Document:

PSA Sunrise

    MEMBERSHIP
      INTEREST PURCHASE AGREEMENT 

     

    by
      and
      among

     

    HALLADOR
      PETROLEUM COMPANY,

     

    a
      Colorado
      corporation,

     

    and

     

    SUNRISE
      COAL, LLC,

     

    an
      Indiana
      limited liability company

     

    

     

    Dated
      as of
      July 31, 2006

     

    
      
        
          1-LA/887883.7 

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        TABLE
          OF CONTENTS

      

    

    

      
        	
                ARTICLE I

                 

              	
                DEFINITIONS

                 

              	
                2

                 

              
	
                1.1

              	
                Certain
                  Defined Terms

              	
                2

              
	
                1.2

              	
                Other
                  Defined Terms

              	
                7

              
	 	 	 
	
                ARTICLE II

              	
                REORGANIZATION

                 

              	
                7

                 

              
	
                2.1

              	
                Purchase
                  and
                  Sale of the Sunrise Interests

              	
                7

              
	
                2.2

              	
                Closing

              	
                8

              
	
                2.3

              	
                Transactions
                  to be Effected at the Closing

              	
                8

              
	 	 	 
	
                ARTICLE III

                 

              	
                REPRESENTATIONS
                  AND WARRANTIES OF SUNRISE

                 

              	
                8

                 

              
	
                3.1

              	
                Organization
                  and Good Standing

              	
                8

              
	
                3.2

              	
                Capitalization

              	
                9

              
	
                3.3

              	
                Sunrise
                  Subsidiaries.

              	
                10

              
	
                3.4

              	
                Authority
                  and
                  Enforceability

              	
                10

              
	
                3.5

              	
                No
                  Conflicts;
                  Authorizations

              	
                11

              
	
                3.6

              	
                Financial
                  Statements.

              	
                11

              
	
                3.7

              	
                No
                  Undisclosed Liabilities

              	
                12

              
	
                3.8

              	
                Coal
                  Reserves

              	
                12

              
	
                3.9

              	
                Accounts
                  Receivable

              	
                12

              
	
                3.10

              	
                Taxes.

              	
                13

              
	
                3.11

              	
                Compliance
                  with Law

              	
                13

              
	
                3.12

              	
                Authorizations

              	
                14

              
	
                3.13

              	
                Title
                  to
                  Personal Properties.

              	
                14

              
	
                3.14

              	
                Condition
                  of
                  Tangible Assets

              	
                15

              
	
                3.15

              	
                Real
                  Property

              	
                15

              
	
                3.16

              	
                Intellectual
                  Property

              	
                16

              
	
                3.17

              	
                Absence
                  of
                  Certain Changes or Events

              	
                17

              
	
                3.18

              	
                Contracts

              	
                19

              
	
                3.19

              	
                Litigation.

              	
                21

              
	
                3.20

              	
                Employee
                  Benefits

              	
                21

              
	
                3.21

              	
                Labor
                  and
                  Employment Matters

              	
                24

              
	
                3.22

              	
                Environmental.

              	
                25

              
	
                3.23

              	
                Related
                  Party
                  Transactions

              	
                28

              
	
                3.24

              	
                Insurance.

              	
                29

              
	
                3.25

              	
                Books
                  and
                  Records

              	
                29

              
	
                3.26

              	
                Brokers
                  or
                  Finders

              	
                30

              
	
                3.27

              	
                No
                  Illegal
                  Payments

              	
                30

              
	
                3.28

              	
                Suppliers
                  and
                  Customers

              	
                30

              
	
                3.29

              	
                Bank
                  Accounts

              	
                30

              
	
                3.30

              	
                Powers
                  of
                  Attorney

              	
                30

              
	
                3.31

              	
                Completeness
                  of Disclosure

              	
                31

              
	 	 	 
	
                ARTICLE IV

                 

              	
                REPRESENTATIONS
                  AND WARRANTIES OF HALLADOR

                 

              	
                31

                 

              
	
                4.1

              	
                Organization
                  and Good Standing

              	
                31

              
	
                4.2

              	
                Authority
                  and
                  Enforceability

              	
                31

              
	
                4.3

              	
                No
                  Conflicts;
                  Authorizations

              	
                31

              
	
                4.4

              	
                Purchase
                  for
                  Investment

              	
                32

              
	
                4.5

              	
                Availability
                  of Funds

              	
                32

              
	
                4.6

              	
                Brokers
                  or
                  Finders

              	
                32

              
	 	 	 
	
                ARTICLE V

                 

              	
                CERTAIN
                  COVENANTS

                 

              	
                32

                 

              
	
                5.1

              	
                Access
                  to
                  Information

              	
                32

              
	
                5.2

              	
                Conduct
                  of
                  Businesses Pending Closing

              	
                32

              
	
                5.3

              	
                No
                  Solicitation of Transactions

              	
                34

              
	
                5.4

              	
                Authorizations

              	
                34

              
	
                5.5

              	
                Public
                  Announcements

              	
                34

              
	
                5.6

              	
                Non-Disclosure
                  of Proprietary Data

              	
                35

              
	
                5.7

              	
                Disclosure
                  Schedule Update

              	
                35

              
	 	 	 
	
                ARTICLE VI

                 

              	
                CONDITIONS
                  TO
                  THE OBLIGATIONS OF HALLADOR

                 

              	
                35

                 

              
	
                6.1

              	
                Accuracy
                  of
                  Representations and Warranties

              	
                35

              
	
                6.2

              	
                Performance

              	
                36

              
	
                6.3

              	
                Absence
                  of
                  Governmental Orders

              	
                36

              
	
                6.4

              	
                Certificates

              	
                36

              
	
                6.5

              	
                Sunrise
                  Members

              	
                36

              
	
                6.6

              	
                Sunrise
                  Required Consents

              	
                36

              
	
                6.7

              	
                Articles
                  of
                  Organization

              	
                36

              
	
                6.8

              	
                Sunrise
                  Coal,
                  Inc

              	
                36

              
	 	 	 
	
                ARTICLE VII

                 

              	
                CONDITIONS
                  TO
                  THE OBLIGATIONS OF SUNRISE

                 

              	
                36

                 

              
	
                7.1

              	
                Accuracy
                  of
                  Representations and Warranties

              	
                36

              
	
                7.2

              	
                Performance

              	
                37

              
	
                7.3

              	
                Absence
                  of
                  Governmental Orders

              	
                37

              
	
                7.4

              	
                Officers’
                  Certificates

              	
                37

              
	
                7.5

              	
                Operating
                  Agreement

              	
                37

              
	 	 	 
	
                ARTICLE VIII

                 

              	
                TERMINATION

                 

              	
                37

                 

              
	
                8.1

              	
                Termination

              	
                37

              
	
                8.2

              	
                Written
                  Notice

              	
                38

              
	
                8.3

              	
                Effect
                  of
                  Termination

              	
                38

              
	
                8.4

              	
                Waiver

              	
                38

              
	
                8.5

              	
                Nonsurvival
                  of Representations and Warranties

              	
                38

              
	 	 	 
	
                ARTICLE IX

                 

              	
                GENERAL
                  PROVISIONS

                 

              	
                38

                 

              
	
                9.1

              	
                Expenses,
                  Taxes, Etc

              	
                38

              
	
                9.2

              	
                Notices

              	
                38

              
	
                9.3

              	
                Interpretation

              	
                39

              
	
                9.4

              	
                Severability

              	
                40

              
	
                9.5

              	
                Assignment

              	
                40

              
	
                9.6

              	
                No
                  Third-Party Beneficiaries

              	
                40

              
	
                9.7

              	
                Amendment

              	
                40

              
	
                9.8

              	
                No
                  Other
                  Remedies

              	
                40

              
	
                9.9

              	
                Further
                  Assurances

              	
                40

              
	
                9.10

              	
                Mutual
                  Drafting

              	
                40

              
	
                9.11

              	
                Governing
                  Law

              	
                40

              
	
                9.12

              	
                Dispute
                  Resolution

              	
                40

              
	
                9.13

              	
                Counterparts

              	
                41

              
	
                9.14

              	
                Entire
                  Agreement

              	
                42

              

      

      

    

     

    
      
        
          
            	
                    1-LA/887883.7 

                  	
                    --

                  	 

          

          

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
           

        

      

    

    EXHIBITS:

     

    EXHIBIT
      A CARLISLE
      MINE
      DEVELOPMENT BUDGET

    

    EXHIBIT
      B FORM
      OF
      OPINION

    

    EXHIBIT
      C FORM
      OF
      CONTRIBUTION AGREEMENT

    

    SCHEDULES:

     

    1.1 SUNRISE
      KNOWLEDGE
      PERSONS AND HALLADOR KNOWLEDGE PERSONS

    

    SUNRISE
      DISCLOSURE SCHEDULE

    

     

    

    

    
      
        
          1-LA/887883.7 

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
          

        

      

    

    MEMBERSHIP
      INTEREST PURCHASE AGREEMENT 

     

    MEMBERSHIP
      INTEREST
      PURCHASE AGREEMENT, dated as of July 31, 2006, by and between Hallador Petroleum
      Company, a Colorado corporation (“Hallador”) and Sunrise Coal, LLC, an Indiana
      limited liability company (“Sunrise”).

     

    RECITALS

     

    A. The
      Sunrise Members
      hold all of the currently issued membership interests in Sunrise.

     

    B. The
      Sunrise Members
      have approved, and deem it advisable and in the best interest of Sunrise, for
      Sunrise to issue the Sunrise Interests (defined below). 

     

    C. Sunrise
      desires to
      sell the Sunrise Interests to Hallador and Hallador desires to purchase the
      Sunrise Interests from Sunrise, upon the terms and subject to the conditions
      set
      forth in this Agreement and the Operating Agreement.

     

    D. In
      furtherance of
      this Agreement, the Sunrise Members and Hallador have entered into that certain
      Amended and Restated Operating Agreement of Sunrise Coal, LLC, dated as of
      the
      date hereof (the “Operating Agreement”).

     

    E. Sunrise
      and
      Hallador desire to make certain representations, warranties, covenants and
      agreements in connection with the Operating Agreement and the transactions
      contemplated hereby and thereby.

     

    NOW,
      THEREFORE, in
      consideration of the foregoing, and of the representations, warranties,
      covenants and agreements contained herein, the parties hereto hereby agree
      as
      follows:

     

    
      
        1

      

      
        
        

        
          

        

      

      
        
        

      

    

    ARTICLE I  

    DEFINITIONS

     

    1.1  Certain
      Defined Terms.
      As used in this
      Agreement, the following terms shall have the following meanings (such
      definitions to be equally applicable to both the singular and plural forms
      of
      the terms defined):

     

    “Acquisition”
has
      the meaning
      specified in Section 2.1.

     

    “Action”
means
      any claim,
      action, suit or arbitration, or any other proceeding, in each instance by or
      before any Governmental Authority or any nongovernmental arbitration, mediation
      or other nonjudicial dispute resolution body.

     

    “Affiliate”
has
      the meaning
      set forth in Rule 12b-2 of the regulations under the Exchange Act.

     

    “Agreement”
means
      this
      Membership Interest Purchase Agreement, including all schedules and exhibits
      hereto, as it may be further amended from time to time as herein
      provided.

     

    “Agreement
      Date”
means
      July 31,
      2006.

     

    “Antitrust
      Authorities”
has
      the meaning
      specified in Section 5.4(b).

     

    “Audited
      Financial Statements”
has
      the meaning
      specified in Section 3.6(a).

     

    “Authorization”
means
      any
      authorization, approval, consent, certificate, license, permit or franchise
      of
      or from any Governmental Authority or pursuant to any Law. 

     

    “Balance
      Sheet”
has
      the meaning
      specified in Section 3.6(b).

     

    “Balance
      Sheet
      Date”
has
      the meaning
      specified in Section 3.6(b).

     

    “Benefit
      Plan”
has
      the meaning
      specified in Section 3.20(a).

     

    “Books
      and
      Records”
means
      all of the
      following which pertain to the conduct of the Sunrise Business: books, records,
      manuals and other materials, accounting books and records, continuing property
      records for property, plant and equipment, files, computer tapes, disks, other
      storage media and records, advertising matter, catalogues, price lists,
      correspondence, mailing lists, lists of customers and suppliers, distribution
      lists, photographs, production data, sales and promotional materials and
      records, purchasing materials and records, personnel records, credit records,
      manufacturing and quality control records and procedures, blueprints, research
      and development files, data and laboratory books, patent and trademark files
      and
      disclosures, media materials and plates, sales order files, litigation files,
      deeds, easements and other instruments relating to the Real Property, any Tax
      Returns filed by Sunrise, including all work papers and calculations in support
      of such Tax Returns, and any comparable information with respect to predecessors
      of Sunrise to the extent available.

     

    “CERCLA”
has
      the meaning
      specified in Section 3.22(a)(iv).

     

    “Charter
      Documents”
means
      a company’s
      certificate of formation, articles of organization, articles of incorporation,
      certificate of incorporation, bylaws, limited liability company operating
      agreement, partnership agreement, formation agreement, joint venture agreement
      or other similar organizational documents of such entity (in each case, as
      amended).

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    “Closing”
means
      the closing
      of the transactions contemplated by this Agreement as specified in
      Section 2.2.

     

    “Closing
      Date”
has
      the meaning
      specified in Section 2.2.

     

    “Coal
      Reserves”
has
      the meaning
      specified in Section 3.8(a).

     

    “Code”
means
      the United
      States Internal Revenue Code of 1986, as amended, and any successor statute
      thereto, and the rules and regulations of the IRS thereunder.

     

    “Consents”
means
      all
      consents, waivers, assignments and other approvals and actions.

     

    “Contract”
means
      any
      agreement, contract, license, lease, commitment, arrangement or understanding,
      written or oral, including any sales order and purchase order.

     

    “Encumbrance”
means
      any
      interest (including any security interest), pledge, mortgage, lien, charge,
      adverse claim or other right of third Persons.

     

    “Environment”
has
      the meaning
      specified in Section 3.22(a)(i).

     

    “Environmental
      Action”
has
      the meaning
      specified in Section 3.22(a)(ii).

     

    “Environmental
      Clean-Up Site”
has
      the meaning
      specified in Section 3.22(a)(iii).

     

    “Environmental
      Laws”
has
      the meaning
      specified in Section 3.22(a)(iv).

     

    “Environmental
      Liabilities”
has
      the meaning
      specified in Section 3.22(a)(v).

     

    “Environmental
      Permit”
has
      the meaning
      specified in Section 3.22(a)(vi).

     

    “ERISA”
has
      the meaning
      specified in Section 3.20(a).

     

    “ERISA
      Affiliate”
has
      the meaning
      specified in Section 3.20(a).

     

    “Exchange
      Act”
means
      the
      Securities Exchange Act of 1934, as amended, and any successor statute thereto,
      and the rules and regulations of the SEC thereunder.

     

    “Financial
      Statements”
has
      the meaning
      specified in Section 3.6(a).

     

    “GAAP”
means
      U.S.
      generally accepted accounting principles, unless expressly described
      otherwise.

     

    “Governmental
      Authority”
means
      any
      international, national, Federal, state, municipal or local government,
      governmental authority, regulatory or administrative agency, governmental
      commission, department, board, bureau, agency or instrumentality, court,
      tribunal, arbitrator or arbitral body.

     

    “Governmental
      Order”
means
      any order,
      writ, rule, judgment, injunction, decree, stipulation, determination or award
      entered by or with any Governmental Authority.

     

    “Hallador”
has
      the meaning
      specified in the preamble.

     

    “Hallador
      Note”
means
      that
      certain Promissory Note dated June 1, 2006 issued by Sunrise in favor of
      Hallador in the original principal amount of up to $5,000,000.

     

    
      
        3

      

      
        
        

        
          

        

      

      
        
        

      

    

    “Hazardous
      Substances”
has
      the meaning
      specified in Section 3.22(a)(vii).

     

    “Indebtedness”
means
      any of the
      following: (a) any
      indebtedness for borrowed money, (b) any obligations evidenced by bonds,
      debentures, notes or other similar instruments, (c) any obligations to pay
      the deferred purchase price of property or services, except trade accounts
      payable and other current Liabilities arising in the ordinary course of
      business, (d) any obligations as lessee under capitalized leases,
      (e) any indebtedness created or arising under any conditional sale or other
      title retention agreement with respect to acquired property, (f) any
      obligations, contingent or otherwise, under acceptance credit, letters of credit
      or similar facilities, and (g) any guaranty of any of the
      foregoing.

     

    “Initial
      Cash
      Payment”
means
      the initial
      payment of the Purchase Price in an amount equal to Seven Million Five Hundred
      Thousand Dollars ($7,500,000), to be made by Hallador to Sunrise on the Closing
      Date.

     

    “Intellectual
      Property”
has
      the meaning
      specified in Section 3.16.

     

    “Interim
      Balance
      Sheet”
has
      the meaning
      specified in Section 3.6(b).

     

    “Interim
      Balance
      Sheet Date”
has
      the meaning
      specified in Section 3.6(b).

     

    “Interim
      Financial Statements”
has
      the meaning
      specified in Section 3.6(a).

     

    “IRS”
means
      the
      Internal Revenue Service.

     

    “Knowledge”
means
      the actual
      knowledge after due inquiry of only the Persons listed on
      Schedule 1.1.
      Anything herein
      to the contrary notwithstanding, no Person listed on any of such schedules
      shall
      have any personal Liability with respect to any of the matters set forth in
      this
      Agreement or any representation or warranty herein being or becoming untrue,
      inaccurate or incomplete, except to the extent such Person may be liable
      hereunder as a Sunrise Member.

     

    “Law”
means
      any
      statute, law (including common law), constitution, treaty, ordinance, code,
      order, decree, judgment, rule, regulation and any other binding requirement
      or
      determination of any Governmental Entity.

     

    “Leased
      Real
      Property”
has
      the meaning
      specified in Section 3.15(a).

     

    “Liabilities”
means
      any and all
      debts, liabilities and obligations of any nature whatsoever, whether accrued
      or
      fixed, absolute or contingent or mature or unmatured.

     

    “Material
      Adverse Effect”
means
      any
      event(s) with respect to, change(s) in, or effect(s) on, a Person which,
      individually or in the aggregate, is reasonably likely to be adverse to the
      business, results of operations or financial condition of such Person in a
      manner that is material to such Person, excluding any such events, changes
      or
      effects resulting from or arising in connection with (i) changes
      or
      conditions generally affecting the coal industry or (ii) changes
      or
      conditions generally affecting the U.S. economy or financial
      markets.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    “Material
      Contracts”
has
      the meaning
      specified in Section 3.18(b).

     

    “Other
      Antitrust
      Laws”
has
      the meaning
      specified in Section 3.5(b).

     

    “Operating
      Agreement”
has
      the meaning
      specified in the recitals to this Agreement.

     

    “Outstanding
      Interests”
has
      the meaning
      specified in Section 3.2(b).

     

    “Owned
      Real
      Property”
has
      the meaning
      specified in Section 3.15(a).

     

    “PCBs”
has
      the meaning
      specified in Section 3.22(i).

     

    “Pension
      Plan”
has
      the meaning
      specified in Section 3.20(b).

     

    “Permitted
      Liens”
means
      any
      (a) mechanics’, carriers’, workers’ and other similar liens arising in the
      ordinary course of business which are not delinquent and which in the aggregate
      are not material in amount, and do not interfere with the present use of the
      assets of the Sunrise Entities to which they apply; (b) liens for current
      Taxes and assessments not yet due and payable; and (c) the title and other
      interests of lessors under capital or operating leases or of licensors under
      licenses or royalty agreements; and (d) liens that are immaterial in
      character, amount, and extent and which do not detract from the value or
      interfere with the present or proposed use of the properties they
      affect.

     

    “Person”
shall
      include any
      individual, trustee, firm, corporation, partnership, limited liability company,
      Governmental Authority or other entity, whether acting in an individual,
      fiduciary or any other capacity.

     

    “Policies”
has
      the meaning
      specified in Section 3.24(a).

     

    “Purchase
      Price”
has
      the meaning
      specified in Section 2.1.

     

    “RCRA”
has
      the meaning
      specified in Section 3.22(a)(iv).

     

    “Real
      Property”
has
      the meaning
      specified in Section 3.15(a).

     

    “Release”
has
      the meaning
      specified in Section 3.22(a)(viii).

     

    “SEC”
means
      the United
      States Securities and Exchange Commission.

     

    “Securities
      Act”
means
      the
      Securities Act of 1933, as amended, and any successor statute thereto, and
      the
      rules and regulations of the SEC thereunder.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    “Sunrise”
has
      the meaning
      specified in the preamble.

     

    “Sunrise
      Business”
means
      the Sunrise
      Entities’ business of owning, operating and developing coal mines.

     

    “Sunrise
      Disclosure Schedule”
means
      the
      Disclosure Schedule dated as of the Agreement Date, as amended in accordance
      with this Agreement, as delivered to Hallador by Sunrise and forming a part
      of
      this Agreement.

     

    “Sunrise
      Entities”
means,
      collectively, Sunrise and the Sunrise Subsidiaries.

     

    “Sunrise
      Interests”
means
      the
      additional membership interests to be issued by Sunrise and purchased by
      Hallador, which shall be made up of 60 Common Units and the right to receive
      the
      Preferred Return, as those terms are defined in the Operating
      Agreement.

     

    “Sunrise
      Members”
means
      the parties
      listed on Schedule 3.2
      hereof.

     

    “Sunrise
      Required Consents”
means
      those
      consents, waivers, approvals, orders and authorizations of, notices to, and
      registrations, declarations, designations, qualifications and filings with,
      Governmental Authorities and third Persons, domestic or foreign, (a) set
      forth in Sunrise Disclosure Schedule Section 3.5(b),
      (b) required
      in order to eliminate the items set forth in Sunrise Disclosure Schedule
      Section 3.5(a)
      from such section,
      (c) that otherwise are necessary in order to make the representations and
      warranties set forth in Section 3.5
      true and correct
      as of the Closing Date and (d) with respect to financings of the Sunrise
      Entities, set forth on Sunrise Disclosure Schedule Section 1.1.

     

    “Sunrise
      Subsidiaries”
means,
      collectively, the Persons in which Sunrise has a direct or indirect equity
      or
      ownership interest in excess of 10%.

     

    “Tax”
or
“Taxes”
means
      any and all
      federal, state, local, or foreign net or gross income, gross receipts, net
      proceeds, sales, use, ad valorem, value added, franchise, bank shares,
      withholding, payroll, employment, excise, property, deed, stamp, alternative
      or
      add-on minimum, environmental, profits, windfall profits, transaction, license,
      lease, service, service use, occupation, severance, energy, unemployment, social
      security, workers’ compensation, capital, premium, and other taxes, assessments,
      customs, duties, fees, levies, or other governmental charges of any nature
      whatever, whether disputed or not, together with any interest, penalties,
      additions to tax, or additional amounts with respect thereto.

     

    “Tax
      Returns”
means
      any return,
      declaration, report, claim for refund, or information return or statement
      relating to Taxes, including any schedule or attachment thereto, and including
      any amendment thereof.

     

    “Taxing
      Authority”
means
      any
      Governmental Authority having jurisdiction with respect to any Tax.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    1.2  Other
      Defined Terms.
      In addition to
      the terms defined in Section 1.1,
      certain other
      terms are defined elsewhere in this Agreement and, whenever such terms are
      used
      in this Agreement, they shall have their respective defined
      meanings.

     

    ARTICLE II  

    REORGANIZATION

     

    2.1  Purchase
      and Sale of the Sunrise
      Interests.
      Upon the terms
      and subject to the conditions of this Agreement, at the Closing, Sunrise shall
      sell to Hallador, and Hallador shall purchase from Sunrise, the Sunrise
      Interests free and clear of all Encumbrances. The aggregate purchase price
      for
      the Sunrise Interests consists of the Initial Cash Payment and the additional
      capital contributions to be made to Sunrise by Hallador pursuant to the Hallador
      Capital Commitment as set forth in the Operating Agreement (the “Purchase
      Price”). The
      purchase and
      sale of the Sunrise Interests is referred to in this Agreement as the
“Acquisition.” 

     

    
      
        
        

      

      
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    2.2  Closing.
      Subject to the fulfillment or waiver of the conditions
      precedent set forth in Article VI
      and Article VII,
      the consummation
      of the transactions contemplated by this Agreement (the “Closing”) shall take
      place at the offices of Morgan, Lewis & Bockius LLP, Los Angeles,
      California, at 9:00 a.m., local time (a) on
      July 31, 2006, or (b) at
      such other
      date, time or place as the parties hereto may agree upon in writing. The date
      on
      which the transactions contemplated by Section 2.1
      hereof are
      consummated is referred to herein as the “Closing Date.”

     

    2.3  Transactions
      to be Effected at the
      Closing. 

     

    2.3.1  At
      the Closing
      Hallador shall deliver to Sunrise (i) the Initial Cash Payment in
      immediately available funds by deposit to an account of Sunrise at Old National
      Bank, (ii) a certificate of Hallador, dated the Closing Date, certifying as
      to
      the matters requested by Sunrise pursuant to Section 7.4,
      (iii) the
      cancelled Hallador Note and (iv) all other documents, instruments or
      certificates required to be delivered by Hallador at or prior to the Closing
      pursuant to Article VII. 

     

    2.3.2  At
      the Closing
      Sunrise shall deliver to Hallador (i) payment in cash in full of the
      outstanding principal amount of the Hallador Note plus all accrued interest
      thereon in an amount equal to Five Million Forty Three Thousand Five Hundred
      Twenty Eight Dollars and Seventy Seven Cents ($5,043,528.77) by deposit of
      immediately available funds into an account of Hallador at Old National Bank,
      (ii) certificates for the Sunrise Interests, (iii) certificates of
      Sunrise dated the Closing Date, certifying as to the matters requested by
      Hallador pursuant to Sections 6.4
      and 6.5,
      (iv) an
      opinion or opinions of Krieg DeVault LLP substantially in the form attached
      hereto as Exhibit B,
      (v) all
      other documents and instruments necessary to vest in Hallador all of Sunrise’s
      right, title and interest in and to the Sunrise Interests, free and clear of
      all
      Encumbrances, and (iv) all other documents, instruments or certificates
      required to be delivered by Sunrise at or prior to the Closing pursuant to
      Article VI.

     

    ARTICLE III  

    REPRESENTATIONS
      AND WARRANTIES OF SUNRISE

     

    Sunrise
      represents
      and warrants to Hallador as of the date hereof and as of the Closing Date that
      the statements contained in this Article III
      are true and
      correct, except as set forth in the Sunrise Disclosure Schedule. The Sunrise
      Disclosure Schedule shall be arranged in paragraphs corresponding to each
      representation and warranty set forth in this Article III,
      but the
      disclosures in any Section of the Sunrise Disclosure Schedule shall qualify
      any other Section in Article III
      to the extent each
      disclosure specifically references such other Section; provided, however, that
      the mere inclusion of an item in the Sunrise Disclosure Schedule as an exception
      to a representation or warranty shall not be deemed an admission by Sunrise
      that
      such item represents a material exception or fact, event or circumstance or
      that
      such item is reasonably likely to result in a Material Adverse Effect with
      respect to Sunrise. 

     

    3.1  Organization
      and Good
      Standing.

     

    (a)  Each
      of the Sunrise
      Entities is a limited liability company, validly existing and in good standing
      under the Laws of the jurisdiction of its formation, has all requisite power
      to
      own, lease and operate its properties and to carry on its business as now being
      conducted and as proposed to be conducted, and is duly qualified to do business
      and is in good standing as a foreign Person in each jurisdiction in which it
      owns or leases property or conducts any business so as to require such
      qualification. The Sunrise Disclosure Schedule lists each jurisdiction in which
      the Sunrise Entities are qualified to do business.

     

    (b)  Each
      of the Sunrise
      Entities has complied with and is not in default under its Charter Documents.
      The Charter Documents of the Sunrise Entities in the forms attached to the
      Sunrise Disclosure Schedule are the Charter Documents of each Sunrise Entity
      as
      in effect on the date of this Agreement and as of the Closing Date.

     

    
      
        
        

      

      
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    3.2  Capitalization.

     

    (a)  The
      outstanding
      membership interests in Sunrise will, upon issuance of the Sunrise Interests
      to
      Hallador, consist of one hundred (100) Common Units (as defined in the Operating
      Agreement) and the rights to receive the Preferred Return as provided in the
      Operating Agreement. All of the Outstanding Interests were and the Sunrise
      Interests will be issued in compliance with all applicable federal and state
      securities Laws. The Sunrise Interests will be issued to Hallador free and
      clear
      of all Encumbrances, other than pursuant to the Operating Agreement.

     

    (b)  Schedule
      3.2
      contains a true
      and complete list of the record holders of the membership interests in Sunrise
      outstanding as of the date hereof (the “Outstanding Interests”) and sets forth
      the full name, current address and number of Outstanding Interests owned by
      each. 

     

    (c)  Except
      for the
      Outstanding Interests, Sunrise does not have outstanding equity securities
      of
      any kind. Except for this Agreement and the Operating Agreement, Sunrise is
      not
      party to any Contract obligating Sunrise, directly or indirectly, to issue
      additional securities and there is no circumstance or condition that may give
      rise to a claim by any Person that such Person is entitled to acquire any
      securities of Sunrise. 

     

    (d)  None
      of the
      Outstanding Interests were issued or have been transferred in violation of,
      or
      are subject to, any preemptive rights, rights of first offer or subscription
      agreements. Sunrise is not party to any stockholder agreements, voting
      agreements, voting trusts or any such other similar arrangements with respect
      to
      the transfer, voting or other rights associated with its securities, and there
      are no such agreements to which Sunrise is not a party. Sunrise does not have
      outstanding or authorized any stock appreciation, phantom stock, profit
      participation, or similar rights.

     

    (e)  Sunrise
      has not
      repurchased or otherwise reacquired any of its securities. There are no
      obligations, contingent or otherwise, of Sunrise to repurchase, redeem or
      otherwise acquire any of its securities. There are no declared or accrued unpaid
      dividends with respect to any of Sunrise’s securities. 

     

    (f)  Sunrise
      does not
      have outstanding any bonds, debentures, notes or other obligations or debt
      securities the holders of which have the right to vote (or convertible into,
      or
      exercisable or exchangeable for, securities having the right to vote) on any
      matter. 

     

    
      
        
        

      

      
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    3.3  Sunrise
      Subsidiaries.

     

    (a)  The
      Sunrise
      Disclosure Schedule contains a true and complete list of the Sunrise
      Subsidiaries and sets forth with respect to each such Sunrise Subsidiary the
      jurisdiction of formation, the authorized and outstanding ownership interests
      of
      such Sunrise Subsidiary, the owner(s) of record of such outstanding ownership
      interests, and the federal, state and local tax classification of such Sunrise
      Subsidiary. All of the outstanding ownership interests of each Sunrise
      Subsidiary are owned by Sunrise free and clear of all Encumbrances.

     

    (b)  Each
      Sunrise
      Subsidiary is validly existing and in good standing under the Laws of the
      jurisdiction of its formation, has all requisite power to own, lease and operate
      its properties and to carry on its business as now being conducted and as
      proposed to be conducted, and is duly qualified to do business and is in good
      standing in each jurisdiction in which it owns or leases property or conducts
      any business so as to require such qualification.

