Document:

Exhibit 4.1

 

 

CLAYTON
WILLIAMS ENERGY, INC.,

 

THE SUBSIDIARY
GUARANTORS PARTIES HERETO

 

AND

 

 

WELLS FARGO
BANK, NATIONAL ASSOCIATION,

AS TRUSTEE

 

73⁄4% Senior Notes due 2013

 

 

 

INDENTURE

 

Dated as of
July 20, 2005

 

 

 

 

 

Table of Contents

 

	
  ARTICLE I

  	
   

  
	
  Definitions and Incorporation by Reference

  	
   

  
	
   

  	
   

  
	
  SECTION 1.1. Definitions

  	
   

  
	
  SECTION 1.2. Other Definitions

  	
   

  
	
  SECTION 1.3. Incorporation by Reference of
  Trust Indenture Act

  	
   

  
	
  SECTION 1.4. Rules of Construction

  	
   

  
	
   

  	
   

  
	
  ARTICLE II

  	
   

  
	
  The Securities

  	
   

  
	
   

  	
   

  
	
  SECTION 2.1. Form, Dating and Terms

  	
   

  
	
  SECTION 2.2. Execution and Authentication

  	
   

  
	
  SECTION 2.3. Registrar and Paying Agent

  	
   

  
	
  SECTION 2.4. Paying Agent to Hold Money in
  Trust

  	
   

  
	
  SECTION 2.5. Securityholder Lists

  	
   

  
	
  SECTION 2.6. Transfer and Exchange

  	
   

  
	
  SECTION 2.7. Mutilated, Destroyed, Lost or
  Stolen Securities

  	
   

  
	
  SECTION 2.8. Outstanding Securities

  	
   

  
	
  SECTION 2.9. Temporary Securities

  	
   

  
	
  SECTION 2.10. Cancellation

  	
   

  
	
  SECTION 2.11. Payment of Interest;
  Defaulted Interest

  	
   

  
	
  SECTION 2.12. Computation of Interest

  	
   

  
	
  SECTION 2.13. CUSIP Numbers

  	
   

  
	
   

  	
   

  
	
  ARTICLE III

  	
   

  
	
  Covenants

  	
   

  
	
   

  	
   

  
	
  SECTION 3.1. Payment of Securities

  	
   

  
	
  SECTION 3.2. Commission Reports

  	
   

  
	
  SECTION 3.3. Limitation on Indebtedness

  	
   

  
	
  SECTION 3.4. Limitation on Restricted
  Payments

  	
   

  
	
  SECTION 3.5. Limitation on Liens

  	
   

  
	
  SECTION 3.6. Limitation on Restrictions on
  Distributions from Restricted Subsidiaries

  	
   

  
	
  SECTION 3.7. Limitation on Sales of Assets
  and Subsidiary Stock

  	
   

  
	
  SECTION 3.8. Limitation on Affiliate
  Transactions

  	
   

  
	
  SECTION 3.9. Change of Control

  	
   

  
	
  SECTION 3.10. Limitation on Sale of Capital
  Stock of Restricted Subsidiaries

  	
   

  
	
  SECTION 3.11. Future Subsidiary Guarantors

  	
   

  
	
  SECTION 3.12. Limitation on Lines of
  Business

  	
   

  
	
  SECTION 3.13. Maintenance of Office or
  Agency

  	
   

  
	
  SECTION 3.14. Corporate Existence

  	
   

  

 

i

 

	
  SECTION 3.15. Payment of Taxes and Other
  Claims

  	
   

  
	
  SECTION 3.16. Payments for Consent

  	
   

  
	
  SECTION 3.17. Compliance Certificate

  	
   

  
	
  SECTION 3.18. Further Instruments and Acts

  	
   

  
	
  SECTION 3.19. Statement by Officers as to
  Default

  	
   

  
	
   

  	
   

  
	
  ARTICLE IV

  	
   

  
	
  Successor Company

  	
   

  
	
   

  	
   

  
	
  SECTION 4.1. Merger and Consolidation

  	
   

  
	
   

  	
   

  
	
  ARTICLE V

  	
   

  
	
  Redemption of Securities

  	
   

  
	
   

  	
   

  
	
  SECTION 5.1. Optional Redemption

  	
   

  
	
  SECTION 5.2. Applicability of Article

  	
   

  
	
  SECTION 5.3. Election to Redeem; Notice to
  Trustee

  	
   

  
	
  SECTION 5.4. Selection by Trustee of
  Securities to Be Redeemed

  	
   

  
	
  SECTION 5.5. Notice of Redemption

  	
   

  
	
  SECTION 5.6. Deposit of Redemption Price

  	
   

  
	
  SECTION 5.7. Securities Payable on
  Redemption Date

  	
   

  
	
  SECTION 5.8. Securities Redeemed in Part

  	
   

  
	
   

  	
   

  
	
  ARTICLE VI

  	
   

  
	
  Defaults and Remedies

  	
   

  
	
   

  	
   

  
	
  SECTION 6.1. Events of Default

  	
   

  
	
  SECTION 6.2. Acceleration

  	
   

  
	
  SECTION 6.3. Other Remedies

  	
   

  
	
  SECTION 6.4. Waiver of Past Defaults

  	
   

  
	
  SECTION 6.5. Control by Majority

  	
   

  
	
  SECTION 6.6. Limitation on Suits

  	
   

  
	
  SECTION 6.7. Rights of Holders to Receive
  Payment

  	
   

  
	
  SECTION 6.8. Collection Suit by Trustee

  	
   

  
	
  SECTION 6.9. Trustee May File Proofs of
  Claim

  	
   

  
	
  SECTION 6.10. Priorities

  	
   

  
	
  SECTION 6.11. Undertaking for Costs

  	
   

  
	
  SECTION 6.12. Additional Payments

  	
   

  
	
  SECTION 6.13. Waiver of Stay

  	
   

  
	
   

  	
   

  
	
  ARTICLE VII

  	
   

  
	
  Trustee

  	
   

  
	
   

  	
   

  
	
  SECTION 7.1. Duties of Trustee

  	
   

  
	
  SECTION 7.2. Rights of Trustee

  	
   

  
	
  SECTION 7.3. Individual Rights of Trustee

  	
   

  
	
  SECTION 7.4. Trustee’s Disclaimer

  	
   

  

 

ii

 

	
  SECTION 7.5. Notice of Defaults

  	
   

  
	
  SECTION 7.6. Reports by Trustee to Holders

  	
   

  
	
  SECTION 7.7. Compensation and Indemnity

  	
   

  
	
  SECTION 7.8. Replacement of Trustee

  	
   

  
	
  SECTION 7.9. Successor Trustee by Merger

  	
   

  
	
  SECTION 7.10. Eligibility; Disqualification

  	
   

  
	
  SECTION 7.11. Preferential Collection of
  Claims Against Company

  	
   

  
	
   

  	
   

  
	
  ARTICLE VIII

  	
   

  
	
  Discharge of Indenture; Defeasance

  	
   

  
	
   

  	
   

  
	
  SECTION 8.1. Discharge of Liability on
  Securities; Defeasance

  	
   

  
	
  SECTION 8.2. Conditions to Defeasance

  	
   

  
	
  SECTION 8.3. Application of Trust Money

  	
   

  
	
  SECTION 8.4. Repayment to Company

  	
   

  
	
  SECTION 8.5. Indemnity for U.S. Government
  Obligations

  	
   

  
	
  SECTION 8.6. Reinstatement

  	
   

  
	
   

  	
   

  
	
  ARTICLE IX

  	
   

  
	
  Amendments

  	
   

  
	
   

  	
   

  
	
  SECTION 9.1. Without Consent of Holders

  	
   

  
	
  SECTION 9.2. With Consent of Holders

  	
   

  
	
  SECTION 9.3. Compliance with Trust
  Indenture Act

  	
   

  
	
  SECTION 9.4. Revocation and Effect of Consents
  and Waivers

  	
   

  
	
  SECTION 9.5. Notation on or Exchange of
  Securities

  	
   

  
	
  SECTION 9.6. Trustee To Sign Amendments

  	
   

  
	
   

  	
   

  
	
  ARTICLE X

  	
   

  
	
  Subsidiary Guarantee

  	
   

  
	
   

  	
   

  
	
  SECTION 10.1. Subsidiary Guarantee

  	
   

  
	
  SECTION 10.2. Limitation on Liability;
  Termination, Release and Discharge

  	
   

  
	
  SECTION 10.3. Limitation of Subsidiary
  Guarantors’ Liability

  	
   

  
	
  SECTION 10.4. Contribution

  	
   

  
	
   

  	
   

  
	
  ARTICLE XI

  	
   

  
	
  Miscellaneous

  	
   

  
	
   

  	
   

  
	
  SECTION 11.1. Trust Indenture Act Controls

  	
   

  
	
  SECTION 11.2. Notices

  	
   

  
	
  SECTION 11.3. Communication by Holders with
  other Holders

  	
   

  
	
  SECTION 11.4. Certificate and Opinion as to
  Conditions Precedent

  	
   

  
	
  SECTION 11.5. Statements Required in
  Certificate or Opinion

  	
   

  
	
  SECTION 11.6. When Securities Disregarded

  	
   

  
	
  SECTION 11.7. Rules by Trustee, Paying
  Agent and Registrar

  	
   

  
	
  SECTION 11.8. Legal Holidays

  	
   

  

 

iii

 

	
  SECTION 11.9. GOVERNING LAW

  	
   

  
	
  SECTION 11.10. No Recourse Against Others

  	
   

  
	
  SECTION 11.11. Successors

  	
   

  
	
  SECTION 11.12. Multiple Originals

  	
   

  
	
  SECTION 11.13. Qualification of Indenture

  	
   

  
	
  SECTION 11.14. Severability

  	
   

  
	
  SECTION 11.15. Table of Contents; Headings

  	
   

  

 

 

	
  EXHIBIT A

  	
  Form of the Unregistered Note

  	
   

  
	
  EXHIBIT B

  	
  Form of the Registered Note

  	
   

  
	
  EXHIBIT C

  	
  Form of Certificate to be Delivered in Connection with Transfers to
  Institutional Accredited Investors

  	
   

  
	
  EXHIBIT D

  	
  Form of Certificate to be Delivered in Connection with Transfers
  Pursuant to Regulation S

  	
   

  
	
  EXHIBIT E

  	
  Form of Subsidiary Guarantee

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule 3.8

  	
  Existing
  Affiliate Agreements

  	
   

  

 

iv

 

CROSS-REFERENCE
TABLE

 

	
  TIA Section

  	
   

  	
  Indenture

  Section

  
	
   

  	
   

  	
   

  
	
  310(a)(1)

  	
   

  	
  7.10

  
	
  (a)(2)

  	
   

  	
  7.10

  
	
  (a)(3)

  	
   

  	
  N.A.

  
	
  (a)(4)

  	
   

  	
  N.A.

  
	
  (b)

  	
   

  	
  7.8; 7.10

  
	
  (c)

  	
   

  	
  N.A.

  
	
  311(a)

  	
   

  	
  7.11

  
	
  (b)

  	
   

  	
  7.11

  
	
  (c)

  	
   

  	
  N.A.

  
	
  312(a)

  	
   

  	
  2.5

  
	
  (b)

  	
   

  	
  11.3

  
	
  (c)

  	
   

  	
  11.3

  
	
  313(a)

  	
   

  	
  7.6

  
	
  (b)(1)

  	
   

  	
  N.A.

  
	
  (b)(2)

  	
   

  	
  7.6

  
	
  (c)

  	
   

  	
  7.6; 11.2

  
	
  (d)

  	
   

  	
  7.6

  
	
  314(a)

  	
   

  	
  3.2; 3.17; 11.2

  
	
  (b)

  	
   

  	
  N.A.

  
	
  (c)(1)

  	
   

  	
  11.4

  
	
  (c)(2)

  	
   

  	
  11.4

  
	
  (c)(3)

  	
   

  	
  N.A.

  
	
  (d)

  	
   

  	
  N.A.

  
	
  (e)

  	
   

  	
  11.5

  
	
  315(a)

  	
   

  	
  7.1

  
	
  (b)

  	
   

  	
  7.5; 11.2

  
	
  (c)

  	
   

  	
  7.1

  
	
  (d)

  	
   

  	
  7.1

  
	
  (e)

  	
   

  	
  6.11

  
	
  316(a)(last sentence)

  	
   

  	
  11.6

  
	
  (a)(1)(A)

  	
   

  	
  6.5

  
	
  (a)(1)(B)

  	
   

  	
  6.4

  
	
  (a)(2)

  	
   

  	
  N.A.

  
	
  (b)

  	
   

  	
  6.7

  
	
  317(a)(1)

  	
   

  	
  6.8

  
	
  (a)(2)

  	
   

  	
  6.9

  
	
  (b)

  	
   

  	
  2.4

  
	
  318(a)

  	
   

  	
  11.1

  

 

N.A. means Not
Applicable.

 

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

 

 

INDENTURE dated as of July 20, 2005, among CLAYTON WILLIAMS ENERGY,
INC., a Delaware corporation (the “Company”), the SUBSIDIARY GUARANTORS
(as herein defined) party hereto and WELLS FARGO BANK, NATIONAL ASSOCIATION, a
national banking association organized under the laws of the United States, as
Trustee (the “Trustee”).

 

Each party agrees as follows for the benefit
of the other parties and for the equal and ratable benefit of the Holders of
(i) the Company’s 73⁄4%
Senior Notes due 2013, issued on the date hereof (the “Initial Securities”),
(ii) if and when issued, an unlimited principal amount of additional 73⁄4% Senior Notes due 2013 in a
non-registered offering or 73⁄4%
Senior Notes due 2013 in a registered offering of the Company that may be
offered from time to time subsequent to the Issue Date (the “Additional
Securities”) and (iii) if and when issued, the Company’s 73⁄4% Senior Notes due 2013 that may be
issued from time to time in exchange for Initial Securities or any Additional
Securities in an offer registered under the Securities Act as provided in the
Registration Rights Agreement (as hereinafter defined the “Exchange
Securities,” and together with the Initial Securities and Additional
Securities, the “Securities”).

 

ARTICLE I

 

Definitions and Incorporation by Reference

 

SECTION 1.1.   Definitions.

 

“Acquired
Indebtedness” means Indebtedness (i) of a Person or any of its Subsidiaries
existing at the time such Person becomes a Restricted Subsidiary or (ii)
assumed in connection with the acquisition of assets from such Person, in each
case whether or not Incurred by such Person in connection with, or in anticipation
or contemplation of, such Person becoming a Restricted Subsidiary or such
acquisition.  Acquired Indebtedness shall
be deemed to have been Incurred, with respect to clause (i) of the preceding
sentence, on the date such Person becomes a Restricted Subsidiary and, with
respect to clause (ii) of the preceding sentence, on the date of consummation
of such acquisition of assets.

