Document:

exv4w2w1

Exhibit 4.2.1

 

Encore Acquisition Company

Issuer

6.0% Senior Subordinated Notes Due 2015

 

INDENTURE

Dated as of July 13, 2005

 

WELLS FARGO BANK, NATIONAL ASSOCIATION

Trustee

 

 

 

CROSS-REFERENCE TABLE

	 	 	 	 	 
	TIA	 	 	 	Indenture
	Section	 	 	 	Section
	310

	 	(a) (1)
	 	7.10
	 

	 	(a) (2)
	 	7.10
	 

	 	(a) (3)
	 	N.A.
	 

	 	(a) (4)
	 	N.A.
	 

	 	(b)
	 	7.08; 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)
	 	N.A.
	 

	 	(b) (2)
	 	7.06
	 

	 	(c)
	 	13.02
	 

	 	(d)
	 	7.06
	314

	 	(a)
	 	4.02; 4.11; 13.02
	 

	 	(b)
	 	N.A.
	 

	 	(c) (1)
	 	13.04
	 

	 	(c) (2)
	 	13.04
	 

	 	(c) (3)
	 	 N.A.
	 

	 	(d)
	 	N.A.
	 

	 	(e)
	 	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)
	 	13.06
	 

	 	(a) (1)(A)
	 	6.05
	 

	 	(a) (1)(B)
	 	6.04
	 

	 	(a) (2)
	 	N.A.
	 

	 	(b)
	 	6.07
	317

	 	(a) (1)
	 	6.08
	 

	 	(a) (2)
	 	6.09
	 

	 	(b)
	 	2.04
	318

	 	(a)
	 	13.01

N.A. means Not Applicable.

 

	Note:	 	This Cross-Reference Table shall not, for any purpose, be deemed to be part of the Indenture.

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	ARTICLE 1 Definitions and Incorporation by Reference	 	 	1	 
	 

	 	SECTION 1.01.
	 	Definitions
	 	 	1	 
	 

	 	SECTION 1.02.
	 	Other Definitions
	 	 	37	 
	 

	 	SECTION 1.03.
	 	Incorporation by Reference of Trust Indenture Act
	 	 	38	 
	 

	 	SECTION 1.04.
	 	Rules of Construction
	 	 	38	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE 2 The Securities	 	 	39	 
	 

	 	SECTION 2.01.
	 	Form and Dating
	 	 	39	 
	 

	 	SECTION 2.02.
	 	Execution and Authentication
	 	 	39	 
	 

	 	SECTION 2.03.
	 	Registrar and Paying Agent
	 	 	40	 
	 

	 	SECTION 2.04.
	 	Paying Agent To Hold Money in Trust
	 	 	40	 
	 

	 	SECTION 2.05.
	 	Securityholder Lists
	 	 	40	 
	 

	 	SECTION 2.06.
	 	Transfer and Exchange
	 	 	40	 
	 

	 	SECTION 2.07.
	 	Replacement Securities
	 	 	41	 
	 

	 	SECTION 2.08.
	 	Outstanding Securities
	 	 	41	 
	 

	 	SECTION 2.09.
	 	Temporary Securities
	 	 	41	 
	 

	 	SECTION 2.10.
	 	Cancellation
	 	 	41	 
	 

	 	SECTION 2.11.
	 	Defaulted Interest
	 	 	42	 
	 

	 	SECTION 2.12.
	 	CUSIP Numbers
	 	 	42	 
	 

	 	SECTION 2.13.
	 	Issuance of Additional Securities
	 	 	42	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE 3 Redemption	 	 	43	 
	 

	 	SECTION 3.01.
	 	Notices to Trustee
	 	 	43	 
	 

	 	SECTION 3.02.
	 	Selection of Securities To Be Redeemed
	 	 	43	 
	 

	 	SECTION 3.03.
	 	Notice of Redemption
	 	 	43	 
	 

	 	SECTION 3.04.
	 	Effect of Notice of Redemption
	 	 	44	 
	 

	 	SECTION 3.05.
	 	Deposit of Redemption Price
	 	 	44	 
	 

	 	SECTION 3.06.
	 	Securities Redeemed in Part
	 	 	44	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE 4 Covenants	 	 	44	 
	 

	 	SECTION 4.01.
	 	Payment of Securities
	 	 	44	 
	 

	 	SECTION 4.02.
	 	SEC Reports
	 	 	45	 
	 

	 	SECTION 4.03.
	 	Limitation on Indebtedness
	 	 	45	 
	 

	 	SECTION 4.04.
	 	Limitation on Restricted Payments
	 	 	48	 
	 

	 	SECTION 4.05.
	 	Limitation on Restrictions on Distributions from Restricted Subsidiaries
	 	 	52	 
	 

	 	SECTION 4.06.
	 	Limitation on Sales of Assets and Subsidiary Stock
	 	 	55	 
	 

	 	SECTION 4.07.
	 	Limitation on Affiliate Transactions
	 	 	59	 
	 

	 	SECTION 4.08.
	 	Change of Control
	 	 	60	 
	 

	 	SECTION 4.09.
	 	Limitation on Liens
	 	 	62	 
	 

	 	SECTION 4.10.
	 	Future Guarantors
	 	 	62	 
	 

	 	SECTION 4.11.
	 	Compliance Certificate
	 	 	62	 
	 

	 	SECTION 4.12.
	 	Further Instruments and Acts
	 	 	62	 

-i-

 

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	 

	 	SECTION 4.13.
	 	Suspension of Covenants
	 	 	62	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE 5 Successor Company	 	 	63	 
	 

	 	SECTION 5.01.
	 	When Company May Merge or Transfer Assets
	 	 	63	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE 6 Defaults and Remedies	 	 	64	 
	 

	 	SECTION 6.01.
	 	Events of Default
	 	 	64	 
	 

	 	SECTION 6.02.
	 	Acceleration
	 	 	66	 
	 

	 	SECTION 6.03.
	 	Other Remedies
	 	 	67	 
	 

	 	SECTION 6.04.
	 	Waiver of Past Defaults
	 	 	67	 
	 

	 	SECTION 6.05.
	 	Control by Majority
	 	 	67	 
	 

	 	SECTION 6.06.
	 	Limitation on Suits
	 	 	68	 
	 

	 	SECTION 6.07.
	 	Rights of Holders to Receive Payment
	 	 	68	 
	 

	 	SECTION 6.08.
	 	Collection Suit by Trustee
	 	 	68	 
	 

	 	SECTION 6.09.
	 	Trustee May File Proofs of Claim
	 	 	68	 
	 

	 	SECTION 6.10.
	 	Priorities
	 	 	69	 
	 

	 	SECTION 6.11.
	 	Undertaking for Costs
	 	 	69	 
	 

	 	SECTION 6.12.
	 	Waiver of Stay or Extension Laws
	 	 	69	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE 7 Trustee	 	 	69	 
	 

	 	SECTION 7.01.
	 	Duties of Trustee
	 	 	69	 
	 

	 	SECTION 7.02.
	 	Rights of Trustee
	 	 	71	 
	 

	 	SECTION 7.03.
	 	Individual Rights of Trustee
	 	 	71	 
	 

	 	SECTION 7.04.
	 	Trustee’s Disclaimer
	 	 	71	 
	 

	 	SECTION 7.05.
	 	Notice of Defaults
	 	 	71	 
	 

	 	SECTION 7.06.
	 	Reports by Trustee to Holders
	 	 	72	 
	 

	 	SECTION 7.07.
	 	Compensation and Indemnity
	 	 	72	 
	 

	 	SECTION 7.08.
	 	Replacement of Trustee
	 	 	73	 
	 

	 	SECTION 7.09.
	 	Successor Trustee by Merger
	 	 	73	 
	 

	 	SECTION 7.10.
	 	Eligibility; Disqualification
	 	 	74	 
	 

	 	SECTION 7.11.
	 	Preferential Collection of Claims Against Company
	 	 	74	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE 8 Discharge of Indenture; Defeasance	 	 	74	 
	 

	 	SECTION 8.01.
	 	Discharge of Liability on Securities; Defeasance
	 	 	74	 
	 

	 	SECTION 8.02.
	 	Conditions to Defeasance
	 	 	75	 
	 

	 	SECTION 8.03.
	 	Application of Trust Money
	 	 	76	 
	 

	 	SECTION 8.04.
	 	Repayment to Company
	 	 	76	 
	 

	 	SECTION 8.05.
	 	Indemnity for Government Obligations
	 	 	76	 
	 

	 	SECTION 8.06.
	 	Reinstatement
	 	 	77	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE 9 Amendments	 	 	77	 
	 

	 	SECTION 9.01.
	 	Without Consent of Holders
	 	 	77	 
	 

	 	SECTION 9.02.
	 	With Consent of Holders
	 	 	78	 
	 

	 	SECTION 9.03.
	 	Compliance with Trust Indenture Act
	 	 	79	 
	 

	 	SECTION 9.04.
	 	Revocation and Effect of Consents and Waivers
	 	 	79	 
	 

	 	SECTION 9.05.
	 	Notation on or Exchange of Securities
	 	 	79	 
	 

	 	SECTION 9.06.
	 	Trustee To Sign Amendments
	 	 	80	 

-ii-

 

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	 

	 	SECTION 9.07.
	 	Payment for Consent
	 	 	80	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE 10 Subordination	 	 	80	 
	 

	 	SECTION 10.01.
	 	Agreement To Subordinate
	 	 	80	 
	 

	 	SECTION 10.02.
	 	Liquidation, Dissolution, Bankruptcy
	 	 	80	 
	 

	 	SECTION 10.03.
	 	Default on Senior Indebtedness of the Company
	 	 	81	 
	 

	 	SECTION 10.04.
	 	Acceleration of Payment of Securities
	 	 	82	 
	 

	 	SECTION 10.05.
	 	When Distribution Must Be Paid Over
	 	 	82	 
	 

	 	SECTION 10.06.
	 	Subrogation
	 	 	82	 
	 

	 	SECTION 10.07.
	 	Relative Rights
	 	 	82	 
	 

	 	SECTION 10.08.
	 	Subordination May Not Be Impaired by Company
	 	 	82	 
	 

	 	SECTION 10.09.
	 	Rights of Trustee and Paying Agent
	 	 	82	 
	 

	 	SECTION 10.10.
	 	Distribution or Notice to Representative
	 	 	83	 
	 

	 	SECTION 10.11.	 	Article 10 Not To Prevent Events of Default or Limit Right To Accelerate	 	 	83	 
	 

	 	SECTION 10.12.
	 	Trust Moneys Not Subordinated
	 	 	83	 
	 

	 	SECTION 10.13.
	 	Trustee Entitled To Rely
	 	 	83	 
	 

	 	SECTION 10.14.
	 	Trustee To Effectuate Subordination
	 	 	83	 
	 

	 	SECTION 10.15.
	 	Trustee Not Fiduciary for Holders of Senior Indebtedness of the Company
	 	 	84	 
	 

	 	SECTION 10.16.
	 	Reliance by Holders of Senior Indebtedness of the Company on Subordination
Provisions
	 	 	84	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE 11 Subsidiary Guaranties	 	 	84	 
	 

	 	SECTION 11.01.
	 	Guaranties
	 	 	84	 
	 

	 	SECTION 11.02.
	 	Limitation on Liability
	 	 	86	 
	 

	 	SECTION 11.03.
	 	Successors and Assigns
	 	 	86	 
	 

	 	SECTION 11.04.
	 	No Waiver
	 	 	86	 
	 

	 	SECTION 11.05.
	 	Modification
	 	 	86	 
	 

	 	SECTION 11.06.
	 	Release of Subsidiary Guarantor
	 	 	86	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE 12 Subordination of Subsidiary Guaranties	 	 	87	 
	 

	 	SECTION 12.01.
	 	Agreement To Subordinate
	 	 	87	 
	 

	 	SECTION 12.02.
	 	Liquidation, Dissolution, Bankruptcy
	 	 	87	 
	 

	 	SECTION 12.03.
	 	Default on Senior Indebtedness of Subsidiary Guarantor
	 	 	87	 
	 

	 	SECTION 12.04.
	 	Demand for Payment
	 	 	88	 
	 

	 	SECTION 12.05.
	 	When Distribution Must Be Paid Over
	 	 	88	 
	 

	 	SECTION 12.06.
	 	Subrogation
	 	 	89	 
	 

	 	SECTION 12.07.
	 	Relative Rights
	 	 	89	 
	 

	 	SECTION 12.08.
	 	Subordination May Not Be Impaired by Company
	 	 	89	 
	 

	 	SECTION 12.09.
	 	Rights of Trustee and Paying Agent
	 	 	89	 
	 

	 	SECTION 12.10.
	 	Distribution or Notice to Representative
	 	 	90	 
	 

	 	SECTION 12.11.
	 	Article 12 Not To Prevent Events of Default or Limit Right To Demand Payment
	 	 	90	 
	 

	 	SECTION 12.12.
	 	Trustee Entitled To Rely
	 	 	90	 
	 

	 	SECTION 12.13.
	 	Trustee To Effectuate Subordination
	 	 	90	 

-iii-

 

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	 

	 	SECTION 12.14.
	 	Trustee Not Fiduciary for Holders of Senior Indebtedness of Subsidiary Guarantor
	 	 	90	 
	 

	 	SECTION 12.15.
	 	Reliance by Holders of Senior Indebtedness of Subsidiary Guarantors on
Subordination Provisions
	 	 	91	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE 13 Miscellaneous	 	 	91	 
	 

	 	SECTION 13.01.
	 	Trust Indenture Act Controls
	 	 	91	 
	 

	 	SECTION 13.02.
	 	Notices
	 	 	91	 
	 

	 	SECTION 13.03.
	 	Communication by Holders with Other Holders
	 	 	92	 
	 

	 	SECTION 13.04.
	 	Certificate and Opinion as to Conditions Precedent
	 	 	92	 
	 

	 	SECTION 13.05.
	 	Statements Required in Certificate or Opinion
	 	 	92	 
	 

	 	SECTION 13.06.
	 	When Securities Disregarded
	 	 	92	 
	 

	 	SECTION 13.07.
	 	Rules by Trustee, Paying Agent and Registrar
	 	 	93	 
	 

	 	SECTION 13.08.
	 	Legal Holidays
	 	 	93	 
	 

	 	SECTION 13.09.
	 	Governing Law
	 	 	93	 
	 

	 	SECTION 13.10.
	 	No Recourse Against Others
	 	 	93	 
	 

	 	SECTION 13.11.
	 	Successors
	 	 	93	 
	 

	 	SECTION 13.12.
	 	Multiple Originals
	 	 	93	 
	 

	 	SECTION 13.13.
	 	Table of Contents; Headings
	 	 	93	 

Rule 144A/Regulation S Appendix

Exhibit 1 — Form of Initial Security

Exhibit A — Form of Exchange Security or Private Exchange Security

-iv-

 

          INDENTURE dated as of July 13, 2005, among ENCORE ACQUISITION COMPANY, a Delaware corporation
(the “Company”), the guarantors listed on the signature pages hereto and WELLS FARGO BANK, NATIONAL
ASSOCIATION, as Trustee (the “Trustee”).

          Each party agrees as follows for the benefit of the other parties and for the equal and
ratable benefit of the Holders of the Company’s Initial Securities, Exchange Securities and Private
Exchange Securities:

ARTICLE 1

Definitions and Incorporation by Reference

          SECTION 1.01. Definitions.

          “Additional Assets” means (1) any property, plant or equipment used in a Related Business; (2)
the Capital Stock of a Person that becomes a Restricted Subsidiary as a result of the acquisition
of such Capital Stock by the Company or another Restricted Subsidiary; or (3) Capital Stock
constituting a minority interest in any Person that at such time is a Restricted Subsidiary;
provided, however, that any such Restricted Subsidiary described in clause (2) or
(3) above is primarily engaged in a Related Business.

          “Additional Securities” means, subject to the Company’s compliance with Section 4.03, 6.0%
Senior Subordinated Notes Due 2015 issued from time to time after the Issue Date under the terms of
this Indenture (other than pursuant to Section 2.06, 2.07, 2.09 or 3.06 of this Indenture and other
than Exchange Securities or Private Exchange Securities issued pursuant to an exchange offer for
other Securities outstanding under this Indenture).

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

          (a) the sum of:

     (1) discounted future net revenue from proved crude oil and natural gas reserves of the
Company and its Restricted Subsidiaries (including oil and natural gas reserves attributable
to the net profits interests owned by an Oil and Gas Royalty Trust to the extent such net
profits interests are attributable to the Company or a Restricted Subsidiary by virtue of
its ownership of Capital Stock of such Oil and Gas Royalty Trust) calculated in accordance
with SEC guidelines before any state or federal income taxes, as estimated in a reserve
report prepared as of the end of the most recently completed fiscal year for which audited
financial statements are available, which reserve report is prepared or audited by
independent petroleum engineers, as increased by, as of the date of determination, the
discounted future net revenue calculated in accordance with SEC guidelines (utilizing the
prices utilized in such year end reserve report) of:

	 	(A)	 	estimated proved crude oil and natural gas
reserves of the Company and its Restricted Subsidiaries attributable to

 

 

	 	 	 	acquisitions consummated since the date of such reserve report, and
	 
	 	(B)	 	estimated crude oil and natural gas reserves of
the Company and its Restricted Subsidiaries attributable to extensions,
discoveries and other additions and upward determinations of estimates
of proved crude oil and natural gas reserves (including previously
estimated development costs incurred during the period and the
accretion of discount since the prior period end) due to exploration,
development or exploitation, production or other activities which
reserves were not reflected in such reserve report which would, in the
case of determinations made under clauses (A) or (B), in accordance
with standard industry practice, result in such determinations,

and decreased by, as of the date of determination, the discounted future net revenue
calculated in accordance with SEC guidelines (utilizing the prices utilized in such
year end reserve report) attributable to:

	 	(C)	 	estimated proved crude 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
reserve report, and
	 
	 	(D)	 	reductions in the estimated oil and natural gas
reserves of the Company and its Restricted Subsidiaries reflected in
such reserve report since the date of such reserve report attributable
to downward determinations of estimates of proved crude oil and natural
gas reserves due to exploration, development or exploitation,
production or other activities conducted or otherwise occurring since
the date of such reserve report which would, in the case of
determinations made under clauses (C) or (D), in accordance with
standard industry practice, result in such determinations;

provided, however, that, in the case of each of the determinations
made pursuant to clauses (A) through (D), such increases and decreases shall be
estimated by the Company’s engineers, except that if as a result of such
acquisitions, dispositions, discoveries, extensions or revisions, there is a
Material Change, then such increases and decreases in the discounted future net
revenue shall be confirmed in writing by an independent petroleum engineer;

     (2) the capitalized costs that are attributable to crude oil and natural gas properties
of the Company and its Restricted Subsidiaries to which no proved crude oil and natural gas
reserves are attributed, based on the Company’s books and records as of a date no earlier than the end of the most recent fiscal quarter for which financial

-2-

 

statements of the Company have been made publicly available prior to the date of
determination;

     (3) the Net Working Capital as of the end of the most recent fiscal quarter for which
financial statements of the Company have been made publicly available prior to the date of
determination; and

     (4) the greater of (i) the net book value as of a date no earlier than the end of the
most recent fiscal quarter for which financial statements of the Company have been made
publicly available prior to the date of determination and (ii) the appraised value, as
estimated by independent appraisers, of other tangible assets of the Company and its
Restricted Subsidiaries as of a date no earlier than the most recent fiscal year for which
financial statements of the Company have been made publicly available prior to the date of
determination (provided that the Company shall not be required to obtain such an appraisal
of such assets if no such appraisal has been performed); minus

          (b) to the extent not otherwise taken into account in the immediately preceding clause (a),
the sum of:

     (1) minority interests;

     (2) any natural gas balancing liabilities of the Company and its Restricted
Subsidiaries reflected in the Company’s latest audited consolidated financial statements;

     (3) the discounted future net revenue, calculated in accordance with SEC guidelines
(utilizing the same prices utilized in the Company’s year-end reserve report), attributable
to reserves subject to participation interests, overriding royalty interests or other
interests of third parties, pursuant to participation, partnership, vendor financing or
other agreements then in effect, or which otherwise are required to be delivered to third
parties;

     (4) the discounted future net revenue calculated in accordance with SEC guidelines
(utilizing the same 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

     (5) the discounted future net revenue, calculated in accordance with SEC guidelines,
attributable to reserves subject to Dollar-Denominated Production Payments that, based on
the estimates of production included in determining the discounted future net revenue
specified in the immediately preceding clause (a)(1) (utilizing the same prices utilized in
the Company’s year-end reserve report), would be necessary to satisfy fully the obligations
of the Company and its Restricted Subsidiaries with respect to Dollar-Denominated Production
Payments on the schedules specified with respect thereto.

-3-

 

          If the Company changes its method of accounting from the successful efforts method to the full
cost method or a similar method of accounting, “ACNTA” will continue to be calculated as if the
Company were still using the successful efforts 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 the purposes of this definition, “control” when used with respect to any Person means the
power to direct the management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms “controlling” and
“controlled” have meanings correlative to the foregoing. For purposes of Sections 4.04, 4.06 and
4.07 only, “Affiliate” shall also mean any beneficial owner of Capital Stock representing 10% or
more of the total voting power of the Voting Stock (on a fully diluted basis) of the Company or of
rights or warrants to purchase such Capital Stock (whether or not currently exercisable) and any
Person who would be an Affiliate of any such beneficial owner pursuant to the first sentence
hereof. No Person shall be deemed an Affiliate of an Oil and Gas Royalty Trust solely by virtue of
ownership of Capital Stock of such trust.

          “Applicable Premium” means, with respect to a Security at any time, the greater of (1) 1.0% of
the principal amount of such Security at such time and (2) the excess, if any, of (A) the present
value at such time of (i) the principal amount of such Security plus (ii) any required interest
payments due on such Security through July 15, 2010, computed using a discount rate equal to the
Treasury Rate plus 50 basis points, over (B) the principal amount of such Security.

          “Asset Disposition” means any sale, lease, transfer or other disposition (or series of related
sales, leases, transfers or dispositions) by the Company or any Restricted Subsidiary or any Oil
and Gas Royalty Trust, the Capital Stock of which is owned by the Company or a Restricted
Subsidiary, including any disposition by means of a merger, consolidation or similar transaction
(each referred to for the purposes of this definition as a “disposition”), of:

	 	(1)	 	any shares of Capital Stock of a Restricted Subsidiary (other
than directors’ qualifying shares or shares required by applicable law to be
held by a Person other than the Company or a Restricted Subsidiary) or of an
Oil and Gas Royalty Trust;
	 
	 	(2)	 	all or substantially all the assets of any division or line of
business of the Company or any Restricted Subsidiary;
	 
	 	(3)	 	any other assets of the Company or any Restricted Subsidiary
outside of the ordinary course of business of the Company or such Restricted
Subsidiary; or
	 
	 	(4)	 	any net profits interests held by any such Oil and Gas Royalty
Trust

other than, in the case of clauses (1), (2) and (3) above,

	 	(A)	 	a disposition by a Restricted Subsidiary to the
Company or by the Company or a Restricted Subsidiary to a Restricted
Subsidiary;

-4-

 

	 	(B)	 	for purposes of Section 4.06 only, (x) a
disposition that constitutes a Restricted Payment permitted by Section
4.04 or a Permitted Investment and (y) a disposition of all or
substantially all the assets of the Company in accordance with Section
5.01; and
	 
	 	(C)	 	the trade or exchange by the Company or any
Restricted Subsidiary of any oil or natural gas property or interest
therein of the Company or such Restricted Subsidiary for any oil or
natural gas property or interest therein of another Person, including
any cash or cash equivalents necessary in order to achieve an exchange
of equivalent value; provided, however, that the value
of the oil or natural gas property or interest therein received by the
Company or any Restricted Subsidiary in such trade or exchange
(including any cash or cash equivalents) is at least equal to the fair
market value (as determined in good faith by the Board of Directors, an
Officer or an officer of such Restricted Subsidiary with responsibility
for such transaction, which determination shall be conclusive evidence
of compliance with this provision) of the oil or natural gas property
or interest therein (including any cash or cash equivalents) so traded
or exchanged;
	 
	 	(D)	 	the creation of a Lien;
	 
	 	(E)	 	a disposition of oil and natural gas properties
in connection with tax credit transactions complying with Section 29 or
any successor or analogous provisions of the Code;
	 
	 	(F)	 	a disposition of the Capital Stock of or any
Investment in any Unrestricted Subsidiary other than an Oil and Gas
Royalty Trust;
	 
	 	(G)	 	surrender or waiver of contract rights or the
settlement, release or surrender of contract, tort or other claims of
any kind;
	 
	 	(H)	 	any disposition of defaulted receivables that
arose in the ordinary course of business for collection;
	 
	 	(I)	 	the contribution of net profits interests in
oil and natural gas properties to an Oil and Gas Royalty Trust that is
wholly owned by the Company or a Restricted Subsidiary at the time or
as the result of such contribution;
	 
	 	(J)	 	Production Payments and Reserve Sales in
connection with the acquisition of any crude oil and natural gas
property after the Issue Date; provided that any such
Production Payment and Reserve Sale is created, incurred, issued or
assumed in connection with the financing of, and within 30 days after
the acquisition of, such oil and natural gas property;

-5-

 

	 	(K)	 	the sale or transfer (whether or not in the
ordinary course of business) of any oil and gas property or interest
therein to which no proved reserves are attributable at the time of
such sale or transfer; and
	 
	 	(L)	 	a single transaction or series of related
transactions that involve the disposition of assets with a fair market
value of less than $2.0 million.

          “Attributable Debt” in respect of a Sale/Leaseback Transaction means, as at the time of
determination, the present value (discounted at the interest rate borne by the Securities,
compounded semiannually) of the total obligations of the lessee for rental payments during the
remaining term of the lease included in such Sale/Leaseback Transaction (including any period for
which such lease has been extended); provided, however, that if such Sale/Leaseback
Transaction results in a Capital Lease Obligation, the amount of Indebtedness represented thereby
will be determined in accordance with the definition of “Capital Lease Obligation” in this Section
1.01.

          “Average Life” means, as of the date of determination, with respect to any Indebtedness, the
quotient obtained by dividing (1) the sum of the products of the numbers of years from the date of
determination to the dates of each successive scheduled principal payment of or redemption or
similar payment with respect to such Indebtedness multiplied by the amount of such payment by (2)
the sum of all such payments.

          “Bank Indebtedness” means all Obligations pursuant to Credit Facilities.

          “Board of Directors” means the Board of Directors of the Company or any committee thereof duly
authorized to act on behalf of such Board.

          “Business Day” means each day which is not a Legal Holiday.

          “Capital Lease Obligation” means an obligation that is required to be classified and accounted
for as a capital lease for financial reporting purposes in accordance with GAAP, and the amount of
Indebtedness represented by such obligation shall be the capitalized amount of such obligation
determined 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 terminated by the lessee without payment of a penalty.

          “Capital Stock” of any Person means any and all shares, units of beneficial interests
(including of an Oil and Gas Royalty Trust), rights to purchase, warrants, options, participations
or other equivalents of or interests in (however designated) equity of such Person, including any
Preferred Stock, but excluding any debt securities convertible into or exchangeable for such
equity.

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

	 	(1)	 	any “person” (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act), other than one or more Permitted Holders, is or becomes

-6-

 

	 	 	 	the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act), except that for purposes of this clause (1) such person shall
be deemed to have “beneficial ownership” of all shares that any such person
has the right to acquire, whether such right is exercisable immediately or
only after the passage of time), directly or indirectly, of more than 50% of
the total voting power of the Voting Stock of the Company; provided,
however, that the Permitted Holders beneficially own (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, in
the aggregate a lesser percentage of the total voting power of the Voting
Stock of the Company than such other person and do not have the right or
ability by voting power, contract or otherwise to elect or designate for
election a majority of the Board of Directors (for the purposes of this
clause (1), such other person shall be deemed to beneficially own any Voting
Stock of a Person (the “specified person”) held by any other Person (the
“parent entity”), if such other person is the beneficial owner (as defined
above in this clause (1)), directly or indirectly, of more than 50% of the
voting power of the Voting Stock of such parent entity and the Permitted
Holders beneficially own (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act), directly or indirectly, in the aggregate a lesser percentage
of the voting power of the Voting Stock of such parent entity and do not
have the right or ability by voting power, contract or otherwise to elect or
designate for election a majority of the board of directors of such parent
entity);
	 
	 	(2)	 	during any period of two consecutive years, individuals who, at
the beginning of such period, constituted the Board of Directors (together with
(A) any new directors whose election by such Board of Directors or whose
nomination for election by the shareholders of the Company was approved by a
vote of the majority of the directors of the Company then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved and (B) any representative
of a Permitted Holder) cease for any reason to constitute a majority of the
Board of Directors then in office;
	 
	 	(3)	 	the adoption of a plan relating to the liquidation or
dissolution of the Company; or
	 
	 	(4)	 	the merger or consolidation of the Company with or into another
Person or the merger of another Person with or into the Company, or the sale of
all or substantially all the assets of the Company (determined on a
consolidated basis) to another Person (other than, in all such cases, a Person
that is controlled by one or more Permitted Holders), other than a transaction
following which (A) in the case of a merger or consolidation transaction,
holders of securities that represented 100% of the Voting Stock of the Company
immediately prior to such transaction (or other securities into which such
securities are converted as part of such merger or consolidation transaction)
own directly or indirectly at least a majority

-7-

 

	 	 	 	of the voting power of the Voting Stock of the surviving Person in such
merger or consolidation transaction immediately after such transaction and
(B) in the case of a sale of assets transaction, each transferee becomes an
obligor in respect of the Securities and a Subsidiary of the transferor of
such assets.

          “Code” means the Internal Revenue Code of 1986, as amended.

          “Company” means the party named as such in this Indenture until a successor replaces it and,
thereafter, means the successor and, for purposes of any provision contained herein and required by
the TIA, each other obligor on the indenture securities.

          “Consolidated Coverage Ratio” as of any date of determination means the ratio of (x) the
aggregate amount of EBITDA for the period of the most recent four consecutive fiscal quarters for
which financial information of the Company has been made publicly available prior to the date of
such determination to (y) Consolidated Interest Expense for such four fiscal quarters;
provided, however, that:

	 	(1)	 	if the Company or any Restricted Subsidiary has Incurred any
Indebtedness since the beginning of such period that remains outstanding or if
the transaction giving rise to the need to calculate the Consolidated Coverage
Ratio is an Incurrence of Indebtedness, or both, EBITDA and Consolidated
Interest Expense for such period shall be calculated after giving effect on a
pro forma basis to such Indebtedness and the use of proceeds
thereof as if such Indebtedness had been Incurred on the first day of such
period and such proceeds had been applied as of such date;
	 
	 	(2)	 	if the Company or any Restricted Subsidiary has repaid,
repurchased, defeased or otherwise discharged any Indebtedness since the
beginning of such period or if any Indebtedness is to be repaid, repurchased,
defeased or otherwise discharged on the date of the transaction giving rise to
the need to calculate the Consolidated Coverage Ratio, EBITDA and Consolidated
Interest Expense for such period shall be calculated on a pro
forma basis as if such discharge had occurred on the first day of such
period and as if the Company or such Restricted Subsidiary had not earned the
interest income actually earned (if any) during such period in respect of cash
or Temporary Cash Investments used to repay, repurchase, defease or otherwise
discharge such Indebtedness;
	 
	 	(3)	 	if since the beginning of such period the Company or any
Restricted Subsidiary shall have made any Asset Disposition, EBITDA for such
period shall be reduced by an amount equal to EBITDA (if positive) directly
attributable to the assets which were the subject of such Asset Disposition for
such period, or increased by an amount equal to EBITDA (if negative), directly
attributable thereto for such period and Consolidated Interest Expense for such
period shall be reduced by an amount equal to the Consolidated Interest Expense
directly attributable to any Indebtedness

-8-

 

	 	 	 	of the Company or any Restricted Subsidiary repaid, repurchased, defeased or
otherwise discharged with respect to the Company and its continuing
Restricted Subsidiaries in connection with such Asset Disposition for such
period (or, if the Capital Stock of any Restricted Subsidiary is sold, the
Consolidated Interest Expense for such period directly attributable to the
Indebtedness of such Restricted Subsidiary to the extent the Company and its
continuing Restricted Subsidiaries are no longer liable for such
Indebtedness after such sale);
	 
	 	(4)	 	if since the beginning of such period the Company or any
Restricted Subsidiary (by merger or otherwise) shall have made an Investment in
any Restricted Subsidiary (or any Person which becomes a Restricted Subsidiary)
or an acquisition of material assets, including any acquisition of assets
occurring in connection with a transaction requiring a calculation to be made
hereunder, which constitutes all or substantially all of an operating unit of a
business, EBITDA and Consolidated Interest Expense for such period shall be
calculated after giving pro forma effect thereto (including the
Incurrence of any Indebtedness) as if such Investment or acquisition occurred
on the first day of such period; and
	 
	 	(5)	 	if since the beginning of such period any Person (that
subsequently became a Restricted Subsidiary or was merged with or into the
Company or any Restricted Subsidiary since the beginning of such period) shall
have made any Asset Disposition, any Investment or acquisition of assets that
would have required an adjustment pursuant to clause (3) or (4) above if made
by the Company or a Restricted Subsidiary during such period, EBITDA and
Consolidated Interest Expense for such period shall be calculated after giving
pro forma effect thereto as if such Asset Disposition,
Investment or acquisition occurred on the first day of such period.

For purposes of this definition, whenever pro forma effect is to be given to an
acquisition of assets, the amount of income or earnings relating thereto and the amount of
Consolidated Interest Expense associated with any Indebtedness Incurred in connection therewith,
the pro forma calculations shall be determined in good faith by a responsible
financial or accounting Officer of the Company. If any Indebtedness bears a floating rate of
interest and is being given pro forma effect, the interest on such Indebtedness
shall be calculated as if the rate in effect on the date of determination had been the applicable
rate for the entire period (taking into account any Interest Rate Agreement applicable to such
Indebtedness, but if the remaining term of such Interest Rate Agreement is less than twelve months,
then such Interest Rate Agreement shall only be taken into account for that portion of the period
equal to the remaining term thereof).

          The Consolidated Interest Expense attributable to interest on any Indebtedness under a
revolving credit facility, the outstanding principal balance of which is required to be computed on
a pro forma basis in accordance with the foregoing, shall be computed based upon
the average daily balance of such Indebtedness during the applicable period, provided, that such
average daily balance shall take into account the amount of any repayment of Indebtedness under

-9-

 

such revolving credit facility during the applicable period, to the extent such repayment
permanently reduced the commitments or amounts available to be borrowed under such facility.

