and information
      relating to such Mortgaged Properties as the Administrative Agent may reasonably
      request.  The Company shall pay the reasonable out-of-pocket costs and
      expenses of all filings and recordings and all searches reasonably deemed
      necessary by the Administrative Agent to establish and determine the validity
      and the priority of the Liens created or intended to be created by the Security
      Documents; and the Company and each Guarantor shall satisfy all other claims
      and
      charges which in the reasonable opinion of the Administrative Agent might
      prejudice, impair or otherwise affect any of the Mortgaged Properties or the
      Lenders' Lien thereon.

     

    (c)           With
      respect to any Collateral (whether tangible or intangible, but excluding titled
      vehicles or other Collateral with respect to which a security interest cannot
      be
      perfected by the filing of a financing statement under the UCC) acquired after
      the Restatement Effective Date by the Company or any Guarantor as to which
      the
      Administrative Agent, for the benefit of the Secured Parties, does not otherwise
      have a fully perfected Lien subject only to the First Liens, promptly (and
      in no
      event later than twenty (20) days (or such later date as may be agreed by the
      Administrative Agent) after becoming aware of the need therefor) take all
      actions necessary or advisable to grant to

     

    

    
      
        
          
          

        

        
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    the
      Administrative Agent, for the benefit of the Secured Parties, fully perfected
      second priority security interest in such Collateral, subject only to the First
      Liens and other Permitted Liens, including without limitation, the filing of
      UCC
      financing statements in such jurisdictions as may be required by the Security
      Documents or by law or as may be reasonably requested by the Administrative
      Agent; provided, however, notwithstanding the foregoing, Property will be
      excluded from the Collateral in circumstances where the Administrative Agent
      and
      the Company agree that the cost of obtaining a security interest in such
      Property is excessive in relation to the value afforded thereby, or if the
      granting of a security interest in such Property would be prohibited by contract
      (other than any non-assignment of payment intangibles provision that is
      unenforceable under the UCC) or any applicable Requirement of Law.

     

    7.15           [Intentionally
      omitted.]

     

    7.16           Hedging
      Program.  Not
      later than the fifteenth (15th) day following the Restatement Effective Date,
      the Company shall, and shall cause its Subsidiaries to enter into, and shall
      maintain at all times thereafter during the relevant period, Derivative
      Contracts for the purpose of hedging prices on the Oil and Gas thereafter
      expected to be produced by the Company or any of its Subsidiaries, which
      contracts shall (a) at all times through the third anniversary of the
      Restatement Effective Date cover not less than 50% of the Company's and its
      Subsidiaries' aggregate Projected Oil and Gas Production anticipated to be
      sold
      in the ordinary course of such Persons' business during such three-year period,
      (b) thereafter, roll forward on a semi-annual basis in order to cover not less
      than 50% of the Company's and its Subsidiaries' aggregate Projected Oil and
      Gas
      Production anticipated to be sold in the ordinary course of such Person's
      business during the ensuing twelve (12) fiscal quarters and (c) shall otherwise
      be in form and substance reasonably acceptable to the Administrative
      Agent.  The Company shall provide copies to the Administrative Agent
      of all Derivative Contracts then in effect not later than the fifteenth (15th)
      day following the Restatement Effective Date, and thereafter contemporaneously
      with the delivery of each Reserve Report as prescribed by Section 7.2(c) beginning with the delivery of the Reserve
      Report required to be delivered on or before October 1,
      2007.  Delivery of such copies at such times shall be accompanied by
      delivery of a certificate of a Responsible Officer certifying that the Company
      is in compliance with the requirements of this Section 7.16.

     

    ARTICLE
      VIII

     

    NEGATIVE
      COVENANTS

     

    So
      long
      as any Lender shall have any Commitment hereunder, or any Loan or other
      Obligation shall remain unpaid or unsatisfied:

     

    8.1           Limitation
      on Liens.  The
      Company and each Guarantor shall not, and shall not permit any of its respective
      Subsidiaries to, directly or indirectly, make, create, incur, assume or suffer
      to exist any Lien upon or with respect to any part of its Property, whether
      now
      owned or hereafter acquired, other than the following:

    

    
      
        
          
          

        

        
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        (a)           any
      Lien on Property of the Company or any Subsidiary as set forth in Schedule
      8.1
      and any modifications, replacements, renewals or extensions thereof;
provided, however, that (i) the Lien does not extend to any additional
      Property other than (A) after-acquired Property that is affixed or incorporated
      into the Property covered by such Lien or financed by Indebtedness permitted
      under Section 8.5, and (B) proceeds and products
      thereof and (ii) the modification, replacement, renewal, extension or
      refinancing of the obligations secured or benefited by such Liens (if such
      obligations constitute Indebtedness) is permitted by Section 8.5;

     

    (b)           any
      Lien created under any Loan Document;

     

    (c)           Liens
      for Taxes, fees, assessments or other governmental charges which are not
      delinquent or remain payable without penalty, or to the extent that non payment
      thereof is permitted by Section 7.7;

     

    (d)           carriers',
      warehousemen's, mechanics', landlords', materialmen's, repairmen's or other
      similar Liens arising in the ordinary course of business (whether by law or
      by
      contract) which (i) are not delinquent, (ii) remain payable without penalty,
      (iii) are being contested in good faith and by appropriate proceedings, which
      proceedings have the effect of preventing the forfeiture or sale of the Property
      subject thereto or (iv) the failure of which to pay could not reasonably be
      expected to have a Material Adverse Effect;

     

    (e)           Liens
      consisting of (i) pledges or deposits required in the ordinary course of
      business in connection with workers' compensation, unemployment insurance and
      other social security legislation; (ii) pledges and deposits in the ordinary
      course of business not exceeding $625,000 in the aggregate securing insurance
      premiums or reimbursement obligations under insurance policies, in each case
      payable to insurance carriers that provide insurance to the Company or any
      of
      its Subsidiaries; or (iii) obligations in respect of letters of credit or bank
      guarantees that have been posted by the Company or any of its Subsidiaries
      to
      support the payments of the items set forth in clauses (i) and (ii) of this
      Section 8.1(e);

     

    (f)           easements,
      rights of way, restrictions, defects or other exceptions to title and other
      similar encumbrances incurred in the ordinary course of business which, in
      the
      aggregate, are not material in amount, are not incurred to secure Indebtedness,
      and which do not in any case materially detract from the value of the Property
      subject thereto or interfere with the ordinary conduct of the businesses of
      the
      Company, the Guarantors and their respective Subsidiaries;

     

    (g)           Liens
      on the Property of the Company, any Guarantor or any Subsidiary of such Person
      securing (i) the non-delinquent performance of bids, trade contracts (other
      than
      for borrowed money), leases or statutory obligations, (ii) Contingent
      Obligations on surety, performance and appeal bonds, and (iii) other
      non-delinquent obligations of a like nature; in each case, incurred in the
      ordinary course of business;

     

    

    
      
        
          
          

        

        
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      (h)           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 as to deposit
        accounts or other funds maintained with a creditor depository institution
        or
        under any deposit account agreement entered into in the ordinary course of
        business; provided, however, that (i) such deposit account is not a dedicated
        cash collateral account and is not subject to restrictions against access
        by the
        Company, (ii) the Company (or applicable Subsidiary) maintains (subject to
        such
        right of set off) dominion and control over such account(s), and (iii) such
        deposit account is not intended by the Company, any Guarantor or any Subsidiary
        to provide cash collateral to the depository institution;

    

     

    (i)           Oil
      and Gas Liens to secure obligations which are not delinquent and which do not
      in
      any case materially detract from the value of the Oil and Gas Property subject
      thereto;

     

    (j)           Liens
      on the Collateral securing the First Lien Obligations; provided, however, that
      such Liens are subject to the Intercreditor Agreement;

     

    (k)           Liens
      on Property of Exempt Subsidiaries securing Non-Recourse Debt permitted to
      be
      incurred under Section 8.5(d);

     

    (l)           Liens
      securing judgments for the payment of money not constituting an Event of
      Default;

     

    (m)           Liens
      securing purchase money Indebtedness and Capitalized Leases permitted hereunder;
      provided, however, that such Liens do not at any time encumber any Property
      other than the Property (including after-acquired Property) financed by such
      Indebtedness and the proceeds and the products thereof and accessions thereto;
      and provided further, however, that individual financings of assets provided
      by
      one lender may be cross collateralized to other financings of equipment provided
      by such lender;

     

    (n)           (i)
      leases, licenses, subleases or sublicenses granted to other Persons in the
      ordinary course of business which do not (A) interfere in any material respect
      with the business of the Company or any of its Subsidiaries or (B) secure any
      Indebtedness for borrowed money or (ii) the rights reserved or vested in any
      Person by the terms of any lease, license, franchise, grant or permit held
      by
      the Company or any of its Subsidiaries or by a statutory provision, to terminate
      any such lease, license, franchise, grant or permit, or to require annual or
      periodic payments as a condition to the continuance thereof;

     

    (o)           Liens
      (i) in favor of the seller of any Property to be acquired in an investment
      permitted pursuant to Sections 8.4 to be applied
      against the purchase price for such investment, (ii) consisting of an agreement
      to Dispose of any Property in a Disposition permitted under Section 8.2, in each case, solely to the extent such
      investment or Disposition, as the case may be, would have been permitted on
      the
      date of the creation of such Lien and (iii) earnest money deposits made by
      the
      Company or any of its Subsidiaries in connection with any letter of intent
      or
      purchase agreement permitted hereunder;

    

    
      
        
          
          

        

        
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      (p)           Liens
        existing on the Property of any Person that becomes a Subsidiary, in each
        case
        after the date hereof (other than Liens on the Capital Stock of any Person
        that
        becomes a Subsidiary) and any modifications, replacements, renewals or
        extensions thereof;
        provided, however, that (i) such Lien does not extend to or cover any other
        Property (other than the proceeds or products thereof and after-acquired
        Property subjected to a Lien pursuant to terms existing at the time of such
        acquisition, it being understood that such requirement shall not be permitted
        to
        apply to any Property to which such requirement would not have applied but
        for
        such acquisition), and (ii) the Indebtedness secured thereby (or, as applicable,
        any modifications, replacements, renewals or extensions thereof) is permitted
        under Section 8.5;

    

     

    (q)           Liens
      arising from precautionary UCC financing statement filings regarding leases
      entered into by the Company or any of its Subsidiaries in the ordinary course
      of
      business;

     

    (r)           Liens
      arising out of conditional sale, title retention, consignment or similar
      arrangements for sale of goods entered into by the Company or any of its
      Subsidiaries in the ordinary course of business not prohibited by this
      Agreement;

     

    (s)           Permitted
      Encumbrances (as defined in the Mortgages);

     

    (t)           Liens
      in favor of the Company securing investments permitted under Section 8.4(i); or

     

    (u)           other
      Liens securing Indebtedness or other obligations (other than First Liens)
      outstanding in an aggregate principal amount not to exceed the lesser
      of:  (i) the difference between $12,500,000 minus the aggregate
      principal amount then outstanding of all Indebtedness secured by Liens permitted
      under Section 8.1(m) and Section 8.1(p) and (ii) $6,250,000.

     

    8.2           Disposition
      of Assets.  The
      Company and each Guarantor shall not, and shall not permit any of its respective
      Subsidiaries that are Guarantors to, directly or indirectly, sell, assign,
      lease, convey, transfer or otherwise dispose of (whether in one or a series
      of
      transactions) (collectively, "Dispositions") any
      Property (including accounts and notes receivable, with or without recourse),
      except:

     

    (a)           Dispositions
      permitted under Sections 8.3, 8.4, or 8.9
      and Liens
      permitted by Section 8.1;

     

    (b)           Dispositions
      of inventory (including produced Oil and Gas) in the ordinary course of
      business;

     

    (c)           Dispositions
      among the Company and wholly-owned Subsidiaries that are
      Guarantors;

     

    (d)           obsolete,
      used, worn out or surplus equipment in the ordinary course of
      business;

     

    (e)           Dispositions
      of accounts and notes receivable in the ordinary course of business consistent
      with past practices;

     

    

    
      
        
          
          

        

        
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    (f)           Dispositions
      of interests in Oil and Gas Properties, or portions thereof, that are sold
      for
      fair cash consideration (considering any net production proceeds from the
      effective date of any such Disposition to the closing thereof that are credited
      against the purchase price payable at such closing as Net Cash Proceeds received
      by the Company or such Guarantor); provided, however, that the aggregate sales
      prices (as of the effective date of each particular Disposition) for
      Dispositions made pursuant to this Section 8.2(f)
      during any Borrowing Base Period shall not exceed 5% of the present value of
      the
      future cash flows from Proved Reserves included in the Oil and Gas Properties
      as
      set forth in the most recent Reserve Report delivered pursuant to Section 6.11 or Section 7.2(c);

     

    (g)           the
      abandonment of any well or forfeiture, surrender or release by the Company
      or
      any Guarantor of any lease in the ordinary course of business which is not
      materially disadvantageous in any way to the Lenders and which, in the Company's
      or such Guarantor's opinion, is in the best interest of the Company or such
      Guarantor;

     

    (h)           Dispositions
      of Property other than Hydrocarbon Interests to the extent that (i) such
      Property is exchanged for credit against the purchase price of similar
      replacement Property or (ii) the proceeds of such Disposition are promptly
      applied to the purchase price of such replacement Property;

     

    (i)           Dispositions
      of Cash Equivalents;

     

    (j)           farm-out
      agreements or participation agreements, or leases, subleases, licenses or
      sublicenses of Property (including real Property and intellectual Property
      but
      excluding Oil and Gas Properties with which Proved Reserves are associated)
      in
      the ordinary course of business and which do not materially interfere with
      the
      business of the Company and its Subsidiaries;

     

    (k)           transfers
      of Property subject to Recovery Events upon receipt of the Net Cash Proceeds
      of
      such Recovery Event; or

     

    (l)           other
      Dispositions of Property by the Company and the Guarantors (other than Oil
      and
      Gas Properties); provided, however, that (i) at the time of such Disposition,
      no
      Event of Default shall exist or would result from such Disposition, (ii) the
      aggregate book value of all Property Disposed of in reliance on this Section
8.2(l) shall not exceed $3,750,000 and (iii) the sale
      price for such Property (if in excess of $375,000) shall be paid to the Company
      or such Guarantor for not less than 75% cash or Cash Equivalent
      consideration.

     

    8.3           Consolidations
      and Mergers.  The
      Company and each Guarantor shall not, directly or indirectly, merge, consolidate
      with or into, or convey, transfer, lease or otherwise dispose of (whether in
      one
      transaction or in a series of transactions) all or substantially all of its
      assets (whether now owned or hereafter acquired) to or in favor of any Person,
      except:

     

    (a)           any
      Guarantor may merge with the Company or another Guarantor; provided, however,
      that the Company shall be the continuing or surviving Person in the case of
      a
      merger involving the Company;

     

    

    
      
        
          
          

        

        
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    (b)           any
      Subsidiary that is not a Guarantor may merge with the Company or a Guarantor;
      provided, however, that the Company or such Guarantor shall be the continuing
      or
      surviving Person;

     

    (c)           a
      merger, dissolution, liquidation, consolidation or Disposition, the purpose
      of
      which is to effect a Disposition permitted pursuant to Section 8.2; or

     

    (d)           the
      Company or any Guarantor may complete Corporate Acquisitions permitted under
      Section 8.4.

     

    8.4           Loans
      and Investments.  The
      Company and each Guarantor shall not, directly or indirectly, purchase or
      acquire, or make any commitment therefor, any Capital Stock or any obligations
      or other securities of, or any interest in, any Person, or make any Corporate
      Acquisitions, or make any advance, loan, extension of credit or capital
      contribution to or any other investment in, any Person, including any Affiliate
      of the Company, except for:

     

    (a)           investments
      in Cash Equivalents;

     

    (b)           extensions
      of credit in the nature of accounts receivable or notes receivable arising
      from
      the sale or lease of goods or services in the ordinary course of
      business;

     

    (c)           investments
      in Guarantors that are directly or indirectly wholly-owned Subsidiaries of
      the
      Company;

     

    (d)           investments
      in Derivative Contracts permitted under Section 8.10;

     

    (e)           investments
      resulting from transactions specifically permitted under Section 8.3;

     

    (f)           investments
      with third parties that are (i) customary in the oil and gas business, (ii)
      made
      in the ordinary course of the Company's business, and (iii) made in the form
      of
      or pursuant to purchase agreements, operating agreements, processing agreements,
      farm-in agreements, farm-out agreements, joint venture agreements, development
      agreements, unitization agreements, pooling agreements, joint bidding
      agreements, service contracts and other similar agreements, that do not, in
      any
      case, (x) constitute an investment in any state law partnership or other Person
      (that is not a Guarantor) or (y) involve the Disposition of any Mortgaged
      Property covering Proved Reserves not otherwise permitted under the Loan
      Documents;

     

    (g)           advances
      by the Company to any of its employees (other than corporate officers) in the
      ordinary course of business which do not exceed $375,000 at any time outstanding
      in the aggregate to all such employees;

     

    (h)           acquisitions
      of Hydrocarbon Interests and related assets in the ordinary course of
      business;

     

    

    
      
        
          
          

        

        
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    (i)           (i)
      with respect to loans or advances by the Company to Exempt Subsidiaries existing
      at the Effective Date, the conversion of such loans or advances to Capital
      Stock
      of the debtor Exempt Subsidiary, or the contribution thereof to the capital
      of
      such Exempt Subsidiary and (ii) in addition to the investments permitted by
      the
      foregoing clause (i), provided that there shall not have occurred and be
      continuing an Event of Default hereunder, and no Event of Default would result
      therefrom, after the Effective Date, the making by the Company or a Guarantor
      of
      (A) direct loans and advances to Exempt Subsidiaries to support working capital
      needs not to exceed an aggregate balance of $1,200,000 at any time outstanding
      and (B) other investments in Exempt Subsidiaries not to exceed an aggregate
      amount of $1,200,000 on a cumulative basis;

     

    (j)           (i)
      the Output Acquisition and (ii) provided that there shall not have occurred
      and
      be continuing an Event of Default hereunder, and no Event of Default would
      result therefrom (and subject to compliance with Section 7.12, where applicable), other Corporate Acquisitions
      by the Company of Persons substantially all of the Property of which is
      comprised of domestic Proved Reserves, including Hydrocarbon Interests in the
      federal Outer Continental Shelf or associated gathering, processing, or pipeline
      assets.

