exv4w1






EXHIBIT 4.1




 





MILAGRO OIL & GAS, INC.




AND EACH OF THE GUARANTORS PARTY HERETO



10.500% SENIOR SECURED SECOND LIEN NOTES DUE 2016



 





INDENTURE



Dated as of May 11, 2011



 





Wells Fargo Bank, N.A.



as Trustee



 




 









 





CROSS-REFERENCE TABLE*




	 	 	 
	Trust Indenture	 	 
	Act Section	 	Indenture Section
	310(a)(1)
	 	7.10
	(a)(2)
	 	7.10
	(a)(3)
	 	N.A.
	(a)(4)
	 	N.A.
	(a)(5)
	 	7.10
	(b)
	 	7.10
	(c)
	 	N.A.
	311(a)
	 	7.11
	(b)
	 	7.11
	(c)
	 	N.A.
	312(a)
	 	2.05
	(b)
	 	13.03
	(c)
	 	13.03
	313(a)
	 	7.06
	(b)(1)
	 	10.06
	(b)(2)
	 	7.06; 7.07
	(c)
	 	7.06; 10.06; 13.02
	(d)
	 	7.06
	314(a)
	 	4.03; 10.01; 13.02; 13.05
	(b)
	 	10.01; 10.02
	(c)(1)
	 	10.01; 13.04
	(c)(2)
	 	10.01; 13.04
	(c)(3)
	 	N.A.
	(d)
	 	10.01; 10.06
	(e)
	 	10.01; 13.05
	(f)
	 	N.A.
	315(a)
	 	7.01
	(b)
	 	7.05; 13.02
	(c)
	 	7.01
	(d)
	 	7.01
	(e)
	 	6.11
	316(a) (last sentence)
	 	2.09
	(a)(1)(A)
	 	6.05
	(a)(1)(B)
	 	6.04
	(a)(2)
	 	N.A.
	(b)
	 	6.07
	(c)
	 	2.12
	317(a)(1)
	 	6.08
	(a)(2)
	 	6.09
	(b)
	 	2.04
	318(a)
	 	13.01
	(b)
	 	N.A.
	(c)
	 	13.01






 












			
	N.A. means not applicable.
	 
	*	 	This Cross Reference Table is not part of the Indenture.




 









 










TABLE OF CONTENTS




	 	 	 	 	 
	 	 	Page	 
	ARTICLE 1

DEFINITIONS AND INCORPORATION

BY REFERENCE
	 
	 
	 	 	 	 
	Section 1.01 Definitions
	 	 	1	 
	Section 1.02 Other Definitions
	 	 	32	 
	Section 1.03 Incorporation by Reference of Trust Indenture Act
	 	 	33	 
	Section 1.04 Rules of Construction
	 	 	33	 
	 
	 	 	 	 
	ARTICLE 2
	 
	THE NOTES
	 
	 
	 	 	 	 
	Section 2.01 Form and Dating
	 	 	33	 
	Section 2.02 Execution and Authentication
	 	 	35	 
	Section 2.03 Registrar and Paying Agent
	 	 	35	 
	Section 2.04 Paying Agent to Hold Money in Trust
	 	 	35	 
	Section 2.05 Holder Lists
	 	 	36	 
	Section 2.06 Transfer and Exchange
	 	 	36	 
	Section 2.07 Replacement Notes
	 	 	48	 
	Section 2.08 Outstanding Notes
	 	 	49	 
	Section 2.09 Treasury Notes
	 	 	49	 
	Section 2.10 Temporary Notes
	 	 	49	 
	Section 2.11 Cancellation
	 	 	49	 
	Section 2.12 Defaulted Interest
	 	 	50	 
	 
	 	 	 	 
	ARTICLE 3

REDEMPTION AND PREPAYMENT
	 
	 
	 	 	 	 
	Section 3.01 Notices to Trustee
	 	 	50	 
	Section 3.02 Selection of Notes to Be Redeemed or Purchased
	 	 	50	 
	Section 3.03 Notice of Redemption
	 	 	51	 
	Section 3.04 Effect of Notice of Redemption
	 	 	51	 
	Section 3.05 Deposit of Redemption or Purchase Price
	 	 	51	 
	Section 3.06 Notes Redeemed or Purchased in Part
	 	 	52	 
	Section 3.07 Optional Redemption
	 	 	52	 
	Section 3.08 Mandatory Redemption
	 	 	53	 
	Section 3.09 Offer to Purchase by Application of Excess Proceeds
	 	 	53	 
	 
	 	 	 	 
	ARTICLE 4

	 
	
COVENANTS
	 
	 
	 	 	 	 
	Section 4.01 Payment of Notes
	 	 	55	 
	Section 4.02 Maintenance of Office or Agency
	 	 	55	 
	Section 4.03 Reports
	 	 	56	 
	Section 4.04 Compliance Certificate
	 	 	57	 
	Section 4.05 Taxes
	 	 	57	 
	Section 4.06 Stay, Extension and Usury Laws
	 	 	57	 
	Section 4.07 Restricted Payments
	 	 	58	 
	Section 4.08 Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries
	 	 	61	 
	Section 4.09 Incurrence of Indebtedness and Issuance of Preferred Stock
	 	 	63	 
	Section 4.10 Asset Sales
	 	 	67	 






 









 






	 	 	 	 	 
	 	 	Page	 
	Section 4.11 Transactions with Affiliates
	 	 	68	 
	Section 4.12 Liens
	 	 	70	 
	Section 4.13 Business Activities
	 	 	70	 
	Section 4.14 Corporate Existence
	 	 	70	 
	Section 4.15 Offer to Repurchase Upon Change of Control
	 	 	70	 
	Section 4.16 Limitation on Sale and Leaseback Transactions
	 	 	72	 
	Section 4.17 Limitation on Issuances and Sales of Equity Interests in Wholly-Owned Restricted
Subsidiaries
	 	 	72	 
	Section 4.18 Payments for Consent
	 	 	73	 
	Section 4.19 Additional Note Guarantees
	 	 	73	 
	Section 4.20 Designation of Restricted and Unrestricted Subsidiaries
	 	 	73	 
	 
	 	 	 	 
	ARTICLE 5

	 
	
SUCCESSORS
	 
	 
	 	 	 	 
	Section 5.01 Merger, Consolidation or Sale of Assets
	 	 	74	 
	Section 5.02 Successor Corporation Substituted
	 	 	75	 
	 
	 	 	 	 
	ARTICLE 6

	 
	
DEFAULTS AND REMEDIES
	 
	 
	 	 	 	 
	Section 6.01 Events of Default
	 	 	76	 
	Section 6.02 Acceleration
	 	 	78	 
	Section 6.03 Other Remedies
	 	 	78	 
	Section 6.04 Waiver of Past Defaults
	 	 	79	 
	Section 6.05 Control by Majority
	 	 	79	 
	Section 6.06 Limitation on Suits
	 	 	79	 
	Section 6.07 Rights of Holders of Notes to Receive Payment
	 	 	79	 
	Section 6.08 Collection Suit by Trustee
	 	 	80	 
	Section 6.09 Trustee May File Proofs of Claim
	 	 	80	 
	Section 6.10 Priorities
	 	 	80	 
	Section 6.11 Undertaking for Costs
	 	 	81	 
	 
	 	 	 	 
	ARTICLE 7

	 
	
TRUSTEE
	 
	 
	 	 	 	 
	Section 7.01 Duties of Trustee
	 	 	81	 
	Section 7.02 Rights of Trustee
	 	 	82	 
	Section 7.03 Individual Rights of Trustee
	 	 	82	 
	Section 7.04 Trustee’s Disclaimer
	 	 	83	 
	Section 7.05 Notice of Defaults
	 	 	83	 
	Section 7.06 Reports by Trustee to Holders of the Notes
	 	 	83	 
	Section 7.07 Compensation and Indemnity
	 	 	83	 
	Section 7.08 Replacement of Trustee
	 	 	84	 
	Section 7.09 Successor Trustee by Merger, etc.
	 	 	85	 
	Section 7.10 Eligibility; Disqualification
	 	 	85	 
	Section 7.11 Preferential Collection of Claims Against Company
	 	 	85	 
	 
	 	 	 	 
	ARTICLE 8

LEGAL DEFEASANCE AND COVENANT DEFEASANCE
	 
	 
	 	 	 	 
	Section 8.01 Option to Effect Legal Defeasance or Covenant Defeasance
	 	 	85	 
	Section 8.02 Legal Defeasance and Discharge
	 	 	85	 
	Section 8.03 Covenant Defeasance
	 	 	86	 
	Section 8.04 Conditions to Legal or Covenant Defeasance
	 	 	87	 






ii









 






	 	 	 	 	 
	 	 	Page	 
	Section 8.05 Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous
Provisions
	 	 	88	 
	Section 8.06 Repayment to Company
	 	 	88	 
	Section 8.07 Reinstatement
	 	 	88	 
	 
	 	 	 	 
	ARTICLE 9

AMENDMENT, SUPPLEMENT AND WAIVER
	 
	 
	 	 	 	 
	Section 9.01 Without Consent of Holders of Notes
	 	 	89	 
	Section 9.02 With Consent of Holders of Notes
	 	 	90	 
	Section 9.03 Compliance with Trust Indenture Act
	 	 	91	 
	Section 9.04 Revocation and Effect of Consents
	 	 	91	 
	Section 9.05 Notation on or Exchange of Notes
	 	 	91	 
	Section 9.06 Trustee to Sign Amendments, etc.
	 	 	92	 
	 
	 	 	 	 
	ARTICLE 10

	 
	
COLLATERAL AND SECURITY
	 
	 
	 	 	 	 
	Section 10.01 Security Interest
	 	 	92	 
	Section 10.02 Intercreditor Agreement
	 	 	93	 
	Section 10.03 Collateral Trust Agreement
	 	 	93	 
	Section 10.04 Equal and Ratable Sharing of Collateral by Holders of Parity Lien Debt
	 	 	93	 
	Section 10.05 Ranking of Parity Liens
	 	 	94	 
	Section 10.06 Release of Liens in Respect of Notes
	 	 	95	 
	Section 10.07 Relative Rights
	 	 	95	 
	Section 10.08 Collateral Trustee
	 	 	96	 
	Section 10.09 Further Assurances; Liens on Additional Property
	 	 	96	 
	Section 10.10 Insurance
	 	 	97	 
	 
	 	 	 	 
	ARTICLE 11

	 
	
NOTE GUARANTEES
	 
	 
	 	 	 	 
	Section 11.01 Guarantee
	 	 	97	 
	Section 11.02 Limitation on Guarantor Liability
	 	 	98	 
	Section 11.03 Execution and Delivery of Note Guarantee
	 	 	99	 
	Section 11.04 Guarantors May Consolidate, etc., on Certain Terms
	 	 	99	 
	Section 11.05 Releases
	 	 	100	 
	 
	 	 	 	 
	ARTICLE 12

	 
	
SATISFACTION AND DISCHARGE
	 
	 
	 	 	 	 
	Section 12.01 Satisfaction and Discharge
	 	 	101	 
	Section 12.02 Application of Trust Money
	 	 	102	 
	 
	 	 	 	 
	ARTICLE 13

	 
	
MISCELLANEOUS
	 
	 
	 	 	 	 
	Section 13.01 Trust Indenture Act Controls
	 	 	102	 
	Section 13.02 Notices
	 	 	102	 
	Section 13.03 Communication by Holders of Notes with Other Holders of Notes
	 	 	103	 
	Section 13.04 Certificate and Opinion as to Conditions Precedent
	 	 	103	 
	Section 13.05 Statements Required in Certificate or Opinion
	 	 	103	 
	Section 13.06 Rules by Trustee and Agents
	 	 	104	 
	Section 13.07 No Personal Liability of Directors, Officers, Employees and Stockholders
	 	 	104	 
	Section 13.08 Governing Law
	 	 	104	 
	Section 13.09 No Adverse Interpretation of Other Agreements
	 	 	104	 






iii









 






	 	 	 	 	 
	 	 	Page	 
	Section 13.10 Successors
	 	 	104	 
	Section 13.11 Severability
	 	 	105	 
	Section 13.12 Counterpart Originals
	 	 	105	 
	Section 13.13 Table of Contents, Headings, etc.
	 	 	105	 






	 	 	 	 	 

	EXHIBITS
	 	 	 	 
	 
	 	 	 	 
	Exhibit A1          FORM OF NOTE
	 	 	 	 
	Exhibit A2          FORM OF REGULATION S TEMPORARY GLOBAL NOTE
	 	 	 	 
	Exhibit B            FORM OF CERTIFICATE OF TRANSFER
	 	 	 	 
	Exhibit C            FORM OF CERTIFICATE OF EXCHANGE
	 	 	 	 
	Exhibit D            FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
	 	 	 	 
	Exhibit E            FORM OF NOTATION OF GUARANTEE
	 	 	 	 
	Exhibit F            FORM OF SUPPLEMENTAL INDENTURE
	 	 	 	 






iv









 






     INDENTURE dated as of May 11, 2011 among Milagro Oil & Gas, Inc., a Delaware corporation, the
Guarantors (as defined) and Wells Fargo Bank, N.A., as trustee.



     The Company, the Guarantors and the Trustee agree as follows for the benefit of each other and
for the equal and ratable benefit of the Holders (as defined) of the Company’s 10.500% Senior
Secured Second Lien Notes due 2016 (the “Notes”):



ARTICLE 1

DEFINITIONS AND INCORPORATION

BY REFERENCE



Section 1.01 Definitions.




     “144A Global Note” means a Global Note substantially in the form of Exhibit A1 hereto bearing
the Global Note Legend and the Private Placement Legend and deposited with or on behalf of, and
registered in the name of, the Depositary or its nominee that will be issued in a denomination
equal to the outstanding principal amount of the Notes sold in reliance on Rule 144A.



     “Acquired Debt” means, with respect to any specified Person:




     (1) Indebtedness of any other Person existing at the time such other Person is merged
with or into or became a Subsidiary of such specified Person, whether or not such
Indebtedness is incurred in connection with, or in contemplation of, such other Person
merging with or into, or becoming a Restricted Subsidiary of, such specified Person; and




     (2) Indebtedness secured by a Lien encumbering any asset acquired by such specified
Person.



     “Act of Parity Lien Debtholders” means, as to any matter at any time, a direction
in writing delivered to the Collateral Trustee by or with the written consent of the holders of
Parity Lien Debt representing the Required Parity Lien Debtholders.



     “Additional Notes” means additional Notes (other than the Initial Notes) issued under this
Indenture in accordance with Sections 2.02 and 4.09 hereof, as part of the same series as the
Initial Notes.



     “Additional Secured Debt Designation” means the written agreement of the holders of any Series
of Parity Lien Debt, as set forth in the indenture, credit agreement or other agreement governing
such Series of Parity Lien Debt, for the benefit of, and enforceable by, all holders of each
existing and future Series of Priority Lien Debt, the Priority Lien Collateral Agent and each
existing and future holder of Permitted Prior Liens:




     (1) that all Parity Lien Obligations will be and are secured equally and ratably by all
Parity Liens at any time granted by the Company or any Guarantor to secure any Obligations
in respect of such Series of Parity Lien Debt, whether or not upon property otherwise
constituting collateral for such Series of Parity Lien Debt, and that all such Parity Liens
will be enforceable by the Collateral Trustee for the benefit of all holders of Parity Lien
Obligations equally and ratably;




     (2) that the holders of Obligations in respect of such Series of Parity Lien Debt are
bound by the provisions of the Collateral Trust Agreement, including the provisions relating
to the ranking of Parity Liens and the order of application of proceeds from the enforcement
of Parity Liens; and



1









 






     (3) consenting to and directing the Collateral Trustee to perform its obligations under
the Collateral Trust Agreement and the other Collateral Documents.



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




     (1) the sum of:




          (a) the discounted future net revenues from proved oil and natural gas reserves of the
Company and its Restricted Subsidiaries calculated in accordance with SEC guidelines (but
giving effect to applicable Oil and Gas Hedging Agreements in place as of the date of
determination (whether positive or negative)), before any state or federal income taxes, as
estimated by the Company and reviewed by independent petroleum engineers in a reserve report
prepared as of the end of the Company’s most recently completed fiscal year for which
audited financial statements are available, as increased by, as of the date of
determination, the discounted future net revenues, calculated in accordance with SEC
guidelines, but giving effect to applicable Oil and Gas Hedging Agreements in place as of
the date of determination (whether positive or negative), from




     (A) estimated proved oil and natural gas reserves of the Company and its
Restricted Subsidiaries acquired since the date of such year-end reserve report; and




     (B) estimated oil and natural gas reserves of the Company and its Restricted
Subsidiaries attributable to extensions, discoveries and other additions and upward
revisions of estimates of proved oil and natural gas reserves (including previously
estimated development costs incurred during the period and the accretion of discount
since the prior period end) since the date of such year-end reserve report due to
exploration, development or exploitation, production or other activities which
would, in accordance with standard industry practice, cause such revisions;




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




     (C) estimated proved oil and natural gas reserves of the Company and its
Restricted Subsidiaries reflected in such reserve report produced or disposed of
since the date of such year-end reserve report; and




     (D) reductions in estimated oil and natural gas reserves of the Company and its
Restricted Subsidiaries reflected in such reserve report attributable to downward
revisions of estimates of proved oil and natural gas reserves since such year-end
due to changes in geological conditions or other factors which would, in accordance
with standard industry practice, cause such revisions;




in the case of each of the determinations made pursuant to clauses (A) through (D)
utilizing prices and costs calculated in accordance with SEC guidelines as if the
end of the most recent fiscal quarter preceding the date of determination for which
such information is available to the Company were year end; provided, however, that
in the case of each of the determinations made pursuant to clauses (A) through (D),
such increases and decreases shall be as estimated by the Company’s petroleum
engineers;



2









 






          (b) the capitalized costs that are attributable to Oil and Gas Properties of the
Company and its Restricted Subsidiaries to which no proved oil and natural gas reserves are
attributable, based on the Company’s books and records as of a date no earlier than the date
of the Company’s most recently available internal quarterly financial statements;




          (c) the Consolidated Net Working Capital of the Company as of a date no earlier than
the date of the Company’s most recently available internal quarterly financial statements;
and




          (d) the greater of




     (A) the net book value as of a date no earlier than the date of the Company’s
most recently available internal quarterly financial statements, and




     (B) the appraised value, as estimated by independent appraisers, of other
tangible assets (including Investments in unconsolidated Subsidiaries) of the
Company and its Restricted Subsidiaries, in either case, as of a date no earlier
than the date of the Company’s most recently available internal quarterly financial
statements; provided that if no such appraisal has been performed the Company shall
not be required to obtain such an appraisal and only clause (d)(A) of this
definition shall apply,




minus




     (2) the sum of:




          (a) minority interests;




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




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




          (d) the discounted future net revenues, 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 revenues specified in (1)(a) above, would be necessary to fully satisfy the
payment obligations of the Company and its consolidated 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” 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



3









 




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; provided that
beneficial ownership of 10% or more of the Voting Stock of a Person will be deemed to be control.
For purposes of this definition, the terms “controlling,” “controlled by” and “under common control
with” have correlative meanings.




     “Agent” means any Registrar, co-registrar, Paying Agent or additional paying agent.



     “Applicable Premium” means, with respect to any Note on any redemption date, the greater of:




     (1) 1.0% of the principal amount of the Note; or




     (2) the excess of: (a) the present value at such redemption date of (i) the redemption
price of the Note at May 15, 2014 (such redemption price being set forth in the table
appearing in Section 3.07 hereof) plus (ii) all required interest payments due on the Note
from such redemption date through May 15, 2014 (excluding accrued but unpaid interest to the
redemption date), computed using a discount rate equal to the Treasury Rate as of such
redemption date plus 50 basis points; over (b) the principal amount of the Note.



     Calculation of the Applicable Premium will be made by the Company or on behalf of the Company
by such Person as the Company shall designate, and in any event, such calculation shall not be a
duty or obligation of the Trustee. The Company will deliver an Officers’ Certificate to the Trustee
prior to the applicable redemption date advising the Trustee of the Applicable Premium, together
with the basis for such calculation in reasonable detail.



     “Applicable Procedures” means, with respect to any transfer or exchange of or for beneficial
interests in any Global Note, the rules and procedures of the Depositary, Euroclear and Clearstream
that apply to such transfer or exchange.



     “Asset Sale” means:




     (1) the sale, lease, conveyance or other disposition of any assets or rights by the
Company or any of the Company’s Restricted Subsidiaries; provided that the sale, lease,
conveyance or other disposition of all or substantially all of the assets of the Company and
its Restricted Subsidiaries taken as a whole will be governed by Section 4.15 and/or Section
5.01 hereof and not by Section 4.10 hereof; and




     (2) the issuance of Equity Interests by any of the Company’s Restricted Subsidiaries or
the sale by the Company or any of the Company’s Restricted Subsidiaries of Equity Interests
in any of the Company’s Subsidiaries.



     Notwithstanding the preceding, none of the following items will be deemed to be an Asset Sale:




     (3) any single transaction or series of related transactions that involves assets
having a Fair Market Value of less than $5.0 million;




     (4) a transfer of assets between or among the Company and its Restricted Subsidiaries;




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



4









 






     (6) the sale or other disposition of surplus, damaged, unserviceable, worn-out or
obsolete assets in the ordinary course of business;




     (7) licenses and sublicenses by the Company or any of its Restricted Subsidiaries of
intellectual property, including, without limitation, licenses for seismic data, in the
ordinary course of business and which do not materially interfere with the business of the
Company and its Restricted Subsidiaries;




     (8) any surrender or waiver of contract rights or settlement, release, recovery on or
surrender of contract, tort or other claims in the ordinary course of business and the
liquidation of any assets received in settlement of claims owed to the Company or any of its
Restricted Subsidiaries;




     (9) the granting of Liens not prohibited by the covenant described in Section 4.12
hereof;




     (10) the sale or other disposition of cash or Cash Equivalents;




     (11) a Restricted Payment (or any transaction that would be a Restricted Payment but
for an exclusion from the definition thereof) that does not violate Section 4.07 hereof or a
Permitted Investment;




     (12) the sale or transfer of Hydrocarbons or other mineral products in the ordinary
course of business;




     (13) the trade or exchange by the Company or any Restricted Subsidiary of any oil and
gas lease, oil or gas property or interest therein and any related assets owned or held by
the Company or such Restricted Subsidiary or the capital stock of a Subsidiary for (a) any
oil and gas lease, oil or gas property or interest therein and any related assets owned or
held by another Person or (b) the Capital Stock of another Person that becomes a Restricted
Subsidiary as a result of such trade or exchange or the Capital Stock of another Person that
is a joint venture, partnership or other similar entity, in each case all or substantially
all of whose assets consist of crude oil or natural gas properties, including in the case of
either of clauses (a) or (b), any cash or cash equivalents necessary in order to achieve an
exchange of equivalent value; provided, however, that (i) the property is useful, or the
Person that becomes a Restricted Subsidiary is engaged, in the Oil and Gas Business and (ii)
the value of the property or Capital Stock received by the Company or any Restricted
Subsidiary in such trade or exchange (including any cash or cash Equivalents) is
substantially equal to the Fair Market Value of the property (including any cash or cash
equivalents so traded or exchanged);




     (14) the abandonment, farm-out, lease, sublease or other disposition of developed or
undeveloped Oil and Gas Properties and related equipment in the ordinary course of business;
and




     (15) any issuance or sale of Capital Stock of the Company.



     “Attributable Debt” in respect of a sale and 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 and 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; provided, however, that if such sale and
leaseback transaction



5









 




results in a Capital Lease Obligation, the amount of Indebtedness represented thereby will be
determined in accordance with the definition of “Capital Lease Obligation.”




     “Banking Services” means each and any of the following bank services provided to the Company
or any Restricted Subsidiary by any lender under the Credit Agreement or affiliate thereof: (a)
commercial credit cards, (b) stored value cards and (c) treasury management services (including
controlled disbursement, automated clearinghouse transactions, return items, overdrafts and
interstate depository network services).



     “Banking Services Obligations” means any and all obligations of the Company or any Restricted
Subsidiary, whether absolute or contingent and howsoever and whensoever created, arising, evidenced
or acquired (including all renewals, extensions and modifications thereof and substitutions
therefor) in connection with Banking Services.



     “Bankruptcy Law” means Title 11, U.S. Code or any similar federal or state law for the relief
of debtors.



     “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 after the passage of time. The terms “Beneficially Owns” and “Beneficially Owned”
have a corresponding meaning.



     “Board of Directors” means:




     (1) with respect to a corporation, the board of directors of the corporation or any
committee thereof duly authorized to act on behalf of such board;




     (2) with respect to a partnership, the Board of Directors of the general partner of the
partnership;




     (3) with respect to a limited liability company, the manager or managers, or if there
are no managers of such limited liability company, the managing member or members or any
controlling committee of managers or managing members thereof, as the case may be; and




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



     “Broker-Dealer” has the meaning set forth in the Registration Rights Agreement.



     “Business Day” means any day other than a Legal Holiday.



     “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 prepared 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.




6









 





     “Capital Stock” means:




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




     (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,
whether or not 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) certificates of deposit and eurodollar time deposits with maturities of one year or
less from the date of acquisition, bankers’ acceptances with maturities not exceeding one
year, overnight bank deposits, and demand and time deposits, in each case, with any lender
party to the Credit Agreement or another Credit Facility or with any domestic commercial
bank having capital and surplus in excess of $500.0 million and a Thomson Bank Watch Rating
of “B” or better;




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




     (5) 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




     (6) money market funds at least 95% of the assets of which constitute Cash Equivalents
of the kinds described in clauses (1) through (5) 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 properties or assets of the Company and its Subsidiaries
taken as a whole to any Person (including any “person” (as that term is used in Section
13(d)(3) of the Exchange Act));




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



7









 






     (3) the consummation of any transaction (including, without limitation, any merger or
consolidation), the result of which is that any Person (including any “person” as defined
above), other than Milagro Holdings, LLC or any Permitted Holder, becomes the Beneficial
Owner, directly or indirectly, of more than 50% of the Voting Stock of the Company, measured
by voting power rather than number of shares; or




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



     “Clearstream” means Clearstream Banking, S.A.



     “Collateral” means all properties and assets at any time owned or acquired by the Company or
any of the Guarantors (or, in the case of the Company’s and the Guarantors’ Oil and Gas Properties,
all Oil and Gas Properties that secure the Priority Lien Obligations, but in any event not less
than 80% of the total Recognized Value of the Company’s and the Guarantors’ proved Oil and Gas
Properties located in the United States or in adjacent Federal waters), except:




     (1) Excluded Assets;




     (2) any properties and assets in which the Collateral Trustee is required to release
its Liens pursuant to Section 4.01 of the Intercreditor Agreement and Section 4.1 of the
Collateral Trust Agreement; and




     (3) any properties and assets that no longer secure the Notes or any Obligations in
respect thereof pursuant to Section 4.01 of the Intercreditor Agreement and Section 4.4 of
the Collateral Trust Agreement,


provided that, in the case of clauses (2) and (3), if such Liens are required to be released as a
result of the sale, transfer or other disposition of any properties or assets of the Company or any
Guarantor, such assets or properties will cease to be excluded from the Collateral if the Company
or any Guarantor thereafter acquires or reacquires such assets or properties.




     “Collateral Documents” means the Collateral Trust Agreement, each Collateral Trust Joinder,
and all security agreements, pledge agreements, collateral assignments, mortgages, deeds of trust,
collateral agency agreements, control agreements or other grants or transfers for security executed
and delivered by the Company or any Guarantor creating (or purporting to create) a Lien upon
Collateral in favor of the Collateral Trustee, in each case, as amended, modified, renewed,
restated or replaced, in whole or in part, from time to time, in accordance with its terms and the
provisions of the Collateral Trust Agreement.



     “Collateral Trust Agreement” means the Collateral Trust Agreement, dated as of the date of
this Indenture, among the Company, the Guarantors from time to time party thereto, the Trustee, the
other Parity Lien Representatives from time to time party thereto and the Collateral Trustee, as
amended, restated, adjusted, waived, renewed, extended, supplemented or otherwise modified from
time to time.



     “Collateral Trustee” means Wells Fargo Bank, N.A., in its capacity as collateral trustee under
the Collateral Trust Agreement, together with its successors in such capacity.



     “Collateral Trust Joinder” has the meaning set forth in the Collateral Trust Agreement.



     “Company” means Milagro Oil & Gas, Inc., and any and all successors thereto.



8









 





     “Consolidated EBITDA” 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 extraordinary or non-recurring loss plus 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




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




     (5) non-cash items increasing such Consolidated Net Income for such period, other than
the accrual of revenue in the ordinary course of business,


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 (loss) of such Person and its Restricted Subsidiaries for such period,
on a consolidated basis (excluding the net income (loss) of any Unrestricted Subsidiary of such
Person), determined in accordance with GAAP and without any reduction in respect of preferred stock
dividends; provided that:




     (1) all extraordinary or non-recurring gains (but not losses) and all gains (but not
losses) realized in connection with any Asset Sale or the disposition of securities or the
early extinguishment of Indebtedness, together with any related provision for taxes on any
such gain, will be excluded;




     (2) the net income (but not loss) of any Person that is not a Restricted Subsidiary
will be included only to the extent of the amount of dividends or similar distributions paid
in cash to the specified Person or a Restricted Subsidiary of the Person;




     (3) the net income (but not loss) of any Restricted Subsidiary 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;



9









 






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




     (5) non-cash gains and losses attributable to movement in the mark-to-market valuation
of Hedging Obligations pursuant to Financial Accounting Standards Board Statement No. 133
will be excluded;




     (6) any non-cash compensation charge arising from any grant of stock, stock options or
other equity based awards will be excluded; provided that the proceeds resulting from any
such grant will be excluded from clause (z)(B) of Section 4.07(a) hereof;




     (7) any asset impairment writedowns of Oil and Gas Properties under GAAP or SEC
guidelines will be excluded; and




     (8) any after-tax effect of income (loss) from the early extinguishment of Indebtedness
will be excluded.



     “Consolidated Net Working Capital” of any Person as of any date of determination means the
difference (shown on the balance sheet of such Person and its Subsidiaries determined on a
consolidated basis in accordance with GAAP as of the end of the most recent fiscal quarter of such
Person for which internal financial statements are available) between (i) all current assets of
such Person and its Subsidiaries (other than current assets arising out of any agreement related to
the Company’s or any Resticted Subsidiary’s Hedging Obligations) and (ii) all current liabilities
of such Person and its Subsidiaries except the current portion of long-term Indebtedness and
current liabilities arising out of any agreement related to the Company’s or any Resticted
Subsidiary’s Hedging Obligations.



     “continuing” means, with respect to any Default or Event of Default, that such Default or
Event of Default has not been cured or waived.



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




     (1) was a member of such Board of Directors on the date of this Indenture; or




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



     “Corporate Trust Office of the Trustee” will be at the address of the Trustee specified in
Section 13.02 hereof or such other address as to which the Trustee may give notice to the Company.



     “Credit Agreement” means that certain Credit Agreement, to be entered into on or before the
date of this Indenture, by and among Milagro Exploration, LLC, Milagro Producing LLC, the Company,
the lenders party thereto from time to time, and Wells Fargo Bank, N.A., as administrative agent,
swing line lender and issuer of letters of credit, providing for up to $300 million of revolving
credit borrowings, including any related notes, Guarantees, collateral documents, instruments and
agreements executed in connection therewith, and, in each case, as amended, restated, modified,
renewed, refunded, replaced in any manner (whether upon or after termination or otherwise) or
refinanced (including by means of sales of debt securities to institutional investors) in whole or
in part from time to time.



     “Credit Agreement Agent” means, at any time, the Person serving at such time as the “Agent” or
“Administrative Agent” under the Credit Agreement or any other representative then most recently



10









 




designated in accordance with the applicable provisions of the Credit Agreement, together with
its successors in such capacity.




     “Credit Facilities” means, one or more debt facilities (including, without limitation, the
Credit Agreement) or commercial paper facilities, in each case, with banks or other institutional
lenders 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) or letters of credit, in each case, as amended, restated,
modified, renewed, refunded, replaced in any manner (whether upon or after termination or
otherwise) or refinanced (including by means of sales of debt securities to institutional
investors) in whole or in part from time to time.



     “Custodian” means the Trustee, as custodian with respect to the Notes in global form, or any
successor entity thereto.



     “Default” means any event that is, or with the passage of time or the giving of notice or both
would be, an Event of Default.



     “Definitive Note” means a certificated Note registered in the name of the Holder thereof and
issued in accordance with Section 2.06 hereof, substantially in the form of Exhibit A1 hereto
except that such Note shall not bear the Global Note Legend and shall not have the “Schedule of
Exchanges of Interests in the Global Note” attached thereto.



     “Depositary” means, with respect to the Notes issuable or issued in whole or in part in global
form, the Person specified in Section 2.03 hereof as the Depositary with respect to the Notes, and
any and all successors thereto appointed as depositary hereunder and having become such pursuant to
the applicable provision of this Indenture.



     “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
date on which the Notes mature. 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 such Capital Stock upon the occurrence of a change of control
or an asset sale will not constitute Disqualified Stock if 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 4.07 hereof. The 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 or that
guarantees or otherwise provides direct credit support for any Indebtedness of the Company.



11









 





     “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 a public or private sale either (1) of Equity Interests of the Company
by the Company (other than Disqualified Stock and other than to a Subsidiary of the Company) or (2)
of Equity Interests of a direct or indirect parent entity of the Company (other than to the Company
or a Subsidiary of the Company) to the extent that the net proceeds therefrom are contributed to
the common equity capital of the Company.



     “Euroclear” means Euroclear Bank, S.A./N.V., as operator of the Euroclear system.



     “Exchange Act” means the Securities Exchange Act of 1934, as amended.



     “Exchange Notes” means the Notes issued in the Exchange Offer pursuant to Section 2.06(f)
hereof.



     “Exchange Offer” has the meaning set forth in the Registration Rights Agreement.



     “Exchange Offer Registration Statement” has the meaning set forth in the Registration Rights
Agreement.



     “Excluded Assets” means:




     (1) any lease (other than an oil and gas lease), license, contract or agreement to
which the Company or any Guarantor is a party or any of its rights or interests thereunder
if and only for so long as the grant of a Lien under the security documents will constitute
or result in a termination under, or a default or breach thereof that would give the other
party thereto the right to terminate, any such lease, license, contract or agreement (other
than to the extent that any such term would be rendered ineffective pursuant to Sections
9-406, 9-407, 9-408 or 9-409 of the Uniform Commercial Code of any relevant jurisdiction or
any other applicable law or principles of equity); provided that such lease, license,
contract or agreement will cease to be an Excluded Asset immediately and automatically, at
such time as such consequences will no longer result;




     (2) the Capital Stock of any Foreign Subsidiary to the extent that the voting power of
such Capital Stock aggregates to more than 65% of the voting power of such Foreign
Subsidiary or the Capital Stock of any Subsidiary of a Foreign Subsidiary;




     (3) the Capital Stock of any Subsidiary to the extent (and only to the extent) that, in
the reasonable judgment of the Company, if such Capital Stock were not excluded from the
Collateral then Rule 3-16 or Rule 3-10 of Regulation S-X under the Securities Act would
require the filing of separate financial statements of such Subsidiary with the SEC (or any
other governmental agency) in connection with a registration of the Notes under the
Securities Act;




     (4) fixed or capital assets owned by the Company or any Guarantor that is subject to a
purchase money Lien or a capital lease if the contractual obligation pursuant to which such
Lien is granted (or in the document providing for such capital lease) prohibits or requires
the consent of any Person other than the Company or any of its Affiliates as a condition to
the creation of any other Lien on such fixed or capital assets; and



12









 






     (5) other property or assets owned by the Company or any Guarantor that is not secured
by Liens for the benefit of any Priority Lien Obligations.



     “Existing Indebtedness” means all Indebtedness of the Company and its Subsidiaries (other than
Indebtedness under the Credit Agreement) in existence on the date of this Indenture, until such
amounts are repaid.



     “Fair Market Value” means the value that would be paid by a willing buyer to an unaffiliated
willing seller in a transaction not involving distress or necessity of either party, determined in
good faith by the Board of Directors of the Company.



     “Fixed Charge Coverage Ratio” means with respect to any specified Person for any period, the
ratio of the Consolidated EBITDA 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 borrowings pursuant to any working capital or other revolving facility) or
issues, repurchases or redeems preferred stock subsequent to the commencement of the period for
which the Fixed Charge Coverage Ratio is being calculated 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 (in
accordance with Regulation S-X under the Securities Act) 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 or consolidations, or any Person or any of its
Restricted Subsidiaries acquired by the specified Person or any of its Restricted
Subsidiaries, and including all related financing transactions and including increases in
ownership of Restricted Subsidiaries, during the four-quarter reference period or subsequent
to such reference period and on or prior to the Calculation Date, or that are to be made on
the Calculation Date, will be given pro forma effect (in accordance with Regulation S-X
under the Securities Act) as if they had occurred on the first day of the four-quarter
reference period;




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




     (3) the Fixed Charges attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses (and ownership interests therein)
disposed of on or 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 on the Calculation Date will be deemed
to have been a Restricted Subsidiary at all times during such four-quarter period;




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



13









 






     (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 Hedging Obligation
applicable to such Indebtedness if such Hedging Obligation 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, 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 Hedging Obligations in respect of interest rates; plus




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




     (3) any interest 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; plus




     (4) all dividends paid in cash on any series of preferred stock of such Person or any
of its Restricted Subsidiaries.



     “Foreign Subsidiary” means any Restricted Subsidiary of the Company that is not a Domestic
Subsidiary.



     “GAAP” means generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as have been approved by a significant segment of the
accounting profession, which are in effect from time to time.



     “Global Note Legend” means the legend set forth in Section 2.06(g)(2) hereof, which is
required to be placed on all Global Notes issued under this Indenture.



     “Global Notes” means, individually and collectively, each of the Restricted Global Notes and
the Unrestricted Global Notes deposited with or on behalf of and registered in the name of the
Depository or its nominee, substantially in the form of Exhibit A1 hereto and that bears the Global
Note Legend and that has the “Schedule of Exchanges of Interests in the Global Note” attached
thereto, issued in accordance with Section 2.01, 2.06(b)(3), 2.06(b)(4), 2.06(d)(2), 2.06(f) or
2.06(g) hereof.



     “Government Securities” means direct obligations of, or obligations guaranteed by, the United
States of America, and the payment for which the United States pledges its full faith and credit.



     “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



14









 




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 (whether arising by virtue of
partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or
services, to take or pay or to maintain financial statement conditions or otherwise).




     “Guarantors” means:




     (1) each of the Company’s Domestic Subsidiaries as of the Issue Date;




     (2) each of the Company’s Domestic Subsidiaries that becomes a guarantor of the Notes
pursuant to Section 4.19 hereof; and




     (3) each of the Company’s other Restricted Subsidiaries executing a supplemental
indenture in which such Restricted Subsidiary agrees to guarantee the obligations of the
Company under, or to be bound by the terms of this Indenture;


provided that any Person constituting a Guarantor as described above shall cease to constitute a
Guarantor when its respective Subsidiary Guarantee is released in accordance with the terms of this
Indenture.




     “Guarantor Subordinated Obligation” means, with respect to a Guarantor, any Indebtedness of
such Guarantor which is expressly subordinate in right of payment to the obligations of such
Guarantor under its Note Guarantee pursuant to a written agreement.



     “Hedge Agreement” means any Interest Rate Agreement or any Oil and Gas Hedging Agreement;
provided that (i) the obligations under such agreement constitute Priority Lien Obligations
pursuant to the Credit Agreement or (ii) the obligations under such agreement have been designated
as Priority Lien Obligations pursuant to the Intercreditor Agreement and the counterparty has
delivered a joinder in respect thereof.



