exv4w2






Exhibit 4.2




EXECUTION VERSION




 

 






FOURTH SUPPLEMENTAL INDENTURE




among



CARRIZO OIL & GAS, INC.

as Issuer



and



THE SUBSIDIARY GUARANTORS NAMED ON THE SIGNATURE PAGE HEREOF

as Subsidiary Guarantors



and



WELLS FARGO BANK, NATIONAL ASSOCIATION,

as Trustee



 





8.625% Senior Notes due 2018



 





November 2, 2010



 

 














 









 
















TABLE OF CONTENTS




	 	 	 	 	 	 	 

	ARTICLE ONE THE NOTES	 	 	2	 
	 
	 	 	 	 	 	 
	SECTION 101
	 	Designation of Notes; Establishment of Form	 	 	2	 
	SECTION 102
	 	Amount	 	 	2	 
	SECTION 103
	 	Interest	 	 	3	 
	SECTION 104
	 	Denominations	 	 	3	 
	SECTION 105
	 	Place of Payment	 	 	3	 
	SECTION 106
	 	Redemption	 	 	3	 
	SECTION 107
	 	Maturity	 	 	3	 
	SECTION 108
	 	Repurchase	 	 	4	 
	SECTION 109
	 	Global Securities; Book-Entry Provisions	 	 	4	 
	SECTION 110
	 	Guarantee	 	 	4	 
	SECTION 111
	 	Other Terms of Notes	 	 	4	 
	 
	 	 	 	 	 	 
	ARTICLE TWO AMENDMENTS TO THE INDENTURE	 	 	4	 
	 
	 	 	 	 	 	 
	SECTION 201
	 	Definitions	 	 	4	 
	SECTION 202
	 	Other Definitions	 	 	41	 
	SECTION 203
	 	Mutilated, Destroyed, Lost and Stolen Securities	 	 	42	 
	SECTION 204
	 	Amendment of Indenture Without Consent of Holders	 	 	42	 
	SECTION 205
	 	Limitation on Mergers and Consolidations	 	 	42	 
	SECTION 206
	 	Issuance of Additional Notes	 	 	44	 
	SECTION 207
	 	Redemption	 	 	45	 
	SECTION 208
	 	Covenants	 	 	49	 
	SECTION 209
	 	Amendment to Events of Default	 	 	74	 
	SECTION 210
	 	Guarantees	 	 	77	 
	SECTION 211
	 	Other Amendments	 	 	79	 
	 
	 	 	 	 	 	 
	ARTICLE THREE MISCELLANEOUS PROVISIONS	 	 	79	 
	 
	 	 	 	 	 	 
	SECTION 301
	 	Integral Part	 	 	79	 
	SECTION 302
	 	General Definitions	 	 	80	 
	SECTION 303
	 	Adoption, Ratification and Confirmation	 	 	80	 
	SECTION 304
	 	Counterparts	 	 	80	 
	SECTION 305
	 	Governing Law	 	 	80	 











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CARRIZO OIL & GAS, INC.




FOURTH SUPPLEMENTAL INDENTURE



     THIS FOURTH SUPPLEMENTAL INDENTURE, dated as of November 2, 2010 (the “Fourth Supplemental
Indenture”), among Carrizo Oil & Gas, Inc., a Texas corporation (the “Company”), the subsidiary
guarantors listed on the signature page hereof (each, a “Subsidiary Guarantor” and, collectively,
the “Subsidiary Guarantors”) and Wells Fargo Bank, National Association (the “Trustee”).



WITNESSETH:




     WHEREAS, the Company has heretofore executed and delivered to the Trustee an Indenture, dated
as of May 28, 2008 (the “Original Indenture”) and, as supplemented by this Fourth Supplemental
Indenture, the “Indenture”), providing for the issuance from time to time of one or more series of
the Company’s Securities;



     WHEREAS, Sections 2.01 and 9.01(9) of the Original Indenture provide that the Company and the
Trustee may from time to time enter into one or more indentures supplemental thereto to establish
the form or terms of Securities of a new series;



     WHEREAS, Section 9.01(6) of the Original Indenture permits the execution of supplemental
indentures without the consent of any Holders to add to the covenants of the Company for the
benefit of, and to add any additional Events of Default with respect to, all or any series of
Securities;



     WHEREAS, Section 9.01(8) of the Original Indenture permits the execution of supplemental
indentures without the consent of any Holders to change or eliminate any of the provisions of the
Indenture; provided that such change or elimination does not adversely affect in any material
respect any outstanding Security of any series created prior to the execution of such supplemental
indenture;



     WHEREAS, the Company desires to issue 8.625% Senior Notes due 2018 (the “Notes”), a new series
of Securities the issuance of which was authorized by or pursuant to resolution of the Board of
Directors of the Company;



     WHEREAS, the Company, pursuant to the foregoing authority, proposes in and by this Fourth
Supplemental Indenture to supplement and amend the Original Indenture insofar as it will apply only
to Notes in certain respects; and



     WHEREAS, all things necessary have been done to make the Notes, when executed by the Company
and authenticated and delivered hereunder and duly issued by the Company, the valid obligations of
the Company, and to make this Fourth Supplemental Indenture a valid agreement of the Company and of
the Subsidiary Guarantors, in accordance with their and its terms; and



     WHEREAS, all things necessary have been done to make the Guarantee of each Subsidiary
Guarantor, when the Notes are executed by the Company and authenticated and



 









 




delivered hereunder and duly issued by the Company, the valid obligation of such Subsidiary
Guarantee, and to make this Fourth Supplemental Indenture a valid agreement of the Subsidiary
Guarantors, in accordance with its terms.




     NOW, THEREFORE:



     In consideration of the premises provided for herein, the Company, the Subsidiary Guarantors
and the Trustee mutually covenant and agree for the equal and proportionate benefit of all Holders
of the Notes as follows:



ARTICLE ONE




THE NOTES



SECTION 101 Designation of Notes; Establishment of Form.




     There shall be a series of Securities designated “8.625% Senior Notes due 2018” of the Company
(the “Notes”). The provisions relating to the Notes set forth in the Appendix hereto are
incorporated into and shall be deemed a part of this Fourth Supplemental Indenture, with such
appropriate insertions, omissions, substitutions and other variations as are required or permitted
by the Indenture. The Initial Notes shall be substantially in the form of Exhibit 1 to the
Appendix. The Exchange Notes shall be substantially in the form of Exhibit 2 to the Appendix. The
Notes may have such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the rules of any securities exchange
or as may, consistently herewith, be determined by the officers of the Company executing such
Notes, as evidenced by their execution of the Notes.



     All of the Notes will initially be issued in permanent global form, substantially in the
respective form set forth in the Appendix (the “Global Securities”). Each Global Security shall
represent such of the Notes as shall be specified therein and shall provide that it shall represent
the aggregate amount of Outstanding Notes from time to time endorsed thereon and that the aggregate
amount of Outstanding Notes represented thereby may from time to time be reduced to reflect
exchanges and redemptions. Any endorsement of a Global Security to reflect the amount, or any
increase or decrease in the amount, of Outstanding Notes represented thereby shall be made by the
Trustee in accordance with written instructions or such other written form of instructions as is
customary for the Depositary, from the Depositary or its nominee on behalf of any Person having the
beneficial interest in the Global Security.



     The Company initially appoints The Depository Trust Company to act as Depositary with respect
to the Global Securities.



     The Company initially appoints the Trustee to act as Registrar and Paying Agent with respect
to the Notes.



SECTION 102 Amount.




     The Notes may be issued in unlimited aggregate principal amount. The Trustee shall
authenticate and deliver Notes for original issue in an aggregate Principal Amount of up to



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$400,000,000 upon Company Order without any further action by the Company. Upon Company
Request, the Trustee shall authenticate and deliver additional Notes, provided that such additional
Notes are fungible with the Notes then outstanding for U.S. Federal income taxation purposes.




SECTION 103 Interest.




     The Notes shall bear interest at the rate set forth under the caption “Interest” in the Notes.
Interest on the Notes shall be payable to the persons in whose name the Notes are registered at
the close of business on the Regular Record Date for such interest payment. Interest on the Notes
shall accrue on the Notes from the date specified in the Notes. The Interest Payment Dates on
which interest on the Notes shall be payable are April 15 and October 15, commencing on April 15,
2011. The Regular Record Dates for the interest payable on the Notes on any Interest Payment Date
shall be April 1 or October 1, as the case may be, immediately preceding such Interest Payment
Date.



SECTION 104 Denominations.




     The Notes shall be in fully registered form without coupons in denominations of $2,000 of
Principal Amount and integral multiples of $1,000 in excess of $2,000.



SECTION 105 Place of Payment.




     The Place of Payment for the Notes and the place or places where the principal of and interest
on the Notes shall be payable, the Notes may be surrendered for registration of transfer, the Notes
may be surrendered for exchange, repurchase or redemption and where notices may be given to the
Company in respect of the Notes is at the office or agency of the Trustee in Dallas, Texas;
provided that payment of interest may be made at the option of the Company by check mailed to the
address of the person entitled thereto as such address shall appear in the register of Securities;
provided, further if a Holder has given wire transfer instructions to the Company, the Company will
pay all principal, interest and premium, if any, on that Holder’s Notes in accordance with such
instructions by wire transfer of immediately available funds to the accounts specified by the
Holder of such Notes.



SECTION 106 Redemption.




     There shall be no sinking fund for the retirement of the Notes.



     The Company, at its option, may redeem the Notes in accordance with the provisions of and at
the Redemption Prices set forth in accordance with the provisions of the Indenture, including,
without limitation, Article III of the Original Indenture.



SECTION 107 Maturity.




     The date on which the principal of the Notes is payable, unless accelerated pursuant to the
Indenture, shall be October 15, 2018.



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SECTION 108 Repurchase.




     The Notes shall be repurchased by the Company in accordance with the provisions and at the
Repurchase Prices set forth under the caption “Repurchase by the Company at the Option of Holder”
in the Notes and in accordance with the provisions of the Indenture, including, without limitation,
Sections 4.12 and 4.16 of the Indenture.



SECTION 109 Global Securities; Book-Entry Provisions.




     Section 2.17 of the Original Indenture shall not apply to the Notes. Instead, the provisions
under Section 2.1 of the Appendix shall apply to the Notes.



SECTION 110 Guarantee.




     The Notes shall be entitled to the benefits of a Guarantee by each of the Subsidiary
Guarantors as provided in Article X of the Original Indenture.



SECTION 111 Other Terms of Notes.




     Without limiting the foregoing provisions of this Article One, the terms of the Notes shall be
as set forth in the form of the Notes set forth in the Appendix hereto and as provided in the
Indenture.



ARTICLE TWO




AMENDMENTS TO THE INDENTURE



     The amendments contained herein shall apply to the Notes only and not to any other series of
Security issued under the Indenture and any covenants provided herein are expressly being included
solely for the benefit of the Notes. These amendments shall be effective for so long as there
remain any Notes Outstanding.



SECTION 201 Definitions.




     Section 1.01 of the Original Indenture is amended by inserting or restating, as the case may
be, in their appropriate alphabetical position, the following definitions:



          “Additional Assets” means:





     (1) any assets used or useful in the Oil and Gas Business, other than
Indebtedness or Capital Stock;




     (2) the Capital Stock of a Person that becomes a Restricted Subsidiary as a
result of the acquisition of such Capital Stock by the Company or any of its
Restricted Subsidiaries; or




     (3) Capital Stock constituting a minority interest in any Person that at such
time is a Restricted Subsidiary;



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provided, however, that any such Restricted Subsidiary described in clause (2) or
(3) is primarily engaged in the Oil and Gas Business.




     “Additional Interest” means all additional interest then owing pursuant to Section 6 of
the Registration Rights Agreement referred to in clause (1) of the definition of
“Registration Rights Agreement” in the Appendix. Unless the context indicates otherwise,
all references to “interest” in this Indenture or the Notes shall be deemed to include any
Additional Interest.




     “Additional Notes” means, subject to the Company’s compliance with Section 4.11, 8.625%
Senior Notes due 2018 issued from time to time after the Initial Issuance Date under the
terms of this Indenture (other than pursuant to Section 2.08, 2.09, 2.12, 3.07, 4.12, 4.16
or 9.05 of this Indenture or Sections 2.3 or 2.4 of the Appendix and other than Exchange
Notes issued pursuant to an exchange offer for Initial Notes outstanding under this
Indenture).




     “Adjusted Consolidated Net Tangible Assets” of a specified Person means (without
duplication), as of the date of determination:




     (1) the sum of:




     (a) discounted future net revenue from proved crude oil and natural gas
reserves of such Person and its Restricted Subsidiaries calculated in
accordance with SEC guidelines before any state or federal or other income
taxes, as estimated by the Company in a reserve report prepared as of the
end of the fiscal year of such Person for which audited financial statements
are available, as increased by, as of the date of determination, the
estimated discounted future net revenue from:




     (i) estimated proved crude oil and natural gas reserves of such
Person and its Restricted Subsidiaries attributable to acquisitions
consummated since the date of such reserve report, which reserves
were not reflected in such reserve report, and




     (ii) estimated crude oil and natural gas reserves of such Person
and its Restricted Subsidiaries attributable to extensions,
discoveries and other additions and upward revisions of estimates of
proved crude oil and natural gas reserves (including previously
estimated development costs incurred during the period and the
accretion of discount since the prior period end) due to exploration,
development or exploitation, production or other activities which
would, in accordance with standard industry practice, cause such
revisions, in the case of clauses (i) and (ii) calculated in
accordance with SEC guidelines,




and decreased by, as of the date of determination, the estimated discounted
future net revenue attributable to:



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     (A) estimated proved crude oil and natural gas reserves of such
Person and its Restricted Subsidiaries reflected in such reserve
report produced or disposed of since the date of such reserve report,
and




     (B) reductions in the estimated crude oil and natural gas
reserves of such Person and its Restricted Subsidiaries reflected in
such reserve report since the date of such reserve report due to
changes in geological conditions or other factors which would, in
accordance with standard industry practice, cause such revisions, in
the case of clauses (A) and (B) calculated in accordance with SEC
guidelines;




provided, however, that, in the case of each of the determinations made
pursuant to clauses (i), (ii), (A) and (B) above, such increases and
decreases shall be estimated by the Company’s petroleum engineers or any
independent petroleum engineers engaged by the Company for that purpose;




     (b) the capitalized costs that are attributable to crude oil and
natural gas properties of such Person and its Restricted Subsidiaries to
which no proved crude oil and natural gas reserves are attributable, based
on such Person’s books and records as of a date no earlier than the date of
such Person’s latest available annual or quarterly financial statements;




     (c) the Net Working Capital of such Person as of a date no earlier than
the date of such Person’s latest available annual or quarterly financial
statements; and




     (d) the greater of:




     (i) the net book value of other tangible assets of such Person
and its Restricted Subsidiaries as of a date no earlier than the date
of such Person’s latest available annual or quarterly financial
statements, and




     (ii) the appraised value, as estimated by independent
appraisers, of other tangible assets of such Person and its
Restricted Subsidiaries as of a date no earlier than the date of such
Person’s latest available annual or quarterly financial statements
(provided that such Person shall not be required to obtain such an
appraisal of such assets if no such appraisal has been performed);




minus




(2) the sum of:




     (a) Minority Interests;



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     (b) to the extent not otherwise taken into account in determining
Adjusted Consolidated Net Tangible Assets, any net natural gas balancing
liabilities of such Person and its Restricted Subsidiaries reflected in such
Person’s latest audited financial statements;




     (c) to the extent included in clause (1)(a) above, the discounted
future net revenue, calculated in accordance with SEC guidelines (utilizing
the prices utilized in such Person’s year end reserve report), attributable
to reserves subject to participation interests, overriding royalty interests
or other interests of third parties, pursuant to participation, partnership,
vendor financing or other agreements then in effect, or which otherwise are
required to be delivered to third parties;




     (d) to the extent included in clause (1)(a) above, the discounted
future net revenue calculated in accordance with SEC guidelines (utilizing
the prices utilized in such Person’s year end reserve report), attributable
to reserves that are required to be delivered to third parties to fully
satisfy the obligations of such Person and its Restricted Subsidiaries with
respect to Volumetric Production Payments on the schedules specified with
respect thereto; and




     (e) the discounted future net revenue, calculated in accordance with
SEC guidelines, attributable to reserves subject to Dollar-Denominated
Production Payments that, based on the estimates of production and price
assumptions included in determining the discounted future net revenue
specified in clause (1)(a) above, would be necessary to satisfy fully the
obligations of such Person and its Restricted Subsidiaries with respect to
Dollar-Denominated Production Payments on the schedules specified with
respect thereto.




If the Company changes its method of accounting from the full cost method to the successful
efforts method or a similar method of accounting, “Adjusted Consolidated Net Tangible
Assets” of the Company will continue to be calculated as if the Company were still using the
full cost method of accounting.




     “Affiliate” of any specified Person means any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with such specified
Person. For purposes of this definition, “control,” as used with respect to any Person,
means the possession, directly or indirectly, of the power to direct or cause the direction
of the management or policies of such Person, whether through the ownership of voting
securities, by agreement or otherwise. For purposes of this definition, the terms
“controlling,” “controlled by” and “under common control with” have correlative meanings.




     “Applicable Law,” except as the context may otherwise require, means all applicable
laws, rules, regulations, ordinances, judgments, decrees, injunctions, writs and orders of
any court or governmental or congressional agency or authority and rules,



7









 







regulations, orders, licenses and permits of any United States federal, state,
municipal, regional, or other governmental body, instrumentality, agency or authority.




     “Asset Sale” means:




     (1) the sale, lease, conveyance or other disposition of any assets (including
by way of a Production Payment or a Sale Leaseback Transaction or mergers,
consolidations or otherwise); provided, however, that the disposition of all or
substantially all of the assets of the Company and its Restricted Subsidiaries taken
as a whole will not be an “Asset Sale,” but will be governed by the provisions of
Section 4.16 and/or the provisions of Section 5.01 and not by the provisions of
Section 4.12; and




     (2) the issuance of Equity Interests in any of the Company’s Restricted
Subsidiaries or the sale of Equity Interests in any of its Restricted Subsidiaries
(other than directors’ qualifying shares or shares required by Applicable Law to be
held by a Person other than the Company or a Restricted Subsidiary of the Company).




     Notwithstanding the preceding, the following items will not be deemed to be Asset
Sales:




     (1) any single transaction or series of related transactions that involves
assets having a Fair Market Value of less than the greater of (i) $10.0 million and
(ii) 1.0% of the Company’s Adjusted Consolidated Net Tangible Assets determined as
of the date of such transaction;




     (2) a disposition of assets between or among any of the Company and its
Restricted Subsidiaries;




     (3) an issuance or sale of Equity Interests by a Restricted Subsidiary to the
Company or to another Restricted Subsidiary;




     (4) any disposition, abandonment, relinquishment or expiration of equipment,
inventory, products, accounts receivable or other assets in the ordinary course of
business;




     (5) the disposition of cash or Cash Equivalents, Hedging Contracts or other
financial instruments in the ordinary course of business;




     (6) a Restricted Payment that is permitted by Section 4.09 or a Permitted
Investment (or a disposition that would constitute a Restricted Payment but for the
exclusion from the definition thereof);




     (7) the farm-out, lease or sublease of developed or undeveloped crude oil or
natural gas properties owned or held by the Company or any of its Restricted
Subsidiaries in the ordinary course of business or in exchange for crude oil and
natural gas properties or interests owned or held by another Person;



8









 






     (8) (i) any trade or exchange by the Company or any of its Restricted
Subsidiaries of Hydrocarbon properties or other assets for Hydrocarbon properties or
other assets owned or held by one or more other Persons, and (ii) any transfer or
sale of assets, or lease, assignment or sublease of any real or personal property,
(A) in exchange for services (including in connection with any outsourcing
arrangements), and/or (B) in exchange for such transferee, lessee or assignee (or an
Affiliate thereof) agreeing to pay all or a portion of the costs and expenses
related to the exploration, development, completion and/or production (and related
activities) of properties of the Company or any Restricted Subsidiary, and/or (C) in
exchange for assets satisfying the requirements of clause (i) above ((A), (B) and
(C) being referred to herein as a “carry”); provided that (except in the case of
land purchase option arrangements granted by or to the Company or any Restricted
Subsidiary of the Company) the Fair Market Value of the assets traded, exchanged,
transferred, sold, leased, assigned or subleased by the Company or such Restricted
Subsidiary (together with any cash and Cash Equivalents) is reasonably equivalent or
of less market value to the Fair Market Value of the properties, assets, services or
carry (together with any cash and Cash Equivalents) expected to be received by the
Company or such Restricted Subsidiary, as determined in good faith by the Company,
and provided further that any cash received must be applied in accordance with the
provisions of Section 4.12;




     (9) the creation or perfection of a Lien (but not, except to the extent
contemplated in clause (10) below, the sale or other disposition of the assets
subject to such Lien);




     (10) the creation or perfection of a Permitted Lien and the exercise by any
Person in whose favor a Permitted Lien is granted of any of its rights in respect of
that Permitted Lien;




     (11) a surrender or waiver of contract rights or the settlement, release or
surrender of contract, tort or other claims of any kind;




     (12) the licensing or sublicensing of intellectual property or other general
intangibles in the ordinary course of business to the extent that such license does
not prohibit the licensor from using the intellectual property and licenses, leases
or subleases of other property;




     (13) the disposition of oil and natural gas properties in connection with tax
credit transactions complying with Section 45K of the Code or any successor or
analogous provisions of the Code, provided that the sale or other disposition is for
not less than the Fair Market Value of such oil and natural gas properties, as
determined in good faith by the Company;




     (14) the transfer of property received in settlement of debts owing to such
Person as a result of foreclosure, perfection or enforcement of any Lien or



9









 







debt, which debts were owing to such Person in the ordinary course of its
business,




     (15) any Production Payments and Reserve Sales, provided that any such
Production Payments and Reserve Sales (other than incentive compensation programs on
terms that are reasonably customary in the Oil and Gas Business for geologists,
geophysicists and other providers of technical services to the Company or a
Restricted Subsidiary of the Company), shall have been created, incurred, issued,
assumed or guaranteed in connection with the acquisition or financing of, and within
60 days after the acquisition of, the property that is subject thereto;




     (16) the sale or other disposition (whether or not in the ordinary course of
business) of oil and gas properties, provided at the time of such sale or other
disposition such properties do not have associated with them any proved reserves,
and provided further that the sale or other disposition is for not less than the
Fair Market Value of such oil and gas properties, as determined in good faith by the
Company;




     (17) any sale or other disposition of Equity Interests in, or other ownership
interests in or assets or property, including Indebtedness, or other securities of,
an Unrestricted Subsidiary;




     (18) any disposition of Equity Interests of a Restricted Subsidiary pursuant to
an agreement or other obligation with or to a Person (other than the Company or a
Restricted Subsidiary of the Company) from whom such Restricted Subsidiary was
acquired or from whom such Restricted Subsidiary acquired its business and assets
(having been newly formed in connection with such acquisition), made as part of such
acquisition and in each case comprising all or a portion of the consideration in
respect of such sale or acquisition; and




     (19) the sale and leaseback of any asset within 180 days of the acquisition
thereof.




     “Attributable Debt” in respect of a Sale Leaseback Transaction means, at the time of
determination, the present value of the obligation of the lessee for net rental payments
during the remaining term of the lease included in such Sale Leaseback Transaction including
any period for which such lease has been extended or may, at the option of the lessor, be
extended. Such present value shall be calculated using a discount rate equal to the rate of
interest implicit in such transaction, determined in accordance with GAAP. As used in the
preceding sentence, the “net rental payments” under any lease for any period shall mean the
sum of rental and other payments required to be paid with respect to such period by the
lessee thereunder, excluding any amounts required to be paid by such lessee on account of
maintenance and repairs, insurance, taxes, assessments, water rates or similar charges. In
the case of any lease that is terminable by the lessee upon payment of penalty, such net
rental payment shall also include the amount of such penalty, but no



10









 







rent shall be considered as required to be paid under such lease subsequent to the
first date upon which it may be so terminated.




     “Avista” means Avista Capital Partners II, L.P., a Delaware limited partnership, and
its successors and permitted assigns.




     “Avista Marcellus Joint Venture” means that certain Joint Venture between Carrizo
(Marcellus) LLC (or other wholly owned Subsidiaries of the Company), Avista and ACP II
Marcellus LLC pursuant to that certain Participation Agreement dated as of November 3, 2008
and such other documents delivered in connection therewith, as the same may be amended,
modified or supplemented from time to time (provided that such amendment, modification or
supplement does not materially and adversely affect the rights of any Holder of Notes under
the Indenture).




     “Beneficial Owner” has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5
under the Exchange Act, except that in calculating the beneficial ownership of any
particular “person” (as that term is used in Section 13(d)(3) of the Exchange Act), such
“person” will be deemed to have beneficial ownership of all securities that such “person”
has the right to acquire by conversion or exercise of other securities, whether such right
is currently exercisable or is exercisable only upon the occurrence of a subsequent
condition. The terms “Beneficially Owns” and “Beneficially Owned” have correlative
meanings.




     “Board of Directors” means:




     (1) with respect to the Company, the board of directors of the Company or any
authorized committee thereof; and




     (2) with respect to any other Person, the board or committee of such Person
serving a similar function.




     “Board Resolution” means a copy of a resolution certified by the Secretary or an
Assistant Secretary of the applicable Person to have been duly adopted by the Board of
Directors of such Person and to be in full force and effect on the date of such
certification, and delivered to the Trustee.




     “Capital Lease Obligation” means, at the time any determination is to be made, the
amount of the liability in respect of a capital lease that would at that time be required to
be capitalized on a balance sheet in accordance with GAAP, and the Stated Maturity thereof
shall be the date of the last payment of rent or any other amount due under such lease prior
to the first date upon which such lease may be prepaid by the lessee without payment of a
penalty.




     “Capital Stock” means:




     (1) in the case of a corporation, corporate stock;



11









 






     (2) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock;




     (3) in the case of a partnership or limited liability company, partnership
interests (whether general or limited) or membership interests; and




     (4) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, the
issuing Person,




but excluding from all of the foregoing any debt securities convertible into Capital
Stock, regardless of whether such debt securities include any right of participation
with Capital Stock.




“Cash Equivalents” means:




     (1) United States dollars;




     (2) securities issued or directly and fully guaranteed or insured by the United
States government or any agency or instrumentality of the United States government
(provided that the full faith and credit of the United States is pledged in support
of those securities) having maturities of not more than one year from the date of
acquisition;




     (3) marketable general obligations issued by any state of the United States of
America or any political subdivision of any such state or any public instrumentality
thereof maturing within one year from the date of acquisition thereof and, at the
time of acquisition thereof, having a credit rating of “A” or better from either S&P
or Moody’s;




     (4) certificates of deposit, demand deposits and eurodollar time deposits with
maturities of one year or less from the date of acquisition, bankers’ acceptances
with maturities not exceeding one year and overnight bank deposits, in each case,
with any domestic commercial bank having capital and surplus in excess of $500.0
million;




     (5) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (2), (3) and (4) above
entered into with any financial institution meeting the qualifications specified in
clause (4) above;




     (6) commercial paper having one of the two highest ratings obtainable from
Moody’s or S&P and, in each case, maturing within one year after the date of
acquisition; and



12









 






     (7) money market funds at least 95% of the assets of which constitute Cash
Equivalents of the kinds described in clauses (1) through (6) of this definition.




     “Change of Control” means the occurrence of any of the following:




     (1) the direct or indirect sale, lease, transfer, conveyance or other
disposition (other than by way of merger or consolidation), in one or a series of
related transactions, of all or substantially all of the assets (including Capital
Stock of the Restricted Subsidiaries) of the Company and its Restricted Subsidiaries
taken as a whole, or a Successor Parent of the Company and its Restricted
Subsidiaries taken as a whole, to any “person” (as that term is used in Section
13(d)(3) of the Exchange Act) other than a Permitted Holder;




     (2) the adoption by the shareholders of the Company of a plan relating to the
liquidation or dissolution of the Company;




     (3) the consummation of any transaction (including, without limitation, any
merger or consolidation) the result of which is that any “person” (as that term is
used in Section 13(d)(3) of the Exchange Act), other than Permitted Holders, becomes
the Beneficial Owner, directly or indirectly, of more than 50% of the Voting Stock
of the Company, or any Successor Parent of the Company, measured by voting power
rather than number of shares, units or the like; provided that no Change of Control
shall be deemed to occur by reason of the Company becoming a Subsidiary of any
Successor Parent; or




     (4) the first day on which a majority of the members of the Board of Directors
of the Company or any Successor Parent of the Company are not Continuing Directors.




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




     “Consolidated Cash Flow” means, with respect to any specified Person for any period,
the Consolidated Net Income of such Person for such period plus, without duplication:




     (1) an amount equal to any net loss realized by such Person or any of its
Restricted Subsidiaries in connection with an Asset Sale, to the extent such losses
were deducted in computing such Consolidated Net Income; plus




     (2) provision for taxes based on income or profits of such Person and its
Restricted Subsidiaries for such period, to the extent that such provision for taxes
was deducted in computing such Consolidated Net Income; plus




     (3) the Fixed Charges of such Person and its Restricted Subsidiaries for such
period, to the extent that such Fixed Charges were deducted in computing such
Consolidated Net Income; plus



13









 






     (4) depreciation, depletion, amortization (including amortization of
intangibles but excluding amortization of prepaid cash expenses that were paid in a
prior period), impairment and other non-cash expenses (excluding any such non-cash
expense to the extent that it represents an accrual of or reserve for cash expenses
in any future period or amortization of a prepaid cash expense that was paid in a
prior period) of such Person and its Restricted Subsidiaries for such period to the
extent that such depreciation, depletion, amortization, impairment and other
non-cash expenses were deducted in computing such Consolidated Net Income; plus




     (5) unrealized non-cash losses resulting from foreign currency balance sheet
adjustments required by GAAP to the extent such losses were deducted in computing
such Consolidated Net Income; plus




     (6) all extraordinary, unusual or non-recurring items of gain or loss, or
revenue or expense; minus




     (7) non-cash items increasing such Consolidated Net Income for such period,
other than items that were accrued in the ordinary course of business; and minus




     (8) to the extent increasing such Consolidated Net Income for such period, the
sum of (a) the amount of deferred revenues that are amortized during such period and
are attributable to reserves that are subject to Volumetric Production Payments and
(b) amounts recorded in accordance with GAAP as repayments of principal and interest
pursuant to Dollar-Denominated Production Payments;




     in each case, on a consolidated basis and determined in accordance with GAAP.




     “Consolidated Net Income” means, with respect to any specified Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP, provided that:




     (1) the Net Income (but not loss) of any Person that is not a Restricted
Subsidiary or that is accounted for by the equity method of accounting will be
included, but only to the extent of the amount of dividends or distributions paid in
cash to the specified Person or a Restricted Subsidiary of the Person;




     (2) the Net Income of any Restricted Subsidiary of the Company will be excluded
to the extent that the declaration or payment of dividends or similar distributions
by that Restricted Subsidiary of that Net Income is not at the date of determination
permitted without any prior governmental approval (that has not been obtained) or,
directly or indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Restricted Subsidiary or its stockholders, partners or members;




14











 






     (3) the cumulative effect of a change in accounting principles will be
excluded;




     (4) any gain (loss) realized upon the sale or other disposition of any
property, plant or equipment of such Person or its consolidated Restricted
Subsidiaries (including pursuant to any sale or leaseback transaction) which is not
sold or otherwise disposed of in the ordinary course of business and any gain (loss)
realized upon the sale or other disposition of any Capital Stock of any Person will
be excluded;




     (5) any asset impairment writedowns on oil and gas properties under GAAP or SEC
guidelines will be excluded;




     (6) unrealized losses and gains under Hedging Contracts included in the
determination of Consolidated Net Income, including, without limitation, those
resulting from the application of FASB ASC Topic 815, “Derivatives and Hedging,”
will be excluded;




     (7) to the extent deducted in the calculation of Net Income, any non-cash or
nonrecurring charges relating to any premium or penalty paid, write off of deferred
financing costs or other financial recapitalization charges in connection with
redeeming or retiring any Indebtedness prior to its Stated Maturity will be
excluded;




     (8) items classified as extraordinary or nonrecurring gains and losses (less
all fees and expenses related thereto) and the related tax effects, in each case
according to GAAP, will be excluded; and




     (9) income resulting from transfers of assets (other than cash) between such
Person or any of its Restricted Subsidiaries, on the one hand, and an Unrestricted
Subsidiary of such Person, on the other hand, will be excluded.