          “Consolidated Interest Expense” means, for any period, the total interest expense of the
Company and its consolidated Restricted Subsidiaries, plus, to the extent not included in such
total interest expense, and to the extent incurred by the Company or its Restricted Subsidiaries,
without duplication:

	 	(1)	 	interest expense attributable to capital leases and the
interest expense attributable to leases constituting part of a Sale/Leaseback
Transaction;
	 
	 	(2)	 	amortization of debt discount and debt issuance cost;
	 
	 	(3)	 	capitalized interest;
	 
	 	(4)	 	non-cash interest expense;
	 
	 	(5)	 	commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers’ acceptance financing;
	 
	 	(6)	 	net payments pursuant to Interest Rate Agreements;
	 
	 	(7)	 	Preferred Stock dividends in respect of all Preferred Stock
held by Persons other than the Company or a Wholly Owned Subsidiary (other than
dividends payable solely in Capital Stock (other than Disqualified Stock) of
the Company);
	 
	 	(8)	 	interest incurred in connection with Investments in
discontinued operations;
	 
	 	(9)	 	interest accruing on any Indebtedness of any other Person to
the extent such Indebtedness is Guaranteed by (or secured by the assets of) the
Company or any Restricted Subsidiary; and
	 
	 	(10)	 	the cash contributions to any employee stock ownership plan or
similar trust to the extent such contributions are used by such plan or trust
to pay interest or fees to any Person (other than the Company) in connection
with Indebtedness Incurred by such plan or trust,

minus, to the extent included above, write-off of deferred financing costs and interest
attributable to Dollar-Denominated Production Payments.

-10-

 

          “Consolidated Net Income” means, for any period, the net income of the Company and its
consolidated Subsidiaries; provided, however, that there shall not be included in
such Consolidated Net Income:

	 	(1)	 	any net income of any Person (other than the Company) if such
Person is not a Restricted Subsidiary, except that:

	 	(A)	 	subject to the exclusion contained in clause
(4) below, the Company’s equity in the net income of any such Person
for such period shall be included in such Consolidated Net Income in an
amount equal to the aggregate amount of cash actually distributed by
such Person during such period to the Company or a Restricted
Subsidiary as a dividend, interest payment or other distribution
(subject, in the case of a dividend, interest payment or other
distribution paid to a Restricted Subsidiary, to the limitations
contained in clause (3) below); and
	 
	 	(B)	 	the Company’s equity in a net loss of any such
Person for such period shall not be included in determining such
Consolidated Net Income, except to the extent of the aggregate cash
actually contributed to such Person by the Company or a Restricted
Subsidiary during such period;

	 	(2)	 	solely for the purposes of determining the aggregate amount
available for Restricted Payments under Section 4.04(a)(3), any net income (or
loss) of any Person acquired by the Company or a Subsidiary in a pooling of
interests transaction for any period prior to the date of such acquisition;
	 
	 	(3)	 	any net income of any Restricted Subsidiary if such Restricted
Subsidiary is subject to restrictions, directly or indirectly, on the payment
of dividends or the making of distributions by such Restricted Subsidiary,
directly or indirectly, to the Company, except that:

	 	(A)	 	subject to the exclusion contained in clause
(4) below, the Company’s equity in the net income of any such
Restricted Subsidiary for such period shall be included in such
Consolidated Net Income in an amount equal to the aggregate amount of
cash that could have been distributed by such Restricted Subsidiary
during such period to the Company or another Restricted Subsidiary as a
dividend, interest payment or other distribution (subject, in the case
of a dividend, interest payment or other distribution paid to another
Restricted Subsidiary, to the limitation contained in this clause); and
	 
	 	(B)	 	the Company’s equity in a net loss of any such
Restricted Subsidiary for such period shall be included in determining
such Consolidated Net Income;

-11-

 

	 	(4)	 	any gain or loss, together with any related provision for taxes
on such gain or loss and all related fees and expenses, realized in connection
with (A) the sale or other disposition of any assets of the Company, its
consolidated Subsidiaries or any other Person (including pursuant to any
Sale/Leaseback Transaction) which is not sold or otherwise disposed of in the
ordinary course of business and (B) the disposition of any securities of any
Person or the extinguishment of any Indebtedness of the Company or any of its
Subsidiaries;
	 
	 	(5)	 	extraordinary or non-recurring gains or losses, together with
any related provision for taxes on such gains or losses and all related fees
and expenses; and
	 
	 	(6)	 	the cumulative effect of a change in accounting principles;
	 
	 	(7)	 	any impairment losses on oil and natural gas properties;
	 
	 	(8)	 	any unrealized non-cash gains or losses or charges in respect
of Hedging Obligations (including those resulting from the application of FAS
133); and
	 
	 	(9)	 	any non-cash compensation charge arising from any grant of
stock, stock options or other equity-based awards.

Notwithstanding the foregoing, for the purposes of Section 4.04 only, there shall be excluded from
Consolidated Net Income any repurchases, repayments or redemptions of Investments, proceeds
realized on the sale of Investments or return of capital to the Company or a Restricted Subsidiary
to the extent such repurchases, repayments, redemptions, proceeds or returns increase the amount of
Restricted Payments permitted under such section pursuant to clause (a)(3)(E) thereof.

          “Consolidated Net Worth” means the total of the amounts shown on the balance sheet of the
Company and its consolidated Subsidiaries, determined on a consolidated basis in accordance with
GAAP, as of the end of the most recent fiscal quarter of the Company ending at least 45 days prior
to the taking of any action for the purpose of which the determination is being made, as the sum
of:

	 	(1)	 	the par or stated value of all outstanding Capital Stock of the
Company plus
	 
	 	(2)	 	paid-in capital or capital surplus relating to such Capital
Stock plus
	 
	 	(3)	 	any retained earnings or earned surplus

less (A) any accumulated deficit and (B) any amounts attributable to Disqualified Stock.

          “Credit Facilities” means, with respect to the Company or any Restricted Subsidiary, one or
more debt facilities (including under the Revolving Credit Facility) or

-12-

 

commercial paper facilities with banks or other lenders providing revolving credit loans, term
loans, production payment facilities, receivables financing facilities (including through the sale
of receivables) or letters of credit facilities, in each case, as amended, restated, modified,
renewed, refunded, replaced or refinanced in whole or in part from time to time.

          “Currency Agreement” means in respect of a Person any foreign exchange contract, currency swap
agreement or other similar agreement designed to protect such Person against fluctuations in
currency values.

          “Default” means any event which is, or after notice or passage of time or both would be, an
Event of Default.

          “Designated Senior Indebtedness”, with respect to a Person means:

	 	(1)	 	the Bank Indebtedness; and
	 
	 	(2)	 	any other Senior Indebtedness of such Person which, at the date
of determination, has an aggregate principal amount outstanding of, or under
which, at the date of determination, the holders thereof are committed to lend
up to, at least $25.0 million and is specifically designated by such Person in
the instrument evidencing or governing such Senior Indebtedness as “Designated
Senior Indebtedness” for purposes of this Indenture.

          “Disqualified Stock” means, with respect to any Person, any Capital Stock which by its terms
(or by the terms of any security into which it is convertible or for which it is exchangeable at
the option of the holder) or upon the happening of any event:

	 	(1)	 	matures or is mandatorily redeemable (other than redeemable
only for Capital Stock of such Person which is not itself Disqualified Stock)
pursuant to a sinking fund obligation or otherwise;
	 
	 	(2)	 	is convertible or exchangeable at the option of the holder for
Indebtedness or Disqualified Stock; or
	 
	 	(3)	 	is mandatorily redeemable or must be purchased upon the
occurrence of certain events or otherwise, in whole or in part (other than
redeemable or required to be purchased only for Capital Stock of such Person
which is not itself Disqualified Stock);

in each case on or prior to the 91st day after the Stated Maturity of the Securities;
provided, however, that (A) any Capital Stock that would not constitute
Disqualified Stock but for provisions thereof giving holders thereof the right to require such
Person to purchase or redeem such Capital Stock upon the occurrence of an “asset sale” or “change
of control” shall not constitute Disqualified Stock if:

	 	(1)	 	the “asset sale” or “change of control” provisions applicable
to such Capital Stock are not more favorable, as measured by the purchase or

-13-

 

	 	 	 	redemption price or the breadth of the definition of the event or events
triggering such purchase or redemption obligation, to the holders of such
Capital Stock than the terms applicable to the Securities and described in
Sections 4.06 and 4.08; and
	 
	 	(2)	 	any such requirement only becomes operative after compliance
with such terms applicable to the Securities, including the purchase of any
Securities tendered pursuant thereto.

and (B) any Capital Stock that would constitute Disqualified Stock solely because such Capital
Stock is issued pursuant to any plan for the benefit of employees of the Company or Subsidiaries of
the Company or by any such plan to such employees and may be required to be repurchased by the
Company in order to satisfy applicable statutory or regulatory obligations shall not constitute
Disqualified Stock.

          The amount of any Disqualified Stock that does not have a fixed redemption, repayment or
repurchase price will be calculated in accordance with the terms of such Disqualified Stock as if
such Disqualified Stock were redeemed, repaid or repurchased on any date on which the amount of
such Disqualified Stock is to be determined pursuant to this Indenture; provided,
however, that if such Disqualified Stock could not be required to be redeemed, repaid or
repurchased at the time of such determination, the redemption, repayment or repurchase price will
be the book value of such Disqualified Stock as reflected in the most recent financial statements
of such Person.

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

          “EBITDA” for any period means the sum of Consolidated Net Income, plus the following to the
extent deducted in calculating such Consolidated Net Income:

	 	(1)	 	all income tax expense of the Company and its consolidated
Restricted Subsidiaries;
	 
	 	(2)	 	Consolidated Interest Expense;
	 
	 	(3)	 	depreciation, depletion, exploration and amortization expense
of the Company and its consolidated Restricted Subsidiaries (excluding
amortization expense attributable to a prepaid operating activity item that was
paid in cash in a prior period); and
	 
	 	(4)	 	all other non-cash charges of the Company and its consolidated
Restricted Subsidiaries (excluding any such non-cash charge to the extent that
it represents an accrual of or reserve for cash expenditures in any future
period),

-14-

 

in each case for such period, and less, to the extent included in calculating such Consolidated Net
Income and in excess of any costs or expenses attributable thereto and deducted in calculating such
Consolidated Net Income, the sum of:

	 	(A)	 	the amount of deferred revenues that are
amortized during such period and are attributable to reserves that are
subject to Volumetric Production Payments; and
	 
	 	(B)	 	amounts recorded in accordance with GAAP as
repayments of principal and interest pursuant to Dollar-Denominated
Production Payments.

Notwithstanding the foregoing, the provision for taxes based on the income or profits of, and the
depreciation, depletion, exploration and amortization and non-cash charges of, a Restricted
Subsidiary shall be added to Consolidated Net Income to compute EBITDA (1) only to the extent (and
in the same proportion, including by reason of minority interests) that the net income of such
Restricted Subsidiary was included in calculating Consolidated Net Income and (2) only if a
corresponding amount would be permitted at the date of determination to be dividended to the
Company by such Restricted Subsidiary without prior approval (that has not been obtained), pursuant
to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes,
rules and governmental regulations applicable to such Restricted Subsidiary or its stockholders.

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

          “Exchange Securities” means (1) the 6.0% Senior Subordinated Notes Due 2015 issued pursuant to
the Indenture in connection with the Registered Exchange Offer pursuant to the Registration Rights
Agreement and (2) Additional Securities, if any, issued pursuant to a registration statement filed
with the SEC under the Securities Act.

          “Existing Investments” means assets (including securities) held by the Company or any of the
Restricted Subsidiaries as consideration for an Investment made on or before the Issue Date or
acquired thereafter pursuant to any agreement or obligation as in effect on the Issue Date.

          “GAAP” means generally accepted accounting principles in the United States of America as in
effect as of the Issue Date, including those set forth in:

	 	(1)	 	the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public Accountants;
	 
	 	(2)	 	statements and pronouncements of the Financial Accounting
Standards Board;
	 
	 	(3)	 	such other statements by such other entity as approved by a
significant segment of the accounting profession; and

-15-

 

	 	(4)	 	the rules and regulations of the SEC governing the inclusion of
financial statements (including pro forma financial statements)
in periodic reports required to be filed pursuant to Section 13 of the Exchange
Act, including opinions and pronouncements in staff accounting bulletins and
similar written statements from the accounting staff of the SEC.

          “Guarantee” means any obligation, contingent or otherwise, of any Person directly or
indirectly guaranteeing any Indebtedness of any Person and any obligation, direct or indirect,
contingent or otherwise, of such Person:

	 	(1)	 	to purchase or pay (or advance or supply funds for the purchase
or payment of) such Indebtedness of such Person (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); or
	 
	 	(2)	 	entered into for the purpose of assuring in any other manner
the obligee of such Indebtedness of the payment thereof or to protect such
obligee against loss in respect thereof (in whole or in part);

provided, however, that the term “Guarantee” shall not include endorsements for
collection or deposit in the ordinary course of business, or any obligation to the extent it is
payable only in Capital Stock of the Guarantor that is not Disqualified Stock. The term
“Guarantee” used as a verb has a corresponding meaning. The term “Guarantor” shall mean any Person
Guaranteeing any Indebtedness.

          “Guaranty Agreement” means a supplemental indenture, in a form satisfactory to the Trustee,
pursuant to which a Subsidiary Guarantor guarantees the Company’s obligations with respect to the
Securities on the terms provided for in this Indenture.

          “Hedging Obligations” of any Person means the obligations of such Person pursuant to any Oil
and Natural Gas Hedging Contract, Interest Rate Agreement or Currency Agreement.

          “Holder” or “Securityholder” means the Person in whose name a Security is registered on the
Registrar’s books.

          “Incur” means issue, assume, Guarantee, incur or otherwise become liable for;
provided, however, that any Indebtedness or Capital Stock of a Person existing at
the time such Person becomes a Restricted Subsidiary (whether by merger, consolidation, acquisition
or otherwise) shall be deemed to be Incurred by such Person at the time it becomes a Restricted
Subsidiary. The term “Incurrence” when used as a noun shall have a correlative meaning. Solely
for purposes of determining compliance with Section 4.03:

	 	(1)	 	amortization of debt discount or the accretion of principal
with respect to a non-interest bearing or other discount security;

-16-

 

	 	(2)	 	the payment of regularly scheduled interest in the form of
additional Indebtedness of the same instrument or the payment of regularly
scheduled dividends on Capital Stock in the form of additional Capital Stock of
the same class and with the same terms;
	 
	 	(3)	 	the obligation to pay a premium in respect of Indebtedness
arising in connection with the issuance of a notice of redemption or making of
a mandatory offer to purchase such Indebtedness; and
	 
	 	(4)	 	unrealized losses or charges in respect of Hedging Obligations
(including those resulting from the application of FAS 133)

will not be deemed to be the Incurrence of Indebtedness.

          “Indebtedness” means, with respect to any Person on any date of determination (without
duplication):

	 	(1)	 	the principal in respect of (A) indebtedness of such Person for
money borrowed and (B) indebtedness evidenced by notes, debentures, bonds or
other similar instruments for the payment of which such Person is responsible
or liable, including, in each case, any premium on such indebtedness to the
extent such premium has become due and payable;
	 
	 	(2)	 	all Capital Lease Obligations of such Person and all
Attributable Debt in respect of Sale/Leaseback Transactions entered into by
such Person;
	 
	 	(3)	 	all obligations of such Person (other than obligations payable
solely in Capital Stock of such Person that is not Disqualified Stock) issued
or assumed as the deferred purchase price of property, all conditional sale
obligations of such Person and all obligations of such Person under any title
retention agreement (but excluding trade accounts payable and accrued
expenses);
	 
	 	(4)	 	all obligations of such Person for the reimbursement of any
obligor on any letter of credit, bankers’ acceptance or similar credit
transactions (other than obligations with respect to letters of credit securing
obligations (other than obligations described in clauses (1) through (3) above)
entered into in the ordinary course of business of such Person to the extent
such letters of credit are not drawn upon or, if and to the extent drawn upon,
such drawing is reimbursed no later than the tenth Business Day following
payment on the letter of credit);
	 
	 	(5)	 	the amount of all obligations of such Person with respect to
the redemption, repayment or other repurchase of any Disqualified Stock of such
Person or, with respect to any Preferred Stock of any Restricted Subsidiary of
such Person the principal amount of such Preferred Stock to be determined in
accordance with this Indenture (but excluding, in each case, any accrued
dividends) (and the term “Incur Indebtedness” and

-17-

 

	 	 	 	similar terms include issuances of such Disqualified Stock and Preferred
Stock);
	 
	 	(6)	 	all obligations of the types referred to in clauses (1) through
(5) of other Persons and all dividends of other Persons for the payment of
which, in either case, such Person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including by means of any
Guarantee;
	 
	 	(7)	 	all obligations of the types referred to in clauses (1) through
(6) of other Persons secured by any Lien on any property or asset of such
Person (whether or not such obligation is assumed by such Person), the amount
of such obligation being deemed to be the lesser of the liquidation value of
such property or asset and the amount of the obligation so secured;
	 
	 	(8)	 	to the extent not otherwise included in this definition,
Hedging Obligations of such Person; and
	 
	 	(9)	 	any Guarantee by such Person of production or payment with
respect to a Production Payment and Reserve Sale;

if and to the extent, in the case of obligations of the types referred to in clauses (1), (2) and
(3) above, such obligations would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP.

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

	 	(1)	 	accrued expenses and trade accounts payable arising in the
ordinary course of business;
	 
	 	(2)	 	except as expressly provided in clause (9) above, Production
Payments and Reserve Sales;
	 
	 	(3)	 	obligations in respect of farm-in agreements;
	 
	 	(4)	 	obligations arising from guarantees to suppliers, lessors,
licensees, contractors, franchisees or customers incurred in the ordinary
course of business;
	 
	 	(5)	 	any obligations under workers’ compensation laws and similar
legislation;
	 
	 	(6)	 	any obligation in respect of any royalty, overriding royalty,
net profits interest, master limited partnership interest or other interest in
oil and natural 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; or
	 
	 	(7)	 	any indebtedness which has been defeased in accordance with
GAAP or defeased pursuant to the deposit of cash or Government Securities (in
an

-18-

 

	 	 	 	amount sufficient to satisfy all such indebtedness obligations at maturity
or redemption, as applicable, and all payments of interest and premium, if
any) in a trust or account created or pledged for the sole benefit of the
holders of such indebtedness, and subject to no other Liens, and the other
applicable terms of the instrument governing such indebtedness.

          Notwithstanding the foregoing, in connection with the purchase by the Company or any
Restricted Subsidiary of any business, the term “Indebtedness” will exclude post-closing payment
adjustments to which the seller may become entitled to the extent such payment is determined by a
final closing balance sheet or such payment depends on the performance of such business after the
closing; provided, however, that, at the time of closing, the amount of any such
payment is not determinable and, to the extent such payment thereafter becomes fixed and
determined, the amount is paid within 30 days thereafter.

          The amount of Indebtedness of any Person at any date shall be the outstanding balance at such
date of all unconditional obligations as described above and the maximum liability, upon the
occurrence of the contingency giving rise to the obligation, of any contingent obligations at such
date; provided, however, that in the case of Indebtedness sold at a discount, the
amount of such Indebtedness at any time will be the accreted value thereof at such time.

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

          “Independent Qualified Party” means an investment banking firm, accounting firm or appraisal
firm of national standing; provided, however, that such firm is not an Affiliate of
the Company.

          “Initial Purchaser” means (1) with respect to the Initial Securities issued on the Issue Date,
Credit Suisse First Boston LLC, and (2) with respect to each issuance of Additional Securities, the
Persons purchasing such Additional Securities under the related Purchase Agreement.

          “Initial Securities” means (1) $300 million aggregate principal amount of 6.0% Senior
Subordinated Notes Due 2015 issued on the Issue Date and (2) Additional Securities, if any, issued
in a transaction exempt from the registration requirements of the Securities Act.

          “Interest Rate Agreement” means in respect of a Person any interest rate swap agreement,
interest rate cap agreement or other financial agreement or arrangement designed to protect such
Person against fluctuations in interest rates.

          “Investment” in any Person means any direct or indirect advance, loan or other extension of
credit (including by way of Guarantee but excluding any such extension of credit made in the
ordinary course of business to any customer or supplier) or capital contribution to (by means of
any transfer of cash or other property to others or any payment for property or services for the
account or use of others), or any purchase or acquisition for value of Capital Stock, Indebtedness
or other similar instruments issued by such Person. Except as otherwise provided for herein, the
amount of an Investment shall be its fair value at the time the Investment is made and without
giving effect to subsequent changes in value.

-19-

 

          For purposes of the definition of “Unrestricted Subsidiary”, the definition of “Restricted
Payment” and Section 4.04:

	 	(1)	 	“Investment” shall include the portion (proportionate to the
Company’s equity interest in such Subsidiary) of the fair market value of the
net assets of any Subsidiary of the Company at the time that such Subsidiary is
designated an Unrestricted Subsidiary; provided, however, that
upon a redesignation of such Subsidiary as a Restricted Subsidiary, the Company
shall be deemed to continue to have a permanent “Investment” in an Unrestricted
Subsidiary equal to an amount (if positive) equal to (A) the Company’s
“Investment” in such Subsidiary at the time of such redesignation less (B) the
portion (proportionate to the Company’s equity interest in such Subsidiary) of
the fair market value of the net assets of such Subsidiary at the time of such
redesignation; and
	 
	 	(2)	 	any property transferred to or from an Unrestricted Subsidiary
shall be valued at its fair market value at the time of such transfer, in each
case as determined in good faith by the Board of Directors.

          “Investment Grade Rating” means having both a rating equal to or higher than BBB- by S&P and a
rating equal to or higher than Baa3 by Moody’s.

          “Issue Date” means July 13, 2005.

          “Legal Holiday” means a Saturday, a Sunday or a day on which banking institutions are not
required to be open in the State of New York.

          “Lien” means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind
(including any conditional sale or other title retention agreement or lease in the nature thereof).

          “Material Change” means an increase or decrease (excluding changes that result solely from
changes in prices and changes resulting from the incurrence of previously estimated development
costs) of more than 50% during a fiscal quarter in the discounted future net revenues from proved
oil and natural gas reserves of the Company and its Restricted Subsidiaries, calculated in
accordance with clause (a)(1) of the definition of ACNTA; provided, however, that
the following will be excluded from the calculation of Material Change:

     (1) any acquisitions during the fiscal quarter of oil and natural gas reserves that
have been estimated by independent petroleum engineers and with respect to which a report or
reports of such engineers exist; and

     (2) any disposition of properties existing at the beginning of such fiscal quarter that
have been disposed of in compliance with Section 4.06.

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

-20-

 

          “Net Available Cash” from an Asset Disposition means cash payments received therefrom
(including any cash payments received by way of deferred payment of principal pursuant to a note or
installment receivable or otherwise and proceeds from the sale or other disposition of any
securities received as consideration, but only as and when received (and, in the case of an Asset
Disposition by an Oil and Gas Royalty Trust, only as and when received by the Company or any
Restricted Subsidiary), but excluding any other consideration received in the form of assumption by
the acquiring Person of Indebtedness or other obligations relating to such properties or assets or
received in any other non-cash form), in each case net of:

	 	(1)	 	all accounting, engineering, investment banking, brokerage,
legal, title and recording tax expenses, commissions and other fees and
expenses incurred, and all Federal, state, provincial, foreign and local and
other taxes required to be accrued as a liability under GAAP, as a consequence
of such Asset Disposition, and any relocation expenses incurred or assumed in
connection with such Asset Disposition;
	 
	 	(2)	 	all payments made on any Indebtedness which is secured by any
assets subject to such Asset Disposition, in accordance with the terms of any
Lien upon or other security agreement of any kind with respect to such assets,
or which must by its terms, or in order to obtain a necessary consent to such
Asset Disposition, or by applicable law, be repaid out of the proceeds from
such Asset Disposition;
	 
	 	(3)	 	all distributions and other payments required to be made to
minority interest holders in Restricted Subsidiaries as a result of such Asset
Disposition; and
	 
	 	(4)	 	the deduction of appropriate amounts provided by the seller as
a reserve for adjustment in respect of the sale price of the assets that were
the subject of such Asset Disposition or as a reserve, in accordance with GAAP,
against any liabilities associated with the property or other assets disposed
in such Asset Disposition and retained by the Company or any Restricted
Subsidiary after such Asset Disposition.

          “Net Cash Proceeds”, with respect to any issuance or sale of Capital Stock or Indebtedness,
means the cash proceeds of such issuance or sale net of attorneys’ fees, accountants’ fees,
underwriters’ or placement agents’ fees, discounts or commissions and brokerage, consultant and
other fees actually incurred in connection with such issuance or sale and net of taxes paid or
payable as a result thereof.

          “Net Present Value” means, with respect to any proved oil and natural gas reserves, the
discounted future net cash flows associated with such reserves, determined in accordance with the
rules and regulations (including interpretations thereof) of the SEC in effect on the date of the
Offering Circular.

-21-

 

          “Net Working Capital” means:

     (1) all current assets of the Company and its Restricted Subsidiaries, except current
assets from commodity price risk management activities arising in the ordinary course of
business; minus

     (2) all current liabilities of the Company and its Restricted Subsidiaries, except
current liabilities included in Indebtedness and current liabilities from commodity price
risk management activities arising in the ordinary course of business;

in each case determined in accordance with GAAP.

          “Non-Recourse Purchase Money Indebtedness” means Indebtedness (other than Capital Lease
Obligations) of the Company or any Subsidiary Guarantor incurred in connection with the acquisition
by the Company or such Subsidiary Guarantor in the ordinary course of business of fixed assets used
in the Oil and Gas Business (including office buildings and other real property used by the Company
or such Subsidiary Guarantor in conducting its operations) with respect to which;

     (1) the holders of such Indebtedness agree that they will look solely to the fixed
assets so acquired which secure such Indebtedness, and neither the Company nor any
Restricted Subsidiary (a) is directly or indirectly liable for such Indebtedness or (b)
provides credit support, including any undertaking, Guarantee, agreement or instrument that
would constitute Indebtedness (other than the grant of a Lien on such acquired fixed
assets); and

     (2) no default or event of default with respect to such Indebtedness would cause or
permit (after notice or passage of time or both), any holder of any other Indebtedness of
the Company or a Subsidiary Guarantor to declare a default or event of default on such other
Indebtedness or cause the payment, repurchase, defeasance or other acquisition or retirement
for value thereof to be accelerated or payable prior to any scheduled principal payment,
scheduled sinking fund payment or Stated Maturity.

          “Obligations” means, with respect to any Indebtedness, all obligations for principal, premium,
interest, penalties, fees, indemnifications, reimbursements, and other amounts payable pursuant to
the documentation governing such Indebtedness.

          “Offering Circular” means the offering circular, dated June 30, 2005, relating the issuance of
the Securities.

          “Officer” means the Chairman of the Board, the President, any Vice President, the Treasurer or
the Secretary of the Company.

          “Officers’ Certificate” means a certificate signed by two Officers.

-22-

 

          “Oil and Gas Business” means:

     (1) the acquisition, exploration, exploitation, development, operation and disposition
of interests in oil, natural gas, other hydrocarbon and mineral properties;

     (2) the gathering, marketing, distribution, treating, processing, storage, refining,
selling and transporting of any production from such interests or properties and the
marketing of oil, natural gas, other hydrocarbons and minerals obtained from unrelated
Persons;

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

     (4) any other related energy business, including power generation and electrical
transmission business where fuel required by such business is supplied, directly or
indirectly, from oil, natural gas, other hydrocarbons and minerals produced substantially
from properties in which the Company or its Restricted Subsidiaries, directly or indirectly,
participates;

     (5) any business relating to oil field sales and service; and

     (6) any activity necessary, appropriate or incidental to the activities described in
the preceding clauses (1) through (5) of this definition.

          “Oil and Gas Royalty Trust” means a trust that is an Unrestricted Subsidiary formed by the
Company or a Restricted Subsidiary to hold net profits interests in any of the Company’s and its
Restricted Subsidiaries’ oil and natural gas properties that, at all times:

     (1) holds no assets other than (a) net profits interests in the Company’s and its
Restricted Subsidiaries’ oil and natural gas properties and (b) Temporary Cash Investments;

     (2) conducts no business or activities other than the holding of the assets permitted
by clause (1) above and the distribution of its available funds as required by clause (3)
below;

     (3) distributes all funds (less reasonable reserves, if any, for operating liabilities
as determined by the trustee) held by it to its unit holders on a pro rata basis no less
frequently than monthly;

     (4) does not incur, nor permit to exist, directly or indirectly, any Indebtedness other
than Indebtedness Incurred for its routine administrative expenses;

     (5) is not permitted to sell its net profits interests except in immaterial amounts or
when revenue from such interests fall below $1.0 million annually;

-23-

 

     (6) is not permitted to sell its net profits interests except for cash equal to the
fair market value thereof (as determined in good faith by the trustee of such Oil and Gas
Royalty Trust, whose determination shall be conclusive);

     (7) is not permitted to issue Capital Stock except to the Company or a Restricted
Subsidiary in exchange for the conveyance to such Oil and Gas Royalty Trust of net profits
interests in connection with its formation; and

     (8) is governed by a trust agreement that requires the trustee to operate the Oil and
Gas Royalty Trust in compliance with the terms of clauses (1) through (7) above.

          “Oil and Natural Gas Hedging Contract” means any oil and natural gas hedging agreement, and
other agreement or arrangement designed to protect the Company or any Restricted Subsidiary against
fluctuations in oil and natural gas prices.

          “Opinion of Counsel” means a written opinion from legal counsel who is acceptable to the
Trustee. The counsel may be an employee of or counsel to the Company or the Trustee.

          “Permitted Business Investments” means Investments and expenditures made in the ordinary
course of, and of a nature that is or shall have become customary in, the Oil and Gas Business as
means of actively exploiting, exploring for, acquiring, developing, processing, gathering,
marketing or transporting oil, natural gas, other hydrocarbons and minerals through agreements,
transactions, interests or arrangements that permit one to share risks or costs, comply with
regulatory requirements regarding local ownership or satisfy other objectives customarily achieved
through the conduct of the Oil and Gas Business jointly with third parties, including:

     (1) ownership interests in oil, natural gas, other hydrocarbon and mineral properties
or gathering, transportation, processing, storage or related systems; and

     (2) entry into, and Investments and expenditures in the form of or pursuant to,
operating agreements, working interests, royalty interests, mineral leases, processing
agreements, farm-in agreements, farm-out agreements, contracts for the sale, transportation
or exchange of oil, natural gas, other hydrocarbons and minerals, production sharing
agreements, development agreements, area of mutual interest agreements, unitization
agreements, pooling arrangements, joint bidding agreements, service contracts, joint venture
agreements, partnership agreements (whether general or limited), limited liability company
agreements, subscription agreements, stock purchase agreements, stockholder agreements and
other similar agreements with third parties (including Unrestricted Subsidiaries).

          “Permitted Holders” means:

	 	(1)	 	I. Jon Brumley;
	 
	 	(2)	 	Jon S. Brumley;

-24-

 

	 	(3)	 	trusts, the sole beneficiaries and trustees of which are the
individuals listed in clauses (1) and (2) above or their immediate family
members; and
	 
	 	(4)	 	corporations, partnerships and other entities (a) of which the
individuals listed in clauses (1) and (2) above or their immediate family
members are the beneficial owners of all Capital Stock and other equity or
voting interests and (b) that are controlled by such individuals and their
immediate family members.

          “Permitted Investment” means an Investment by the Company or any Restricted Subsidiary in:

	 	(1)	 	(a) the Company, (b) a Restricted Subsidiary or (c) a Person
that will, upon the making of such Investment, become a Restricted Subsidiary;
provided, however, that the primary business of such Restricted
Subsidiary is a Related Business, or (d) another Person if, as a result of such
Investment, such other Person is merged or consolidated with or into, or
transfers or conveys all or substantially all its assets to, the Company or a
Restricted Subsidiary; provided, however, that the primary
business of such Person is a Related Business;
	 
	 	(2)	 	cash and Temporary Cash Investments;
	 
	 	(3)	 	receivables owing to the Company or any Restricted Subsidiary
if created or acquired in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms; provided,
however, that such trade terms may include such concessionary trade
terms as the Company or any such Restricted Subsidiary deems reasonable under
the circumstances;
	 
	 	(4)	 	payroll, travel and similar advances to cover matters that are
expected at the time of such advances ultimately to be treated as expenses for
accounting purposes and that are made in the ordinary course of business;
	 
	 	(5)	 	loans or advances to officers, directors and employees made in
the ordinary course of business consistent with past practices of the Company
or such Restricted Subsidiary;
	 
	 	(6)	 	Capital Stock, obligations or securities received in settlement
of debts created in the ordinary course of business and owing to the Company or
any Restricted Subsidiary or in satisfaction of judgments;
	 
	 	(7)	 	any Person to the extent such Investment represents the
non-cash portion of the consideration received for an Asset Disposition as
permitted pursuant to Section 4.06 or consideration received for a disposition
not constituting an Asset Disposition;

-25-

 

	 	(8)	 	any Person where such Investment was acquired by the Company or
any of its Restricted Subsidiaries (a) in exchange for any other Investment or
accounts receivable held by the Company or any such Restricted Subsidiary in
connection with or as a result of a bankruptcy, workout, reorganization or
recapitalization of the issuer of such other Investment or accounts receivable
or (b) as a result of a foreclosure by the Company or any of its Restricted
Subsidiaries with respect to any secured Investment or other transfer of title
with respect to any secured Investment in default;
	 
	 	(9)	 	any acquisitions of Capital Stock solely in exchange for
Capital Stock (other than Disqualified Stock) of the Company; provided,
however, that the fair market value of such acquired Capital Stock, when taken
together with all other Capital Stock acquired pursuant to this clause (9) and
at the time owned by the Company or its Restricted Subsidiaries, does not
exceed $10.0 million;
	 
	 	(10)	 	Hedging Obligations;
	 
	 	(11)	 	obligations of one or more officers, directors or employees of
the Company or any of its Restricted Subsidiaries in connection with such
individual’s acquisition of shares of Capital Stock of the Company (and
refinancings of the principal thereof and accrued interest thereon) so long as
no net cash or other assets of the Company and its Restricted Subsidiaries are
paid by the Company or any of its Restricted Subsidiaries to such individuals
in connection with the acquisition of any such obligations;
	 
	 	(12)	 	Existing Investments and any Investments made with the proceeds
of any dispositions thereof;
	 
	 	(13)	 	Permitted Business Investments;
	 
	 	(14)	 	Guarantees of performance or other obligations (other than
Indebtedness) arising in the ordinary course in the Oil and Gas Business,
including obligations under oil and natural gas exploration, development, joint
operating, and related agreements and licenses or concessions related to the
Oil and Gas Business;
	 
	 	(15)	 	Investments in prepaid expenses, negotiable instruments held
for collection or deposit and lease, utility and workers compensation,
performance and similar deposits entered into as a result of the operations of
the business in the ordinary course of business;
	 
	 	(16)	 	Investments in a wholly-owned Unrestricted Subsidiary that
constructs and owns an office building for use as the Company’s headquarters in
an aggregate amount not to exceed $10.0 million at any one time outstanding;
	 
	 	(17)	 	Investments in Capital Stock of any Oil and Gas Royalty Trust;
and

-26-

 

	 	(18)	 	Investments in any Person, not otherwise permitted to be made
pursuant to clause (1) through (17), in an aggregate amount, which when taken
together with all other Investments made on or after the Issue Date pursuant to
this clause, does not exceed $20.0 million at any one time outstanding (after
giving effect to any reductions in the aggregate amount of such Investments as
a result of the disposition thereof, including through liquidation, repayment
or other reduction (but excluding dividends) for cash, the aggregate amount of
such reductions not to exceed the aggregate amount of such Investments
outstanding and previously made pursuant to this clause (18).