     

    (k)           investments
      consisting of Liens, Dispositions, fundamental changes, Indebtedness, and
      Restricted Payments permitted by Sections 8.1, 8.2, 8.3,
8.5
      and 8.9,
      respectively;

     

    (l)           promissory
      notes and other noncash consideration received in connection with Dispositions
      permitted by Section 8.2 (other than Sections 8.2(f) or (k));

     

    (m)           investments
      in the ordinary course of business consisting of endorsements for collection
      or
      deposit;

     

    (n)           investments
      (including debt obligations and Capital Stock) received in connection with
      the
      bankruptcy or reorganization of any Person and in settlement of obligations
      of,
      or other disputes with, such Persons arising in the ordinary course of business;
      or

     

    (o)           guarantees
      by the Company or any Subsidiary of leases (other than Capital Lease
      Obligations) or of other obligations that do not constitute Indebtedness, in
      each case entered into in the ordinary course of business.

     

    8.5           Limitation
      on Indebtedness.  The
      Company and each Guarantor shall not, and shall not permit any of its respective
      Subsidiaries to, directly or indirectly, create, incur, assume, suffer to exist,
      or otherwise become or remain liable with respect to, any Indebtedness, except
      (collectively, "Permitted Indebtedness"):

     

    (a)           Indebtedness
      incurred pursuant to this Agreement;

     

    (b)           Indebtedness
      incurred pursuant to the First Lien Credit Agreement;

     

    

    
      
        
          
          

        

        
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    (c)           Indebtedness
      consisting of Contingent Obligations permitted pursuant to Section 8.8;

     

    (d)           Non-Recourse
      Debt not to exceed $25,000,000 in an aggregate principal amount at any time
      outstanding;

     

    (e)           Indebtedness
      consisting of gas imbalances or obligations in respect of take or pay or other
      prepayments not exceeding the amount specified in Section 6.12;

     

    (f)           Indebtedness
      in respect of Derivative Contracts permitted under Section 8.10;

     

    (g)           guarantees
      by the Company and the Guarantors in respect of Indebtedness of the Company
      and
      such Guarantors otherwise permitted hereunder; provided, however, that if the
      Indebtedness being guaranteed is subordinated to the Obligations, such guarantee
      shall be subordinated to the guarantee of the Obligations;

     

    (h)           Indebtedness
      of (i) of any Loan Party owing to any other Loan Party, or (ii) any Subsidiary
      that is not a Loan Party owing to (A) any Subsidiary that is not a Loan Party
      or
      (B) a Loan Party in respect of an investment permitted under Section 8.4(i);

     

    (i)           Indebtedness
      (other than for borrowed money, purchase money Indebtedness or obligations
      with
      respect to Capital Leases) subject to Liens permitted under Section 8.1;

     

    (j)           Capital
      Leases and purchase money obligations (including obligations in respect of
      mortgage, industrial revenue bond, industrial development bond, and similar
      financings) to finance the purchase, repair or improvement of fixed or capital
      assets and any Permitted Refinancing thereof; provided, however, that the
      aggregate amount of all Indebtedness at any one time outstanding described
      in
      Sections 8.5(j), (l),
(m)
      and (n) shall not
      exceed $12,500,000;

     

    (k)           Indebtedness
      incurred by the Company or its Subsidiaries in a Disposition under agreements
      providing for indemnification, the adjustment of the purchase price or similar
      adjustments;

     

    (l)           Indebtedness
      in respect of netting services, overdraft protections and similar arrangements
      in each case in connection with cash management and deposit accounts; provided,
      however, that the aggregate amount of all Indebtedness at any one time
      outstanding described in Sections 8.5(j), (l), (m)
      and (n) shall not exceed $12,500,000;

    

    
      
        
          
          

        

        
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      (m)           Indebtedness
        consisting of the financing of insurance premiums; provided, however, that
        the
        aggregate amount of all Indebtedness at any one time outstanding described
        in
        Sections 8.5(j), (l),
(m)
        and (n) shall not
        exceed $12,500,000; or

       

      (n)           in
        addition to the Indebtedness otherwise permitted under this Section 8.5,
        Indebtedness described in the definition thereof of the Loan Parties not
        to
        exceed at any time
        outstanding, together with Indebtedness outstanding at such time described
        in
        Sections 8.5(j), (l)
        or (m), $12,500,000 in aggregate principal
        amount.

    

     

    8.6           Transactions
      with Affiliates.  Except
      as set forth on Schedule 8.6, the Company and each Guarantor shall not, and
      shall not permit any of its respective Subsidiaries to, directly or indirectly,
      enter into any transaction with or make any payment or transfer to any Affiliate
      of the Company or its stockholders, except transactions (a) among the Loan
      Parties, (b) in the ordinary course of business and upon fair and reasonable
      terms no less favorable to the Company, such Guarantor or such Subsidiary than
      would obtain in a comparable arm's length transaction with a Person not an
      Affiliate of the Company, such Guarantor or such Subsidiary, (c) customary
      fees
      payable to any directors of the Company and reimbursement of reasonable out
      of
      pocket costs of the directors of the Company, (d) employment and severance
      arrangements between the Company or its Subsidiaries and their respective
      officers, consultants and employees in the ordinary course of business, (e)
      the
      payment of customary fees and indemnities to directors, officers and employees
      of the Company and the Subsidiaries in the ordinary course of business or (f)
      to
      the extent permitted under Sections 8.4, 8.5 and 8.9.

     

    8.7           Margin
      Stock.  The
      Company and each Guarantor shall not, and shall not permit any of its respective
      Subsidiaries to, directly or indirectly, suffer or permit any Subsidiary to,
      use
      any portion of the proceeds of the Loans to (i) purchase or carry Margin Stock,
      (ii) repay or otherwise refinance Indebtedness of the Company or others incurred
      to purchase or carry Margin Stock, (iii) extend credit for the purpose of
      purchasing or carrying any Margin Stock, or (iv) acquire any security in any
      transaction that is subject to Section 13 or 15(d) of the Exchange
      Act.

     

    8.8           Contingent
      Obligations.  The
      Company and each Guarantor shall not, and shall not permit any of its respective
      Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
      exist any Contingent Obligations except:

     

    (a)           endorsements
      for collection or deposit in the ordinary course of business;

     

    (b)           Derivative
      Contracts permitted under Section 8.10
      hereof;

     

    (c)           obligations
      under plugging bonds, performance bonds and fidelity bonds issued for the
      account of the Company or its Subsidiaries, obligations to indemnify or make
      whole any surety and similar agreements incurred in the ordinary course of
      business;

     

    (d)           this
      Agreement and each Guaranty;

     

    (e)           Guaranty
      Obligations permitted under Section 8.5 or
      obligations in respect of letters of credit or bank guarantees permitted under
      Section 8.1(e);

     

    (f)           Contingent
      Obligations consisting of gas imbalances or obligations in respect of take
      or
      pay or other prepayments not to exceed the amount specified in Section 6.12; or

     

    

    
      
        
          
          

        

        
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    (g)           guarantees
      of leases (other than Capital Leases) or of other obligations that do not
      constitute Indebtedness, in each case entered into in the ordinary course of
      business.

     

    8.9           Restricted
      Payments

     

    .  The
      Company and each Guarantor shall not, directly or indirectly, (a) purchase,
      redeem or otherwise acquire for value any Capital Stock, now or hereafter
      outstanding from its members, partners or stockholders (other than from its
      members, partners or stockholders that are Loan Parties; provided, however,
      that
      (i) to the extent constituting Restricted Payments, the Company and the
      Guarantors may enter into transactions expressly permitted by Section 8.3; (ii) the Company may
      effect  repurchases of Capital Stock deemed to occur upon exercise of
      stock options or warrants if such Capital Stock represent a portion of the
      exercise price of such options or warrants; (iii) the Company may make
      repurchases of Capital Stock necessary to enable the Company to pay federal
      withholding Taxes incurred by an employee upon the vesting of restricted Capital
      Stock granted to such employee in connection with a stock incentive plan; or
      (iv) the Company and any of the Guarantors may pay for the repurchase,
      retirement or other acquisition or retirement for value of Capital Stock of
      the
      Company held by any future, present or former director, officer, member of
      management employee or consultant of the Company or any of its Subsidiaries
      (or
      the estate, family members, spouse or former spouse of any of the foregoing);
      provided, however, that the aggregate amount of Restricted Payments made under
      this clause (iv) does not exceed in any calendar year $375,000 (with unused
      amounts in any calendar year being carried over to the two succeeding calendar
      years); or (b) declare or pay any distribution, dividend or return capital
      to
      its members, partners or stockholders (other than to its members, partners
      or
      stockholders that are Loan Parties), or make any distribution of cash or
      Property to its members, partners or stockholders (other than members, partners
      or stockholders that are Loan Parties; provided, however, that (i) the Company
      may declare and make dividend payments or other distributions payable solely
      in
      the Capital Stock (other than Disqualified Capital Stock) of the Company; (ii)
      the Company may make cash payments in lieu of issuing fractional shares in
      connection with the exercise of warrants, options or other securities
      convertible into or exchangeable for Capital Stock of the Company; or (iii)
      in
      addition to the foregoing Restricted Payments, the Company may make additional
      Restricted Payments to holders of any Qualifying Preferred Stock in an aggregate
      annual amount not to exceed $7,000,000 (collectively "Restricted
      Payments").

     

    8.10           Derivative
      Contracts.

     

    (a)           The
      Company and each Guarantor shall not, directly or indirectly, enter into or
      in
      any manner be liable on any Derivative Contract except:

     

    (i)           Derivative
      Contracts entered into with the purpose and effect of fixing prices on oil
      or
      gas expected to be produced by such Person; provided, however, that at all
      times
      (i) no such contract shall be for speculative purposes; (ii) as of any date
      (the
      "Calculation Date") no such contract, when aggregated
      with all Derivative Contracts permitted under this Section 8.10(a)(i), but excluding Derivative Contracts
      described in clause (v) of this Section 8.10(a)(i),
      shall cover a notional volume in excess of the Applicable Percentage of the
      total Projected Oil and Gas Production to be produced in any month from the
      Proved Developed Producing Reserves reflected in the most recent Reserve
      Report

     

    

    
      
        
          
          

        

        
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    (unless
      and solely to the extent such an excess occurs in a month falling within a
      period covered by a Derivative Contract entered into by the Company to maintain
      compliance with Section 7.16); (iii) each such
      contract (excluding Derivative Contracts offered by a national commodity
      exchange) shall be with the Administrative Agent, or any of the Lenders (or
      Affiliate of a Lender), the First Lien Credit Agent or any First Lien Lender
      (or
      Affiliate of a First Lien Lender), or with a counterparty or have a Guarantor
      of
      the obligation of the counterparty which, at the time the contract is made,
      has
      long-term obligations rated BBB+ or Baa1 or better, respectively, by S&P or
      Moody's; (iv) no such contract requires the Company to put up money, Property,
      letters of credit or other security against the event of its non-performance
      prior to actual default by the Company in performing its obligations thereunder,
      except Liens in favor of the Administrative Agent for the benefit of the Lenders
      under the Security Documents, or the First Liens; and (v) with respect to
      Derivative Contracts under which the Company's or a Guarantor's only interest
      is
      a "put" right or which is a commodity price hedge by means of a price "floor"
      (A) there exists no deferred obligation to pay the related premium or other
      purchase price and (B) all such contracts are with Qualifying Derivative
      Contract Counterparties.

     

    (ii)           The
      Existing Derivative Contracts; provided, however, that no Existing Derivative
      Contract may be amended, restated, supplemented or otherwise modified or
      extended without the prior written consent of the Administrative Agent unless
      such modified Derivative Contract satisfies the requirements set forth in clause
      (i) or clause (ii) of this Section 8.10(a);
      or

     

    (iii)           Derivative
      Contracts entered into with the purpose and effect of fixing interest rates
      on a
      principal amount of Indebtedness of the Company that is accruing interest at
      a
      variable rate; provided, however, that (i) no such contract shall be for
      speculative purposes; (ii) the floating rate index of each such contract
      generally matches the index used to determine the floating rates of interest
      on
      the corresponding Indebtedness of the Company to be hedged by such contract;
      (iii) no such contract requires the Company to put up money, Property, letters
      of credit, or other security against the event of its non-performance prior
      to
      actual default by the Company in performing its obligations thereunder; (iv)
      the
      aggregate notional amount of the Derivative Contracts shall not exceed fifty
      percent (50%) of the Borrowing Base (as defined in the First Lien Credit
      Agreement) during any Borrowing Base Period (as defined in the First Lien Credit
      Agreement); and (v) each such contract shall be with a Lender (or an Affiliate
      of a Lender) or with a counterparty or have a guarantor of the obligation of
      the
      counterparty who, at the time the contract is made, has long-term obligations
      rated BBB+ or Baa1 or better, respectively, by S&P or Moody's.

    

    
      
        
          
          

        

        
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      (b)           In
        the event the Company enters into a Derivative Contract with any Lender,
        the
        Contingent Obligation evidenced under such Derivative Contract shall not
        be
        applied against such Lender's Commitment nor against the Effective
        Amount.  The benefits of the Security Documents and of the provisions
        of the Loan Documents relating to the Collateral shall also extend to and
        be
        available on a pro rata basis to each Qualifying
        Derivative Contract Counterparty in respect to all Obligations with respect
        to
        the related Qualifying Derivative Contract.

    

     

    8.11           Sale
      Leasebacks.  The
      Company and each Guarantor shall not, and shall not permit any of its respective
      Subsidiaries to, directly or indirectly, become liable, directly or by way
      of
      any Guaranty Obligation, with respect to any lease of any Property (whether
      real, personal or mixed) whether now owned or hereafter acquired, (a) which
      the
      Company or such Guarantor or Subsidiary has sold or transferred or is to sell
      or
      transfer to any other Person or (b) which the Company or such Guarantor or
      Subsidiary intends to use for substantially the same purposes as any other
      Property which has been or is to be sold or transferred by the Company or such
      Guarantor or Subsidiary to any other Person in connection with such
      lease.

     

    8.12           Consolidated
      Leverage Ratio.  As
      of the last day of any Fiscal Quarter, the Company shall not permit the
      Consolidated Leverage Ratio to exceed 3.50 to 1.00.

     

    8.13           Current
      Ratio.  As
      of the last day of any Fiscal Quarter, the Company shall not permit the ratio
      of
      Current Assets to Current Liabilities to be less than 1.00 to 1.00; provided,
      however, that for purposes of such ratio, adjustments required by FAS 133 and
      143 that affect the calculation of Current Assets or Current Liabilities shall
      be excluded from current assets and current liabilities,
      respectively.

     

    8.14           Minimum
      Interest Coverage Ratio.  The
      Company shall not permit the ratio of Consolidated EBITDAX for any period
      commencing with the period ended June 30, 2007 to Consolidated Interest Expense
      for such period to be less than 2.00 to 1.00.

     

    8.15           Minimum
      PV 10 to Consolidated Total Debt Ratio.  The
      Company shall not permit the ratio of Net Present Value to Consolidated Total
      Debt at the end of any fiscal quarter to be less than 1.50 to 1.00.

     

    8.16           Change
      in Business.  The
      Company and each Guarantor shall not, and shall not permit any of its respective
      Subsidiaries to, directly or indirectly, engage in any business or activity
      other than the Principal Business and businesses ancillary or reasonably related
      thereto.

     

    8.17           Accounting
      Changes.  The
      Company and each Guarantor shall not, and shall not permit any of its respective
      Subsidiaries to, directly or indirectly, make any significant change in
      accounting treatment or reporting practices, except as required by GAAP, or
      change the fiscal year of the Company or of any Guarantor or
      Subsidiary.

     

    8.18           Certain
      Contracts; Amendments; Multiemployer ERISA Plans.  Except
      for the restrictions expressly set forth in the Loan Documents and the First
      Lien Credit Documents, the Company and each Guarantor shall not, directly or
      indirectly, enter into, create, or otherwise allow to exist any contract or
      other consensual restriction on the ability of any Guarantor to: (a) pay
      dividends or make other distributions to the Company or another Guarantor,
      (b)
      redeem its Capital Stock held by the Company or another Guarantor, (c) repay
      Indebtedness owing by it to the Company or another Guarantor, or (d) transfer
      any of its Property to the Company or another Guarantor.  The Company
      and each Guarantor shall not, and shall not permit any ERISA Affiliate to,
      incur
      any obligation to contribute to any Multiemployer Plan.