     

    (c)  Other
      than the
      ownership interests set forth in the Sunrise Disclosure Schedule, no Sunrise
      Subsidiary has outstanding securities of any kind. No Sunrise Subsidiary is
      party to any Contract obligating such Subsidiary, directly or indirectly, to
      issue any additional securities and there is no circumstance or condition that
      may give rise to a claim by any Person that such Person is entitled to acquire
      the securities of any such Subsidiary. No Sunrise Subsidiary has outstanding
      or
      authorized any stock appreciation, phantom stock, profit participation, or
      similar rights.

     

    (d)  No
      Sunrise
      Subsidiary has outstanding any bonds, debentures, notes or other obligations
      or
      debt securities the holders of which have the right to vote (or convertible
      into, or exercisable or exchangeable for, securities having the right to vote)
      on any matter.

     

    (e)  Other
      than the
      Subsidiaries set forth in the Sunrise Disclosure Schedule, none of the Sunrise
      Entities, directly or indirectly, owns any securities or other interest in
      any
      corporation, partnership, joint venture or other business association or entity,
      or to provide funds to or make any investment.

     

    (f)  There
      are no
      obligations, contingent or otherwise, of any Sunrise Entity to provide funds
      to
      or make an investment (in the form of a loan, capital contribution or otherwise)
      in any entity.

     

    3.4  Authority
      and
      Enforceability.
      Sunrise has all
      necessary power and authority to enter into this Agreement, to perform its
      obligations hereunder and to consummate the transactions contemplated hereby.
      The execution and delivery of this Agreement by Sunrise and the consummation
      by
      Sunrise of the transactions contemplated hereby have been duly authorized by
      all
      necessary limited liability company action. This Agreement has been duly
      executed and delivered by Sunrise and, assuming due authorization, execution
      and
      delivery by Hallador, constitutes the valid and binding obligation of Sunrise,
      enforceable against it in accordance with its terms, except as such
      enforceability may be limited by (i) bankruptcy,
      insolvency, reorganization, moratorium or other similar Laws affecting or
      relating to creditors’ rights generally, and (ii) the
      availability of injunctive relief and other equitable remedies. The Operating
      Agreement has been duly authorized by the Sunrise Members.

     

    
      
        
        

      

      
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    3.5  No
      Conflicts;
      Authorizations.

     

    (a)  Except
      as set forth
      in the Sunrise Disclosure Schedule, the execution and delivery of this Agreement
      by Sunrise does not, and the performance by Sunrise of its obligations hereunder
      and the consummation by Sunrise of the transactions contemplated hereby (in
      each
      case, with or without the giving of notice or lapse of time, or both) will
      not,
      directly or indirectly, (i) violate
      the
      provisions of any of the Charter Documents of any Sunrise Entity, (ii) violate
      or
      conflict with, or constitute a default, an event of default or an event creating
      rights of acceleration, termination, cancellation, imposition of additional
      obligations or loss of rights, or require a consent to assignment, under any
      Contract (A) to
      which any
      of the Sunrise Entities is a party, (B) of
      which any
      of the Sunrise Entities is a beneficiary or (C) by
      which any
      of the Sunrise Entities or any of their respective assets is bound, or
(iii) assuming
      compliance by the Sunrise Entities with the matters referred to in
      Section 3.5(b),
      violate or
      conflict with any Law, Authorization or Governmental Order applicable to any
      of
      the Sunrise Entities, or give any Governmental Authority or other Person the
      right to challenge any of the transactions contemplated hereby or to exercise
      any remedy, obtain any relief under or revoke or otherwise modify any rights
      held under, any such Law, Authorization or Governmental Order.

     

    (b)  No
      Authorization or
      Governmental Order of, registration, declaration or filing with, or notice
      to
      any Governmental Authority or other Person, is required to be made, obtained,
      performed or given to or with respect to any of the Sunrise Entities in
      connection with the execution and delivery of this Agreement.

     

    3.6  Financial
      Statements.

     

    (a)  True
      and complete
      copies of the Sunrise Entities’ unaudited consolidated financial statements
      consisting of the consolidated balance sheet of the Sunrise Entities as at
      December 31, 2005 and the related statements of income and retained earnings,
      members’ equity and cash flow for the year then ended (the “Annual Financial
      Statements”), and unaudited consolidated financial statements consisting of the
      balance sheet of the Sunrise Entities as at June 30, 2006 and the related
      statements of income and retained earnings, stockholders’ equity and cash flow
      for the six month period then ended (the “Interim Financial Statements” and
      together with the Annual Financial Statements, the “Financial Statements”), are
      included in the Sunrise Disclosure Schedule. 

     

    (b)  The
      Financial
      Statements are true, complete and correct and have been prepared in accordance
      GAAP applied on a consistent basis throughout the periods involved, subject,
      in
      the case of the Interim Financial Statements, to normal year-end adjustments
      (the effect of which will not be materially adverse) and the absence of notes
      (that, if presented, would not differ materially from those presented in the
      Annual Financial Statements). The Financial Statements are based on the books
      and records of the Sunrise Entities, and fairly present the financial condition
      of the Sunrise Entities as of the respective dates they were prepared and the
      results of the operations of the Sunrise Entities for the periods indicated.
      The
      consolidated balance sheet of the Sunrise Entities as of December 31, 2005
      is
      referred to herein as the “Balance Sheet” and the date thereof as the “Balance
      Sheet Date” and the consolidated balance sheet of the Sunrise Entities as of
      June 30, 2006 is referred to herein as the “Interim Balance Sheet” and the date
      thereof as the “Interim Balance Sheet Date.” Each of the Sunrise Entities
      maintains a standard system of accounting established and administered in
      accordance with GAAP.

     

    (c)  There
      is and has
      been no fraud, whether or not material, that involves management or other
      employees who have a significant role in the Sunrise Entities’ internal
      controls. 

     

    
      
        
        

      

      
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    3.7  No
      Undisclosed
      Liabilities.
      The Sunrise
      Entities have no Liabilities except (a)those
      which are
      adequately reflected or reserved against in the Balance Sheet as of the Balance
      Sheet Date, and (b) those
      which
      have been incurred in the ordinary course of business and consistent with past
      practice since the Balance Sheet Date and which do not, individually or in
      the
      aggregate, equal to or more than $10,000.

     

    3.8  Coal
      Reserves. 

     

    (a)  The
      Sunrise
      Entities reserve estimates of measured, indicated and inferred reserves (as
      defined in United States Geological Survey Circular 891) (the “Coal Reserves”)
      are set forth on Section 3.8
      of the Sunrise
      Disclosure Schedule.

     

    (b)  The
      Sunrise
      Entities possess the legal rights to access and extract coal from the Coal
      Reserves.

     

    (c)  None
      of the Coal
      Reserves are within an area designated as unsuitable for mining activities
      or
      under study for designation as unsuitable for mining activities under the
      Federal Surface Mining Control and Reclamation Act, 30 U.S.C. Section 1201,
      et seq. or analogous state laws.

     

    (d)  The
      Coal Reserves
      can be mined utilizing approved methods and procedures commonly used by
      competent mine operators in the region.

     

    3.9  Accounts
      Receivable.
      The accounts
      receivable of the Sunrise Entities as set forth on the Interim Balance Sheet
      or
      arising since the date thereof are, to the extent not paid in full by the
      account debtor prior to the date hereof, (a) valid
      and
      genuine, have arisen solely out of bona fide sales and deliveries of goods,
      performance of services and other business transactions in the ordinary course
      of business consistent with past practice, (b) not subject to valid defenses,
      set offs or counterclaims, and (c) collectible within 90 days after billing
      at
      the full recorded amount thereof less, in the case of accounts receivable
      appearing on the Sunrise Interim Balance Sheet, the recorded allowance for
      collection losses on the Interim Balance Sheet or, in the case of accounts
      receivable arising since the Interim Balance Sheet Date, the recorded allowance
      for collection losses shown on the accounting records of the Sunrise Entities.
      The allowance for collection losses on the Interim Balance Sheet and, with
      respect to accounts receivable arising since the Interim Balance Sheet Date,
      the
      allowance for collection losses shown on the accounting records of the Sunrise
      Entities, have been determined in accordance with GAAP consistent with past
      practice. The accounts receivable existing as of the Closing Date will be
      collectible within 90 days after billing at the full recorded amount thereof
      net
      of the reserves shown on the accounting records of the Sunrise Entities as
      of
      the Closing Date (which reserve shall be adequate and shall not represent a
      greater percentage of the accounts receivable as of the Closing Date than the
      reserve reflected in the Interim Balance Sheet represented of the accounts
      receivable reflected therein).

     

    
      
        
        

      

      
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    3.10  Taxes.

     

    (a)  Each
      of the Sunrise
      Entities has duly and timely filed all Tax Returns required to have been filed
      by or with respect to the Sunrise Entities and will duly and timely file all
      Tax
      Returns due between the date hereof and the Closing Date. Each such Tax Return
      correctly and completely reflects all liability for Taxes and all other
      information required to be reported thereon. All Taxes owed by the Sunrise
      Entities (whether or not shown on any Tax Return) have been timely paid (or,
      if
      due between the date hereof and the Closing Date, will be duly and timely paid).
      Each of the Sunrise Entities has adequately provided for, in its books of
      account and related records, all liability for all unpaid Taxes, being current
      Taxes not yet due and payable.

     

    (b)  None
      of the Sunrise
      Entities is the beneficiary of any extension of time within which to file any
      Tax Return, nor has any of the Sunrise Entities made (or had made on its behalf)
      any requests for such extensions. None of the Sunrise Entities has waived (or,
      to the Knowledge of Sunrise, is subject to a waiver of) any statute of
      limitations in respect of Taxes or has agreed to (or, to the Knowledge of
      Sunrise, is subject to) any extension of time with respect to a Tax assessment
      or deficiency.

     

    (c)  The
      Sunrise
      Disclosure Schedule indicates those Tax Returns that have been audited and
      those
      Tax Returns that currently are the subject of audit. Except as set forth in
      the
      Sunrise Disclosure Schedule there is no Action now pending or, to the Knowledge
      of Sunrise, threatened against or with respect to the Sunrise Entities in
      respect of any Tax or any assessment or deficiency. There are no liens for
      Taxes
      (other than current Taxes not yet due and payable) upon the assets of the
      Sunrise Entities. Sunrise has delivered to Hallador correct and complete copies
      of all federal income Tax Returns, examination reports, and statements of
      deficiencies assessed against or agreed to by the Sunrise Entities.

     

    (d)  The
      Sunrise
      Disclosure Schedule lists, as of the date of this Agreement, all jurisdictions
      in which any of the Sunrise Entities currently files Tax Returns. No claim
      has
      been made by an authority in a jurisdiction where any of the Sunrise Entities
      does not file Tax Returns that any of them is or may be subject to taxation
      by
      that jurisdiction or that any of them must file Tax Returns. 

     

    (e)  None
      of the Sunrise
      Entities (i) has
      ever been
      a party to any Tax allocation or sharing agreement or Tax indemnification
      agreement, (ii) has
      ever been
      a member of an affiliated, consolidated, condensed or unitary group, or
(iii) has
      any
      liability for or obligation to pay Taxes of any other Person under Treas. Reg.
      1.1502-6 (or any similar provision of Tax Law), or as transferee or successor,
      by contract or otherwise.

     

    3.11  Compliance
      with Law.

     

    (a)  Each
      of the Sunrise
      Entities has complied with each, and is not in material violation of, any
      applicable Law to which any of the Sunrise Entities or its business, operations,
      assets or properties is or has been subject. 

     

    (b)  No
      event has
      occurred and no circumstances exist that (with or without the passage of time
      or
      the giving of notice) may result in a violation of, conflict with or failure
      on
      the part of any of the Sunrise Entities to comply with, any Law. Except as
      set
      forth in the Sunrise Disclosure Schedule, none of the Sunrise Entities has
      received notice regarding any such violation of, conflict with, or failure
      to
      comply with, any Law, except such violations, conflicts or failures to comply
      that (i) have been resolved, or (ii) cannot reasonably be expected to result
      in
      a Material Adverse Effect on Sunrise or its assets or properties.

     

    
      
        
        

      

      
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    3.12  Authorizations.

     

    (a)  Except
      as set forth
      in the Sunrise Disclosure Schedule, each of the Sunrise Entities owns, holds
      or
      lawfully uses in the operation of its business all Authorizations which are
      necessary for it to conduct its business as currently conducted or as proposed
      to be conducted or for the ownership and use of the assets owned or used by
      such
      Sunrise Entity in the conduct of its business free and clear of all
      Encumbrances. The Authorizations held by the Sunrise Entities are valid and
      in
      full force and effect and none of such Authorizations will be terminated or
      impaired or become terminable as a result of the transactions contemplated
      by
      this Agreement.

     

    (b)  No
      event has
      occurred and no circumstances exist that (with or without the passage of time
      or
      the giving of notice) may result in a violation of, conflict with, failure
      on
      the part of any of the Sunrise Entities to comply with the terms of, or the
      revocation, withdrawal, termination, cancellation, suspension or modification
      of
      any Authorization. None of the Sunrise Entities has received notice regarding
      any violation of, conflict with, failure to comply with the terms of, or any
      revocation, withdrawal, termination, cancellation, suspension or modification
      of, any Authorization. None of the Sunrise Entities is in default, nor has
      any
      of the Sunrise Entities received notice of any claim of default, with respect
      to
      any Authorization.

     

    (c)  No
      Person other
      than one of the Sunrise Entities owns or has any proprietary, financial or
      other
      interest (direct or indirect) in any Authorization which any of the Sunrise
      Entities owns, possesses or uses in the operation of its business as now or
      proposed to be conducted.

     

    3.13  Title
      to
      Personal Properties.

     

    (a)  The
      Sunrise
      Disclosure Schedule sets forth a complete and accurate list of all the personal
      properties and assets owned, leased or used by any of the Sunrise Entities
      or
      otherwise used in the businesses of the Sunrise Entities as of the date of
      this
      Agreement, with a current fair market value in excess of $100,000, specifying
      whether and by whom each such asset is owned or leased and, in the case of
      leased assets, indicating the parties to and annual payments under, the lease.
      

     

    (b)  With
      respect to
      personal properties and assets that they purport to own, including all
      properties and assets reflected as owned on the Interim Balance Sheet (other
      than inventory sold in the ordinary course of business since the date thereof),
      the Sunrise Entities named on the Sunrise Disclosure Schedule have good and
      valid title to all of such properties and assets, free and clear of all
      Encumbrances other than Permitted Liens.

     

    (c)  With
      respect to
      personal properties and assets that are leased, the Sunrise Entities named
      on
      the Sunrise Disclosure Schedule have a valid leasehold interest in such
      properties and assets and all such leases are in full force and effect and
      constitute valid and binding obligations of the other party(ies) thereto. None
      of the Sunrise Entities nor any other party thereto is in violation of any
      of
      the terms of any such lease. 

     

    
      
        
        

      

      
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    3.14  Condition
      of Tangible
      Assets.
      All buildings,
      plants, leasehold improvements, structures, facilities, equipment and other
      items of tangible property and assets which are owned, leased or used by any
      of
      the Sunrise Entities are structurally sound, are in good operating condition
      and
      repair (subject to normal wear and tear given the use and age of such assets),
      are usable in the regular and ordinary course of business and conform, to the
      Knowledge of Sunrise, to all Laws and Authorizations relating to their
      construction, use and operation.

     

    3.15  Real
      Property.

     

    (a)  The
      Sunrise
      Disclosure Schedule contains (i) a
      list of all
      real property and interests in real property owned in fee by any of the Sunrise
      Entities (the “Owned Real Property”), and (ii) a
      list of all
      real property and interests in real property leased by any of the Sunrise
      Entities (the “Leased Real Property” and together with the Owned Real Property,
      the “Real Property”). The Real Property listed on the Sunrise Disclosure
      Schedule includes all interests in real property used in or necessary for the
      conduct of the businesses and operations of the Sunrise Entities as currently
      conducted and as proposed to be conducted. 

     

    (b)  With
      respect to
      each parcel of Owned Real Property:

     

    (i)  One
      of the Sunrise
      Entities has good and marketable title to each such parcel of Owned Real
      Property free and clear of all Encumbrances, except (A) Permitted
      Liens and (B) zoning
      and
      building restrictions, easements, covenants, rights of way and other similar
      restrictions of record, none of which impairs the current or proposed use of
      such Owned Real Property.

     

    (ii)  The
      legal
      description for such parcel of Owned Real Property contained in the deed thereof
      describes the property fully and accurately. All buildings, structures and
      facilities located on, and improvements to, such parcel of Owned Real Property
      are located within the boundary lines of such Owned Real Property and do not
      encroach on any easement, right of way or other encumbrance which burdens any
      portion of the Owned Real Property. No structures, facilities or other
      improvements on any parcel adjacent to the Owned Real Property encroach onto
      any
      portion of the Owned Real Property.

     

    (iii)  The
      Sunrise
      Entities have provided (or made available) to Hallador copies of the deeds
      and
      other instruments (as recorded) by which the Sunrise Entities acquired such
      parcel of Owned Real Property, and copies of all title insurance policies,
      opinions, abstracts and surveys in the possession of any of the Sunrise Entities
      relating thereto.

     

    (iv)  There
      are no
      outstanding options or rights of first refusal to purchase such parcel of Owned
      Real Property, or any portion thereof or interest therein.

     

    (c)  With
      respect to
      Leased Real Property, the Sunrise Entities have delivered (or made available)
      to
      Hallador a true and complete copy of every lease and sublease pursuant to which
      any of the Sunrise Entities is a party or by which any of them is bound. The
      applicable Sunrise Entity has peaceful, undisturbed and exclusive possession
      of
      the Leased Real Property.

     

    (d)  The
      uses for which
      the buildings, facilities and other improvements located on the Real Property
      are zoned do not restrict, or impair, the use of the Real Property for purposes
      of the business. None of the Sunrise Entities has received any notice from
      any
      Governmental Authority or other Person that the Real Property does not comply
      with all applicable building and zoning codes, deed restrictions, ordinances
      and
      rules.

     

    (e)  No
      Governmental
      Authority having the power of eminent domain over the Real Property has
      commenced or, to the Knowledge of Sunrise, intends to exercise the power of
      eminent domain or a similar power with respect to all or any part of the Real
      Property. There are no pending or, to the Knowledge of Sunrise, threatened
      condemnation, fire, health, safety, building, zoning or other land use
      regulatory proceedings, lawsuits or administrative actions relating to any
      portion of the Real Property or any other matters which do or may adversely
      effect the current use, occupancy or value thereof. None of the Sunrise Entities
      has received notice of any pending or threatened special assessment proceedings
      affecting any portion of the Real Property.

     

    (f)  The
      Real Property
      and all present uses and operations of the Real Property comply with all Laws,
      Authorizations, covenants, conditions, restrictions, easements, disposition
      agreements and similar matters affecting the Real Property. The continued use,
      occupancy and operation of the Real Property as currently used, occupied and
      operated do not constitute a nonconforming use and are not the subject of a
      special use permit under any Law.

     

    (g)  The
      Real Property
      is in suitable condition for the businesses of the Sunrise Entities as currently
      conducted and as proposed to be conducted. Each of the Sunrise Entities has
      good
      and valid rights of ingress and egress to and from all Real Property from and
      to
      the public street systems for all usual street, road and utility
      purposes.

     

    (h)  No
      Person other
      than a Sunrise Entity is in possession of any of the Real Property or any
      portion thereof, and there are no leases, subleases, licenses, concessions
      or
      other agreements, written or oral, granting to any Person other than a Sunrise
      Entity the right of use or occupancy of the Real Property or any portion
      thereof. To the Knowledge of Sunrise, no easement, utility transmission line
      or
      water main located on the Real Property adversely affects the use of the Real
      Property or any improvement on the Real Property.

     

    
      
        
        

      

      
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    3.16  Intellectual
      Property. 

     

    (a)  The
      Sunrise
      Disclosure Schedule contains an accurate and complete list of (b) all
      patents
      throughout the world, (c) all
      trademarks, trade names and service marks and applications therefore throughout
      the world, (d) all
      copyrights and applications therefor throughout the world, (e) all
      software
      and computer programs, and (f) all
      licenses
      relating to patents, patent rights, know how, trade secrets, trademarks, trade
      names, service marks, software and computer programs or other intellectual
      property, in each case issued to or used or held for use by the Sunrise Entities
      in the operation of the Sunrise Business (collectively, the “Intellectual
      Property”; provided, however, that the Sunrise Disclosure Schedule need not
      contain any Intellectual Property consisting of “off-the shelf” software or
      computer programs). Except as set forth in the Sunrise Disclosure Schedule,
      the
      Sunrise Entities are the sole and exclusive owner or licensee of, with all
      right, title and interest in and to (free and clear of any Encumbrances, other
      than Permitted Liens), the Intellectual Property. To the Knowledge of Sunrise,
      the use of any such Intellectual Property in the conduct of the Sunrise Business
      as presently conducted does not violate any rights of any third Person. The
      Sunrise Entities have not received written notice that the use of any such
      Intellectual Property in the conduct of the Sunrise Business as presently
      conducted violates any rights of any third Person.

     

    
      
        
        

      

      
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    3.17  Absence
      of Certain Changes or
      Events.
      Since the Balance Sheet Date to the date
      of this Agreement (with respect to the representation and warranty made as
      of
      the date of this Agreement) and to the Closing Date (with respect to the
      representation and warranty made as of the Closing Date):

     

    (a)  there
      has not been
      any material adverse change in the business, financial condition, operations,
      prospects or results of operations of the Sunrise Entities taken as a whole;
      

     

    (b)  None
      of the Sunrise
      Entities has amended or otherwise modified its Charter Documents;

     

    (c)  None
      of the Sunrise
      Entities has declared, set aside or paid any dividend or other distribution
      (whether in cash, stock or property) with respect to any of its securities
      other
      than customary distributions intended to enable the Sunrise Members to satisfy
      Tax liabilities associated with their respective allocable shares of Sunrise
      taxable income as determined pursuant to Section 702 and 704 of the Code
      and any similar provisions of state or local law and in all events agreed to
      by
      Hallador; 

     

    (d)  None
      of the Sunrise
      Entities has split, combined or reclassified any of its securities, or issued,
      or authorized for issuance, any securities;

     

    (e)  None
      of the Sunrise
      Entities has altered any term of any outstanding securities;

     

    (f)  None
      of the Sunrise
      Entities has (i) increased
      or
      modified the compensation or benefits payable or to become payable to any of
      their respective current or former directors, employees, contractors or
      consultants, (ii) increased
      or
      modified any bonus, severance, termination, pension, insurance or other employee
      benefit plan, payment or arrangement made to, for or with any of its current
      or
      former directors, employees, contractors or consultants or (iii) entered
      into
      any employment, severance or termination agreement;

     

    (g)  None
      of the Sunrise
      Entities has sold, leased, transferred or assigned any property or assets of
      the
      Sunrise Entities, except for the sale of inventory, in each case in the ordinary
      course of business consistent with past practice;

     

    (h)  None
      of the Sunrise
      Entities has incurred, assumed or guaranteed any Indebtedness, or modified
      the
      terms of any Indebtedness outstanding as of the Balance Sheet Date;

     

    
      
        
        

      

      
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    (i)  None
      of the Sunrise
      Entities has incurred any material Liability or created or assumed any
      Encumbrance on any asset, except for Permitted Liens, Encumbrances arising
      under
      lease financing arrangements existing as of the Balance Sheet Date and
      Encumbrances for taxes not yet due and payable with respect to which the Sunrise
      Entities maintain adequate reserves;

     

    (j)  None
      of the Sunrise
      Entities has made any loan, advance or capital contribution to, or investment
      in, any Person other than travel loans or advances in the ordinary course of
      business consistent with past practice; 

     

    (k)  None
      of the Sunrise
      Entities has entered into any Material Contract;

     

    (l)  (i) no
      Material
      Contract has been modified, (ii) no
      rights
      under any Material Contract have been waived or accelerated and (iii) no
      Contract
      that would be required to be listed as a Material Contract pursuant to
      Section 3.18
      hereof if such
      Contract were in effect on the date hereof has been terminated or
      cancelled;

     

    (m)  None
      of the Sunrise
      Entities has sold, transferred, pledged or assigned, and there has been no
      material reduction in the value of, any Intellectual Property;

     

    (n)  there
      has not been
      any labor dispute, other than individual grievances, or any activity or
      proceeding by a labor union or representative thereof to organize any employees
      of any of the Sunrise Entities;

     

    (o)  there
      has not been
      any violation of or conflict with any Law to which the business, operations,
      assets or properties of any of the Sunrise Entities are subject;

     

    (p)  None
      of the Sunrise
      Entities has agreed or entered into any arrangement to take any action which,
      if
      taken prior to the date hereof, would have made any representation or warranty
      set forth in this Article III
      untrue or
      incorrect as of the date when made; 

     

    (q)  there
      has not been
      any material damage, destruction or loss with respect to the property and assets
      of any of the Sunrise Entities, whether or not covered by
      insurance;

     

    (r)  None
      of the Sunrise
      Entities has made any change in accounting practices; or

     

    (s)  None
      of the Sunrise
      Entities has agreed, whether in writing or otherwise, to do any of the
      foregoing.

     

    
      
        
        

      

      
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    3.18  Contracts.

     

    (a)  The
      Sunrise
      Disclosure Schedule contains a complete and accurate list of each Contract
      or
      series of related Contracts to which any of the Sunrise Entities is a party
      or
      is subject, or by which any of their respective assets are bound:

     

    (i)  for
      the purchase of
      materials, supplies, goods, services, equipment or other assets and that
      involves or would reasonably be expected to involve (A) annual
      payments by any of the Sunrise Entities of $50,000 or more, or (B) aggregate
      payments by any of the Sunrise Entities of $250,000 or more;

     

    (ii)  (A) for
      the sale
      by any of the Sunrise Entities of materials, supplies, goods, services,
      equipment or other assets, and that involves (1) a specified annual minimum
      dollar sales amount by any of the Sunrise Entities of $50,000 or more, or
      (2) aggregate payments to any of the Sunrise Entities of $50,000 or more,
      or (B) pursuant
      to
      which any of the Sunrise Entities received payments of more than $100,000 in
      the
      year ended 2006 or expects to receive payments of more than $100,000 in the
      year
      ending 2006;

     

    (iii)  that
      requires any
      of the Sunrise Entities to purchase its total requirements of any product or
      service from a third party or that contains “take or pay”
provisions;

     

    (iv)  pursuant
      to which
(A) any
      of the
      Sunrise Entities purchases components for inclusion into its products other
      than
      components purchased solely on a purchase order basis or (B) pursuant
      to
      which a third party manufactures or assembles products on behalf of any of
      the
      Sunrise Entities; 

     

    (v)  that
      continues over
      a period of more than six months from the date hereof, other than arrangements
      disclosed pursuant to the preceding subparagraphs (i) and (ii); 

     

    (vi)  that
      is an
      employment, consulting, termination or severance Contract, other than any such
      Contract that is terminable at-will by any of the Sunrise Entities without
      liability to such Sunrise Entity;

     

    (vii)  that
      is a
      partnership, joint venture or similar Contract;

     

    (viii)  that
      is a
      distribution, dealer, representative or sales agency Contract;

     

    (ix)  that
      is a
(A) lease
      or
      sublease pursuant to which any of the Sunrise Entities is a party or by which
      any of them is bound or (B) Contract
      for
      the lease of personal property, in either case which provides for payments
      to or
      by any of the Sunrise Entities in any one case of $5,000 or more annually or
      $10,000 or more over the term of the lease;

     

    (x)  which
      provides for
      the indemnification by any of the Sunrise Entities of any Person, the
      undertaking by any of the Sunrise Entities to be responsible for consequential
      damages, or the assumption by any of the Sunrise Entities of any Tax,
      environmental or other Liability;

     

    (xi)  with
      any
      Governmental Authority;

     

    (xii)  that
      is a note,
      debenture, bond, equipment trust, letter of credit, loan or other Contract
      for
      Indebtedness or lending of money (other than to employees for travel expenses
      in
      the ordinary course of business) or Contract for a line of credit or guarantee,
      pledge or undertaking of the Indebtedness of any other Person;

     

    
      
        
        

      

      
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    (xiii)  for
      a charitable or
      political contribution in any one case in excess of $1,000 or any such Contracts
      in the aggregate greater than $5,000;

     

    (xiv)  for
      any capital
      expenditure or leasehold improvement in any one case in excess of $100,000
      or
      any such Contracts in the aggregate greater than $500,000;

     

    (xv)  that
      restricts or
      purports to restrict the right of any of the Sunrise Entities to engage in
      any
      line of business, acquire any property, develop or distribute any product or
      provide any service (including geographic restrictions) or to compete with
      any
      Person or granting any exclusive distribution rights, in any market, field
      or
      territory;

     

    (xvi)  that
      relates to the
      acquisition or disposition of any material business (whether by merger, sale
      of
      stock, sale of assets or otherwise); 

     

    (xvii)  that
      is a
      collective bargaining Contract or other Contract with any labor organization,
      union or association; and

     

    (xviii)  that
      is otherwise
      material to the Sunrise Entities as a whole and not previously disclosed
      pursuant to this Section 3.18.

     

    (b)  Each
      Contract
      required to be listed in Section 3.18(a)
      of the Sunrise
      Disclosure Schedule (collectively, the “Material Contracts”) is in full force
      and effect and valid and enforceable in accordance with its terms. 

     

    (c)  None
      of the Sunrise
      Entities is, and to the Knowledge of Sunrise, no other party thereto is, in
      default in the performance, observance or fulfillment of any obligation,
      covenant, condition or other term contained in any Material Contract, and none
      of the Sunrise Entities has given or received notice to or from any Person
      relating to any such alleged or potential default that has not been cured.
      To
      the Knowledge of Sunrise, no event has occurred which with or without the giving
      of notice or lapse of time, or both, may conflict with or result in a violation
      or breach of, or give any Person the right to exercise any remedy under or
      accelerate the maturity or performance of, or cancel, terminate or modify,
      any
      Sunrise Material Contract. 

     

    (d)  The
      Sunrise
      Entities have provided (or made available) accurate and complete copies of
      each
      Material Contract to Hallador.

     

    (e)  All
      Contracts other
      than Material Contracts to which any of the Sunrise Entities is a party or
      is
      subject, or by which any of their respective assets are bound are in all
      material respects valid and enforceable in accordance with their terms. None
      of
      the Sunrise Entities is in default in the performance, observance or fulfillment
      of any obligation, covenant or condition contained therein, and no event has
      occurred which with or without the giving of notice or lapse of time, or both,
      would constitute a default thereunder by any of the Sunrise Entities, except
      in
      either case where any such default or defaults could not reasonably be expected
      have, individually or in the aggregate, a material adverse effect on any of
      the
      Sunrise Entities taken as a whole. 

     

    
      
        
        

      

      
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    3.19  Litigation.

     

    (a)  There
      is no Action
      pending or, to the Knowledge of Sunrise, threatened (i) against
      or
      affecting any of the Sunrise Entities or (ii) that
      challenges or seeks to prevent, enjoin or otherwise delay the Acquisition.
      No
      event has occurred or circumstances exist that may give rise or serve as a
      basis
      for any such Action. To the Knowledge of Sunrise, there is no Action against
      any
      current or former director or employee of any of the Sunrise Entities with
      respect to which any of the Sunrise Entities has or is reasonably likely to
      have
      an indemnification obligation. 

