DEBTOR-IN-POSSESSION NOTE

Exhibit 10.1

THIS DEBTOR-IN-POSSESSION NOTE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF 1933 OR ANY APPLICABLE STATE SECURITIES LAWS, AND HAS BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF.

FOR VALUE RECEIVED, the undersigned, TXCO RESOURCES INC., a corporation organized and existing under the laws of the State of Delaware, TXCO ENERGY CORP., a corporation organized and existing under the laws of the State of Texas, TEXAS TAR SANDS INC., a corporation organized and existing under the laws of the State of Texas, OUTPUT ACQUISITION CORP., a corporation organized and existing under the laws of the State of Texas, OPEX ENERGY, LLC, a limited liability company formed and existing under the laws of the State of Texas, CHARRO ENERGY INC., a corporation organized and existing under the laws of the State of Texas, TXCO DRILLING CORP., a corporation organized and existing under the laws of the State of Texas, EAGLE PASS WELL SERVICES, L.L.C., a limited liability company formed and existing under the laws of the State of Texas, PPL OPERATING INC., a corporation organized and existing under the laws of the State of Texas, MAVERICK GAS MARKETING, LTD., a limited partnership organized and existing under the laws of the State of Texas and MAVERICK-DIMMIT PIPELINE, LTD., a limited partnership organized and existing under the laws of the State of Texas (together, the " Borrowers ", and each individually, a " Borrower "), hereby jointly and severally promises to pay the principal sum of TWELVE MILLION FIVE HUNDRED THOUSAND DOLLARS (U.S.$12,500,000) (or such lesser amount as may have been advanced hereunder from time to time) on the Maturity Date (as defined below) to the order of DOUBLE BLACK DIAMOND OFFSHORE, LTD., acting in the capacity as agent (the " Agent ") on behalf of REGIMENT CAPITAL SPECIAL SITUATIONS FUND III, L.P., CIT BANK, BD FUNDING I, LLC and LTD/DLT LONGHORN CORP. (together, the " Lenders ", and each individually, a " Lender ").

Amounts payable under this Debtor-In-Possession Note (" this DIP Note ") shall bear interest from the date hereof until paid in full (computed on the basis of a year of 360 days and the actual number of days elapsed) (a) with respect to the amount of up to SEVEN MILLION FIVE HUNDRED THOUSAND DOLLARS (U.S.$7,500,000) advanced hereunder, at the rate of LIBOR (as defined below) plus four percent (4.0%) per annum, and (b) with respect to any additional amounts advanced hereunder in excess of SEVEN MILLION FIVE HUNDRED THOUSAND DOLLARS (U.S.$7,500,000) up to TWELVE MILLION FIVE HUNDRED THOUSAND DOLLARS (U.S.$12,500,000), at the rate of LIBOR plus ten percent (10.0%) per annum, in each case which interest shall accrue daily and be payable in arrears in cash on the following dates:

(i)           on the last day of each calendar month occurring prior to the Maturity Date (as adjusted in accordance with this DIP Note); and

(ii)           on the Maturity Date,

unless otherwise prepaid in connection with a prepayment of principal in accordance with this DIP Note.  If any day when interest is scheduled to be paid under this DIP Note is not a Business Day (as defined below), interest shall not be payable on such day but on the next day which is a Business Day, unless such next day would thereby fall into the next calendar month in which event such day when interest is scheduled to be paid shall be brought forward to the immediately preceding Business Day.  Notwithstanding the foregoing, if an Event of Default (as defined in the Interim Order (as defined below)) shall have occurred and be continuing, amounts evidenced by this DIP Note and all other Obligations shall bear interest at the rate set forth in this paragraph, as applicable, plus two percent (2.0%) per annum, which interest shall be payable in cash on demand.

Unless otherwise defined in the text of this DIP Note, terms used in this DIP Note shall have the meanings provided in Section 10 below.

