Document:

Exhibit 4.2

                              ALABAMA POWER COMPANY

                                       TO

                              THE BANK OF NEW YORK
                                     TRUSTEE

                       FORTY-FIRST SUPPLEMENTAL INDENTURE

                            DATED AS OF MAY 14, 2008

                            SERIES 2008A SENIOR NOTES

                                DUE MAY 15, 2038

<PAGE>

                              TABLE OF CONTENTS(1)
                                                                       PAGE

ARTICLE 1  Series 2008A Senior Notes......................................2

SECTION 101.  Establishment...............................................2
SECTION 102.  Definitions.................................................2
SECTION 103.  Payment of Principal and Interest...........................3
SECTION 104.  Denominations...............................................4
SECTION 105.  Global Securities...........................................4
SECTION 106.  Transfer....................................................5
SECTION 107.  Redemption at the Company's Option..........................5

ARTICLE 2  Miscellaneous Provisions.......................................6

SECTION 201.  Recitals by Company.........................................6
SECTION 202.  Ratification and Incorporation of Original Indenture........6
SECTION 203.  Executed in Counterparts....................................6

EXHIBIT A  FORM OF SERIES 2008A NOTE ...................................A-1

EXHIBIT B  CERTIFICATE OF AUTHENTICATION ...............................B-1

---------------------
1 This Table of Contents does not constitute part of the Indenture or have any
bearing upon the interpretation of any of its terms and provisions.
<PAGE>

        THIS FORTY-FIRST SUPPLEMENTAL INDENTURE is made as of the 14th day of
May, 2008, by and between ALABAMA POWER COMPANY, an Alabama corporation, 600
North 18th Street, Birmingham, Alabama 35291 (the "Company"), and THE BANK OF
NEW YORK, a New York banking corporation, 101 Barclay Street, New York, New York
10286 (the "Trustee").

                              W I T N E S S E T H:

                  WHEREAS, the Company has heretofore entered into a Senior Note
Indenture, dated as of December 1, 1997 (the "Original Indenture"), with The
Bank of New York (as successor to JPMorgan Chase Bank, N.A. (formerly known as
The Chase Manhattan Bank)), Trustee, as heretofore supplemented;

                  WHEREAS, the Original Indenture is incorporated herein by this
reference and the Original Indenture, as heretofore supplemented and as further
supplemented by this Forty-First Supplemental Indenture, is herein called the
"Indenture";

                  WHEREAS, under the Original Indenture, a new series of Senior
Notes may at any time be established pursuant to a supplemental indenture
executed by the Company and the Trustee;

                  WHEREAS, the Company proposes to create under the Indenture a
new series of Senior Notes;

                  WHEREAS, additional Senior Notes of other series hereafter
established, except as may be limited in the Original Indenture as at the time
supplemented and modified, may be issued from time to time pursuant to the
Indenture as at the time supplemented and modified; and

                  WHEREAS, all conditions necessary to authorize the execution
and delivery of this Forty-First Supplemental Indenture and to make it a valid
and binding obligation of the Company have been done or performed.

                  NOW, THEREFORE, in consideration of the agreements and
obligations set forth herein and for other good and valuable consideration, the
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:

<PAGE>

                                    ARTICLE 1

                            Series 2008A Senior Notes

         SECTION 101. Establishment. There is hereby established a new series of
Senior Notes to be issued under the Indenture, to be designated as the Company's
Series 2008A 6.125% Senior Notes due May 15, 2038 (the "Series 2008A Notes").

         There are to be authenticated and delivered $300,000,000 aggregate
principal amount of Series 2008A Notes, and such principal amount of the Series
2008A Notes may be increased from time to time pursuant to Section 301 of the
Original Indenture. All Series 2008A Notes need not be issued at the same time
and such series may be reopened at any time, without the consent of any Holder,
for issuances of additional Series 2008A Notes. Any such additional Series 2008A
Notes will have the same interest rate, maturity and other terms as those
initially issued. No Series 2008A Notes shall be authenticated and delivered in
excess of the principal amount as so increased except as provided by Sections
203, 303, 304, 907 or 1107 of the Original Indenture. The Series 2008A Notes
shall be issued in definitive fully registered form.