     “Consolidated Net Worth” means, with respect to any specified Person as of any date,
the sum of:




     (1) the consolidated equity of the common shareholders of, or the consolidated
capital of the unitholders of, such Person and its consolidated Subsidiaries as of
such date; plus




     (2) the respective amounts reported on such Person’s balance sheet as of such
date with respect to any series of preferred stock (other than Disqualified Stock)
that by its terms is not entitled to the payment of dividends unless such dividends
may be declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such Person
upon issuance of such preferred stock.




     “Continuing Directors” means, as of any date of determination, any member of the Board
of Directors of the Company who:



15









 






     (1) was a member of such Board of Directors on the Initial Issuance Date; or




     (2) was nominated for election or elected or appointed to such Board of
Directors with the approval of a majority of the Continuing Directors who were
members of such Board at the time of such nomination, election or appointment.




     “Credit Agreement” means that certain Credit Agreement, dated as of May 25, 2006, among
the Company, Wells Fargo Bank, N.A., as Administrative Agent, and the other lenders party
thereto, including any related notes, guarantees, collateral documents, instruments and
agreements executed in connection therewith, in each case as amended, restated, modified,
renewed, refunded, replaced or refinanced from time to time.




     “Credit Facilities” means one or more debt facilities (including, without limitation,
the Credit Agreement), commercial paper facilities or Debt Issuances, in each case with
banks or other institutional lenders or institutional investors providing for revolving
credit loans, term loans, receivables financing (including through the sale of receivables
to such lenders or to special purpose entities formed to borrow from such lenders against
such receivables), letters of credit or other borrowings or Debt Issuances, in each case, as
amended, restated, modified, renewed, refunded, replaced or refinanced (including
refinancing with any capital markets transaction) in whole or in part from time to time.




     “Customary Recourse Exceptions” means, with respect to any Non-Recourse Debt of an
Unrestricted Subsidiary, exclusions from the exculpation provisions with respect to such
Non-Recourse Debt for the voluntary bankruptcy of such Unrestricted Subsidiary, fraud,
misapplication of cash, environmental claims, waste, willful destruction, and other
circumstances customarily excluded by lenders from exculpation provisions and/or included in
separate indemnification agreements in non-recourse financings.




     “Debt Issuance” means, with respect to the Company or any of its Restricted
Subsidiaries, one or more issuances after the Initial Issuance Date of Indebtedness
evidenced by notes, debentures, bonds or other similar securities or instruments.




     “De Minimis Guaranteed Amount” means a principal amount of Indebtedness that does not
exceed $5.0 million.




     “Disqualified Stock” means any Capital Stock that, by its terms (or by the terms of any
security into which it is convertible, or for which it is exchangeable, in each case at the
option of the holder of the Capital Stock), or upon the happening of any event, matures or
is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable
at the option of the holder of the Capital Stock, in whole or in part, on or prior to the
date that is 91 days after the earlier of the final stated maturity date of the Notes or the
date the Notes are no longer outstanding; provided that only the portion of Capital Stock
which so matures or is mandatorily redeemable, is so convertible or exchangeable or is so
redeemable at the option of the holder thereof prior to such date



16









 







shall be deemed to be Disqualified Stock; provided, further, that if such Capital Stock
is issued to any employee or to any plan for the benefit of employees of the Company or its
Subsidiaries or by any such plan to such employees, such Capital Stock shall not constitute
Disqualified Stock solely because it may be required to be repurchased by the Company in
order to satisfy applicable statutory or regulatory obligations or as a result of such
employee’s termination, death or disability; provided, further, that any class of Capital
Stock of such Person that by its terms authorizes such Person to satisfy its obligations
thereunder by delivery of Capital Stock that is not Disqualified Stock shall not be deemed
to be Disqualified Stock. Notwithstanding the preceding sentence, any Capital Stock that
would constitute Disqualified Stock solely because the holders of the Capital Stock have the
right to require the Company to repurchase or redeem such Capital Stock upon the occurrence
of a change of control or an asset sale will not constitute Disqualified Stock if (x) the
terms of such Capital Stock provide that the Company may not repurchase or redeem any such
Capital Stock pursuant to such provisions unless such repurchase or redemption complies with
Section 4.09 or (y) the terms of such Capital Stock provide that the Company may not
repurchase or redeem any such Capital Stock pursuant to such provisions prior to the
Company’s purchase of the Notes as is required to be purchased pursuant to the terms of this
Indenture. The amount (or principal amount) of Disqualified Stock deemed to be outstanding
at any time for purposes of this Indenture will be the maximum amount that the Company and
its Restricted Subsidiaries may become obligated to pay upon the maturity of, or pursuant to
any mandatory redemption provisions of, such Disqualified Stock, exclusive of accrued
dividends.




     “Dollar-Denominated Production Payments” means production payment obligations recorded
as liabilities in accordance with GAAP, together with all undertakings and obligations in
connection therewith.




     “Domestic Subsidiary” means any Restricted Subsidiary of the Company that was formed
under the laws of the United States or any state of the United States or the District of
Columbia.




     “Equity Interests” means Capital Stock and all warrants, options or other rights to
acquire Capital Stock (but excluding any debt security that is convertible into, or
exchangeable for, Capital Stock).




     “Equity Offering” means any public or private sale of Capital Stock (other than
Disqualified Stock) made for cash on a primary basis by the Company after the Initial
Issuance Date.




     “Exchange Notes” has the meaning provided in the Appendix.




     “Existing Indebtedness” means the aggregate principal amount of Indebtedness of the
Company and its Restricted Subsidiaries (other than Indebtedness under the Credit Agreement
and intercompany Indebtedness) in existence on the Initial Issuance Date, until such amounts
are repaid.



17









 






     “Fair Market Value” means, with respect to any asset, the sale value that would be
obtained in an arm’s-length free market transaction between an informed and willing seller
under no compulsion to sell and an informed and willing buyer under no compulsion to buy,
determined on the date of contractually agreeing to such sale, or in circumstances in which
the Company or a Restricted Subsidiary of the Company grants a third party the right to
purchase an asset, the date of such grant.




     “Fixed Charge Coverage Ratio” means with respect to any specified Person for any
four-quarter reference period, the ratio of the Consolidated Cash Flow of such Person for
such period to the Fixed Charges of such Person for such period. In the event that the
specified Person or any of its Restricted Subsidiaries incurs, assumes, guarantees, repays,
repurchases, redeems, defeases or otherwise discharges any Indebtedness (other than ordinary
working capital borrowings) or issues, repurchases or redeems preferred stock subsequent to
the commencement of the applicable four-quarter reference period and on or prior to the date
on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the
“Calculation Date”), then the Fixed Charge Coverage Ratio will be calculated giving pro
forma effect to such incurrence, assumption, guarantee, repayment, repurchase, redemption,
defeasance or other discharge of Indebtedness, or such issuance, repurchase or redemption of
preferred stock, and the use of the proceeds therefrom, as if the same had occurred at the
beginning of the applicable four-quarter reference period.




     In addition, for purposes of calculating the Fixed Charge Coverage Ratio:




     (1) acquisitions that have been made by the specified Person or any of its
Restricted Subsidiaries, including through mergers, consolidations or otherwise
(including acquisitions of assets used or useful in the Oil and Gas Business), or
any Person or any of its Restricted Subsidiaries acquired by the specified Person or
any of its Restricted Subsidiaries, and including in each case any related financing
transactions and increases in ownership of Restricted Subsidiaries, during the
applicable four-quarter reference period or subsequent to such reference period and
on or prior to the Calculation Date, will be given pro forma effect as if they had
occurred on the first day of the four-quarter reference period, and the Consolidated
Cash Flow for such reference period will be calculated giving pro forma effect to
any expense and cost reductions or synergies that have occurred or are reasonably
expected to occur, in the reasonable judgment of the chief financial or accounting
officer of the Company (provided those cost savings or operating improvements could
then be reflected in pro forma financial statements in accordance with Regulation
S-X promulgated under the Securities Act or any other regulation or policy of the
SEC related thereto);




     (2) the Consolidated Cash Flow attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses (and ownership
interests therein) disposed of prior to the Calculation Date, will be excluded;



18









 






     (3) the Fixed Charges attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses (and ownership interests therein)
disposed of prior to the Calculation Date, will be excluded, but only to the extent
that the obligations giving rise to such Fixed Charges will not be obligations of
the specified Person or any of its Restricted Subsidiaries following the Calculation
Date;




     (4) any Person that is a Restricted Subsidiary of the specified Person on the
Calculation Date will be deemed to have been a Restricted Subsidiary of the
specified Person at all times during such four-quarter period;




     (5) any Person that is not a Restricted Subsidiary of the specified Person on
the Calculation Date will be deemed not to have been a Restricted Subsidiary of the
specified Person at any time during such four-quarter period; and




     (6) if any Indebtedness bears a floating rate of interest, the interest expense
on such Indebtedness will be calculated as if the rate in effect on the Calculation
Date had been the applicable rate for the entire period (taking into account any
obligations arising under any Hedging Contract applicable to such Indebtedness if
such Hedging Contract has a remaining term as at the Calculation Date in excess of
12 months).




     “Fixed Charges” means, with respect to any specified Person for any period, the sum,
without duplication, of:




     (1) the consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued (excluding any interest
attributable to Dollar-Denominated Production Payments but including, without
limitation, amortization of debt issuance costs and original issue discount,
non-cash interest payments, the interest component of any deferred payment
obligations, the interest component of all payments associated with Capital Lease
Obligations, imputed interest with respect to Attributable Debt, commissions,
discounts and other fees and charges incurred in respect of letter of credit or
bankers’ acceptance financings), and net of the effect of all payments made or
received pursuant to interest rate Hedging Contracts; plus




     (2) the consolidated interest expense of such Person and its Restricted
Subsidiaries that was capitalized during such period; plus




     (3) any interest expense on Indebtedness of another Person that is guaranteed
by such Person or one of its Restricted Subsidiaries or secured by a Lien on assets
of such Person or one of its Restricted Subsidiaries, whether or not such guarantee
or Lien is called upon (other than a Lien of the type described in clause (9) of the
definition of “Permitted Liens”); plus




     (4) all dividends on any Disqualified Stock or series of preferred securities
of such Person or any of its Restricted Subsidiaries, whether paid or



19









 







accrued and whether or not in cash, other than dividends on Equity Interests
payable solely in Equity Interests of the Company (other than Disqualified Stock) or
to the Company or a Restricted Subsidiary of the Company,




     in each case, on a consolidated basis and in accordance with GAAP.




     “GAAP” means generally accepted accounting principles in the United States, which are
in effect on the Initial Issuance Date.




     The term “guarantee” means a guarantee other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or indirect, in any
manner including, without limitation, by way of a pledge of assets or through letters of
credit or reimbursement agreements in respect thereof, of all or any part of any
Indebtedness or entered into for purposes of assuring in any other manner the obligee of
such Indebtedness of the payment thereof or to protect such obligee against loss in respect
thereof (in whole or in part). When used as a verb, “guarantee” has a correlative meaning.




     “Hedging Contracts” means, with respect to any specified Person:




     (1) interest rate swap agreements, interest rate cap agreements and interest
rate collar agreements entered into with one of more financial institutions and
designed to protect the Person or any of its Restricted Subsidiaries entering into
the agreement against fluctuations in interest rates, or to otherwise reduce the
cost of borrowing of such Person or any of such Restricted Subsidiaries, with
respect to Indebtedness incurred;




     (2) foreign exchange contracts and currency protection agreements entered into
with one of more financial institutions and designed to protect the Person or any of
its Restricted Subsidiaries entering into the agreement against fluctuations in
currency exchange rates;




     (3) any commodity futures contract, commodity swap, commodity option, commodity
forward sale or other similar agreement or arrangement designed to protect against
fluctuations in the price of Hydrocarbons used, produced, processed or sold by that
Person or any of its Restricted Subsidiaries at the time; and




     (4) other agreements or arrangements designed to protect such Person or any of
its Restricted Subsidiaries against fluctuations in interest rates, commodity prices
or currency exchange rates,




     and in each case are entered into only in the normal course of business and not for
speculative purposes.




     “Holder” or “Noteholder” means a Person in whose name a Note is registered.



20









 






     “Hydrocarbons” means crude oil, natural gas, casinghead gas, drip gasoline, natural
gasoline, condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons and all
constituents, elements or compounds thereof and products refined or processed therefrom.




     “Indebtedness” means, with respect to any specified Person:




     (1) any indebtedness of such Person, whether or not contingent in respect of
borrowed money;




     (2) all obligations evidenced by bonds, notes, debentures or similar
instruments or letters of credit (or reimbursement agreements in respect thereof)
(other than performance, surety and appeal bonds arising in the ordinary course of
business);




     (3) all obligations in respect of bankers’ acceptances;




     (4) all Capital Lease Obligations or Attributable Debt in respect of Sale
Leaseback Transactions;




     (5) all obligations representing the balance deferred and unpaid of the
purchase price of any property (other than (i) property purchased, and expense
accruals and deferred compensation items arising in the ordinary course of business,
(ii) obligations payable solely in Capital Stock that is not Disqualified Stock and
(iii) purchase price holdbacks in respect of a portion of the purchase price of an
asset to satisfy warranty or other unperformed obligations of the respective
seller);




     (6) all obligations under Hedging Contracts; and




     (7) with respect to Production Payments, any warranties or guarantees of
production or payment by such Person with respect to such Production Payment, but
excluding other contractual obligations of such Person with respect to such
Production Payment;




if and to the extent any of the preceding items (other than letters of credit and
obligations under Hedging Contracts) would appear as a liability upon a balance
sheet of the specified Person prepared in accordance with GAAP. In addition, the
term “Indebtedness” includes all Indebtedness of other Persons secured by a Lien on
any asset of the specified Person, whether or not such Indebtedness is assumed by
the specified Person (provided that the amount of such Indebtedness will be the
lesser of (a) the Fair Market Value of such asset at such date of determination and
(b) the amount of such Indebtedness of such other Person), and, to the extent not
otherwise included, the guarantee by the specified Person of any Indebtedness of any
other Person (including, with respect to any Production Payment, any warranties or
guarantees of production or payment by such Person with respect to such Production
Payment, but excluding other contractual obligations of such Person with respect to
such Production Payment).



21









 






     Notwithstanding the foregoing, the following shall not constitute or be deemed
“Indebtedness”:




     (i) any indebtedness which has been defeased in accordance with GAAP or
defeased pursuant to the deposit of cash or Cash Equivalents (in an amount
sufficient to satisfy all such indebtedness obligations at maturity or redemption,
as applicable, and all payments of interest and premium, if any) in a trust or
account created or pledged for the sole benefit of the holders of such indebtedness,
and subject to no other Liens, and the other applicable terms of the instrument
governing such indebtedness;




     (ii) any obligation of a Person in respect of the balance deferred and unpaid
of the purchase price of any property, a farm-in agreement, joint venture,
participation or similar arrangement whereby such Person agrees to pay all or a
share of the exploration, development, completion or production or other expenses of
an exploratory or development well or program (which agreement may be subject to a
maximum payment obligation, after which expenses are shared in accordance with the
working or participation interest therein or in accordance with the agreement of the
parties) or perform the drilling, completion or other operation on such well or
program, or transfer of overriding royalty interests or other interests in
Hydrocarbon properties in exchange for an ownership interest in an oil or gas
property;




     (iii) any obligations arising from agreements of a Person providing for
indemnification, guarantees, adjustment of purchase price, holdbacks, contingent
payment obligations based on a final financial statement or performance of acquired
or disposed of assets or similar obligations (other than guarantees of
Indebtedness), in each case, incurred or assumed by such Person in connection with
the acquisition or disposition of assets (including through mergers, consolidations
or otherwise);




     (iv) subject to clause (7) above, any Dollar-Denominated Production Payments or
Volumetric Production Payments;




     (v) any Lien of the type described in clause (9) of the definition of
“Permitted Liens;”




     (vi) obligations with respect to letters of credit in support of trade
obligations or incurred in connection with public liability insurance, workers’
compensation, unemployment insurance, old-age pensions and other social security
benefits other than in respect of employee benefit plans subject to the Employee
Retirement Income Security Act of 1974, as amended;




     (vii) the obligations described in clause (13) of Section 4.09;




     (viii) the repayment or reimbursement obligations of the Company or any
Restricted Subsidiary with respect to Customary Recourse Exceptions shall not be
considered Indebtedness unless and until an event or circumstance occurs



22









 







that triggers the Company’s or such Restricted Subsidiary’s direct payment
liability or reimbursement obligation (as opposed to contingent or performance
obligations) to the lender or other party to whom such obligation is actually owed,
in which case the amount of such direct payment liability to such lender or other
party shall, to the extent otherwise applicable, constitute Indebtedness; and




     (ix) in connection with the purchase by the Company or any Restricted
Subsidiary of any property, the term “Indebtedness” will exclude post-closing
payment adjustments to which the seller may become entitled to the extent such
payment is determined by a closing purchase price adjustment or such payment depends
on the performance of such property after the closing; provided, however, that, at
the time of closing, the amount of any such payment is not determinable and, to the
extent such payment at a later date becomes finally fixed and determined by the
parties to the purchase, the amount is paid within 30 days after such date.




     The amount (or principal amount) of any Indebtedness outstanding as of any date will
be:




     (1) the accreted value of the Indebtedness, in the case of any Indebtedness
issued with original issue discount;




     (2) in the case of obligations under any Hedging Contracts, the termination
value of the agreement or arrangement giving rise to such obligations that would be
payable by such Person at such date; and




     (3) the principal amount of the Indebtedness, together with any interest on the
Indebtedness that is more than 30 days past due, in the case of any other
Indebtedness.




     The amount of Indebtedness of any Person at any date will be the outstanding
balance at such date of all unconditional obligations as described above and the
maximum liability, upon the occurrence of the contingency giving rise to the
obligation, of any contingent obligations at such date.




     “Initial Issuance Date” means November 2, 2010.




     “Initial Notes” has the meaning provided in the Appendix.




     “Initial Purchasers” has the meaning provided in the Appendix.




     “Investment Grade Rating” means a rating equal to or higher than Baa3 (or the
equivalent) by Moody’s and BBB- (or the equivalent) by S&P (or an equivalent rating by
another nationally recognized rating agency if both of the two named rating agencies cease
publishing ratings of investments), in each case, with a stable or better outlook.




     “Investments” means, with respect to any Person, all direct or indirect investments by
such Person in other Persons (including Affiliates) in the forms of loans,



23









 







advances or extensions of credit (including guarantees or similar arrangements, but
excluding (1) commission, travel and similar advances to officers, directors, employees and
consultants made in the ordinary course of business and (2) advances to Persons in the
ordinary course of business that are recorded as accounts receivable on the balance sheet of
the lender), or capital contributions or purchases or other acquisitions for consideration
of Indebtedness, Equity Interests or other securities (excluding any interest in a crude oil
or natural gas leasehold to the extent constituting a security under applicable law),
together with all items that are or would be classified as investments on a balance sheet of
such Person prepared in accordance with GAAP. If the Company or any Restricted Subsidiary
of the Company sells or otherwise disposes of any Equity Interests of any direct or indirect
Restricted Subsidiary of the Company such that, after giving effect to any such sale or
disposition, such Person is no longer a Restricted Subsidiary of the Company, the Company
will be deemed to have made an Investment on the date of any such sale or disposition in an
amount equal to the Fair Market Value of the Equity Interests of such Restricted Subsidiary
not sold or disposed of in an amount determined as provided in the final paragraph of
Section 4.09. The acquisition by the Company or any Subsidiary of the Company of a Person
that holds an Investment in a third Person will be deemed to be an Investment made by the
Company or such Subsidiary in such third Person in an amount equal to the Fair Market Value
of the Investment held by the acquired Person in such third Person on the date of any such
acquisition in an amount determined as provided in the final paragraph of Section 4.09.
Except as otherwise provided in this Indenture, the amount of an Investment will be
determined at the time the Investment is made and without giving effect to subsequent
changes in value or write-ups, write-downs or write-offs with respect to such Investment.




     “Joint Venture” means any Person that is not a direct or indirect Subsidiary of the
Company in which the Company or any of its Restricted Subsidiaries makes any Investment.




     “Lien” means, with respect to any asset, any mortgage, lien, pledge, charge, security
interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded
or otherwise perfected under Applicable Law, including any conditional sale or other title
retention agreement, or any lease in the nature thereof, other than a precautionary
financing statement respecting a lease not intended as a security agreement.




     “Make Whole Premium” means, with respect to a Note at any time, the excess, if any, of
(a) the present value at such time of (i) the Redemption Price of such Note at October 15,
2014 pursuant to Section 3.12(a) plus (ii) any required interest payments due on such Note
through October 15, 2014 (except for currently accrued and unpaid interest), computed using
a discount rate equal to the Treasury Rate at such time plus 50 basis points, discounted to
the Redemption Date on a semi-annual basis (assuming a 360-day year consisting of twelve
30-day months), over (b) the principal amount of such Note.




     “Measurement Date” means October 1, 2010.



24









 






     “Minority Interest” means the percentage interest represented by any shares of stock of
any class of Capital Stock of a Restricted Subsidiary of the Company that are not owned by
the Company or a Restricted Subsidiary of the Company.




     “Moody’s” means Moody’s Investors Service, Inc. or any successor to the rating agency
business thereof.




     “Net Income” means, with respect to any specified Person, the net income (loss) of such
Person, determined in accordance with GAAP and before any reduction in respect of preferred
stock dividends, excluding, however:




     (1) any gain (but not loss), together with any related provision for taxes on
such gain (but not loss), realized in connection with: (a) any Asset Sale; or (b)
the disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its
Restricted Subsidiaries; and




     (2) any extraordinary gain (but not loss), together with any related provision
for taxes on such extraordinary gain (but not loss).




     “Net Proceeds” means the aggregate cash proceeds received by the Company or any of its
Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any
cash received upon the sale or other disposition of any non-cash consideration received in
any Asset Sale), net of:




     (1) the direct costs relating to such Asset Sale, including, without
limitation, legal, accounting and investment banking fees, title and recording tax
expenses and sales commissions, and any relocation and severance expenses and
charges of personnel incurred as a result of the Asset Sale,




     (2) taxes paid or payable or required to be accrued as a liability under GAAP
as a result of the Asset Sale, in each case, after taking into account any available
tax credits or deductions and any tax sharing arrangements,




     (3) amounts required to be applied to the repayment of Indebtedness secured by
a Lien on the assets that were the subject of such Asset Sale, or which must by its
terms, or in order to obtain a necessary consent to such Asset Sale or by Applicable
Law, be repaid out of the proceeds from such Asset Sale,




     (4) all distributions and other payments required to be made to minority
interest holders in Restricted Subsidiaries or Joint Ventures as a result of such
Asset Sale, and




     (5) any amounts to be set aside in any reserve established in accordance with
GAAP or any amount placed in escrow, in either case for adjustment in respect of the
sale price of such assets or for liabilities associated with such Asset Sale and
retained by the Company or any of its Restricted Subsidiaries until such time as
such reserve is reversed or such escrow



25









 







arrangement is terminated, in which case Net Proceeds shall include only the
amount of the reserve so reversed or the amount returned to the Company or its
Restricted Subsidiaries from such escrow arrangement, as the case may be.




     “Net Working Capital” means (a) all current assets of the Company and its Restricted
Subsidiaries except current assets from commodity price risk management activities arising
in the ordinary course of business, less (b) all current liabilities of the Company and its
Restricted Subsidiaries, except current liabilities included in Indebtedness and any current
liabilities from commodity price risk management activities arising in the ordinary course
of business, in each case as set forth in the consolidated financial statements of the
Company prepared in accordance with GAAP (excluding any adjustments made pursuant to FASB
ASC Topic 815, “Derivatives and Hedging”).




     “Non-Recourse Debt” means Indebtedness:




     (1) as to which neither the Company nor any of its Restricted Subsidiaries (a)
provides credit support of any kind (including any undertaking, agreement or
instrument that would constitute Indebtedness), (b) is directly or indirectly liable
as a guarantor or otherwise, or (c) is the lender, except (i) pursuant to a Lien of
the type permitted by item (9) in the definition of “Permitted Lien,” (ii) as
described in clause (13) of Section 4.09, (iii) Customary Recourse Exceptions and
(iv) a guarantee by the Company or any Restricted Subsidiary of Indebtedness of any
Affiliate of the Company, in which case (unless the incurrence of such guarantee
resulted in a Restricted Payment at the time of incurrence) the Company shall be
deemed to have made a Restricted Payment equal to the principal amount of any such
Indebtedness to the extent guaranteed at the time such Affiliate is designated an
Unrestricted Subsidiary; and




     (2) no default with respect to which (including any rights that the holders of
the Indebtedness may have to take enforcement action against an Unrestricted
Subsidiary) would permit upon notice, lapse of time or both any holder of any other
Indebtedness (other than the Notes and any guarantee permitted by clause (ii) or
(iv) in the preceding paragraph) of the Company or any of its Restricted
Subsidiaries to declare a default on such other Indebtedness or cause the payment of
the Indebtedness to be accelerated or payable prior to its Stated Maturity.




For purposes of determining compliance with Section 4.11, in the event that any
Non-Recourse Debt of any of the Company’s Unrestricted Subsidiaries ceases to be
Non-Recourse Debt of such Unrestricted Subsidiary, such event will be deemed to
constitute an incurrence of Indebtedness by a Restricted Subsidiary of the Company.




     “North Sea Properties” means the UK Petroleum Production Licence No. P1114 governing
Blocks 22/14b and 22/19b, together with any other licences unitized therewith and all
associated property, plant and equipment located on, or related to such licenses.



26









 






     “Obligations” means any principal, premium, if any, interest (including interest
accruing on or after the filing of any petition in bankruptcy or for reorganization, whether
or not a claim for post-filing interest is allowed in such proceeding), penalties, fees,
charges, expenses, indemnifications, reimbursement obligations, damages, guarantees, and
other liabilities or amounts payable under the documentation governing any Indebtedness or
in respect thereto.




     “Oil and Gas Business” means:




     (1) the acquisition, exploration, development, production, operation and
disposition of interests in oil, gas, liquid natural gas, carbon dioxide and other
Hydrocarbon properties;




     (2) the gathering, marketing, treating, processing, refining, storage,
distribution, selling and transporting of any production from such interests or
properties;




     (3) any business relating to exploration for or development, production,
treatment, processing, refining, storage, transportation or marketing of, oil, gas
and other minerals and products produced in association therewith;




     (4) any activity that is ancillary, complementary or incidental to or necessary
or appropriate for the activities described in clauses (1) through (3) of this
definition.




     “Outstanding,” when used with respect to the Notes, means, as of the date of
determination, all Notes theretofore authenticated and delivered under this Indenture,
except:




     (i) Notes theretofore cancelled by the Trustee or delivered to the Trustee for
cancellation;




     (ii) Notes for whose payment, repurchase, redemption or defeasance money in the
necessary amount has been theretofore deposited with the Trustee or any Paying Agent
(other than the Company) in trust or set aside and segregated in trust by the
Company (if the Company shall act as its own Paying Agent) for the Holders of such
Notes; provided that, if such Notes are to be redeemed, notice of such redemption
has been duly given pursuant to this Indenture or provision therefor satisfactory to
the Trustee has been made; and




     (iii) Notes which have been cancelled pursuant to Section 2.13 or in exchange
for or in lieu of which other Notes have been authenticated and delivered pursuant
to this Indenture, other than any such Notes in respect of which there shall have
been presented to the Trustee proof satisfactory to it that such Notes are held by a
bona fide purchaser in whose hands such Notes are valid obligations of the Company;



27









 







provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Notes have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Notes owned by the
Company or any other obligor upon the Notes or any Affiliate of the Company or of
such other obligor shall be disregarded and deemed not to be Outstanding, except
that, in determining whether the Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent or waiver, only Notes
which the Trustee knows to be so owned shall be so disregarded. Notes so owned which
have been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee’s right so to act with
respect to such Notes and that the pledgee is not the Company or any other obligor
upon the Notes or any Affiliate of the Company or of such other obligor.




     “Pari Passu Indebtedness” means, with respect to any Excess Proceeds from Asset Sales,
Indebtedness of the Company or any Subsidiary Guarantor that ranks equally in right of
payment with the Notes or the Subsidiary Guarantees, as the case may be, and the terms of
which require the Company or any of its Restricted Subsidiaries to apply such Excess
Proceeds to offer to repurchase such Indebtedness.




     “Permitted Acquisition Indebtedness” means Indebtedness or Disqualified Stock of the
Company or any of its Restricted Subsidiaries to the extent such Indebtedness or
Disqualified Stock was Indebtedness or Disqualified Stock of any other Person existing at
the time (a) such Person became a Restricted Subsidiary of the Company, (b) such Person was
merged or consolidated with or into the Company or any of its Restricted Subsidiaries, or
(c) assets of such Person were acquired by the Company or any of its Restricted Subsidiaries
and such Indebtedness was assumed in connection therewith (excluding any such Indebtedness
that is repaid contemporaneously with such event), provided that on the date such Person
became a Restricted Subsidiary of the Company or the date such Person was merged or
consolidated with or into the Company or any of its Restricted Subsidiaries, or on the date
of such asset acquisition, as applicable, either




     (1) immediately after giving effect to such transaction on a pro forma basis as
if the same had occurred at the beginning of the applicable four-quarter period, the
Company or such Restricted Subsidiary, as applicable, would be permitted to incur at
least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio
test set forth in the first paragraph of Section 4.11,




     (2) immediately after giving effect to such transaction on a pro forma basis as
if the same had occurred at the beginning of the applicable four-quarter period, the
Fixed Charge Coverage Ratio of the Company would be equal to or greater than the
Fixed Charge Coverage Ratio of the Company immediately prior to such transaction, or




     (3) immediately after giving effect to such transaction on a pro forma basis,
the Consolidated Net Worth of the Company would be greater than the Consolidated Net
Worth of the Company immediately prior to such transaction.



28









 






     “Permitted Business Investments” means Investments made in the ordinary course of, and
of a nature that is or shall have become customary in, the Oil and Gas Business, including
investments or expenditures for actively exploring for, acquiring, developing, producing,
processing, gathering, marketing or transporting Hydrocarbons through agreements,
transactions, interests or arrangements that permit one to share risk or costs, comply with
regulatory requirements regarding local ownership or satisfy other objectives customarily
achieved through the conduct of the Oil and Gas Business jointly with third parties,
including without limitation:




     (1) direct or indirect ownership of crude oil, natural gas, other restricted
Hydrocarbon properties or any interest therein, gathering, transportation,
processing, storage or related systems, or ancillary real property interests and
interests therein; and




     (2) the entry into operating agreements, Joint Ventures, processing agreements,
working interests, royalty interests, mineral leases, farm-in agreements, farm-out
agreements, development agreements, production sharing agreements, area of mutual
interest agreements, contracts for the sale, transportation or exchange of crude oil
and natural gas and related Hydrocarbons and minerals, unitization agreements,
pooling arrangements, joint bidding agreements, service contracts, partnership
agreements (whether general or limited), or other similar or customary agreements,
transactions, properties, interests or arrangements, and Investments and
expenditures in connection therewith or pursuant thereto, in each case made or
entered into in the ordinary course of the Oil and Gas Business, excluding, however,
Investments in corporations and publicly-traded limited partnerships.




     “Permitted Holders” means (1) the Company or any Subsidiary of the Company, as long as
such Subsidiary of the Company remains a Subsidiary following completion of the transaction
that would have constituted a Change of Control, had the transaction not been effected with
a Permitted Holder and (2) the directors, officers and other management employees of the
Company that are shareholders of the Company on the Initial Issuance Date and their
respective Affiliates.