     “Hedging Obligations” means, with respect to any specified Person, the obligations of such
Person under any (a) Interest Rate Agreement and (b) Oil and Gas Hedging Agreement.



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



     “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.



     “IAI Global Note” means a Global Note substantially in the form of Exhibit A1 hereto bearing
the Global Note Legend and the Private Placement Legend and deposited with or on behalf of and
registered in the name of the Depositary or its nominee that will be issued in a denomination equal
to the outstanding principal amount of the Notes sold to Institutional Accredited Investors.



     “Immaterial Subsidiary” means, as of any date, any Restricted Subsidiary whose total assets,
as of that date, are less than $500,000 and whose total revenues for the most recent 12-month
period do not exceed $500,000; provided that a Restricted Subsidiary will not be considered to be
an Immaterial Subsidiary if it, directly or indirectly, guarantees or otherwise provides direct
credit support for any Indebtedness of the Company.



     “Indebtedness” means, with respect to any specified Person, any indebtedness of such Person
(excluding accrued expenses and trade payables), whether or not contingent:



15









 






     (1) in respect of borrowed money;




     (2) evidenced by bonds, notes, debentures or similar instruments or letters of credit
(or reimbursement agreements in respect thereof);




     (3) in respect of banker’s acceptances;




     (4) representing Capital Lease Obligations or Attributable Debt in respect of sale and
leaseback transactions;




     (5) representing the balance deferred and unpaid of the purchase price of any property
or services due more than six months after such property is acquired or such services are
completed; or




     (6) representing the net amount due under any Hedging Obligations,


if and to the extent any of the preceding items (other than letters of credit, Attributable Debt
and Hedging Obligations) 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 others secured by a Lien on any asset of the specified Person (whether or not such Indebtedness
is assumed by the specified Person) and, to the extent not otherwise included, the Guarantee by the
specified Person of any Indebtedness of any other Person. Indebtedness shall be calculated without
giving effect to the effects of Statement of Financial Accounting Standards No. 133 and related
interpretations to the extent such effects would otherwise increase or decrease an amount of
Indebtedness for any purpose under this Indenture as a result of accounting for any embedded
derivatives created by the terms of such Indebtedness.




     “Indenture” means this Indenture, as amended or supplemented from time to time.



     “Indirect Participant” means a Person who holds a beneficial interest in a Global Note through
a Participant.



     “Initial Notes” means the first $250.0 million aggregate principal amount of Notes issued
under this Indenture on the date hereof.



     “Initial Purchasers” means, collectively, Credit Suisse Securities (USA) LLC, Wells Fargo
Securities, LLC, Macquarie Capital (USA) Inc., RBS Securities Inc., Scotia Capital (USA) Inc. and
UBS Securities LLC.



     “Insolvency or Liquidation Proceeding” means:




     (1) any case commenced by or against the Company or any Guarantor under Bankruptcy Law,
any other proceeding for the reorganization, recapitalization or adjustment or marshalling
of the assets or liabilities of the Company or any Guarantor, any receivership or assignment
for the benefit of creditors relating to the Company or any Guarantor or any similar case or
proceeding relative to the Company or any Guarantor or its creditors, as such, in each case
whether or not voluntary;




     (2) any liquidation, dissolution, marshalling of assets or liabilities or other winding
up of or relating to the Company or any Guarantor, in each case whether or not voluntary and
whether or not involving bankruptcy or insolvency; or



16









 






     (3) any other proceeding of any type or nature in which substantially all claims of
creditors of the Company or any Guarantor are determined and any payment or distribution is
or may be made on account of such claims.



     “Institutional Accredited Investor” means an institution that is an “accredited investor” as
defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act, who are not also QIBs.



     “Intercreditor Agreement” means the Intercreditor Agreement, dated as of the date of this
Indenture, among the Collateral Trustee, the Company, the Guarantors and the Priority Lien
Collateral Agent, as amended, restated, adjusted, waived, renewed, extended, supplemented or
otherwise modified from time to time.



     “Interest Rate Agreement” means any interest rate swap agreement (whether from fixed to
floating or from floating to fixed), interest rate cap agreement, interest rate collar agreement or
other similar agreement or arrangement designed to protect the Company or any of its Restricted
Subsidiaries against fluctuations in interest rates and not for speculative purposes.



     “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 (including Guarantees or other
obligations), advances or capital contributions (excluding commission, travel and similar advances
to officers and employees made in the ordinary course of business), purchases or other acquisitions
for consideration of Indebtedness, Equity Interests or other securities, together with all items
that are or would be classified as investments on a balance sheet 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 equal to the Fair Market Value of the Company’s Investments in such Subsidiary that
were not sold or disposed of in an amount determined as provided in Section 4.07 hereof. The
acquisition by the Company or any Restricted Subsidiary of the Company of a Person that holds an
Investment in a third Person will be deemed to be an Investment by the Company or such Restricted
Subsidiary in such third Person in an amount equal to the Fair Market Value of the Investments held
by the acquired Person in such third Person in an amount determined as provided in Section 4.07
hereof. 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.



     “Issue Date” means the date of the first issuance of the Notes under this Indenture.



     “Legal Holiday” means a Saturday, a Sunday or a day on which banking institutions in the City
of New York or at a place of payment are authorized by law, regulation or executive order to remain
closed. If a payment date is a Legal Holiday at a place of payment, payment may be made at that
place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue on such
payment for the intervening period.



     “Letter of Transmittal” means the letter of transmittal to be prepared by the Company and sent
to all Holders of the Notes for use by such Holders in connection with the Exchange Offer.



     “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,
any lease in the nature thereof, any option or other agreement to sell or give a security interest
in and any filing of or



17









 




agreement to give any financing statement under the Uniform Commercial Code (or equivalent
statutes) of any jurisdiction.




     “Moody’s” means Moody’s Investors Service, Inc.



     “Mortgaged Property” means any property owned by the Company or any Guarantor that is subject
to the Liens existing and to exist under the terms of the Collateral Documents.



     “Mortgages” means all mortgages, deeds of trust and similar documents, instruments and
agreements (and all amendments, modifications and supplements thereof) creating, evidencing,
perfecting or otherwise establishing the Liens on Mortgaged Property to secure payment of the Notes
and the Note Guarantees or any party thereof.



     “Net Proceeds” means the aggregate cash proceeds and Cash Equivalents received by the Company
or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation,
any cash or Cash Equivalents received upon the sale or other disposition of any non-cash
consideration received in any Asset Sale), net of the direct costs relating to such Asset Sale,
including, without limitation, legal, accounting and investment banking fees, and sales
commissions, and any relocation expenses incurred as a result of the Asset Sale, taxes paid or
payable 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, and amounts required to be applied to the
repayment of Indebtedness, secured by a Lien on the asset or assets that were the subject of such
Asset Sale and any reserve for adjustment or indemnification obligations in respect of the sale
price of such asset or assets established in accordance with GAAP.



     “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) or (b) is directly or indirectly liable as a guarantor or
otherwise; and




     (2) as to which the lenders have been notified in writing that they will not have any
recourse to the stock or assets of the Company or any of its Restricted Subsidiaries (other
than the Equity Interests of an Unrestricted Subsidiary).



     “Non-U.S. Person” means a Person who is not a U.S. Person.



     “Note Documents” means the Indenture, the Notes and the Collateral Documents.



     “Note Guarantee” means the Guarantee by each Guarantor of the Company’s obligations under this
Indenture and the Notes, executed pursuant to the provisions of this Indenture.



     “Notes” has the meaning assigned to it in the preamble to this Indenture. The Initial Notes
and the Additional Notes shall be treated as a single class for all purposes under this Indenture,
and unless the context otherwise requires, all references to the Notes shall include the Initial
Notes and any Additional Notes.



     “Obligations” means any principal (including reimbursement obligations with respect to letters
of credit whether or not drawn), interest (including, to the extent legally permitted, all interest
accrued thereon after the commencement of any Insolvency or Liquidation Proceeding at the rate,
including any applicable post-default rate, specified in the Priority Lien Documents, even if such
interest is not



18









 




enforceable, allowable or allowed as a claim in such proceeding), premium (if any), fees,
indemnifications, reimbursements, expenses and other liabilities payable under the documentation
governing any Indebtedness.




     “Offering Circular” means the offering circular dated May 4, 2011 related to the Notes.



     “Officer” means, with respect to any Person, the Chairman of the Board, the Chief Executive
Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer,
any Assistant Treasurer, the Controller, the Secretary or any Vice President of such Person.



     “Officers’ Certificate” means, in the case of any Person, a certificate signed by any two of
the chief executive officer, president, chief financial officer or any vice president of such
Person, that meets the requirements of Section 13.05 hereof.



     “oil” means crude oil, condensate, natural gas liquids or other liquid Hydrocarbons.



     “Oil and Gas Business” means:




     (1) the business of acquiring, exploring, exploiting, developing, producing, operating
and disposing of interests in oil, natural gas, liquefied natural gas and other Hydrocarbon
and mineral properties or products produced in association with any of the foregoing;




     (2) the business of gathering, marketing, distributing, treating, processing (but not
refining), storing, selling and transporting of any production from such interests or
properties and products produced in association therewith and the marketing of oil, natural
gas, other Hydrocarbons and minerals obtained from unrelated Persons; and




     (3) any business or activity relating to, arising from, or necessary, appropriate or
incidental to the activities described in the foregoing clauses (1) and (2) of this
definition.



     “Oil and Gas Hedging Agreement” means any puts, cap transactions, floor transactions, collar
transactions, forward contract, commodity swap agreement, commodity option agreement or other
similar agreement or arrangement in respect of Hydrocarbons to be used, produced, processed or sold
by the Company or any Restricted Subsidiary that are customary in the Oil and Gas Business and
designed to protect such Person against fluctuation in Hydrocarbons prices and not for speculative
purposes.



     “Oil and Gas Liens” means:




     (1) Liens on any specific property or any interest therein, construction thereon or
improvement thereto to secure all or any part of the costs (other than indebtedness)
incurred for surveying, exploration, drilling, extraction, development, operation,
production, construction, alteration, repair or improvement of, in, under or on such
property and the plugging and abandonment of wells located thereon (it being understood
that, in the case of oil and gas producing properties, or any interest therein, costs
incurred for “development” will include costs incurred for all facilities relating to such
properties or to projects, ventures or other arrangements of which such properties form a
part or that relate to such properties or interests);




     (2) Liens on an oil or gas producing property to secure obligations incurred or
Guarantees of obligations incurred (in each case, other than indebtedness) in connection
with or necessarily incidental to commitments for the purchase or sale of, or the
transportation or distribution of, the products derived from such property;



19









 






     (3) Liens arising under partnership agreements, oil and gas leases, overriding royalty
agreements, net profits agreements, production payment agreements, royalty trust agreements,
incentive compensation programs on terms that are reasonably customary in the Oil and Gas
Business for geologist, geophysicists and other providers of technical services to the
Company or a Restricted Subsidiary, farm-out agreements, farm-in agreements, division
orders, contracts for the sale, purchase, exchange, transportation, gathering or processing
of oil, gas or other hydrocarbons, unitizations and pooling designations, declarations,
orders and agreements, development agreements, operating agreements, gas balancing or
deferred production agreements, production sharing agreements, area of mutual interests
agreements, injection, repressuring and recycling agreements, salt water or other disposal
agreements, seismic or geophysical permits or agreements, and other agreements that are
customary in the Oil and Gas Business; provided, however, that in all instances such Liens
are limited to the assets that are the subject of the relevant agreement, program, order or
contract;




     (4) Liens securing Production Payments and Reserve Sales; provided, however, that such
Liens are limited to the property that is subject to such Production Payments and Reserve
Sales, and such Production Payments and Reserve Sales either:




          (a) were in existence on the Issue Date,




          (b) were created in connection with the acquisition of property after the Issue Date
and such Lien was incurred in connection with the financing of, and within 90 days after,
the acquisition of the property subject thereto, or




          (c) constitute Asset Sales made in compliance with the provisions of Section 4.10
hereof; and




     (5) Liens on pipelines or pipelines facilities that arise by operation of law.



     “Oil and Gas Properties” means, with respect to any Person, all properties, including equity
or other ownership interest therein, owned by such Person or any of its Restricted Subsidiaries
which contain “proved oil and gas reserves” as defined in Rule 4-10 of Regulation S-X of the
Securities Act.



     “Opinion of Counsel” means an opinion from legal counsel who is reasonably acceptable to the
Trustee, that meets the requirements of Section 13.05 hereof. The counsel may be an employee of or
counsel to the Company, any Subsidiary of the Company or the Trustee.



     “Parity Lien” means a Lien granted by a Collateral Document to the Collateral Trustee, at any
time, upon any property of the Company or any Guarantor to secure Parity Lien Obligations.



     “Parity Lien Cap” means, as of any date of determination, the amount of Parity Lien Debt that
may be incurred by the Company such that, after giving pro forma effect to the incurrence thereof
and the application of the proceeds therefrom, the aggregate principal amount of all Parity Lien
Debt shall not exceed the greater of (a) $275.0 million and (b) an amount equal to 50% of the
Adjusted Consolidated Net Tangible Assets determined as of the date of incurrence; provided, in the
case of this clause (b), that after giving pro forma effect to the incurrence of such Parity Lien
Debt and the application of the proceeds therefrom, the Senior Secured Leverage Ratio as at the end
of the Company’s most recently ended four full fiscal quarters for which internal financial
statements are available immediately preceding the date on which such Parity Lien Debt is incurred
would have been not greater than 3.5 to 1.0, determined on a pro forma basis (including pro forma
application of the net proceeds therefrom) as if such additional Parity Lien Debt had been incurred
on the last day of such period.




20











 





     “Parity Lien Debt” means:




     (1) the Notes issued on the date of this Indenture (including any related Exchange
Notes); and




     (2) any other Indebtedness of the Company (including Additional Notes) that is
secured equally and ratably with the Notes by a Parity Lien that was permitted to be
incurred and so secured under each applicable Secured Debt Document; provided that, in the
case of any Indebtedness referred to in clause (2) of this definition:




          (a) on or before the date on which such Indebtedness is incurred by the Company,
such Indebtedness is designated by the Company, in an officers’ certificate delivered to
each Parity Lien Representative and the Collateral Trustee, as “Parity Lien Debt” for the
purposes of this Indenture and the Collateral Trust Agreement; provided that no Series of
Secured Debt may be designated as both Parity Lien Debt and Priority Lien Debt;




          (b) such Indebtedness is governed by an indenture, credit agreement or other
agreement that includes an Additional Secured Debt Designation; and




          (c) all requirements set forth in the Collateral Trust Agreement as to the
confirmation, grant or perfection of the Collateral Trustee’s Liens to secure such
Indebtedness or Obligations in respect thereof are satisfied (and the satisfaction of such
requirements and the other provisions of this clause (c) will be conclusively established if
the Company delivers to the Collateral Trustee an officers’ certificate stating that such
requirements and other provisions have been satisfied and that such Indebtedness is “Parity
Lien Debt”).



     “Parity Lien Documents” means, collectively, the Note Documents and any additional indenture,
credit agreement or other agreement governing each other Series of Parity Lien Debt and the
Collateral Documents.



     “Parity Lien Obligations” means Parity Lien Debt and all other Obligations in respect thereof.



     “Parity Lien Representative” means:




     (1) in the case of the Notes, the Trustee; or




     (2) in the case of any other Series of Parity Debt, the trustee, agent or
representative of the holders of such Series of Parity Lien Debt who (a) is appointed as a
Parity Lien Representative (for purposes related to the administration of the Collateral
Documents) pursuant to the indenture, credit agreement or other agreement governing such
Series of Parity Lien Debt, together with its successors in such capacity, and (b) has
become a party to the Collateral Trust Agreement by executing a joinder in the form required
under the Collateral Trust Agreement.



     “Participant” means, with respect to the Depositary, Euroclear or Clearstream, a Person who
has an account with the Depositary, Euroclear or Clearstream, respectively (and, with respect to
DTC, shall include Euroclear and Clearstream).



     “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 through
agreements, transactions, interests or arrangements that permit one to share risk or costs, comply
with



21









 




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:





     (1) ownership of oil, natural gas, other related hydrocarbon and mineral properties
or any interest therein or gathering, transportation, processing, storage or related
systems; 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 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 (including for limited liability companies),
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.



     “Permitted Holder” means each of ACON Milagro Investors, LLC, ACON-Bastion Partners II, LP,
ACON Milagro Second Lien Investors, LLC or any Affiliated funds and investment vehicles managed by
ACON Funds Management or ACON Investments LLC; 1888 Fund, Ltd., Copper River CLO Ltd., Green Lane
CLO Ltd., NZC Guggenheim Master Fund Limited, Sands Point Funding Ltd., Guggenheim Energy
Opportunities Fund, LP, Kennecott Funding Ltd., IN-FPI, LLC, New Energy LLC and any Affiliated
fund managed by Guggenheim Investment Management, LLC; and West Coast Energy Partners and West
Coast Milagro Partners LLC.



     “Permitted Investments” means:




     (1) any Investment in the Company or in a Guarantor;




     (2) any Investment in Cash Equivalents;




     (3) any Permitted Business Investment and any Investment by the Company or any
Restricted Subsidiary of the Company in a Person whose primary business is the Oil and Gas
Business, if as a result of such Investment:




          (a) such Person becomes a Guarantor; or




          (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
Guarantor;




     (4) any Investment made as a result of the receipt of non-cash consideration from
an Asset Sale that was made pursuant to and in compliance with Section 4.10 hereof;




     (5) any acquisition of assets or Capital Stock solely in exchange for the issuance
of Equity Interests (other than Disqualified Stock) of the Company;




     (6) any Investments received in compromise or resolution of (a) obligations of
trade creditors or customers that were incurred in the ordinary course of business of the
Company or any of its Restricted Subsidiaries, including pursuant to any plan of
reorganization or similar



22









 






arrangement upon the bankruptcy or insolvency of any trade creditor or customer; or (b)
litigation, arbitration or other disputes;




     (7) Investments represented by Hedging Obligations;




     (8) loans or advances to employees made in the ordinary course of business of the
Company or any Restricted Subsidiary of the Company in an aggregate principal amount not to
exceed $1.0 million at any one time outstanding;




     (9) repurchases of the Notes;




     (10) any guarantee of Indebtedness permitted to be incurred by Section 4.09 hereof
other than a guarantee of Indebtedness of an Affiliate of the Company that is not a
Restricted Subsidiary of the Company;




     (11) any Investment existing on, or made pursuant to binding commitments existing
on, the date of this Indenture and any Investment consisting of an extension, modification
or renewal of any Investment existing on, or made pursuant to a binding commitment existing
on, the date of this Indenture; provided that the amount of any such Investment may be
increased (a) as required by the terms of such Investment as in existence on the date of
this Indenture or (b) as otherwise permitted under this Indenture;




     (12) Investments acquired after the date of this Indenture as a result of the
acquisition by the Company or any Restricted Subsidiary of the Company of another Person,
including by way of a merger, amalgamation or consolidation with or into the Company or any
of its Restricted Subsidiaries in a transaction that is not prohibited by Section 5.01
hereof after the date of this Indenture to the extent that such Investments were not made in
contemplation of such acquisition, merger, amalgamation or consolidation and were in
existence on the date of such acquisition, merger, amalgamation or consolidation;




     (13) Investments in any Person organized for and engaged in the business of
installing, operating and maintaining geothermal power generation facilities and any related
activities for use solely in connection with Oil and Gas Properties in which the Company or
any Restricted Subsidiary has an interest having an aggregate Fair Market Value (measured on
the date each such Investment is made and without giving effect to subsequent changes in
value), when taken together with all other Investments made pursuant to this clause (13)
that are at the time outstanding not to exceed the greater of (a) $10.0 million and (b) 2.5%
of Adjusted Consolidated Net Tangible Assets; and




     (14) other Investments in any Person other than an Affiliate of the Company that is
not a Subsidiary of the Company having an aggregate Fair Market Value (measured on the date
each such Investment is made and without giving effect to subsequent changes in value), when
taken together with all other Investments made pursuant to this clause (14) that are at the
time outstanding not to exceed the greater of (a) $15.0 million and (b) 2.5% of Adjusted
Consolidated Net Tangible Assets.



     “Permitted Liens” means:




     (1) Liens held by the Priority Lien Collateral Agent securing (a) Priority Lien
Debt in an aggregate principal amount (as of the date of incurrence of any Priority Lien
Debt and after



23









 






giving pro forma effect to the application of the net proceeds therefrom) not
exceeding, on the date of incurrence, the Priority Lien Cap and (b) all other Priority Lien
Obligations;




     (2) Parity Liens securing (a) Parity Lien Debt in an aggregate principal amount (as
of the date of incurrence of such Parity Lien Debt and after giving pro forma effect to the
application of the net proceeds therefrom), not exceeding the Parity Lien Cap and (b) all
other Parity Lien Obligations;




     (3) Liens in favor of the Company or the Guarantors;




     (4) Liens on property (including Capital Stock) existing at the time of acquisition
of the property by the Company or any Subsidiary of the Company or Liens on property or
Equity Interests of another Person at the time such other Person becomes a Subsidiary of the
Company or a Restricted Subsidiary; provided that such Liens were in existence prior to such
acquisition and not incurred in contemplation of, such acquisition;




     (5) Liens to secure the performance of statutory obligations, insurance, surety or
appeal bonds, workers compensation obligations, performance bonds or other obligations of a
like nature incurred in the ordinary course of business (including Liens to secure letters
of credit issued to assure payment of such obligations);




     (6) Liens to secure Indebtedness (including Capital Lease Obligations) permitted by
clause (4) of Section 4.09(b) hereof covering only the assets acquired with or financed by
such Indebtedness and the proceeds thereof;




     (7) Liens for taxes, assessments or governmental charges or claims that are not yet
delinquent 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;




     (8) Liens imposed by law, such as carriers’, warehousemen’s, landlord’s and
mechanics’ Liens, in each case, incurred in the ordinary course of business;




     (9) 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 such Person;




     (10) Liens to secure any Permitted Refinancing Indebtedness permitted to be
incurred under this Indenture; provided, however, that:




          (a) the new Lien is limited to all or part of the same property and assets that
secured or, under the written agreements pursuant to which the original Lien arose, could
secure the original Lien (plus improvements and accessions to, such property or proceeds or
distributions thereof); and




          (b) the Indebtedness secured by the new Lien is not increased to any amount greater
than the sum of (i) the outstanding principal amount, or, if greater, committed amount, of
the Indebtedness renewed, refunded, refinanced, replaced, defeased or discharged with such
Permitted Refinancing Indebtedness and (ii) an amount necessary to pay any fees and
expenses,



24









 






including premiums, related to such renewal, refunding, refinancing, replacement,
defeasance or discharge;




     (11) Liens on insurance policies and proceeds thereof, or other deposits, to secure
insurance premium financings;




     (12) filing of Uniform Commercial Code financing statements as a precautionary
measure in connection with operating leases;




     (13) bankers’ Liens, rights of setoff, Liens arising out of judgments or awards not
constituting an Event of Default and notices of lis pendens and associated rights related to
litigation being contested in good faith by appropriate proceedings and for which adequate
reserves have been made;




     (14) Liens on cash, Cash Equivalents or other property arising in connection with
the defeasance, discharge or redemption of Indebtedness;




     (15) Liens on specific items of inventory or other goods (and the proceeds thereof)
of any Person securing such Person’s obligations in respect of bankers’ acceptances issued
or created in the ordinary course of business for the account of such Person to facilitate
the purchase, shipment or storage of such inventory or other goods;




     (16) grants of software and other technology licenses in the ordinary course of
business;




     (17) Liens arising out of conditional sale, title retention, consignment or similar
arrangements for the sale of goods entered into in the ordinary course of business;




     (18) any (a) interest or title of a lessor or sublessor under any lease, liens
reserved in oil, gas or other Hydrocarbons or minerals leases for bonus, royalty or rental
payments and for compliance with the terms of such leases; (b) restriction or encumbrance
that the interest or title of such lessor or sublessor may be subject to (including, without
limitation, ground leases or other prior leases of the demised premises, mortgages,
mechanics’ liens, tax liens, and easements); or (c) subordination of the interest of the
lessee or sublessee under such lease to any restrictions or encumbrance referred to in the
preceding clause (b);




     (19) Oil and Gas Liens;




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




     (21) Liens incurred in the ordinary course of business of the Company or any
Restricted Subsidiary of the Company with respect to obligations that do not exceed the
greater of $10.0 million and 1% of the Company’s Adjusted Consolidated Net Tangible Assets,
determined as of the date of incurrence of such obligations, at any one time outstanding.



     “Permitted Prior Liens” means those Liens which, under each of the Priority Lien Documents,
are permitted to be incurred on a priority basis to the Priority Liens.



     “Permitted Refinancing Indebtedness” means any Indebtedness of the Company or any of its
Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to renew,
refund,



25









 




refinance, replace, defease or discharge other Indebtedness of the Company or any of its
Restricted Subsidiaries (other than intercompany Indebtedness); provided that:





     (1) the principal amount (or accreted value, if applicable) of such Permitted
Refinancing Indebtedness does not exceed the principal amount (or accreted value, if
applicable) of the Indebtedness renewed, refunded, refinanced, replaced, defeased or
discharged (plus all accrued interest on the Indebtedness and the amount of all fees and
expenses, including premiums, incurred in connection therewith);




     (2) such Permitted Refinancing Indebtedness has (a) a final maturity date not
earlier than the earlier of (i) the final maturity date of the Indebtedness being renewed,
refunded, refinanced, replaced, defeased or discharged and (ii) more than 90 days after the
final maturity date of the Notes, and (b) has a Weighted Average Life to Maturity that is
equal to or greater than the Weighted Average Life to Maturity of the Indebtedness being
renewed, refunded, refinanced, replaced, defeased or discharged;




     (3) if the Indebtedness being renewed, refunded, refinanced, replaced, defeased or
discharged is subordinated in right of payment to the Notes, such Permitted Refinancing
Indebtedness is subordinated in right of payment to the Notes on terms at least as favorable
to the Holders of Notes as those contained in the documentation governing the Indebtedness
being renewed, refunded, refinanced, replaced, defeased or discharged; and




     (4) such Indebtedness is incurred either by the Company or by the Restricted
Subsidiary of the Company that was the obligor on the Indebtedness being renewed, refunded,
refinanced, replaced, defeased or discharged and is guaranteed only by Persons who were
obligors on the Indebtedness being renewed, refunded, refinanced, replaced, defeased or
discharged.



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



     “Priority Lien” means a Lien granted by a Collateral Document to the Priority Lien Collateral
Agent, at any time, upon any property of the Company or any Guarantor to secure Priority Lien
Obligations.



     “Priority Lien Cap” means, as of any date, (a) the principal amount of Indebtedness under the
Credit Agreement and/or any other Credit Facility that may be incurred under clause (1) of the
definition of Permitted Debt as of such date, plus (b) the amount of all Hedging Obligations and
Indebtedness and Obligations under Hedge Agreements, to the extent such Obligations and
Indebtedness are secured by the Priority Liens, plus (c) the amount of all Banking Services
Obligations, to the extent such Obligations are secured by the Priority Liens. For purposes of
this definition, all letters of credit will be valued at the face amount thereof, whether or not
drawn.



     “Priority Lien Collateral Agent” means Wells Fargo Bank, N.A., as agent under the Credit
Agreement and any successor thereof in such capacity under the Credit Agreement, or if the Credit
Agreement ceases to exist, the collateral agent or other representative of lenders or holders of
Priority Lien Obligations designated pursuant to the terms of the Priority Lien Documents and the
Intercreditor Agreement.




26









 





     “Priority Lien Debt” means:




     (1) Indebtedness of the Company under the Credit Agreement (including letters of
credit and reimbursement obligations with respect thereto) that was permitted to be incurred
and secured under each applicable Secured Debt Document (or as to which the lenders under
the Credit Agreement obtained an officers’ certificate at the time of incurrence to the
effect that such Indebtedness was permitted to be incurred and secured by all applicable
Secured Debt Documents); and




     (2) additional Indebtedness of the Company under any other Credit Facility that is
secured with the Credit Agreement by a Priority Lien that was permitted to be incurred and
so secured under each applicable Secured Debt Document; provided, in the case of any
Indebtedness referred to in this clause (2), that:




          (a) on or before the date on which such Indebtedness is incurred by the Company,
such Indebtedness is designated by the Company, in an officers’ certificate delivered to the
Priority Lien Collateral Agent and the Collateral Trustee, as “Priority Lien Debt” for the
purposes of the Secured Debt Documents and the Intercreditor Agreement; provided that no
Series of Secured Debt may be designated as both Parity Lien Debt and Priority Lien Debt;




          (b) the collateral agent or other representative with respect to such Indebtedness,
the Priority Lien Collateral Agent, the Collateral Trustee, the issuers and each applicable
Guarantor have duly executed and delivered the Intercreditor Agreement (or a joinder to the
Intercreditor Agreement or a new intercreditor agreement substantially similar to the
Intercreditor Agreement, as in effect on the date of this Indenture, and in a form
reasonably acceptable to each of the parties thereto); and




          (c) all other requirements set forth in the Intercreditor Agreement as to the
confirmation, grant or perfection of the Priority Lien Collateral Agent’s Liens to secure
such Indebtedness or Obligations in respect thereof are satisfied.



     “Priority Lien Documents” means the Credit Agreement and any other Credit Facility pursuant to
which any Priority Lien Debt is incurred and the security documents that secure the Priority Lien
Obligations.



     “Priority Lien Obligations” means the Priority Lien Debt and all other Obligations in respect
of Priority Lien Debt together with Hedging Obligations and the Banking Services Obligations.



     “Private Placement Legend” means the legend set forth in Section 2.06(g)(1) hereof to be
placed on all Notes issued under this Indenture except where otherwise permitted by the provisions
of this Indenture.



     “Production Payments and Reserve Sales” means the grant or transfer by the Company or any of
its Restricted Subsidiaries to any Person of a royalty, overriding royalty, net profits interest,
Production Payment, 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 where the holder of such interest has recourse solely to such
production or proceeds of production, subject to the obligation of the grantor or transferor to
operate and maintain, or to use reasonable efforts to cause the subject interests to be operated
and maintained, in a reasonably prudent manner or other customary standard and subject to the
obligation of the grantor or transferor to indemnify for environmental, title or other matters
customary in the Oil and Gas Business.



     “QIB” means a “qualified institutional buyer” as defined in Rule 144A.



27









 





     “Recognized Value” means, with respect to the Oil and Gas Properties of the Company and the
Guarantors constituting proved reserves, the discounted present value of the estimated net cash
flow to be realized from the production of Hydrocarbons from all such Oil and Gas Properties which
the Credit Agreement Agent attributes to such Oil and Gas Properties for the purposes of the most
recent redetermination of the borrowing base under the Credit Agreement (or for purposes of
determining the initial borrowing base in the event no such redetermination has occurred);
provided, that if the Credit Agreement is terminated and not restated, renewed, refunded, replaced
or refinanced the Company, acting in good faith, shall continue to make redeterminations of
Recognized Value from time to time in the same manner as if the Credit Agreement were still in
effect; provided, further, that in making the redeterminations required by the preceding proviso,
present value shall be determined using a 10% discount factor and SEC pricing.



     “Registration Rights Agreement” means the Registration Rights Agreement, dated as of May 11,
2011, among the Company, the Guarantors and the other parties named on the signature pages thereof,
as such agreement may be amended, modified or supplemented from time to time and, with respect to
any Additional Notes, one or more registration rights agreements among the Company, the Guarantors
and the other parties thereto, as such agreement(s) may be amended, modified or supplemented from
time to time, relating to rights given by the Company to the purchasers of Additional Notes to
register such Additional Notes under the Securities Act.



     “Regulation S” means Regulation S promulgated under the Securities Act.



     “Regulation S Global Note” means a Regulation S Temporary Global Note or Regulation S
Permanent Global Note, as appropriate.



     “Regulation S Permanent Global Note” means a permanent Global Note in the form of Exhibit A1
hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on
behalf of and registered in the name of the Depositary or its nominee, issued in a denomination
equal to the outstanding principal amount of the Regulation S Temporary Global Note upon expiration
of the Restricted Period.



     “Regulation S Temporary Global Note” means a temporary Global Note in the form of Exhibit A2
hereto deposited with or on behalf of and registered in the name of the Depositary or its nominee,
issued in a denomination equal to the outstanding principal amount of the Notes initially sold in
reliance on Rule 903 of Regulation S.



     “Required Parity Lien Debtholders” means, at any time, the holders of a majority in aggregate
principal amount of all Parity Lien Debt then outstanding, calculated in accordance with Section
7.2 of the Collateral Trust Agreement. For purposes of this definition, Parity Lien Debt
registered in the name of, or beneficially owned by, the Company or any Affiliate of the Company
will be deemed not to be outstanding.



     “Responsible Officer,” when used with respect to the Trustee, means any officer within the
Corporate Trust Administration of the Trustee (or any successor group of the Trustee) or any other
officer of the Trustee customarily performing functions similar to those performed by any of the
above designated officers and also means, with respect to a particular corporate trust matter, any
other officer to whom such matter is referred because of his knowledge of and familiarity with the
particular subject.



     “Restricted Definitive Note” means a Definitive Note bearing the Private Placement Legend.



     “Restricted Global Note” means a Global Note bearing the Private Placement Legend.



28









 





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



     “Restricted Period” means the 40-day distribution compliance period as defined in Regulation
S.



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



     “Rule 144” means Rule 144 promulgated under the Securities Act.



     “Rule 144A” means Rule 144A promulgated under the Securities Act.



     “Rule 903” means Rule 903 promulgated under the Securities Act.



     “Rule 904” means Rule 904 promulgated under the Securities Act.



     “S&P” means Standard & Poor’s Ratings Group.



     “SEC” means the Securities and Exchange Commission.



     “Second Lien Secured Party” has the meaning assigned to that term pursuant to the
Intercreditor Agreement.



     “Second Lien Collateral Trustee” has the meaning assigned to that term pursuant to the
Intercreditor Agreement.



     “Secured Debt” means Parity Lien Debt and Priority Lien Debt.



     “Secured Debt Documents” means the Parity Lien Documents and the Priority Lien Documents.



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



     “Senior Secured Debt” means the aggregate outstanding principal amount of all Priority Lien
Debt and Parity Lien Debt, determined in accordance with GAAP.



     “Senior Secured Leverage Ratio” means the ratio of the Senior Secured Debt as of the last day
of any period of four full fiscal quarters to the Company’s Consolidated EBITDA for such period. In
the event that the Company or any of its Restricted Subsidiaries incurs, assumes, guarantees,
repays, repurchases, redeems, defeases or otherwise discharges any Senior Secured Debt (other than
borrowings pursuant to any working capital or other revolving facility) subsequent to the
commencement of the period for which the Senior Secured Leverage Ratio is being calculated and on
or prior to the date on which the event for which the calculation of the Senior Secured Leverage
Ratio is made (the “Calculation Date”), then the Senior Secured Leverage Ratio will be calculated
giving pro forma effect (in accordance with Regulation S-X under the Securities Act) to such
incurrence, assumption, Guarantee, repayment, repurchase, redemption, defeasance or other discharge
of Indebtedness 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 Senior Secured Leverage Ratio:




     (1) acquisitions that have been made by the Company or any of its Restricted
Subsidiaries, including through mergers or consolidations, or any Person or any of its
Restricted Subsidiaries acquired by the Company or any of its Restricted Subsidiaries, and
including all related financing transactions and including increases in ownership of
Restricted Subsidiaries,



29









 






during the four-quarter reference period or subsequent to such reference period and on
or prior to the Calculation Date, or that are to be made on the Calculation Date, will be
given pro forma effect (in accordance with Regulation S-X under the Securities Act) as if
they had occurred on the first day of the four-quarter reference period;




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




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




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



     “Series of Parity Lien Debt” means, severally, the Notes and each other issue or series of
Parity Lien Debt for which a single transfer register is maintained.



     “Series of Priority Lien Debt” means, severally, the Indebtedness outstanding under the Credit
Agreement and any other Credit Facility that constitutes Priority Lien Debt.



     “Series of Secured Debt” means each Series of Parity Lien Debt and each Series of Priority
Lien Debt.



     “Shelf Registration Statement” means the Shelf Registration Statement as defined in the
Registration Rights Agreement.



     “Significant Subsidiary” means any Restricted 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 date of this Indenture.



     “Special Interest” has the meaning assigned to that term pursuant to the Registration Rights
Agreement.



     “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 documentation governing such Indebtedness as of the date of this Indenture, 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.



     “Subordinated Obligation” means any Indebtedness of the Company which is expressly subordinate
or junior in right of payment to the Notes.



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




     (1) any corporation, association or other business entity of which more than 50% of
the total voting power of shares of Capital Stock entitled (without regard to the occurrence
of any contingency and after giving effect to any voting agreement or stockholders’
agreement that effectively transfers voting power) to vote in the election of directors,
managers or trustees of the corporation, association or other business entity is at the time
owned or controlled, directly or



30









 






indirectly, by that Person or one or more of the other Subsidiaries of that Person (or
a combination thereof); and




     (2) any partnership or limited liability company of which (a) more than 50% of the
capital accounts, distribution rights, total equity and voting interests or general and
limited partnership interests, as applicable, are owned or controlled, directly or
indirectly, by such Person or one or more of the other Subsidiaries of that Person or a
combination thereof, whether in the form of membership, general, special or limited
partnership interests or otherwise, and (b) such Person or any Subsidiary of such Person is
a controlling general partner or otherwise controls such entity.



     “TIA” means the Trust Indenture Act of 1939, as amended (15 U.S.C. §§ 77aaa-77bbbb).



     “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) that 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 May 15, 2014; provided, however, that if the period from the
redemption date to May 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 will be used.



     “Trustee” means Wells Fargo Bank, N.A., until a successor replaces it in accordance with the
applicable provisions of this Indenture and thereafter means the successor serving hereunder.



     “Unrestricted Definitive Note” means a Definitive Note that does not bear and is not required
to bear the Private Placement Legend.



     “Unrestricted Global Note” means a Global Note that does not bear and is not required to bear
the Private Placement Legend.



     “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 resolution of the Board of
Directors, but only to the extent that such Subsidiary:




     (1) has no Indebtedness other than Non-Recourse Debt;




     (2) except as permitted by Section 4.11 hereof, is not party to any agreement,
contract, arrangement or understanding with the Company or any Restricted Subsidiary of the
Company unless 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;




     (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 guaranteed or otherwise directly or indirectly provided credit support
for any Indebtedness of the Company or any of its Restricted Subsidiaries.



31









 





     “U.S. Person” means a U.S. Person as defined in Rule 902(k) promulgated under the Securities
Act.



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



     “Voting Stock” of any specified Person as of any date means the Capital Stock of such Person
that is at the time entitled to vote in the election of the Board of Directors of such Person.



     “Weighted Average Life to Maturity” means, when applied to any Indebtedness 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, in respect of the Indebtedness, 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 principal amount of such Indebtedness.



     “Wholly-Owned Restricted Subsidiary” of any specified Person means a Restricted Subsidiary of
such Person all of the outstanding Capital Stock or other ownership interests of which (other than
directors’ qualifying shares) will at the time be owned by such Person or by one or more
Wholly-Owned Restricted Subsidiaries of such Person.


Section 1.02 Other Definitions.