         The Series 2008A Notes shall be issued in the form of one or more
Global Securities in substantially the form set out in Exhibit A hereto. The
Depositary with respect to the Series 2008A Notes shall be The Depository Trust
Company.

         The form of the Trustee's Certificate of Authentication for the Series
2008A Notes shall be in substantially the form set forth in Exhibit B hereto.

         Each Series 2008A Note shall be dated the date of authentication
thereof and shall bear interest from the date of original issuance thereof or
from the most recent Interest Payment Date to which interest has been paid or
duly provided for.

                  SECTION 102. Definitions. The following defined terms used
herein shall, unless the context otherwise requires, have the meanings specified
below. Capitalized terms used herein for which no definition is provided herein
shall have the meanings set forth in the Original Indenture.

         "Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the Series 2008A Notes to be redeemed that would be
utilized, at the time of selection and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of comparable
maturity to the remaining term of the Series 2008A Notes.

         "Comparable Treasury Price" means, with respect to any Redemption Date,
(i) the average of the Reference Treasury Dealer Quotations for such Redemption
Date, after excluding the highest and lowest such Reference Treasury Dealer

                                       2
<PAGE>

Quotations, or (ii) if the Company obtains fewer than four such Reference
Treasury Dealer Quotations, the average of all such quotations.

         "Independent Investment Banker" means an independent investment banking
institution of national standing appointed by the Company.

         "Interest Payment Dates" means May 15 and November 15 of each year,
commencing November 15, 2008.

         "Original Issue Date" means May 14, 2008.

         "Redemption Price" has the meaning given to it in Section 107 hereof.

         "Reference Treasury Dealer" means a primary U.S. Government securities
dealer in New York City appointed by the Company.

         "Reference Treasury Dealer Quotation" means, with respect to each
Reference Treasury Dealer and any Redemption Date, the average, as determined by
the Company, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount and quoted in
writing to the Company by such Reference Treasury Dealer at 5:00 p.m. on the
third Business Day in New York City preceding such Redemption Date).

         "Regular Record Date" means, with respect to each Interest Payment
Date, the close of business on the 15th calendar day preceding such Interest
Payment Date (whether or not a Business Day).

         "Stated Maturity" means May 15, 2038.

         "Treasury Yield" means, with respect to any Redemption Date, the rate
per annum equal to the semiannual equivalent yield to maturity of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as
a percentage of its principal amount) equal to the Comparable Treasury Price for
such Redemption Date.

         SECTION 103. Payment of Principal and Interest. The principal of the
Series 2008A Notes shall be due at Stated Maturity (unless earlier redeemed).
The unpaid principal amount of the Series 2008A Notes shall bear interest at the
rate of 6.125% per annum until paid or duly provided for. Interest shall be paid
semiannually in arrears on each Interest Payment Date to the Person in whose
name the Series 2008A Notes are registered on the Regular Record Date for such
Interest Payment Date, provided that interest payable at the Stated Maturity of
principal or on a Redemption Date as provided herein will be paid to the Person
to whom principal is payable. Any such interest that is not so punctually paid
or duly provided for will forthwith cease to be payable to the Holders on such
Regular Record Date and may either be paid to the Person or Persons in whose
name the Series 2008A Notes are registered at the close of business on a Special
Record Date for the payment of such defaulted interest to be fixed by the

                                       3
<PAGE>

Trustee, notice whereof shall be given to Holders of the Series 2008A Notes not
less than ten (10) days prior to such Special Record Date, or be paid at any
time in any other lawful manner not inconsistent with the requirements of any
securities exchange, if any, on which the Series 2008A Notes shall be listed,
and upon such notice as may be required by any such exchange, all as more fully
provided in the Original Indenture.