          “Permitted Liens” means the following types of Liens:

	 	(1)	 	Liens securing Senior Indebtedness;
	 
	 	(2)	 	Liens in favor of the Company or a Restricted Subsidiary;
	 
	 	(3)	 	Liens securing the Securities, any Subsidiary Guarantee or
other obligations arising under this Indenture;
	 
	 	(4)	 	Liens existing as of the Issue Date;
	 
	 	(5)	 	Liens for taxes, assessments and governmental charges or claims
either (A) not delinquent or (B) contested in good faith by appropriate
proceedings and as to which the Company or its Restricted Subsidiaries shall
have set aside on its books such reserves as may be required pursuant to GAAP;
	 
	 	(6)	 	statutory and contractual Liens of landlords and Liens of
carriers, warehousemen, mechanics, suppliers, materialmen, repairmen and other
Liens imposed by law or contract incurred in the ordinary course of business
for sums not delinquent or being contested in good faith, if such reserve or
other appropriate provision, if any, as shall be required by GAAP shall have
been made in respect thereof;
	 
	 	(7)	 	Liens incurred or deposits or pledges made in the ordinary
course of business in connection with workers’ compensation, unemployment
insurance and other types of social security, or to secure the payment or
performance of tenders, statutory or regulatory obligations, surety and appeal
bonds, bids, leases, government contracts and leases, performance and return of
money bonds and other similar obligations, including letters of credit and bank
guarantees required or requested by the United States, any State thereof or any
foreign government or any subdivision, department, agency, organization or
instrumentality of any of the foregoing in connection with any contract or
statute (exclusive of obligations for the payment of borrowed money but
including lessee or operator obligations under statutes, governmental
regulations, contracts or instruments related to the ownership, exploration and
production of oil,

-27-

 

	 	 	 	natural gas, other hydrocarbons and minerals on state, Federal or foreign
lands or waters);
	 
	 	(8)	 	Liens arising out of judgments, decrees, orders or awards not
constituting an Event of Default;
	 
	 	(9)	 	leases, subleases, licenses or sublicenses to third parties
entered into in the ordinary course of business;
	 
	 	(10)	 	Liens on, or related to, assets to secure all or part of the
costs incurred in the ordinary course of the Oil and Gas Business for the
exploration, drilling, development, production, processing, transportation,
marketing, storage or operation thereof;
	 
	 	(11)	 	Liens on pipeline or pipeline facilities that arise under
operation of law;
	 
	 	(12)	 	Liens arising under operating agreements, joint venture
agreements, partnership agreements, oil, natural gas, other hydrocarbon and
mineral leases, farm-out or farm-in agreements, division orders, contracts for
the sale, transportation or exchange of oil or natural gas, unitization and
pooling declarations and agreements, area of mutual interest agreements and
other agreements that are customary in the Oil and Gas Business;
	 
	 	(13)	 	Liens reserved in oil, natural gas, other hydrocarbon and
mineral leases for bonus or rental payments and for compliance with the terms
of such leases;
	 
	 	(14)	 	Liens constituting survey exceptions, encumbrances, easements,
and reservations of, and rights to others for, rights-of-way, zoning and other
restrictions as to the use of real properties, and minor defects of title
which, in the case of any of the foregoing, do not secure the payment of
borrowed money, and in the aggregate do not materially adversely affect the
value of the assets of the Company and its Restricted Subsidiaries, taken as a
whole, or materially impair the use of such properties for the purposes for
which such properties are held by the Company or such Subsidiaries;
	 
	 	(15)	 	Liens encumbering assets under construction arising from
progress or partial payments by a customer of the Company or its Restricted
Subsidiaries relating to such assets;
	 
	 	(16)	 	Liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual or warranty requirements of the Company
or any of its Restricted Subsidiaries, including rights of offset and set-off;
	 
	 	(17)	 	Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person’s obligations in respect of
bankers’

-28-

 

	 	 	 	acceptances issued or created for the account of such Person to facilitate
the purchase, shipment or storage of such inventory or other goods;
	 
	 	(18)	 	Liens arising under this Indenture in favor of the Trustee for
its own benefit and similar Liens in favor of other trustees, agents and
representatives arising under instruments governing Indebtedness permitted to
be incurred under this Indenture; provided, however, that such Liens are solely
for the benefit of the trustees, agents or representatives in their capacities
as such and not for the benefit of the holders of such Indebtedness;
	 
	 	(19)	 	set-off, chargeback and other rights of depositary and
collection banks and other regulated financial institutions with respect to
money or instruments of the Company or any of its Restricted Subsidiaries on
deposit with or in the possession of such institutions;
	 
	 	(20)	 	Liens arising from the deposit of funds or securities in trust
for the purpose of decreasing or defeasing Indebtedness so long as such deposit
of funds or securities and such decreasing or defeasing of Indebtedness are
permitted under Section 4.04;
	 
	 	(21)	 	any Lien existing on any Property of a Person at the time such
Person is merged or consolidated with or into the Company or a Restricted
Subsidiary or becomes a Restricted Subsidiary (and not incurred in anticipation
of or in connection with such transaction), provided that such Liens are not
extended to other Property of the Company or the Restricted Subsidiaries;
	 
	 	(22)	 	any Lien existing on any Property at the time of the
acquisition thereof (and not incurred in anticipation of or in connection with
such transaction), provided that such Liens are not extended to other Property
of the Company or the Restricted Subsidiaries;
	 
	 	(23)	 	Liens to secure Production Payments that are not prohibited by
this Indenture to the extent such Liens are limited to the assets that are the
subject of such Production Payments; and
	 
	 	(24)	 	Liens to secure a Refinancing Indebtedness incurred to
refinance Indebtedness that was secured by a Lien permitted under this
Indenture and that was incurred in accordance with the provisions of this
Indenture; provided that such Liens do not extend to or cover any
property or assets of the Company or any Restricted Subsidiary other than
assets or property securing the Indebtedness so refinanced.

          In each case set forth above, notwithstanding any stated limitation on the assets that may be
subject to such Lien, a Permitted Lien on a specified asset or group or type of assets may include
Liens on all improvements, additions and accessions thereto and all products and

-29-

 

proceeds thereof (including, without limitation, dividends, distributions and increases in
respect thereof).

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

          “Preferred Stock”, as applied to the Capital Stock of any Person, means Capital Stock of any
class or classes (however designated) which is preferred as to the payment of dividends or
distributions, or as to the distribution of assets upon any voluntary or involuntary liquidation or
dissolution of such Person, over shares of Capital Stock of any other class of such Person.

          “principal” of a Security means the principal of the Security plus the premium, if any,
payable on the Security which is due or overdue or is to become due at the relevant time.

          “Private Exchange” means the offer by the Company, pursuant to the Registration Rights
Agreement, to the Initial Purchaser to issue and deliver to the Initial Purchaser, in exchange for
the Initial Securities held by the Initial Purchaser as part of its initial distribution, a like
aggregate principal amount of Private Exchange Securities.

          “Private Exchange Securities” means any 6.0% Senior Subordinated Notes Due 2015 issued in
connection with a Private Exchange.

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

          “Production Payments and Reserve Sales” means the grant or transfer to any Person of a
Dollar-Denominated Production Payment, Volumetric Production Payment, royalty, overriding royalty,
net profits interest, master limited partnership interest or other interest in oil and natural 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.

          “Public Equity Offering” means an underwritten primary public offering of common stock of the
Company pursuant to an effective registration statement under the Securities Act.

          “Purchase Agreement” means (1) with respect to the Initial Securities issued on the Issue
Date, the Purchase Agreement dated June 30, 2005, among the Company, the Subsidiary Guarantors and
the Initial Purchaser, and (2) with respect to each issuance of Additional Securities, the purchase
agreement or underwriting agreement among the Company and the Persons purchasing such Additional
Securities.

          “Refinance” means, in respect of any Indebtedness, to refinance, extend, renew, refund, repay,
prepay, redeem, defease or retire, or to issue other Indebtedness in exchange or replacement for,
such Indebtedness. “Refinanced” and “Refinancing” shall have correlative meanings.

-30-

 

          “Refinancing Indebtedness” means Indebtedness that Refinances any Indebtedness of the Company
or any Restricted Subsidiary existing on the Issue Date or Incurred in compliance with this
Indenture, including Indebtedness that Refinances Refinancing Indebtedness; provided,
however, that:

	 	(1)	 	such Refinancing Indebtedness has a Stated Maturity no earlier
than the Stated Maturity of the Indebtedness being Refinanced;
	 
	 	(2)	 	such Refinancing Indebtedness has an Average Life at the time
such Refinancing Indebtedness is Incurred that is equal to or greater than the
Average Life of the Indebtedness being Refinanced; and
	 
	 	(3)	 	such Refinancing Indebtedness has an aggregate principal amount
(or if Incurred with original issue discount, an aggregate issue price) that is
equal to or less than the aggregate principal amount (or if Incurred with
original issue discount, the aggregate accreted value) then outstanding or
committed (plus accrued interest thereon and fees and expenses, including any
premium and defeasance costs) under the Indebtedness being Refinanced;

provided further, however, that Refinancing Indebtedness shall not include (A)
Indebtedness of a Restricted Subsidiary that is not a Subsidiary Guarantor that Refinances
Indebtedness of the Company or (B) Indebtedness of the Company or a Restricted Subsidiary that
Refinances Indebtedness of an Unrestricted Subsidiary.

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

          “Registration Rights Agreement” means (1) with respect to the Initial Securities issued on the
Issue Date, the Registration Rights Agreement dated July 13, 2005 among the Company, the Subsidiary
Guarantors and the Initial Purchaser, and (2) with respect to each issuance of Additional
Securities issued in a transaction exempt from the registration requirements of the Securities Act,
the registration rights agreement, if any, among the Company and the Persons purchasing such
Additional Securities under the related Purchase Agreement.

          “Related Business” means the Oil and Gas Business and any other business in which the Company
or a Subsidiary was engaged on the Issue Date and any business related, ancillary or complementary
thereto.

          “Representative” means, with respect to a Person, any trustee, agent or representative (if
any) for an issue of Senior Indebtedness of such Person.

          “Restricted Payment” with respect to any Person means:

	 	(1)	 	the declaration or payment of any dividends or any other
distributions of any sort in respect of its Capital Stock (including any
payment in

-31-

 

	 	 	 	connection with any merger or consolidation involving such Person) or
similar payment to the direct or indirect holders of its Capital Stock
(other than dividends or distributions payable solely in its Capital Stock
(other than Disqualified Stock) and dividends or distributions payable
solely to the Company or a Restricted Subsidiary, and other than pro rata
dividends or other distributions (or dividends or other distributions on a
basis more favorable to the Company or to a Restricted Subsidiary) made by a
Subsidiary that is not a Wholly Owned Subsidiary to stockholders (or owners
of an equivalent interest in the case of a Subsidiary that is an entity
other than a corporation));
	 
	 	(2)	 	the purchase, redemption or other acquisition or retirement for
value of any Capital Stock of the Company held by any Person (other than a
Restricted Subsidiary) or of any Capital Stock of a Restricted Subsidiary held
by any Affiliate of the Company (other than the Company or a Restricted
Subsidiary), including in connection with any merger or consolidation and
including the exercise of any option to exchange any Capital Stock (other than
into Capital Stock of the Company that is not Disqualified Stock);
	 
	 	(3)	 	the purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value, prior to scheduled maturity, scheduled
repayment or scheduled sinking fund payment of any Subordinated Obligations of
such Person (other than the purchase, repurchase, redemption, defeasance or
other acquisition of Subordinated Obligations or retirement for value 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 for
value); or
	 
	 	(4)	 	the making of any Investment (other than a Permitted
Investment) in any Person.

          “Restricted Subsidiary” means any Subsidiary of the Company that is not an Unrestricted
Subsidiary.

          “Revolving Credit Facility” means the Credit Agreement dated as of August 19, 2004, as
amended, among the Company, Encore Operating, L.P., Bank of America, N.A., as Administrative Agent
and L/C Issuer, Fortis Capital Corp. and Wachovia Bank, N.A., as Co-Syndication Agents, BNP Paribas
and Citibank, N.A., as Co-Documentation Agents, and the financial institutions listed on Schedule
2.01 thereto, as Lenders.

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

          “Sale/Leaseback Transaction” means an arrangement relating to property owned by the Company or
a Restricted Subsidiary on the Issue Date or thereafter acquired by the Company or a Restricted
Subsidiary whereby the Company or a Restricted Subsidiary transfers

-32-

 

such property to a Person and the Company or a Restricted Subsidiary leases it from such
Person.

          “SEC” means the U.S. Securities and Exchange Commission.

          “Secured Indebtedness” means any Indebtedness of the Company secured by a Lien.

          “Securities” means the Initial Securities, the Exchange Securities and the Private Exchange
Securities, treated as a single class.

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

          “Senior Indebtedness” means with respect to any Person:

	 	(1)	 	Indebtedness of such Person, whether outstanding on the Issue
Date or thereafter Incurred; and
	 
	 	(2)	 	all other Obligations of such Person (including interest
accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to such Person whether or not post-filing interest is
allowed in such proceeding) in respect of Indebtedness described in clause (1)
above;

unless, in the case of clauses (1) and (2), in the instrument creating or evidencing the same or
pursuant to which the same is outstanding, it is provided that such Indebtedness or other
obligations are subordinate or pari passu in right of payment to the Securities or the Subsidiary
Guaranty of such Person, as the case may be; provided, however, that Senior
Indebtedness shall not include:

	 	(1)	 	any obligation of such Person to any Subsidiary;
	 
	 	(2)	 	any liability for Federal, state, local or other taxes owed or
owing by such Person;
	 
	 	(3)	 	any accounts payable or other liability to trade creditors
arising in the ordinary course of business (including Guarantees thereof or
instruments evidencing such liabilities);
	 
	 	(4)	 	any Indebtedness or other Obligation (and any accrued and
unpaid interest in respect thereof) of such Person which is subordinate or
junior in any respect to any other Indebtedness or other Obligation of such
Person;
	 
	 	(5)	 	that portion of any Indebtedness which at the time of
Incurrence is Incurred in violation of this Indenture; or
	 
	 	(6)	 	any Preferred Stock or Disqualified Stock.

-33-

 

          “Senior Subordinated Indebtedness” means, with respect to a Person, the Securities (in the
case of the Company), the Subsidiary Guaranty (in the case of a Subsidiary Guarantor) and any other
Indebtedness of such Person that specifically provides that such Indebtedness is to rank
pari passu with the Securities or such Subsidiary Guaranty, as the case may be, in
right of payment and is not subordinated by its terms in right of payment to any Indebtedness or
other obligation of such Person which is not Senior Indebtedness of such Person.

          “Significant Subsidiary” means any Restricted Subsidiary that would be a “Significant
Subsidiary” of the Company within the meaning of Rule 1-02 under Regulation S-X promulgated by the
SEC.

          “Stated Maturity” means, with respect to any security, the date specified in such security as
the fixed date on which the final payment of principal of such security is due and payable,
including pursuant to any mandatory redemption provision (but excluding any provision providing for
the repurchase of such security at the option of the holder thereof upon the happening of any
contingency unless such contingency has occurred).

          “Subordinated Obligation” means, with respect to a Person, any Indebtedness of such Person
(whether outstanding on the Issue Date or thereafter Incurred) which is subordinate or junior in
right of payment to the Securities or a Subsidiary Guaranty of such Person, as the case may be,
pursuant to a written agreement to that effect.

          “Subsidiary” means, with respect to any Person, any corporation, association, partnership or
other business entity of which more than 50% of the total voting power of shares of Voting Stock is
at the time owned or controlled, directly or indirectly, by (1) such Person; (2) such Person and
one or more Subsidiaries of such Person; or (3) one or more Subsidiaries of such Person. Unless
otherwise specified, “Subsidiary” means a Subsidiary of the Company.

          “Subsidiary Guarantor” means each Subsidiary of the Company that executes the Indenture as a
guarantor on the Issue Date and each other Subsidiary of the Company that thereafter guarantees the
Securities pursuant to the terms of the Indenture, in each case unless and until such subsidiary is
released from its obligations under its Subsidiary Guaranty pursuant to the terms of the Indenture.
As of the Issue Date, the Subsidiary Guarantors are EAP Energy, Inc., EAP Energy Services, L.P.,
EAP Operating, Inc., EAP Properties, Inc., Encore Operating, L.P. and Encore Operating Louisiana,
LLC.

          “Subsidiary Guaranty” means a Guarantee by a Subsidiary Guarantor of the Company’s obligations
with respect to the Securities.

          “Temporary Cash Investments” means any of the following:

	 
	 	(1)	 	any investment in direct obligations of the United States of
America or any agency thereof or obligations guaranteed by the United States of
America or any agency thereof;
	 
	 	(2)	 	investments in demand accounts and time deposit accounts,
bankers acceptances, overnight bank deposits, certificates of deposit and money
market deposits maturing within twelve months of the date of acquisition

-34-

 

	 	 	 	thereof issued by a bank or trust company which is organized under the laws
of the United States of America, any State thereof or any foreign country
recognized by the United States of America, and which bank or trust company
has capital, surplus and undivided profits aggregating in excess of $50.0
million (or the foreign currency equivalent thereof) and has outstanding
debt which is rated “A” (or such similar equivalent rating) or higher by at
least one nationally recognized statistical rating organization (as defined
in Rule 436 under the Securities Act) or any money-market fund sponsored by
a registered broker dealer or mutual fund distributor;
	 
	 	(3)	 	investments in deposits available for withdrawal on demand with
any commercial bank that is organized under the laws of any country in which
the Company or any Restricted Subsidiary maintains an office or is engaged in
the Oil and Gas Business, provided that (i) all such deposits have been made in
such accounts in the ordinary course of business and (ii) such deposits do not
at any one time exceed $10.0 million in the aggregate;
	 
	 	(4)	 	repurchase (or reverse repurchase) obligations with a term of
not more than 30 days for underlying securities of the types described in
clause (1) above entered into with a bank meeting the qualifications described
in clause (2) above;
	 
	 	(5)	 	investments in commercial paper, maturing not more than 90 days
after the date of acquisition, issued by a corporation (other than an Affiliate
of the Company) organized and in existence under the laws of the United States
of America or any foreign country recognized by the United States of America
with a rating at the time as of which any investment therein is made of “P-1”
(or higher) according to Moody’s or “A-1” (or higher) according to S&P; and
	 
	 	(6)	 	investments in securities with maturities of six months or less
from the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States of America, or by any political
subdivision or taxing authority thereof, and rated at least “A” by S&P or “A”
by Moody’s.

          “Transfer Restricted Securities” means Securities that bear or are required to bear the legend
set forth in Section 2.3(b) of the Rule 144A/Regulation S Appendix attached hereto.

          “TIA” or “Trust Indenture Act” means the Trust Indenture Act of 1939 (15 U.S.C. §§
77aaa-77bbbb) as in effect on the date of this Indenture.

          “Treasury Rate” means the yield to maturity at the time of computation of United States
Treasury securities with a constant maturity (as compiled and published in the most recent Federal
Reserve Statistical Release H.15(519) which has become publicly available at least two

-35-

 

Business Days prior to the date fixed for redemption or, in the case of defeasance, prior to
the date of deposit (or, if such Statistical Release is no longer published, any publicly available
source of similar market data)) most nearly equal to the then remaining average life to July 15,
2010 or, in the case of defeasance, to maturity; provided, however, that if the
average life to July 15, 2010 or maturity, as the case may be, of the Securities is not equal to
the constant maturity of a United States Treasury security for which a weekly average yield is
given, the Treasury Rate shall be obtained by linear interpolation (calculated to the nearest
one-twelfth of a year) from the weekly average yields of United States Treasury securities for
which such yields are given, except that if the average life to July 15, 2010 or maturity, as the
case may be, of the Securities is less than one year, the weekly average yield on actually traded
United States Treasury securities adjusted to a constant maturity of one year shall be used.

          “Trustee” means the party named as such in this Indenture until a successor replaces it and,
thereafter, means the successor.

          “Trust Officer” means the Chairman of the Board, the President or any other officer or
assistant officer of the Trustee assigned by the Trustee to administer its corporate trust matters.

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

          “Unrestricted Subsidiary” means:

	 	(1)	 	any Subsidiary of the Company that at the time of
determination shall be designated an Unrestricted Subsidiary by the Board of
Directors in the manner provided below; and
	 
	 	(2)	 	any Subsidiary of an Unrestricted Subsidiary.

The Board of Directors may designate any Subsidiary of the Company (including any newly acquired or
newly formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary or any of its
Subsidiaries own any Capital Stock or Indebtedness of, or holds any Lien on any property of, the
Company or any other Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so
designated; provided, however, that either (A) the Subsidiary to be so designated
has total assets of $1,000 or less or (B) if such Subsidiary has assets greater than $1,000, such
designation would be permitted under Section 4.04. In the case of any designation by the Company
of a Person as an Unrestricted Subsidiary on the first day that such Person is a Subsidiary of the
Company in accordance with the provisions of this Indenture, such designation shall be deemed to
have occurred for all purposes of this Indenture simultaneously with, and automatically upon, such
Person becoming a Subsidiary.

          The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; provided, however, that immediately after giving effect to such
designation (A) the Company could Incur $1.00 of additional Indebtedness under Section 4.03(a) and
(B) no Default shall have occurred and be continuing. Any such designation by the Board of
Directors shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the

-36-

 

resolution of the Board of Directors giving effect to such designation and an Officers’
Certificate certifying that such designation complied with the foregoing provisions.

          “U.S. Government Obligations” means direct obligations (or certificates representing an
ownership interest in such obligations) of the United States of America (including any agency or
instrumentality thereof) for the payment of which the full faith and credit of the United States of
America is pledged and which are not callable at the issuer’s option.

          “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 a Person means all classes of Capital Stock or other interests (including
partnership interests) of such Person then outstanding and normally entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers or trustees thereof.

          “Wholly Owned Subsidiary” means a Restricted Subsidiary all the Capital Stock of which (other
than directors’ qualifying shares) is owned by the Company or one or more Wholly Owned
Subsidiaries.

          SECTION 1.02. Other Definitions.

	 	 	 
	 	 	Defined
	Term	 	in Section
	“Affiliate Transaction”

	 	4.07
	“Bankruptcy Law”

	 	6.01
	“Cash Consideration”

	 	4.06(a)(2)
	“Change of Control Offer”

	 	4.08(b)
	“covenant defeasance option”

	 	8.01(b)
	“Custodian”

	 	6.01
	“Event of Default”

	 	6.01
	“Guaranteed Obligation”

	 	11.01
	“Investment Grade Rating”

	 	4.13
	“legal defeasance option”

	 	8.01(b)
	“Legal Holiday”

	 	13.08
	“Offer”

	 	4.06(b)
	“Offer Amount”

	 	4.06(c)(2)
	“Offer Period”

	 	4.06(c)(2)
	“Paying Agent”

	 	2.03
	“Purchase Date”

	 	4.06(c)(1)
	“Registrar”

	 	2.03
	“Successor Company”

	 	5.01
	“Suspended Covenants”

	 	4.13

-37-

 

          SECTION 1.03. Incorporation by Reference of Trust Indenture Act. This Indenture is subject
to the mandatory provisions of the TIA which are incorporated by reference in and made a part of
this Indenture. The following TIA terms have the following meanings:

          “Commission” means the SEC;

          “indenture securities” means the Securities;

          “indenture security holder” means a Securityholder;

          “indenture to be qualified” means this Indenture;

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

          “obligor” on the indenture securities means the Company and any other obligor on the indenture
securities.

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

          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)	 	“including” means including without limitation;
	 
	 	(5)	 	words in the singular include the plural and words in the
plural include the singular;
	 
	 	(6)	 	unsecured Indebtedness shall not be deemed to be subordinate or
junior to Secured Indebtedness merely by virtue of its nature as unsecured
Indebtedness;
	 
	 	(7)	 	the principal amount of any noninterest bearing or other
discount security at any date shall be the principal amount thereof that would
be shown on a balance sheet of the issuer dated such date prepared in
accordance with GAAP;
	 
	 	(8)	 	the principal amount of any Preferred Stock shall be (i) the
maximum liquidation value of such Preferred Stock or (ii) the maximum mandatory
redemption or mandatory repurchase price with respect to such Preferred Stock,
whichever is greater; and

-38-

 

	 	(9)	 	all references to the date the Securities were originally
issued shall refer to the Issue Date.

ARTICLE 2

The Securities

          SECTION 2.01. Form and Dating. Provisions relating to the Initial Securities, the Private
Exchange Securities and the Exchange Securities are set forth in the Rule 144A/Regulation S
Appendix attached hereto (the “Appendix”), which is hereby incorporated in and expressly made part
of this Indenture. The Initial Securities and the Trustee’s certificate of authentication shall be
substantially in the form of Exhibit 1 to the Appendix, which is hereby incorporated in and
expressly made a part of this Indenture. The Exchange Securities, the Private Exchange Securities
and the Trustee’s certificate of authentication shall be substantially in the form of Exhibit A,
which is hereby incorporated in and expressly made a part of this Indenture. The Securities may
have notations, legends or endorsements required by law, stock exchange rules, agreements to which
the Company is subject, if any, or usage (provided that any such notation, legend or endorsement is
in a form acceptable to the Company). Each Security shall be dated the date of its authentication.
The terms of the Securities set forth in the Appendix and Exhibit A are part of the terms of this
Indenture.

          SECTION 2.02. Execution and Authentication. Two Officers shall sign the Securities for the
Company by manual or facsimile signature. The Company’s seal shall be impressed, affixed,
imprinted or reproduced on the Securities and may be in facsimile form.

          If an Officer whose signature is on a Security no longer holds that office at the time the
Trustee authenticates the Security, the Security shall be valid nevertheless.

          A Security shall not be valid until an authorized signatory of the Trustee manually signs the
certificate of authentication on the Security. The signature shall be conclusive evidence that the
Security has been authenticated under this Indenture.

          On the Issue Date, the Trustee shall authenticate and deliver $300 million of 6.0% Senior
Subordinated Notes Due 2015, and, at any time and from time to time thereafter, the Trustee shall
authenticate and deliver Securities for original issue in an aggregate principal amount specified
in such order, in each case upon a written order of the Company signed by two Officers or by an
Officer and either an Assistant Treasurer or an Assistant Secretary of the Company. Such order
shall specify the amount of the Securities to be authenticated and the date on which the original
issue of Securities is to be authenticated and, in the case of an issuance of
Additional Securities pursuant to Section 2.13 after the Issue Date, shall certify that such
issuance is in compliance with Section 4.03.

          The Trustee may appoint an authenticating agent reasonably acceptable to the Company to
authenticate the Securities. Unless limited by the terms of such appointment, an authenticating
agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture
to authentication by the Trustee includes authentication by such agent.

-39-

 

An authenticating agent
has the same rights as any Registrar, Paying Agent or agent for service of notices and demands.

          SECTION 2.03. Registrar and Paying Agent. The Company shall maintain an office or agency
where Securities may be presented for registration of transfer or for exchange (the “Registrar”)
and an office or agency where Securities may be presented for payment (the “Paying Agent”). The
Registrar shall keep a register of the Securities and of their transfer and exchange. The Company
may have one or more co-registrars and one or more additional paying agents. The term “Paying
Agent” includes any additional paying agent.

          The Company shall enter into an appropriate agency agreement with any Registrar, Paying Agent
or co-registrar not a party to this Indenture, which shall incorporate the terms of the TIA. The
agreement shall implement the provisions of this Indenture that relate to such agent. The Company
shall notify the Trustee of the name and address of any such agent. If the Company fails to
maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be entitled to
appropriate compensation therefor pursuant to Section 7.07. The Company or any Wholly Owned
Subsidiary incorporated or organized within The United States of America may act as Paying Agent,
Registrar, co-registrar or transfer agent.

          The Company initially appoints the Trustee as Registrar and Paying Agent in connection with
the Securities.

          SECTION 2.04. Paying Agent To Hold Money in Trust. Prior to each due date of the principal
of and interest on any Security, the Company shall deposit with the Paying Agent a sum sufficient
to pay such principal and interest when so becoming due. The Company shall require each Paying
Agent (other than the Trustee) to agree in writing that the Paying Agent shall hold in trust for
the benefit of Securityholders or the Trustee all money held by the Paying Agent for the payment of
principal of or interest on the Securities and shall notify the Trustee of any default by the
Company in making any such payment. If the Company or a Subsidiary acts as Paying Agent, it shall
segregate the money held by it as Paying Agent and hold it as a separate trust fund. The Company
at any time may require a Paying Agent to pay all money held by it to the Trustee and to account
for any funds disbursed by the Paying Agent. Upon complying with this Section, the Paying Agent
shall have no further liability for the money delivered to the Trustee.

          SECTION 2.05. Securityholder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent
list available to it of the names and addresses of Securityholders. If the Trustee is not the
Registrar, the Company shall furnish to the Trustee, in writing at least five 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
Securityholders.

          SECTION 2.06. Transfer and Exchange. The Securities shall be issued in registered form and
shall be transferable only upon the surrender of a Security for registration of transfer. When a
Security is presented to the Registrar or a co-registrar with a request to register a transfer, the
Registrar shall register the transfer as requested if the requirements of this Indenture and
Section 8-401(a) of the Uniform Commercial Code are met. When Securities are

-40-

 

presented to the
Registrar or a co-registrar with a request to exchange them for an equal principal amount of
Securities of other denominations, the Registrar shall make the exchange as requested if the same
requirements are met.

          SECTION 2.07. Replacement Securities. If a mutilated Security is surrendered to the
Registrar or if the Holder of a Security claims that the Security has been lost, destroyed or
wrongfully taken, the Company shall issue and the Trustee shall authenticate a replacement Security
if the requirements of Section 8-405 of the Uniform Commercial Code are met and the Holder
satisfies any other reasonable requirements of the Trustee. If required by the Trustee or the
Company, such Holder shall furnish an indemnity bond sufficient in the judgment of the Company and
the Trustee to protect the Company, the Trustee, the Paying Agent, the Registrar and any
co-registrar from any loss which any of them may suffer if a Security is replaced. The Company and
the Trustee may charge the Holder for their expenses in replacing a Security.

          Every replacement Security is an additional obligation of the Company.

          SECTION 2.08. Outstanding Securities. Securities outstanding at any time are all
Securities authenticated by the Trustee except for those canceled by it, those delivered to it for
cancellation and those described in this Section as not outstanding. A Security does not cease to
be outstanding because the Company or an Affiliate of the Company holds the Security.

          If a Security is replaced pursuant to Section 2.07, it ceases to be outstanding unless the
Trustee and the Company receive proof satisfactory to them that the replaced Security is held by a
bona fide purchaser.

          If the Paying Agent segregates and holds in trust, in accordance with this Indenture, on a
redemption date or maturity date money sufficient to pay all principal and interest payable on that
date with respect to the Securities (or portions thereof) to be redeemed or maturing, as the case
may be, and the Paying Agent is not prohibited from paying such money to the Securityholders on
that date pursuant to the terms of this Indenture, then on and after that
date such Securities (or portions thereof) cease to be outstanding and interest on them ceases
to accrue.

          SECTION 2.09. Temporary Securities. Until definitive Securities are ready for delivery,
the Company may prepare and the Trustee shall authenticate temporary Securities. Temporary
Securities shall be substantially in the form of definitive Securities but may have variations that
the Company considers appropriate for temporary Securities. Without unreasonable delay, the
Company shall prepare and the Trustee shall authenticate definitive Securities and deliver them in
exchange for temporary Securities.

          SECTION 2.10. Cancellation. The Company at any time may deliver Securities to the Trustee
for cancellation. The Registrar and the Paying Agent shall forward to the Trustee any Securities
surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else
shall cancel and destroy (subject to the record retention requirements of the Exchange Act) all
Securities surrendered for registration of transfer, exchange, payment or cancellation and deliver
a certificate of such destruction to the Company unless the Company directs the Trustee to deliver
canceled Securities to the Company. The Company may not issue

-41-

 

new Securities to replace Securities
it has redeemed, paid or delivered to the Trustee for cancellation.

          SECTION 2.11. Defaulted Interest. If the Company defaults in a payment of interest on the
Securities, the Company shall pay defaulted interest (plus interest on such defaulted interest to
the extent lawful) in any lawful manner. The Company may pay the defaulted interest to the persons
who are Securityholders on a subsequent special record date. The Company shall fix or cause to be
fixed any such special record date and payment date to the reasonable satisfaction of the Trustee
and shall promptly mail to each Securityholder a notice that states the special record date, the
payment date and the amount of defaulted interest to be paid.

          SECTION 2.12. CUSIP Numbers. The Company in issuing the Securities may use numbers
assigned by the Committee on Uniform Securities Identification Procedures (“CUSIP”) and
corresponding International Securities Identification Numbers (“ISIN”) (if then generally in use)
and, if so, the Trustee shall use CUSIP numbers and corresponding “ISIN’s” (if then generally in
use) in notices of redemption as a convenience to Holders; provided, however, that
any such notice may state that no representation is made as to the correctness of such numbers
either as printed on the Securities or as contained in any notice of a redemption and that reliance
may be placed only on the other identification numbers printed on the Securities, and any such
redemption shall not be affected by any defect in or omission of such numbers. The Company shall
promptly notify the Trustee of any change in the CUSIP or ISIN numbers.

          SECTION 2.13. Issuance of Additional Securities. The Company shall be entitled, subject to its compliance with Section 4.03, to issue Additional
Securities under this Indenture which shall have identical terms as the Initial Securities issued
on the Issue Date, other than with respect to the date of issuance and issue price. The Initial
Securities issued on the Issue Date, any Additional Securities and all Exchange Securities or
Private Exchange Securities issued in exchange therefor shall be treated as a single class for all
purposes under this Indenture.

          With respect to any Additional Securities, the Company shall set forth in a resolution of the
Board of Directors and an Officers’ Certificate, a copy of each which shall be delivered to the
Trustee, the following information:

	 	(1)	 	the aggregate principal amount of such Additional Securities to
be authenticated and delivered pursuant to this Indenture;
	 
	 	(2)	 	the issue price, the issue date and the CUSIP number of such
Additional Securities; provided, however, that no Additional
Securities may be issued at a price that would cause such Additional Securities
to have “original issue discount” within the meaning of Section 1273 of the
Code; and
	 
	 	(3)	 	whether such Additional Securities shall be Transfer Restricted
Securities and issued in the form of Initial Securities as set forth in the
Appendix to this Indenture or shall be issued in the form of Exchange
Securities as set forth in Exhibit A.

-42-

 

ARTICLE 3

Redemption

          SECTION 3.01. Notices to Trustee. If the Company elects to redeem Securities pursuant to
paragraph 5 of the Securities, it shall notify the Trustee in writing of the redemption date, the
principal amount of Securities to be redeemed and the paragraph of the Securities pursuant to which
the redemption will occur.

          The Company shall give each notice to the Trustee provided for in this Section at least 60
days before the redemption date unless the Trustee consents to a shorter period. Such notice shall
be accompanied by an Officers’ Certificate and an Opinion of Counsel from the Company to the effect
that such redemption will comply with the conditions herein.