 

“Additional
Assets” means:

 

(1)                                  any property, plant
or equipment to be used by the Company or a Restricted Subsidiary in the Oil
and Gas Business;

 

(2)                                  capital expenditures
by the Company or a Restricted Subsidiary in the Oil and Gas Business;

 

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

 

1

 

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

 

provided, however, that, in the case of
clauses (3) and (4), such Restricted Subsidiary is primarily engaged in the Oil
and Gas Business.

 

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

 

(1)                                  the
sum of:

 

(a)                                  discounted
future net revenues from proved oil and gas reserves of the Company and its
Restricted Subsidiaries calculated in accordance with Commission guidelines
before any provincial, territorial, state, Federal or foreign income taxes, as
estimated by the Company in a reserve report prepared as of the end of the
Company’s most recently completed fiscal year for which audited financial
statements are available, as increased by, as of the date of determination, the
estimated discounted future net revenues from

 

(i)                                     estimated
proved oil and gas reserves acquired since such year end, which reserves were
not reflected in such year end reserve report, and

 

(ii)                                  estimated
oil and gas reserves attributable to upward revisions of estimates of proved
oil and gas reserves since such year end due to exploration, development or
exploitation activities, in each case calculated in accordance with Commission
guidelines (utilizing the prices for the fiscal quarter ending prior to the
date of determination),

 

and decreased by,
as of the date of determination, the estimated discounted future net revenues
from

 

(iii)                               estimated
proved oil and gas reserves produced or disposed of since such year end, and

 

(iv)                              estimated
oil and gas reserves attributable to downward revisions of estimates of proved
oil and gas reserves since such year end due to changes in geological
conditions or other factors which would, in accordance with standard industry
practice, cause such revisions, in each case calculated on a pre-tax basis and
substantially in accordance with Commission guidelines (utilizing the prices
for the fiscal quarter ending prior to the date of determination),

 

2

 

in each case as
estimated by the Company’s petroleum engineers or any independent petroleum
engineers engaged by the Company for that purpose;

 

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

 

(c)                                  the
Net Working Capital on a date no earlier than the date of the Company’s latest
annual or quarterly financial statements; and

 

(d)                                 the
greater of

 

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

 

(ii)                                  the
appraised value, as estimated by independent appraisers, of other tangible
assets of the Company and its Restricted Subsidiaries, as of a date no earlier
than the date of the Company’s latest audited financial statements; minus

 

(2)                                  the
sum of:

 

(a)                                  Minority
Interests;

 

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

 

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

 

(d)                                 the
discounted future net revenues, calculated in accordance with Commission
guidelines, attributable to reserves subject to Dollar-Denominated Production
Payments which, based on the estimates of production and price assumptions
included in determining the discounted future net revenues specified in (1)(a)

 

3

 

above, would be necessary to fully satisfy the payment
obligations of the Company and its Subsidiaries with respect to
Dollar-Denominated Production Payments (determined, if applicable, using the
schedules specified with respect thereto).

 

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

 

For purposes of calculating the amount
referred to in clause (1) of the second paragraph of Section 3.3, the
Company will be entitled to rely on the greater of (i) Adjusted Consolidated
Net Tangible Assets as calculated as of the date used for determining the
borrowing base from time to time under the Company’s Senior Secured Credit
Agreement, or (ii) Adjusted Consolidated Net Tangible Assets as determined
above as of the date of determination.

 

“Additional
Securities” has the meaning ascribed to it in the second introductory
paragraph of this Indenture.

 

“Affiliate”
of any specified Person means any other Person, directly or indirectly,
controlling or controlled by or under direct or indirect common control with
such specified Person. For the purposes of this definition, “control” when used
with respect to any Person means the power to direct the management and
policies of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise; and the terms “controlling” and
“controlled” have meanings correlative to the foregoing; provided
that exclusively for purposes of Section 3.8, the beneficial ownership
of 10% or more of the Voting Stock of a Person shall be deemed to be control.

 

“Applicable
Premium” means, with respect to any Security at any Redemption Date, the greater of:

 

(1)                                  1.0% of the principal
amount of such Security; and

 

(2)                                  the excess of:

 

(a)                                  the present value at such time of (i) the redemption price,
excluding accrued interest, of such Security at August 1,
2009 (such
redemption price being set forth in Section 5.1) plus (ii) all required
interest payments, excluding accrued interest, due on such Security through August 1,
2009, computed
using a discount rate equal to the Treasury Rate plus 50 basis points over

 

(b)                                 the principal amount of such
Security.

 

“Asset
Disposition” means any direct or indirect sale, lease (other than an
operating lease entered into in the ordinary course of the Oil and Gas
Business), transfer, issuance or other disposition, or a series of related
sales, leases, transfers, issuances or dispositions that are part of a

 

4

 

common plan, of shares of
Capital Stock of a Subsidiary (other than directors’ qualifying shares), property or other assets (each
referred to for the purposes of this definition as a “disposition”) by the
Company or any of its Restricted Subsidiaries, including any disposition by
means of a merger, consolidation or similar transaction.

 

Notwithstanding
the preceding, the following items shall not be deemed to be Asset
Dispositions:

 

(1)                                  a disposition of
assets by a Restricted Subsidiary to the Company or by the Company or a
Restricted Subsidiary to a Restricted Subsidiary, provided that in the case of a sale by a Restricted
Subsidiary to another Restricted Subsidiary, the Company directly or indirectly
owns an equal or greater percentage of the Common Stock of the transferee than
of the transferor;

 

(2)                                  the sale of Cash
Equivalents in the ordinary course of business;

 

(3)                                  dispositions of
equipment, inventory, accounts receivable or other properties or assets in the
ordinary course of business, including any abandonment, farm-in, farm-out,
lease or sublease of any oil and gas properties or the forfeiture or other disposition
of such properties pursuant to standard form operating agreements, in each case
in the ordinary course of business in a manner customary in the Oil and Gas
Business;

 

(4)                                  a disposition of
obsolete or worn out equipment or equipment that is no longer useful in the
conduct of the business of the Company and its Restricted Subsidiaries and that
is disposed of in each case in the ordinary course of business;

 

(5)                                  transactions
permitted under Section 4.1;

 

(6)                                  an issuance of
Capital Stock by a Restricted Subsidiary to the Company or to a Restricted
Subsidiary;

 

(7)                                  for purposes of Section
3.7 only, the making of a Permitted Investment or a disposition subject to Section
3.4;

 

(8)                                  an Asset Swap
effected in compliance with Section 3.7;

 

(9)                                  dispositions of
assets in a single transaction or series of related transactions with an
aggregate fair market value of less than $2.5 million;

 

(10)                            the creation of a Permitted
Lien or dispositions in connection with Permitted Liens;

 

(11)                            dispositions of receivables
in connection with the compromise, settlement or collection thereof in the
ordinary course of business or in bankruptcy or similar proceedings and
exclusive of factoring or similar arrangements;

 

5

 

(12)                            the licensing or
sublicensing of intellectual property or other general intangibles and
licenses, leases or subleases of other property;

 

(13)                            foreclosure
on assets;

 

(14)                            any
Production Payments and Reserve Sales; and

 

(15)                            the
conveyance of assets to Employee Partnerships or the sale or grant of
partnership interests in Employee Partnerships to their respective limited
partners, as permitted in the definition of “Employee Partnerships.”

 

“Asset Swap” means
the concurrent purchase and sale or exchange of Additional Assets between the
Company or any of its Restricted Subsidiaries and another Person; provided that any cash received must be applied in
accordance with Section 3.7.

 

“Attributable
Indebtedness” in respect of a Sale/Leaseback Transaction means, as at the
time of determination, the present value (discounted at the interest rate borne
by the Securities, compounded semi-annually) of the total obligations of the
lessee for rental payments during the remaining term of the lease included in
such Sale/Leaseback Transaction (including any period for which such lease has
been extended).

 

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

 

“Bankruptcy
Law” means Title 11, United States Code or any similar Federal or
state law for the relief of debtors.

 

“Board of
Directors” means, as to any Person, the board of directors of such Person
or any duly authorized committee thereof.

 

“Business
Day” means each day that is not a Saturday, Sunday or other day on which
banking institutions in New York, New York are authorized or required by law to
close.

 

“Capital
Stock” of any Person means any and all shares, interests, rights to purchase,
warrants, options, participation or other equivalents of or interests in
(however designated) equity of such Person, including any Preferred Stock, but
excluding any debt securities convertible into such equity.

 

“Capitalized
Lease Obligations” means an obligation that is required to be classified
and accounted for as a capitalized lease for financial reporting purposes in
accordance with GAAP, and the amount of Indebtedness represented by such
obligation will be the capitalized amount of such obligation at the time any
determination thereof is to be made as determined in accordance with GAAP, and
the Stated Maturity thereof will be the date of the last payment of rent

 

6

 

or any other amount due under
such lease prior to the first date such lease may be terminated without
penalty.

 

“Cash
Equivalents” means:

 

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

 

(2)                                  marketable general
obligations issued by any state of the United States of America or any
political subdivision of any such state or any public instrumentality thereof
maturing within one year from the date of acquisition (provided
that the full faith and credit of the United States is pledged in support
thereof) and, at the time of acquisition, having a credit rating of “A” or
better from either Standard & Poor’s Ratings Services or Moody’s Investors
Service, Inc.;

 

(3)                                  certificates of
deposit, time deposits, eurodollar time deposits, overnight bank deposits or
bankers’ acceptances having maturities of not more than one year from the date
of acquisition thereof issued by any commercial bank the long-term debt of
which is rated at the time of acquisition thereof at least “A” or the
equivalent thereof by Standard & Poor’s Ratings Services, or “A” or the
equivalent thereof by Moody’s Investors Service, Inc., and having combined
capital and surplus in excess of $100.0 million;

 

(4)                                  repurchase
obligations with a term of not more than seven days for underlying securities
of the types described in clauses (1), (2) and (3) entered into with any bank
meeting the qualifications specified in clause (3) above;

 

(5)                                  commercial paper
rated at the time of acquisition thereof at least “A-2” or the equivalent
thereof by Standard & Poor’s Ratings Services or “P-2” or the equivalent
thereof by Moody’s Investors Service, Inc., or carrying an equivalent rating by
a nationally recognized rating agency, if both of the two named rating agencies
cease publishing ratings of investments, and in any case maturing within one
year after the date of acquisition thereof; and

 

(6)                                  interests in any
investment company or money market fund which invests 95% or more of its assets
in instruments of the type specified in clauses (1) through (5) above.

 

“Change of
Control” means:

 

(1)                                  (A)  any “person” or “group” of related persons
(as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other
than one or more

 

7

 

Permitted Holders, is or becomes the beneficial owner (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act, except that such person or group
shall be deemed to have “beneficial ownership” of all shares that any such
person or group has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of more
than 35% of the total voting power of the Voting Stock of the Company (or its
successor by merger, consolidation or purchase of all or substantially all of
its assets) (for the purposes of this clause, such person or group shall be
deemed to beneficially own any Voting Stock of the Company held by a parent
entity, if such person or group “beneficially owns” (as defined above),
directly or indirectly, more than 35% of the voting power of the Voting Stock
of such parent entity); and (B) the Permitted Holders “beneficially own” (as
defined in Rules 13d-3 and 13d-5 of the Exchange Act), directly or indirectly,
in the aggregate less than 25% of the total voting power of the Voting Stock of
the Company (or its successor by merger, consolidation or purchase of all or
substantially all of its assets) or its parent entity and do not have the right
or ability by voting power, contract or otherwise to elect or designate for
election a majority of the board of directors of the Company (or such
successor) or its parent entity; or

 

(2)                                  the first day on
which a majority of the members of the Board of Directors of the Company are
not Continuing Directors; or

 

(3)                                  the sale, lease,
transfer, conveyance or other disposition (other than by way of merger or
consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Restricted Subsidiaries
taken as a whole to any “person” (as such term is used in Sections 13(d) and
14(d) of the Exchange Act) other than a Permitted Holder; or

 

(4)                                  the adoption by the
stockholders of the Company of a plan or proposal for the liquidation or
dissolution of the Company.

 

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

 

“Commodity
Agreements” means, in respect of any Person, any forward contract,
commodity swap agreement, commodity option agreement or other similar agreement
or arrangement in respect of Hydrocarbons used, produced, processed or sold by
such Person that are customary in the Oil and Gas Business and designed to
protect such Person against fluctuation in Hydrocarbon prices.

 

“Common
Stock” means with respect to any Person, any and all shares, interests or
other participations in, and other equivalents (however designated and whether
voting or nonvoting) of such Person’s common stock whether or not outstanding
on the Issue Date, and includes, without limitation, all series and classes of
such common stock.

 

8

 

“Consolidated
Coverage Ratio” means as of any date of determination, with respect to any
Person, the ratio of (x) the aggregate amount of Consolidated EBITDAX of such
Person for the period of the most recent four consecutive fiscal quarters ending
prior to the date of such determination for which financial statements are in
existence to (y) Consolidated Interest Expense for such four fiscal quarters, provided, however, that:

 

(1)                                  if the Company or any
Restricted Subsidiary:

 

(a)                                  has Incurred any Indebtedness
since the beginning of such period that remains outstanding on such date of
determination or if the transaction giving rise to the need to calculate the
Consolidated Coverage Ratio is an Incurrence of Indebtedness, Consolidated
EBITDAX and Consolidated Interest Expense for such period will be calculated
after giving effect on a pro forma basis to such Indebtedness as if such
Indebtedness had been Incurred on the first day of such period (except that in
making such computation, the amount of Indebtedness under any revolving credit
facility outstanding on the date of such calculation will be deemed to be
(i)  the average daily balance of such
Indebtedness during such four fiscal quarters or such shorter period for which
such facility was outstanding or (ii) if such facility was created after the
end of such four fiscal quarters, the average daily balance of such
Indebtedness during the period from the date of creation of such facility to
the date of such calculation) and the discharge of any other Indebtedness
repaid, repurchased, defeased or otherwise discharged with the proceeds of such
new Indebtedness as if such discharge had occurred on the first day of such
period; or

 

(b)                                 has repaid, repurchased,
defeased or otherwise discharged any Indebtedness since the beginning of the
period that is no longer outstanding on such date of determination or if the
transaction giving rise to the need to calculate the Consolidated Coverage
Ratio involves a discharge of Indebtedness (in each case other than Indebtedness
Incurred under any revolving credit facility unless such Indebtedness has been
permanently repaid and the related commitment terminated), Consolidated EBITDAX
and Consolidated Interest Expense for such period will be calculated after
giving effect on a pro forma basis to such discharge of such Indebtedness,
including with the proceeds of such new Indebtedness, as if such discharge had
occurred on the first day of such period;

 

(2)                                  if since the
beginning of such period the Company or any Restricted Subsidiary shall have made any Asset Disposition or
disposed of any company, division, operating unit, segment, business, group of
related

 

9

 

assets or line of business or if the transaction giving rise to the
need to calculate the Consolidated Coverage Ratio is such an Asset Disposition:

 

(a)                                  the Consolidated EBITDAX for
such period will be reduced by an amount equal to the Consolidated EBITDAX (if
positive) directly attributable to the assets which are the subject of such
Asset Disposition for such period or increased by an amount equal to the
Consolidated EBITDAX (if negative) directly attributable thereto for such
period; and

 

(b)                                 Consolidated Interest Expense
for such period will be reduced by an amount equal to the Consolidated Interest
Expense directly attributable to any Indebtedness of the Company or any
Restricted Subsidiary repaid, repurchased, defeased or otherwise discharged
with respect to the Company and its continuing Restricted Subsidiaries in connection
with such Asset Disposition for such period (or, if the Capital Stock of any
Restricted Subsidiary is sold, the Consolidated Interest Expense for such
period directly attributable to the Indebtedness of such Restricted Subsidiary
to the extent the Company and its continuing Restricted Subsidiaries are no
longer liable for such Indebtedness after such sale);

 

(3)                                  if since the
beginning of such period the Company or any Restricted Subsidiary (by merger or
otherwise) shall have made an Investment in any Restricted Subsidiary (or any
Person which becomes a Restricted Subsidiary or is merged with or into the
Company) or an acquisition of assets, including any acquisition of assets
occurring in connection with a transaction causing a calculation to be made
hereunder, which constitutes all or substantially all of a company, division,
operating unit, segment, business, group of related assets or line of business,
Consolidated EBITDAX and Consolidated Interest Expense for such period will be
calculated after giving pro forma effect thereto (including the Incurrence of
any Indebtedness) as if such Investment or acquisition had occurred on the
first day of such period; and

 

(4)                                  if since the
beginning of such period any Person that subsequently became a Restricted
Subsidiary or was merged with or into the Company or any Restricted Subsidiary
since the beginning of such period shall have Incurred any Indebtedness or
discharged any Indebtedness, made any Asset Disposition or any Investment or
acquisition of assets that would have required an adjustment pursuant to clause
(2) or (3) above if made by the Company or a Restricted Subsidiary during such
period, Consolidated EBITDAX and Consolidated Interest Expense for such period
will be calculated after giving pro forma effect thereto as if such Asset
Disposition or Investment or acquisition of assets had occurred on the first
day of such period.