         Payments of interest on the Series 2008A Notes will include interest
accrued to but excluding the respective Interest Payment Dates. Interest
payments for the Series 2008A Notes shall be computed and paid on the basis of a
360-day year of twelve 30-day months. In the event that any date on which
interest is payable on the Series 2008A Notes is not a Business Day, then
payment of the interest payable on such date will be made on the next succeeding
day that is a Business Day (and without any interest or other payment in respect
of any such delay), with the same force and effect as if made on the date the
payment was originally payable.

         Payment of the principal and interest due at the Stated Maturity or
earlier redemption of the Series 2008A Notes shall be made upon surrender of the
Series 2008A Notes at the Corporate Trust Office of the Trustee. The principal
of and interest on the Series 2008A Notes shall be paid in such coin or currency
of the United States of America as at the time of payment is legal tender for
payment of public and private debts. Payments of interest (including interest on
any Interest Payment Date) will be made, subject to such surrender where
applicable, at the option of the Company, (i) by check mailed to the address of
the Person entitled thereto as such address shall appear in the Security
Register or (ii) by wire transfer or other electronic transfer at such place and
to such account at a banking institution in the United States as may be
designated in writing to the Trustee at least sixteen (16) days prior to the
date for payment by the Person entitled thereto.

         SECTION 104. Denominations. The Series 2008A Notes may be issued in
denominations of $1,000, or any integral multiple thereof.

         SECTION 105. Global Securities. The Series 2008A Notes will be issued
in the form of one or more Global Securities registered in the name of the
Depositary (which shall be The Depository Trust Company) or its nominee. Except
under the limited circumstances described below, Series 2008A Notes represented
by one or more Global Securities will not be exchangeable for, and will not
otherwise be issuable as, Series 2008A Notes in definitive form. The Global
Securities described above may not be transferred except by the Depositary to a
nominee of the Depositary or by a nominee of the Depositary to the Depositary or
another nominee of the Depositary or to a successor Depositary or its nominee.

         Owners of beneficial interests in such a Global Security will not be
considered the Holders thereof for any purpose under the Indenture, and no
Global Security representing a Series 2008A Note shall be exchangeable, except
for another Global Security of like denomination and tenor to be registered in
the name of the Depositary or its nominee or a successor Depositary or its
nominee. The rights of Holders of such Global Security shall be exercised only
through the Depositary.

                                       4
<PAGE>

         Neither the Company, the Trustee nor any agent of the Company or the
Trustee shall have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests in a
Global Security or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.

         Subject to the procedures of the Depositary, a Global Security shall be
exchangeable for Series 2008A Notes registered in the names of persons other
than the Depositary or its nominee only if (i) the Depositary notifies the
Company that it is unwilling or unable to continue as a Depositary for such
Global Security and no successor Depositary shall have been appointed by the
Company, or if at any time the Depositary ceases to be a clearing agency
registered under the Securities Exchange Act of 1934, as amended, at a time when
the Depositary is required to be so registered to act as such Depositary and no
successor Depositary shall have been appointed by the Company, in each case
within 90 days after the Company receives such notice or becomes aware of such
cessation, (ii) the Company in its sole discretion determines that such Global
Security shall be so exchangeable, or (iii) there shall have occurred an Event
of Default with respect to the Series 2008A Notes. Any Global Security that is
exchangeable pursuant to the preceding sentence shall be exchangeable for Series
2008A Notes registered in such names as the Depositary shall direct.

         SECTION 106. Transfer. No service charge will be made for any transfer
or exchange of Series 2008A Notes, but payment will be required of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection therewith.

         The Company shall not be required (a) to issue, register the transfer
of or exchange any Series 2008A Notes during a period beginning at the opening
of business fifteen (15) days before the date of the mailing of a notice
pursuant to Section 1104 of the Original Indenture identifying the serial
numbers of the Series 2008A Notes to be called for redemption, and ending at the
close of business on the day of the mailing, or (b) to register the transfer of
or exchange any Series 2008A Notes theretofore selected for redemption in whole
or in part, except the unredeemed portion of any Series 2008A Notes redeemed in
part.