     

    

    
      
        
          
          

        

        
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    8.19           Midstream
      Contracts.  The
      Company and each Guarantor shall not, directly or indirectly;

     

    (a)           amend,
      supplement or otherwise modify any material term or condition (pursuant to
      a
      waiver granted by or to such Person or otherwise) or fail to enforce strictly
      the terms and conditions of the indemnities and rights furnished to the Company
      or any Guarantor pursuant to the Midstream Contracts, in each case, such that
      after giving effect thereto such terms, conditions, indemnities and rights
      shall
      be materially less favorable to the interests of the Loan Parties or the Lenders
      with respect thereto; or

     

    (b)           otherwise
      amend, supplement or otherwise modify or fail to enforce the terms and
      conditions of the Midstream Contracts except to the extent that any such
      amendment, supplement or modification or failure to enforce could not reasonably
      expected to have a Material Adverse Effect.

     

    8.20           First
      Lien Credit Agreement.  The
      Company and each Guarantor shall not, directly or indirectly: (a) amend or
      modify any of the terms or provisions of the First Lien Credit Agreement, except
      as permitted by Section 5.3(a) of the Intercreditor Agreement; (b) cause, or
      purport to cause, the Liens securing the Obligations to cease to be Permitted
      Liens as defined therein; or (c) grant any Lien for the benefit of the lenders
      thereunder, except to the extent permitted hereunder or required by the
      Intercreditor Agreement.

     

    8.21           Limitation
      on Amendments to Output Acquisition Documents.  The
      Company shall not, directly or indirectly:

     

    (a)           amend,
      supplement or otherwise modify any material term or condition (pursuant to
      a
      waiver granted by or to such Person or otherwise) or fail to enforce strictly
      the terms and conditions of the indemnities and rights furnished to the Company
      or any of its Subsidiaries pursuant to the Output Acquisition Documents such
      that after giving effect thereto such terms, conditions, indemnities or rights
      shall be materially less favorable to the interests of the Loan Parties or
      the
      Lenders with respect thereto; or

     

    (b)           otherwise
      amend, supplement or otherwise modify or fail to enforce the terms and
      conditions of the Output Acquisition Documents except to the extent that any
      such amendment, supplement or modification or failure to enforce could not
      reasonably be expected to have a Material Adverse Effect.

     

    8.22           Forward
      Sales, Production Payments, Etc.  The
      Company and each Guarantor shall not, directly or indirectly:

     

    (a)           enter
      into any forward sales transaction or agreement with respect to physical
      deliveries of Oil and Gas outside the ordinary course of business as conducted
      prior to the Restatement Effective Time; or

     

    (b)           sell
      or convey any production payment, term overriding interest, net profits interest
      or any similar interest (except for overriding royalty or net profits interests
      granted to employees or consultants of the Company in the ordinary course of
      business in connection with the generation of prospects or the development
      of
      Oil and Gas Properties).

     

    

    
      
        
          
          

        

        
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    8.23           Use
      of Proceeds.  The
      Company and each Guarantor shall not, and shall not permit any of its respective
      Subsidiaries to, directly or indirectly, use or permit the use of all or any
      portion of the Loans for any purpose other than those set forth in Section
7.13.

     

    ARTICLE
      IX

     

    EVENTS
      OF DEFAULT

     

    9.1           Event
      of Default.  Any
      of the following shall constitute an "Event of
      Default":

     

    (a)           Principal
      Non Payment.  The Company fails to pay, when and as required to be
      paid herein, any amount of scheduled principal payment of any Loan of this
      Agreement;

     

    (b)           Interest
      and Expense Non-Payment.  Any Loan Party fails to pay, when and as
      required to be paid herein, any interest due on any Interest Payment Date,
      any
      other payments for fees, expenses, or other amount payable hereunder or under
      any other Loan Document within three Business Days after the same becomes due
      and payable;

     

    (c)           Representation
      or Warranty.  Any representation or warranty by the Company or any
      Guarantor made or deemed made herein, in any other Loan Document, or which
      is
      contained in any certificate, document or financial or other statement by the
      Company, any Guarantor or any Responsible Officer, furnished at any time under
      this Agreement, or in or under any other Loan Document, is incorrect in any
      material respect on or as of the date made or deemed made;

     

    (d)           Specific
      Defaults.  Any Loan Party fails to perform or observe any term,
      covenant or agreement contained in Section 7.13 or
      in Article VIII;

     

    (e)           Other
      Defaults.  The Company or any Guarantor fails to perform or
      observe any other term or covenant contained in this Agreement or any other
      Loan
      Document, and such default shall continue unremedied for a period of 30 days,
      in
      all other cases after the earlier of (i) the date upon which a Responsible
      Officer knew or reasonably should have known of such default and (ii) the date
      upon which written notice thereof is given to the Company by the Administrative
      Agent or any Lender;

     

    (f)           Cross
      Default.  (i) Subject to clause (iii) of this paragraph, the
      Company, any Guarantor or any other Subsidiary (A) fails to make any payment
      of
      more than $5,000,000 in respect of any Indebtedness or Contingent Obligation
      when due (whether by scheduled maturity, required prepayment, acceleration,
      demand, or otherwise) and such failure continues after the applicable grace
      or
      notice period, if any, specified in the relevant document on the date of such
      failure and, in the case of any such failure by an Exempt Subsidiary, such
      failure results in a Material Adverse Effect or (B) fails after the applicable
      grace or notice period, if any, specified in the relevant document on the date
      of such failure to perform or observe any other condition or covenant, or any
      other event shall occur or condition exist, under any agreement or instrument
      relating to any such Indebtedness or Contingent Obligation having an aggregate
      principal amount of more than 

     

    

    
      
        
          
          

        

        
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    $5,000,000
      if the effect of such failure, event or condition is to cause, or to permitthe
      holder or holders of such Indebtedness or beneficiary or beneficiaries of such
      Indebtedness (or a trustee or agent on behalf of such holder or holders or
      beneficiary or beneficiaries) to cause such Indebtedness to be declared to
      be
      due and payable prior to its stated maturity, or such Contingent Obligation
      to
      become payable or cash collateral in respect thereof to be demanded and, in
      the
      case of any such failure by an Exempt Subsidiary, such failure results in a
      Material Adverse Effect; (ii) subject to clause (iii) of this paragraph, any
      Indebtedness or Contingent Obligation of the Company, any Guarantor or any
      other
      Subsidiary in excess of $5,000,000 shall be declared due and payable prior
      to
      its stated maturity or cash collateral is demanded in respect of such Contingent
      Obligation; or (iii) with respect to the Indebtedness or Contingent Obligation
      under any First Lien Credit Documents, (x) an "Event of Default" (as defined
      in
      any First Lien Credit Document) shall have occurred and shall continue and
      (y)
      the First Lien Credit Agent shall have exercised its remedies pursuant to
      Section 9.2 of the First Lien Credit Agreement;

     

    (g)           Insolvency;
      Voluntary Proceedings.  The Company, any Guarantor or any other
      Subsidiary (i) generally fails to pay, or admits in writing its inability to
      pay, its debts as they become due, subject to applicable grace periods, if
      any,
      whether at stated maturity or otherwise; (ii) commences any Insolvency
      Proceeding with respect to itself; or (iii) takes any action to effectuate
      or
      authorize any of the foregoing and, in the case of any of the foregoing
      occurring with respect to an Exempt Subsidiary (other than Maverick-Dimmit
      Pipeline, Ltd.), a Material Adverse Effect results therefrom;

     

    (h)           Involuntary
      Proceedings. (i) Any involuntary Insolvency Proceeding is commenced or filed
      against the Company, any Guarantor, or any other Subsidiary, or any writ,
      judgment, warrant of attachment, execution or similar process, is issued or
      levied against all or a substantial part of the Company's, any Guarantor's
      or
      any other Subsidiary's Property, and any such proceeding or petition shall
      not
      be dismissed or stayed, or such writ, judgment, warrant of attachment, execution
      or similar process shall not be released, vacated or fully bonded within 60
      days
      after commencement, filing or levy; (ii) the Company, any Guarantor or any
      other
      Subsidiary files an answer admitting the material allegations of a petition
      against it in any Insolvency Proceeding, or an order for relief (or similar
      order under non-U.S. law) is ordered in any Insolvency Proceeding; or (iii)
      the
      Company, any Guarantor or any other Subsidiary consents to the appointment
      of a
      receiver, trustee, custodian, conservator, liquidator, mortgagee in possession
      (or agent therefor), or other similar Person for itself or a substantial portion
      of its Property or business, and, in the case of any of the foregoing occurring
      with respect to an Exempt Subsidiary (other than Maverick-Dimmit Pipeline,
      Ltd.), a Material Adverse Effect results therefrom;

     

    (i)           Monetary
      Judgments.  One or more non-interlocutory judgments,
      non-interlocutory orders, decrees or arbitration awards is entered against
      the
      Company or any Guarantor or any other Subsidiary involving in the aggregate
      a
      liability (to the extent not covered by independent third-party insurance as
      to
      which the insurer has not denied coverage) as to any single or related series
      of
      transactions, incidents or conditions, of $5,000,000 or more, and the same
      shall
      remain unsatisfied, unvacated and unstayed pending appeal for a period of 60
      consecutive days after the entry thereof;

     

    

    
      
        
          
          

        

        
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    (j)           Change
      of Control.  There occurs any Change of Control;

     

    (k)           Guaranty
      Default.  A Guaranty ceases to be in full force and effect, or
      such Guarantor contests in any manner the validity or enforceability thereof
      or
      denies that it has any further liability or obligation thereunder other than
      as
      a result of payment in full of the Obligations;

     

    (l)           Enforceability
      or Perfection of Loan Documents.  (i) Any Loan Document shall, at
      any time after its execution and delivery and for any reason, cease to be in
      full force and effect or shall be declared to be null and void, the validity
      or
      enforceability thereof shall be contested by any Person party thereto (other
      than the Administrative Agent or any Lender) or any such Person party thereto
      (other than the Administrative Agent or any Lender) shall deny that it has
      any
      or further liability or obligation thereunder; or (ii) any Lien created under
      any Loan Document shall fail to constitute a fully perfected Lien, subject
      only
      to Permitted Liens, and such failure shall continue for at least 30 days after
      the earlier of (A) the date upon which a Responsible Officer knew or reasonably
      should have known of such default or (B) the date upon which written notice
      thereof is given to the Company by the Administrative Agent or any Lender;
      or

     

    (m)           ERISA.  Either
      (i) any "accumulated funding deficiency" (as defined in Section 412(a) of the
      Code) in excess of $2,000,000 exists with respect to any ERISA Plan, whether
      or
      not waived by the Secretary of the Treasury or his delegate, or (ii) the Company
      or any ERISA Affiliate institutes steps to terminate any ERISA Plan and the
      then
      current value of such ERISA Plan's benefit liabilities exceeds the then current
      value of such ERISA Plan's assets available for the payment of such benefit
      liabilities by more than $2,000,000.

     

    9.2           Remedies.  If
      any Event of Default occurs and is continuing, the Administrative Agent shall,
      at the request of, or may, with the consent of, the Required
      Lenders:

     

    (a)           declare
      the Commitment, if any, of each Lender to make Loans to be terminated, or
      declare all or any part of the unpaid principal of the Loans, all interest
      accrued and unpaid thereon and all other amounts payable under the Loan
      Documents to be immediately due and payable, whereupon the same shall become
      immediately due and payable, without presentment, demand, protest, notice of
      intention to accelerate, notice of acceleration, or any other notice of any
      kind, all of which are hereby expressly waived by the Company and each
      Guarantor; and

     

    (b)           exercise
      on behalf of itself and the Lenders all rights and remedies available to it
      and
      the Lenders under the Loan Documents or applicable law; provided, however,
      that
      upon the occurrence of any event specified in Section 9.1(g) or (h) (in the
      case of clause (i) of Section 9.1(h) upon the
      expiration of the 60-day period mentioned therein), the obligation of each
      Lender to make Loans shall automatically terminate and the unpaid principal
      amount of all outstanding Loans and all interest and other amounts as aforesaid
      shall automatically become due and payable without further act of the
      Administrative Agent, or any Lender and without presentment, demand, protest,
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    intention
      to accelerate, notice of acceleration or any other notice of any kind, all
      of
      which are hereby expressly waived by the Company and each
      Guarantor.

     

    9.3           Rights
      Not Exclusive.  The
      rights provided for in this Agreement and the other Loan Documents are
      cumulative and are not exclusive of any other rights, powers, privileges or
      remedies provided by law or in equity, or under any other instrument, document
      or agreement now existing or hereafter arising.

     

    ARTICLE
      X

     

    THE
      ADMINISTRATIVE AGENT

     

    10.1           Appointment
      and Authorization; Limitation of Agency.  Each
      Lender hereby irrevocably (subject to Section 10.9)
      appoints, designates and authorizes the Administrative Agent to take such action
      on its behalf under the provisions of this Agreement and each other Loan
      Document and to exercise such powers and perform such duties as are expressly
      delegated to it by the terms of this Agreement or any other Loan Document,
      together with such powers as are reasonably incidental thereto.  The
      duties of the Administrative Agent shall be administrative and mechanical in
      nature; notwithstanding any provision to the contrary contained elsewhere in
      this Agreement or in any other Loan Document, the Administrative Agent shall
      not
      have any duty or responsibility, except those expressly set forth herein, nor
      shall the Administrative Agent, under any circumstances, have or be deemed
      to
      have any fiduciary relationship with any Person, and no implied covenants,
      functions, responsibilities, duties, obligations or liabilities shall be read
      into this Agreement or any other Loan Document or otherwise exist against the
      Administrative Agent.

     

    10.2           Delegation
      of Duties.  The
      Administrative Agent may execute any of its duties under this Agreement or
      any
      other Loan Document by or through agents, employees or attorneys in fact and
      shall be entitled to advice of counsel concerning all matters pertaining to
      such
      duties.  The Administrative Agent shall not be responsible for the
      negligence or misconduct of any agent or attorney in fact that it selects with
      reasonable care.

     

    10.3           Liability
      of Administrative Agent.  None
      of the Administrative Agent-Related Persons shall (i) be liable for any action
      taken or omitted to be taken by any of them under or in connection with this
      Agreement or any other Loan Document or the transactions contemplated hereby
      (except for its own gross negligence or willful misconduct), or (ii) be
      responsible in any manner to any of the Lenders for any recital, statement,
      representation or warranty made by the Company, any Guarantor or any Subsidiary
      or Affiliate of the Company, or any officer thereof, contained in this Agreement
      or in any other Loan Document, or in any certificate, report, statement or
      other
      document referred to or provided for in, or received by the Administrative
      Agent
      under or in connection with, this Agreement or any other Loan Document, or
      the
      validity, effectiveness (other than such Administrative Agent-Related Person's
      own due execution and delivery), genuineness, enforceability or sufficiency
      of
      this Agreement or any other Loan Document, or for any failure of the Company,
      any Guarantor or any other party to any Loan Document to perform its obligations
      hereunder or thereunder.  No Administrative Agent-Related Person shall
      be under any obligation to any Lender to ascertain or to inquire as to the
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    performance
      of any of the agreements contained in, or conditions of, this Agreement or
      any
      other Loan Document, or to inspect the Property, books or records of the
      Company, any Guarantor or any of the Company's other Subsidiaries or
      Affiliates.

     

    10.4           Reliance
      by Administrative Agent.

     

    (a)           The
      Administrative Agent shall be entitled to rely, and shall be fully protected
      in
      relying, upon any writing, resolution, notice, consent, certificate, affidavit,
      letter, telegram, facsimile, telex, telephonic or electronic message, statement
      or other document or conversation believed by it to be genuine and correct
      and
      to have been signed, sent or made by the proper Person or Persons, and upon
      advice and statements of legal counsel, independent accountants and other
      experts selected by the Administrative Agent. The Administrative Agent shall
      be
      fully justified in failing or refusing to take any action under this Agreement
      or any other Loan Document unless it shall first receive such advice or
      concurrence of the Lenders as it deems appropriate and, if it so requests,
      it
      shall first be indemnified to its satisfaction by the Lenders against any and
      all liability and expense which may be incurred by it by reason of taking or
      continuing to take any such action.  The Administrative Agent shall in
      all cases be fully protected in acting, or in refraining from acting, under
      this
      Agreement or any other Loan Document in accordance with a request or consent
      of
      the Lenders and such request and any action taken or failure to act pursuant
      thereto shall be binding upon all of the Lenders.

     

    (b)           For
      purposes of determining compliance with the conditions specified in Article
      V,
      each Lender that has made available to the Administrative Agent its Pro Rata
      Share of the initial Credit Extension or subsequent Credit Extension, as the
      case may be, shall be deemed to have consented to, approved or accepted or
      to be
      satisfied with, each document or other matter either sent by the Administrative
      Agent to such Lender for consent, approval, acceptance or satisfaction, or
      required thereunder to be consented to or approved by or acceptable or
      satisfactory to the Lender as a condition precedent to such initial Credit
      Extension or subsequent Credit Extension, as applicable.

     

    10.5           Notice
      of Default.  The
      Administrative Agent shall not be deemed to have knowledge or notice of the
      occurrence of any Default or Event of Default, except with respect to Defaults
      in the payment of principal, interest and fees required to be paid to the
      Administrative Agent for the account of the Lenders, unless the Administrative
      Agent shall have received written notice from a Lender or the Company referring
      to this Agreement, describing such Default or Event of Default and stating
      that
      such notice is a "notice of default".  The Administrative Agent will
      notify the Lenders of its receipt of any such notice.  Subject to
      Section 10.4(a), the Administrative Agent shall
      take such action with respect to such Default or Event of Default as may be
      requested by the Required Lenders in accordance with Article IX; provided, however, that unless and until
      the Administrative Agent has received any such request, the Administrative
      Agent
      may (but shall not be obligated to) take such action, or refrain from taking
      such action, with respect to such Default or Event of Default as it shall deem
      advisable or in the best interest of the Lenders.