     “Permitted Investments” means:




     (1) any Investment in the Company or in a Restricted Subsidiary of the Company;




     (2) any Investment in cash and Cash Equivalents;




     (3) any Investment by the Company or any Restricted Subsidiary of the Company
in a Person, if as a result of such Investment:




     (a) such Person becomes a Restricted Subsidiary of the Company; or



29









 






     (b) such Person is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is liquidated
into, the Company or a Restricted Subsidiary of the Company;




     (4) any Investment made as a result of the receipt of non-cash consideration
from, or consisting of any deferred portion of the sales price received by the
Company or any Restricted Subsidiary in connection with:




     (a) an Asset Sale that was made pursuant to and in compliance with
Section 4.12;




     (b) pursuant to clause (8) of the items deemed not to be Asset Sales
under the definition of “Asset Sale;”




     (5) any Investment in any Person solely in exchange for, or with the net cash
proceeds from a substantially concurrent (i) contribution (other than from a
Restricted Subsidiary of the Company) to the equity capital of the Company or (ii)
issuance of, Equity Interests (other than Disqualified Stock) of the Company, with
an issuance being deemed substantially concurrent of such Investment occurring not
more than 120 days after such issuance; provided that the amount of any such net
cash proceeds will be excluded from clause (II) of Section 4.09;




     (6) any Investments received in compromise or resolution of, or upon
satisfaction of judgments with respect to, (a) obligations of trade creditors or
customers that were incurred in the ordinary course of business, including pursuant
to any plan of reorganization or similar arrangement upon the bankruptcy or
insolvency of any trade creditor or customer, or (b) litigation, arbitration or
other disputes (including pursuant to any bankruptcy or insolvency proceedings) with
Persons who are not Affiliates;




     (7) Hedging Contracts;




     (8) guarantees by the Company or any of its Restricted Subsidiaries of
operating leases (other than Capital Lease Obligations) or of other obligations that
do not constitute Indebtedness, in each case entered into by the Company or any
Restricted Subsidiary of the Company in the ordinary course of business or otherwise
customary in the Oil and Gas Business;




     (9) Investments in property, plant and equipment used in the ordinary course of
business and Permitted Business Investments;




     (10) Investments that are in existence on the Initial Issuance Date;




     (11) Investments in any Person to the extent such Investments consist of
prepaid expenses, negotiable instruments held for collection and lease, utility and
workers’ compensation, performance and other similar deposits made in the ordinary
course of business by the Company or any of its Restricted Subsidiaries;



30









 






     (12) guarantees of performance or other obligations (other than Indebtedness)
arising in the ordinary course in the Oil and Gas Business, including obligations
under oil and natural gas exploration, development, joint operating and related
agreements and licenses or concessions related to the Oil and Gas Business;




     (13) loans or advances to officers, directors, employees or consultants made in
the ordinary course of business or otherwise customary in the Oil and Gas Business
and otherwise in compliance with Section 4.13 of this Indenture;




     (14) Investments of a Restricted Subsidiary acquired after the Initial Issuance
Date or of any entity merged into or consolidated with the Company or a Restricted
Subsidiary in accordance with Section 5.01 of this Indenture, the extent that such
Investments were not made in contemplation of or in connection with such
acquisition, merger or consolidation and were in existence on the date of such
acquisition, merger or consolidation;




     (15) Investments received as a result of a foreclosure by, or other transfer of
title to, the Company or any of its Restricted Subsidiaries with respect to any
secured Investment in default;




     (16) Liens of the type described in clause (9) of the definition of “Permitted
Liens;” and




     (17) other Investments having an aggregate Fair Market Value (measured on the
date each such Investment was made and without giving effect to subsequent changes
in value), when taken together with all other Investments made pursuant to this
clause (17) that are at the time outstanding, not to exceed the greater of $30.0
million and 3.0% of the Company’s Adjusted Consolidated Net Tangible Assets
determined at the time of such Investment (after giving effect to any dividends,
interest payments, return of capital and subsequent reduction in the amount of any
Investment made pursuant to this clause (17) as a result of the repayment or other
disposition thereof, in an amount not to exceed the amount of such Investments
previously made pursuant to this clause); provided, however, that if any Investment
pursuant to this clause (17) is made in any Person that is not a Restricted
Subsidiary of the Company at the date of the making of such Investment and such
Person becomes a Restricted Subsidiary of the Company after such date, such
Investment shall thereafter be deemed to have been made pursuant to clause (1) above
and shall cease to have been made pursuant to this clause (17) for so long as such
Person continues to be a Restricted Subsidiary;




provided, however, that with respect to any Investment, the Company may, in its sole
discretion, allocate all or any portion of any Investment and later re-allocate all
or any portion of any Investment to one or more of the above clauses (1) through
(17) so that the entire Investment would be a Permitted Investment.




“Permitted Liens” means:



31









 






     (1) Liens securing any Indebtedness and other Obligations under any of the
Credit Facilities incurred under clause (1) of the second paragraph of Section 4.11
of this Indenture;




     (2) Liens in favor of the Company or the Subsidiary Guarantors;




     (3) Liens on property (including Capital Stock) of a Person existing at the
time such Person is merged with or into or consolidated with the Company or any
Restricted Subsidiary of the Company, provided that such Liens were in existence
prior to the contemplation of such merger or consolidation and do not extend to any
assets other than those of the Person merged into or consolidated with the Company
or the Restricted Subsidiary;




     (4) Liens on property existing at the time of acquisition of the property by
the Company or any Restricted Subsidiary of the Company, provided that such Liens
were in existence prior to the contemplation of such acquisition;




     (5) any interest or title of a lessor to the property subject to a Capital
Lease Obligation;




     (6) Liens on any asset or property acquired, constructed or improved by the
Company or any of its Restricted Subsidiaries; provided that (a) such Liens are in
favor of the seller of such asset or property, in favor of the Person or Persons
developing, constructing, repairing or improving such asset or property, or in favor
of the Person or Persons that provided the funding for the acquisition, development,
construction, repair or improvement cost, as the case may be, of such asset or
property, (b) such Liens are created within 360 days after the acquisition,
development, construction, repair or improvement, (c) the aggregate principal amount
of the Indebtedness secured by such Liens is otherwise permitted to be incurred
under this Indenture and does not exceed the greater of (i) the cost of the asset or
property so acquired, constructed or improved plus related financing costs and (ii)
the Fair Market Value (as determined by an executive officer involved in or
otherwise familiar with such acquisition, construction or improvement of such asset
or property, or, if such Fair Market Value is $40.0 million or more, the Board of
Directors of the Company) of the asset or property so acquired, constructed or
improved, measured at the date of such acquisition, or the date of completion of
such construction or improvement, and (d) such Liens are limited to the asset or
property so acquired, constructed or improved (including the proceeds thereof,
accessions thereto, upgrades thereof and improvements thereto);




     (7) Liens existing on the Initial Issuance Date other than Liens securing the
Credit Facilities;




     (8) Liens to secure the performance of tenders, bids, statutory obligations,
surety or appeal bonds, government contracts, performance bonds or other obligations
of a like nature incurred in the ordinary course of business;



32









 






     (9) Liens on and pledges of the Equity Interests of any Unrestricted Subsidiary
or any Joint Venture owned by the Company or any Restricted Subsidiary of the
Company to the extent securing Non-Recourse Debt or other Indebtedness of such
Unrestricted Subsidiary or Joint Venture;




     (10) Liens in respect of Production Payments and Reserve Sales;




     (11) Liens on pipelines or pipeline facilities that arise by operation of law;




     (12) Liens arising under oil and gas leases, overriding royalty interest
agreements, operating agreements, joint venture agreements, partnership agreements,
oil and gas leases, farm-out agreements, farm-in agreements, division orders,
contracts for the sale, transportation or exchange of crude oil and natural gas and
related Hydrocarbons and minerals, unitization and pooling declarations and
agreements, area of mutual interest agreements, land purchase option arrangements,
participation and development agreements, joint operating agreements, and other
agreements (including, without limitation, options, put and call arrangements,
rights of first offer, rights of first refusal, preferential rights, restrictions on
dispositions and the like and those of the type described in the definition of
“Permitted Business Investments”) arising in the ordinary course of business of the
Company and its Restricted Subsidiaries or that are customary in the Oil and Gas
Business;




     (13) Liens reserved in oil and gas mineral leases for bonus or rental payments
and for compliance with the terms of such leases;




     (14) Liens upon specific items of inventory, receivables or other goods or
proceeds of the Company or any of its Restricted Subsidiaries securing such Person’s
obligations in respect of bankers’ acceptances or receivables securitizations issued
or created for the account of such Person to facilitate the purchase, shipment or
storage of such inventory, receivables or other goods or proceeds and permitted by
Section 4.11;




     (15) Liens securing Obligations of the Company or the Subsidiary Guarantors
under the Notes or the Subsidiary Guarantees, as the case may be, and Liens securing
other obligations of the Company or the Subsidiary Guarantors under this Indenture;




     (16) Liens to secure payment and performance of Hedging Contracts of the
Company or any of its Restricted Subsidiaries;




     (17) Liens for taxes, assessments or governmental charges or claims that are
not yet delinquent by more than sixty (60) days or that are being contested in good
faith by appropriate proceedings promptly instituted and diligently concluded;
provided that any reserve or other appropriate provision as is required in
conformity with GAAP has been made therefor;



33









 






     (18) landlords’, carriers’, warehousemen’s, mechanics’, materialmen’s,
repairmen’s or like Liens arising by contract or statute in the ordinary course of
business and with respect to amounts which are not yet delinquent by more than sixty
(60) days or are being contested in good faith by appropriate proceedings;




     (19) pledges or deposits made in the ordinary course of business (A) in
connection with leases, tenders, bids, statutory obligations, surety or appeal
bonds, government contracts, performance bonds and similar obligations, or (B) in
connection with workers’ compensation, unemployment insurance and other social
security or similar legislation;




     (20) any attachment or judgment Lien that does not constitute an Event of
Default;




     (21) survey exceptions, easements or reservations of, or rights of others for,
licenses, rights-of-way, sewers, electric lines, telegraph and telephone lines and
other similar purposes, or zoning or other restrictions as to the use of real
property that were not incurred in connection with Indebtedness and that do not in
the aggregate materially adversely affect the value of said properties or materially
impair their use in the operation of the business of the Company or any of its
Restricted Subsidiaries;




     (22) Liens arising solely by virtue of any statutory or common law provisions
relating to banker’s Liens, rights of set-off or similar rights and remedies as to
deposit accounts or other funds maintained or deposited with a depositary
institution; provided that (A) such deposit account is not a dedicated cash
collateral account and is not subject to restrictions against access by the Company
in excess of those set forth by regulations promulgated by the Federal Reserve Board
and (B) such deposit account is not intended by the Company or any of its Restricted
Subsidiaries to provide collateral to the depositary institution;




     (23) Liens arising from Uniform Commercial Code financing statement filings
regarding operating leases entered into by the Company and its Restricted
Subsidiaries in the ordinary course of business;




     (24) leases or subleases granted to others that do not materially interfere
with the ordinary course of business of the Company and its Restricted Subsidiaries,
taken as a whole;




     (25) Liens arising under this Indenture in favor of the Trustee for its own
benefit and similar Liens in favor of other trustees, agents and representatives
arising under instruments governing Indebtedness permitted to be incurred under this
Indenture, provided, however, that such Liens are solely for the benefit of the
trustees, agents or representatives in their capacities as such and not for the
benefit of the holders of such Indebtedness;




     (26) Liens arising from the deposit of funds or securities in trust for the
purpose of decreasing or defeasing Indebtedness so long as such deposit of funds



34









 







or securities and such decreasing or defeasing of Indebtedness are permitted
under Section 4.09 of this Indenture;




     (27) Liens (other than Liens securing Indebtedness) on, or related to, assets
to secure all or part of the costs incurred in the ordinary course of the Oil and
Gas Business for the exploration, drilling, development, production, processing,
transportation, marketing, storage or operation thereof;




     (28) Liens arising from royalties, overriding royalties, revenue interests, net
revenue interests, net profit interests, reversionary interests, production
payments, preferential rights of purchase, working interests and other similar
interests, all as ordinarily exist with respect to properties and assets of the
Company and its Restricted Subsidiaries or otherwise as are customary in the Oil and
Gas Business;




     (29) Liens incurred in the ordinary course of business of the Company or any
Restricted Subsidiary of the Company, provided that, after giving effect to any such
incurrence, the aggregate principal amount of all Indebtedness then outstanding and
secured by any Liens incurred pursuant to this clause (29) does not exceed the
amount set forth in clause (18) of the second paragraph of Section 4.11 of this
Indenture; and




     (30) Liens to secure any Permitted Refinancing Indebtedness permitted to be
incurred under this Indenture and incurred to refinance Indebtedness that was
previously so secured other than Indebtedness referred to in clause (1) above,
provided that any such Lien is limited to all or part of the same assets (plus
improvements, accessions, proceeds or dividends or distributions in respect thereof)
that secured (or, under the written arrangements under which the original Lien
arose, could secure) the Indebtedness being refinanced or is in respect of assets
that is the security for a Permitted Lien hereunder.




     “Permitted MLP Securities” means equity securities (including incentive distribution
rights) of a master limited partnership (or limited liability company or similar business
entity with pass-through treatment for U.S. Federal income tax purposes) that has a class of
equity securities traded on the New York Stock Exchange, the NYSE Amex, the Nasdaq Stock
Market or any successor to any such exchange or market, provided that such master limited
partnership (or other entity) is an Affiliate of the Company.




     “Permitted Refinancing Indebtedness” means any Indebtedness of the Company or any of
its Restricted Subsidiaries or any Disqualified Stock of the Company incurred or issued in
exchange for, or the net proceeds of which shall be used to extend, refinance, renew,
replace, defease, discharge, refund or otherwise retire for value, in whole or in part, any
other Indebtedness of the Company or any of its Restricted Subsidiaries (other than
intercompany Indebtedness) or any Disqualified Stock of the Company (the “Refinanced
Indebtedness”), provided that:



35









 






     (1) the principal amount, or in the case of Disqualified Stock, the amount
thereof as determined in accordance with the definition of Disqualified Stock, of
such Permitted Refinancing Indebtedness does not exceed the principal amount of the
Refinanced Indebtedness (plus all accrued (including, for the purposes of
defeasance, future accrued) and unpaid interest on, or accrued and unpaid dividends
on, the Refinanced Indebtedness, as the case may be, and the amount of all fees,
expenses and premiums incurred in connection therewith) and by an amount equal to
any existing commitments and incremental facilities unutilized thereunder to the
extent incurrence of indebtedness under such unutilized commitment and incremental
facilities would then have been permitted;




     (2) such Permitted Refinancing Indebtedness has a final maturity date or
redemption date, as applicable, later than or equal to the shorter of (A) 91 days
following the Stated Maturity of the Notes or (B) the final maturity date or
redemption date, as applicable, of, the Refinanced Indebtedness;




     (3) such Permitted Refinancing Indebtedness has a Weighted Average Life to
Maturity at the time such Permitted Refinancing Indebtedness is incurred equal to or
greater than the shorter of (A) the Weighted Average Life to Maturity of, the
Refinanced Indebtedness and (B) the Weighted Average Life to Maturity that would
result if all payments of principal on the Refinanced Indebtedness that were due on
or after the date that is 91 days following the last maturity date of any Notes then
Outstanding were instead due on such date;




     (4) if the Refinanced Indebtedness is contractually subordinated or otherwise
junior in right of payment to the Notes or the Subsidiary Guarantees, such Permitted
Refinancing Indebtedness is contractually subordinated or otherwise junior in right
of payment to the Notes or the Subsidiary Guarantees on terms at least as favorable
to the Holders of Notes as those contained in the documentation governing the
Refinanced Indebtedness; and




     (5) such Permitted Refinancing Indebtedness is not incurred (other than by way
of a guarantee) by a Non-Guarantor Restricted Subsidiary of the Company if the
Company or a Subsidiary Guarantor is the issuer or other obligor on the Refinanced
Indebtedness; and




     (6) except as otherwise provided in clause (3) of the second paragraph of
Section 4.09, the proceeds of the Permitted Refinancing Indebtedness shall be used
substantially concurrently with the incurrence thereof to extend, refinance, renew,
replace, defease, discharge, refund or otherwise retire the Refinanced Indebtedness,
unless the Refinanced Indebtedness is not then due and is not redeemable or
prepayable, defeasable or dischargeable, as the case may be, at the option of the
obligor thereof or is redeemable or prepayable or may be defeased or discharged only
with notice, in which case, such proceeds shall be held in a segregated account of
the obligor of the Refinanced Indebtedness until the Refinanced Indebtedness becomes
due or redeemable, prepayable or subject to



36









 







defeasance or discharge, as the case may be, or such notice period lapses and
then shall be used to extend, refinance, renew, replace, defease, discharge, refund
or otherwise retire the Refinanced Indebtedness; provided that in any event the
Refinanced Indebtedness shall be extended, refinanced, renewed, replaced, defeased,
discharged, refunded or otherwise retired within 60 days of the incurrence of the
Refinancing Indebtedness.




     “Person” means any individual, corporation, partnership, joint venture, association,
joint-stock company, trust, unincorporated organization, limited liability company or
government or other entity.




     “Production Facility or Pipeline Assets” means (i) assets used primarily for production
gathering, transmission, transportation, storage, processing or treatment of natural gas,
natural gas liquids or other Hydrocarbons or carbon dioxide and (ii) equity interests of any
Person that has no substantial assets other than assets referred to in clause (i).




     “Production Payments” means, collectively, Dollar-Denominated Production Payments and
Volumetric Production Payments.




     “Production Payments and Reserve Sales” means the grant or transfer by the Company or a
Restricted Subsidiary of the Company to any Person of a royalty, overriding royalty, net
profits interest, production payment (whether volumetric or dollar denominated), partnership
or other interest in oil and gas properties, reserves or the right to receive all or a
portion of the production or the proceeds from the sale of production attributable to such
properties, including any such grants or transfers pursuant to incentive compensation
programs on terms that are reasonably customary in the oil and gas business for geologists,
geophysicists and other providers of technical services to the Company or a Subsidiary of
the Company.




     “Rating Agency” means S&P and Moody’s, or if S&P or Moody’s or both shall not make a
rating on the Notes publicly available, a nationally recognized statistical rating agency or
agencies, as the case may be, selected by the Company (as certified by a resolution of the
Board of Directors or a committee thereof) which shall be substituted for S&P or Moody’s or
both, as the case may be.




     “Registration Rights Agreement” has the meaning provided in the Appendix.




     “Reporting Default” means a Default described in clause (4) of Section 6.01.




     “Restricted Investment” means an Investment other than a Permitted Investment.




     “Restricted Subsidiary” of a Person means any Subsidiary of the referent Person that is
not an Unrestricted Subsidiary.




     “S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill
Companies, Inc., or any successor to the rating agency business thereof.



37









 






     “Sale Leaseback Transaction” means, with respect to the Company or any of its
Restricted Subsidiaries, any arrangement with any Person providing for the leasing by the
Company or any of its Restricted Subsidiaries of any principal property, acquired or placed
into service more than 180 days prior to such arrangement, whereby such property has been or
is to be sold or transferred by the Company or any of its Restricted Subsidiaries to such
Person.




     “Securities Act” means the Securities Act of 1933, as amended.




     “Senior Debt” means




     (1) all Indebtedness of the Company or any of its Restricted Subsidiaries
outstanding under Credit Facilities and all obligations under Hedging Contracts with
respect thereto;




     (2) any other Indebtedness of the Company or any of its Restricted Subsidiaries
permitted to be incurred under the terms of this Indenture, unless the instrument
under which such Indebtedness is incurred expressly provides that it is subordinated
in right of payment to the Notes or any Subsidiary Guarantee; and




     (3) all Obligations with respect to the items listed in the preceding clauses
(1) and (2).




     Notwithstanding anything to the contrary in the preceding sentence, Senior Debt will
not include:




     (a) any intercompany Indebtedness of the Company or any of its Restricted
Subsidiaries to the Company or any of its Affiliates; or




     (b) any Indebtedness that is incurred in violation of this Indenture.




     For the avoidance of doubt, “Senior Debt” will not include any trade payables or taxes
owed or owing by the Company or any of its Restricted Subsidiaries.




     “Significant Subsidiary” means any Subsidiary that would be a “significant subsidiary”
as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities
Act, as such Regulation is in effect on the Initial Issuance Date.




     “Stated Maturity” means, with respect to any installment of interest or principal on
any series of Indebtedness, the date on which the payment of interest or principal was
scheduled to be paid in the original documentation governing such Indebtedness, and will not
include any contingent obligations to repay, redeem or repurchase any such interest or
principal prior to the date originally scheduled for the payment thereof.




     “Subsidiary” means, with respect to any specified Person:




     (1) any corporation, association or other business entity (other than a
partnership or limited liability company) of which more than 50% of the total



38









 







voting power of Voting Stock is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other Subsidiaries of that Person
(or a combination thereof); and




     (2) any partnership (whether general or limited) or limited liability company
(a) the sole general partner or member of which is such Person or a Subsidiary of
such Person, or (b) if there is more than a single general partner or member, either
(x) the only managing general partners or managing members of which are such Person
or one or more Subsidiaries of such Person (or any combination thereof) or (y) such
Person owns or controls, directly or indirectly, a majority of the outstanding
general partner interests, member interests or other Voting Stock of such
partnership or limited liability company, respectively.




     “Subsidiary Guarantee” means the joint and several guarantee pursuant to Article X
hereof by a Subsidiary Guarantor of the Obligations of the Company under this Indenture and
the Notes.




     “Subsidiary Guarantors” means each of (a) the Restricted Subsidiaries of the Company
executing this Indenture as initial Subsidiary Guarantors, (b) any other Restricted
Subsidiary of the Company that executes a supplement to this Indenture in accordance with
Section 4.15 or 10.02 hereof and (c) the respective successors and assigns of such
Restricted Subsidiaries in each case until such time as any such Restricted Subsidiary shall
be released and relieved of its obligations pursuant to Section 4.15, 8.01 or 10.03 hereof.




     “Successor Parent” with respect to any Person means any other Person more than 50% of
the total outstanding Voting Stock of which (measured by voting power rather than the number
of shares, units or the like) is, at the time the first Person becomes a Subsidiary of such
other Person, “Beneficially Owned” either by the first Person or by one or more Persons that
Beneficially Owned more than 50% of the total outstanding Voting Stock of the first Person
(measured by voting power rather than the number of shares, units or the like) immediately
prior to the first Person becoming a Subsidiary of such other Person.




     “Transfer Restricted Securities” has the meaning provided in the Appendix.




     “Treasury Rate” means, as of any Redemption Date, the yield to maturity as of such
Redemption Date of United States Treasury securities with a constant maturity (as compiled
and published in the most recent Federal Reserve Statistical Release H.15(519) which has
become publicly available at least two Business Days prior to the Redemption Date (or, if
such Statistical Release is no longer published, any publicly available source of similar
market data)) most nearly equal to the period from the Redemption Date to October 15, 2014;
provided, however, that if such period is not equal to the constant maturity of a United
States Treasury security for which a weekly average yield is given, the Company shall obtain
the Treasury Rate by linear interpolation (calculated to the nearest one-twelfth of a year)
from the weekly average yields of United States Treasury securities for which such yields
are given, except that if the period from the Redemption



39









 







Date to October 15, 2014 is less than one year, the weekly average yield on actually
traded United States Treasury securities adjusted to a constant maturity of one year shall
be used. The Company will (a) calculate the Treasury Rate on the second Business Day
preceding the applicable Redemption Date and (b) prior to such Redemption Date file with the
Trustee an Officers’ Certificate setting forth the Make Whole Premium and the Treasury Rate
and showing the calculation of each in reasonable detail.




     “Uniform Commercial Code” means the New York Uniform Commercial Code as in effect from
time to time.




     “Unrestricted Subsidiary” means any Subsidiary of the Company that is designated by the
Board of Directors of the Company as an Unrestricted Subsidiary pursuant to a Board
Resolution, but only to the extent that such Subsidiary:




     (1) has no Indebtedness other than Non-Recourse Debt owing to any Person other
than the Company or any of its Restricted Subsidiaries;




     (2) is not party to any agreement, contract, arrangement or understanding with
the Company or any Restricted Subsidiary of the Company unless (a) the terms of any
such agreement, contract, arrangement or understanding are no less favorable to the
Company or such Restricted Subsidiary than those that might be obtained at the time
from Persons who are not Affiliates of the Company or (b) is otherwise permitted
under the provisions of Section 4.13 or (c) to the extent that clause (a) or (b) is
not satisfied, the excess value of such agreement, contract, arrangement or
understanding shall be deemed a Restricted Payment;




     (3) is a Person with respect to which neither the Company nor any of its
Restricted Subsidiaries has any direct or indirect obligation (a) to subscribe for
additional Equity Interests or (b) to maintain or preserve such Person’s financial
condition or to cause such Person to achieve any specified levels of operating
results; and




     (4) has not, from and after such designation, guaranteed or otherwise directly
or indirectly provided credit support for any Indebtedness of the Company or any of
its Restricted Subsidiaries (other than as otherwise provided in the definition of
“Non-Recourse Debt”);




     provided, however, that Items (1) through (4) shall not be deemed to prevent
Permitted Investments in Unrestricted Subsidiaries that are otherwise allowed under
this Indenture.




     Any designation of a Subsidiary of the Company as an Unrestricted Subsidiary
will be evidenced to the Trustee by filing with the Trustee a Board Resolution
giving effect to such designation and an Officers’ Certificate certifying that such
designation complied with the preceding conditions and was permitted by Section
4.09. In the case of any designation by the Company of a Person as an Unrestricted
Subsidiary on the first day that such Person is a Subsidiary of the



40









 







Company in accordance with the provisions of the Indenture, such designation
shall be deemed to have occurred for all purposes of the Indenture simultaneously
with, and automatically upon, such Person becoming a Subsidiary. If, at any time,
any Unrestricted Subsidiary would fail to meet the preceding requirements as an
Unrestricted Subsidiary, it will thereafter cease to be an Unrestricted Subsidiary
for purposes of this Indenture and any Indebtedness of such Subsidiary will be
deemed to be incurred by a Restricted Subsidiary of the Company as of such date and,
if such Indebtedness is not permitted to be incurred as of such date under Section
4.11, the Company will be in default of such covenant.




     “Volumetric Production Payments” means production payment obligations recorded as
deferred revenue in accordance with GAAP, together with all related undertakings and
obligations.




     “Voting Stock” of any Person as of any date means the Capital Stock of such Person that
is at the time entitled (without regard to the occurrence of any contingency) to vote in the
election of the Board of Directors of such Person.




     “Weighted Average Life to Maturity” means, when applied to any Indebtedness or
Disqualified Stock at any date, the number of years obtained by dividing:




     (1) the sum of the products obtained by multiplying (a) the amount of each then
remaining installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity or redemption, in respect of the
Indebtedness or Disqualified Stock, by (b) the number of years (calculated to the
nearest one-twelfth) that will elapse between such date and the making of such
payment; by




     (2) the then outstanding aggregate principal amount of such Indebtedness or
Disqualified Stock.



SECTION
202 Other Definitions.




     Section 1.02 of the Original Indenture shall be amended by inserting the following terms, in
their appropriate alphabetical position, and corresponding section references into the table in
such Section 1.02 of the Original Indenture:



	 	 	 	 	 
	Term	 	Defined in Section
	“Affiliate Transaction”
	 	 	4.13	 
	“Asset Sale Offer”
	 	 	3.13	 
	“Change of Control Offer”
	 	 	4.16	 
	“Change of Control Payment”
	 	 	4.16	 
	“Change of Control Purchase Date”
	 	 	4.16	 
	“Change of Control Settlement Date”
	 	 	4.16	 
	“Excess Proceeds”
	 	 	4.12	 
	“incur”
	 	 	4.11	 
	“Offer Amount”
	 	 	3.13	 






41









 






	 	 	 	 	 
	Term	 	Defined in Section
	“Offer Period”
	 	 	3.13	 
	“Payment Default”
	 	 	6.01	 
	“Permitted Debt”
	 	 	4.11	 
	“Restricted Payments”
	 	 	4.09	 
	“Settlement Date”
	 	 	3.13	 
	“Termination Date”
	 	 	3.13	 






SECTION
203 Mutilated, Destroyed, Lost and Stolen Securities.




     The Original Indenture shall be amended by replacing the second sentence of Section 2.09 of
the Original Indenture with the following sentence:




     If any such mutilated, destroyed, lost or stolen Security has become or is about to
become due and payable, or is about to be redeemed or purchased by the Company pursuant to
an optional redemption described in Section 3.12 or purchased by the Company upon a Change
of Control or an Asset Sale pursuant to Article IV, the Company in its discretion may,
instead of issuing a new Security, pay, redeem or purchase such Security.



SECTION
204 Amendment of Indenture Without Consent of Holders




     Clause (8) of Section 9.01 of the Original Indenture is hereby amended to replace the words
“prospectus supplement” with the words “prospectus, prospectus supplement or offering memorandum.”



SECTION
205 Limitation on Mergers and Consolidations.




     Article V of the Original Indenture shall be amended by replacing Article V of the Original
Indenture with the following with respect to the Notes:



     Section 5.01 Merger, Consolidation or Sale of Assets.




     The Company may not (x) consolidate or merge with or into another Person (whether or
not the Company is the survivor), or (y) directly or indirectly sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of its assets, in one or more
related transactions to another Person, unless:




     (a) either (1) the Company is the survivor or (2) the Person formed by or
surviving any such consolidation or merger (if other than such Issuer) or to which
such sale, assignment, transfer, lease, conveyance or other disposition shall have
been made is a Person organized or existing under the laws of the United States, any
state of the United States or the District of Columbia;




     (b) the Person formed by or surviving any such consolidation or merger (if
other than the Company) or the Person to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made assumes all



42









 







the obligations of the Company under the Notes, this Indenture and the
applicable Registration Rights Agreement pursuant to a supplemental indenture or
other agreement in a form reasonably satisfactory to the Trustee;




     (c) immediately after such transaction, no Default (other than a Reporting
Default) or Event of Default exists;




     (d) and either




     (i) the Company or the Person formed by or surviving any such
consolidation or merger (if other than the Company), or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made will, on the date of such transaction immediately after giving pro
forma effect thereto and any related financing transactions as if the same
had occurred at the beginning of the applicable four-quarter period, be
permitted to incur at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in the first paragraph of Section
4.11 hereof; or




     (ii) immediately after giving effect to such transaction and any
related financing transactions on a pro forma basis as if the same had
occurred at the beginning of the applicable four-quarter period, the Fixed
Charge Coverage Ratio of the Company or the Person formed by or surviving
any such consolidation or merger (if other than the Company), or to which
such sale, assignment, transfer, lease, conveyance or other disposition has
been made, will be equal to or greater than the Fixed Charge Coverage Ratio
of the Company immediately prior to such transaction; or




     (iii) immediately after giving effect to such transaction and any
related financing transactions on a pro forma basis, the Consolidated Net
Worth of the Company will be greater than the Consolidated Net Worth of the
Company immediately prior to such transaction; and




     (e) the Company has delivered to the Trustee an Officers’ Certificate and an
Opinion of Counsel, each stating that such consolidation, merger or disposition and
such supplemental indenture (if any) comply with this Indenture.




     Notwithstanding the restrictions described in the foregoing clauses (c) and (d), (x)
any Restricted Subsidiary of the Company may consolidate with, merge into or dispose of all
or part of its assets to the Company or another Restricted Subsidiary, and (y) the Company
may merge with or into an Affiliate formed solely for the purpose of reincorporating the
Company in another jurisdiction, and the Company will not be required to comply with the
preceding clause (e) in connection with any such consolidation, merger or disposition.




     For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise,
in a single transaction or series of transactions) of all or substantially all of the



43









 







assets of one or more Restricted Subsidiaries of the Company, the Capital Stock of
which constitutes all or substantially all of the assets of the Company, shall be deemed to
be the transfer of all or substantially all of the assets of the Company.



     Section 5.02 Successor Substituted.




     Upon any consolidation or merger, or any sale, assignment, transfer, lease, conveyance
or other disposition of all or substantially all of the assets of the Company in accordance
with Section 5.01 hereof, in which the Company is not the surviving entity, the surviving
entity formed by such consolidation or into or with which the Company is merged or to which
such sale, assignment, transfer, lease, conveyance or other disposition is made shall
succeed to, and be substituted for, and may exercise every right and power of, the Company
under this Indenture with the same effect as if such surviving entity had been named as the
Company herein and shall be substituted for the Company (so that from and after the date of
such consolidation, merger, sale, assignment, transfer, lease, conveyance or other
disposition, the provisions of this Indenture referring to the “Company” shall refer instead
to the surviving entity and not to the Company; and thereafter, if the Company is dissolved
following a transfer of all or substantially all of its assets in accordance with this
Indenture (except in the case of a lease of all or substantially all of the Company’s
assets), it shall be discharged and released from all obligations and covenants under this
Indenture and the Notes. The Trustee shall enter into a supplemental indenture to evidence
the succession and substitution of such successor and such discharge and release of the
Company.



SECTION
206 Issuance of Additional Notes.





     Article II of the Original Indenture shall be amended by inserting the following section:




     Section 2.18 Issuance of Additional Notes.