          SECTION 3.02. Selection of Securities To Be Redeemed. If fewer than all the Securities are
to be redeemed, the Trustee shall select the Securities to be redeemed pro rata or by lot or by a
method that complies with applicable legal and securities exchange requirements, if any, and that
the Trustee in its sole discretion shall deem to be fair and appropriate and in accordance with
methods generally used at the time of selection by fiduciaries in similar circumstances. The
Trustee shall make the selection from outstanding Securities not previously called for redemption.
The Trustee may select for redemption portions of the principal of Securities that have
denominations larger than $1,000. Securities and portions of them the Trustee selects shall be in principal amounts of $1,000 or a whole multiple of $1,000.
Provisions of this Indenture that apply to Securities called for redemption also apply to portions
of Securities called for redemption. The Trustee shall notify the Company promptly of the
Securities or portions of Securities to be redeemed.

          SECTION 3.03. Notice of Redemption. At least 30 days but not more than 60 days before a
date for redemption of Securities, the Company shall mail a notice of redemption by first-class
mail to each Holder of Securities to be redeemed at such Holder’s registered address.

          The notice shall identify the Securities to be redeemed and shall state:

	 	(1)	 	the redemption date;
	 
	 	(2)	 	the redemption price;
	 
	 	(3)	 	the name and address of the Paying Agent;
	 
	 	(4)	 	that Securities called for redemption must be surrendered to
the Paying Agent to collect the redemption price;
	 
	 	(5)	 	if fewer than all the outstanding Securities are to be
redeemed, the identification and principal amounts of the particular Securities
to be redeemed;

-43-

 

	 	(6)	 	that, unless the Company defaults in making such redemption
payment or the Paying Agent is prohibited from making such payment pursuant to
the terms of this Indenture, interest on Securities (or portion thereof) called
for redemption ceases to accrue on and after the redemption date; and
	 
	 	(7)	 	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
Securities.

          At the Company’s request, the Trustee shall give the notice of redemption in the Company’s
name and at the Company’s expense. In such event, the Company shall provide the Trustee with the
information required by this Section.

          SECTION 3.04. Effect of Notice of Redemption. Once notice of redemption is mailed,
Securities called for redemption become due and payable on the redemption date and at the
redemption price stated in the notice. Upon surrender to the Paying Agent, such Securities shall
be paid at the redemption price stated in the notice, plus accrued interest to the redemption date
(subject to the right of Holders of record on the relevant record date to receive interest due on
the related interest payment date). Failure to give notice or any defect in the notice to any
Holder shall not affect the validity of the notice to any other Holder.

          SECTION 3.05. Deposit of Redemption Price. Prior to the redemption date, the Company shall
deposit with the Paying Agent (or, if the Company or a Subsidiary is the Paying Agent, shall
segregate and hold in trust) money sufficient to pay the redemption price of and accrued interest
on all Securities to be redeemed on that date other than Securities or portions of Securities
called for redemption which have been delivered by the Company to the Trustee for cancellation.

          SECTION 3.06. Securities Redeemed in Part. Upon surrender and cancellation of a Security
that is redeemed in part, the Company shall execute and the Trustee shall authenticate for the
Holder (at the Company’s expense) a new Security equal in principal amount to the unredeemed
portion of the Security surrendered.

          Any notice of redemption given pursuant to this Article 3 may be modified by the Company to
conform with the applicable requirements of the Depositary if any of the Securities subject to such
notice are then represented by one or more Global Securities.

ARTICLE 4

Covenants

          SECTION 4.01. Payment of Securities.

          (a) The Company shall promptly pay the principal of and interest on the Securities on the
dates and in the manner provided in the Securities and in this Indenture. Principal and interest
shall be considered paid on the date due if on such date the Trustee or the Paying Agent holds in
accordance with this Indenture money sufficient to pay all principal and interest then due and the
Trustee or the Paying Agent, as the case may be, is not prohibited from paying such money to the
Securityholders on that date pursuant to the terms of this Indenture.

-44-

 

          (b) The Company shall pay interest on overdue principal at the rate specified therefor in the
Securities, and it shall pay interest on overdue installments of interest at the same rate to the
extent lawful.

          SECTION 4.02. SEC Reports. Notwithstanding that the Company may not be subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company shall file with the
SEC (to the extent the SEC will accept such filings) and provide the Trustee and Securityholders
with such annual reports and such information, documents and other reports as are specified in
Sections 13 and 15(d) of the Exchange Act and applicable to a U.S. corporation subject to such
Sections (but, without exhibits in the case of the Securityholders), such information, documents
and other reports to be so filed and provided at the times specified for the filings of such
information, documents and reports under such Sections. In addition, the Company shall furnish to
the Holders of the Securities and to prospective investors, upon the requests of such Holders, any
information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act so long as the Securities are not
freely transferable under the Securities Act. The Company also shall comply with the other
provisions of TIA § 314(a).

          SECTION 4.03. Limitation on Indebtedness.

          (a) The Company shall not, and shall not permit any Restricted Subsidiary to, Incur, directly
or indirectly, any Indebtedness; provided, however, that the Company and the
Subsidiary Guarantors will be entitled to Incur Indebtedness if, on the date of such Incurrence and
after giving effect thereto on a pro forma basis, no Default has occurred and is
continuing and the Consolidated Coverage Ratio exceeds 2.5 to 1.

          (b) Notwithstanding the foregoing Section 4.03(a), the Company and the Restricted Subsidiaries
shall be entitled to Incur any or all of the following Indebtedness:

	 	(1)	 	Indebtedness Incurred by the Company and its Restricted
Subsidiaries pursuant to Credit Facilities; provided, however,
that, immediately after giving effect to any such Incurrence, the aggregate
principal amount of all Indebtedness Incurred under this clause (1) and then
outstanding does not exceed the greater of (A) $300 million less the sum of all
principal payments since the Issue Date with respect to such Indebtedness
pursuant to Section 4.06(a)(3)(A) and (B) $150 million plus 20% of ACNTA as of
the date of such Incurrence;
	 
	 	(2)	 	Indebtedness owed to and held by the Company or a Restricted
Subsidiary; provided, however, that (A) any subsequent issuance
or transfer of any Capital Stock which results in any such Restricted
Subsidiary ceasing to be a Restricted Subsidiary or any subsequent transfer of
such Indebtedness (other than to the Company or a Restricted Subsidiary) shall
be deemed, in each case, to constitute the Incurrence of such Indebtedness by
the obligor thereon and (B) if the Company or a Subsidiary Guarantor is the
obligor on such Indebtedness, unless such

-45-

 

	 	 	 	Indebtedness is owing to the Company
or a Subsidiary Guarantor, such Indebtedness is expressly subordinated to the
prior payment in full in cash of all obligations with respect to the
Securities;
	 
	 	(3)	 	the Securities including the Exchange Securities (but excluding
any Additional Securities) and all Subsidiary Guaranties;
	 
	 	(4)	 	Indebtedness outstanding on the Issue Date (other than
Indebtedness described in clause (1), (2) or (3) of this Section 4.03(b));
	 
	 	(5)	 	Indebtedness of a Restricted Subsidiary Incurred and
outstanding on or prior to the date on which such Subsidiary became a
Restricted Subsidiary or was acquired by the Company (other than Indebtedness
Incurred in connection with, or to provide all or any portion of the funds or
credit support utilized to consummate, the transaction or series of related
transactions pursuant to which such Subsidiary became a Restricted
Subsidiary or was acquired by the Company); provided,
however, that on the date such Subsidiary became a Restricted
Subsidiary or was acquired by the Company and after giving pro
forma effect thereto, the Company would have been able to Incur at
least $1.00 of additional Indebtedness pursuant to Section 4.03(a);
	 
	 	(6)	 	Refinancing Indebtedness in respect of Indebtedness Incurred
pursuant to Section 4.03(a) or pursuant to clause (3), (4), or (5) of this
Section 4.03(b) or this clause (6); provided, however, that to
the extent such Refinancing Indebtedness directly or indirectly Refinances
Indebtedness of a Restricted Subsidiary Incurred pursuant to clause (5) of this
Section 4.03(b), such Refinancing Indebtedness shall be Incurred only by such
Restricted Subsidiary;
	 
	 	(7)	 	Hedging Obligations consisting of Interest Rate Agreements
directly related to Indebtedness outstanding on the Issue Date or permitted to
be Incurred by the Company and its Restricted Subsidiaries pursuant to this
Indenture;
	 
	 	(8)	 	Hedging Obligations consisting of Oil and Natural Gas Hedging
Contracts and Currency Agreements entered into in the ordinary course of
business for the purpose of limiting risks that arise in the ordinary course of
business of the Company and its Subsidiaries;
	 
	 	(9)	 	Indebtedness in respect of performance, bid and surety bonds,
including Guarantees and letters of credit functioning as or supporting such
performance, bid and surety bonds, completion guarantees and other
reimbursement obligations provided by the Company or any Restricted Subsidiary
in the ordinary course of business (in each case other than for an obligation
for money borrowed);
	 
	 	(10)	 	Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument drawn against

-46-

 

	 	 	 	insufficient funds in the ordinary course of business; provided,
however, that such Indebtedness is extinguished within two Business
Days of its Incurrence;
	 
	 	(11)	 	Indebtedness consisting of any Guarantee by the Company or a
Subsidiary Guarantor of Indebtedness of the Company or a Subsidiary Guarantor
outstanding on the Issue Date or permitted by this Indenture to be Incurred by
the Company or a Subsidiary Guarantor;
	 
	 	(12)	 	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, cost of
construction or improvement or carrying cost of assets used in the business
of the Company and its Restricted Subsidiaries and related financing costs,
and Refinancing Indebtedness Incurred to Refinance any Indebtedness Incurred
pursuant to this clause, in an aggregate principal amount at any one time
outstanding not to exceed $25.0 million;
	 
	 	(13)	 	Indebtedness arising from any agreement providing for
indemnities, Guarantees, purchase price adjustments, holdbacks, contingency
payment obligations based on the performance of the acquired or disposed assets
or similar obligations (other than Guarantees of Indebtedness) Incurred by any
Person in connection with the acquisition or disposition of assets;
	 
	 	(14)	 	Indebtedness in respect of in-kind obligations relating to net
oil or natural gas balancing positions arising in the ordinary course of
business;
	 
	 	(15)	 	Non-Recourse Purchase Money Indebtedness Incurred by the
Company and any Subsidiary Guarantors; provided, however, that immediately
after giving effect to any such Incurrence, the aggregate principal amount of
all Non-Recourse Purchase Money Indebtedness Incurred under this clause (15)
and then outstanding does not exceed $25.0 million; and
	 
	 	(16)	 	Indebtedness of the Company or of any of its Restricted
Subsidiaries in an aggregate principal amount which, when taken together with
all other Indebtedness of the Company and its Restricted Subsidiaries
outstanding on the date of such Incurrence (other than Indebtedness permitted
by clauses (1) through (15) of this Section 4.03(b) or Section 4.03(a)) does
not exceed $40.0 million of which not more than $20.0 million may be
Indebtedness of Restricted Subsidiaries that are not Subsidiary Guarantors.

          (c) Notwithstanding the foregoing, neither the Company nor any Subsidiary Guarantor will incur
any Indebtedness pursuant to Section 4.03(b) if the proceeds thereof are used, directly or
indirectly, to Refinance any Subordinated Obligations of the Company or any Subsidiary Guarantor
unless such Indebtedness shall be subordinated to the Securities or the applicable Subsidiary
Guaranty to at least the same extent as such Subordinated Obligations.

-47-

 

          (d) For purposes of determining compliance with this Section 4.03:

	 	(1)	 	any Indebtedness remaining outstanding under the Revolving
Credit Facility after the application of the net proceeds from the sale of the
Securities will be treated as Incurred on the Issue Date under Section
4.03(b)(1);
	 
	 	(2)	 	in the event that an item of Indebtedness (or any portion
thereof) meets the criteria of more than one of the types of Indebtedness
described above, or is entitled to be incurred in compliance with the
Consolidated Coverage Ratio in Section 4.03(a), the Company, in its sole
discretion, may classify such item of Indebtedness (or any portion thereof) in
any manner that
complies with this Section 4.03 and will only be required to include the
amount and type of such Indebtedness in one of the above clauses; and
	 
	 	(3)	 	the Company will be entitled to divide and classify an item of
Indebtedness in more than one of the types of Indebtedness described above or
as having been incurred in compliance with the Consolidated Coverage Ratio in
Section 4.03(a).

          (e) Notwithstanding Sections 4.03(a) and (b), neither the Company nor any Subsidiary Guarantor
will Incur any Indebtedness if such Indebtedness is subordinate or junior ranking in right of
payment to any Senior Indebtedness of such Person, as applicable, unless such Indebtedness is
Senior Subordinated Indebtedness or is expressly subordinated in right of payment to Senior
Subordinated Indebtedness of such Person.

          SECTION 4.04. Limitation on Restricted Payments.

          (a) The Company shall not, and shall not permit any Restricted Subsidiary, directly or
indirectly, to make a Restricted Payment if at the time the Company or such Restricted Subsidiary
makes such Restricted Payment:

	 	(1)	 	a Default shall have occurred and be continuing (or would
result therefrom);
	 
	 	(2)	 	the Company is not entitled to Incur an additional $1.00 of
Indebtedness pursuant to Section 4.03(a); or
	 
	 	(3)	 	the aggregate amount of such Restricted Payment and all other
Restricted Payments since April 2, 2004 would exceed the sum of (without
duplication):

	 	(A)	 	50% of the Consolidated Net Income accrued
during the period (treated as one accounting period) from the beginning
of the fiscal quarter immediately following the fiscal quarter during
which April 2, 2004 occurs to the end of the most recent fiscal quarter
for which financial statements of the Company are publicly available
prior to the date of such Restricted Payment (or, in case such

-48-

 

	 	 	 	Consolidated Net Income shall be a deficit, minus 100% of such
deficit); plus
	 
	 	(B)	 	100% of the aggregate Net Cash Proceeds or the
fair market value of property other than cash (including Capital Stock
of Persons engaged in the Oil and Gas Business or assets used in the
Oil and Gas Business) received by the Company from the issuance or sale
of its Capital Stock (other than Disqualified Stock) subsequent to
April 2, 2004 (other than an issuance or sale to a Subsidiary of the
Company and other than an issuance or sale to an employee stock
ownership plan or to a trust established by the Company or any of its
Subsidiaries for the benefit of their employees) and 100% of any cash
capital contribution, or the fair market value of property other than
cash, received by the Company from its shareholders subsequent to
April 2, 2004; plus
	 
	 	(C)	 	the aggregate Net Cash Proceeds received by the
Company subsequent to April 2, 2004 from the issuance or sale of its
Capital Stock (other than Disqualified Stock) to an employee stock
ownership plan or to a trust established by the Company or any of its
Subsidiaries for the benefit of their employees; provided,
however, that if such employee stock ownership plan or trust
Incurs any Indebtedness to finance the purchase of such Capital Stock,
such aggregate amount shall be limited to the excess of such Net Cash
Proceeds over the amount of such Indebtedness plus an amount equal to
any increase in the Consolidated Net Worth of the Company resulting
from principal repayments made from time to time by such employee stock
ownership plan or trust with respect to such Indebtedness; plus
	 
	 	(D)	 	the amount by which Indebtedness of the Company
or a Restricted Subsidiary is reduced on the Company’s consolidated
balance sheet upon the conversion or exchange subsequent to April 2,
2004 of any Indebtedness of the Company or any Restricted Subsidiary
convertible or exchangeable for Capital Stock (other than Disqualified
Stock) of the Company (less the amount of any cash, or the fair value
of any other property, distributed by the Company upon such conversion
or exchange); provided, however, that the foregoing
amount shall not exceed the Net Cash Proceeds received by the Company
or any Restricted Subsidiary from the sale of such Indebtedness
(excluding Net Cash Proceeds from sales to a Subsidiary of the Company
or to an employee stock ownership plan or to a trust established by the
Company or any of its Subsidiaries for the benefit of their employees);
plus
	 
	 	(E)	 	an amount equal to the sum of (x) the net
reduction in the Investments (other than Permitted Investments) made by
the

-49-

 

	 	 	 	Company or any Restricted Subsidiary in any Person (including any
Unrestricted Subsidiary) resulting from repurchases, repayments or
redemptions of such Investments by such Person, proceeds realized on
the sale of such Investment and proceeds representing the return of
capital (excluding dividends and distributions), in each case received
by the Company or any Restricted Subsidiary, and (y) to the extent such
Person is an Unrestricted Subsidiary, the portion (proportionate to the
Company’s equity interest in such Subsidiary) of the fair market value
of the net assets of such Unrestricted Subsidiary at the time
such Unrestricted Subsidiary is designated a Restricted Subsidiary;
provided, however, that to the extent the foregoing
sum exceeds, in the case of any such Person or Unrestricted
Subsidiary, the amount of Investments (excluding Permitted
Investments) previously made (and treated as a Restricted Payment) by
the Company or any Restricted Subsidiary in such Person or
Unrestricted Subsidiary, such excess shall not be included in this
clause (E) unless the amount represented by such excess has not been
and will not be taken into account in one of the foregoing clauses
(A), (B), (C) or (D); plus
	 
	 	(F)	 	$25.0 million.

          (b) The preceding provisions will not prohibit:

	 	(1)	 	any Restricted Payment made out of the Net Cash Proceeds of the
substantially concurrent issuance or sale of, or made by conversion into or
exchange for, Capital Stock of the Company (other than Disqualified Stock and
other than Capital Stock issued or sold to a Subsidiary of the Company or an
employee stock ownership plan or to a trust established by the Company or any
of its Subsidiaries for the benefit of their employees) or a substantially
concurrent cash capital contribution received by the Company from one or more
of its shareholders; provided, however, that (A) such
Restricted Payment shall be excluded in the calculation of the amount of
Restricted Payments under Section 4.04(a)(3) and (B) the Net Cash Proceeds from
such sale or such cash capital contribution (to the extent so used for such
Restricted Payment) shall be excluded from the calculation of amounts under
Section 4.04(a)(3)(B);
	 
	 	(2)	 	any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations of the Company
or any Subsidiary Guarantor made by exchange for, or out of the proceeds of the
substantially concurrent Incurrence or sale of, Indebtedness which is permitted
to be Incurred pursuant to Section 4.03; provided, however,
that such purchase, repurchase, redemption, defeasance or other acquisition or
retirement for value shall be excluded in the calculation of the amount of
Restricted Payments under Section 4.04(a)(3);

-50-

 

	 	(3)	 	any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Disqualified Stock of the Company or a
Subsidiary Guarantor made by conversion into or exchange for, or out of the
proceeds of the substantially concurrent issuance or sale (other than to a
Subsidiary of the Company or an employee stock ownership plan or to a trust
established by the Company or any of its Subsidiaries for the benefit of their
employees) of, Disqualified Stock of the Company which is permitted to be
issued pursuant to Section 4.03; provided, however, that such
purchase, repurchase, redemption, defeasance or other acquisition or
retirement for value shall be excluded in the calculation of the amount of
Restricted Payments under Section 4.04(a)(3);
	 
	 	(4)	 	dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividend would have complied with
this Section 4.04; provided, however, that at the time of
payment of such dividend, no other Default shall have occurred and be
continuing (or result therefrom); provided further, however,
that such dividend shall be included in the calculation of the amount of
Restricted Payments under Section 4.04(a)(3) at the time of payment;
	 
	 	(5)	 	so long as no Default has occurred and is continuing, the
purchase, redemption or other acquisition or retirement for value of shares of
Capital Stock of the Company or any of its Subsidiaries from employees, former
employees, directors or former directors of the Company or any of its
Subsidiaries (or the respective heirs, estates or permitted transferees of such
employees, former employees, directors or former directors), pursuant to the
terms of the agreements (including employment agreements) or plans (or
amendments thereto) approved by the Board of Directors under which such
individuals purchase or sell or are granted the option to purchase or sell,
            shares of such Capital Stock; provided, however, that the
aggregate amount of such purchases, redemptions and other acquisitions and
retirements (excluding amounts representing cancellation of Indebtedness) shall
not exceed $2.0 million in any calendar year; provided further,
however, that such purchases, redemptions and other acquisitions and
retirements shall be excluded in the calculation of the amount of Restricted
Payments under Section 4.04(a)(3);
	 
	 	(6)	 	repurchases, acquisitions or retirements of shares of Company
common stock deemed to occur upon the exercise of stock options or similar
rights issued under employee benefit plans when shares are surrendered to pay
all or a portion of the exercise price or to satisfy any federal income tax
obligations; provided, however, that such repurchases,
acquisitions or retirements shall be excluded in the calculation of the amount
of Restricted Payments under Section 4.04(a)(3);
	 
	 	(7)	 	the payment of cash in lieu of fractional shares of Capital
Stock in connection with any transaction otherwise permitted under this Section

-51-

 

	 	 	 	4.04; provided, however, that such payment will be excluded in
the calculation of the amount of Restricted Payments under Section 4.04(a)(3);
	 
	 	(8)	 	payments to dissenting stockholders (x) pursuant to applicable
law or (y) in connection with the settlement or other satisfaction of legal
claims made pursuant to or in connection with a consolidation, merger or
transfer of assets in connection with a transaction that is not prohibited by
this Indenture; provided, however, that such payments will be
included in the
calculation of the amount of Restricted Payments under Section 4.04(a)(3).
	 
	 	(9)	 	upon the occurrence of a Change of Control or an Asset
Disposition and within 60 days after the completion of the offer to repurchase
the Securities pursuant to Sections 4.06 or 4.08, (including the purchase of
all Securities tendered), any purchase, repurchase, redemption, defeasance,
acquisition or other retirement for value of Subordinated Obligations required
pursuant to the terms thereof as a result of such Change of Control or Asset
Disposition at a purchase or redemption price not to exceed 101% of the
outstanding principal amount thereof, plus accrued and unpaid interest thereon,
if any; provided, however, that (A) at the time of such
purchase, repurchase, redemption, defeasance or other acquisition or retirement
for value, no Default shall have occurred and be continuing (or would result
therefrom), and (B) such purchase, repurchase, redemption, defeasance or other
acquisition and retirement for value will be excluded in the calculation of the
amount of Restricted Payments under Section 4.04(a)(3).

          The amount of all Restricted Payments (other than cash) shall be the fair market value on the
date of the Restricted Payment of the assets proposed to be transferred by the Company or such
Restricted Subsidiary, as the case may be, in accordance with the Restricted Payment.

          For purposes of determining compliance with this Section 4.04, in the event that a Restricted
Payment meets the criteria of more than one of the types of Restricted Payments described above,
the Company, in its sole discretion, may order and classify such Restricted Payment in any manner
in compliance with this Section 4.04.

          SECTION 4.05. Limitation on Restrictions on Distributions from Restricted Subsidiaries.
The Company shall not, and shall not permit any Restricted Subsidiary to, create or otherwise cause
or permit to exist or become effective any consensual encumbrance or restriction on the ability of
any Restricted Subsidiary to (a) pay dividends or make any other distributions on its Capital Stock
to the Company or a Restricted Subsidiary or pay any Indebtedness owed to the Company, (b) make any
loans or advances to the Company or (c) transfer any of its property or assets to the Company,
except:

-52-

 

	 	(1)	 	with respect to clauses (a), (b) and (c),

	 	(A)	 	any encumbrance or restriction pursuant to an
agreement governing Indebtedness or Capital Stock and other agreements
or instruments in effect at or entered into on the Issue Date;
	 
	 	(B)	 	any encumbrance or restriction with respect to
a Restricted Subsidiary pursuant to an agreement relating to any
Indebtedness Incurred by such Restricted Subsidiary or Capital Stock or
other
agreement or instrument of such Restricted Subsidiary in existence on
or prior to the date on which such Restricted Subsidiary was acquired
by the Company or otherwise became a Restricted Subsidiary (other
than Indebtedness Incurred, Capital Stock issued or agreements or
instruments entered into as consideration in, or to provide all or
any portion of the funds or credit support utilized to consummate,
the transaction or series of related transactions pursuant to which
such Restricted Subsidiary became a Restricted Subsidiary or was
acquired by the Company) and outstanding on such date;
	 
	 	(C)	 	any encumbrance or restriction pursuant to an
agreement effecting a Refinancing in whole or in part of Indebtedness
Incurred pursuant to an agreement referred to in subclause (A) or (B)
of clause (1) of this Section 4.05 or this subclause (C) or subclause
(B) of clause (2) of this Section 4.05 or contained in any amendment
to, or modification, restatement, renewal, increase, supplement,
replacement or extension of, an agreement referred to in subclause (A)
or (B) of clause (1) of this Section 4.05 or this clause (C) or
subclause (B) of clause (2) of this Section 4.05; provided,
however, that the encumbrances and restrictions with respect to
such Restricted Subsidiary contained in any such refinancing agreement
or amendment, modification, restatement, renewal, increase, supplement,
replacement or extension agreement are not materially more restrictive,
taken as a whole, than encumbrances and restrictions with respect to
such Restricted Subsidiary contained in such predecessor agreements;
	 
	 	(D)	 	any customary encumbrance or restriction with
respect to a Restricted Subsidiary imposed pursuant to a merger
agreement or an agreement entered into for the sale or disposition of
all or substantially all the Capital Stock or assets of such Restricted
Subsidiary pending the closing of such sale or disposition;
	 
	 	(E)	 	customary encumbrances and restrictions
contained in agreements of the types described in the definition of the
term “Permitted Business Investments;” and

-53-

 

	 	(F)	 	customary supermajority voting provisions and
other customary provisions with respect to the disposition or
distribution of assets, each contained in corporate charters, bylaws,
stockholders’ agreements, limited liability company agreements,
partnership agreements, joint venture agreements and other similar
agreements entered into in the ordinary course of business of the
Company and its Restricted Subsidiaries; and

	 	(2)	 	with respect to clause (c) only,

	 	(A)	 	any such encumbrance or restriction consisting
of customary nonassignment provisions (including provisions forbidding
subletting or sublicensing) in leases governing leasehold interests and
licenses to the extent such provisions restrict the transfer of the
lease or license or the property leased, or licensed thereunder;
	 
	 	(B)	 	any encumbrance or restriction contained in
credit agreements, security agreements or mortgages securing
Indebtedness of the Company or a Restricted Subsidiary or in Production
Payments and Reserve Sales, to the extent such encumbrance or
restriction restricts the transfer of the property subject to such
credit agreements, security agreements or mortgages or Production
Payments and Reserve Sales;
	 
	 	(C)	 	encumbrances and restrictions contained in any
agreement, instrument or Capital Stock assumed by the Company or any of
its Restricted Subsidiaries or for which any of them becomes liable as
in effect at the time of such transaction (except to the extent such
agreement, instrument or Capital Stock was entered into in connection
with or in contemplation of such transaction), which encumbrances and
restrictions are not applicable to any assets other than assets
acquired in connection with such transaction and all improvements,
additions and accessions thereto and products and proceeds thereof;
	 
	 	(D)	 	restrictions on cash or other deposits imposed
by customers under contracts entered into in the ordinary course of
business;
	 
	 	(E)	 	encumbrances and restrictions contained in
contracts entered into in the ordinary course of business, not relating
to any Indebtedness, and that do not, individually or in the aggregate,
detract from the value of, or from the ability of the Company and the
Restricted Subsidiaries to realize the value of, property or assets of
the Company or any Restricted Subsidiary in any manner material to the
Company or any Restricted Subsidiary;

-54-

 

	 	(F)	 	restrictions on the transfer of property or
assets required by any regulatory authority having jurisdiction over
the Company or such Restricted Subsidiary; and
	 
	 	(G)	 	customary restrictions contained in asset sale
agreements limiting the transfer of such assets pending the closing of
such sale.

          SECTION 4.06. Limitation on Sales of Assets and Subsidiary Stock.

          (a) The Company shall not, and shall not permit any Restricted Subsidiary to, directly or
indirectly, consummate any Asset Disposition unless:

	 	(1)	 	the Company or such Restricted Subsidiary receives
consideration at the time of such Asset Disposition at least equal to the fair
market value (including as to the value of all non-cash consideration) (as
determined in good faith by the Board of Directors, an Officer or an officer of
such Restricted Subsidiary with responsibility for such transaction, which
determination shall be conclusive evidence of compliance with this provision),
of the shares and assets subject to such Asset Disposition;
	 
	 	(2)	 	at least 75% of the consideration thereof received by the
Company or such Restricted Subsidiary is in the form of cash or cash
equivalents, Additional Assets or any combination thereof (collectively, the
“Cash Consideration”); and
	 
	 	(3)	 	an amount equal to 100% of the Net Available Cash from such
Asset Disposition is applied by the Company (or such Restricted Subsidiary, as
the case may be):

	 	(A)	 	first, to the extent the Company elects
(or is required by the terms of any Indebtedness), to prepay, repay,
redeem or purchase Senior Indebtedness of the Company or any Subsidiary
Guarantor or Indebtedness (other than any Disqualified Stock) of a
Wholly Owned Subsidiary that is not a Subsidiary Guarantor (in each
case other than Indebtedness owed to the Company or an Affiliate of the
Company) within one year from the later of the date of such Asset
Disposition or the receipt of such Net Available Cash;
	 
	 	(B)	 	second, to the extent of the balance of
such Net Available Cash after application in accordance with clause
(A), to the extent the Company elects, to acquire Additional Assets or
to make capital expenditures in the Oil and Gas Business within one
year from the later of the date of such Asset Disposition or the
receipt of such Net Available Cash; and
	 
	 	(C)	 	third, to the extent of the balance of
such Net Available Cash after application in accordance with clauses
(A) and (B), to make an offer to the holders of the Securities (and to
holders of other Senior

-55-

 

	 	 	 	Subordinated Indebtedness of the Company
designated by the Company) to purchase Securities (and such other
Senior Subordinated Indebtedness of the Company) pursuant to and
subject to the conditions contained in this Indenture;

	 	 	 	provided, however, that in connection with any prepayment,
repayment, purchase, repurchase, redemption, defeasance or other acquisition
or retirement for value of Indebtedness pursuant to clause (A) or (C) above,
the Company or such Restricted Subsidiary shall permanently retire such
Indebtedness and shall cause the related loan commitment (if any) to be
permanently reduced in an amount equal to the principal amount so prepaid,
repaid or purchased.

          Upon any Asset Disposition by an Oil and Gas Royalty Trust in which the Company or any
Restricted Subsidiary owns Capital Stock, the Company or such Restricted Subsidiary will apply the
Net Available Cash therefrom as provided in Section 4.06(a)(3).

          Notwithstanding the foregoing provisions of this Section 4.06, the Company and the Restricted
Subsidiaries will not be required to apply any Net Available Cash in accordance with this Section
4.06 except to the extent that the aggregate Net Available Cash from all Asset Dispositions which
is not applied in accordance with this Section 4.06 exceeds $20.0 million. Pending application of
Net Available Cash pursuant to this Section 4.06, such Net Available Cash shall be invested in
Temporary Cash Investments or applied to temporarily reduce revolving credit indebtedness.

          For the purposes of this Section 4.06, the following are deemed to be cash or cash
equivalents:

	 	(1)	 	any liabilities, as shown on the Company’s or such Restricted
Subsidiary’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 Securities or any Subsidiary Guaranty)
that are assumed by the transferee of any such assets pursuant to (1) a
customary novation agreement that releases the Company or such Restricted
Subsidiary from further liability or (2) an assignment agreement that includes,
in lieu of such a release, the agreement of the transferee or its parent
company to indemnify and hold harmless the Company or such Restricted
Subsidiary from and against any loss, liability or cost in respect of such
assumed liability (provided, however, that such indemnifying
party (or its long-term debt securities) shall have an Investment Grade Rating
(with no indication of a negative outlook or credit watch with negative
implications, in any case, that contemplates such indemnifying party (or its
long-term debt securities) failing to have an Investment Grade Rating) at the
time the indemnity is entered into);
	 
	 	(2)	 	any non-Cash Consideration received by the Company or any
Restricted Subsidiary from the transferee that is converted, monetized, sold or

-56-

 

	 	 	 	exchanged by the Company or such Restricted Subsidiary into cash or cash
equivalents within 120 days of receipt.

          Notwithstanding the foregoing, the 75% limitation referred to in Section 4.06(a)(2) shall be
deemed satisfied with respect to any Asset Disposition in which the cash or cash equivalents
portion of the consideration received therefrom, determined in accordance with the foregoing
provision on an after-tax basis, is equal to or greater than what the after-tax
proceeds would have been had such Asset Disposition complied with the aforementioned 75%
limitation.

          The requirement of Section 4.06(a)(3)(B) shall be deemed to be satisfied if an agreement
(including a lease, whether a capital lease or an operating lease) committing to make the
acquisitions or expenditures referred to therein is entered into by the Company or its Restricted
Subsidiary within the time period specified in such clause and such Net Available Cash is
subsequently applied in accordance with such agreement within six months following such agreement.

          (b) In the event of an Asset Disposition that requires the purchase of Securities (and other
Senior Subordinated Indebtedness of the Company) pursuant to Section 4.06(a)(3)(C), the Company
shall make such offer to purchase Securities (an “Offer”) on or before the 366th day after the
later of the date of such Asset Disposition or the receipt of such Net Available Cash, and shall
purchase Securities tendered pursuant to an offer by the Company for the Securities (and such other
Senior Subordinated Indebtedness of the Company) at a purchase price of 100% of their principal
amount (or, in the event such other Senior Subordinated Indebtedness of the Company was issued with
significant original issue discount, 100% of the accreted value thereof) without premium, plus
accrued but unpaid interest (or, in respect of such other Senior Subordinated Indebtedness of the
Company, such lesser price, if any, as may be provided for by the terms of such Senior Subordinated
Indebtedness of the Company) in accordance with the procedures (including prorating in the event of
oversubscription) set forth in this Indenture. If the aggregate purchase price of the securities
tendered exceeds the Net Available Cash allotted to their purchase, the Company will select the
securities to be purchased on a pro rata basis but in round denominations, which in the case of the
Securities will be denominations of $1,000 principal amount or multiples thereof. The Company
shall not be required to make such an offer to purchase Securities (and other Senior Subordinated
Indebtedness of the Company) pursuant to this Section 4.06 if the Net Available Cash not applied or
invested as provided in Section 4.06(a)(3)(A) or (B) is less than $20.0 million (which lesser
amount shall be carried forward for purposes of determining whether such an offer is required with
respect to the Net Available Cash from any subsequent Asset Disposition). Upon completion of such
an offer to purchase, Net Available Cash will be deemed to be reduced by the aggregate amount of
such offer.

          (c) (1) Promptly, and in any event within 10 days after the Company becomes obligated to make
an Offer, the Company shall deliver to the Trustee and send, by first-class mail to each Holder, a
written notice stating that the Holder may elect to have his Securities purchased by the Company
either in whole or in part (subject to prorating as described in Section 4.06(b) in the event the
Offer is oversubscribed) in integral multiples of $1,000 of principal amount, at the applicable
purchase price. The notice shall specify a purchase date not less than

-57-

 

30 days nor more than 60
days after the date of such notice (the “Purchase Date”) and shall contain such information
concerning the business of the Company which the Company in good faith believes will enable such
Holders to make an informed decision (which at a minimum will include (A) the most recently filed
Annual Report on Form 10-K (including audited consolidated financial statements) of the Company,
the most recent subsequently filed Quarterly Report on Form 10-Q and any Current Report on Form 8-K
of the Company filed subsequent to such Quarterly Report, other than Current Reports describing
Asset Dispositions otherwise described
in the information furnished with such notice (or corresponding successor reports), (B) a
description of material developments in the Company’s business subsequent to the date of the latest
of such Reports, and (C) if material, appropriate pro forma financial information) and all
instructions and materials necessary to tender Securities pursuant to the Offer, together with the
information contained in clause (3).