 

10

 

For purposes
of this definition, whenever pro forma effect is to be given to any calculation
under this definition, the pro forma calculations will be determined in good
faith by a responsible financial or accounting officer of the Company
(including pro forma expense and cost reductions calculated on a basis
consistent with Regulation S-X under the Securities Act).

 

If any
Indebtedness bears a floating rate of interest and is being given pro forma
effect, the interest expense on such Indebtedness will be calculated as if the
rate in effect on the date of determination had been the applicable rate for
the entire period (taking into account any Interest Rate Agreement applicable
to such Indebtedness if such Interest Rate Agreement has a remaining term in
excess of 12 months).  If any Indebtedness
that is being given pro forma effect bears an interest rate at the option of
the Company, the interest rate shall be calculated by applying such optional
rate chosen by the Company.

 

“Consolidated
EBITDAX” for any period means the Consolidated Net Income for such period,
plus, without duplication, the following to the extent deducted in calculating
such Consolidated Net Income:

 

(1)                                  Consolidated Interest
Expense;

 

(2)                                  Consolidated Income
Taxes;

 

(3)                                  consolidated
depletion and depreciation expense;

 

(4)                                  consolidated
amortization expense or impairment charges recorded in connection with the
application of Financial Accounting Standard No. 142 “Goodwill and Other
Intangibles” and Financial Accounting Standard No. 144 “Accounting for the
Impairment or Disposal of Long Lived Assets”;

 

(5)                                  other non-cash
charges reducing Consolidated Net Income (excluding any such non-cash charge to
the extent it represents an accrual of or reserve for cash charges in any
future period or amortization of a prepaid cash expense that was paid in a
prior period not included in the calculation); and

 

(6)                                  consolidated
exploration expenses;

 

less, to the
extent included in calculating such Consolidated Net Income and in excess of
any costs or expenses attributable thereto that were deducted in calculating
such Consolidated Net Income, the sum of (x) the amount of deferred revenues
that are amortized during such period and are attributable to reserves that are
subject to Volumetric Production Payments, and (y) amounts recorded in
accordance with GAAP as repayments of principal and interest pursuant to
Dollar-Denominated Production Payments. Notwithstanding the preceding sentence,
clauses (2) through (6) relating to amounts of a Restricted Subsidiary of a
Person will be added to Consolidated Net Income to compute Consolidated EBITDAX
of such Person only to the extent (and in the same proportion) that the net
income (loss) of such Restricted Subsidiary was included in calculating the
Consolidated Net Income of such Person and, to the extent the amounts set forth
in clauses (2) through (6) are in excess of those necessary to offset a net
loss of such Restricted Subsidiary or if such Restricted Subsidiary has net
income for such period included in

 

11

 

Consolidated Net Income, only
if a corresponding amount would be permitted at the date of determination to be
dividended to the Company by such Restricted Subsidiary without prior approval
(that has not been obtained), pursuant to the terms of its charter and all
agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to that Restricted Subsidiary or its
stockholders.

 

“Consolidated
Income Taxes” means, with respect to any Person for any period, taxes
imposed upon such Person or other payments required to be made by such Person
by any governmental authority which taxes or other payments are calculated by
reference to the income or profits of such Person or such Person and its
Restricted Subsidiaries (to the extent such income or profits were included in
computing Consolidated Net Income for such period), regardless of whether such
taxes or payments are required to be remitted to any governmental authority.

 

“Consolidated
Interest Expense” means, for any period, the total consolidated interest expense of the
Company and its Restricted Subsidiaries, whether paid or accrued, plus, to the
extent not included in such interest expense:

 

(1)                                  interest expense
attributable to Capitalized Lease Obligations and the interest portion of rent
expense associated with Attributable Indebtedness in respect of the relevant
lease giving rise thereto, determined as if such lease were a capitalized lease
in accordance with GAAP and the interest component of any deferred payment
obligations;

 

(2)                                  amortization of debt
discount and debt issuance cost (provided that
any amortization of bond premium will be credited to reduce Consolidated
Interest Expense unless, pursuant to GAAP, such amortization of bond premium
has otherwise reduced Consolidated Interest Expense);

 

(3)                                  non-cash interest
expense;

 

(4)                                  commissions,
discounts and other fees and charges owed with respect to letters of credit and
bankers’ acceptance financing;

 

(5)                                  the interest expense
on Indebtedness of another Person that is Guaranteed by such Person or one of
its Restricted Subsidiaries or secured by a Lien on assets of such Person or
one of its Restricted Subsidiaries;

 

(6)                                  costs associated with
Interest Rate Agreements (including amortization of fees) provided,
however, that if Interest Rate Agreements result in net benefits
rather than costs, such benefits shall be credited to reduce Consolidated
Interest Expense unless, pursuant to GAAP, such net benefits are otherwise
reflected in Consolidated Net Income;

 

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

 

12

 

(8)                                  the product of (a)
all dividends paid or payable in cash, Cash Equivalents or Indebtedness or
accrued during such period on any series of Disqualified Stock of such Person
or on Preferred Stock of its Restricted Subsidiaries that are not Subsidiary
Guarantors payable to a party other than the Company or a Wholly-Owned
Subsidiary, times (b) a fraction, the numerator of which is one and the
denominator of which is one minus the then current combined federal, state, provincial and local
statutory tax rate of such Person, expressed as a decimal, in each case, on a
consolidated basis and in accordance with GAAP; and

 

(9)                                  the cash
contributions to any employee stock ownership plan or similar trust to the
extent such contributions are used by such plan or trust to pay interest or
fees to any Person (other than the Company and its Restricted Subsidiaries) in
connection with Indebtedness Incurred by such plan or trust.

 

For the
purpose of calculating the Consolidated Coverage Ratio in connection with the
Incurrence of any Indebtedness described in the final paragraph of the
definition of “Indebtedness”, the calculation of Consolidated Interest Expense
shall include all interest expense (including any amounts described in clauses
(1) through (9) above) relating to any Indebtedness of the Company or any
Restricted Subsidiary described in the final paragraph of the definition of “Indebtedness”.

 

For purposes
of the foregoing, total interest expense will be determined (i) after giving
effect to any net payments made or received by the Company and its Subsidiaries
with respect to Interest Rate Agreements and (ii) exclusive of amounts classified
as other comprehensive income on the balance sheet of the Company.
Notwithstanding anything to the contrary contained herein, commissions,
discounts, yield and other fees and charges Incurred in connection with any
transaction pursuant to which the Company or its Restricted Subsidiaries may
sell, convey or otherwise transfer or grant a security interest in any accounts
receivable or related assets shall be included in Consolidated Interest
Expense.

 

“Consolidated
Net Income” means, for any period, the consolidated net income (loss) of the
Company and its Restricted Subsidiaries determined in accordance with GAAP; provided, however, that there will not be included in such
Consolidated Net Income:

 

(1)                                  any net income (loss)
of any Person if such Person is not a Restricted Subsidiary, except that:

 

(a)                                  subject to the limitations
contained in clauses (3), (4) and (5) below, the Company’s equity in the net
income of any such Person for such period will be included in such Consolidated
Net Income up to the aggregate amount of cash actually distributed by such
Person during such period to the Company or a Restricted Subsidiary as a
dividend or other distribution (subject, in the case of a dividend or other
distribution to a Restricted Subsidiary, to the limitations contained in clause
(2) below); and

 

13

 

(b)                                 the Company’s equity in a net
loss of any such Person (other than an Unrestricted Subsidiary) for such period
will be included in determining such Consolidated Net Income to the extent such
loss has been funded with cash from the Company or a Restricted Subsidiary;

 

(2)                                  any net income (but
not loss) of any Restricted Subsidiary if such Subsidiary is subject to
restrictions, directly or indirectly, on the payment of dividends or the making
of distributions by such Restricted Subsidiary, directly or indirectly, to the
Company, except that:

 

(a)                                  subject to the limitations
contained in clauses (3), (4) and (5) below, the Company’s equity in the net
income of any such Restricted Subsidiary for such period will be included in
such Consolidated Net Income up to the aggregate amount of cash that could have
been distributed by such Restricted Subsidiary during such period to the
Company or another Restricted Subsidiary as a dividend (subject, in the case of
a dividend to another Restricted Subsidiary, to the limitation contained in
this clause); and

 

(b)                                 the Company’s equity in a net
loss of any such Restricted Subsidiary for such period will be included in
determining such Consolidated Net Income;

 

(3)                                  any gain (loss)
realized upon the sale or other disposition of any property, plant or equipment
of the Company or its consolidated Restricted Subsidiaries (including pursuant
to any Sale/Leaseback Transaction) which is not sold or otherwise disposed of
in the ordinary course of business and any gain (loss) realized upon the sale
or other disposition of any Capital Stock of any Person;

 

(4)                                  any after-tax
extraordinary gain or loss;

 

(5)                                  the after-tax
cumulative effect of a change in accounting principles;

 

(6)                                  any asset impairment
writedowns on oil and gas properties under GAAP or Commission guidelines;

 

(7)                                  any unrealized
non-cash gains or losses or charges in respect of Hedging Obligations
(including those resulting from the application of Statement of Financial
Accounting Standards 133); and

 

(8)                                  non-cash charges
relating to employee stock-based compensation.

 

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

 

14

 

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

 

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

 

“Credit
Facility” means, with respect to the Company or any Subsidiary Guarantor,
one or more debt facilities (including, without limitation, the Senior Secured
Credit Agreement) or commercial paper facilities with banks or other
institutional lenders providing for revolving credit loans, term loans,
receivables financing (including through the sale of receivables to such
lenders or to special purpose entities formed to borrow from such lenders
against such receivables) or letters of credit, in each case, as amended,
restated, modified, renewed, refunded, replaced or refinanced in whole or in
part from time to time (and whether or not with the original administrative agent
and lenders or another administrative agent or agents or other lenders and
whether provided under the original Senior Secured Credit Agreement or any
other credit or other agreement or indenture).

 

“Currency
Agreement” means in respect of a Person any foreign exchange contract,
currency swap agreement, currency futures contract, currency option contract or
other similar agreement as to which such Person is a party or a beneficiary.

 

“Custodian”
means any receiver, trustee, assignee, liquidator, custodian or similar
official under any Bankruptcy Law.

 

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

 

“Definitive
Security” means a certificated Security registered in the name of the
Holder thereof and issued in accordance with Section 2.1 hereof, in the
form of Exhibit A hereto except that such Security shall not bear the
Global Security legend specified in Section 2.1 (d)(C).

 

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

 

(1)                                  matures or is
mandatorily redeemable pursuant to a sinking fund obligation or otherwise;

 

(2)                                  is convertible or
exchangeable for Indebtedness or Disqualified Stock (excluding Capital Stock
which is convertible or exchangeable solely at the option of the Company or a
Restricted Subsidiary); or

 

(3)                                  is redeemable at the
option of the holder of the Capital Stock, in whole or in part,

 

in each case
on or prior to the date that is 91 days after the earlier of the date (a) of
the Stated Maturity of the Securities or (b) on which there are no Securities
outstanding; provided that only

 

15

 

the portion of Capital Stock
which so matures or is mandatorily redeemable, is so convertible or
exchangeable or is so redeemable at the option of the holder thereof prior to
such date will be deemed to be Disqualified Stock; provided,
further, that any Capital Stock that would constitute Disqualified
Stock solely because the holders thereof have the right to require the Company
to repurchase such Capital Stock upon the occurrence of a change of control or
asset sale (each defined in a substantially identical manner to the
corresponding definitions in this Indenture) shall not constitute Disqualified
Stock if the terms of such Capital Stock (and all such securities into which it
is convertible or for which it is ratable or exchangeable) provide that the
Company may not repurchase or redeem any such Capital Stock (and all such
securities into which it is convertible or for which it is ratable or
exchangeable) pursuant to such provision prior to compliance by the Company
with the provisions of this Indenture described under Section 3.9 and Section 3.7
and such repurchase or redemption complies with Section 3.4.

 

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

 

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

 

“Employee
Partnerships” means partnerships or trusts formed in connection with the
Company’s After Payout Working Interest Incentive Plan as in effect on the
Issue Date or similar partnerships or trusts with employees or consultants
intended to provide compensation or incentives through the sale or grant of
partnership interests representing interests in oil and gas properties or
prospects of the Company and its Restricted Subsidiaries, in each case as
approved by the Compensation Committee of the Board of Directors of the
Company, provided, that, after the Issue Date,
the Company and its Restricted Subsidiaries shall not sell or grant to any such
partnership or trust more than 10% of their respective interests in any
particular oil and gas property or prospect.

 

“Equity
Offering” means (i) a public offering for cash by the Company of its
Capital Stock (other than Disqualified Stock), other than public offerings
registered on Form S-4 or S-8 or (ii) a private offering to one or more
institutional investors for cash by the Company of its Capital Stock (other
than Disqualified Stock).