         SECTION 107. Redemption at the Company's Option. The Series 2008A Notes
will be subject to redemption at the option of the Company in whole or in part,
at any time and from time to time upon not less than 30 nor more than 60 days'
notice. The Company shall have the right to redeem the Series 2008A Notes in
whole or in part at a redemption price (the "Redemption Price") equal to the
greater of (i) 100% of the principal amount of the Series 2008A Notes to be
redeemed, or (ii) the sum of the present values of the remaining scheduled
payments of principal and interest on the Series 2008A Notes being redeemed (not
including any portion of such payments of interest accrued to the Redemption
Date), discounted (for purposes of determining present value) to the Redemption
Date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day
months) at a discount rate equal to the Treasury Yield plus 25 basis points,
plus, in each case, accrued interest thereon to the Redemption Date.

                                       5
<PAGE>

         In the event of redemption of the Series 2008A Notes in part only, a
new Series 2008A Note or Notes for the unredeemed portion will be issued in the
name or names of the Holders thereof upon the surrender thereof.

         The Series 2008A Notes will not have a sinking fund.

         Notice of redemption shall be given as provided in Section 1104 of the
Original Indenture except that any notice of redemption shall not specify the
Redemption Price but only the manner of calculation thereof. The Trustee shall
not be responsible for the calculation of the Redemption Price. The Company
shall calculate the Redemption Price and promptly notify the Trustee thereof.

         Any redemption of less than all of the Series 2008A Notes shall, with
respect to the principal thereof, be divisible by $1,000.

                                    ARTICLE 2

                            Miscellaneous Provisions

         SECTION 201. Recitals by Company. The recitals in this Forty-First
Supplemental Indenture are made by the Company only and not by the Trustee, and
all of the provisions contained in the Original Indenture in respect of the
rights, privileges, immunities, powers and duties of the Trustee shall be
applicable in respect of Series 2008A Notes and of this Forty-First Supplemental
Indenture as fully and with like effect as if set forth herein in full.

         SECTION 202. Ratification and Incorporation of Original Indenture. As
heretofore supplemented and as supplemented hereby, the Original Indenture is in
all respects ratified and confirmed, and the Original Indenture as heretofore
supplemented and as supplemented by this Forty-First Supplemental Indenture
shall be read, taken and construed as one and the same instrument.

         SECTION 203. Executed in Counterparts. This Forty-First Supplemental
Indenture may be simultaneously executed in several counterparts, each of which
shall be deemed to be an original, and such counterparts shall together
constitute but one and the same instrument.

                                       6
<PAGE>

         IN WITNESS WHEREOF, each party hereto has caused this instrument to be
signed in its name and behalf by its duly authorized officers, all as of the day
and year first above written.

ATTEST:                                ALABAMA POWER COMPANY

By:      /s/ Ceila H. Shorts           By:      /s/ Art P. Beattie
   ----------------------------------       -----------------------------------
         Assistant Secretary                    Art P. Beattie
                                                Executive Vice President,
                                                Chief Financial Officer and
                                                Treasurer

ATTEST:                                  THE BANK OF NEW YORK,
                                         as Trustee

By:      /s/ L. O'Brien                  By:      /s/ Francine Kincaid
   -----------------------------------      -----------------------------------
         L. O'Brien                               Francine Kincaid
         Vice President                           Vice President