          (2) Not later than the date upon which written notice of an Offer is delivered to the Trustee
as provided below, the Company shall deliver to the Trustee an Officers’ Certificate as to (A) the
amount of the Offer (the “Offer Amount”), including information as to any other Senior Subordinated
Indebtedness included in the Offer, (B) the allocation of the Net Available Cash from the Asset
Dispositions pursuant to which such Offer is being made and (C) the compliance of such allocation
with the provisions of Section 4.06(a) and (b). On such date, the Company shall also irrevocably
deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust) in Temporary Cash Investments, maturing on the last day prior
to the Purchase Date or on the Purchase Date if funds are immediately available by open of
business, an amount equal to the Offer Amount to be held for payment in accordance with the
provisions of this Section. If the Offer includes other Senior Subordinated Indebtedness, the
deposit described in the preceding sentence may be made with any other paying agent pursuant to
arrangements satisfactory to the Trustee. Upon the expiration of the period for which the Offer
remains open (the “Offer Period”), the Company shall deliver to the Trustee for cancellation the
Securities or portions thereof which have been properly tendered to and are to be accepted by the
Company. The Trustee shall, on the Purchase Date, mail or deliver payment (or cause the delivery
of payment) to each tendering Holder in the amount of the purchase price. In the event that the
aggregate purchase price of the Securities delivered by the Company to the Trustee is less than the
Offer Amount applicable to the Securities, the Trustee shall deliver the excess to the Company
immediately after the expiration of the Offer Period for application in accordance with this
Section 4.06.

          (3) Holders electing to have a Security purchased shall be required to surrender the Security,
with an appropriate form duly completed, to the Company at the address specified in the notice at
least three Business Days prior to the Purchase Date. Holders shall be entitled to withdraw their
election if the Trustee or the Company receives not later than one Business Day prior to the
Purchase Date, a telex, facsimile transmission or letter setting forth the name of the Holder, the
principal amount of the Security which was delivered for purchase by the Holder and a statement
that such Holder is withdrawing his election to have such Security purchased. Holders whose
Securities are purchased only in part shall be issued new Securities equal in principal amount to
the unpurchased portion of the Securities surrendered.

          (4) At the time the Company delivers Securities to the Trustee which are to be accepted for
purchase, the Company shall also deliver an Officers’ Certificate stating that such

-58-

 

Securities are
to be accepted by the Company pursuant to and in accordance with the terms of this Section 4.06. A
Security shall be deemed to have been accepted for purchase at the time the Trustee, directly or
through an agent, mails or delivers payment therefor to the surrendering Holder.

          (d) The Company shall comply, to the extent applicable, with the requirements of Section 14(e)
of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of Securities pursuant to this Section 4.06. To the extent
that the provisions of any securities laws or regulations conflict with provisions of this Section
4.06, the Company shall comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Section by virtue of its compliance with such
securities laws or regulations.

          SECTION 4.07. Limitation on Affiliate Transactions.

          (a) The Company shall not, and shall not permit any Restricted Subsidiary to, enter into any
transaction (including the purchase, sale, lease or exchange of any property, employee compensation
arrangements or the rendering of any service) with, or for the benefit of, any Affiliate of the
Company (an “Affiliate Transaction”) unless:

	 	(1)	 	the terms of the Affiliate Transaction are no less favorable to
the Company or such Restricted Subsidiary than those that could reasonably be
expected to be obtained at the time of the Affiliate Transaction in
arm’s-length dealings with a Person who is not an Affiliate;
	 
	 	(2)	 	if such Affiliate Transaction involves an amount in excess of
$10.0 million, the terms of the Affiliate Transaction are set forth in writing
and a majority of the non-employee directors of the Company disinterested with
respect to such Affiliate Transaction have determined in good faith that the
criteria set forth in clause (1) are satisfied and have approved the relevant
Affiliate Transaction as evidenced by a resolution of the Board of Directors;
and
	 
	 	(3)	 	if such Affiliate Transaction involves an amount in excess of
$25.0 million, the Board of Directors shall also have received a written
opinion from an Independent Qualified Party to the effect that such Affiliate
Transaction is fair, from a financial standpoint, to the Company and its
Restricted Subsidiaries or is not less favorable to the Company and its
Restricted Subsidiaries than could reasonably be expected to be obtained at the
time in an arm’s-length transaction with a Person who was not an Affiliate.

          (b) Section 4.07(a) will not prohibit:

	 	(1)	 	any Investment (other than a Permitted Investment) or other
Restricted Payment, in each case not prohibited to be made pursuant to Section
4.04;

-59-

 

	 	(2)	 	any issuance of securities, or other payments, awards or grants
in cash, securities or otherwise pursuant to, or the funding of, employment and
severance arrangements, stock options and stock ownership plans, phantom stock
or other incentive plans approved by the Board of Directors;
	 
	 	(3)	 	loans or advances to officers, directors and employees in the
ordinary course of business of the Company or its Restricted Subsidiaries, but
in any event not to exceed $3.0 million in the aggregate outstanding at any one
time;
	 
	 	(4)	 	any transaction with a Restricted Subsidiary or joint venture
or similar entity which would constitute an Affiliate Transaction solely
because the Company or a Restricted Subsidiary owns an equity interest in or
otherwise controls such Restricted Subsidiary, joint venture or similar entity;
	 
	 	(5)	 	the issuance or sale of any Capital Stock (other than
Disqualified Stock) of the Company;
	 
	 	(6)	 	reasonable fees and reasonable compensation paid to, and
indemnity and similar arrangements provided on behalf of, officers, directors
and employees of the Company or any Restricted Subsidiary as determined in good
faith by the Board of Directors or the Company’s senior management; and
	 
	 	(7)	 	any agreement as in effect on the Issue Date or any renewals,
extensions or replacements of any such agreement (so long as such renewals,
extensions or replacements are not less favorable to the Company or the
Restricted Subsidiaries than the original agreement in effect on the Issue
Date) and the transactions evidenced thereby.

          SECTION 4.08. Change of Control.

          (a) Upon the occurrence of a Change of Control, then unless the Company shall have exercised
its right to redeem all the Securities, each Holder shall have the right to cause the Company to
repurchase all or any part of such Holder’s Securities at a purchase price in cash equal to 101% of
the principal amount of the Securities to be repurchased plus accrued and unpaid interest, if any,
to the date of purchase (subject to the right of holders of record on the relevant record date to
receive interest due on the relevant interest payment date), in accordance with the terms
contemplated in Section 4.08(b). In the event that at the time of such Change of Control the terms
of the Senior Indebtedness of the Company (including the Revolving Credit Facility) restrict or
prohibit the repurchase of Securities following such Change of Control, then prior to the mailing
of the notice to Holders provided for in Section 4.08(b) below but in any event within 30 days
following any Change of Control, the Company shall (1) repay in full all such Senior Indebtedness

-60-

 

or (ii) obtain the requisite consents under the agreements governing such Senior Indebtedness to
permit the repurchase of the Securities as provided for in Section 4.08(b).

          (b) Unless the Company has exercised its right to redeem all the Securities and shall have
delivered an irrevocable notice of redemption to the Trustee, within 30 days
following any Change of Control, the Company shall mail a notice to each Holder with a copy to
the Trustee (the “Change of Control Offer”) stating:

     (1) that a Change of Control has occurred and that such Holder has the right to require
the Company to purchase such Holder’s Securities at a purchase price in cash equal to 101%
of the principal amount thereof on the date of purchase, plus accrued and unpaid interest,
if any, to the date of purchase (subject to the right of Holders of record on the relevant
record date to receive interest on the relevant interest payment date);

     (2) the circumstances and relevant facts regarding such Change of Control (including
information with respect to pro forma historical income, cash flow and
capitalization, in each case after giving effect to such Change of Control);

     (3) the purchase date (which shall be no earlier than 30 days nor later than 60 days
from the date such notice is mailed); and

     (4) the instructions, as determined by the Company, consistent with this Section 4.08,
that a Holder must follow in order to have its Securities purchased.

          (c) Holders electing to have a Security purchased will be required to surrender the Security,
with an appropriate form duly completed, to the Company at the address specified in the notice at
least three Business Days prior to the purchase date. Holders will be entitled to withdraw their
election if the Trustee or the Company receives not later than one Business Day prior to the
purchase date, a telegram, telex, facsimile transmission or letter setting forth the name of the
Holder, the principal amount of the Security which was delivered for purchase by the Holder and a
statement that such Holder is withdrawing his election to have such Security purchased.

          (d) On the purchase date, all Securities purchased by the Company under this Section 4.08
shall be delivered by the Company to the Trustee for cancellation, and the Company shall pay the
purchase price plus accrued and unpaid interest, if any, to the Holders entitled thereto.

          (e) Notwithstanding the foregoing provisions of this Section 4.08, the Company shall not be
required to make a Change of Control Offer upon a Change of Control if 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 Indenture applicable to a Change of Control Offer made by the
Company and purchases all Securities validly tendered and not withdrawn under such Change of
Control Offer.

          (f) The Company shall comply, to the extent applicable, with the requirements of Section 14(e)
of the Exchange Act and any other securities laws or regulations in connection with the repurchase
of Securities as a result of a Change of Control. To the extent

-61-

 

that the provisions of any
securities laws or regulations conflict with provisions of this Section 4.08, the Company shall
comply with the applicable securities laws and regulations and shall not be deemed to have breached
its obligations under this Section 4.08 by virtue of its compliance with such securities laws or
regulations.

          SECTION 4.09. Limitation on Liens. The Company shall not, and shall not permit any
Subsidiary Guarantor to, directly or indirectly, create, incur, assume or suffer to exist or become
effective any Lien securing Indebtedness of any kind except for Permitted Liens, on or with respect
to any of its assets, whether owned at the Issue Date or thereafter acquired, unless (A) in the
case of any Lien securing Subordinated Obligations, the Securities are secured by a Lien on such
assets that is senior in priority to such Lien and (B) in the case of any other Lien, the
Securities are either secured equally and ratably with such Indebtedness or are secured by a Lien
on such assets that is senior in priority to such Lien.

          SECTION 4.10. Future Guarantors. The Company shall cause each Restricted Subsidiary that
Incurs any Indebtedness (other than Indebtedness Incurred pursuant to and in compliance with the
last clause of Section 4.03(b)(16)) to, at the same time, execute and deliver to the Trustee a
Guaranty Agreement pursuant to which such Restricted Subsidiary will Guarantee payment of the
Securities on the same terms and conditions as those set forth in this Indenture.

          SECTION 4.11. Compliance Certificate. The Company shall deliver to the Trustee within 120
days after the end of each fiscal year of the Company an Officers’ Certificate stating that in the
course of the performance by the signers of their duties as Officers of the Company they would
normally have knowledge of any Default and whether or not the signers know of any Default that
occurred during such period. If they do, the certificate shall describe the Default, its status
and what action the Company is taking or proposes to take with respect thereto. The Company also
shall comply with TIA § 314(a)(4).

          SECTION 4.12. Further Instruments and Acts. Upon request of the Trustee, the Company will
execute and deliver such further instruments and do such further acts as may be reasonably
necessary or proper to carry out more effectively the purpose of this Indenture.

          SECTION 4.13. Suspension of Covenants.

          (a) During any period that the Securities have an Investment Grade Rating and no Default has
occurred and is continuing, the Company and the Restricted Subsidiaries shall not be subject to
Sections 4.03(a), (b), (c) or (d), 4.04, 4.05, 4.06, 4.07, 4.10 or 5.01(a)(3) (collectively, the
“Suspended Covenants”).

          (b) In the event that the Company and the Restricted Subsidiaries are not subject to the
Suspended Covenants for any period of time as a result of Section 4.13(a), and subsequently one or
both of S&P and Moody’s downgrades the rating assigned to the Securities below BBB-, in the case of
S&P, and below Baa3, in the case of Moody’s, then the Company and the Restricted Subsidiaries will
thereafter again be subject to the Suspended Covenants
(subject to subsequent suspension if the Securities again receive an Investment Grade Rating),
and, with respect to Restricted Payments proposed to be made after the time of such downgrade,

-62-

 

the
permissibility of such proposed Restricted Payments will be calculated in accordance with Section
4.04 as though Section 4.04 had been in effect since the Issue Date.

ARTICLE 5

Successor Company

          SECTION 5.01. When Company May Merge or Transfer Assets.

          (a) The Company shall not consolidate with or merge with or into, or convey, transfer or
lease, in one transaction or a series of transactions, directly or indirectly, all or substantially
all the assets of the Company and its Restricted Subsidiaries, taken as a whole, to, any Person,
unless:

     (1) the resulting, surviving or transferee Person (the “Successor Company”) shall be a
Person organized and existing under the laws of the United States of America, any State
thereof or the District of Columbia and the Successor Company (if not the Company) shall
expressly assume, by an indenture supplemental hereto, executed and delivered to the
Trustee, in form satisfactory to the Trustee, all the obligations of the Company under the
Securities and this Indenture;

     (2) immediately after giving pro forma effect to such transaction (and
treating any Indebtedness which becomes an obligation of the Successor Company or any
Subsidiary as a result of such transaction as having been Incurred by such Successor Company
or such Subsidiary at the time of such transaction), no Default shall have occurred and be
continuing;

     (3) immediately after giving pro forma effect to such transaction, the
Successor Company would be able to Incur an additional $1.00 of Indebtedness pursuant to
Section 4.03(a);

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

     (5) the Company shall have delivered to the Trustee an Opinion of Counsel to the effect
that the Holders will not recognize income, gain or loss for Federal income tax purposes as
a result of such transaction and will not 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
transaction had not occurred;

provided, however, that Section 5.01(a)(3) will not be applicable to (A) the
Company or a Restricted Subsidiary consolidating with, merging into, conveying, transferring or
leasing all or
part of its properties and assets to the Company or a Subsidiary Guarantor, or (B) the Company
merging with an Affiliate of the Company solely for the purpose and with the sole effect of
reincorporating the Company in another jurisdiction within the United States of America or

-63-

 

(C) at a
time when the Company and its Restricted Subsidiaries are not subject to the Suspended Covenants.

          For purposes of this Section 5.01, the sale, lease, conveyance, assignment, transfer or other
disposition of all or substantially all of the properties and assets of one or more Subsidiaries of
the Company, which properties and assets, if held by the Company instead of such Subsidiaries,
would constitute all or substantially all of the properties and assets of the Company on a
consolidated basis, shall be deemed to be the transfer of all or substantially all of the
properties and assets of the Company.

          The Successor Company (if not the Company) shall be the successor to the Company and shall
succeed to, and be substituted for, and may exercise every right and power of, the Company under
this Indenture, and the predecessor Company, except in the case of a lease, shall be released from
the obligation to pay the principal of and interest on the Securities.

          (b) The Company shall not permit any Subsidiary Guarantor to consolidate with or merge with or
into, or convey, transfer or lease, in one transaction or a series of transactions, all or
substantially all of its assets to any Person unless: (1) except in the case of a Subsidiary
Guarantor (other than Encore Operating, L.P. and any Subsidiary Guarantor that directly or
indirectly holds an equity interest in Encore Operating, L.P.) that has been disposed of in its
entirety to another Person (other than to the Company or an Affiliate of the Company), whether
through a merger, consolidation or sale of Capital Stock or assets, if in connection therewith the
Company complies with its obligations under Section 4.06 in respect of such disposition, the
resulting, surviving or transferee Person (if not such Subsidiary) shall be a Person organized and
existing under the laws of the jurisdiction under which such Subsidiary was organized or under the
laws of the United States of America, or any State thereof or the District of Columbia, and, if
such Person is not already a Subsidiary Guarantor, such Person shall expressly assume, by a
Guaranty Agreement, in a form satisfactory to the Trustee, all the obligations of such Subsidiary,
if any, under its Subsidiary Guaranty; (2) immediately after giving effect to such transaction or
transactions on a pro forma basis (and treating any Indebtedness which becomes an
obligation of the resulting, surviving or transferee Person as a result of such transaction as
having been issued by such Person at the time of such transaction), no Default shall have occurred
and be continuing; and (3) in the event a Guaranty Agreement is executed and delivered pursuant to
clause (1) above, the Company delivers to the Trustee an Officers’ Certificate and an Opinion of
Counsel, each stating that such consolidation, merger, conveyance, transfer or lease and such
Guaranty Agreement, if any, complies with this Indenture.

ARTICLE 6

Defaults and Remedies

          SECTION 6.01. Events of Default. An “Event of Default” occurs if:

     (1) the Company defaults in any payment of interest on any Security when the same
becomes due and payable, whether or not such payment shall be prohibited by Article 10, and
such default continues for a period of 30 days;

-64-

 

     (2) the Company defaults in the payment of the principal of any Security when the same
becomes due and payable at its Stated Maturity, upon optional redemption, upon required
repurchase, upon declaration of acceleration or otherwise, whether or not such payment shall
be prohibited by Article 10;

     (3) the Company fails to comply with Section 5.01;

     (4) the Company fails to comply with Section 4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08,
or 4.10 (other than a failure to purchase Securities when required under Section 4.06 or
4.08) and such failure continues for 30 days after the notice specified below;

     (5) the Company or any Subsidiary Guarantor fails to comply with any of its agreements
in this Indenture (other than those referred to in clause (1), (2), (3) or (4) above) and
such failure continues for 60 days after the notice specified below;

     (6) Indebtedness of the Company, any Subsidiary Guarantor or any Significant Subsidiary
(other than Non-Recourse Purchase Money Indebtedness) is not paid within any applicable
grace period after final maturity or is accelerated by the holders thereof because of a
default and the total amount of such Indebtedness unpaid or accelerated exceeds $10.0
million; provided, that if such default is cured or waived or any such acceleration is
rescinded, or such Indebtedness is repaid, within a period of 10 days from the continuance
of such default beyond the applicable grace period or the occurrence of such acceleration,
as the case may be, such Event of Default and any consequential acceleration of the
Securities shall be automatically rescinded, so long as such rescission does not conflict
with any judgment or decree;

     (7) the Company, any Subsidiary Guarantor or any Significant Subsidiary pursuant to or
within the meaning of any 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 any substantial
part of its property; or

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

or takes any comparable action under any foreign laws relating to insolvency;

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

     (A) is for relief against the Company, any Subsidiary Guarantor or any
Significant Subsidiary in an involuntary case;

-65-

 

     (B) appoints a Custodian of the Company, any Subsidiary Guarantor or any
Significant Subsidiary or for any substantial part of its property; or

     (C) orders the winding up or liquidation of the Company, any Subsidiary
Guarantor or any Significant Subsidiary;

or any similar relief is granted under any foreign laws and the order or decree remains
unstayed and in effect for 60 days; or

     (9) any judgment or decree for the payment of money in excess of $10.0 million above
the coverage under applicable insurance policies and indemnities as to which the relevant
insurer or indemnitor has not disclaimed responsibility is entered against the Company, a
Subsidiary Guarantor or any Significant Subsidiary, remains outstanding for a period of 60
consecutive days following such judgment or decree and is not discharged, waived or stayed
(the “judgment default provision”); or

     (10) a Subsidiary Guaranty ceases to be in full force and effect (other than in
accordance with the terms of such Subsidiary Guaranty) for five days after notice or a
Subsidiary Guarantor denies or disaffirms its obligations under its Subsidiary Guaranty (the
“Guaranty Failure Provision”).

          The foregoing will constitute Events of Default whatever the reason for any such Event of
Default and whether it is voluntary or involuntary or is effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body.

          The term “Bankruptcy Law” means Title 11, United States Code, or any similar Federal
or state law for the relief of debtors. The term “Custodian” means any receiver, trustee,
assignee, liquidator, custodian or similar official under any Bankruptcy Law.

          A Default under clauses (4), (5) or (10) is not an Event of Default until the Trustee or the
holders of at least 25% in principal amount of the outstanding Securities notify the Company of the
Default and the Company does not cure such Default within the time specified after receipt of such
notice. Such notice must specify the Default, demand that it be remedied and state that such
notice is a “Notice of Default”.

          The Company shall deliver to the Trustee, within 30 days after the occurrence thereof, written
notice in the form of an Officers’ Certificate of any Event of Default under clause (6) or (10) and
any event which with the giving of notice or the lapse of time would become an Event of Default
under clause (4), (5) or (9), its status and what action the Company is taking or proposes to take
with respect thereto.

          SECTION 6.02. Acceleration. If an Event of Default (other than an Event of Default
specified in Section 6.01(7) or (8) with respect to the Company) occurs and is continuing, the
Trustee by notice to the Company, or the Holders of at least 25% in principal amount of the
outstanding Securities by notice to the Company and the Trustee, may declare the principal of and
accrued but unpaid interest on all the Securities to be due and payable. Upon such a declaration,
such principal and interest shall be due and payable immediately. If an Event

-66-

 

of Default specified
in Section 6.01(7) or (8) with respect to the Company occurs, the principal of and interest on all
the Securities shall ipso facto become and be immediately due and payable without
any declaration or other act on the part of the Trustee or any Securityholders. The Holders of a
majority in principal amount of the Securities by notice to the Trustee may rescind an acceleration
and its consequences if (i) the rescission would not conflict with any judgment or decree and (ii)
if all existing Events of Default have been cured or waived except nonpayment of principal or
interest that has become due solely because of acceleration. No such rescission shall affect any
subsequent Default or impair any right consequent thereto.

          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 or interest on the
Securities or to enforce the performance of any provision of the Securities or this Indenture.

          The Trustee may maintain a proceeding even if it does not possess any of the Securities or
does not produce any of them in the proceeding. A delay or omission by the Trustee or any
Securityholder 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. No remedy
is exclusive of any other remedy. All available remedies are cumulative.

          SECTION 6.04. Waiver of Past Defaults. The Holders of a majority in principal amount of
the Securities then outstanding (including consents obtained in connection with a tender offer or
exchange for the Securities) by notice to the Trustee may waive an existing Default with respect to
all of the Securities and its consequences (including, without limitation, waivers obtained in
connection with a tender offer or exchange offer for, or purchases of, Securities or a
solicitations of consents in respect of the Securities) except (i) a Default in the payment of the
principal of or interest on a Security, (ii) a Default arising from the failure to redeem or
purchase any Security when required pursuant to this Indenture or (iii) a Default in respect of a
provision that under Section 9.02 cannot be amended without the consent of each Securityholder
affected. When a Default is waived, it is
deemed cured and shall cease to exist, but no such waiver shall extend to any subsequent or other
Default or impair any consequent right.

          SECTION 6.05. Control by Majority. The Holders of a majority in principal amount of the
Securities then outstanding may direct the time, method and place of conducting any proceeding for
any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee.
However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture
or, subject to Section 7.01, that the Trustee determines is unduly prejudicial to the rights of
other Securityholders or would involve the Trustee in personal liability; provided, however, that
the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with
such direction. Prior to taking any action hereunder, the Trustee shall be entitled to
indemnification satisfactory to it in its sole discretion against all losses and expenses caused by
taking or not taking such action.

-67-

 

          SECTION 6.06. Limitation on Suits. Except to enforce the right to receive payment of
principal, premium (if any) or interest when due, no Securityholder may pursue any remedy with
respect to this Indenture or the Securities unless:

     (1) the Holder gives to the Trustee written notice stating that an Event of Default is
continuing;

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

     (3) such Holder or Holders offer to the Trustee reasonable security or indemnity
against any loss, liability or expense;

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

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

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

          SECTION 6.07. Rights of Holders to Receive Payment. Notwithstanding any other provision of
this Indenture, the right of any Holder to receive payment of principal of and interest on the
Securities held by such Holder, on or after the respective due dates expressed in the Securities,
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.

          SECTION 6.08. Collection Suit by Trustee. If an Event of Default specified in Section
6.01(1) or (2) occurs and is continuing, the Trustee may recover judgment in its own name and as
trustee of an express trust against the Company for the whole amount then due and owing (together
with interest on any unpaid interest to the extent lawful) and the amounts provided for in Section
7.07.

          SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may 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 and the Securityholders allowed in any judicial proceedings relative to the Company, its
creditors or its property and, unless prohibited by law or applicable regulations, may vote on
behalf of the Holders in any election of a trustee in bankruptcy or other Person performing similar
functions, and any Custodian in any such judicial proceeding is hereby authorized by each Holder to
make 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 it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents and its counsel, and
any other amounts due the Trustee under Section 7.07.

-68-

 

          SECTION 6.10. Priorities. If the Trustee collects any money or property pursuant to this
Article 6, it shall pay out the money or property in the following order:

     FIRST: to the Trustee for amounts due under Section 7.07;

     SECOND: to holders of Senior Indebtedness of the Company and, if such money or
property has been collected from a Subsidiary Guarantor, to holders of Senior Indebtedness
of such Subsidiary Guarantor, in each case to the extent required by Articles 10 and 12;

     THIRD: to Securityholders for amounts due and unpaid on the Securities for principal
and interest, ratably, without preference or priority of any kind, according to the amounts
due and payable on the Securities for principal and interest, respectively; and

     FOURTH: to the Company.

          The Trustee may fix a record date and payment date for any payment to Securityholders pursuant
to this Section. At least 15 days before such record date, the Company shall mail to each
Securityholder and the Trustee a notice that states the record date, the payment date and amount to
be paid.

          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 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 does not apply to a suit by the
Trustee, a suit by a Holder pursuant to Section 6.07 or a suit by Holders of more than 10% in
principal amount of the Securities.

          SECTION 6.12. Waiver of Stay or Extension Laws. The Company (to the extent it may lawfully
do so) shall not at any time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter
in force, which may affect the covenants or the performance of this Indenture; and the Company (to
the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and shall not hinder, delay or impede the execution of any power herein granted to the
Trustee, but shall suffer and permit the execution of every such power as though no such law had
been enacted.

ARTICLE 7

Trustee

          SECTION 7.01. Duties of Trustee.

          (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise the
rights and powers vested in it by this Indenture and use the same degree of care and

-69-

 

skill in their
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 Trustee undertakes to perform such duties and only such duties as are
specifically set forth in this Indenture 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 shall 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 liability 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;

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

     (3) the Trustee shall 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.

          (d) Every provision of this Indenture that in any way relates to the Trustee is subject to
paragraphs (a), (b) and (c) of this Section.

          (e) The Trustee shall not be liable for interest on any money received by it except as the
Trustee may agree in writing with the Company.

          (f) Money held in trust by the Trustee need not be segregated from other funds except to the
extent required by law.

          (g) No provision of this Indenture shall require the Trustee to expend or risk its own funds
or otherwise incur financial liability in the performance of any of its duties hereunder or in the
exercise of any of its rights or powers, if it shall have reasonable grounds to believe that
repayment of such funds or adequate indemnity against such risk or liability is not reasonably
assured to it.

          (h) Every provision of this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this Section and to the
provisions of the TIA.

-70-

 

          SECTION 7.02. Rights of Trustee.

          (a) The Trustee may rely on 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, but may accept the same as conclusive evidence of the truth and accuracy of such
statement or the correctness of such opinions.

          (b) Before the Trustee acts or refrains from acting, it may require an Officers’ Certificate
or an Opinion of Counsel. The Trustee shall not be liable for any action it takes or omits to take
in good faith in reliance on the Officers’ Certificate or Opinion of Counsel.

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

          (d) The Trustee shall not be liable for any action it takes or omits to take in good faith
which it believes to be authorized or within its rights or powers; provided,
however, that the Trustee’s conduct does not constitute willful misconduct or negligence.

          (e) The Trustee may consult with counsel, and the advice or opinion of counsel with respect to
legal matters relating to this Indenture and the Securities shall be full and complete
authorization and protection from liability in respect to any action taken, omitted or suffered by
it hereunder in good faith and in accordance with the advice or opinion of such counsel.

          SECTION 7.03. Individual Rights of Trustee. The Trustee in its individual or any other
capacity may become the owner or pledgee of Securities and may otherwise deal with the Company or
its Affiliates with the same rights it would have if it were not Trustee. Any Paying Agent,
Registrar, co-registrar or co-paying agent may do the same with like rights. However, the Trustee
must comply with Sections 7.10 and 7.11.

          SECTION 7.04. Trustee’s Disclaimer. The Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this Indenture or the Securities, it shall not be
accountable for the Company’s use of the proceeds from the Securities, and it shall not be
responsible for any statement of the Company in the Indenture or in any document issued in
connection with the sale of the Securities or in the Securities other than the Trustee’s
certificate of authentication.

          SECTION 7.05. Notice of Defaults. If a Default occurs and is continuing and if it is known
to the Trustee, the Trustee shall mail to each Securityholder notice of the Default within 90 days
after it occurs. Except in the case of a Default in payment of principal of or interest on any
Security (including payments pursuant to the mandatory redemption provisions of such Security, if
any), the Trustee may withhold the notice if and so long as a committee of its Trust Officers in
good faith determines that withholding the notice is not opposed to the interests of
Securityholders.

          The Trustee shall not be required to take notice or be deemed to have notice of any Event of
Default, except failure of the Company to cause to be made any required payment to the Trustee,
unless the Trustee shall be specifically notified of such default by the Company or

-71-

 

by the Holders
of at least 25% in aggregate principal amount of all Securities then outstanding by a notice
delivered to the Corporate Trust Office of the Trustee and, in the absence of such notice, the
Trustee may conclusively assume no Default exists.

          SECTION 7.06. Reports by Trustee to Holders. As promptly as practicable after each June 15
beginning with the June 15 following the date of this Indenture, and in any event prior to August
15 in each year, the Trustee shall mail to each Securityholder a brief report dated as of June 15
that complies with TIA § 313(a). The Trustee also shall comply with TIA § 313(b).

          A copy of each report at the time of its mailing to Securityholders shall be filed with the
SEC and each stock exchange (if any) on which the Securities are listed. The Company
agrees to notify promptly the Trustee whenever the Securities become listed on any stock
exchange and of any delisting thereof.

          SECTION 7.07. Compensation and Indemnity. The Company shall pay to the Trustee from time
to time reasonable compensation for its services. The Trustee’s compensation shall not be limited
by any law on compensation of a trustee of an express trust. The Company shall reimburse the
Trustee upon request for all reasonable out-of-pocket expenses incurred or made by it, including
costs of collection, in addition to the compensation for its services. Such expenses shall include
the reasonable compensation and expenses, disbursements and advances of the Trustee’s agents,
counsel, accountants and experts. The Company shall indemnify the Trustee against any and all
loss, liability or expense (including attorneys’ fees) incurred by it in connection with the
administration of this trust and the performance of its duties hereunder. The Trustee shall notify
the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so
notify the Company shall not relieve the Company of its obligations hereunder. The Company shall
defend the claim and the Trustee may have separate counsel and the Company shall pay the fees and
expenses of such counsel. The Company need not reimburse any expense or indemnify against any
loss, liability or expense incurred by the Trustee through the Trustee’s own willful misconduct,
negligence or bad faith. Neither the Company nor any Guarantor need pay for any settlement made
without its consent, which consent will not be unreasonably withheld.

          To secure the Company’s payment obligations in this Section, the Trustee shall have a lien
prior to the Securities on all money or property held or collected by the Trustee other than money
or property held in trust to pay principal of and interest on particular Securities.

          The Company’s payment obligations pursuant to this Section shall survive the discharge of this
Indenture. When the Trustee incurs expenses after the occurrence of a Default specified in Section
6.01(7) or (8) with respect to the Company, the expenses are intended to constitute expenses of
administration under the Bankruptcy Law.

-72-

 

          SECTION 7.08. Replacement of Trustee. The Trustee may resign at any time by so notifying
the Company. The Holders of a majority in principal amount of the Securities then outstanding may
remove the Trustee by so notifying the Trustee and may appoint a successor Trustee. The Company
may remove the Trustee if:

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

     (2) the Trustee is adjudged bankrupt or insolvent;

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

     (4) the Trustee otherwise becomes incapable of acting.

          If the Trustee resigns, is removed by the Company or by the Holders of a majority in principal
amount of the Securities then outstanding and such Holders do not reasonably promptly appoint a
successor Trustee, or if a vacancy exists in the office of Trustee for any reason (the Trustee in
such event being referred to herein as the retiring Trustee), the Company shall promptly appoint a
successor Trustee.

          A successor Trustee shall deliver a written acceptance of its appointment to the retiring
Trustee and to the Company. Thereupon the resignation or removal of the retiring Trustee shall
become effective, and the successor Trustee shall have all the rights, powers and duties of the
Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to
Securityholders. The retiring Trustee shall promptly transfer all property held by it as Trustee
to the successor Trustee, subject to the lien provided for in Section 7.07.

          If a successor Trustee does not take office within 60 days after the retiring Trustee resigns
or is removed, the retiring Trustee or the Holders of 10% in principal amount of the Securities may
petition any court of competent jurisdiction for the appointment of a successor Trustee.

          If the Trustee fails to comply with Section 7.10, any Securityholder may petition any court of
competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.

          Notwithstanding the replacement of the Trustee pursuant to this Section, the Company’s
obligations under Section 7.07 shall continue for the benefit of the retiring Trustee.

          SECTION 7.09. Successor Trustee by Merger. If the Trustee consolidates with, merges or
converts into, or transfers all or substantially all its corporate trust business or assets to,
another corporation or banking association, the resulting, surviving or transferee corporation
without any further act shall be the successor Trustee.

          In case at the time such successor or successors by merger, conversion or consolidation to the
Trustee shall succeed to the trusts created by this Indenture any of the Securities shall have been
authenticated but not delivered, any such successor to the Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Securities so

-73-

 

authenticated; and in
case at that time any of the Securities shall not have been authenticated, any successor to the
Trustee may authenticate such Securities either in the name of any predecessor hereunder or in the
name of the successor to the Trustee; and in all such cases such certificates shall have the full
force which it is anywhere in the Securities or in this Indenture provided that the certificate of
the Trustee shall have.

          SECTION 7.10. Eligibility; Disqualification. The Trustee shall at all times satisfy the
requirements of TIA § 310(a). The Trustee shall be a corporation, bank or banking association
organized and doing business under the laws of the United States of America or any state that is
authorized under such laws to exercise corporate trustee power and shall have a combined capital
and surplus of at least $50,000,000 as set forth in its most recent published annual report of
condition. The Trustee shall comply with TIA §
310(b); provided, however, that there shall be excluded from the operation of TIA § 310(b)(1) any
indenture or indentures under which other securities or certificates of interest or participation
in other securities of the Company are outstanding if the requirements for such exclusion set forth
in TIA § 310(b)(1) are met.

          SECTION 7.11. Preferential Collection of Claims Against Company. The Trustee shall comply
with 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.

ARTICLE 8

Discharge of Indenture; Defeasance

          SECTION 8.01. Discharge of Liability on Securities; Defeasance.

          (a) When (1) the Company delivers to the Trustee all outstanding Securities (other than
Securities replaced pursuant to Section 2.07) for cancellation or (2) all outstanding Securities
have become due and payable, whether at maturity or on a redemption date as a result of the mailing
of a notice of redemption pursuant to Article 3 hereof and the Company irrevocably deposits with
the Trustee funds sufficient to pay at maturity or upon redemption all outstanding Securities,
including interest thereon to maturity or such redemption date (other than Securities replaced
pursuant to Section 2.07), and if in either case the Company pays all other sums payable hereunder
by the Company, then this Indenture shall, subject to Section 8.01(c), cease to be of further
effect. The Trustee shall acknowledge satisfaction and discharge of this Indenture on demand of
the Company accompanied by an Officers’ Certificate and an Opinion of Counsel and at the cost and
expense of the Company.