     

    10.6           Credit
      Decision.  Each
      Lender acknowledges that no Administrative Agent-Related Person has made any
      representation or warranty to it, and that no act by any Administrative
      Agent-Related Person hereafter taken, including any review of the affairs of
      the
      Company, any

     

    

    
      
        
          
          

        

        
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    Guarantor
      or their respective Subsidiaries, shall be deemed to constitute any
      representation or warranty by any Administrative Agent-Related Person to any
      Lender.  Each Lender represents to the Administrative Agent that it
      has, independently and without reliance upon any Administrative Agent-Related
      Person and based on such documents and information as it has deemed appropriate,
      made its own appraisal of and investigation into the business, prospects,
      operations, Property, financial and other condition and creditworthiness of
      the
      Company, and all applicable bank regulatory laws relating to the transactions
      contemplated hereby, and made its own decision to enter into this Agreement
      and
      to extend credit to the Company hereunder.  Each Lender also
      represents that it will, independently and without reliance upon any
      Administrative Agent-Related Person and based on such documents and information
      as it shall deem appropriate at the time, continue to make its own credit
      analysis, appraisals and decisions in taking or not taking action under this
      Agreement and the other Loan Documents, and to make such investigations as
      it
      deems necessary to inform itself as to the business, prospects, operations,
      Property, financial and other condition and creditworthiness of the
      Company.  Except for notices, reports and other documents expressly
      herein required to be furnished to the Lenders by the Administrative Agent,
      the
      Administrative Agent shall not have any duty or responsibility to provide any
      Lender with any credit or other information concerning the business, prospects,
      operations, Property, financial and other condition or creditworthiness of
      the
      Company which may come into the possession of any of the Administrative
      Agent-Related Persons.

     

    10.7           Indemnification.  Whether
      or not the transactions contemplated hereby are consummated, the Lenders shall
      indemnify upon demand the Administrative Agent-Related Persons (to the extent
      not reimbursed by or on behalf of the Company and without limiting the
      obligation of the Company to do so), pro rata according to each respective
      Lender's Pro Rata Share, each Administrative Agent-Related Person from and
      against any and all Indemnified Liabilities INCLUDING SUCH INDEMNIFIED
      LIABILITIES AS MAY ARISE OR BE CAUSED BY THE NEGLIGENCE, SOLE, JOINT,
      CONCURRENT, COMPARATIVE OR OTHERWISE OF SUCH ADMINISTRATIVE AGENT-RELATED
      PERSONS; provided, however, that no Lender shall be liable for the payment
      to
      any Administrative Agent-Related Persons of any portion of such Indemnified
      Liabilities to the extent the same arise from (i) the gross negligence or
      willful misconduct of any Administrative Agent-Related Person or (ii) a claim
      or
      action asserted by one or more other Administrative Agent-Related
      Persons.  Without limitation of the foregoing, each Lender shall
      reimburse the Administrative Agent upon demand for its ratable share of any
      costs or out of pocket expenses (including Attorney Costs) incurred by the
      Administrative Agent in connection with the preparation, execution, delivery,
      administration, modification, amendment or enforcement (whether through
      negotiations, legal proceedings or otherwise) of, or legal advice in respect
      of
      rights or responsibilities under, this Agreement, any other Transaction Document
      or any document contemplated by or referred to herein, to the extent that the
      Administrative Agent is not reimbursed for such expenses by or on behalf of
      the
      Company.  The undertaking in this Section 10.7 shall survive the payment of all Obligations
      hereunder and the resignation or replacement of the Administrative
      Agent.

     

    10.8           Administrative
      Agent in Individual Capacity.  Bank
      of Montreal and its Affiliates may make loans to, accept deposits from, acquire
      or underwrite equity or debt securities of and generally engage in any kind
      of
      banking, investment banking, trust, financial advisory, underwriting or other
      business with the Company and its Affiliates as though Bank of Montreal were
      not
      the Administrative Agent hereunder and without notice to or 

     

    

    
      
        
          
          

        

        
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    consent
      of the Lenders. The Lenders acknowledge that, pursuant to such activities,
      Bank
      of Montreal or its Affiliates may receive information regarding the Company
      or
      its Affiliates (including information that may be subject to confidentiality
      obligations in favor of the Company or such Affiliate) and acknowledge that
      the
      Administrative Agent-Related Persons shall be under no obligation to provide
      such information to them.  With respect to Obligations held by it,
      Bank of Montreal shall have the same rights and powers under this Agreement
      as
      any other Lender and may exercise the same as though it were not the
      Administrative Agent.

     

    10.9           Successor
      Administrative Agent.  The
      Administrative Agent may resign as Administrative Agent upon 30 days' notice
      to
      the Lenders.  If the Administrative Agent resigns under this
      Agreement, the Lenders shall appoint from among the Lenders a successor
      administrative agent for the Lenders, which successor agent shall be consented
      to by the Company (which consent shall not be unreasonably withheld or
      delayed).  If no successor administrative agent is appointed prior to
      the effective date of the resignation of the Administrative Agent, the
      Administrative Agent may appoint, after consulting with the Lenders and the
      Company, a successor administrative agent from among the
      Lenders.  Upon the acceptance of its appointment as successor
      administrative agent hereunder, such successor administrative agent shall
      succeed to all the rights, powers and duties of the retiring Administrative
      Agent and the term "Administrative Agent" shall mean such successor
      administrative agent and the retiring Administrative Agent's appointment, powers
      and duties as Administrative Agent shall be terminated. After any retiring
      Administrative Agent's resignation hereunder as Administrative Agent, the
      provisions of this Article X and Sections 11.4 and 11.5
      shall inure
      to its benefit as to any actions taken or omitted to be taken by it while it
      was
      Administrative Agent under this Agreement.  If no successor agent has
      accepted appointment as Administrative Agent by the date which is 30 days
      following a retiring Administrative Agent's notice of resignation, the retiring
      Administrative Agent's resignation shall nevertheless thereupon become effective
      and the Lenders shall perform all of the duties of the Administrative Agent
      hereunder until such time, if any, as the Lenders appoint a successor
      administrative agent as provided for above.

     

    10.10                      Withholding
      Tax.

     

    (a)           Any
      Foreign Lender that is entitled to an exemption from or reduction of withholding
      tax under the laws of the United States, or under any treaty to which the United
      States is a party, with respect to payments under this Agreement shall deliver
      to the Company (with a copy to the Administrative Agent), at the time or times
      prescribed by applicable law, such properly completed and executed documentation
      prescribed by applicable law or reasonably requested by the Company or the
      Administrative Agent as will permit such payments to be made without withholding
      or at a reduced rate of withholding.  In addition, any Lender, if
      requested by the Company or the Administrative Agent, shall deliver such
      properly completed and executed documentation prescribed by applicable law
      or
      reasonably requested by the Company or the Administrative Agent as will enable
      the Company or the Administrative Agent to determine whether or not such Lender
      is subject to backup withholding or information reporting
      requirements.  Each Lender shall promptly (i) notify the Company and
      the Administrative Agent of any change in circumstances which would modify
      or
      render invalid any such claimed

     

    

    
      
        
          
          

        

        
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    exemption
      or reduction and (ii) take such steps as may be required pursuant to Section
3.1(e).

     

    (b)           Without
      limiting the generality of the foregoing provisions of Section 10.10(a), each Foreign Lender shall deliver to the
      Company and the Administrative Agent (in such number of copies as shall be
      requested by the recipient) on or prior to the date on which such Foreign Lender
      becomes a Lender under this Agreement (and from time to time thereafter upon
      the
      request of the Company or the Administrative Agent, but only if such Foreign
      Lender is legally entitled to do so), whichever of the following is
      applicable:

     

    (i)           duly
      completed copies of IRS Form W-8BEN claiming eligibility for benefits of an
      income tax treaty to which the United States is a party,

     

    (ii)           duly
      completed copies of IRS Form W-8ECI,

     

    (iii)           in
      the case of a Foreign Lender claiming the benefits of the exemption for
      portfolio interest under Section 881(c) of the Code, (x) a certificate to the
      effect that such Foreign Lender is not (A) a "bank" within the meaning of
      Section 881(c)(3)(A) of the Code, (B) a "10 percent shareholder" of the Company
      within the meaning of Section 881(c)(3)(B) of the Code, or (C) a "controlled
      foreign corporation" described in Section 881(c)(3)(C) of the Code and (y)
      duly
      completed copies of  IRS Form W-8BEN, or

     

    (iv)           any
      other form prescribed by applicable law as a basis for claiming exemption from
      or a reduction in United States Federal withholding tax duly completed together
      with such supplementary documentation as may be prescribed by applicable law
      to
      permit the Company or the Administrative Agent to determine the withholding
      or
      deduction required to be made.

     

    (c)           If
      any Lender delivers to the Company and the Administrative Agent completed and
      executed documentation described in Section 10.10(a) and (b) claiming a reduction in withholding
      tax, the Company and the Administrative Agent may withhold from any amount
      payable to such Lender hereunder an amount equivalent to the applicable
      withholding tax after taking into account such reduction.  If the
      forms or other documentation required by Section 10.10(a) and (b) are not
      delivered by a Lender to the Company and the Administrative Agent, then the
      Company and the Administrative Agent may withhold from any amount payable to
      such Lender not providing such forms or other documentation an amount equivalent
      to the applicable withholding tax.

     

    (d)           If
      the IRS or any other Governmental Authority of the United States or other
      jurisdiction asserts a claim that the Company or the Administrative Agent did
      not properly withhold tax from amounts paid to or for the account of any Lender
      (because the appropriate form was not delivered, was not properly completed
      or
      executed, or because such Lender failed to notify the Company and the
      Administrative Agent of a change in circumstances which rendered the exemption
      from, or reduction of, withholding tax ineffective or modified, or for any
      other
      reason) such Lender shall indemnify the Company and the Administrative Agent
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    Company
      or the Administrative Agent (as the case may be) as tax or otherwise,
      including penalties, additions to tax and interest, and including any taxes
      imposed by any jurisdiction on the amounts payable to the Company or the
      Administrative Agent under this Section 10.10(d),
      together with all costs and expenses (including Attorney Costs).  The
      obligation of the Lenders under this Section 10.10(d) shall survive the payment of all Obligations
      and the resignation or the replacement of the Administrative Agent.

     

    10.11                      Arranger;
      Syndication Agent.  Each
      of the Arranger and the Syndication Agent, in their respective capacities as
      such, shall have no duties or responsibilities, and shall incur no liability,
      under this Agreement or the other Loan Documents.

     

    10.12                      Release
      of Collateral.  The
      Administrative Agent is hereby irrevocably authorized by each of the Lenders
      to
      effect any release of Liens or Guaranty Obligations contemplated by Section
11.26.

     

    ARTICLE
      XI

     

    MISCELLANEOUS

     

    11.1           Amendments
      and Waivers.  No
      amendment, modification, termination or waiver of any provision of this
      Agreement or any other Loan Document, and no consent with respect to any
      departure by the Company or any Guarantor therefrom, shall be effective unless
      the same shall be in writing and signed by the Required Lenders (or by the
      Administrative Agent at the written request of the Required Lenders) and the
      Company or the applicable Guarantor, and then any such waiver or consent shall
      be effective only in the specific instance and for the specific purpose for
      which it is given; provided, however, that no such waiver, amendment,
      modification, termination or consent shall, unless in writing and signed by
      all
      the Lenders directly affected thereby (or in the case of clauses (e) and (f),
      all of the Lenders), the Company or the applicable Guarantor do any of the
      following:

     

    (a)           increase
      or extend the Commitment of any Lender (it being understood that the waiver
      of
      an Event of Default shall not constitute an extension or increase of any
      Commitment of any Lender);

     

    (b)           postpone
      the final maturity date of any Loan, or postpone or delay any date fixed by
      this
      Agreement or any other Loan Document for any payment of principal, interest,
      fees or other amounts due to the Lenders (or any of them) hereunder (it being
      understood that the waiver of an obligation to pay interest at the Default
      Rate
      or Event of Default shall not constitute a postponement of any date fixed for
      the payment of principal, interest or fees)or under any other Loan
      Document;

    

    
      
        
          
          

        

        
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      (c)           reduce
        the principal of, or the rate of interest specified herein on any Loan, or
        (subject to clause (ii) below) any fees or other amounts payable hereunder
        (it
        being understood that a change to the definition of "Default Rate" or the
        waiver
        of an Event of Default
        shall not constitute a reduction of the principal of or rate of interest
        specified) or under any other Loan Document;

    

     

    (d)           change
      the pro rata application of payments, prepayments, reductions of the Commitments
      or change in any manner the definition of "Required Lenders";

     

    (e)           amend
      this Section 11.1, or any provision of this
      Agreement which, by its terms, expressly requires the approval or concurrence
      of
      all Lenders; or

     

    (f)           release
      all or substantially all of the Collateral (except for releases in connection
      with Dispositions which are permitted hereunder or under any Loan Document),
      or
      release any material Guarantor from any Guaranty;

     

    provided
      further, however, that no amendment, waiver or consent shall, unless in writing
      and signed by the Administrative Agent in addition to the Required Lenders
      or
      all the Lenders, as the case may be, affect the rights or duties of the
      Administrative Agent under this Agreement or any other Loan
      Document.

     

    11.2           Notices.

     

    (a)           All
      notices, requests and other communications shall be in writing and mailed,
      faxed
      or delivered, to the address or facsimile number specified for notices on the
      signature pages hereof or, as directed to the Company or the Administrative
      Agent, to such other address as shall be designated by such party in a written
      notice to the other parties, and as directed to any other party, at such other
      address as shall be designated by such party in a written notice to the Company
      and the Administrative Agent.

     

    (b)           All
      such notices, requests and communications shall, when transmitted by overnight
      delivery, or faxed, be effective when delivered for overnight (next-day)
      delivery, or transmitted in legible form by facsimile machine, respectively,
      or
      if mailed, upon the third Business Day after the date deposited into the U.S.
      mail, or if delivered, upon delivery; except that notices pursuant to Article II or IX shall not be effective until actually
      received by the Administrative Agent.

     

    (c)           Any
      agreement of the Administrative Agent and the Lenders herein to receive certain
      notices by telephone or facsimile is solely for the convenience and at the
      request of the Company.  The Administrative Agent and the Lenders
      shall be entitled to rely on the authority of any Person purporting to be a
      Person authorized by the Company to give such notice and the Administrative
      Agent and the Lenders shall not have any liability to the Company or any other
      Person on account of any action taken or not taken by the Administrative Agent
      or the Lenders in reliance upon such telephonic or facsimile
      notice.  The obligation of the Company to repay the Loans shall not be
      affected in any way or to any extent by any failure by the Administrative Agent
      and the Lenders to receive written confirmation of any telephonic or facsimile
      notice or the receipt by the Administrative Agent and the Lenders of a
      confirmation which is at variance with the terms understood by the
      Administrative Agent and the Lenders to be contained in the telephonic or
      facsimile notice.

     

    

    
      
        
          
          

        

        
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    11.3           No
      Waiver; Cumulative Remedies.  No
      failure to exercise and no delay in exercising, on the part of the
      Administrative Agent or any Lender, any right, remedy, power or privilege
      hereunder, shall operate as a waiver thereof; nor shall any single or partial
      exercise of any right, remedy, power or privilege hereunder preclude any other
      or further exercise thereof or the exercise of any other right, remedy, power
      or
      privilege.

     

    11.4           Costs
      and Expenses.  The
      Company shall:

     

    (a)           whether
      or not the transactions contemplated hereby are consummated, pay or reimburse
      the Administrative Agent and the Arranger within five Business Days after demand
      for all reasonable and documented out-of-pocket costs and expenses incurred
      by
      the Administrative Agent, the Arranger or any of their Affiliates in connection
      with the syndications of the Credit Extensions hereunder (other than fees
      payable to syndicate members) and the development, preparation, delivery,
      administration and execution of, and any amendment, supplement, waiver or
      modification to (in each case, whether or not consummated), this Agreement,
      any
      Loan Document and any other documents prepared in connection herewith or
      therewith, the consummation of the transactions contemplated hereby and thereby,
      and the syndication of the credit facilities provided herein, including Attorney
      Costs incurred by such Person with respect thereto except such costs and
      expenses as may be incurred by the assignor Lenders or Assignee under Section
11.8; and

     

    (b)           pay
      or reimburse the Administrative Agent, any other Agent and each Lender within
      five Business Days after demand for all documented out-of-pocket costs and
      expenses (including Attorney Costs) incurred by each of them in connection
      with
      the enforcement, attempted enforcement, or preservation of any rights or
      remedies under this Agreement or any other Loan Document during the existence
      of
      a Default or after acceleration of the Loans (including in connection with
      any
      "workout" or restructuring regarding the Loans, and including in any Insolvency
      Proceeding or appellate proceeding).