                                       7
<PAGE>

                                    EXHIBIT A

                            FORM OF SERIES 2008A NOTE

NO. __                                                     CUSIP NO. 010392 EZ7

                              ALABAMA POWER COMPANY

                         SERIES 2008A 6.125% SENIOR NOTE

                                DUE MAY 15, 2038

       Principal Amount:                      $__________________
       Regular Record Date:                   15th  calendar day prior to
                                              Interest  Payment Date  (whether
                                              or not a Business Day)
       Original Issue Date:                   May 14, 2008
       Stated Maturity:                       May 15, 2038
       Interest Payment Dates:                May 15 and November 15
       Interest Rate:                         6.125%
       Authorized Denomination:               $1,000 or any integral multiple
                                              thereof
         Alabama Power Company, an Alabama corporation (the "Company", which
term includes any successor corporation under the Indenture referred to on the
reverse hereof), for value received, hereby promises to pay to
___________________________________________, or registered assigns, the
principal sum of ____________________________________________ DOLLARS
($______________) on the Stated Maturity shown above (or upon earlier
redemption), and to pay interest thereon from the Original Issue Date shown
above, or from the most recent Interest Payment Date to which interest has been
paid or duly provided for, semiannually in arrears on each Interest Payment Date
as specified above, commencing on November 15, 2008, and on the Stated Maturity
(or upon earlier redemption) at the rate per annum shown above until the
principal hereof is paid or made available for payment and at such rate on any
overdue principal and on any overdue installment of interest. The interest so
payable, and punctually paid or duly provided for, on any Interest Payment Date
(other than an Interest Payment Date that is the Stated Maturity or on a
Redemption Date) will, as provided in such Indenture, be paid to the Person in
whose name this Note (the "Note") is registered at the close of business on the
Regular Record Date as specified above next preceding such Interest Payment
Date, provided that any interest payable at the Stated Maturity or on any
Redemption Date will be paid to the Person to whom principal is payable. Except

<PAGE>

as otherwise provided in the Indenture, any such interest not so punctually paid
or duly provided for will forthwith cease to be payable to the Holder on such
Regular Record Date and may either be paid to the Person in whose name this Note
is registered at the close of business on a Special Record Date for the payment
of such defaulted interest to be fixed by the Trustee, notice whereof shall be
given to Holders of Notes of this series not less than 10 days prior to such
Special Record Date, or be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange, if any, on which
the Notes of this series shall be listed, and upon such notice as may be
required by any such exchange, all as more fully provided in the Indenture.

         Payments of interest on this Note will include interest accrued to but
excluding the respective Interest Payment Dates. Interest payments for this Note
shall be computed and paid on the basis of a 360-day year of twelve 30-day
months. In the event that any Interest Payment Date would otherwise be a day
that is not a Business Day, then payment of the interest payable on such date
will be made on the next succeeding day that is a Business Day (and without any
interest or other payment in respect of any such delay), with the same force and
effect as if made on the date the payment was originally payable. A "Business
Day" shall mean any day other than a Saturday or a Sunday or a day on which
banking institutions in New York City are authorized or required by law or
executive order to remain closed or a day on which the Corporate Trust Office of
the Trustee is closed for business.

         Payment of the principal of and interest due at the Stated Maturity or
earlier redemption of the Series 2008A Notes shall be made upon surrender of the
Series 2008A Notes at the Corporate Trust Office of the Trustee. The principal
of and interest on the Series 2008A Notes shall be paid in such coin or currency
of the United States of America as at the time of payment is legal tender for
payment of public and private debts. Payment of interest (including interest on
an Interest Payment Date) will be made, subject to such surrender where
applicable, at the option of the Company, (i) by check mailed to the address of
the Person entitled thereto as such address shall appear in the Security
Register or (ii) by wire transfer or other electronic transfer at such place and
to such account at a banking institution in the United States as may be
designated in writing to the Trustee at least 16 days prior to the date for
payment by the Person entitled thereto.

         REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS NOTE SET
FORTH ON THE REVERSE HEREOF, WHICH FURTHER PROVISIONS SHALL FOR ALL PURPOSES
HAVE THE SAME EFFECT AS IF SET FORTH AT THIS PLACE.

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

<PAGE>

         IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.

Dated:

                              ALABAMA POWER COMPANY

                              By:
                                 -----------------------------------------
                                 Vice President

Attest:

----------------------------------------
         Assistant Secretary

                  {Seal of ALABAMA POWER COMPANY appears here}

<PAGE>

                          CERTIFICATE OF AUTHENTICATION

         This is one of the Senior Notes referred to in the within-mentioned
Indenture.