     The Company shall be entitled, subject to its compliance with Section 4.11, at any time
and from time to time to create and issue Additional Notes under this Indenture which shall
rank equally and ratably with, and have identical terms, as the Initial Notes issued on the
Initial Issuance Date, other than with respect to the date of issuance and issue price;
provided, however, that any issuance of Additional Notes bearing the same CUSIP number as
the Initial Notes (i) is treated as part of the same issue as the Initial Notes within the
meaning of Treasury Regulation § 1.1275-1(f), (ii) is a qualified reopening of the Initial
Notes within the meaning of Treasury Regulation § 1.1275-2(k), or (iii) is otherwise
fungible with the Initial Notes for U.S. federal income tax purposes, in the case of each of
clauses (i), (ii) and (iii), so that such Additional Notes will trade as part of a single
class with the Initial Notes. The Initial Notes issued on the Initial Issuance Date, and
any Additional Notes and all Exchange Notes issued in exchange therefor shall be treated as
a single class for all purposes under this Indenture, including, without limitation,
waivers, consents, directions, declarations, amendments, redemptions and offers to purchase.




44











 






     With respect to any Additional Notes, the Company shall set forth in an Officers’
Certificate, which shall be delivered to the Trustee, the following information:




     (1) the aggregate principal amount of such Additional Notes to be authenticated
and delivered pursuant to this Indenture;




     (2) the issue price, the issue date (and the corresponding date from which
interest shall accrue thereon and the first interest payment date therefor) and the
CUSIP number and any corresponding ISIN of such Additional Notes; and




     (3) whether such Additional Notes shall be Transfer Restricted Securities and
issued in the form of Initial Notes as set forth in Exhibit 1 to the Appendix or
shall be issued in the form of Exchange Notes as set forth in Exhibit 2 to the
Appendix.



SECTION 207 Redemption.




     (a) Section 3.03 of the Original Indenture shall be amended by replacing that section of the
Original Indenture with the following with respect to the Notes:



     Section 3.03 Selection of Notes to Be Redeemed.




     If less than all of the Notes are to be redeemed at any time, the Trustee shall select
the Notes to be redeemed among the Holders of the Notes as follows: (1) if the Notes are
listed on any national securities exchange, in compliance with the requirements of the
principal national securities exchange on which the Notes are listed; or (2) if the Notes
are not listed on any national securities exchange, on a pro rata basis. In the event of
partial redemption other than on a pro rata basis, the particular Notes to be redeemed shall
be selected, not less than five (5) Business Days (unless a shorter period shall be
agreeable to the Trustee) prior to the giving of notice of the redemption pursuant to
Section 3.04, by the Trustee from the Outstanding Notes not previously called for
redemption.




     The Trustee shall promptly notify the Company in writing of the Notes selected for
redemption and, in the case of any Note selected for partial redemption, the principal
amount thereof to be redeemed. Notes and portions of Notes selected shall be in amounts of
$2,000 or whole multiples of $1,000 in excess of $2,000; except that if all of the Notes of
a Holder are to be redeemed, the entire Outstanding amount of Notes held by such Holder,
even if not a multiple of $1,000, shall be redeemed. Provisions of this Indenture that
apply to Notes called for redemption also apply to portions of Notes called for redemption.



     (b) The first paragraph of Section 3.04 of the Original Indenture shall be amended by
replacing that paragraph with the following:




     Subject to the provisions of Section 3.13 hereof, at least 30 days but not more than 60
days before a Redemption Date (except that redemption notices may be mailed



45









 







more than 60 days prior to a Redemption Date if the notice is issued in connection with a
legal defeasance, covenant defeasance or discharge), the Company shall mail or cause to be
mailed, by first class mail, a notice of redemption to each Holder whose Notes are to be
redeemed at its registered address.



     (c) The following provisions shall be added to Article III of the Original Indenture with
respect to the Notes:



     Section 3.12 Optional Redemption.




     (a) Except as set forth in clauses (b) and (c) of this Section 3.12, the Company shall
not have the option to redeem the Notes prior to October 15, 2014. On and after October 15,
2014, the Company shall have the option to redeem the Notes, in whole or in part at any
time, at the Redemption Prices (expressed as percentages of principal amount) set forth
below, plus accrued and unpaid interest and Additional Interest, if any, on the Notes to be
redeemed to the applicable Redemption Date (subject to the right of Holders of record on the
relevant record date to receive interest due on an interest payment date that is on or prior
to the Redemption Date), if redeemed during the twelve-month period beginning on October 15
of the years indicated below:



	 	 	 	 	 
	YEAR	 	PERCENTAGE
	2014
	 	 	104.313	%
	2015
	 	 	102.875	%
	2016
	 	 	101.438	%
	2017 and thereafter
	 	 	100.000	%







     (b) Notwithstanding the provisions of clause (a) of this Section 3.12, at any time
prior to October 15, 2013, the Company may on any one or more occasions redeem up to 35% of
the aggregate principal amount of Notes (including any Additional Notes) issued under this
Indenture at a Redemption Price of 108.625% of the principal amount thereof, plus accrued
and unpaid interest, if any, and Additional Interest, if any, thereon to the Redemption Date
(subject to the right of Holders of record on the relevant record date to receive interest
due on an interest payment date that is on or prior to the Redemption Date), with the net
cash proceeds of one or more Equity Offerings, provided that, with respect to each such
redemption:




     (1) at least 65% of the aggregate principal amount of Notes (including any
Additional Notes) issued under this Indenture remains Outstanding immediately after
the occurrence of such redemption (excluding any Notes held by the Company and its
Subsidiaries); and




     (2) such redemption occurs within 180 days of the date of the closing of the
related Equity Offering.




     (c) Prior to October 15, 2014, the Company may redeem on one or more occasions all or
part of the Notes at a Redemption Price equal to the sum of:



46









 






     (1) 100% of the principal amount thereof, plus




     (2) accrued and unpaid interest, if any, to the Redemption Date (subject to the
right of Holders of record on the relevant record date to receive interest due on an
interest payment date that is on or prior to the Redemption Date), plus




     (3) the Make Whole Premium at the Redemption Date.




     (d) Any redemption pursuant to this Section 3.12 shall be made pursuant to the
provisions of Section 3.01 through Section 3.11 hereof.




     (e) Nothing in this Section 3.12 shall prohibit the Company from acquiring the Notes by
means other than a redemption, whether pursuant to a tender offer, open market purchase or
otherwise, so long as the acquisition does not violate the terms of the Indenture.



     Section 3.13 Offer to Purchase by Application of Excess Proceeds.




     In the event that, pursuant to Section 4.12 hereof, the Company shall be required to
commence an offer to all Holders to purchase Notes (an “Asset Sale Offer”), it shall follow
the procedures specified below.




     The Asset Sale Offer shall remain open for a period of 20 Business Days following its
commencement and no longer, except to the extent that a longer period is required by
Applicable Law (the “Offer Period”). No later than five Business Days after the termination
of the Offer Period (the “Settlement Date”), the Company shall purchase and pay for the
principal amount of Notes required to be purchased pursuant to Section 4.12 hereof (the
“Offer Amount”) or, if less than the Offer Amount has been tendered, all Notes validly
tendered in response to the Asset Sale Offer. Payment for any Notes so purchased shall be
made in the manner prescribed in the Notes.




     Upon the commencement of an Asset Sale Offer, the Company shall send, by first class
mail, a notice to each of the Holders, with a copy to the Trustee. The notice shall contain
all instructions and materials necessary to enable such Holders to tender Notes pursuant to
the Asset Sale Offer. The Asset Sale Offer shall be made to all Holders. The notice, which
shall govern the terms of the Asset Sale Offer, shall state:




     (a) that the Asset Sale Offer is being made pursuant to this Section 3.13 and
Section 4.12 hereof and the length of time the Asset Sale Offer shall remain open,
including the time and date the Asset Sale Offer will terminate (the “Termination
Date”);




     (b) the Offer Amount and the purchase price;




     (c) that any Note not tendered or accepted for payment shall continue to accrue
interest and Additional Interest, if any;



47









 






     (d) that, unless the Company defaults in making such payment, any Note accepted
for payment pursuant to the Asset Sale Offer shall cease to accrue interest and
Additional Interest, if any, after the Settlement Date;




     (e) that Holders electing to have a Note purchased pursuant to any Asset Sale
Offer shall be required to surrender the Note, properly endorsed for transfer,
together with the form entitled “Option of Holder to Elect Purchase” on the reverse
of the Note completed and such customary documents as the Company may reasonably
request, to the Company or a Paying Agent at the address specified in the notice,
before the Termination Date;




     (f) that Holders shall be entitled to withdraw their election if the Company or
the Paying Agent, as the case may be, receives, prior to the Termination Date, a
telegram, telex, facsimile transmission or letter setting forth the name of the
Holder, the principal amount of the Note the Holder delivered for purchase and a
statement that such Holder is withdrawing his election to have such Note purchased;




     (g) that, if the aggregate principal amount of Notes surrendered by Holders,
and Pari Passu Indebtedness surrendered by holders or lenders, collectively, exceeds
the amount the Company is required to repurchase, the Trustee shall select the Notes
and Pari Passu Indebtedness to be purchased on a pro rata basis on the basis of the
aggregate principal amount of tendered Notes and Pari Passu Indebtedness (with such
adjustments as may be deemed appropriate by the Trustee so that only Notes in
denominations of $2,000, or integral multiples of $1,000 in excess of $2,000, shall
be purchased); and




     (h) that Holders whose Notes were purchased only in part shall be issued new
Notes equal in principal amount to the unpurchased portion of the Notes surrendered,
which unpurchased portion must be equal to $2,000 in principal amount or an integral
multiple of $1,000 in excess of $2,000.




     If any of the Notes subject to an Asset Sale Offer is in the form of a Global Note,
then the Company shall modify such notice to the extent necessary to accord with the
procedures of the Depositary applicable to repurchases.




     Promptly after the Termination Date, the Company shall, to the extent lawful, accept
for payment Notes or portions thereof tendered pursuant to the Asset Sale Offer in the
aggregate principal amount required by Section 4.12 hereof, and prior to the Settlement Date
it shall deliver to the Trustee an Officers’ Certificate stating that such Notes or portions
thereof were accepted for payment by the Company in accordance with the terms of this
Section 3.13 and Section 4.12. Prior to 11:00 a.m., New York City time, on the Settlement
Date, the Company or the Paying Agent, as the case may be, shall mail or deliver to each
tendering Holder an amount equal to the purchase price of the Notes tendered by such Holder
and accepted by the Company for purchase, and the Company shall issue a new Note, and the
Trustee shall authenticate and mail or deliver such new Note to such Holder, in a principal
amount equal to any unpurchased portion of the Note



48









 







surrendered. Any Note not so accepted shall be promptly mailed or delivered by the Company
to the Holder thereof. The Company shall publicly announce the results of the Asset Sale
Offer on or before the Settlement Date.



SECTION 208 Covenants.




     (a) Section 4.05 of the Original Indenture is amended and restated in its entirety as follows:




     Section 4.05 Existence.




     Except as otherwise permitted pursuant to the terms hereof (including consolidation and
merger permitted by Section 5.01), the Company shall do or cause to be done all things
necessary to preserve and keep in full force and effect its corporate existence, and the
corporate, partnership, limited liability company or other existence of each of its
Restricted Subsidiaries, in accordance with the respective organizational documents (as the
same may be amended from time to time) of the Company or any such Restricted Subsidiary;
provided, however, that the Company shall not be required to preserve the existence of any
of its Restricted Subsidiaries if the Company shall determine that the preservation thereof
is no longer desirable in the conduct of the business of the Company and its Restricted
Subsidiaries taken as a whole and that the loss thereof is not adverse in any material
respect to the Holders of the Notes.



     (b) Article IV of the Original Indenture is amended by adding the following covenants for the
benefit of the Holders of the Notes:



     Section 4.08. Effectiveness of Covenants.




     From and after the first day (the “Suspension Date”) on which (i) the Notes have an
Investment Grade Rating from both of the Ratings Agencies and (ii) no Default has occurred
and is continuing under the Indenture, the Company and its Restricted Subsidiaries shall
cease to be subject to the provisions of the following sections of the Indenture:




	 	•	 	Section 4.09,
	 
	 	•	 	Section 4.10,
	 
	 	•	 	Section 4.11,
	 
	 	•	 	Section 4.12,
	 
	 	•	 	Section 4.13, and
	 
	 	•	 	clauses (d) of (e) of Section 5.01 (collectively, the “Suspended Covenants”).






     If at any date (each such date, a “Reversion Date”) the credit rating of the Notes is
downgraded from an Investment Grade Rating by either Rating Agency, then the



49









 







Suspended Covenants will thereafter be reinstated and again be applicable pursuant to the
terms of the Indenture, unless and until the Notes subsequently attain an Investment Grade
Rating. The period of time between any Suspension Date and the first subsequent Reversion
Date is referred to herein as a “Suspension Period.” Neither the failure of the Company or
any of its Subsidiaries to comply with a Suspended Covenant during a Suspension Period nor
compliance by the Company or any of its Subsidiaries with any contractual obligation entered
into in compliance with the Indenture during a Suspension Period will constitute a Default,
Event of Default or breach of any kind under the Indenture, the Notes or the Subsidiary
Guarantees.




     During any Suspension Period, the Board of Directors of the Company shall not designate
any of the Company’s Subsidiaries as Unrestricted Subsidiaries pursuant to the Indenture.




     Calculations made after the Reversion Date of the amount available to be made as
Restricted Payments under Section 4.09 will be made as though the covenant described in
Section 4.09 had been in effect at all times since the Initial Issuance Date, including
during any Suspension Period.



     Section 4.09 Limitation on Restricted Payments.




     The Company will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly:




     (1) declare or pay any dividend or make any other payment or distribution on
account of the Company’s or any of its Restricted Subsidiaries’ Equity Interests
(including, without limitation, any payment in connection with any merger or
consolidation involving the Company or any of its Restricted Subsidiaries) or to the
holders of the Company’s or any of its Restricted Subsidiaries’ Equity Interests in
their capacity as such (other than dividends or distributions payable in Equity
Interests (other than Disqualified Stock) of the Company or payable to the Company
or a Restricted Subsidiary of the Company);




     (2) purchase, redeem or otherwise acquire or retire for value (including,
without limitation, in connection with any merger or consolidation involving the
Company) any Equity Interests of the Company or any direct or indirect parent of the
Company;




     (3) make any principal payment on or with respect to, or purchase, redeem,
defease or otherwise acquire or retire for value any Indebtedness that is
subordinated in right of payment to the Notes or any Subsidiary Guarantee (excluding
(a) any intercompany Indebtedness between or among the Company and any of its
Restricted Subsidiaries, (b) the purchase, redemption, defeasance, repurchase or
other acquisition of Indebtedness that is subordinated in right of payment to the
Notes or the Subsidiary Guarantees purchased, redeemed, defeased or otherwise
acquired in anticipation of satisfying a sinking fund obligation, principal
installment or final maturity, in each case due within one



50









 







year of the date of purchase, repurchase, redemption, defeasance or acquisition, and
(c) any payment of principal at the Stated Maturity thereof); or




     (4) make any Restricted Investment (all such payments and other actions set
forth in these clauses (1) through (4) being collectively referred to as “Restricted
Payments”),




     unless, at the time of and after giving effect to such Restricted Payment, no Default
(except a Reporting Default) or Event of Default has occurred and is continuing or would
occur as a consequence of such Restricted Payment and:




     (I) the Company would, at the time of such Restricted Payment immediately after
giving pro forma effect thereto as if the same had occurred at the beginning of the
applicable four-quarter period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first
paragraph of Section 4.11; and




     (II) such Restricted Payment, together with the aggregate amount of all other
Restricted Payments made by the Company and its Restricted Subsidiaries (excluding
Restricted Payments permitted by clauses (2), (3), (4), (5), (8), (9), (11) and (13)
of the next succeeding paragraph) since the Initial Issuance Date, is less than the
sum, without duplication, of:




     (a) 50% of the aggregate Consolidated Net Income of the Company accrued
on a cumulative basis during the period beginning on the Measurement Date
and ending on the last day of the Company’s last fiscal quarter ending prior
to the date of the Restricted Payment (or, if such aggregate cumulative
Consolidated Net Income shall be a loss, minus 100% of such loss); plus




     (b) 100% of the aggregate net cash proceeds, and the Fair Market Value
of any Capital Stock of Persons (other than an Unrestricted Subsidiary)
engaged primarily in the Oil and Gas Business or any other assets that are
used or useful in the Oil and Gas Business, in each case received by the
Company after the Measurement Date as a contribution to its common equity
capital or from the issue or sale after the Measurement Date of Equity
Interests of the Company (other than Disqualified Stock) or from the issue
or sale after the Measurement Date of convertible or exchangeable
Disqualified Stock or convertible or exchangeable debt securities of the
Company that have been converted into or exchanged for such Equity Interests
(other than Equity Interests (or Disqualified Stock or debt securities) sold
to a Subsidiary of the Company) or received upon the exercise of any
options, warrants or rights to purchase Equity Interests (other than
Disqualified Stock) of the Company; plus



51









 






     (c) the amount equal to the net reduction in Restricted Investments
made by the Company or any of its Restricted Subsidiaries in any Person
since the Measurement Date resulting from:




     (i) repurchases or redemptions of such Restricted Investments by
such Person, proceeds realized upon the sale of such Restricted
Investment to a purchaser other than the Company or a Subsidiary of
the Company, repayments of loans or advances or other transfers of
assets (including by way of interest payments, dividend or
distribution) by such Person to the Company or any Restricted
Subsidiary of the Company; plus




     (ii) the redesignation of Unrestricted Subsidiaries as
Restricted Subsidiaries or the merger or consolidation of an
Unrestricted Subsidiary with and into the Company or any Restricted
Subsidiary (valued in each case as provided in the definition of
“Investment”) not to exceed, in the case of any Unrestricted
Subsidiary, the amount of Investments previously made by the Company
or any Restricted Subsidiary of the Company in such Unrestricted
Subsidiary; plus




     (iii) an amount equal to any amount included as a Restricted
Payment pursuant to clause (II) of the first paragraph of this
Section 4.09 on account of any guarantee entered into by the Company
or any Restricted Subsidiary; to the extent that such guarantee has
not been called upon and the obligation arising under such guarantee
no longer exists or has been reduced; plus




     (iv) in the event the Company or any Restricted Subsidiary makes
any Investment in a Person that, as a result of or in connection with
such Investment, becomes a Restricted Subsidiary or is merged or
consolidated with the Company or a Restricted Subsidiary, an amount
equal to the amount included as a Restricted Payment pursuant to
clause (II) of the first paragraph of this Section 4.09 on account of
the Company’s or any Restricted Subsidiary’s Investment in such
Person prior to the time it became a Restricted Subsidiary or the
time of such merger or consolidation; plus




     (d) the amount by which Indebtedness of the Company or its Restricted
Subsidiaries is reduced on the Company’s balance sheet upon the conversion
or exchange (other than by a Subsidiary of the Company) subsequent to the
Measurement Date of any Indebtedness of the Company or its Restricted
Subsidiaries convertible into or exchangeable for Equity Interests of the
Company (other than Disqualified Stock) (less the amount of cash, or the
Fair Market Value of any other property, distributed by the Company upon
such conversion or exchange),



52









 






in each case to the extent such amounts have not been included in
Consolidated Net Income for any period commencing on or after the
Measurement Date.




The preceding provisions will not prohibit:




     (1) the payment of any dividend or distribution within 60 days after the date
of its declaration, if at the date of declaration the payment would have complied
with the provisions of this Indenture;




     (2) the redemption, repurchase, retirement, defeasance or other acquisition of
any subordinated Indebtedness of the Company or any Subsidiary Guarantor or of any
Equity Interests of the Company in exchange for, or out of the net cash proceeds of
the substantially concurrent (a) contribution (other than from a Restricted
Subsidiary of the Company) to the equity capital of the Company or (b) sale (other
than to a Restricted Subsidiary of the Company) of, Equity Interests of the Company
(other than Disqualified Stock), with a sale being deemed substantially concurrent
if such redemption, repurchase, retirement, defeasance or acquisition occurs not
more than 120 days after such sale; provided, however, that the amount of any such
net cash proceeds that are utilized for any such redemption, repurchase, retirement,
defeasance or other acquisition will be excluded or deducted from clause (II) of
this Section 4.09;




     (3) the defeasance, redemption, repurchase, retirement or other acquisition of
subordinated Indebtedness or Disqualified Stock of the Company or any Subsidiary
Guarantor with the net cash proceeds from a substantially concurrent incurrence of,
or in exchange for, Permitted Refinancing Indebtedness, with an incurrence of
Permitted Refinancing Indebtedness being deemed substantially concurrent if such
defeasance, redemption, repurchase, retirement or acquisition occurs not more than
120 days after such incurrence;




     (4) the payment of any dividend or distribution by a Restricted Subsidiary of
the Company to the holders of such Restricted Subsidiary’s Equity Interests on a pro
rata basis or on a basis more favorable to the Company or a Restricted Subsidiary;




     (5) so long as no Default (other than a Reporting Default) or Event of Default
shall have occurred and be continuing or would be caused thereby, the repurchase,
redemption or other acquisition or retirement for value (other than for any Equity
Interest) of any Equity Interests of the Company or any Restricted Subsidiary of the
Company pursuant to any director, employee or consultant equity subscription
agreement or equity option agreement or other employee benefit plan or to satisfy
obligations under any Equity Interests option plan or similar arrangement other than
any rights described under clause 9(b) below; provided, however, that the aggregate
price paid for all such repurchased, redeemed, acquired or retired Equity Interests
may not exceed $3.0 million in any calendar year (with any portion of such $3.0
million amount that is unused in any



53









 







calendar year to be carried forward to successive calendar years and added to such
amount) plus, to the extent not previously applied or included,




     (a) the cash proceeds received by the Company or any of its Restricted
Subsidiaries from sales of Equity Interests of the Company to employees,
consultants or directors of the Company or its Affiliates that occur after
the Initial Issuance Date (to the extent the cash proceeds from the sale of
such Equity Interests have not otherwise been applied to the payment of
Restricted Payments by virtue of clause (II)(b) of the first paragraph of
this Section 4.09); and




     (b) the cash proceeds of key man life insurance policies received by
the Company or any of its Restricted Subsidiaries after the Initial Issuance
Date.




     (6) any purchase, redemption, defeasance, retirement or other acquisition of
Indebtedness that is subordinated in right of payment to the Notes or a Subsidiary
Guarantee pursuant to the provisions of such Indebtedness in the event of a Change
of Control or an Asset Sale, in each case plus accrued and unpaid interest thereon,
but only if:




     (a) in the case of a Change of Control, the Company has first complied
with and fully satisfied its obligations under Section 4.16; or




     (b) in the case of an Asset Sale, the Company has complied with and
fully satisfied its obligations in accordance with Section 4.12;




     (7) the repurchase, redemption or other acquisition for value of Equity
Interests of the Company or any Restricted Subsidiary of the Company representing
fractional shares of such Equity Interests in connection with a merger or
consolidation involving the Company or such Restricted Subsidiary or any other
transaction permitted by this Indenture;




     (8) the repurchase, redemption or other acquisition of Equity Interests deemed
to occur upon the exercise or conversion of stock options, warrants or other
convertible securities if such Equity Interests represent a portion of the exercise
or conversion price thereof;




     (9) the defeasance, repurchase, redemption or other acquisition or retirement
for value of (a) any Equity Interests of the Company or any Restricted Subsidiary of
the Company held by any current or former officers, directors or employees of the
Company or any of its Restricted Subsidiaries in connection with the exercise or
vesting of any equity compensation (including, without limitation, stock options,
restricted stock and phantom stock) in order to satisfy any tax withholding
obligation with respect to such exercise or vesting or (b) to the extent otherwise
constituting a Restricted Payment, any rights under any cash and/or equity-settled
equity stock appreciation agreement or plan of the Company or any Restricted
Subsidiary;



54









 






     (10) any payments in connection with a consolidation, merger or transfer of
assets in connection with a transaction that is not prohibited by this Indenture not
to exceed $25.0 million in the aggregate after the Initial Issuance Date;




     (11) the payment of any dividends or distributions by the Company to the
holders of its Disqualified Stock or preferred stock; provided that such
Disqualified Stock or preferred stock is issued on or after the Initial Issuance
Date in accordance with the first paragraph of Section 4.11;




     (12) the declaration and payment of distributions effecting “poison pill”
rights plans provided that any securities or rights so distributed have a nominal
Fair Market Value at the time of declaration;




     (13) (i) a capital contribution to Carrizo UK Huntington Ltd. of the North Sea
Properties, (ii) cash capital contributions to, and funding of expenses for the
benefit of, Carrizo UK Huntington Ltd. in an amount not to exceed $50 million and
(iii) a guarantee to fund such capital contributions; or




     (14) so long as no Default (other than a Reporting Default) or Event of Default
shall have occurred and be continuing or would be caused thereby, other Restricted
Payments in an aggregate amount not to exceed $25.0 million at any time outstanding
since the Initial Issuance Date (after giving effect to any dividends, interest
payments, return of capital and subsequent reduction in the amount of any
Investments made pursuant to this clause as a result of the repayment or other
disposition thereof, in an amount not to exceed the amount of such Investments
previously made pursuant to this clause); provided, however, that if any Investment
pursuant to this clause (14) is made in any Person that is not a Restricted
Subsidiary of the Company at the date of the making of such Investment and such
Person becomes a Restricted Subsidiary of the Company after such date, such
Investment shall thereafter be deemed to have been made pursuant to clause (1) of
the definition of “Permitted Investments” and shall cease to have been made pursuant
to this clause (14) for so long as such Person continues to be a Restricted
Subsidiary.




     The amount of all Restricted Payments (other than cash) will be the Fair Market Value
on the date of the Restricted Payment of the asset(s) or securities proposed to be
transferred or issued by the Company or any of its Restricted Subsidiaries, as the case may
be, pursuant to the Restricted Payment. The Fair Market Value of any assets or securities
that are required to be valued by this Section 4.09 will be determined, in the case of
amounts under $20.0 million, by an officer of the Company and, in the case of amounts over
$20.0 million, by the Board of Directors of the Company, whose determination shall be
evidenced by a Board Resolution. For purposes of determining compliance with this Section
4.09, in the event that a Restricted Payment meets the criteria of more than one of the
categories of Restricted Payments described in the preceding clauses (1) — (14) or as a
Permitted Investment, the Company will be permitted to divide or classify (or later divide,
classify or reclassify in whole or in part in



55









 







its sole discretion) such Restricted Payment in any manner that complies with this Section
4.09.




     Section 4.10 Limitation on Dividend and Other Payment Restrictions Affecting
Subsidiaries.




     The Company will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, create or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any Restricted Subsidiary of the Company to:




     (1) pay dividends or make any other distributions on its Capital Stock to the
Company or any of its Restricted Subsidiaries, or pay any Indebtedness or other
obligations owed to the Company or any of its Restricted Subsidiaries;




     (2) make loans or advances to the Company or any of its Restricted
Subsidiaries; or




     (3) sell, lease or transfer any of its assets to the Company or any of its
Restricted Subsidiaries.




     However, the preceding restrictions of this Section 4.10 will not apply to encumbrances
or restrictions existing under or by reason of:




     (1) agreements (including in respect of any Credit Facilities) as in effect on
the Initial Issuance Date and any amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacements or refinancings of those agreements
(or the agreements referred to in this clause (1)) or the Indebtedness to which
those agreements (or the agreements referred to in this clause (1)) relate, provided
that the amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings are no more restrictive, taken as a whole,
with respect to such dividend, distribution and other payment restrictions than
those contained in those agreements on the Initial Issuance Date, as determined by
the Board of Directors of the Company in its reasonable and good faith judgment;




     (2) this Indenture, the Notes and the Subsidiary Guarantees;




     (3) Applicable Law or similar restriction;




     (4) any agreement or instrument with respect to a Restricted Subsidiary that is
not a Restricted Subsidiary of the Company on the Initial Issuance Date, in
existence at the time such Person becomes a Restricted Subsidiary of the Company and
not incurred in connection with, or in contemplation of, such Person becoming a
Restricted Subsidiary; provided that such encumbrances and restrictions are not
applicable to the Company or any Restricted Subsidiary or the assets of the Company
or any Restricted Subsidiary other than such Subsidiary which is becoming a
Restricted Subsidiary;



56









 






     (5) any agreement or instrument governing any Permitted Acquisition
Indebtedness, so long as such agreement or instrument (A) was not entered into in
contemplation of the acquisition, merger or consolidation transaction related
thereto, and (B) is not applicable to any Person, or the assets of any Person, other
than the Person, or the assets or Subsidiaries of the Person, subject to such
acquisition, merger or consolidation, so long as the agreement containing such
restriction does not violate any other provision of the Indenture;




     (6) instruments governing Indebtedness of the Company or any of the Subsidiary
Guarantors permitted to be incurred pursuant to an agreement entered into subsequent
to the Initial Issuance Date in accordance with Section 4.11; provided that the
provisions relating to such encumbrance or restriction contained in such instruments
are not materially more restrictive, taken as a whole, than the provisions contained
in the Credit Agreement and in this Indenture as in effect on the Initial Issuance
Date, as determined by the Board of Directors of the Company in its reasonable and
good faith judgment;




     (7) (i) customary non-assignment provisions in Hydrocarbon purchase and sale or
exchange agreements, joint operating agreements, or similar operational agreements
or in licenses or leases, or (ii) other encumbrances or restrictions in agreements
or instruments relating to specific assets or property that restrict generally the
transfers of such assets or property, provided, however, that such other
encumbrances or restrictions do not materially impair the ability of the Company to
make scheduled payments on the Notes when due in each case entered into in the
ordinary course of business or customary in the Oil and Gas Business;




     (8) Capital Lease Obligations, mortgage financings or purchase money
obligations, in each case for property acquired in the ordinary course of business
or which is customary in the Oil and Gas Business that impose restrictions on that
property purchased or leased of the nature described in clause (3) of the preceding
paragraph;




     (9) any agreement for the sale or other disposition of a Restricted Subsidiary
of the Company that restricts distributions by that Restricted Subsidiary pending
its sale or other disposition;




     (10) Permitted Refinancing Indebtedness, provided that the restrictions
contained in the agreements governing such Permitted Refinancing Indebtedness are
not materially more restrictive, taken as a whole, than those contained in the
agreements governing the Indebtedness being refinanced, as determined by the Board
of Directors of the Company in its reasonable and good faith judgment;




     (11) Liens securing Indebtedness otherwise permitted to be incurred under the
provisions of Section 4.14 that limit the right of the debtor to dispose of the
assets subject to such Liens;



57









 






     (12) provisions limiting the disposition or distribution of assets or property
in joint venture agreements, asset sale agreements, stock sale agreements and other
similar agreements entered into (a) in the ordinary course of business or which are
customary in the Oil and Gas Business, or (b) with the approval of the Company’s
Board of Directors, which limitations are applicable only to the assets that are the
subject of such agreements;




     (13) any agreement or instrument relating to any assets acquired after the
Initial Issuance Date, so long as such encumbrance or restriction relates only to
the assets so acquired and is not and was not created in anticipation of such
acquisition;




     (14) restrictions on cash, Cash Equivalents or other deposits or net worth
imposed by customers or lessors under contracts or leases entered into in the
ordinary course of business or which are customary in the Oil and Gas Business;




     (15) customary encumbrances and restrictions contained in agreements of the
types described in the definition of “Permitted Business Investments”;




     (16) Hedging Contracts permitted from time to time under this Indenture;




     (17) the issuance of preferred securities by a Restricted Subsidiary of the
Company or the payment of dividends thereon in accordance with the terms thereof;
provided that issuance of such preferred securities is permitted pursuant to Section
4.11 and the terms of such preferred securities do not expressly restrict the
ability of a Restricted Subsidiary of the Company to pay dividends or make any other
distributions on its Equity Interests (other than requirements to pay dividends or
liquidation preferences on such preferred securities prior to paying any dividends
or making any other distributions on such other Equity Interests); and




     (18) any Permitted Investment.




     Section 4.11 Limitation on Incurrence of Indebtedness and Issuance of Preferred Stock.




     The Company will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly
or indirectly liable, contingently or otherwise, with respect to (collectively, “incur”) any
Indebtedness, the Company will not issue any Disqualified Stock, and the Company will not
permit any of its Restricted Subsidiaries to issue any Disqualified Stock or preferred
securities; provided, however, that the Company and any of the Subsidiary Guarantors may
incur Indebtedness and the Company may issue Disqualified Stock and any Subsidiary Guarantor
may issue Disqualified Stock or preferred securities, if the Fixed Charge Coverage Ratio for
the Company’s most recently ended four full fiscal quarters for which internal financial
statements are available immediately preceding the date on



58









 







which such additional Indebtedness is incurred or such preferred securities or Disqualified
Stock is or are issued, as the case may be, would have been at least 2.50 to 1.0, determined
on a pro forma basis (including a pro forma application of the net proceeds therefrom), as
if the additional Indebtedness had been incurred or such preferred securities or
Disqualified Stock had been issued, as the case may be, at the beginning of such
four-quarter period.