	 	 	 	 	 
	 	 	Defined in
	Term	 	Section
	“Affiliate Transaction”

	 	 	4.11	 
	“Asset Sale Offer”

	 	 	3.09	 
	“Authentication Order”

	 	 	2.02	 
	“Change of Control Offer”

	 	 	4.15	 
	“Change of Control Payment”

	 	 	4.15	 
	“Change of Control Payment Date”

	 	 	4.15	 
	“Covenant Defeasance”

	 	 	8.03	 
	“DTC”

	 	 	2.03	 
	“Event of Default”

	 	 	6.01	 
	“Excess Proceeds”

	 	 	4.10	 
	“incur”

	 	 	4.09	 
	“Legal Defeasance”

	 	 	8.02	 
	“Offer Amount”

	 	 	3.09	 
	“Offer Period”

	 	 	3.09	 
	“Paying Agent”

	 	 	2.03	 
	“Permitted Debt”

	 	 	4.09	 
	“Payment Default”

	 	 	6.01	 
	“Purchase Date”

	 	 	3.09	 
	“Registrar”

	 	 	2.03	 
	“Restricted Payments”

	 	 	4.07	 






32









 





Section 1.03 Incorporation by Reference of Trust Indenture Act.




     Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by
reference in and made a part of this Indenture.



     The following TIA terms used in this Indenture have the following meanings:



     “indenture securities” means the Notes;



     “indenture security Holder” means a Holder of a Note;



     “indenture to be qualified” means this Indenture;



     “indenture trustee” or “institutional trustee” means the Trustee; and



     “obligor” on the Notes and the Note Guarantees means the Company and the Guarantors,
respectively, and any successor obligor upon the Notes and the Note Guarantees, respectively.



     All other terms used in this Indenture that are defined by the TIA, defined by TIA reference
to another statute or defined by SEC rule under the TIA have the meanings so assigned to them.


Section 1.04 Rules of Construction.




     Unless the context otherwise requires:




     (1) a term has the meaning assigned to it;




     (2) an accounting term not otherwise defined has the meaning assigned to it in
accordance with GAAP;




     (3) “or” is not exclusive;




     (4) words in the singular include the plural, and in the plural include the
singular;




     (5) “will” shall be interpreted to express a command;




     (6) provisions apply to successive events and transactions; and




     (7) references to sections of or rules under the Securities Act will be deemed to
include substitute, replacement of successor sections or rules adopted by the SEC from time
to time.



ARTICLE 2

THE NOTES



Section 2.01 Form and Dating.




     (a) General. The Notes and the Trustee’s certificate of authentication will be
substantially in the form of Exhibits A1 and A2 hereto. The Notes may have notations, legends or
endorsements required by law, stock exchange rule or usage. Each Note will be dated the date of
its authentication. The Notes shall be in denominations of $2,000 and integral multiples of $1,000
in excess thereof.



33









 





     The terms and provisions contained in the Notes will constitute, and are hereby expressly
made, a part of this Indenture and the Company, the Guarantors and the Trustee, by their execution
and delivery of this Indenture, expressly agree to such terms and provisions and to be bound
thereby. However, to the extent any provision of any Note conflicts with the express provisions of
this Indenture, the provisions of this Indenture shall govern and be controlling.



     (b) Global Notes. Notes issued in global form will be substantially in the form of
Exhibits A1 or A2 hereto (including the Global Note Legend thereon and the “Schedule of Exchanges
of Interests in the Global Note” attached thereto). Notes issued in definitive form will be
substantially in the form of Exhibit A1 hereto (but without the Global Note Legend thereon and
without the “Schedule of Exchanges of Interests in the Global Note” attached thereto). Each Global
Note will represent such of the outstanding Notes as will be specified therein and each shall
provide that it represents the aggregate principal amount of outstanding Notes from time to time
endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby
may from time to time be reduced or increased, as appropriate, to reflect exchanges and
redemptions. Any endorsement of a Global Note to reflect the amount of any increase or decrease in
the aggregate principal amount of outstanding Notes represented thereby will be made by the Trustee
or the Custodian, at the direction of the Trustee, in accordance with instructions given by the
Holder thereof as required by Section 2.06 hereof.



     (c) Temporary Global Notes. Notes offered and sold in reliance on Regulation S will be
issued initially in the form of the Regulation S Temporary Global Note, which will be deposited on
behalf of the purchasers of the Notes represented thereby with the Trustee, at its office, as
custodian for the Depositary, and registered in the name of the Depositary or the nominee of the
Depositary for the accounts of designated agents holding on behalf of Euroclear or Clearstream,
duly executed by the Company and authenticated by the Trustee as hereinafter provided. The
Restricted Period will be terminated upon the receipt by the Trustee of:




     (1) a written certificate from the Depositary, together with copies of certificates
from Euroclear and Clearstream certifying that they have received certification of
non-United States beneficial ownership of 100% of the aggregate principal amount of the
Regulation S Temporary Global Note (except to the extent of any beneficial owners thereof
who acquired an interest therein during the Restricted Period pursuant to another exemption
from registration under the Securities Act and who will take delivery of a beneficial
ownership interest in a 144A Global Note or an IAI Global Note bearing a Private Placement
Legend, all as contemplated by Section 2.06(b) hereof); and




     (2) an Officers’ Certificate from the Company.



     Following the termination of the Restricted Period, beneficial interests in the Regulation S
Temporary Global Note will be exchanged for beneficial interests in the Regulation S Permanent
Global Note pursuant to the Applicable Procedures. Simultaneously with the authentication of the
Regulation S Permanent Global Note, the Trustee will cancel the Regulation S Temporary Global Note.
The aggregate principal amount of the Regulation S Temporary Global Note and the Regulation S
Permanent Global Note 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 the case may be, in connection with
transfers of interest as hereinafter provided.



     (d) Euroclear and Clearstream Procedures Applicable. The provisions of the “Operating
Procedures of the Euroclear System” and “Terms and Conditions Governing Use of Euroclear” and the
“General Terms and Conditions of Clearstream Banking” and “Customer Handbook” of Clearstream will



34









 




be applicable to transfers of beneficial interests in the Regulation S Temporary Global Note
and the Regulation S Permanent Global Note that are held by Participants through Euroclear or
Clearstream.



Section 2.02 Execution and Authentication.




     At least one Officer must sign the Notes for the Company by manual or facsimile signature.



     If an Officer whose signature is on a Note no longer holds that office at the time a Note is
authenticated, the Note will nevertheless be valid.



     A Note will not be valid until authenticated by the manual signature of the Trustee. The
signature will be conclusive evidence that the Note has been authenticated under this Indenture.



     The Trustee will, upon receipt of a written order of the Company signed by at least one
Officer (an “Authentication Order”), authenticate Notes for original issue that may be validly
issued under this Indenture, including any Additional Notes. The Trustee shall hold such signed
and authenticated Notes as custodian for the Depositary. The aggregate principal amount of Notes
outstanding at any time may not exceed the aggregate principal amount of Notes authorized for
issuance by the Company pursuant to one or more Authentication Orders, except as provided in
Section 2.07 hereof.



     The Trustee may appoint an authenticating agent acceptable to the Company to authenticate
Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each
reference in this Indenture to authentication by the Trustee includes authentication by such agent.
An authenticating agent has the same rights as an Agent to deal with Holders or an Affiliate of
the Company.


Section 2.03 Registrar and Paying Agent.




     The Company will maintain a registrar with an office or agency where Notes may be presented
for registration of transfer or for exchange (“Registrar”) and a paying agent with an office or
agency where Notes may be presented for payment (“Paying Agent”). The Registrar will keep a
register of the Notes and of their transfer and exchange. The Company may appoint one or more
co-registrars and one or more additional paying agents. The term “Registrar” includes any
co-registrar and the term “Paying Agent” includes any additional paying agent. The Company may
change any Paying Agent or Registrar without notice to any Holder. The Company will notify the
Trustee in writing of the name and address of any Agent not a party to this Indenture. If the
Company fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall
act as such. The Company or any of its Subsidiaries may act as Paying Agent or Registrar.



     The Company initially appoints The Depository Trust Company (“DTC”) to act as Depositary with
respect to the Global Notes.



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


Section 2.04 Paying Agent to Hold Money in Trust.




     The Company will require each Paying Agent other than the Trustee to agree in writing that the
Paying Agent will hold in trust for the benefit of Holders or the Trustee all money held by the
Paying Agent for the payment of principal of, premium on, if any, or interest or Special Interest,
if any, on, the Notes, and will notify the Trustee of any default by the Company in making any such
payment. While any such default continues, the Trustee may require a Paying Agent to pay all money
held by it to the



35









 




Trustee. The Company at any time may require a Paying Agent to pay all money held by it to
the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or a
Subsidiary) will have no further liability for the money. If the Company or a Subsidiary acts as
Paying Agent, it will segregate and hold in a separate trust fund for the benefit of the Holders
all money held by it as Paying Agent. Upon any bankruptcy or reorganization proceedings relating
to the Company, the Trustee will serve as Paying Agent for the Notes.



Section 2.05 Holder Lists.




     The Trustee will preserve in as current a form as is reasonably practicable the most recent
list available to it of the names and addresses of all Holders and shall otherwise comply with TIA
§312(a). If the Trustee is not the Registrar, the Company will furnish to the Trustee at least
seven Business Days before each interest payment date and at such other times as the Trustee may
request in writing, a list in such form and as of such date as the Trustee may reasonably require
of the names and addresses of the Holders of Notes and the Company shall otherwise comply with TIA
§312(a).


Section 2.06 Transfer and Exchange.




     (a) Transfer and Exchange of Global Notes. A Global Note may not be transferred except as
a whole by the Depositary to a nominee of the Depositary, by a nominee of the Depositary to the
Depositary or to 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 Global Notes will be exchanged
by the Company for Definitive Notes if:




     (1) the Company delivers to the Trustee notice from the Depositary that it is
unwilling or unable to continue to act as Depositary or that it is no longer a clearing
agency registered under the Exchange Act and, in either case, a successor Depositary is not
appointed by the Company within 120 days after the date of such notice from the Depositary;




     (2) the Company in its sole discretion determines that the Global Notes (in whole
but not in part) should be exchanged for Definitive Notes and delivers a written notice to
such effect to the Trustee; provided that in no event shall the Regulation S Temporary
Global Note be exchanged by the Company for Definitive Notes prior to (A) the expiration of
the Restricted Period and (B) the receipt by the Registrar of any certificates required
pursuant to Rule 903(b)(3)(ii)(B) under the Securities Act; or




     (3) there has occurred and is continuing a Default or Event of Default with respect
to the Notes and the Depositary requests such exchange.



     Upon the occurrence of either of the preceding events in (1) or (2) above, Definitive Notes
shall be issued in such names as the Depositary shall instruct the Trustee. Global Notes also may
be exchanged or replaced, in whole or in part, as provided in Sections 2.07 and 2.10 hereof. Every
Note authenticated and delivered in exchange for, or in lieu of, a Global Note or any portion
thereof, pursuant to this Section 2.06 or Section 2.07 or 2.10 hereof, shall be authenticated and
delivered in the form of, and shall be, a Global Note. A Global Note may not be exchanged for
another Note other than as provided in this Section 2.06(a), however, beneficial interests in a
Global Note may be transferred and exchanged as provided in Section 2.06(b), (c) or (f) hereof.



     (b) Transfer and Exchange of Beneficial Interests in the Global Notes. The transfer and
exchange of beneficial interests in the Global Notes will be effected through the Depositary, in
accordance with the provisions of this Indenture and the Applicable Procedures. Beneficial
interests in



36









 




the Restricted Global Notes will be subject to restrictions on transfer comparable to those
set forth herein to the extent required by the Securities Act. Transfers of beneficial interests
in the Global Notes also will require compliance with either subparagraph (1) or (2) below, as
applicable, as well as one or more of the other following subparagraphs, as applicable:





     (1) Transfer of Beneficial Interests in the Same Global Note. Beneficial interests
in any Restricted Global Note may be transferred to Persons who take delivery thereof in the
form of a beneficial interest in the same Restricted Global Note in accordance with the
transfer restrictions set forth in the Private Placement Legend; provided, however, that
prior to the expiration of the Restricted Period, transfers of beneficial interests in the
Regulation S Temporary Global Note may not be made to a U.S. Person or
for the account or benefit of a U.S. Person (other than an Initial Purchaser). Beneficial
interests in any Unrestricted Global Note may be transferred to Persons who take delivery
thereof in the form of a beneficial interest in an Unrestricted Global Note. No written
orders or instructions shall be required to be delivered to the Registrar to effect the
transfers described in this Section 2.06(b)(1).




     (2) All Other Transfers and Exchanges of Beneficial Interests in Global Notes. In
connection with all transfers and exchanges of beneficial interests that are not subject to
Section 2.06(b)(1) above, the transferor of such beneficial interest must deliver to the
Registrar either:




     (A) both:




     (i) a written order from a Participant or an Indirect Participant
given to the Depositary in accordance with the Applicable Procedures
directing the Depositary to credit or cause to be credited a beneficial
interest in another Global Note in an amount equal to the beneficial
interest to be transferred or exchanged; and




     (ii) instructions given in accordance with the Applicable
Procedures containing information regarding the Participant account to be
credited with such increase; or




     (B) both:




     (i) a written order from a Participant or an Indirect Participant
given to the Depositary in accordance with the Applicable Procedures
directing the Depositary to cause to be issued a Definitive Note in an
amount equal to the beneficial interest to be transferred or exchanged; and




     (ii) instructions given by the Depositary to the Registrar
containing information regarding the Person in whose name such Definitive
Note shall be registered to effect the transfer or exchange referred to in
(1) above;




; provided that in no event shall Definitive Notes be issued upon the
transfer or exchange of beneficial interests in the Regulation S Temporary
Global Note prior to (A) the expiration of the Restricted Period and (B) the
receipt by the Registrar of any certificates required pursuant to Rule 903
under the Securities Act.


Upon consummation of an Exchange Offer by the Company in accordance with Section 2.06(f) hereof,
the requirements of this Section 2.06(b)(2) shall be deemed to have been satisfied upon receipt by
the Registrar of the instructions contained in the Letter of Transmittal delivered by the Holder of
such






37









 







beneficial interests in the Restricted Global Notes. Upon satisfaction of all of the requirements
for transfer or exchange of beneficial interests in Global Notes contained in this Indenture and
the Notes or otherwise applicable under the Securities Act, the Trustee shall adjust the principal
amount of the relevant Global Note(s) pursuant to Section 2.06(h) hereof.





     (3) Transfer of Beneficial Interests to Another Restricted Global Note. A
beneficial interest in any Restricted Global Note may be transferred to a Person who takes
delivery thereof in the form of a beneficial interest in another Restricted Global Note if
the transfer complies with the requirements of Section 2.06(b)(2) above and the Registrar
receives the following:




     (A) if the transferee will take delivery in the form of a beneficial
interest in the 144A Global Note, then the transferor must deliver a certificate in
the form of Exhibit B hereto, including the certifications in item (1) thereof;




     (B) if the transferee will take delivery in the form of a beneficial
interest in the Regulation S Temporary Global Note or the Regulation S Permanent
Global Note, then the transferor must deliver a certificate in the form of Exhibit B
hereto, including the certifications in item (2) thereof; and




     (C) if the transferee will take delivery in the form of a beneficial
interest in the IAI Global Note, then the transferor must deliver a certificate in
the form of Exhibit B hereto, including the certifications in item (3) thereof, if
applicable.




     (4) Transfer and Exchange of Beneficial Interests in a Restricted Global Note for
Beneficial Interests in an Unrestricted Global Note. A beneficial interest in any
Restricted Global Note may be exchanged by any holder thereof for a beneficial interest in
an Unrestricted Global Note or transferred to a Person who takes delivery thereof in the
form of a beneficial interest in an Unrestricted Global Note if the exchange or transfer
complies with the requirements of Section 2.06(b)(2) above and:




     (A) such exchange or transfer is effected pursuant to the Exchange Offer in
accordance with the Registration Rights Agreement and the holder of the beneficial
interest to be transferred, in the case of an exchange, or the transferee, in the
case of a transfer, certifies in the applicable Letter of Transmittal that it is not
(i) a Broker-Dealer, (ii) a Person participating in the distribution of the Exchange
Notes or (iii) a Person who is an affiliate (as defined in Rule 144) of the Company;




     (B) such transfer is effected pursuant to the Shelf Registration Statement
in accordance with the Registration Rights Agreement;




     (C) such transfer is effected by a Broker-Dealer pursuant to the Exchange
Offer Registration Statement in accordance with the Registration Rights Agreement;
or




     (D) the Registrar receives the following:




     (i) if the holder of such beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a beneficial
interest in an Unrestricted Global Note, a certificate from such holder in
the form of Exhibit C hereto, including the certifications in item (1)(a)
thereof; or



38









 






     (ii) if the holder of such beneficial interest in a Restricted
Global Note proposes to transfer such beneficial interest to a Person who
shall take delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note, a certificate from such holder in the form of
Exhibit B hereto, including the certifications in item (4) thereof;




and, in each such case set forth in this subparagraph (D), if the Registrar so
requests or if the Applicable Procedures so require, an Opinion of Counsel in form
reasonably acceptable to the Registrar to the effect that such exchange or transfer
is in compliance with the Securities Act and that the restrictions on transfer
contained herein and in the Private Placement Legend are no longer required in order
to maintain compliance with the Securities Act.



     If any such transfer is effected pursuant to subparagraph (B) or (D) above at a time when an
Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an
Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or
more Unrestricted Global Notes in an aggregate principal amount equal to the aggregate principal
amount of beneficial interests transferred pursuant to subparagraph (B) or (D) above.



     Beneficial interests in an Unrestricted Global Note cannot be exchanged for, or transferred to
Persons who take delivery thereof in the form of, a beneficial interest in a Restricted Global
Note.



     (c) Transfer or Exchange of Beneficial Interests for Definitive Notes.




     (1) Beneficial Interests in Restricted Global Notes to Restricted Definitive Notes.
If any holder of a beneficial interest in a Restricted Global Note proposes to exchange
such beneficial interest for a Restricted Definitive Note or to transfer such beneficial
interest to a Person who takes delivery thereof in the form of a Restricted Definitive Note,
then, upon receipt by the Registrar of the following documentation:




     (A) if the holder of such beneficial interest in a Restricted Global Note
proposes to exchange such beneficial interest for a Restricted Definitive Note, a
certificate from such holder in the form of Exhibit C hereto, including the
certifications in item (2)(a) thereof;




     (B) if such beneficial interest is being transferred to a QIB in accordance
with Rule 144A, a certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (1) thereof;




     (C) if such beneficial interest is being transferred to a Non-U.S. Person
in an offshore transaction in accordance with Rule 903 or Rule 904, a certificate to
the effect set forth in Exhibit B hereto, including the certifications in item (2)
thereof;




     (D) if such beneficial interest is being transferred pursuant to an
exemption from the registration requirements of the Securities Act in accordance
with Rule 144, a certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (3)(a) thereof;




     (E) if such beneficial interest is being transferred to an Institutional
Accredited Investor in reliance on an exemption from the registration requirements
of the Securities Act other than those listed in subparagraphs (B) through (D)
above, a



39









 






certificate to the effect set forth in Exhibit B hereto, including the
certifications, certificates and Opinion of Counsel required by item (3) thereof, if
applicable;




     (F) if such beneficial interest is being transferred to the Company or any
of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(b) thereof; or




     (G) if such beneficial interest is being transferred pursuant to an
effective registration statement under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the certifications in item (3)(c)
thereof,


the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced
accordingly pursuant to Section 2.06(h) hereof, and the Company shall execute and the Trustee shall
authenticate and deliver to the Person designated in the instructions a Definitive Note in the
appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest in
a Restricted Global Note pursuant to this Section 2.06(c) shall be registered in such name or names
and in such authorized denomination or denominations as the holder of such beneficial interest
shall instruct the Registrar through instructions from the Depositary and the Participant or
Indirect Participant. The Trustee shall deliver such Definitive Notes to the Persons in whose
names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial
interest in a Restricted Global Note pursuant to this Section 2.06(c)(1) shall bear the Private
Placement Legend and shall be subject to all restrictions on transfer contained therein.





     (2) Beneficial Interests in Regulation S Temporary Global Note to Definitive Notes.
Notwithstanding Sections 2.06(c)(1)(A) and (C) hereof, a beneficial interest in the
Regulation S Temporary Global Note may not be exchanged for a Definitive Note or transferred
to a Person who takes delivery thereof in the form of a Definitive Note prior to (A) the
expiration of the Restricted Period and (B) the receipt by the Registrar of any certificates
required pursuant to Rule 903(b)(3)(ii)(B) under the Securities Act, except in the case of a
transfer pursuant to an exemption from the registration requirements of the Securities Act
other than Rule 903 or Rule 904.




     (3) Beneficial Interests in Restricted Global Notes to Unrestricted Definitive
Notes. A holder of a beneficial interest in a Restricted Global Note may exchange such
beneficial interest for an Unrestricted Definitive Note or may transfer such beneficial
interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive
Note only if:




     (A) such exchange or transfer is effected pursuant to the Exchange Offer in
accordance with the Registration Rights Agreement and the holder of such beneficial
interest, in the case of an exchange, or the transferee, in the case of a transfer,
certifies in the applicable Letter of Transmittal that it is not (i) a
Broker-Dealer, (ii) a Person participating in the distribution of the Exchange Notes
or (iii) a Person who is an affiliate (as defined in Rule 144) of the Company;




     (B) such transfer is effected pursuant to the Shelf Registration Statement
in accordance with the Registration Rights Agreement;




     (C) such transfer is effected by a Broker-Dealer pursuant to the Exchange
Offer Registration Statement in accordance with the Registration Rights Agreement;
or




     (D) the Registrar receives the following:



40









 






     (i) if the holder of such beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for an
Unrestricted Definitive Note, a certificate from such holder in the form of
Exhibit C hereto, including the certifications in item (1)(b) thereof; or




     (ii) if the holder of such beneficial interest in a Restricted
Global Note proposes to transfer such beneficial interest to a Person who
shall take delivery thereof in the form of an Unrestricted Definitive Note,
a certificate from such holder in the form of Exhibit B hereto, including
the certifications in item (4) thereof;




and, in each such case set forth in this subparagraph (D), if the Registrar so
requests or if the Applicable Procedures so require, an Opinion of Counsel in form
reasonably acceptable to the Registrar to the effect that such exchange or transfer
is in compliance with the Securities Act and that the restrictions on transfer
contained herein and in the Private Placement Legend are no longer required in order
to maintain compliance with the Securities Act.




     (4) Beneficial Interests in Unrestricted Global Notes to Unrestricted Definitive
Notes. If any holder of a beneficial interest in an Unrestricted Global Note proposes to
exchange such beneficial interest for a Definitive Note or to transfer such beneficial
interest to a Person who takes delivery thereof in the form of a Definitive Note, then, upon
satisfaction of the conditions set forth in Section 2.06(b)(2) hereof, the Trustee will
cause the aggregate principal amount of the applicable Global Note to be reduced accordingly
pursuant to Section 2.06(h) hereof, and the Company will execute and the Trustee will
authenticate and deliver to the Person designated in the instructions a Definitive Note in
the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial
interest pursuant to this Section 2.06(c)(4) will be registered in such name or names and in
such authorized denomination or denominations as the holder of such beneficial interest
requests through instructions to the Registrar from or through the Depositary and the
Participant or Indirect Participant. The Trustee will deliver such Definitive Notes to the
Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange
for a beneficial interest pursuant to this Section 2.06(c)(4) will not bear the Private
Placement Legend.



     (d) Transfer and Exchange of Definitive Notes for Beneficial Interests.




     (1) Restricted Definitive Notes to Beneficial Interests in Restricted Global Notes.
If any Holder of a Restricted Definitive Note proposes to exchange such Note for a
beneficial interest in a Restricted Global Note or to transfer such Restricted Definitive
Notes to a Person who takes delivery thereof in the form of a beneficial interest in a
Restricted Global Note, then, upon receipt by the Registrar of the following documentation:




     (A) if the Holder of such Restricted Definitive Note proposes to exchange
such Note for a beneficial interest in a Restricted Global Note, a certificate from
such Holder in the form of Exhibit C hereto, including the certifications in item
(2)(b) thereof;




     (B) if such Restricted Definitive Note is being transferred to a QIB in
accordance with Rule 144A, a certificate to the effect set forth in Exhibit B
hereto, including the certifications in item (1) thereof;



41









 






     (C) if such Restricted Definitive Note is being transferred to a Non-U.S.
Person in an offshore transaction in accordance with Rule 903 or Rule 904, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (2) thereof;




     (D) if such Restricted Definitive Note is being transferred pursuant to an
exemption from the registration requirements of the Securities Act in accordance
with Rule 144, a certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (3)(a) thereof;




     (E) if such Restricted Definitive Note is being transferred to an
Institutional Accredited Investor in reliance on an exemption from the registration
requirements of the Securities Act other than those listed in subparagraphs (B)
through (D) above, a certificate to the effect set forth in Exhibit B hereto,
including the certifications, certificates and Opinion of Counsel required by item
(3) thereof, if applicable;




     (F) if such Restricted Definitive Note is being transferred to the Company
or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B
hereto, including the certifications in item (3)(b) thereof; or




     (G) if such Restricted Definitive Note is being transferred pursuant to an
effective registration statement under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the certifications in item (3)(c)
thereof,




the Trustee will cancel the Restricted Definitive Note, increase or cause to be
increased the aggregate principal amount of, in the case of clause (A) above, the
appropriate Restricted Global Note, in the case of clause (B) above, the 144A Global
Note, and in the case of clause (C) above, the Regulation S Global Note, and in all
other cases, the IAI Global Note.




     (2) Restricted Definitive Notes to Beneficial Interests in Unrestricted Global
Notes. A Holder of a Restricted Definitive Note may exchange such Note for a beneficial
interest in an Unrestricted Global Note or transfer such Restricted Definitive Note to a
Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted
Global Note only if:




     (A) such exchange or transfer is effected pursuant to the Exchange Offer in
accordance with the Registration Rights Agreement and the Holder, in the case of an
exchange, or the transferee, in the case of a transfer, certifies in the applicable
Letter of Transmittal that it is not (i) a Broker-Dealer, (ii) a Person
participating in the distribution of the Exchange Notes or (iii) a Person who is an
affiliate (as defined in Rule 144) of the Company;




     (B) such transfer is effected pursuant to the Shelf Registration Statement
in accordance with the Registration Rights Agreement;




     (C) such transfer is effected by a Broker-Dealer pursuant to the Exchange
Offer Registration Statement in accordance with the Registration Rights Agreement;
or




     (D) the Registrar receives the following:




     (i) if the Holder of such Definitive Notes proposes to exchange
such Notes for a beneficial interest in the Unrestricted Global Note, a
certificate from



42









 






such Holder in the form of Exhibit C hereto, including the
certifications in item (1)(c) thereof; or




     (ii) if the Holder of such Definitive Notes proposes to transfer
such Notes to a Person who shall take delivery thereof in the form of a
beneficial interest in the Unrestricted Global Note, a certificate from such
Holder in the form of Exhibit B hereto, including the certifications in item
(4) thereof;




and, in each such case set forth in this subparagraph (D), if the Registrar so
requests or if the Applicable Procedures so require, an Opinion of Counsel in form
reasonably acceptable to the Registrar to the effect that such exchange or transfer
is in compliance with the Securities Act and that the restrictions on transfer
contained herein and in the Private Placement Legend are no longer required in order
to maintain compliance with the Securities Act.




     Upon satisfaction of the conditions of any of the subparagraphs in this Section
2.06(d)(2), the Trustee will cancel the Definitive Notes and increase or cause to be
increased the aggregate principal amount of the Unrestricted Global Note.




     (3) Unrestricted Definitive Notes to Beneficial Interests in Unrestricted Global
Notes. A Holder of an Unrestricted Definitive Note may exchange such Note for a beneficial
interest in an Unrestricted Global Note or transfer such Definitive Notes to a Person who
takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note
at any time. Upon receipt of a request for such an exchange or transfer, the Trustee will
cancel the applicable Unrestricted Definitive Note and increase or cause to be increased the
aggregate principal amount of one of the Unrestricted Global Notes.




     If any such exchange or transfer from a Definitive Note to a beneficial interest is
effected pursuant to subparagraphs (2)(B), (2)(D) or (3) above at a time when an
Unrestricted Global Note has not yet been issued, the Company will issue and, upon receipt
of an Authentication Order in accordance with Section 2.02 hereof, the Trustee will
authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to
the principal amount of Definitive Notes so transferred.



     (e) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon request by a
Holder of Definitive Notes and such Holder’s compliance with the provisions of this Section
2.06(e), the Registrar will register the transfer or exchange of Definitive Notes. Prior to such
registration of transfer or exchange, the requesting Holder must present or surrender to the
Registrar the Definitive Notes duly endorsed or accompanied by a written instruction of transfer in
form satisfactory to the Registrar duly executed by such Holder or by its attorney, duly authorized
in writing. In addition, the requesting Holder must provide any additional certifications,
documents and information, as applicable, required pursuant to the following provisions of this
Section 2.06(e).




     (1) Restricted Definitive Notes to Restricted Definitive Notes. Any Restricted
Definitive Note may be transferred to and registered in the name of Persons who take
delivery thereof in the form of a Restricted Definitive Note if the Registrar receives the
following:




     (A) if the transfer will be made pursuant to Rule 144A, then the transferor
must deliver a certificate in the form of Exhibit B hereto, including the
certifications in item (1) thereof;



43









 






     (B) if the transfer will be made pursuant to Rule 903 or Rule 904, then the
transferor must deliver a certificate in the form of Exhibit B hereto, including the
certifications in item (2) thereof; and




     (C) if the transfer will be made pursuant to any other exemption from the
registration requirements of the Securities Act, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3) thereof, if applicable.




     (2) Restricted Definitive Notes to Unrestricted Definitive Notes. Any Restricted
Definitive Note may be exchanged by the Holder thereof for an Unrestricted Definitive Note
or transferred to a Person or Persons who take delivery thereof in the form of an
Unrestricted Definitive Note if:




     (A) such exchange or transfer is effected pursuant to the Exchange Offer in
accordance with the Registration Rights Agreement and the Holder, in the case of an
exchange, or the transferee, in the case of a transfer, certifies in the applicable
Letter of Transmittal that it is not (i) a Broker-Dealer, (ii) a Person
participating in the distribution of the Exchange Notes or (iii) a Person who is an
affiliate (as defined in Rule 144) of the Company;




     (B) any such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;




     (C) any such transfer is effected by a Broker-Dealer pursuant to the
Exchange Offer Registration Statement in accordance with the Registration Rights
Agreement; or




     (D) the Registrar receives the following:




     (i) if the Holder of such Restricted Definitive Notes proposes to
exchange such Notes for an Unrestricted Definitive Note, a certificate from
such Holder in the form of Exhibit C hereto, including the certifications in
item (1)(d) thereof; or




     (ii) if the Holder of such Restricted Definitive Notes proposes to
transfer such Notes to a Person who shall take delivery thereof in the form
of an Unrestricted Definitive Note, a certificate from such Holder in the
form of Exhibit B hereto, including the certifications in item (4) thereof;




and, in each such case set forth in this subparagraph (D), if the Registrar so
requests, an Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the Securities Act
and that the restrictions on transfer contained herein and in the Private Placement
Legend are no longer required in order to maintain compliance with the Securities
Act.




     (3) Unrestricted Definitive Notes to Unrestricted Definitive Notes. A Holder of
Unrestricted Definitive Notes may transfer such Notes to a Person who takes delivery thereof
in the form of an Unrestricted Definitive Note. Upon receipt of a request to register such
a transfer, the Registrar shall register the Unrestricted Definitive Notes pursuant to the
instructions from the Holder thereof.



44









 





     (f) Exchange Offer. Upon the occurrence of the Exchange Offer in accordance with the
Registration Rights Agreement, the Company will issue and, upon receipt of an Authentication Order
in accordance with Section 2.02 hereof, the Trustee will authenticate:




     (1) one or more Unrestricted Global Notes in an aggregate principal amount equal to
the principal amount of the beneficial interests in the Restricted Global Notes accepted for
exchange in the Exchange Offer by Persons that certify in the applicable Letters of
Transmittal that (A) they are not Broker-Dealers, (B) they are not participating in a
distribution of the Exchange Notes and (C) they are not affiliates (as defined in Rule 144)
of the Company; and




     (2) Unrestricted Definitive Notes in an aggregate principal amount equal to the
principal amount of the Restricted Definitive Notes accepted for exchange in the Exchange
Offer by Persons that certify in the applicable Letters of Transmittal that (A) they are not
Broker-Dealers, (B) they are not participating in a distribution of the Exchange Notes and
(C) they are not affiliates (as defined in Rule 144) of the Company.



     Concurrently with the issuance of such Notes, the Trustee will cause the aggregate principal
amount of the applicable Restricted Global Notes to be reduced accordingly, and the Company will
execute and the Trustee will authenticate and deliver to the Persons designated by the Holders of
Definitive Notes so accepted Unrestricted Definitive Notes in the appropriate principal amount.



     (g) Legends. The following legends will appear on the face of all Global Notes and
Definitive Notes issued under this Indenture unless specifically stated otherwise in the applicable
provisions of this Indenture.




     (1) Private Placement Legend.




     (A) Except as permitted by subparagraph (B) below, each Global Note and
each Definitive Note (and all Notes issued in exchange therefor or substitution
thereof) shall bear the legend in substantially the following form:




     “THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES
ACT OF 1933 (THE “SECURITIES ACT”), AND THIS NOTE MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS NOTE IS HEREBY
NOTIFIED THAT THE SELLER OF THIS NOTE MAY BE RELYING ON THE EXEMPTION
FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE
144A THEREUNDER.




     THE HOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF THE COMPANY THAT
(A) THIS NOTE MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED,
ONLY (I) IN THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (II) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN
ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (III)



45









 






PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (IV) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF
CASES (I) THROUGH (IV) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS NOTE FROM
IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE.”




     (B) Notwithstanding the foregoing, any Global Note or Definitive Note
issued pursuant to subparagraphs (b)(4), (c)(3), (c)(4), (d)(2), (d)(3), (e)(2),
(e)(3) or (f) of this Section 2.06 (and all Notes issued in exchange therefor or
substitution thereof) will not bear the Private Placement Legend.




     (2) Global Note Legend. Each Global Note will bear a legend in substantially the
following form:



     “THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE)
OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE
TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (1) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS
MAY BE REQUIRED PURSUANT TO SECTION 2.06 OF THE INDENTURE, (2) THIS GLOBAL NOTE MAY BE EXCHANGED IN
WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (3) THIS GLOBAL NOTE MAY BE
DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (4) THIS
GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF MILAGRO
OIL & GAS, INC.



     UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE FORM, THIS 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.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY (55 WATER STREET, NEW YORK, NEW YORK) (“DTC”), TO THE COMPANY 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 MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.”




     (3) Regulation S Temporary Global Note Legend. The Regulation S Temporary Global
Note will bear a legend in substantially the following form:


“THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE CONDITIONS AND PROCEDURES
GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES,






46









 







ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE BENEFICIAL
OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT OF INTEREST
HEREON.”





     (4) Regulation S Permanent Global Note Legend. The Regulation S Permanent Global
Note will bear a legend in substantially the following form:


“THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION ORIGINALLY EXEMPT FROM
REGISTRATION UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT
BE TRANSFERRED IN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY U.S. PERSON EXCEPT
PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ALL
APPLICABLE STATE SECURITIES LAWS. TERMS USED ABOVE HAVE THE MEANINGS GIVEN TO THEM IN REGULATION S
UNDER THE SECURITIES ACT.”





     (5) Original Issue Discount Legend. Each Note will bear a legend in substantially
the following form:


“FOR THE PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED,
THIS SECURITY IS BEING ISSUED WITH ORIGINAL ISSUE DISCOUNT; FOR EACH $1,000 PRINCIPAL AMOUNT OF
THIS SECURITY, THE ISSUE PRICE IS $971.82, THE AMOUNT OF ORIGINAL ISSUE DISCOUNT IS $28.18, THE
ISSUE DATE IS MAY 11, 2011 AND THE YIELD TO MATURITY IS 11.250% PER ANNUM.”




     (h) Cancellation and/or Adjustment of Global Notes. At such time as all beneficial
interests in a particular Global Note have been exchanged for Definitive Notes or a particular
Global Note has been redeemed, repurchased or canceled in whole and not in part, each such Global
Note will be returned to or retained and canceled by the Trustee in accordance with Section 2.11
hereof. At any time prior to such cancellation, if any beneficial interest in a Global Note is
exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial
interest in another Global Note or for Definitive Notes, the principal amount of Notes represented
by such Global Note will be reduced accordingly and an endorsement will be made on such Global Note
by the Trustee or by the Depositary at the direction of the Trustee to reflect such reduction; and
if the beneficial interest is being exchanged for or transferred to a Person who will take delivery
thereof in the form of a beneficial interest in another Global Note, such other Global Note will be
increased accordingly and an endorsement will be made on such Global Note by the Trustee or by the
Depositary at the direction of the Trustee to reflect such increase.



     (i) General Provisions Relating to Transfers and Exchanges.




     (1) To permit registrations of transfers and exchanges, the Company will execute
and the Trustee will authenticate Global Notes and Definitive Notes upon receipt of an
Authentication Order in accordance with Section 2.02 hereof or at the Registrar’s request.




     (2) No service charge will be made to a Holder of a beneficial interest in a Global
Note or to a Holder of a Definitive Note for any registration of transfer or exchange, but
the Company may require payment of a sum sufficient to cover any transfer tax or similar
governmental charge payable in connection therewith (other than any such transfer taxes or
similar governmental charge payable upon exchange or transfer pursuant to Sections 2.10,
3.06, 3.09, 4.10, 4.15 and 9.05 hereof).



47









 






     (3) The Registrar will not be required to register the transfer of or exchange of
any Note selected for redemption in whole or in part, except the unredeemed portion of any
Note being redeemed in part.




     (4) All Global Notes and Definitive Notes issued upon any registration of transfer
or exchange of Global Notes or Definitive Notes will be the valid obligations of the
Company, evidencing the same debt, and entitled to the same benefits under this Indenture,
as the Global Notes or Definitive Notes surrendered upon such registration of transfer or
exchange.




     (5) Neither the Registrar nor the Company will be required:




     (A) to issue, to register the transfer of or to exchange any Notes during a
period beginning at the opening of business 15 days before the day of any selection
of Notes for redemption under Section 3.02 hereof and ending at the close of
business on the day of selection;




     (B) to register the transfer of or to exchange any Note selected for
redemption in whole or in part, except the unredeemed portion of any Note being
redeemed in part; or




     (C) to register the transfer of or to exchange a Note between a record date
and the next succeeding interest payment date.




     (6) Prior to due presentment for the registration of a transfer of any Note, the
Trustee, any Agent and the Company may deem and treat the Person in whose name any Note is
registered as the absolute owner of such Note for the purpose of receiving payment of
principal of and interest on such Notes and for all other purposes, and none of the Trustee,
any Agent or the Company shall be affected by notice to the contrary.




     (7) The Trustee will authenticate Global Notes and Definitive Notes in accordance
with the provisions of Section 2.02 hereof.




     (8) All certifications, certificates and Opinions of Counsel required to be
submitted to the Registrar pursuant to this Section 2.06 to effect a registration of
transfer or exchange may be submitted by facsimile.


Section 2.07 Replacement Notes.




     If any mutilated Note is surrendered to the Trustee or the Company and the Trustee receives
evidence to its satisfaction of the destruction, loss or theft of any Note, the Company will issue
and the Trustee, upon receipt of an Authentication Order, will authenticate a replacement Note if
the Trustee’s requirements are met. If required by the Trustee or the Company, an indemnity bond
must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Company to
protect the Company, the Trustee, any Agent and any authenticating agent from any loss that any of
them may suffer if a Note is replaced. The Company may charge for its expenses in replacing a
Note.



     Every replacement Note is an additional obligation of the Company and will be entitled to all
of the benefits of this Indenture equally and proportionately with all other Notes duly issued
hereunder.




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Section 2.08 Outstanding Notes.