                                                     THE BANK OF NEW YORK

                                                     as Trustee

                                                     By:
                                                        -----------------------
                                                         Authorized Signatory

<PAGE>

                             (Reverse Side of Note)

         This Note is one of a duly authorized issue of Senior Notes of the
Company (the "Notes"), issued and issuable in one or more series under a Senior
Note Indenture, dated as of December 1, 1997, as supplemented (the "Indenture"),
between the Company and The Bank of New York (as successor to JPMorgan Chase
Bank, N.A. (formerly known as The Chase Manhattan Bank)), Trustee (the
"Trustee," which term includes any successor trustee under the Indenture), to
which Indenture and all indentures incidental thereto reference is hereby made
for a statement of the respective rights, limitation of rights, duties and
immunities thereunder of the Company, the Trustee and the Holders of the Notes
issued thereunder and of the terms upon which said Notes are, and are to be,
authenticated and delivered. This Note is one of the series designated on the
face hereof as Series 2008A 6.125% Senior Notes due May 15, 2038 (the "Series
2008A Notes") which is unlimited in aggregate principal amount. Capitalized
terms used herein for which no definition is provided herein shall have the
meanings set forth in the Indenture.

         The Series 2008A Notes will be subject to redemption at the option of
the Company in whole or in part at any time and from time to time upon not less
than 30 nor more than 60 days' notice. The Company shall have the right to
redeem the Series 2008A Notes in whole or in part at a redemption price (the
"Redemption Price") equal to the greater of (i) 100% of the principal amount of
the Series 2008A Notes to be redeemed, or (ii) the sum of the present values of
the remaining scheduled payments of principal and interest on the Series 2008A
Notes being redeemed (not including any portion of such payments of interest
accrued to the Redemption Date), discounted (for purposes of determining present
value) to the Redemption Date on a semiannual basis (assuming a 360-day year
consisting of twelve 30-day months) at a discount rate equal to the Treasury
Yield (as defined below) plus 25 basis points, plus, in each case, accrued
interest thereon to the Redemption Date.

         "Treasury Yield" means, with respect to any Redemption Date, the rate
per annum equal to the semiannual equivalent yield to maturity of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as
a percentage of its principal amount) equal to the Comparable Treasury Price for
such Redemption Date.

         "Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the Series 2008A Notes to be redeemed that would be
utilized, at the time of selection and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of comparable
maturity to the remaining term of the Series 2008A Notes.

<PAGE>

         "Comparable Treasury Price" means, with respect to any Redemption Date,
(i) the average of the Reference Treasury Dealer Quotations for such Redemption
Date, after excluding the highest and lowest such Reference Treasury Dealer
Quotations, or (ii) if the Company obtains fewer than four such Reference
Treasury Dealer Quotations, the average of all such quotations.

         "Independent Investment Banker" means an independent investment banking
institution of national standing appointed by the Company.

         "Reference Treasury Dealer" means a primary U.S. Government securities
dealer in New York City appointed by the Company.

         "Reference Treasury Dealer Quotation" means, with respect to each
Reference Treasury Dealer and any Redemption Date, the average, as determined by
the Company, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount and quoted in
writing to the Company by such Reference Treasury Dealer at 5:00 p.m. on the
third Business Day in New York City preceding such Redemption Date).

         The Trustee shall not be responsible for the calculation of the
Redemption Price. The Company shall calculate the Redemption Price and promptly
notify the Trustee thereof.

         In the event of redemption of this Note in part only, a new Note or
Notes of this series for the unredeemed portion hereof will be issued in the
name of the Holder hereof upon the surrender hereof. The Series 2008A Notes will
not have a sinking fund.

         If an Event of Default with respect to the Notes of this series shall
occur and be continuing, the principal of the Notes of this series may be
declared due and payable in the manner, with the effect and subject to the
conditions provided in the Indenture.