     The first paragraph of this Section 4.11 will not prohibit the incurrence of any of the
following items of Indebtedness or the issuance of any Disqualified Stock or any preferred
securities described below (collectively, “Permitted Debt”):




     (1) the incurrence by the Company or any of the Subsidiary Guarantors of
additional Indebtedness (including letters of credit) under one or more Credit
Facilities, provided that, after giving effect to any such incurrence, the aggregate
principal amount of all Indebtedness outstanding under the Company’s and its
Restricted Subsidiaries’ Credit Facilities incurred under this clause (1) (with
letters of credit being deemed to have a principal amount equal to the maximum
potential liability of the Company and its Subsidiaries thereunder) does not exceed
the greater of (a) $600 million and (b) an amount equal to the sum of $250 million
plus 35.0% of the Company’s Adjusted Consolidated Net Tangible Assets determined as
of the date of such incurrence;




     (2) the incurrence by the Company or its Restricted Subsidiaries of the
Existing Indebtedness not otherwise referred to in this definition of “Permitted
Debt”;




     (3) the incurrence by the Company and the Subsidiary Guarantors of Indebtedness
represented by (a) the Notes issued and sold on the Initial Issuance Date (excluding
any Additional Notes) and the related Subsidiary Guarantees to be issued on the
Initial Issuance Date and (b) the Exchange Notes and the related Subsidiary
Guarantees to be issued pursuant to any Registration Rights Agreement;




     (4) the incurrence by the Company or any of its Restricted Subsidiaries of
Indebtedness represented by Capital Lease Obligations, mortgage financings or
purchase money obligations, in each case incurred for the purpose of financing all
or any part of the purchase price or cost of design, installation, repair,
replacement, construction or improvement of property, plant or equipment used in the
business of the Company or such Restricted Subsidiary (whether through the direct
purchase of such assets or the Capital Stock of any Person owning such assets (but
no other material assets)) and related financing costs, and Attributable Debt in
respect of Sale Leaseback Transactions, including all Permitted Refinancing
Indebtedness incurred to extend, refinance, renew, replace, defease or refund any
Indebtedness incurred pursuant to this clause (4), provided that after giving effect
to any such incurrence, the aggregate principal amount of all Indebtedness incurred
pursuant to this clause (4) and then outstanding does not



59









 







exceed the greater of (a) $25.0 million and (b) 2.5% of the Company’s Adjusted
Consolidated Net Tangible Assets determined as of the date of such incurrence;




     (5) the incurrence or issuance by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net
proceeds of which shall be used to extend, refinance, renew, replace, defease,
discharge, refund or otherwise retire for value, in whole or in part, Indebtedness
of the Company or any of its Restricted Subsidiaries (other than intercompany
Indebtedness) or Disqualified Stock of the Company, in each case that was permitted
by this Indenture to be incurred pursuant to the first paragraph of this Section
4.11 or clauses (2), (3), (5) and (12) of this paragraph;




     (6) the incurrence by the Company or any of its Restricted Subsidiaries of
intercompany Indebtedness between or among any of the Company and any of its
Restricted Subsidiaries; provided, however, that:




     (a) if the Company is the obligor on such Indebtedness and a Subsidiary
Guarantor is not the obligee, such Indebtedness must be expressly
subordinated to the prior payment in full in cash of all Obligations with
respect to the Notes, or if a Subsidiary Guarantor is the obligor on such
Indebtedness and neither the Company nor another Subsidiary Guarantor is the
obligee, such Indebtedness must be expressly subordinated to the prior
payment in full in cash of all Obligations with respect to the Subsidiary
Guarantee of such Subsidiary Guarantor; and




     (b) (i) any subsequent issuance or transfer of Equity Interests that
results in any such Indebtedness being held by a Person other than the
Company or a Restricted Subsidiary of the Company and (ii) any sale or other
transfer of any such Indebtedness to a Person that is neither the Company
nor a Restricted Subsidiary of the Company will be deemed, in each case, to
constitute an incurrence (as of the date of such issuance, sale or transfer)
of such Indebtedness by the Company or such Restricted Subsidiary, as the
case may be, that was not permitted by this clause (6);




     (7) the incurrence by the Company or any of its Restricted Subsidiaries of
obligations under Hedging Contracts;




     (8) the guarantee by the Company or any of its Restricted Subsidiaries of
Indebtedness of the Company or any of its Restricted Subsidiaries that was permitted
to be incurred by another provision of this Section 4.11;




     (9) the incurrence by the Company or any of its Restricted Subsidiaries of
Indebtedness relating to net gas balancing positions arising in the ordinary course
of business and consistent with past practice;




     (10) the incurrence by the Company or any of its Restricted Subsidiaries of
Indebtedness in respect of bid, performance, surety and similar bonds issued for the
account of the Company and any of its Restricted



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Subsidiaries in the ordinary course of business or which are customary in the Oil
and Gas Business, including guarantees and obligations of the Company or any of its
Restricted Subsidiaries with respect to letters of credit supporting such
obligations (in each case other than an obligation for money borrowed);




     (11) the issuance by any of the Company’s Restricted Subsidiaries to the
Company or to any of its Restricted Subsidiaries of any preferred securities;
provided, however, that:




     (a) any subsequent issuance or transfer of Equity Interests that
results in any such preferred securities being held by a Person other than
the Company or a Restricted Subsidiary of the Company; and




     (b) any sale or other transfer of any such preferred securities to a
Person that is not either the Company or a Restricted Subsidiary of the
Company shall be deemed, in each case, to constitute an issuance (as of the
date of such issuance, sale or transfer) of such preferred securities by
such Restricted Subsidiary that was not permitted by this clause (11);




     (12) Permitted Acquisition Indebtedness;




     (13) the incurrence by the Company or its Restricted Subsidiaries of
Indebtedness arising from the honoring by a bank or other financial institution of a
check, draft or similar instrument inadvertently drawn against insufficient funds in
the ordinary course of business;




     (14) the incurrence by the Company or its Restricted Subsidiaries of
Indebtedness consisting of the financing of insurance premiums in customary amounts
consistent with the operations and business of the Company and its Restricted
Subsidiaries;




     (15) accounts payable or other obligations of the Company or any of its
Restricted Subsidiaries to trade creditors created or assumed by the Company or such
Restricted Subsidiary in the ordinary course of business or which is customary in
the Oil and Gas Business in connection with the obtaining of goods or services;




     (16) the incurrence by the Company or any of its Restricted Subsidiaries of
Indebtedness arising from agreements of the Company or any Restricted Subsidiary of
the Company providing for indemnification, adjustment of purchase price, earn outs,
or similar obligations, in each case, incurred or assumed in connection with the
disposition or acquisition of any business, assets or Capital Stock of a Subsidiary
in a transaction permitted by this Indenture, other than guarantees of Indebtedness
incurred or assumed by any Person acquiring all or any portion of such business,
assets or Subsidiary for the purpose of financing such acquisition;



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     (17) the guarantee by the Company described in clause (13) of Section 4.09; and




     (18) the incurrence by the Company or any of its Restricted Subsidiaries of
additional Indebtedness or the issuance by the Company of additional Disqualified
Stock or the issuance by any Restricted Subsidiary of preferred securities, provided
that, after giving effect to any such incurrence or issuance, the aggregate
principal amount of all Indebtedness, Disqualified Stock and preferred securities
incurred or issued under this clause (18) and then outstanding does not exceed the
greater of (a) $25.0 million and (b) 2.5% of the Company’s Adjusted Consolidated Net
Tangible Assets determined as of the date of such incurrence or issuance.




     For purposes of determining compliance with this Section 4.11, in the event that an
item of Indebtedness or Disqualified Stock or preferred securities meets the criteria of
more than one of the categories of Permitted Debt described in clauses (1) through (18)
above, or is entitled to be incurred or issued pursuant to the first paragraph of this
Section 4.11, the Company will be permitted to divide and classify (or later classify,
reclassify or re-divide in whole or in part in its sole discretion) such item of
Indebtedness or Disqualified Stock or preferred securities in any manner that complies with
this Section 4.11, provided that any Indebtedness under a Credit Facility that was incurred
on or prior to, and outstanding on the Initial Issuance Date shall be deemed to have been
initially incurred on the Initial Issuance Date pursuant to clause (1) of the definition of
“Permitted Debt” rather than the first paragraph of this Section 4.11. For purposes of
determining any particular amount of Indebtedness under this covenant, (i) guarantees of, or
obligations in respect of letters of credit relating to, Indebtedness otherwise included in
the determination of such amount shall not also be included except to the extent that such
Indebtedness exceeds such guarantee or letter of credit and (ii) if obligations in respect
of letters of credit are incurred pursuant to a Credit Facility and are being treated as
incurred pursuant to clause (1) of the definition of “Permitted Debt” and the letters of
credit relate to other Indebtedness, then such other Indebtedness shall not be included
except to the extent that such Indebtedness exceeds such letter of credit.




     The accrual of interest, accrual of dividends, the accretion or amortization of
original issue discount, the payment of interest on any Indebtedness in the form of
additional Indebtedness, and the payment of dividends on Disqualified Stock or preferred
securities in the form of additional shares of Disqualified Stock or preferred securities
will not be deemed to be an incurrence of Indebtedness or an issuance of Disqualified Stock
or preferred securities for purposes of this Section 4.11, provided, in each such case, that
the amount thereof is included in Fixed Charges of the Company as accrued.




     For purposes of determining compliance with any U.S. dollar-denominated restriction on
the incurrence of Indebtedness, the U.S. dollar-equivalent principal amount of Indebtedness
denominated in a foreign currency will be calculated based on the relevant currency exchange
rate in effect on the date the Indebtedness was incurred, in the case of term Indebtedness,
or first committed, in the case of revolving credit Indebtedness; provided that if such
Indebtedness is incurred to refinance other



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Indebtedness denominated in a foreign currency, and the refinancing would cause the
applicable U.S. dollar-dominated restriction to be exceeded if calculated at the relevant
currency exchange rate in effect on the date of the refinancing, such U.S. dollar-dominated
restriction shall be deemed not to have been exceeded so long as the principal amount of
such refinancing Indebtedness does not exceed the principal amount of such Indebtedness
being refinanced (plus all accrued and unpaid interest on such Indebtedness, and the amount
of all fees, expenses and premiums incurred in connection therewith). Notwithstanding any
other provision of this Section 4.11, the maximum amount of Indebtedness that the Company or
any Restricted Subsidiary may incur pursuant to this Section 4.11 shall not be deemed to be
exceeded solely as a result of fluctuations in the exchange rate of currencies. The
principal amount of any Indebtedness incurred to refinance other Indebtedness, if incurred
in a different currency from the Indebtedness being refinanced, will be calculated based on
the currency exchange rate applicable to the currencies in which the refinancing
Indebtedness is denominated that is in effect on the date of such refinancing.




     Section 4.12 Limitation on Asset Sales.




     The Company will not, and will not permit any of its Restricted Subsidiaries to,
consummate an Asset Sale unless:




     (1) the Company (or the Restricted Subsidiary, as the case may be) receives
consideration (including by way of relief from, or any Person assuming
responsibilities for, any liabilities, contingent or otherwise), as determined (on
the date of contractually agreeing to such Asset Sale) in good faith by senior
management of the Company or, if the consideration with respect to such Asset Sale
exceeds $25 million, the Board of Directors of the Company, at least equal to the
Fair Market Value of the assets or Equity Interest issued or sold or otherwise
disposed of; and




     (2) at least 75% of the aggregate consideration to be received by the Company
and its Restricted Subsidiaries in such Asset Sale (determined on the date of
contractually agreeing to such Asset Sale) is in the form of cash or Cash
Equivalents. For purposes of this provision, each of the following will be deemed
to be cash:




     (a) any liabilities, as shown on the Company’s or such Restricted
Subsidiary’s most recent balance sheet, of the Company or any Restricted
Subsidiary (other than contingent liabilities and liabilities that are by
their terms subordinated in right of payment to the Notes or any Subsidiary
Guarantee) that are assumed by the transferee of any such assets pursuant to
a customary novation agreement that releases the Company or such Restricted
Subsidiary from further liability;




     (b) any securities, notes or other obligations received by the Company
or any such Restricted Subsidiary from such transferee that are, within 180
days after the Asset Sale, converted by the Company or such



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Subsidiary into cash or Cash Equivalents, to the extent of the cash received
in that conversion;




     (c) accounts receivable of a business retained by the Company or any of
its Restricted Subsidiaries, as the case may be, following the sale of such
business, provided that such accounts receivable (i) are not past due more
than 90 days and (ii) do not have a payment date greater than 120 days from
the date of the invoices creating such accounts receivable; and




     (d) solely in the case of any Asset Sale of Production Facility or
Pipeline Assets, the Company or the Restricted Subsidiary receives Permitted
MLP Securities;




provided that in the case of any Asset Sale pursuant to a condemnation,
appropriation or similar taking, including by deed in lieu of condemnation, such
Asset Sale shall not be required to satisfy the requirements of items (1) and (2)
above. Notwithstanding the preceding, the 75% limitation referred to above shall be
deemed satisfied with respect to any Asset Sale in which the cash or Cash
Equivalents portion of the consideration received therefrom, determined in
accordance with the preceding provision on an after-tax basis, is equal to or
greater than what the after-tax proceeds would have been had such Asset Sale
complied with the aforementioned 75% limitation.




     Within 365 days after the receipt of any Net Proceeds from an Asset Sale, the Company
(or the applicable Restricted Subsidiary, as the case may be) may apply those Net Proceeds
at its option to any combination of the following:




     (1) to prepay, repay, redeem, defease or repurchase Senior Debt;




     (2) to invest in or acquire Additional Assets; or




     (3) to make capital expenditures in respect of the Company’s or its Restricted
Subsidiaries’ Oil and Gas Business.




     The requirement of clause (2) or (3) of the preceding paragraph shall be deemed to be
satisfied if a bona fide binding contract committing to make the investment, acquisition or
expenditure referred to therein is entered into by the Company or any of its Restricted
Subsidiaries with a Person other than an Affiliate of the Company within the time period
specified in the preceding paragraph and such Net Proceeds are subsequently applied in
accordance with such contract within six months following the date such agreement is entered
into.




     Pending the final application of any Net Proceeds, the Company or any Restricted
Subsidiary of the Company may invest the Net Proceeds in any manner that is not prohibited
by this Indenture. Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the preceding paragraph will constitute “Excess Proceeds.”



64









 






     On the 366th day after an Asset Sale (or, at the Company’s option, any earlier date),
if the aggregate amount of Excess Proceeds then exceeds $20.0 million, the Company will make
an Asset Sale Offer to all Holders of Notes, and to all holders of Pari Passu Indebtedness
then outstanding, to purchase the maximum principal amount of Notes and such Pari Passu
Indebtedness that may be purchased out of the Excess Proceeds. The offer price in any Asset
Sale Offer will be equal to 100% of principal amount plus accrued and unpaid interest and
Additional Interest, if any, thereon to the Settlement Date, subject to the right of Holders
of record on the relevant record date to receive interest due on an interest payment date
that is on or prior to the Settlement Date, and will be payable in cash. If any Excess
Proceeds remain after consummation of an Asset Sale Offer, the Company may use those Excess
Proceeds for any purpose not otherwise prohibited by this Indenture. If the aggregate
principal amount of Notes and Pari Passu Indebtedness tendered into such Asset Sale Offer
exceeds the amount of Excess Proceeds, the Trustee will select the Notes and such Pari Passu
Indebtedness to be purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Trustee so that only Notes in denominations of $2,000, or integral
multiples of $1,000 in excess of $2,000, shall be purchased). Upon surrender of a Note that
is repurchased in part, the Company shall issue in the name of the applicable Holder and the
Trustee shall authenticate for such Holder at the expense of the Company a new Note equal in
principal amount to the non-repurchased portion of the Note surrendered. Upon completion of
each Asset Sale Offer, the amount of Excess Proceeds will be reset at zero.




     The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and
any other securities laws and regulations thereunder to the extent those laws and
regulations are applicable in connection with each repurchase of Notes pursuant to an Asset
Sale Offer. To the extent that the provisions of any securities laws or regulations
conflict with the provisions of this Section 4.12, the Company will comply with the
applicable securities laws and regulations and will not be deemed to have breached its
obligations under such provisions by virtue of such compliance.




     Prior to complying with the provisions of this Section 4.12, but in any event no later
than the date of the Asset Sale Offer, the Company or any Subsidiary Guarantor must either
repay all of its other outstanding Senior Debt or obtain the requisite consents, if any,
under all agreements governing such Senior Debt to permit the repurchase of Notes required
by the provisions of this Section 4.12.




     Section 4.13 Limitation on Transactions with Affiliates.




     The Company will not, and will not permit any of its Restricted Subsidiaries to, make
any payment to, or sell, lease, transfer or otherwise dispose of any of its assets to, or
purchase any assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit of, any
Affiliate of the Company (each, an “Affiliate Transaction”), unless:




     (1) the Affiliate Transaction is on terms that are not materially less
favorable to the Company or the relevant Restricted Subsidiary than those that would
have been obtained in a comparable transaction by the Company or such



65









 







Restricted Subsidiary with an unrelated Person or, if in the good faith judgment of
the Company’s Board of Directors, no comparable transaction is available with which
to compare such Affiliate Transaction, such Affiliate Transaction is otherwise fair
to the Company or the relevant Restricted Subsidiary from a financial point of view;
and




     (2) the Company delivers to the Trustee:




     (a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration to or from an
Affiliate in excess of $15.0 million, an Officers’ Certificate certifying
that such Affiliate Transaction complies with this Section 4.13; and




     (b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration to or from an
Affiliate in excess of $25.0 million, a resolution of the Board of Directors
of the Company set forth in an Officers’ Certificate certifying that such
Affiliate Transaction complies with this Section 4.13 and that such
Affiliate Transaction has been approved by a majority of the disinterested
members of the Board of Directors of the Company.




     The following items will not be deemed to be Affiliate Transactions and, therefore,
will not be subject to the provisions of the prior paragraph of this Section 4.13:




     (1) any employment agreement or arrangement, equity award, equity option or
cash and/or equity settled equity appreciation agreement or plan, employee benefit
plan, officer or director indemnification agreement, severance agreement, consulting
agreement or other compensation plan or arrangement entered into by the Company or
any of its Restricted Subsidiaries in the ordinary course of business or which is
customary in the Oil and Gas Business, and payments, awards, grants or issuances of
securities pursuant thereto;




     (2) transactions between or among any of the Company and its Restricted
Subsidiaries (or any entity that becomes a Restricted Subsidiary as a result of such
transaction);




     (3) transactions with a Person (other than an Unrestricted Subsidiary of the
Company) that is an Affiliate of the Company solely because the Company owns,
directly or indirectly, an Equity Interest in, or otherwise controls, such Person
and/or has nominated or appointed a person to the Board of Directors of that Person;




     (4) customary compensation, indemnification and other benefits made available
to officers, directors, employees or consultants of the Company or a Restricted
Subsidiary or Affiliate of the Company, including reimbursement or advancement of
out-of-pocket expenses and provisions of officers’ and directors’ liability
insurance;



66









 






     (5) sales of Equity Interests (other than Disqualified Stock) to, or receipt of
capital contributions from, Affiliates of the Company and any dividend or
distribution payable in Equity Interests (other than Disqualified Stock);




     (6) any Permitted Investments or Restricted Payments that are permitted by
Section 4.09;




     (7) transactions between the Company or any of its Restricted Subsidiaries and
any Person that would not otherwise constitute an Affiliate Transaction except for
the fact that one director of such other Person is also a director of the Company or
such Restricted Subsidiary, as applicable; provided that such director abstains from
voting as a director of the Company or such Restricted Subsidiary, as applicable, on
any matter involving such other Person;




     (8) the existence of, and the performance of obligations of the Company or any
of its Restricted Subsidiaries under the terms of, any written agreement to which
the Company or any of its Restricted Subsidiaries is a party on the Initial Issuance
Date, as such agreements may be amended, modified, supplemented or replaced from
time to time; provided, however, that any amendment, modification, supplement or
replacement entered into after the Initial Issuance Date will be permitted to the
extent that its terms are not materially more disadvantageous, taken as a whole, to
the Holders of the Notes than the terms of the agreements in effect on the Initial
Issuance Date (as conclusively evidenced by a Board Resolution);




     (9) any transaction in which the Company or any of its Restricted Subsidiaries,
as the case may be, delivers to the Trustee an opinion from an accounting, appraisal
or investment banking firm of national standing stating that such transaction is
fair to the Company or such Restricted Subsidiary from a financial point of view or
that such transaction meets the requirements of clause (1) of this Section 4.13;




     (10) (a) guarantees by the Company or any of its Restricted Subsidiaries of
performance of obligations of the Company’s Unrestricted Subsidiaries in the
ordinary course of business or which is customary in the Oil and Gas Business, and
(b) pledges by the Company or any Restricted Subsidiary of the Company of Equity
Interests in Unrestricted Subsidiaries for the benefit of lenders or other creditors
of the Company’s Unrestricted Subsidiaries;




     (11) any Affiliate Transaction with a Person in its capacity as a holder of
Indebtedness or Capital Stock of the Company or any Restricted Subsidiary of the
Company if such Person is treated no more favorably than the other holders of
Indebtedness or Capital Stock of the Company or such Restricted Subsidiary;




     (12) transactions with joint venture partners, customers, clients, suppliers or
purchasers or sellers of goods or services, or lessors or lessees of property, in
each case in the ordinary course of business or which is customary in



67









 







the Oil and Gas Business and otherwise in compliance with the terms of this
Indenture similar to those contained in similar contracts entered into by the
Company or any Restricted Subsidiary and third parties, or if neither the Company
nor any Restricted Subsidiary has entered into a similar contract with a third
party, which are, in the aggregate (taking into account all the costs and benefits
associated with such transactions), not materially less favorable to the Company and
its Restricted Subsidiaries than those that would have been obtained in a comparable
transaction by the Company or such Restricted Subsidiary with an unrelated Person,
in the good faith determination of the Company’s Board of Directors or any executive
officer of the Company involved in or otherwise familiar with such transaction;




     (13) transactions entered into by a Person prior to the time such Person
becomes a Subsidiary of the Company or is merged or consolidated into the Company or
a Subsidiary of the Company (provided such transaction is not entered into in
contemplation of such event);




     (14) dividends and distributions to the Company and its Restricted Subsidiaries
by any Unrestricted Subsidiary or Joint Venture;




     (15) transactions with Avista or any of its Subsidiaries entered into in
connection with the Avista Marcellus Joint Venture; provided such transactions are
on terms that are not materially less favorable, taken as a whole, to the Company or
the relevant Restricted Subsidiary than those that would have been obtained in a
comparable transaction by the Company or such Restricted Subsidiary with an
unrelated Person; and




     (16) arrangements relating to sale of the Company’s interests in Pinnacle Gas
Resources, Inc. or other management of the Company’s investment in that company;
provided that such arrangements are on terms that are not materially less favorable,
taken as a whole, to the Company or the relevant Restricted Subsidiary than those
that would have been obtained in a comparable transaction by the Company or such
Restricted Subsidiary with an unrelated Person.




     Section 4.14 Limitation on Liens.




     The Company will not, and will not permit any of its Restricted Subsidiaries to,
create, incur, assume or otherwise cause or suffer to exist or become effective any Lien of
any kind (other than Permitted Liens) upon any of its assets (whether now owned or hereafter
acquired), securing Indebtedness, unless the Notes or the Subsidiary Guarantee of such
Restricted Subsidiary, as applicable, is secured on an equal and ratable basis with (or, in
the case of obligations subordinated in right of payment to the Notes or such Subsidiary
Guarantee, as the case may be, on a basis senior (to at least the same extent as the Notes
are senior in right of payment) to) the obligations so secured until such time as such
obligations are no longer secured by a Lien.



68









 






     Any Lien on any assets of the Company or any of its Restricted Subsidiaries created for
the benefit of the Holders of the Notes pursuant to the preceding paragraph shall provide by
its terms that such Lien shall be automatically and unconditionally released and discharged
at such time as there are no other Liens of any kind (other than Permitted Liens) on such
assets securing Indebtedness.




     Section 4.15 Additional Subsidiary Guarantees.




     If, after the Initial Issuance Date, any Restricted Subsidiary of the Company that is
not already a Subsidiary Guarantor guarantees any other Indebtedness of the Company or any
Indebtedness of any Restricted Subsidiary in excess of the De Minimis Guaranteed Amount, or
any Restricted Subsidiary, if not then a Subsidiary Guarantor, incurs any Indebtedness under
any of the Credit Facilities, then in either case that Subsidiary shall become a Subsidiary
Guarantor by executing a supplemental indenture substantially in the form of Annex A hereto
and delivering it to the Trustee within 90 days of the date on which it guaranteed or
incurred such Indebtedness, as the case may be, together with any Officers’ Certificate or
Opinion of Counsel required by Section 9.06. Notwithstanding the preceding, any Subsidiary
Guarantee of a Restricted Subsidiary that was incurred pursuant to this Section 4.15 shall
provide by its terms that it shall be automatically and unconditionally released at such
time as such Subsidiary Guarantor ceases both (x) to guarantee any other Indebtedness of the
Company and any Indebtedness of any other Restricted Subsidiary and (y) to be an obligor
with respect to any Indebtedness under any Credit Facility.




     Each Subsidiary Guarantee shall also be released in accordance with Article X.




     Section 4.16 Offer to Repurchase Upon Change of Control




     Within 30 days following the occurrence of a Change of Control, the Company shall make
an offer (a “Change of Control Offer”) to repurchase all or any part (equal to $2,000 or an
integral multiple of $1,000 in excess of $2,000) of each Holder’s Notes at a purchase price
(the “Change of Control Payment”) in cash equal to 101% of the aggregate principal amount of
Notes repurchased, plus accrued and unpaid interest and Additional Interest, if any, thereon
to the date of settlement (the “Change of Control Settlement Date”), subject to the right of
Holders of record on the relevant record date to receive interest due on an interest payment
date that is on or prior to the Change of Control Settlement Date. Within 30 days following
a Change of Control, the Company shall mail a notice of the Change of Control Offer to each
Holder and the Trustee describing the transaction or transactions that constitute the Change
of Control and stating:




     (a) that the Change of Control Offer is being made pursuant to this Section
4.16 and that all Notes validly tendered and not withdrawn pursuant to the Change of
Control Offer will be accepted for payment;



69









 






     (b) the purchase price and the purchase date, which shall be no earlier than 30
days and no later than 60 days from the date such notice is mailed (the “Change of
Control Purchase Date”);




     (c) that the Change of Control Offer will expire as of the time specified in
such notice on the Change of Control Purchase Date and that the Company shall pay
the Change of Control Purchase Price for all Notes purchased as of the Change of
Control Purchase Date promptly thereafter on the Change of Control Settlement Date;




     (d) that any Note not tendered will continue to accrue interest and Additional
Interest, if any;




     (e) that, unless the Company defaults in the payment of the Change of Control
Payment, all Notes accepted for payment pursuant to the Change of Control Offer
shall cease to accrue interest and Additional Interest, if any, after the Change of
Control Settlement Date;




     (f) that Holders electing to have any Notes purchased pursuant to a Change of
Control Offer will be required to surrender the Notes, properly endorsed for
transfer, together with the form entitled “Option of Holder to Elect Purchase” on
the reverse of the Notes completed and such customary documents as the Company may
reasonably request, to the Paying Agent at the address specified in the notice prior
to the termination of the Change of Control Offer on the Change of Control Purchase
Date;




     (g) that Holders will be entitled to withdraw their election if the Paying
Agent receives, prior to the termination of the Change of Control Offer, a telegram,
facsimile transmission or letter setting forth the name of the Holder, the principal
amount of Notes delivered for purchase, and a statement that such Holder is
withdrawing its election to have the Notes purchased; and




     (h) that Holders whose Notes are being purchased only in part will be issued
new Notes equal in principal amount to the unpurchased portion of the Notes
surrendered, which unpurchased portion must be equal to $2,000 in principal amount
or an integral multiple of $1,000 in excess of $2,000.




     If any of the Notes subject to a Change of Control Offer is in the form of a Global
Note, then the Company shall modify such notice to the extent necessary to accord with the
procedures of the Depositary applicable to repurchases. Further, the Company shall comply
with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and
regulations thereunder to the extent such laws and regulations are applicable in connection
with the repurchase of Notes as a result of a Change of Control. To the extent that the
provisions of any securities laws or regulations conflict with the provisions of this
Section 4.16, the Company will comply with the applicable securities laws and regulations
and will not be deemed to have breached its obligations under such provisions by virtue of
such compliance.



70









 






     On the Change of Control Purchase Date, the Company shall, to the extent lawful, accept
for payment all Notes or portions thereof (in integral multiples of $1,000) properly
tendered pursuant to the Change of Control Offer. Promptly thereafter on the Change of
Control Settlement Date, the Company shall:




     (i) deposit with the Paying Agent by 11:00 a.m., New York City time, an amount
equal to the Change of Control Payment in respect of all Notes or portions thereof
so tendered; and




     (ii) deliver or cause to be delivered to the Trustee the Notes so accepted
together with an Officers’ Certificate stating the aggregate principal amount of
Notes or portions of Notes being purchased by the Company.




     On the Change of Control Settlement Date, the Paying Agent shall mail to each Holder of
Notes properly tendered the Change of Control Payment for such Notes (or, if all the Notes
are then in global form, make such payment through the facilities of the Depositary) and the
Trustee shall authenticate and mail (or cause to be transferred by book entry) to each
Holder a new Note equal in principal amount to any unpurchased portion of the Notes
surrendered, if any; provided, however, that each such new Note will be in a principal
amount of $2,000 or an integral multiple of $1,000 in excess of $2,000. The Company shall
publicly announce the results of the Change of Control Offer on or as soon as practicable
after the Change of Control Settlement Date.




     Prior to complying with any of the provisions of this Section 4.16, but in any event no
later than the Change of Control Purchase Date, the Company or any Subsidiary Guarantor
shall either repay all of its other outstanding Senior Debt or obtain the requisite
consents, if any, under all agreements governing such Senior Debt to permit the repurchase
of Notes required by this Section 4.16.




     The Company shall not be required to make a Change of Control Offer following a Change
of Control if (1) a third party makes the Change of Control Offer in the manner, at the time
and otherwise in compliance with the requirements set forth in this Indenture applicable to
a Change of Control Offer made by the Company and purchases all Notes properly tendered and
not withdrawn under such Change of Control Offer or (2) notice of redemption of all Notes
has been given pursuant to Section 3.12 unless there is a default in payment of the
applicable Redemption Price.




     A Change of Control Offer may be made in advance of a Change of Control, and
conditioned upon the occurrence of such Change of Control, if a definitive agreement is in
place for such Change of Control at the time of making the Change of Control Offer.




     In the event that Holders of not less than 90% of the aggregate principal amount of the
Outstanding Notes accept a Change of Control Offer and the Company purchases all of the
Notes held by such Holders, the Company will have the right, upon not less than 30 nor more
than 60 days’ prior notice, given not more than 30 days following the purchase pursuant to
such Change of Control Offer, to redeem all of the Notes that remain Outstanding following
such purchase at a purchase price equal to the Change of



71









 







Control Payment plus, to the extent not included in the Change of Control Payment, accrued
and unpaid interest on the Notes that remain Outstanding, to the date of redemption (subject
to the right of Holders on the relevant record date to receive interest due on the relevant
interest payment date that is on or prior to such date of redemption).




     Section 4.17 No Partial Inducements.




     The Company shall not, and the Company shall not permit any of its Subsidiaries, either
directly or indirectly, to pay (or cause to be paid) any consideration, whether by way of
interest, fee or otherwise, to any Beneficial Owner or Holder of the Notes for or as an
inducement to any consent to any waiver, supplement or amendment of any terms or provisions
of this Indenture or the Notes, unless such consideration is offered to be paid (or agreed
to be paid) to all Beneficial Owners and Holders of the Notes which so consent in the time
frame set forth in the solicitation documents relating to such consent.




     Section 4.18 Designation of Restricted and Unrestricted Subsidiaries.