     The Notes outstanding at any time are all the Notes authenticated by the Trustee except for
those canceled by it, those delivered to it for cancellation, those reductions in the interest in a
Global Note effected by the Trustee in accordance with the provisions hereof, and those described
in this Section 2.08 as not outstanding. Except as set forth in Section 2.09 hereof, a Note does
not cease to be outstanding because the Company or an Affiliate of the Company holds the Note;
however, Notes held by the Company or a Subsidiary of the Company shall not be deemed to be
outstanding for purposes of Section 3.07(a) hereof.



     If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be outstanding unless the
Trustee receives proof satisfactory to it that the replaced Note is held by a protected purchaser.



     If the principal amount of any Note is considered paid under Section 4.01 hereof, it ceases to
be outstanding and interest on it ceases to accrue.



     If the Paying Agent (other than the Company, a Subsidiary or an Affiliate of any thereof)
holds, on a redemption date or maturity date, money sufficient to pay Notes payable on that date,
then on and after that date such Notes will be deemed to be no longer outstanding and will cease to
accrue interest.


Section 2.09 Treasury Notes.




     In determining whether the Holders of the required principal amount of Notes have concurred in
any direction, waiver or consent, Notes owned by the Company or any Guarantor, or by any Person
directly or indirectly controlling or controlled by or under direct or indirect common control with
the Company or any Guarantor, will be considered as though not outstanding, except that for the
purposes of determining whether the Trustee will be protected in relying on any such direction,
waiver or consent, only Notes that the Trustee knows are so owned will be so disregarded.


Section 2.10 Temporary Notes.




     Until certificates representing Notes are ready for delivery, the Company may prepare and the
Trustee, upon receipt of an Authentication Order, will authenticate temporary Notes. Temporary
Notes will be substantially in the form of certificated Notes but may have variations that the
Company considers appropriate for temporary Notes and as may be reasonably acceptable to the
Trustee. Without unreasonable delay, the Company will prepare and the Trustee will authenticate
definitive Notes in exchange for temporary Notes.



     Holders of temporary Notes will be entitled to all of the benefits of this Indenture.


Section 2.11 Cancellation.




     The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and
Paying Agent will forward to the Trustee any Notes surrendered to them for registration of
transfer, exchange or payment. The Trustee and no one else will cancel all Notes surrendered for
registration of transfer, exchange, payment, replacement or cancellation and will destroy canceled
Notes (subject to the record retention requirement of the Exchange Act). Certification of the
destruction of all canceled Notes will be delivered to the Company from time to time pursuant to a
written request. The Company may not issue new Notes to replace Notes that it has paid or that
have been delivered to the Trustee for cancellation.



49









 




Section 2.12 Defaulted Interest.




     If the Company defaults in a payment of interest on the Notes, it will pay the defaulted
interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted
interest, to the Persons who are Holders on a subsequent special record date, in each case at the
rate provided in the Notes and in Section 4.01 hereof. The Company will notify the Trustee in
writing of the amount of defaulted interest proposed to be paid on each Note and the date of the
proposed payment. The Company will fix or cause to be fixed each such special record date and
payment date; provided that no such special record date may be less than 10 days prior to the
related payment date for such defaulted interest. At least 15 days before the special record date,
the Company (or, upon the written request of the Company, the Trustee in the name and at the
expense of the Company) will mail or cause to be mailed to Holders a notice that states the special
record date, the related payment date and the amount of such interest to be paid.



ARTICLE 3

REDEMPTION AND PREPAYMENT



Section 3.01 Notices to Trustee.




     If the Company elects to redeem Notes pursuant to the optional redemption provisions of
Section 3.07 hereof, it must furnish to the Trustee, at least 30 days but not more than 60 days
before a redemption date, an Officers’ Certificate setting forth:




     (1) the clause of this Indenture pursuant to which the redemption shall occur;




     (2) the redemption date;




     (3) the principal amount of Notes to be redeemed; and




     (4) the redemption price.


Section 3.02 Selection of Notes to Be Redeemed or Purchased.




     If less than all of the Notes are to be redeemed or purchased in an offer to purchase at any
time, the Trustee will select Notes for redemption or purchase on a pro rata basis (or, in the case
of Notes issued in global form pursuant to Article 2 hereof, based on a method that most nearly
approximates a pro rata selection as the Trustee deems fair and appropriate but subject to
Applicable Procedures) unless otherwise required by law or applicable stock exchange or depositary
requirements.



     In the event of partial redemption, the particular Notes to be redeemed or purchased will be
selected, unless otherwise provided herein, not less than 30 nor more than 60 days prior to the
redemption or purchase date by the Trustee from the outstanding Notes not previously called for
redemption or purchase.



     The Trustee will promptly notify the Company in writing of the Notes selected for redemption
or purchase and, in the case of any Note selected for partial redemption or purchase, the principal
amount thereof to be redeemed or purchased. Notes and portions of Notes selected will be in
amounts of $2,000 or integral multiples of $1,000 in excess thereof; except that if all of the
Notes of a Holder are to be redeemed or purchased, the entire outstanding amount of Notes held by
such Holder shall be redeemed or purchased. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for redemption or purchase also apply to
portions of Notes called for redemption or purchase.



50









 




Section 3.03 Notice of Redemption.




     Subject to the provisions of Section 3.09 hereof, at least 30 days but not more than 60 days
before a redemption date, the Company will 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,
except that 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 satisfaction and discharge of
this Indenture pursuant to Articles 8 or 12 hereof.



     The notice will identify the Notes to be redeemed and will state:




     (1) the redemption date;




     (2) the redemption price;




     (3) if any Note is being redeemed in part, the portion of the principal amount of such
Note to be redeemed and that, after the redemption date upon surrender of such Note, a new
Note or Notes in principal amount equal to the unredeemed portion will be issued upon
cancellation of the original Note;




     (4) the name and address of the Paying Agent;




     (5) that Notes called for redemption must be surrendered to the Paying Agent to collect
the redemption price;




     (6) that, unless the Company defaults in making such redemption payment, interest on
Notes called for redemption ceases to accrue on and after the redemption date;




     (7) the paragraph of the Notes and/or Section of this Indenture pursuant to which the
Notes called for redemption are being redeemed; and




     (8) that no representation is made as to the correctness or accuracy of the CUSIP
number, if any, listed in such notice or printed on the Notes.



     At the Company’s request, the Trustee will give the notice of redemption in the Company’s name
and at its expense; provided, however, that the Company has delivered to the Trustee, at least 45
days prior to the redemption date, an Officers’ Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in such notice as provided in the preceding
paragraph.


Section 3.04 Effect of Notice of Redemption.




     Once notice of redemption is mailed in accordance with Section 3.03 hereof, Notes called for
redemption become irrevocably due and payable on the redemption date at the redemption price. A
notice of redemption may not be conditional.


Section 3.05 Deposit of Redemption or Purchase Price.




     One Business Day prior to the redemption or purchase date, the Company will deposit with the
Trustee or with the Paying Agent money sufficient to pay the redemption or purchase price of and,
accrued interest and Special Interest, if any, on all Notes to be redeemed or purchased on that
date. The Trustee or the Paying Agent will promptly return to the Company any money deposited with
the Trustee



51









 




or the Paying Agent by the Company in excess of the amounts necessary to pay the redemption or
purchase price of and, accrued interest and Special Interest, if any, on all Notes to be redeemed
or purchased.




     If the Company complies with the provisions of the preceding paragraph, on and after the
redemption or purchase date, interest will cease to accrue on the Notes or the portions of Notes
called for redemption or purchase. If a Note is redeemed or purchased on or after an interest
record date but on or prior to the related interest payment date, then any accrued and unpaid
interest shall be paid to the Person in whose name such Note was registered at the close of
business on such record date. If any Note called for redemption or purchase is not so paid upon
surrender for redemption or purchase because of the failure of the Company to comply with the
preceding paragraph, interest shall be paid on the unpaid principal, from the redemption or
purchase date until such principal is paid, and to the extent lawful on any interest not paid on
such unpaid principal, in each case at the rate provided in the Notes and in Section 4.01 hereof.


Section 3.06 Notes Redeemed or Purchased in Part.




     Upon surrender of a Note that is redeemed or purchased in part, the Company will issue and,
upon receipt of an Authentication Order, the Trustee will authenticate for the Holder at the
expense of the Company a new Note equal in principal amount to the unredeemed or unpurchased
portion of the Note surrendered. No Notes in denominations of $2,000 or less shall be redeemed in
part.


Section 3.07 Optional Redemption.




     (a) At any time prior to May 15, 2014, the Company may on any one or more occasions redeem up
to 35% of the aggregate principal amount of outstanding Notes (which amount includes Additional
Notes issued under this Indenture), upon not less than 30 nor more than 60 days’ notice, at a
redemption price equal to 110.500% of the principal amount of the Notes redeemed, plus accrued and
unpaid interest and Special Interest, if any, to the date of redemption (subject to the rights of
Holders of Notes on the relevant record date to receive interest on the relevant interest payment
date), with the net cash proceeds of an Equity Offering by the Company; provided that:




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




     (2) the redemption occurs within 90 days of the date after the closing of such Equity
Offering.



     (b) At any time prior to May 15, 2014, the Company may on any one or more occasions redeem all
or a part of the Notes, upon not less than 30 nor more than 60 days’ notice, at a redemption price
equal to 100% of the principal amount of the Notes redeemed, plus the Applicable Premium as of, and
accrued and unpaid interest and Special Interest, if any, to the date of redemption, subject to the
rights of Holders of Notes on the relevant record date to receive interest due on the relevant
interest payment date.



     (c) Except pursuant to the preceding paragraphs, the Notes will not be redeemable at the
Company’s option prior to May 15, 2014.



52









 





     (d) On or after May 15, 2014, the Company may on any one or more occasions redeem all or a
part of the Notes, upon not less than 30 nor more than 60 days’ notice, at the redemption prices
(expressed as percentages of principal amount) set forth below, plus accrued and unpaid interest
and Special Interest, if any, on the Notes redeemed, to the applicable date of redemption, if
redeemed on and after the following dates, subject to the rights of Holders of Notes on the
relevant record date to receive interest on the relevant interest payment date:



	 	 	 	 	 
	Year	 	Percentage	 
	May 15, 2014
	 	 	110.500	%
	May 15, 2015
	 	 	102.625	%
	November 15, 2015
	 	 	100.000	%






     Unless the Company defaults in the payment of the redemption price, interest will cease to
accrue on the Notes or portions thereof called for redemption on the applicable redemption date.



     (e) Any redemption pursuant to this Section 3.07 shall be made pursuant to the provisions of
Sections 3.01 through 3.06 hereof.


Section 3.08 Mandatory Redemption.




     The Company is not required to make mandatory redemption or sinking fund payments with respect
to the Notes.


Section 3.09 Offer to Purchase by Application of Excess Proceeds.




     In the event that, pursuant to Section 4.10 hereof, the Company is required to commence an
offer to all Holders to purchase Notes (an “Asset Sale Offer”), it will follow the procedures
specified below.



     The Asset Sale Offer shall be made to all Holders and all holders of other Indebtedness that
is pari passu with the Notes containing provisions similar to those set forth in this Indenture
with respect to offers to purchase, prepay or redeem with the proceeds of sales of assets. The
Asset Sale Offer will remain open for a period of at least 20 Business Days following its
commencement and not more than 30 Business Days, except to the extent that a longer period is
required by applicable law (the “Offer Period”). No later than three Business Days after the
termination of the Offer Period (the “Purchase Date”), the Company will apply all Excess Proceeds
(the “Offer Amount”) to the purchase of Notes and such other pari passu Indebtedness (on a pro rata
basis based on the principal amount of Notes and such other pari passu Indebtedness surrendered, if
applicable) or, if less than the Offer Amount has been tendered, all Notes and other Indebtedness
tendered in response to the Asset Sale Offer. Payment for any Notes so purchased will be made in
the same manner as interest payments are made.



     If the Purchase Date is on or after an interest record date and on or before the related
interest payment date, any accrued and unpaid interest and Special Interest, if any, will be paid
to the Person in whose name a Note is registered at the close of business on such record date, and
no additional interest will be payable to Holders who tender Notes pursuant to the Asset Sale
Offer.



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



53









 






     (1) that the Asset Sale Offer is being made pursuant to this Section 3.09 and Section
4.10 hereof and the length of time the Asset Sale Offer will remain open;




     (2) the Offer Amount, the purchase price and the Purchase Date;




     (3) that any Note not tendered or accepted for payment will continue to accrue
interest;




     (4) that, unless the Company defaults in making such payment, any Note accepted for
payment pursuant to the Asset Sale Offer will cease to accrue interest after the Purchase
Date;




     (5) that Holders electing to have a Note purchased pursuant to an Asset Sale Offer may
elect to have Notes purchased in denominations of $2,000 or an integral multiple of $1,000
in excess thereof;




     (6) that Holders electing to have Notes purchased pursuant to any Asset Sale Offer will
be required to surrender the Note, with the form entitled “Option of Holder to Elect
Purchase” attached to the Notes completed, or transfer by book-entry transfer, to the
Company, a Depositary, if appointed by the Company, or a Paying Agent at the address
specified in the notice at least three days before the Purchase Date;




     (7) that Holders will be entitled to withdraw their election if the Company, the
Depositary or the Paying Agent, as the case may be, receives, not later than the expiration
of the Offer Period, 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;




     (8) that, if the aggregate principal amount of Notes and other pari passu Indebtedness
surrendered by holders thereof exceeds the Offer Amount, the Company will select the Notes
and other pari passu Indebtedness to be purchased on a pro rata basis based on the principal
amount of Notes and such other pari passu Indebtedness surrendered (with such adjustments as
may be deemed appropriate by the Company so that only Notes in denominations of $2,000, or
an integral multiple of $1,000 in excess thereof, will be purchased); and




     (9) that Holders whose Notes were purchased only in part will be issued new Notes equal
in principal amount to the unpurchased portion of the Notes surrendered (or transferred by
book-entry transfer).



     On or before the Purchase Date, the Company will, to the extent lawful, accept for payment, on
a pro rata basis to the extent necessary, the Offer Amount of Notes or portions thereof tendered
pursuant to the Asset Sale Offer, or if less than the Offer Amount has been tendered, all Notes
tendered, and will deliver or cause to be delivered to the Trustee the Notes properly accepted
together with 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 3.09. The Company, the
Depositary or the Paying Agent, as the case may be, will promptly (but in any case not later than
five days after the Purchase Date) 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 will promptly issue a new Note, and the Trustee, upon written request from the Company,
will authenticate and mail or deliver (or cause to be transferred by book entry) such new Note to
such Holder, in a principal amount equal to any unpurchased portion of the Note surrendered. Any
Note not so accepted shall be promptly mailed or



54









 




delivered by the Company to the Holder thereof. The Company will publicly announce the
results of the Asset Sale Offer on the Purchase Date.




     Other than as specifically provided in this Section 3.09, any purchase pursuant to this
Section 3.09 shall be made pursuant to the provisions of Sections 3.01 through 3.06 hereof.



ARTICLE 4

COVENANTS



Section 4.01 Payment of Notes.




     The Company will pay or cause to be paid the principal of, premium on, if any, and interest
and Special Interest, if any, on, the Notes on the dates and in the manner provided in the Notes.
Principal, premium, if any, and interest and Special Interest, if any, will be considered paid on
the date due if the Paying Agent, if other than the Company or a Subsidiary thereof, holds as of
10:00 a.m. Eastern Time on the due date money deposited by the Company in immediately available
funds and designated for and sufficient to pay all principal, premium, if any, and interest, if
any, then due. The Company will pay all Special Interest, if any, in the same manner on the dates
and in the amounts set forth in the Registration Rights Agreement.



     The Company will pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law to the extent permitted by law) on overdue principal at a rate that is 1% higher
than the then applicable interest rate on the Notes to the extent lawful; it will pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law to the extent
permitted by law) on overdue installments of interest and Special Interest, if any (without regard
to any applicable grace period), at the same rate to the extent lawful.


Section 4.02 Maintenance of Office or Agency.




     The Company will maintain in the Borough of Manhattan, the City of New York, an office or
agency (which may be an office of the Trustee or an affiliate of the Trustee, Registrar or
co-registrar) where Notes may be surrendered for registration of transfer or for exchange and where
notices and demands to or upon the Company in respect of the Notes and this Indenture may be
served. The Company will give prompt written notice to the Trustee of the location, and any change
in the location, of such office or agency. If at any time the Company fails to maintain any such
required office or agency or fails to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office
of the Trustee.



     The Company may also from time to time designate one or more other offices or agencies where
the Notes may be presented or surrendered for any or all such purposes and may from time to time
rescind such designations; provided, however, that no such designation or rescission will in any
manner relieve the Company of its obligation to maintain an office or agency in the Borough of
Manhattan, the City of New York for such purposes. The Company will give prompt written notice to
the Trustee of any such designation or rescission and of any change in the location of any such
other office or agency.



     The Company hereby designates the Corporate Trust Office of the Trustee as one such office or
agency of the Company in accordance with Section 2.03 hereof.



55









 




Section 4.03 Reports.




     (a) Commencing with the fiscal quarter ending June 30, 2011, whether or not required by the
rules and regulations of the SEC, so long as any Notes are outstanding, the Company will furnish to
the Holders of Notes or cause the Trustee to furnish to the Holders of Notes (or file with the SEC
for public availability), within the time periods specified in the SEC’s rules and regulations:




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




     (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;




     (3) within 15 Business Days after furnishing to the Trustee the annual and quarterly
reports required by clause (1) of this Section 4.03(a), hold a conference call to discuss
such reports and the results of operations for the relevant reporting period; and




     (4) issue a press release to an internationally recognized wire service no fewer than
three Business Days prior to the date of the conference call required to be held in
accordance with this Section 4.03(a), announcing the time and date of such conference call
and either including all information necessary to access the call or directing Holders of
Notes, prospective investors, broker-dealers and securities analysts to contact the
appropriate person at the Company to obtain such information.



     All such reports will be prepared in all material respects in accordance with all of the rules
and regulations applicable to such reports. In addition, following the consummation of the Exchange
Offer contemplated by the Registration Rights Agreement, the Company will file a copy of each of
the reports referred to in clauses (1) and (2) above with the SEC for public availability within
the time periods specified in the rules and regulations applicable to such reports (unless the SEC
will not accept such a filing) and will post the reports on its website within those time periods.
The Company will at all times comply with TIA §314(a).



     If, at any time after consummation of the Exchange Offer contemplated by the Registration
Rights Agreement, the Company is no longer subject to the periodic reporting requirements of the
Exchange Act for any reason, the Company will nevertheless continue filing the reports specified in
the preceding paragraphs with the SEC within the time periods specified above unless the SEC will
not accept such a filing. The Company will not take any action for the purpose of causing the SEC
not to accept any such filings. If, notwithstanding the foregoing, the SEC will not accept the
Company’s filings for any reason, the Company will post the reports referred to in the preceding
paragraphs on its website within the time periods that would apply if the Company were required to
file those reports with the SEC.



     (b) If the Company has designated any of its Subsidiaries as Unrestricted Subsidiaries, then
the quarterly and annual financial information required by Section 4.03(a) hereof will include a
reasonably detailed presentation, either on the face of the financial statements or in the
footnotes thereto, and in Management’s Discussion and Analysis of Financial Condition and Results
of Operations, of the financial condition and results of operations of the Company and its
Restricted Subsidiaries separate from the financial condition and results of operations of the
Unrestricted Subsidiaries of the Company.



56









 





     (c) For so long as any Notes remain outstanding, if at any time the Company and the Guarantors
are not required to file with the SEC the reports required by this Section 4.03, the Company and
the Guarantors will furnish to the Holders of Notes and to securities analysts and prospective
investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act.



     (d) The Company will be deemed to have furnished any reports required by this Section 4.03 to
the Trustee and the Holders of Notes if the Company has filed such reports with the SEC using the
Electronic Data Gathering Analysis and Retrieval filing system and such reports are publicly
available.



     (e) Delivery of all reports, information and documents to the Trustee pursuant to this Section
4.03 is for informational purposes only, and the Trustee’s receipt of such reports, information or
documents shall not constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company’s compliance with any of its
covenants under this Indenture (as to which the Trustee is entitled to rely exclusively on
Officers’ Certificates).


Section 4.04 Compliance Certificate.




     (a) The Company and each Guarantor (to the extent that such Guarantor is so required under the
TIA) shall deliver to the Trustee, within 90 days after the end of each fiscal year, an Officers’
Certificate stating that a review of the activities of the Company and its Subsidiaries during the
preceding fiscal year has been made under the supervision of the signing Officers with a view to
determining whether the Company has kept, observed, performed and fulfilled its obligations under
this Indenture, and further stating, as to each such Officer signing such certificate, that to the
best of his or her knowledge the Company has kept, observed, performed and fulfilled each and every
covenant contained in this Indenture and is not in default in the performance or observance of any
of the terms, provisions and conditions of this Indenture (or, if a Default or Event of Default has
occurred, describing all such Defaults or Events of Default of which he or she may have knowledge
and what action the Company is taking or proposes to take with respect thereto) and that to the
best of his or her knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of, premium on, if any, or interest or Special Interest, if
any, on, the Notes is prohibited or if such event has occurred, a description of the event and what
action the Company is taking or proposes to take with respect thereto.



     (b) So long as any of the Notes are outstanding, the Company will deliver to the Trustee,
within 30 days after any Officer becomes aware of any Event of Default, an Officers’ Certificate
specifying such Event of Default and what action the Company is taking or proposes to take with
respect thereto.


Section 4.05 Taxes.




     The Company will pay, and will cause each of its Subsidiaries to pay, prior to delinquency,
all material taxes, assessments, and governmental levies except such as are contested in good faith
and by appropriate proceedings or where the failure to effect such payment is not adverse in any
material respect to the Holders of the Notes.


Section 4.06 Stay, Extension and Usury Laws.




     The Company and each of the Guarantors covenants (to the extent that it may lawfully do so)
that it will not at any time insist upon, plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time
hereafter in force, that may affect the covenants or the performance of this Indenture; and the
Company and each of the



57









 




Guarantors (to the extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay
or impede the execution of any power herein granted to the Trustee, but will suffer and permit the
execution of every such power as though no such law has been enacted.



Section 4.07 Restricted Payments.




     (a) 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 direct or indirect 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 and other than dividends or distributions 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 payment on or with respect to, or purchase, redeem, defease or otherwise
acquire or retire for value any Subordinated Obligation or Guarantor Subordinated
Obligation, except (x) a payment of interest or principal at the Stated Maturity thereof,
(y) intercompany Indebtedness between or among the Company and any Restricted Subsidiary or
between or among Restricted Subsidiaries, or (z) the purchase, redemption, defeasance or
other acquisition or retirement of any Subordinated Obligations or Guarantor Subordinated
Obligations in anticipation of satisfying a sinking fund obligation, principal installment
or final maturity, in each case due within one year of the date of such purchase,
repurchase, redemption, defeasance or other acquisition or retirement; or




     (4) make any Restricted Investment




(all such payments and other actions set forth in these clauses (1) through (4) above being
collectively referred to as “Restricted Payments”), unless, at the time of and after giving
effect to such Restricted Payment:




     (x) no Default or Event of Default has occurred and is continuing or would occur as a
consequence of such Restricted Payment;




     (y) the Company would, at the time of such Restricted Payment and after giving pro
forma effect thereto as if such Restricted Payment had been made at the beginning of the
applicable four-quarter period, have been permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 4.09(a)
hereof; and




     (z) such Restricted Payment, together with the aggregate amount of all other Restricted
Payments made by the Company and its Restricted Subsidiaries since the date of this



58









 






Indenture (excluding Restricted Payments permitted by clauses (2), (3), (4), (5), (6),
(7) and (8) of paragraph (b) of this Section 4.07), is less than the sum, without
duplication, of:




     (A) 50% of the Consolidated Net Income of the Company for the period (taken as
one accounting period) from April 1, 2011 to the end of the Company’s most recently
ended fiscal quarter for which internal financial statements are available at the
time of such Restricted Payment (or, if such Consolidated Net Income for such period
is a deficit, less 100% of such deficit); plus




     (B) 100% of the aggregate net cash proceeds received by the Company since the
date of this Indenture (i) as a contribution to its common equity capital or from
the issue or sale of its Equity Interests (other than Disqualified Stock and other
than net cash proceeds received from an issuance or sale of such Equity Interests
(x) to a Subsidiary of the Company or (y) to or under an employee stock ownership
plan, option plan or similar trust (to the extent such sale to an employee stock
ownership plan, option plan or similar trust is financed by loans from or guaranteed
by the Company or any Restricted Subsidiary except to the extent such loans have
been repaid with cash on or prior to the date of determination)) or (ii) from the
issue or sale of convertible or exchangeable Disqualified Stock of the Company or
convertible or exchangeable debt securities of the Company, in each case that have
been converted into or exchanged for Equity Interests of the Company (other than
convertible or exchangeable Disqualified Stock or debt securities sold to a
Subsidiary of the Company); plus




     (C) to the extent not already included in Consolidated Net Income for such
period, (i) if any Restricted Investment that was made by the Company or any
Restricted Subsidiary after the date of this Indenture is sold for cash (other than
to any Subsidiary of the Company) or otherwise cancelled, liquidated or repaid for
cash, the cash return of capital with respect to such Restricted Investment
resulting from such sale, liquidation or repayment (less any out-of-pocket costs
incurred in connection with any such sale) and (ii) the amount returned in cash to
the Company or any of its Restricted Subsidiaries from such Restricted Investment
resulting from payments of interest, dividends, principal repayments and other
transfers, in an amount not to exceed the aggregate amount of such Restricted
Investment; plus




     (D) in case any Unrestricted Subsidiary has been redesignated a Restricted
Subsidiary pursuant to the terms of this Indenture or has been merged or
consolidated with or into, or transfers or otherwise disposes of all of
substantially all of its properties or assets to or is liquidated into, the Company
or a Restricted Subsidiary, the lesser of, at the date of such redesignation,
merger, consolidation, transfer, disposition or liquidation (i) the book value
(determined in accordance with GAAP) of the aggregate Investments made by the
Company and its Restricted Subsidiaries in such Unrestricted Subsidiary (or of the
properties or assets disposed of, as applicable) and (ii) the Fair Market Value of
such Investment in such Unrestricted Subsidiary, in each case after deducting any
Indebtedness of such Unrestricted Subsidiary.



     (b) The provisions of Section 4.07(a) hereof will not prohibit:




     (1) the making of any Restricted Payment (including a dividend) within 60 days after
the date the Company or Restricted Subsidiary became legally or contractually obligated to
make such Restricted Payment (including the declaration of a dividend), if at the date of
becoming so legally or contractually bound, such Restricted Payment would have complied with
the provisions



59









 






of this Indenture (and such Restricted Payment shall be deemed to be made on the date
of becoming so legally or contractually bound for purposes of any calculation required by
this Section 4.07);




     (2) the making of any Restricted Payment in exchange for, or out of or with the net
cash proceeds of the substantially concurrent sale (other than to a Subsidiary of the
Company) of, Equity Interests of the Company (other than Disqualified Stock and other than
Equity Interests issued or sold to a Subsidiary of the Company or an employee stock
ownership plan, option plan or similar trust to the extent such sale to an employee stock
ownership plan, option plan or similar trust is financed by loans from or guaranteed by the
Company or any Restricted Subsidiary except to the extent such loans have been repaid with
cash on or prior to the date of determination) or from the substantially concurrent
contribution of common equity capital to the Company; provided that the amount of any such
net cash proceeds that are utilized for any such Restricted Payment will not be considered
to be net proceeds of Equity Interests for purposes of Section 4.07(a)(z)(B) hereof;




     (3) the payment of any dividend or distribution by a Restricted Subsidiary of the
Company to the holders of its Equity Interests (other than Disqualified Stock) on a pro rata
basis;




     (4) the repurchase, redemption, defeasance or other acquisition or retirement for value
of Subordinated Obligations of the Company or Guarantor Subordinated Obligations of any
Guarantor with the net cash proceeds from a substantially concurrent incurrence of
Subordinated Obligations or Guarantor Subordinated Obligations permitted to be incurred
under Section 4.09 hereof; provided, however, that the Subordinated Obligations or Guarantor
Subordinated Obligations being incurred has (a) a final maturity date no earlier than the
earlier of (i) the final maturity date of the Subordinated Obligations or the Guarantor
Subordinated Obligations being repurchased, redeemed, defeased or otherwise acquired or
retired for value and (ii) the date 90 days after the final maturity date of the Notes and
(b) a Weighted Average Life to Maturity that is equal to or greater than the Weighted
Average Life to Maturity of the Subordinated Obligations or the Guarantor Subordinated
Obligations being repurchased, redeemed, defeased or otherwise acquired or retired for
value;




     (5) so long as no Default or Event of Default has occurred and is continuing, the
repurchase, redemption or other acquisition or retirement for value of any Equity Interests
of the Company or any Restricted Subsidiary of the Company held by any current or former
officer, director or employee of the Company or any of its Restricted Subsidiaries pursuant
to any equity subscription agreement, stock option agreement, shareholders’ agreement or
similar agreement; provided that the aggregate price paid for all such repurchased,
redeemed, acquired or retired Equity Interests may not exceed $2.0 million in any calendar
year (with any unused amounts in any calendar year being carried over to succeeding calendar
years); provided, further, that such amount in any calendar year may be increased by an
amount not to exceed:




     (A) the cash proceeds received by the Company from the sale of Equity Interests
(other than Disqualified Stock) of the Company or any direct or indirect parent
company of the Company to employees, members of management or directors of the
Company or any direct or indirect parent company of the Company and the Restricted
Subsidiaries that occurs after the date of this Indenture (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 Section 4.07(a)(z)(B) hereof); plus



60









 






     (B) the cash proceeds of key man life insurance policies received by the
Company or any direct or indirect parent company of the Company and the Restricted
Subsidiaries after the date of this Indenture; less




     (C) the amount of any Restricted Payments made after the date of this Indenture
pursuant to clauses (A) and (B) of this Section 4.07(b)(5);




     (6) purchases, repurchases, redemptions or other acquisitions for value of Equity
Interests deemed to occur upon the exercise of stock options, warrants or rights to acquire
Equity Interests to the extent such Equity Interests represent a portion of the exercise or
exchange price thereof, and any purchases, repurchases, redemptions or other acquisitions
for value of Equity Interests made in lieu of withholding taxes in connection with any
exercise or exchange of warrants, options or rights to acquire Equity Interests;




     (7) so long as no Default or Event of Default has occurred and is continuing, the
declaration and payment of regularly scheduled or accrued dividends to holders of any class
or series of Disqualified Stock of the Company or any preferred stock of any Restricted
Subsidiary of the Company issued on or after the date of this Indenture in accordance with
the Fixed Charge Coverage Ratio test described in Section 4.09(a) hereof;




     (8) payments of cash, dividends, distributions, advances or other Restricted Payments
by the Company or any of its Restricted Subsidiaries to allow the payment of cash in lieu of
the issuance of fractional shares upon (i) the exercise of options or warrants, (ii) in
connection with stock dividends, splits or combinations or (iii) the conversion or exchange
of Capital Stock or convertible indebtedness of any such Person; and




     (9) so long as no Default or Event of Default has occurred and is continuing, other
Restricted Payments in an aggregate amount not to exceed $10.0 million since the date of
this Indenture.



     In determining whether any Restricted Payment is permitted by this Section 4.07, the Company
may allocate or re-allocate all or any portion of such Restricted Payment among clauses (1) through
(9) of Section 4.07(b) or among such clauses and Section 4.07(a); provided that at the time of such
allocation or re-allocation all such Restricted Payments or allocated portions thereof, and all
prior Restricted Payments, would be permitted under the various provisions of this Section 4.07.
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 such Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.


Section 4.08 Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries.




     (a) 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 to:




     (1) pay dividends or make any other distributions on its Capital Stock to the Company
or any of its Restricted Subsidiaries or with respect to any other interest or participation
in, or measured by, its profits, or pay any indebtedness 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



61









 






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



     (b) The restrictions in Section 4.08(a) hereof will not apply to encumbrances or restrictions
existing under or by reason of:




     (1) agreements governing Existing Indebtedness and Credit Facilities as in effect on
the date of this Indenture and any amendments, restatements, modifications, renewals,
supplements, refundings, replacements or refinancings of those agreements; provided that the
amendments, restatements, modifications, renewals, supplements, refundings, replacements or
refinancings of Existing Indebtedness are not materially more restrictive, taken as a whole,
with respect to such dividend and other payment restrictions than those contained in those
agreements on the date of this Indenture;




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




     (3) agreements governing other Indebtedness permitted to be incurred under Section 4.09
hereof and any amendments, restatements, modifications, renewals, supplements, refundings,
replacements or refinancings of those agreements; provided that the restrictions therein are
not materially more restrictive, taken as a whole, than those contained in this Indenture,
the Notes and the Note Guarantees;




     (4) applicable law, rule, regulation or order;




     (5) any instrument governing Indebtedness or Capital Stock of a Person acquired by the
Company or any of its Restricted Subsidiaries as in effect at the time of such acquisition
(except to the extent such Indebtedness or Capital Stock was incurred in connection with or
in contemplation of such acquisition), which encumbrance or restriction is not applicable to
any Person, or the properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired; provided that, in the case of Indebtedness,
such Indebtedness was permitted by the terms of this Indenture to be incurred;




     (6) customary non-assignment provisions in contracts and licenses entered into in the
ordinary course of business;




     (7) in the case of clause (3) of Section 4.08(a) hereof, any encumbrance or
restriction:




     (A) that restricts in a customary manner the subletting, assignment or transfer
of any property or asset that is subject to a lease (including leases governing
leasehold interests or farm-in agreements or farm-out agreements relating to
leasehold interests in Oil and Gas Properties), license or similar contract, or the
assignment or transfer of any such lease (including leases governing leasehold
interests or farm-in agreements or farm-out agreements relating to leasehold
interests in Oil and Gas Properties), license (including, without limitation,
licenses of intellectual property) or other contract;




     (B) contained in mortgages, pledges or other security agreements permitted
under this Indenture securing Indebtedness of the Company or a Restricted Subsidiary
to the extent such encumbrances or restrictions restrict the transfer of the
property subject to such mortgages, pledges or other security agreements;



62









 






     (C) contained in any agreement creating Hedging Obligations permitted from time
to time under this Indenture;




     (D) pursuant to customary provisions restricting dispositions of real property
interests set forth in any reciprocal easement agreements of the Company or any
Restricted Subsidiary;




     (E) restrictions on cash or other deposits imposed by customers under contracts
entered into in the ordinary course of business; or




     (F) provisions with respect to the disposition or distribution of assets or
property in operating agreements, joint venture agreements, development agreements,
area of mutual interest agreements and other agreements that are customary in the
Oil and Gas Business and entered into in the ordinary course of business;




     (8) purchase money obligations for property acquired in the ordinary course of business
and Capital Lease Obligations that impose restrictions on the property purchased or leased
of the nature described in clause (3) of Section 4.08(a) hereof;




     (9) any agreement for the sale or other disposition of a Restricted Subsidiary 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;




     (11) Liens permitted to be incurred under the provisions of Section 4.12 hereof that
limit the right of the debtor to dispose of the assets subject to such Liens;




     (12) provisions limiting the disposition or distribution of assets or property in joint
venture agreements, asset sale agreements, sale-leaseback agreements, stock sale agreements
and other similar agreements (including agreements entered into in connection with a
Restricted Investment) entered into with the approval of the Company’s Board of Directors,
which limitation is applicable only to the assets that are the subject of such agreements;
and




     (13) restrictions on cash or other deposits or net worth imposed by customers under
contracts entered into in the ordinary course of business.


Section 4.09 Incurrence of Indebtedness and Issuance of Preferred Stock.




     (a) 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 (collectively, “incur”), with respect to any Indebtedness
(including Acquired Debt), and the Company will not issue any Disqualified Stock and will not
permit any of its Restricted Subsidiaries to issue any shares of preferred stock; provided,
however, that the Company may incur Indebtedness (including Acquired Debt) or issue Disqualified
Stock, and the Guarantors may incur Indebtedness (including Acquired Debt) or issue preferred
stock, 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
which such additional Indebtedness is incurred or such Disqualified Stock or such preferred stock
is issued, as the case may be, would have been at least 2.5 to



63









 




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 the Disqualified Stock or the
preferred stock had been issued, as the case may be, at the beginning of such four-quarter period.




     (b) The provisions of Section 4.09(a) hereof will not prohibit the incurrence of any of the
following items of Indebtedness (collectively, “Permitted Debt”):




     (1) Indebtedness of the Company or any Restricted Subsidiary incurred pursuant to one
or more Credit Facilities (including the Credit Agreement) in an aggregate principal amount
not to exceed the greater of (i) $200.0 million and (ii) 30% of the Company’s Adjusted
Consolidated Net Tangible Assets determined as of the date of the incurrence of such
Indebtedness after giving effect to the application of the proceeds therefrom plus, in the
case of either of clauses (i) or (ii), all interest and fees and other obligations
thereunder;




     (2) the incurrence by the Company and its Restricted Subsidiaries of the Existing
Indebtedness;




     (3) the incurrence by the Company and the Guarantors of Indebtedness represented by the
Notes and the related Note Guarantees and the Exchange Notes and the related Note Guarantees
to be issued pursuant to the 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,
construction, installation or improvement of property, plant or equipment used in the
business of the Company or any of its Restricted Subsidiaries, in an aggregate principal
amount, including all Permitted Refinancing Indebtedness incurred to renew, refund,
refinance, replace, defease or discharge any Indebtedness incurred pursuant to this clause
(4), not to exceed $10.0 million; provided that the principal amount of any Indebtedness
permitted under this clause (4) did not in each case at the time of incurrence exceed the
Fair Market Value, as determined in accordance with the definition of such term, of the
acquired, installed or constructed asset or improvement so financed;




     (5) the incurrence by the Company or any of its Restricted Subsidiaries of Permitted
Refinancing Indebtedness in exchange for, or the net proceeds of which are used to renew,
refund, refinance, replace, defease or discharge any Indebtedness (other than intercompany
Indebtedness) that was permitted by this Indenture to be incurred under Section 4.09(a)
hereof or clauses (2), (3), (4), (5) or (16) of this Section 4.09(b);




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




     (A) if the Company or any Guarantor is the obligor on such Indebtedness and the
payee is not the Company or a Guarantor, such Indebtedness must be unsecured and
expressly subordinated to the prior payment in full in cash of all Obligations then
due with respect to the Notes, in the case of the Company, or the Note Guarantee, in
the case of a Guarantor; and




     (B) (1) 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



64









 






Subsidiary of the Company and (2) any sale or other transfer of any such
Indebtedness to a Person that is not either the Company or a Restricted Subsidiary
of the Company,




will be deemed, in each case, to constitute an incurrence 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 issuance by any of the Company’s Restricted Subsidiaries to the Company or to
any of its Restricted Subsidiaries of shares of preferred stock; provided, however, that:




     (A) any subsequent issuance or transfer of Equity Interests that results in any
such preferred stock 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 stock to a Person that is
not either the Company or a Restricted Subsidiary of the Company,




	 	 	will be deemed, in each case, to constitute an issuance of such preferred stock by such
Restricted Subsidiary that was not permitted by this clause (7);






     (8) the incurrence by the Company or any of its Restricted Subsidiaries of Hedging
Obligations in the ordinary course of business and not for speculative purposes;




     (9) the guarantee by the Company or any of the Guarantors of Indebtedness of the
Company or a Restricted Subsidiary of the Company to the extent that the guaranteed
Indebtedness was permitted to be incurred by another provision of this Section 4.09;
provided that if the Indebtedness being guaranteed is subordinated to or pari passu with the
Notes, then the Guarantee must be subordinated or pari passu, as applicable, to the same
extent as the Indebtedness guaranteed;




     (10) the incurrence by the Company or any of its Restricted Subsidiaries of
Indebtedness in respect of (i) self-insurance obligations or bid, plugging and abandonment,
appeal, reimbursement, performance, surety and similar bonds and completion guarantees
provided by the Company or a Restricted Subsidiary in the ordinary course of business and
any Guarantees or letters of credit functioning as or supporting any of the foregoing bonds
or obligations and (ii) workers’ compensation claims in the ordinary course of business;




     (11) the incurrence by the Company or any of 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, so long as such
Indebtedness is covered within five Business Days;




     (12) the incurrence by the Company or any of its Restricted Subsidiaries of
Indebtedness arising from agreements of the Company or any of its Restricted Subsidiaries
providing for indemnification, obligations in respect of earn-outs or other purchase price
adjustments or similar obligations, in each case, incurred or assumed in connection with the
disposition of any business, assets or Capital Stock of a Subsidiary, provided that the
maximum aggregate liability in respect of all such Indebtedness shall at no time exceed the
gross proceeds actually received by the Company and its Restricted Subsidiaries in
connection with such disposition;



65









 






     (13) the incurrence by the Company or any of its Restricted Subsidiaries of obligations
relating to gas balancing obligations arising in the ordinary course of business;




     (14) Indebtedness of the Company or any Restricted Subsidiary with respect to the
financing of insurance premiums;




     (15) Indebtedness to the extent the net proceeds thereof are promptly deposited to
defease the Notes or to satisfy and discharge this Indenture; and




     (16) the incurrence by the Company or any of the Guarantors of additional Indebtedness
in an aggregate principal amount (or accreted value, as applicable) at any time outstanding,
including all Permitted Refinancing Indebtedness incurred to renew, refund, refinance,
replace, defease or discharge any Indebtedness incurred pursuant to this clause (16), not to
exceed, at any time, the greater of $35.0 million and 5% of the Company’s Adjusted
Consolidated Net Tangible Assets, determined as of the date of incurrence of such
Indebtedness after giving effect to such incurrence and the application of the proceeds
therefrom.