     

    11.5           Indemnity.  Whether
      or not the transactions contemplated hereby are consummated, the Company shall
      indemnify and hold each Agent-Related Person and each Lender and each of their
      respective Affiliates, successors and permitted assigns and its and their
      respective officers, directors, employees, counsel, agents, advisors,
      controlling Persons, members and attorneys in fact (each, an
      "Indemnified Person") harmless from and against any
      and all liabilities, obligations, losses, damages, penalties, actions,
      judgments, suits, costs, charges, expenses and disbursements (including Attorney
      Costs) of any kind or nature whatsoever which may at any time (including at
      any
      time following repayment of the Loans, and the termination, resignation or
      replacement of the Administrative Agent or replacement of any Lender) be imposed
      on, incurred by or asserted against any such Person in any way relating to
      or
      arising out of this Agreement or any document contemplated by or referred to
      herein, including any of the Transaction Documents, or the transactions
      contemplated hereby, including the Output Acquisition, or any action taken
      or
      omitted by any such Person under or in connection with any of the foregoing,
      including with respect to any investigation, litigation or proceeding (including
      any Insolvency Proceeding or appellate proceeding) related to or arising out
      of
      this Agreement, any Transaction Document, the Loans or the use of the

     

    

    
      
        
          
          

        

        
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    proceeds
      thereof, whether or not any Indemnified Person is a party thereto (all the
      foregoing, collectively, the "Indemnified
      Liabilities"), WHETHER OR NOT SUCH INDEMNIFIED LIABILITIES ARISE
      OUT OF OR AS A RESULT OF ANY INDEMNIFIED PARTY'S NEGLIGENCE IN WHOLE OR IN
      PART,
      INCLUDING, WITHOUT LIMITATION, THOSE CLAIMS WHICH RESULT FROM THE SOLE, JOINT,
      CONCURRENT OR COMPARATIVE NEGLIGENCE OF THE INDEMNIFIED PARTY, OR ANY ONE OR
      MORE OF THEM; provided, however, that the Company shall have no obligation
      hereunder to any Indemnified Person with respect to Indemnified Liabilities
      to
      the extent same arise (i) from the gross negligence or willful misconduct of,
      or
      breach of the Loan Documents by, such Indemnified Person or (ii) in the case
      of
      any Lender or Affiliate thereof, from the gross negligence or willful misconduct
      of such Indemnified Person's Affiliates, or any of its or their respective
      officers, directors, employees, counsel, agents, advisors, controlling Persons,
      members or attorneys in fact.  No Indemnified Person shall be liable
      for any damages arising from the use by unauthorized Persons of information
      or
      other materials sent through electronic, telecommunications or other information
      transmission systems that are intercepted by such Persons or for any special,
      indirect, consequential or punitive damages in connection with this
      Agreement.  All amounts due under this Section 11.5 shall be payable not later than 30 days after
      written demand therefor.  The agreements in Section 11.4 and this Section 11.5 shall survive
      payment of all other
      Obligations.

     

    11.6           Payments
      Set Aside.  To
      the extent that the Company makes a payment to the Administrative Agent or
      the
      Lenders, or the Administrative Agent or the Lenders exercise their right of
      set-off, and such payment or the proceeds of such set-off or any part thereof
      are subsequently invalidated, declared to be fraudulent or preferential, set
      aside or required (including pursuant to any settlement entered into by the
      Administrative Agent or such Lender in its discretion) to be repaid to a
      trustee, debtor-in-possession, receiver or any other Person, in connection
      with
      any Insolvency Proceeding or otherwise, then (a) to the extent of such recovery
      the obligation or part thereof originally intended to be satisfied shall be
      revived and continued in full force and effect as if such payment had not been
      made or such set-off had not occurred, and (b) each Lender severally agrees
      to
      pay to the Administrative Agent or such Lender upon demand its Pro Rata Share
      of
      any amount so recovered from or repaid by the Administrative Agent or such
      Lender.

     

    11.7           Successors
      and Assigns.  This
      Agreement shall become effective at the Restatement Effective Time after it
      shall have been executed by the Company, each Guarantor and the Administrative
      Agent and after the Administrative Agent shall have been notified by each Lender
      that such Lender has executed it and thereafter this Agreement shall be binding
      upon and inure to the benefit of the parties hereto and their respective
      successors and permitted assigns, except that the Company may not assign or
      transfer any of its rights or obligations under this Agreement without the
      prior
      written consent of the Administrative Agent and each Lender.

     

     

    

    
      
        
          
          

        

        
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            11.8           Assignments,
      Participations, etc.

    
       

      (a)           Each
        Lender may assign to one or more assignees (each, an
        "Assignee") all or a portion of its interests, rights
        and obligations under this Agreement (including all or a portion of its
        Commitment and the Loans at the time owing to it) with the prior written
        consent
        of the Administrative Agent (not to be unreasonably withheld or delayed)
        and
        prior written notice to (but not consent of) the Company; provided, however,
        that (i) the
        amount of the Commitment or Loans of the assigning Lender subject to each
        such
        assignment (determined as of the date the Assignment and Acceptance in the
        form
        of Exhibit "E" (the "Assignment and
        Acceptance") with respect to such assignment is delivered to the
        Administrative Agent and determined on an aggregate basis in the event of
        concurrent assignments to Related Funds (as defined below)) shall not, unless
        consented to by the Administrative Agent, be less than $1,000,000 (or, if
        less,
        the entire remaining amount of such Lender's Commitment or Loans), (ii) the
        parties to each such assignment shall execute and deliver to the Administrative
        Agent an Assignment and Acceptance via an electronic settlement system
        acceptable to the Administrative Agent (or, if previously agreed with the
        Administrative Agent, manually) and shall pay to the Administrative Agent
        a
        processing and recordation fee in the amount of $3,500.00 (which fee may
        be
        waived or reduced in the sole discretion of the Administrative Agent), provided
        further, however, that only one such fee shall be payable in the case of
        concurrent assignments to Persons that, after giving effect to such assignments,
        will be Related Funds and (iii) the Assignee, if it shall not be a Lender,
        shall
        deliver to the Administrative Agent an administrative questionnaire in such
        form
        as supplied from time to time by the Administrative Agent (an
        "Administrative Questionnaire") and all applicable tax
        forms. Upon acceptance and recording pursuant to Section 11.8(c), from and after the effective date specified
        in each Assignment and Acceptance, (A) the assignee thereunder shall be a
        party
        hereto and, to the extent of the interest assigned by such Assignment and
        Acceptance, have the rights and obligations of a Lender under this Agreement
        and
        (B) the assigning Lender thereunder shall, to the extent of the interest
        assigned by such Assignment and Acceptance, be released from its obligations
        under this Agreement (and, in the case of an Assignment and Acceptance covering
        all or the remaining portion of an 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 Article
        III and Section 11.5, as well as to any fees
        accrued for its account prior to the effective date specified in such Assignment
        and Acceptance and not yet paid). The term "Related
        Funds" shall mean with respect to any Lender that is a fund or
        combined investment vehicle that invests in bank loans, any other fund that
        invests in bank loans and is managed or advised by the same investment advisor
        as such Lender or by an Affiliate of such investment advisor.

    

     

    (b)           By
      executing and delivering an Assignment and Acceptance, the assigning Lender
      thereunder and the Assignee thereunder shall be deemed to confirm to and agree
      with each other and the other parties hereto as follows: (i) such assigning
      Lender warrants that it is the legal and beneficial owner of the interest being
      assigned thereby free and clear of any adverse claim and that its Commitment,
      and the outstanding balances of its Loans, in each case without giving effect
      to
      assignments thereof which have not become effective, are as set forth in such
      Assignment and Acceptance, (ii) except as set forth in (i) above, such assigning
      Lender makes no representation or warranty and assumes no responsibility with
      respect to any statements, warranties or representations made in or in
      connection with this Agreement, or the execution, legality, validity,
      enforceability, genuineness, sufficiency or value of this Agreement, any other
      Loan Document or any other instrument or document furnished pursuant hereto,
      or
      the financial condition of the Company or any Subsidiary or the performance
      or
      observance by the Company or any Subsidiary of any of its obligations under
      this
      Agreement, any other Loan Document or any other 

     

    

    
      
        
          
          

        

        
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    instrument
      or document furnished pursuant hereto; (iii) such Assignee represents and
      warrants that it is legally authorized to enter into such Assignment and
      Acceptance; (iv) such Assignee confirms that it has received a copy of this
      Agreement, together with copies of the most recent financial statements referred
      to in Section 6.14 or delivered pursuant to Section
7.1, the Intercreditor
      Agreement and such other
      documents and information as it has deemed appropriate to make its own credit
      analysis and decision to enter into such Assignment and Acceptance; (v) such
      Assignee will independently and without reliance upon the Administrative Agent,
      such assigning Lender or any other Lender and based on such documents and
      information as it shall deem appropriate at the time, continue to make its
      own
      credit decisions in taking or not taking action under this Agreement; (vi)
      such
      Assignee appoints and authorizes the Administrative Agent to take such action
      as
      agent on its behalf and to exercise such powers under this Agreement, as are
      delegated to the Administrative Agent, by the terms hereof and thereof, together
      with such powers as are reasonably incidental thereto; and (vii) such Assignee
      agrees that it will perform in accordance with their terms all the obligations
      which by the terms of this Agreement are required to be performed by it as
      a
      Lender and will be bound by and will take no actions contrary to the provisions
      of the Intercreditor Agreement. The Administrative Agent shall be entitled
      to
      rely, without any independent investigation, on the representations and
      warranties and other statements deemed to be made by the assigning Lender and
      the Assignee pursuant to this Section 11.8(c) and
      shall not incur any liability for relying thereon.

     

    (c)           The
      Administrative Agent, acting for this purpose as an agent of the Company, shall
      maintain at one of its offices in Chicago, Illinois a copy of each Assignment
      and Acceptance delivered to it.  Upon its receipt of, and consent to,
      a duly completed Assignment and Acceptance executed by an assigning Lender
      and
      an Assignee, an Administrative Questionnaire completed in respect of the
      Assignee (unless the Assignee shall already be a Lender hereunder), the
      processing and recordation fee referred to in Section 11.8(b) above, if applicable, and the written consent
      of the Administrative Agent to such assignment and any applicable tax forms,
      the
      Administrative Agent shall (i) accept such Assignment and Acceptance and (ii)
      record the information contained therein in the Register. No assignment shall
      be
      effective unless it has been recorded in the Register as provided in this
      Section 11.8(c).  The Register shall be
      available for inspection by the Company or any Lender (with respect to any
      entry
      relating to such Lender's Loans) at any reasonable time and from time to time
      upon reasonable prior notice.

     

    (d)           Notwithstanding
      anything to the contrary contained herein, any Lender (a "Granting
      Lender") may grant to a special purpose funding vehicle (an
      "SPC"), identified as such in writing from time to
      time by the Granting Lender to the Administrative Agent and the Company, the
      option to provide to the Company all or any part of any Loan that such Granting
      Lender would otherwise be obligated to make to the Company on the Restatement
      Effective Date pursuant to this Agreement; provided, however, that (i) nothing
      herein shall constitute a commitment by any SPC to make any Loan and (ii) if
      an
      SPC elects not to exercise such option or otherwise fails to provide all or
      any
      part of such Loan, the Granting Lender shall be obligated to make such Loan
      pursuant to the terms hereof. The making of a Loan by an 

     

    

    
      
        
          
          

        

        
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    SPC
      hereunder shall utilize theCommitment of the Granting Lender to the same extent,
      and as if, such Loan were made by such Granting Lender. Each party hereto hereby
      agrees that no SPC shall be liable for any indemnity or similar payment
      obligation under this Agreement (all liability for which shall remain with
      the
      Granting Lender). In furtherance of the foregoing, each party hereto hereby
      agrees (which agreement shall survive the termination of this Agreement) that,
      prior to the date that is one year and one day after the payment in full of
      all
      outstanding commercial paper or other senior Indebtedness of any SPC, it will
      not institute against, or join any other person in instituting against, such
      SPC
      any bankruptcy, reorganization, arrangement, insolvency or liquidation
      proceedings under the laws of the United States or any State thereof. In
      addition, notwithstanding anything to the contrary contained in this Section
11.8, any SPC may (i) with notice to, but without
      the
      prior written consent of, the Company and the Administrative Agent and without
      paying any processing fee therefor, assign all or a portion of its interests
      in
      any Loans to the Granting Lender or to any financial institutions (consented
      to
      by the Administrative Agent) providing liquidity and/or credit support to or
      for
      the account of such SPC to support the funding or maintenance of Loans and
      (ii)
      disclose on a confidential basis any non−public information relating to its
      Loans to any rating agency, commercial paper dealer or provider of any surety,
      guarantee or credit or liquidity enhancement to such SPC.

     

    (e)           Within
      five Business Days after its receipt of notice by the Administrative Agent
      that
      it has received an executed Assignment and Acceptance and payment of the
      processing fee, if a Note was issued in respect of the assigned interests,
      upon
      the request of the Administrative Agent by the Assignee, the Company shall
      execute and deliver to the Administrative Agent a new Note evidencing such
      Assignee's assigned Loans and, if the assignor Lender has retained a portion
      of
      its Loans and its Commitment, a replacement Note, upon the request of the
      Administrative Agent by the assignor Lender, in the principal amount equal
      to
      the Loans and Commitments, if any, retained by the assignor Lender (such Note
      to
      be in exchange for, but not in payment of, the Note held by such
      Lender).

     

    (f)           Any
      Lender may at any time sell to one or more commercial banks or other Persons
      not
      Affiliates of the Company (a "Participant")
      participating interests in any Loans, the Commitment of that Lender, if any,
      and
      the other interests of that Lender (the "Originating
      Lender") hereunder and under the other Loan Documents; provided,
      however, that (i) the Originating Lender's obligations under this Agreement
      shall remain unchanged, the Originating Lender shall remain a Lender for all
      purposes hereof and the other Loan Documents to which such Originating Lender
      is
      a party, and the Participant may not become a Lender for purposes hereof or
      for
      any other of the Loan Documents, (ii) the Originating Lender shall remain solely
      responsible for the performance of such obligations, (iii) the Company and
      the
      Administrative Agent shall continue to deal solely and directly with the
      Originating Lender in connection with the Originating Lender's rights and
      obligations under this Agreement and the other Loan Documents, and (iv) no
      Lender shall transfer or grant any participating interest under which the
      Participant has rights to approve any amendment to, or any consent or waiver
      with respect to, this Agreement or any other Loan Document, except to the extent
      such amendment, consent or waiver would require unanimous consent of the
      Lenders. In the case of any such participation, the Participant shall not have
      any rights under this Agreement, or any of the other Loan Documents (the

     

    

    
      
        
          
          

        

        
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    Participant's
      rights against the Originating Lender in respect of such participation being
      those set forth in the agreement creating or evidencing such participation
      with
      such Lender), and all amounts payable by the Company hereunder shall be
      determined as if such Lender had not sold such participation; except that,
      if
      amounts outstanding under this Agreement are due and unpaid, or shall have
      been
      declared or shall have become due and payable upon the occurrence and
      continuance of an Event of Default, each Participant shall be deemed to have
      the
      right of set off in respect of its participating interest in amounts owing
      under
      this Agreement to the same extent as if the amount of its participating interest
      were owing directly to it as a Lender under this Agreement.

     

    (g)           Each
      Lender agrees to take normal and reasonable precautions and exercise due care
      to
      maintain the confidentiality of all information provided to it by the Company,
      or by the Administrative Agent on the Company's behalf, under or in connection
      with this Agreement or any other Loan Document, and neither it nor any of its
      Affiliates shall use any such information other than in connection with or
      in
      enforcement of this Agreement and the other Loan Documents, except to the extent
      such information (i) was or becomes generally available to the public other
      than
      as a result of disclosure by such Lender, or (ii) was or becomes available
      on a
      non-confidential basis from a source other than the Company,
      provided,  however, that such source is not bound by a confidentiality
      agreement with the Company known to the Lender; provided further, however,
      that
      any Lender may disclose such information (and, in the case of the following
      subclauses (A) through (D), shall provide promptly written notice of such
      disclosure to the Company) (A) at the request or pursuant to any requirement
      of
      any Governmental Authority to which such Lender is subject or in connection
      with
      an examination of such Lender by any such authority; (B) pursuant to subpoena
      or
      other court process; (C) when required to do so in accordance with the
      provisions of any applicable Requirement of Law; (D) to the extent reasonably
      required in connection with any litigation or proceeding to which the
      Administrative Agent, any Lender or their respective Affiliates may be party;
      (E) to the extent reasonably required in connection with the exercise of any
      remedy hereunder or under any other Loan Document; (F) to such Lender's
      independent auditors and other professional advisors; (G) to any Affiliate
      of
      such Lender, or to any Participant or Assignee, actual or potential, provided
      that such Affiliate, Participant or Assignee agrees to keep such information
      confidential to the same extent required of the Lenders hereunder; and (H)
      as to
      any Lender, as expressly permitted under the terms of any other document or
      agreement regarding confidentiality to which the Company is party or is deemed
      to be party with such Lender.

     

    (h)           Notwithstanding
      any other provision in this Agreement, any Lender may at any time create a
      security interest in, or pledge, all or any portion of its rights under and
      interest in this Agreement and the Note held by it in favor of any Federal
      Reserve Lender in accordance with Regulation A of the FRB or U.S. Treasury
      Regulation 31 CFR §203.14, and such Federal Reserve Lender may enforce such
      pledge or security interest in any manner permitted under applicable
      law.  Any Lender may at any time assign all or any portion of its
      rights under this Agreement to secure extensions of credit to such Lender or
      in
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    that
      no
      such assignment shall release a Lender from any of its obligations hereunder
      or
      substitute any such assignee for such Lender as a party hereto.