     

    (b)  There
      is no
      unsatisfied judgment, penalty or award against or affecting any of the Sunrise
      Entities or any of their respective properties or assets. There is no
      Governmental Order to which any of the Sunrise Entities or any of their
      respective properties or assets are subject.

     

    3.20  Employee
      Benefits.

     

    (a)  The
      Sunrise
      Disclosure Schedule sets forth a complete and accurate list of all Benefit
      Plans. A current, accurate and complete copy of each Benefit Plan has been
      provided to Hallador. None of the Sunrise Entities has any intent or commitment
      to create any additional Benefit Plan or amend any Benefit Plan. “Benefit Plan”
means any “employee benefit plan” as defined in Section 3(3) of the
      Employee Retirement Income Security Act of 1974 (“ERISA”), including any
(i) nonqualified
      deferred compensation or retirement plan or arrangement which is an Employee
      Pension Benefit Plan (as defined in ERISA Section 3(2)), (ii) qualified
      defined contribution retirement plan or arrangement which is an Employee Pension
      Benefit Plan, (iii) qualified
      defined benefit retirement plan or arrangement which is an Employee Pension
      Benefit Plan (including any Multiemployer Plan (as defined in ERISA
      Section 3(37)), (iv) Employee
      Welfare Benefit Plan (as defined in ERISA Section 3(1)) or material fringe
      benefit plan or program, or (v) stock
      purchase, stock option, severance pay, employment, change-in-control, vacation
      pay, Sunrise Members awards, salary continuation, sick leave, excess benefit,
      bonus or other incentive compensation, life insurance, or other employee benefit
      plan, contract, program, policy or other arrangement, whether or not subject
      to
      ERISA, in each case which is sponsored, maintained or contributed to by any
      of
      the Sunrise Entities or any ERISA Affiliate, or with respect to which the
      Sunrise Entities or any ERISA Affiliate otherwise has any present or future
      Liability. “ERISA Affiliate” means any entity which is a member of a “controlled
      group of corporations” with, under “common control” with or a member of an
“affiliated services group” with, the any of the Sunrise Entities, as defined in
      Section 414(b), (c), (m) or (o) of the Code.

     

    (b)  Each
      Benefit Plan
      has been and is currently administered in compliance with its constituent
      documents and with all reporting, disclosure and other requirements of ERISA
      and
      the Code applicable to such Benefit Plan. Each Benefit Plan that is an Employee
      Pension Benefit Plan (as defined in Section 3(2) of ERISA) and which is
      intended to be qualified under Section 401(a) of the Code (a “Pension
      Plan”), has been determined by the Internal Revenue Service to be so qualified
      and no condition exists that would adversely affect any such determination.
      No
      Benefit Plan is a “defined benefit plan” as defined in Section 3(35) of
      ERISA.

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

    (c)  None
      of any Sunrise
      Entity, any ERISA Affiliate or any trustee or agent of any Benefit Plan has
      been
      or is currently engaged in any prohibited transactions as defined by
      Section 406 of ERISA or Section 4975 of the Code for which an
      exemption is not applicable which could subject any Sunrise Entity, any ERISA
      Affiliate or any trustee or agent of any Benefit Plan to the tax or penalty
      imposed by Section 4975 of the Code or Section 502 of
      ERISA.

     

    (d)  There
      is no event
      or condition existing which could be deemed a “reportable event” (within the
      meaning of Section 4043 of ERISA) with respect to which the 30 day notice
      requirement has not been waived. To the Knowledge of Sunrise, no condition
      exists which could subject any of the Sunrise Entities to a penalty under
      Section 4071 of ERISA.

     

    (e)  None
      of any Sunrise
      Entity or any ERISA Affiliate is, or has been, party to any “multi employer
      plan,” as that term is defined in Section 3(37) of ERISA.

     

    (f)  True
      and correct
      copies of the most recent annual report on Form 5500 and any attached schedules
      for each Benefit Plan (if any such report was required by applicable Law) and
      a
      true and correct copy of the most recent determination letter issued by the
      Internal Revenue Service for each Pension Plan have been provided to
      Hallador.

     

    (g)  With
      respect to
      each Benefit Plan, there are no actions, suits or claims (other than routine
      claims for benefits in the ordinary course) pending or, to the Knowledge of
      Sunrise, threatened against any Benefit Plan, any Sunrise Entity, any ERISA
      Affiliate or any trustee or agent of any Benefit Plan.

     

    (h)  With
      respect to
      each Benefit Plan to which any Sunrise Entity or any ERISA Affiliate is a party
      which constitutes a group health plan subject to Section 4980B of the Code,
      each such Benefit Plan complies, and in each case has complied, with all
      applicable requirements of Section 4980B of the Code.

     

    (i)  Full
      payment has
      been made of all amounts which any Sunrise Entity or any ERISA Affiliate was
      required to have paid as a contribution to any Benefit Plan as of the last
      day
      of the most recent fiscal year of each of the Benefit Plans ended prior to
      the
      date of this Agreement, and none of Benefit Plans has incurred any “accumulated
      funding deficiency” (as defined in Section 302 of ERISA and
      Section 412 of the Code), whether or not waived, as of the last day of the
      most recent fiscal year of each such Sunrise Benefit Plan ended prior to the
      date of this Agreement.

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

    (j)  Each
      Benefit Plan
      is, and its administration is and has been during the six year period preceding
      the date of this Agreement, in compliance with, and none of any Sunrise Entity
      nor any ERISA Affiliate has received any claim or notice that any such Sunrise
      Benefit Plan is not in compliance with, all applicable Laws and Governmental
      Orders and prohibited transaction exemptions, including to the extent
      applicable, the requirements of ERISA.

     

    (k)  None
      of any Sunrise
      Entity nor any ERISA Affiliate is in default in performing any of its
      contractual obligations under any Sunrise Benefit Plans or any related trust
      agreement or insurance contract.

     

    (l)  There
      are no
      material outstanding Liabilities of any Benefit Plan other than Liabilities
      for
      benefits to be paid to participants in any Benefit Plan and their beneficiaries
      in accordance with the terms of such Benefit Plan.

     

    (m)  Subject
      to ERISA
      and the Code, each Benefit Plan may be amended, modified, terminated or
      otherwise discontinued by a Sunrise Entity or an ERISA Affiliate at any time
      without liability.

     

    (n)  No
      Benefit Plan
      other than a Pension Plan, retiree medical plan or severance plan provides
      benefits to any individual after termination of employment.

     

    (o)  The
      sale of the
      Sunrise Interests will not (either alone or in conjunction with any other event)
      (i) entitle
      any
      current or former director, employee, contractor or consultant of any of the
      Sunrise Entities to severance pay, unemployment compensation or any other
      payment, (ii) accelerate
      the time of payment or vesting, or increase the amount of compensation due
      to
      any such director, employee, contractor or consultant, or result in the payment
      of any other benefits to any Person or the forgiveness of any Indebtedness
      of
      any Person, (iii) result
      in any
      prohibited transaction described in Section 406 of ERISA or
      Section 4975 of the Code for which an exemption is not available, or
(iv) result
      in the
      payment or series of payments by Sunrise or any of its Affiliates to any person
      of an “excess parachute payment” within the meaning of Section 280G of the
      Code. 

     

    (p)  With
      respect to
      each Benefit Plan that is funded wholly or partially through an insurance
      policy, all premiums required to have been paid to date under the insurance
      policy have been paid, all premiums required to be paid under the insurance
      policy through the Closing will have been paid on or before the Closing and,
      as
      of the Closing, there will be no liability of any Sunrise Entity or any ERISA
      Affiliate under any insurance policy or ancillary agreement with respect to
      such
      insurance policy in the nature of a retroactive rate adjustment, loss sharing
      arrangement or other actual or contingent liability arising wholly or partially
      out of events occurring prior to the Closing.

     

    (q)  Each
      Benefit Plan
      that constitutes a “welfare benefit plan,” within the meaning of
      Section 3(1) of ERISA, and for which contributions are claimed by any
      Sunrise Entity or any ERISA Affiliate as deductions under any provision of
      the
      Code, is in compliance with all applicable requirements pertaining to such
      deduction. With respect to any welfare benefit fund (within the meaning of
      Section 419 of the Code) related to a welfare benefit plan, there is no
      disqualified benefit (within the meaning of Section 4976(b) of the Code)
      that would result in the imposition of a tax under Section 4976(a) of the
      Code. All welfare benefit funds intended to be exempt from tax under
      Section 501(a) of the Code have been determined by the Internal Revenue
      Service to be so exempt and no event or condition exists which would adversely
      affect any such determination.

     

    
      
        
        

      

      
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    3.21  Labor
      and
      Employment Matters.

     

    (a)  The
      Sunrise
      Disclosure Schedule sets forth (i) (A) a
      list of all
      managers, directors, employees, contractors and consultants of the Sunrise
      Entities (including title and position) as of the date hereof, and (B) the
      base
      compensation and benefits of each such manager, director, employee, contractor
      and consultant in the years ending 2005 and as of July 1, 2006, and (ii) a
      list of all
      former managers, directors, employees, contractors and consultants of Sunrise
      and each of its Subsidiaries who are receiving benefits or scheduled to receive
      benefits in the future, and the pension benefit, medical insurance coverage
      and
      other benefits of each such manager, director, employee, contractor and
      consultant. All managers, directors, employees, contractors and consultants
      of
      the Sunrise Entities may be terminated by the relevant Sunrise Entity at any
      time with or without cause and without any severance or other Liability to
      the
      Sunrise Entities. 

     

    (b)  None
      of the Sunrise
      Entities is a party or subject to any labor union or collective bargaining
      Contract. There have not been and there are not pending or, to the Knowledge
      of
      Sunrise, threatened any labor disputes, work stoppages, requests for
      representation, pickets, work slow-downs due to labor disagreements or any
      actions or arbitrations which involve the labor or employment relations of
      any
      of the Sunrise Entities. There is no unfair labor practice, charge or complaint
      pending, unresolved or, to the Knowledge of Sunrise, threatened before the
      National Labor Relations Board. To the Knowledge of Sunrise, no event has
      occurred or circumstance exist that may provide the basis of any work stoppage
      or other labor dispute.

     

    (c)  Each
      of the Sunrise
      Entities has complied with each, and is not in violation of any, Law relating
      to
      anti-discrimination and equal employment opportunities and there are, and have
      been, no violations of any other Law respecting the hiring, hours, wages,
      occupational safety and health, employment, promotion, termination or benefits
      of any employee or other Person. Each of the Sunrise Entities has filed all
      reports, information and notices required under any Law respecting the hiring,
      hours, wages, occupational safety and health, employment, promotion, termination
      or benefits of any employee or other Person, and will timely file prior to
      Closing all such reports, information and notices required by any Law to be
      given prior to Closing.

     

    (d)  Each
      of the Sunrise
      Entities has paid or properly accrued in the ordinary course of business all
      wages and compensation due to employees, including all vacations or vacation
      pay, holidays or holiday pay, sick days or sick pay, and bonuses.

     

    (e)  None
      of the Sunrise
      Entities is a party to any Contract which restricts any of the Sunrise Entities
      from relocating, closing or terminating any of its operations or facilities
      or
      any portion thereof. None of the Sunrise Entities have since December 31, 2005
      effectuated (i) a
“plant
      closing” (as defined in the Worker Adjustment and Retraining Notification Act of
      1988 (the “WARN Act”)) or (ii) a
“mass
      lay-off” (as defined in the WARN Act), in either case affecting any site of
      employment or facility of any of the Sunrise Entities, except in accordance
      with
      the WARN Act. The consummation of the Acquisition will not create liability
      for
      any act by any of the Sunrise Entities on or prior to the Closing Date under
      the
      WARN Act or any other Law respecting reductions in force or the impact on
      employees on plant closings or sales of businesses. 

     

    (f)  Each
      of the Sunrise
      Entities has complied and is in compliance with the requirements of the
      Immigration Reform and Control Act of 1986. The Sunrise Disclosure Schedule
      sets
      forth a true and complete list of all employees working in the United States
      who
      are not U.S. citizens and a description of the legal status under which each
      such employee is permitted to work in the United States. All employees of the
      Sunrise Entities who are performing services for any of the Sunrise Entities
      in
      the United States are legally able to work in the United States and will be
      able
      to continue to work in the United States following the Closing.

     

    
      
        
        

      

      
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    3.22  Environmental.

     

    (a)  As
      used in this
      Agreement, the following words and terms have the following
      definitions:

     

    (i)  “Environment”
means
      all air, surface water, groundwater, land, including land surface or subsurface,
      including all fish, wildlife, biota and all other natural
      resources.

     

    (ii)  “Environmental
      Action” means any claim, proceeding or other Action brought or threatened under
      any Environmental Law or otherwise asserting that any of the Sunrise Entities
      has incurred any Environmental Liability.

     

    (iii)  “Environmental
      Clean up Site” means any location that is listed or proposed for listing on the
      National Priorities List, the Comprehensive Environmental Response, Compensation
      and Liability Information System, or on any similar state or foreign list of
      sites requiring investigation or cleanup, or which is the subject of any pending
      or threatened Action related to or arising from any alleged violation of any
      Environmental Law, or at which there has been a threatened or actual Release
      of
      a Hazardous Substance.

     

    (iv)  “Environmental
      Laws” means any and all applicable Laws and Authorizations issued, promulgated
      or entered into by any Governmental Authority relating to the Environment,
      worker health and safety, mine safety, extraction of minerals, preservation,
      or
      reclamation of natural resources, or to the management, handling, use,
      generation, treatment, storage, transportation, disposal, manufacture,
      distribution, formulation, packaging, labeling, Release or threatened Release
      of
      or exposure to Hazardous Substances, whether now existing or subsequently
      amended or enacted, including but not limited to: the Comprehensive
      Environmental Response, Compensation, and Liability Act, 42 U.S.C.
      Section 9601 et seq. (“CERCLA”); the Federal Water Pollution Control Act,
      33 U.S.C. Section 1251 et seq.; the Clean Air Act, 42 U.S.C.
      Section 7401 et seq.; the Toxic Substances Control Act, 15 U.S.C.
      Section 2601 et seq.; the Surface Mining Control and Reclamation Act of
      1977, 30 U.S.C. Section 1201 et seq.; the Occupational Safety and Health
      Act, 29 U.S.C. Section 651 et seq.; the Federal Coal Mine Health and Safety
      Act of 1969, P.L. 91-173 and the Federal Mine Safety and Health Act of 1977,
      P.L. 95-164 (collectively, the “Mine Safety and Health Acts”); Title XI of the
      Organized Crime Control Act of 1970, 18 U.S.C. Ch. 40; the Emergency Planning
      and Community Right to Know Act of 1986, 42 U.S.C. Section 11001 et seq.;
      the Safe Drinking Water Act, 42 U.S.C. Section 300(f) et seq.; the
      Hazardous Materials Transportation Act, 49 U.S.C. Section 1801 et seq.; the
      Federal Insecticide, Fungicide and Rodenticide Act 7 U.S.C. Section 136 et
      seq.; the Resource Conservation and Recovery Act of 1976 (“RCRA”), 42 U.S.C.
      Section 6901 et seq.; the Toxic Substances Control Act, 15 U.S.C.
      Section 2601 et seq.; the Oil Pollution Act of 1990, 33 U.S.C.
      Section 2701 et seq.; and any similar or implementing state or local Law,
      and any non U.S. Laws and regulations of similar import, and all amendments
      or
      regulations promulgated thereunder; and any common law doctrine, including
      but
      not limited to, negligence, nuisance, trespass, personal injury, or property
      damage related to or arising out of the presence, Release, or exposure to
      Hazardous Substances or the extraction of minerals. 

     

    
      
        
        

      

      
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    (v)  “Environmental
      Liabilities” means Liabilities based upon or arising out of (A) the
      ownership
      or operation of the business of any of the Sunrise Entities or (B) the
      ownership, operation or condition of the Real Property or any other real
      property currently or formerly owned, operated or leased by any of the Sunrise
      Entities, in each case to the extent based upon or arising out of
      (i) Environmental Law, (ii) a failure to obtain, maintain or comply
      with any Environmental Permit, (iii) a Release of any Hazardous Substance
      or (iv) the use, generation, storage, transportation, treatment, sale or
      disposal of Hazardous Substances at any location.

     

    (vi)  “Environmental
      Permit” means any Authorization under Environmental Law, and includes any and
      all Governmental Orders issued or entered into by a Governmental Authority
      under
      Environmental Law.

     

    (vii)  “Hazardous
      Substances” means all explosive or radioactive materials or substances,
      hazardous or toxic materials, wastes or chemicals, petroleum, petroleum
      hydrocarbons, or petroleum products (including crude oil or any fraction
      thereof), petroleum by-products, asbestos or asbestos-containing materials,
      and
      any other materials, chemicals, substances, or wastes in any amount or
      concentration, which are now or hereafter become defined as or included in
      the
      definition of “hazardous substances,” “hazardous materials,” hazardous wastes,”
“extremely hazardous wastes,” “restricted hazardous wastes,” “toxic substances,”
“toxic pollutants,” “pollutants,” “regulated substances,” “solid wastes,”
“wastes,” “contaminants,” or words of similar import, under any Environmental
      Law.

     

    (viii)  “Release”
means
      any
      spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting,
      escaping, leaching, dumping, or disposing of Hazardous Substances into or in
      the
      Environment.

     

    (b)  Each
      of the Sunrise
      Entities has secured, and is in material compliance with, all Environmental
      Permits required in connection with its operations and the Real Property. Each
      Environmental Permit, together with the name of the Governmental Authority
      issuing such Environmental Permit, is set forth in the Sunrise Disclosure
      Schedule. All such Environmental Permits are valid and in full force and effect
      and none of such Environmental Permits will be terminated or impaired or become
      terminable as a result of the consummation of the Acquisition. Each of the
      Sunrise Entities has been, and are currently, in material compliance with all
      Environmental Laws. Except as set forth in the Sunrise Disclosure Schedule,
      none
      of the Sunrise Entities has received notice alleging that it is not in such
      compliance with Environmental Laws.

     

    
      
        
        

      

      
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    (c)  There
      are no past,
      pending or, to the Knowledge of Sunrise, threatened Environmental Actions
      against or affecting any of the Sunrise Entities, and Sunrise is not aware
      of
      any facts or circumstances which could be expected to form the basis for any
      Environmental Action against any of the Sunrise Entities.

     

    (d)  None
      of the Sunrise
      Entities has entered into or agreed to any Governmental Order, and none of
      the
      Sunrise Entities is subject to any Governmental Order, relating to compliance
      with any Environmental Law or to investigation or cleanup of a Hazardous
      Substance under any Environmental Law.

     

    (e)  No
      Encumbrance has
      been attached to, or asserted against, the assets, property or rights of any
      of
      the Sunrise Entities pursuant to any Environmental Law, and, to the Knowledge
      of
      Sunrise, no such Encumbrance has been threatened. To the Knowledge of Sunrise,
      there are no facts, circumstances or other conditions that could be expected
      to
      give rise to any Encumbrances on or affecting any Real Property.

     

    (f)  There
      has been no
      treatment, storage, disposal or Release of any Hazardous Substance at, from,
      into, on or under any Real Property or any other property currently or formerly
      owned, operated or leased by any of the Sunrise Entities. No Hazardous
      Substances are present in, on, about or, to the Knowledge of Sunrise, migrating
      to or from any Real Property that could be expected to give rise to an
      Environmental Action against any of the Sunrise Entities.

     

    (g)  None
      of the Sunrise
      Entities has received a CERCLA 104(e) information request nor has any of the
      Sunrise Entities been named a potentially responsible party for any
      Environmental Clean-up Site. None of the Sunrise Entities has received an
      analogous notice or request from any non U.S. Governmental
      Authority.

     

    (h)  There
      are no active
      or abandoned aboveground storage tanks or underground storage tanks on, under
      or
      about the Real Property. Any aboveground or underground tanks previously
      situated on the Real Property or any other property currently or formerly owned,
      operated or leased by any of the Sunrise Entities have been removed in
      accordance with all Environmental Laws and no residual contamination, if any,
      remains at such sites in excess of applicable standards.

     

    (i)  To
      the Knowledge of
      Sunrise, there are no polychlorinated biphenyls (“PCBs”) leaking from any
      article, container or equipment on, under or about the Real Property and there
      are no such articles, containers or equipment containing PCBs. There is no
      asbestos containing material or lead based paint containing materials in at,
      on,
      under or within the Real Property.

     

    (j)  None
      of the Sunrise
      Entities has transported or arranged for the treatment, storage, handling,
      disposal, or transportation of any Hazardous Substance to any off site location
      which is an Environmental Clean up Site.

     

    (k)  None
      of the Real
      Property is an Environmental Clean up Site.

     

    (l)  The
      Sunrise
      Entities have paid all reclamation fees required by §402 of the Federal Surface
      Mining Control and Reclamation Act, 30 U.S.C. Section 1232, and any
      analogous state law.

     

    (m)  There
      are no claims
      for subsidence damage or diminution/contamination of water supplies as a result
      of mining operations pending against the Sunrise Entities.

     

    (n)  None
      of the Sunrise
      Entities have had a mining bond or other analogous form of financial assurance
      under Environmental Laws forfeited by a Governmental Authority.

     

    (o)  The
      Sunrise
      Entities have public liability insurance in force at their mining operations
      as
      required by §507(f) of the Federal Surface Mining Control and Reclamation Act,
      30 U.S.C. Section 1257, and analogous state law.

     

    (p)  The
      Sunrise
      Entities have in force insurance to guarantee the payment of benefits for which
      they may be liable under the Mine Safety and Health Acts.

     

    (q)  The
      Sunrise
      Entities have provided to Hallador true and complete copies of, or access to,
      all environmental, worker health and safety, and mine safety investigations,
      studies, audits, tests, reviews, reports and/or materials that have been
      prepared by or on behalf of any of the Sunrise Entities with respect to any
      of
      the Real Property or operations.

     

    
      
        
        

      

      
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    3.23  Related
      Party Transactions.
      Except as set
      forth in the Sunrise Disclosure Schedule, there are no Contracts of any kind,
      written or oral, entered into by any of the Sunrise Entities with, or for the
      benefit of, any officer, director or stockholder of any Sunrise Entity or any
      Affiliate of any of them, except in each case, for (a)employment
      agreements, fringe benefits and other compensation paid to directors, officers
      and employees consistent with previously established policies (including normal
      merit increases in such compensation in the ordinary course of business) and
      copies of which have been provided to Hallador and are listed on the Sunrise
      Disclosure Schedule, (b) reimbursements
      of ordinary and necessary expenses incurred in connection with their employment
      or service, and (c)
      amounts paid
      pursuant to Benefit Plans of which copies have been provided to Hallador. None
      of such Persons has any material direct or indirect ownership interest in any
      firm or corporation with which any of the Sunrise Entities has a business
      relationship, or with any firm or corporation that competes with any of the
      Sunrise Entities (other than ownership of securities in a publicly traded
      company representing less than one percent of the outstanding stock of such
      company). No officer or director of any of the Sunrise Entities or member of
      his
      or her immediate family or greater than 5% stockholder of any Sunrise Entity
      or
      any Affiliate of any of them or any employee of any of the Sunrise Entities
      is
      directly or indirectly interested in any Material Contract.

     

    
      
        
        

      

      
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    3.24  Insurance.

     

    (a)  The
      Sunrise
      Disclosure Schedule sets forth (i) an
      accurate
      and complete list of each insurance policy, binder of insurance and fidelity
      bond which covers the Sunrise Entities or their respective businesses,
      properties, assets, directors or employees (the “Policies”) and (ii) a
      list of all
      pending claims and the claims history for each Sunrise Entity during the current
      year and the preceding three years (including with respect to insurance obtained
      but not currently maintained). There are no pending claims under any of such
      Policies as to which coverage has been questioned, denied or disputed by the
      insurer or in respect of which the insurer has reserved its rights.

     

    (b)  The
      Sunrise
      Disclosure Schedule describes any self-insurance arrangement by or affecting
      any
      of the Sunrise Entities, including any reserves thereunder, and describes the
      loss experience for all claims that were self-insured in the current year and
      the preceding three years.

     

    (c)  All
      Policies are
      issued by an insurer that is financially sound and reputable, are in full force
      and effect and are enforceable in accordance with their terms and will continue
      in full force and effect with respect to the Sunrise Entities following the
      Closing and the consummation of the Acquisition. Such Policies provide adequate
      insurance coverage for the Sunrise Entities and their respective businesses,
      properties, assets and employees, and are sufficient for compliance with all
      Laws and Contracts to which any of the Sunrise Entities is a party or by which
      it is bound.

     

    (d)  All
      premiums due
      under the Policies have been paid in full or, with respect to premiums not
      yet
      due, accrued. None of the Sunrise Entities has received a notice of cancellation
      of any Policy or of any material changes that are required in the conduct of
      the
      business of any of the Sunrise Entities as a condition to the continuation
      of
      coverage under, or renewal of, any such Policy. To the Knowledge of Sunrise,
      there is no existing default or event which, with the giving of notice or lapse
      of time or both, would constitute a default under any Policy or entitle any
      insurer to terminate or cancel any Policy. Sunrise has no knowledge of any
      threatened termination of, or material premium increase with respect to, any
      Policy and none of such Policies provides for retroactive premium
      adjustments.

     

    
      
        
        

      

      
        
        

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    3.25  Books
      and
      Records.
      The books,
      records and accounts of the Sunrise Entities accurately and fairly reflect,
      in
      reasonable detail, the transactions and the assets and Liabilities of the
      Sunrise Entities. None of the Sunrise Entities has engaged in any transaction,
      maintained any bank account or used any of the funds of any of the Sunrise
      Entities other than transactions, bank accounts and funds which have been and
      are reflected in the normally maintained books and records of the business.
      The
      minute books (containing the records of the meetings, or written consents in
      lieu of such meetings, of the stockholders, the board of directors and any
      committees of the board of directors), the stock certificate books, and the
      stock record books of the Sunrise Entities are correct and complete, and have
      been maintained in accordance with sound business practices. There are no
      resolutions or other actions of the stockholders, the board of directors or
      any
      committee of the board of directors other than as disclosed in the records
      of
      the meetings and written consents contained in the minute books. At the Closing,
      all of those books and records will be in the possession of Sunrise. At the
      Closing, Sunrise will deliver, or cause to be delivered, to Hallador or its
      designee all of the minute books of the Sunrise Entities. 

     

    3.26  Brokers
      or
      Finders.
      Except as set
      forth in the Sunrise Disclosure Schedule, there is no investment banker, broker,
      finder, financial advisor or other intermediary which has been retained by
      or is
      authorized to act on behalf of the Sunrise Entities who is entitled to any
      fee
      or commission in connection with the transactions contemplated by this
      Agreement. No claim exists or will exist against the Sunrise Entities, based
      on
      any action by any of the Sunrise Entities, against Hallador for payment of
      any
“topping,” “break up” or “bust-up” fee or any similar compensation or payment
      arrangement as a result of the transactions contemplated hereby.

     

    
      
        
        

      

      
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    3.27  No
      Illegal
      Payments.
      None of the
      Sunrise Entities or any Affiliate, officer, agent or employee thereof, directly
      or indirectly, has, since inception, on behalf of or with respect to any of
      the
      Sunrise Entities, (a) made
      any
      unlawful domestic or foreign political contributions, (b)made
      any payment or
      provided services which were not legal to make or provide or which the Sunrise
      Entities or any Affiliate thereof or any such officer, employee or other Person
      should reasonably have known were not legal for the payee or the recipient
      of
      such services to receive, (c) received
      any
      payment or any services which were not legal for the payer or the provider
      of
      such services to make or provide, (d) had
      any
      material transactions or payments which are not recorded in its accounting
      books
      and records or (e) had
      any
      off-book bank or cash accounts or “slush funds.”

     

    3.28  Suppliers
      and Customers.
      The Sunrise
      Disclosure Schedule sets forth (a) the
      names of
      the 10 suppliers with the greatest dollar volume of sales to the Sunrise
      Entities in the year ended December 31, 2005 and the six-month period ended
      June
      30, 2006; (b) each
      supplier
      who constitutes a sole source of supply, or is otherwise material, to the
      Sunrise Entities; and (c) the
      names of
      the 10 customers with the greatest dollar volume of purchases from the Sunrise
      Entities in the year ended December 31, 2005 and the six-month period ended
      June 30, 2006. The relationship of the Sunrise Entities with each such
      supplier and customer are good commercial working relationships. Except as
      set
      forth on the Sunrise Disclosure Schedule, no such supplier or customer has
      canceled or otherwise terminated, or, to the Knowledge of Sunrise, threatened
      to
      cancel or otherwise terminate, its relationship with the Sunrise Entities.
      None
      of the Sunrise Entities has received notice that any such supplier or customer
      may cancel or otherwise materially and adversely modify its relationship with
      such Sunrise Entity or limit its services, supplies or materials to the such
      Sunrise entity, as a result of the consummation of the Acquisition or
      otherwise.

     

    3.29  Bank
      Accounts.
      The Sunrise
      Disclosure Schedule sets forth the name of each bank, safe deposit company
      or
      other financial institution in which any of the Sunrise Entities has an account,
      lock box or safe deposit box and the names of all persons authorized to draw
      thereon or have access thereto.

     

    3.30  Powers
      of
      Attorney.
      Except as set
      forth in the Sunrise Disclosure Schedule, there are no outstanding powers of
      attorney executed by or on behalf of any of the Sunrise Entities in favor of
      any
      Person. 

     

    
      
        
        

      

      
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    3.31  Completeness
      of Disclosure.
      No representation
      or warranty by Sunrise in this Agreement, and no statement made by Sunrise
      in
      the Sunrise Disclosure Schedule, the Exhibits attached hereto or any certificate
      furnished or to be furnished to Hallador pursuant hereto, or in connection
      with
      the negotiation, execution or performance of this Agreement, contains or will
      at
      the Closing contain any untrue statement of a material fact or omits or will
      omit to state any material fact necessary to make any statement herein or
      therein, in light of the circumstances under which they were made, not
      misleading.

     

    ARTICLE IV 

    REPRESENTATIONS
      AND WARRANTIES OF HALLADOR

     

    Hallador
      represents
      and warrants to Sunrise as of the date hereof and as of the Closing Date that
      the statements contained in this Article IV
      are true and
      correct.

     

    4.1  Organization
      and Good Standing.
      Hallador is a
      corporation duly organized, validly existing and in good standing under the
      Laws
      of the State of Colorado, has all requisite corporate power to own, lease and
      operate its properties and to carry on its business as now being conducted
      and
      as proposed to be conducted, and is duly qualified to do business and is in
      good
      standing as a foreign Person in each jurisdiction in which it owns or leases
      property or conducts any business so as to require such
      qualification.

     

    4.2  Authority
      and Enforceability.
      Hallador has the
      requisite power and authority to enter into this Agreement and to consummate
      the
      Acquisition. The execution and delivery of this Agreement and the consummation
      of the Acquisition have been duly authorized by all necessary corporate action
      on the part of Hallador. This Agreement has been duly executed and delivered
      by
      Hallador and, assuming due authorization, execution and delivery by Sunrise,
      constitutes the valid and binding obligation of Hallador, enforceable against
      it
      in accordance with its terms, except as such enforceability may be limited
      by
      (a) bankruptcy, insolvency, reorganization, moratorium or other similar
      Laws affecting or relating to creditors’ rights generally, and (b) the
      availability of injunctive relief and other equitable remedies. 