     The Company will not incur, and will not permit any Guarantor to incur, any Indebtedness
(including Permitted Debt) that is contractually subordinated in right of payment to any other
Indebtedness of the Company or such Guarantor unless such Indebtedness is also contractually
subordinated in right of payment to the Notes or the applicable Note Guarantee, as the case may be,
on substantially identical terms; provided, however, that no Indebtedness will be deemed to be
contractually subordinated in right of payment to any other Indebtedness of the Company or any
Guarantor solely by virtue of being unsecured or by virtue of being secured on a junior priority
basis.



     For purposes of determining compliance with this Section 4.09, in the event that an item of
Indebtedness meets the criteria of more than one of the categories of Permitted Debt described in
clauses (1) through (16) above, or is entitled to be incurred pursuant to Section 4.09(a) hereof,
the Company will be permitted to classify such item of Indebtedness on the date of its incurrence,
or later reclassify all or a portion of such item of Indebtedness, in any manner that complies with
this Section 4.09. Indebtedness under the Credit Agreement will initially be deemed to have been
incurred on such date in reliance on the exception provided by clause (1) of the definition of
Permitted Debt. The accrual of interest or preferred stock dividends, the accretion or
amortization of original issue discount, the payment of interest on any Indebtedness in the form of
additional Indebtedness with the same terms, the reclassification of preferred stock as
Indebtedness due to a change in accounting principles and the payment of dividends on preferred
stock or Disqualified Stock in the form of additional shares of the same class of preferred stock
or Disqualified Stock will not be deemed to be an incurrence of Indebtedness or an issuance of
preferred stock or Disqualified Stock for purposes of this Section 4.09. 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 shall be utilized, calculated based on the relevant currency exchange rate in effect on
the date such Indebtedness was incurred. Notwithstanding any other provision of this Section 4.09,
the maximum amount of Indebtedness that the Company or any Restricted Subsidiary may incur pursuant
to this Section 4.09 shall not be deemed to be exceeded solely as a result of fluctuations in
exchange rates or currency values.



     The 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;



66









 






     (2) the principal amount of the Indebtedness, in the case of any other Indebtedness;
and




     (3) in respect of Indebtedness of another Person secured by a Lien on the assets of the
specified Person, the lesser of:




     (A) the Fair Market Value of such assets at the date of determination; and




     (B) the amount of the Indebtedness of the other Person.


Section 4.10 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 at the time of the Asset Sale at least equal to the Fair Market Value
(measured as of the date of the definitive agreement with respect to such Asset Sale) of the
assets or Equity Interests issued or sold or otherwise disposed of; and




     (2) at least 75% of the consideration received in the Asset Sale by the Company or such
Restricted Subsidiary 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 most recent consolidated balance
sheet, of the Company or any Restricted Subsidiary (other than contingent
liabilities and liabilities that are by their terms subordinated to the Notes or any
Note Guarantee) that are assumed by the transferee of any such assets pursuant to a
customary novation or indemnity agreement that releases the Company or such
Restricted Subsidiary from or indemnifies against further liability;




     (B) any securities, notes or other obligations received by the Company or any
such Restricted Subsidiary from such transferee that are contemporaneously, subject
to ordinary settlement periods, converted by the Company or such Restricted
Subsidiary into cash, to the extent of the cash received in that conversion; and




     (C) any stock or assets of the kind referred to in clauses (2) or (4) of the
next paragraph of this Section 4.10.



     Within 360 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 such Net Proceeds:




     (1) to repay Priority Lien Debt and other outstanding Priority Lien Obligations;
provided, that if such Priority Lien Debt is revolving credit Indebtedness, (A) such payment
is required under the terms thereof or (B) there is a corresponding reduction in the
commitments with respect thereto;




     (2) to acquire all or substantially all of the assets of, or any Capital Stock of,
another Oil and Gas Business, if, after giving effect to any such acquisition of Capital
Stock, the Oil and Gas Business is or becomes a Restricted Subsidiary of the Company;



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     (3) to make capital expenditures in the Oil and Gas Business; or




     (4) to acquire other assets that are not classified as current assets under GAAP and
that are used or useful in the Oil and Gas Business.


Pending the final application of any Net Proceeds, the Company (or the applicable Restricted
Subsidiary) may temporarily reduce revolving credit borrowings or otherwise 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 second
paragraph of this Section 4.10 will constitute “Excess Proceeds.” When the aggregate amount of
Excess Proceeds exceeds $15.0 million, within five days thereafter, the Company will make an Asset
Sale Offer to all Holders of Notes and all holders of other Indebtedness that is pari passu with
the Notes containing provisions with respect to offers to purchase, prepay or redeem with the
proceeds of sales of assets in accordance with Section 3.09 hereof to purchase, prepay or redeem
the maximum principal amount of Notes and such other pari passu Indebtedness (plus all accrued
interest on the Indebtedness and the amount of all fees and expenses, including premiums, incurred
in connection therewith) that may be purchased, prepaid or redeemed out of the Excess Proceeds.
The offer price in any Asset Sale Offer will be equal to 100% of the principal amount, plus accrued
and unpaid interest and Special Interest, if any, to the date of purchase, prepayment or
redemption, subject to the rights of Holders of Notes on the relevant record date to receive
interest due on the relevant interest payment 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 other pari passu Indebtedness tendered in (or required to be prepaid or
redeemed in connection with) 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, based on the amounts tendered or required to be prepaid or redeemed (with such adjustments
as may be deemed appropriate by the Company so that only Notes in denominations of $2,000, or an
integral multiple of $1,000 in excess thereof, will be purchased). 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
Section 3.09 hereof or this Section 4.10, the Company will comply with the applicable securities
laws and regulations and will not be deemed to have breached its obligations under Section 3.09
hereof or this Section 4.10 by virtue of such compliance.


Section 4.11 Transactions with Affiliates.




     (a) 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 properties or assets to, or
purchase any property or 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 no 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 Restricted Subsidiary with an unrelated Person; and



68









 






     (2) the Company delivers to the Trustee:




     (A) with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $10.0 million, a
resolution of the Board of Directors of the Company set forth in an Officers’
Certificate certifying that such Affiliate Transaction complies with clause (1) of
this Section 4.11(a) and that such Affiliate Transaction has been approved by a
majority of the disinterested members of the Board of Directors of the Company; and




     (B) with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $25.0 million, an
opinion as to the fairness to the Company or such Subsidiary of such Affiliate
Transaction from a financial point of view issued by an accounting, appraisal or
investment banking firm of national standing.



     (b) The following items will not be deemed to be Affiliate Transactions and, therefore, will
not be subject to the provisions of Section 4.11(a) hereof:




     (1) any employment agreement, employee benefit plan, officer or director
indemnification agreement or any similar arrangement entered into by the Company or any of
its Restricted Subsidiaries in the ordinary course of business and payments pursuant
thereto;




     (2) transactions between or among (A) the Company and one or more Restricted
Subsidiaries and (B) any Restricted Subsidiary;




     (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 through a
Restricted Subsidiary, an Equity Interest in, or controls, such Person;




     (4) payment of reasonable and customary fees and reimbursements of expenses (pursuant
to indemnity arrangements or otherwise) of officers, directors, employees or consultants of
the Company or any of its Restricted Subsidiaries;




     (5) any issuance of Equity Interests (other than Disqualified Stock) of the Company to
Affiliates of the Company;




     (6) Restricted Payments that do not violate Section 4.07 hereof;




     (7) loans or advances to employees in the ordinary course of business in accordance
with the past practices of the Company or the Restricted Subsidiaries, but in any event not
to exceed $2.0 million in the aggregate outstanding at any one time;




     (8) advances to or reimbursements of employees for moving, entertainment and travel
expenses, drawing accounts and similar expenditures, in each case in the ordinary course of
business of the Company or any of the Restricted Subsidiaries;




     (9) indemnities of officers, directors and employees of the Company or any Restricted
Subsidiary consistent with applicable charter, by-law or statutory provisions;




     (10) transactions with customers, clients, suppliers, or purchasers or sellers of goods
or services, in each case in the ordinary course of business and otherwise in compliance
with the



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terms of this Indenture, provided that in the reasonable determination of the Board of
Directors of the Company or the senior management of the Company, such transactions are on
terms not materially less favorable to the Company or the relevant Restricted Subsidiary
than those that could reasonably be expected to be obtained in a comparable transaction at
such time on an arm’s—length basis from a Person that is not an Affiliate of the Company;
and




     (11) transactions between the Company or any Restricted Subsidiary and any Person, a
director of which is also a director of the Company or any direct or indirect parent company
of the Company, and such director is the sole cause for such Person to be deemed an
Affiliate of the Company or any Restricted Subsidiary; provided, however, that such director
shall abstain from voting as a director of the Company or such direct or indirect parent
company, as the case may be, on any matter involving such other Person.


Section 4.12 Liens.




     The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, create, incur, assume or suffer to exist any Lien of any kind upon any of its property
or assets (including Capital Stock of Restricted Subsidiaries), including any income or profits
therefrom, whether owned on the date of this Indenture or acquired after that date, securing any
Indebtedness, except Permitted Liens. Notwithstanding anything to the contrary contained in the
Note Documents, the Company will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, pledge any Capital Stock of the Company or any of the Restricted
Subsidiaries to secure Indebtedness of the Company or any Guarantor, other than Liens securing any
Priority Lien Debt, any Parity Lien Debt and as otherwise required as a matter of law.


Section 4.13 Business Activities.




     The Company will not, and will not permit any of its Restricted Subsidiaries to, engage in any
business other than Oil and Gas Businesses, except to such extent as would not be material to the
Company and its Restricted Subsidiaries taken as a whole.


Section 4.14 Corporate Existence.




     Subject to Article 5 hereof, the Company shall do or cause to be done all things necessary to
preserve and keep in full force and effect:




     (1) its corporate existence, and the corporate, partnership or other existence of each
of its Subsidiaries, in accordance with the respective organizational documents (as the same
may be amended from time to time) of the Company or any such Subsidiary; and




     (2) the rights (charter and statutory), licenses and franchises of the Company and its
Subsidiaries; provided, however, that the Company shall not be required to preserve any such
right, license or franchise, or the corporate, partnership or other existence of any of its
Subsidiaries, if the Board of Directors shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company and its Subsidiaries, taken
as a whole, and that the loss thereof is not adverse in any material respect to the Holders
of the Notes.


Section 4.15 Offer to Repurchase Upon Change of Control.




     (a) Upon the occurrence of a Change of Control, the Company will make an offer (a “Change of
Control Offer”) to each Holder to repurchase all or any part (equal to $2,000 or an integral



70









 




multiple of $1,000 in excess thereof) of that Holder’s Notes at a purchase price in cash equal
to 101% of the aggregate principal amount of Notes repurchased, plus accrued and unpaid interest
and Special Interest, if any, on the Notes repurchased to the date of purchase, subject to the
rights of Holders of Notes on the relevant record date to receive interest due on the relevant
interest payment date (the “Change of Control Payment”). Within 30 days following any Change of
Control, the Company will mail a notice to each Holder describing the transaction or transactions
that constitute the Change of Control and stating:





     (1) that the Change of Control Offer is being made pursuant to this Section 4.15 and
that all Notes tendered will be accepted for payment;




     (2) 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
Payment Date”);




     (3) that any Note not tendered will continue to accrue interest;




     (4) 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 will cease to accrue
interest after the Change of Control Payment Date;




     (5) that Holders electing to have any Notes purchased pursuant to a Change of Control
Offer will be required to surrender the Notes, with the form entitled “Option of Holder to
Elect Purchase” attached to the Notes completed, or transfer by book-entry transfer, to the
Paying Agent at the address specified in the notice prior to the close of business on the
third Business Day preceding the Change of Control Payment Date;




     (6) that Holders will be entitled to withdraw their election if the Paying Agent
receives, not later than the close of business on the second Business Day preceding the
Change of Control Payment Date, a telegram, telex, 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 his election to have the Notes purchased; and




     (7) 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 thereof.



     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 the repurchase of the 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 4.15, the Company will comply with the applicable securities laws and regulations
and will not be deemed to have breached its obligations under this Section 4.15 by virtue of such
compliance.



     (b) On or before the Change of Control Payment Date, the Company will, to the extent lawful:




     (1) accept for payment all Notes or portions of Notes properly tendered pursuant to the
Change of Control Offer;



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     (2) deposit with the Paying Agent an amount equal to the Change of Control Payment in
respect of all Notes or portions of Notes properly tendered; and




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



     The Paying Agent will promptly mail (but in any case not later than five days after the Change
of Control Payment Date) to each Holder of Notes properly tendered the Change of Control Payment
for such Notes, and the Trustee will promptly 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. The Company will publicly announce the results of the Change of Control
Offer on or as soon as practicable after the Change of Control Payment Date.



     (c) Notwithstanding anything to the contrary in this Section 4.15, 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 times and otherwise in compliance with the
requirements set forth in this Section 4.15 and purchases all Notes properly tendered and not
withdrawn under the Change of Control Offer, or (2) notice of redemption has been given pursuant to
Section 3.07 hereof, unless and until there is a default in payment of the applicable redemption
price.



     (d) Notwithstanding anything to the contrary contained herein, a Change of Control Offer may
be made in advance of a Change of Control, conditioned upon the consummation of such Change of
Control, if a definitive agreement is in place for the Change of Control at the time the Change of
Control Offer is made.


Section 4.16 Limitation on Sale and Leaseback Transactions.




     The Company will not, and will not permit any of its Restricted Subsidiaries to, enter into
any sale and leaseback transaction; provided that the Company or any Restricted Subsidiary may
enter into a sale and leaseback transaction if:




     (1) the Company or that Restricted Subsidiary, as applicable, could have (a) incurred
Indebtedness in an amount equal to the Attributable Debt relating to such sale and leaseback
transaction under the Fixed Charge Coverage Ratio test in Section 4.09(a) hereof and (b)
incurred a Lien to secure such Indebtedness pursuant to Section 4.12 hereof;




     (2) the gross cash proceeds of that sale and leaseback transaction are at least equal
to the Fair Market Value, as determined in good faith by the Board of Directors of the
Company and set forth in an Officers’ Certificate delivered to the Trustee, of the property
that is the subject of that sale and leaseback transaction; and




     (3) the transfer of assets in that sale and leaseback transaction is permitted by, and
the Company applies the proceeds of such transaction in compliance with, Section 4.10
hereof.


Section 4.17 Limitation on Issuances and Sales of Equity Interests in Wholly-Owned Restricted
Subsidiaries.




     The Company will not, and will not permit any of its Restricted Subsidiaries to, transfer,
convey, sell, lease or otherwise dispose of any Equity Interests in any Wholly-Owned Restricted
Subsidiary of the



72









 




Company to any Person (other than the Company or a Wholly-Owned Subsidiary of the Company),
unless:





     (1) such transfer, conveyance, sale, lease or other disposition is of all the Equity
Interests in such Wholly-Owned Restricted Subsidiary; and




     (2) the Net Proceeds from such transfer, conveyance, sale, lease or other disposition
are applied in accordance with Section 4.10 hereof.



     In addition, the Company will not permit any Wholly-Owned Restricted Subsidiary of the Company
to issue any of its Equity Interests (other than, if necessary, shares of its Capital Stock
constituting directors’ qualifying shares) to any Person other than to the Company or a
Wholly-Owned Restricted Subsidiary of the Company.


Section 4.18 Payments for Consent.




     The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, pay or cause to be paid any consideration to or for the benefit of any Holder of Notes
for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of
this Indenture or the Notes unless such consideration is offered to be paid and is paid to all
Holders of the Notes that consent, waive or agree to amend in the time frame set forth in the
solicitation documents relating to such consent, waiver or agreement.


Section 4.19 Additional Note Guarantees.




     If the Company or any of its Restricted Subsidiaries acquires or creates another Domestic
Subsidiary after the date of this Indenture, then the Company will cause that newly acquired or
created Domestic Subsidiary to provide a Note Guarantee pursuant to a supplemental indenture in
form and substance satisfactory to the Trustee and deliver an Opinion of Counsel to the Trustee
within 20 Business Days of the date on which it was acquired or created to the effect that such
supplemental indenture has been duly authorized, executed and delivered by that Domestic Subsidiary
and constitutes a valid and binding agreement of that Domestic Subsidiary, enforceable in
accordance with its terms (subject to customary exceptions); provided that any Domestic Subsidiary
that constitutes an Immaterial Subsidiary need not become a Guarantor until such time as it ceases
to be an Immaterial Subsidiary. The form of such supplemental indenture is attached as Exhibit F
hereto.


Section 4.20 Designation of Restricted and Unrestricted Subsidiaries.




     The Board of Directors of the Company may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if that designation would not cause a Default. If a Restricted Subsidiary
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 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 Section 4.07 hereof or under one
or more clauses of the definition of Permitted Investments, as determined by the Company. That
designation will only be permitted if the Investment would be permitted at that time and if the
Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary.



     Any designation of a Subsidiary of the Company as an Unrestricted Subsidiary will be evidenced
to the Trustee by filing with the Trustee a certified copy of a resolution of the Board of
Directors giving effect to such designation and an Officers’ Certificate certifying that such
designation complied with the



73









 




preceding conditions and was permitted by Section 4.07 hereof. 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 4.09 hereof, the Company will be in default of such covenant. The
Board of Directors of the Company may at any time designate any Unrestricted Subsidiary 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 4.09 hereof, calculated on a pro forma basis as if
such designation had occurred at the beginning of the applicable reference period; and (2) no
Default or Event of Default would be in existence following such designation.




ARTICLE 5

SUCCESSORS



Section 5.01 Merger, Consolidation or Sale of Assets.




     (a) The Company shall not, directly or indirectly: (i) consolidate or merge with or into
another Person (whether or not the Company is the surviving corporation); or (ii) sell, assign,
transfer, convey or otherwise dispose of all or substantially all of the properties or assets of
the Company and its Restricted Subsidiaries taken as a whole, in one or more related transactions,
to another Person, unless:




     (1) either:




     (A) the Company is the surviving corporation; or




     (B) the Person formed by or surviving any such consolidation or merger (if
other than the Company) or to which such sale, assignment, transfer, conveyance or
other disposition has been made is an entity organized or existing under the laws of
the United States, any state of the United States or the District of Columbia; and,
if such entity is not a corporation, a co-obligor of the Notes is a corporation
organized or existing under any such laws;




     (2) 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, conveyance or other
disposition has been made assumes all the obligations of the Company under the Notes and the
other Notes Documents pursuant to agreements reasonably satisfactory to the Trustee;




     (3) immediately after such transaction, no Default or Event of Default has occurred and
is continuing;




     (4) 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, conveyance or
other disposition has been made would, on the date of such transaction 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, (i) be permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth
in Section 4.09(a) hereof; or (ii) have a Fixed Charge Coverage Ratio equal to or greater
than the Fixed Charge Coverage Ratio of the Company immediately prior to such transaction;
and



74









 






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



     In addition, the Company will not, directly or indirectly, lease all or substantially all of
the properties and assets of it and its Restricted Subsidiaries taken as a whole, in one or more
related transactions, to any other Person.



     (b) The Company will not permit any Guarantor to consolidate with or merge with or into, or
convey, transfer or lease all or substantially all of its assets to any Person unless:




     (1) the resulting, surviving or transferee Person will be an entity organized and
existing under the laws of the United States of America, any state of the United States or
the District of Columbia and such Person (if not such Guarantor) will expressly assume all
of the obligations of such Guarantor under its Note Guarantee and the Registration Rights
Agreement pursuant to agreements reasonably satisfactory to the Trustee;




     (2) immediately after giving effect to such transaction (and treating any Indebtedness
which becomes an obligation of the resulting, surviving or transferee Person as a result of
such transaction as having been incurred by such Person at the time of such transaction), no
Default or Event of Default will have occurred or be continuing; and




     (3) the Company will have delivered to the Trustee an Officers’ Certificate and an
Opinion of Counsel, each stating that such consolidation, merger or transfer and such
supplemental agreements (if applicable) comply with this Indenture;


provided, however, that the foregoing will not apply to any such consolidation or merger with or
into, or conveyance, transfer or lease to, any Person if the resulting, surviving or transferee
Person will not be a Subsidiary of the Company and the other terms of this Indenture, including
Section 4.10, are complied with.




     This Section 5.01 will not apply to any sale, assignment, transfer, conveyance, lease or other
disposition of assets between or among the Company and its Restricted Subsidiaries. Clauses (3)
and (4) of Section 5.01(a) hereof will not apply to (i) any merger or consolidation of the Company
with or into one of its Restricted Subsidiaries for any purpose or (ii) with or into an Affiliate
solely for the purpose of reincorporating the Company in another jurisdiction.


Section 5.02 Successor Corporation Substituted.




     Upon any consolidation or merger, or any sale, assignment, transfer, lease, conveyance or
other disposition of all or substantially all of the properties or assets of the Company in a
transaction that is subject to, and that complies with the provisions of, Section 5.01 hereof, the
successor Person 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 (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 successor Person and not to the Company), and
may exercise every right and power of the Company under this Indenture with the same effect as if
such successor Person had been named as the Company herein; provided, however, that the predecessor
Company shall not be relieved from the obligation to pay the principal of, premium on, if any, and
interest and Special Interest, if any, on, the Notes except in the



75









 




case of a sale of all of the Company’s assets in a transaction that is subject to, and that
complies with the provisions of, Section 5.01 hereof.




ARTICLE 6

DEFAULTS AND REMEDIES



Section 6.01 Events of Default.




     Each of the following is an “Event of Default”:




     (1) default for 30 days in the payment when due of interest and Special Interest, if
any, on the Notes;




     (2) default in the payment when due (at maturity, upon redemption or otherwise) of the
principal of, or premium, if any, on the Notes;




     (3) failure by the Company or any of its Restricted Subsidiaries to comply with the
provisions of Sections 4.10, 4.15 or 5.01 hereof;




     (4) failure by the Company to comply for 30 days with the provisions of Sections 4.07
or 4.09 hereof;




     (5) failure by the Company or any of its Restricted Subsidiaries for 60 days after
notice to the Company by the Trustee or the Holders of at least 25% in aggregate principal
amount of the Notes then outstanding voting as a single class to comply with any of the
other agreements in this Indenture;




     (6) default 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 date of this Indenture, if that default:




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




     (B) results in the acceleration of such Indebtedness prior to its express
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 $10.0 million
or more;




     (7) failure by the Company or any of its Restricted Subsidiaries to pay final judgments
entered by a court or courts of competent jurisdiction aggregating in excess of $10.0
million, which judgments are not paid, discharged or stayed, for a period of 60 days;




     (8) the occurrence of any of the following:



76









 






     (A) except as permitted by this Indenture, any Collateral Document ceases for
any reason to be enforceable; provided that it will not be an Event of Default under
this clause (8)(A) if the sole result of the failure of one or more Collateral
Documents to be fully enforceable is that any Parity Lien purported to be granted
under such Collateral Documents on Collateral, individually or in the aggregate,
having a Fair Market Value of not more than $10.0 million ceases to be an
enforceable and perfected second priority Lien, subject only to Priority Liens and
other Permitted Prior Liens;




     (B) except as permitted by the Intercreditor Agreement or this Indenture, any
Parity Lien purported to be granted under any Collateral Document on Collateral,
individually or in the aggregate, having a Fair Market Value in excess of $10.0
million ceases to be an enforceable and perfected second priority Lien, subject only
to Priority Liens and other Permitted Prior Liens; or




     (C) the Company or any Guarantor, or any Person acting on behalf of any of
them, denies or disaffirms, in writing, any obligation of the Company or any
Guarantor set forth in or arising under any Collateral Document;




     (9) except as permitted by this Indenture, any Note 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 any Guarantor, or any Person acting on behalf of any Guarantor, denies or
disaffirms its obligations under its Note Guarantee;




     (10) the Company or any of its Restricted Subsidiaries that is a Significant Subsidiary
or any group of Restricted Subsidiaries of the Company that, taken together, would
constitute a Significant Subsidiary pursuant to or within the meaning of Bankruptcy Law:




     (A) commences a voluntary case,




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




     (C) consents 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) generally is not paying its debts as they become due; and




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




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




     (B) appoints a custodian of the Company or any of its Restricted Subsidiaries
that is a Significant Subsidiary or any group of Restricted Subsidiaries of the
Company that, taken together, would constitute a Significant Subsidiary or for all
or substantially all of the property of the Company or any of its Restricted
Subsidiaries that is a



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Significant Subsidiary or any group of Restricted Subsidiaries of the Company
that, taken together, would constitute a Significant Subsidiary; or




     (C) orders the liquidation of the Company or any of its Restricted Subsidiaries
that is a Significant Subsidiary or any group of Restricted Subsidiaries of the
Company that, taken together, would constitute a Significant Subsidiary;


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



Section 6.02 Acceleration.




     In the case of an Event of Default specified in clause (10) or (11) of Section 6.01 hereof,
with respect to the Company, any Restricted Subsidiary of the Company that is a Significant
Subsidiary or any group of Restricted Subsidiaries of the Company that, taken together, would
constitute a Significant Subsidiary, all outstanding Notes will become due and payable immediately
without further action or notice. If any other Event of Default occurs and is continuing, the
Trustee or the Holders of at least 25% in aggregate principal amount of the then outstanding Notes
may declare all the Notes to be due and payable immediately.



     Upon any such declaration, the Notes shall become due and payable immediately.



     Notwithstanding the foregoing, if an Event of Default specified in clause (6) of Section 6.01
hereof shall have occurred and be continuing, such Event of Default and any consequential
acceleration (to the extent not in violation of any applicable law or in conflict with any judgment
or decree of a court of competent jurisdiction) shall be automatically rescinded if (i) the
Indebtedness that is the subject of such Event of Default has been repaid or (ii) if the default
relating to such Indebtedness is waived by the holders of such Indebtedness or cured and if such
Indebtedness has been accelerated, then the holders thereof have rescinded their declaration of
acceleration in respect of such Indebtedness, in each case within 20 days after the declaration of
acceleration with respect thereto, and (iii) any other existing Events of Default, except
nonpayment of principal, premium or interest on the Notes that became due solely because of the
acceleration of the Notes, have been cured or waived.



     The Holders of a majority in aggregate principal amount of the then outstanding Notes by
written notice to the Trustee may, on behalf of all of the Holders of all the Notes, rescind an
acceleration and its consequences hereunder, if the rescission would not conflict with any judgment
or decree and if all existing Events of Default (except nonpayment of principal of, premium on, if
any, or interest or Special Interest, if any, on the Notes that has become due solely because of
the acceleration) have been cured or waived.


Section 6.03 Other Remedies.




     If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy
to collect the payment of principal of, premium on, if any, or interest or Special Interest, if
any, on, the Notes or to enforce the performance of any provision of the Notes or this Indenture.



     The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not
produce any of them in the proceeding. A delay or omission by the Trustee or any Holder of a Note
in exercising any right or remedy accruing upon an Event of Default shall not impair the right or
remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are
cumulative to the extent permitted by law.



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Section 6.04 Waiver of Past Defaults.




     The Holders of a majority in aggregate principal amount of the then outstanding Notes by
written notice to the Trustee may, on behalf of the Holders of all of the Notes waive any existing
Default or Event of Default and its consequences hereunder, except a continuing Default or Event of
Default in the payment of principal of, premium on, if any, or interest or Special Interest, if
any, on, the Notes (including in connection with an offer to purchase); provided, however, that the
Holders of a majority in aggregate principal amount of the then outstanding Notes may rescind an
acceleration and its consequences, including any related payment default that resulted from such
acceleration. 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.


Section 6.05 Control by Majority.




     Holders of a majority in aggregate principal amount of the then outstanding Notes may direct
the time, method and place of conducting any proceeding for exercising any remedy available to the
Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to
follow any direction that conflicts with law or this Indenture that the Trustee determines may be
unduly prejudicial to the rights of other Holders of Notes or that may involve the Trustee in
personal liability.


Section 6.06 Limitation on Suits.




     No Holder of a Note may pursue any remedy with respect to this Indenture or the Notes unless:




     (1) such Holder has previously given the Trustee written notice that an Event of
Default is continuing;




     (2) Holders of at least 25% in aggregate principal amount of the then outstanding Notes
make a written request to the Trustee to pursue the remedy;




     (3) such Holder or Holders offer and, if requested, provide to the Trustee security or
indemnity reasonably satisfactory to the Trustee against any loss, liability or expense;




     (4) the Trustee does not comply with such request within 60 days after receipt of the
request and the offer of security or indemnity; and




     (5) during such 60-day period, Holders of a majority in aggregate principal amount of
the then outstanding Notes do not give the Trustee a direction inconsistent with such
request.



     A Holder of a Note may not use this Indenture to prejudice the rights of another Holder of a
Note or to obtain a preference or priority over another Holder of a Note.


Section 6.07 Rights of Holders of Notes to Receive Payment.




     Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to
receive payment of principal of, premium on, if any, or interest or Special Interest, if any, on,
the Note, on or after the respective due dates expressed in the Note (including in connection with
an offer to purchase), or to bring suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or affected without the consent of such Holder; provided
that a Holder shall not have the right to institute any such suit for the enforcement of payment if
and to the extent that the institution or



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prosecution thereof or the entry of judgment therein would, under applicable law, result in
the surrender, impairment, waiver or loss of the Lien of this Indenture upon any property subject
to such Lien.



Section 6.08 Collection Suit by Trustee.




     If an Event of Default specified in Section 6.01(1) or (2) hereof occurs and is continuing,
the Trustee is authorized to recover judgment in its own name and as trustee of an express trust
against the Company for the whole amount of principal of, premium on, if any, and interest and
Special Interest, if any, remaining unpaid on, the Notes and interest on overdue principal and, to
the extent lawful, interest and such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel.


Section 6.09 Trustee May File Proofs of Claim.




     The Trustee is authorized to file such proofs of claim and other papers or documents as may be
necessary or advisable in order to have the claims of the Trustee (including any claim for the
reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and
counsel) and the Holders of the Notes allowed in any judicial proceedings relative to the Company
(or any other obligor upon the Notes), its creditors or its property and shall be entitled and
empowered to collect, receive and distribute any money or other property payable or deliverable on
any such claims and any custodian in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the
reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and
counsel, and any other amounts due the Trustee under Section 7.07 hereof. To the extent that the
payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.07 hereof out of the estate in
any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien
on, and shall be paid out of, any and all distributions, dividends, money, securities and other
properties that the Holders may be entitled to receive in such proceeding whether in liquidation or
under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder, or to authorize the Trustee to vote in respect of the claim of any Holder
in any such proceeding.


Section 6.10 Priorities.




     If the Trustee collects any money pursuant to this Article 6, it shall pay out the money in
the following order:




     First: to the Trustee, its agents and attorneys for amounts due under Section 7.07
hereof, including payment of all compensation, expenses and liabilities incurred, and all
advances made, by the Trustee and the costs and expenses of collection;




     Second: to Holders of Notes for amounts due and unpaid on the Notes for principal,
premium, if any, and interest and Special Interest, if any, ratably, without preference or
priority of any kind, according to the amounts due and payable on the Notes for principal,
premium, if any, and interest and Special Interest, if any, respectively; and




     Third: to the Company or to such party as a court of competent jurisdiction shall
direct.



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     The Trustee may fix a record date and payment date for any payment to Holders of Notes
pursuant to this Section 6.10.


Section 6.11 Undertaking for Costs.




     In any suit for the enforcement of any right or remedy under this Indenture or in any suit
against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion
may require the filing by any party litigant in the suit of an undertaking to pay the costs of the
suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys’
fees, against any party litigant in the suit, having due regard to the merits and good faith of the
claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the
Trustee, a suit by a Holder of a Note pursuant to Section 6.07 hereof, or a suit by Holders of more
than 10% in aggregate principal amount of the then outstanding Notes.



ARTICLE 7

TRUSTEE



Section 7.01 Duties of Trustee.




     (a) If an Event of Default has occurred and is continuing, the Trustee will exercise such of
the rights and powers vested in it by this Indenture, and use the same degree of care and skill in
its exercise, as a prudent person would exercise or use under the circumstances in the conduct of
such person’s own affairs.



     (b) Except during the continuance of an Event of Default:




     (1) the duties of the Trustee will be determined solely by the express provisions of
this Indenture and the Trustee need perform only those duties that are specifically set
forth in this Indenture and no others, and no implied covenants or obligations shall be read
into this Indenture against the Trustee; and




     (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to
the truth of the statements and the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Trustee and conforming to the requirements of this
Indenture. However, the Trustee will examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture.



     (c) The Trustee may not be relieved from liabilities for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:




     (1) this paragraph does not limit the effect of paragraph (b) of this Section 7.01;




     (2) the Trustee will not be liable for any error of judgment made in good faith by a
Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the
pertinent facts; and




     (3) the Trustee will not be liable with respect to any action it takes or omits to take
in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof.



     (d) Whether or not therein expressly so provided, every provision of this Indenture that in
any way relates to the Trustee is subject to paragraphs (a), (b), and (c) of this Section 7.01.



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     (e) No provision of this Indenture will require the Trustee to expend or risk its own funds or
incur any liability. The Trustee will be under no obligation to exercise any of its rights and
powers under this Indenture at the request of any Holders, unless such Holder has offered to the
Trustee security and indemnity satisfactory to it against any loss, liability or expense.



     (f) The Trustee will not be liable for interest on any money received by it except as the
Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be
segregated from other funds except to the extent required by law.


Section 7.02 Rights of Trustee.




     (a) The Trustee may conclusively rely upon any document believed by it to be genuine and to
have been signed or presented by the proper Person. The Trustee need not investigate any fact or
matter stated in the document.



     (b) Before the Trustee acts or refrains from acting, it may require an Officers’ Certificate
or an Opinion of Counsel or both. The Trustee will not be liable for any action it takes or omits
to take in good faith in reliance on such Officers’ Certificate or Opinion of Counsel. The Trustee
may consult with counsel and the written advice of such counsel or any Opinion of Counsel will be
full and complete authorization and protection from liability in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance thereon.



     (c) The Trustee may act through its attorneys and agents and will not be responsible for the
misconduct or negligence of any agent appointed with due care.



     (d) The Trustee will not be liable for any action it takes or omits to take in good faith that
it believes to be authorized or within the rights or powers conferred upon it by this Indenture.



     (e) Unless otherwise specifically provided in this Indenture, any demand, request, direction
or notice from the Company will be sufficient if signed by an Officer of the Company.



     (f) The Trustee will be under no obligation to exercise any of the rights or powers vested in
it by this Indenture at the request or direction of any of the Holders unless such Holders have
offered to the Trustee reasonable indemnity or security satisfactory to it against the losses,
liabilities and expenses that might be incurred by it in compliance with such request or direction.



     (g) The Trustee shall not be deemed to have notice of any Event of Default unless written
notice of any event which is in fact such Event of Default is received by the Trustee at the
Corporate Trust Office of the Trustee, and such notice references the Notes and this Indenture.


Section 7.03 Individual Rights of Trustee.




     The Trustee in its individual or any other capacity may become the owner or pledgee of Notes
and may otherwise deal with the Company or any Affiliate of the Company with the same rights it
would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting
interest it must eliminate such conflict within 90 days, apply to the SEC for permission to
continue as trustee (if this Indenture has been qualified under the TIA) or resign. Any Agent may
do the same with like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11
hereof.




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Section 7.04 Trustee’s Disclaimer.




     The Trustee will not be responsible for and makes no representation as to the validity or
adequacy of this Indenture or the Notes, it shall not be accountable for the Company’s use of the
proceeds from the Notes or any money paid to the Company or upon the Company’s direction under any
provision of this Indenture, it will not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it will not be responsible for any
statement or recital herein or any statement in the Notes or any other document in connection with
the sale of the Notes or pursuant to this Indenture other than its certificate of authentication.


Section 7.05 Notice of Defaults.




     If a Default or Event of Default occurs and is continuing and if it is known to the Trustee,
the Trustee will mail to Holders of Notes a notice of the Default or Event of Default within 90
days after it occurs. Except in the case of a Default or Event of Default in payment of principal
of, premium on, if any, or interest or Special Interest, if any, on, any Note, the Trustee may
withhold the notice if and so long as a committee of its Responsible Officers in good faith
determines that withholding the notice is in the interests of the Holders of the Notes.


Section 7.06 Reports by Trustee to Holders of the Notes.




     (a) Within 60 days after each May 15 beginning with the May 15 following the date of this
Indenture, and for so long as Notes remain outstanding, the Trustee will mail to the Holders of the
Notes a brief report dated as of such reporting date that complies with TIA §313(a) (but if no
event described in TIA §313(a) has occurred within the twelve months preceding the reporting date,
no report need be transmitted). The Trustee also will comply with TIA §313(b)(2). The Trustee
will also transmit by mail all reports as required by TIA §313(c).



     (b) A copy of each report at the time of its mailing to the Holders of Notes will be mailed by
the Trustee to the Company and filed by the Trustee with the SEC and each stock exchange on which
the Notes are listed in accordance with TIA §313(d). The Company will promptly notify the Trustee
when the Notes are listed on any stock exchange.


Section 7.07 Compensation and Indemnity.




     (a) The Company will pay to the Trustee from time to time reasonable compensation for its
acceptance of this Indenture and services hereunder. The Trustee’s compensation will not be
limited by any law on compensation of a trustee of an express trust. The Company will reimburse
the Trustee promptly upon request for all reasonable disbursements, advances and expenses incurred
or made by it in addition to the compensation for its services. Such expenses will include the
reasonable compensation, disbursements and expenses of the Trustee’s agents and counsel.