 

“Exchange
Act” means the Securities Exchange Act of 1934, as amended, and the rules
and regulations of the Commission promulgated thereunder.

 

“Foreign
Subsidiary” means any Restricted Subsidiary that is not organized under the
laws of the United States of America or any state thereof or the District of
Columbia.

 

“GAAP”
means generally accepted accounting principles in the United States of America
as in effect as of the date of this Indenture, including those set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as approved by a significant segment of the

 

16

 

accounting profession. All
ratios and computations based on GAAP contained in this Indenture will be
computed in conformity with GAAP.

 

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

 

(1)                                  to purchase or pay
(or advance or supply funds for the purchase or payment of) such Indebtedness
of such other Person (whether arising by virtue of partnership arrangements, or
by agreement to keep-well, to purchase assets, goods, securities or services,
to take-or-pay, or to maintain financial statement conditions or otherwise); or

 

(2)                                  entered into for
purposes of assuring in any other manner the obligee of such Indebtedness of
the payment thereof or to protect such obligee against loss in respect thereof
(in whole or in part); provided, however, that
the term “Guarantee” will not include endorsements for collection or deposit in
the ordinary course of business. The term “Guarantee” used as a verb has a
corresponding meaning.

 

“Guarantor
Subordinated Obligation” means, with respect to a Subsidiary Guarantor, any
Indebtedness of such Subsidiary Guarantor (whether outstanding on the Issue
Date or thereafter Incurred) which is expressly subordinate in right of payment
to the obligations of such Subsidiary Guarantor under its Subsidiary Guarantee
pursuant to a written agreement.

 

“Hedging
Obligations” of any Person means the obligations of such Person pursuant to
any Interest Rate Agreement, Currency Agreement or Commodity Agreement.

 

“Holder”
or “Securityholder” means the Person in whose name a Security is
registered in the Note Register.

 

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

 

“Incur”
means issue, create, assume, Guarantee, incur or otherwise become liable for; provided, however, that any Indebtedness or Capital Stock of
a Person existing at the time such Person becomes a Restricted Subsidiary
(whether by merger, consolidation, acquisition or otherwise) will be deemed to
be incurred by such Restricted Subsidiary at the time it becomes a Restricted
Subsidiary; and the terms “Incurred” and “Incurrence” have meanings correlative
to the foregoing.

 

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

 

(1)                                  the principal of and
premium (if any) in respect of indebtedness of such Person for borrowed money;

 

17

 

(2)                                  the principal of and
premium (if any) in respect of obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments;

 

(3)                                  the principal
component of all obligations of such Person in respect of letters of credit,
bankers’ acceptances or other similar instruments (including reimbursement
obligations with respect thereto except to the extent such reimbursement
obligation relates to a trade payable and such obligation is satisfied within 30
days of Incurrence);

 

(4)                                  the principal
component of all obligations of such Person to pay the deferred and unpaid
purchase price of property (except trade payables), which purchase price is due
more than six months after the date of placing such property in service or
taking delivery and title thereto;

 

(5)                                  Capitalized Lease
Obligations and all Attributable Indebtedness of such Person;

 

(6)                                  the principal
component or liquidation preference of all obligations of such Person with
respect to the redemption, repayment or other repurchase of any Disqualified
Stock or, with respect to any Subsidiary that is not a Subsidiary Guarantor,
any Preferred Stock (but excluding, in each case, any accrued dividends);

 

(7)                                  the principal
component of all Indebtedness of other Persons secured by a Lien on any asset
of such Person, whether or not such Indebtedness is assumed by such Person; provided, however, that the amount of such
Indebtedness will be the lesser of (a) the fair market value of such asset at
such date of determination and (b) the amount of such Indebtedness of such
other Persons;

 

(8)                                  the principal
component of Indebtedness of other Persons to the extent Guaranteed by such
Person; and

 

(9)                                  to the extent not
otherwise included in this definition, net obligations of such Person under
Commodity Agreements, Currency Agreements and Interest Rate Agreements (the
amount of any such obligations to be equal at any time to the termination value
of such agreement or arrangement giving rise to such obligation that would be
payable by such Person at such time).

 

Notwithstanding
the preceding, Indebtedness shall not include Volumetric Production
Payments.  The amount of Indebtedness of
any Person at any date will be the outstanding balance at such date of all
unconditional obligations as described above and the maximum liability, upon
the occurrence of the contingency giving rise to the obligation, of any
contingent obligations at such date.

 

In addition, “Indebtedness”
of any Person shall include Indebtedness described in the preceding paragraph
that would not appear as a liability on the balance sheet of such Person if:

 

18

 

(1)                                  such Indebtedness is
the obligation of a partnership or joint venture that is not a Restricted Subsidiary
(a “Joint Venture”);

 

(2)                                  such Person or a
Restricted Subsidiary of such Person is a general partner of the Joint Venture
(a “General Partner”); and

 

(3)                                  there is recourse, by
contract or operation of law, with respect to the payment of such Indebtedness
to property or assets of such Person or a Restricted Subsidiary of such Person;
and then such Indebtedness shall be included in an amount not to exceed:

 

(a)                                  the lesser of (i) the net assets
of the General Partner and (ii) the amount of such obligations to the extent
that there is recourse, by contract or operation of law, to the property or
assets of such Person or a Restricted Subsidiary of such Person; or

 

(b)                                 if less than the amount
determined pursuant to clause (a) immediately above, the actual amount of such
Indebtedness that is recourse to such Person or a Restricted Subsidiary of such
Person, if the Indebtedness is evidenced by a writing and is for a determinable
amount.

 

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

 

“Initial
Securities” has the meaning ascribed to it in the second introductory
paragraph of this Indenture.

 

“Interest
Rate Agreement” means with respect to any Person any interest rate
protection agreement, interest rate future agreement, interest rate option
agreement, interest rate swap agreement, interest rate cap agreement, interest
rate collar agreement, interest rate hedge agreement or other similar agreement
or arrangement as to which such Person is party or a beneficiary.

 

“Investment”
means, with respect to any Person, all investments by such Person in other
Persons (including Affiliates) in the form of any direct or indirect advance,
loan (other than advances or extensions of credit to customers in the ordinary
course of business) or other extensions of credit (including by way of
Guarantee or similar arrangement, but excluding any debt or extension of credit
represented by a bank deposit other than a time deposit) or capital
contribution to (by means of any transfer of cash or other property to others
or any payment for property or services for the account or use of others), or
any purchase or acquisition of Capital Stock, Indebtedness or other similar
instruments issued by, such Person and all other items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP; provided that:

 

(1)                                  Hedging Obligations
entered into in the ordinary course of business and in compliance with this
Indenture;

 

19

 

(2)                                  endorsements of
negotiable instruments and documents in the ordinary course of business; and

 

(3)                                  an acquisition of
assets, Capital Stock or other securities by the Company or a Subsidiary for
consideration to the extent such consideration consists of Capital Stock of the
Company (other than Disqualified Stock);

 

shall not, in each case, be deemed to be an
Investment.

 

For purposes
of Section 3.4:

 

(1)                                  “Investment” will
include the portion (proportionate to the Company’s equity interest in a
Restricted Subsidiary to be designated as an Unrestricted Subsidiary) of the
fair market value of the net assets of such Restricted Subsidiary of the
Company at the time that such Restricted Subsidiary is designated an
Unrestricted Subsidiary (as conclusively determined by the Board of Directors
of the Company in good faith); provided,
however, that upon a redesignation of such Subsidiary as a
Restricted Subsidiary, the Company will be deemed to continue to have a
permanent “Investment” in an Unrestricted Subsidiary in an amount (if positive)
equal to (a) the Company’s “Investment” in such Subsidiary at the time of such
redesignation less (b) the portion (proportionate to the Company’s equity
interest in such Subsidiary) of the fair market value of the net assets (as
conclusively determined by the Board of Directors of the Company in good faith)
of such Subsidiary at the time that such Subsidiary is so re-designated a
Restricted Subsidiary; and

 

(2)                                  any property
transferred to or from an Unrestricted Subsidiary will be valued at its fair
market value at the time of such transfer, in each case as determined in good
faith by the Board of Directors of the Company.

 

“Issue Date”
means the date on which the Initial Securities are originally issued.

 

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

 

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

 

“Net
Available Cash” from an Asset Disposition means cash payments received
(including any cash payments received by way of deferred payment of principal
pursuant to a note or installment receivable or otherwise and net proceeds from
the sale or other disposition of any securities received as consideration, but
only as and when received, but excluding any other consideration received in
the form of assumption by the acquiring Person of Indebtedness or other

 

20

 

obligations relating to the
properties or assets that are the subject of such Asset Disposition or received
in any other non-cash
form) therefrom, in each case net of:

 

(1)                                  all legal,
accounting, investment banking, title and recording tax expenses, commissions
and other fees and expenses incurred, and all Federal, state, provincial,
foreign and local taxes required to be paid or accrued as a liability under
GAAP (after taking into account any available tax credits or deductions and any
tax sharing agreements), as a consequence of such Asset Disposition;

 

(2)                                  all payments made on
any Indebtedness which is secured by any assets subject to such Asset
Disposition, in accordance with the terms of any Lien upon such assets, or
which must by its terms, or in order to obtain a necessary consent to such
Asset Disposition, or by applicable law be repaid out of the proceeds from such
Asset Disposition;

 

(3)                                  all distributions and
other payments required to be made to minority interest holders in Subsidiaries
or joint ventures as a result of such Asset Disposition; and

 

(4)                                  the deduction of
appropriate amounts to be provided by the seller as a reserve, in accordance
with GAAP, against any liabilities associated with the assets disposed of in
such Asset Disposition and retained by the Company or any Restricted Subsidiary
after such Asset Disposition.

 

“Net Cash
Proceeds”, with respect to any issuance or sale of Capital Stock, means the
cash proceeds of such issuance or sale net of attorneys’ fees, accountants’
fees, underwriters’ or placement agents’ fees, listing fees, discounts or
commissions and brokerage, consultant and other fees and charges actually
incurred in connection with such issuance or sale and net of taxes paid or
payable as a result of such issuance or sale (after taking into account any
available tax credit or deductions and any tax sharing arrangements).

 

“Net
Working Capital” means (a) all current assets of the Company and its
Restricted Subsidiaries except current assets from commodity price risk
management activities arising in the ordinary course of the Oil and Gas
Business, less (b) all current liabilities of the Company and its Restricted
Subsidiaries, except current liabilities included in Indebtedness and any
current liabilities from commodity price risk management activities arising in
the ordinary course of the Oil and Gas Business, in each case as set forth in
the consolidated financial statements of the Company prepared in accordance
with GAAP.

 

“Non-Recourse
Debt” means Indebtedness of a Person:

 

(1)                                  as to which neither
the Company nor any Restricted Subsidiary (a) provides any Guarantee or credit
support of any kind (including any undertaking, guarantee, indemnity, agreement
or instrument that would constitute Indebtedness) or (b) is directly or
indirectly liable (as a guarantor or otherwise);

 

21

 

(2)                                  no default with
respect to which (including any rights that the holders thereof may have to
take enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any Restricted Subsidiary to declare a default under such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity; and

 

(3)                                  the explicit terms of
which provide there is no recourse against any of the assets of the Company or
its Restricted Subsidiaries.

 

“Non-U.S.
Person” means a person who is not a U.S. person, as defined in Regulation
S.

 

“Note
Register” means the register of Securities, maintained by the Registrar,
pursuant to Section 2.3.

 

“Officer”
means the Chairman of the Board, the Chief Executive Officer, the President,
the Chief Operating Officer, the Chief Financial Officer, any Vice President,
the Treasurer or the Secretary of the Company. 
Officer of any Subsidiary Guarantor has a correlative meaning.

 

“Officers’
Certificate” means a certificate signed by two Officers or by an Officer
and either an Assistant Treasurer or an Assistant Secretary of the Company or a
Subsidiary Guarantor, as applicable.

 

“Oil and Gas Business” means (a) the
business of acquiring, exploring, exploiting, developing, producing, operating
and disposing of interests in oil, gas, liquid natural gas and other
hydrocarbon properties, (b) the business of gathering, marketing, treating,
processing, storage, refining, selling and transporting of any production from
such interests or properties and products produced in association therewith or
providing drilling and related services and supplies and equipment, (c) any
business or activity relating to, arising from, or necessary, appropriate or
incidental to the activities described in the foregoing clauses (a) and (b) of
this definition.

 

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

 

“Pari Passu
Indebtedness” means Indebtedness that ranks equally in right of payment to
the Securities.

 

“Permitted
Holders” means Clayton Williams, Jr. and any Affiliate or Related Person thereof.

 

“Permitted
Business Investment” means any Investment made in the ordinary course of
the Oil and Gas Business including investments or expenditures for actively
exploiting, exploring for, acquiring, developing, producing, operating,
processing, gathering, refining, storing, marketing, selling or transporting
oil and gas and other Hydrocarbons through agreements,

 

22

 

transactions, interests or
arrangements which permit one to share risks or costs, comply with regulatory
requirements regarding local ownership or satisfy other objectives customarily
achieved through the conduct of the Oil and Gas Business jointly with third
parties, including:

 

(1)                                  ownership interests
in oil and gas properties, liquid natural gas facilities, processing
facilities, gathering systems, pipelines or ancillary real property interests;

 

(2)                                  Investments in the
form of or pursuant to operating agreements, processing agreements, farm-in
agreements, farm-out agreements, development agreements, area of mutual
interest agreements, unitization agreements, pooling agreements, joint bidding
agreements, service contracts, joint venture agreements, partnership agreements
(whether general or limited), subscription agreements, stock purchase
agreements and other similar agreements (including for limited liability
companies) with third parties; and

 

(3)                                  direct or indirect
ownership interests in drilling rigs and related equipment, including, without
limitation, transportation equipment;

 

provided, however,
that a “Permitted Business Investment” shall not include Investments in entities
that are not classified as pass-through entities for U.S. federal, state and local and foreign
income tax purposes.