     

    11.9           Interest.  It
      is the intention of the parties hereto to comply with applicable usury laws,
      if
      any; accordingly, notwithstanding any provision to the contrary in this
      Agreement, the Notes or in any of the other Loan Documents securing the payment
      hereof or otherwise relating hereto, in no event shall this Agreement, the
      Notes
      or such other Loan Documents require or permit the payment, taking, reserving,
      receiving, collection, or charging of any sums constituting interest under
      applicable laws which exceed the Highest Lawful Rate.  If any such
      excess interest is called for, contracted for, charged, taken, reserved, or
      received in connection with the Loans evidenced by the Notes or in any of the
      Loan Documents securing the payment thereof or otherwise relating thereto,
      or in
      any communication by the Administrative Agent or the Lenders or any other Person
      to the Company or any other Person, or in the event all or part of the principal
      or interest thereof shall be prepaid or accelerated, so that under any of such
      circumstances or under any other circumstance whatsoever the amount of interest
      contracted for, charged, taken, reserved, or received on the amount of principal
      actually outstanding from time to time under the Notes or any other Loan
      Document shall exceed the Highest Lawful Rate, then in any such event it is
      agreed as follows:  (i) the provisions of this Section 11.9 shall govern and control, (ii) neither any
      Company nor any other Person now or hereafter liable for the payment of the
      Notes shall be obligated to pay the amount of such interest to the extent such
      interest is in excess of the Highest Lawful Rate, (iii) any such excess which
      is
      or has been received notwithstanding this Section 11.9 shall be credited against the then unpaid
      principal balance of the Notes or, if the Notes have been or would be paid
      in
      full, refunded to the Company, and (iv) the provisions of this Agreement, the
      Notes and the other Loan Documents securing the payment thereof and otherwise
      relating thereto, and any communication to the Company, shall immediately be
      deemed reformed and such excess interest reduced, without the necessity of
      executing any other document, to the Highest Lawful Rate as now or hereafter
      construed by courts having jurisdiction hereof or thereof.  Without
      limiting the foregoing, all calculations of the rate of the interest contracted
      for, charged, collected, taken, reserved, or received in connection with the
      Notes, this Agreement or any other Loan Document which are made for the purpose
      of determining whether such rate exceeds the Highest Lawful Rate shall be made
      to the extent permitted by applicable laws by amortizing, prorating, allocating
      and spreading during the period of the full term of the Loans, including all
      prior and subsequent renewals and extensions, all interest at any time
      contracted for, charged, taken, collected, reserved, or received.  The
      terms of this Section 11.9 shall be deemed to be
      incorporated in every document and communication relating to the Notes, the
      Loans or any other Loan Document.

     

    11.10                      Indemnity
      and Subrogation.  In
      addition to all such rights of indemnity and subrogation as any Guarantor may
      have under applicable law, the Company agrees that in the event a payment shall
      be made by a Guarantor under a Guaranty in respect of a Credit Extension to
      the
      Company, the Company shall indemnify such Guarantor for the full amount of
      such
      payment and such Guarantor shall be subrogated to the rights of the Person
      to
      whom such payment shall have been made to the extent of such payment subject
      to
      the provisions of the Guaranty executed by such
      Guarantor.  Notwithstanding any provision of this Agreement to the
      contrary, all rights of the Guarantors under this Section 11.10 and all other rights of indemnity, contribution
      or subrogation under applicable law or otherwise shall be fully subordinated
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    Obligations,
      and no payments may be made in respect of such rights of indemnity, contribution
      or subrogation until all the Obligations have been paid in full and the
      Commitments shall have expired.  No failure on the part of the Company
      to make the payments required by this Section 11.10
      (or any other payments required under applicable law or otherwise) shall in
      any
      respect limit the obligations and liabilities of the Guarantors with respect
      to
      any Guaranty, and each Guarantor shall remain liable for the full amount of
      the
      obligation of the Guarantors under each such Guaranty in accordance
      therewith.

     

    11.11                      Automatic
      Debits of Fees.  With
      respect to any fee, or any other cost or expense (including Attorney Costs)
      due
      and payable to the Administrative Agent under the Loan Documents, the Company
      hereby irrevocably authorizes the Administrative Agent, after giving reasonable
      prior notice to the Company, to debit any deposit account of the Company with
      the Administrative Agent in an amount such that the aggregate amount debited
      from all such deposit accounts does not exceed such fee or other cost or
      expense.  If there are insufficient funds in such deposit accounts to
      cover the amount of the fee or other cost or expense then due, such debits
      will
      be reversed (in whole or in part, in the Administrative Agent's sole discretion)
      and such amount not debited shall be deemed to be unpaid.  No such
      debit under this Section 11.11 shall be deemed a
      set-off.

     

    11.12                      Notification
      of Addresses, Lending Offices, Etc.  Each
      Lender shall notify the Administrative Agent in writing of any changes in the
      address to which notices to the Lender should be directed, of addresses of
      any
      Lending Office, of payment instructions in respect of all payments to be made
      to
      it hereunder and of such other administrative information as the Administrative
      Agent shall reasonably request.

     

    11.13                      Counterparts.  This
      Agreement may be executed in any number of separate counterparts, no one of
      which need be signed by all parties; each of which, when so executed, shall
      be
      deemed an original, and all of such counterparts taken together shall be deemed
      to constitute but one and the same instrument.  A fully executed
      counterpart of this Agreement by facsimile signatures shall be binding upon
      the
      parties hereto.

     

    11.14                      Severability.  The
      illegality or unenforceability of any provision of this Agreement or any
      instrument or agreement required hereunder shall not in any way affect or impair
      the legality or enforceability of the remaining provisions of this Agreement
      or
      any instrument or agreement required hereunder.

     

    11.15                      No
      Third Parties Benefited.  This
      Agreement is made and entered into for the sole protection and legal benefit
      of
      the Company, the Guarantors, the Lenders, the Administrative Agent, the
      Administrative Agent-Related Persons and the Indemnified Persons, and their
      permitted successors and assigns, and no other Person shall be a direct or
      indirect legal beneficiary of, or have any direct or indirect cause of action
      or
      claim in connection with, this Agreement or any of the other Loan
      Documents.

     

    11.16                      Governing
      Law, Jurisdiction.  THIS
      AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT
      SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE
      LAW
      OF THE STATE OF NEW YORK.

     

    

    
      
        
          
          

        

        
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    11.17                      Submission
      To Jurisdiction; Waivers.  Each
      of the parties hereto hereby irrevocably and unconditionally:

     

    (a)           submits,
      for itself and its Property, to the nonexclusive jurisdiction of the Supreme
      Court of the State of New York sitting in New York County and of the United
      States District Court of the Southern District of New York, and any appellate
      court from any thereof, in any action or proceeding arising out of or relating
      to this Agreement, or for recognition or enforcement of any judgment, and each
      of the parties hereto hereby irrevocably and unconditionally agrees that all
      claims in respect of any such action or proceeding may be heard and determined
      in such New York State or, to the extent permitted by law, in such Federal
      court. Each of the parties hereto agrees that a final judgment in any such
      action or proceeding shall be conclusive and may be enforced in other
      jurisdictions by suit on the judgment or in any other manner provided by law.
      Nothing in this Agreement shall affect any right that the Administrative Agent
      may otherwise have to bring any action or proceeding relating to this Agreement
      against the Company or any Guarantor or its respective Property in the courts
      of
      any jurisdiction;

     

    (b)           waives,
      to the fullest extent it may legally and effectively do so, any objection which
      it may now or hereafter have to the laying of venue of any suit, action or
      proceeding arising out of or relating to this Agreement in any court referred
      to
      in Section 11.17(a), and each of the parties hereto
      hereby irrevocably waives, to the fullest extent permitted by law, the defense
      of an inconvenient forum to the maintenance of such action or proceeding in
      any
      such court; and

     

    (c)           consents
      to service of process in the manner provided for notices herein; provided,
      however, nothing in this Agreement will affect the right of any party to this
      Agreement to serve process in any other manner permitted by law.

     

    11.18                      Entire
      Agreement.  This
      Agreement, together with the other Loan Documents, embodies the entire agreement
      and understanding among the Company, the Guarantors, the Lenders and the
      Administrative Agent, and supersedes all prior or contemporaneous agreements
      and
      understandings of such Persons, oral or written, relating to the subject matter
      hereof and thereof.

     

    11.19                      NO
      ORAL AGREEMENTS.  THIS
      AGREEMENT, TOGETHER WITH THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED IN CONNECTION
      HEREWITH, REPRESENTS THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE
      CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
      OF THE PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE
      PARTIES.

     

    11.20                      Accounting
      Changes.  If
      at any time any Accounting Change (as defined below) would affect the
      computation of any financial ratio or requirement set forth in any Loan
      Document, and either the Company or the Required Lenders shall so request,
      the
      Administrative Agent and the Company shall negotiate to amend such ratio or
      requirement to preserve the original intent thereof in light of such Accounting
      Change (subject to the approval of the Required Lenders); provided, however,
      that until so amended such ratio or requirement shall continue to be computed
      

     

    

    
      
        
          
          

        

        
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    in
      accordance with GAAP prior to such change
      therein.  "Accounting Change" refers to any
      change in accounting principles required by the promulgation of any rule,
      regulation, pronouncement or opinion by the Financial Accounting Standards
      Board
      of the American Institute of Certified Public Accountants or, if applicable,
      the
      SEC.

     

    11.21                      WAIVER
      OF JURY TRIAL, PUNITIVE DAMAGES, ETC.  THE
      COMPANY, THE GUARANTORS, THE LENDERS AND THE ADMINISTRATIVE AGENT EACH HEREBY
      KNOWINGLY, VOLUNTARILY, INTENTIONALLY, AND IRREVOCABLY (A) WAIVES, TO THE
      MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY
      IN RESPECT OF ANY LITIGATION BASED HEREON, OR DIRECTLY OR INDIRECTLY AT ANY
      TIME
      ARISING OUT OF, UNDER OR IN CONNECTION WITH THE LOAN DOCUMENTS OR ANY
      TRANSACTION CONTEMPLATED THEREBY OR ASSOCIATED THEREWITH, BEFORE OR AFTER
      MATURITY; (B) WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT
      IT
      MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY "SPECIAL
      DAMAGES", AS DEFINED BELOW, (C) CERTIFIES THAT NO PARTY HERETO NOR
      ANY REPRESENTATIVE OR AGENT OR 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 (D) ACKNOWLEDGES THAT
      IT
      HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS AND
      THE
      TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE MUTUAL
      WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION 11.21.  AS USED
      IN THIS SECTION, "SPECIAL DAMAGES" INCLUDES ALL SPECIAL, CONSEQUENTIAL,
      EXEMPLARY, OR PUNITIVE DAMAGES (REGARDLESS OF HOW NAMED), BUT DOES NOT INCLUDE
      ANY PAYMENTS OR FUNDS WHICH ANY PARTY HERETO HAS EXPRESSLY PROMISED TO PAY
      OR
      DELIVER TO ANY OTHER PARTY HERETO.

     

    11.22                      Intercreditor
      Agreement.  Each
      Lender (a) hereby agrees that it will be bound by and take no actions contrary
      to the Intercreditor Agreement and (b) hereby irrevocably authorizes and
      instructs the Administrative Agent to enter into the Intercreditor Agreement
      on
      its behalf.

     

    11.23                      USA
      PATRIOT Act.  Each
      Lender hereby notifies each Loan Party that pursuant to the requirements of
      the
      USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26,
      2001)), it is required to obtain, verify and record information that identifies
      each Loan Party, which information includes the name and address of such Loan
      Party and other information that will allow such Lender to identify such Loan
      Party in accordance with that Requirement of Law.

    

    
      
        
          
          

        

        
          89

          
            

          

        

         

      

    

     

    
       

      11.24                      Acknowledgments.  Each
        of the Company and each Guarantor hereby acknowledges that:

       

      (a)           it
        has been advised by counsel in the negotiation, execution and delivery of
        this
        Agreement and the other Loan Documents;

       

      (b)           neither
        the Administrative Agent, any other Agent nor any Lender has any fiduciary
        relationship with or duty to the Company or any Guarantor arising out of
        or in
        connection with this Agreement or any of the other Loan Documents, and the
        relationship between
        the Administrative Agent, any other Agent and the Lenders, on one hand, and
        the
        Company and the Guarantors, on the other hand, in connection herewith or
        therewith is solely that of creditor and debtor; and

    

     

    (c)           no
      joint venture is created hereby or by the other Loan Documents or otherwise
      exists by virtue of the transactions contemplated hereby among the
      Administrative Agent, any other Agent and the Lenders or among the Company
      and
      the Guarantors and the Lenders.

     

    11.25                      Survival
      of Representations and Warranties.  All
      representations and warranties made herein, in the other Loan Documents and
      in
      any document, certificate or statement delivered pursuant hereto or in
      connection herewith shall survive the execution and delivery of this Agreement
      and the making of the Loans and other extensions of credit
      hereunder.

     

    11.26                      Release
      of Collateral and Guarantee Obligations.

     

    (a)           Notwithstanding
      anything to the contrary contained herein or in any other Loan Document, but
      subject to Sections 5.1(e) and 5.4 (e) of the Intercreditor Agreement, upon
      request of the Company in connection with any Disposition of Property (including
      any Disposition of a Guarantor) permitted by the Loan Documents, the
      Administrative Agent shall (without notice to, or vote or consent of, any Lender
      or any Qualified Derivative Contract Counterparty) take such actions as shall
      be
      required to release its security interest in any Collateral being Disposed
      of in
      such Disposition, and to release any Guaranty Obligations under any Loan
      Document of any Person being Disposed of in such Disposition, to the extent
      necessary to permit consummation of such Disposition in accordance with the
      Loan
      Documents; provided, however, that the Company shall have delivered to the
      Administrative Agent, at least ten Business Days prior to the date of the
      proposed release (or such shorter period agreed to by the Administrative Agent),
      a written request for release identifying the relevant Collateral being Disposed
      of in such Disposition and, in the case of a Disposition under Section 8.2(f) or any other Disposition of Collateral
      comprising (i) Hydrocarbon Interests or (ii) other Property with a book value
      in
      excess of $2,000,000, and the terms of such Disposition in reasonable detail,
      including the date thereof, the price thereof and any expenses in connection
      therewith, together with a certification by the Company stating that such
      transaction is in compliance with this Agreement and the other Loan Documents
      and that the proceeds of such Disposition will be applied in accordance with
      this Agreement and the other Loan Documents.

     

    (b)           Notwithstanding
      anything to the contrary contained herein or any other Loan Document, when
      all
      Obligations have been paid or otherwise satisfied in full and all Commitments
      have terminated or expired, but subject to Sections 5.1(e) and 5.4(e) of the
      Intercreditor Agreement, upon request of the Company, the Administrative Agent
      shall (without notice to, or vote or consent of, any Lender, or any Qualified
      Derivative Contract Counterparty) take such actions as shall be required to
      release its security interest in all Collateral, and to release all Guaranty
      Obligations provided for in any Loan Document; provided, however, that in lieu
      of terminating and repaying any such 

     

    

    
      
        
          
          

        

        
          90

          
            

          

        

         

      

    

     

    Obligations
      arising under any Qualified Derivative Contract, the Company may provide
      substitute credit support under a standard form ISDA Credit Support Annex or
      other credit support documents reasonably acceptable to such Qualified
      Derivative Contract Counterparty to cover its then current exposure under such
      Qualified Derivative Contract and such Qualified Derivative Contract
      Counterparty shall have provided written notice to the Administrative Agent
      to
      the effect that such substitute credit support has been provided to it and
      that
      such Qualified Derivative Contract Counterparty no longer claims any right,
      title or interest in any Collateral arising under the Loan Documents to secure
      any Obligations and Indebtedness of the Company or any of its Subsidiaries
      arising under or related to such Qualified Derivative Contract, whether then
      existing or thereafter arising.  Any such release of Guaranty
      Obligations shall be deemed subject to the provision that such Guaranty
      Obligations shall be reinstated if after such release any portion of any payment
      in respect of the Obligations guaranteed thereby shall be rescinded or must
      otherwise be restored or returned upon the insolvency, bankruptcy, dissolution,
      liquidation or reorganization of the Company or any Guarantor, or upon or as
      a
      result of the appointment of a receiver, intervenor or conservator of, or
      trustee or similar officer for, the Company or any Guarantor or any substantial
      part of its Property, or otherwise, all as though such payment had not been
      made.

     

    11.27                      Amendment
      and Restatement.

     

    (a)           From
      and after the Restatement Effective Time, this Agreement amends and restates
      in
      its entirety the Existing Term Loan Agreement; the Existing Term Loan Agreement
      shall thereafter be of no further force and effect except to evidence (i) the
      incurrence by the Company of the Existing Obligations (whether or not any such
      Existing Obligations are contingent as of the Restatement Effective Time),
      (ii)
      the representations and warranties made by any Loan Party prior to the
      Restatement Effective Time and (iii) any act or omission performed or required
      to be performed pursuant to the Existing Term Loan Agreement prior to the
      Restatement Effective Time (including any failure, prior to the Restatement
      Effective Time, to comply with the covenants contained in such Existing Term
      Loan Agreement).  The amendments and restatements set forth herein
      shall not cure any breach thereof or any "Default" or "Event of Default" under
      and as defined in the Existing Term Loan Agreement existing prior to the
      Restatement Effective Time.  This Agreement does not constitute and
      shall not be construed to evidence a novation of or a payment and readvance
      of
      any of the Existing Obligations, it being the intention of the parties hereto
      that this Agreement is an amendment and restatement (but not an extinguishment)
      of the Existing Term Loan Agreement.