         The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Notes of each series to be affected
under the Indenture at any time by the Company and the Trustee with the consent
of the Holders of not less than a majority in principal amount of the Notes at
the time Outstanding of each series to be affected. The Indenture also contains
provisions permitting the Holders of specified percentages in principal amount
of the Notes of each series at the time Outstanding, on behalf of the Holders of

<PAGE>

all Notes of such series, to waive compliance by the Company with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Note shall
be conclusive and binding upon such Holder and upon all future Holders of this
Note and of any Note issued upon the registration of transfer hereof or in
exchange hereof or in lieu hereof, whether or not notation of such consent or
waiver is made upon this Note.

         No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency, herein prescribed.

         As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Note is registerable in the Security Register,
upon surrender of this Note for registration of transfer at the office or agency
of the Company for such purpose, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Security
Registrar and duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Notes of this series, of
authorized denominations and of like tenor and for the same aggregate principal
amount, will be issued to the designated transferee or transferees. No service
charge shall be made for any such registration of transfer or exchange, but the
Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith.

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

         The Notes of this series are issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Notes of this series are exchangeable for a like aggregate principal amount of
Notes of this series of a different authorized denomination, as requested by the
Holder surrendering the same upon surrender of the Note or Notes to be exchanged
at the office or agency of the Company.

         This Note shall be governed by, and construed in accordance with, the
internal laws of the State of New York.

<PAGE>

                                  ABBREVIATIONS

The following abbreviations, when used in the inscription on the face of this
instrument, shall be construed as though they were written out in full according
to applicable laws or regulations:

TEN COM-  as tenants in            UNIF GIFT MIN ACT-   ______ Custodian_____
          common                                        (Cust)          (Minor)
TEN ENT-  as tenants by the
          entireties                                    under Uniform Gifts to
JT TEN-   as joint tenants                              Minors Act
          with right of
          survivorship and                              ____________________
          not as tenants                                      (State)
          in common

                   Additional abbreviations may also be used

                          though not on the above list.

         FOR VALUE RECEIVED, the undersigned hereby sell(s) and transfer(s) unto

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(please insert Social Security or other identifying number of assignee)

PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE OF
ASSIGNEE

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the within Note and all rights thereunder, hereby irrevocably constituting and
appointing

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

Dated:
       --------------------         -------------------------------------------

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

<PAGE>

                                    EXHIBIT B

                          CERTIFICATE OF AUTHENTICATION

         This is one of the Senior Notes referred to in the within-mentioned
Indenture.

                                                     THE BANK OF NEW YORK
                                                     as Trustee

                                                     By:
                                                        -----------------------
                                                           Authorized Signatoryexhibit10_1.htm

    
      

    

     

     

    
                  877 N. 8th W.,
Riverton, WY  82501            307-856-9271            FAX 
307-857-3050

      

      

      For
Immediate Release

      

      U.S.
ENERGY CORP. ANNOUNCES A JOINT EXPLORATION AGREEMENT WITH A PRIVATE HOUSTON,
TEXAS BASED EXPLORATION & PRODUCTION COMPANY

      

      WORKING
INTEREST COVERS 50,000+ NET ACRES IN

      SOUTHERN
LOUISIANA

      

      RIVERTON,
Wyoming – May 14, 2008 -U.S. Energy Corp. (NASDAQ Capital Market: “USEG”) (“USE”
or the “Company”), a natural resources exploration and development company with
interests in molybdenum, uranium, oil and gas, gold, and real estate, today
announced that it has entered into a Joint Exploration Agreement with a private
Houston, Texas based oil and gas company.

      

      U.S.
Energy Corp. has agreed to participate as a 4.55% working interest partner in a
South Louisiana oil and gas area of mutual interest (AMI) covering in excess of
50,000 net acres.  U.S. Energy’s initial commitment to the program
will approximate $1.3 million.