     (b) The Company and the Guarantors will indemnify the Trustee against any and all losses,
liabilities or expenses incurred by it arising out of or in connection with the acceptance or
administration of its duties under this Indenture, including the costs and expenses of enforcing
this Indenture against the Company and the Guarantors (including this Section 7.07) and defending
itself against any claim (whether asserted by the Company, the Guarantors, any Holder or any other
Person) or liability in connection with the exercise or performance of any of its powers or duties
hereunder, except to the extent any such loss, liability or expense may be attributable to its
negligence or bad faith. The Trustee will notify the Company promptly of any claim for which it
may seek indemnity. Failure by the Trustee to so notify the Company will not relieve the Company
or any of the Guarantors of their obligations hereunder.



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The Company or such Guarantor will defend
the claim and the Trustee will cooperate in the defense. The Trustee may have separate counsel and
the Company will pay the reasonable fees and expenses of such counsel. Neither the Company nor any
Guarantor need pay for any settlement made without its consent, which consent will not be
unreasonably withheld.




     (c) The obligations of the Company and the Guarantors under this Section 7.07 will survive the
satisfaction and discharge of this Indenture.



     (d) To secure the Company’s and the Guarantors’ payment obligations in this Section 7.07, the
Trustee will have a Lien prior to the Notes on all money or property held or collected by the
Trustee, except that held in trust to pay principal of, premium on, if any, or interest or Special
Interest, if any, on, particular Notes. Such Lien will survive the satisfaction and discharge of
this Indenture.



     (e) When the Trustee incurs expenses or renders services after an Event of Default specified
in Section 6.01(10) or (11) hereof occurs, the expenses and the compensation for the services
(including the fees and expenses of its agents and counsel) are intended to constitute expenses of
administration under any Bankruptcy Law.



     (f) The Trustee will comply with the provisions of TIA §313(b)(2) to the extent applicable.


Section 7.08 Replacement of Trustee.




     (a) A resignation or removal of the Trustee and appointment of a successor Trustee will become
effective only upon the successor Trustee’s acceptance of appointment as provided in this Section
7.08.



     (b) The Trustee may resign in writing at any time and be discharged from the trust hereby
created by so notifying the Company. The Holders of a majority in aggregate principal amount of
the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Company in
writing. The Company may remove the Trustee if:




     (1) the Trustee fails to comply with Section 7.10 hereof;




     (2) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is
entered with respect to the Trustee under any Bankruptcy Law;




     (3) a custodian or public officer takes charge of the Trustee or its property; or




     (4) the Trustee becomes incapable of acting.



     (c) If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for
any reason, the Company will promptly appoint a successor Trustee. Within one year after the
successor Trustee takes office, the Holders of a majority in aggregate principal amount of the then
outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the
Company.



     (d) If a successor Trustee does not take office within 60 days after the retiring Trustee
resigns or is removed, the retiring Trustee, the Company, or the Holders of at least 10% in
aggregate principal amount of the then outstanding Notes may petition any court of competent
jurisdiction for the appointment of a successor Trustee.



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     (e) If the Trustee, after written request by any Holder who has been a Holder for at least six
months, fails to comply with Section 7.10 hereof, such Holder may petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.



     (f) A successor Trustee will deliver a written acceptance of its appointment to the retiring
Trustee and to the Company. Thereupon, the resignation or removal of the retiring Trustee will
become effective, and the successor Trustee will have all the rights, powers and duties of the
Trustee under this Indenture. The successor Trustee will mail a notice of its succession to
Holders. The retiring Trustee will promptly transfer all property held by it as Trustee to the
successor Trustee; provided all sums owing to the Trustee hereunder have been paid and subject to
the Lien provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant
to this Section 7.08, the Company’s obligations under Section 7.07 hereof will continue for the
benefit of the retiring Trustee.


Section 7.09 Successor Trustee by Merger, etc.




     If the Trustee consolidates, merges or converts into, or transfers all or substantially all of
its corporate trust business to, another corporation, the successor corporation without any further
act will be the successor Trustee.


Section 7.10 Eligibility; Disqualification.




     There will at all times be a Trustee hereunder that is a corporation organized and doing
business under the laws of the United States of America or of any state thereof that is authorized
under such laws to exercise corporate trustee power, that is subject to supervision or examination
by federal or state authorities and that has a combined capital and surplus of at least $100.0
million as set forth in its most recent published annual report of condition.



     This Indenture will always have a Trustee who satisfies the requirements of TIA §310(a)(1),
(2) and (5). The Trustee is subject to TIA §310(b).


Section 7.11 Preferential Collection of Claims Against Company.




     The Trustee is subject to TIA §311(a), excluding any creditor relationship listed in TIA
§311(b). A Trustee who has resigned or been removed shall be subject to TIA §311(a) to the extent
indicated therein.



ARTICLE 8

LEGAL DEFEASANCE AND COVENANT DEFEASANCE



Section 8.01 Option to Effect Legal Defeasance or Covenant Defeasance.




     The Company may at any time, at the option of its Board of Directors evidenced by a resolution
set forth in an Officers’ Certificate, elect to have either Section 8.02 or 8.03 hereof be applied
to all outstanding Notes upon compliance with the conditions set forth below in this Article 8.


Section 8.02 Legal Defeasance and Discharge.




     Upon the Company’s exercise under Section 8.01 hereof of the option applicable to this Section
8.02, the Company and each of the Guarantors will, subject to the satisfaction of the conditions
set forth in Section 8.04 hereof, be deemed to have been discharged from their obligations with
respect to all outstanding Notes (including the Note Guarantees) on the date the conditions set
forth below are satisfied



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(hereinafter, “Legal Defeasance”). For this purpose, Legal Defeasance
means that the Company and the Guarantors will be deemed to have paid and discharged the entire
Indebtedness represented by the outstanding Notes (including the Note Guarantees), which will
thereafter be deemed to be “outstanding” only for the purposes of Section 8.05 hereof and the other
Sections of this Indenture referred to in clauses (1) and (2) below, and to have satisfied all
their other obligations under such Notes, the Note Guarantees and this Indenture (and the Trustee,
on demand of and at the expense of the Company, shall execute proper instruments acknowledging the
same), except for the following provisions which will survive until otherwise terminated or
discharged hereunder:





     (1) the rights of Holders of outstanding Notes to receive payments in respect of the
principal of, premium on, if any, or interest or Special Interest, if any, on, such Notes
when such payments are due from the trust referred to in Section 8.04 hereof;




     (2) the Company’s obligations with respect to such Notes under Article 2 and Section
4.02 hereof;




     (3) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the
Company’s and the Guarantors’ obligations in connection therewith; and




     (4) this Article 8.



     Subject to compliance with this Article 8, the Company may exercise its option under this
Section 8.02 notwithstanding the prior exercise of its option under Section 8.03 hereof.


Section 8.03 Covenant Defeasance.




     Upon the Company’s exercise under Section 8.01 hereof of the option applicable to this Section
8.03, the Company and each of the Guarantors will, subject to the satisfaction of the conditions
set forth in Section 8.04 hereof, be released from each of their obligations under the covenants
contained in Sections 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.15, 4.16, 4.17, 4.18, 4.19 and
4.20 hereof and clause (4) of Section 5.01 hereof with respect to the outstanding Notes on and
after the date the conditions set forth in Section 8.04 hereof are satisfied (hereinafter,
“Covenant Defeasance”), and the Notes will thereafter be deemed not “outstanding” for the purposes
of any direction, waiver, consent or declaration or act of Holders (and the consequences of any
thereof) in connection with such covenants, but will continue to be deemed “outstanding” for all
other purposes hereunder (it being understood that such Notes will not be deemed outstanding for
accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the
outstanding Notes and Note Guarantees, the Company and the Guarantors may omit to comply with and
will have no liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such
covenant or by reason of any reference in any such covenant to any other provision herein or in any
other document and such omission to comply will not constitute a Default or an Event of Default
under Section 6.01 hereof, but, except as specified above, the remainder of this Indenture and such
Notes and Note Guarantees will be unaffected thereby. In addition, upon the Company’s exercise
under Section 8.01 hereof of the option applicable to this Section 8.03, subject to the
satisfaction of the conditions set forth in Section 8.04 hereof, Sections 6.01(3), (4), (5), (6),
(7), (8) and (9) hereof will not constitute Events of Default and Section 6.01(10) and (11) hereof
shall not apply to a Significant Subsidiary or a group of Restricted Subsidiaries of the Company
that, taken together would constitute a Significant Subsidiary.



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Section 8.04 Conditions to Legal or Covenant Defeasance.




     In order to exercise either Legal Defeasance under Section 8.02 or Covenant Defeasance under
Section 8.03 hereof:




     (1) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of
the Holders, cash in U.S. dollars, non-callable Government Securities, or a combination
thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized
investment bank, appraisal firm, or firm of independent public accountants, to pay the
principal of, premium on, if any, and interest and Special Interest, if any, on, the
outstanding Notes on the stated date for payment thereof or on the applicable redemption
date, as the case may be, and the Company must specify whether the Notes are being defeased
to such stated date for payment or to a particular redemption date;




     (2) in the case of an election under Section 8.02 hereof, the Company must deliver to
the Trustee an Opinion of Counsel reasonably acceptable to the Trustee confirming that:




     (A) the Company has received from, or there has been published by, the Internal
Revenue Service a ruling; or




     (B) since the date of this Indenture, there has been a change in the applicable
federal income tax law,




in either case to the effect that, and based thereon such Opinion of Counsel shall confirm
that, the Holders of the outstanding Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Legal Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same times as would
have been the case if such Legal Defeasance had not occurred;




     (3) in the case of an election under Section 8.03 hereof, the Company must deliver to
the Trustee an Opinion of Counsel reasonably acceptable to the Trustee confirming that the
Holders of the outstanding Notes will not recognize income, gain or loss for federal income
tax purposes as a result of such Covenant Defeasance and will be subject to federal income
tax on the same amounts, in the same manner and at the same times as would have been the
case if such Covenant Defeasance had not occurred;




     (4) no Default or Event of Default shall have occurred and is continuing on the date of
such deposit (other than a Default or Event of Default resulting from the borrowing of funds
to be applied to such deposit (and any similar concurrent deposit relating to other
Indebtedness), and the granting of Liens to secure such borrowings);




     (5) such Legal Defeasance or Covenant Defeasance will not result in a breach or
violation of, or constitute a default under, any material agreement or instrument (other
than this Indenture and the agreements governing any other Indebtedness being defeased,
discharged or replaced) to which the Company or any of the Guarantors is a party or by which
the Company or any of the Guarantors is bound;




     (6) the Company must deliver to the Trustee an Officers’ Certificate stating that the
deposit was not made by the Company with the intent of preferring the Holders of Notes over
the other creditors of the Company with the intent of defeating, hindering, delaying or
defrauding any creditors of the Company or others; and



87









 






     (7) the Company must deliver to the Trustee an Officers’ Certificate and an Opinion of
Counsel, each stating that all conditions precedent relating to the Legal Defeasance or the
Covenant Defeasance have been complied with.



     The Collateral will be released from the Lien securing the Notes, as provided in Section 10.06
upon a Legal Defeasance or Covenant Defeasance in accordance with the provisions of this Section
8.04.


Section 8.05 Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous
Provisions.




     Subject to Section 8.06 hereof, all money and non-callable Government Securities (including
the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for
purposes of this Section 8.05, the “Trustee”) pursuant to Section 8.04 hereof in respect of the
outstanding Notes will be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or through any Paying
Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Holders
of such Notes of all sums due and to become due thereon in respect of principal, premium, if any,
and interest and Special Interest, if any, but such money need not be segregated from other funds
except to the extent required by law.



     The Company will pay and indemnify the Trustee against any tax, fee or other charge imposed on
or assessed against the cash or non-callable Government Securities deposited pursuant to Section
8.04 hereof or the principal and interest received in respect thereof other than any such tax, fee
or other charge which by law is for the account of the Holders of the outstanding Notes.



     Notwithstanding anything in this Article 8 to the contrary, the Trustee will deliver or pay to
the Company from time to time upon the request of the Company any money or non-callable Government
Securities held by it as provided in Section 8.04 hereof which, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under Section 8.04(1) hereof), are in
excess of the amount thereof that would then be required to be deposited to effect an equivalent
Legal Defeasance or Covenant Defeasance.


Section 8.06 Repayment to Company.




     Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in
trust for the payment of the principal of, premium on, if any, or interest or Special Interest, if
any, on, any Note and remaining unclaimed for two years after such principal, premium, if any, or
interest or Special Interest, if any, has become due and payable shall be paid to the Company on
its request or (if then held by the Company) will be discharged from such trust; and the Holder of
such Note will thereafter be permitted to look only to the Company for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust money, and all liability
of the Company as trustee thereof, will thereupon cease; provided, however, that the Trustee or
such Paying Agent, before being required to make any such repayment, may at the expense of the
Company cause to be published once, in the New York Times and The Wall Street Journal (national
edition), notice that such money remains unclaimed and that, after a date specified therein, which
will not be less than 30 days from the date of such notification or publication, any unclaimed
balance of such money then remaining will be repaid to the Company.


Section 8.07 Reinstatement.




     If the Trustee or Paying Agent is unable to apply any U.S. dollars or non-callable Government
Securities in accordance with Section 8.02 or 8.03 hereof, as the case may be, by reason of any
order or



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judgment of any court or governmental authority enjoining, restraining or otherwise
prohibiting such application, then the Company’s and the Guarantors’ obligations under this
Indenture and the Notes and the Note Guarantees will be revived and reinstated as though no deposit
had occurred pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent
is permitted to apply all such money in accordance with Section 8.02 or 8.03 hereof, as the case
may be; provided, however, that, if the Company makes any payment of principal of, premium on, if
any, or interest or Special Interest, if any, on, any Note following the reinstatement of its
obligations, the Company will be subrogated to the rights of the Holders of such Notes to receive
such payment from the money held by the Trustee or Paying Agent.




ARTICLE 9

AMENDMENT, SUPPLEMENT AND WAIVER



Section 9.01 Without Consent of Holders of Notes.




     Notwithstanding Section 9.02 hereof, without the consent of any Holder of Notes, the Company,
the Guarantors and the Trustee may amend or supplement this Indenture, the Notes or the Note
Guarantees:




     (1) to cure any ambiguity, defect or inconsistency;




     (2) to provide for uncertificated Notes in addition to or in place of certificated
Notes;




     (3) to provide for the assumption of the Company’s or a Guarantor’s obligations to the
Holders of the Notes and Note Guarantees by a successor to the Company or such Guarantor
pursuant to Article 5 or Article 10 hereof;




     (4) to make any change that would provide any additional rights or benefits to the
Holders of the Notes or that does not adversely affect the legal rights hereunder of any
Holder;




     (5) to comply with requirements of the SEC in order to effect or maintain the
qualification of this Indenture under the TIA;




     (6) to conform the text of this Indenture, the Notes or the Note Guarantees to any
provision of the “Description of Notes” section of the Offering Circular, relating to the
initial offering of the Notes, to the extent that such provision in that “Description of
Notes” was intended to be a verbatim recitation of a provision of this Indenture, the Notes
or the Note Guarantees, which intent may be evidenced by an Officers’ Certificate to that
effect;




     (7) to provide for the issuance of Additional Notes in accordance with the limitations
set forth in this Indenture as of the date hereof; or




     (8) to allow any Person to execute a supplemental indenture and/or a Note Guarantee in
order to Guarantee the Notes;




     (9) to provide for the issuance of Additional Notes in accordance with the limitations
set forth in this Indenture; and




     (10) to make, complete or confirm any grant of Collateral permitted or required by this
Indenture or any of the Collateral Documents or any release of Collateral pursuant to the
terms of this Indenture or any of the Collateral Documents.



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     Upon the request of the Company accompanied by a resolution of its Board of Directors
authorizing the execution of any such amended or supplemental indenture, and upon receipt by the
Trustee of the documents described in Section 7.02 hereof, the Trustee will join with the Company
and the Guarantors in the execution of any amended or supplemental indenture authorized or
permitted by the terms of this Indenture and to make any further appropriate agreements and
stipulations that may be therein contained, but the Trustee will not be obligated to enter into
such amended or supplemental indenture that affects its own rights, duties or immunities under this
Indenture or otherwise.


Section 9.02 With Consent of Holders of Notes.




     Except as provided below in this Section 9.02, the Company and the Trustee may amend or
supplement this Indenture (including, without limitation, Section 3.09, 4.10 and 4.15 hereof) and
the Notes and the Note Guarantees with the consent of the Holders of at least a majority in
aggregate principal amount of the then outstanding Notes voting as a single class (including,
without limitation, consents obtained in connection with a tender offer or exchange offer for, or
purchase of, the Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or
Event of Default (other than a Default or Event of Default in the payment of the principal of,
premium on, if any, or interest or Special Interest, if any, on, the Notes, except a payment
default resulting from an acceleration that has been rescinded) or compliance with any provision of
this Indenture or the Notes or the Note Guarantees may be waived with the consent of the Holders of
a majority in aggregate principal amount of the then outstanding Notes voting as a single class
(including, without limitation, consents obtained in connection with a purchase of, or tender offer
or exchange offer for, the Notes). Section 2.08 hereof shall determine which Notes are considered
to be “outstanding” for purposes of this Section 9.02.



     Upon the request of the Company accompanied by a resolution of its Board of Directors
authorizing the execution of any such amended or supplemental indenture, and upon the filing with
the Trustee of evidence satisfactory to the Trustee of the consent of the Holders of Notes as
aforesaid, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the
Trustee will join with the Company and the Guarantors in the execution of such amended or
supplemental indenture unless such amended or supplemental indenture directly affects the Trustee’s
own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may
in its discretion, but will not be obligated to, enter into such amended or supplemental Indenture.



     It is not necessary for the consent of the Holders of Notes under this Section 9.02 to approve
the particular form of any proposed amendment, supplement or waiver, but it is sufficient if such
consent approves the substance thereof.



     After an amendment, supplement or waiver under this Section 9.02 becomes effective, the
Company will mail to the Holders of Notes affected thereby a notice briefly describing the
amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect
therein, will not, however, in any way impair or affect the validity of any such amended or
supplemental indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a
majority in aggregate principal amount of the Notes then outstanding voting as a single class may
waive compliance in a particular instance by the Company with any provision of this Indenture, the
Notes or the Note Guarantees. However, without the consent of each Holder affected, an amendment,
supplement or waiver under this Section 9.02 may not (with respect to any Notes held by a
non-consenting Holder):




     (1) reduce the principal amount of Notes whose Holders must consent to an amendment,
supplement or waiver;



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     (2) reduce the principal of or change the fixed maturity of any Note or alter or waive
any of the provisions with respect to the redemption of the Notes (except as provided above
with respect to Sections 3.09, 4.10 and 4.15 hereof);




     (3) reduce the rate of or change the time for payment of interest, including default
interest, on any Note;




     (4) waive a Default or Event of Default in the payment of principal of, premium on, if
any, or interest or Special Interest, if any, on, the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority in aggregate principal
amount of the then outstanding Notes and a waiver of the payment default that resulted from
such acceleration);




     (5) make any Note payable in money other than that stated in the Notes;




     (6) make any change in the provisions of this Indenture relating to waivers of past
Defaults or the rights of Holders of Notes to receive payments of principal of, premium on,
if any, or interest or Special Interest, if any, on, the Notes;




     (7) waive a redemption payment with respect to any Note (other than a payment required
by Sections 3.09, 4.10 or 4.15 hereof);




     (8) release any Guarantor from any of its obligations under its Note Guarantee or this
Indenture, except in accordance with the terms of this Indenture; or




     (9) make any change in the amendment and waiver provisions contained in clauses (1)
through (8) of this Section 9.02.



     In addition, any amendment to, or waiver of, the provisions of this Indenture or any
Collateral Document that has the effect of releasing all or substantially all of the Collateral
from the Liens securing the Notes will require the consent of the Holders of at least 66-2/3% in
aggregate principal amount of Notes then outstanding.


Section 9.03 Compliance with Trust Indenture Act.




     Every amendment or supplement to this Indenture or the Notes will be set forth in an amended
or supplemental indenture that complies with the TIA as then in effect.


Section 9.04 Revocation and Effect of Consents.




     Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a
Note is a continuing consent by the Holder of a Note and every subsequent Holder of a Note or
portion of a Note that evidences the same debt as the consenting Holder’s Note, even if notation of
the consent is not made on any Note. However, any such Holder of a Note or subsequent Holder of a
Note may revoke the consent as to its Note if the Trustee receives written notice of revocation
before the date the amendment, supplement or waiver becomes effective. An amendment, supplement or
waiver becomes effective in accordance with its terms and thereafter binds every Holder.


Section 9.05 Notation on or Exchange of Notes.




     The Trustee may place an appropriate notation about an amendment, supplement or waiver on any
Note thereafter authenticated. The Company in exchange for all Notes may issue and the Trustee



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shall, upon receipt of an Authentication Order, authenticate new Notes that reflect the amendment,
supplement or waiver.




     Failure to make the appropriate notation or issue a new Note will not affect the validity and
effect of such amendment, supplement or waiver.


Section 9.06 Trustee to Sign Amendments, etc.




     The Trustee will sign any amended or supplemental indenture authorized pursuant to this
Article 9 if the amendment or supplement does not adversely affect the rights, duties, liabilities
or immunities of the Trustee. The Company may not sign an amended or supplemental indenture until
the Board of Directors of the Company approves it. In executing any amended or supplemental
indenture, the Trustee will be entitled to receive and will be fully protected in relying upon, in
addition to the documents required by Section 13.04 hereof, an Officers’ Certificate and an Opinion
of Counsel stating that the execution of such amended or supplemental indenture is authorized or
permitted by this Indenture.



ARTICLE 10

COLLATERAL AND SECURITY



Section 10.01 Security Interest.




     (a) The due and punctual payment of the principal of, premium on, if any, and interest and
Special Interest, if any, on the Notes when and as the same shall be due and payable, whether on an
interest payment date, at maturity, by acceleration, repurchase, redemption or otherwise, and
interest on the overdue principal of, premium on, if any, and interest and Special Interest, if any
(to the extent permitted by law), on the Notes and performance of all other obligations of the
Company and the Guarantors to the Holders of Notes or the Trustee under this Indenture and the
Notes (including, without limitation, the Note Guarantees), according to the terms hereunder or
thereunder, are secured as provided in the Collateral Documents. Each Holder of Notes, by its
acceptance thereof, consents and agrees to the terms of the Collateral Documents (including,
without limitation, the provisions providing for foreclosure and release of Collateral) as the same
may be in effect or may be amended from time to time in accordance with their terms and authorizes
and appoints Wells Fargo Bank, N.A. as the Trustee and as the Collateral Trustee. The Trustee
hereby authorizes and appoints Wells Fargo Bank, N.A. as Collateral Trustee and each Holder of
Notes and the Trustee direct the Collateral Trustee to enter into the Collateral Documents and to
perform its obligations and exercise its rights thereunder in accordance therewith, subject to the
terms and conditions thereof, including, without limitation, the limitations on duties of the
Collateral Trustee provided in Section 5.12 of the Collateral Trust Agreement. The Company and
each of the Guarantors consent and agree to be bound by the terms of the Collateral Documents, as
the same may be in effect from time to time, and agree to perform their obligations thereunder in
accordance therewith. The Company will deliver to the Trustee copies of all documents delivered to
the Collateral Trustee pursuant to the Collateral Documents, and will do or cause to be done all
such acts and things as may be required by the provisions of the Collateral Documents, to assure
and confirm to the Collateral Trustee the security interest in the Collateral contemplated by the
Collateral Documents or any part thereof, as from time to time constituted, so as to render the
same available for the security and benefit of this Indenture and of the Notes. The Company shall
take, and shall cause its Subsidiaries to take, any and all actions reasonably required to cause
the Collateral Documents to create and maintain, as security for the Obligations under the Notes
and the Note Guarantees and any other Parity Lien Obligations, a valid and enforceable perfected
Lien in and on all the Collateral, in favor of the Collateral Trustee for the benefit of the
Holders of the Notes and holders of any Parity Lien Obligations, junior in priority to the Liens
securing Priority Lien Obligations, subject to the Priority Lien Cap, and to all other Permitted
Prior Liens.



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     (b) In addition to the Collateral, if the Company or any Guarantor creates any additional Lien
upon any Oil and Gas Properties to secure Priority Lien Obligations, substantially concurrently
with granting any such additional Lien the Company shall take, and shall cause its Subsidiaries to
take, any and all actions reasonably required to cause the Collateral Documents to create and
maintain, as security for the Obligations under the Notes and the Note Guarantees and any other
Parity Lien Obligations, a valid and enforceable perfected Lien in and on such Oil and Gas
Properties, in favor of the Collateral Trustee for the benefit of the Holders of the Notes and
holders of any Parity Lien Obligations, junior in priority to the Liens securing Priority Lien
Obligations and all other Permitted Prior Liens.



     (c) The Company will comply with the provisions of TIA §314.


Section 10.02 Intercreditor Agreement.




          This Article 10 and the provisions of each other Collateral Document are subject to the terms,
conditions and benefits set forth in the Intercreditor Agreement. The Company and each Guarantor
consents to, and agrees to be bound by, the terms of the Intercreditor Agreement, as the same may
be in effect from time to time, and to perform its obligations thereunder in accordance with the
terms thereof. Each Holder of the Notes, by its acceptance of the Notes (a) consents to the
subordination of Liens provided for in the Intercreditor Agreement, (b) agrees that it will be
bound by, and will take no actions contrary to, the provisions of the Intercreditor Agreement and
(c) authorizes and instructs the Collateral Trustee on behalf of each Second Lien Secured Party to
enter into the Intercreditor Agreement as Second Lien Collateral Trustee on behalf of such Second
Lien Secured Parties. The foregoing provisions are intended as an inducement to the lenders under
the Credit Agreement to extend credit to the Company and certain of its Subsidiaries, and such
lenders are intended third party beneficiaries of such provisions and the provisions of the
Intercreditor Agreement.


Section 10.03 Collateral Trust Agreement.




          This Article 10 and the provisions of each other Collateral Document are subject to the terms,
conditions and benefits set forth in the Collateral Trust Agreement. The Company and each
Guarantor consents to, and agrees to be bound by, the terms of the Collateral Trust Agreement, as
the same may be in effect from time to time, and to perform its obligations thereunder in
accordance with the terms therewith.


Section 10.04 Equal and Ratable Sharing of Collateral by Holders of Parity Lien Debt.




     Notwithstanding:



     (a) anything to the contrary contained in the Collateral Documents;



     (b) the time of incurrence of any Series of Parity Lien Debt;



     (c) the order or method of attachment or perfection of any Liens securing any Series of Parity
Lien Debt;



     (d) the time or order of filing or recording of financing statements, deeds of trusts,
mortgages or other documents filed or recorded to perfect any Lien upon any Collateral;



     (e) the time of taking possession or control over any Collateral;



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     (f) that any Parity Lien may not have been perfected or may be or have become subordinated, by
equitable subordination or otherwise, to any other Lien; or



     (g) the rules for determining priority under any law governing relative priorities of Liens:


all Parity Liens granted at any time by the Company or any Guarantor will secure, equally and
ratably, all present and future Parity Lien Obligations.




     This Section 10.04 is intended for the benefit of, and will be enforceable as a third party
beneficiary by, each present and future holder of Parity Lien Obligations, each present and future
Parity Lien Representative and the Collateral Trustee as holder of Parity Liens. The Parity Lien
Representative of each future Series of Parity Lien Debt will be required to deliver an Additional
Secured Debt Designation to the Collateral Trustee and the Trustee at the time of incurrence of
such Series of Parity Lien Debt.


Section 10.05 Ranking of Parity Liens.




     (a) The Intercreditor Agreement shall provide that, notwithstanding:




     (1) anything to the contrary contained in the security documents;




     (2) the time of incurrence of any Series of Secured Debt;




     (3) the order or method of attachment or perfection of any Liens securing any Series of
Secured Debt;




     (4) the time or order of filing or recording of financing statements, deeds of trust,
mortgages or other documents filed or recorded to perfect any Lien upon any Collateral;




     (5) the time of taking possession or control over any Collateral;




     (6) that any Parity Lien may not have been perfected or may be or have become
subordinated, by equitable subordination or otherwise, to any other Lien; or




     (7) the rules for determining priority under any law governing relative priorities of
Liens,


all Parity Liens at any time granted by the Company or any Guarantor will be subject and
subordinate to all Priority Liens securing Priority Lien Obligations, subject to the Priority Lien
Cap.




     This Section 10.05 is intended for the benefit of, and will be enforceable as a third party
beneficiary by, each present and future holder of Priority Lien Obligations and each present and
future Priority Lien Collateral Agent as holder of Priority Liens. No other Person will be
entitled to rely on, have the benefit of or enforce those provisions.



     In addition, this Section 10.05 is intended solely to set forth the relative ranking, as
Liens, of the Liens securing Parity Lien Debt as against the Priority Liens. Neither the Notes nor
any other Parity Lien Obligations are intended to be, or will ever be by reason of this Section
10.05, in any respect subordinated, deferred, postponed, restricted or prejudiced in right of
payment.



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Section 10.06 Release of Liens in Respect of Notes.




     (a) The Collateral Trustee’s other Liens upon the Collateral will no longer secure the Notes
outstanding under this Indenture or any other Obligations under this Indenture, and the right of
the Holders of the Notes and holders of such other Obligations to the benefits and proceeds of the
Collateral Trustee’s Liens on the Collateral will terminate and be discharged:




     (1) upon satisfaction and discharge of this Indenture in accordance with Article 12
hereof;




     (2) upon a Legal Defeasance or Covenant Defeasance of the Notes in accordance with
Article 8 hereof;




     (3) upon payment in full and discharge of all Notes outstanding under this Indenture
and all Obligations that are outstanding, due and payable under this Indenture at the time
the Notes are paid in full and discharged;




     (4) in whole or in part, with the consent of the Holders of the requisite percentage of
Notes in accordance with Article 9 hereof; and




     (5) if and to the extent required by Section 4.01 of the Intercreditor Agreement.



     In addition, the Collateral Trustee’s Liens on the Collateral will be released upon the terms
and subject to the conditions set forth in Section 4.1 of the Collateral Trust Agreement.



     (b) The release of any Collateral from the terms of this Indenture will not be deemed to
impair the security under this Indenture in contravention of provisions hereof if and to the extent
the Collateral is released pursuant to the terms of the Collateral Documents. To the extent
applicable, the Company will cause TIA §313(b), relating to reports, and TIA §314(d), relating to
the release of property or securities subject to the Lien of the Collateral Documents, to be
complied with. Any certificate or opinion required by TIA §314(d) may be made by an Officer of the
Company except in cases where TIA §314(d) requires that such certificate or opinion be made by an
independent Person, which Person will be an independent engineer, appraiser or other expert
selected by or reasonably satisfactory to the trustee. Notwithstanding anything to the contrary in
this paragraph, the Company will not be required to comply with all or any portion of TIA §314(d)
if it determines, in good faith based on advice of counsel, that under the terms of TIA §314(d)
and/or any interpretation or guidance as to the meaning thereof of the SEC and its staff, including
“no action” letters or exemptive orders, all or any portion of TIA §314(d) is inapplicable to one
or a series of released Collateral.


Section 10.07 Relative Rights.




     Nothing in the Note Documents will:



     (a) impair, as between the Company and the Holders of the Notes, the obligation of the Company
to pay principal of, premium, accrued and unpaid interest and Special Interest, if any, on the
Notes in accordance with their terms or any other obligation of the Company or any Guarantor;



     (b) affect the relative rights of Holders of Notes as against any other creditors of the
Company or any Guarantor (other than holders of Priority Liens, other Permitted Prior Liens or
other Parity Liens);



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     (c) restrict the right of any Holder of Notes to sue for payments that are then due and owing
(but not enforce any judgment in respect thereof against any Collateral to the extent specifically
prohibited by Sections 3.01 of the Intercreditor Agreement or Section 3.3 of the Collateral Trust
Agreement);



     (d) restrict or prevent any Holder of Notes or other Parity Lien Obligations, the Collateral
Trustee or any Parity Lien Representative from exercising any of its rights or remedies upon a
Default or Event of Default not specifically restricted or prohibited by Sections 3.01, 3.05 and
4.02 of the Intercreditor Agreement or Section 3.3 of the Collateral Trust Agreement; or



     (e) restrict or prevent any Holder of Notes of other Parity Lien Obligations, the Collateral
Trustee or any Parity Lien Representative from taking any lawful action in an Insolvency or
Liquidation Proceeding not specifically restricted or prohibited by Section 4.02 of the
Intercreditor Agreement or Section 3.3 of the Collateral Trust Agreement.


Section 10.08 Collateral Trustee.




     (a) The Collateral Trustee will hold (directly or through co-trustees or agents) and, subject
to the terms of the Intercreditor Agreement, will be entitled to enforce all Liens on the
Collateral created by the Collateral Documents.



     (b) Except as provided in the Collateral Trust Agreement or as directed by an Act of Parity
Lien Debtholders in accordance with the Collateral Trust Agreement, the Collateral Trustee will not
be obligated:




     (1) to act upon directions purported to be delivered to it by any Person;




     (2) to foreclose upon or otherwise enforce any Lien; or




     (3) to take any other action whatsoever with regard to any or all of the Collateral
Documents, the Liens created thereby or the Collateral.


Section 10.09 Further Assurances; Liens on Additional Property.




     (a) The Company and each of the Guarantors shall do or cause to be done all acts and things
that may be required, or that the Collateral Trustee from time to time may reasonably request, to
assure and confirm that the Collateral Trustee holds, for the benefit of the holders of Parity Lien
Obligations, duly created and enforceable and perfected Liens upon the Collateral (including any
property or assets that are acquired or otherwise become, or are required by any Parity Lien
Document to become, Collateral after the Notes are issued), in each case, as contemplated by, and
with the Lien priority required under, the Parity Lien Documents.



     (b) Upon the reasonable request of the Collateral Trustee or any Parity Lien Representative at
any time and from time to time, the Company and each of the Guarantors shall promptly execute,
acknowledge and deliver such Collateral Documents, instruments, certificates, notices and other
documents, and take such other actions as shall be reasonably required, or that the Collateral
Trustee may reasonably request, to create, perfect, protect, assure or enforce the Liens and
benefits intended to be conferred, in each case as contemplated by the Parity Lien Documents for
the benefit of the holders of Parity Lien Obligations; provided, that no such Collateral Document,
instrument or other document shall be materially more burdensome upon the Company and the
Guarantors than the Parity Lien Documents executed and delivered by the Company and the Guarantors
in connection with the issuance of the Notes on or about the Issue Date.



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     (c) If at any time of certification by the Company with respect to the Recognized Value of Oil
and Gas Properties subject to a Mortgage, such Oil and Gas Properties represent less than 80% of
the Recognized Value of the Company’s and the Guarantors’ proved Oil and Gas Properties located in
the United States and adjacent Federal waters, the Company will promptly, and in any event within
90 days after the date of such certification, cause to be delivered to the Collateral Trustee (in
form and substance reasonably satisfactory to the Collateral Trustee) such Mortgages or amendments
or supplements to prior Mortgages as may be necessary to increase such percentage to at least 80%
of such Recognized Value.



     (d) Upon reasonable request by the Collateral Trustee, the Company shall, within a reasonable
amount of time after receipt of such request, use their commercially reasonable efforts (i) to
correct any material defect or error that may be discovered in the execution, acknowledgment,
filing or recordation of any document or instrument relating to any Collateral, and (ii) do,
execute, acknowledge, deliver, record, re-record, file, re-file, register and re-register any and
all such further acts, deeds, certificates, assurances and other instruments as the Collateral
Trustee may reasonably require from time to time in order to carry out more effectively the
purposes of the Collateral Documents.


Section 10.10 Insurance.




     (a) The Company and the Guarantors shall:




     (1) keep their properties insured at all times by financially sound and reputable
insurers;




     (2) maintain such other insurance, to such extent and against such risks (and with such
deductibles, retentions and exclusions), including fire and other risks insured against by
extended coverage and coverage for acts of terrorism, as is customary with companies in the
same or similar businesses operating in the same or similar locations, including public
liability insurance against claims for personal injury or death or property damage occurring
upon, in, about or in connection with the use of any properties owned, occupied or
controlled by them; and




     (3) maintain such other insurance as may be required by law.



     (b) Upon the request of the Collateral Trustee, the Company and the Guarantors will furnish to
the Collateral Trustee information as to their property and liability insurance carriers. Holders
of Parity Lien Obligations, as a class, will be named as additional insureds, with a waiver of
subrogation, on all insurance policies of the Company and the Guarantors, and the Collateral
Trustee will be named as loss payee, with 30 days’ notice of cancellation or material change, on
all property and casualty insurance policies of the Company and the Guarantors.



ARTICLE 11

NOTE GUARANTEES



Section 11.01 Guarantee.




     (a) Subject to this Article 11, each of the Guarantors hereby, jointly and severally,
unconditionally Guarantees to each Holder of a Note authenticated and delivered by the Trustee and
to the Trustee and its successors and assigns, irrespective of the validity and enforceability of
this Indenture, the Notes or the obligations of the Company hereunder or thereunder, that:




     (1) the principal of, premium on, if any, and interest and Special Interest, if any,
on, the Notes will be promptly paid in full when due, whether at maturity, by acceleration,



97









 






redemption or otherwise, and interest on the overdue principal of, premium on, if any, and
interest and Special Interest, if any, on, the Notes, if lawful, and all other obligations
of the Company to the Holders or the Trustee hereunder or thereunder will be promptly paid
in full or performed, all in accordance with the terms hereof and thereof; and




     (2) in case of any extension of time of payment or renewal of any Notes or any of such
other obligations, that same will be promptly paid in full when due or performed in
accordance with the terms of the extension or renewal, whether at stated maturity, by
acceleration or otherwise.



     Failing payment when due of any amount so guaranteed or any performance so guaranteed for
whatever reason, the Guarantors will be jointly and severally obligated to pay the same
immediately. Each Guarantor agrees that this is a guarantee of payment and not a guarantee of
collection.



     (b) The Guarantors hereby agree that their obligations hereunder are unconditional,
irrespective of the validity, regularity or enforceability of the Notes or this Indenture, the
absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with
respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any
action to enforce the same or any other circumstance which might otherwise constitute a legal or
equitable discharge or defense of a guarantor. Each Guarantor hereby waives diligence,
presentment, demand of payment, filing of claims with a court in the event of insolvency or
bankruptcy of the Company, any right to require a proceeding first against the Company, protest,
notice and all demands whatsoever and covenant that this Note Guarantee will not be discharged
except by complete performance of the obligations contained in the Notes and this Indenture.



     (c) If any Holder or the Trustee is required by any court or otherwise to return to the
Company, the Guarantors or any custodian, trustee, liquidator or other similar official acting in
relation to either the Company or the Guarantors, any amount paid by either to the Trustee or such
Holder, this Note Guarantee, to the extent theretofore discharged, will be reinstated in full force
and effect.



     (d) Each Guarantor agrees that it will not be entitled to any right of subrogation in relation
to the Holders in respect of any Obligations guaranteed hereby until payment in full of all
Obligations guaranteed hereby. Each Guarantor further agrees that, as between the Guarantors, on
the one hand, and the Holders and the Trustee, on the other hand, (1) the maturity of the
Obligations guaranteed hereby may be accelerated as provided in Article 6 hereof for the purposes
of this Note Guarantee, notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the Obligations guaranteed hereby, and (2) in the event of any
declaration of acceleration of such Obligations as provided in Article 6 hereof, such Obligations
(whether or not due and payable) will forthwith become due and payable by the Guarantors for the
purpose of this Note Guarantee. The Guarantors will have the right to seek contribution from any
non-paying Guarantor so long as the exercise of such right does not impair the rights of the
Holders under the Note Guarantee.


Section 11.02 Limitation on Guarantor Liability.