     

    (b)           The
      terms and conditions of this Agreement and the Administrative Agent's and the
      Lenders' rights and remedies under this Agreement and the other Loan Documents
      shall apply to all of the Existing Obligations.

     

    (c)           Each
      of the Company and Guarantors reaffirms the Liens granted pursuant to the
      Security Documents to the Administrative Agent for the benefit of the Secured
      Parties, which Liens shall continue in full force and effect during the term
      of
      this Agreement and any renewals or extensions thereof.

     

    

    
      
        
          
          

        

        
          91

          
            

          

        

         

      

    

    

    (d)           Each
      of the Guarantors reaffirms the guaranties made pursuant to the Guaranty (or
      a
      joinder thereto) in favor of the Administrative Agent for the benefit of the
      Secured Parties, which guaranties shall continue in full force and effect during
      the terms of this Agreement and any renewals or extensions thereof as guaranties
      of the Obligations.

     

    (e)           From
      and after the Restatement Effective Time, except as the context otherwise
      provides, (i) all references to the Existing Term Loan Agreement (or to any
      amendment, supplement, modification or amendment and restatement thereof) in
      the
      Loan Documents (other than this Agreement) shall be deemed to refer to this
      Agreement, (ii) all references to any section (or subsection) of the Existing
      Term Loan Agreement in any Loan Document (but not herein) shall be amended
      to
      become mutatis mutandis, references to the corresponding provisions of this
      Agreement and (iii) all references to this Agreement herein (including for
      purposes of indemnification and reimbursement of fees) shall be deemed to be
      references to this Agreement as the same may be further amended, restated,
      amended and restated, supplemented or otherwise modified from time to time
      pursuant to the terms of this Agreement and of the Intercreditor
      Agreement.

     

    (f)           This
      Agreement is limited as written and is not a consent to any other amendment,
      restatement, waiver or other modification, whether or not similar, and, except
      as expressly provided herein or in any other Loan Document, all terms and
      conditions of the Loan Documents remain in full force and effect unless
      otherwise specifically amended by this Agreement or any other Loan
      Document.

     

    11.28                      Amendment
      to the First Lien Credit Agreement.  Each
      Agent and each Lender hereby consents to the execution and delivery by the
      Loan
      Parties of the First Amendment to Amended and Restated Credit Agreement referred
      to in the definition of "First Lien Credit Agreement".

     

    [THE
      REMAINDER OF THIS PAGE IS LEFT BLANK]

     

    

    
      
        
          
          

        

        
          92

          
            

          

        

         

      

    

    

    IN
      WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
      executed and delivered by their proper and duly authorized officers as of the
      day and year first above written.

     

    
      	 	
              COMPANY:

            
	 	 
	 	
              TXCO
                RESOURCES INC.

            
	 	 
	 	
              By:

            	
              /s/
                James E. Sigmon

            
	 	 	
              James
                E. Sigmon

            
	 	 	
              President
                and Chief Executive Officer

            
	 	 	 
	 	
              GUARANTORS:

            
	 	 
	 	
              OUTPUT
                ACQUISITION CORP.

            
	 	 
	 	
              By:

            	
              /s/
                M. Frank Russell

            
	 	 	
              M.
                Frank Russell

            
	 	 	
              Vice
                President and General Counsel

            
	 	 	 
	 	
              TXCO
                ENERGY CORP.

            
	 	 
	 	
              By:

            	
              /s/
                P. Mark Stark

            
	 	 	
              P.
                Mark Stark

            
	 	 	
              Vice
                President, Treasurer and Chief Financial Officer

            
	 	 	 
	 	
              TEXAS
                TAR SANDS INC.

            
	 	 
	 	
              By:

            	
              /s/
                M. Frank Russell

            
	 	 	
              M.
                Frank Russell

            
	 	 	
              Vice
                President and General Counsel

            
	 	 	 
	 	
              OPEX
                ENERGY, LLC

            
	 	 
	 	
              By:

            	
              /s/
                P. Mark Stark

            
	 	 	
              P.
                Mark Stark

            
	 	 	
              Vice
                President, Treasurer and Chief Financial Officer

            
	 	 	 
	 	
              Address
                for Notice:

              Principal
                Place of Business

              and
                Chief Executive Office:

            
	 	 
	 	 	
              777
                E. Sonterra Blvd., Suite 350

              San
                Antonio, Texas 78258

              Attention:  Chief
                Financial Officer

              Facsimile
                No.:  (210) 496-3232

            

    

    

    
      
        
          
          

        

        
          
          

          
            

          

        

         

      

    

    

    

    
      	 	
              ADMINISTRATIVE
                AGENT AND A LENDER:

            
	 	 
	 	
              BANK
                OF MONTREAL, acting through its U.S. branches and agencies,
                including its Chicago, Illinois branch, as Administrative Agent and
                as a
                Lender

            
	 	 
	 	
              By:

            	
              /s/
                Joseph A. Bliss

              Joseph
                A. Bliss

              Managing
                Director

            
	 	 	 
	 	 	
              Address:

            	
              115
                South LaSalle Street

              11th
                Floor West

              Chicago,
                Illinois  60603

            
	 	 	 	 
	 	 	
              Facsimile
                No.:

            	
              (312)
                765-8078

            
	 	 	 	 
	 	 	
              Attention:

            	
              Terri
                Perez-Ford, Specialist

            
	 	 	 	 
	 	 	 	 
	 	
              with
                copy to:

            	 
	 	 	 	 
	 	 	
              Address:

            	
              Bank
                of Montreal

              Houston
                Agency

              700
                Louisiana Street

              4400
                Bank of America Center

              Houston,
                Texas  77002

            
	 	 	 	 
	 	 	
              Facsimile
                No.:

            	
              (713)
                223-4007

            
	 	 	 	 
	 	 	
              Attention:

            	
              Joseph
                A. Bliss

            
	 	 	 	 
	 	 	
              Applicable
                Lending Office

              for
                Base Rate Loans and

              LIBO
                Rate Loans:

            
	 	 	 	 
	 	 	
              Address:

            	
              115
                South LaSalle Street,

              11th
                Floor West

              Chicago,
                Illinois 60603

            
	 	 	 	 
	 	 	
              Facsimile
                No.:

            	
              (312)
                765-8078

            
	 	 	 	 
	 	 	
              Attention:

            	
              Terri
                Perez-Ford, Specialistexh102.htm

    
       

      EXHIBIT
        10.2

       

      FIRST
        AMENDMENT TO THE

      AMENDED
        AND RESTATED CREDIT AGREEMENT

       

      THIS
        FIRST AMENDMENT TO THE AMENDED AND RESTATED CREDIT AGREEMENT (this
        "First Amendment"), dated
        and effective as of July 25, 2007 (the "First Amendment Effective
        Date"), which amends that certain Amended and Restated Credit
        Agreement dated as of April 2, 2007 by and among TXCO
        RESOURCES, INC. (formerly named THE
        EXPLORATION COMPANY OF DELAWARE, INC.), a Delaware corporation (the
        "Company"), OUTPUT
        ACQUISITION CORP., a Texas corporation ("Merger
        Sub"), TXCO
        ENERGY CORP., a Texas corporation ("TXCOE"),
TEXAS
        TAR SANDS INC., a Texas corporation ("TTSI"
        and, together with Merger Sub, TXCOE,
        the "Original Guarantors"), each of the Lenders party
        thereto, BANK
        OF MONTREAL, a Canadian chartered bank acting through certain of its
        United States branches and agencies, including its Chicago, Illinois branch,
        as
        administrative agent for the Lenders (in such capacity, together with its
        successors in such capacity, the "Administrative
        Agent"), and BMO
        CAPITAL MARKETS CORP., as arranger (as in effect immediately prior to the
        First Amendment Effective Date, the "Credit
        Agreement"), is by and among the Company, each of the Original
        Guarantors, OPEX
        ENERGY, LLC, a Texas limited liability company
        ("OPEX" and, together with the Original Guarantors,
        the "Guarantors"), each of the Lenders party hereto
        and the Administrative Agent.

       

      WHEREAS,
        the Company has advised the Administrative Agent and the Lenders that the
        Company has requested that the Second Lien Term Loan Agreement be amended
        and
        restated to provide for certain amendments, including an increase of the
        amount
        of the term loans to be made available to the Company by $20,000,000 to a
        total
        aggregate principal amount of $100,000,000 under an Amended and Restated
        Term
        Loan Agreement, substantially in the form of Exhibit A attached hereto,
        subject to effectiveness of this First Amendment and the other conditions
        precedent provided for in such agreement;

       

      WHEREAS,
        the Company has requested that the Credit Agreement be amended to
        allow each of GUARANTY BANK, AMEGY BANK NATIONAL
        ASSOCIATION, NATIXIS, ALLIED IRISH BANKS P.L.C. and CIT ENERGY USA INC. (the
        "New Lenders") to become "Lenders" party to the Credit
        Agreement, as set forth herein;

       

      WHEREAS,
        the Company has requested that the Credit Agreement be amended to make certain
        other changes to the Credit Agreement on the terms and conditions set forth
        in
        this First Amendment;

       

      WHEREAS,
        as used herein, the term "Current Lenders" means the
        Lenders identified as the Current Lenders on Schedule I hereto;
        capitalized terms used but not otherwise defined herein shall have the meanings
        assigned such terms in the Credit Agreement; and the rules of interpretation
        set
        forth in Section 1.2 of the Credit Agreement are incorporated in this First
        Amendment as if set forth herein; and

       

      
        
          
          

        

        
          -
            1 -

          
            

          

        

         

      

      WHEREAS,
        all of the Lenders (including the New Lenders) have agreed to such amendments
        subject to the terms and conditions set forth in this First
        Amendment.

       

      NOW
        THEREFORE, in consideration of the mutual agreements, provisions and
        covenants contained herein and other good and valuable consideration, the
        receipt and adequacy of which are hereby acknowledged, the parties hereto,
        intending to be legally bound, hereby agree as follows.

       

      Section
        1.                      Lender
        Transactions.

       

      (a)           Each
        Current Lender hereby sells, transfers and assigns to the other Current Lenders
        and the New Lenders, and each other Current Lender and each New Lender hereby
        purchases, assumes and undertakes from such Current Lender, without recourse
        and
        without representation or warranty (except as provided in this Section 1)
        a
        percentage equal to the percentage set forth opposite such Lender's name
        on
        Schedule I hereto under the column "Pro Rata Shares Purchased on the First
        Amendment Effective Date" of (i) the Maximum Loan Amount of such Current
        Lender
        and (ii) all related rights, benefits, obligations, liabilities and indemnities
        of such Current Lender under and in connection with the Credit Agreement,
        as
        amended hereby, each Guaranty, the Mortgages, each other Security Document
        and
        the other Loan Documents and all Collateral and other security for the
        Obligations.

       

      (b)           Upon
        the effectiveness of this First Amendment and by its execution and delivery
        hereof, each of the New Lenders shall be  a party to the Credit
        Agreement, as amended hereby, shall have all the rights and obligations of
        a
        "Lender" under the Credit Agreement, as amended hereby, and the other Loan
        Documents as if each were a signatory thereto, and shall agree, and does
        hereby
        agree, to be bound by the terms and conditions set forth in the Credit
        Agreement, as amended hereby, and the other Loan Documents to which the Lenders
        are a party, in each case, as if each were a signatory thereto.

       

      (c)           Each
        of the New Lenders hereby represents and warrants as follows:  (i)
        such New Lender has fully reviewed the terms of the Credit Agreement, this
        First
        Amendment and the other Loan Documents, copies of which, together with copies
        of
        the documents which were required to be delivered as a condition to the making
        of the initial Loans thereunder, have been delivered to such New Lender by
        the
        Administrative Agent, and such New Lender has independently and without reliance
        upon any other Lender or the Administrative Agent, and based on such information
        as such New Lender has deemed appropriate, made its own credit analysis and
        decision to enter into this First Amendment and (ii) if such New Lender is
        not
        incorporated, formed or organized under the laws of the United States of
        America
        or a state thereof, such New Lender has contemporaneously herewith delivered
        to
        the Administrative Agent and the Company such documents as are required by
        the
        Credit Agreement, including Section 10.10 of the Credit
        Agreement.  Each of the New Lenders hereby (x) appoints and
        authorizes the Administrative Agent to take such action as agent on its behalf
        and to exercise such powers and discretion under the Loan Documents as are
        delegated to the Administrative Agent by the terms thereof, together with
        such
        powers and discretion as are reasonably incidental thereto; and (y) agrees
        that
        it will perform in accordance with their terms all of the obligations that
        by
        the terms of the Credit Agreement, as amended hereby, or any other Loan
        Document are required to be performed by it as a Lender.

       

      
        
          
          

        

        
          - 2
            -

          
            

          

        

         

      

      (d)           Each
        of the New Lenders and each of the Current Lenders hereby advise each other
        party hereto that its respective address for notices and its respective Lending
        Office(s) shall be as set forth below its name on its respective signature
        page
        hereto.

       

      (e)           In
        furtherance of the foregoing transactions, the Company agrees that upon the
        request to the Administrative Agent by any Lender, the Company will promptly
        execute and deliver to such Lender a Note evidencing the Loans of such Lender
        with appropriate insertions as to date and principal amount; provided, however,
        that delivery of Notes shall not be a condition precedent to the occurrence
        of
        the First Amendment Effective Date.  The amount of principal owning on
        any Lender's Note, if any, at any given time shall be the aggregate amount
        of
        all Loans theretofore made by such Lender minus all payments of principal
        theretofore received by such Lender on such Note.  Any Note shall be
        issued in renewal, modification and extension but not novation and discharge
        of
        indebtedness of the Company under, and evidenced by, that certain promissory
        note dated April 2, 2007 in the principal amount of $125,000,000 executed
        by the
        Company payable to Bank of Montreal.

       

      (f)           As
        a result of the transactions effected by this Section 1, upon effectiveness
        of
        this First Amendment, for purposes of Section 2.1(a) of the Credit Agreement,
        as
        amended hereby, and for all other purposes of the Credit Agreement, as amended
        hereby, each Lender's Maximum Loan Amount and Pro Rata Share shall be as
        set
        forth in Schedule I hereto.

       

      Section
        2.                      Amendments.  The
        Credit Agreement is hereby amended as follows:

       

      (a)           The
        following definition of "First Amendment Effective Date" is hereby added
        in its
        proper alphabetical order:

       

      "First
        Amendment Effective Date" means, July 25, 2007.

       

      (b)           The
        definition of "Commitment Letter" is hereby amended and restated to read
        in its
        entirety as follows:

       

      "Commitment
        Letter" means, collectively, (i) the commitment letter dated
        February 13, 2007 by and among the Company, BMO Capital Markets Corp. and
        Bank
        of Montreal and (ii) the Supplemental Commitment Letter dated July 19, 2007
        by
        and among the Company, BMO, Capital Markets Corp. and Bank of
        Montreal.

       

      (c)           The
        definition of "Second Lien Term Loan Agreement" is hereby amended and restated
        to read in its entirety as follows:

       

      "'Second
        Lien Term Loan
        Agreement' means the Amended and Restated Term Loan Agreement,
        dated as of July 25, 2007, among the Company, the guarantors party thereto,
        the
        several lenders from time to time party thereto, Bank of Montreal, as
        Administrative Agent, and BMO Capital Markets Corp., as Arranger, which amends
        and restates that certain Term Loan Agreement dated as of April 2, 2007,
        as the
        same may be further amended, amended and restated, supplemented or otherwise
        modified in accordance with the terms hereof."

       

      
        
          
          

        

        
          - 3
            -

          
            

          

        

         

      

      (d)           Section
        2.6(a) is hereby amended and restated to read in its entirety as
        follows:

       

      "(a)
Scheduled
        Borrowing Base
        Determinations.  At all times prior to the Termination Date the
        Company shall not permit the Effective Amount to exceed the Borrowing Base
        then
        in effect and shall, in accordance with Section 2.7(f), cure any Deficiency.
        The
        Initial Borrowing Base hereunder shall be $50,000,000 (the "Initial
        Borrowing Base")."

       

      (e)           The
        following new section for "Hedging Program" is hereby inserted into the Credit
        Agreement as Section 7.16 thereof:

       

      "7.16                      Hedging
        Program

       

      .  Not
        later than the fifteenth (15th) day
        following the
        First Amendment Effective Date, the Company shall, and shall cause its
        Subsidiaries to, enter into, and shall maintain at all times thereafter during
        the relevant period, Derivative Contracts for the purpose of hedging prices
        on
        the Oil and Gas thereafter expected to be produced by the Company or any
        of its
        Subsidiaries, which contracts shall (a) at all times through the third
        anniversary of the First Amendment Effective Date cover not less than 50%
        of the
        Company's and its Subsidiaries' aggregate Projected Oil and Gas Production
        anticipated to be sold in the ordinary course of such Persons' business during
        such three-year period, (b) thereafter, roll forward on a basis in order
        to
        cover not less than 50% of the Company's and its Subsidiaries' aggregate
        Projected Oil and Gas Production anticipated to be sold in the ordinary course
        of such Persons' business during the ensuing twelve (12) fiscal quarters
        and (c)
        otherwise be in form and substance reasonably acceptable to the Administrative
        Agent.  The Company shall provide copies to the Administrative Agent
        of all Derivative Contracts then in effect not later than the fifteenth (15th) day
        following the
        First Amendment Effective Date, and thereafter contemporaneously with the
        delivery of each Reserve Report as prescribed by Section 7.2(c)(i) beginning
        with the delivery of the Reserve Report required to be delivered on or before
        October 1, 2007.  Delivery of such copies at such times shall be
        accompanied by delivery of a certificate of a Responsible Officer, certifying
        that the Company is in compliance with the requirements of this Section
        7.16."