 

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

 

(1)                                  the Company or a
Restricted Subsidiary or a Person which will, upon the making of such
Investment, become a Restricted Subsidiary; provided,
however, that the primary business of such Restricted Subsidiary is
the Oil and Gas Business;

 

(2)                                  another Person if as
a result of such Investment such other Person is merged or consolidated with or
into, or transfers or conveys all or substantially all its assets to, the
Company or a Restricted Subsidiary; provided,
however, that such Person’s primary business is the Oil and Gas
Business;

 

(3)                                  cash and Cash
Equivalents;

 

(4)                                  receivables owing to
the Company or any Restricted Subsidiary created or acquired in the ordinary
course of business and payable or
dischargeable in accordance with customary trade terms; provided, however, that such trade terms
may include such concessionary trade terms as the Company or any such
Restricted Subsidiary deems reasonable under the circumstances;

 

23

 

(5)                                  payroll, travel and
similar advances to cover matters that are expected at the time of such
advances ultimately to be treated as expenses for accounting purposes and that
are made in the ordinary course of business;

 

(6)                                  loans or advances to
employees made in the ordinary course of business consistent with past
practices of the Company or such Restricted Subsidiary; provided,
however, that the Company and its Subsidiaries will comply in all
material respects with all applicable provisions of the Sarbanes-Oxley Act of
2002 and the rules and regulations promulgated in connection therewith in
connection with such loans or advances as if the Company had filed a
registration statement with the Commission;

 

(7)                                  Capital Stock,
obligations or securities received in settlement of debts created in the
ordinary course of business and owing to the Company or any Restricted
Subsidiary or in satisfaction of judgments or pursuant to any plan of
reorganization or similar arrangement upon the bankruptcy or insolvency of a
debtor;

 

(8)                                  Investments made as a
result of the receipt of non-cash consideration from an Asset Disposition that
was made pursuant to and in compliance with Section 3.7;

 

(9)                                  Investments in
existence on the Issue Date and any amendment, renewal or replacement thereof
that doesn’t exceed the amount of the original Investment;

 

(10)                            Commodity Agreements,
Currency Agreements, Interest Rate Agreements and related Hedging Obligations,
which transactions or obligations are Incurred in compliance with Section
3.3;

 

(11)                            Guarantees issued in
accordance with Section 3.3;

 

(12)                            any Asset Swap made in
accordance with Section 3.7;

 

(13)                            Permitted Business
Investments or Investments in Employee Partnerships; and

 

(14)                            Investments by the Company
or any of its Restricted Subsidiaries, together with all other Investments
pursuant to this clause (14), in an aggregate amount at the time of such
Investment not to exceed the greater of (a) 2.5% of Adjusted Consolidated Net
Tangible Assets and (b) $20.0 million, in each case outstanding at any one time
(with the fair market value of such Investment being measured at the time made
and without giving effect to subsequent changes in value).

 

24

 

“Permitted
Liens” means, with respect to any Person:

 

(1)                                  Liens securing
Indebtedness and other obligations under, and related Hedging Obligations and
Liens on assets of Restricted Subsidiaries securing Guarantees of Indebtedness
and other obligations of the Company under, any Credit Facility permitted to be
Incurred under this Indenture under the provisions described in clause (1) of
the second paragraph of Section 3.3;

 

(2)                                  pledges or deposits
by such Person under workmen’s compensation laws, unemployment insurance laws
or similar legislation, or good faith deposits in connection with bids,
tenders, contracts (other than for the payment of Indebtedness) or leases to
which such Person is a party, or deposits to secure public or statutory
obligations of such Person or deposits of cash or United States government
bonds to secure surety or appeal bonds to which such Person is a party, or
deposits as security for contested taxes or import or customs duties or for the
payment of rent, in each case Incurred in the ordinary course of business;

 

(3)                                  Liens imposed by law,
including carriers’, warehousemen’s, mechanics’, materialmen’s and repairmen’s
Liens, in each case for sums not yet due or being contested in good faith by
appropriate proceedings if a reserve or other appropriate provisions, if any,
as shall be required by GAAP shall have been made in respect thereof;

 

(4)                                  Liens for taxes,
assessments or other governmental charges not yet subject to penalties for
non-payment or which are being contested in good faith by appropriate
proceedings; provided that
appropriate reserves required pursuant to GAAP have been made in respect
thereof;

 

(5)                                  Liens in favor of
issuers of surety or performance bonds or letters of credit or bankers’
acceptances issued pursuant to the request of and for the account of such
Person in the ordinary course of its business; provided,
however, that such letters of credit do not constitute Indebtedness;

 

(6)                                  encumbrances,
easements or reservations of, or rights of others for, licenses, rights of way,
sewers, electric lines, telegraph and telephone lines and other similar
purposes, or zoning, building codes or other restrictions (including, without
limitation, minor defects or irregularities in title and similar encumbrances)
as to the use of real properties or Liens incidental to the conduct of the
business of such Person or to the ownership of its properties which do not in
the aggregate materially adversely affect the value of said properties or
materially impair their use in the operation of the business of such Person;

 

(7)                                  Liens securing
Hedging Obligations;

 

(8)                                  leases, licenses,
subleases and sublicenses of assets (including, without limitation, real
property and intellectual property rights) which do not

 

25

 

materially interfere with the ordinary conduct of the business of the
Company or any of its Restricted Subsidiaries;

 

(9)                                  judgment Liens not
giving rise to an Event of Default so long as such Lien is adequately bonded
and any appropriate legal proceedings which may have been duly initiated for
the review of such judgment have not been finally terminated or the period
within which such proceedings may be initiated has not expired;

 

(10)                            Liens for the purpose of
securing the payment of all or a part of the purchase price of, or Capitalized
Lease Obligations, purchase money obligations or other payments Incurred to
finance the acquisition, improvement or construction of, assets or property
acquired or constructed in the ordinary course of business; provided that:

 

(a)                                  the aggregate principal amount
of Indebtedness secured by such Liens is otherwise permitted to be Incurred
under this Indenture and does not exceed the cost of the assets or property so
acquired or constructed; and

 

(b)                                 such Liens are created within
180 days of construction or acquisition of such assets or property and do not
encumber any other assets or property of the Company or any Restricted
Subsidiary other than such assets or property and assets affixed or appurtenant
thereto;

 

(11)                            Liens arising solely by
virtue of any statutory or common law provisions relating to banker’s Liens, rights
of set-off or similar rights and remedies as to deposit accounts or other funds
maintained with a depositary institution; provided
that:

 

(a)                                  such deposit account is not a
dedicated cash collateral account and is not subject to restrictions against access
by the Company in excess of those set forth by regulations promulgated by the
Federal Reserve Board; and

 

(b)                                 such deposit account is not
intended by the Company or any Restricted Subsidiary to provide collateral to
the depository institution;

 

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

 

(13)                            Liens existing on the Issue
Date;

 

26

 

(14)                            Liens on property or shares
of stock of a Person at the time such Person becomes a Restricted Subsidiary; provided, however, that such Liens are not created, Incurred
or assumed in connection with, or in contemplation of, such other Person
becoming a Restricted Subsidiary; provided further, however,
that any such Lien may not extend to any other property owned by the
Company or any Restricted Subsidiary;

 

(15)                            Liens on property at the
time the Company or a Restricted Subsidiary acquired the property, including
any acquisition by means of a merger or consolidation with or into the Company
or any Restricted Subsidiary; provided, however,
that such Liens are not created, Incurred or assumed in connection with, or in
contemplation of, such acquisition; provided further, however,
that such Liens may not extend to any other property owned by the Company or
any Restricted Subsidiary;

 

(16)                            Liens securing Indebtedness
or other obligations of a Restricted Subsidiary owing to the Company or a
Wholly-Owned Subsidiary;

 

(17)                            Liens securing the
Securities, the Subsidiary Guarantees and other obligations arising under this
Indenture;

 

(18)                            Liens securing obligations
under Refinancing Indebtedness Incurred to refinance, refund, replace, amend,
extend or modify Indebtedness that was previously so secured (other than Liens
permitted pursuant to clause (1) above), provided
that any such Lien is limited to all or part of the same property or assets
(plus improvements, accessions, proceeds or dividends or distributions in
respect thereof) that secured (or, under the written arrangements under which
the original Lien arose, could secure) the Indebtedness being refinanced or is
in respect of property that is the security for a Permitted Lien hereunder;

 

(19)                            any interest or title of a
lessor under any Capitalized Lease Obligation or operating lease;

 

(20)                            Liens in respect of
Production Payments and Reserve Sales, which Liens shall be limited to the
property that is the subject of such Production Payments and Reserve Sales;

 

(21)                            Liens arising under
farm-out agreements, farm-in agreements, division orders, contracts for the
sale, purchase, exchange, transportation, gathering or processing of
Hydrocarbons, unitizations and pooling designations, declarations, orders and
agreements, development agreements, operating agreements, production sales
contracts, area of mutual interest agreements, gas balancing or deferred
production agreements, injection, repressuring and recycling agreements, salt
water or other disposal agreements, seismic or geophysical permits or
agreements, and other agreements which are customary in the Oil and Gas
Business; provided, however, in
all instances

 

27

 

that such Liens are limited to the assets that are the subject of the
relevant agreement, program, order or contract;

 

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

 

(23)                            Liens securing obligations
under Indebtedness (other than Subordinated Obligations and Guarantor
Subordinated Obligations) in an aggregate principal amount outstanding at any
one time not to exceed $10.0 million.

 

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

 

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

 

“Production
Payments and Reserve Sales” means the grant or transfer by the Company or a
Restricted Subsidiary to any Person of a royalty, overriding royalty, net
profits interest, production payment (whether volumetric or dollar
denominated), partnership or other interest in oil and gas properties, reserves
or the right to receive all or a portion of the production or the proceeds from
the sale of production attributable to such properties where the holder of such
interest has recourse solely to such production or proceeds of production,
subject to the obligation of the grantor or transferor to operate and maintain,
or cause the subject interests to be operated and maintained, in a reasonably
prudent manner or other customary standard or subject to the obligation of the
grantor or transferor to indemnify for environmental, title or other matters
customary in the Oil and Gas Business, including any such grants or transfers
pursuant to incentive compensation programs on terms that are reasonably
customary in the Oil and Gas Business for geologists, geophysicists or other
providers of technical services to the Company or a Restricted Subsidiary.

 

“Refinancing
Indebtedness” means Indebtedness that is Incurred to refund, refinance,
replace, exchange, renew, repay or extend (including pursuant to any defeasance
or discharge mechanism) (collectively, “refinance,” “refinances,” and “refinanced”
shall have a correlative meaning) any Indebtedness existing on the date of this
Indenture or Incurred in compliance with this Indenture (including Indebtedness
of the Company that refinances Indebtedness of any Restricted Subsidiary and
Indebtedness of any Restricted Subsidiary that refinances Indebtedness of
another Restricted Subsidiary) including Indebtedness that refinances Refinancing
Indebtedness; provided, however, that:

 

(1)                                  (a) if the Stated
Maturity of the Indebtedness being refinanced is earlier than the Stated
Maturity of the Securities, the Refinancing Indebtedness has a Stated Maturity
no earlier than the Stated Maturity of the Indebtedness being refinanced or (b)
if the Stated Maturity of the Indebtedness being refinanced is later than the
Stated Maturity of the Securities, the

 

28

 

Refinancing Indebtedness has a Stated Maturity at least 91 days later
than the Stated Maturity of the Securities;

 

(2)                                  the Refinancing
Indebtedness has an Average Life at the time such Refinancing Indebtedness is
Incurred that is equal to or greater than the Average Life of the Indebtedness
being refinanced;

 

(3)                                  such Refinancing
Indebtedness is Incurred in an aggregate principal amount (or if issued with
original issue discount, an aggregate issue price) that is equal to or less
than the sum of the aggregate principal amount (or if issued with original
issue discount, the aggregate accreted value) then outstanding of the
Indebtedness being refinanced (plus,
without duplication, any additional Indebtedness Incurred to pay interest or
premiums required by the instruments governing such existing Indebtedness and
fees and expenses Incurred in connection therewith); and

 

(4)                                  if the Indebtedness
being refinanced is subordinated in right of payment to the Securities or a Subsidiary Guarantee, such Refinancing
Indebtedness is subordinated in right of payment to the Securities or the
Subsidiary Guarantee on terms at least as favorable to the Holders of
Securities as those contained in the documentation governing the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded.

 

“Registration
Rights Agreement” means that certain registration rights agreement dated as
of the date of this Indenture by and among the Company, the Subsidiary
Guarantors and the initial purchaser set forth therein and, with respect to any
Additional Notes, one or more substantially similar registration rights
agreements among the Company and the other parties thereto, as such agreements
may be amended from time to time.

 

“Related
Person” with respect to any Permitted Holder means:

 

(1)           any
controlling stockholder or a majority (or more) owned Subsidiary of such
Permitted Holder or, in the case of an individual, any spouse, family member,
(including adopted children), heir or descendant of such Permitted Holder, any
trust created for the benefit of such individual or such individual’s estate,
executor, administrator, committee or beneficiaries; or

 

(2)           any
trust, corporation, partnership or other entity, the beneficiaries,
stockholders, partners, owners or Persons beneficially holding a majority (or
more) controlling interest of which consist of such Permitted Holder and/or
such other Persons referred to in the immediately preceding clause (1).

 

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

 

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

 

29

 

“Restricted
Securities Legend” means the Private Placement Legend or the Regulation S
Legend, as applicable.

 

“Restricted
Subsidiary” means any Subsidiary of the Company other than an Unrestricted
Subsidiary.

 

“Sale/Leaseback
Transaction” means an arrangement relating to property now owned or
hereafter acquired whereby the Company or a Restricted Subsidiary transfers
such property to a Person and the Company or a Restricted Subsidiary leases it
from such Person.

 

“Secured
Indebtedness” means Indebtedness that is secured by a lien on the property
or assets of the relevant obligor.

 

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

 

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

 

“Senior
Secured Credit Agreement” means the Amended and Restated Credit Agreement,
dated May 21, 2004,
among the Company, JPMorgan Chase Bank, N.A., as Administrative Agent, and the lenders party thereto from
time to time, as the same may be amended, restated, modified, renewed,
refunded, replaced or refinanced in whole or in part from time to time
(including increasing the amount loaned thereunder provided that such
additional Indebtedness is incurred in accordance with the covenant described
under Section 3.3.

 

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

 

“Stated
Maturity” means, with respect to any security, the date specified in such
security as the fixed date on which the payment of principal of such security
is due and payable, including pursuant to any mandatory redemption provision,
but shall not include any contingent obligations to repay, redeem or repurchase
any such principal prior to the date originally scheduled for the payment
thereof.

 

“Subordinated
Obligation” means any Indebtedness of the Company (whether outstanding on
the Issue Date or thereafter Incurred) which is subordinate or junior in right
of payment to the Securities pursuant to a written agreement.

 

“Subsidiary”
of any Person means (a) any corporation, association or other business entity
(other than a partnership, joint venture, limited liability company or similar
entity) of which more than 50% of the total ordinary voting power of shares of
Capital Stock entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof (or persons
performing similar functions) or (b) any partnership, joint venture limited
liability company or similar entity of which more than 50% of the capital
accounts, distribution rights, total equity and voting interests or general or
limited partnership interests, as applicable, is, in the case of clauses (a)
and (b), at the time owned or controlled, directly or

 

30

 

indirectly, by (1) such Person,
(2) such Person and one or more Subsidiaries of such Person or (3) one or more
Subsidiaries of such Person. Unless otherwise specified herein, each reference
to a Subsidiary will refer to a Subsidiary of the Company.

 

“Subsidiary
Guarantee” means, individually, any Guarantee of payment of the Initial
Securities and Exchange Securities issued in a registered exchange offer
pursuant to the Registration Rights Agreement by a Subsidiary Guarantor
pursuant to the terms of this Indenture and any supplemental indenture thereto,
and, collectively, all such Guarantees. 
Each such Subsidiary Guarantee will be in the form prescribed by this Indenture.