     Each Guarantor, and by its acceptance of Notes, each Holder, hereby confirms that it is the
intention of all such parties that the Note Guarantee of such Guarantor not constitute a fraudulent
transfer or conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the
Uniform Fraudulent Transfer Act or any similar federal or state law to the extent applicable to any
Note Guarantee. To effectuate the foregoing intention, the Trustee, the Holders and the Guarantors
hereby irrevocably agree that the obligations of such Guarantor will be limited to the maximum
amount that will, after giving effect to such maximum amount and all other contingent and fixed
liabilities of such Guarantor that are



98









 




relevant under such laws, and after giving effect to any
collections from, rights to receive contribution from or payments made by or on behalf of any other
Guarantor in respect of the obligations of such other Guarantor under this Article 11, result in
the obligations of such Guarantor under its Note Guarantee not constituting a fraudulent transfer
or conveyance.



Section 11.03 Execution and Delivery of Note Guarantee.




     To evidence its Note Guarantee set forth in Section 11.01 hereof, each Guarantor hereby agrees
that a notation of such Note Guarantee substantially in the form attached as Exhibit E hereto will
be endorsed by an Officer of such Guarantor on each Note authenticated and delivered by the Trustee
and that this Indenture will be executed on behalf of such Guarantor by one of its Officers.



     Each Guarantor hereby agrees that its Note Guarantee set forth in Section 11.01 hereof will
remain in full force and effect notwithstanding any failure to endorse on each Note a notation of
such Note Guarantee.



     If an Officer whose signature is on this Indenture or on the Note Guarantee no longer holds
that office at the time the Trustee authenticates the Note on which a Note Guarantee is endorsed,
the Note Guarantee will be valid nevertheless.



     The delivery of any Note by the Trustee, after the authentication thereof hereunder, will
constitute due delivery of the Note Guarantee set forth in this Indenture on behalf of the
Guarantors.



     In the event that the Company or any of its Restricted Subsidiaries creates or acquires any
Domestic Subsidiary after the date of this Indenture, if required by Section 4.19 hereof, the
Company will cause such Domestic Subsidiary to comply with the provisions of Section 4.19 hereof
and this Article 11, to the extent applicable.


Section 11.04 Guarantors May Consolidate, etc., on Certain Terms.




     Except as otherwise provided in Section 11.05 hereof, no Guarantor may sell or otherwise
dispose of all or substantially all of its assets to, or consolidate with or merge with or into
(whether or not such Guarantor is the surviving Person) another Person, other than the Company or
another Guarantor, unless:




     (1) immediately after giving effect to such transaction, no Default or Event of Default
exists; and




     (2) either:




          (a) subject to Section 11.05 hereof, the Person acquiring the property in any such sale
or disposition or the Person formed by or surviving any such consolidation or merger
unconditionally assumes all the obligations of that Guarantor under (i) its Note Guarantee
pursuant to a supplemental indenture satisfactory to the Trustee and (ii) the other
applicable Note Documents pursuant to supplements satisfactory to the Collateral Trustee; or




          (b) the Net Proceeds of such sale or other disposition are applied in accordance with
the applicable provisions of this Indenture, including without limitation, Section 4.10
hereof.



     In case of any such consolidation, merger, sale or conveyance and upon the assumption by the
successor Person, by supplemental indenture, executed and delivered to the Trustee and satisfactory
in form to the Trustee, of the Note Guarantee endorsed upon the Notes and the due and punctual



99









 




performance of all of the covenants and conditions of this Indenture to be performed by the
Guarantor, such successor Person will succeed to and be substituted for the Guarantor with the same
effect as if it had been named herein as a Guarantor. Such successor Person thereupon may cause to
be signed any or all of the Note Guarantees to be endorsed upon all of the Notes issuable hereunder
which theretofore shall not have been signed by the Company and delivered to the Trustee. All the
Note Guarantees so issued will in all respects have the same legal rank and benefit under this
Indenture as the Note Guarantees theretofore and thereafter issued in accordance with the terms of
this Indenture as though all of such Note Guarantees had been issued at the date of the execution
hereof.




     Except as set forth in Articles 4 and 5 hereof, and notwithstanding clauses 2(a) and (b) of
the second preceding paragraph above, nothing contained in this Indenture or in any of the Notes
will prevent any consolidation or merger of a Guarantor with or into the Company or another
Guarantor, or will prevent any sale or conveyance of the property of a Guarantor as an entirety or
substantially as an entirety to the Company or another Guarantor.


Section 11.05 Releases.




     (a) In connection with any sale or other disposition of all or substantially all of the assets
of any Guarantor, by way of merger, consolidation or otherwise, to a Person that is not (either
before or after giving effect to such transaction) the Company or a Restricted Subsidiary of the
Company, then the corporation acquiring the property will be released and relieved of any
obligations under the Note Guarantee;



     (b) In the event of any sale or other disposition of Capital Stock of any 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 and such Guarantor ceases to be a Restricted Subsidiary of the
Company as a result of the sale or other disposition, then such Guarantor will be released and
relieved of any obligations under its Note Guarantee;


provided, in both cases, that the Net Proceeds of such sale or other disposition are applied in
accordance with the applicable provisions of this Indenture, including without limitation Section
4.10 hereof. Upon delivery by the Company to the Trustee of an Officers’ Certificate and an
Opinion of Counsel to the effect that such sale or other disposition was made by the Company in
accordance with the provisions of this Indenture, including without limitation Section 4.10 hereof,
the Trustee will execute any documents reasonably required in order to evidence the release of any
Guarantor from its obligations under its Note Guarantee.




     (c) Upon designation of any Restricted Subsidiary that is a Guarantor as an Unrestricted
Subsidiary in accordance with the terms of this Indenture, such Guarantor will be released and
relieved of any obligations under its Note Guarantee.



     (d) Upon Legal Defeasance or Covenant Defeasance in accordance with Article 8 hereof or
satisfaction and discharge of this Indenture in accordance with Article 12 hereof, each Guarantor
will be released and relieved of any obligations under its Note Guarantee.



     Any Guarantor not released from its obligations under its Note Guarantee as provided in this
Section 11.05 will remain liable for the full amount of principal of, premium on, if any, and
interest and Special Interest, if any, on, the Notes and for the other obligations of any Guarantor
under this Indenture as provided in this Article 11.



100









 





ARTICLE 12

SATISFACTION AND DISCHARGE



Section 12.01 Satisfaction and Discharge.




     This Indenture will be discharged and will cease to be of further effect as to all Notes
issued hereunder, when:




     (1) either:




          (a) all Notes that have been authenticated, except lost, stolen or destroyed Notes that
have been replaced or paid and Notes for whose payment money has been deposited in trust and
thereafter repaid to the Company or discharged from such trust as provided in this
Indenture, have been delivered to the Trustee for cancellation; or




          (b) all Notes that have not been delivered to the Trustee for cancellation have become
due and payable by reason of the mailing of a notice of redemption or otherwise or will
become due and payable within one year and the Company, any Guarantor or any other Person on
behalf of the Company or any Guarantor has irrevocably deposited or caused to be deposited
with the Trustee as trust funds in trust solely for the benefit of the Holders, cash in U.S.
dollars, non-callable Government Securities, or a combination thereof, in such amounts as
will be sufficient, without consideration of any reinvestment of interest, to pay and
discharge the entire Indebtedness on the Notes not delivered to the Trustee for cancellation
for principal, premium, if any, and interest and Special Interest, if any, to the date of
maturity or redemption;




     (2) in respect of subclause (b) of clause (1) of this Section 12.01, no Default or
Event of Default has occurred and is continuing on the date of the deposit (other than a
Default or Event of Default resulting from the borrowing of funds to be applied to such
deposit and any similar deposit relating to other Indebtedness and, in each case, the
granting of Liens to secure such borrowings) and the deposit will not result in a breach or
violation of, or constitute a default under, any other instrument to which the Company or
any Guarantor is a party or by which the Company or any Guarantor is bound (other than with
respect to the borrowing of funds to be applied concurrently to make the deposit required to
effect such satisfaction and discharge and any similar concurrent deposit relating to other
Indebtedness, and in each case the granting of Liens to secure such borrowings);




     (3) the Company or any Guarantor has paid or caused to be paid all sums payable by it
under this Indenture; and




     (4) the Company has delivered irrevocable instructions to the Trustee under this
Indenture to apply the deposited money toward the payment of the Notes at maturity or on the
redemption date, as the case may be.


In addition, the Company must deliver an Officers’ Certificate and an Opinion of Counsel to the
Trustee stating that all conditions precedent to satisfaction and discharge have been satisfied.




     Notwithstanding the satisfaction and discharge of this Indenture, if money has been deposited
with the Trustee pursuant to subclause (b) of clause (1) of this Section 12.01, the provisions of
Sections 12.02 and 8.06 hereof will survive. In addition, nothing in this Section 12.01 will be
deemed to discharge those provisions of Section 7.07 hereof, that, by their terms, survive the
satisfaction and discharge of this Indenture.



101









 





     The Collateral will be released from the Lien securing the Notes, as provided in Section 10.06
upon a satisfaction and discharge in accordance with the provisions of this Section 12.01.


Section 12.02 Application of Trust Money.




     Subject to the provisions of Section 8.06 hereof, all money deposited with the Trustee
pursuant to Section 12.01 hereof shall be held in trust and applied by it, in accordance with the
provisions of the Notes and this Indenture, to the payment, either directly or through any Paying
Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the
Persons entitled thereto, of the principal, premium, if any, and interest and Special Interest, if
any, for whose payment such money has been deposited with the Trustee; but such money need not be
segregated from other funds except to the extent required by law.



     If the Trustee or Paying Agent is unable to apply any money or Government Securities in
accordance with Section 12.01 hereof by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting
such application, the Company’s and any Guarantor’s obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to Section 12.01 hereof;
provided that if the Company has made any payment of principal of, premium on, if any, or interest
or Special Interest, if any, on, any Notes because of the reinstatement of its obligations, the
Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from
the money or Government Securities held by the Trustee or Paying Agent.



ARTICLE 13

MISCELLANEOUS



Section 13.01 Trust Indenture Act Controls.




     If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by
TIA §318(c), the imposed duties will control.


Section 13.02 Notices.




     Any notice or communication by the Company, any Guarantor or the Trustee to the others is duly
given if in writing and delivered in Person or by first class mail (registered or certified, return
receipt requested), facsimile transmission or overnight air courier guaranteeing next day delivery,
to the others’ address:




If to the Company and/or any Guarantor:




Milagro Oil & Gas, Inc.

1301 McKinney Street, Suite 500

Houston, Texas, 77010-3089

Facsimile No.: (713) 750-1601

Attention: Chief Executive Officer




If to the Trustee:

Wells Fargo Bank, N.A.

1445 Ross Ave. 2nd Floor

MAC: T5303-022



102









 






Dallas, Texas 75201

Facsimile No.: (214) 777-4086

Attention: Corporate Trust and Escrow Services



     The Company, any Guarantor or the Trustee, by notice to the others, may designate additional
or different addresses for subsequent notices or communications.



     All notices and communications (other than those sent to Holders) will be deemed to have been
duly given: at the time delivered by hand, if personally delivered; five Business Days after being
deposited in the mail, postage prepaid, if mailed; when receipt acknowledged, if transmitted by
facsimile; and upon receipt, if sent by overnight air courier guaranteeing next day delivery.



     Any notice or communication to a Holder will be mailed by first class mail, certified or
registered, return receipt requested, or by overnight air courier guaranteeing next day delivery to
its address shown on the register kept by the Registrar. Any notice or communication will also be
so mailed to any Person described in TIA §313(c), to the extent required by the TIA. Failure to
mail a notice or communication to a Holder or any defect in it will not affect its sufficiency with
respect to other Holders.



     If a notice or communication is mailed in the manner provided above within the time
prescribed, it is duly given, whether or not the addressee receives it.



     If the Company mails a notice or communication to Holders, it will mail a copy to the Trustee
and each Agent at the same time.


Section 13.03 Communication by Holders of Notes with Other Holders of Notes.




     Holders may communicate pursuant to TIA §312(b) with other Holders with respect to their
rights under this Indenture or the Notes. The Company, the Trustee, the Registrar and anyone else
shall have the protection of TIA §312(c).


Section 13.04 Certificate and Opinion as to Conditions Precedent.




     Upon any request or application by the Company to the Trustee to take any action under this
Indenture, the Company shall furnish to the Trustee:




     (1) an Officers’ Certificate in form and substance reasonably satisfactory to the
Trustee (which must include the statements set forth in Section 13.05 hereof) stating that,
in the opinion of the signers, all conditions precedent and covenants, if any, provided for
in this Indenture relating to the proposed action have been satisfied; and




     (2) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee
(which must include the statements set forth in Section 13.05 hereof) stating that, in the
opinion of such counsel, all such conditions precedent and covenants have been satisfied.


Section 13.05 Statements Required in Certificate or Opinion.




     Each certificate or opinion with respect to compliance with a condition or covenant provided
for in this Indenture (other than a certificate provided pursuant to TIA §314(a)(4)) must comply
with the provisions of TIA §314(e) and must include:



103









 






     (1) a statement that the Person making such certificate or opinion has read such
covenant or condition;




     (2) a brief statement as to the nature and scope of the examination or investigation
upon which the statements or opinions contained in such certificate or opinion are based;




     (3) a statement that, in the opinion of such Person, he or she has made such
examination or investigation as is necessary to enable him or her to express an informed
opinion as to whether or not such covenant or condition has been satisfied; and




     (4) a statement as to whether or not, in the opinion of such Person, such condition or
covenant has been satisfied.


Section 13.06 Rules by Trustee and Agents.




     The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar
or Paying Agent may make reasonable rules and set reasonable requirements for its functions.


Section 13.07 No Personal Liability of Directors, Officers, Employees and Stockholders.




     No director, officer, employee, incorporator or stockholder of the Company or any Guarantor,
as such, will have any liability for any obligations of the Company or the Guarantors under any
Note Documents 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.


Section 13.08 Governing Law.




     THE INTERNAL LAW OF THE STATE OF NEW YORK WILL GOVERN AND BE USED TO CONSTRUE THIS INDENTURE,
THE NOTES AND THE NOTE GUARANTEES WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF
LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED
THEREBY.


Section 13.09 No Adverse Interpretation of Other Agreements.




     This Indenture may not be used to interpret any other indenture, loan or debt agreement of the
Company or its Subsidiaries or of any other Person. Any such indenture, loan or debt agreement may
not be used to interpret this Indenture.


Section 13.10 Successors.




     All agreements of the Company in this Indenture and the Notes will bind its successors. All
agreements of the Trustee in this Indenture will bind its successors. All agreements of each
Guarantor in this Indenture will bind its successors, except as otherwise provided in Section 11.05
hereof.



104









 




Section 13.11 Severability.




     In case any provision in this Indenture or in the Notes is invalid, illegal or unenforceable,
the validity, legality and enforceability of the remaining provisions will not in any way be
affected or impaired thereby.


Section 13.12 Counterpart Originals.




     The parties may sign any number of copies of this Indenture. Each signed copy will be an
original, but all of them together represent the same agreement.


Section 13.13 Table of Contents, Headings, etc.




     The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not to be considered a part of
this Indenture and will in no way modify or restrict any of the terms or provisions hereof.



[Signature pages follow.]




105









 








SIGNATURES



Dated as of May 11, 2011




	 	 	 	 	 
	 	Milagro Oil & Gas, Inc.

 	 
	 	By:  	/s/ James G. Ivey
 	 
	 	 	Name:  	James G. Ivey 	 
	 	 	Title:  	President and Chief Executive Officer 	 
	 
	 	Milagro Exploration, LLC

 	 
	 	By:  	/s/ James G. Ivey
 	 
	 	 	Name:  	James G. Ivey 	 
	 	 	Title:  	President and Chief Executive Officer 	 
	 
	 	Milagro Producing, LLC

 	 
	 	By:  	/s/ James G. Ivey
 	 
	 	 	Name:  	James G. Ivey 	 
	 	 	Title:  	President and Chief Executive Officer 	 
	 
	 	Milagro Mid-Continent LLC

 	 
	 	By:  	/s/ James G. Ivey
 	 
	 	 	Name:  	James G. Ivey 	 
	 	 	Title:  	President and Chief Executive Officer 	 
	 
	 	Milagro Resources LLC

 	 
	 	By:  	/s/ James G. Ivey
 	 
	 	 	Name:  	James G. Ivey 	 
	 	 	Title:  	President and Chief Executive Officer 	 
	 



[Signature Page to Indenture]






 









 








SIGNATURES



Dated as of May 11, 2011




	 	 	 	 	 
	 	Wells Fargo Bank, N.A.

as Trustee

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



[Signature Page to Indenture]





 









 








EXHIBIT A1



[Insert the Global Note Legend, if applicable pursuant to the provisions of the Indenture]



[Insert the Private Placement Legend, if applicable pursuant to the provisions of the Indenture]



[Insert the Original Issue Discount Legend, if applicable pursuant to the provisions of the
Indenture]




[Face of Note]




 





CUSIP/CINS ____________




10.500% Senior Secured Second Lien Notes due 2016




	 		
	No. ___
	 	$____________






MILAGRO OIL & GAS, INC.




promises
to pay to           
          
 or registered assigns,



the principal sum of __________________________________________________________ DOLLARS on May 15,
2016.



Interest Payment Dates: May 15 and November 15



Record Dates: May 1 and November 1



Dated: _______________, 2011




	 	 	 	 	 
	 	MILAGRO OIL & GAS, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



This is one of the Notes referred to

in the within-mentioned Indenture:




WELLS FARGO BANK, N.A.
as Trustee




	 	 	 	 	 
	By:  	 	 
	 	Authorized Signatory 	 
	 



 








A1-1









 








[Back of Note]

10.500% Senior Secured Second Lien Notes due 2016





     Capitalized terms used herein have the meanings assigned to them in the Indenture referred to
below unless otherwise indicated.




     (1) Interest. Milagro Oil & Gas, Inc., a Delaware corporation (the
“Company”), promises to pay or cause to be paid interest on the principal amount of this
Note at 10.500% per annum from May 11, 2011 until maturity and shall pay the Special
Interest, if any, payable pursuant to the Registration Rights Agreement referred to below.
The Company will pay interest and Special Interest, if any, semi-annually in arrears on May
15 and November 15 of each year, or if any such day is not a Business Day, on the next
succeeding Business Day (each, an “Interest Payment Date”). Interest on the Notes will
accrue from the most recent date to which interest has been paid or, if no interest has been
paid, from the date of issuance; provided that, if this Note is authenticated between a
record date referred to on the face hereof and the next succeeding Interest Payment Date,
interest shall accrue from such next succeeding Interest Payment Date; provided further that
the first Interest Payment Date shall be _________ __, 20__. The Company will pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law to the extent
permitted by law) on overdue principal at a rate that is 1% higher than the then applicable
interest rate on the Notes to the extent lawful; it will pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law to the extent permitted by
law) on overdue installments of interest and Special Interest, if any (without regard to any
applicable grace period), at the same rate to the extent lawful.




     Interest will be computed on the basis of a 360-day year comprised of twelve 30-day
months.




     (2) Method of Payment. The Company will pay interest on the Notes (except
defaulted interest) and Special Interest, if any, to the Persons who are registered Holders
of Notes at the close of business on the May 1 or November 1 next preceding the Interest
Payment Date, even if such Notes are canceled after such record date and on or before such
Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to
defaulted interest. The Notes will be payable as to principal, premium, if any, and
interest and Special Interest, if any, at the office or agency of the Paying Agent and
Registrar within the City and State of New York, or, at the option of the Company, payment
of interest and Special Interest, if any, may be made by check mailed to the Holders at
their addresses set forth in the register of Holders; provided that payment by wire transfer
of immediately available funds will be required with respect to principal of, premium on, if
any, and interest and Special Interest, if any, on, all Global Notes and all other Notes the
Holders of which will have provided wire transfer instructions to the Company or the Paying
Agent to an account in the United States. Such payment will be 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.




     (3) Paying Agent and Registrar. Initially, Wells Fargo Bank, N.A., the
Trustee under the Indenture, will act as Paying Agent and Registrar. The Company may change
the Paying Agent or Registrar without prior notice to the Holders of the Notes. The Company
or any of its Subsidiaries may act as Paying Agent or Registrar.




     (4) Indenture. The Company issued the Notes under an Indenture dated as of
May 11, 2011 (the “Indenture”) among the Company, the Guarantors and the Trustee. The terms
of



A1-2









 






the Notes include those stated in the Indenture and those made part of the Indenture by
reference to the TIA. The Notes are subject to all such terms, and Holders are referred to
the Indenture and the TIA for a statement of such terms. To the extent any provision of
this Note conflicts with the express provisions of the Indenture, the provisions of the
Indenture shall govern and be controlling. The Notes are secured obligations of the
Company.




     (5) Optional Redemption.




          (a) At any time prior to May 15, 2014, the Company may on any one or more occasions
redeem up to 35% of the aggregate principal amount of outstanding Notes (which amount
includes Additional Notes issued under the Indenture), upon not less than 30 nor more than
60 days’ notice, at a redemption price equal to 110.500% of the principal amount of the
Notes redeemed, plus accrued and unpaid interest and Special Interest, if any, to the date
of redemption (subject to the rights of Holders of Notes on the relevant record date to
receive interest on the relevant interest payment date), with the net cash proceeds of an
Equity Offering by the Company; provided that:




     (A) at least 65% of the aggregate principal amount of Notes issued under the
Indenture (which amount includes Additional Notes, but excluding Notes held by the
Company and its Subsidiaries) remains outstanding immediately after the occurrence
of such redemption; and




     (B) the redemption occurs within 90 days of the date after the closing of such
Equity Offering.




          (b) At any time prior to May 15, 2014, the Company may on any one or more occasions
redeem all or a part of the Notes, upon not less than 30 nor more than 60 days’ notice, at a
redemption price equal to 100% of the principal amount of the Notes redeemed, plus the
Applicable Premium as of, and accrued and unpaid interest and Special Interest, if any, to
the date of redemption, subject to the rights of Holders of Notes on the relevant record
date to receive interest due on the relevant interest payment date.




          (c) Except pursuant to the preceding paragraphs, the Notes will not be redeemable at
the Company’s option prior to May 15, 2014.




          (d) On or after May 15, 2014, the Company may on any one or more occasions redeem all
or a part of the Notes, upon not less than 30 nor more than 60 days’ notice, at the
redemption prices (expressed as percentages of principal amount) set forth below, plus
accrued and unpaid interest and Special Interest, if any, on the Notes redeemed, to the
applicable date of redemption, if redeemed on and after the following dates, subject to the
rights of Holders of Notes on the relevant record date to receive interest on the relevant
interest payment date:



	 	 	 	 	 
	Year	 	Percentage	 
	May 15, 2014
	 	 	110.500	%
	May 15, 2015
	 	 	102.625	%
	November 15, 2015
	 	 	100.000	%







Unless the Company defaults in the payment of the redemption price, interest will cease to
accrue on the Notes or portions thereof called for redemption on the applicable redemption
date.



A1-3









 






     (6) Mandatory Redemption. The Company is not required to make mandatory
redemption or sinking fund payments with respect to the Notes.




     (7) Repurchase at the Option of Holder.




          (a) If there is a Change of Control, the Company will make an offer (a “Change of
Control Offer”) to each Holder to repurchase all or any part (equal to $2,000 or an integral
multiple of $1,000 in excess thereof) of that Holder’s Notes at a purchase price in cash
equal to 101% of the aggregate principal amount of Notes repurchased, plus accrued and
unpaid interest and Special Interest, if any, on the Notes repurchased to the date of
purchase, subject to the rights of Holders of Notes on the relevant record date to receive
interest due on the relevant interest payment date (the “Change of Control Payment”).
Within 30 days following any Change of Control, the Company will mail a notice to each
Holder setting forth the procedures governing the Change of Control Offer as required by the
Indenture.




          (b) If the Company or a Restricted Subsidiary of the Company consummates any Asset
Sales, within five days of each date on which the aggregate amount of Excess Proceeds
exceeds $15.0 million, the Company will make an Asset Sale Offer to all Holders of Notes and
all holders of other Indebtedness that is pari passu with the Notes containing provisions
with respect to offers to purchase, prepay or redeem with the proceeds of sales of assets in
accordance with the Indenture to purchase, prepay or redeem the maximum principal amount of
Notes and such other pari passu Indebtedness (plus all accrued interest on the Indebtedness
and the amount of all fees and expenses, including premiums, incurred in connection
therewith) that may be purchased, prepaid or redeemed 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 Special Interest, if any, to the date of purchase, prepayment or
redemption, subject to the rights of Holders of Notes on the relevant record date to receive
interest due on the relevant interest payment 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 the Indenture. If the aggregate
principal amount of Notes and other pari passu Indebtedness tendered in (or required to be
prepaid or redeemed in connection with) 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, based on the amounts tendered or required to be prepaid or
redeemed. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds will be
reset at zero. Holders of Notes that are the subject of an offer to purchase will receive
an Asset Sale Offer from the Company prior to any related purchase date and may elect to
have such Notes purchased by completing the form entitled “Option of Holder to Elect
Purchase” attached to the Notes.




     (8) Notice of Redemption. At least 30 days but not more than 60 days before a
redemption date, the Company will 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,
except that 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 satisfaction and
discharge of the Indenture pursuant to Articles 8 or 12 thereof. Notes and portions of
Notes selected will be in amounts of $2,000 or integral multiples of $1,000 in excess
thereof; except that if all of the Notes of a Holder are to be redeemed or purchased, the
entire outstanding amount of Notes held by such Holder shall be redeemed or purchased.




     (9) Denominations, Transfer, Exchange. The Notes are in registered form in
denominations of $2,000 and integral multiples of $1,000 in excess thereof. The transfer of
Notes may be registered and Notes



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may be exchanged as provided in the Indenture. The
Registrar and the Trustee may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and the Company may require a Holder to pay any taxes
and fees required by law or permitted by the Indenture. The Company need not exchange or
register the transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, the Company need not
exchange or register the transfer of any Notes for a period of 15 days before a selection of
Notes to be redeemed or during the period between a record date and the corresponding
Interest Payment Date.




     (10) Persons Deemed Owners. The registered Holder of a Note may be treated as
the owner of it for all purposes. Only registered Holders have rights under the Indenture.




     (11) Amendment, Supplement and Waiver. Subject to certain exceptions, the
Indenture, the Notes or the Note Guarantees may be amended or supplemented with the consent
of the Holders of at least a majority in aggregate principal amount of the then outstanding
Notes including Additional Notes, if any, voting as a single class, and any existing Default
or Event of Default or compliance with any provision of the Indenture or the Notes or the
Note Guarantees may be waived with the consent of the Holders of a majority in aggregate
principal amount of the then outstanding Notes including Additional Notes, if any, voting as
a single class. Without the consent of any Holder of Notes, the Indenture, the Notes or the
Note Guarantees may be amended or supplemented to cure any ambiguity, defect or
inconsistency, to provide for uncertificated Notes in addition to or in place of
certificated Notes, to provide for the assumption of the Company’s or a Guarantor’s
obligations to Holders of the Notes and Note Guarantees by a successor to the Company or
such Guarantor pursuant to the Indenture, to make any change that would provide any
additional rights or benefits to the Holders of the Notes or that does not adversely affect
the legal rights under the Indenture of any Holder, to comply with the requirements of the
SEC in order to effect or maintain the qualification of the Indenture under the TIA, to
conform the text of the Indenture, the Notes, the Note Guarantees to any provision of the
“Description of Notes” section of the Company’s Offering Circular dated May 4, 2011,
relating to the initial offering of the Notes, to the extent that such provision in that
“Description of Notes” was intended to be a verbatim recitation of a provision of the
Indenture, the Notes, the Note Guarantees, which intent may be evidenced by an Officers’
Certificate to that effect, to enter into additional or supplemental Collateral Documents,
to release Collateral in accordance with the terms of this Indenture and the Collateral
Documents, to provide for the issuance of Additional Notes in accordance with the
limitations set forth in the Indenture, or to allow any Guarantor to execute a supplemental
indenture to the Indenture and/or a Note Guarantee with respect to the Notes.




     (12) Defaults and Remedies. Events of Default include: (i) default for 30
days in the payment when due of interest and Special Interest, if any, on, the Notes; (ii)
default in the payment when due (at maturity, upon redemption or otherwise) of the principal
of, or premium on, if any, the Notes, (iii) failure by the Company or any of its Restricted
Subsidiaries to comply with the provisions of Sections 4.10, 4.15 or 5.01 of the Indenture;
(iv) failure by the Company to comply with the provisions of Sections 4.07 or 4.09 of the
Indenture, (v) failure by the Company or any of its Restricted Subsidiaries for 60 days
after notice to the Company by the Trustee or the Holders of at least 25% in aggregate
principal amount of the Notes then outstanding voting as a single class to comply with any
of the other agreements in the Indenture; (vi) default under certain other agreements
relating to Indebtedness of the Company which default is a Payment Default or results in the
acceleration of such Indebtedness prior to its express maturity; (vii) failure by the
Company or any of its Restricted Subsidiaries to pay certain final judgments, which
judgments are not paid, discharged or stayed, for a period of 60 days; (viii) the occurrence
of any



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of the following: (A) except as permitted by the Indenture, any Collateral Document
ceases for any reason to be enforceable; provided that it will not be an Event of Default
under this clause (viii)(A) if the sole result of the failure of one or more Collateral
Documents to be fully enforceable is that any Parity Lien purported to be granted under such
Collateral Documents on Collateral, individually or in the aggregate, having a Fair Market
Value of not more than $10.0 million ceases to be an enforceable and perfected second
priority Lien, subject only to Priority Liens and other Permitted Prior Liens; (B) except as
permitted by the Intercreditor Agreement or this Indenture, any Parity Lien purported to be
granted under any Collateral Document on Collateral, individually or in the aggregate,
having a Fair Market Value in excess of $10.0 million ceases to be an enforceable and
perfected second priority Lien, subject only to Priority Liens and other Permitted Prior
Liens; or (C) the Company or any Guarantor, or any Person acting on behalf of any of them,
denies or disaffirms, in writing, any obligation of the Company or any Guarantor set forth
in or arising under any Collateral Document, (ix) except as permitted by the Indenture, any
Note 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 any Guarantor, or any Person acting on
behalf of any Guarantor, denies or disaffirms its obligations under its Note Guarantee, (x)
certain events of bankruptcy or insolvency with respect to the Company or any of its
Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted
Subsidiaries that, taken together, would constitute a Significant Subsidiary. In the case
of an Event of Default arising from certain events of bankruptcy or insolvency with respect
to the Company, any Restricted Subsidiary of the Company that is a Significant Subsidiary or
any group of Restricted Subsidiaries of the Company that, taken together, would constitute a
Significant Subsidiary, all outstanding Notes will become due and payable immediately
without further action or notice. If any other Event of Default occurs and is continuing,
the Trustee or the Holders of at least 25% in aggregate principal amount of the then
outstanding Notes may declare all the Notes to be due and payable immediately.
Notwithstanding the foregoing, if an Event of Default specified in clause (vi) of the
preceding sentence shall have occurred and be continuing, such Event of Default and any
consequential acceleration (to the extent not in violation of any applicable law or in
conflict with any judgment or decree of a court of competent jurisdiction) shall be
automatically rescinded if (a) the Indebtedness that is the subject of such Event of Default
has been repaid or (b) if the default relating to such Indebtedness is waived by the holders
of such Indebtedness or cured and if such Indebtedness has been accelerated, then the
holders thereof have rescinded their declaration of acceleration in respect of such
Indebtedness, in each case within 20 days after the declaration of acceleration with respect
thereto, and (c) any other existing Events of Default, except nonpayment of principal,
premium or interest on the Notes that became due solely because of the acceleration of the
Notes, have been cured or waived. Holders may not enforce the Indenture or the Notes except
as provided in the Indenture. Subject to certain limitations, Holders of a majority in
aggregate principal amount of the then outstanding Notes may direct the time, method and
place of conducting any proceeding for exercising any remedy available to the Trustee or
exercising any trust or power conferred on it. The Trustee may withhold from Holders of the
Notes notice of any continuing Default or Event of Default (except a Default or Event of
Default relating to the payment of principal, premium, if any, or interest or Special
Interest, if any) if it determines that withholding notice is in their interest. The
Holders of a majority in aggregate principal amount of the then outstanding Notes by notice
to the Trustee may, on behalf of all the Holders, rescind an acceleration or waive an
existing Default or Event of Default and its respective consequences under the Indenture
except a continuing Default or Event of Default in the payment of principal of, premium on,
if any, or interest or Special Interest, if any, on, the Notes (including in connection with
an offer to purchase). The Company is required to deliver to the Trustee annually an
Officers’ Certificate regarding compliance with the Indenture. Within 30 days after any
Officer of the Company becomes aware of any Event of Default, the Company is required to
deliver to the Trustee an Officers’ Certificate specifying such Event of Default.



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Certain
rights and remedies with respect to the Notes are limited by the terms and provisions of the
Intercreditor Agreement.




     (13) Trustee Dealings with Company. The Trustee, in its individual or any
other capacity, may make loans to, accept deposits from, and perform services for the
Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if
it were not the Trustee.




     (14) No Recourse Against Others. No director, officer, employee, incorporator
or stockholder of the Company or any Guarantor, as such, will have any liability for any
obligations of the Company or the Guarantors under the Notes, this Indenture or the Note
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.




     (15) Authentication. This Note will not be valid until authenticated by the
manual signature of the Trustee or an authenticating agent.




     (16) Abbreviations. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in
common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).




     (17) Additional Rights of Holders of Restricted Global Notes and Restricted
Definitive Notes. In addition to the rights provided to Holders of Notes under the
Indenture, Holders of Restricted Global Notes and Restricted Definitive Notes will have all
the rights set forth in the Registration Rights Agreement dated as of May 11, 2011, among
the Company, the Guarantors and the other parties named on the signature pages thereof or,
in the case of Additional Notes, Holders of Restricted Global Notes and Restricted
Definitive Notes will have the rights set forth in one or more registration rights
agreements, if any, among the Company, the Guarantors and the other parties thereto,
relating to rights given by the Company and the Guarantors to the purchasers of any
Additional Notes (collectively, the “Registration Rights Agreement”).




     (18) CUSIP Numbers. Pursuant to a recommendation promulgated by the Committee
on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be
printed on the Notes, and the Trustee may use CUSIP numbers in notices of redemption as a
convenience to Holders. No representation is made as to the accuracy of such numbers either
as printed on the Notes or as contained in any notice of redemption, and reliance may be
placed only on the other identification numbers placed thereon.




     (19) GOVERNING LAW. THE INTERNAL LAW OF THE STATE OF NEW YORK WILL GOVERN AND
BE USED TO CONSTRUE THE INDENTURE, THIS NOTE AND THE NOTE GUARANTEES WITHOUT GIVING EFFECT
TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS
OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.



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     The Company will furnish to any Holder upon written request and without charge a copy of the
Indenture, the Registration Rights Agreement, the Collateral Trust Agreement or the Intercreditor
Agreement. Requests may be made to:




Milagro Oil & Gas, Inc.

1301 McKinney Street, Suite 500

Houston, Texas, 77010-3089

Facsimile No.: (713) 750-1601

Attention: James Ivey




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Assignment Form




     To assign this Note, fill in the form below:



	 	 	 

	(I) or (we) assign and transfer this Note to:
	 	 
	 

	 	 
	 

	 	(Insert assignee’s legal name)






 




(Insert assignee’s soc. sec. or tax I.D. 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.





Date: _______________




	 	 	 	 	 

	 

	 	Your Signature: 	 	 
	 

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






	 	 	 	 	 

	Signature Guarantee*: 

	 	 	 	 
	 

	 	 	 	 







 




			
	*	 	Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor
acceptable to the Trustee).




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Option of Holder to Elect Purchase




     If you want to elect to have this Note purchased by the Company pursuant to Section 4.10
or 4.15 of the Indenture, check the appropriate box below:



¬Section 4.10
                    
¬Section 4.15




     If you want to elect to have only part of the Note purchased by the Company pursuant to
Section 4.10 or Section 4.15 of the Indenture, state the amount you elect to have purchased:



$_______________



Date: _______________




	 	 	 	 	 

	 

	 	Your Signature: 	 	 
	 

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






	 	 	 	 	 

	 

	 	Tax Identification No.:	 	 
	 

	 	 	 	 





	 	 	 	 	 

	Signature Guarantee*: 
	 	 	 	 
	 

	 	 

	 	 








 




			
	*	 	Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor
acceptable to the Trustee).




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Schedule of Exchanges of Interests in the Global Note *




     The following exchanges of a part of this Global Note for an interest in another Global
Note or for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for
an interest in this Global Note, have been made:



	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Principal amount of this	 	Signature of
	 	 	Amount of decrease	 	Amount of increase	 	Global Note following	 	authorized officer
	 	 	in principal amount	 	in principal amount	 	such decrease	 	of Trustee or
	Date of Exchange	 	of this Global Note	 	of this Global Note	 	(or increase)	 	Custodian
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 







 




			
	*	 	This schedule should be included only if the Note is issued in global form.










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EXHIBIT A2



[Insert the Global Note Legend, if applicable pursuant to the provisions of the Indenture]



[Insert the Private Placement Legend, if applicable pursuant to the provisions of the Indenture]



[Insert the Regulation S Temporary Global Note Legend, if applicable pursuant to the provisions of
the Indenture]



[Insert the Original Issue Discount Legend, if applicable pursuant to the provisions of the
Indenture]




[Face of Regulation S Temporary Global Note]




CUSIP/CINS __________




10.500% Senior Secured Second Lien Notes due 2016




			
	 	 	 
	No. ___
	 	$__________






MILAGRO OIL & GAS, INC.



promises to pay to ____________ or registered assigns,



the principal sum of ____________________________ DOLLARS on May 15, 2016.




Interest Payment Dates: May 15 and November 15

Record Dates: May 1 and November 1

Dated: _______________, 2011




	 	 	 	 	 
	 	MILAGRO OIL & GAS, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



This is one of the Notes referred to

in the within-mentioned Indenture:




	 	 	 	 
	WELLS FARGO BANK, N.A.

as Trustee

 	 
	By:  	 	 
	 	Authorized Signatory 	 
	 	 	 




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[Back of Regulation S Temporary Global Note]

10.500% Senior Secured Second Lien Notes due 2016




     Capitalized terms used herein have the meanings assigned to them in the Indenture referred to
below unless otherwise indicated.




     (1) Interest. Milagro Oil & Gas, Inc., a Delaware corporation (the
“Company”), promises to pay or cause to be paid interest on the principal amount of this
Note at 10.500% per annum from May 11, 2011 until maturity and shall pay the Special
Interest, if any, payable pursuant to the Registration Rights Agreement referred to below.
The Company will pay interest and Special Interest, if any, semi-annually in arrears on May
15 and November 15 of each year, or if any such day is not a Business Day, on the next
succeeding Business Day (each, an “Interest Payment Date”). Interest on the Notes will
accrue from the most recent date to which interest has been paid or, if no interest has been
paid, from the date of issuance; provided that, if this Note is authenticated between a
record date referred to on the face hereof and the next succeeding Interest Payment Date,
interest shall accrue from such next succeeding Interest Payment Date; provided further that
the first Interest Payment Date shall be _________ __, 20_. The Company will pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law to the extent
permitted by law) on overdue principal at a rate that is 1% higher than the then applicable
interest rate on the Notes to the extent lawful; it will pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law to the extent permitted by
law) on overdue installments of interest and Special Interest, if any (without regard to any
applicable grace period), at the same rate to the extent lawful.




     Interest will be computed on the basis of a 360-day year comprised of twelve 30-day
months.