     

    4.3  No
      Conflicts; Authorizations.

     

    4.3.1  The
      execution and
      delivery of this Agreement by Hallador does not, and the performance by Hallador
      of its obligations hereunder and the consummation by Hallador of the Acquisition
      will not, (i) violate the provisions of any of the Charter Documents of
      Hallador, (ii) violate any Contract to which Hallador is a party,
      (iii) to the knowledge of Hallador, violate any Law of any Governmental
      Entity applicable to Hallador on the date hereof, or (iv) to the knowledge
      of Hallador, result in the creation of any Encumbrances upon any of the assets
      owned or used by Hallador, except in each such case where such violation or
      Encumbrances would not reasonably be expected to impair materially the ability
      of Hallador to perform its obligations under this Agreement or consummate the
      Acquisition. 

     

    4.3.2  No
      Authorization or
      Order of, registration, declaration or filing with, or notices to any
      Governmental Entity is required by Hallador in connection with the execution
      and
      delivery of this Agreement and the consummation of the Acquisition, except
      for
      (i) such filings as may be required under the HSR Act and the Other
      Antitrust Laws, or (ii) such Authorizations, Orders, registrations,
      declarations, filings and notices the failure to obtain or make which would
      not
      reasonably be expected to impair materially the ability of Hallador to perform
      its obligations under this Agreement or consummate the Acquisition.

     

    4.4  Purchase
      for Investment.
      The Sunrise
      Interests purchased by Hallador pursuant to this Agreement are being acquired
      for investment only and not with a view to any public distribution thereof.
      Hallador shall not offer to sell or otherwise dispose of, or sell or otherwise
      dispose of, the Sunrise Interests so acquired by it in violation of any of
      the
      registration requirements of the Securities Act or any state securities
      laws.

     

    
      
        
        

      

      
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    4.5  Availability
      of Funds.
      Hallador has cash
      available or has existing borrowing facilities which together are sufficient
      to
      enable it to consummate the Acquisition.

     

    4.6  Brokers
      or
      Finders.
      No broker, finder
      or investment banker is entitled to any brokerage, finder’s or other fee or
      commission in connection with the transactions contemplated by this Agreement
      based upon arrangements made by or on behalf of Hallador or any Affiliate of
      Hallador.

     

    ARTICLE V  

    CERTAIN
      COVENANTS

     

    5.1  Access
      to
      Information.
(a) From
      the
      Agreement Date through the Closing Date, but subject to any rights of third
      Persons, upon reasonable notice, the Sunrise Entities shall (i) afford
      the
      officers, employees and authorized agents and representatives of Hallador
      reasonable access during normal business hours to the offices, properties and
      Books and Records of the Sunrise Entities and (ii) furnish
      to
      the officers, employees and authorized agents and representatives of Hallador
      such additional financial and operating data and other information regarding
      the
      assets, properties and Liabilities of the Sunrise Entities and the Sunrise
      Business (or legible copies thereof) as Hallador may from time to time
      reasonably request; provided, however, that such investigation shall not
      unreasonably interfere with any of the businesses or operations of the Sunrise
      Entities. Without limiting the generality of the foregoing, the Sunrise Entities
      shall cooperate fully with Hallador’s investigation of such assets, properties
      and Liabilities and the Sunrise Business and provide copies of such documents
      in
      its possession as Hallador may reasonably request to confirm the title to any
      and all properties or assets owned or leased by the Sunrise Entities. Sunrise
      shall not be responsible for any bodily injury suffered by any of the officers,
      employees or authorized agents and representatives of Hallador conducting any
      investigation of the Sunrise Entities’ assets and properties. No investigation
      by Hallador shall affect the representations and warranties of
      Sunrise.

     

    5.2  Conduct
      of
      Businesses Pending Closing.
      From the
      Agreement Date through the Closing Date, except as set forth in Sunrise
      Disclosure Schedule Section 5.2,
      or as required by
      this Agreement or otherwise consented to or approved by the parties in writing,
      which consent or approval shall not be unreasonably withheld:

     

    (a)  The
      Sunrise
      Entities shall operate the Sunrise Business only in its usual, regular and
      ordinary manner and substantially in the same manner as heretofore conducted.
      The Sunrise Entities shall use commercially reasonable efforts to (i) preserve
      the
      Sunrise Business; (ii) maintain
      the
      services of the present officers, employees, agents and independent contractors
      of the Sunrise Entities; (iii) maintain
      the
      assets of the Sunrise Business in their current state of repair, order and
      condition, usual and ordinary wear and tear excepted and subject to requirements
      in the ordinary course of business; and (iv) maintain
      in
      effect insurance upon the assets of the Sunrise Entities and with respect to
      the
      conduct of the Sunrise Business in such amounts and of such kinds comparable
      in
      all material respects to that in effect on the Agreement Date.

     

    (b)  The
      Sunrise
      Entities shall not:

     

    (i)  amend
      the Charter
      Documents of any of the Sunrise Entities, except for the purpose of organizing
      entities for the purpose of acquiring land in the ordinary course of
      business;

     

    (ii)  incur
      or assume or
      become subject to any additional Indebtedness, except in the ordinary course
      of
      business and consistent with past practices;

     

    (iii)  declare
      or pay any
      dividend or make any other distribution to any of the Sunrise Members, other
      than distributions for payment of income Taxes due to the taxable income of
      the
      Sunrise Entities;

     

    (iv)  redeem
      or otherwise
      acquire any shares or interest of capital stock or other equity of any Sunrise
      Entity or issue any capital stock or other equity of any Sunrise Entity or
      any
      option, warrant or right relating thereto or any securities exchangeable for
      or
      convertible into any such shares or equity;

     

    (v)  permit
      or allow any
      Sunrise Entities’ assets or properties to be subject to any additional
      Encumbrance (other than Permitted Liens) or sell, transfer, lease or otherwise
      dispose of any such assets or properties, in each case except in the ordinary
      course of business and consistent with past practices;

     

    (vi)  grant
      any increase
      in salaries or commissions payable or to become payable to any employee of
      the
      Sunrise Entities, or to any sales agent or representative of the Sunrise
      Entities, except normal periodic increases in salaries and commissions in
      accordance with the Sunrise Entities’ existing compensation
      practices;

     

    (vii)  make
      any capital
      expenditure or commitment therefor for additions to property, equipment or
      facilities in excess of $100,000 in the aggregate per month, other than land
      acquisitions and expenditures associated with home building in the ordinary
      course of business and consistent with past practices, except as otherwise
      used
      in connection with the development of the Carlisle mine pursuant to the budget
      attached hereto as Exhibit A;

     

    (viii)  license,
      sell,
      transfer, pledge, modify, disclose, dispose of or permit to lapse any right
      under or respecting, or enter into any settlement regarding the breach or
      infringement of, any material Intellectual Property;

     

    (ix)  terminate,
      renew,
      enter into or amend any Material Contract or contract or agreement which would
      qualify as a Material Contract;

     

    (x)  establish
      or adopt
      any severance pay plan or arrangement with respect to, or for the benefit of,
      employees;

     

    (xi)  make
      any change in
      any method of accounting or accounting practice or policy, other than those
      required by GAAP;

     

    (xii)  engage
      in any
      transactions with a Sunrise Entity, other than transactions in the ordinary
      course and consistent with past practices; or

     

    (xiii)  agree,
      whether in
      writing or otherwise, to do any of the foregoing.

     

    
      
        32

      

      
        
        

        
          

        

      

      
        
        

      

    

    5.3  No
      Solicitation of Transactions.
      From the
      Agreement Date through the Closing Date, none of the Sunrise Entities nor any
      of
      their representatives, Affiliates, directors, officers, employees, members,
      managers, subsidiaries or agents will solicit, consider, encourage or accept
      any
      inquiries, proposals or offers to acquire, or offer or sell, or agree to sell,
      any of the Outstanding Interests, the Sunrise Interests or the securities,
      assets or properties of any Sunrise Entities (other than sales of properties
      in
      the ordinary course of business consistent with past practices) or assist any
      third Person in preparing or soliciting such an inquiry, proposal or offer.
      The
      Sunrise Entities shall not have, and shall cause such representatives,
      Affiliates, directors, officers, employees, members, managers, subsidiaries
      and
      agents not to have, any discussions, conversations, negotiations or other
      communication with, or provide any information or data to, any Person(s)
      expressing an interest in making or effecting any such inquiry, proposal or
      offer.

     

    5.4  Authorizations.

     

    (a)  Each
      of Hallador
      and Sunrise as promptly as practicable after the Agreement Date, shall
(i) deliver,
      or
      cause to be delivered, all notices and make, or cause to be made, all such
      declarations, designations, registrations, filings and submissions under all
      statutes, laws, regulations and Governmental Orders applicable to it as may
      be
      required for it to consummate the transactions contemplated hereby and by the
      Ancillary Agreements in accordance with the terms of this Agreement and the
      Ancillary Agreements; (ii) use
      commercially reasonable efforts to obtain, or cause to be obtained, all
      authorizations, approvals, orders, consents and waivers from all Persons
      necessary to consummate the foregoing; and (iii) use
      commercially reasonable efforts to take, or cause to be taken, all other actions
      necessary, proper or advisable in order for it to fulfill its respective
      obligations hereunder and to carry out the intentions of the parties expressed
      herein.

     

    (b)  Each
      party shall
      use its commercially reasonable efforts to satisfy the conditions to Closing
      applicable to it in Article VI
      and Article VII
      as soon as
      commercially practicable.

     

    5.5  Public
      Announcements.
      Neither Sunrise
      nor Hallador shall make any public announcement with respect to this Agreement
      or the transactions contemplated hereby or thereby without the prior written
      consent of the other party hereto. The foregoing notwithstanding, any such
      public announcement may be made if required by applicable statute, law,
      regulation, Governmental Order, the NASD or NASDAQ rule or listing agreement,
      provided that the party required to make such public announcement, to the extent
      reasonably possible, shall confer with the other party concerning the timing
      and
      content of such public announcement before the same is made.

     

    
      
        
        

      

      
        34

        
          

        

      

      
        
        

      

    

    5.6  Non-Disclosure
      of Proprietary Data.
      Each of the
      parties agrees that such party will not, at any time, make use of, divulge
      or
      otherwise disclose, directly or indirectly, any trade secret or other
      proprietary data or confidential information concerning the business or policies
      of any Sunrise Entity or of Hallador obtained in connection with the
      negotiation, execution, or performance of this Agreement. The parties’
obligations under this Section 5.6
      with respect to
      any trade secret or other proprietary data or confidential information of
      Hallador or the Sunrise Entities is independent of any obligations under the
      Confidentiality Agreement and shall survive the termination of this Agreement
      if
      this Agreement is terminated prior to Closing.

     

    5.7  Disclosure
      Schedule Update.
      Sunrise will, from
      time to time prior to the Closing, promptly supplement or amend the Sunrise
      Disclosure Schedules with respect to any matter arising after the date of this
      Agreement, which, if existing as of the date of this Agreement, would have
      been
      required to be set forth or described in the Sunrise Disclosure Schedules in
      order to make any representation or warranty set forth in this Agreement true
      and correct as of such date. Any disclosure pursuant to this
      Section 5.7
      will be deemed to
      amend and supplement the Sunrise Disclosure Schedules and to have qualified
      the
      representations and warranties contained in this Agreement. If the items
      disclosed on such supplemented or amended Sunrise Disclosure Schedules have
      had
      or could reasonably be expected to have a Material Adverse Effect and Sunrise
      shall not have cured such existing or potential Material Adverse Effect within
      10 days of such amended disclosure, then Hallador may, in accordance with
      Section 8.1,
      terminate this
      Agreement, after the expiration of the 10 day cure period, by written notice
      thereof to Sunrise; provided, however, that if Hallador does not exercise such
      right to terminate this Agreement within 5 business days thereafter, then
(i) Hallador
      will
      be deemed to have waived any right to terminate this Agreement based upon such
      amendment and supplement, (ii) Hallador
      will
      be deemed to have accepted such amendment and supplement, and (iii) such
      amendment or supplement will be deemed to amend and supplement the Sunrise
      Disclosure Schedules, as applicable. 

     

    ARTICLE VI  

    CONDITIONS
      TO THE OBLIGATIONS OF HALLADOR

     

    The
      obligations of
      Hallador to effect the transactions contemplated herein shall be subject to
      the
      fulfillment, satisfaction or waiver, on or before the Closing Date, of each
      of
      the following conditions:

     

    6.1  Accuracy
      of
      Representations and Warranties.
      The
      representations and warranties of Sunrise contained in Article III
      and taken as a
      whole shall be true and correct in all material respects at and as of the
      Closing Date with the same effect as though made at and as of the Closing Date,
      except that representations and warranties made as of, or in respect of, only
      a
      specified date or period shall be true and correct in all material respects
      in
      respect of, or as of, such date or period.

     

    
      
        
        

      

      
        35

        
          

        

      

      
        
        

      

    

    6.2  Performance.
      The Sunrise
      Members and the Sunrise Entities shall have performed and complied in all
      material respects with all agreements and obligations required by this Agreement
      to be performed or complied with by them on or prior to the Closing
      Date.

     

    6.3  Absence
      of
      Governmental Orders.
      No temporary or
      permanent Governmental Order shall be in effect which prohibits or makes
      unlawful consummation of the transactions contemplated hereby.

     

    6.4  Certificates.
      Sunrise shall
      have furnished Hallador with such certificates certifying as to compliance
      with
      the conditions set forth in this Article VI
      as may be
      reasonably requested by Hallador. 

     

    6.5  Sunrise
      Members.
      Each of the
      Sunrise Members shall have duly authorized and executed the Operating Agreement
      and the documents related thereto, including a contribution agreement between
      each such Sunrise Member and Sunrise in the form attached hereto as Exhibit
      C,
      and shall have delivered the same to Hallador. The Sunrise Members shall have
      duly authorized the issuance of the Sunrise Interests and the admittance of
      Hallador as a member of Sunrise. Each of the Sunrise Members that is a trust
      shall have executed and delivered to Hallador a certificate certifying as to
      the
      authority of the trustees to execute the Operating Agreement and that such
      trust
      is duly organized and validly existing under the Laws of the jurisdiction of
      its
      formation.

     

    6.6  Sunrise
      Required Consents.
      The Sunrise
      Entities shall have obtained the Sunrise Required Consents.

     

    6.7  Articles
      of
      Organization.
      The Sunrise
      Members shall have approved an amendment to the Articles of Organization of
      Sunrise that provides that Sunrise may be managed by one or more managers,
      and
      such amendment shall have been filed with and accepted by the Secretary of
      State
      of the State of Indiana.

     

    6.8  Sunrise
      Coal, Inc.
      Any assets of
      Sunrise held in the name of Sunrise Coal, Inc. shall be transferred to Sunrise
      in a manner reasonably acceptable to Hallador and Sunrise Coal, Inc. shall
      be
      dissolved and withdrawn in accordance with the laws of the State of Indiana
      and
      all other relevant jurisdictions.

     

    ARTICLE VII  

    CONDITIONS
      TO THE OBLIGATIONS OF SUNRISE

     

    The
      obligations of
      Sunrise to effect the transactions contemplated herein shall be subject to
      the
      fulfillment, satisfaction or waiver, on or before the Closing Date, of each
      of
      the following conditions:

     

    
      
        
        

      

      
        7.1

        
          

        

      

      
        
        

      

    

    7.1  Accuracy
      of
      Representations and Warranties.
      The
      representations and warranties of Hallador contained in Article IV
      and taken as a
      whole shall be true and correct in all material respects at and as of the
      Closing Date with the same effect as though made at and as of the Closing Date,
      except that representations and warranties made as of, or in respect of, only
      a
      specified date or period shall be true and correct in all material respects
      in
      respect of, or as of, such date, or period.

     

    7.2  Performance.
      Hallador shall
      have performed and complied in all material respects with all agreements and
      obligations required by this Agreement to be performed or complied with by
      it on
      or prior to the Closing Date.

     

    7.3  Absence
      of
      Governmental Orders.
      No temporary or
      permanent Governmental Order shall be in effect which prohibits or makes
      unlawful consummation of the transactions contemplated hereby.

     

    7.4  Officers’
      Certificates.
      Hallador shall
      have furnished Sunrise with such certificates of its officers certifying as
      to
      compliance with the conditions set forth in this Article VII
      as may be
      reasonably requested by Sunrise.

     

    7.5  Operating
      Agreement.
      Hallador shall
      have duly authorized and executed the Operating Agreement and the documents
      related thereto and shall have delivered the same to Sunrise.

     

    ARTICLE VIII 

    TERMINATION

     

    8.1  Termination.
      This Agreement
      may be terminated at any time prior to the Closing:

     

    (a)  by
      the mutual
      written consent of Hallador and Sunrise; or

     

    (b)  by
      either Hallador,
      on the one hand, or Sunrise, on the other hand, if (i) a
      United
      States federal or state court of competent jurisdiction or United States federal
      or state governmental, regulatory or administrative agency or commission shall
      have issued an order, decree or ruling or taken any other action permanently
      restraining, enjoining or otherwise prohibiting the transactions contemplated
      by
      this Agreement and such order, decree, ruling or other action shall have become
      final and non-appealable; provided, however, that the party seeking to terminate
      this Agreement pursuant to this clause (i) shall have used all reasonable
      efforts to remove such injunction, order or decree; or (ii) if
      the
      Closing shall not have occurred by August 31, 2006; provided, however, that
      the
      right to terminate this Agreement pursuant to this subsection shall not be
      available to any party or parties whose failure to fulfill any obligation under
      this Agreement shall have been the cause of, or shall have resulted in, the
      failure of the Closing to occur prior to such date; or

     

    (c)  by
      Hallador, as a
      result of the breach in any material respect of any of the representations
      and
      warranties of the Sunrise contained in Article III
      or the failure by
      Sunrise to perform and comply in any material respect with any of the agreements
      and obligations required by this Agreement to be performed or complied with
      by
      Sunrise, provided that such breach or failure is not cured within 30 days of
      Sunrise’s receipt of a written notice from Hallador that such a breach or
      failure has occurred; 

     

    (d)  by
      Sunrise, as a
      result of the breach in any material respect of any of the representations
      and
      warranties of Hallador contained in Article IV
      or the failure by
      Hallador to perform and comply in any material respect with any of the
      agreements and obligations required by this Agreement to be performed or
      complied with by Hallador, provided that such breach or failure is not cured
      within 30 days of Hallador’s receipt of a written notice from Sunrise that such
      a breach or failure has occurred; or

     

    (e)  in
      accordance with
      Section 5.7,
      by Hallador
      immediately upon written notice to Sunrise within the 5 business day period
      after the expiration of the 10 day cure period as provided therein.

     

    
      
        
        

      

      
        37

        
          

        

      

      
        
        

      

    

    8.2  Written
      Notice.
      In order to
      terminate this Agreement pursuant to Section 8.1,
      the party so
      acting shall give written notice of such termination to the other parties,
      specifying the grounds thereof.

     

    8.3  Effect
      of
      Termination.
      In the event of
      the termination of this Agreement in accordance with Section 8.1,
      this Agreement
      (other than Sections 9.1
      and 9.12,
      which shall
      survive the termination hereof) shall become void and have no effect, with
      no
      liability on the part of any party or its Affiliates, directors, officers,
      employees, shareholders or agents in respect thereof; provided, however, that
      nothing in this Section 8.3
      shall deprive
      Sunrise, on the one hand, and Hallador, on the other, from bringing any Action
      pursuant to Section 9.12
      for breach of the
      Agreement by the other.

     

    8.4  Waiver.
      At any time prior
      to the Closing, Hallador, on the one hand, and Sunrise, on the other hand,
      may
(a) extend
      the
      time for the performance of any of the obligations or other acts of the other
      party hereto, (b) waive
      any
      inaccuracies in the representations and warranties contained herein or in any
      document delivered pursuant hereto or (c) waive
      compliance with any of the agreements or conditions contained
      herein.

     

    8.5  Nonsurvival
      of Representations and Warranties.
      The
      representations and warranties of the parties contained in this Agreement shall
      expire at the earlier of the termination of this Agreement and the Closing
      Date,
      and thereafter Sunrise, Hallador, and all of their respective directors,
      managers, officers, employees and agents shall have no further liability with
      respect thereto.

     

    ARTICLE IX  

    GENERAL
      PROVISIONS

     

    9.1  Expenses,
      Taxes, Etc. Except
      as otherwise
      provided herein or in the Operating Agreement, each party shall pay all fees
      and
      expenses incurred by it in connection with this Agreement, the Operating
      Agreement and the transactions contemplated hereby and thereby; provided,
      however, that all sales, use, documentary, stamp and excise Taxes and all
      transfer, filing, recordation and similar Taxes and fees (including all real
      estate transfer Taxes and conveyance and recording fees, if any) incurred by
      any
      party or the Sunrise Entities in connection with this Agreement and the
      transactions contemplated hereby and thereby will be borne equally by Hallador,
      on the one hand, and Sunrise, on the other hand.

     

    9.2  Notices.
      All notices and
      other communications given or made pursuant hereto shall be in writing and
      shall
      be deemed to have been duly given or made as of the date delivered or mailed
      if
      delivered personally or by recognized overnight delivery service or mailed
      by
      registered or certified mail (postage prepaid, return receipt requested), or
      sent by facsimile transmission (confirmation received) to the parties at the
      following addresses and facsimile transmission numbers (or at such other address
      or number for a party as shall be specified by like notice), except that notices
      after the giving of which there is a designated period within which to perform
      an act and notices of changes of address or number shall be effective only
      upon
      receipt:

     

    (a)  if
      to
      Sunrise:

     

    Sunrise
      Coal,
      LLC

                                       
      6641 State Road 46

                                       
      Terre Haute, Indiana 47802

                                       
      Attn: Brent Bilsland

     

    Facsimile
      No.: 

                                       
      with a copy to:

     

    Kreig
      DeVault
      LLP

                                       
      One Indiana Square, Suite 2800

                                       
      Indianapolis, IN 46204-2017

                                        Attn:
      Michael Messaglia, Esq.

     

    Facsimile
      No.:
      (317) 636-1507

     

    (b)  if
      to
      Hallador:

     

    Hallador
      Petroleum
      Company

                                       
      1660 Lincoln Street, Suite 2700

                                       
      Denver, CO 80264

                                       
      Attn: Victor Stabio

     

    Facsimile
      No.:
      (303) 832-3013

                                       
      with a copy to:

     

    Morgan,
      Lewis &
Bockius LLP

                                       
      300 South Grand Avenue, Suite 2200

                                       
      Los Angeles, CA 90071

                                       
      Attn: Ingrid A. Myers, Esq.

     

    Facsimile
      No.:
      (213) 612-2501

     

    
      
        
        

      

      
        38

        
          

        

      

      
        
        

      

    

    9.3  Interpretation.
      When a reference
      is made in this Agreement to Sections, subsections, Schedules or Exhibits,
      such
      reference shall be to a Section, subsection, Schedule or Exhibit to this
      Agreement unless otherwise indicated. The words “include,” “includes” and
“including” when used herein shall be deemed in each case to be followed by the
      words “without limitation.” The table of contents and the headings contained in
      this Agreement are for reference purposes only and shall not affect in any
      way
      the meaning or interpretation of this Agreement. The words “herein” and “hereby”
and similar references mean, except where a specific Section or Article
      reference is expressly indicated, the entire Agreement rather than any specific
      Section or Article. Except as otherwise expressly provided herein, all
      monetary amounts referenced in this Agreement shall mean U.S. dollars. All
      capitalized terms defined herein are equally applicable to both the singular
      and
      plural forms of such terms.

     

    9.4  Severability.
      If any term or
      other provision of this Agreement is invalid, illegal or incapable of being
      enforced by any rule of law or public policy, all other conditions and
      provisions of this Agreement shall nevertheless remain in full force and effect
      so long as the economic or legal substance of the transactions contemplated
      hereby is not affected in any manner adverse to any party. Upon such
      determination that any term or other provision is invalid, illegal or incapable
      of being enforced, the parties hereto shall negotiate in good faith to modify
      this Agreement so as to effect the original intent of the parties as closely
      as
      possible in an acceptable manner to the end that the transactions contemplated
      hereby are fulfilled to the greatest extent possible.

      
      

    
      
        
        

      

      
        40

        
          

        

      

      
        
        

      

    

    9.5  Assignment.
      This Agreement
      may not be assigned by operation of law or otherwise.

     

    9.6  No
      Third-Party Beneficiaries.
      This Agreement is
      for the sole benefit of the parties hereto and their permitted assigns and
      nothing herein expressed or implied shall give or be construed to give to any
      Person, other than the parties hereto and such assigns, any legal or equitable
      rights or remedies hereunder.

     

    9.7  Amendment.
      This Agreement
      may not be amended or modified except by an instrument in writing signed by
      Sunrise and Hallador. 

     

    9.8  No
      Other
      Remedies.
      Except as
      provided in Sections 8.3
      and 9.12,
      any and all
      remedies herein expressly conferred upon a party hereby are deemed exclusive
      of
      any other remedy conferred hereby or by law or equity on such party.
      Notwithstanding any provision hereof, neither party shall be liable hereunder
      for any incidental or consequential damages, damages for loss of profits or
      opportunities or exemplary or punitive damages, regardless of the circumstances
      from which such damages arose.

     

    9.9  Further
      Assurances.
      Each party agrees
      to cooperate fully with the other parties and to execute such further
      instruments, documents and agreements and to give such further written
      assurances as may be reasonably requested by any other party to evidence and
      reflect the transactions described herein and contemplated hereby and to carry
      into effect the intents and purposes of this Agreement.

     

    9.10  Mutual
      Drafting.
      This Agreement is
      the joint product of Hallador and Sunrise and each provision hereof has been
      subject to the mutual consultation, negotiation and agreement of Hallador and
      Sunrise and shall not be construed for or against any party hereto.

     

    9.11  Governing
      Law.
      This Agreement
      shall be governed by, and construed in accordance with, the internal laws of
      the
      State of Colorado applicable to agreements made and to be performed entirely
      within such State (without giving effect to such State’s choice of law
      principles).

     

    9.12  Dispute
      Resolution.
      Any dispute,
      controversy or claim between the parties relating to, arising out of or in
      connection with this Agreement (or any subsequent agreements or amendments
      thereto), including as to its existence, enforceability, validity,
      interpretation, performance or breach or as to damages, including claims in
      tort, whether arising before or after the termination of this Agreement (any
      such dispute, controversy or claim being herein referred to as a “Dispute”),
      shall be settled without litigation and only by use of the following alternative
      dispute resolution procedure:

     

    (a)  At
      the written
      request of Sunrise, on the one hand, or Hallador, on the other hand, each party
      shall appoint a knowledgeable, responsible representative to meet and negotiate
      in good faith to resolve any Dispute. The discussions shall be left to the
      discretion of the representatives. Upon agreement, the representatives may
      utilize other alternative dispute resolution procedures such as mediation to
      assist in the negotiations. Discussions and correspondence among the parties’
representatives for purposes of these negotiations shall be treated as
      confidential information developed for the purposes of settlement, exempt from
      discovery and production, and without the concurrence of both parties shall
      not
      be admissible in the arbitration described below or in any lawsuit. Documents
      identified in or provided with such communications, which are not prepared
      for
      purposes of the negotiations, are not so exempted and may, if otherwise
      admissible, be admitted in the arbitration.

     

    (b)  If
      negotiations
      between the representatives of the parties do not resolve the Dispute within
      60
      days of the initial written request, the Dispute shall be submitted to binding
      arbitration by a panel of three arbitrators (each of which shall have at least
      ten years of experience in the industry in which the Sunrise Business operates
      or some material aspect thereof relating to the matter subject to arbitration)
      pursuant to the Commercial Arbitration Rules, as then amended and in effect,
      of
      the American Arbitration Association (the “Rules”). Any party may demand such
      arbitration in accordance with the procedures set out in the Rules. Sunrise
      and
      Hallador shall each select one arbitrator, and the two arbitrators so selected
      shall select the third arbitrator. The arbitration shall take place in Denver,
      Colorado. The arbitration hearing shall be commenced within 60 days of such
      party’s demand for arbitration. The arbitrators shall control the scheduling (so
      as to process the matter expeditiously) and any discovery. The parties may
      submit written briefs. At the arbitration hearing, each party may make written
      and oral presentations to the arbitrators, present testimony and written
      evidence and examine witnesses. No party shall be eligible to receive, and
      the
      arbitrators shall not have the authority to award, incidental or consequential
      damages, damages for loss of profits or opportunities or exemplary or punitive
      damages. The arbitrators shall rule on the Dispute by issuing a written opinion
      within 30 days after the close of hearings. The arbitrators’ decision shall be
      binding and final. Judgment upon the award rendered by the arbitrators may
      be
      entered in any court having jurisdiction.

     

    (c)  Each
      party will
      bear its own costs and expenses in submitting and presenting its position with
      respect to any Dispute to the arbitrators. Hallador, on the one hand, and
      Sunrise, on the other hand, shall pay one-half of the fees and expenses of
      the
      arbitrators and the American Arbitration Association. Notwithstanding anything
      to the contrary in the foregoing, the prevailing party in the Dispute shall
      be
      entitled to recover its costs and reasonable attorneys’ fees.

     

    
      
        
        

      

      
        40

        
          

        

      

      
        
        

      

    

    9.13  Counterparts.
      This Agreement
      may be executed in one or more counterparts, and by the different parties hereto
      in separate counterparts, each of which when executed shall be deemed to be
      an
      original but all of which taken together shall constitute one and the same
      agreement.

     

    
      
        
        

      

      
        41

        
          

        

      

      
        
        

      

    

    9.14  Entire
      Agreement.
      This Agreement,
      together with all Schedules and Exhibits hereto, and the documents and
      instruments and other agreements among the parties delivered pursuant hereto,
      including the Operating Agreement, constitute the entire agreement and supersede
      all prior agreements and undertakings, both written and oral, other than the
      Confidentiality Agreement, among Sunrise, the Sunrise Members and Hallador
      with
      respect to the subject matter hereof.

     

    

    

     

    
      
        
          1-LA/887883.7 

        

        
        

      

      
        42

        
          

        

      

      
        
        

        
          

        

      

    

    IN
      WITNESS WHEREOF, Hallador and Sunrise have caused this Agreement to be executed
      as of the date first written above by their respective officers thereunto duly
      authorized.