 

“Subsidiary
Guarantor” means the Restricted Subsidiaries of the Company who are party
to this
Indenture on the Issue Date and any other Restricted Subsidiary of the Company
that later becomes a Subsidiary Guarantor in accordance with this Indenture.

 

“SWR
Partnerships” means the oil and gas limited partnerships of which Southwest
Royalties, Inc. (a Wholly-Owned Subsidiary of the Company) is general partner, as of the Issue Date.

 

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

 

“Total
Assets” means, with respect to any Person, the total consolidated assets of
such Person and its Restricted Subsidiaries, as shown on the most recent
balance sheet of such Person.

 

“Treasury Rate” means the yield to maturity at the time of
computation of United States Treasury securities with a constant maturity (as
compiled and published in the most recent Federal Reserve Statistical Release
H.15 (519) which has become publicly available at least two business days prior
to the redemption date (or, if such Statistical Release is no longer published,
any publicly available source or similar market data)) most nearly equal to the
period from the redemption date to August 1, 2009; provided, however, that if
the period from the redemption date to August 1, 2009 is not equal to the
constant maturity of a United States Treasury security for which a weekly
average is given, the Treasury Rate shall be obtained by linear interpolation
(calculated to the nearest one-twelfth of a year) from the weekly average
yields of United States Treasury securities for which such yields are given,
except that if the period from the redemption date to August 1, 2009 is less
than one year, the weekly average yield on actually traded United States
Treasury securities adjusted to a constant maturity of one year shall be used.

 

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

 

“Trust
Officer” shall mean, when used with respect to the Trustee, any officer
within the corporate trust department of the Trustee, including any vice
president, assistant vice president, assistant secretary, assistant treasurer,
trust officer or any other officer of the Trustee who customarily performs
functions similar to those performed by the Persons who at the time shall be
such officers, respectively, or to whom any corporate trust matter is referred
because of

 

31

 

such person’s knowledge of and
familiarity with the particular subject and who shall have direct
responsibility for the administration of this Indenture.

 

“Unrestricted
Subsidiary” means:

 

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

 

(2)                                  any Subsidiary of an
Unrestricted Subsidiary.

 

The Board of
Directors of the Company may designate any Subsidiary of the Company (including
any newly acquired or newly formed Subsidiary or a Person becoming a Subsidiary
through merger or consolidation or Investment therein) to be an Unrestricted
Subsidiary only if:

 

(1)                                  such Subsidiary or
any of its Subsidiaries does not own any Capital Stock or Indebtedness of or
have any Investment in, or own or hold any Lien on any property of, any other
Subsidiary of the Company which is not a Subsidiary of the Subsidiary to be so
designated or otherwise an Unrestricted Subsidiary;

 

(2)                                  all the Indebtedness
of such Subsidiary and its Subsidiaries shall, at the date of designation, and
will at all times thereafter, consist of Non-Recourse Debt;

 

(3)                                  on the date of such
designation, such designation and the Investment of the Company in such
Subsidiary complies with Section 3.4;

 

(4)                                  such Subsidiary,
either alone or in the aggregate with all other Unrestricted Subsidiaries, does
not operate, directly or indirectly, all
or substantially all of the
business of the Company and its Subsidiaries;

 

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

 

(6)                                  on the date such
Subsidiary is designated an Unrestricted Subsidiary, such Subsidiary is not a
party to any agreement, contract, arrangement or understanding with the Company
or any Restricted Subsidiary with terms substantially less favorable to the
Company, than those that might have been obtained from Persons who are not
Affiliates of the Company.

 

Any such designation by the Board of
Directors of the Company shall be evidenced to the Trustee by filing with the
Trustee a resolution of the Board of Directors of the Company

 

32

 

giving effect to such
designation and an Officers’ Certificate certifying that such designation
complies with the foregoing conditions. If, at any time, any Unrestricted
Subsidiary would fail to meet the foregoing requirements as an Unrestricted
Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for
purposes of this Indenture and any Indebtedness of such Subsidiary shall be
deemed to be Incurred as of such date.

 

The Board of Directors of the Company may
designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that immediately after giving effect to such
designation, no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof and the Company could Incur at least
$1.00 of additional Indebtedness under the first paragraph of Section 3.3
on a pro forma basis taking into account such designation.

 

“U.S.
Government Obligations” means securities that are (a) direct obligations of
the United States of America for the timely payment of which its full faith and
credit is pledged or (b) obligations of a Person controlled or supervised by
and acting as an agency or instrumentality of the United States of America the
timely payment of which is unconditionally guaranteed as a full faith and
credit obligation of the United States of America, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depositary receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act), as custodian with respect to any such U.S. Government
Obligations or a specific payment of principal of or interest on any such U.S.
Government Obligations held by such custodian for the account of the holder of
such depositary receipt; provided
that (except as required by law) such custodian is not authorized to make any
deduction from the amount payable to the holder of such depositary receipt from
any amount received by the custodian in respect of the U.S. Government
Obligations or the specific payment of principal of or interest on the U.S.
Government Obligations evidenced by such depositary receipt.

 

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

 

“Voting
Stock” of a corporation means all classes of Capital Stock of such
corporation then outstanding and normally entitled to vote in the election of
directors.

 

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

 

SECTION 1.2.   Other Definitions.

 

	
  Term

  	
   

  	
  Defined in

  Section

  
	
   

  	
   

  	
   

  
	
  “Additional
  Restricted Securities”

  	
   

  	
  2.1(b)

  
	
   

  	
   

  	
   

  
	
  “Affiliate
  Transaction”

  	
   

  	
  3.8

  

 

33

 

	
  Term

  	
   

  	
  Defined in

  Section

  
	
   

  	
   

  	
   

  
	
  “Agent
  Member”

  	
   

  	
  2.1(e)

  
	
   

  	
   

  	
   

  
	
  “Asset
  Disposition Offer”

  	
   

  	
  3.7(b)

  
	
   

  	
   

  	
   

  
	
  “Asset
  Disposition Offer Amount”

  	
   

  	
  3.7(c)(1)

  
	
   

  	
   

  	
   

  
	
  “Asset
  Disposition Offer Period”

  	
   

  	
  3.7(c)(1)

  
	
   

  	
   

  	
   

  
	
  “Asset
  Disposition Purchase Date”

  	
   

  	
  3.7(c)(1)

  
	
   

  	
   

  	
   

  
	
  “Authenticating
  Agent”

  	
   

  	
  2.2

  
	
   

  	
   

  	
   

  
	
  “Certificate
  of Destruction”

  	
   

  	
  2.10

  
	
   

  	
   

  	
   

  
	
  “Change of
  Control Offer”

  	
   

  	
  3.9(b)

  
	
   

  	
   

  	
   

  
	
  “Change of
  Control Payment”

  	
   

  	
  3.9(b)(1)

  
	
   

  	
   

  	
   

  
	
  “Change of
  Control Payment Date”

  	
   

  	
  3.9(b)(2)

  
	
   

  	
   

  	
   

  
	
  “Company
  Order”

  	
   

  	
  2.2

  
	
   

  	
   

  	
   

  
	
  “Corporate
  Trust Office”

  	
   

  	
  3.13

  
	
   

  	
   

  	
   

  
	
  “covenant
  defeasance option”

  	
   

  	
  8.1(b)

  
	
   

  	
   

  	
   

  
	
  “cross
  acceleration provision”

  	
   

  	
  6.1(6)(b)

  
	
   

  	
   

  	
   

  
	
  “Defaulted
  Interest”

  	
   

  	
  2.11

  
	
   

  	
   

  	
   

  
	
  “Event of
  Default”

  	
   

  	
  6.1

  
	
   

  	
   

  	
   

  
	
  “Excess
  Proceeds”

  	
   

  	
  3.7(b)

  
	
   

  	
   

  	
   

  
	
  “Exchange
  Global Note”

  	
   

  	
  2.1(b)

  
	
   

  	
   

  	
   

  
	
  “General
  Partner”

  	
   

  	
  1.1
  (definition of “Indebtedness”)

  
	
   

  	
   

  	
   

  
	
  “Global
  Securities”

  	
   

  	
  2.1(b)

  
	
   

  	
   

  	
   

  
	
  “IAI”

  	
   

  	
  2.1(b)

  
	
   

  	
   

  	
   

  
	
  “Institutional
  Accredited Investor Note”

  	
   

  	
  2.1(b)

  

 

34

 

	
  Term

  	
   

  	
  Defined in

  Section

  
	
   

  	
   

  	
   

  
	
  “Institutional
  Accredited Investor Global Note”

  	
   

  	
  2.1(b)

  
	
   

  	
   

  	
   

  
	
  “Joint
  Venture”

  	
   

  	
  1.1
  (definition of “Indebtedness”)

  
	
   

  	
   

  	
   

  
	
  “judgment
  default provision”

  	
   

  	
  6.1(8)

  
	
   

  	
   

  	
   

  
	
  “legal
  defeasance option”

  	
   

  	
  8.1(b)

  
	
   

  	
   

  	
   

  
	
  “Legal
  Holiday”

  	
   

  	
  11.8

  
	
   

  	
   

  	
   

  
	
  “Note Register”

  	
   

  	
  2.3

  
	
   

  	
   

  	
   

  
	
  “Obligations”

  	
   

  	
  10.1

  
	
   

  	
   

  	
   

  
	
  “Pari Passu
  Notes”

  	
   

  	
  3.7(b)

  
	
   

  	
   

  	
   

  
	
  “Paying
  Agent”

  	
   

  	
  2.3

  
	
   

  	
   

  	
   

  
	
  “payment
  default”

  	
   

  	
  6.1(6)(a)

  
	
   

  	
   

  	
   

  
	
  “Private
  Placement Legend”

  	
   

  	
  2.1(d)(A)

  
	
   

  	
   

  	
   

  
	
  “protected
  purchaser”

  	
   

  	
  2.7

  
	
   

  	
   

  	
   

  
	
  “QIB”

  	
   

  	
  2.1(b)

  
	
   

  	
   

  	
   

  
	
  “Redemption
  Date”

  	
   

  	
  5.1

  
	
   

  	
   

  	
   

  
	
  “Registrar”

  	
   

  	
  2.3

  
	
   

  	
   

  	
   

  
	
  “Regulation
  S”

  	
   

  	
  2.1(b)

  
	
   

  	
   

  	
   

  
	
  “Regulation
  S Global Note”

  	
   

  	
  2.1(b)

  
	
   

  	
   

  	
   

  
	
  “Regulation
  S Legend”

  	
   

  	
  2.1(d)(B)

  
	
   

  	
   

  	
   

  
	
  “Regulation
  S Notes”

  	
   

  	
  2.1(b)

  
	
   

  	
   

  	
   

  
	
  “Resale
  Restriction Termination Date”

  	
   

  	
  2.6(a)

  
	
   

  	
   

  	
   

  
	
  “Restricted
  Payment”

  	
   

  	
  3.4

  
	
   

  	
   

  	
   

  
	
  “Rule 144A”

  	
   

  	
  2.1(b)

  

 

35

 

	
  Term

  	
   

  	
  Defined in

  Section

  
	
   

  	
   

  	
   

  
	
  “Rule 144A
  Global Note”

  	
   

  	
  2.1(b)

  
	
   

  	
   

  	
   

  
	
  “Rule 144A
  Notes”

  	
   

  	
  2.1(b)

  
	
   

  	
   

  	
   

  
	
  “Special
  Interest Payment Date”

  	
   

  	
  2.11(a)

  
	
   

  	
   

  	
   

  
	
  “Special
  Record Date”

  	
   

  	
  2.11(a)

  
	
   

  	
   

  	
   

  
	
  “Successor
  Company”

  	
   

  	
  4.1

  

 

SECTION 1.3.   Incorporation by Reference of Trust Indenture
Act.  This Indenture is subject to
the mandatory provisions of the TIA which are incorporated by reference in and
made a part of this Indenture.  The
following TIA terms have the following meanings:

 

“Commission”
means the Securities and Exchange Commission.

 

“indenture securities” mean the Securities.

 

“indenture security holder” means a
Securityholder.

 

“indenture to be qualified” means this
Indenture.

 

“indenture trustee” or “institutional trustee”
means the Trustee.

 

“obligor” on the Indenture securities means
the Company and any successor obligor on the Indenture securities.

 

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

 

SECTION 1.4.   Rules of Construction.  Unless the context otherwise requires:

 

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

 

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

 

(3)                                  “or”
is not exclusive;

 

(4)                                  “including”
means including without limitation;

 

(5)                                  words
in the singular include the plural and words in the plural include the
singular;

 

36

 

(6)                                  unsecured
Indebtedness shall not be deemed to be subordinate or junior to Secured
Indebtedness merely by virtue of its nature as unsecured Indebtedness;

 

(7)                                  the
principal amount of any non-interest bearing or other discount security at any
date shall be the principal amount thereof that would be shown on a balance
sheet of the issuer dated such date prepared in accordance with GAAP;

 

(8)                                  the
principal amount of any Preferred Stock shall be (i) the maximum liquidation
value of such Preferred Stock or (ii) the maximum mandatory redemption or
mandatory repurchase price with respect to such Preferred Stock, whichever is
greater; and

 

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

 

ARTICLE II

 

The Securities

 

SECTION 2.1.   Form, Dating
and Terms.

 

(a)                                  The aggregate principal amount
of Securities that may be authenticated and delivered under this Indenture is
unlimited.  The Initial Securities issued
on the date hereof will be in an aggregate principal amount of
$225,000,000.  In addition, the Company
may issue, from time to time in accordance with the provisions of this
Indenture, including, without limitation, Section 3.3 hereof, Additional
Securities and Exchange Securities. 
Furthermore, Securities may be authenticated and delivered upon
registration or transfer, or in lieu of, other Securities pursuant to Sections
2.6, 2.7, 2.9, 5.8 or 9.5 or in connection with
an Asset Disposition Offer pursuant to Section 3.7 or a Change of
Control Offer pursuant to Section 3.9.

 

The Initial Securities,
Additional Securities and Exchange Securities shall be known and designated as “73⁄4% Senior Notes due 2013” of the
Company.

 

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

 

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

 

(2)                                  the
issue price and the issue date of such Additional Securities, including the
date from which interest shall accrue; and

 

37

 

(3)                                  whether
such Additional Securities shall be Restricted Securities issued in the form of
Exhibit A hereto and/or shall be issued in the form of Exhibit B hereto.

 

The Initial Securities,
the Additional Securities and the Exchange Securities shall be considered
collectively as a single class for all purposes of this Indenture.  Holders of the Initial Securities, the
Additional Securities and the Exchange Securities will vote and consent
together on all matters to which such Holders are entitled to vote or consent
as one class, and none of the Holders of the Initial Securities, the Additional
Securities or the Exchange Securities shall have the right to vote or consent
as a separate class on any matter to which such Holders are entitled to vote or
consent.