      

      The AMI
is believed to be highly prospective for oil and gas resources and includes
potential targets in known producing formations.  The Houston based
oil company has spent the last 15 months securing lease options, analyzing
reprocessed 2-D seismic, and finalizing preparation to conduct a large 3-D
seismic campaign in the near future.  In total they have analyzed
approximately 400 miles of recently reprocessed 2-D seismic in preparation for
the 3-D shoot.

      

      The
Houston based company will be the operator of the 3-D seismic survey and any
subsequent drilling that may occur in the future.  To date, multiple
leads in the AMI have been identified.

      

      Significant
pipeline infrastructure exists in the AMI, along with known fields of production
in formations that will also be targeted by the exploration
program.  If successful, the program could continue for many
years.

      

      “We are
pleased to announce yet another potentially long-term oil and gas exploration
partnership with a proven developer of oil and gas reserves,” stated Keith
Larsen, Chief Executive Officer of U.S. Energy Corp.  “We have been
evaluating the prospective Louisiana AMI for some time now and are convinced
that we have chosen another prudent oil and gas partner with an exciting
exploration program.  Our partner believes that this large AMI could
hold significant reserves if its analysis holds true.  We are
confident in our partner’s abilities and look forward to participating in a
comprehensive 3-D survey in the near future.  Although we will not
commence drilling until 2009, we believe that extensive evaluation of geology
and seismic interpretation reduces the risk of our participation.”

       

       

      
 

      
        
           

        

        
           

          
            

          

        

        
           

          
            Press
Release

            May14,
2008

            Page
2 of 3

          

        

      

       

      
 

      “This
program is one of many programs that we have evaluated during the past nine
months,” stated Mark Larsen, President of U. S. Energy Corp.  “This
program has intrigued us from the start, and we are confident that we have
chosen another highly qualified exploration company to partner
with.  We expect to announce more oil and gas participation agreements
in the near future.”

      

      * * * *
*

       

      
 

      

      About
U.S. Energy Corp.

      

      U.S.
Energy Corp. is a diversified natural resource company with interests in
molybdenum, oil and gas, gold, and real estate.  The Company is
headquartered in Riverton, Wyoming, and its common stock is listed on The NASDAQ
Capital Market under the symbol “USEG”.

      

      

      Disclosure
Regarding Mineral Resources

      Under
SEC and Canadian Regulations;

      and
Forward-Looking Statements

      

      The
Company owns or may come to own stock in companies which are traded on foreign
exchanges, and may have agreements with some of these companies to acquire
and/or develop the Company’s mineral properties.  An example is Sutter
Gold Mining Inc.  These other companies are subject to the reporting
requirements of other jurisdictions.

      

      United
States residents are cautioned that some of the information available about our
mineral properties, which is reported by the other companies in foreign
jurisdictions, may be materially different from what the Company is permitted to
disclose in the United States.

      

      This
news release includes statements which may constitute “forward-looking”
statements, usually containing the words “believe,” “estimate,” “project,”
“expect," or similar expressions.  These statements are made pursuant
to the safe harbor provision of the Private Securities Litigation Reform Act of
1995.  Forward-looking statements inherently involve risks and
uncertainties that could cause actual results to differ materially from the
forward-looking statements.  Factors that would cause or contribute to
such differences include, but are not limited to, future trends in mineral
prices, the availability of capital, competitive factors, and other
risks.  By making these forward-looking statements, the Company
undertakes no obligation to update these statements for revision or changes
after the date of this release.

      

      For
further information on the differences between the reporting limitations of the
United States, compared to reports filed in foreign jurisdictions, and also
concerning forward-looking statements, please see the Company’s Form 10-K
(“Disclosure Regarding Forward-Looking Statements”; “Disclosure Regarding
Mineral Resources under SEC and Canadian Regulation”; and “Risk Factors”); and
similar disclosures in the Company’s Forms 10-Q.

      

      *
* * *

      

      For
further information, please contact:

      Keith
G. Larsen, CEO or Mark J. Larsen, President

      U.S.
Energy Corp. (307) 856-9271

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