     

    HALLADOR
      PETROLEUM
      COMPANY,

    a
      Colorado corporation

    

    

    

    By:
      /S/VICTOR P.
      STABIO

         

                                                                          
      Name:  Victor P. Stabio

     

    Title:   
      President and CEO

     

    SUNRISE
      COAL, LLC,

    an
      Indiana limited liability company

    

    

    

    By: /S/BRENT BILSLAND     

     

    Name: 
Brent
      Bilsland

     

    Title:

     

    

    
      
        
          {Signature
            page
            to Membership Interest Purchase Agreement}

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
          

        

      

    

    SCHEDULE
      1.1

    

    

    SUNRISE
      KNOWLEDGE
      PERSONS:

    

    Brent
      K.
      Bilsland

    Ronald
      Laswell

    

    

    HALLADOR
      KNOWLEDGE
      PERSONS:

    

    Vic
      StabioExhibit 4.1

    Exhibit
      4.1

     

    EXECUTION
      COPY

    

     

      
        

      

    

     

     

    WEINGARTEN
      REALTY INVESTORS,

     

    and

     

    JPMORGAN
      CHASE BANK, NATIONAL ASSOCIATION

     

    (FORMERLY,
      TEXAS COMMERCE BANK NATIONAL ASSOCIATION),

     

    Trustee

     

    
      
        

      

     

    FIRST
      SUPPLEMENTAL INDENTURE

     

    Dated
      as
      of August 2, 2006

     

    
      
  

    3.95%
      Convertible Senior Notes due 2026

     

     

    
      
        

      

    

    

    
      
        
          

          

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

     

    EXECUTION
      COPY

    FIRST
      SUPPLEMENTAL INDENTURE 

     

    THIS
      FIRST SUPPLEMENTAL INDENTURE (this “First
      Supplemental Indenture”)
      is
      entered into as of August 2, 2006 between WEINGARTEN REALTY INVESTORS, a
      Texas real estate investment trust (the “Company”),
      having its principal place of business at 2600 Citadel Plaza Drive, Suite 300,
      Houston, Texas 77008, and JPMorgan Chase Bank, National Association (formerly
      Texas Commerce Bank National Association), a national banking association duly
      organized and existing under the laws of the United States, as Trustee hereunder
      (the “Trustee”),
      having its Corporate Trust Office at 600 Travis, Suite 1150, Houston, Texas
      77002.

     

    WHEREAS,
      the Company and the Trustee entered into that certain Indenture dated as of
      May 1, 1995 (the “Original
      Indenture”),
      relating to the Company’s senior debt securities;

     

    WHEREAS,
      pursuant to Section 901 of the Indenture, the Company and the Trustee may
      enter into supplemental indentures to establish the terms and provisions of
      a
      series of Securities issued pursuant to the Indenture;

     

    WHEREAS,
      pursuant to Section 301 of the Indenture, the Company and the Trustee
      desire to establish the terms of a series of Securities entitled the “3.95%
      Convertible Senior Notes due 2026” (the “Notes”);
      and

     

    WHEREAS,
      the Company and the Trustee have duly authorized the execution and delivery
      of
      this instrument to establish the terms of the Notes set forth herein and have
      done all things necessary to make this instrument (together with the Original
      Indenture, the “Indenture”)
      a
      valid agreement of the parties hereto, in accordance with its
      terms;

     

    NOW,
      THEREFORE, in consideration of the premises and the covenants and agreements
      contained herein, and for other good and valuable consideration the receipt
      of
      which is hereby acknowledged, and for the equal and proportionate benefit of
      the
      Holders of the Securities, the Company and the Trustee agree as
      follows:

     

    ARTICLE
      ONE 

    DEFINITIONS
      

     

    Section
      1.01.  Definitions.
      Capitalized terms used in this instrument and not otherwise defined herein
      shall
      have the meanings assigned to such terms in the Original Indenture, as
      supplemented by the First Supplemental Indenture, or in the form of Note
      attached as Exhibit A hereto.

     

    “Additional
      Notes”
has
      the
      meaning provided in Section 2.02 hereof.

     

    “Additional
      Interest”
has
      the
      meaning specified for Liquidated Damages in the Registration Rights
      Agreement.

     

    “Additional
      Interest Notice”
has
      the
      meaning specified in Section 2.27.

     

    “Additional
      Shares”
has
      the
      meaning specified in Section 2.10.

     

     

    
      
        
        

      

      
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    “Applicable
      Conversion Period”
means,
      with respect to a conversion of Notes, the 10 consecutive Trading Day period
      commencing on the third Trading Day following the date the Notes are tendered
      for conversion.

     

    “Average
      Price”
means,
      with respect to a conversion of Notes, an amount equal to the average of the
      Closing Sale Prices of Common Shares for each Trading Day in the Applicable
      Conversion Period.

     

    “Business
      Day”
means,
      with respect to any Note, any day, other than a Saturday, Sunday or any other
      day on which banking institutions in The City of New York are authorized or
      obligated by law or executive order to close.

     

    “Change
      in Control”
means
      the occurrence at any time any of the following events: (1) consummation of
      any transaction or event (whether by means of a share exchange or tender offer
      applicable to Common Shares, a liquidation, consolidation, recapitalization,
      reclassification, combination or merger of the Company or a sale, lease or
      other
      transfer of all or substantially all of the consolidated assets of the Company)
      or a series of related transactions or events pursuant to which all of the
      outstanding Common Shares are exchanged for, converted into or constitute solely
      the right to receive, cash, securities or other property; (2) any “person” or
“group” (as such terms are used for purposes of Sections 13(d) and 14(d) of the
      Exchange Act, whether or not applicable), other than the Company or any
      majority-owned subsidiary of the Company or any employee benefit plan of the
      Company or such subsidiary, is or becomes the “beneficial owner” (as defined in
      Rule 13d-3 under the Exchange Act), directly or indirectly, of more than 50%
      of
      the total voting power in the aggregate of all classes of shares of beneficial
      interest of the Company then outstanding entitled to vote generally in elections
      of the Company’s trust managers; or (3) during any period of 12 consecutive
      months after the date of original issuance of the Notes, persons who at the
      beginning of such 12-month period constituted the Board of Trust Managers of
      the
      Company, together with any new persons whose election was approved by a vote
      of
      a majority of the persons then still comprising the Board of Trust Managers
      of
      the Company who were either members of the Board of Trust Managers of the
      Company at the beginning of such period or whose election, designation or
      nomination for election was previously so approved, cease for any reason to
      constitute a majority of the Board of Trust Managers of the Company.
      Notwithstanding the foregoing, even if any of the events specified in the
      preceding clauses (1) through (3) have occurred, except as specified in clause
      (x), a Change in Control will not be deemed to have occurred if either: (x)
      the
      Closing Sale Price per Common Share for any five Trading Days within
      (i) the period of 10 consecutive Trading Days ending immediately after the
      later of the Change in Control or the public announcement of the Change in
      Control, in the case of a Change in Control relating to an acquisition of
      capital shares, or (ii) the period of 10 consecutive Trading Days ending
      immediately after the Change in Control, in the case of a Change in Control
      relating to a merger, consolidation or asset sale, equals or exceeds 105% of
      the
      Conversion Price applicable to the Notes in effect on each of those Trading
      Days; provided,
      however,
      that
      the exception to the definition of “Change in Control” specified in this clause
      (x) shall not apply in the context of a Change in Control for purposes of
      Section 2.10 or Section 2.11(d); or (y) at least 90% of the consideration
      (excluding cash payments for fractional shares and cash payments made pursuant
      to dissenters’ appraisal rights) in a merger, consolidation or other transaction
      otherwise constituting a Change in Control consists of common shares (or
      depositary receipts or other certificates representing common 

     

     

    
      
        
        

      

      
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    equity
      interests) traded on a U.S. national securities exchange or quoted on the Nasdaq
      National Market or another established automated over-the-counter trading market
      in the United States (or will be so traded or quoted immediately following
      such
      merger, consolidation or other transaction) and as a result of the merger,
      consolidation or other transaction the Notes become exchangeable into such
      common shares (or depositary receipts or other certificates representing common
      equity interests). For the purposes of this definition, “person” includes any
      syndicate or group that would be deemed to be a “person” under Section 13(d)(3)
      of the Exchange Act.

     

    “Change
      in Control Purchase Date”
has
      the
      meaning provided in Section 2.09 hereof.

     

    “Change
      in Control Purchase Notice”
has
      the
      meaning provided in Section 2.09 hereof.

     

    “Change
      in Control Purchase Price”
has
      the
      meaning provided in Section 2.09 hereof.

     

    “Closing
      Sale Price”
of
      the
      Common Shares or other capital shares or similar equity interests or other
      publicly traded securities on any date means the closing sale price per share
      (or, if no closing sale price is reported, the average of the closing bid and
      ask prices or, if more than one in either case, the average of the average
      closing bid and the average closing ask prices) on such date as reported on
      the
      principal U.S. securities exchange on which the Common Shares or such other
      capital shares or similar equity interests or other securities are traded or,
      if
      the Common Shares or such other capital shares or similar equity interests
      or
      other securities are not listed on a U.S. national or regional securities
      exchange, as reported by the Nasdaq National Market or by the National Quotation
      Bureau Incorporated or another established over-the-counter trading market
      in
      the United States. The Closing Sale Price shall be determined without regard
      to
      after-hours trading or extended market making. In the absence of the foregoing,
      the Company shall determine the Closing Sale Price on such basis as it considers
      appropriate.

     

    “Common
      Shares”
means
      common shares of beneficial interest, par value $0.03 per share, of the
      Company.

     

    “Company”
has
      the
      meaning provided in the first paragraph of this instrument until a successor
      Person shall have become such pursuant to the applicable provisions of the
      Indenture, and thereafter “Company” shall mean such successor
      Person.

     

    “Company
      Notice”
has
      the
      meaning provided in Section 2.09 hereof.

     

    “Conversion
      Agent”
means
      the
      office or agency designated by the Company where the Notes may be presented
      for
      conversion.

     

    “Conversion
      Price”
means,
      as of any date of determination, for $1,000 principal amount of Notes, the
      quotient of $1,000 divided by the Conversion Rate in effect as of such date,
      rounded to the nearest $0.01, with $0.005 rounded upward. 

     

    “Conversion
      Rate”
means
      the number of Common Shares by reference to which the Conversion Value shall
      be
      determined, which shall be initially 20.3770 Common Shares for each $1,000
      principal amount of Notes and as the same shall be adjusted from time to time
      in
      accordance with the provisions hereof and of the Notes.

     

     

    
      
        
        

      

      
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    “Conversion
      Value”
means,
      for each $1,000 principal amount of Notes, the product of (a) the
      applicable Conversion Rate, multiplied by (b) the Average Price.

     

    “Daily
      Share Amount” has
      the
      meaning provided in Section 2.12 hereof.

     

    “Depositary”
has
      the
      meaning provided in Section 2.03 hereof.

     

    “Effective
      Date”
has
      the
      meaning specified in Section 2.10.

     

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

     

    “Expiration
      Time”
has
      the
      meaning specified in Section 2.14.

     

    “Initial
      Purchasers”
means
      each of Citigroup Global Markets Inc., J.P. Morgan Securities Inc. and Morgan
      Stanley & Co. Incorporated (each, an “Initial Purchaser”).

     

    “interest”
means,
      when used
      with
      reference to the Notes, any interest payable under the terms of the Notes,
      including Additional Interest, if any, payable under the terms of the
      Registration Rights Agreement.

     

    “Indenture”
has
      the
      meaning provided in the preamble of this instrument.

     

    “Interest
      Payment Date”
has
      the
      meaning provided in Section 2.05 hereof.

     

    “Net
      Amount”
      has
      the
      meaning provided in Section 2.12 hereof.

     

    “Net
      Cash Amount”
      has
      the
      meaning provided in Section 2.12 hereof.

     

    “Net
      Shares”
      has
      the
      meaning provided in Section 2.12 hereof.

     

    “Notes”
has
      the
      meaning provided in Section 2.01 hereof which shall be substantially in the
      form
      attached as Exhibit A hereto.

     

    “Optional
      Repurchase Date”
has
      the
      meaning provided in Section 2.08 hereof.

     

    “Optional
      Repurchase Notice”
has
      the
      meaning provided in Section 2.08 hereof.

     

    “Optional
      Repurchase Price”
has
      the
      meaning provided in Section 2.08 hereof.

     

    “PORTALSM
      Market”
means
      The PORTAL Market operated by the Nasdaq Stock Market or any successor
      thereto.

     

    “Principal
      Return”
      has
      the
      meaning provided in Section 2.12 hereof.

     

    “Purchase
      Agreement”
means
      the Purchase Agreement, dated July 28, 2006, between the Company and the
      Initial Purchasers. 

     

    
      
        
        

      

      
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    “Redemption
      Date”
means,
      with respect to any Note or portion thereof to be redeemed in accordance with
      the provisions of Section 2.07 hereof, the date fixed for such redemption in
      accordance with the provisions of Section 2.07 hereof.

     

    “Redemption
      Price”
has
      the
      meaning provided in Section 2.07 hereof.

     

    “Reference
      Dividend”
has
      the
      meaning specified in Section 2.14.

     

    “Registration
      Rights Agreement”
means
      the Registration Rights Agreement, dated as of August 2, 2006, between the
Company
      and the
      Initial Purchasers, as amended from time to time in accordance with its
      terms.

     

    “Regular
      Record Date”
has
      the
      meaning provided in Section 2.05 hereof.

     

    “Restricted
      Securities”
has
      the
      meaning specified in Section 2.24.

     

    “Rule
      144A”
means
      Rule 144A as promulgated under the Securities Act as it may be amended from
      time
      to time hereafter.

     

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

     

    “Share
      Price”
has
      the
      meaning specified in Section 2.10.

     

    “Spin-Off”
has
      the
      meaning specified in Section 2.14.

     

    “Trading
      Day”
      means
      a day
      during which trading in securities generally occurs on the New York Stock
      Exchange or, if the Common Shares are not then listed on the New York Stock
      Exchange, on the principal other U.S. national or regional securities exchange
      on which Common Shares are then listed or, if the Common Shares are not then
      listed on a U.S. national or regional securities exchange, on the Nasdaq
      National Market or, if the Common Shares are not then quoted on the Nasdaq
      National Market, on the principal other market on which Common Shares are then
      traded.

     

    “Trading
      Price”
means,
      with respect to the Notes on any date of determination, the average of the
      secondary market bid quotations per $1,000 principal amount of Notes obtained
      by
      the Trustee for a $5,000,000 principal amount of Notes at approximately 3:30
      p.m., New York City time, on such determination date from two independent
      nationally recognized securities dealers selected by the Company, which may
      include one or more of the Initial Purchasers or any successor to such entities.
      If at least two such bids cannot reasonably be obtained by the Trustee, but
      one
      such bid can reasonably be obtained by the Trustee, then one bid shall be used.
      If the Trustee cannot reasonably obtain at least one bid for a $5,000,000
      principal amount of Notes from a nationally recognized securities dealer or,
      in
      the reasonable judgment of the Company, the bid quotations are not indicative
      of
      the secondary market value of the Notes, then the Trading Price per $1,000
      principal amount of Notes shall be deemed to be less than 98% of the product
      of
      the Closing Sale Price of the Common Shares and the Conversion Rate on such
      determination date.

     

    “Trust
      Indenture Act”
means
      the Trust Indenture Act of 1939, as amended.

     

     

    
      
        
        

      

      
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    ARTICLE
      TWO

    TERMS

     

    Section
      2.01.  Title.
      The
      Notes shall constitute a series of Securities designated as the “3.95%
      Convertible Senior Notes due 2026” of the Company.

     

    Section
      2.02.  Aggregate
      Principal Amount.
      The
      aggregate principal amount of Notes which may be authenticated and delivered
      under the Indenture is initially limited in aggregate principal amount to
      $575,000,000, except for Notes authenticated and delivered upon registration
      of
      transfer of, or in exchange for, or in lieu of, other Notes pursuant to Sections
      304, 305, 306, 906, 1107 or 1203 of the Indenture and except for any Notes
      which, pursuant to Section 303 of the Indenture, are deemed never to have been
      authenticated and delivered thereunder; provided that the Company may from
      time
      to time, without the consent of the Holders of the Notes, increase the principal
      amount of the Notes by issuing additional Securities in the future (the
“Additional
      Notes”)
      having
      the same terms and ranking equally and ratably with the Notes in all respects
      and with the same CUSIP number as the Notes, except for the difference in the
      issue price and interest accrued prior to the issue date of such Additional
      Notes, provided that such Additional Notes constitute part of the same issue
      as
      the Notes for U.S. federal income tax purposes. Any Additional Notes will be
      treated as a single series with the Notes under the Indenture and shall have
      the
      same terms as to status, redemption, repurchase, conversion and otherwise as
      the
      Notes. 

     

    Section
      2.03.  Registered
      Securities in Book-Entry Form.
      The
      Notes shall be issuable in the form of one or more global Securities registered
      in the name of The Depository Trust Company’s nominee, and shall be deposited
      with, or on behalf of, The Depository Trust Company, New York, New York (the
      “Depositary”).
      The
      Notes may be surrendered for registration of transfer and for conversion at
      the
      office or agency of the Company (including the Trustee) maintained for such
      purpose in the Borough of Manhattan, The City of New York, or at any other
      office or agency maintained by the Company for such purpose.

     

    Section
      2.04.  Stated
      Maturity of Principal.
      The
      Stated Maturity of the principal of the Notes shall be August 1,
      2026.

     

    Section
      2.05.  Interest.
      The
      Notes shall bear interest at the rate of 3.95% per annum from August 2,
      2006, or from the most recent Interest Payment Date to which interest has been
      paid or provided for, as the case may be, and will be payable semi-annually
      in
      arrears on February 1 and August 1 of each year (each, an
“Interest
      Payment Date”),
      commencing on February 1, 2007, until the principal thereof is paid or duly
      made available for payment, to the Persons in whose names such Notes are
      registered at the close of business on the January 15 or July 15
      (whether or not a Business Day) immediately preceding the applicable Interest
      Payment Date (each, a “Regular
      Record Date”).
      Interest payable on each Interest Payment Date shall equal the amount of
      interest accrued for the period commencing on and including the immediately
      preceding Interest Payment Date in respect of which interest has been paid
      (or
      commencing on and including August 2, 2006, if no interest has been paid)
      and ending on and including the day immediately preceding such Interest Payment
      Date. Interest on the Notes will be computed on the basis of a 360-day year
      consisting of twelve 30-day months.

     

     

    
      
        
        

      

      
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    If
      the
      Company shall redeem the Notes in accordance with the provisions of Section
      2.07
      hereof, or if a Holder shall surrender a Note for repurchase by the Company
      in
      accordance with the provisions of 2.08 or 2.09 hereof, subject to the next
      succeeding sentence, accrued and unpaid interest (including Additional Interest,
      if any) shall be payable to each Holder that shall have surrendered such Note
      for redemption or repurchase, as the case may be. However, if an Interest
      Payment Date shall fall on or prior to the Redemption Date or Optional
      Repurchase Date or Change in Control Purchase Date, as the case may be, for
      a
      Note, accrued and unpaid interest (including Additional Interest, if any) due
      on
      such Interest Payment Date shall be payable instead to the Person in whose
      name
      such Note is registered at the close of business on the related Regular Record
      Date.

     

    Section
      2.06.  Place
      of Payment. The
      principal of and the interest on the Notes shall be payable at the office or
      agency of the Company (including the Trustee) maintained for such purpose in
      the
      Borough of Manhattan, The City of New York in the in the manner specified in
      the
      Indenture.

     

    Section
      2.07.  Redemption.
      The
      Company shall not have the right to redeem any Notes prior to August 4,
      2011, except to preserve the Company’s status as a real estate investment trust.
      If, at any time, the Company determines it is necessary to redeem the Notes
      in
      order to preserve the Company’s status as a real estate investment trust, the
      Company may, upon not less than 30 nor more than 60 days’ prior written notice
      by mail to the Holders of the Notes, redeem the Notes in whole or in part,
      for
      cash equal to 100% of the principal amount of the Notes to be redeemed plus
      unpaid interest (including Additional Interest, if any) accrued thereon to
      the
      Redemption Date. In such case, the Company shall provide the Trustee with an
      Officers’ Certificate evidencing that the Board of Trust Managers of the Company
      has, in good faith, made the determination that it is necessary to redeem the
      Notes in order to preserve the Company’s status as a real estate investment
      trust.

     

    The
      Company shall have the right to redeem the Notes, in whole or in part at any
      time or from time to time, on or after August 4, 2011 upon not less than 30
      nor more than 60 days’ prior written notice by mail to the Holders of the Notes,
      at a redemption price (“Redemption
      Price”)
      for
      cash equal to 100% of the principal amount of the Notes to be redeemed plus
      unpaid interest (and Additional Interest, if any) accrued thereon to the
      Redemption Date. If less than all the Notes are to be redeemed, the Trustee
      shall select the Notes to be redeemed (in principal amounts of $1,000 and
      integral multiples thereof) on a pro
      rata basis
      or
      by such other method the Trustee considers fair and appropriate. The Trustee
      shall make the selection at least 30 days but not more than 60 days before
      the
      Redemption Date from Outstanding Notes not previously called for redemption.
      Notes and portions of the principal amount thereof selected for redemption
      shall
      be in integral multiples of $1,000. The Trustee shall notify the Company
      promptly of the Notes or portions of the principal amount thereof to be
      redeemed. If the Trustee selects a portion of a Note for partial redemption
      and
      a Holder converts a portion of the same Note in accordance with the provisions
      of Section 2.11 hereof before termination of the conversion right with respect
      to the portion of the Note so selected, the converted portion of such Note
      shall
      be deemed to be from the portion selected for redemption. Notes that have been
      converted during a selection of Notes to be redeemed shall be treated by the
      Trustee as Outstanding for the purpose of such selection.

     

     

    
      
        
        

      

      
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    In
      the
      event of any redemption in part, the Company shall not be required to: (i)
      issue
      or register the transfer or exchange of any Note during a period beginning
      at
      the opening of business 15 days before any selection of Notes for redemption
      and
      ending at the close of business on the earliest date on which the relevant
      notice of redemption is deemed to have been given to all Holders of Notes to
      be
      so redeemed, or (ii) register the transfer or exchange of any Note so
      selected for redemption, in whole or in part, except the unredeemed portion
      of
      any Note being redeemed in part.

     

    In
      addition to those matters set forth in Section 1104 of the Indenture, a notice
      of redemption sent to the Holders of Notes to be redeemed in accordance with
      the
      provisions of the two preceding paragraphs shall state:

     

    (a)  the
      name
      of the Paying Agent and Conversion Agent;

     

    (b)  the
      then
      current Conversion Rate;

     

    (c)  that
      Notes called for redemption may be converted at any time prior to the close
      of
      business on the third Business Day immediately preceding the Redemption Date;
      and

     

    (d)  that
      Holders who wish to convert Notes must comply with the procedures relating
      thereto specified in Section 2.13 hereof.

     

    Section
      2.08.  Repurchase
      Rights.
      A Holder
      of Notes shall have the right to require the Company to repurchase such Holder’s
      Notes, in whole or in part (in principal amounts of $1,000 or an integral
      multiple thereof), on each of August 1, 2011, August 1, 2016 and
      August 1, 2021 (each, an “Optional
      Repurchase Date”)
      for
      cash equal to 100% of the principal amount of the Notes to be repurchased plus
      unpaid interest (including Additional Interest, if any) accrued thereon to
      the
      Optional Repurchase Date (such amount, the “Optional
      Repurchase Price”),
      subject to satisfaction by or on behalf of the Holder of the requirements set
      forth below.

     

    On
      or
      before to the 30th day prior to each Optional Repurchase Date, the Company
      shall
      provide a written notice by first-class mail to the Trustee, any Paying Agent
      and all Holders (and to beneficial owners as required by applicable law). The
      notice shall include a form of Optional Repurchase Notice to be completed by
      the
      Holder and shall state:

     

    (a)  the
      date
      by which the Optional Repurchase Notice must be delivered to the Paying
      Agent;

     

    (b)  the
      Optional Repurchase Date;

     

    (c)  the
      Optional Repurchase Price;

     

    (d)  the
      name
      and address of the Trustee, the Paying Agent and the Conversion
      Agent;

     

    (e)  that
      Notes must be surrendered to the Paying Agent to collect payment of the Optional
      Repurchase Price;

     

    
      
        
        

      

      
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    (f)  that
      the
      Optional Repurchase Price for any Note as to which an Optional Repurchase Notice
      has been duly given will be paid within two Business Days after the later of
      the
      Optional Repurchase Date or the time at which such Notes are surrendered for
      repurchase;

     

    (g)  that,
      unless the Company defaults in making payment of the Optional Repurchase Price,
      interest on Notes surrendered for repurchase will cease to accrue on and after
      the Optional Repurchase Date; 

     

    (h)  that
      Notes in respect of which an Optional Repurchase Notice is provided by a Holder
      shall not be convertible in accordance with their terms even if otherwise
      convertible unless such Holder validly withdraws such Optional Repurchase Notice
      in accordance with the provisions of this Section 2.08; and

     

    (i)  the
      CUSIP
      number of the Notes.

     

    The
      Company shall also disseminate a press release through Dow Jones & Company,
      Inc. or Bloomberg Business News containing the information specified in such
      notice or publish such information in a newspaper of general circulation in
      The
      City of New York or on the Company’s website, or through such other public
      medium as the Company shall deem appropriate at such time.

     

    A
      Holder
      may exercise its rights specified in this Section 2.08 upon delivery of a
      written notice of repurchase (an “Optional
      Repurchase Notice”)
      to the
      Paying Agent during the period beginning at any time from the opening of
      business on the date that is 30 days prior to the applicable Optional Repurchase
      Date until the close of business on the third Business Day prior to such
      Optional Repurchase Date, stating:

     

    (a) if
      such
      Notes are in certificated form, the certificate number(s) of the Notes which
      the
      Holder will deliver to be repurchased;

     

    (b) the
      portion of the principal amount of the Notes to be repurchased, in integral
      multiples of $1,000, provided that the remaining principal amount of Notes
      is in
      an authorized denomination; and

     

    (c) that
      such
      Notes shall be repurchased pursuant to the applicable provisions hereof and
      the
      Notes.

     

    The
      Paying Agent shall promptly notify the Company in writing of the receipt by
      it
      of any Optional Repurchase Notice.

     

    Book-entry
      transfer of Notes in book-entry form in compliance with appropriate procedures
      of the Depositary or delivery of Notes in certificated form, together with
      all
      necessary endorsements, to the Paying Agent on or after the Optional Repurchase
      Date at the offices of the Paying Agent shall be a condition to the receipt
      by
      the Holder of the Optional Repurchase Price therefor. Holders electing to
      require the Company to repurchase Notes must effect such transfer or delivery
      to
      the Paying Agent prior to the Optional Repurchase Date to receive payment of
      the
      Optional Repurchase Price on or within two Business Days after the 

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    Optional
      Repurchase Date. The Company shall pay the Optional Repurchase Price within
      two
      Business Days after the later of the Optional Repurchase Date or the time of
      such transfer or delivery of the Notes.

     

    An
      Optional Repurchase Notice may be withdrawn in whole or in part by a Holder
      by
      means of a written notice of withdrawal delivered to the office of the Paying
      Agent prior to the close of business on the third Business Day prior to the
      Optional Repurchase Date specifying:

     

    (a) the
      Holder’s name;

     

    (b) the
      principal amount of Notes in respect of which the Optional Repurchase Notice
      is
      being withdrawn, which must be an integral multiple of $1,000;

     

    (c) if
      the
      Notes subject to the notice of withdrawal are in certificated form, the
      certificate number(s) of all Notes subject to the notice of withdrawal;
      and

     

    (d) the
      principal amount of Notes, if any, that remains subject to the Optional
      Repurchase Notice, which must be an integral multiple of $1,000.

     

    If
      Notes
      subject to the notice of withdrawal are in book-entry form, the above notices
      must also comply with the applicable procedures of the Depositary.

     

    On
      or
      before 10:00 a.m. (New York City time) on the Optional Repurchase Date, the
      Company shall deposit with the Paying Agent (or if the Company or an Affiliate
      of the Company is acting as the Paying Agent, shall segregate and hold in trust)
      money sufficient to pay the aggregate Optional Repurchase Price of the Notes
      to
      be repurchased pursuant to this Section 2.08. If the Paying Agent holds, in
      accordance with the terms of the Indenture, money sufficient to pay the Optional
      Repurchase Price of such Notes on the Optional Repurchase Date, then on and
      after such date, such Notes shall cease to be Outstanding and interest on such
      Notes shall cease to accrue, and all rights of the Holder of such Notes shall
      terminate (other than the right to receive the Optional Repurchase Price after
      delivery or transfer of the Notes). Such will be the case whether or not
      book-entry transfer of the Notes in book-entry form is made and whether or
      not
      Notes in certificated form, together with the necessary endorsements, are
      delivered to the Paying Agent.

     

    Notwithstanding
      the foregoing, no Notes may be repurchased by the Company in accordance with
      the
      provisions of this Section 2.08 if there has occurred and is continuing an
      Event
      of Default with respect to the Notes (other than a default in the payment of
      the
      Optional Repurchase Price).

     

    To
      the
      extent legally required in connection with a repurchase of Notes, the Company
      shall comply with the provisions of Rule 13e-4 and other tender offer rules
      under the Exchange Act then applicable, if any, and will file a Schedule TO
      or
      any other schedule required under the Exchange Act.

     

    The
      Company may arrange for a third party to purchase Notes for which the Company
      has received a valid Optional Repurchase Notice that has not been properly
      withdrawn, in the manner and otherwise in compliance with the requirements
      set
      forth herein and in the Notes. If a 

     

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

     

    third
      party purchases any Notes under such circumstances, then interest will continue
      to accrue on the Notes and such Notes will continue to be Outstanding after
      the
      Optional Repurchase Date for all purposes of the Indenture and will be fungible
      with all other Notes then Outstanding.

     

    Section
      2.09.  Repurchase
      at Option of Holders upon a Change in Control.
      If a
      Change in Control occurs at any time on or prior to August 4, 2011, a
      Holder of Notes shall have the right to require the Company to repurchase such
      Holder’s Notes, in whole or in part (in principal amounts of $1,000 or an
      integral multiple thereof) for cash equal to 100% of the principal amount of
      the
      Notes to be repurchased, plus unpaid interest (including Additional Interest,
      if
      any) accrued thereon to the Change in Control Purchase Date (such amount, the
      “Change
      in Control Purchase Price”),
      subject to satisfaction by or on behalf of the Holder of the requirements set
      forth below. If a Change in Control occurs after August 4, 2011, Holders of
      Notes will not have any right to require the Company to repurchase its Notes,
      except in accordance with Section 2.08.

     

    Within
      20
      days after the occurrence of a Change in Control, the Company shall mail a
      written notice of the particular Change in Control and of the repurchase right
      arising as a result of such Change in Control (the “Company
      Notice”)
      by
      first-class mail to the Trustee, any Paying Agent and to each Holder (and to
      beneficial owners as required by applicable law). The notice shall include
      a
      form of Change in Control Purchase Notice to be completed by the Holder and
      shall state:

     

    (a)  briefly,
      the events causing a Change in Control and the date of such Change in
      Control;

     

    (b)  the
      date
      by which the Change in Control Purchase Notice must be delivered to the Paying
      Agent;

     

    (c)  the
      date
      on which the Company will repurchase Notes upon a Change in Control, which
      must
      be not less than 15 days nor more than 30 days after the date of the Company
      Notice (such date, the “Change
      in Control Purchase Date”);

     

    (d)  the
      Change in Control Purchase Price;

     

    (e)  the
      name
      and address of the Trustee, the Paying Agent and the Conversion
      Agent;

     

    (f)  that
      Notes in respect of which a Change in Control Purchase Notice is provided by
      a
      Holder shall not be convertible unless such Holder validly withdraws such Change
      in Control Purchase Notice in accordance with the provisions of this Section
      2.09;

     

    (g)  that
      Notes must be surrendered to the Paying Agent to collect payment of the Change
      in Control Purchase Price;

     

    (h)  that
      the
      Change in Control Purchase Price for any Note as to which a Change in Control
      Purchase Notice has been duly given will be paid within two Business Days after
      the later of the Change in Control Purchase Date or the time at which such
      Notes
      are surrendered for repurchase;

     

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    (i)  that,
      unless the Company defaults in making payment of the Change in Control Purchase
      Price, interest on Notes surrendered for repurchase will cease to accrue on
      and
      after the Change in Control Purchase Date; and

     

    (j)  the
      CUSIP
      number of the Notes.