 

(b)                                 The Initial Securities are being
offered and sold by the Company pursuant to a Purchase Agreement, dated July
14, 2005, among the Company, the Subsidiary Guarantors and J.P. Morgan
Securities Inc. as Initial Purchaser. 
The Initial Securities and any Additional Securities (if issued as
Restricted Securities) (the “Additional Restricted Securities”) will be
resold initially only to (A) qualified institutional buyers (as defined in Rule
144A under the Securities Act (“Rule 144A”)) in reliance on Rule 144A (“QIBs”)
and (B) Persons other than U.S. Persons (as defined in Regulation S under the
Securities Act (“Regulation S”)) in reliance on Regulation S.  Such Initial Securities and Additional
Restricted Securities may thereafter be transferred to, among others, QIBs,
purchasers in reliance on Regulation S and institutional “accredited investors”
(as defined in Rules 501(a)(1), (2), (3) and (7) under the Securities Act) who
are not QIBs (“IAIs”) in accordance with Rule 501 of the Securities Act
in accordance with the procedure described herein.

 

Initial Securities and Additional Restricted
Securities offered and sold to qualified institutional buyers in the United
States of America in reliance on Rule 144A (the “Rule 144A Notes”) shall
be issued in the form of a permanent global Security, without interest coupons,
substantially in the form of Exhibit A, which is hereby incorporated by
reference and made a part of this Indenture, including appropriate legends as
set forth in Section 2.1(d) (the “Rule 144A Global Note”),
deposited with the Trustee, as custodian for DTC, duly executed by the Company
and authenticated by the Trustee as hereinafter provided.  The Rule 144A Global Note may be represented
by more than one certificate, if so required by DTC’s rules regarding the
maximum principal amount to be represented by a single certificate.  The aggregate principal amount of the Rule
144A Global Note may from time to time be increased or decreased by adjustments
made on the records of the Trustee, as custodian for DTC or its nominee, as hereinafter
provided.

 

Initial Securities and Additional Securities
offered and sold outside the United States of America (the “Regulation S
Notes”) in reliance on Regulation S shall be issued in the form of a
permanent global Security, without interest coupons, substantially in the form
of Exhibit A (the “Regulation S Global Note”) deposited with the
Trustee, as custodian for DTC, duly executed by the Company and authenticated
by the Trustee as hereinafter provided. 
The Regulation S Global Note may be represented by more than one
certificate, if so required by DTC’s rules regarding the maximum principal
amount to be represented by a single certificate.  The aggregate principal amount of the
Regulation S Global Note may from time to time be

 

38

 

increased or decreased by
adjustments made on the records of the Trustee, as custodian for DTC or its
nominee, as hereinafter provided.

 

Initial Securities and Additional Securities
resold to IAIs (the “Institutional Accredited Investor Notes”) in the
United States of America shall be issued in the form of a permanent global
Security, without interest coupons, substantially in the form of Exhibit A
(the “Institutional Accredited Investor Global Note”) deposited with the
Trustee, as custodian for DTC, duly executed by the Company and authenticated
by the Trustee as hereinafter provided. 
The Institutional Accredited Investor Global Note may be represented by
more than one certificate, if so required by DTC’s rules regarding the maximum
principal amount to be represented by a single certificate.  The aggregate principal amount of the
Institutional Accredited Investor Global Note may from time to time be
increased or decreased by adjustments made on the records of the Trustee, as
custodian for DTC or its nominee, as hereinafter provided.

 

Exchange Securities exchanged for interests
in the Rule 144A Notes, the Regulation S Notes and the Institutional Accredited
Investor Notes will be issued in the form of a permanent global Security,
without interest coupons, substantially in the form of Exhibit B, which
is hereby incorporated by reference and made a part of this Indenture,
deposited with the Trustee as hereinafter provided, including the appropriate
legend set forth in Section 2.1(d) (the “Exchange Global Note”).  The Exchange Global Note may be represented
by more than one certificate, if so required by DTC’s rules regarding the
maximum principal amount to be represented by a single certificate.

 

The Rule 144A Global Note, the Regulation S
Global Note, the Institutional Accredited Investor Global Note and the Exchange
Global Note are sometimes collectively herein referred to as the “Global
Securities.”

 

The principal of (and premium, if any) and
interest on the Securities shall be payable at the office or agency of the Company
maintained for such purpose in The City of New York, or at such other office or
agency of the Company as may be maintained for such purpose pursuant to Section
2.3; provided, however, that,
at the option of the Company, each installment of interest may be paid by (i)
check mailed to addresses of the Persons entitled thereto as such addresses
shall appear on the Note Register or (ii) wire transfer to an account located
in the United States maintained by the payee. 
Payments in respect of Securities represented by a Global Security
(including principal, premium and interest) will be made by wire transfer of
immediately available funds to the accounts specified by DTC.

 

The Securities may have notations, legends or
endorsements required by law, stock exchange rule or usage or DTC rule or usage
in addition to those set forth on Exhibit A and Exhibit B and in Section
2.1(d).  The Company and the Trustee
shall approve the forms of the Securities and any notation, endorsement or
legend on them.  Each Security shall be
dated the date of its authentication. 
The terms of the Securities set forth in Exhibit A and Exhibit
B are part of the terms of this Indenture and, to the extent applicable,
the Company, the Subsidiary Guarantors and the Trustee, by their execution and
delivery of this Indenture, expressly agree to be bound by such terms.

 

39

 

(c)                                  Denominations.  The Securities shall be issuable only in
fully registered form, without coupons, and only in denominations of $1,000 and
any integral multiple thereof.

 

(d)                                 Restrictive Legends.  Unless and until (i) an Initial Security
is sold under an effective registration statement or (ii) an Initial
Security is exchanged for an Exchange Security in connection with an effective
registration statement, in each case pursuant to the Registration Rights
Agreement or a similar agreement,

 

(A)                              the
Rule 144A Global Note and the Institutional Accredited Investor Global Note
shall bear the following legend (the “Private Placement Legend”) on the
face thereof:

 

“THIS SECURITY
HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION.  NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION UNLESS
SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.  THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE
HEREOF, AGREES ON ITS OWN BEHALF AND ON BEHALF OF ANY INVESTOR ACCOUNT FOR
WHICH IT HAS PURCHASED SECURITIES, TO OFFER, SELL OR OTHERWISE TRANSFER SUCH
SECURITY, PRIOR TO THE DATE (THE “RESALE RESTRICTION TERMINATION DATE”) THAT IS
TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE
ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS
SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE COMPANY, (B)
PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A PERSON IT REASONABLY
BELIEVES IS A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT
OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE
SECURITIES ACT, (E) TO AN INSTITUTIONAL ACCREDITED INVESTOR WITHIN THE MEANING
OF RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS AN
INSTITUTIONAL ACCREDITED INVESTOR ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A
MINIMUM PRINCIPAL AMOUNT OF THE SECURITIES OF $250,000, FOR INVESTMENT PURPOSES
AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION
IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION

 

40

 

REQUIREMENTS OF
THE SECURITIES ACT, SUBJECT TO THE COMPANY’S AND THE TRUSTEE’S RIGHT PRIOR TO
ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E) AND (F) TO
REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM. THIS LEGEND WILL BE REMOVED UPON THE
REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.”

 

(B)                                the
Regulation S Global Note shall bear the following legend (the “Regulation S
Legend”) on the face thereof:

 

“THIS SECURITY
HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION.  NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION UNLESS
SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.  THE HOLDER OF THIS SECURITY, BY ITS
ACCEPTANCE HEREOF, AGREES ON ITS OWN BEHALF AND ON BEHALF OF ANY INVESTOR
ACCOUNT FOR WHICH IT HAS PURCHASED SECURITIES, TO OFFER, SELL OR OTHERWISE
TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE “RESALE RESTRICTION TERMINATION
DATE”) THAT IS FORTY DAYS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND
THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE
OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE
COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A PERSON
IT REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND
SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S
UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL ACCREDITED INVESTOR WITHIN THE
MEANING OF RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS AN
INSTITUTIONAL ACCREDITED INVESTOR ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A
MINIMUM PRINCIPAL AMOUNT OF THE SECURITIES OF $250,000, FOR INVESTMENT PURPOSES
AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION
IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION

 

41

 

REQUIREMENTS OF
THE SECURITIES ACT, SUBJECT TO THE COMPANY’S AND THE TRUSTEE’S RIGHT PRIOR TO
ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E) AND (F) TO
REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM. THIS LEGEND WILL BE REMOVED UPON THE
REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.  BY ITS ACQUISITION HEREOF, THE HOLDER HEREOF
REPRESENTS THAT IT IS NOT A U.S. PERSON NOR IS IT PURCHASING FOR THE ACCOUNT OF
A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN
ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT.”

 

(C)                                The
Global Securities, whether or not an Initial Security, shall bear the following
legend on the face thereof:

 

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

 

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

 

(e)                                  Book-Entry Provisions.

 

(i)                                     This
Section 2.1(e) shall apply only to Global Securities deposited with the
Trustee, as custodian for DTC.

 

(ii)                                  Each
Global Security initially shall (x) be registered in the name of DTC for such
Global Security or the nominee of DTC, (y) be delivered to the Trustee as
custodian for DTC and (z) bear legends as set forth in Section 2.1(d).

 

(iii)                               Members
of, or participants in, DTC (“Agent Members”) shall have no rights under
this Indenture with respect to any Global Security held on their behalf by DTC
or by the Trustee as the custodian of DTC or under such Global Security, and
DTC may be treated by the

 

42

 

Company, the Trustee and any
agent of the Company or the Trustee as the absolute owner of such Global
Security for all purposes whatsoever. 
Notwithstanding the foregoing, nothing herein shall prevent the Company,
the Trustee or any agent of the Company or the Trustee from giving effect to
any written certification, proxy or other authorization furnished by DTC or
impair, as between DTC and its Agent Members, the operation of customary
practices of DTC governing the exercise of the rights of a Holder of a
beneficial interest in any Global Security.

 

(iv)                              In
connection with any transfer of a portion of the beneficial interest in a
Global Security pursuant to subsection (f) of this Section 2.1 to
beneficial owners who are required to hold Definitive Securities, the
Securities Custodian shall reflect on its books and records the date and a
decrease in the principal amount of such Global Security in an amount equal to
the principal amount of the beneficial interest in the Global Security to be
transferred, and the Company shall execute, and the Trustee shall authenticate
and deliver, one or more Definitive Securities of like tenor and amount.

 

(v)                                 In
connection with the transfer of an entire Global Security to beneficial owners
pursuant to subsection (f) of this Section 2.1, such Global Security
shall be deemed to be surrendered to the Trustee for cancellation, and the
Company shall execute, and the Trustee shall authenticate and deliver, to each
beneficial owner identified by DTC in exchange for its beneficial interest in
such Global Security, an equal aggregate principal amount of Definitive
Securities of authorized denominations.

 

(vi)                              The
registered Holder of a Global Security may grant proxies and otherwise
authorize any person, including Agent Members and persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture or the Securities.

 

(f)                                    Definitive Securities.  (i) 
Except as provided below, owners of beneficial interests in Global
Securities will not be entitled to receive Definitive Securities.  Definitive Securities shall be transferred to
all beneficial owners in exchange for their beneficial interests in a Global
Security if (a) DTC notifies the Company that it is unwilling or unable to
continue as depositary for such Global Security or DTC ceases to be a clearing
agency registered under the Exchange Act, at a time when DTC is required to be
so registered in order to act as depositary, and in each case a successor
depositary is not appointed by the Company within 90 days of such notice or,
(b) the Company executes and delivers to the Trustee and Registrar an
Officers’ Certificate stating that such Global Security shall be so
exchangeable or (c) an Event of Default has occurred and is continuing and
the Registrar has received a request from DTC.

 

(ii)                                  Any
Definitive Security delivered in exchange for an interest in a Global Security
pursuant to Section 2.1(e)(iv) or (v) shall, except as otherwise
provided by Section 2.6(c), bear the applicable legend regarding transfer
restrictions applicable to the Definitive Security set forth in Section
2.1(d).

 

(iii)                               In
connection with the exchange of a portion of a Definitive Security for a
beneficial interest in a Global Security, the Trustee shall cancel such
Definitive Security, and the Company shall execute, and the Trustee shall
authenticate and deliver, to the transferring Holder a new Definitive Security
representing the principal amount not so transferred.

 

43

 

SECTION 2.2.   Execution and Authentication.  One Officer shall sign the Securities for the
Company by manual or facsimile signature. 
If an Officer whose signature is on a Security no longer holds that
office at the time the Trustee authenticates the Security, the Security shall
be valid nevertheless, after giving effect to any exchange of Initial
Securities for Exchange Securities.

 

A Security shall not be valid until an
authorized signatory of the Trustee manually authenticates the Security.  The signature of the Trustee on a Security
shall be conclusive evidence that such Security has been duly and validly
authenticated and issued under this Indenture. 
A Security shall be dated the date of its authentication.

 

At any time and from time to time after the
execution and delivery of this Indenture, the Trustee shall authenticate and
make available for delivery:  (1) Initial
Securities for original issue on the Issue Date in an aggregate principal
amount of $225,000,000, (2) Additional Securities for original issue and
(3) Exchange Securities for issue only in an Exchange Offer pursuant to
the Registration Rights Agreement, and only in exchange for Initial Securities
or Additional Securities of an equal principal amount, in each case upon a
written order of the Company signed by two Officers or by an Officer and either
an Assistant Treasurer or an Assistant Secretary of the Company (the “Company
Order”).  Such Company Order shall
specify the amount of the Securities to be authenticated and the date on which
the original issue of Securities is to be authenticated and whether the
Securities are to be Initial Securities, Additional Securities or Exchange
Securities.

 

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

 

In case the Company or any Subsidiary
Guarantor, pursuant to Article IV, shall be consolidated or merged with
or into any other Person or shall convey, transfer, lease or otherwise dispose
of its properties and assets substantially as an entirety to any Person, and
the Successor Company resulting from such consolidation, or surviving such
merger, or into which the Company shall have been merged, or the Person which
shall have received a conveyance, transfer, lease or other disposition as
aforesaid, shall have executed an indenture supplemental hereto with the
Trustee pursuant to Article IV, any of the Securities authenticated or
delivered prior to such consolidation, merger, conveyance, transfer, lease or
other disposition may, from time to time, at the request of the Successor
Company, be exchanged for other Securities executed in the name of the
Successor Company with such changes in phraseology and form as may be
appropriate, but otherwise in substance of like tenor as the Securities surrendered
for such exchange and of like principal amount; and the Trustee, upon Company
Order of the Successor Company, shall authenticate and deliver Securities as
specified in such order for the purpose of such exchange.  If Securities shall at any time be
authenticated and delivered in any new name of a Successor Company pursuant to
this Section 2.2 in exchange or substitution for or upon registration of
transfer of any Securities, such Successor Company, at the option of the
Holders but without

 

44

 

expense to them, shall provide
for the exchange of all Securities at the time outstanding for Securities
authenticated and delivered in such new name.