     (2) Method of Payment. The Company will pay interest on the Notes
(except defaulted interest) and Special Interest, if any, to the Persons who are registered
Holders of Notes at the close of business on the May 1 or November 1 next preceding the
Interest Payment Date, even if such Notes are canceled after such record date and on or
before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with
respect to defaulted interest. The Notes will be payable as to principal, premium, if any,
and interest and Special Interest, if any, at the office or agency of the Paying Agent and
Registrar within the City and State of New York, or, at the option of the Company, payment
of interest and Special Interest, if any, may be made by check mailed to the Holders at
their addresses set forth in the register of Holders; provided that payment by wire transfer
of immediately available funds will be required with respect to principal of, premium on, if
any, and interest and Special Interest, if any, on, all Global Notes and all other Notes the
Holders of which will have provided wire transfer instructions to the Company or the Paying
Agent to an account in the United States. Such payment will be 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.




     (3) Paying Agent and Registrar. Initially, Wells Fargo Bank, N.A.,
the Trustee under the Indenture, will act as Paying Agent and Registrar. The Company may
change the Paying Agent or Registrar without prior notice to the Holders of the Notes. The
Company or any of its Subsidiaries may act as Paying Agent or Registrar.




     (4) Indenture. The Company issued the Notes under an Indenture dated
as of May 11, 2011 (the “Indenture”) among the Company, the Guarantors and the Trustee. The
terms of



A2-2









 






the Notes include those stated in the Indenture and those made part of the Indenture by
reference to the TIA. The Notes are subject to all such terms, and Holders are referred to
the Indenture and the TIA for a statement of such terms. To the extent any provision of
this Note conflicts with the express provisions of the Indenture, the provisions of the
Indenture shall govern and be controlling. The Notes are secured obligations of the
Company.




     (5) Optional Redemption.




          (a) At any time prior to May 15, 2014, the Company may on any one or more occasions
redeem up to 35% of the aggregate principal amount of outstanding Notes (which amount
includes Additional Notes issued under the Indenture), upon not less than 30 nor more than
60 days’ notice, at a redemption price equal to 110.500% of the principal amount of the
Notes redeemed, plus accrued and unpaid interest and Special Interest, if any, to the date
of redemption (subject to the rights of Holders of Notes on the relevant record date to
receive interest on the relevant interest payment date), with the net cash proceeds of an
Equity Offering by the Company; provided that:




     (A) at least 65% of the aggregate principal amount of Notes issued under the
Indenture (which amount includes Additional Notes, but excluding Notes held by the
Company and its Subsidiaries) remains outstanding immediately after the occurrence
of such redemption; and




     (B) the redemption occurs within 90 days of the date after the closing of such
Equity Offering.




          (b) At any time prior to May 15, 2014, the Company may on any one or more occasions
redeem all or a part of the Notes, upon not less than 30 nor more than 60 days’ notice, at a
redemption price equal to 100% of the principal amount of the Notes redeemed, plus the
Applicable Premium as of, and accrued and unpaid interest and Special Interest, if any, to
the date of redemption, subject to the rights of Holders of Notes on the relevant record
date to receive interest due on the relevant interest payment date.




          (c) Except pursuant to the preceding paragraphs, the Notes will not be redeemable at
the Company’s option prior to May 15, 2014.




          (d) On or after May 15, 2014, the Company may on any one or more occasions redeem all
or a part of the Notes, upon not less than 30 nor more than 60 days’ notice, at the
redemption prices (expressed as percentages of principal amount) set forth below, plus
accrued and unpaid interest and Special Interest, if any, on the Notes redeemed, to the
applicable date of redemption, if redeemed on and after the following dates, subject to the
rights of Holders of Notes on the relevant record date to receive interest on the relevant
interest payment date:



	 	 	 	 	 
	Year	 	Percentage	 
	May 15, 2014
	 	 	110.500	%
	May 15, 2015
	 	 	102.625	%
	November 15, 2015
	 	 	100.000	%







Unless the Company defaults in the payment of the redemption price, interest will cease to
accrue on the Notes or portions thereof called for redemption on the applicable redemption
date.



A2-3









 






     (6) Mandatory Redemption. The Company is not required to make
mandatory redemption or sinking fund payments with respect to the Notes.




     (7) Repurchase at the Option of Holder.




          (a) If there is a Change of Control, the Company will make an offer (a “Change of
Control Offer”) to each Holder to repurchase all or any part (equal to $2,000 or an integral
multiple of $1,000 in excess thereof) of that Holder’s Notes at a purchase price in cash
equal to 101% of the aggregate principal amount of Notes repurchased, plus accrued and
unpaid interest and Special Interest, if any, on the Notes repurchased to the date of
purchase, subject to the rights of Holders of Notes on the relevant record date to receive
interest due on the relevant interest payment date (the “Change of Control Payment”).
Within 30 days following any Change of Control, the Company will mail a notice to each
Holder setting forth the procedures governing the Change of Control Offer as required by the
Indenture.




          (b) If the Company or a Restricted Subsidiary of the Company consummates any Asset
Sales, within five days of each date on which the aggregate amount of Excess Proceeds
exceeds $15.0 million, the Company will make an Asset Sale Offer to all Holders of Notes and
all holders of other Indebtedness that is pari passu with the Notes containing provisions
with respect to offers to purchase, prepay or redeem with the proceeds of sales of assets
in accordance with the Indenture to purchase, prepay or redeem the maximum principal amount
of Notes and such other pari passu Indebtedness (plus all accrued interest on the
Indebtedness and the amount of all fees and expenses, including premiums, incurred in
connection therewith) that may be purchased, prepaid or redeemed 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 Special Interest, if any, to the date of purchase,
prepayment or redemption, subject to the rights of Holders of Notes on the relevant record
date to receive interest due on the relevant interest payment 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 the Indenture. If
the aggregate principal amount of Notes and other pari passu Indebtedness tendered in (or
required to be prepaid or redeemed in connection with) 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, based on the amounts tendered or required
to be prepaid or redeemed. Upon completion of each Asset Sale Offer, the amount of Excess
Proceeds will be reset at zero.. Holders of Notes that are the subject of an offer to
purchase will receive an Asset Sale Offer from the Company prior to any related purchase
date and may elect to have such Notes purchased by completing the form entitled “Option of
Holder to Elect Purchase” attached to the Notes.




     (8) Notice of Redemption. At least 30 days but not more than 60 days
before a redemption date, the Company will 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, except that 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
satisfaction and discharge of the Indenture pursuant to Articles 8 or 12 thereof. Notes and
portions of Notes selected will be in amounts of $2,000 or integral multiples of $1,000 in
excess thereof; except that if all of the Notes of a Holder are to be redeemed or purchased,
the entire outstanding amount of Notes held by such Holder shall be redeemed or purchased.




     (9) Denominations, Transfer, Exchange. The Notes are in registered
form in denominations of $2,000 and integral multiples of $1,000 in excess thereof. The
transfer of Notes



A2-4









 






may be registered and Notes may be exchanged as provided in the Indenture. The
Registrar and the Trustee may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and the Company may require a Holder to pay any taxes
and fees required by law or permitted by the Indenture. The Company need not exchange or
register the transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, the Company need not
exchange or register the transfer of any Notes for a period of 15 days before a selection of
Notes to be redeemed or during the period between a record date and the corresponding
Interest Payment Date.




     This Regulation S Temporary Global Note is exchangeable in whole or in part for one or
more Global Notes only (i) on or after the termination of the 40-day distribution compliance
period (as defined in Regulation S) and (ii) upon presentation of certificates (accompanied
by an Opinion of Counsel, if applicable) required by Article 2 of the Indenture. Upon
exchange of this Regulation S Temporary Global Note for one or more Global Notes, the
Trustee shall cancel this Regulation S Temporary Global Note.




     (10) Persons Deemed Owners. The registered Holder of a Note may be
treated as the owner of it for all purposes. Only registered Holders have rights under the
Indenture.




     (11) Amendment, Supplement and Waiver. Subject to certain
exceptions, the Indenture, the Notes or the Note Guarantees may be amended or supplemented
with the consent of the Holders of at least a majority in aggregate principal amount of the
then outstanding Notes including Additional Notes, if any, voting as a single class, and any
existing Default or Event of Default or compliance with any provision of the Indenture or
the Notes or the Note Guarantees may be waived with the consent of the Holders of a majority
in aggregate principal amount of the then outstanding Notes including Additional Notes, if
any, voting as a single class. Without the consent of any Holder of Notes, the Indenture,
the Notes or the Note Guarantees may be amended or supplemented to cure any ambiguity,
defect or inconsistency, to provide for uncertificated Notes in addition to or in place of
certificated Notes, to provide for the assumption of the Company’s or a Guarantor’s
obligations to Holders of the Notes and Note Guarantees by a successor to the Company or
such Guarantor pursuant to the Indenture, to make any change that would provide any
additional rights or benefits to the Holders of the Notes or that does not adversely affect
the legal rights under the Indenture of any Holder, to comply with the requirements of the
SEC in order to effect or maintain the qualification of the Indenture under the TIA, to
conform the text of the Indenture, the Notes, the Note Guarantees to any provision of the
“Description of Notes” section of the Company’s Offering Circular dated May 4, 2011,
relating to the initial offering of the Notes, to the extent that such provision in that
“Description of Notes” was intended to be a verbatim recitation of a provision of the
Indenture, the Notes, the Note Guarantees, which intent may be evidenced by an Officers’
Certificate to that effect, to enter into additional or supplemental Collateral Documents,
to release Collateral in accordance with the terms of this Indenture and the Collateral
Documents, to provide for the issuance of Additional Notes in accordance with the
limitations set forth in the Indenture, or to allow any Guarantor to execute a supplemental
indenture to the Indenture and/or a Note Guarantee with respect to the Notes.




     (12) Defaults and Remedies. Events of Default include: (i) default
for 30 days in the payment when due of interest and Special Interest, if any, on, the Notes;
(ii) default in the payment when due (at maturity, upon redemption or otherwise) of the
principal of, or premium on, if any, the Notes, (iii) failure by the Company or any of its
Restricted Subsidiaries to comply with the provisions of Sections 4.10, 4.15 or 5.01 of the
Indenture; (iv) failure by the Company to comply with the provisions of Sections 4.07 or
4.09 of the Indenture, (v) failure by the Company



A2-5









 






or any of its Restricted Subsidiaries for 60 days after notice to the Company by the
Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then
outstanding voting as a single class to comply with any of the other agreements in the
Indenture; (vi) default under certain other agreements relating to Indebtedness of the
Company which default is a Payment Default or results in the acceleration of such
Indebtedness prior to its express maturity; (vii) failure by the Company or any of its
Restricted Subsidiaries to pay certain final judgments, which judgments are not paid,
discharged or stayed, for a period of 60 days; (viii) the occurrence of any of the
following: (A) except as permitted by the Indenture, any Collateral Document ceases for any
reason to be enforceable; provided that it will not be an Event of Default under this clause
(viii)(A) if the sole result of the failure of one or more Collateral Documents to be fully
enforceable is that any Parity Lien purported to be granted under such Collateral Documents
on Collateral, individually or in the aggregate, having a Fair Market Value of not more than
$10.0 million ceases to be an enforceable and perfected second priority Lien, subject only
to Priority Liens and other Permitted Prior Liens; (B) except as permitted by the
Intercreditor Agreement or this Indenture, any Parity Lien purported to be granted under any
Collateral Document on Collateral, individually or in the aggregate, having a Fair Market
Value in excess of $10.0 million ceases to be an enforceable and perfected second priority
Lien, subject only to Priority Liens and other Permitted Prior Liens; or (C) the Company or
any Guarantor, or any Person acting on behalf of any of them, denies or disaffirms, in
writing, any obligation of the Company or any Guarantor set forth in or arising under any
Collateral Document, (ix) except as permitted by the Indenture, any Note 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 any Guarantor, or any Person acting on behalf of any Guarantor,
denies or disaffirms its obligations under its Note Guarantee, (x) certain events of
bankruptcy or insolvency with respect to the Company or any of its Restricted Subsidiaries
that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken
together, would constitute a Significant Subsidiary. In the case of an Event of Default
arising from certain events of bankruptcy or insolvency with respect to the Company, any
Restricted Subsidiary of the Company that is a Significant Subsidiary or any group of
Restricted Subsidiaries of the Company that, taken together, would constitute a Significant
Subsidiary, all outstanding Notes will become due and payable immediately without further
action or notice. If any other Event of Default occurs and is continuing, the Trustee or
the Holders of at least 25% in aggregate principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately. Notwithstanding the foregoing, if
an Event of Default specified in clause (vi) of the preceding sentence shall have occurred
and be continuing, such Event of Default and any consequential acceleration (to the extent
not in violation of any applicable law or in conflict with any judgment or decree of a court
of competent jurisdiction) shall be automatically rescinded if (a) the Indebtedness that is
the subject of such Event of Default has been repaid or (b) if the default relating to such
Indebtedness is waived by the holders of such Indebtedness or cured and if such Indebtedness
has been accelerated, then the holders thereof have rescinded their declaration of
acceleration in respect of such Indebtedness, in each case within 20 days after the
declaration of acceleration with respect thereto, and (c) any other existing Events of
Default, except nonpayment of principal, premium or interest on the Notes that became due
solely because of the acceleration of the Notes, have been cured or waived. Holders may not
enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain
limitations, Holders of a majority in aggregate principal amount of the then outstanding
Notes may direct the time, method and place of conducting any proceeding for exercising any
remedy available to the Trustee or exercising any trust or power conferred on it. The
Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of
Default (except a Default or Event of Default relating to the payment of principal, premium,
if any, or interest or Special Interest, if any) if it determines that withholding notice is
in their interest. The Holders of a majority in aggregate principal amount of the then
outstanding Notes by notice to the Trustee may, on behalf



A2-6









 






of all the Holders, rescind an acceleration or waive an existing Default or Event of
Default and its respective consequences under the Indenture except a continuing Default or
Event of Default in the payment of principal of, premium on, if any, or interest or Special
Interest, if any, on, the Notes (including in connection with an offer to purchase). The
Company is required to deliver to the Trustee annually an Officers’ Certificate regarding
compliance with the Indenture. Within 30 days after any Officer of the Company becomes
aware of any Event of Default, the Company is required to deliver to the Trustee an
Officers’ Certificate specifying such Event of Default. Certain rights and remedies with
respect to the Notes are limited by the terms and provisions of the Intercreditor Agreement.




     (13) Trustee Dealings with Company. The Trustee, in its individual
or any other capacity, may make loans to, accept deposits from, and perform services for the
Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if
it were not the Trustee.




     (14) No Recourse Against Others. No director, officer, employee,
incorporator or stockholder of the Company or any Guarantor, as such, will have any
liability for any obligations of the Company or the Guarantors under the Notes, this
Indenture or the Note 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.




     (15) Authentication. This Note will not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.




     (16) Abbreviations. Customary abbreviations may be used in the name
of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by
the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in
common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).




     (17) Additional Rights of Holders. In addition to the rights
provided to Holders of Notes under the Indenture, Holders of this Regulation S Temporary
Global Note will have all the rights set forth in the Registration Rights Agreement dated as
of May 11, 2011, among the Company, the Guarantors and the other parties named on
the signature pages thereof or, in the case of Additional Notes, Holders thereof will have
the rights set forth in one or more registration rights agreements, if any, among the
Company, the Guarantors and the other parties thereto, relating to rights given by the
Company and the Guarantors to the purchasers of any Additional Notes (collectively, the
“Registration Rights Agreement”).




     (18) CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused CUSIP
numbers to be printed on the Notes, and the Trustee may use CUSIP numbers in notices of
redemption as a convenience to Holders. No representation is made as to the accuracy of
such numbers either as printed on the Notes or as contained in any notice of redemption, and
reliance may be placed only on the other identification numbers placed thereon.




     (19) GOVERNING LAW. THE INTERNAL LAW OF THE STATE OF NEW YORK WILL
GOVERN AND BE USED TO CONSTRUE THE INDENTURE, THIS NOTE AND THE NOTE GUARANTEES WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF



A2-7









 






CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION
WOULD BE REQUIRED THEREBY.



     The Company will furnish to any Holder upon written request and without charge a copy of the
Indenture, the Registration Rights Agreement, the Collateral Trust Agreement or the Intercreditor
Agreement. Requests may be made to:




Milagro Oil & Gas, Inc. 

1301 McKinney Street, Suite 500

Houston, Texas, 77010-3089

Facsimile No.: (713) 750-1601

Attention: James Ivey



A2-8









 





Assignment Form




     To assign this Note, fill in the form below:



	 	 	 

	(I) or (we) assign and transfer this Note to:
	 	 
	 

	 	 
	 

	 	(Insert assignee’s legal name)






 




(Insert assignee’s soc. sec. or tax I.D. 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.





Date: _______________




	 	 	 	 	 

	 

	 	Your Signature: 	 	 
	 

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






	 	 	 	 	 

	Signature Guarantee*: 

	 	 	 	 
	 

	 	 	 	 







 




			
	*	 	Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor
acceptable to the Trustee).




A2-9









 










Option of Holder to Elect Purchase




     If you want to elect to have this Note purchased by the Company pursuant to Section 4.10
or 4.15 of the Indenture, check the appropriate box below:



¬Section 4.10
                    ¬Section 4.15




     If you want to elect to have only part of the Note purchased by the Company pursuant to
Section 4.10 or Section 4.15 of the Indenture, state the amount you elect to have purchased:



$_______________



Date: _______________




	 	 	 	 	 

	 

	 	Your Signature: 	 	 
	 

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






	 	 	 	 	 

	 

	 	Tax Identification No.:	 	 
	 

	 	 	 	 





	 	 	 	 	 

	Signature Guarantee*: 

	 	 	 	 
	 

	 	 	 	 







 




			
	*	 	Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor
acceptable to the Trustee).




A2-10









 










Schedule of Exchanges of Interests in the Regulation S Temporary Global Note




     The following exchanges of a part of this Regulation S Temporary Global Note for an
interest in another Global Note, or exchanges of a part of another other Restricted Global Note for
an interest in this Regulation S Temporary Global Note, have been made:



	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Principal amount of this	 	Signature of
	 	 	Amount of decrease	 	Amount of increase	 	Global Note following	 	authorized officer
	 	 	in principal amount	 	in principal amount	 	such decrease	 	of Trustee or
	Date of Exchange	 	of this Global Note	 	of this Global Note	 	(or increase)	 	Custodian
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 







 




			
	*	 	This schedule should be included only if the Note is issued in global form.




A2-11









 










EXHIBIT B




FORM OF CERTIFICATE OF TRANSFER




Milagro Oil & Gas, Inc.

1301 McKinney Street, Suite 500

Houston, Texas, 77010-3089

Facsimile No.: (713) 750-1601

Attention: James Ivey




Wells Fargo Bank, N.A.

1445 Ross Ave., 2nd Floor

MAC: T5303-022

Dallas, Texas 75201

Facsimile No.: (214) 777-4086

Attention: Corporate Trust and Escrow Services




     Re: 10.500% Senior Secured Second Lien Notes due 2016



     Reference is hereby made to the Indenture, dated as of May 11, 2011 (the “Indenture”), among
Milagro Oil & Gas, Inc., as issuer (the “Company”), the Guarantors party thereto and Wells Fargo
Bank, N.A., as trustee. Capitalized terms used but not defined herein shall have the meanings
given to them in the Indenture.



     ___________________, (the “Transferor”) owns and proposes to transfer the Note[s] or interest
in such Note[s] specified in Annex A hereto, in the principal amount of $___________ in such
Note[s] or interests (the “Transfer”), to ___________________________ (the “Transferee”), as
further specified in Annex A hereto. In connection with the Transfer, the Transferor hereby
certifies that:



[CHECK ALL THAT APPLY]




     1.  ̈ Check if Transferee will take delivery of a beneficial interest in the 144A
Global Note or a Restricted Definitive Note pursuant to Rule 144A. The Transfer is being
effected pursuant to and in accordance with Rule 144A under the Securities Act of 1933, as amended
(the “Securities Act”), and, accordingly, the Transferor hereby further certifies that the
beneficial interest or Definitive Note is being transferred to a Person that the Transferor
reasonably believes is purchasing the beneficial interest or Definitive Note for its own account,
or for one or more accounts with respect to which such Person exercises sole investment discretion,
and such Person and each such account is a “qualified institutional buyer” within the meaning of
Rule 144A in a transaction meeting the requirements of Rule 144A, and such Transfer is in
compliance with any applicable blue sky securities laws of any state of the United States. Upon
consummation of the proposed Transfer in accordance with the terms of the Indenture, the
transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the 144A Global Note and/or the Restricted
Definitive Note and in the Indenture and the Securities Act.



     2.  ̈ Check if Transferee will take delivery of a beneficial interest in the
Regulation S Temporary Global Note, the Regulation S Permanent Global Note or a Restricted
Definitive Note pursuant to Regulation S. The Transfer is being effected pursuant to and in
accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly, the Transferor
hereby further certifies that (i) the Transfer is not being made to a Person in the United States
and (x) at the time the buy order was originated, the Transferee was outside the United States or
such Transferor and any Person acting on its behalf reasonably believed and believes that the
Transferee was outside the United States or (y) the transaction was executed in, on or through the
facilities of a designated offshore securities market and



B-1









 




neither such Transferor nor any Person acting on its behalf knows that the transaction was
prearranged with a buyer in the United States, (ii) no directed selling efforts have been made in
contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the
Securities Act, (iii) the transaction is not part of a plan or scheme to evade the registration
requirements of the Securities Act and (iv) if the proposed transfer is being made prior to the
expiration of the Restricted Period, the transfer is not being made to a U.S. Person or for the
account or benefit of a U.S. Person (other than an Initial Purchaser). Upon consummation of the
proposed transfer in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note will be subject to the restrictions on Transfer enumerated in the
Private Placement Legend printed on the Regulation S Temporary Global Note, the Regulation S
Permanent Global Note and/or the Restricted Definitive Note and in the Indenture and the Securities
Act.




     3.  ̈ Check and complete if Transferee will take delivery of a beneficial interest
in the IAI Global Note or a Restricted Definitive Note pursuant to any provision of the Securities
Act other than Rule 144A or Regulation S. The Transfer is being effected in compliance with
the transfer restrictions applicable to beneficial interests in Restricted Global Notes and
Restricted Definitive Notes and pursuant to and in accordance with the Securities Act and any
applicable blue sky securities laws of any state of the United States, and accordingly the
Transferor hereby further certifies that (check one):




     (a)  ̈ such Transfer is being effected pursuant to and in accordance with Rule
144 under the Securities Act;



or





     (b)  ̈ such Transfer is being effected to the Company or a subsidiary thereof;



or





     (c)  ̈ such Transfer is being effected pursuant to an effective registration
statement under the Securities Act and in compliance with the prospectus delivery
requirements of the Securities Act;



or





     (d)  ̈ such Transfer is being effected to an Institutional Accredited Investor
and pursuant to an exemption from the registration requirements of the Securities Act
other than Rule 144A, Rule 144, Rule 903 or Rule 904, and the Transferor hereby further
certifies that it has not engaged in any general solicitation within the meaning of
Regulation D under the Securities Act and the Transfer complies with the transfer
restrictions applicable to beneficial interests in a Restricted Global Note or Restricted
Definitive Notes and the requirements of the exemption claimed, which certification is
supported by (1) a certificate executed by the Transferee in the form of Exhibit D to the
Indenture and (2) an Opinion of Counsel provided by the Transferor or the Transferee (a
copy of which the Transferor has attached to this certification), to the effect that such
Transfer is in compliance with the Securities Act. Upon consummation of the proposed
transfer in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note will be subject to the restrictions on transfer enumerated in
the Private Placement Legend printed on the IAI Global Note and/or the Restricted
Definitive Notes and in the Indenture and the Securities Act.



     4.  ̈ Check if Transferee will take delivery of a beneficial interest in an
Unrestricted Global Note or of an Unrestricted Definitive Note.



B-2









 





     (a)  ̈ Check if Transfer is pursuant to Rule 144. (i) The Transfer is being effected
pursuant to and in accordance with Rule 144 under the Securities Act and in compliance with the
transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any
state of the United States and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with the Securities Act.
Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the
transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on
Restricted Definitive Notes and in the Indenture.



     (b)  ̈ Check if Transfer is Pursuant to Regulation S. (i) The Transfer is being
effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and in
compliance with the transfer restrictions contained in the Indenture and any applicable blue sky
securities laws of any state of the United States and (ii) the restrictions on transfer contained
in the Indenture and the Private Placement Legend are not required in order to maintain compliance
with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms
of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject
to the restrictions on transfer enumerated in the Private Placement Legend printed on the
Restricted Global Notes, on Restricted Definitive Notes and in the Indenture.



     (c)  ̈ Check if Transfer is Pursuant to Other Exemption. (i) The Transfer is being
effected pursuant to and in compliance with an exemption from the registration requirements of the
Securities Act other than Rule 144, Rule 903 or Rule 904 and in compliance with the transfer
restrictions contained in the Indenture and any applicable blue sky securities laws of any State of
the United States and (ii) the restrictions on transfer contained in the Indenture and the Private
Placement Legend are not required in order to maintain compliance with the Securities Act. Upon
consummation of the proposed Transfer in accordance with the terms of the Indenture, the
transferred beneficial interest or Definitive Note will not be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes or
Restricted Definitive Notes and in the Indenture.



     This certificate and the statements contained herein are made for your benefit and the benefit
of the Company.



	 	 	 	 	 
	 	 	 
	 	 	
 	 
	 	 	[Insert Name of Transferor] 	 
	 	 	 	 
	 	 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 




     Dated: _______________________



B-3









 





ANNEX A TO CERTIFICATE OF TRANSFER



1. The Transferor owns and proposes to transfer the following:




[CHECK ONE OF (a) OR (b)]




     (a)  ̈ a beneficial interest in the:



(i)  ̈ 144A Global Note (CUSIP _________); or



(ii)  ̈ Regulation S Global Note (CUSIP _________); or



(iii)  ̈ IAI Global Note (CUSIP _________); or



     (b)  ̈ a Restricted Definitive Note.


2. After the Transfer the Transferee will hold:




[CHECK ONE]




     (a)  ̈ a beneficial interest in the:



(i)  ̈ 144A Global Note (CUSIP _________); or



(ii)  ̈ Regulation S Global Note (CUSIP _________); or



(iii)  ̈ IAI Global Note (CUSIP _________); or



(iv)  ̈ Unrestricted Global Note (CUSIP _________); or



     (b)  ̈ a Restricted Definitive Note; or



     (c)  ̈ an Unrestricted Definitive Note;



     in accordance with the terms of the Indenture.








B-4









 








EXHIBIT C




FORM OF CERTIFICATE OF EXCHANGE




Milagro Oil & Gas, Inc.

1301 McKinney Street, Suite 500

Houston, Texas, 77010-3089

Facsimile No.: (713) 750-1601

Attention: James Ivey




Wells Fargo Bank, N.A.

1445 Ross Ave., 2nd Floor

MAC: T5303-022

Dallas, Texas 75201

Facsimile No.: (214) 777-4086

Attention: Corporate Trust and Escrow Services




     Re: 10.500% Senior Secured Second Lien Notes due 2016



(CUSIP [          ])




     Reference is hereby made to the Indenture, dated as of May 11, 2011 (the “Indenture”), among
Milagro Oil & Gas, Inc., as issuer (the “Company”), the Guarantors party thereto and Wells Fargo
Bank, N.A., as trustee. Capitalized terms used but not defined herein shall have the meanings
given to them in the Indenture.



     __________________________, (the “Owner”) owns and proposes to exchange the Note[s] or
interest in such Note[s] specified herein, in the principal amount of $____________ in such Note[s]
or interests (the “Exchange”). In connection with the Exchange, the Owner hereby certifies that:



     1. Exchange of Restricted Definitive Notes or Beneficial Interests in a Restricted Global
Note for Unrestricted Definitive Notes or Beneficial Interests in an Unrestricted Global Note



     (a)  ̈ Check if Exchange is from beneficial interest in a Restricted Global Note to
beneficial interest in an Unrestricted Global Note. In connection with the Exchange of the Owner’s
beneficial interest in a Restricted Global Note for a beneficial interest in an Unrestricted Global
Note in an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being
acquired for the Owner’s own account without transfer, (ii) such Exchange has been effected in
compliance with the transfer restrictions applicable to the Global Notes and pursuant to and in
accordance with the Securities Act of 1933, as amended (the “Securities Act”), (iii) the
restrictions on transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the beneficial interest
in an Unrestricted Global Note is being acquired in compliance with any applicable blue sky
securities laws of any state of the United States.



     (b)  ̈ Check if Exchange is from beneficial interest in a Restricted Global Note to
Unrestricted Definitive Note. In connection with the Exchange of the Owner’s beneficial interest
in a Restricted Global Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the
Unrestricted Definitive Note is being acquired for the Owner’s own account without transfer, (ii)
such Exchange has been effected in compliance with the transfer restrictions applicable to the
Restricted Global Notes and pursuant to and in accordance with the Securities Act, (iii) the
restrictions on transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the Unrestricted
Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any
state of the United States.



C-1









 





     (c)  ̈ Check if Exchange is from Restricted Definitive Note to beneficial interest in an
Unrestricted Global Note. In connection with the Owner’s Exchange of a Restricted Definitive Note
for a beneficial interest in an Unrestricted Global Note, the Owner hereby certifies (i) the
beneficial interest is being acquired for the Owner’s own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions applicable to Restricted
Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions
on transfer contained in the Indenture and the Private Placement Legend are not required in order
to maintain compliance with the Securities Act and (iv) the beneficial interest is being acquired
in compliance with any applicable blue sky securities laws of any state of the United States.



     (d)  ̈ Check if Exchange is from Restricted Definitive Note to Unrestricted Definitive
Note. In connection with the Owner’s Exchange of a Restricted Definitive Note for an Unrestricted
Definitive Note, the Owner hereby certifies (i) the Unrestricted Definitive Note is being acquired
for the Owner’s own account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in
accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain compliance with the
Securities Act and (iv) the Unrestricted Definitive Note is being acquired in compliance with any
applicable blue sky securities laws of any state of the United States.



     2. Exchange of Restricted Definitive Notes or Beneficial Interests in Restricted Global
Notes for Restricted Definitive Notes or Beneficial Interests in Restricted Global Notes



     (a)  ̈ Check if Exchange is from beneficial interest in a Restricted Global Note to
Restricted Definitive Note. In connection with the Exchange of the Owner’s beneficial interest in
a Restricted Global Note for a Restricted Definitive Note with an equal principal amount, the Owner
hereby certifies that the Restricted Definitive Note is being acquired for the Owner’s own account
without transfer. Upon consummation of the proposed Exchange in accordance with the terms of the
Indenture, the Restricted Definitive Note issued will continue to be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the Restricted Definitive Note and
in the Indenture and the Securities Act.



     (b)  ̈ Check if Exchange is from Restricted Definitive Note to beneficial interest in a
Restricted Global Note. In connection with the Exchange of the Owner’s Restricted Definitive Note
for a beneficial interest in the [CHECK ONE]  ̈ 144A Global Note,  ̈ Regulation S Global
Note,  ̈ IAI Global Note with an equal principal amount, the Owner hereby certifies (i) the
beneficial interest is being acquired for the Owner’s own account without transfer and (ii) such
Exchange has been effected in compliance with the transfer restrictions applicable to the
Restricted Global Notes and pursuant to and in accordance with the Securities Act, and in
compliance with any applicable blue sky securities laws of any state of the United States. Upon
consummation of the proposed Exchange in accordance with the terms of the Indenture, the beneficial
interest issued will be subject to the restrictions on transfer enumerated in the Private Placement
Legend printed on the relevant Restricted Global Note and in the Indenture and the Securities Act.



     This certificate and the statements contained herein are made for your benefit and the benefit
of the Company.



	 	 	 	 	 
	 	 	 
	 	 	 	 
	 	 	[Insert Name of Transferor] 	 



C-2









 







	 	 	 	 	 
	 	 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 


Dated: ______________________









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EXHIBIT D




FORM OF CERTIFICATE FROM

ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR




Milagro Oil & Gas, Inc.

1301 McKinney Street, Suite 500

Houston, Texas, 77010-3089

Facsimile No.: (713) 750-1601

Attention: James Ivey




Wells Fargo Bank, N.A.

1445 Ross Ave., 2nd Floor

MAC: T5303-022

Dallas, Texas 75201

Facsimile No.: (214) 777-4086

Attention: Corporate Trust and Escrow Services





     Re: 10.500% Senior Secured Second Lien Notes due 2016



     Reference is hereby made to the Indenture, dated as of May 11, 2011 (the “Indenture”), among
Milagro Oil & Gas, Inc., as issuer (the “Company”), the Guarantors party thereto and Wells Fargo
Bank, N.A., as trustee. Capitalized terms used but not defined herein shall have the meanings
given to them in the Indenture.



     In connection with our proposed purchase of $____________ aggregate principal amount of:



     (a)  ̈ a beneficial interest in a Global Note, or



     (b)  ̈ a Definitive Note,



     we confirm that:



     1. We understand that any subsequent transfer of the Notes or any interest therein is subject
to certain restrictions and conditions set forth in the Indenture and the undersigned agrees to be
bound by, and not to resell, pledge or otherwise transfer the Notes or any interest therein except
in compliance with, such restrictions and conditions and the Securities Act of 1933, as amended
(the “Securities Act”).



     2. We understand that the offer and sale of the Notes have not been registered under the
Securities Act, and that the Notes and any interest therein may not be offered or sold except as
permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for
which we are acting as hereinafter stated, that if we should sell the Notes or any interest
therein, we will do so only (A) to the Company or any subsidiary thereof, (B) in accordance with
Rule 144A under the Securities Act to a “qualified institutional buyer” (as defined therein), (C)
to an institutional “accredited investor” (as defined below) that, prior to such transfer,
furnishes (or has furnished on its behalf by a U.S. broker-dealer) to you and to the Company a
signed letter substantially in the form of this letter and an Opinion of Counsel in form reasonably
acceptable to the Company to the effect that such transfer is in compliance with the Securities
Act, (D) outside the United States in accordance with Rule 904 of Regulation S under the Securities
Act, (E) pursuant to the provisions of Rule 144 under the Securities Act or (F) pursuant to an
effective registration statement under the Securities Act, and we further agree to provide to any
Person purchasing the Definitive Note or beneficial interest in a Global Note from us in a
transaction meeting the requirements of clauses (A) through (E) of this paragraph a notice advising
such purchaser that resales thereof are restricted as stated herein.



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     3. We understand that, on any proposed resale of the Notes or beneficial interest therein, we
will be required to furnish to you and the Company such certifications, legal opinions and other
information as you and the Company may reasonably require to confirm that the proposed sale
complies with the foregoing restrictions. We further understand that the Notes purchased by us
will bear a legend to the foregoing effect.



     4. We are an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or
(7) of Regulation D under the Securities Act) and have such knowledge and experience in financial
and business matters as to be capable of evaluating the merits and risks of our investment in the
Notes, and we and any accounts for which we are acting are each able to bear the economic risk of
our or its investment.



     5. We are acquiring the Notes or beneficial interest therein purchased by us for our own
account or for one or more accounts (each of which is an institutional “accredited investor”) as to
each of which we exercise sole investment discretion.



     You and the Company are entitled to rely upon this letter and are irrevocably authorized to
produce this letter or a copy hereof to any interested party in any administrative or legal
proceedings or official inquiry with respect to the matters covered hereby.



	 	 	 	 	 
	 	 	 	 
	 	 	[Insert Name of Accredited Investor] 	 



	 	 	 	 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 


Dated: _______________________









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EXHIBIT E




FORM OF NOTATION OF GUARANTEE





     For value received, each Guarantor (which term includes any successor Person under the
Indenture) has, jointly and severally, unconditionally guaranteed, to the extent set forth in the
Indenture and subject to the provisions in the Indenture dated as of May 11, 2011 (the “Indenture”)
among Milagro Oil & Gas, Inc., (the “Company”), the Guarantors party thereto and Wells Fargo Bank,
N.A., as trustee (the “Trustee”), (a) the due and punctual payment of the principal of, premium on,
if any, and interest and Special Interest, if any, on, the Notes, whether at maturity, by
acceleration, redemption or otherwise, the due and punctual payment of interest on overdue
principal of, premium on, if any, and interest and Special Interest, if any, on, the Notes, if any,
if lawful, and the due and punctual performance of all other obligations of the Company to the
Holders or the Trustee all in accordance with the terms of the Indenture and (b) in case of any
extension of time of payment or renewal of any Notes or any of such other obligations, that the
same will be promptly paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at stated maturity, by acceleration or otherwise. The obligations of
the Guarantors to the Holders of Notes and to the Trustee pursuant to the Note Guarantee and the
Indenture are expressly set forth in Article 11 of the Indenture and reference is hereby made to
the Indenture for the precise terms of the Note Guarantee. Each Holder of a Note, by accepting the
same, agrees to and shall be bound by such provisions.



     Capitalized terms used but not defined herein have the meanings given to them in the
Indenture.



	 	 	 	 	 
	 	[Name of Guarantor(s)]

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 








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EXHIBIT G




FORM OF SUPPLEMENTAL INDENTURE

TO BE DELIVERED BY SUBSEQUENT GUARANTORS





     Supplemental Indenture (this “Supplemental Indenture”), dated as of ________________,
among __________________ (the “Guaranteeing Subsidiary”), a subsidiary of Milagro Oil & Gas, Inc.
(or its permitted successor), a Delaware corporation (the “Company”), the Company, the other
Guarantors (as defined in the Indenture referred to herein) and Wells Fargo Bank, N.A., as trustee
under the Indenture referred to below (the “Trustee”).



W I T N E S S E T H




     WHEREAS, the Company has heretofore executed and delivered to the Trustee an indenture (the
“Indenture”), dated as of May 11, 2011 providing for the issuance of 10.500% Senior Secured Second
Lien Notes due 2016 (the “Notes”);



     WHEREAS, the Indenture provides that under certain circumstances the Guaranteeing Subsidiary
shall execute and deliver to the Trustee a supplemental indenture pursuant to which the
Guaranteeing Subsidiary shall unconditionally guarantee all of the Company’s Obligations under the
Notes and the Indenture on the terms and conditions set forth herein (the “Note Guarantee”); and



     WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and
deliver this Supplemental Indenture.



     NOW, THEREFORE, in consideration of the foregoing and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the Guaranteeing Subsidiary and the
Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes
as follows:



     1. Capitalized Terms. Capitalized terms used herein without definition shall have
the meanings assigned to them in the Indenture.



     2. Agreement to Guarantee. The Guaranteeing Subsidiary hereby agrees to provide an
unconditional Guarantee on the terms and subject to the conditions set forth in the Note Guarantee
and in the Indenture including but not limited to Article 11 thereof.



     4. No Recourse Against Others. No director, officer, employee, incorporator or
stockholder of the Company or any Guarantor, as such, will have any liability for any obligations
of the Company or the Guarantors under the Note Documents 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.



     5. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED
TO CONSTRUE THIS SUPPLEMENTAL INDENTURE WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS
OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED
THEREBY.



     6. Counterparts. The parties may sign any number of copies of this Supplemental
Indenture. Each signed copy shall be an original, but all of them together represent the same
agreement.



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EXHIBIT E



     7. Effect of Headings. The Section headings herein are for convenience only and
shall not affect the construction hereof.



     8. The Trustee. The Trustee shall not be responsible in any manner whatsoever for or
in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of
the recitals contained herein, all of which recitals are made solely by the Guaranteeing Subsidiary
and the Company.



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EXHIBIT E




     IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly
executed and attested, all as of the date first above written.



     Dated: _______________,



	 	 	 	 	 
	 	[Guaranteeing Subsidiary]

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	[Company]

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	[Existing Guarantors]

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	Wells Fargo Bank, N.A.,

as Trustee

 	 
	 	By:  	 	 
	 	 	Authorized Signatory 	 
	 	 	 	 
	 




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