     

    The
      Company shall also disseminate a press release through Dow Jones & Company,
      Inc. or Bloomberg Business News announcing the occurrence of such Change in
      Control or publish such information in a newspaper of general circulation in
      The
      City of New York or on the Company’s website, or through such other public
      medium as the Company shall deem appropriate at such time.

     

    A
      Holder
      may exercise its rights specified in this Section 2.09 upon delivery of a
      written notice of such Holder’s exercise of its repurchase right (a
“Change
      in Control Purchase Notice”)
      to the
      Paying Agent at any time prior to the close of business on the third Business
      Day prior to the Change in Control Purchase Date, stating:

     

    (a) if
      such
      Notes are in certificated form, the certificate number(s) of the Notes which
      the
      Holder will deliver to be repurchased;

     

    (b) the
      portion of the principal amount of the Notes to be repurchased, in multiples
      of
      $1,000, provided that the remaining principal amount of Notes is in an
      authorized denomination; and

     

    (c) that
      such
      Note shall be repurchased pursuant to the applicable provisions hereof and
      of
      the Notes.

     

    The
      Paying Agent shall promptly notify the Company in writing of the receipt by
      it
      of any Change in Control Purchase Notice.

     

    Book-entry
      transfer of Notes in book-entry form in compliance with appropriate procedures
      of the Depositary or delivery of Notes in certificated form (together with
      all
      necessary endorsements) to the Paying Agent on or after the Change in Control
      Purchase Date at the offices of the Paying Agent shall be a condition to the
      receipt by the Holder of the Change in Control Purchase Price therefor. Holders
      electing to require the Company to repurchase Notes must effect such transfer
      or
      delivery to the Paying Agent prior to the Change in Control Purchase Date to
      receive payment of the Change in Control Purchase Price on or within two
      Business Days after the Change in Control Purchase Date. The Company shall
      pay
      the Change in Control Purchase Price within two Business Days after the later
      of
      the Change in Control Purchase Date or the time of such transfer or delivery
      of
      the Notes.

     

    A
      Change
      in Control Purchase Notice may be withdrawn in whole or in part by a Holder
      by
      means of a written notice of withdrawal delivered to the office of the Paying
      Agent prior to the close of business on the third Business Day prior to the
      Change in Control Purchase Date specifying:

     

    (a) the
      Holder’s name;

     

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

     

    (b) the
      principal amount of Notes in respect of which the Change in Control Purchase
      Notice is being withdrawn, which must be an integral multiple of
      $1,000;

     

    (c) if
      the
      Notes subject to the notice of withdrawal are in certificated form, the
      certificate number(s) of all Notes subject to the notice of withdrawal;
      and

     

    (d) the
      principal amount of Notes, if any, that remains subject to the Change in Control
      Purchase Notice, which must be an integral multiple of $1,000.

     

    If
      Notes
      subject to the notice of withdrawal are in book-entry form, the above notices
      must also comply with the applicable procedures of the Depositary.

     

    On
      or
      before 10:00 a.m. (New York City time) on the Change in Control Purchase Date,
      the Company shall deposit with the Paying Agent (or if the Company or an
      Affiliate of the Company is acting as the Paying Agent, shall segregate and
      hold
      in trust) money sufficient to pay the aggregate Change in Control Purchase
      Price
      of the Notes to be repurchased pursuant to this Section 2.09. If the Paying
      Agent holds, in accordance with the terms of the Indenture, money sufficient
      to
      pay the Change in Control Purchase Price of such Notes on the Change in Control
      Purchase Date, then, on and after such date, such Notes shall cease to be
      Outstanding and interest on such Notes shall cease to accrue and all rights
      of
      the Holders of such Notes shall terminate (other than the right to receive
      the
      Change in Control Purchase Price after delivery or transfer of the Notes).
      Such
      will be the case whether or not book-entry transfer of the Notes in book-entry
      form is made and whether or not Notes in certificated form, together with the
      necessary endorsements, are delivered to the Paying Agent.

     

    Notwithstanding
      the foregoing, no Notes may be repurchased by the Company in accordance with
      the
      provisions of this Section 2.09 if there has occurred and is continuing an
      Event
      of Default with respect to the Notes (other than a default in the payment of
      the
      Change in Control Purchase Price).

     

    To
      the
      extent legally required in connection with a repurchase of Notes, the Company
      shall comply with the provisions of Rule 13e-4 and other tender offer rules
      under the Exchange Act then applicable, if any, and will file a Schedule TO
      or
      any other schedule required under the Exchange Act.

     

    The
      Company may arrange for a third party to purchase Notes for which the Company
      has received a valid Change in Control Purchase Notice that has not been
      properly withdrawn, in the manner and otherwise in compliance with the
      requirements set forth herein and in the Notes. If a third party purchases
      any
      Notes under such circumstances, then interest will continue to accrue on the
      Notes and such Notes will continue to be Outstanding after the Change in Control
      Purchase Date for all purposes of the Indenture and will be fungible with all
      other Notes then Outstanding.

     

    Section
      2.10.  Make
      Whole Amount.
      If
      a
      Change in Control occurs on or prior to August 4, 2011 as a result of a
      transaction or event described in clauses (1) or (2) of the definition of Change
      in Control and a Holder elects to convert its Notes in connection with such
      Change in Control pursuant to Section 2.11(d) hereof, the Company shall increase
      the applicable Conversion Rate for such Notes surrendered for conversion by
      a
      number of additional Common Shares (the 

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    “Additional
      Shares”)
      as
      specified below. A conversion of Notes shall be deemed for these purposes to
      be
“in connection with” such a Change in Control if the notice of conversion of the
      Notes is received by the Conversion Agent on any date from and including the
      date that is the Effective Date (as defined below) of such Change in Control
      up
      to and including the 30th Business Day following the Effective Date of such
      Change in Control.

     

    The
      number of Additional Shares will be determined by reference to the table below
      and is based on the date on which such Change in Control transaction becomes
      effective (the “Effective
      Date”)
      and
      the price (the “Share
      Price”)
      paid
      per Common Share in such Change in Control transaction. If holders of Common
      Shares receive only cash in a Change in Control transaction, the Share Price
      shall be the cash amount paid per Common Share. In all other cases, the Share
      Price shall be the average of the Closing Sale Prices of the Common Shares
      on
      the 10 consecutive Trading Days up to but excluding the Effective
      Date.

     

    The
      Share
      Prices set forth in the first row of the table (i.e., the column headers) will
      be adjusted as of any date on which the Conversion Rate of the Notes is
      adjusted. The adjusted Share Prices will equal the Share Prices applicable
      immediately prior to such adjustment multiplied by a fraction, the numerator
      of
      which is the Conversion Rate immediately prior to the adjustment giving rise
      to
      the Share Price adjustment and the denominator of which is the Conversion Rate
      as so adjusted. In addition, the number of Additional Shares will be subject
      to
      adjustment in the same manner as the Conversion Rate in accordance with the
      provisions of Section 2.14 hereof.

     

    The
      following table sets forth the Share Price and number of Additional Shares
      to be
      received per $1,000 principal amount of Notes:

     

    
      	
              Effective

              Date

            	
              Share
                Price

            
	
              $39.26

            	
              $42.50

            	
              $45.00

            	
              $47.50

            	
              $50.00

            	
              $55.00

            	
              $60.00

            	
              $65.00

            	
              $70.00

            	
              $75.00

            	
              $80.00

            	
              $85.00

            
	
              August
                2, 2006    

            	
              5.0942

            	
              3.8996

            	
              3.1466

            	
              2.5348

            	
              2.0376

            	
              1.3060

            	
              0.8240

            	
              0.5074

            	
              0.3003

            	
              0.1659

            	
              0.0797

            	
              0.0256

            
	
              August
                1, 2007     

            	
              5.0942

            	
              3.8135

            	
              3.0371

            	
              2.4108

            	
              1.9067

            	
              1.1774

            	
              0.7106

            	
              0.4145

            	
              0.2284

            	
              0.1131

            	
              0.0433

            	
              0.0022

            
	
              August
                1, 2008

            	
              5.0942

            	
              3.6925

            	
              2.8847

            	
              2.2400

            	
              1.7283

            	
              1.0075

            	
              0.5671

            	
              0.3029

            	
              0.1477

            	
              0.0586

            	
              0.0089

            	
              0.0000

            
	
              August
                1, 2009

            	
              5.0942

            	
              3.5117

            	
              2.6552

            	
              1.9830

            	
              1.4623

            	
              0.7630

            	
              0.3718

            	
              0.1620

            	
              0.0541

            	
              0.0008

            	
              0.0000

            	
              0.0000

            
	
              August
                1, 2010

            	
              5.0942

            	
              3.2525

            	
              2.2928

            	
              1.5603

            	
              1.0222

            	
              0.3860

            	
              0.1147

            	
              0.0152

            	
              0.0000

            	
              0.0000

            	
              0.0000

            	
              0.0000

            
	
              August
                4, 2011

            	
              5.0942

            	
              3.1686

            	
              1.8605

            	
              0.6901

            	
              0.0000

            	
              0.0000

            	
              0.0000

            	
              0.0000

            	
              0.0000

            	
              0.0000

            	
              0.0000

            	
              0.0000

            

    

    

    The
      exact
      Share Prices and Effective Dates may not be set forth in the table, in which
      case:

     

    (a)  if
      the
      Share Price is between two Share Price amounts in the table or the Effective
      Date is between two dates in the table, the Additional Shares will be determined
      by straight-line interpolation between the number of Additional Shares set
      forth
      for the higher and lower Share Price amounts and the two dates, as applicable,
      based on a 365-day year;

     

    (b)  if
      the
      Share Price is in excess of $85.00 per Common Share (subject to adjustment
      as
      specified in the second preceding paragraph), no Additional Shares will be
      issued upon a conversion of Notes; and

     

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    (c)  if
      the
      Share Price is less than $39.26 per Common Share (subject to adjustment as
      specified in the second preceding paragraph), no Additional Shares will be
      issued upon a conversion of Notes.

     

    Notwithstanding
      the foregoing, in no event shall the total number of Common Shares issuable
      upon
      a conversion of Notes exceed 25.4712 shares per $1,000 principal amount of
      Notes, subject to adjustment in the same manner as the Conversion Rate pursuant
      to Section 2.14 hereof.

     

    Section
      2.11.  Conversion
      Rights.

     

    Subject
      to the restrictions on ownership of the Common Shares as set forth in Section
      2.15 hereof and to the conditions set forth herein, Holders may surrender their
      Notes for conversion for cash, Common Shares or a combination of cash and Common
      Shares, at the Company’s option, at the applicable Conversion Rate prior to the
      close of business on the second Business Day immediately preceding the Stated
      Maturity of the Notes at any time on or after August 1, 2025 and also under
      any of the circumstances set forth in this Section 2.11.

     

    (a)
      Conversion Upon Satisfaction of Market Price Condition.
      A
      Holder may surrender any of its Notes for conversion during any calendar quarter
      beginning after December 31, 2006 (and only during such calendar quarter)
      if, and only if, the Closing Sale Price of the Common Shares for at least 20
      Trading Days (whether or not consecutive) in the period of 30 consecutive
      Trading Days ending on the last Trading Day of the preceding calendar quarter
      is
      more than 130% of the Conversion Price per Common Share in effect on the
      applicable Trading Day. The Board of Trust Managers of the Company shall make
      appropriate adjustments, in its good faith determination, to account for any
      adjustment to the Conversion Rate that becomes effective, or any event requiring
      an adjustment to the Conversion Rate where the ex-dividend date of the event
      occurs, during that 30 consecutive Trading-Day period.

     

    (b)
      Conversion Upon Satisfaction of Trading Price Condition.
      A
      Holder may surrender any of its Notes for conversion during the five consecutive
      Trading Day period following any five consecutive Trading Days in which the
      Trading Price per $1,000 principal amount of Notes (as determined following
      a
      reasonable request by a Holder of the Notes) was less than 98% of the product
      of
      the Closing Sale Price of the Common Shares multiplied by the Conversion Rate.
      

     

    The
      Trustee shall have no obligation to determine the Trading Price of the Notes
      unless the Company shall have requested such determination, and the Company
      shall have no obligation to make such request unless a Holder provides the
      Company with written reasonable evidence that the Trading Price per $1,000
      principal amount of the Notes would be less than 98% of the product of the
      Closing Sale Price of the Common Shares and the Conversion Rate, whereupon
      the
      Company shall instruct the Trustee to determine the Trading Price of the Notes
      beginning on the next Trading Day and on each successive Trading Day until
      the
      Trading Price is greater than or equal to 98% of the product of the Closing
      Sale
      Price of the Common Shares and the Conversion Rate.

     

    (c)
      Conversion Upon Notice of Redemption.
      A
      Holder may surrender for conversion any of the Notes called for redemption
      at
      any time prior to the close of business on the third Business 

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    Day
      prior
      to the Redemption Date, even if the Notes are not otherwise convertible at
      such
      time. The right to convert Notes pursuant to this clause (c) will expire after
      the close of business on the third Business Day prior to the Redemption Date
      unless the Company defaults in making the payment due upon redemption. A Holder
      may convert fewer than all of its Notes so long as the Notes converted are
      an
      integral multiple of $1,000 principal amount and the remaining principal amount
      of Notes is in an authorized denomination. However, if a Holder has already
      delivered an Optional Repurchase Notice or a Change in Control Purchase Notice
      with respect to a Note, such Holder may not surrender such Note for conversion
      until it has withdrawn such notice in accordance with the applicable provisions
      of Section 2.08 or 2.09 hereof, as the case may be.

     

    (d)
      Conversion Upon Specified Transactions.
      If the
      Company elects to:

     

    (i)  distribute
      to all holders of Common Shares rights entitling them to purchase, for a period
      expiring within 45 days, Common Shares at less than the Closing Sale Price
      of
      the Common Shares on the Trading Day immediately preceding the declaration
      date
      of the distribution; or

     

    (ii)  distribute
      to all holders of Common Shares assets, debt securities or certain rights to
      purchase securities of the Company, which distribution has a per share value
      exceeding 10% of the Closing Sale Price of the Common Shares on the Trading
      Day
      immediately preceding the declaration date of such distribution,

     

    the
      Company shall notify the Holders of the Notes in writing at least 20 days prior
      to the ex-dividend date for such distribution. Following the giving of such
      notice, Holders may surrender their Notes for conversion at any time until
      the
      earlier of the close of business on the Business Day immediately prior to the
      ex-dividend date or an announcement that such distribution will not take place;
      provided,
      however,
      that a
      Holder may not exercise this right to convert if the Holder may participate,
      on
      an as-converted basis, in the distribution without a conversion of Notes. The
      ex-dividend date is the first date upon which a sale of the Common Shares does
      not automatically transfer the right to receive the relevant distribution from
      the seller of Common Shares to its buyer.

     

    In
      addition, if the Company is party to a consolidation, merger or binding share
      exchange pursuant to which all of the Common Shares would be exchanged for
      cash,
      securities or other property that is not otherwise a Change in Control, a Holder
      may surrender Notes for conversion at any time from and including the date
      that
      is 15 Business Days prior to the Effective Date of the transaction up to and
      including five Business Days after the actual date of such transaction. The
      Company shall notify Holders as promptly as practicable following the date
      it
      publicly announces such transaction (but in no event less than 15 Business
      Days
      prior to the anticipated effective time of such transaction).

     

    If
      a
      Change in Control occurs as a result of a transaction described in clauses
      (1)
      or (2) of the definition of “Change in Control”, a Holder will have the right to
      convert its Notes at any time from and including the Effective Date of such
      transaction up to and including the 30th Business Day following the Effective
      Date of the transaction, provided that, if a Holder has already delivered an
      Optional Repurchase Notice or a Change in Control Purchase Notice with

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    respect
      to a Note, such Holder may not surrender such Note for conversion until it
      has
      withdrawn such notice in accordance with the applicable provisions of Section
      2.08 or 2.09 hereof, as the case may be. The Company will notify Holders as
      promptly as practicable following the date that it publicly announces such
      Change in Control (but in no event later than five Business Days prior to the
      Effective Date of such Change in Control).

     

    If
      the
      Company is a party to a consolidation, merger or binding share exchange pursuant
      to which all of the Common Shares are exchanged for cash, securities or other
      property, then at the Effective Date of the transaction any conversion of Notes
      and the Conversion Value will be based on the kind and amount of cash,
      securities or other property that the Holder would have received if such Holder
      had converted its Notes for Common Shares immediately prior to the Effective
      Date of the transaction. For purposes of the foregoing, where a consolidation,
      merger or binding share exchange involves a transaction that causes Common
      Shares to be exchanged into the right to receive more than a single type of
      consideration based upon any form of shareholder election, such consideration
      will be deemed to be the weighted average of the types and amounts of
      consideration received by the holders of Common Shares that affirmatively make
      such an election. If a Change of Control occurs on or prior to August 4,
      2011 as a result of a transaction described in clauses (1) or (2) of the
      definition thereof, the Company will adjust the Conversion Rate for Notes
      surrendered for conversion in connection with such a Change in Control
      transaction, as described in Section 2.10 hereof. 

     

    (e)
      Conversion
      Upon Delisting of the Common Shares.
      A
      Holder of Notes may surrender any of its Notes for conversion at any time
      beginning on the first Business Day after the Common Shares have ceased to
      be
      listed on a U.S. national or regional securities exchange or quoted on the
      Nasdaq National Market for a 30 consecutive Trading Day period.

     

    Section
      2.12.  Conversion
      Settlement.
      Upon a
      conversion of Notes, the Company shall deliver, in respect of each $1,000
      principal amount of Notes surrendered for conversion in accordance with their
      terms:

     

    (a)  cash
      in
      an amount (the “Principal
      Return”)
      equal
      to the lesser of (1) the principal amount of the Notes surrendered for
      conversion and (2) the Conversion Value, and 

     

    (b)  if
      the
      Conversion Value is greater than the Principal Return, an amount (the
“Net
      Amount”)
      in
      cash or Common Shares with an aggregate value equal to the difference between
      the Conversion Value and the Principal Return.

     

    The
      Company may elect to deliver any portion of the Net Amount in cash (the
“Net
      Cash Amount”)
      or
      Common Shares, and any portion of the Net Amount the Company elects to deliver
      in Common Shares (the “Net
      Shares”)
      will
      be the sum of the Daily Share Amounts for each Trading Day during the Applicable
      Conversion Period. Prior to the close of business on the second Trading Day
      following the date on which Notes are surrendered for conversion, the Company
      shall inform Holders of such Notes of its election to pay cash for all or a
      portion of the Net Amount and, if applicable, the portion of the Net Amount
      that
      will be paid in cash and the portion that will be delivered in the form of
      Net
      Shares.

     

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    The
      Company shall deliver cash in lieu of any fractional Common Shares issuable
      in
      connection with payment of the Net Shares based upon the Average
      Price.

     

    The
      “Daily
      Share Amount”
for
      each $1,000 principal amount of Notes and each Trading Day in the Applicable
      Conversion Period is equal to the greater of:

     

    (a) zero;
      and

     

    (b) a
      number
      of Common Shares determined by the following formula:

     

    where

     

    (CSP
      x CR) - ($1,000 + Net Cash Amount, if any)

    ______________________________________

                                   
        10 x CSP

     

    CSP
      means
      the Closing Sale Price of the Common Shares on such Trading Day,
      and

    

    CR
      means
      the applicable Conversion Rate

     

    The
      Company will determine the Conversion Value, Principal Return, Net Amount,
      Net
      Cash Amount and the number of Net Shares, as applicable, promptly after the
      end
      of the Applicable Conversion Period. The Company shall pay the Principal Return
      and cash in lieu of fractional shares, and deliver Net Shares or pay the Net
      Cash Amount, as applicable, no later than the third Business Day following
      the
      last Trading Day of the Applicable Conversion Period.

     

    Section
      2.13.  Conversion
      Procedures.
      To
      convert Notes, a Holder must satisfy the requirements set forth in this Section
      2.13.

     

    To
      convert the Notes, a Holder must (a) complete and manually sign the
      irrevocable conversion notice on the reverse of the Note (or complete and
      manually sign a facsimile of such notice) and deliver such notice to the
      Conversion Agent at the office maintained by the Conversion Agent for such
      purpose, (b) with respect to Notes which are in certificated form,
      surrender the Notes to the Conversion Agent, or, if the Notes are in book-entry
      form, comply with the appropriate procedures of the Depositary, (c) furnish
      appropriate endorsements and transfer documents if required by the Conversion
      Agent, the Company or the Trustee and (d) pay any transfer or similar tax,
      if required. The date on which the Holder satisfies all such requirements shall
      be deemed to be the date on which the applicable Notes shall have been tendered
      for conversion. 

     

    Notes
      in
      respect of which a Holder has delivered an Optional Repurchase Notice or Change
      in Control Purchase Notice may be converted only if such notice is withdrawn
      in
      accordance with the terms of Section 2.08 or Section 2.09, as the case may
      be.

     

    In
      case
      any Note shall be surrendered for partial conversion, the Company shall execute
      and the Trustee shall authenticate and deliver to, or upon the written order
      of,
      the Holder of the Note so surrendered, without charge to such Holder, a new
      Note
      or Notes in authorized 

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

    denominations
      in an aggregate principal amount equal to the portion of the surrendered Notes
      not surrendered for conversion. A Holder may convert fewer than all of such
      Holder’s Notes so long as the Notes converted are an integral multiple of $1,000
      principal amount.

     

    Upon
      surrender of a Note for conversion by a Holder, such Holder shall deliver to
      the
      Company cash equal to the amount that the Company is required to deduct and
      withhold under applicable law in connection with the conversion; provided,
      however,
      if the
      Holder does not deliver such cash, the Company may deduct and withhold from
      the
      amount of consideration otherwise deliverable to such Holder the amount required
      to be deducted and withheld under applicable law.

     

    Upon
      conversion of a Note, a Holder will not receive any cash payment representing
      accrued and unpaid interest on such Note, except as specified in the immediately
      preceding paragraph. Instead, upon a conversion of Notes, the Company will
      deliver to surrendering Holder only the consideration specified in Section
      2.12.
      Delivery of cash and Common Shares, if any, upon a conversion of Notes will
      be
      deemed to satisfy the Company’s obligation to pay the principal of the Notes and
      any accrued and unpaid interest thereon. Accordingly, upon a conversion of
      Notes, any accrued and unpaid interest will be deemed paid in full rather than
      cancelled, extinguished or forfeited. In no event will the Conversion Rate
      be
      adjusted to account for accrued and unpaid interest on the Notes.

     

    Holders
      of Notes at the close of business on a Regular Record Date for an interest
      payment will receive payment of interest payable on the corresponding Interest
      Payment Date notwithstanding the conversion of such Notes at any time after
      the
      close of business on the applicable Regular Record Date. Notes surrendered
      for
      conversion by a Holder after the close of business on any Regular Record Date
      for an interest payment and on or prior to the corresponding Interest Payment
      Date must be accompanied by payment of an amount equal to the interest that
      such
      Holder is to receive on such Notes on such Interest Payment Date; provided,
      however,
      that no
      such payment shall be required to be made (1) if such Notes have been called
      for
      redemption on a Redemption Date that is after such Regular Record Date and
      on or
      prior to such Interest Payment Date or (2) with respect to overdue interest
      (including Additional Interest), if any overdue interest exists at the time
      of
      conversion with respect to such Notes. 

     

    Upon
      conversion of a Note, the Company, if it elects to deliver Net Shares, will
      pay
      any documentary, stamp or similar issue or transfer tax due on the issue of
      the
      Net Shares upon such conversion unless the tax is due because the Holder
      requests the Net Shares to be issued or delivered to a Person other than the
      Holder, in which case the Holder must pay the tax due prior to the delivery
      of
      such Net Shares. Certificates representing Common Shares will not be issued
      or
      delivered unless all taxes and duties, if any, payable by the Holder have been
      paid.

     

    A
      Holder
      of Notes, as such, shall not be entitled to any rights of a holder of Common
      Shares. Such Holder shall only acquire such rights upon the delivery by the
      Company, at its option, of Net Shares in accordance with the provisions of
      Section 2.12 upon a conversion of Notes by a Holder.

     

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

     

     

    If
      a
      Holder converts more than one Note at the same time, the number of Net Shares,
      if any, issuable upon the conversion shall be based on the total principal
      amount of the Notes surrendered for conversion.

     

    The
      Company shall, prior to issuance of any Notes hereunder, and from time to time
      as may be necessary, reserve out of its authorized but unissued Common Shares
      a
      sufficient number of Common Shares to permit the conversion of the Notes at
      the
      applicable Conversion Rate. Any Common Shares delivered upon a conversion of
      Notes shall be newly issued shares or treasury shares, shall be duly and validly
      issued and fully paid and nonassessable and shall be free from preemptive rights
      and free of any lien or adverse claim.

     

    The
      Company shall endeavor promptly to comply with all federal and state securities
      laws regulating the issuance and delivery of Common Shares, if any, upon a
      conversion of Notes and shall cause to have listed or quoted all such Common
      Shares on each U.S. national securities exchange or over-the-counter or other
      domestic market on which the Common Shares are then listed or
      quoted.

     

    Except
      as
      set forth herein, no other payment or adjustment for interest shall be made
      upon
      conversion of Notes. 

     

    Section
      2.14.  Conversion
      Rate Adjustments.
      The
      Conversion Rate shall be adjusted from time to time as follows:

     

    (a)  If
      the
      Company issues Common Shares as a dividend or distribution on Common Shares
      to
      all holders of Common Shares, or if the Company effects a share split or share
      combination, the Conversion Rate will be adjusted based on the following
      formula:

     

    

      
        	
                CR1
                  = 

                 

              	
                CR0
                  x OS1/OS0

                 

              
	
                where

                 

              	
                 

              
	
                CR0
                  = 

                 

              	
                the
                  Conversion Rate in effect immediately prior to the adjustment relating
                  to
                  such event 

                 

              
	
                CR1
                  = 

                 

              	
                the
                  new Conversion Rate in effect taking such event into account

                 

              
	
                OS0
                  = 

                 

              	
                the
                  number of Common Shares outstanding immediately prior to such
                  event

                 

              
	
                OS1
                  = 

                 

              	
                the
                  number of Common Shares outstanding immediately after such
                  event.

                 

              

      

    

     

    Any
      adjustment made pursuant to this clause (a) shall become effective on the date
      that is immediately after (x) the date fixed for the determination of
      shareholders entitled to receive such dividend or other distribution or
      (y) the date on which such split or combination becomes effective, as
      applicable. If any dividend or distribution described in this clause (a) is
      declared but not so paid or made, the new Conversion Rate shall be 

     

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

    readjusted
      to the Conversion Rate that would then be in effect if such dividend or
      distribution had not been declared.

     

    (b)  If
      the
      Company issues to all holders of Common Shares any rights, warrants, options
      or
      other securities entitling them for a period of not more than 45 days after
      the
      date of issuance thereof to subscribe for or purchase Common Shares, or if
      the
      Company issues to all holders of Common Shares securities convertible into
      Common Shares for a period of not more than 45 days after the date of issuance
      thereof, in either case at an exercise price per Common Share or a conversion
      price per Common Share less than the Closing Sale Price of the Common Shares
      on
      the Business Day immediately preceding the time of announcement of such
      issuance, the Conversion Rate will be adjusted based on the following
      formula:

     

    

      
        	
                CR1
                  =

                 

              	
                CR0
                  x (OS0+X)/(OS0+Y)

                 

              
	
                where

                 

              	 
	
                CR0
                  = 

                 

              	
                the
                  Conversion Rate in effect immediately prior to the adjustment relating
                  to
                  such event

                 

              
	
                CR1
                  = 

                 

              	
                the
                  new Conversion Rate taking such event into account

                 

              
	
                OS0
                  = 

                 

              	
                the
                  number of Common Shares outstanding immediately prior to such
                  event

                 

              
	
                X
                  =

                 

              	
                the
                  total number of Common Shares issuable pursuant to such rights,
                  warrants,
                  options, other securities or convertible securities

                 

              
	
                Y
                  =
                  

                 

              	
                the
                  number of Common Shares equal to the quotient of (A) the aggregate
                  price payable to exercise such rights, warrants, options, other
                  securities
                  or convertible securities and (B) the average of the Closing Sale
                  Prices of the Common Shares for the 10 consecutive Trading Days
                  prior to
                  the Business Day immediately preceding the date of announcement
                  for the
                  issuance of such rights, warrants, options, other securities or
                  convertible securities.

                 

              

      

    

     

    For
      purposes of this clause (b), in determining whether any rights, warrants,
      options, other securities or convertible securities entitle the holders to
      subscribe for or purchase, or exercise a conversion right for, Common Shares
      at
      less than the applicable Closing Sale Price of the Common Shares, and in
      determining the aggregate exercise or conversion price payable for such Common
      Shares, there shall be taken into account any consideration received by the
      Company for such rights, warrants, options, other securities or convertible
      securities and any amount payable on exercise or conversion thereof, with the
      value of such consideration, if other than cash, to be determined by the Board
      of Trust Managers of the Company. If any right, warrant, option, other security
      or convertible security described in this clause (b) is not exercised or
      converted prior to the expiration of the exercisability or convertibility
      thereof, the new Conversion Rate shall be readjusted to 

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

     

    the
      Conversion Rate that would then be in effect if such right, warrant, option,
      other security or convertible security had not been so issued.

     

    (c)  If
      the
      Company distributes capital shares, evidences of indebtedness or other assets
      or
      property of the Company to all holders of Common Shares, excluding:

     

    (i)  dividends,
      distributions, rights, warrants, options, other securities or convertible
      securities referred to in clause (a) or (b) above,

     

    (ii)  dividends
      or distributions paid exclusively in cash, and

     

    (iii)  Spin-Offs
      described below in this clause (c),

     

    then
      the
      Conversion Rate will be adjusted based on the following formula:

     

    
      
        	
                CR1
                  =

                 

              	
                CR0
                  x SP0/(SP0-FMV)

                 

              
	
                where

                 

              	 
	
                CR0
                  = 

                 

              	
                the
                  Conversion Rate in effect immediately prior to the adjustment relating
                  to
                  such event

                 

              
	
                CR1
                  = 

                 

              	
                the
                  new Conversion Rate taking such event into account

                 

              
	
                SP0
                  = 

                 

              	
                the
                  average of the Closing Sale Prices of the Common Shares for the
                  10
                  consecutive Trading Days prior to the Business Day immediately
                  preceding
                  the earlier of the record date or the ex-dividend date for such
                  distribution

                 

              
	
                FMV=

                 

              	
                the
                  fair market value (as determined in good faith by the Board of
                  Trust
                  Managers of the Company) of the capital shares, evidences of indebtedness,
                  assets or property distributed with respect to each outstanding
                  Common
                  Share on the earlier of the record date or the ex-dividend date
                  for such
                  distribution.