     The Board of Directors of the Company may designate any Restricted Subsidiary of the
Company to be an Unrestricted Subsidiary if that designation would not cause a Default. If
a Restricted Subsidiary of the Company is designated as an Unrestricted Subsidiary, the
aggregate Fair Market Value of all outstanding Investments owned by the Company and its
Restricted Subsidiaries in the Subsidiary properly designated as an Unrestricted Subsidiary
will be deemed to be an Investment made as of the time of the designation and will reduce
the amount available for Restricted Payments under the first paragraph of Section 4.09 or
represent Permitted Investments, as determined by the Company. That designation shall only
be permitted if the Investment would be permitted at that time and if the Subsidiary so
designated otherwise meets the definition of an Unrestricted Subsidiary.




     The Board of Directors of the Company may at any time designate any Unrestricted
Subsidiary of the Company to be a Restricted Subsidiary of the Company; provided that such
designation will be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of
the Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such
designation will only be permitted if (1) such Indebtedness is permitted under Section 4.11,
calculated on a pro forma basis as if such designation had occurred at the beginning of the
four-quarter reference period, and (2) no Default (other than a Reporting Default) or Event
of Default would be in existence following such designation.




     Section 4.19 Reports




     (a) Whether or not required by the SEC, so long as any Notes are Outstanding, the
Company will file with the SEC for public availability within the time periods specified in
the SEC’s rules and regulations taking into account any extension of time, deemed filing
date or safe harbor contemplated or provided for by Rule 12b-25, Rule 13a-11(c) and Rule
15d-11(c) under the Exchange Act or General Instruction I.A.3(b) of Form S-3 under the
Securities Act, and successor provisions (unless the SEC



72









 







will not accept such a filing, in which case the Company will furnish to the Trustee and,
upon its prior request, to any of the Holders of the Notes, within the time periods
specified in the SEC’s rules and regulations):




     (1) all quarterly and annual financial information with respect to the Company
and its Subsidiaries that would be required to be contained in a filing with the SEC
on Forms 10-Q and 10-K if the Company were required to file such Forms, including a
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations” and, with respect to the annual information only, a report on the annual
financial statements by the Company’s certified independent accountants; and




     (2) all current reports that would be required to be filed with the SEC on Form
8-K if the Company were required to file such reports.




     The Company will be deemed to have provided such information to the Trustee and the
Holders of the Notes if it has filed such reports or reports containing such information
with the SEC via the EDGAR filing system and such reports are publicly available.




     The Company shall at all times comply with TIA § 314(a).




     (b) For as long as the Notes remain Outstanding and are “restricted securities” within
the meaning of Rule 144(a)(3), if at any time the Company is not required to file the
reports required by this Section 4.19 with the SEC, the Company and the Subsidiary
Guarantors shall furnish to the Holders of the Notes and to securities analysts and
prospective investors in the Notes, upon their request, the information, if any, required to
be delivered pursuant to Rule 144A(d)(4) under the Securities Act. The Company will be
deemed to have provided such information to the Holders of the Notes, securities analysts
and prospective investors in the Notes if it has filed reports containing such information
with the SEC via the EDGAR filing system and such reports are publicly available.




     (c) In the event that: (1) the rules and regulations of the SEC permit the Company and
any direct or indirect parent company of the Company to report at such parent entity’s level
on a consolidated basis and such parent entity of the Company is not engaged in any business
in any material respect other than incidental to its ownership, directly or indirectly, of
the Capital Stock of the Company, or (2) any direct or indirect parent of the Company
becomes a Guarantor of the Notes, such consolidated reporting at such parent entity’s level
in a manner consistent with that described in this Section 4.19 for the Company will satisfy
this Section 4.19; provided that, such financial information is accompanied by consolidating
information that explains in reasonable detail the differences between the information
relating to such direct or indirect parent and any of its Subsidiaries other than the
Company and its Subsidiaries, on the one hand, and the information relating to the Company
and its Subsidiaries on a stand alone basis, on the other hand.



73









 






     (d) Delivery of reports, information and documents to the Trustee under this Section
4.19 is for informational purposes only and the Trustee’s receipt of the foregoing shall not
constitute constructive notice of any information contained therein or determinable from
information contained therein.



SECTION 209 Amendment to Events of Default.




     (a) Sections 6.01 and 6.02 of the Original Indenture are hereby amended and restated in their
entirety as follows with respect to the Notes:




     Section 6.01 Events of Default.




     An “Event of Default” occurs if one of the following shall have occurred and be
continuing (whatever the reason for such Event of Default and whether it shall be
involuntary or be effected by operation of law):




     (1) the Company defaults in the payment when due of interest or Additional
Interest, if any, with respect to the Notes, and such default continues for a period
of 30 days;




     (2) the Company defaults in the payment of the principal of or premium, if any,
on the Notes when due at their Stated Maturity, upon optional redemption, upon
required repurchase, upon acceleration or otherwise;




     (3) the Company fails to comply with the provisions of Section 5.01 hereof or
to consummate a purchase of Notes when required pursuant to the provisions of
Section 3.13, 4.12 or 4.16 hereof;




     (4) the Company fails to comply with the provisions of Section 4.19 for 120
days after notice to the Company by the Trustee or the Holders of at least 25% in
principal amount of the Notes then Outstanding of such failure;




     (5) the Company fails to comply with any other covenant or other agreement in
this Indenture or the Notes (including the provisions of Section 3.13, 4.12 or 4.16
to the extent not described in clause (3) of this Section 6.01) for 60 days after
notice to the Company by the Trustee or the Holders of at least 25% in principal
amount of the Notes then Outstanding of such failure;




     (6) a default occurs under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any Indebtedness
for money borrowed by the Company or any of its Restricted Subsidiaries (or the
payment of which is guaranteed by the Company or any of its Restricted
Subsidiaries), whether such Indebtedness or guarantee now exists or is created after
the Initial Issuance Date, if such default:




     (A) is caused by a failure to pay principal of, or interest or premium,
if any, on such Indebtedness prior to the expiration of any grace period
provided in such Indebtedness (a “Payment Default”); or



74









 






     (B) results in the acceleration of such Indebtedness prior to its
Stated Maturity




and, in each case, the principal amount of any such Indebtedness, together
with the principal amount of any other such Indebtedness under which there
has been a Payment Default or the maturity of which has been so accelerated,
aggregates $30.0 million or more; provided, however, that if any such
default is cured or waived or any such acceleration rescinded, or such
Indebtedness is repaid and the Notes have not been accelerated, such Event
of Default shall be automatically rescinded, so long as such rescission does
not conflict with any judgment or decree;




     (7) the Company or any of its Restricted Subsidiaries fails to pay final
judgments aggregating in excess of $30.0 million (to the extent not covered by
insurance by a reputable and creditworthy insurer as to which the insurer has not
disclaimed coverage), which judgments are not paid, discharged or stayed for a
period of 60 consecutive days;




     (8) (A) any Subsidiary Guarantee is held in any judicial proceeding to be
unenforceable or invalid or ceases for any reason to be in full force and effect or
(B) any Subsidiary Guarantor, or any Person acting on behalf of any Subsidiary
Guarantor, denies or disaffirms its obligations under its Subsidiary Guarantee,
except, in each case, by reason of the release of such Subsidiary Guarantee in
accordance with the provisions of this Indenture; and




     (9) the Company, any of the Company’s Restricted Subsidiaries that is a
Significant Subsidiary of the Company or any group of Restricted Subsidiaries of the
Company that, taken as a whole, would constitute a Significant Subsidiary of the
Company, pursuant to or within the meaning of Bankruptcy Law:




     (A) commences a voluntary case,




     (B) consents in writing to the entry of an order for relief against it
in an involuntary case,




     (C) consents in writing to the appointment of a Custodian of it or for
all or substantially all of its property,




     (D) makes a general assignment for the benefit of its creditors, or




     (E) admits in writing it generally is not paying its debts as they
become due; or




     (10) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:




75











 






     (A) is for relief against the Company, any of the Company’s
Restricted Subsidiaries that is a Significant Subsidiary of the Company or
any group of Restricted Subsidiaries of the Company that, taken as a whole,
would constitute a Significant Subsidiary of the Company, in an involuntary
case;




     (B) appoints a Custodian (x) of the Company, any of the Company’s
Restricted Subsidiaries that is a Significant Subsidiary of the Company or
any group of Restricted Subsidiaries of the Company that, taken as a whole,
would constitute a Significant Subsidiary of the Company, or (y) for all or
substantially all of the property of the Company, any of the Company’s
Restricted Subsidiaries that is a Significant Subsidiary of the Company or
any group of Restricted Subsidiaries of the Company, that, taken together,
would constitute a Significant Subsidiary of the Company; or




     (C) orders the liquidation of the Company, any of the Company’s
Restricted Subsidiaries that is a Significant Subsidiary of the Company or
any group of Restricted Subsidiaries of the Company that, taken as a whole,
would constitute a Significant Subsidiary of the Company;




     and the order or decree remains unstayed and in effect for 60 consecutive days.




     Section 6.02 Acceleration.




     If any Event of Default occurs and is continuing, the Trustee, by notice to the
Company, or the Holders of at least 25% in principal amount of the then Outstanding Notes,
by notice to the Company and the Trustee, may declare all the Notes to be due and payable
immediately. Upon any such declaration, the Notes shall become due and payable immediately,
together with all accrued and unpaid interest, Additional Interest, if any, and premium, if
any, thereon. Notwithstanding the preceding, if an Event of Default specified in clause (9)
or (10) of Section 6.01 hereof occurs with respect to the Company, any of the Company’s
Restricted Subsidiaries that is a Significant Subsidiary of the Company or any group of
Restricted Subsidiaries of the Company that, taken together, would constitute a Significant
Subsidiary of the Company, all Outstanding Notes shall become due and payable immediately
without further action or notice, together with all accrued and unpaid interest, Additional
Interest, if any, and premium, if any, thereon. The Holders of a majority in principal
amount of the then Outstanding Notes by notice to the Trustee may on behalf of all of the
Holders rescind an acceleration and its consequences if the rescission would not conflict
with any judgment or decree and if all existing Events of Default (except with respect to
nonpayment of principal, interest, premium or Additional Interest, if any, that have become
due solely because of the acceleration) have been cured or waived.



     (b) Section 6.03 of the Original Indenture is hereby amended by inserting the phrase
“(including Additional Interest)” after the word “interest” in the first sentence thereof.



76









 





     (c) Section 6.04 of the Original Indenture is hereby amended and restated in its entirety as
follows:




     Section 6.04 Waiver of Past Defaults.




     Holders of a majority in principal amount of the then Outstanding Notes by notice to
the Trustee may on behalf of the Holders of all of the Notes waive (including, without
limitation, in connection with a purchase of, or tender offer or exchange offer for, Notes)
any existing Default or Event of Default and its consequences hereunder, except a continuing
Default or Event of Default in the payment of the principal of, or interest, premium, or
Additional Interest, if any, on, the Notes. Upon any such waiver, such Default shall cease
to exist, and any Event of Default arising therefrom shall be deemed to have been cured for
every purpose of this Indenture; but no such waiver shall extend to any subsequent or other
Default or impair any right consequent thereon.



     (d) Section 6.05 of the Original Indenture is hereby amended by replacing the words “clause
(1), (2), (3) or (7) of Section 6.01” with the words “clause (1), (2), (3), (4), (5), (6), (7) or
(8) of Section 6.01” in the first sentence thereof.



SECTION 210 Guarantees.




     (a) Section 10.01(d) of the Original Indenture is amended to replace “The obligations of” at
the beginning of such section with “To the fullest extent allowed under Applicable Law, the
obligations of”.



     (b) Section 10.01(e) of the Original Indenture is amended to replace “Each of the Subsidiary
Guarantors hereby” with “To the fullest extent allowed under Applicable Law, each of the Subsidiary
Guarantors hereby”.



     (c) Section 10.04 of the Original Indenture is hereby amended and restated in its entirety as
follows with respect to the Notes:




     Section 10.04 Releases of Subsidiary Guarantees.




     Notwithstanding any other provisions of this Indenture, the Subsidiary Guarantee of a
Subsidiary Guarantor shall be released: (1) in connection with any sale or other
disposition of all or substantially all of the assets of such Subsidiary Guarantor
(including by way of merger or consolidation) to a Person that is not (either before or
after giving effect to such transaction) the Company or a Restricted Subsidiary of the
Company, if the sale or other disposition complies with Section 4.12; (2) in connection with
any sale or other disposition of all of the Capital Stock of such Subsidiary Guarantor to a
Person that is not (either before or after giving effect to such transaction) the Company or
a Restricted Subsidiary of the Company, if the sale or other disposition complies with
Section 4.12; (3) if such Subsidiary Guarantor is a Restricted Subsidiary and the Company
designates such Subsidiary Guarantor as an Unrestricted Subsidiary in accordance with
Section 4.18 of this Indenture; (4) upon legal defeasance or discharge in accordance with
Article VIII; (5) upon the liquidation or dissolution of such Subsidiary Guarantor provided
no Default or Event of Default has occurred or is continuing; (6) at



77









 







such time as such Subsidiary Guarantor ceases both (x) to guarantee any other
Indebtedness of the Company and any Indebtedness of any other Restricted Subsidiary (except
as a result of payment under any such other guarantee) and (y) to be an obligor with respect
to any Indebtedness under any Credit Facility; or (7) upon such Subsidiary Guarantor
consolidating with, merging into or transferring all of its assets to the Company or another
Subsidiary Guarantor, and as a result of, or in connection with, such transaction such
Subsidiary Guarantor dissolving or otherwise ceasing to exist.




     Upon delivery by the Company to the Trustee of an Officers’ Certificate to the effect
that any of the conditions described in the foregoing clauses (1) - (7) has occurred, the
Trustee shall execute any documents reasonably requested by the Company in order to evidence
the release of any Subsidiary Guarantor from its obligations under its Subsidiary Guarantee.
Any Subsidiary Guarantor not released from its obligations under its Subsidiary Guarantee
shall remain liable for the full amount of principal of and interest, premium, and
Additional Interest, if any, on, the Notes and for the other obligations of such Subsidiary
Guarantor under this Indenture as provided in this Article X.



     (d) Article X of the Original Indenture is hereby amended by adding the following Section
10.05 with respect to the Notes:




     Section 10.05 Subsidiary Guarantors May Consolidate, etc., on Certain Terms.




     (a) No Subsidiary Guarantor shall sell or otherwise dispose of, in one or more related
transactions, all or substantially all of its assets to, or consolidate with or merge with
or into (whether or not such Subsidiary Guarantor is the surviving Person), another Person
(other than the Company or another Subsidiary Guarantor), unless, (i) either (1) the Person
acquiring the assets in any such sale or other disposition or the Person formed by or
surviving any such consolidation or merger (if other than such Subsidiary Guarantor)
unconditionally assumes, pursuant to a supplemental indenture substantially in the form of
Annex A hereto, all the obligations of such Subsidiary Guarantor under the Notes, this
Indenture and its Subsidiary Guarantee on terms set forth herein and therein, or (2) such
transaction or series of related transactions complies with the provisions of Section 4.12,
and (ii) immediately after giving effect to such transaction or series of related
transactions, no Default or Event of Default exists.




     (b) In the case of any such consolidation or merger and upon the assumption by the
successor Person, by supplemental indenture, executed and delivered to the Trustee and
substantially in the form of Annex A hereto, of the Subsidiary Guarantee of, and compliance
with Section 10.5(a) of the Indenture by, the applicable Subsidiary Guarantor, such
successor Person shall succeed to and be substituted for such Subsidiary Guarantor with the
same effect as if it had been named herein as a Subsidiary Guarantor.



78









 





SECTION 211 Other Amendments.





     (a) The third paragraph of Section 2.08 of the Original Indenture shall be amended to
delete “(except as otherwise expressly permitted herein)” and to replace “Business Days”
with “days”.




     (b) The second paragraph of Section 4.01 of the Original Indenture shall be amended and
restated as follows:




     The Company shall pay interest (including post-petition interest in any proceeding
under any Bankruptcy Law) on overdue principal and premium (if any), from time to time on
demand at a rate that is 1.0% higher than the then applicable interest rate on the Notes to
the extent lawful; and it shall pay interest (including post petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest and any Additional
Interest (without regard to any applicable grace period) from time to time on demand at a
rate that is 1.0% higher than the then applicable interest rate on the Notes to the extent
lawful.




     (c) Clause (3) of Section 6.06 of the Original Indenture shall be amended to add “to be
incurred in compliance with such request” at the end of such clause.




     (d) Section 8.01(b) of the Original Indenture shall be amended to add the following
paragraph after the first paragraph of such Section:




     In addition, the Company shall have delivered to the Trustee an Officers’ Certificate
stating that the deposit was not made by the Company with the intent of preferring the
Holders over the other creditors of the Company or the Subsidiary Guarantors or with the
intent of defeating, hindering, delaying or defrauding creditors of the Company, the
Subsidiary Guarantors or others.




     (e) Clause (10) of Section 9.02 of the Original Indenture shall be amended to delete
“materially”.




     (f) The third paragraph of Section 9.04 of the Original Indenture shall be amended to
replace “clauses (1) through (9)” with “clauses (1) through (10)”.




     (g) The last sentence of Section 10.03 of the Original Indenture shall be amended to
replace “federal or state law” with “applicable law.”



ARTICLE
THREE




MISCELLANEOUS PROVISIONS



SECTION 301 Integral Part.




     This Fourth Supplemental Indenture constitutes an integral part of the Indenture.



79









 





SECTION 302 General Definitions.




     For all purposes of this Fourth Supplemental Indenture:



          (a) capitalized terms used herein without definition shall have the meanings
specified in the Indenture; and




          (b) the terms “herein,” “hereof,” “hereunder,” and other words of similar import
refer to this Fourth Supplemental Indenture.




SECTION 303 Adoption, Ratification and Confirmation.




     The Indenture, as supplemented and amended by this Fourth Supplemental Indenture, is in all
respects hereby adopted, ratified and confirmed.



SECTION 304 Counterparts.




     This Fourth Supplemental Indenture may be executed in any number of counterparts, each of
which when so executed shall be deemed an original; and all such counterparts shall together
constitute but one and the same instrument.



SECTION 305 Governing Law.




     THIS FOURTH SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.



80









 





     IN WITNESS WHEREOF, the parties hereto have caused this Fourth Supplemental Indenture to be
duly executed as of the day and year first written above.



	 	 	 	 	 
	 	CARRIZO OIL & GAS, INC.

 	 
	 	By:  	/s/ Paul F. Boling
 	 
	 	 	Name:  	Paul F. Boling 	 
	 	 	Title:  	Vice President and Chief Financial Officer 	 
	 
	 	BANDELIER PIPELINE HOLDING, LLC

 	 
	 	By:  	/s/ Paul F. Boling
 	 
	 	 	Name:  	Paul F. Boling 	 
	 	 	Title:  	Vice President 	 
	 
	 	CARRIZO (MARCELLUS) LLC

 	 
	 	By:  	/s/ Paul F. Boling
 	 
	 	 	Name:  	Paul F. Boling 	 
	 	 	Title:  	Vice President 	 
	 
	 	CARRIZO (MARCELLUS) WV LLC

 	 
	 	By:  	/s/ Paul F. Boling
 	 
	 	 	Name:  	Paul F. Boling 	 
	 	 	Title:  	Vice President 	 
	 
	 	CARRIZO MARCELLUS HOLDING INC.

 	 
	 	By:  	/s/ Paul F. Boling
 	 
	 	 	Name:  	Paul F. Boling 	 
	 	 	Title:  	Vice President 	 



B-1









 






	 	 	 	 	 



	 	 	 	 	 
	 	CCBM, INC.

 	 
	 	By:  	/s/ Paul F. Boling
 	 
	 	 	Name:  	Paul F. Boling 	 
	 	 	Title:  	Vice President 	 
	 
	 	CHAMA PIPELINE HOLDING LLC

 	 
	 	By:  	/s/ Paul F. Boling
 	 
	 	 	Name:  	Paul F. Boling 	 
	 	 	Title:  	Vice President 	 
	 
	 	CLLR, INC.

 	 
	 	By:  	/s/ Paul F. Boling
 	 
	 	 	Name:  	Paul F. Boling 	 
	 	 	Title:  	Vice President 	 
	 
	 	HONDO PIPELINE, INC.

 	 
	 	By:  	/s/ Paul F. Boling
 	 
	 	 	Name:  	Paul F. Boling 	 
	 	 	Title:  	Vice President 	 
	 
	 	MESCALERO PIPELINE, LLC

 	 
	 	By:  	/s/ Paul F. Boling
 	 
	 	 	Name:  	Paul F. Boling 	 
	 	 	Title:  	Vice President 	 



B-2









 






	 	 	 	 	 



	 	 	 	 	 
	 	WELLS FARGO BANK, NATIONAL ASSOCIATION, as
Trustee

 	 
	 	By:  	/s/ Patrick T. Giordano
 	 
	 	 	Name:  	Patrick T. Giordano 	 
	 	 	Title:  	Vice President 	 



B-3









 






	 	 	 	 	 



RULE 144A/REGULATION S APPENDIX




PROVISIONS RELATING TO INITIAL NOTES

AND EXCHANGE NOTES




1. Definitions





     1.1 Definitions.



     For the purposes of this Appendix the following terms shall have the meanings indicated below:



     “Depositary” means The Depository Trust Company, its nominees and their respective successors
and assigns, or such other depository institution hereinafter appointed by the Company.



     “Clearstream” means Clearstream Banking, S.A., or any successor securities clearing agency.



     “Euroclear” means Euroclear Bank S.A./N.V. or any successor securities clearing agency.



     “Exchange Notes” means (1) the 8.625% Senior Notes due 2018 issued pursuant to this Indenture
in connection with a Registered Exchange Offer pursuant to a Registration Rights Agreement and (2)
Additional Notes, if any, issued pursuant to a registration statement filed with the SEC under the
Securities Act.



     “Initial Notes” means (1) $400,000,000 aggregate principal amount of 8.625% Senior Notes due
2018 issued pursuant to this Indenture on the Initial Issuance Date, (2) Additional Notes, if any,
issued in a transaction exempt from the registration requirements of the Securities Act and (3) any
8.625% Senior Notes due 2018 issued pursuant to Section 2.3(b)(ii) hereof in exchange for any
Initial Notes.



     “Initial Purchasers” means (1) with respect to the Initial Notes issued on the Initial
Issuance Date, Credit Suisse (USA) LLC, Wells Fargo Securities, LLC and RBC Capital Markets
Corporation and (2) with respect to each issuance of Additional Notes, the Persons purchasing such
Additional Notes under the related Purchase Agreement.



     “Notes” means the Initial Notes (including any Additional Notes, if any, issued in a
transaction exempt from the registration requirements of the Securities Act) and the Exchange Notes
(including any Additional Notes, if any, issued pursuant to a registration statement filed with the
SEC under the Securities Act), treated as a single class.



     “Notes Custodian” means the custodian with respect to a Global Note (as appointed by the
Depositary), or any successor Person thereto and shall initially be the Trustee.



     “Purchase Agreement” means (1) with respect to the Initial Notes issued on the Initial
Issuance Date, the Purchase Agreement dated October 28, 2010 among the Company, the



Appendix - 1









 




Subsidiary Guarantors and the Initial Purchasers, and (2) with respect to each issuance of
Additional Notes, the purchase agreement or underwriting agreement among the Company and the
Persons purchasing or underwriting such Additional Notes.




     “QIB” means “qualified institutional buyer” as that term is defined in Rule 144A(a)(1) under
the Securities Act.



     “Registered Exchange Offer” means the offer by the Company, pursuant to a Registration Rights
Agreement, to certain Holders of Initial Notes, to issue and deliver to such Holders, in exchange
for the Initial Notes, a like aggregate principal amount of Exchange Notes registered under the
Securities Act.



     “Registration Rights Agreement” means (1) with respect to the Initial Notes issued on the
Initial Issuance Date, the Registration Rights Agreement dated as of November 2, 2010 among the
Company, the Subsidiary Guarantors and Credit Suisse (USA) LLC, Wells Fargo Securities, LLC and RBC
Capital Markets, LLC and (2) with respect to each issuance of Additional Notes issued in a
transaction exempt from the registration requirements of the Securities Act, the registration
rights agreement, if any, among the Company and one or more Persons purchasing such Additional
Notes under the related Purchase Agreement, in each case, as amended from time to time.



     “Shelf Registration Statement” means any registration statement issued by the Company in
connection with the offer and sale of Initial Notes pursuant to a Registration Rights Agreement.



     “Transfer Restricted Securities” means Notes that bear or are required to bear the legend set
forth in Section 2.3(b)(i) hereof.



     “Unrestricted Initial Notes” means any Initial Notes that are not Transfer Restricted
Securities.



     1.2 Other Definitions.



	 	 	 	 	 
	Term	 	Defined in Section:
	“Agent Members”
	 	 	2.1	(b)
	“Distribution Compliance Period”
	 	 	2.1	(b)
	“Global Note”
	 	 	2.1	(a)
	“Regulation S”
	 	 	2.1	(a)
	“Regulation S Notes”
	 	 	2.1	(a)
	“Resale Restriction Termination Date”
	 	 	2.3	(b)
	“Restricted Global Note”
	 	 	2.1	(a)
	“Restricted Period”
	 	 	2.1	(b)
	“Rule 144A”
	 	 	2.1	(a)
	“Rule 144A Notes”
	 	 	2.1	(a)






Appendix - 2









 






     2.1 The Notes.



     (a) Form and Dating. Initial Notes offered and sold to QIBs in reliance on Rule 144A
(“Rule 144A Notes”) under the Securities Act (“Rule 144A”) or in reliance on Regulation S
(“Regulation S Notes”) under the Securities Act (“Regulation S”), in each case as provided in a
Purchase Agreement, shall be issued initially in the form of one or more permanent global Notes in
definitive, fully registered form without interest coupons with the global Notes legend and
Restricted Notes legend set forth in Exhibit 1 hereto (each, unless and until becoming an
Unrestricted Initial Note in accordance with Section 2.3(b)(ii) below, a “Restricted Global Note”),
which shall be deposited on behalf of the purchasers of the Initial Notes represented thereby with
the Trustee, as custodian for the Depositary (or with such other custodian as the Depositary may
direct), and registered in the name of the Depositary or a nominee of the Depositary, duly executed
by the Company and authenticated by the Trustee as hereinafter provided. Beneficial interests in a
Restricted Global Note representing Initial Notes sold in reliance on either Rule 144A or
Regulation S may be held through Euroclear or Clearstream, as indirect participants in the
Depositary. The aggregate principal amount of the Global Notes may from time to time be increased
or decreased by adjustments made on the records of the Trustee and the Depositary or its nominee as
hereinafter provided. Exchange Notes shall be issued in global form (with the global Notes legend
set forth in Exhibit 1 hereto) or in certificated form as provided in Section 2.4 of this Appendix.
Exchange Notes issued in global form, Unrestricted Initial Notes issued in global form and
Restricted Global Notes are sometimes referred to in this Appendix as “Global Notes.”



     (b) Book-Entry Provisions. This Section 2.1(b) shall apply only to a Global Note
deposited with or on behalf of the Depositary.



     The Company shall execute and the Trustee shall, in accordance with this Section 2.1(b),
authenticate and deliver initially one or more Global Notes that (a) shall be registered in the
name of the Depositary for such Global Note or Global Notes or the nominee of such Depositary and
(b) shall be delivered by the Trustee to such Depositary or pursuant to such Depositary’s
instructions or held by the Trustee as custodian for the Depositary. If such Global Notes are
Restricted Global Notes, then separate Global Notes shall be issued to represent Rule 144A Notes
and Regulation S Notes so long as required by law or the Depositary.



     Members of, or participants in, the Depositary (“Agent Members”) shall have no rights under
this Indenture with respect to any Global Note held on their behalf by the Depositary or by the
Trustee as the custodian of the Depositary or under such Global Note, and the Company, the Trustee
and any agent of the Company or the Trustee shall be entitled to treat the Depositary as the
absolute owner of such Global Note for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee
from giving effect to any written certification, proxy or other authorization furnished by the
Depositary or impair, as between the Depositary and its Agent Members, the operation of customary
practices of such Depositary governing the exercise of the rights of a holder of a beneficial
interest in any Global Note.



     Prior to the expiration of the period through and including the 40th day after the later of
the commencement of the offering of any Initial Notes and the closing of such offering (such



Appendix - 3









 




period, the “Restricted Period”), beneficial interests in the Restricted Global Note
representing Regulation S Notes may be exchanged for beneficial interests in the Rule 144A
Restricted Global Note representing Rule 144A Notes only if (i) such exchange occurs in connection
with a transfer of the Notes pursuant to Rule 144A, (ii) the transferor first delivers to the
Trustee a written certificate (in the form of transfer provided in Exhibit 1 hereto) to the effect
that the Notes are being transferred to a Person who the transferor reasonably believes to be a QIB
within the meaning of Rule 144A and is purchasing for its own account or the account of a QIB, in
each case in a transaction meeting the requirements of Rule 144A, and (iii) the transfer is in
accordance with all applicable securities laws of the states of the United States and other
jurisdictions. After the expiration of the Restricted Period, such certification requirements
shall not apply to such transfers of beneficial interests in a Restricted Global Note representing
Regulation S Notes.




     Beneficial interests in a Restricted Global Note representing Rule 144A Notes may be
transferred to a Person who takes delivery in the form of an interest in the Restricted Global Note
representing Regulation S Notes, whether before or after the expiration of the Restricted Period,
only if the transferor first delivers to the Trustee a written certificate (in the form provided in
Exhibit 1 hereto) to the effect that such transfer is being made in accordance with Rule 903 or 904
of Regulation S or Rule 144 (if available) and that, if such transfer occurs prior to the
expiration of the Restricted Period, the interest transferred will be held immediately thereafter
through Euroclear or Clearstream.



     (c) Certificated Notes. Except as provided in Section 2.3 or 2.4, owners of
beneficial interests in Restricted Global Notes shall not be entitled to receive physical delivery
of certificated Notes. Certificated Notes shall not be exchangeable for beneficial interests in
Global Notes unless the transferor first delivers to the Trustee a written certificate (in the form
provided in Exhibit 1 hereto) to the effect that such transfer will comply with the appropriate
transfer restrictions applicable to such Notes.



     2.2 Authentication.



     The Trustee shall authenticate and deliver: (1) on the Initial Issuance Date, an aggregate
principal amount of $400,000,000 8.625% Senior Notes due 2018, (2) at any time or from time to
time, any Additional Notes for an original issue in an aggregate principal amount specified in the
written order of the Company pursuant to Section 2.04 of the Indenture and (3) at any time or from
time to time, Exchange Notes for issue only in a Registered Exchange Offer pursuant to a
Registration Rights Agreement, for a like principal amount of Initial Notes, in each case upon a
written order of the Company. Such order (x) shall specify (i) the aggregate principal amount of
the Notes to be authenticated, the date on which such Notes are to be authenticated, to whom such
Notes shall be registered and whether such Notes shall be held by the Notes Custodian or, if not,
to whom the Notes shall be delivered; (ii) whether such Notes constitute Initial Notes or Exchange
Notes; (iii) whether or not such Notes constitute Additional Notes; and (iv) if such Notes
constitute Additional Notes, the issue price, the issue date (and the corresponding date from which
interest shall accrue thereon and the first interest payment date therefor) and the CUSIP number
and any corresponding ISIN of such Additional Notes and whether such Additional Notes shall be
Transfer Restricted Securities and issued in the form of Initial Notes as set forth in Exhibit 1
hereto or shall be issued in the form of Exchange Notes as set forth in



Appendix - 4









 




Exhibit 2 hereto and (y) in the case of any issuance of Additional Notes, shall certify that
such issuance is in compliance with Section 4.11 of the Indenture. The Trustee shall also
authenticate and deliver Notes at the times and in the manner specified in Sections 2.3 and 2.4
hereof and in Sections 2.08, 2.09, 2.12, 3.07, 4.12, 4.16 or 9.05 of the Indenture.




     2.3 Transfer and Exchange.



     (a) Transfer and Exchange of Global Notes.




     (i) The transfer and exchange of Global Notes or beneficial interests therein
shall be effected through the Depositary, in accordance with the Indenture
(including applicable restrictions on transfer set forth herein, if any) and the
procedures of the Depositary therefor. A transferor of a beneficial interest in a
Global Note shall deliver to the Registrar a written order given in accordance with
the Depositary’s procedures containing information regarding the participant account
of the Depositary to be credited with a beneficial interest in the Global Note. The
Registrar shall, in accordance with such instructions instruct the Depositary to
credit to the account of the Person specified in such instructions a beneficial
interest in the Global Note and to debit the account of the Person making the
transfer the beneficial interest in the Global Note being transferred.




     (ii) Notwithstanding any other provisions of this Appendix, a Global Note may
not be transferred as a whole except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another nominee of
the Depositary or by the Depositary or any such nominee to a successor Depositary or
a nominee of such successor Depositary.