          (b) Subject to Sections 8.01(c) and 8.02, the Company at any time may terminate (1) all its
obligations under the Securities and this Indenture (“legal defeasance option”) or (2) its
obligations under Sections 4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08 and 4.09 and the operation of
Sections 6.01(4), 6.01(6), 6.01(7), 6.01(8) and 6.01(9) (but, in the case of Sections 6.01(7) and
(8), with respect only to Significant Subsidiaries and Subsidiary Guarantors) and the limitations
contained in Sections 5.01(a)(3) (“covenant defeasance option”).

-74-

 

The Company may exercise its
legal defeasance option notwithstanding its prior exercise of its covenant defeasance option.

          If the Company exercises its legal defeasance option, payment of the Securities may not be
accelerated because of an Event of Default with respect thereto. If the Company exercises its
covenant defeasance option, payment of the Securities may not be accelerated because of an Event of
Default specified in Sections 6.01(4), 6.01(6), 6.01(7), 6.01(8) and 6.01(9) (but, in the case of
Sections 6.01(7) and 6.01(8), with respect only to Significant Subsidiaries and Subsidiary
Guarantors) or because of the failure of the Company to comply with Section 5.01(a)(3). If the
Company exercises its legal defeasance option or its covenant defeasance option, each Subsidiary Guarantor, if any, shall be released from all its
obligations with respect to its Subsidiary Guaranty.

          Upon satisfaction of the conditions set forth herein and upon request of the Company, the
Trustee shall acknowledge in writing the discharge of those obligations that the Company
terminates.

          (c) Notwithstanding clauses (a) and (b) above, the Company’s obligations in Sections 2.03,
2.04, 2.05, 2.06, 2.07, 2.08, 7.07 and 7.08 and in this Article 8 shall survive until the
Securities have been paid in full. Thereafter, the Company’s obligations in Sections 7.07, 8.04
and 8.05 shall survive.

          SECTION 8.02. Conditions to Defeasance. The Company may exercise its legal defeasance
option or its covenant defeasance option only if:

     (1) the Company irrevocably deposits in trust (the “defeasance trust”) with the Trustee
money or U.S. Government Obligations for the payment of principal of and interest on the
Securities to maturity or redemption, as the case may be;

     (2) the Company delivers to the Trustee a certificate from a nationally recognized firm
of independent accountants expressing their opinion that the payments of principal and
interest when due and without reinvestment on the deposited U.S. Government Obligations plus
any deposited money without investment will provide cash at such times and in such amounts
as will be sufficient to pay principal and interest when due on all the Securities to
maturity or redemption, as the case may be;

     (3) 123 days pass after the deposit is made and during the 123-day period no Default
specified in Sections 6.01(7) or (8) with respect to the Company occurs which is continuing
at the end of the 123-day period;

     (4) the deposit does not constitute a default under any other agreement binding on the
Company and is not prohibited by Article 10;

     (5) the Company delivers to the Trustee an Opinion of Counsel to the effect that the
trust resulting from the deposit does not constitute, or is qualified as, a regulated
investment company under the Investment Company Act of 1940;

-75-

 

     (6) in the case of the legal defeasance option, the Company shall have delivered to the
Trustee an Opinion of Counsel stating 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
Securityholders will not recognize income, gain or loss for Federal income tax purposes as a
result of such 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 defeasance had not
occurred;

     (7) in the case of the covenant defeasance option, the Company shall have delivered to
the Trustee an Opinion of Counsel to the effect that the Securityholders 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;

     (8) the Company delivers to the Trustee an Opinion of Counsel in the jurisdiction or
organization of the Company (if other than the United States) to the effect that (A) Holders
will not recognize income, gain or loss for income tax purposes of such jurisdiction as a
result of such deposit and defeasance, and will be subject to income tax of such
jurisdiction on the same amounts, and in the same manner and at the same times as would have
been the case if such deposit and defeasance had not occurred; and

     (9) the Company delivers to the Trustee an Officers’ Certificate and an Opinion of
Counsel, each stating that all conditions precedent to the defeasance and discharge of the
Securities as contemplated by this Article 8 have been complied with.

          Before or after a deposit, the Company may make arrangements satisfactory to the Trustee for
the redemption of Securities at a future date in accordance with Article 3.

          SECTION 8.03. Application of Trust Money. The Trustee shall hold in trust money or U.S.
Government Obligations deposited with it pursuant to this Article 8. It shall apply the deposited
money and the money from U.S. Government Obligations through the Paying Agent and in accordance
with this Indenture to the payment of principal of and interest on the Securities. Money and
securities so held in trust are not subject to Article 10.

          SECTION 8.04. Repayment to Company. The Trustee and the Paying Agent shall promptly turn
over to the Company upon request any excess money or securities held by them at any time.

          Subject to any applicable abandoned property law, the Trustee and the Paying Agent shall pay
to the Company upon request any money held by them for the payment of principal or interest that
remains unclaimed for two years, and, thereafter, Securityholders entitled to the money must look
to the Company for payment as general creditors.

          SECTION 8.05. Indemnity for Government Obligations. The Company shall pay and shall
indemnify the Trustee against any tax, fee or other charge imposed on or assessed

-76-

 

against deposited
U.S. Government Obligations or the principal and interest received on such U.S. Government
Obligations.

          SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is unable to apply any money or U.S. Government Obligations in
accordance with this Article 8 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 obligations under this Indenture and the Securities and the
Subsidiary Guarantors’ obligations under their respective Guarantees shall be revived and
reinstated as though no deposit had occurred pursuant to this Article 8 until such time as the
Trustee or Paying Agent is permitted to apply all such money or U.S. Government Obligations in
accordance with this Article 8; provided, however, that, if the Company has made any payment of
interest on or principal of any Securities because of the reinstatement of its obligations, the
Company shall be subrogated to the rights of the Holders of such Securities to receive such payment
from the money or U.S. Government Obligations held by the Trustee or Paying Agent.

ARTICLE 9

Amendments

          SECTION 9.01. Without Consent of Holders. Subject to Section 9.02 of this Indenture, the
Company, the Subsidiary Guarantors and the Trustee may amend this Indenture or the Securities
without notice to or consent of any Securityholder:

     (1) to cure any ambiguity, omission, defect or inconsistency;

     (2) to comply with Article 5;

     (3) to provide for uncertificated Securities in addition to or in place of certificated
Securities; provided, however, that the uncertificated Securities are issued
in registered form for purposes of Section 163(f) of the Code or in a manner such that the
uncertificated Securities are described in Section 163(f)(2)(B) of the Code;

     (4) to add Guarantees with respect to the Securities, including any Subsidiary
Guaranties, to secure the Securities or to confirm the release, termination or discharge of
any Subsidiary Guarantor or any such Lien when such release, termination or discharge is
permitted under this Indenture;

     (5) to add to the covenants of the Company or a Subsidiary Guarantor for the benefit of
the Holders or to surrender any right or power herein conferred upon the Company or a
Subsidiary Guarantor;

     (6) to comply with any requirement of the SEC in connection with qualifying, or
maintaining the qualification of, this Indenture under the TIA;

     (7) to make any change that does not adversely affect in any material respect the
rights of any Securityholder; or

-77-

 

     (8) to conform the text of this Indenture or the Securities to any provision in the
Offering Circular in the section “Description of the Notes” to the extent that such
provision in the “Description of the Notes” was intended to be a verbatim recitation of
a provision of this Indenture or the Securities.

          However, no amendment may be made to the subordination provisions of this Indenture that
adversely affects the rights of any holder of Senior Indebtedness of the Company or a Subsidiary
Guarantor then outstanding unless such holder of such Senior Indebtedness (or its Representative)
consents to such change or as otherwise permitted by the notes, debentures, bonds or other similar
instruments evidencing such Senior Indebtedness.

          The consent of the holders of the Securities is not necessary to approve the particular form
of any proposed amendment. It is sufficient if such consent approves the substance of the proposed
amendment.

          After an amendment under this Section 9.01 becomes effective, the Company shall mail to
Securityholders a notice briefly describing such amendment. The failure to give such notice to all
Securityholders, or any defect therein, shall not impair or affect the validity of an amendment
under this Section 9.01.

          SECTION 9.02. With Consent of Holders. The Company, the Subsidiary Guarantors and the
Trustee may amend or supplement this Indenture or the Securities, or waive compliance in a
particular instance by the Company with any provisions hereof or thereof, without notice to any
Securityholder but with the written consent of the Holders of at least a majority in principal
amount of the Securities then outstanding (including consents obtained in connection with a tender
offer or exchange for the Securities). However, without the consent of each Securityholder
affected thereby, an amendment, supplement or waiver may not (with respect to any Securities held
by a non-consenting Holder):

     (1) reduce the amount of Securities whose Holders must consent to an amendment,
supplement or waiver;

     (2) reduce the rate of or extend the time for payment of interest on any Security;

     (3) reduce the principal amount of or extend the Stated Maturity of any Security;

     (4) reduce the amount payable upon the redemption of any Security or change the time at
which any Security may be redeemed in accordance with Article 3;

     (5) make any Security payable in money other than that stated in the Security;

     (6) impair the right of any Securityholder to receive payment of principal of and
interest on such Securityholder’s securities on or after the due dates therefor or to
institute suit for the enforcement of any payment on or with respect to such
Securityholder’s Securities;

-78-

 

     (7) make any change in Section 6.04 or 6.07 or the second sentence of this Section
9.02;

     (8) make any change in the ranking or priority of any Security that would adversely
affect the Securityholders; or

     (9) make any change in any Subsidiary Guaranty that would adversely affect the
Securityholders in any material respect.

          It shall not be necessary for the consent of the Holders under this Section 9.02 to approve
the particular form of any proposed amendment, but it shall be sufficient if such consent approves
the substance thereof.

          After an amendment under this Section 9.02 becomes effective, the Company shall mail to
Securityholders a notice briefly describing such amendment, supplement or waiver. The failure to
give such notice to all Securityholders, or any defect therein, shall not impair or affect the
validity of an amendment, supplement or waiver under this Section 9.02.

          SECTION 9.03. Compliance with Trust Indenture Act. Every amendment to this Indenture or
the Securities shall comply with the TIA as then in effect.

          SECTION 9.04. Revocation and Effect of Consents and Waivers. A consent to an amendment, a
supplement or a waiver by a Holder of a Security shall bind the Holder and every subsequent Holder
of that Security or portion of the Security that evidences the same debt as the consenting Holder’s
Security, even if notation of the consent, supplement or waiver is not made on the Security.
However, any such Holder or subsequent Holder may revoke the consent or waiver as to such Holder’s
Security or portion of the Security if the Trustee receives the notice of revocation before the
date the amendment, supplement or waiver becomes effective. After an amendment, a supplement or
waiver becomes effective, it shall bind every Securityholder, unless it makes a change described in
any of clauses (1) through (9) of Section 9.02. In that case, the amendment or waiver shall bind
each Holder of a Security who has consented to it and any subsequent Holder of such Security or any
Security that evidences all or any part of the same debt as the consenting Holder’s Security. An
amendment or waiver becomes effective upon the execution of such amendment or waiver by the
Trustee.

          The Company may, but shall not be obligated to, fix a record date for the purpose of
determining the Securityholders entitled to give their consent or take any other action described
above or required or permitted to be taken pursuant to this Indenture. If a record date is fixed,
then notwithstanding the immediately preceding paragraph, those Persons who were Securityholders at
such record date (or their duly designated proxies), and only those Persons, shall be entitled to
give such consent or to revoke any consent previously given or to take any such action, whether or
not such Persons continue to be Holders after such record date. No such consent shall be valid or
effective for more than 120 days after such record date.

          SECTION 9.05. Notation on or Exchange of Securities. If an amendment changes the terms of a Security, the Trustee may require the Holder of the
Security to deliver it to the Trustee. The Trustee may place an appropriate notation on the
Security regarding the changed terms and return it to the Holder. Alternatively, if the Company or
the Trustee so

-79-

 

determines, the Company in exchange for the Security shall issue and the Trustee
shall authenticate a new Security that reflects the changed terms. Failure to make the appropriate
notation or to issue a new Security shall not affect the validity of such amendment.

          SECTION 9.06. Trustee To Sign Amendments. The Trustee shall sign any amendment authorized
pursuant to this Article 9 if the amendment does not adversely affect the rights, duties,
liabilities or immunities of the Trustee. If it does, the Trustee may but need not sign it. In
signing such amendment the Trustee shall be entitled to receive indemnity reasonably satisfactory
to it and to receive, and (subject to Section 7.01) shall be fully protected in relying upon, an
Officers’ Certificate and an Opinion of Counsel stating that such amendment is authorized or
permitted by this Indenture.

          SECTION 9.07. Payment for Consent. Neither the Company nor any Affiliate of the Company
shall, directly or indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder for or as an inducement to any consent, waiver or
amendment of any of the terms or provisions of this Indenture or the Securities unless such
consideration is offered to be paid to all Holders that so consent, waive or agree to amend in the
time frame set forth in solicitation documents relating to such consent, waiver or agreement.

ARTICLE 10

Subordination

          SECTION 10.01. Agreement To Subordinate. The Company agrees, and each Securityholder by
accepting a Security agrees, that the Indebtedness evidenced by the Securities is subordinated in
right of payment, to the extent and in the manner provided in this Article 10, to the prior payment
of all Senior Indebtedness of the Company and that the subordination is for the benefit of and
enforceable by the holders of such Senior Indebtedness. The Securities shall in all respects rank
pari passu with all other Senior Subordinated Indebtedness of the Company and only
Indebtedness of the Company which is Senior Indebtedness of the Company shall rank senior to the
Securities in accordance with the provisions set forth herein. All provisions of this Article 10
shall be subject to Section 10.12.

          SECTION 10.02. Liquidation, Dissolution, Bankruptcy. Upon any payment or distribution of
the assets of the Company to creditors upon a total or partial liquidation or a total or partial
dissolution of the Company or in a bankruptcy reorganization, insolvency, receivership or similar
proceeding relating to the Company or its property:

     (1) holders of Senior Indebtedness of the Company shall be entitled to receive payment
in full in cash of such Senior Indebtedness before Securityholders shall be entitled to
receive any payment of principal of or interest on the Securities; and

     (2) until such Senior Indebtedness is paid in full in cash, any payment or distribution
to which Securityholders would be entitled but for this Article 10 shall be made to holders
of such Senior Indebtedness as their interests may appear, except that Securityholders may
receive shares of stock and any debt securities that are subordinated to such Senior
Indebtedness to at least the same extent as the Securities.

-80-

 

          SECTION 10.03. Default on Senior Indebtedness of the Company. The Company shall not pay
the principal of or interest on the Securities or make any deposit pursuant to Section 8.01 and may
not purchase, redeem or otherwise retire any Securities (collectively, “pay the Securities”) if
either of the following (a “Payment Default”) occurs (1) any Obligation on any Designated Senior
Indebtedness of the Company is not paid in full in cash when due; or (2) any other default on
Designated Senior Indebtedness of the Company occurs and the maturity of such Designated Senior
Indebtedness is accelerated in accordance with its terms unless, in either case, the Payment
Default has been cured or waived and any such acceleration has been rescinded or such Designated
Senior Indebtedness has been paid in full in cash; provided, however, that the Company shall be
entitled to pay the Securities without regard to the foregoing if the Company and the Trustee
receive written notice approving such payment from the Representative of any Designated Senior
Indebtedness with respect to which the Payment Default has occurred and is continuing. During the
continuance of any default (other than a Payment Default) with respect to any Designated Senior
Indebtedness of the Company pursuant to which the maturity thereof may be accelerated immediately
without further notice (except such notice as may be required to effect such acceleration) or the
expiration of any applicable grace periods, the Company shall not pay the Securities for a period
(a “Payment Blockage Period”) commencing upon the receipt by the Trustee of (with a copy to the
Company) written notice (a “Blockage Notice”) of such default from the Representative of such
Designated Senior Indebtedness specifying an election to effect a Payment Blockage Period and
ending 179 days thereafter. The Payment Blockage Period shall end earlier if such Payment Blockage
Period is terminated (1) by written notice to the Trustee and the Company from the Person or
Persons who gave such Blockage Notice; (2) because the default giving rise to such Blockage Notice
is cured, waived or otherwise no longer continuing; or (3) because such Designated Senior
Indebtedness has been discharged or repaid in full in cash. Notwithstanding the provisions
described in the immediately preceding two sentences (but subject to the provisions contained in
the first sentence of this Section), unless the holders of such Designated Senior Indebtedness or
the Representative of such Designated Senior Indebtedness shall have accelerated the maturity of
such Designated Senior Indebtedness, the Company shall be entitled to resume payments on the
Securities after termination of such Payment Blockage Period. The Securities shall not be subject
to more than one Payment Blockage Period in any consecutive 360-day period, irrespective of the
number of defaults with respect to Designated Senior Indebtedness of the Company during such
period, except that if any Blockage Notice is delivered to the Trustee by or on behalf of holders
of Designated Senior Indebtedness of the Company (other than holders of the Bank Indebtedness), a
Representative of holders of Bank Indebtedness may give another Blockage Notice within such period.
However, in no event may the total
number of days during which any Payment Blockage Period or Periods is in effect exceed 179 days in
the aggregate during any consecutive 360-day period, and there must be 181 days during any
consecutive 360-day period during which no Payment Blockage Period is in effect. For purposes of
this Section, no default or event of default which existed or was continuing on the date of the
commencement of any Payment Blockage Period with respect to the Designated Senior Indebtedness of
the Company initiating such Payment Blockage Period shall be, or be made, the basis of
the
commencement of a subsequent Payment Blockage Period by the Representative of such Designated
Senior Indebtedness unless such default or event of default shall have been cured or waived for a
period of not less than 90 consecutive days.

-81-

 

          SECTION 10.04. Acceleration of Payment of Securities. If payment of the Securities is
accelerated because of an Event of Default, the Company or the Trustee shall promptly notify the
holders of the Designated Senior Indebtedness of the Company (or their Representatives) of the
acceleration.

          SECTION 10.05. When Distribution Must Be Paid Over. If a distribution is made to
Securityholders that because of this Article 10 should not have been made to them, the
Securityholders who receive the distribution shall hold it in trust for holders of Senior
Indebtedness of the Company and pay it over to them as their interests may appear.

          SECTION 10.06. Subrogation. After all Senior Indebtedness of the Company is paid in full
and until the Securities are paid in full, Securityholders shall be subrogated to the rights of
holders of such Senior Indebtedness to receive distributions applicable to such Senior
Indebtedness. A distribution made under this Article 10 to holders of such Senior Indebtedness
which otherwise would have been made to Securityholders is not, as between the Company and
Securityholders, a payment by the Company on such Senior Indebtedness.

          SECTION 10.07. Relative Rights. This Article 10 defines the relative rights of
Securityholders and holders of Senior Indebtedness of the Company. Nothing in this Indenture
shall:

     (1) impair, as between the Company and Securityholders, the obligation of the Company,
which is absolute and unconditional, to pay principal of and interest on the Securities in
accordance with their terms; or

     (2) prevent the Trustee or any Securityholder from exercising its available remedies
upon a Default, subject to the rights of holders of Senior Indebtedness of the Company to
receive distributions otherwise payable to Securityholders.

          SECTION 10.08. Subordination May Not Be Impaired by Company. No right of any holder of Senior Indebtedness of the Company to enforce the subordination of the
Indebtedness evidenced by the Securities shall be impaired by any act or failure to act by the
Company or by its failure to comply with this Indenture.

          SECTION 10.09. Rights of Trustee and Paying Agent. Notwithstanding Section 10.03, the
Trustee or Paying Agent shall continue to make payments on the Securities and shall not be charged
with knowledge of the existence of facts that under this Article 10 would prohibit the making of
any such payments unless, not less than two Business Days prior to the date of such payment, a
Trust Officer of the Trustee receives notice satisfactory to it that such payments are prohibited
by this Article 10. The Company, the Registrar or co-registrar, the Paying Agent, a Representative
or a holder of Senior Indebtedness of the Company shall be entitled to give the notice; provided,
however, that, if an issue of Senior Indebtedness of the Company has a Representative, only the
Representative shall be entitled to give the notice.

          The Trustee in its individual or any other capacity shall be entitled to hold Senior
Indebtedness of the Company with the same rights it would have if it were not Trustee. The
Registrar and co-registrar and the Paying Agent shall be entitled to do the same with like rights.
The Trustee shall be entitled to all the rights set forth in this Article 10 with respect to any
Senior

-82-

 

Indebtedness of the Company which may at any time be held by it, to the same extent as any
other holder of such Senior Indebtedness; and nothing in Article 7 shall deprive the Trustee of any
of its rights as such holder. Nothing in this Article 10 shall apply to claims of, or payments to,
the Trustee under or pursuant to Section 7.07.

          SECTION 10.10. Distribution or Notice to Representative. Whenever any Person is to make a
distribution or give a notice to holders of Senior Indebtedness of the Company, such Person shall
be entitled to make such distribution or give such notice to their Representative (if any).

          SECTION 10.11. Article 10 Not To Prevent Events of Default or Limit Right To Accelerate.
The failure to make a payment pursuant to the Securities by reason of any provision in this Article
10 shall not be construed as preventing the occurrence of a Default. Nothing in this Article 10
shall have any effect on the right of the Securityholders or the Trustee to accelerate the maturity
of the Securities.

          SECTION 10.12. Trust Moneys Not Subordinated. Notwithstanding anything contained herein to
the contrary, payments from money or the proceeds of U.S. Government Obligations held in trust
under Article 8 by the Trustee for the payment of principal of and interest on the Securities shall
not be subordinated to the prior payment of any Senior Indebtedness of the Company or subject to
the restrictions set forth in this Article 10, and none of the Securityholders shall be obligated
to pay over any such amount to the Company or any holder of Senior Indebtedness of the Company or
any other creditor of the Company.

          SECTION 10.13. Trustee Entitled To Rely. Upon any payment or distribution pursuant to this
Article 10, the Trustee and the Securityholders shall be entitled to rely (1) upon any order or
decree of a court of competent jurisdiction in which any proceedings of the nature referred to in
Section 10.02 are pending, (2) upon a certificate of the liquidating trustee or agent or other
Person making such payment or distribution to the Trustee or to the Securityholders or (3) upon the
Representatives of Senior Indebtedness of the Company for the purpose of ascertaining the Persons
entitled to participate in such payment or distribution, the holders of such Senior Indebtedness
and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts
paid or distributed thereon and all other facts pertinent thereto or to this Article 10. In the
event that the Trustee determines, in good faith, that evidence is required with respect to the
right of any Person as a holder of Senior Indebtedness of the Company to participate in any payment
or distribution pursuant to this Article 10, the Trustee shall be entitled to request such Person
to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of such Senior
Indebtedness held by such Person, the extent to which such Person is entitled to participate in
such payment or distribution and other facts pertinent to the rights of such Person under this
Article 10, and, if such evidence is not furnished, the Trustee shall be entitled to defer any
payment to such Person pending judicial determination as to the right of such Person to receive
such payment. The provisions of Sections 7.01 and 7.02 shall be applicable to all actions or
omissions of actions by the Trustee pursuant to this Article 10.

          SECTION 10.14. Trustee To Effectuate Subordination. Each Securityholder by accepting a
Security authorizes and directs the Trustee on his behalf to take such action as may be necessary
or appropriate to acknowledge or effectuate the subordination between the

-83-

 

Securityholders and the
holders of Senior Indebtedness of the Company as provided in this Article 10 and appoints the
Trustee as attorney-in-fact for any and all such purposes.

          SECTION 10.15. Trustee Not Fiduciary for Holders of Senior Indebtedness of the Company.
The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness of
the Company and shall not be liable to any such holders if it shall mistakenly pay over or
distribute to Securityholders or the Company or any other Person, money or assets to which any
holders of Senior Indebtedness of the Company shall be entitled by virtue of this Article 10 or
otherwise.

          SECTION 10.16. Reliance by Holders of Senior Indebtedness of the Company on Subordination
Provisions. Each Securityholder by accepting a Security acknowledges and agrees that the
foregoing subordination provisions are, and are intended to be, an inducement and a consideration
to each holder of any Senior Indebtedness of the Company, whether such Senior Indebtedness was
created or acquired before or after the issuance of the Securities, to acquire and continue to
hold, or to continue to hold, such Senior Indebtedness and such holder of such Senior Indebtedness
shall be deemed conclusively to have relied on such subordination provisions in acquiring and
continuing to hold, or in continuing to hold, such Senior Indebtedness.

ARTICLE 11

Subsidiary Guaranties

          SECTION 11.01. Guaranties. Each Subsidiary Guarantor hereby unconditionally and
irrevocably guarantees, jointly and severally, to each Holder and to the Trustee and its successors
and assigns (a) the full and punctual payment of principal of and interest on the Securities when
due, whether at maturity, by acceleration, by redemption or otherwise, and all other monetary
obligations of the Company under this Indenture and the Securities and (b) the full and punctual
performance within applicable grace periods of all other obligations of the Company under this
Indenture and the Securities (all the foregoing being hereinafter collectively called the
“Guaranteed Obligations”). Each Subsidiary Guarantor further agrees that the Guaranteed
Obligations may be extended or renewed, in whole or in part, without notice or further assent from
such Subsidiary Guarantor and that such Subsidiary Guarantor will remain bound under this Article
11 notwithstanding any extension or renewal of any Obligation.

          Each Subsidiary Guarantor waives presentation to, demand of, payment from and protest to the
Company of any of the Guaranteed Obligations and also waives notice of protest for nonpayment.
Each Subsidiary Guarantor waives notice of any default under the Securities or the Guaranteed
Obligations. The obligations of each Subsidiary Guarantor hereunder shall not be affected by (a)
the failure of any Holder or the Trustee to assert any claim or demand or to enforce any right or
remedy against the Company or any other Person under this Indenture, the Securities or any other
agreement or otherwise; (b) any extension or renewal of any thereof; (c) any rescission, waiver,
amendment or modification of any of the terms or provisions of this Indenture, the Securities or
any other agreement; (d) the release of any security held by any Holder or the Trustee for the
Guaranteed Obligations or any of them; (e) the failure of any Holder or the Trustee to exercise any
right or remedy against any other guarantor of the

-84-

 

Guaranteed Obligations; or (f) except as set
forth in Section 11.06, any change in the ownership of such Subsidiary Guarantor.

          Each Subsidiary Guarantor further agrees that its Subsidiary Guaranty herein constitutes a
guarantee of payment, performance and compliance when due (and not a guarantee of collection) and
waives any right to require that any resort be had by any Holder or the Trustee to any security
held for payment of the Guaranteed Obligations.

          Except as expressly set forth in Sections 8.01(b), 11.02 and 11.06, the obligations of each
Subsidiary Guarantor hereunder shall not be subject to any reduction, limitation, impairment or
termination for any reason, including any claim of waiver, release, surrender, alteration or
compromise, and shall not be subject to any defense of setoff, counterclaim, recoupment or
termination whatsoever or by reason of the invalidity, illegality or unenforceability of the
Guaranteed Obligations or otherwise. Without limiting the generality of the foregoing, the
obligations of each Subsidiary Guarantor herein shall not be discharged or
impaired or otherwise affected by the failure of any Holder or the Trustee to assert any claim
or demand or to enforce any remedy under this Indenture, the Securities or any other agreement, by
any waiver or modification of any thereof, by any default, failure or delay, willful or otherwise,
in the performance of the obligations, or by any other act or thing or omission or delay to do any
other act or thing which may or might in any manner or to any extent vary the risk of such
Subsidiary Guarantor or would otherwise operate as a discharge of such Subsidiary Guarantor as a
matter of law or equity.

          Each Subsidiary Guarantor further agrees that its Guarantee herein shall continue to be
effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of
principal of or interest on any Guaranteed Obligation is rescinded or must otherwise be restored by
any Holder or the Trustee upon the bankruptcy or reorganization of the Company or otherwise.

          In furtherance of the foregoing and not in limitation of any other right which any Holder or
the Trustee has at law or in equity against any Subsidiary Guarantor by virtue hereof, upon the
failure of the Company to pay the principal of or interest on any Guaranteed Obligation when and as
the same shall become due, whether at maturity, by acceleration, by redemption or otherwise, or to
perform or comply with any other Guaranteed Obligation, each Subsidiary Guarantor hereby promises
to and shall, upon receipt of written demand by the Trustee, forthwith pay, or cause to be paid, in
cash, to the Holders or the Trustee an amount equal to the sum of (1) the unpaid amount of such
Guaranteed Obligations, (2) accrued and unpaid interest on such Guaranteed Obligations (but only to
the extent not prohibited by law) and (3) all other monetary Guaranteed Obligations of the Company
to the Holders and the Trustee.

          Each Subsidiary Guarantor agrees that, as between it, on the one hand, and the Holders and the
Trustee, on the other hand, (x) the maturity of the Guaranteed Obligations hereby may be
accelerated as provided in Article 6 for the purposes of such Subsidiary Guarantor’s Subsidiary
Guaranty herein, notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the Obligations guaranteed hereby, and (y) in the event of any
declaration of acceleration of such Guaranteed Obligations as provided in

-85-

 

Article 6, such
Guaranteed Obligations (whether or not due and payable) shall forthwith become due and payable by
such Subsidiary Guarantor for the purposes of this Section 11.01.

          Each Subsidiary Guarantor also agrees to pay any and all costs and expenses (including
reasonable attorneys’ fees) incurred by the Trustee or any Holder in enforcing any rights under
this Section 11.01.

          SECTION 11.02. Limitation on Liability. Any term or provision of this Indenture to the
contrary notwithstanding, the maximum aggregate amount of the Obligations guaranteed hereunder by
any Subsidiary Guarantor shall not exceed the maximum amount that can be hereby guaranteed without
rendering this Indenture, as it relates to such Subsidiary Guarantor, voidable under applicable law
relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of
creditors generally.

          SECTION 11.03. Successors and Assigns. This Article 11 shall be binding upon each Subsidiary Guarantor and its successors and assigns
and shall enure to the benefit of the successors and assigns of the Trustee and the Holders and, in
the event of any transfer or assignment of rights by any Holder or the Trustee, the rights and
privileges conferred upon that party in this Indenture and in the Securities shall automatically
extend to and be vested in such transferee or assignee, all subject to the terms and conditions of
this Indenture.

          SECTION 11.04. No Waiver. Neither a failure nor a delay on the part of either the Trustee
or the Holders in exercising any right, power or privilege under this Article 11 shall operate as a
waiver thereof, nor shall a single or partial exercise thereof preclude any other or further
exercise of any right, power or privilege. The rights, remedies and benefits of the Trustee and
the Holders herein expressly specified are cumulative and not exclusive of any other rights,
remedies or benefits which either may have under this Article 11 at law, in equity, by statute or
otherwise.

          SECTION 11.05. Modification. No modification, amendment or waiver of any provision of this
Article 11, nor the consent to any departure by any Subsidiary Guarantor therefrom, shall in any
event be effective unless the same shall be in writing and signed by the Trustee, and then such
waiver or consent shall be effective only in the specific instance and for the purpose for which
given. No notice to or demand on any Subsidiary Guarantor in any case shall entitle such
Subsidiary Guarantor to any other or further notice or demand in the same, similar or other
circumstances.

          SECTION 11.06. Release of Subsidiary Guarantor. Upon (a) the sale or other disposition
(including by way of consolidation or merger) of all of the Capital Stock of a Subsidiary
Guarantor, (b) the sale or disposition of all or substantially all the assets of such Subsidiary
Guarantor or (c) the designation of such Subsidiary Guarantor as an Unrestricted Subsidiary (in
each case other than a sale or disposition to the Company or an Affiliate of the Company), such
Subsidiary Guarantor shall be deemed released from all obligations under this Article 11 without
any further action required on the part of the Trustee or any Holder. At the request of the
Company, the Trustee shall execute and deliver an appropriate instrument evidencing such release.

-86-

 

ARTICLE 12

Subordination of Subsidiary Guaranties

          SECTION 12.01. Agreement To Subordinate. Each Subsidiary Guarantor agrees, and each
Securityholder by accepting a Security agrees, that the Indebtedness evidenced by such Subsidiary
Guarantor’s Subsidiary Guaranty is subordinated in right of payment, to the extent and in the
manner provided in this Article 12, to the prior payment of all Senior Indebtedness of such
Subsidiary Guarantor and that the subordination is for the benefit of and enforceable by the
holders of such Senior Indebtedness. The Obligations of a Subsidiary Guarantor shall in all
respects rank pari passu with all other Senior Subordinated
Indebtedness of such Subsidiary Guarantor and only Senior Indebtedness of such Subsidiary Guarantor
(including such Subsidiary Guarantor’s Guaranty of Senior Indebtedness of the Company) shall rank
senior to the Obligations of such Subsidiary Guarantor in accordance with the provisions set forth
herein.

          SECTION 12.02. Liquidation, Dissolution, Bankruptcy. Upon any payment or distribution of
the assets of any Subsidiary Guarantor to creditors upon a total or partial liquidation or a total
or partial dissolution of such Subsidiary Guarantor or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to such Subsidiary Guarantor or its property:

     (1) holders of Senior Indebtedness of such Subsidiary Guarantor shall be entitled to
receive payment in full in cash of such Senior Indebtedness before Securityholders shall be
entitled to receive any payment pursuant to the Subsidiary Guaranty of such Subsidiary
Guarantor; and

     (2) until the Senior Indebtedness of any Subsidiary Guarantor is paid in full in cash,
any payment or distribution to which Securityholders would be entitled but for this Article
12 shall be made to holders of such Senior Indebtedness as their interests may appear,
except that Securityholders may receive shares of stock and any debt securities of such
Subsidiary Guarantor that are subordinated to such Senior Indebtedness to at least the same
extent as Subsidiary Guaranty.