                 

              

      

    

    An
      adjustment to the Conversion Rate made pursuant to the immediately preceding
      clause shall be made successively whenever any such distribution is made and
      shall become effective on the day immediately after the date fixed for the
      determination of holders of Common Shares entitled to receive such
      distribution.

     

    If
      the
      Company distributes to all holders of Common Shares capital shares of any class
      or series, or similar equity interest, of or relating to a subsidiary or other
      business unit of the Company (a “Spin-Off”),
      the
      Conversion Rate in effect immediately before the close of business on the date
      fixed for determination of holders of Common Shares entitled to receive such
      distribution will be adjusted based on the following formula:

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

     

    

      
        	
                CR1
                  =

                 

              	
                CR0
                  x (FMV0+MP0)/MP0

                 

              
	
                where

                 

              	 
	
                CR0
                  =

                 

              	
                the
                  Conversion Rate in effect immediately prior to the adjustment relating
                  to
                  such event

                 

              
	
                CR1
                  =

                 

              	
                the
                  new Conversion Rate taking such event into account

                 

              
	
                FMV0
                  =

                 

              	
                the
                  average of the Closing Sale Prices of the capital shares or similar
                  equity
                  interest distributed to holders of Common Shares applicable to
                  one Common
                  Share over the first 10 consecutive Trading Days after the effective
                  date
                  of the Spin-Off

                 

              
	
                MP0
                  = 

                 

              	
                the
                  average of the Closing Sale Prices of the Common Shares over the
                  first 10
                  consecutive Trading Days after the effective date of the
                  Spin-Off.

                 

              

      

    

     

    An
      adjustment to the Conversion Rate made pursuant to the immediately preceding
      clause will occur on the 10th Trading Day from and including the effective
      date
      of the Spin-Off.

     

    If
      any
      such dividend or distribution described in this clause (c) is declared but
      not
      paid or made, the new Conversion Rate shall be readjusted to be the Conversion
      Rate that would then be in effect if such dividend or distribution had not
      been
      declared.

     

    (d)  If
      the
      Company pays or makes any cash dividend or distribution in respect of any of
      its
      quarterly fiscal periods (without regard to when paid) to all holders of Common
      Shares in an aggregate amount that, together with other cash dividends or
      distributions made in respect of such quarterly fiscal period, exceeds the
      product of $0.465 (the “Reference
      Dividend”)
      multiplied by the number of Common Shares outstanding on the record date for
      such distribution, the Conversion Rate will be adjusted based on the following
      formula:

     

    

      
        	
                CR1
                  =

                 

              	
                CR0
                  x SP0/(SP0-C)

                 

              
	
                where

                 

              	 
	
                CR0
                  =

                 

              	
                the
                  Conversion Rate in effect immediately prior to the adjustment relating
                  to
                  such event

                 

              
	
                CR1
                  =

                 

              	
                the
                  new Conversion Rate taking such event into account

                 

              
	
                SP0
                  =

                 

              	
                the
                  average of the Closing Sale Prices of Common Shares for the 10
                  consecutive
                  Trading Days prior to the Business Day immediately preceding the
                  earlier
                  of the record date or the day prior to the ex-dividend date for
                  such
                  distribution

                 

              

      

    

     

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

     

    

      
        	
                C
                  =

                 

              	
                the
                  amount in cash per Common Share that the Company distributes to
                  holders of
                  Common Shares in respect of such quarterly fiscal period that exceeds
                  the
                  Reference Dividend.

                 

              

      

    

    An
      adjustment to the Conversion Rate made pursuant to this clause (d) shall become
      effective on the date immediately after the date fixed for the determination
      of
      holders of Common Shares entitled to receive such dividend or distribution.
      If
      any dividend or distribution described in this clause (d) is declared but not
      so
      paid or made, the new Conversion Rate shall be readjusted to the Conversion
      Rate
      that would then be in effect if such dividend or distribution had not been
      declared.

     

    The
      Reference Dividend shall be subject to adjustment on account of any of the
      events set forth in clauses (a), (b) and (c) above and clause (e) below.
      Any such adjustment will be effected by multiplying the Reference Dividend
      by a
      fraction, the numerator of which will equal the Conversion Rate in effect
      immediately prior to the adjustment on account of such event and the denominator
      of which will equal the Conversion Rate as adjusted.

     

    (e)  If
      the
      Company or any of its subsidiaries makes a payment in respect of a tender offer
      or exchange offer for Common Shares to the extent that the cash and value of
      any
      other consideration included in the payment per Common Share exceeds the Closing
      Sale Price of a Common Share on the Trading Day next succeeding the last date
      on
      which tenders or exchanges may be made pursuant to such tender or exchange
      offer
      (the “Expiration
      Time”),
      the
      Conversion Rate will be adjusted based on the following formula:

    

      
        	
                CR1
                  = 

                 

              	
                CR0
                  x (AC + (SP1 x OS1))/(SP1 x OS0)

                 

              
	
                where

                 

              	 
	
                CR0
                  =

                 

              	
                the
                  Conversion Rate in effect immediately prior to the adjustment relating
                  to
                  such event

                 

              
	
                CR1
                  =

                 

              	
                the
                  new Conversion Rate taking such event into account

                 

              
	
                AC
                  =

                 

              	
                the
                  aggregate value of all cash and any other consideration (as determined
                  by
                  the Board of Trust Managers of the Company) paid or payable for
                  Common
                  Shares purchased in such tender or exchange offer

                 

              
	
                OS0
                  =

                 

              	
                the
                  number of Common Shares outstanding immediately prior to the date
                  such
                  tender or exchange offer expires

                 

              
	
                OS1
                  =

                 

              	
                the
                  number of Common Shares outstanding immediately after such tender
                  or
                  exchange offer expires (after giving effect to the purchase or
                  exchange of
                  shares pursuant to such tender or exchange offer)

                 

              

      

    

     

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

     

    

      
        	
                SP1
                  =

                 

              	
                the
                  average of the Closing Sale Prices of Common Shares for the 10
                  consecutive
                  Trading Days commencing on the Trading Day next succeeding the
                  date such
                  tender or exchange offer expires.

                 

              

      

    

    If
      the
      application of the foregoing formula would result in a decrease in the
      Conversion Rate, no adjustment to the Conversion Rate will be made.

     

    Any
      adjustment to the Conversion Rate made pursuant to this clause (e) shall become
      effective on the date immediately following the Expiration Time. If the Company
      or one of its subsidiaries is obligated to purchase Common Shares pursuant
      to
      any such tender or exchange offer but is permanently prevented by applicable
      law
      from effecting any such purchase or all such purchases are rescinded, the new
      Conversion Rate shall be readjusted to be the Conversion Rate that would be
      in
      effect if such tender or exchange offer had not been made.

     

    (f)  Notwithstanding
      the foregoing, in the event of an adjustment to the Conversion Rate pursuant
      to
      clause (d) or (e) above, in no event will the Conversion Rate exceed 25.4712
      per
      $1,000 principal amount of Notes, subject to adjustment pursuant to clauses
      (a),
      (b) and (c) above.

     

    (g)  If
      the
      Company has in effect a rights plan while any Notes remain Outstanding, Holders
      of Notes will receive, upon a conversion of Notes in respect of which the
      Company has elected to deliver Net Shares, in addition to such Net Shares,
      rights under the Company’s shareholder rights agreement unless, prior to
      conversion, the rights have expired, terminated or been redeemed or unless
      the
      rights have separated from the Common Shares. If the rights provided for in
      the
      rights plan adopted by the Company have separated from the Common Shares in
      accordance with the provisions of the applicable shareholder rights agreement
      so
      that Holders of Notes would not be entitled to receive any rights in respect
      of
      Common Shares that the Company elects to deliver as Net Shares upon conversion
      of Notes, the Conversion Rate will be adjusted at the time of separation as
      if
      the Company had distributed to all holders of Common Shares capital shares,
      evidences of indebtedness or other assets or property pursuant to clause (c)
      above, subject to readjustment upon the subsequent expiration, termination
      or
      redemption of the rights. In lieu of any such adjustment, the Company may amend
      such applicable shareholder rights agreement to provide that upon a conversion
      of Notes the Holders will receive, in addition to Common Shares that the Company
      elects to deliver as Net Shares upon such conversion, the rights which would
      have attached to such Common Shares if the rights had not become separated
      from
      the Common Shares under such applicable shareholder rights agreement. To the
      extent that the Company adopts any future shareholder rights agreement, upon
      a
      conversion of Notes in respect of which the Company elects to deliver Common
      Shares as Net Shares, a Holder of Notes shall receive, in addition to such
      Common Shares, the rights under the future shareholder rights agreement whether
      or not the rights have separated from Common Shares at the time of conversion
      and no adjustment will be made in accordance with clause (c) or
      otherwise.

     

     

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

     

    In
      addition to the adjustments pursuant to clauses (a) through (g) above, the
      Company may increase the Conversion Rate in order to avoid or diminish any
      income tax to holders of Common Shares resulting from any dividend or
      distribution of capital shares (or rights to acquire Common Shares) or from
      any
      event treated as such for income tax purposes. The Company may also, from time
      to time, to the extent permitted by applicable law, increase the Conversion
      Rate
      by any amount for any period if the Company has determined that such increase
      would be in the best interests of the Company. If the Company makes such
      determination, it will be conclusive and the Company will mail to Holders of
      the
      Notes a notice of the increased Conversion Rate and the period during which
      it
      will be in effect at least fifteen (15) days prior to the date the increased
      Conversion Rate takes effect in accordance with applicable law.

     

    If,
      in
      connection with any adjustment to the Conversion Rate as set forth in this
      Section 2.14 a Holder shall be deemed for U.S. federal tax purposes to have
      received a distribution, the Company may set off any withholding tax it
      reasonably believes it is required to collect with respect to any such deemed
      distribution against cash payments of interest in accordance with the provisions
      of Section 2.05 hereof or from cash and Common Shares, if any, otherwise
      deliverable to a Holder upon a conversion of Notes in accordance with the
      provisions of Section 2.12 hereof or a redemption or repurchase of a Note in
      accordance with the provisions of Section 2.07, 2.08 or 2.09
      hereof.

     

    The
      Company will not make any adjustment to the Conversion Rate if Holders of the
      Notes are permitted to participate, on an as-converted basis, in the
      transactions described above.

     

    Notwithstanding
      anything to the contrary contained herein, in addition to the other events
      set
      forth herein on account of which no adjustment to the Conversion Rate shall
      be
      made, the applicable Conversion Rate shall not be adjusted for:

     

    (i)  the
      issuance of any Common Shares pursuant to any present or future plan providing
      for the reinvestment of dividends or interest payable on securities
      of the Company and the investment of additional optional amounts in Common
      Shares under any plan;

     

    (ii)  the
      issuance of any Common Shares or options or rights to purchase those shares
      pursuant to any present or future employee, trust manager or consultant benefit
      plan, employee agreement or arrangement or program of the Company;

     

    (iii)  the
      issuance of any Common Shares pursuant to any option, warrant, right, or
      exercisable, exchangeable or convertible security outstanding as of the date
      the
      Notes were first issued;

     

    (iv)  a
      change
      in the par value of the Common Shares;

     

    (v)  accumulated
      and unpaid dividends or distributions; and

     

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

     

     

    (vi)  as
      a
      result of a tender offer solely to holders of fewer than 100 Common
      Shares.

     

    No
      adjustment in the Conversion Rate will be required unless the adjustment would
      require an increase or decrease of at least 1% of the Conversion Price. If
      the
      adjustment is not made because the adjustment does not change the Conversion
      Price by at least 1%, then the adjustment that is not made will be carried
      forward and taken into account in any future adjustment. All required
      calculations will be made to the nearest cent or 1/1000th of a share, as the
      case may be. Notwithstanding the foregoing, if the Notes are called for
      redemption, all adjustments not previously made will be made on the applicable
      Redemption Date.

     

    Whenever
      the Conversion Rate is adjusted as herein provided, the Company shall, as
      promptly as reasonably practicable, file with the Trustee and any Conversion
      Agent other than the Trustee, an Officers’ Certificate setting forth the
      Conversion Rate after such adjustment and setting forth a brief statement of
      the
      facts requiring such adjustment. Promptly after delivery of such certificate,
      the Company shall prepare a notice of such adjustment of the Conversion Rate
      setting forth the adjusted Conversion Rate and the date on which each adjustment
      becomes effective and shall mail such notice of such adjustment of the
      Conversion Rate to the Holders of the Notes within 20 Business Days of the
      effective date of such adjustment. Failure to deliver such notice shall not
      affect the legality or validity of any such adjustment.

     

    For
      purposes of this Section 2.14, the number of Common Shares at any time
      outstanding shall not include shares held in the treasury of the Company but
      shall include shares issuable in respect of scrip certificates issued in lieu
      of
      fractions of Common Shares.

     

    Notwithstanding
      anything in this Section 2.14 to the contrary, in no event shall the Conversion
      Rate be adjusted so that the Conversion Rate would be less than
      $0.01.

     

    Section
      2.15.  Ownership
      Limit; Withholding.
      Notwithstanding any other provision of the Notes or the instructions contained
      herein, no Holder of Notes shall be entitled to convert such Notes for Common
      Shares to the extent that receipt of such shares would cause such Holder
      (together with such Holder’s affiliates) to exceed the ownership limit contained
      in the Declaration of Trust of the Company as in effect from time to
      time.

     

    At
      the
      Maturity of the principal of the Notes, whether at Stated Maturity or upon
      earlier redemption or repurchase of Notes or otherwise, and as otherwise
      required by law, the Company may deduct and withhold from the amount of
      consideration otherwise deliverable to such Holder the amount required to be
      deducted and withheld under applicable law.

     

    Section
      2.16.  Merger,
      Consolidation or Sale.

     

    Section
      801 of the Indenture, for purposes of the Notes, is hereby modified and amended
      to include the following additional proviso:

     

    “(3)
      if
      as a result of such transaction the Notes become exchangeable into common stock
      or other securities issued by a third party, such third party shall assume
      or
      fully and unconditionally guarantee all obligations under the Notes and the
      Indenture.”

     

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

     

    Section
      2.17.  Satisfaction
      and Discharge.
      The
      provisions of ARTICLE FOURTEEN of the Indenture shall not be applicable to
      the
      Notes. The Company may satisfy and discharge its obligations under the Indenture
      by delivering to the Trustee for cancellation all Outstanding Notes or by
      depositing with the Trustee, the Paying Agent or the Conversion Agent, if
      applicable, after the Notes have become due and payable, whether on the date
      of
      the Stated Maturity of the principal amount of the Notes, any Redemption Date,
      Optional Repurchase Date or Change in Control Purchase Date or upon conversion
      or otherwise, cash or Common Shares in accordance with the terms hereof
      sufficient to pay all of the Outstanding Notes and paying all other sums payable
      under the Notes and the Indenture in respect of the Notes.

     

    Section
      2.18.  Events
      of Default; Waiver of Past Defaults.

     

    (a)  Section
      501 of the Indenture is modified and amended for purposes of the Notes to add
      the following Events of Default as clauses (9) and (10):

     

    “default
      in the delivery when due of the Conversion Value, on the terms set forth herein
      and in the Notes, upon exercise of a Holder’s conversion right in accordance
      with the terms hereof and of the Notes and the continuation of such default
      for
      10 days;”

     

    -
      and
      -

     

    “failure
      of the Company to provide a Company Notice within 20 days after the occurrence
      of a Change in Control as provided in Section 2.09 of the First Supplemental
      Indenture.”

     

    (b)  Section
      508 of the Indenture is modified and amended for purposes of the Notes to read
      as follows: 

     

    “Notwithstanding
      any other provision in this Indenture, the Holder of any Note shall have the
      right which is absolute and unconditional to receive payment of the principal
      of
      (and premium, if any), Conversion Value and (subject to Sections 305 and 307)
      interest on, and any Additional Amounts in respect of, such Note on the
      respective due dates expressed in such Note (or, in the case of redemption
      on
      the Redemption Date) and to institute suit for the enforcement of any such
      payment, and such rights shall not be impaired without the consent of such
      Holder.”

     

    (c)  Section
      513 of the Indenture is modified and amended for purposes of the Notes to add
      the following as clause (3):

     

    (3)
“in
      respect of the failure to convert any Notes in accordance with the provisions
      of
      this Indenture.”

     

    Section
      2.19.  Modification.
      Section
      902 of the Indenture is modified for purposes of the Notes to read as
      follows:

     

    “With
      the
      consent of the Holders of a majority in principal amount of all Outstanding
      Securities affected by such supplemental indenture (voting together as a single
      class), by Act of said Holders delivered to the Company and the Trustee, the
      Company, when authorized by or 

     

     

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

     

    pursuant
      to a Board Resolution and the Trustee may enter into an indenture or indentures
      supplemental hereto for the purpose of adding any provisions to or changing
      in
      any manner or eliminating any of the provisions of this Indenture or of
      modifying in any manner the rights of the Holders of Securities under this
      Indenture; provided, however, that no such supplemental indenture shall, without
      the consent of the Holder of each Outstanding Note affected thereby:

     

    (1)  change
      the Stated Maturity of the principal of, or any installment of interest
      (including Additional Interest, if any) on, the Notes; 

     

    (2)  reduce
      the principal amount of, the rate of interest (including Additional Interest,
      if
      any) on, or change the timing or reduce the amount payable on the redemption
      of,
      the Notes; 

     

    (3)  make
      any
      change that impairs or adversely affects the rights of a Holder to convert
      Notes
      in accordance herewith; 

     

    (4)  change
      the Place of Payment, or the coin or currency, for payment of principal of,
      or
      interest (including Additional Interest, if any) on, the Notes; 

     

    (5)  impair
      the right to institute suit for the enforcement of any payment on or with
      respect to Notes or the delivery of the Conversion Value as required by the
      Indenture upon a conversion of Notes; 

     

    (6)  reduce
      the percentage in principal amount of the Outstanding Notes, the consent of
      whose Holders is required for any such supplemental indenture, or the consent
      of
      whose Holders is required for any waiver with respect to the Outstanding Notes
      (or compliance with specified provisions of the Indenture or specified defaults
      and consequences thereunder) or to reduce the quorum or voting requirements
      set
      forth in the Indenture; or

     

    (7)  modify
      any of the provisions of this Section 902 or Section 513 of the Indenture,
      except to increase the required percentage to effect such action or to provide
      that specified other provisions of the Indenture may not be modified or waived
      without the consent of the Holders of each Outstanding Note affected
      thereby.

     

    It
      shall
      not be necessary for any Act of Holders under this Section 2.19 to approve
      the
      particular form of any proposed supplemental indenture, but it shall be
      sufficient if such Act shall approve the substance thereof. 

     

    A
      supplemental indenture which changes or eliminates any covenant or other
      provision of this Indenture which has expressly been included solely for the
      benefit of one or more particular series of Securities, or which modifies the
      rights of the Holders of Securities of such series with respect to such covenant
      or other provision, shall be deemed not to affect the rights under this
      Indenture of the Holders of Securities of any other series.”

     

     

    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    

     

    Section
      2.20.  Certain
      Covenants Not Applicable to the Notes.
      The
      Notes shall not be entitled to the benefits of the covenants set forth in
      Section 1004 and Section 1013 of the Indenture.

     

    Section
      2.21.  Calculations
      in Respect of the Notes. Except
      as
      otherwise specifically stated herein or in the Notes, all calculations to be
      made in respect of the Notes shall be the obligation of the Company. All
      calculations made by the Company or its agent as contemplated pursuant to the
      terms hereof and of the Notes shall be made in good faith and be final and
      binding on the Company and the Holders absent manifest error. The Company shall
      provide a schedule of calculations to the Trustee, and the Trustee shall be
      entitled to rely upon the accuracy of the calculations by the Company without
      independent verification. The Trustee shall forward calculations made by the
      Company to any Holder of Notes upon written request within 20 Business Days
      after the effective date of any adjustment.

     

    Section
      2.22.  Authorized
      Denominations. The
      Notes
      shall be issued in denominations of $1,000 and integral multiples thereof and
      payments of principal, interest (including Additional Interest) and Additional
      Amounts, if any, on the Notes shall be made in U.S. dollars.

     

    Section
      2.23.  Conversion
      Agent, Paying Agent and Securities Registrar. JPMorgan
      Chase Bank, National Association, is hereby appointed as Conversion Agent,
      Paying Agent and the Security Registrar for the Notes. The Security Register
      for
      the Notes will be maintained by the Security Registrar at the Trustee’s
      Corporate Trust Office. The rights, privileges, protections, immunities and
      benefits given to the Trustee pursuant to the Indenture, including, without
      limitation, its right to be indemnified, are extended to, and shall be
      enforceable by, the Trustee in each of its capacities with respect to the
      Notes.

     

    Section
      2.24.  Restrictions
      on Transfer.
      (a)
Every
      Note (and all Notes issued in exchange therefor or in substitution thereof)
      that
      bears or is required under this Section 2.24(a) to bear the legend set forth
      in
      this Section 2.24(a) (together with any Common Shares issued upon conversion
      of
      the Notes, collectively, the “Restricted
      Securities”)
      shall
      be subject to the restrictions on transfer set forth in this Section 2.24(a)
      (including those set forth in the legend below) unless such restrictions on
      transfer shall be waived by written consent of the Company, and the Holder
      of
      each such Restricted Security, by such Holder’s acceptance thereof, agrees to be
      bound by all such restrictions on transfer. As used in this Section 2.24(a),
      the
      term “transfer” means any sale, pledge, loan, transfer or other disposition
      whatsoever of any Restricted Security or any interest therein.

     

    Until
      the
      expiration of the holding period applicable to sales of Restricted Securities
      under Rule 144(k) under the Securities Act (or any successor provision), any
      certificate evidencing a Restricted Security shall bear a legend in
      substantially the following form, unless such Restricted Security has been
      sold
      pursuant to a registration statement that has been declared effective under
      the
      Securities Act (and which continues to be effective at the time of such
      transfer) or sold pursuant to Rule 144 under the Securities Act or any similar
      provision then in force, or unless otherwise agreed by the Company in writing,
      with written notice thereof to the Trustee:

     

     

    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    

     

    THIS
      SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
      (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR
      SOLD EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF,
      THE HOLDER:

     

    (1) REPRESENTS
      THAT IT IS A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER
      THE SECURITIES ACT) IS AWARE THAT THE TRANSFER IS BEING MADE IN RELIANCE ON
      RULE
      144A UNDER THE SECURITIES ACT AND IS PURCHASING THIS SECURITY IN COMPLIANCE
      WITH
      RULE 144A UNDER THE SECURITIES ACT;

     

    (2) AGREES
      THAT IT WILL NOT, WITHIN TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE
      OF
      THIS SECURITY AND THE LAST DATE ON WHICH THE COMPANY OR AN AFFILIATE THEREOF
      WAS
      THE OWNER OF THIS SECURITY, RESELL OR OTHERWISE TRANSFER THIS SECURITY OR THE
      COMMON SHARES ISSUABLE UPON CONVERSION OF SUCH SECURITY EXCEPT (A) TO THE
      COMPANY OR ANY OF ITS SUBSIDIARIES, (B) TO A QUALIFIED INSTITUTIONAL BUYER
      IN
      COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) PURSUANT TO THE
      EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT
      (IF AVAILABLE), OR (D) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN
      DECLARED EFFECTIVE UNDER THE SECURITIES ACT AND WHICH CONTINUES TO BE EFFECTIVE
      AT THE TIME OF SUCH TRANSFER; AND

     

    (3) AGREES
      THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED (OTHER
      THAN A TRANSFER PURSUANT TO CLAUSE 2(C) OR 2(D) ABOVE) A NOTICE
      SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER
      OF
      THIS SECURITY WITHIN TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE OF
      THIS SECURITY AND THE LAST DATE ON WHICH THE COMPANY OR AN AFFILIATE THEREOF
      WAS
      THE OWNER OF THIS SECURITY, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH
      ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS
      SECURITY TO THE TRUSTEE (OR ANY SUCCESSOR TRUSTEE, AS APPLICABLE). IF THE
      PROPOSED TRANSFER IS PURSUANT TO CLAUSE 2(C) ABOVE, THE HOLDER MUST, PRIOR
      TO
      SUCH TRANSFER, FURNISH TO THE TRUSTEE (OR ANY SUCCESSOR TRUSTEE, AS APPLICABLE),
      SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE COMPANY OR
      THE
      TRUSTEE MAY REASONABLY REQUIRE 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. THIS LEGEND WILL BE REMOVED
      UPON THE EARLIER OF THE TRANSFER OF THIS SECURITY PURSUANT TO CLAUSE 2(C) OR
      2(D) ABOVE OR THE EXPIRATION OF TWO YEARS FROM THE LATER OF THE ORIGINAL ISSUE
      DATE OF THIS SECURITY AND THE LAST DATE ON WHICH THE COMPANY OR AN AFFILIATE
      THEREOF WAS THE OWNER OF THIS SECURITY.

     

     

    
      
        
        

      

      
        32

        
          

        

      

      
        
        

      

    

     

    PURSUANT
      TO SECTIONS 1271 THROUGH 1275 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED,
      THIS SECURITY HAS BEEN ISSUED WITH ORIGINAL ISSUE DISCOUNT. TO OBTAIN
      (I) THE ISSUE PRICE OF THIS SECURITY, (II) THE AMOUNT OF ORIGINAL
      ISSUE DISCOUNT, (III) THE ISSUE DATE, AND (IV) THE YIELD TO MATURITY;
      CONTACT INVESTOR RELATIONS AT 2600 CITADEL PLAZA DRIVE SUITE 300, HOUSTON,
      TEXAS
      77008 OR BY PHONE AT (713) 866-6000.

     

    THE
      HOLDER OF THIS SECURITY IS ENTITLED TO THE BENEFITS OF A REGISTRATION RIGHTS
      AGREEMENT (AS SUCH TERM IS DEFINED IN THE INDENTURE REFERRED TO ON THE REVERSE
      HEREOF) AND, BY ITS ACCEPTANCE HEREOF, AGREES TO BE BOUND BY AND TO COMPLY
      WITH
      THE PROVISIONS OF SUCH REGISTRATION RIGHTS AGREEMENT.

     

    Any
      Notes
      that are Restricted Securities and as to which such restrictions on transfer
      shall have expired in accordance with their terms or as to conditions for
      removal of the foregoing legend set forth therein have been satisfied may,
      upon
      surrender of such Note for exchange to the Securities Registrar in accordance
      with the provisions of this Section 2.24, be exchanged for a new Note or Notes,
      of like tenor and aggregate principal amount, which shall not bear the
      restrictive legend required by this Section 2.24(a). If such Restricted Security
      surrendered for exchange is represented by a global Note bearing the legend
      set
      forth in this Section 2.24(a), the principal amount of the legended global
      Note
      shall be reduced by the appropriate principal amount and the principal amount
      of
      a global Note without the legend set forth in this Section 2.24(a) shall be
      increased by an equal principal amount. If a global Note without the legend
      set
      forth in this Section 2.24(a) is not then Outstanding, the Issuer shall execute
      and the Trustee shall authenticate and deliver an unlegended global Note to
      the
      Depositary.

     

    In
      the
      event Rule 144(k) under the Securities Act (or any successor provision) is
      amended to shorten the two-year period under Rule 144(k), then, the references
      in the restrictive legends set forth above to “TWO YEARS,” and in the
      corresponding transfer restrictions described above, and in the Notes and the
      Common Shares will be deemed to refer to such shorter period, from and after
      receipt by the Trustee of an Officers’ Certificate and an Opinion of Counsel to
      that effect. As soon as reasonably practicable after the Company knows of the
      effectiveness of any such amendment to shorten the two-year period under Rule
      144(k), unless such changes would otherwise be prohibited by, or would cause
      a
      violation of, the federal securities laws applicable at the time, the Company
      will provide to the Trustee an Officers’ Certificate and an Opinion of Counsel
      as to the effectiveness of such amendment and the effectiveness of such change
      to the restrictive legends and transfer restrictions.

     

    (b)
      Any
      Restricted Securities, prior to the expiration of the holding period applicable
      to sales thereof under Rule 144(k) under the Securities Act (or any successor
      provision), purchased or owned by the Company or any Affiliate thereof may
      not
      be resold by the Company or such Affiliate and will be surrendered to the
      Trustee for cancellation. Upon expiration of the holding period applicable
      to
      Restricted Securities under Rule 144(k) under the Securities Act (or any
      successor provision), the Notes may, to the extent permitted by applicable
      law,
      be reissued or sold or may be surrendered to the Trustee for cancellation.
      Any
      Notes surrendered for cancellation may not be reissued or resold and will be
      canceled promptly by the Trustee.

     

     

    
      
        
        

      

      
        33

        
          

        

      

      
        
        

      

    

     

    (c)
      The
      Trustee shall have no obligation or duty to monitor, determine or inquire as
      to
      compliance with any restrictions on transfer imposed under this instrument
      or
      under applicable law with respect to any transfer of any interest in any Note
      other than to require delivery of such certificates and other documentation
      or
      evidence as are expressly required by, and to do so if and when expressly
      required by, the terms of this instrument, and to examine the same to determine
      substantial compliance as to form with the express requirements
      hereof.

     

    Section
      2.25.  Rule
      144A Information Requirement.
      Within
      the period prior to the expiration of the holding period applicable to sales
      thereof under Rule 144(k) under the Securities Act (or any successor provision),
      the Company covenants and agrees that it shall, during any period in which
      it is
      not subject to Section 13 or 15(d) under the Exchange Act, make available to
      any
      Holder or beneficial owner of Notes or any Common Shares issued upon conversion
      thereof which continue to be Restricted Securities in connection with any sale
      thereof and any prospective purchaser of Notes or such Common Shares designated
      by such Holder or beneficial owner, the information required pursuant to Rule
      144A(d)(4) under the Securities Act upon the request of any Holder or beneficial
      owner of the Notes or such Common Shares, all to the extent required to enable
      such Holder or beneficial owner to sell its Notes or Common Shares without
      registration under the Securities Act within the limitation of the exemption
      provided by Rule 144A.

     

    Section
      2.26.  Provision
      of Financial Information.
      The
      Company, for so long as any Notes are Outstanding, within 15 days after it
      is
      required to file the same with the Commission, will furnish to the Holders
      of
      the Notes, or cause the Trustee to furnish to the Holders of the Notes, all
      annual, quarterly and other reports that it may be required to file with the
      Commission pursuant to Section 13 or Section 15(d) of the Exchange Act. Delivery
      of such reports, information and documents to the Trustee is for informational
      purposes only and the Trustee’s receipt of such shall not constitute
      constructive notice of any information contained therein or determinable from
      information contained therein, including the Company’s compliance with any of
      its covenants hereunder (as to which the Trustee is entitled to rely exclusively
      on an Officers’ Certificate). If the Company is not required to file the
      foregoing forms or reports with the Commission, then it will file with the
      Trustee and the Commission such reports as may be prescribed by the Commission
      at such time.