     (iii) In the event that a Restricted Global Note is exchanged for Notes in
certificated form pursuant to Section 2.4 of this Appendix, prior to the
consummation of a Registered Exchange Offer or the effectiveness of a Shelf
Registration Statement with respect to such Notes, such Notes may be exchanged only
in accordance with such procedures as are substantially consistent with the
provisions of this Section 2.3 (including the certification requirements set forth
on the reverse of the Initial Notes intended to ensure that such transfers comply
with Rule 144A or Regulation S, as the case may be) and such other procedures as may
from time to time be adopted by the Company.



     (b) Legend.




     (i) Except as permitted by the following paragraphs (ii), (iii), (iv) and (v),
each Note certificate evidencing the Restricted Global Notes (and all Notes issued
in exchange therefor or in substitution thereof) shall bear a legend in
substantially the following form:




THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS. NEITHER SUCH
NOTES NOR ANY INTEREST OR PARTICIPATION HEREIN MAY



Appendix - 5









 







BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED
OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF
ANY NOTE EVIDENCED HEREBY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT (A) IT IS A
“QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT)
OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING SUCH NOTE IN AN “OFFSHORE
TRANSACTION” PURSUANT TO RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (2)
AGREES THAT IT WILL NOT, PRIOR TO THE DATE WHICH IS ONE YEAR AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF (OR OF ANY PREDECESSOR OF SUCH NOTE) OR THE LAST DAY ON
WHICH WE OR ANY OF OUR AFFILIATES WERE THE OWNERS OF THIS SECURITY (OR ANY
PREDECESSOR OF SUCH NOTE) (THE “RESALE RESTRICTION TERMINATION DATE”), OFFER, SELL
OR OTHERWISE TRANSFER SUCH NOTE EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY THEREOF,
(B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (C)
FOR SO LONG AS THE NOTES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT (“RULE 144A”), TO A PERSON IT REASONABLY BELIEVES IS A “QUALIFIED
INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO
NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT, (E) PURSUANT TO RULE 144 UNDER THE SECURITIES
ACT OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON
TO WHOM SUCH NOTE IS TRANSFERRED PRIOR TO THE RESALE RESTRICTION TERMINATION DATE A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND, SUBJECT TO THE ISSUER’S AND THE
TRUSTEE’S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i) THAT IS (A) PURSUANT
TO CLAUSE (2)(D) PRIOR TO THE END OF THE 40 DAY DISTRIBUTION COMPLIANCE PERIOD
WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT OR (B) PURSUANT TO
CLAUSE (2)(F) PRIOR TO THE RESALE RESTRICTION TERMINATION DATE TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM, AND (ii) IN EACH OF THE FOREGOING CASES IN CLAUSES
(i)(A) OR (B), TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON
THIS NOTE IS COMPLETED AND DELIVERED BY THE



Appendix - 6









 







TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED AS TO ANY NOTE EVIDENCED
HEREBY UPON DELIVERY TO THE TRUSTEE BY THE COMPANY OR THE HOLDER THEREOF OF A
WRITTEN REQUEST FOR THE REMOVAL HEREOF, IN ANY CASE AT ANY TIME AFTER THE RESALE
RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS “OFFSHORE TRANSACTION,”
“UNITED STATES” AND “U.S. PERSON” HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S
UNDER THE SECURITIES ACT.




     (ii) Subject to applicable procedures of the Depositary, and without limiting
Section 2.3(b)(i), the Company, acting in its discretion, may remove the legend set
forth in paragraph (i) above from any Transfer Restricted Security at any time on or
after the Resale Restriction Termination Date applicable to such Transfer Restricted
Security. Without limiting the generality of the preceding sentence, the Company
may effect such removal by issuing and delivering, in exchange for such Transfer
Restricted Security, an Unrestricted Initial Note without such legend, registered to
the same Holder and in an equal principal amount, and upon receipt by the Trustee of
a written order of the Company stating that the Resale Restriction Termination Date
applicable to such Transfer Restricted Security has occurred and requesting the
authentication and delivery of an Unrestricted Initial Note in exchange therefor
(which order shall not be required to be accompanied by any Opinion of Counsel or
any other document) given at least three Business Days in advance of the proposed
date of exchange specified therein (which shall be no earlier than such Resale
Restriction Termination Date), the Trustee shall authenticate and deliver such
Unrestricted Initial Note to the Depositary or pursuant to such Depositary’s
instructions or hold such Note as Note Custodian for the Depositary and shall
request the Depositary to, or, if the Trustee is Note Custodian of such Transfer
Restricted Security, shall itself, surrender such Transfer Restricted Security in
exchange for such Unrestricted Initial Note without such legend and thereupon cancel
such Transfer Restricted Security so surrendered, all as directed in such order.
For purposes of determining whether the Resale Restriction Termination Date has
occurred with respect to any Notes evidenced by a Transfer Restricted Security or
delivering any order pursuant to this Section 2.3(b)(ii) with respect to such Notes,
(i) only those Notes which a Principal Officer of the Company actually knows (after
reasonable inquiry) to be or to have been owned by an Affiliate of the Company shall
be deemed to be or to have been, respectively, owned by an Affiliate of the Company;
and (ii) “Principal Officer” means the principal executive officer, the principal
financial officer, the treasurer or the principal accounting officer of the Company.




For purposes of this Section 2.3(b)(ii), all provisions relating to the removal of
the legend set forth in paragraph (i) above shall relate, if the Resale Restriction
Termination Date has occurred only with respect to a portion of the Notes evidenced
by a Transfer Restricted Security, to such portion of the Notes so evidenced as to
which the Resale Restriction Termination Date has occurred.



Appendix - 7









 






Each holder of any Note evidenced by any Restricted Global Note, by its acceptance
thereof, (A) authorizes and consents to, (B) appoints the Company as its agent for
the sole purpose of delivering such electronic messages, executing and delivering
such instruments and taking such other actions, on such holder’s behalf, as the
Depositary or the Trustee may require to effect, and (C) upon the request of the
Company, agrees to deliver such electronic messages, execute and deliver such
instruments and take such other actions as the Depositary or the Trustee may
require, or as shall otherwise be necessary to effect, the removal of the legend set
forth in Section 2.3(b)(i) (including by means of the exchange of all or the portion
of such Restricted Global Note evidencing such Note for a certificate evidencing
such Note that does not bear such legend) at any time after the Resale Restriction
Termination Date.




     (iii) Upon any sale or transfer of a Transfer Restricted Security (including
any Transfer Restricted Security represented by a Restricted Global Note) pursuant
to Rule 144 under the Securities Act, the Registrar shall permit the transferee
thereof to exchange such Transfer Restricted Security for a certificated Note that
does not bear the legend set forth above and rescind any restriction on the transfer
of such Transfer Restricted Security, if the transferor thereof certifies in writing
to the Registrar that such sale or transfer was made in reliance on Rule 144 (such
certification to be in the form set forth on the reverse of the Note).




     (iv) After a transfer of any Initial Notes pursuant to and during the period of
the effectiveness of a Shelf Registration Statement with respect to such Initial
Notes, all requirements pertaining to legends on such Initial Note will cease to
apply, and an Initial Note in global form, without restrictive transfer legends,
will be available to the transferee of the Holder of such Initial Notes upon
directions to transfer such Holder’s interest in the Global Note.




     (v) Upon the consummation of a Registered Exchange Offer with respect to the
Initial Notes, Exchange Notes in global form will be available to Holders that
exchange such Initial Notes in such Registered Exchange Offer.



     (c) Cancellation or Adjustment of Global Note.



     At such time as all beneficial interests in a Global Note have either been exchanged for
certificated Notes, redeemed, purchased or canceled, such Global Note shall be returned to the
Trustee for cancellation or retained and canceled by the Trustee. At any time prior to such
cancellation, if any beneficial interest in a Global Note is exchanged for certificated Notes,
redeemed, purchased or canceled, the principal amount of Notes represented by such Global Note
shall be reduced and an adjustment shall be made on the books and records of the Trustee (if it is
then the Notes Custodian for such Global Note) with respect to such Global Note, by the Trustee or
the Notes Custodian, to reflect such reduction.



Appendix - 8









 





     (d) Obligations with Respect to Transfers and Exchanges of Notes.




     (i) To permit registrations of transfers and exchanges, the Company shall
execute and the Trustee shall authenticate certificated Notes and Global Notes at
the Registrar’s request.




     (ii) No service charge shall be made for any registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
transfer tax, assessments or similar governmental charge payable in connection
therewith (other than any such transfer taxes, assessments or similar governmental
charge payable upon any exchange or transfer pursuant to Sections 3.07, 4.12, 4.16
and 9.05 of the Indenture).




     (iii) The Registrar shall not be required to register the transfer of or
exchange of any Note or portion of a Note selected for redemption, except for the
unredeemed portion of any Note being redeemed in part. Also, it need not exchange
or register the transfer of any Notes for a period of 15 days before a selection of
Notes to be redeemed.




     (iv) Prior to the due presentation for registration of transfer of any Note,
the Company, the Subsidiary Guarantors, the Trustee, the Paying Agent or the
Registrar may deem and treat the Person in whose name a Note is registered as the
absolute owner of such Note for the purpose of receiving payment of principal of,
interest, premium and Additional Interest, if any, on, such Note and for all other
purposes whatsoever, whether or not such Note is overdue, and none of the Company,
the Subsidiary Guarantors, the Trustee, the Paying Agent or the Registrar shall be
affected by notice to the contrary.




     (v) All Notes issued upon any transfer or exchange pursuant to the terms of
this Indenture shall evidence the same debt and shall be entitled to the same
benefits under this Indenture as the Notes surrendered upon such transfer or
exchange. Accordingly, for purposes of clause (3) of the second paragraph of
Section 4.11 of this Indenture, “the Notes issued and sold on the Initial Issuance
Date” shall be deemed to refer to and include any Notes issued in exchange for, or
upon registration of transfer of, or in lieu of, any such Notes (or any predecessor
Notes thereof) pursuant to Sections 2.3 or 2.4 hereof or Sections 2.08, 2.09, 2.12,
3.07, 4.12, 4.16 or 9.05 of this Indenture.



     (e) No Obligation of the Trustee.




     (i) The Trustee shall have no responsibility or obligation to any beneficial
owner of a Global Note, a member of, or a participant in the Depositary or other
Person with respect to the accuracy of the records of the Depositary or its nominee
or of any participant or member thereof, with respect to any ownership interest in
the Notes or with respect to the delivery to any participant, member, beneficial
owner or other Person (other than the Depositary) of any notice (including any
notice of optional redemption) or the payment of any amount,



Appendix - 9









 







under or with respect to such Notes. All notices and communications to be
given to the Holders and all payments to be made to Holders under the Notes shall be
given or made only to or upon the order of the registered Holders (which shall be
the Depositary or its nominee in the case of a Global Note). The rights of
beneficial owners in any Global Note shall be exercised only through the Depositary
subject to the applicable rules and procedures of the Depositary. The Trustee may
rely and shall be fully protected in relying upon information furnished by the
Depositary with respect to its members, participants and any beneficial owners.




     (ii) The Trustee shall have no obligation or duty to monitor, determine or
inquire as to compliance with any restrictions on transfer imposed under the
Indenture or under Applicable Law with respect to any transfer of any interest in
any Note (including any transfers between or among Depositary participants, members
or beneficial owners in any Global Note) other than to require delivery of such
certificates and other documentation or evidence as are expressly required by, and
to do so if and when expressly required by, the terms of the Indenture, and to
examine the same to determine substantial compliance as to form with the express
requirements hereof.



     2.4 Certificated Notes.



     (a) A Global Note deposited with the Depositary or with the Trustee as custodian for the
Depositary pursuant to Section 2.1 shall be transferred to the beneficial owners thereof in the
form of certificated Notes in an aggregate principal amount equal to the principal amount of such
Global Note, in exchange for such Global Note, only if such transfer complies with Section 2.3 and
(i) the Depositary notifies the Company that it is unwilling or unable to continue as Depositary
for such Global Note or if at any time such Depositary ceases to be a “clearing agency” registered
under the Exchange Act and in either case a successor depositary is not appointed by the Company
within 90 days, (ii) the Company, at its option, notifies the Trustee in writing that it elects to
cause the issuance of the Certificated Notes, or (iii) a Default or an Event of Default has
occurred and is continuing and DTC notifies the Trustee of its decision to exchange the Global
Notes.



     (b) Any Global Note that is transferable to the beneficial owners thereof pursuant to this
Section shall be surrendered by the Depositary or the Notes Custodian to the Trustee located at its
Corporate Trust Office to be so transferred, in whole or from time to time in part, without charge,
and the Trustee shall authenticate and deliver, upon such transfer of each portion of such Global
Note, an equal aggregate principal amount of certificated Notes of authorized denominations. Any
portion of a Global Note transferred pursuant to this Section shall be executed, authenticated and
delivered only in denominations equal to $2,000 or an integral multiple of $1,000 in excess of
$2,000, and registered in such names as the Depositary shall direct. Any certificated Note
delivered in exchange for an interest in a Global Note shall, except as otherwise provided by
Section 2.3(b), bear the Restricted Notes legend set forth in Exhibit 1 hereto.



Appendix - 10









 





     (c) The Holder of a Global Note shall be entitled to grant proxies and otherwise authorize any
Person, including Agent Members and Persons that may hold interests through Agent Members, to take
any action which a Holder is entitled to take under the Indenture or the Notes.



     (d) In the event of the occurrence of any of the events specified in Section 2.4(a), the
Company shall promptly make available to the Trustee a reasonable supply of certificated Notes in
definitive, fully registered form without interest coupons.



Appendix - 11









 





[EXHIBIT 1 TO RULE 144A/REGULATION S APPENDIX]




[FORM OF FACE OF INITIAL NOTE]




     [UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE & CO.,
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.



     UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR THE INDIVIDUAL NOTES REPRESENTED
HEREBY, THIS GLOBAL NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF
THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE
DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH
SUCCESSOR DEPOSITARY.]



[RESTRICTED NOTE LEGEND]




     THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS. NEITHER SUCH NOTES NOR ANY INTEREST
OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT
FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF ANY
NOTE EVIDENCED HEREBY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT (A) IT IS A “QUALIFIED
INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A U.S.
PERSON AND IS ACQUIRING THIS NOTE IN AN “OFFSHORE TRANSACTION” PURSUANT TO RULE 904 OF REGULATION S
UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT, PRIOR TO THE DATE WHICH IS ONE YEAR AFTER
THE LATER OF THE ORIGINAL ISSUE DATE HEREOF (OR OF ANY PREDECESSOR OF THIS NOTE) OR THE LAST DAY ON
WHICH THE COMPANY OR ANY OF AFFILIATE OF THE COMPANY WERE THE OWNERS OF THIS NOTE (OR ANY
PREDECESSOR OF THIS NOTE) (THE “RESALE RESTRICTION TERMINATION DATE”), OFFER, SELL OR OTHERWISE
TRANSFER SUCH NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE NOTES ARE
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT (“RULE 144A”), TO A PERSON IT
REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A THAT PURCHASES FOR
ITS



Exhibit 1 to App.-1









 




OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT
THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S.
PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE
SECURITIES ACT, (E) PURSUANT TO RULE 144 UNDER THE SECURITIES ACT OR (F) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3) AGREES THAT IT
WILL GIVE TO EACH PERSON TO WHOM SUCH NOTE IS TRANSFERRED PRIOR TO THE RESALE RESTRICTION
TERMINATION DATE A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND, SUBJECT TO THE COMPANY’S AND
THE TRUSTEE’S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i) THAT IS (A) PURSUANT TO CLAUSE
(2)(D) PRIOR TO THE END OF THE 40 DAY DISTRIBUTION COMPLIANCE PERIOD WITHIN THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT OR (B) PURSUANT TO CLAUSE (2)(F) PRIOR TO THE RESALE
RESTRICTION TERMINATION DATE TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR
OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (ii) IN EACH OF THE FOREGOING CASES IN CLAUSES
(i)(A) OR (B), TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THIS NOTE IS
COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON
DELIVERY TO THE TRUSTEE BY THE COMPANY OR THE HOLDER THEREOF OF A WRITTEN REQUEST FOR THE REMOVAL
HEREOF, IN ANY CASE AT ANY TIME AFTER THE RESALE RESTRICTION TERMINATION DATE. AS USED HEREIN, THE
TERMS “OFFSHORE TRANSACTION,” “UNITED STATES” AND “U.S. PERSON” HAVE THE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT.




8.625% SENIOR NOTE DUE 2018




CARRIZO OIL & GAS, INC.



Maturity: October 15, 2018




			
	 	 	 
	Principal Amount: $
	 	CUSIP: [______]
	 	 	 
	No. [R] [S]-
	 	ISIN: [______]






     Carrizo Oil & Gas, Inc., a Texas corporation (herein called the “Company,” which term includes
any successor entity under the indenture hereinafter referred to), for value received, hereby
promises to pay to [__], or registered assigns, the principal sum of [__] Dollars ($) on October
15, 2018 and to pay interest thereon in immediately available funds as specified on the other side
of this Note.



     If a Holder of this Note has given wire transfer instructions to the Company, the Company will
pay all principal, interest and premium, if any on this Note in accordance with such instructions.
Otherwise, payment of the principal, interest and premium, if any, on this Note will be made at the
office or agency of the Company maintained for that purpose in Dallas,



Exhibit 1 to App.-2









 




Texas in such coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts; provided, however, that at the option of the
Company, payment of interest may be made by check mailed to the address of the Person entitled
thereto as such address shall appear in the register of Notes unless the Holder has given wire
transfer instructions to the Company.




     Reference is hereby made to the further provisions of this Note set forth on the reverse
hereof, which further provisions shall for all purposes have the same effect as if set forth at
this place.



     Unless the certificate of authentication hereon has been executed by the Trustee referred to
on the reverse hereof by manual signature, this Note shall not be entitled to any benefit under the
Indenture or be valid or obligatory for any purpose.



     IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.



Dated:




	 	 	 	 	 
	 	CARRIZO OIL & GAS, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 



Exhibit 1 to App.-3









 






	 	 	 	 	 



TRUSTEE’S CERTIFICATE OF AUTHENTICATION





     This is one of the Notes of the series designated therein referred to in the within-mentioned
Indenture.



	 	 	 	 	 
	 	WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee

 	 
	 	 	 
	 	Authorized Signatory 	 
	 	 	 
	 



Date of Authentication:







Exhibit 1 to App.-4









 








[FORM OF REVERSE OF INITIAL NOTE]




CARRIZO OIL & GAS, INC.



8.625% SENIOR NOTE DUE 2018




     This Note is one of a duly authorized issue of Notes of the Company issued and to be issued in
one or more series under an Indenture, dated as of May 28, 2008, as amended by the Fourth
Supplemental Indenture thereto dated as of November 2, 2010 (as so amended, herein called the
“Indenture”), among the Company, the Subsidiary Guarantors named therein and Wells Fargo Bank,
National Association, as trustee (herein called the “Trustee”, which term includes any successor
trustee under the Indenture), or their respective predecessors, as applicable, to which Indenture
and all indentures supplemental thereto reference is hereby made for a statement of the respective
rights, limitations of rights, duties and immunities thereunder of the Company, the Subsidiary
Guarantors, the Trustee and the Holders of the Notes and of the terms upon which the Notes are, and
are to be, authenticated and delivered. This Note is one of the series designated on the face
hereof, which is initially in the aggregate principal amount of $400,000,000. As used herein, the
term “Notes” means the Company’s 8.625% Senior Notes due 2018.



     Subject to Section 2.18 of the Indenture, the Company may, at any time and from time to time,
without notice or the consent of the holders of the Notes, create and issue Additional Notes
ranking equally and ratably with the Initial Notes and the Exchange Notes in all respects (except
for the payment of interest accruing prior to the date such Additional Notes are initially issued
under the Indenture and the offering price and issue date), so that such Additional Notes form a
single series with such Initial Notes and Exchange Notes and have the same terms as to status,
redemption, covenants or otherwise as such Initial Notes and Exchange Notes.



Interest





     The rate at which this Note shall bear interest shall be 8.625% per annum. Interest on
this Note shall accrue from the date of original issuance, or from the most recent date to
which interest has been paid or provided for on the Notes. The Company will also pay
Additional Interest payable pursuant to Section 6 of the Registration Rights Agreement
referred to below. The Interest Payment Dates on which interest on this Note shall be
payable are October 15 and April 15 of each year (each, an “Interest Payment Date”),
commencing on April 15, 2011. If an Interest Payment Date falls on a day that is not a
Business Day, the interest payment to be made on such Interest Payment Date will be made on
the next succeeding Business Day with the same force and effect as if made on such Interest
Payment Date, and no additional interest will accrue solely as a result of such delayed
payment. The Regular Record Date for the interest payable on this Note on any Interest
Payment Date shall be the October 1 or April 1, as the case may be, immediately preceding
such Interest Payment Date. Interest will cease to accrue on this Note upon its maturity,
purchase by the Company at the option of a holder or redemption. Interest will be computed
on the basis of a 360-day year comprised of twelve 30-day



Exhibit 1 to App.-5









 







months. The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal and premium (if any), from time to
time on demand at a rate that is 1.0% higher than the then applicable interest rate on the
Notes to the extent lawful; and it shall pay interest (including post petition interest in
any proceeding under any Bankruptcy Law) on overdue installments of interest and any
Additional Interest (without regard to any applicable grace period) from time to time on
demand at a rate that is 1.0% higher than the then applicable interest rate on the Notes to
the extent lawful.



Method of Payment




     Payments in respect of principal of and interest, if any, on the Notes shall be made by the
Company in immediately available funds.



Optional Redemption




     (a) Except as set forth in subparagraphs (b) and (c) of this section, the Company shall not
have the option to redeem this Note prior to October 15, 2014. On and after October 15, 2014, the
Company shall have the option to redeem this Note, in whole or in part at any time, upon prior
notice as set forth below under the caption “Notice,” at the Redemption Prices (expressed as
percentages of principal amount) set forth below, plus accrued and unpaid interest and Additional
Interest, if any, on this Note to the applicable Redemption Date (subject to the right of Holders
of record on the relevant record date to receive interest due on an Interest Payment Date that is
on or prior to the Redemption Date), if redeemed during the twelve-month period beginning on
October 15 of the years indicated below:



	 	 	 	 	 
	YEAR	 	PERCENTAGE
	2014
	 	 	104.313	%
	2015
	 	 	102.875	%
	2016
	 	 	101.438	%
	2017 and thereafter
	 	 	100.000	%






     (b) Notwithstanding the provisions of subparagraph (a) of this section, at any time prior to
October 15, 2013, the Company may on one or more occasions redeem up to 35% of the aggregate
principal amount of this Note at a Redemption Price of 108.625% of the principal amount thereof,
plus accrued and unpaid interest, if any, and Additional Interest, if any, thereon to the
Redemption Date (subject to the right of Holders of record on the relevant record date to receive
interest due on an Interest Payment Date that is on or prior to the Redemption Date), with the net
cash proceeds of one or more Equity Offerings; provided that, with respect to each such redemption,
(i) at least 65% of the aggregate principal amount of Notes issued under the Indenture remains
outstanding immediately after the occurrence of such redemption (excluding any Notes held by the
Company and its Subsidiaries) and (ii) such redemption occurs within 180 days of the date of the
closing of the related Equity Offering.



     (c) Prior to October 15, 2014, the Company may redeem on one or more occasions all or part of
this Note at a Redemption Price equal to the sum of (1) 100% of the principal amount



Exhibit 1 to App.-6









 




thereof, plus (2) accrued and unpaid interest, if any, to the Redemption Date (subject to the
right of Holders of record on the relevant record date to receive interest due on an interest
payment date that is on or prior to the Redemption Date), plus (3) the Make Whole Premium at the
Redemption Date.




Selection




     If less than all of the Notes are to be redeemed at any time, the Trustee will select Notes
for redemption as follows:




     (1) if the Notes are listed on any national securities exchange, in compliance with the
requirements of the principal national securities exchange on which the Notes are listed; or




     (2) if the Notes are not listed on any national securities exchange, on a pro rata
basis.



Notice




     No Note of $2,000 or less can be redeemed in part. Notices of optional redemption will be
mailed by first class mail at least 30 but not more than 60 days before the Redemption Date to each
Holder of Notes to be redeemed at its registered address, except that optional redemption notices
may be mailed more than 60 days prior to a Redemption Date if the notice is issued in connection
with a defeasance of the Notes or a discharge of the indenture. Notice of any redemption,
including, without limitation, upon an Equity Offering, may, at the Company’s discretion, be
subject to one or more conditions precedent, including, but not limited to, completion of a related
Equity Offering.



     If this Note is to be redeemed in part only, the notice of redemption that relates to this
Note will state the portion of the principal amount that is to be redeemed. A new Note in
principal amount equal to the unredeemed portion of this Note will be issued in the name of the
applicable Holder upon cancellation of this Note. Notes called for redemption become due on the
date fixed for redemption. On and after the Redemption Date, interest ceases to accrue on Notes or
portions of them called for redemption.



     The notice of redemption with respect to a redemption described in Paragraph (c) under the
caption “Optional Redemption” need not set forth the Make Whole Premium but only the manner of
calculation thereof.



Repurchase by the Company at the Option of Holder




Change of Control




     If a Change of Control occurs, the Holder of this Note will have the right to require the
Company to repurchase all or any part (equal to $2,000 or an integral multiple of $1,000 in excess
of $2,000) of this Note pursuant to an offer (“Change of Control Offer”) on the terms set forth in
the Indenture. In the Change of Control Offer, the Company will offer a payment in cash (the
“Change of Control Payment”) equal to 101% of the aggregate principal amount of the part



Exhibit 1 to App.-7









 




of this Note repurchased plus accrued and unpaid interest, if any, to the date of purchase
(the “Change of Control Purchase Date”), subject to the right of the Holders of record of this Note
on the relevant record date to receive interest due on an interest payment date that is on or prior
to the Change of Control Purchase Date. Within 30 days following any Change of Control, the
Company will mail a notice to each Holder and the Trustee describing the transaction or
transactions that constitute the Change of Control and offering to repurchase Notes as of the
Change of Control Purchase Date specified in the notice, which date will be no earlier than 30 days
and no later than 60 days from the date such notice is mailed, pursuant to the procedures required
by the Indenture and described in such notice.




     The Company will not be required to make a Change of Control Offer upon a Change of Control if
(1) a third party makes the Change of Control Offer in the manner, at the time and otherwise in
compliance with the requirements set forth in the Indenture applicable to a Change of Control Offer
made by the Company and purchases all Notes properly tendered and not withdrawn under the Change of
Control Offer or (2) notice of redemption of all Notes has been given pursuant to the Indenture as
described above under the caption “Optional Redemption” unless there is a default in payment of the
applicable Redemption Price.



     In the event that Holders of not less than 90% of the aggregate principal amount of the
outstanding Notes accept a Change of Control Offer and the Company purchases all of the Notes held
by such Holders, the Company will have the right, upon not less than 30 nor more than 60 days’
prior notice, given not more than 30 days following the purchase pursuant to the Change of Control
Offer described above, to redeem all of the Notes that remain outstanding following such purchase
at a purchase price equal to the Change of Control Payment plus, to the extent not included in the
Change of Control Payment, accrued and unpaid interest on the Notes that remain outstanding, to the
date of redemption (subject to the right of Holders on the relevant record date to receive interest
due on the relevant interest payment date).



Asset Sale




     Subject to the terms of the Indenture, on the 366th day after an Asset Sale (or, at the
Company’s option, any earlier date), if the aggregate amount of Excess Proceeds then exceeds $20.0
million, the Company will make an offer (the “Asset Sale Offer”) to all Holders of Notes, and to
all holders of Pari Passu Indebtedness then outstanding, to purchase the maximum principal amount
of Notes and such Pari Passu Indebtedness that may be purchased out of the Excess Proceeds. The
offer price in any Asset Sale Offer will be equal to 100% of principal amount plus accrued and
unpaid interest, if any, to the date of settlement, subject to the right of Holders of record on
the relevant record date to receive interest due on an Interest Payment Date that is on or prior to
the date of settlement, and will be payable in cash. If any Excess Proceeds remain after
consummation of an Asset Sale Offer, the Company may use those Excess Proceeds for any purpose not
otherwise prohibited by the Indenture. If the aggregate principal amount of Notes and other Pari
Passu Indebtedness tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds, the
Trustee will select the Notes and such other Pari Passu Indebtedness to be purchased on a pro rata
basis. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds will be reset at
zero.



Exhibit 1 to App.-8









 





Transfer




     As provided in the Indenture and subject to certain limitations therein set forth, the
transfer of this Note is registrable in the register of the Notes, upon surrender of this Note for
registration or transfer at the office or agency of the Registrar for the Notes, duly endorsed by,
or accompanied by a written instrument of transfer in form reasonably satisfactory to the Registrar
duly executed by the Holder thereof or his attorney duly authorized in writing, and thereupon one
or more new Notes, of like tenor and of other authorized denominations and for the same aggregate
principal amount, executed by the Company and authenticated and delivered by the Trustee, will be
issued to the designated transferee or transferees.



     The Notes are issuable only in registered form without coupons in denominations of $2,000 and
integral multiples of $1,000, in excess of $2,000. As provided in the Indenture and subject to
certain limitations set forth therein and on the face of this Note, Notes are exchangeable for a
like aggregate principal amount of Notes of a different authorized denomination as requested by the
Holder surrendering the same.



     No service charge shall be made for any such registration of transfer or exchange, but the
Company may require payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith.



     Prior to due presentment of this Note for registration of transfer, the Company, the Trustee
or any agent of the Company or the Trustee may treat the Person in whose name this Note is
registered as the owner hereof for all purposes, whether or not this Note be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the contrary.



Guarantees




     The payment by the Company of the principal of and interest, premium and Additional Interest,
if any, on, the Notes is fully and unconditionally guaranteed on a joint and several senior
unsecured basis by each of the Subsidiary Guarantors to the extent set forth in the Indenture.



Amendment, Supplement and Waiver; Limitation on Suits




     The Indenture permits, with certain exceptions as therein provided, the amendment thereof and
the modification of the rights and obligations of the Company and the rights of the Holders of the
Notes at any time by the Company and the Trustee with the consent of the Holders of at least a
majority in principal amount of the then outstanding Notes. The Indenture also contains provisions
permitting the Holders of at least a majority in principal amount of the then outstanding Notes, to
waive compliance by the Company with certain existing or past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Note shall be conclusive and
binding upon such Holder and upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not notation of
such consent or waiver is made upon this Note.



     Subject to the right of the Holder of any Notes to institute proceedings to enforce the
Holder’s right to receive payment of the principal thereof and interest thereon (or repurchase



Exhibit 1 to App.-9









 




price thereof), no Holder of the Notes shall have any right to institute any proceeding,
judicial or otherwise, with respect to the Indenture, or for the appointment of a receiver or
Trustee, or for any other remedy thereunder, unless




     (1) such Holder has previously given written notice to the Trustee of a continuing Event of
Default;



     (2) the Holders of at least 25% in principal amount of the then Outstanding Notes shall have
made written request to the Trustee to pursue the remedy;



     (3) such Holder or Holders offer to the Trustee indemnity satisfactory to the Trustee against
any loss, liability or expense to be incurred in compliance with such request;



     (4) the Trustee for 60 days after its receipt of such request and offer of indemnity has
failed to comply with such request; and



     (5) no direction inconsistent with such written request has been given to the Trustee during
such 60-day period by the Holders of a majority in principal amount of the then outstanding Notes;


it being understood and intended that no one or more of such Holders shall have the right in any
manner whatever by virtue of, or by availing of, any provision of the Indenture to prejudice the
rights of any other of such Holders, or to obtain preference or priority over any other of such
Holders.




Successor Entity




     When a successor Person assumes all the obligations of its predecessor under the Notes and the
Indenture in accordance with the terms and conditions of the Indenture, the predecessor Person will
(except in certain circumstances specified in the Indenture) be released from those obligations.



Defaults and Remedies




     If an Event of Default with respect to Notes shall occur and be continuing, all unpaid
Principal Amount plus accrued and unpaid interest through the acceleration date of the Notes may be
declared due and payable in the manner and with the effect provided in the Indenture.



No Personal Liability of Directors, Officers, Employees and Shareholders




     No director, officer, partner, employee, incorporator, manager or shareholder or other owner
of Capital Stock of the Company or any Subsidiary Guarantor, as such, will have any liability for
any obligations of the Company or any Subsidiary Guarantor under the Notes, the Indenture or the
Subsidiary Guarantees, or for any claim based on, in respect of, or by reason of, such obligations
or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability.
The waiver and release are part of the consideration for issuance of the Notes. The waiver may not
be effective to waive liabilities under the federal securities laws.