          SECTION 12.03. Default on Senior Indebtedness of Subsidiary Guarantor. No Subsidiary
Guarantor shall make its Subsidiary Guaranty or purchase, redeem or otherwise retire or defease any
Securities or other Obligations (collectively, “pay its Subsidiary Guaranty”) if either of the
following (a “Payment Default”) occurs (1) any Obligation on any Designated Senior Indebtedness of
such Subsidiary Guarantor is not paid in full in cash when due; or (2) any other default on
Designated Senior Indebtedness of such Subsidiary Guarantor occurs and the maturity of such
Designated Senior Indebtedness is accelerated in accordance with its terms; unless, in either case,
the Payment Default has been cured or waived and any such acceleration has been rescinded or such
Designated Senior Indebtedness has been paid in full in cash; provided, however, that any
Subsidiary Guarantor shall be entitled to pay its Subsidiary Guaranty without regard to the
foregoing if such Subsidiary Guarantor and the Trustee receive written notice approving such
payment from the Representative of any Designated Senior Indebtedness with respect to which the
Payment Default has occurred and is continuing. During

-87-

 

the continuance of any default (other than
a Payment Default) with respect to any Designated Senior Indebtedness of such Subsidiary Guarantor
pursuant to which the maturity thereof may be accelerated immediately without further notice
(except such notice as may be required to effect such acceleration) or the expiration of any
applicable grace periods, such Subsidiary Guarantor shall not pay its Subsidiary Guaranty for a
period (a “Payment Blockage Period”) commencing upon the receipt by the Trustee of (with a copy to
such Subsidiary Guarantor) written notice (a “Blockage Notice”) of such default from the
Representative of such Designated Senior Indebtedness specifying an election to effect a Payment
Blockage Period and ending 179 days thereafter. The Payment Blockage Period shall end earlier if
such Payment Blockage Period is
terminated (1) by written notice to the Trustee and such Subsidiary Guarantor from the Person or
Persons who gave such Blockage Notice; (2) because the default giving rise to such Blockage Notice
is cured, waived or otherwise no longer continuing; or (3) because such Designated Senior
Indebtedness has been discharged or repaid in full in cash. Notwithstanding the provisions
described in the immediately preceding two sentences (but subject to the provisions contained in
the first sentence of this Section), unless the holders of such Designated Senior Indebtedness
giving such Payment Notice or the Representative of such Designated Senior Indebtedness shall have
accelerated the maturity of such Designated Senior Indebtedness, any Subsidiary Guarantor shall be
entitled to resume payments pursuant to its Subsidiary Guaranty after termination of such Payment
Blockage Period. No Subsidiary Guarantor shall be subject to more than one Blockage Period in any
consecutive 360-day period, irrespective of the number of defaults with respect to Designated
Senior Indebtedness of such Subsidiary Guarantor during such period, except that if any Blockage
Notice is delivered to the Trustee by or on behalf of holders of Designated Senior Indebtedness of
such Subsidiary Guarantor (other than holders of the Bank Indebtedness), a Representative of
holders of Bank Indebtedness may give another Blockage Notice within such period. However, in no
event may the total number of days during which any Payment Blockage Period or Periods is in effect
exceed 179 days in the aggregate during any consecutive 360-day period, and there must be 181 days
during any consecutive 360-day period during which no Payment Blockage Period is in effect. For
purposes of this Section, no default or event of default which existed or was continuing on the
date of the commencement of any Payment Blockage Period with respect to the Designated Senior
Indebtedness of such Subsidiary Guarantor initiating such Payment Blockage Period shall be, or be
made, the basis of the commencement of a subsequent Payment Blockage Period by the Representative
of such Designated Senior Indebtedness unless such default or event of default shall have been
cured or waived for a period of not less than 90 consecutive days.

          SECTION 12.04. Demand for Payment. If a demand for payment is made on a Subsidiary
Guarantor pursuant to Article 11, the Trustee shall promptly notify the holders of the Designated
Senior Indebtedness of such Subsidiary Guarantor (or their Representatives) of such demand.

          SECTION 12.05. When Distribution Must Be Paid Over. If a distribution is made to
Securityholders that because of this Article 12 should not have been made to them, the
Securityholders who receive the distribution shall hold it in trust for holders of Senior
Indebtedness of the applicable Subsidiary Guarantor and pay it over to them or their
Representatives as their interests may appear.

-88-

 

          SECTION 12.06. Subrogation. After all Senior Indebtedness of a Subsidiary Guarantor is
paid in full and until the Securities are paid in full, Securityholders shall be subrogated to the
rights of holders of such Senior Indebtedness to receive distributions applicable to Senior
Indebtedness of such Subsidiary Guarantor. A distribution made under this Article 12 to holders of
such Senior Indebtedness which otherwise would have been made to Securityholders is not, as between
the relevant
Subsidiary Guarantor and Securityholders, a payment by such Subsidiary Guarantor on such Senior
Indebtedness.

          SECTION 12.07. Relative Rights. This Article 12 defines the relative rights of
Securityholders and holders of Senior Indebtedness of a Subsidiary Guarantor. Nothing in this
Indenture shall:

     (1) impair, as between a Subsidiary Guarantor and Securityholders, the obligation of
such Subsidiary Guarantor, which is absolute and unconditional, to pay its Subsidiary
Guaranty to the extent set forth in Article 11; or

     (2) prevent the Trustee or any Securityholder from exercising its available remedies
upon a default by such Subsidiary Guarantor under its Subsidiary Guaranty, subject to the
rights of holders of Senior Indebtedness of such Subsidiary Guarantor to receive
distributions otherwise payable to Securityholders.

          SECTION 12.08. Subordination May Not Be Impaired by Company. No right of any holder of
Senior Indebtedness of any Subsidiary Guarantor to enforce the subordination of the Subsidiary
Guaranty of such Subsidiary Guarantor shall be impaired by any act or failure to act by such
Subsidiary Guarantor or by its failure to comply with this Indenture.

          SECTION 12.09. Rights of Trustee and Paying Agent. Notwithstanding Section 12.03, the
Trustee or Paying Agent shall continue to make payments on any Subsidiary Guaranty and shall not be
charged with knowledge of the existence of facts that would prohibit the making of any such
payments unless, not less than two Business Days prior to the date of such payment, a Trust Officer
of the Trustee receives written notice satisfactory to it that such payments are prohibited by this
Article 12. The Company, the relevant Subsidiary Guarantor, the Registrar or co-registrar, the
Paying Agent, a Representative or a holder of Senior Indebtedness of such Subsidiary Guarantor
shall be entitled to give the notice; provided, however, that, if an issue of Senior Indebtedness
of any Subsidiary Guarantor has a Representative, only the Representative shall be entitled to give
the notice.

          The Trustee in its individual or any other capacity shall be entitled to hold Senior
Indebtedness of any Subsidiary Guarantor with the same rights it would have if it were not the
Trustee. The Registrar and co-registrar and the Paying Agent may do the same with like rights.
The Trustee shall be entitled to all the rights set forth in this Article 12 with respect to any
Senior Indebtedness of any Subsidiary Guarantor which may at any time be held by it, to the same
extent as any other holder of such Senior Indebtedness; and nothing in Article 7 shall deprive the
Trustee of any of its rights as such holder. Nothing in this Article 12 shall apply to claims of,
or payments to, the Trustee under or pursuant to Section 7.07.

-89-

 

          SECTION 12.10. Distribution or Notice to Representative
        . Whenever any Person is to make a distribution or give a notice to holders of Senior Indebtedness
of any Subsidiary Guarantor, such Person shall be entitled to make such distribution or give such
notice to their Representative (if any).

          SECTION 12.11. Article 12 Not To Prevent Events of Default or Limit Right To Demand
Payment. The failure to make a payment pursuant to a Subsidiary Guaranty by reason of any
provision in this Article 12 shall not be construed as preventing the occurrence of a Default.
Nothing in this Article 12 shall have any effect on the right of the Securityholders or the Trustee
to make a demand for payment on any Subsidiary Guarantor pursuant to its Subsidiary Guaranty.

          SECTION 12.12. Trustee Entitled To Rely. Upon any payment or distribution pursuant to this
Article 12, the Trustee and the Securityholders shall be entitled to rely (1) upon any order or
decree of a court of competent jurisdiction in which any proceedings of the nature referred to in
Section 12.02 are pending, (2) upon a certificate of the liquidating trustee or agent or other
Person making such payment or distribution to the Trustee or to the Securityholders or (3) upon the
Representatives for the holders of Senior Indebtedness of any Subsidiary Guarantor for the purpose
of ascertaining the Persons entitled to participate in such payment or distribution, the holders of
such Senior Indebtedness and other indebtedness of such Subsidiary Guarantor, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article 12. In the event that the Trustee determines, in good faith, that
evidence is required with respect to the right of any Person as a holder of Senior Indebtedness of
any Subsidiary Guarantor to participate in any payment or distribution pursuant to this Article 12,
the Trustee shall be entitled to request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of Senior Indebtedness of such Subsidiary Guarantor
held by such Person, the extent to which such Person is entitled to participate in such payment or
distribution and other facts pertinent to the rights of such Person under this Article 12, and, if
such evidence is not furnished, the Trustee shall be entitled to defer any payment to such Person
pending judicial determination as to the right of such Person to receive such payment. The
provisions of Sections 7.01 and 7.02 shall be applicable to all actions or omissions of actions by
the Trustee pursuant to this Article 12.

          SECTION 12.13. Trustee To Effectuate Subordination. Each Securityholder by accepting a
Security authorizes and directs the Trustee on his behalf to take such action as may be necessary
or appropriate to acknowledge or effectuate the subordination between the Securityholders and the
holders of Senior Indebtedness of any Subsidiary Guarantor as provided in this Article 12 and
appoints the Trustee as attorney-in-fact for any and all such purposes.

          SECTION 12.14. Trustee Not Fiduciary for Holders of Senior Indebtedness of Subsidiary
Guarantor. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior
Indebtedness of any Subsidiary Guarantor and shall not be liable to any such holders if it shall
mistakenly pay over or distribute to Securityholders or the Company or any other Person, money or
assets to which any holders of such Senior Indebtedness shall be entitled by virtue of this Article
12 or otherwise.

-90-

 

          SECTION 12.15. Reliance by Holders of Senior Indebtedness of Subsidiary Guarantors on
Subordination Provisions. Each Securityholder by accepting a Security acknowledges and agrees
that the foregoing subordination provisions are, and are intended to be, an inducement and a
consideration to each holder of any Senior Indebtedness of any Subsidiary Guarantor, whether such
Senior Indebtedness was created or acquired before or after the issuance of the Securities, to
acquire and continue to hold, or to continue to hold, such Senior Indebtedness and such holder of
Senior Indebtedness shall be deemed conclusively to have relied on such subordination provisions in
acquiring and continuing to hold, or in continuing to hold, such Senior Indebtedness.

ARTICLE 13

Miscellaneous

          SECTION 13.01. Trust Indenture Act Controls. If any provision of this Indenture limits,
qualifies or conflicts with another provision which is required to be included in this Indenture by
the TIA, the required provision shall control.

          SECTION 13.02. Notices. Any notice or communication shall be in writing and delivered in
person or mailed by first-class mail addressed as follows:

     if to the Company or any Subsidiary Guarantor:

Encore Acquisition Company

777 Main Street

Suite 1400

Fort Worth, TX 76102

Attention: Roy W. Jageman

     if to the Trustee:

Wells Fargo Bank, National Association

505 Main Street

Suite 301

Fort Worth, TX 76102

Attention: Corporate Trust Administration

          The Company, any Subsidiary Guarantor or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.

          Any notice or communication mailed to a Securityholder shall be mailed to the Securityholder
at the Securityholder’s address as it appears on the registration books of the Registrar and shall
be sufficiently given if so mailed within the time prescribed.

          Failure to mail a notice or communication to a Securityholder or any defect in it shall not
affect its sufficiency with respect to other Securityholders. If a notice or

-91-

 

communication is
mailed in the manner provided above, it is duly given, whether or not the addressee receives it.

          SECTION 13.03. Communication by Holders with Other Holders. Securityholders may
communicate pursuant to TIA § 312(b) with other Securityholders with respect to their rights under
this Indenture or the Securities. The Company, any Subsidiary Guarantor, 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 or refrain from taking 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 stating that, in the opinion of the signers, all conditions precedent, if any,
provided for in this Indenture relating to the proposed action have been complied with; and

     (2) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee
stating that, in the opinion of such counsel, all such conditions precedent have been
complied with.

          SECTION 13.05. Statements Required in Certificate or Opinion. Each certificate or opinion
with respect to compliance with a covenant or condition provided for in this Indenture shall
include:

     (1) a statement that the individual 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 individual, he has made such examination
or investigation as is necessary to enable him to express an informed opinion as to whether
or not such covenant or condition has been complied with; and

     (4) a statement as to whether or not, in the opinion of such individual, such covenant
or condition has been complied with.

          SECTION 13.06. When Securities Disregarded. In determining whether the Holders of the
required principal amount of Securities have concurred in any direction, waiver or consent,
Securities owned by the Company or by any Person directly or indirectly controlling or controlled
by or under direct or indirect common control with the Company shall be disregarded and deemed not
to be outstanding, except that, for the purpose of determining whether the Trustee shall be
protected in relying on any such direction, waiver or consent, only Securities which the Trustee
knows are so owned shall be so disregarded. Also, subject to the foregoing, only Securities
outstanding at the time shall be considered in any such determination.

-92-

 

          SECTION 13.07. Rules by Trustee, Paying Agent and Registrar. The Trustee may make
reasonable rules for action by or a meeting of Securityholders. The Registrar and the Paying Agent
may make reasonable rules for their functions.

          SECTION 13.08. Legal Holidays. A “Legal Holiday” is a Saturday, a Sunday or a day on which
banking institutions are not required to be open in the State of New York, Texas or Minnesota. If
a payment date is a Legal Holiday, payment shall be made on the next succeeding day that is not a
Legal Holiday, and no interest shall accrue for the intervening period. If a regular record date
is a Legal Holiday, the record date shall not be affected.

          SECTION 13.09. Governing Law. This Indenture and the Securities shall be governed by, and
construed in accordance with, the laws of the State of New York but 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 13.10. No Recourse Against Others. A director, officer, employee, incorporator or
stockholder, as such, of the Company or any Subsidiary Guarantor shall not have any liability for
any obligations of the Company under the Securities or this Indenture or of such Subsidiary
Guarantor under its Subsidiary Guaranty or this Indenture or for any claim based on, in respect of
or by reason of such obligations or their creation. By accepting a Security, each Securityholder
waives and releases all such liability. The waiver and release shall be part of the consideration
for the issuance of the Securities.

          SECTION 13.11. Successors. All agreements of the Company in this Indenture and the
Securities shall bind their respective successors. All agreements of the Trustee in this Indenture
shall bind its successors.

          SECTION 13.12. Multiple Originals. The parties may sign any number of copies of this
Indenture. Each signed copy shall be an original, but all of them together represent the same
agreement. One signed copy is enough to prove this Indenture.

          SECTION 13.13. Table of Contents; Headings. The table of contents, cross-reference sheet
and headings of the Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not intended to be considered a part hereof and shall not modify or restrict
any of the terms or provisions hereof.

-93-

 

          IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed as of the date
first written above.

	 	 	 	 	 	 	 
	 	 	ENCORE ACQUISITION COMPANY,
	 
	 	 	 	 	 	 
	 

	 	By
	 	 	 	/s/ Roy W. Jageman
	 	 	 	 	 
	 

	 	 	 	 	 	Roy W. Jageman
	 

	 	 	 	 	 	Executive Vice
	 

	 	 	 	 	 	President & Chief
	 

	 	 	 	 	 	Financial Officer
	 
	 	 	 	 	 	 
	 	 	EAP ENERGY, INC.,
	 
	 	 	 	 	 	 
	 

	 	By
	 	 	 	/s/ Roy W. Jageman
	 	 	 	 	 
	 

	 	 	 	 	 	Roy W. Jageman
	 

	 	 	 	 	 	Executive Vice
	 

	 	 	 	 	 	President & Chief
	 

	 	 	 	 	 	Financial Officer

	 	 	 	 	 	 	 
	 	 	EAP ENERGY SERVICES, L.P.,
	 
	 	 	 	 	 	 
	 	 	By	 	EAP Energy, Inc.,
	 	 	 	 	its general partner
	 
	 	 	 	 	 	 
	 

	 	 	 	By
	 	/s/ Roy W. Jageman
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	          Roy W. Jageman
	 

	 	 	 	 	 	          Executive Vice
	 

	 	 	 	 	 	          President & Chief
	 

	 	 	 	 	 	          Financial Officer

	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	EAP OPERATING, INC.,
	 
	 	 	 	 	 	 
	 

	 	By
	 	 	 	/s/ Roy W. Jageman
	 	 	 	 	 
	 

	 	 	 	 	 	Roy W. Jageman
	 

	 	 	 	 	 	Executive Vice
	 

	 	 	 	 	 	President & Chief
	 

	 	 	 	 	 	Financial Officer

 

 

	 	 	 	 	 	 	 
	 	 	EAP PROPERTIES, INC.,
	 
	 	 	 	 	 	 
	 

	 	By
	 	 	 	/s/ Robert A. Sagedy
	 	 	 	 	 
	 

	 	 	 	 	 	Robert A. Sagedy
	 

	 	 	 	 	 	Vice President

	 	 	 	 	 	 	 
	 	 	ENCORE OPERATING, L.P.,
	 
	 	 	 	 	 	 
	 	 	By	 	EAP Operating, Inc.,
	 	 	 	 	its general partner
	 
	 	 	 	 	 	 
	 

	 	 	 	By
	 	/s/ Roy W. Jageman
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	          Roy W. Jageman
	 

	 	 	 	 	 	          Executive Vice
	 

	 	 	 	 	 	          President & Chief
	 

	 	 	 	 	 	          Financial Officer

	 	 	 	 	 	 	 
	 	 	ENCORE OPERATING LOUISIANA, LLC,
	 
	 	 	 	 	 	 
	 

	 	By
	 	 	 	/s/ Tom Olle
	 	 	 	 	 
	 

	 	 	 	 	 	Tom Olle
	 

	 	 	 	 	 	President

 

 

	 	 	 	 	 	 	 
	 	 	WELLS FARGO BANK, NATIONAL
	 	 	ASSOCIATION,
	 
	 	 	 	 	 	 
	 

	 	By
	 	 	 	          /s/ Melissa Scott
	 	 	 	 	 
	 	 	 	 	Name: Melissa Scott
	 	 	 	 	Title:   Vice President

 

 

RULE 144/REGULATIONS APPENDIX

PROVISIONS RELATING TO INITIAL SECURITIES,

PRIVATE EXCHANGE SECURITIES

AND EXCHANGE SECURITIES

     1. Definitions

     1.1 Definitions

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

          “Depository” means The Depository Trust Company, its nominees and their respective successors.

          “Exchange Securities” means (1) the 6.0% Senior Subordinated Notes Due 2015 issued pursuant to
the Indenture in connection with the Registered Exchange Offer pursuant to the Registration Rights
Agreement and (2) Additional Securities, if any, issued pursuant to a registration statement filed
with the SEC under the Securities Act.

          “Initial Purchaser” means (1) with respect to the Initial Securities issued on the Issue Date,
Credit Suisse First Boston LLC, and (2) with respect to each issuance of Additional Securities, the
Persons purchasing such Additional Securities under the related Purchase Agreement.

          “Initial Securities” means (1) $300 million aggregate principal amount of 6.0% Senior
Subordinated Notes Due 2015 issued on the Issue Date and (2) Additional Securities, if any, issued
in a transaction exempt from the registration requirements of the Securities Act.

          “Private Exchange” means the offer by the Company, pursuant to the Registration Rights
Agreement, to the Initial Purchaser to issue and deliver to the Initial Purchaser, in exchange for
the Initial Securities held by the Initial Purchaser as part of its initial distribution, a like
aggregate principal amount of Private Exchange Securities.

          “Private Exchange Securities” means any 6.0% Senior Subordinated Notes Due 2015 issued in
connection with a Private Exchange.

          “Purchase Agreement” means (1) with respect to the Initial Securities issued on the Issue
Date, the Purchase Agreement dated June 30, 2005, among the Company, the Subsidiary Guarantors and
the Initial Purchaser, and (2) with respect to each issuance of Additional Securities, the purchase
agreement or underwriting agreement among the Company and the Persons purchasing such Additional
Securities.

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

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

 

 

          “Registration Rights Agreement” means (1) with respect to the Initial Securities issued on the
Issue Date, the Registration Rights Agreement dated July 13, 2005 among the Company, the Subsidiary
Guarantors and the Initial Purchaser, and (2) with respect to each issuance of Additional
Securities issued in a transaction exempt from the registration requirements of the Securities Act,
the registration rights agreement, if any, among the Company and the Persons purchasing such
Additional Securities under the related Purchase Agreement.

          “Securities” means the Initial Securities, the Exchange Securities and the Private Exchange
Securities, treated as a single class.

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

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

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

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

     1.2 Other Definitions

	 	 	 	 	 
	 	 	Defined in	 
	Term	 	Section:	 
	“Agent Members”
	 	 	2.1	(b)
	“Global Security”
	 	 	2.1	(a)
	“Regulation S”
	 	 	2.1	(a)
	“Restricted Global Security”
	 	 	2.1	(a)
	“Rule 144A”
	 	 	2.1	(a)

     2. The Securities.

     2.1 (a) Form and Dating. Initial Securities offered and sold to a QIB in reliance on Rule
144A under the Securities Act (“Rule 144A”) or in reliance on Regulation S under the Securities Act
(“Regulation S”), in each case as provided in the Purchase Agreement, and Private Exchange
Securities, as provided in the Registration Rights Agreement, shall be issued initially in the form
of one or more permanent global Securities in definitive, fully registered form without interest
coupons with the global securities legend and restricted securities legend set forth in Exhibit 1
hereto (each, a “Restricted Global Security”), which shall be deposited on behalf of the purchasers
of the Initial Securities represented thereby with the Trustee, at its principal corporate trust
office, as custodian for the Depository (or with such other custodian as the Depository may
direct), and registered in the
name of the Depository or a nominee of the Depository, duly executed by the Company and
authenticated by the Trustee as hereinafter

2

 

provided. The aggregate principal amount of the Global
Securities may from time to time be increased or decreased by adjustments made on the records of
the Trustee and the Depository or its nominee as hereinafter
provided. Exchange Securities shall
be issued in global form (with the global securities legend set forth in Exhibit 1 hereto) or in
certificated form at the option of the Holders thereof from time to time. Exchange Securities
issued in global form and Restricted Global Securities are sometimes referred to in this Appendix
as “Global Securities.”

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

          The Company shall execute and the Trustee shall, in accordance with this Section 2.1(b),
authenticate and deliver initially one or more Global Securities that (a) shall be registered in
the name of the Depository for such Global Security or Global Securities or the nominee of such
Depository and (b) shall be delivered by the Trustee to such Depository or pursuant to such
Depository’s instructions or held by the Trustee as custodian for the Depository.

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

          (c) Certificated Securities. Except as provided in this Section 2.1 or Section 2.3 or 2.4,
owners of beneficial interests in Restricted Global Securities shall not be entitled to receive
physical delivery of certificated Securities.

     2.2 Authentication. The Trustee shall authenticate and deliver: (1) on the Issue Date, an
aggregate principal amount of $300 million 6.0% Senior Subordinated Notes Due 2015, (2) any
Additional Securities for an original issue in an aggregate principal amount specified in the
written order of the Company pursuant to Section 2.02 of the Indenture and (3) Exchange Securities
or Private Exchange Securities for issue only in a Registered Exchange Offer or a Private Exchange,
respectively, pursuant to a Registration Rights Agreement, for a like principal amount of Initial
Securities, in each case upon a written order of the Company signed by two Officers or by an
Officer and either an Assistant Treasurer or an Assistant Secretary of the Company. Such order
shall specify the amount of the Securities to be authenticated and the date on which the original
issue of Securities is to be authenticated and, in the case of any issuance of Additional
Securities pursuant to Section 2.13 of the Indenture, shall certify that such issuance is in
compliance with Section 4.03 of the Indenture.

3

 

     2.3 Transfer and Exchange.

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

          (ii) Notwithstanding any other provisions of this Appendix (other than the provisions set forth
in Section 2.4), a Global Security may not be transferred as a whole except by the Depository to a
nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of
the Depository or by the Depository or any such nominee to a successor Depository or a nominee of
such successor Depository.

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

          (b) Legend.

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

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,

4

 

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
COMPLYING WITH RULE 904 UNDER THE SECURITIES ACT, (III) 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 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.

[ADDITIONAL LEGEND FOR REG S NOTE ONLY]

THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION 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.

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

     (iii) After a transfer of any Initial Securities or Private Exchange Securities
pursuant to and during the period of the effectiveness of a Shelf Registration Statement
with respect to such Initial Securities or Private Exchange Securities, as the case may be,
all requirements pertaining to legends on such Initial Security or such Private Exchange
Security will cease to apply, the requirements requiring any such Initial Security or such
Private Exchange Security issued to certain Holders be issued in global form will cease to
apply, and a certificated Initial Security or Private Exchange Security or an Initial
Security or Private Exchange Security in global form, in each case without restrictive
transfer legends, will be available to the transferee of the Holder of such Initial
Securities

5

 

or Private Exchange Securities upon exchange of such transferring Holder’s
certificated Initial Security or Private Exchange Security or directions to transfer such
Holder’s interest in the Global Security, as applicable.

     (iv) Upon the consummation of a Registered Exchange Offer with respect to the Initial
Securities, all requirements pertaining to such Initial Securities that Initial Securities
issued to certain Holders be issued in global form will still apply with respect to Holders
of such Initial Securities that do not exchange their Initial Securities, and Exchange
Securities in certificated or global form will be available to Holders that exchange such
Initial Securities in such Registered Exchange Offer.

     (v) Upon the consummation of a Private Exchange with respect to the Initial Securities,
all requirements pertaining to such Initial Securities that Initial Securities issued to
certain Holders be issued in global form will still apply with respect to Holders of such
Initial Securities that do not exchange their Initial Securities, and Private Exchange
Securities in global form with the global securities legend and the Restricted Securities
Legend set forth in Exhibit 1 hereto will be available to Holders that exchange such Initial
Securities in such Private Exchange.

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

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

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

     (ii) No service charge shall be made for any registration of transfer or exchange, but
the Company may require payment of a sum sufficient to cover any transfer tax, assessments,
or similar governmental charge payable in connection therewith (other than any such transfer
taxes, assessments or similar governmental charge payable upon exchange or transfer pursuant
to Sections 3.06, 4.08 and 9.05 of the Indenture).

     (iii) The Registrar or co-registrar shall not be required to register the transfer of
or exchange of any Security for a period beginning 15 Business Days before the mailing of a
notice of an offer to repurchase or redeem Securities or 15 Business Days before an interest
payment date.

     (iv) Prior to the due presentation for registration of transfer of any Security, the
Company, the Trustee, the Paying Agent, the Registrar or any co-registrar may deem

6

 

and treat the person in whose name a Security is registered as the absolute owner of such Security for
the purpose of receiving payment of principal of and interest on such Security and for all
other purposes whatsoever, whether or not such Security is overdue, and none of the Company,
the Trustee, the Paying Agent, the Registrar or any co-registrar shall be affected by notice
to the contrary.

     (v) All Securities issued upon any transfer or exchange pursuant to the terms of this
Indenture shall evidence the same debt and shall be entitled to the same benefits under this
Indenture as the Securities surrendered upon such transfer or exchange.

          (e) No Obligation of the Trustee.

     (i) The Trustee shall have no responsibility or obligation to any beneficial owner of a
Global Security, a member of, or a participant in the Depository or other Person with
respect to the accuracy of the records of the Depository or its nominee or of any
participant or member thereof, with respect to any ownership interest in the Securities or
with respect to the delivery to any participant, member, beneficial owner or other Person
(other than the Depository) of any notice (including any notice of redemption) or the
payment of any amount, under or with respect to such Securities. All notices and
communications to be given to the Holders and all payments to be made to Holders under the
Securities shall be given or made only to or upon the order of the registered Holders (which
shall be the Depository or its nominee in the case of a Global Security). The rights of
beneficial owners in any Global Security shall be exercised only through the Depository
subject to the applicable rules and procedures of the Depository. The Trustee may rely and
shall be fully protected in relying upon information furnished by the Depository with
respect to its members, participants and any beneficial owners.

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

     2.4 Certificated Securities.

          (a) A Restricted Global Security deposited with the Depository or with the Trustee as
custodian for the Depository pursuant to Section 2.1 shall be transferred to the beneficial owners
thereof in the form of certificated Securities in an aggregate principal amount equal to the
principal amount of such Global Security, in exchange for such Global Security, only if such
transfer complies with Section 2.3 and (i) the Depository notifies the Company that it is unwilling
or unable to continue as Depository for such Restricted Global Security or if at any time such
Depository ceases to be a “clearing agency” registered under the Exchange Act and a successor
depositary is not appointed by the Company within 90 days of such notice, (ii)

7

 

an Event of Default
has occurred and is continuing or (iii) the Company, in its sole discretion, notifies the Trustee
in writing that it elects to cause the issuance of certificated Securities under this Indenture.

          (b) Any Restricted Global Security that is transferable to the beneficial owners thereof
pursuant to this Section 2.4 shall be surrendered by the Depository to the Trustee located at its
principal corporate trust office in the Borough of Manhattan, The City of New York, to be so
transferred, in whole or from time to time in part, without charge, and the Trustee shall
authenticate and deliver, upon such transfer of each portion of such Restricted Global Security, an
equal aggregate principal amount of certificated Initial Securities of authorized denominations.
Any portion of a Restricted Global Security transferred pursuant to this Section shall be executed,
authenticated and delivered only in denominations of $1,000 principal amount and any integral
multiple thereof and registered in such names as the Depository shall direct. Any certificated
Initial Security or Private Exchange Security delivered in exchange for an interest in the
Restricted Global Security shall, except as otherwise provided by Section 2.3(b), bear the
restricted securities legend set forth in Exhibit 1 hereto.

          (c) Subject to the provisions of Section 2.4(b), the registered Holder of a Global Security
shall be entitled to grant proxies and otherwise authorize any Person, including Agent Members and
Persons that may hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Securities.

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

8

 

EXHIBIT 1

to

RULE 144A/REGULATION S APPENDIX

[FORM OF FACE OF INITIAL SECURITY]

[Global Securities Legend]

          UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY, A NEW YORK CORPORATION (“DTC”), NEW YORK, NEW YORK, 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 IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS 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.

          TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO
NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE AND TRANSFERS OF PORTIONS OF
THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET
FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.

[Restricted Securities Legend]

          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 COMPLYING WITH RULE 904 UNDER THE SECURITIES ACT, (III) 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 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.

[Additional Legend for Reg S Note Only]

     THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION 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.

 

 

	 	 	 	 	 	 	 	 	 
	No.

	 	 	 	 	 	CUSIP No.	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	ISIN No.	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	$	 
	 

	 	 	 	 	 	 	 	 

6.0% Senior Subordinated Notes Due 2015

          Encore Acquisition Company, a Delaware corporation, promises to pay to Cede & Co., or
registered assigns, the principal sum of            Dollars on July 15, 2015.

          Interest Payment Dates: January 15 and July 15.

          Record Dates: January 1 and July 1.

          Additional provisions of this Security are set forth on the other side of this Security.

 

 

          IN WITNESS WHEREOF, the parties have caused this instrument to be duly executed.

Dated:

	 	 	 	 	 
	 	 	ENCORE ACQUISITION COMPANY,
	 
	 	 	 	 
	 

	 	By	 	 
	 

	 	 	 	 
	 

	 	 	 	Name:
	 

	 	 	 	Title:

 

 

Dated:

TRUSTEE’S CERTIFICATE

OF AUTHENTICATION

WELLS FARGO BANK, NATIONAL ASSOCIATION,

as Trustee, certifies

that this is one of

the Securities referred

to in the Indenture.

	 	 	 	 	 
	By
	 	 	 	 
	 

	 	

	 	 
	 

	 	Authorized Signatory	 	 

 

 

EXHIBIT 1

to

RULE 144A/REGULATION S APPENDIX

[FORM OF] REVERSE SIDE OF [INITIAL] SECURITY

6.0% Senior Subordinated Security Due 2015

1. Interest

          Encore Acquisition Company, a Delaware corporation (such corporation, and its successors and
assigns under the Indenture hereinafter referred to, being herein called the “Company”), promises
to pay interest on the principal amount of this Security at the rate per annum shown above;
provided, however, that if a Registration Default (as defined in the Registration
Rights Agreement) occurs, additional interest will accrue on this Security at a rate of 0.25% per
annum (increasing by an additional 0.25% per annum after each consecutive 90-day period that occurs
after the date on which such Registration default occurs up to a maximum additional interest rate
of 1.00%) from and including the date on which any such Registration Default shall occur to but
excluding the date on which all Registration Defaults have been cured. The Company will pay
interest semiannually on January 15 and July 15 of each year, commencing January 15, 2006.
Interest on the Securities will accrue from the most recent date to which interest has been paid
or, if no interest has been paid, from July 13, 2005. Interest will be computed on the basis of a
360-day year of twelve 30-day months.

2. Method of Payment

          The Company will pay interest on the Securities (except defaulted interest) to the Persons who
are registered holders of Securities at the close of business on the January 1 or July 1 next
preceding the interest payment date even if Securities are canceled after the record date and on or
before the interest payment date. Holders must surrender Securities to a Paying Agent to collect
principal payments. The Company will pay principal and interest in money of the United States that
at the time of payment is legal tender for payment of public and private debts. Payments in
respect of the Securities represented by a Global Security (including principal, premium and
interest) will be made by wire transfer of immediately available funds to the accounts specified by
The Depository Trust Company. The Company will make all payments in respect of a certificated
Security (including principal, premium and interest) by mailing a check to the registered address
of each Holder thereof; provided, however, that payments on a certificated Security
will be made by wire transfer to a U.S. dollar account maintained by the payee with a bank in the
United States if such Holder elects payment by wire transfer by giving written notice to the
Trustee or the Paying Agent to such effect designating such account no later than 30 days
immediately preceding the relevant due date for payment (or such other date as the Trustee may
accept in its discretion).

3. Paying Agent and Registrar

          Initially, Wells Fargo Bank, National Association, a United States banking association (the
“Trustee”), will act as Paying Agent and Registrar. The Company may appoint

 

 

and change any Paying Agent, Registrar or co-registrar without notice. The Company or any of
its domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent, Registrar or
co-registrar.

4. Indenture

          The Company issued the Securities under an Indenture dated as of July 13, 2005 (“Indenture”),
among the Company, the Subsidiary Guarantors and the Trustee. The terms of the Securities include
those stated in the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S.C. §§ 77aaa-77bbbb) as in effect on the date of the Indenture
(the “Act”). Terms defined in the Indenture and not defined herein have the meanings ascribed
thereto in the Indenture. The Securities are subject to all such terms, and Securityholders are
referred to the Indenture and the Act for a statement of those terms.

          The Securities are general unsecured obligations of the Company. The Company shall be
entitled, subject to its compliance with Section 4.03 of the Indenture, to issue Additional
Securities pursuant to Section 2.13 of the Indenture. The Initial Securities issued on the Issue
Date, any Additional Securities and all Exchange Securities or Private Exchange Securities issued
in exchange therefor will be treated as a single class for all purposes under the Indenture. The
Indenture contains covenants that limit the ability of the Company and its subsidiaries to incur
additional indebtedness; pay dividends or distributions on, or redeem or repurchase capital stock;
make investments; issue or sell capital stock of subsidiaries; engage in transactions with
affiliates; create liens on assets; transfer or sell assets; guarantee indebtedness; restrict
dividends or other payments of subsidiaries; and consolidate, merge or transfer all or
substantially all of its assets and the assets of its subsidiaries. During any period that the
Securities have an Investment Grade Rating from both S&P and Moody’s and no Default has occurred
and is continuing, certain covenants will be suspended. These covenants are subject to important
exceptions and qualifications.

5. Optional Redemption

          Except as set forth below, the Company shall not be entitled to redeem the Securities at its
option prior to July 15, 2010.