     

    Section
      2.27.  Additional
      Interest Notice.
      In the
      event that the Company is required to pay Additional Interest to Holders of
      Notes pursuant to the Registration Rights Agreement, the Company will provide
      written notice (“Additional
      Interest Notice”)
      to the
      Trustee of its obligation to pay Additional Interest no later than fifteen
      (15)
      calendar days prior to the proposed payment date for Additional Interest, and
      the Additional Interest Notice shall set forth the amount of Additional Interest
      to be paid by the Company on such payment date. The Trustee shall not at any
      time be under any duty or responsibility to any Holder of Notes to determine
      the
      Additional Interest, or with respect to the nature, extent or calculation of
      the
      amount of Additional Interest when made, or with respect to the method employed
      in such calculation of the Additional Interest.

     

     

    
      
        
        

      

      
        34

        
          

        

      

      
        
        

      

    

     

    ARTICLE
      THREE 

    FORM
      OF
      NOTES

     

    Section
      3.01.  Form
      of Notes.
      The
      Notes and the Trustee’s certificate of authentication to be borne by such Notes
      shall be substantially in the form set forth in Exhibit A hereto. Any of the
      Notes may have such letters, numbers or other marks of identification and such
      notations, legends, endorsements or changes as the officers executing the same
      may approve (execution thereof to be conclusive evidence of such approval)
      and
      as are not inconsistent with the provisions of the Indenture, or as may be
      required by the Depositary or by the National Association of Securities Dealers,
      Inc. in order for the Notes to be eligible for trading on The PORTALSM
      Market
      or as may be required for the Notes to be tradable on any other market developed
      for trading of securities pursuant to Rule 144A or as may be required to comply
      with any applicable law or with any rule or regulation made pursuant thereto
      or
      with any rule or regulation of any securities exchange or automated quotation
      system on which the Notes may be listed, or to conform to usage, or to indicate
      any special limitations or restrictions to which any particular Notes are
      subject.

     

    ARTICLE
      FOUR

    MISCELLANEOUS

     

    Section
      4.01.  Relation
      to Original Indenture.
      This
      First Supplemental Indenture supplements the Original Indenture and shall be
      a
      part of and subject to all the terms thereof. Except as supplemented hereby,
      all
      of the terms, provisions and conditions of the Original Indenture and the
      Securities issued thereunder shall continue in full force and effect.

     

    Section
      4.02.  Concerning
      the Trustee.
      The
      Trustee shall not be responsible for any recital herein, as such recitals shall
      be taken as statements of the Company, or the validity of the execution by
      the
      Company of this First Supplemental Indenture. The Trustee makes no
      representations as to the validity or sufficiency of this instrument.

     

    Section
      4.03.  Effect
      of Headings.
      The
      Article and Section headings herein are for convenience of reference only and
      shall not affect the construction hereof. 

     

    Section
      4.04.  Counterparts.
      This
      instrument may be executed in counterparts, each of which shall be deemed an
      original, but all of which shall together constitute one and the same
      instrument.

     

    Section
      4.05.  Governing
      Law.
      This
      instrument shall be governed by and construed in accordance with the laws of
      the
      State of New York. 

     

    [signature
      page follows]

     

    

     

    
      
        
        

      

      
        35

        
          

        

      

      
        
        

        
        

      

    

    
EXECUTION
      COPY

     

    
 

    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.

     

     

    
      	
              WEINGARTEN
                REALTY INVESTORS

            
	 	 
	 	 
	
              By:

            	
              /s/
                Stephen C. Richter

            
	 	
              Stephen
                C. Richter

            
	 	
              Executive
                Vice President and Chief Financial Officer

            
	 	 
	 	 
	 	 
	
              JPMORGAN
                CHASE BANK, NATIONAL ASSOCIATION

            
	 	 
	 	 
	
              By:

            	
              /s/
                Mauri J. Cowen

            
	 	
              Mauri
                J. Cowen

            
	 	
              Vice
                President and Trust Officer

            

    

    

    

    
      
        
        

      

      
        36

        
          

        

      

      
        
        

        
        

      

    

    Exhibit
      A

    

    

    [FORM
      OF
      NOTE]

     

    [Include
      only for Global Notes]

     

    UNLESS
      THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
      COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE ISSUER OR ITS AGENT FOR
      REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT AND ANY NOTE ISSUED IS REGISTERED
      IN THE NAME OF CEDE & CO. OR IN 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.

     

    UNLESS
      AND UNTIL THIS NOTE IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN CERTIFICATED
      FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY DTC TO A NOMINEE
      THEREOF OR BY A NOMINEE THEREOF TO DTC OR ANOTHER NOMINEE OF DTC OR BY DTC
      OR
      ANY SUCH NOMINEE TO A SUCCESSOR OF DTC OR A NOMINEE OF SUCH
      SUCCESSOR.

     

    [Include
      only for Notes that are Restricted Securities]

     

    THIS
      SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
      (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR
      SOLD EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF,
      THE HOLDER:

     

    (1) REPRESENTS
      THAT IT IS A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER
      THE SECURITIES ACT), IS AWARE THAT THE TRANSFER IS BEING MADE IN RELIANCE ON
      RULE 144A UNDER THE SECURITIES ACT AND IS PURCHASING THIS SECURITY IN COMPLIANCE
      WITH RULE 144A UNDER THE SECURITIES ACT;

     

    (2) AGREES
      THAT IT WILL NOT, WITHIN TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE
      OF
      THIS SECURITY AND THE LAST DATE ON WHICH WEINGARTEN REALTY INVESTORS (THE
“COMPANY”) OR AN AFFILIATE THEREOF WAS THE OWNER OF THIS SECURITY, RESELL OR
      OTHERWISE TRANSFER THIS SECURITY OR THE COMMON SHARES ISSUABLE UPON CONVERSION
      OF SUCH SECURITY EXCEPT (A) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B)
      TO A
      QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
      SECURITIES ACT, (C) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY
      RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (D) PURSUANT TO A
      REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
      ACT AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH TRANSFER;
      AND

     

     

    
      
        
        

      

      
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          1

        
          

        

      

      
        
        

      

    

     

    (3) AGREES
      THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED (OTHER
      THAN A TRANSFER PURSUANT TO CLAUSE 2(C) OR 2(D) ABOVE) A NOTICE
      SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER
      OF
      THIS SECURITY WITHIN TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE OF
      THIS SECURITY AND THE LAST DATE ON WHICH THE COMPANY OR AN AFFILIATE THEREOF
      WAS
      THE OWNER OF THIS SECURITY, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH
      ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS
      SECURITY TO THE TRUSTEE (OR ANY SUCCESSOR TRUSTEE, AS APPLICABLE). IF THE
      PROPOSED TRANSFER IS PURSUANT TO CLAUSE 2(C) ABOVE, THE HOLDER MUST, PRIOR
      TO
      SUCH TRANSFER, FURNISH TO THE TRUSTEE (OR ANY SUCCESSOR TRUSTEE, AS APPLICABLE),
      SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE COMPANY OR
      THE
      TRUSTEE MAY REASONABLY REQUIRE 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. THIS LEGEND WILL BE REMOVED
      UPON THE EARLIER OF THE TRANSFER OF THIS SECURITY PURSUANT TO CLAUSE 2(C) OR
      2(D) ABOVE OR THE EXPIRATION OF TWO YEARS FROM THE LATER OF THE ORIGINAL ISSUE
      DATE OF THIS SECURITY AND THE LAST DATE ON WHICH THE COMPANY OR AN AFFILIATE
      THEREOF WAS THE OWNER OF THIS SECURITY.

     

    [Include
      for all Notes]

     

    PURSUANT
      TO SECTIONS 1271 THROUGH 1275 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED,
      THIS SECURITY HAS BEEN ISSUED WITH ORIGINAL ISSUE DISCOUNT. TO OBTAIN
      (I) THE ISSUE PRICE OF THIS SECURITY, (II) THE AMOUNT OF ORIGINAL
      ISSUE DISCOUNT, (III) THE ISSUE DATE, AND (IV) THE YIELD TO MATURITY;
      CONTACT INVESTOR RELATIONS AT 2600 CITADEL PLAZA DRIVE SUITE 300, HOUSTON,
      TEXAS
      77008 OR BY PHONE AT (713) 866-6000.

     

    [Include
      only for Notes that are Restricted Securities]

     

    THE
      HOLDER OF THIS SECURITY IS ENTITLED TO THE BENEFITS OF A REGISTRATION RIGHTS
      AGREEMENT (AS SUCH TERM IS DEFINED IN THE INDENTURE REFERRED TO ON THE REVERSE
      HEREOF) AND, BY ITS ACCEPTANCE HEREOF, AGREES TO BE BOUND BY AND TO COMPLY
      WITH
      THE PROVISIONS OF SUCH REGISTRATION RIGHTS AGREEMENT.

     

    
      
        
        

      

      
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                NO.
                  _____

                 

              	
                PRINCIPAL
                  AMOUNT

                 

              
	
                CUSIP
                  NO. 948741 AE 3

                 

              	
                $____________________

                 

              

      

    

     

    

     

    WEINGARTEN
      REALTY INVESTORS

     

    3.95%
      Convertible Senior Note due 2026

     

    WEINGARTEN
      REALTY INVESTORS, a Texas real estate investment trust (the “Company”, which
      term shall include any successor under the Indenture hereinafter referred to),
      for value received, hereby promises to pay to Cede & Co., or its registered
      assigns, the principal sum of _________________ Dollars ($____________) on
      August 1, 2026 unless redeemed, repurchased or converted prior to such date
      in accordance with the terms hereof and of the Indenture.

     

    This
      Note
      shall bear interest as specified on the reverse hereof. This Note is convertible
      for the consideration specified on the reverse hereof. This Note is subject
      to
      redemption by the Company at its option and to repurchase by the Company at
      the
      option of the Holder as specified on the reverse hereof. 

     

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

     

    This
      Note
      shall not be entitled to the benefits of the Indenture or be valid or become
      obligatory for any purpose until the certificate of authentication hereon shall
      have been signed by the Trustee.

     

    

     

    
      
        
        

      

      
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    IN
      WITNESS WHEREOF, the Company has caused this Note to be signed manually or
      by
      facsimile by an authorized signatory.

     

    Dated:
      August 2, 2006

     

    

      
        	
                WEINGARTEN
                  REALTY INVESTORS

                 

              
	
                By:
                  

              	 
	 	
                Name:
                  

              
	 	
                Title:

              
	 	 
	 	 
	
                By:
                  

              	 
	 	
                Name:
                  

              
	 	
                Title:
                  

              

      

    

     

    

      
        	
                Attest:

                 

              
	
                Name:
                  

              
	
                Title:
                  

                 

              

      

    

     

     

    

     

    TRUSTEE’S
      CERTIFICATE OF AUTHENTICATION

     

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

     

    

      
        	
                JPMORGAN
                  CHASE BANK, NATIONAL ASSOCIATION

                as
                  Trustee

              
	 	 
	
                By:

              	 
	 	
                Authorized
                  Signatory

              

      

    

     

    
      
        
        

      

      
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    [REVERSE
      OF NOTE] 

     

    WEINGARTEN
      REALTY INVESTORS

     

    3.95%
      Convertible Senior Note due 2026

     

    This
      Note
      is one of a duly authorized issue of notes, debentures, bonds, or other
      evidences of indebtedness of the Company (hereinafter called the “Securities”)
      of the series hereinafter specified, all issued or to be issued under and
      pursuant to an Indenture, dated as of May 1, 1995 (as amended and
      supplemented by the First Supplemental Indenture, dated as of August 2,
      2006, and as further amended or supplemented from time to time, the
“Indenture”), duly executed and delivered by Weingarten Realty Investors, a
      Texas real estate investment trust (“Weingarten” or the “Company”), to JPMorgan
      Chase Bank, National Association, as trustee (the “Trustee,” which term includes
      any successor trustee under the Indenture with respect to the series of
      Securities of which this Note is a part), and reference is hereby made to the
      Indenture, and all modifications and amendments and indentures supplemental
      thereto relating to the Notes, for a description of the rights, limitations
      of
      rights, obligations, duties, and immunities thereunder of the Trustee, the
      Company, and the Holders of the Notes and the terms upon which the Notes are
      authenticated and delivered. The Securities may be issued in one or more series,
      which different series may be issued in various aggregate principal amounts,
      may
      mature at different times, may accrue interest (if any) at different rates
      or
      formulas and may otherwise vary as provided in the Indenture. This Note is
      one
      of a series of Securities designated as the “3.95% Convertible Senior Notes due
      2026” of the Company, initially limited (except as permitted under the
      Indenture) in aggregate principal amount to $575,000,000. Terms used herein
      without definition and which are defined in the Indenture have the meanings
      assigned to them in the Indenture.

     

    
      	1.  	
              INTEREST
                

            

    

     

    The
      Notes
      shall bear interest at the rate of 3.95% per annum from August 2, 2006 or
      from the most recent Interest Payment Date (as defined below) to which interest
      has been paid or duly provided for, as the case may be, payable semi-annually
      in
      arrears on February 1 and August 1 of each year (each, an “Interest
      Payment Date”), commencing on February 1, 2007, until the principal hereof
      is paid or duly made available for payment. Interest payable on each Interest
      Payment Date shall equal the amount of interest accrued for the period
      commencing on and including the immediately preceding Interest Payment Date
      in
      respect of which interest has been paid or duly provided for (or commencing
      on
      and including August 2, 2006, if no interest has been paid or duly provided
      for) and ending on and including the day immediately preceding such Interest
      Payment Date. Interest on the Notes will be computed on the basis of a 360-day
      year consisting of twelve 30-day months.

     

    
      	2.  	
              METHOD
                OF PAYMENT 

            

    

     

    Except
      as
      provided in the Indenture, the Company shall pay interest on the Notes to the
      Persons who are Holders of record of Notes at the close of business (whether
      or
      not a Business Day) on the January 15 and July 15 immediately
      preceding the applicable Interest Payment Date (each, a “Regular Record Date”).
      Holders must surrender Notes to a Paying Agent and comply 

     

    
      
        
        

      

      
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    with
      the
      other terms of the Indenture to collect the principal amount, Redemption Price,
      Optional Repurchase Price or Change in Control Purchase Price of the Notes,
      plus, if applicable, accrued and unpaid interest (including Additional Interest,
      if any) payable as herein provided at maturity, upon redemption at the Company’s
      option or repurchase at the Holder’s option. The Company shall pay, in money of
      the United States that at the time of payment is legal tender for payment of
      public and private debts, all amounts due in cash with respect to the Notes
      on
      the dates and in the manner provided in this Note and the
      Indenture.

     

    
      	3.  	
              PAYING
                AGENT, CONVERSION AGENT AND SECURITY REGISTRAR
                

            

    

     

    Initially,
      the Trustee shall act as Paying Agent, Conversion Agent and Security Registrar.
      The Company hereby initially designates the Corporate Trust Office of the
      Trustee in New York, New York as the office to be maintained by it where this
      Note may be presented for payment, registration of transfer or exchange, where
      notices or demands to or upon the Company in respect of this Note or the
      Indenture may be served and where the Notes may be surrendered for conversion
      in
      accordance with the provisions of paragraph 6 hereof and the Indenture. The
      Company may appoint and change any Paying Agent, Conversion Agent, Security
      Registrar or co-registrar or approve a change in the office through which any
      Paying Agent acts without notice, other than notice to the Trustee.

     

    
      	4.  	
              REDEMPTION
                BY THE COMPANY

            

    

     

    The
      Company shall not have the right to redeem any Notes prior to August 4,
      2011, except to preserve the status of the Company as a real estate investment
      trust. If the Company determines it is necessary to redeem the Notes in order
      to
      preserve the status of the Company as a real estate investment trust, the
      Company may redeem the Notes then Outstanding, in whole or in part, at 100%
      of
      the principal amount of the Notes to be redeemed plus unpaid interest (including
      Additional Interest, if any) accrued thereon to the Redemption
      Date.

     

    The
      Company shall have the right to redeem the Notes for cash, in whole or in part
      at any time or from time to time, on or after August 4, 2011 at 100% of the
      principal amount of the Notes to be redeemed plus unpaid interest (including
      Additional Interest, if any) accrued thereon to the Redemption Date (the
“Redemption Price”).

     

    Notice
      of
      redemption at the option of the Company shall be mailed at least 30 days but
      not
      more than 60 days before the Redemption Date to each Holder of Notes to be
      redeemed at the Holder’s registered address. Notes in denominations larger than
      $1,000 principal amount may be redeemed in part but only in integral multiples
      of $1,000 principal amount.

     

    
      	5.  	
              OPTIONAL
                REPURCHASE RIGHTS;

              REPURCHASE
                AT OPTION OF HOLDER UPON A CHANGE IN
                CONTROL

            

    

     

    (a) Subject
      to the terms and conditions of the Indenture, a Holder shall have the right
      to
      require the Company to repurchase all of its Notes, or any portion of the
      principal amount thereof that is equal to $1,000 or an integral multiple
      thereof, on each of August 1, 2011, August 1, 2016 and August 1,
      2021 (each, an “Optional Repurchase Date”) for cash equal to 100% of the
      principal amount of the Notes to be repurchased plus unpaid interest (including
      Additional Interest, if any) accrued thereon to such Optional Repurchase Date
      (the “Optional 

     

    
      
        
        

      

      
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    Repurchase
      Price”), upon delivery to the Paying Agent of an Optional Repurchase Notice
      containing the information set forth in the Indenture, from the opening of
      business on the date that is 30 days prior to such Optional Repurchase Date
      until the close of business on the third Business Day prior to such Optional
      Repurchase Date and upon compliance with the other terms of the Indenture.
      

     

    (b) If
      a
      Change in Control occurs at any time on or prior to August 4, 2011, a
      Holder shall have the right, at such Holder’s option and subject to the terms
      and conditions of the Indenture, to require the Company to repurchase all or
      any
      of such Holder’s Notes having a principal amount equal to $1,000 or an integral
      multiple thereof on the date (the “Change in Control Purchase Date”) specified
      by the Company in the Company Notice (which date shall be no earlier than 15
      days and no later than 30 days after the date of such Company Notice) for cash
      equal to the 100% of the principal amount of the Notes to be repurchased plus
      unpaid interest (including Additional Interest, if any) accrued thereon to
      the
      Change in Control Purchase Date (the “Change in Control Purchase Price”).

     

    (c) Holders
      have the right to withdraw any Optional Repurchase Notice or Change in Control
      Purchase Notice, as the case may be, by delivery to the Paying Agent of a
      written notice of withdrawal in accordance with the provisions of the Indenture.
      

     

    (d) If
      the
      Paying Agent holds, in accordance with the terms of the Indenture, money
      sufficient to pay the Optional Repurchase Price or Change in Control Purchase
      Price of such Notes on the Optional Repurchase Date or Change in Control
      Purchase Date, as the case may be, then, on and after such date, such Notes
      shall cease to be Outstanding and interest on such Notes shall cease to accrue,
      and all other rights of the Holder shall terminate (other than the right to
      receive the Optional Repurchase Price or Change in Control Purchase Price upon
      delivery or transfer of the Notes). 

     

    
      	6.  	
              CONVERSION

            

    

     

    The
      Notes
      shall be convertible into the consideration specified in the Indenture at such
      times, upon compliance with such conditions and upon the terms set forth in
      the
      Indenture.

     

    The
      initial Conversion Rate shall be 20.3770 Common Shares per $1,000 principal
      amount of Notes, subject to adjustment in certain circumstances as specified
      in
      the Indenture. Notes tendered for conversion by a Holder after the close of
      business on any Regular Record Date for an interest payment and on or prior
      to
      the corresponding Interest Payment Date must be accompanied by payment of an
      amount equal to the interest that such Holder is to receive on such Notes on
      such Interest Payment Date; provided,
      however,
      that no
      such payment shall be required (1) if such Notes have been called for redemption
      on a Redemption Date that is after such Regular Record Date and on or prior
      to
      such Interest Payment Date or (2) with respect to overdue interest, if any
      overdue interest exists at the time of conversion with respect to such
      Notes.

     

    The
      Conversion Rate applicable to each Note a notice of conversion in respect of
      which is received by the Conversion Agent from and including the Effective
      Date
      of a Change in Control resulting from a transaction described in clauses (1)
      or
      (2) of the definition of Change in 

     

    
      
        
        

      

      
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    Control
      up to and including the 30th Business Day following the Effective Date of such
      Change in Control shall be increased by the number of Additional Shares
      specified in the Indenture.

     

    To
      convert this Note, the Holder must (a) complete and manually sign the
      irrevocable conversion notice set forth below (or complete and manually sign
      a
      facsimile of such notice) and deliver such notice to the Conversion Agent at
      the
      office maintained by the Conversion Agent for such purpose, (b) if this Note
      is
      in certificated form, surrender such Note to the Conversion Agent,
      (c) furnish appropriate endorsements and transfer documents if required by
      the Conversion Agent, the Company or the Trustee and (d) pay any transfer
      or similar tax, if required. The date on which the Holder satisfies all such
      requirements shall be deemed to be the date on which this Note shall have been
      surrendered for conversion.

     

    If
      the
      Holder has delivered an Optional Repurchase Notice or a Change in Control
      Purchase Notice requiring the Company to repurchase all or a portion of this
      Note pursuant to paragraph 5 hereof, then this Note (or portion hereof subject
      to such Optional Repurchase Notice or Change in Control Purchase Notice) may
      be
      converted only if the Optional Repurchase Notice or Change in Control Purchase
      Notice is withdrawn in accordance with the terms of the Indenture.

     

    
      	7.  	
              RANKING

            

    

     

    The
      Notes
      are senior unsecured obligations of the Company and shall rank pari passu in
      right of payment with all other senior unsecured senior indebtedness of the
      Company from time to time outstanding.

     

    
      	8.  	
              DEFAULTED
                INTEREST 

            

    

     

    Except
      as
      otherwise specified herein or in the Indenture, any Defaulted Interest on this
      Note shall forthwith cease to be payable to the Holder hereof on the relevant
      Regular Record Date by virtue of having been such Holder, and such Defaulted
      Interest may be paid by the Company as provided for in Section 307 of the
      Indenture. 

     

    
      	9.  	
              DENOMINATIONS;
                TRANSFER; CONVERSION

            

    

     

    This
      Note
      is issuable only in fully registered form, without coupons, in denominations
      of
      $1,000 and integral multiples thereof. This Note may be exchanged for a like
      aggregate principal amount of Notes of other authorized denominations at the
      office or agency of the Company in The City of New York, in the manner and
      subject to the limitations provided herein and in the Indenture, but without
      the
      payment of any charge except for any tax or other governmental charge imposed
      in
      connection therewith. Upon due presentment for registration of transfer of
      this
      Note at the office or agency of the Company in The City of New York, one or
      more
      new Notes of authorized denominations in an equal aggregate principal amount
      will be issued to the transferee in exchange therefor, and bearing such
      restrictive legends as may be required by the Indenture, but without payment
      of
      any charge except for any tax or other governmental charge imposed in connection
      therewith. In the event of any redemption in part, the Company shall not be
      required to: (i) issue or register the transfer or exchange of any Note during
      a
      period beginning at the opening of business 15 days before any selection of
      Notes for redemption and ending at the close of business on the earliest date
      on
      which the relevant notice 

     

    
      
        
        

      

      
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    of
      redemption is deemed to have been given to all Holders of Notes to be so
      redeemed, or (ii) register the transfer or exchange of any Note so selected
      for redemption, in whole or in part, except the unredeemed portion of any Note
      being redeemed in part. 

     

    
      	10.  	
              PERSONS
                DEEMED OWNERS 

            

    

     

    The
      Holder of this Note may be treated as the owner of this Note for all purposes,
      and neither the Company or the Trustee nor any authorized agent of the Company
      or the Trustee shall be affected by any notice to the contrary, except as
      required by law.

     

    
      	11.  	
              ADDITIONAL
                RIGHTS OF HOLDERS

            

    

     

    In
      addition to the rights provided to Holders of Notes under the Indenture, Holders
      shall have all the rights set forth in the Registration Rights Agreement, dated
      as of August 2, 2006, among the Company and the Initial Purchasers named
      therein.

     

    
      	12.  	
              MODIFICATION
                AND AMENDMENT; WAIVER 

            

    

     

    The
      Indenture permits, with certain exceptions as therein provided, the amendment
      thereof and the modification of the rights and obligations of the Company and
      the rights of the Holders of the Securities under the Indenture at any time
      by
      the Company and the Trustee with the consent of the Holders of a majority in
      the
      aggregate principal amount of all Outstanding Securities affected thereby
      (voting together as a single class). The Indenture also provides that certain
      amendments or modifications may not be made without the consent of each Holder
      to be affected thereby. Furthermore, provisions in the Indenture permit the
      Holders of a majority in the aggregate principal amount of the Outstanding
      Securities of any series, in certain instances, to waive, on behalf of all
      of
      the Holders of Securities of such series, certain past defaults under the
      Indenture and their consequences. Any such waiver by the Holder of this Note
      shall be conclusive and binding upon such Holder and upon all future Holders
      of
      this Note and other Notes issued upon the registration of transfer hereof or
      in
      exchange hereof, or in lieu hereof, whether or not notation of such consent
      or
      waiver is made upon this Note.

     

    
      	13.  	
              DEFAULTS
                AND REMEDIES 

            

    

     

    If
      an
      Event of Default occurs and is continuing, the Trustee, or the Holders of not
      less than 25% in aggregate principal amount of the Notes at the time
      Outstanding, may declare the principal amount and any accrued and unpaid
      interest, of all the Notes to be due and payable in the manner and with the
      effect provided in the Indenture. For Events of Default due to bankruptcy,
      insolvency, reorganization or the appointment of a receiver or liquidator,
      acceleration of maturity of the Notes is automatic.

     

    Events
      of
      Default in respect of the Notes are set forth in Section 501 of the Indenture.
      Holders may not enforce the Indenture or the Notes except as provided in the
      Indenture. 

     

    
      	14.  	
              CONSOLIDATION,
                MERGER, AND SALE OF ASSETS 

            

    

     

    In
      the
      event of a consolidation or merger of the Company or a sale, lease or conveyance
      of all or substantially all of the assets of the Company, or if the Notes are
      exchangeable into the 

     

    
      
        
        

      

      
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    common
      stock or other securities of a third party, as described in ARTICLE EIGHT of
      the
      Indenture, the successor entity to the Company shall succeed to and be
      substituted for the Company and may exercise the rights and powers of the
      Company under the Indenture, and thereafter, except in the case of a lease,
      the
      Company shall be relieved of all obligations and covenants under the Indenture
      and the Notes. 

     

    
      	15.  	
              CERTAIN
                COVENANTS NOT TO APPLY

            

    

     

    The
      Notes
      shall not be entitled to the benefits of the covenants set forth in Section
      1004
      and Section 1013 of the Indenture.

     

    
      	16.  	
              TRUSTEE
                AND AGENT DEALINGS WITH THE COMPANY

            

    

     

    The
      Trustee, Paying Agent, Conversion Agent and Securities Registrar under the
      Indenture, each in its individual or any other capacity, may become the owner
      or
      pledgee of Notes 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, Paying
      Agent, Conversion Agent or Registrar. 

     

    
      	17.  	
              CALCULATIONS
                IN RESPECT OF THE NOTES 

            

    

     

    Except
      as
      otherwise specifically stated herein or in the Indenture, all calculations
      to be
      made in respect of the Notes shall be the obligation of the Company. All
      calculations made by the Company or its agent as contemplated pursuant to the
      terms hereof and of the Indenture shall be final and binding on the Company
      and
      the Holders absent manifest error. The Company shall provide a schedule of
      calculations to the Trustee, and the Trustee shall be entitled to rely upon
      the
      accuracy of the calculations by the Company without independent verification.
      The Trustee shall forward calculations made by the Company to any Holder of
      Notes upon written request.

     

    
      	18.  	
              GOVERNING
                LAW 

            

    

     

    The
      Indenture and this Note shall be governed by and construed in accordance with
      the laws of the State of New York.

     

    

     

    
      
        
        

      

      
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    ASSIGNMENT

     

    FOR
      VALUE
      RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s)
      unto_________________________________________________________________________.

     

    PLEASE
      INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE

     

    

    
      	 

    

    

    
      
        

      

    

    (Please
      print or Typewrite Name and Address

    Including
      Postal Zip Code of Assignee)

    
      
        

      

    

     

     

    the
      within Note and all rights thereunder, and hereby irrevocably constitutes and
      appoints 

     

      
        

      

    

    to
      transfer said Note on the books of the Company, with full power of substitution
      in the premises.

     

    In
      connection with any transfer of the Note prior to the expiration of the holding
      period applicable to sales thereof under Rule 144(k) under the Securities Act
      (or any successor provision) (other than any transfer pursuant to a registration
      statement that has been declared effective under the Securities Act), the
      undersigned confirms that such Note is being transferred:

     

    
      	 	 o	
              To
                Weingarten Realty Investors or any of its subsidiaries;
                or

            

    

     

    
      	 	 o	
              To
                a “qualified institutional buyer” in compliance with Rule 144A under the
                Securities Act of 1933, as amended;
                or

            

    

     

    
      	 	 o	
              Pursuant
                to and in compliance with Rule 144 under the Securities Act of 1933,
                as
                amended; or

            

    

     

    
      	 	 o	
              Pursuant
                to a registration statement which has been declared effective under
                the
                Securities Act of 1933, as amended, and which continues to be effective
                at
                the time of transfer.

            

    

     

    Unless
      one of the boxes is checked, the Trustee will refuse to register any of the
      Notes evidenced by this certificate in the name of any person other than the
      registered holder thereof.

     

    

    
      
        
        

      

      
        A
          -
          11

        
          

        

      

      
        
        

      

    

     

    Dated:__________________________

     

    
      	
              Signature
                Guaranteed

            	 	 
	
              NOTICE:
                Signature must be guaranteed by an eligible Guarantor Institution
                (banks,
                stockbrokers, savings and loan associations and credit unions) with
                membership in an approved signature guarantee medallion program pursuant
                to Securities and Exchange Commission Rule 17Ad-15.

            	 	
              NOTICE:
                The signature to this Assignment must correspond with the name as
                written
                upon the face of the within Note in every particular, without alteration
                or enlargement or any change whatever.

               

            

    

    

     

    
      
        
        

      

      
        A
          -
          12

        
          

        

      

      
        
        

        
        

      

    

    CONVERSION
      NOTICE 

     

    To
      convert this Note as provided in the Indenture, check the box: ‮ڤo

     

    To
      convert only part of this Note, state the principal amount to be converted
      (must
      be $1,000 or an integral multiple of $1,000): $____________.

     

    If,
      in
      the event the Company delivers Net Shares and you want the stock certificate
      made out in another Person’s name, fill in the form below:

     

      
        

      

    

     

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

     

     

      
        

      

    

     

      
        

      

    

     

      
        

      

    

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

     

    
      

        
          	 	 	
                  Your
                    Signature:

                   

                
	
                  Date:

                   

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

                   

                
	 	 	 
	
                  1 Signature
                    guaranteed by:

                   

                	 	 
	
                  By:

                	 	 	 

        

         

        

          
            
              
                

              

            

            1 Signature
              must be guaranteed by an eligible Guarantor Institution (banks, stockbrokers,
              savings and loan associations and credit unions) with membership in
              an approved
              signature guarantee medallion program pursuant to Securities and Exchange
              Commission Rule 17Ad-15. 

             

             

            A
              -
              13

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