All amounts payable under this DIP Note shall be payable in immediately available United States funds to the Lenders at an account or accounts of the Lenders to be designated to the Borrowers by the Lenders in writing.  All payments on this DIP Note shall be applied first to accrued and unpaid interest and second to the outstanding principal balance hereof.  Any principal amounts paid by the Borrowers may not be reborrowed.  Whenever any payment to be made under this DIP Note shall be stated to be due on a day that is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day.

This DIP Note has been issued in connection with post-petition financing provided by the Lenders pursuant to that certain "INTERIM ORDER UNDER 11 U.S.C. §§ 105(a), 361, 363 AND 364 AND FED. R. BANKR. P. 2002, 4001 AND 9014 (I) AUTHORIZING DEBTORS TO INCUR POST-PETITION SECURED INDEBTEDNESS, (II) GRANTING SECURITY INTERESTS AND SUPERPRIORITY CLAIMS, (III) APPROVING USE OF CASH COLLATERAL, AND (IV) SCHEDULING FINAL HEARING" (together with the term sheet attached thereto, the " Interim Order "), entered by the United States Bankruptcy Court for the Western District of Texas, San Antonio Division (the " Bankruptcy Court ") (Case No. 09-51807) (et al) in the pending chapter 11 case (the " Chapter 11 Case ") of the Borrowers.

This DIP Note may be prepaid by the Borrowers, in whole or in part, at any time without premium or penalty; provided , that any partial prepayment shall be applied pro rata in prepayment of (a) the initial principal amount of SEVEN MILLION FIVE HUNDRED THOUSAND DOLLARS (U.S.$7,500,000) advanced hereunder and (b) any additional principal amounts advanced hereunder in excess of SEVEN MILLION FIVE HUNDRED THOUSAND DOLLARS (U.S.$7,500,000) up to TWELVE MILLION FIVE HUNDRED THOUSAND DOLLARS (U.S.$12,500,000), in each case as are outstanding as of the date of such prepayment.  Any principal amounts prepaid by the Borrowers may not be reborrowed.  Accrued and unpaid interest with respect to the principal amount prepaid shall be due and payable on the date of any such prepayment.

It is the intention of the parties hereto that the loans made hereunder shall conform strictly to applicable usury laws.  Accordingly, none of the terms and provisions contained in this DIP Note shall ever be construed to create a contract to pay interest to the Lender for the use, forbearance or detention of money at a rate in excess of the highest lawful rate applicable (the " Maximum Lawful Rate ").

(a)           In addition to the terms and provisions of this DIP Note, the terms and provisions of the Interim Order also shall apply to the making of the advances evidenced by this DIP Note and shall be deemed incorporated herein by reference as if fully set forth herein.  In the event of a conflict between this DIP Note and the Interim Order, the terms and provisions of the Interim Order shall govern.

(b)           As described in the Interim Order, the loans evidenced by this DIP Note represent a portion of the total loans that may be provided by the Lenders to the Borrowers pursuant to definitive loan documentation (collectively, the " Definitive Credit Agreement ") to be negotiated and entered into between the Borrowers and the Lenders subsequent to the date hereof.   At the time of execution and delivery of the Definitive Credit Agreement, the loans evidenced by this DIP Note shall be deemed to be continued under the Definitive Credit Agreement and thereafter governed by, and entitled to the benefits of, the terms and provisions of the Definitive Credit Agreement, and this DIP Note shall be promptly returned to the Borrowers.  The Borrowers, and by accepting this DIP Note, the Agent and the Lenders, each agrees to negotiate the terms of the Definitive Credit Agreement in good faith and consistent with applicable court orders.

Section 2.                       Collateral Security .

(a)           Pursuant to the Interim Order and in accordance with the terms thereof and hereof, as security for the full and timely payment and performance of all of the Obligations, each of the Borrowers hereby assigns, pledges and grants to the Agent, on behalf of itself and the Lenders, a valid, binding, continuing enforceable fully-perfected security interest in and to and lien on any and all real and personal property and interests in real and personal property of the Borrowers, whether now owned or existing or hereafter created, acquired or arising, including all of the following properties and interests in properties, whether now owned or hereafter created, acquired or arising (all being collectively referred to herein as the " Collateral "):