Exhibit 1 to App.-10









 





Removal of Restricted Note Legend




     Each holder of any Note evidenced by any Restricted Global Note, by its acceptance thereof,
(A) authorizes and consents to, (B) appoints the Company as its agent for the sole purpose of
delivering such electronic messages, executing and delivering such instruments and taking such
other actions, on such holder’s behalf, as the Depositary or the Trustee may require to effect, and
(C) upon the request of the Company, agrees to deliver such electronic messages, execute and
deliver such instruments and take such other actions as the Depositary or the Trustee may require,
or as shall otherwise be necessary to effect, the removal of the Restricted Note Legend set forth
on the face of such Note (including by means of the exchange of all or the portion of such
Restricted Global Note evidencing such Note for a certificate evidencing such Note that does not
bear such Restricted Note Legend) at any time after the Resale Restriction Termination Date.



Additional Rights of Holders of Transfer Restricted Notes




     In addition to the rights provided to Holders of the Notes under the Indenture, Holders of
Transfer Restricted Notes shall have all the rights set forth in the Registration Rights Agreement
dated as of November 2, 2010, among the Company, the Subsidiary Guarantors and Credit Suisse (USA)
LLC, Wells Fargo Securities, LLC and RBC Capital Markets, LLC (the “Registration Rights
Agreement”).



Indenture to Control; Governing Law




     In the case of any conflict between the provisions of this Note and the Indenture, the
provisions of the Indenture shall control.



     THE INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK.



Definitions




     All terms defined in the Indenture and used in this Note but not specifically defined herein
are used herein as so defined.




Exhibit 1 to App.-11











 





ASSIGNMENT FORM




     To assign this Note, fill in the form below and have your signature guaranteed: (I) or (we)
assign and transfer this Note to:




 





(Insert assignee’s soc. sec. or tax ID. no.)




 





(Print or type assignee’s name, address and zip code)



and irrevocably appoint ___________________________
to transfer this Note on the books of the Company. The agent may substitute another to act for him.



Dated:




Your Name:




 





(Print your name exactly as it appears on the face of this Note)



Your Signature:




 





(Sign exactly as your name appears on the face of this Note)




SIGNATURE GUARANTEE*:






 




			
	*	 	The signature must be guaranteed by an institution which is a member of one of the following
recognized signature guaranty programs: (i) the Securities Transfer Agent Medallion Program
(STAMP); (ii) the New York Stock Exchange Medallion Program (MSP); (iii) the Stock Exchange
Medallion Program (SEMP); or (iv) such other guarantee program acceptable to the Trustee.





[Include the following only if the Restricted Note Legend is included hereon]



[In connection with any transfer of any of the Notes evidenced by this certificate occurring prior
to one year after the later of the date of original issuance of such Notes and the last date, if
any, on which such Notes were owned by the Company or any Affiliate of the Company (or, in the case
of Regulation S Notes, prior to the expiration of the Distribution Compliance Period), the
undersigned confirms that such Notes are being transferred in accordance with their terms:




Exhibit 1 to App.-12




 









 







CHECK ONE BOX BELOW





	 	(1)	o 	to the Company or any Subsidiary thereof; or
	 
	 	(2)	o 	pursuant to an effective registration statement under the Securities
Act of 1933; or
	 
	 	(3)	o 	to a person who the undersigned reasonably believes is a “qualified
institutional buyer” (as defined in Rule 144A under the Securities Act of 1933) that is
purchasing for its own account or for the account of a qualified institutional buyer to
whom notice is given that such transfer is being made in reliance on Rule 144A, in each
case pursuant to and in compliance with Rule 144A under the Securities Act of 1933; or
	 
	 	(4)	o 	pursuant to offers and sales to non-U.S. persons that occur outside the
United States within the meaning of Regulation S under the Securities Act of 1933 in
compliance with Rule 904 under the Securities Act of 1933; or
	 
	 	(5)	o 	pursuant to Rule 144 under the Securities Act of 1933; or
	 
	 	(6)	o 	pursuant to another exemption from registration under the Securities
Act of 1933.





Unless one of the boxes is checked, the Trustee will refuse to register any of the Notes evidenced
by this certificate in the name of any person other than the registered holder thereof;
provided, however, that if box (4) or (6) is checked, the Trustee shall be entitled
to require, prior to registering any such transfer of the Notes, such legal opinions,
certifications and other information as the Company has reasonably requested to confirm that such
transfer is being made pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act of 1933.




	 	 	 	 	 
	 	 	 
	 	 	 
	 	Signature 	 
	 	 	 



Exhibit 1 to App.-13




 









 







TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.



The undersigned represents and warrants that it is purchasing this Note for its own account or an
account with respect to which it exercises sole investment discretion and that it and any such
account is a “qualified institutional buyer” within the meaning of Rule 144A under the Securities
Act of 1933, and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company and any Subsidiary
Guarantors as the undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the undersigned’s
foregoing representations in order to claim the exemption from registration provided by Rule 144A.




	 	 	 	 	 	 	 	 	 

	Dated:
	 	 	 	 	 	 	 	 
	 

	 	 

	 	 
	 	 

Notice: To be executed by an executive officer
	 	 






Exhibit 1 to App.-14




 









 








OPTION OF HOLDER TO ELECT PURCHASE




     If you want to elect to have this Note purchased, in whole or in part, by the Company pursuant
to Section 4.12 or 4.16 of the Indenture, check the following box:



	 	 	 

	o Section 4.12
	 	o Section 4.16






     If you want to have only part of this Note purchased by the Company pursuant to Section 4.12
or 4.16 of the Indenture, state the Principal Amount you want to be purchased (in minimum
denomination of $2,000 or integral multiples of $1,000 in excess of $2,000):
$________________


Your
Signature:
__________________________________________   Date: ________________

(Sign exactly as your name appears on the other side of this Note)



*Signature guaranteed by: __________________________________________



By: ________________






 




			
	*	 	The signature must be guaranteed by an
institution which is a member of one of the following recognized signature
guaranty programs: (i) the Securities Transfer Agent Medallion Program (STAMP);
(ii) the New York Stock Exchange Medallion Program (MSP); (iii) the Stock
Exchange Medallion Program (SEMP); or (iv) such other guaranty program
acceptable to the Trustee.





Exhibit 1 to App.-15




 









 








[FORM OF NOTATION OF GUARANTEE]




     Each of the Subsidiary Guarantors (which term includes any successor Person under the
Indenture) has fully, unconditionally and absolutely guaranteed, to the extent set forth in the
Indenture and subject to the provisions in the Indenture, the due and punctual payment of the
principal of, and premium, if any, and interest on the Notes and all other amounts due and payable
under the Indenture and the Notes by the Company.



     The obligations of the Subsidiary Guarantors to the Holders of Notes and to the Trustee
pursuant to the Guarantee and the Indenture are expressly set forth in Article X of the Indenture
and reference is hereby made to the Indenture for the precise terms of the Guarantee.



	 	 	 	 	 
	 	[NAME OF SUBSIDIARY GUARANTOR]
 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 



Exhibit 1 to App.-16




 









 








EXHIBIT 2 TO RULE 144A/REGULATION S APPENDIX




[FORM OF FACE OF EXCHANGE NOTE]*





     [UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE & CO.,
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.



UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR THE INDIVIDUAL NOTES REPRESENTED HEREBY,
THIS GLOBAL NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE
DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY
OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITARY.]



All references to “Additional Interest” in this Note shall be deleted unless if, at the date of
issuance of the Exchange Note, any Registration Default (as defined in the Registration Rights
Agreement) has occurred with respect to the related Initial Notes during the interest period in
which such date of issuance occurs.




8.625% SENIOR NOTE DUE 2018




CARRIZO OIL & GAS, INC.



	 	 	 

	 

	 	Maturity: October 15, 2018
	 
	 	 
	Principal
Amount: $

	 	CUSIP: [_____]
	 
	 	 
	Registered: No. [R] [S]-

	 	ISIN: [______]






     Carrizo Oil & Gas, Inc., a Texas corporation (herein called the “Company,” which term includes
any successor entity under the indenture hereinafter referred to), for value received, hereby
promises to pay to [__], or registered assigns, the principal sum of [__] Dollars ($) on October
15, 2018 and to pay interest thereon in immediately available funds as specified on the other side
of this Note.



     If a Holder of this Note has given wire transfer instructions to the Company, the Company will
pay all principal, interest and premium, if any on this Note in accordance with such instructions.
Otherwise, payment of the principal, interest and premium, if any, on this Note will be made at the
office or agency of the Company maintained for that purpose in Dallas, Texas in such coin or
currency of the United States of America as at the time of payment is legal



Exhibit 2 to App-1









 










tender for payment of public and private debts; provided, however, that at the option of the
Company, payment of interest may be made by check mailed to the address of the Person entitled
thereto as such address shall appear in the register of Notes unless the Holder has given wire
transfer instructions to the Company.




     Reference is hereby made to the further provisions of this Note set forth on the reverse
hereof, which further provisions shall for all purposes have the same effect as if set forth at
this place.



     Unless the certificate of authentication hereon has been executed by the Trustee referred to
on the reverse hereof by manual signature, this Note shall not be entitled to any benefit under the
Indenture or be valid or obligatory for any purpose.



     IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.



Dated:




	 	 	 	 	 
	 	CARRIZO OIL & GAS, INC.
 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 






Exhibit 2
to App.-2









 








TRUSTEE’S CERTIFICATE OF AUTHENTICATION





     This is one of the Notes of the series designated therein referred to in the within-mentioned
Indenture.



	 	 	 	 	 
	 	WELLS FARGO BANK, NATIONAL 

ASSOCIATION, as Trustee

 	 
	 	 	 
	 	Authorized Signatory 	 
	 	 	 
	 


Date of Authentication:




Exhibit 2 to App.-3





 











 





[FORM OF REVERSE OF EXCHANGE NOTE]




CARRIZO OIL & GAS, INC.




8.625% SENIOR NOTE DUE 2018




     This Note is one of a duly authorized issue of Notes of the Company issued and to be issued in
one or more series under an Indenture, dated as of May 28, 2008, as amended by the Fourth
Supplemental Indenture thereto dated as of November 2, 2010 (as so amended, herein called the
“Indenture”), among the Company, the Subsidiary Guarantors named therein and Wells Fargo Bank,
National Association, as trustee (herein called the “Trustee”, which term includes any successor
trustee under the Indenture), or their respective predecessors, as applicable, to which Indenture
and all indentures supplemental thereto reference is hereby made for a statement of the respective
rights, limitations of rights, duties and immunities thereunder of the Company, the Subsidiary
Guarantors, the Trustee and the Holders of the Notes and of the terms upon which the Notes are, and
are to be, authenticated and delivered. This Note is one of the series designated on the face
hereof, which is initially in the aggregate principal amount of $400,000,000. As used herein, the
term “Notes” means the Company’s 8.625% Senior Notes due 2018.



     Subject to Section 2.18 of the Indenture, the Company may, at any time and from time to time,
without notice or the consent of the holders of the Notes, create and issue Additional Notes
ranking equally and ratably with the Initial Notes and the Exchange Notes in all respects (except
for the payment of interest accruing prior to the date such Additional Notes are initially issued
under the Indenture and the offering price and issue date), so that such Additional Notes form a
single series with such Initial Notes and Exchange Notes and have the same terms as to status,
redemption, covenants or otherwise as such Initial Notes and Exchange Notes.



Interest





     The rate at which this Note shall bear interest shall be 8.625% per annum. Interest on
this Note shall accrue from the date of original issuance, or from the most recent date to
which interest has been paid or provided for on the Notes. The Company will also pay
Additional Interest payable pursuant to Section 6 of the Registration Rights Agreement
referred to below. The Interest Payment Dates on which interest on this Note shall be
payable are October 15 and April 15 of each year (each, an “Interest Payment Date”),
commencing on April 15, 2011. If an Interest Payment Date falls on a day that is not a
Business Day, the interest payment to be made on such Interest Payment Date will be made on
the next succeeding Business Day with the same force and effect as if made on such Interest
Payment Date, and no additional interest will accrue solely as a result of such delayed
payment. The Regular Record Date for the interest payable on this Note on any Interest
Payment Date shall be the October 1 or April 1, as the case may be, immediately preceding
such Interest Payment Date. Interest will cease to accrue on this Note upon its maturity,
purchase by the Company at the option of a holder or redemption. The Company shall pay
interest (including post-petition interest in any proceeding under any Bankruptcy Law) on
overdue principal and premium (if any), from time to time on demand at a rate that is 1.0%
higher than the then applicable interest rate on the Notes to



Exhibit 2 to App.-4









 




the extent lawful; and it shall pay interest (including post petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest and any Additional
Interest (without regard to any applicable grace period) from time to time on demand at a
rate that is 1.0% higher than the then applicable interest rate on the Notes to the extent
lawful. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day
months.




Method of Payment




     Payments in respect of principal of and interest, if any, on the Notes shall be made by the
Company in immediately available funds.



Optional Redemption




     (a) Except as set forth in subparagraphs (b) and (c) of this section, the Company shall not
have the option to redeem this Note prior to October 15, 2014. On and after October 15, 2014, the
Company shall have the option to redeem this Note, in whole or in part at any time, upon prior
notice as set forth below under the caption “Notice,” at the Redemption Prices (expressed as
percentages of principal amount) set forth below, plus accrued and unpaid interest and Additional
Interest, if any, on this Note to the applicable Redemption Date (subject to the right of Holders
of record on the relevant record date to receive interest due on an Interest Payment Date that is
on or prior to the Redemption Date), if redeemed during the twelve-month period beginning on
October 15 of the years indicated below:



	 	 	 	 	 
	YEAR	 	PERCENTAGE
	2014
	 	 	104.313	%
	2015
	 	 	102.875	%
	2016
	 	 	101.438	%
	2017 and thereafter
	 	 	100.000	%






     (b) Notwithstanding the provisions of subparagraph (a) of this section, at any time prior to
October 15, 2013, the Company may on one or more occasions redeem up to 35% of the aggregate
principal amount of this Note at a Redemption Price of 108.625% of the principal amount thereof,
plus accrued and unpaid interest, if any, and Additional Interest, if any, thereon to the
Redemption Date (subject to the right of Holders of record on the relevant record date to receive
interest due on an Interest Payment Date that is on or prior to the Redemption Date), with the net
cash proceeds of one or more Equity Offerings; provided that, with respect to each such redemption,
(i) at least 65% of the aggregate principal amount of Notes issued under the Indenture remains
outstanding immediately after the occurrence of such redemption (excluding any Notes held by the
Company and its Subsidiaries) and (ii) such redemption occurs within 180 days of the date of the
closing of the related Equity Offering.



     (c) Prior to October 15, 2014, the Company may redeem on one or more occasions all or part of
this Note at a Redemption Price equal to the sum of (1) 100% of the principal amount thereof, plus
(2) accrued and unpaid interest, if any, to the Redemption Date (subject to the right of Holders of
record on the relevant record date to receive interest due on an interest payment



Exhibit 2 to App.-5









 




date that is on or prior to the Redemption Date), plus (3) the Make Whole Premium at the
Redemption Date.




Selection




     If less than all of the Notes are to be redeemed at any time, the Trustee will select Notes
for redemption as follows:




(1) if the Notes are listed on any national securities exchange, in compliance with the
requirements of the principal national securities exchange on which the Notes are listed; or




(2) if the Notes are not listed on any national securities exchange, on a pro rata
basis.



Notice




     No Note of $2,000 or less can be redeemed in part. Notices of optional redemption will be
mailed by first class mail at least 30 but not more than 60 days before the Redemption Date to each
Holder of Notes to be redeemed at its registered address, except that optional redemption notices
may be mailed more than 60 days prior to a Redemption Date if the notice is issued in connection
with a defeasance of the Notes or a discharge of the indenture. Notice of any redemption,
including, without limitation, upon an Equity Offering, may, at the Company’s discretion, be
subject to one or more conditions precedent, including, but not limited to, completion of a related
Equity Offering.



     If this Note is to be redeemed in part only, the notice of redemption that relates to this
Note will state the portion of the principal amount that is to be redeemed. A new Note in
principal amount equal to the unredeemed portion of this Note will be issued in the name of the
applicable Holder upon cancellation of this Note. Notes called for redemption become due on the
date fixed for redemption. On and after the Redemption Date, interest ceases to accrue on Notes or
portions of them called for redemption.



     The notice of redemption with respect to a redemption described in Paragraph (c) under the
caption “Optional Redemption” need not set forth the Make Whole Premium but only the manner of
calculation thereof.



Repurchase by the Company at the Option of Holder




Change of Control




     If a Change of Control occurs, the Holder of this Note will have the right to require the
Company to repurchase all or any part (equal to $2,000 or an integral multiple of $1,000 in excess
of $2,000) of this Note pursuant to an offer (“Change of Control Offer”) on the terms set forth in
the Indenture. In the Change of Control Offer, the Company will offer a payment in cash (the
“Change of Control Payment”) equal to 101% of the aggregate principal amount of the part of this
Note repurchased plus accrued and unpaid interest, if any, to the date of purchase (the “Change of
Control Purchase Date”), subject to the right of the Holders of record of this Note on



Exhibit 2 to App.-6









 




the relevant record date to receive interest due on an interest payment date that is on or
prior to the Change of Control Purchase Date. Within 30 days following any Change of Control, the
Company will mail a notice to each Holder and the Trustee describing the transaction or
transactions that constitute the Change of Control and offering to repurchase Notes as of the
Change of Control Purchase Date specified in the notice, which date will be no earlier than 30 days
and no later than 60 days from the date such notice is mailed, pursuant to the procedures required
by the Indenture and described in such notice.




     The Company will not be required to make a Change of Control Offer upon a Change of Control if
(1) a third party makes the Change of Control Offer in the manner, at the time and otherwise in
compliance with the requirements set forth in the Indenture applicable to a Change of Control Offer
made by the Company and purchases all Notes properly tendered and not withdrawn under the Change of
Control Offer or (2) notice of redemption of all Notes has been given pursuant to the Indenture as
described above under the caption “Optional Redemption” unless there is a default in payment of the
applicable Redemption Price.



     In the event that Holders of not less than 90% of the aggregate principal amount of the
outstanding Notes accept a Change of Control Offer and the Company purchases all of the Notes held
by such Holders, the Company will have the right, upon not less than 30 nor more than 60 days’
prior notice, given not more than 30 days following the purchase pursuant to the Change of Control
Offer described above, to redeem all of the Notes that remain outstanding following such purchase
at a purchase price equal to the Change of Control Payment plus, to the extent not included in the
Change of Control Payment, accrued and unpaid interest on the Notes that remain outstanding, to the
date of redemption (subject to the right of Holders on the relevant record date to receive interest
due on the relevant interest payment date).



Asset Sale




     Subject to the terms of the Indenture, on the 366th day after an Asset Sale (or, at the
Company’s option, any earlier date), if the aggregate amount of Excess Proceeds then exceeds $20.0
million, the Company will make an offer (the “Asset Sale Offer”) to all Holders of Notes, and to
all holders of Pari Passu Indebtedness then outstanding, to purchase the maximum principal amount
of Notes and such Pari Passu Indebtedness that may be purchased out of the Excess Proceeds. The
offer price in any Asset Sale Offer will be equal to 100% of principal amount plus accrued and
unpaid interest, if any, to the date of settlement, subject to the right of Holders of record on
the relevant record date to receive interest due on an Interest Payment Date that is on or prior to
the date of settlement, and will be payable in cash. If any Excess Proceeds remain after
consummation of an Asset Sale Offer, the Company may use those Excess Proceeds for any purpose not
otherwise prohibited by the Indenture. If the aggregate principal amount of Notes and other Pari
Passu Indebtedness tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds, the
Trustee will select the Notes and such other Pari Passu Indebtedness to be purchased on a pro rata
basis. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds will be reset at
zero.



Exhibit 2 to App.-7









 





Transfer




     As provided in the Indenture and subject to certain limitations therein set forth, the
transfer of this Note is registrable in the register of the Notes, upon surrender of this Note for
registration or transfer at the office or agency of the Registrar for the Notes, duly endorsed by,
or accompanied by a written instrument of transfer in form reasonably satisfactory to the Registrar
duly executed by the Holder thereof or his attorney duly authorized in writing, and thereupon one
or more new Notes, of like tenor and of other authorized denominations and for the same aggregate
principal amount, executed by the Company and authenticated and delivered by the Trustee, will be
issued to the designated transferee or transferees.



     The Notes are issuable only in registered form without coupons in denominations of $2,000 and
integral multiples of $1,000, in excess of $2,000. As provided in the Indenture and subject to
certain limitations set forth therein and on the face of this Note, Notes are exchangeable for a
like aggregate principal amount of Notes of a different authorized denomination as requested by the
Holder surrendering the same.



     No service charge shall be made for any such registration of transfer or exchange, but the
Company may require payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith.



     Prior to due presentment of this Note for registration of transfer, the Company, the Trustee
or any agent of the Company or the Trustee may treat the Person in whose name this Note is
registered as the owner hereof for all purposes, whether or not this Note be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the contrary.



Guarantees




     The payment by the Company of the principal of and interest, premium and Additional Interest,
if any, on, the Notes is fully and unconditionally guaranteed on a joint and several senior
unsecured basis by each of the Subsidiary Guarantors to the extent set forth in the Indenture.



Amendment, Supplement and Waiver; Limitation on Suits




     The Indenture permits, with certain exceptions as therein provided, the amendment thereof and
the modification of the rights and obligations of the Company and the rights of the Holders of the
Notes at any time by the Company and the Trustee with the consent of the Holders of at least a
majority in principal amount of the then outstanding Notes. The Indenture also contains provisions
permitting the Holders of at least a majority in principal amount of the then outstanding Notes, to
waive compliance by the Company with certain existing or past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Note shall be conclusive and
binding upon such Holder and upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not notation of
such consent or waiver is made upon this Note.



     Subject to the right of the Holder of any Notes to institute proceedings to enforce the
Holder’s right to receive payment of the principal thereof and interest thereon (or repurchase



Exhibit 2 to App.-8









 




price thereof), no Holder of the Notes shall have any right to institute any proceeding,
judicial or otherwise, with respect to the Indenture, or for the appointment of a receiver or
Trustee, or for any other remedy thereunder, unless




     (1) such Holder has previously given written notice to the Trustee of a continuing Event of
Default;



     (2) the Holders of at least 25% in principal amount of the then Outstanding Notes shall have
made written request to the Trustee to pursue the remedy;



     (3) such Holder or Holders offer to the Trustee indemnity satisfactory to the Trustee against
any loss, liability or expense to be incurred in compliance with such request;



     (4) the Trustee for 60 days after its receipt of such request and offer of indemnity has
failed to comply with such request; and



     (5) no direction inconsistent with such written request has been given to the Trustee during
such 60-day period by the Holders of a majority in principal amount of the then outstanding Notes;


it being understood and intended that no one or more of such Holders shall have the right in any
manner whatever by virtue of, or by availing of, any provision of the Indenture to prejudice the
rights of any other of such Holders, or to obtain preference or priority over any other of such
Holders.




Successor Entity




     When a successor Person assumes all the obligations of its predecessor under the Notes and the
Indenture in accordance with the terms and conditions of the Indenture, the predecessor Person will
(except in certain circumstances specified in the Indenture) be released from those obligations.



Defaults and Remedies




     If an Event of Default with respect to Notes shall occur and be continuing, all unpaid
Principal Amount plus accrued and unpaid interest through the acceleration date of the Notes may be
declared due and payable in the manner and with the effect provided in the Indenture.



No Personal Liability of Directors, Officers, Employees and Shareholders




     No director, officer, partner, employee, incorporator, manager or shareholder or other owner
of Capital Stock of the Company or any Subsidiary Guarantor, as such, will have any liability for
any obligations of the Company or any Subsidiary Guarantor under the Notes, the Indenture or the
Subsidiary Guarantees, or for any claim based on, in respect of, or by reason of, such obligations
or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability.
The waiver and release are part of the consideration for issuance of the Notes. The waiver may not
be effective to waive liabilities under the federal securities laws.



Exhibit 2 to App.-9









 





[Additional Rights of Holders of Transfer Restricted Notes




     In addition to the rights provided to Holders of the Notes under the Indenture, Holders of
Transfer Restricted Notes shall have all the rights set forth in the Registration Rights Agreement
dated as of November 2, 2010, among the Company, the Subsidiary Guarantors and Credit Suisse (USA)
LLC, Wells Fargo Securities, LLC and RBC Capital Markets, LLC (the “Registration Rights
Agreement”).]1



Indenture to Control; Governing Law




     In the case of any conflict between the provisions of this Note and the Indenture, the
provisions of the Indenture shall control.



     THE INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK.



Definitions




     All terms defined in the Indenture and used in this Note but not specifically defined herein
are used herein as so defined.





 




			
	1	 	Delete if this Security is not being issued
in exchange for an Initial Note.




Exhibit 2 to App.-10









 










ASSIGNMENT FORM




     To assign this Note, fill in the form below and have your signature guaranteed: (I) or (we)
assign and transfer this Note to:




 



(Insert assignee’s soc. sec. or tax ID. no.)




 



(Print or type assignee’s name, address and zip code)



and irrevocably appoint ___________________________ to transfer this Note on the books of the
Company. The agent may substitute another to act for him.



Dated:



Your Name:




 



(Print your name exactly as it appears on the face of this Note)



Your Signature:



__________________________



(Sign exactly as your name appears on the face of this Note)




SIGNATURE GUARANTEE*:






 




			
	*	 	The signature must be guaranteed by an institution which is a member of one of the following
recognized signature guaranty programs: (i) the Securities Transfer Agent Medallion Program
(STAMP); (ii) the New York Stock Exchange Medallion Program (MSP); (iii) the Stock Exchange
Medallion Program (SEMP); or (iv) such other guarantee program acceptable to the Trustee.




Exhibit 2 to App.-11









 










OPTION OF HOLDER TO ELECT PURCHASE




     If you want to elect to have this Note purchased, in whole or in part, by the Company pursuant
to Section 4.12 or 4.16 of the Indenture, check the following box:



o     Section 4.12          o     Section 4.16



     If you want to have only part of this Note purchased by the Company pursuant to Section 4.12
or 4.16 of the Indenture, state the Principal Amount you want to be purchased (in minimum
denomination of $2,000 or integral multiples of $1,000 in excess of $2,000): $________________



Your
Signature:________________________________________________________________________________ 
Date:____________




(Sign exactly as your name appears on the other side of this Note)




*Signature
guaranteed
by:  





By: ________________________






 




			
	*	 	The signature must be guaranteed by an
institution which is a member of one of the following recognized signature
guaranty programs: (i) the Securities Transfer Agent Medallion Program (STAMP);
(ii) the New York Stock Exchange Medallion Program (MSP); (iii) the Stock
Exchange Medallion Program (SEMP); or (iv) such other guaranty program
acceptable to the Trustee.




Exhibit 2 to App.-12









 










[FORM OF NOTATION OF GUARANTEE]




     Each of the Subsidiary Guarantors (which term includes any successor Person under the
Indenture) has fully, unconditionally and absolutely guaranteed, to the extent set forth in the
Indenture and subject to the provisions in the Indenture, the due and punctual payment of the
principal of, and premium, if any, and interest on the Notes and all other amounts due and payable
under the Indenture and the Notes by the Company.



     The obligations of the Subsidiary Guarantors to the Holders of Notes and to the Trustee
pursuant to the Guarantee and the Indenture are expressly set forth in Article X of the Indenture
and reference is hereby made to the Indenture for the precise terms of the Guarantee.




	 	 	 	 	 
	 	[NAME OF SUBSIDIARY GUARANTOR]
 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 




Exhibit 2 to App.-13









 





ANNEX A




 

 



FORM OF SUPPLEMENTAL INDENTURE




CARRIZO OIL & GAS, INC.,



the Subsidiary Guarantors named herein



and



WELLS FARGO BANK, NATIONAL ASSOCIATION,



as Trustee



 





8.625% Senior Notes due 2018



 

 














Annex-1









 






TABLE OF CONTENTS




	 	 	 	 	 	 	 

	ARTICLE ONE AGREEMENT TO BE BOUND	 	 	3	 
	 
	 	 	 	 	 	 
	SECTION 101

	 	Agreement to be Bound
	 	 	3	 
	 
	 	 	 	 	 	 
	ARTICLE TWO MISCELLANEOUS PROVISIONS	 	 	4	 
	 
	 	 	 	 	 	 
	SECTION 201

	 	Integral Part
	 	 	4	 
	SECTION 202

	 	General Definitions
	 	 	4	 
	SECTION 203

	 	Adoption, Ratification and Confirmation
	 	 	4	 
	SECTION 204

	 	Counterparts
	 	 	4	 
	SECTION 205

	 	Governing Law
	 	 	4	 






Annex-2









 






CARRIZO OIL & GAS, INC.




SUPPLEMENTAL INDENTURE



     THIS SUPPLEMENTAL INDENTURE, dated as of ________________, _______, among Carrizo Oil and Gas,
Inc., a Texas corporation (the “Company”), [__________] (the “Guaranteeing Subsidiary”), which is a
subsidiary of the Company, each of the existing Subsidiary Guarantors (as defined in the Indenture
referred to below) and Wells Fargo Bank, National Association (the “Trustee”).



WITNESSETH:




     WHEREAS, the Company, certain of its Subsidiaries and the Trustee heretofore executed and
delivered an Indenture, dated as of May 28, 2008 (as amended and supplemented by a Fourth
Supplemental Indenture among the Company, certain of its Subsidiaries, and the Trustee, dated as of
November 2, 2010, the “Indenture”), providing for the issuance of the Company’s 8.625% Senior Notes
due 2018 (the “Senior Notes”);



     WHEREAS, Section 4.15 of the Indenture provides that under certain circumstances a Restricted
Subsidiary of the Company that is not already a Subsidiary Guarantor shall execute and deliver to
the Trustee a supplemental indenture pursuant to which such Restricted Subsidiary shall become a
Subsidiary Guarantor; and



     WHEREAS, the Company, pursuant to the terms and provisions of the Indenture, proposes in and
by this Supplemental Indenture to supplement and amend the Indenture insofar as it will apply only
to the Senior Notes in certain respects;



     NOW, THEREFORE:



     To comply with the provisions of the Indenture and in consideration of the premises provided
for herein, the Guaranteeing Subsidiary, the Company, the existing Subsidiary Guarantors and the
Trustee mutually covenant and agree for the equal and proportionate benefit of all Holders of the
Notes as follows:



ARTICLE ONE



GUARANTEE


SECTION 101 Guarantee.




     The Guaranteeing Subsidiary hereby agrees by execution of this Supplemental Indenture, with
respect to the Senior Notes, to be bound by all of the provisions of the Indenture applicable to a
Subsidiary Guarantor to the extent provided for in Article X of the Indenture.



Annex-3









 





ARTICLE TWO




MISCELLANEOUS PROVISIONS


SECTION 201 Integral Part.




     This Supplemental Indenture constitutes an integral part of the Indenture.


SECTION 202 General Definitions.




     For all purposes of this Supplemental Indenture:



          (a) capitalized terms used herein without definition shall have the meanings
specified in the Indenture; and




          (b) the terms “herein,” “hereof,” “hereunder” and other words of similar import
refer to this Supplemental Indenture.



SECTION 203 Adoption, Ratification and Confirmation.




     The Indenture, as supplemented and amended by this Supplemental Indenture, is in all respects
hereby adopted, ratified and confirmed.


SECTION 204 Counterparts.




     This Supplemental Indenture may be executed in any number of counterparts, each of which when
so executed shall be deemed an original; and all such counterparts shall together constitute but
one and the same instrument.


SECTION 205 Governing Law.




     THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK.



Annex-4









 





     IN WITNESS WHEREOF, the parties hereto have caused this [          ] Supplemental
Indenture to be duly executed as of the day and year first written above.



	 	 	 	 	 
	 	CARRIZO OIL & GAS, INC.

 	 
	 	By:  	

 	 
	 	 	Name:  	Paul F. Boling 	 
	 	 	Title:  	Vice President and Chief Financial

Officer 	 
	 
	 	GUARANTEEING SUBSIDIARY



[_____________________________]

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	EXISTING SUBSIDIARY 

GUARANTORS1



WELLS FARGO BANK, NATIONAL 

ASSOCIATION, as Trustee

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 





 




			
	1	 	Insert signature blocks for each Subsidiary
Guarantor existing at the time of execution of this Supplemental Indenture.






Annex-5