          On and after July 15, 2010, the Company shall be entitled at its option to redeem all or a
portion of the Securities upon not less than 30 nor more than 60 days’ notice, at the redemption
prices (expressed in percentages of principal amount on the redemption date), plus accrued interest
to the redemption date (subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date), if redeemed during the 12-month period
commencing on July 15 of the years set forth below:

	 	 	 	 	 
	 	 	Redemption	 
	Period	 	Price	 
	2010
	 	 	103.0	%
	2011
	 	 	102.0	%
	2012
	 	 	101.0	%
	2013 and thereafter
	 	 	100.0	%

2

 

          In addition, prior to July 15, 2008, the Company shall be entitled at its option on one or
more occasions to redeem Securities (which includes Additional Securities, if any) in an aggregate
principal amount not to exceed 35% of the aggregate principal amount of the Securities (which
includes Additional Securities, if any) issued prior to the redemption date at a redemption price
(expressed as a percentage of principal amount) of 106.0%, plus accrued and unpaid interest to the
redemption date, with the net cash proceeds from one or more Public Equity Offerings;
provided that (1) at least 65% of such aggregate principal amount of Securities (which
includes Additional Securities, if any) remains outstanding immediately after the occurrence of
each such redemption (other than Securities held, directly or indirectly, by the Company or its
Affiliates); and (2) each such redemption occurs within 180 days after the date of the related
Public Equity Offering.

          Prior to July 15, 2010, the Company may at its option redeem all (but not less than all) the
Securities (which includes the Additional Securities, if any) at a redemption price equal to the
sum of:

          (1) the principal amount thereof, plus

          (2) accrued and unpaid interest, if any, to the redemption date,
plus

          (3) the Applicable Premium at the redemption date.

6. Notice of Redemption

          Notice of redemption will be mailed at least 30 days but not more than 60 days before the
redemption date to each Holder of Securities to be redeemed at its registered address. Securities
in denominations larger than $1,000 principal amount may be redeemed in part but only in whole
multiples of $1,000. If money sufficient to pay the redemption price of and accrued interest on
all Securities (or portions thereof) to be redeemed on the redemption date is deposited with the
Paying Agent on or before the redemption date and certain other conditions are satisfied, on and
after such date interest ceases to accrue on such Securities (or such portions thereof) called for
redemption.

7. Put Provisions

          Upon a Change of Control, then unless the Company shall have exercised its right to redeem all
the Securities, any Holder of Securities will have the right to cause the Company to repurchase all
or any part of the Securities of such Holder at a repurchase price equal to 101% of the principal
amount of the Securities to be repurchased plus accrued and unpaid interest, if any, to the date of
repurchase (subject to the right of holders of record on the relevant record date to receive
interest due on the related interest payment date) as provided in, and subject to the terms of, the
Indenture.

3

 

8. Subordination

          The Securities are subordinated to Senior Indebtedness of the Company, as defined in the
Indenture. To the extent provided in the Indenture, Senior Indebtedness of the Company must be
paid before the Securities may be paid. The Company agrees, and each Securityholder by accepting a
Security agrees, to the subordination provisions contained in the Indenture and authorizes the
Trustee to give it effect and appoints the Trustee as attorney-in-fact for such purpose.

9. Guaranty

          The payment by the Company of the principal of, and premium and interest on, the Securities is
fully and unconditionally guaranteed on a joint and several senior subordinated basis by each of
the Subsidiary Guarantors.

10. Denominations; Transfer; Exchange

          The Securities are in registered form without coupons in denominations of $1,000 principal
amount and whole multiples of $1,000. A Holder may transfer or exchange Securities in accordance
with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate
endorsements or transfer documents and to pay any taxes and fees required by law or permitted by
the Indenture. The Registrar need not register the transfer or exchange of any Securities selected
for redemption (except, in the case of a Security to be redeemed in part, the portion of the
Security not to be redeemed) or any Securities for a period of 15 days before a selection of
Securities to be redeemed or 15 days before an interest payment date.

11. Persons Deemed Owners

          The registered Holder of this Security may be treated as the owner of it for all purposes.

12. Unclaimed Money

          If money for the payment of principal or interest remains unclaimed for two years, the Trustee
or Paying Agent shall pay the money back to the Company at its request unless an abandoned property
law designates another Person. After any such payment, Holders entitled to the money must look
only to the Company and not to the Trustee for payment.

13. Discharge and Defeasance

          Subject to certain conditions, the Company at any time shall be entitled to terminate some or
all of its obligations under the Securities and the Indenture if the Company deposits with the
Trustee money or U.S. Government Obligations for the payment of principal and interest on the
Securities to redemption or maturity, as the case may be.

4

 

14. Amendment, Waiver

          Subject to certain exceptions set forth in the Indenture, (i) the Indenture and the Securities
may be amended or supplemented, and compliance with any provision of the Indenture may be waived,
with the written consent of the Holders of at least a majority in principal amount outstanding of
the Securities and (ii) any default or noncompliance with any provision may be waived with the
written consent of the Holders of a majority in principal amount outstanding of the Securities.
Subject to certain exceptions set forth in the Indenture, without the consent of any
Securityholder, the Company, the Subsidiary Guarantors and the Trustee shall be entitled to amend
or supplement the Indenture or the Securities to cure any ambiguity, omission, defect or
inconsistency, or to comply with Article 5 of the Indenture, or to provide for uncertificated
Securities in addition to or in place of certificated Securities, or to add guarantees with respect
to the Securities, including Subsidiary Guaranties, or to secure the Securities, or to confirm the
release, termination or discharge of any Subsidiary Guarantor or any such Lien when such release,
termination or discharge is permitted under the Indenture, or to add additional covenants or
surrender rights and powers conferred on the Company or the Subsidiary Guarantors, or to comply
with any request of the SEC in connection with qualifying the Indenture under the Act, or to make
any change that does not adversely affect in any material respect the rights of any Securityholder,
or to conform the text of the Indenture or the Securities to any provision in the Offering Circular
in the section “Description of Notes” to the extent that such provision in the “Description of
Notes” was intended to be a verbatim recitation of a provision of the Indenture or the Securities.

15. Defaults and Remedies

          Under the Indenture, Events of Default include (i) default for 30 days in payment of interest
on the Securities; (ii) default in payment of principal on the Securities at maturity, upon
redemption pursuant to paragraph 5 of the Securities, upon acceleration or otherwise, or failure by
the Company to redeem or purchase Securities when required; (iii) failure by the Company or any
Subsidiary Guarantor to comply with other agreements in the Indenture or the Securities, in certain
cases subject to notice and lapse of time; (iv) certain accelerations (including failure to pay
within any grace period after final maturity) of other Indebtedness of the Company or any
Significant Subsidiary (other than Non-Recourse Purchase Money Indebtedness) if the amount
accelerated (or so unpaid) exceeds $10.0 million, provided that such acceleration is not rescinded
within a period of 10 days from the occurrence of such acceleration; (v) certain events of
bankruptcy or insolvency with respect to the Company and the Significant Subsidiaries; (vi) certain
judgments or decrees for the payment of money in excess of $10.0 million; and (vii) certain
defaults with respect to Subsidiary Guaranties. If an Event of Default occurs and is continuing,
the Trustee or the Holders of at least 25% in principal amount of the Securities may declare all
the Securities to be due and payable immediately. Certain events of bankruptcy or insolvency are
Events of Default which will result in the Securities being due and payable immediately upon the
occurrence of such Events of Default.

          Securityholders may not enforce the Indenture or the Securities except as provided in the
Indenture. The Trustee may refuse to enforce the Indenture or the Securities unless it receives
indemnity or security satisfactory to it. Subject to certain limitations, Holders of a majority in
principal amount of the Securities may direct the Trustee in its exercise of any

5

 

trust or power. The Trustee may withhold from Securityholders notice of any continuing
Default (except a Default in payment of principal or interest) if it determines that withholding
notice is not opposed to the interest of the Holders.

16. Trustee Dealings with the Company

          Subject to certain limitations imposed by the Act, the Trustee under the Indenture, in its
individual or any other capacity, may become the owner or pledgee of Securities and may otherwise
deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise
deal with the Company or its Affiliates with the same rights it would have if it were not Trustee.

17. No Recourse Against Others

          A director, officer, employee or stockholder, as such, of the Company or the Trustee shall not
have any liability for any obligations of the Company under the Securities or the Indenture or for
any claim based on, in respect of or by reason of such obligations or their creation. By accepting
a Security, each Securityholder waives and releases all such liability. The waiver and release are
part of the consideration for the issuance of the Securities.

18. Authentication

          This Security shall not be valid until an authorized signatory of the Trustee (or an
authenticating agent) manually signs the certificate of authentication on the other side of this
Security.

19. Abbreviations

          Customary abbreviations may be used in the name of a Securityholder or an assignee, such as
TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with
rights of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift
to Minors Act).

20. 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 Securities and has directed
the Trustee to use CUSIP numbers in notices of redemption as a convenience to Securityholders. No
representation is made as to the accuracy of such numbers either as printed on the Securities or as
contained in any notice of redemption and reliance may be placed only on the other identification
numbers placed thereon.

21. Holders’ Compliance with Registration Rights Agreement

          Each Holder of a Security, by acceptance hereof, acknowledges and agrees to the provisions of
the Registration Rights Agreement, including the obligations of the Holders with respect to a
registration and the indemnification of the Company to the extent provided therein.

6

 

22. Governing Law

          THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK BUT 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.

          The Company will furnish to any Securityholder upon written request and without charge to the
Securityholder a copy of the Indenture which has in it the text of this Security in larger type.
Requests may be made to:

Encore Acquisition Company

777 Main Street

Suite 1400

Fort Worth, TX 76102

Attention: Roy W. Jageman

7

 

EXHIBIT 1

to

RULE 144A/REGULATION S APPENDIX

 

ASSIGNMENT FORM

To assign this Security, fill in the form below:

I or we assign and transfer this Security to

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

     (Insert assignee’s soc. sec. or tax I.D. No.)

and irrevocably appoint            agent to transfer this Security 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 other side of this Security.

In connection with any transfer of any of the Securities evidenced by this certificate occurring
prior to the expiration of the period referred to in Rule 144(k) under the Securities Act after the
later of the date of original issuance of such Securities and the last date, if any, on which such
Securities were owned by the Company or any Affiliate of the Company, the undersigned confirms that
such Securities are being transferred in accordance with its terms:

CHECK ONE BOX BELOW

	 	 	 	 	 
	(1)

	 	o
	 	in the United States to a “qualified institutional buyer” (as defined
in Rule 144A under the Securities Act of 1933) pursuant to and in
compliance with Rule 144A under the Securities Act of 1933;
	 
	(2)

	 	o
	 	outside the United States in an offshore transaction within the
meaning of Regulation S under the Securities Act in compliance with
Rule 904 under the Securities Act of 1933;
	 
	(3)

	 	o
	 	pursuant to an exemption from registration provided by Rule 144 under
the Securities Act of 1933; or
	 
	(4)

	 	o
	 	pursuant to an effective registration statement under the Securities
Act of 1933.

Unless one of the boxes is checked, the Trustee will refuse to register any of the
Securities evidenced by this certificate in the name of any person other than the registered
holder thereof; provided, however, that if box (2) or (3) is checked, the
Trustee shall be entitled to require, prior to registering any such transfer of the
Securities, such legal opinions, certifications and other information as the Company has
reasonably requested

 

 

to confirm that such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act, such as the
exemption provided by Rule 144 under such Act.

	 	 	 
	 

	 	 
	 

	 	Signature

Signature Guarantee:

	 	 	 
	 

	 	 
	Signature must be guaranteed

	 	Signature

     Signatures must be guaranteed by an “eligible guarantor institution” meeting the requirements
of the Registrar, which requirements include membership or participation in the Security Transfer
Agent Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined
by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.

 

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

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

	 	 	 	 	 	 	 
	Dated:
	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	 	 	NOTICE:
	 	To be executed by an
	 

	 	 	 	 	 	executive officer

 

 

[TO BE ATTACHED TO GLOBAL SECURITIES]

SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY

          The following increases or decreases in this Global Security have been made:

	 	 	 	 	 	 	 	 	 
	 

	 	Amount of decrease
	 	Amount of increase
	 	Principal amount of
	 	Signature of
	 

	 	in Principal amount
	 	in Principal amount
	 	this Global Security
	 	authorized officer of
	 

	 	of this Global
	 	of this Global
	 	following such
	 	Trustee or Securities
	Date of Exchange

	 	Security
	 	Security
	 	decrease or increase)
	 	Custodian

 

 

OPTION OF HOLDER TO ELECT PURCHASE

          If you want to elect to have this Security purchased by the Company pursuant to Section 4.06
or 4.08 of the Indenture, check the box:

o

     If you want to elect to have only part of this Security purchased by the Company pursuant to
Section 4.06 or 4.08 of the Indenture, state the amount in principal amount: $                    

	 	 	 	 	 	 	 
	Date:

	 	 	 	Your Signature:	 	 
	 

	 	 
	 	 	 	 
	 

	 	 	 	 	 	(Sign exactly as your name appears on the
	 

	 	 	 	 	 	other side of this Security.)

	 	 	 
	Signature Guarantee:
	 	 
	 

	 	 
	 

	 	(Signature must be guaranteed)

     Signatures must be guaranteed by an “eligible guarantor institution” meeting the requirements
of the Registrar, which requirements include membership or participation in the Security Transfer
Agent Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined
by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.

 

 

EXHIBIT A

[FORM OF FACE OF [EXCHANGE] SECURITY

[OR PRIVATE EXCHANGE SECURITY]]*/**

 

	*/	 	If the Security is to be issued in global form add the
Global Securities Legend from Exhibit 1 to Appendix A and the attachment from
such Exhibit 1 captioned “[TO BE ATTACHED TO GLOBAL SECURITIES] -
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY”.
	 
	**/	 	If the Security is a Private Exchange Security issued in a
Private Exchange to an Initial Purchaser holding an unsold portion of its
initial allotment, add the Restricted Securities Legend from Exhibit 1 to
Appendix A and replace the Assignment Form included in this Exhibit A with the
Assignment Form included in such Exhibit 1.

 

 

	 	 	 	 	 	 	 	 	 
	No.

	 	 	 	 	 	CUSIP No.	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	ISIN No.	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	$	 
	 

	 	 	 	 	 	 	 	 

6.0% Senior Subordinated Notes Due 2015

          Encore Acquisition Company, a Delaware corporation, promises to pay to
                                        , or registered assigns, the principal sum of                      Dollars on
July 15, 2015.

          Interest Payment Dates: January 15 and July 15.

          Record Dates: January 1 and July 1.

          Additional provisions of this Security are set forth on the other side of this Security.

Dated:

	 	 	 	 	 
	 	 	ENCORE ACQUISITION COMPANY,
	 
	 	 	 	 
	 

	 	By	 	 
	 

	 	 	 	 
	 

	 	 	 	Name:
	 

	 	 	 	Title:
	 

	 	By	 	 
	 

	 	 	 	 
	 

	 	 	 	Name:
	 

	 	 	 	Title:

TRUSTEE’S CERTIFICATE

OF AUTHENTICATION

WELLS FARGO BANK, NATIONAL ASSOCIATION,

as Trustee, certifies

that this is one of

the Securities referred

to in the Indenture.

	 	 	 	 	 
	By
	 	 	 	 
	 

	 	 	 	 
	 

	 	Authorized Signatory	 	 

 

 

EXHIBIT A

[FORM OF] REVERSE SIDE OF [EXCHANGE] SECURITY

[OR PRIVATE EXCHANGE SECURITY]

6.0% Senior Subordinated Security Due 2015

1. Interest

          Encore Acquisition Company, a Delaware corporation (such corporation, and its successors and
assigns under the Indenture hereinafter referred to, being herein called the “Company”), promises
to pay interest on the principal amount of this Security at the rate per annum shown above[;
provided, however, that if a Registration Default (as defined in the Registration
Rights Agreement) occurs, additional interest will accrue on this Security at a rate of .25% per
annum (increasing by an additional .25% per annum after each consecutive 90-day period that occurs
after the date on which such Registration Default occurs up to a maximum additional interest rate
of 1.00% per annum) from and including the date on which any such Registration Default shall occur
to but excluding the date on which all Registration Defaults have been cured.]0 The
Company will pay interest semiannually on January 15 and July 15 of each year, commencing January
15, 2006. Interest on the Securities will accrue from the most recent date to which interest has
been paid or, if no interest has been paid, from July 13, 2005. Interest will be computed on the
basis of a 360-day year of twelve 30-day months.

2. Method of Payment

          The Company will pay interest on the Securities (except defaulted interest) to the Persons who
are registered holders of Securities at the close of business on the January 1 or July 1 next
preceding the interest payment date even if Securities are canceled after the record date and on or
before the interest payment date. Holders must surrender Securities to a Paying Agent to collect
principal payments. The Company will pay principal and interest in money of the United States that
at the time of payment is legal tender for payment of public and private debts. Payments in
respect of the Securities represented by a Global Security (including principal, premium, if any,
and interest) will be made by wire transfer of immediately available funds to the accounts
specified by The Depository Trust Company. The Company will make all payments in respect of a
certificated Security (including principal, premium, if any, and interest) by mailing a check to
the registered address of each Holder thereof; provided, however, that payments on
a certificated Security will be made by wire transfer to a U.S. dollar account maintained by the
payee with a bank in the United States if such Holder elects payment by wire transfer by giving
written notice to the Trustee or the Paying Agent to such effect designating such account no later
than 30 days immediately preceding the relevant due date for payment (or such other date as the
Trustee may accept in its discretion).

 

	1	 	Insert if at the date of issuance of the Exchange
Security or Private Exchange Security (as the case may be) any Registration
Default has occurred with respect to the related Initial Securities during the
interest period in which such date of issuance occurs.

 

 

3. Paying Agent and Registrar

          Initially, Wells Fargo Bank, National Association, a United States banking association (the
“Trustee”), will act as Paying Agent and Registrar. The Company may appoint and change any Paying
Agent, Registrar or co-registrar without notice. The Company or any of its domestically
incorporated Wholly Owned Subsidiaries may act as Paying Agent, Registrar or co-registrar.

4. Indenture

          The Company issued the Securities under an Indenture dated July 13, 2005 (“Indenture”), among
the Company, the Subsidiary Guarantors and the Trustee. The terms of the Securities include those
stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture
Act of 1939 (15 U.S.C. §§ 77aaa-77bbbb) as in effect on the date of the Indenture (the
“Act”). Terms defined in the Indenture and not defined herein have the meanings ascribed thereto
in the Indenture. The Securities are subject to all such terms, and Securityholders are referred
to the Indenture and the Act for a statement of those terms.

          The Securities are general unsecured obligations of the Company. The Company shall be
entitled, subject to its compliance with Section 4.03 of the Indenture, to issue Additional
Securities pursuant to Section 2.13 of the Indenture. The Initial Securities issued on the Issue
Date, any Additional Securities and all Exchange Securities or Private Exchange Securities issued
in exchange therefor will be treated as a single class for all purposes under the Indenture. The
Indenture contains covenants that limit the ability of the Company and its subsidiaries to incur
additional indebtedness; pay dividends or distributions on, or redeem or repurchase capital stock;
make investments; issue or sell capital stock of subsidiaries; engage in transactions with
affiliates; create liens on assets; transfer or sell assets; guarantee indebtedness; restrict
dividends or other payments of subsidiaries; and consolidate, merge or transfer all or
substantially all of its assets and the assets of its subsidiaries; and engage in business
activities unrelated to its current activities. During any period that the Securities have an
Investment Grade Rating from both S&P and Moody’s and no Default has occurred and is continuing,
certain covenants will be suspended. These covenants are subject to important exceptions and
qualifications.

5. Optional Redemption

          Except as set forth below, the Company shall not be entitled to redeem the Securities at its
option prior to July 15, 2010.

          On and after July 15, 2010, the Company shall be entitled at its option to redeem all or a
portion of the Securities upon not less than 30 nor more than 60 days’ notice, at the redemption
prices (expressed in percentages of principal amount, on the redemption date) plus accrued interest
to the redemption date (subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date), if redeemed during the 12-month period
commencing on July 15 of the years set forth below:

2

 

	 	 	 	 	 
	 	 	Redemption	 
	Period	 	Price	 
	2010
	 	 	103.0	%
	2011
	 	 	102.0	%
	2012
	 	 	101.0	%
	2013 and thereafter
	 	 	100.0	%

          In addition, prior to July 15, 2008, the Company shall be entitled at its option on one or
more occasions to redeem Securities (which includes Additional Securities, if any) in an aggregate
principal amount not to exceed 35% of the aggregate principal amount of the Securities (which
includes Additional Securities, if any) issued prior to the redemption date at a redemption price
(expressed as a percentage of principal amount) of 106.0%, plus accrued and unpaid interest to the
redemption date, with the net cash proceeds from one or more Public Equity Offerings;
provided that (1) at least 65% of such aggregate principal amount of Securities (which
includes Additional Securities, if any) remains outstanding immediately after the occurrence of
each such redemption (other than Securities held, directly or indirectly, by the Company or its
Affiliates); and (2) each such redemption occurs within 180 days after the date of the related
Public Equity Offering.

          Prior to July 15, 2010, the Company may at its option redeem all (but not less than all) the
Securities (which includes the Additional Securities, if any) at a redemption price equal to the
sum of:

          (1) the principal amount thereof, plus

          (2) accrued and unpaid interest, if any, to the redemption date,
plus

          (3) the Applicable Premium at the redemption date.

6. Notice of Redemption

          Notice of redemption will be mailed at least 30 days but not more than 60 days before the
redemption date to each Holder of Securities to be redeemed at its registered address. Securities
in denominations larger than $1,000 principal amount may be redeemed in part but only in whole
multiples of $1,000. If money sufficient to pay the redemption price of and accrued interest on
all Securities (or portions thereof) to be redeemed on the redemption date is deposited with the
Paying Agent on or before the redemption date and certain other conditions are satisfied, on and
after such date interest ceases to accrue on such Securities (or such portions thereof) called for
redemption.

7. Put Provisions

          Upon a Change of Control, then unless the Company shall have exercised its right to redeem all
the Securities, any Holder of Securities will have the right to cause the Company to repurchase all
or any part of the Securities of such Holder at a repurchase price equal to 101% of the principal
amount of the Securities to be repurchased plus accrued and unpaid interest, if any, to the date of
repurchase (subject to the right of holders of record on the relevant record date to

3

 

receive interest due on the related interest payment date) as provided in, and subject to the
terms of, the Indenture.

8. Subordination

          The Securities are subordinated to Senior Indebtedness of the Company, as defined in the
Indenture. To the extent provided in the Indenture, Senior Indebtedness of the Company must be
paid before the Securities may be paid. The Company agrees, and each Securityholder by accepting a
Security agrees, to the subordination provisions contained in the Indenture and authorizes the
Trustee to give it effect and appoints the Trustee as attorney-in-fact for such purpose.

9. Guaranty

          The payment by the Company of the principal of, and premium and interest on, the Securities is
fully and unconditionally guaranteed on a joint and several senior subordinated basis by each of
the Subsidiary Guarantors.

10. Denominations; Transfer; Exchange

          The Securities are in registered form without coupons in denominations of $1,000 principal
amount and whole multiples of $1,000. A Holder may transfer or exchange Securities in accordance
with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate
endorsements or transfer documents and to pay any taxes and fees required by law or permitted by
the Indenture. The Registrar need not register the transfer of or exchange any Securities selected
for redemption (except, in the case of a Security to be redeemed in part, the portion of the
Security not to be redeemed) or any Securities for a period of 15 days before a selection of
Securities to be redeemed or 15 days before an interest payment date.

11. Persons Deemed Owners

          The registered Holder of this Security may be treated as the owner of it for all purposes.

12. Unclaimed Money

          If money for the payment of principal or interest remains unclaimed for two years, the Trustee
or Paying Agent shall pay the money back to the Company at its request unless an abandoned property
law designates another Person. After any such payment, Holders entitled to the money must look
only to the Company and not to the Trustee for payment.

13. Discharge and Defeasance

          Subject to certain conditions, the Company at any time shall be entitled to terminate some or
all of its obligations under the Securities and the Indenture if the Company deposits with the
Trustee money or U.S. Government Obligations for the payment of principal and interest on the
Securities to redemption or maturity, as the case may be.

4

 

14. Amendment, Waiver

          Subject to certain exceptions set forth in the Indenture, (i) the Indenture and the Securities
may be amended or supplemented, and compliance with any provision of the Indenture may be waived,
with the written consent of the Holders of at least a majority in principal amount outstanding of
the Securities and (ii) any default or noncompliance with any provision may be waived with the
written consent of the Holders of a majority in principal amount outstanding of the Securities.
Subject to certain exceptions set forth in the Indenture, without the consent of any
Securityholder, the Company, the Subsidiary Guarantors and the Trustee shall be entitled to amend
or supplement the Indenture or the Securities to cure any ambiguity, omission, defect or
inconsistency, or to comply with Article 5 of the Indenture, or to provide for uncertificated
Securities in addition to or in place of certificated Securities, or to add guarantees with respect
to the Securities, including Subsidiary Guaranties, or to secure the Securities, or to confirm the
release, termination or discharge of any Subsidiary Guarantor or any such Lien when such release,
termination or discharge is permitted under the Indenture, or to add additional covenants or
surrender rights and powers conferred on the Company or the Subsidiary Guarantors, or to comply
with any request of the SEC in connection with qualifying the Indenture under the Act, or to make
any change that does not adversely affect in any material respect the rights of any Securityholder,
or to conform the text of the Indenture or the Securities to any provision in the Offering Circular
in the section “Description of Notes” to the extent that such provision in the “Description of
Notes” was intended to be a verbatim recitation of a provision of the Indenture or the Securities.

15. Defaults and Remedies

          Under the Indenture, Events of Default include (i) default for 30 days in payment of interest
on the Securities; (ii) default in payment of principal on the Securities at maturity, upon
redemption pursuant to paragraph 5 of the Securities, upon acceleration or otherwise, or failure by
the Company to redeem or purchase Securities when required; (iii) failure by the Company or any
Subsidiary Guarantor to comply with other agreements in the Indenture or the Securities, in certain
cases subject to notice and lapse of time; (iv) certain accelerations (including failure to pay
within any grace period after final maturity) of other Indebtedness of the Company or any
Significant Subsidiary (other than Non-Recourse Purchase Money Indebtedness) if the amount
accelerated (or so unpaid) exceeds $10.0 million, provided that such acceleration is not rescinded
within a period of 10 days from the occurrence of such acceleration; (v) certain events of
bankruptcy or insolvency with respect to the Company and the Significant Subsidiaries; (vi) certain
judgments or decrees for the payment of money in excess of $10.0 million; and (vii) certain
defaults with respect to Subsidiary Guaranties. If an Event of Default occurs and is continuing,
the Trustee or the Holders of at least 25% in principal amount of the Securities may declare all
the Securities to be due and payable immediately. Certain events of bankruptcy or insolvency are
Events of Default which will result in the Securities being due and payable immediately upon the
occurrence of such Events of Default.

          Securityholders may not enforce the Indenture or the Securities except as provided in the
Indenture. The Trustee may refuse to enforce the Indenture or the Securities unless it receives
indemnity or security satisfactory to it. Subject to certain limitations, Holders of a majority in
principal amount of the Securities may direct the Trustee in its exercise of any

          

5

 

\

trust or power. The Trustee may withhold from Securityholders notice of any continuing
Default (except a Default in payment of principal or interest) if it determines that withholding
notice is not opposed to the interest of the Holders.

16. Trustee Dealings with the Company

          Subject to certain limitations imposed by the Act, the Trustee under the Indenture, in its
individual or any other capacity, may become the owner or pledgee of Securities and may otherwise
deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise
deal with the Company or its Affiliates with the same rights it would have if it were not Trustee.

17. No Recourse Against Others

          A director, officer, employee or stockholder, as such, of the Company or the Trustee shall not
have any liability for any obligations of the Company under the Securities or the Indenture or for
any claim based on, in respect of or by reason of such obligations or their creation. By accepting
a Security, each Securityholder waives and releases all such liability. The waiver and release are
part of the consideration for the issuance of the Securities.

18. Authentication

          This Security shall not be valid until an authorized signatory of the Trustee (or an
authenticating agent) manually signs the certificate of authentication on the other side of this
Security.

19. Abbreviations

          Customary abbreviations may be used in the name of a Securityholder or an assignee, such as
TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with
rights of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift
to Minors Act).

20. 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 Securities and has directed
the Trustee to use CUSIP numbers in notices of redemption as a convenience to Securityholders. No
representation is made as to the accuracy of such numbers either as printed on the Securities or as
contained in any notice of redemption and reliance may be placed only on the other identification
numbers placed thereon.

21. Holders’ Compliance with Registration Rights Agreement

          Each Holder of a Security, by acceptance hereof, acknowledges and agrees to the provisions of
the Registration Rights Agreement, including the obligations of the Holders with respect to a
registration and the indemnification of the Company to the extent provided therein.

6

 

22. Governing Law

          THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK BUT 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.

          The Company will furnish to any Securityholder upon written request and without charge to the
Securityholder a copy of the Indenture which has in it the text of this Security in larger type.
Requests may be made to:

Encore Acquisition Company

777 Main Street

Suite 1400

Fort Worth, TX 76102

Attention: Roy W. Jageman

7

 

EXHIBIT A

 

ASSIGNMENT FORM

To assign this Security, fill in the form below:

I or we assign and transfer this Security to

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

     (Insert assignee’s soc. sec. or tax I.D. No.)

and irrevocably appoint            agent to transfer this Security 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 other side of this Security.

 

 

OPTION OF HOLDER TO ELECT PURCHASE

          If you want to elect to have this Security purchased by the Company pursuant to Section 4.06
or 4.08 of the Indenture, check the box:

o

          If you want to elect to have only part of this Security purchased by the Company pursuant to
Section 4.06 or 4.08 of the Indenture, state the amount in principal amount: $                    

	 	 	 	 	 	 	 
	Date:

	 	 	 	Your Signature:	 	 
	 

	 	 
	 	 	 	 
	 

	 	 	 	 	 	(Sign exactly as your name appears on the
	 

	 	 	 	 	 	other side of this Security.)

	 	 	 
	Signature Guarantee:
	 	 
	 

	 	 
	 

	 	(Signature must be guaranteed)

     Signatures must be guaranteed by an “eligible guarantor institution” meeting the requirements
of the Registrar, which requirements include membership or participation in the Security Transfer
Agent Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined
by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.exv4w2w2

Exhibit 4.2.2

     FIRST SUPPLEMENTAL INDENTURE, dated as of January 2, 2008 (this “First Supplemental
Indenture”), between Encore Acquisition Company, a Delaware corporation (the “Company”), and Wells
Fargo Bank, National Association, as trustee (the “Trustee”).

     WHEREAS, the Company and the Trustee have heretofore entered into an Indenture dated as of
July 13, 2005 (the “Indenture”) relating to the Company’s 6% Senior Subordinated Notes due 2015;
and

     WHEREAS, EAP Operating, Inc., a Delaware corporation and a Subsidiary Guarantor, has filed a
Certificate of Conversion under Delaware law to convert to a limited liability company formed under
the laws of Delaware, effective as of December 31, 2007, named EAP Operating, LLC; and

     WHEREAS, Section 11.03 of the Indenture states that Article 10 of the Indenture shall be
binding upon each Subsidiary Guarantor and its successors and assigns; and

     WHEREAS, Section 4.10 of the Indenture provides that the Company shall cause each Restricted
Subsidiary that Incurs any Indebtedness (other than Indebtedness Incurred pursuant to and in
compliance with the last cause of Section 4.03(b)(16), to, at the same, execute and deliver to the
Trustee a Guaranty Agreement pursuant to which such Restricted Subsidiary will Guarantee payment of
the Securities on the same terms and condition as those set forth in the Indenture; and

     WHEREAS, Section 9.01 provides that the Company and the Trustee may amend or supplement the
Indenture without the consent of any Holder to add Guarantees of any series of Securities as
permitted by the terms of the Indenture; and

     WHEREAS, all acts and things necessary to make this First Supplemental Indenture a valid and
binding agreement in accordance with the Indenture have been done or performed;

     NOW, THEREFORE, in consideration of the premises, agreements and obligations set forth herein
and for other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree, for the equal and proportionate benefit of all
Holders of the Notes, as follows:

     SECTION 1. Capitalized Terms. Capitalized terms used in this First Supplemental
Indenture and not otherwise defined herein shall have the respective meanings assigned to such
terms in the Indenture.

     SECTION 2. Guarantees. EAP Operating, LLC hereby agrees, jointly and severally with
the Subsidiary Guarantors, to guarantee the Company’s obligations under the Notes on the terms and
subject to the conditions set forth in Article 10 of the Indenture and to be bound by all other
applicable provisions of the Indenture.

     SECTION 3. Continuing Effect of Indenture. Except as expressly provided herein, all
of the terms, provisions and conditions of the Indenture and the Notes outstanding thereunder shall
remain in full force and effect.

 

 

     SECTION 4. Construction of First Supplemental Indenture. This First Supplemental
Indenture is executed as and shall constitute an indenture supplemental to the Indenture and shall
be construed in connection with and as part of the Indenture.

     SECTION 5. Trust Indenture Act Controls. If any provision of this First Supplemental
Indenture limits, qualifies or conflicts with another provision of this First Supplemental
Indenture or the Indenture that is required to be included by the Trust Indenture Act of 1939 as in
force at the date as of which this First Supplemental Indenture is executed, the provision required
by said Act shall control.

     SECTION 6. Trustee Disclaimer. The recitals contained in this First Supplemental
Indenture shall be taken as the statements of the Company, and the Trustee assumes no
responsibility for their correctness. The Trustee makes no representations as to the validity or
sufficiency of this First Supplemental Indenture.

     SECTION 7. Governing Law. THIS FIRST SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

     SECTION 8. Counterparts. This First Supplemental Indenture may be executed in any
number of counterparts, each of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.

[The remainder of this page is intentionally left blank]

 

 

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

	 	 	 	 	 
	 	ENCORE ACQUISITION COMPANY

 	 
	 	By:  	/s/ Robert C. Reeves
 	 
	 	 	Robert C. Reeves 	 
	 	 	Senior Vice President, Chief Financial

Officer and Treasurer 	 
	 
	 	EAP OPERATING, LLC

 	 
	 	By:  	/s/ Robert C. Reeves
 	 
	 	 	Robert C. Reeves 	 
	 	 	Senior Vice President, Chief Financial

Officer and Treasurer 	 
	 
	 	EAP PROPERTIES, INC.

 	 
	 	By:  	/s/ Robert C. Reeves
 	 
	 	 	Robert C. Reeves 	 
	 	 	Senior Vice President, Chief Financial

Officer and Treasurer 	 
	 
	 	ENCORE OPERATING, L.P.

 	 
	 	By:  	EAP Operating, LLC, its general partner
 	 
	 	 	 
	 	By:  	                                                     /s/ Robert C. Reeves
 	 
	 	 	Robert C. Reeves 	 
	 	 	Senior Vice President, Chief Financial

Officer and Treasurer 	 

 

 

	 	 	 	 	 

	 	 	 	 	 
	 	ENCORE OPERATING LOUISIANA, LLC

 	 
	 	By:  	/s/ Thomas H. Olle
 	 
	 	 	Thomas H. Olle 	 
	 	 	President and Assistant Secretary 	 

 

 

	 	 	 	 	 

	 	 	 	 	 
	 	WELLS FARGO BANK, NATIONAL ASSOCIATION,

as Trustee

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

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00170-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00170-of-00352.parquet"}]]