       

      (f)           Section
        8.1(e) is hereby amended and restated in its entirety to read as
        follows:

       

      "(e)
        Liens consisting of (i) pledges or deposits required in the ordinary course
        of
        business in connection with workers' compensation, unemployment insurance
        and
        other social security legislation; (ii) pledges and deposits in the
        ordinary course of business not exceeding $500,000 in the aggregate securing
        insurance premiums or reimbursement obligations under insurance policies,
        in
        each case payable to insurance carriers that provide insurance to the Company
        or
        any of its Subsidiaries; or

       

      
        
          
          

        

        
          - 4
            -

          
            

          

        

         

      

      (iii) obligations
        in respect of letters of credit or bank guarantees that have been posted
        by the
        Company or any of its Subsidiaries to support the payments of the items set
        forth in clauses (i) and (ii) of this Section 8.1(e);"

       

      (g)           Section
        8.5(b) is hereby amended and restated in its entirety to read as
        follows:

       

      "(b)  Indebtedness
        incurred pursuant to the Second Lien Term Loan Agreement in an aggregate
        principal amount not to exceed $100,000,000;"

       

      (h)           Section
        8.10(a)(i) is hereby amended by replacing clause (ii) thereof with the
        following:

       

      "(ii)
        as
        of any date (the "Calculation Date") no such contract,
        when aggregated with all Derivative Contracts permitted under this Section
        8.10(a)(i), but excluding Derivative Contracts described in clause (v) of
        this
        Section 8.10(a)(i), shall cover a notional volume in excess of the Applicable
        Percentage of the total Projected Oil and Gas Production to be produced in
        any
        month from the Proved Developed Producing Reserves reflected in the most
        recent
        Reserve Report (unless and solely to the extent such an
        excess occurs in a month falling within a period covered by a Derivative
        Contract entered into by the Company to maintain compliance with Section
        7.16);"

       

      (i)           Section
        11.27 (b) is hereby amended by replacing the first sentence thereof with
        the
        following:

       

      "Notwithstanding
        anything to the contrary contained herein or any other Loan Document, when
        all
        Obligations have been paid or otherwise satisfied in full and all Commitments
        have terminated or expired, but subject to Sections 5.1(e) and 5.4(e) of
        the
        Intercreditor Agreement, upon request of the Company, the Administrative
        Agent
        shall (without notice to, or vote or consent of, any Lender, or any Qualified
        Derivative Contract Counterparty) take such actions as shall be required
        to
        release its security interest in all Collateral, and to release all Guaranty
        Obligations provided for in any Loan Document; provided, however, that in
        lieu
        of terminating and repaying any such Obligations arising under any Qualified
        Derivative Contract, the Company may provide substitute credit support under
        a
        standard form ISDA Credit Support Annex or other credit support documents
        reasonably acceptable to such Qualified Derivative Contract Counterparty
        to
        cover its then current exposure under such Qualified Derivative Contract
        and
        such Qualified Derivative Contract Counterparty shall have provided written
        notice to the Administrative Agent to the effect that such substitute credit
        support has been provided to it and that such Qualified Derivative Contract
        Counterparty no longer claims any right, title or interest in any Collateral
        arising under the Loan Documents to secure any Obligations and Indebtedness
        of
        the Company or any of

       

      
        
          
          

        

        
          -
            5
            -

          
            

          

        

         

      

      its
        Subsidiaries arising under or related to such Qualified Derivative Contract,
        whether then existing or thereafter arising."

       

      Section
        3.                      Amendment
        and Ratification.  Upon the effectiveness hereof as provided in Section 4 of this First Amendment, this First
        Amendment shall be deemed to be an amendment to the Credit Agreement, and
        the
        Credit Agreement, as modified hereby, is hereby ratified, approved and confirmed
        to be in full force and effect in each and every respect.  Except as
        expressly provided by the amendments set forth in Section 2 of this First
        Amendment, the execution, delivery and effectiveness of this First Amendment
        shall neither operate as a waiver of any right, power or remedy of any Lender
        or
        any Agent, nor constitute a waiver of any provision of any of the Loan
        Documents.  All references to the Credit Agreement in any other
        document, instrument, agreement or writing shall hereafter be deemed to refer
        to
        the Credit Agreement, as amended hereby.

       

      Section
        4.                      Conditions
        to Effectiveness.  The effectiveness of this First Amendment is
        subject to the condition that, on or before the First Amendment Effective
        Date,
        the Administrative Agent shall have received all of the following, in form
        and
        substance satisfactory to the Administrative Agent:

       

      (a)           Amendment.  This
        First Amendment, duly executed and delivered by the Company and each of the
        Guarantors; and

       

      (b)           Payment
        of Fees.  Evidence of payment by the Company of all accrued and
        unpaid fees, costs and expenses owed pursuant to the Credit Agreement, as
        amended hereby, or this First Amendment, including the Fee Letter Agreement,
        in
        each case to the extent then due and payable at the First Amendment Effective
        Date, including any such costs, fees and expenses arising under or referenced
        in
        Sections 2.8 and 11.4 of the Credit Agreement.

       

      Section
        5.                      Representations
        and Warranties.  The Company and each Guarantor hereby represents
        and warrants that, as of the First Amendment Effective Date, after giving
        effect
        to this First Amendment:

       

      (a)           Bring-Down
        of Representations and Warranties.  The representations and warranties
        of the Company and each Guarantor contained in Article VI and Section 4.5(b)
        of
        the Credit Agreement are true and correct in all material respects on and
        as of
        the First Amendment Effective Date, as though made on and as of such date
        (except to the extent such representations and warranties expressly refer
        to an
        earlier date, in which case they shall be true and correct as of such earlier
        date).

       

      (b)           No
        Default or Event of Default.  No event has occurred and is
        continuing which constitutes a Default, an Event of Default or
        both.

       

      Section
        6.                      Governing
        Law.  THIS FIRST AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE
        PARTIES UNDER THIS FIRST AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
        INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

       

      
        
          
          

        

        
          - 6
            -

          
            

          

        

         

      

      Section
        7.                      Costs
        and Expenses.  The Company shall pay all reasonable costs and
        expenses incurred by the Administrative Agent, the Arranger or any of their
        Affiliates in connection with the development, preparation, administration
        and
        execution of this First Amendment, including Attorney Costs incurred by any
        such
        Person with respect thereto, in each case in accordance with Section 11.4
        of the
        Credit Agreement.

       

      Section
        8.                      Counterparts.  This
        First Amendment may be executed in any number of separate counterparts, no
        one
        of which need be signed by all parties; each of which, when so executed,
        shall
        be deemed an original, and all of such counterparts taken together shall
        be
        deemed to constitute but one and the same instrument.  A fully
        executed counterpart of this First Amendment by facsimile signatures shall
        be
        binding upon the parties hereto.

       

      Section
        9.                      Facsimile
        Transmission of Signature.  Any party to this First Amendment may
        indicate its intention to be bound by its execution and delivery of this
        First
        Amendment by its signature to the signature page hereof and the delivery
        of the
        signature page hereof to the other parties or their respective representatives
        by facsimile transmission or telecopy.  The delivery of a party's
        signature on the signature page by facsimile transmission or telecopy shall
        have
        the same force and effect as if such party signed and delivered this First
        Amendment in person.

       

      [Signature
        Pages Follow]

      
        
          
          

        

        
          - 7
            -

          
            

          

        

         

      

      IN
        WITNESS WHEREOF, the parties hereto have caused this First Amendment to be
        duly
        executed and delivered by their respective duly authorized officers as of
        the
        date first set forth above, to be effective as of the First Amendment Effective
        Date.

       

      
        
          	 	
                  COMPANY:

                
	 	 
	 	
                  TXCO
                    RESOURCES INC.

                
	 	 
	 	
                  By:    /s/
                    James E.
                    Sigmon                                                

                
	 	
                  Name:   James
                    E. Sigmon

                
	 	
                  Title:     President
                    and Chief Executive Officer

                
	 	 
	 	
                  GUARANTORS:

                
	 	 
	 	
                  OUTPUT
                    ACQUISITION CORP.

                
	 	 
	 	
                  By:   /s/
                    M. Frank
                    Russell                                     

                
	 	
                  Name:  M.
                    Frank
                    Russell         

                
	 	
                  Title:    Vice
                    President and General Counsel

                
	 	 
	 	
                  TXCO
                    ENERGY CORP.

                
	 	 
	 	
                  By:   /s/
                    P. Mark
                    Stark                                                    

                
	 	
                  Name:  P.
                    Mark
                    Stark           

                
	 	
                  Title:    Vice
                    President, Treasurer and Chief Financial Officer

                
	 	 
	 	
                  TEXAS
                    TAR SANDS INC.

                
	 	 
	 	
                  By:   /s/
                    M. Frank
                    Russell                                                

                
	 	
                  Name:  M.
                    Frank
                    Russell     

                
	 	
                  Title:  Vice
                    President and General Counsel

                
	 	 
	 	
                  OPEX
                    ENERGY, LLC

                
	 	 
	 	
                  By:   /s/
                    P. Mark
                    Stark                                                     

                
	 	
                  Name:  P.
                    Mark
                    Stark         

                
	 	
                  Title:    Vice
                    President, Treasurer and Chief Financial Officer

                
	 	
                   

                  Address
                    for Notice:

                  Principal
                    Place of Business

                  and
                    Chief Executive Office:

                  777
                    E. Sonterra Blvd., Suite 350

                  San
                    Antonio, Texas 78258

                  Attention:  Chief
                    Financial Officer

                  Facsimile
                    No.:  (210)
                    496-3232

                

        

      
        
          
          

        

        
          Signature
            Page to First Amendment to Amended and Restated Credit Agreement

          
            

          

        

         

      

      ADMINISTRATIVE
        AGENT AND

      A
        LENDER:

       

      
        	
                 

              	
                BANK
                  OF MONTREAL, acting through its U.S. branches and agencies,
                  including its Chicago, Illinois branch, as Administrative Agent
                  and as a
                  Lender

              

      

      

      
        	
                 

              	
                By:  
                  

              	
                /s/
                  Joseph A. Bliss

                Joseph A. Bliss

                Managing Director

              

      

       

       

      Address:        115
        South LaSalle Street

      11th
        Floor West

      Chicago,
        Illinois  60603

      

      Facsimile
        No.:  (312) 765-8078

      

      Attention:        Terri
        Perez-Ford, Specialist

      

      with
        copy
        to:

      

      Bank
        of
        Montreal

      Houston
        Agency

      700
        Louisiana Street

      4400
        Bank
        of America Center

      Houston,
        Texas  77002

      

      Facsimile
        No.:  (713) 223-4007

      

      Attention:         Joseph
        A. Bliss

      

      Applicable
        Lending Office

      for
        Base
        Rate Loans and

      LIBO
        Rate
        Loans:

      

      Address:        115
        South LaSalle Street,

      11th
        Floor
        West

      Chicago,
        Illinois 60603

      

      Facsimile
        No.:   (312) 765-8078

      

      Attention:          Terri
        Perez-Ford, Specialist

      
        
          
          

        

        
          Signature
            Page to
            First Amendment to Amended and Restated Credit Agreement

          
            

          

        

         

      

      A
        LENDER:

      

      GUARANTY
        BANK

      

      By:   /s/
        David
        Butler                                                                        

            Name:David
        Butler  

            Title: 
        Vice President

      

      By:                                                                           

            Name:

            Title:

      

      

      Address
        for Notices:

      

      Address:                        333
        Clay Suite 4400

      Houston,
        TX 77002

      

      

      Facsimile
        No.:                (713)
        890-8868

      

      Attention:                       David
        Butler

      

      

      with
        a
        copy to:

      

      Address:                        8333
        Douglas

      Dallas,
        TX 75225

      

      

      Facsimile
        No.:                (214)
        360-1938

      

      Attention:                       Robert
        Lyons

       

      
        
          
          

        

        
          Signature
            Page to
            First Amendment to Amended and Restated Credit Agreement

          
            

          

        

         

      

      A
        LENDER:

      

      AMEGY
        BANK NATIONAL ASSOCIATION

      

      By:   /s/
        Mark A.
        Serice                                                                       

            Name:
        Mark A. Serice   

            Title:  
        Vice President

      

      By:                                                                           

            Name:

            Title:

      

      

      Address
        for Notices:

      

      Address:                    4400
        Post Oak Parkway, 4th Floor

      Houston,
        TX  77027

      

      Facsimile
        No.:            (713)
        561-0345

      

      Attention:                   Mark
        A. Serice

      

      

      with
        a
        copy to:

      

      Address:                    1801
        Main Street

      Houston,
        TX 77002

      

      Facsimile
        No.:            (713)
        693-7467

      

      Attention:                   Dana
        Chargois

       

      
        
          
          

        

        
          Signature
            Page to
            First Amendment to Amended and Restated Credit Agreement

          
            

          

        

         

      

      A
        LENDER:

      

      NATIXIS

      

      By:   /s/
        Timothy L.
        Polvado                                                                        

            Name:   
        Timothy L. Polvado 

            Title:      Managing
        Director

      

      By: 
        /s/ Louis P. Laville, III

            Name:  
        Louis P. Laville, III

            Title:     Managing
        Director

      

      

      Address
        for Notices:

      

      
        	
                 

              	
                Address:  
                  

              	
                Natural
                  Resources & Related Industries

              

      

      333
        Clay Street, Suite
        4340

      Houston,
        TX 77002

      

      Facsimile
        No.:            (713)
        583-7745

      

      Attention:                   Honi
        Gregory

      

      

      with
        a
        copy to:

      

      Address:                    Houston
        Energy Group

      333
        Clay Street, Suite
        4340

      Houston,
        TX 77002

      

      Facsimile
        No.:            (713)
        571-6167

      

      Attention:                   Donovan
        Broussard

       

      

       

      
        
          
          

        

        
          Signature
            Page to
            First Amendment to Amended and Restated Credit Agreement

          
            

          

        

         

      

      A
        LENDER:

      

      ALLIED
        IRISH BANKS P.L.C.

      

      By:    /s/
        Edward M.
        Fenk                                                                      

            Name:
        Edward M. Fenk

            Title:  
        Vice President

      

      By:   /s/
        Aidan
        Lanigan                                                                  

            Name:
        Aidan Lanigan  

            Title:  
        Vice President

      

      

      Address
        for Notices:

      

      Address:                       Bankcentre,

      Ballsbridge,
        Dublin 4,
        Ireland

      

      Facsimile
        No.:              353
        1 608-9815

      

      Attention:                     Eimear
        O'Meara / Peter Garvey

      

      

      with
        a
        copy to:

      

      Address:                       Allied
        Irish Bank

      -
        Corporate Operations

      2nd
        Floor, Iona House,

      Shelbourne
        Road

      Ballsbridge,
        Dublin 4,
        Ireland

      

      Facsimile
        No.:               353
        1 641 6668

      

      Attention:                      Eimear
        O'Meara / Peter Garvey

       

      
        
          
          

        

        
          Signature
            Page to
            First Amendment to Amended and Restated Credit Agreement

          
            

          

        

         

      

      A
        LENDER:

      

      CIT CAPITAL
        USA INC.

      

      By:   /s/
        Harold J.
        Schroeder                                                                

            Name:
        Harold J. Schroeder  

            Title:  
        Senior Vice President

      

      By:                                                                           

            Name:

            Title:

      

      

      Address
        for Notices:

      

      Address:                        505
        Fifth Avenue, 10th Floor

      New
        York, NY 10017

      

      Facsimile
        No.:                (212)
        771-9675

      

      Attention:                       Peggy
        Dolan

      

      

      with
        a
        copy to:

      

      Address:                        11
        West 42nd
        Street

      New
        York, NY 10036

      

      Facsimile
        No.:                (212)
        461-7852

      

      Attention:                       Maria
        McClung

       

       

      
        
          
          

        

        
          Signature
            Page to
            First Amendment to Amended and Restated Credit Agreement

          
            

          

        

         

      

      SCHEDULE
        I

       

      
        	
                Lender

              	 	
                Pro
                  Rata Shares on the First Amendment Effective Date

              	
                Maximum
                  Loan Amount

              
	
                CURRENT
                  LENDER:

              	 	 	 
	 	 	 	 
	
                BANK
                  OF MONTREAL

              	 	
                30%

              	
                $37,500,000

              
	 	 	 	 
	 	 	 	 
	
                NEW
                  LENDERS:

              	 	 	 
	 	 	 	 
	
                GUARANTY
                  BANK

              	 	
                20%

              	
                $25,000,000

              
	 	 	 	 
	
                AMEGY
                  BANK NATIONAL ASSOCIATION

              	 	
                20%

              	
                $25,000,000

              
	 	 	 	 
	
                NATIXIS

              	 	
                10%

              	
                $12,500,000

              
	 	 	 	 
	
                ALLIED
                  IRISH BANKS P.L.C.

              	 	
                10%

              	
                $12,500,000

              
	 	 	 	 
	
                CIT
                  ENERGY USA INC.

              	 	
                10%

              	
                $12,500,000

              
	 	 	 	 
	
                TOTAL:

              	 	
                100%

              	
                $125,000,000

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00126-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00126-of-00352.parquet"}]]