 

SECTION 2.3.   Registrar and Paying Agent.  The Company shall maintain an office or
agency where Securities may be presented for registration of transfer or for
exchange (the “Registrar”) and an office or agency where Securities may
be presented for payment (the “Paying Agent”).  The Registrar shall keep a register of the
Securities and of their transfer and exchange (the “Note Register”).  The Company may have one or more
co-registrars and one or more additional paying agents.  The term “Paying Agent” includes any
additional paying agent.

 

The Company shall enter into an appropriate
agency agreement with any Registrar, Paying Agent or co-registrar not a party
to this Indenture, which shall incorporate the terms of the TIA.  The agreement shall implement the provisions
of this Indenture that relate to such agent.  The Company shall notify the Trustee of the
name and address of each such agent.  If
the Company fails to maintain a Registrar or Paying Agent, the Trustee shall
act as such and shall be entitled to appropriate compensation therefor pursuant
to Section 7.7.  The Company or
any of its Restricted Subsidiaries may act as Paying Agent, Registrar,
co-registrar or transfer agent.

 

The Company initially appoints the Trustee as
Registrar and Paying Agent for the Securities.

 

SECTION 2.4.   Paying Agent to Hold Money in Trust.  By no later than 10:00 a.m. (New York City
time) on the date on which any principal of or interest on any Security is due
and payable, the Company shall deposit with the Paying Agent a sum sufficient
in immediately available funds to pay such principal or interest when due.  The Company shall require each Paying Agent
(other than the Trustee) to agree in writing that such Paying Agent shall hold
in trust for the benefit of Securityholders or the Trustee all money held by
such Paying Agent for the payment of principal of or interest on the Securities
and shall notify the Trustee in writing of any default by any of the Company or
any Subsidiary Guarantor in making any such payment.  If the Company or a Subsidiary acts as Paying
Agent, it shall segregate the money held by it as Paying Agent and hold it as a
separate trust fund.  The Company at any
time may require a Paying Agent (other than the Trustee) to pay all money held
by it to the Trustee and to account for any funds disbursed by such Paying
Agent.  Upon complying with this Section 2.4,
the Paying Agent (if other than the Company or a Subsidiary) shall have no
further liability for the money delivered to the Trustee.  Upon any bankruptcy, reorganization or
similar proceeding with respect to the Company, the Trustee shall serve as
Paying Agent for the Securities.

 

SECTION 2.5.   Securityholder Lists.  The Trustee shall preserve in as current a
form as is reasonably practicable the most recent list available to it of the
names and addresses of Securityholders. 
If the Trustee is not the Registrar, or to the extent otherwise required
under the TIA, the Company shall furnish to the Trustee, in writing at least
five Business Days before each interest payment date and at such other times as
the Trustee may request in writing, a list in such form and as of such date as
the Trustee may reasonably require of the names and addresses of
Securityholders.

 

45

 

SECTION 2.6.   Transfer and Exchange.

 

(a)                                  The following provisions shall
apply with respect to any proposed transfer of a Rule 144A Note or an
Institutional Accredited Investor Note prior to the date which is two years
after the later of the date of its original issue and the last date on which
the Company or any affiliate of the Company was the owner of such Securities
(or any predecessor thereto) (the “Resale Restriction Termination Date”):

 

(i)                                     a
transfer of a Rule 144A Note or an Institutional Accredited Investor Note or a
beneficial interest therein to a QIB shall be made upon the representation of
the transferee in the form as set forth on the reverse of the Security that it
is purchasing for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a “qualified
institutional buyer” within the meaning of Rule 144A, and is aware that
the sale to it is being made in reliance on Rule 144A and acknowledges
that it has received such information regarding the Company as the undersigned
has requested pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon its
foregoing representations in order to claim the exemption from registration
provided by Rule 144A;

 

(ii)                                  a
transfer of a Rule 144A Note or an Institutional Accredited Investor Note or a
beneficial interest therein to an IAI shall be made upon receipt by the Trustee
or its agent of a certificate substantially in the form set forth in Exhibit
C from the proposed transferee and, if requested by the Company or the
Trustee, the delivery of an opinion of counsel stating that such transaction is
exempt from registration under the Federal securities laws, certification
and/or other information satisfactory to each of them; and

 

(iii)                               a
transfer of a Rule 144A Note or an Institutional Accredited Investor Note or a
beneficial interest therein to a Non-U.S. Person shall be made upon receipt by
the Trustee or its agent of a certificate
substantially in the form set forth in Exhibit D from the proposed
transferee and, if requested by the Company or the Trustee, the delivery of an
opinion of counsel stating that such transaction is exempt from registration
under the Federal securities laws, certification and/or other information satisfactory
to each of them.

 

(b)                                 The following provisions shall
apply with respect to any proposed transfer of a Regulation S Note prior to the
expiration of the Restricted Period:

 

(i)                                     a
transfer of a Regulation S Note or a beneficial interest therein to a QIB shall
be made upon the representation of the transferee, in the form of assignment on
the reverse of the certificate, that it is purchasing the Security for its own
account or an account with respect to which it exercises sole investment
discretion and that it and any such account is a “qualified institutional buyer”
within the meaning of Rule 144A, and is aware that the sale to it is being
made in reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as the undersigned has requested pursuant to
Rule 144A or has determined not to request such information and that it is
aware that the transferor is relying upon its foregoing representations in
order to claim the exemption from registration provided by Rule 144A;

 

(ii)                                  a
transfer of a Regulation S Note or a beneficial interest therein to an IAI
shall be made upon receipt by the Trustee or its agent of a certificate
substantially in the

 

46

 

form set forth
in Exhibit C from the proposed transferee and, if requested by the
Company or the Trustee, the delivery of an opinion of counsel stating that such
transaction is exempt from registration under the Federal securities laws,
certification and/or other information satisfactory to each of them; and

 

(iii)                               a
transfer of a Regulation S Note or a beneficial interest therein to a Non-U.S.
Person shall be made upon receipt by the Trustee or its agent of a certificate
substantially in the form set forth in Exhibit D hereof from the
proposed transferee and, if requested by the Company or the Trustee, receipt by
the Trustee or its agent of an opinion of counsel stating that such transaction
is exempt from registration under the Federal securities laws, certification
and/or other information satisfactory to each of them.

 

After the expiration of the Restricted
Period, interests in the Regulation S Note may be transferred without requiring
the certification set forth in Exhibit C, Exhibit D or any
additional certification.

 

(c)                                  Restricted Securities Legend.  Upon the transfer, exchange or replacement of
Securities not bearing a Restricted Securities Legend, the Registrar shall
deliver Securities that do not bear a Restricted Securities Legend unless such
transferee is an affiliate (as defined in Rule 144A) of the Company.  Upon the registration of transfer, exchange
or replacement of Securities bearing a Restricted Securities Legend, the
Registrar shall deliver only Securities that bear a Restricted Securities
Legend unless there is delivered to the Registrar an Opinion of Counsel to the
effect that neither such legend nor the related restrictions on transfer are
required in order to maintain compliance with the provisions of the Securities
Act.

 

(d)                                 The Registrar shall retain
copies of all letters, notices and other written communications received
pursuant to Section 2.1 or this Section 2.6.  The Company shall have the right to inspect
and make copies of all such letters, notices or other written communications at
any reasonable time upon the giving of reasonable prior written notice to the
Registrar.

 

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

 

(i)                                     To
permit registrations of transfers and exchanges, the Company shall, subject to
the other terms and conditions of this Article II, execute and the
Trustee shall authenticate Definitive Securities and Global Securities at the
Registrar’s or co-registrar’s request.

 

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

 

(iii)                               The
Registrar or co-registrar shall not be required to register the transfer of or
exchange of any Security for a period beginning (1) 15 days before the
selection of Securities to be repurchased or redeemed and ending at the close
of business on the day of such selection (except, in the case of Securities to
be redeemed in part, the portion of the

 

47

 

Security not
to be redeemed) or (2) 15 days before an interest payment date and ending on
such interest payment date.

 

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

 

(v)                                 Any
Definitive Security delivered in exchange for an interest in a Global Security
pursuant to Section 2.1(e) shall, except as otherwise provided by Section
2.6(c), bear the applicable legend regarding transfer restrictions
applicable to the Definitive Security set forth in Section 2.1(d).

 

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

 

(f)                                    No Obligation of the Trustee.

 

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

 

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

 

48

 

SECTION 2.7.   Mutilated, Destroyed, Lost or Stolen
Securities.  If a mutilated Security
is surrendered to the Registrar or if the Holder of a Security claims that the
Security has been lost, destroyed or wrongfully taken, the Company shall issue
and the Trustee shall authenticate a replacement Security if the requirements
of Section 8-405 of the Uniform Commercial Code are met, such that the
Securityholder (a) satisfies the Company or the Trustee within a reasonable
time after such Securityholder has notice of such loss, destruction or wrongful
taking and the Registrar does not register a transfer prior to receiving such
notification, (b) makes such request to the Company or Trustee prior to the
Security being acquired by a protected purchaser as defined in Section 8-303 of
the Uniform Commercial Code (a “protected purchaser”) and (c) satisfies
any other reasonable requirements of the Trustee.  If required by the Trustee or the Company,
such Holder shall furnish an indemnity bond sufficient in the judgment of the
Company and the Trustee to protect the Company, the Subsidiary Guarantors, the
Trustee, the Paying Agent, the Registrar and any co-registrar from any loss
which any of them may suffer if a Security is replaced, and, in the absence of
notice to the Company, the Subsidiary Guarantors or the Trustee that such
Security has been acquired by a protected purchaser, the Company shall execute
and upon Company Order the Trustee shall authenticate and make available for
delivery, in exchange for any such mutilated Security or in lieu of any such
destroyed, lost or stolen Security, a new Security of like tenor and principal
amount, bearing a number not contemporaneously outstanding.

 

In case any such mutilated, destroyed, lost
or stolen Security has become or is about to become due and payable, the
Company in its discretion may, instead of issuing a new Security, pay such
Security.

 

Upon the issuance of any new Security under
this Section 2.7, the Company may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto and any other expenses (including the fees and expenses of the
Trustee) in connection therewith.

 

Every new Security issued pursuant to this Section
2.7 in lieu of any mutilated, destroyed, lost or stolen Security shall
constitute an original additional contractual obligation of the Company, any
Subsidiary Guarantor (if applicable) and any other obligor upon the Securities,
whether or not the mutilated, destroyed, lost or stolen Security shall be at
any time enforceable by anyone, and shall be entitled to all benefits of this
Indenture equally and proportionately with any and all other Securities duly
issued hereunder.

 

The provisions of this Section 2.7 are
exclusive and shall preclude (to the extent lawful) all other rights and
remedies with respect to the replacement or payment of mutilated, destroyed,
lost or stolen Securities.

 

SECTION 2.8.   Outstanding Securities.  Securities outstanding at any time are all
Securities authenticated by the Trustee except for those canceled by it, those
delivered to it for cancellation and those described in this Section 2.8
as not outstanding.  A Security shall be
deemed to be outstanding in the event the Company or an Affiliate of the
Company holds the Security, provided, however,
that (i) for purposes of determining which are outstanding for consent or
voting purposes hereunder, the provisions of Section 11.6 shall
apply and (ii) in determining whether the Trustee shall be protected in making
a determination whether the Holders of the requisite principal amount of
outstanding Securities are present at a meeting of Holders of

 

49

 

Securities for quorum purposes
or have consented to or voted in favor of any request, demand, authorization,
direction, notice, consent, waiver, amendment or modification hereunder, or
relying upon any such quorum, consent or vote, only Securities which a Trust
Officer of the Trustee actually knows to be held by the Company or an Affiliate
of the Company shall not be considered outstanding.

 

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

 

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

 

SECTION 2.9.   Temporary Securities.  In the event that Definitive Securities are
to be issued under the terms of this Indenture, until such Definitive
Securities are ready for delivery, the Company may prepare and the Trustee
shall authenticate temporary Securities. 
Temporary Securities shall be substantially in the form of Definitive
Securities but may have variations that the Company considers appropriate for
temporary Securities.  Without
unreasonable delay, the Company shall prepare and the Trustee shall
authenticate Definitive Securities. 
After the preparation of Definitive Securities, the temporary Securities
shall be exchangeable for Definitive Securities upon surrender of the temporary
Securities at any office or agency maintained by the Company for that purpose
and such exchange shall be without charge to the Holder.  Upon surrender for cancellation of any one or
more temporary Securities, the Company shall execute, and the Trustee shall
authenticate and make available for delivery in exchange therefor, one or more
Definitive Securities representing an equal principal amount of
Securities.  Until so exchanged, the
Holder of temporary Securities shall in all respects be entitled to the same
benefits under this Indenture as a Holder of Definitive Securities.

 

SECTION 2.10.   Cancellation.  The Company at any time may deliver Securities
to the Trustee for cancellation.  The
Registrar and the Paying Agent shall forward to the Trustee any Securities
surrendered to them for registration of transfer, exchange or payment.  The Trustee and no one else shall cancel all
Securities surrendered for registration of transfer, exchange, payment or
cancellation and destroy such Securities in accordance with its internal
policies and, upon the Company’s written request, deliver a certificate (a “Certificate
of Destruction”) describing such Securities disposed (subject to the record
retention requirements of the Exchange Act). 
The Company may not issue new Securities to replace Securities it has
paid or delivered to the Trustee for cancellation for any reason other than in
connection with a transfer or exchange.

 

SECTION 2.11.   Payment of Interest; Defaulted Interest.  Interest on any Security which is payable,
and is punctually paid or duly provided for, on any interest payment date shall
be paid to the Person in whose name such Security (or one or more predecessor
Securities) is registered at the close of business on the regular record date
for such interest at the office or agency of the Company maintained for such
purpose pursuant to Section 2.3.

 

50

 

Any interest on any Security which is
payable, but is not paid when the same becomes due and payable and such
nonpayment continues for a period of 30 days shall forthwith cease to be
payable to the Holder on the regular record date by virtue of having been such
Holder, and such defaulted interest and (to the extent lawful) interest on such
defaulted interest at the rate borne by the Securities (such defaulted interest
and interest thereon herein collectively called “Defaulted Interest”)
shall be paid by the Company, at its election in each case, as provided in
clause (a) or (b) below:

 

(a)                                  The Company may elect to make
payment of any Defaulted Interest to the Persons in whose names the Securities
(or their respective predecessor Securities) are registered at the close of
business on a Special Record Date (as defined below) for the payment of such
Defaulted Interest, which shall be fixed in the following manner.  The Company shall notify the Trustee in
writing of the amount of Defaulted Interest proposed to be paid on each
Security and the date (not less than 30 days after such notice) of the proposed
payment (the “Special Interest Payment Date”), and at the same time the
Company shall deposit with the Trustee an amount of money equal to the
aggregate amount proposed to be paid in respect of such Defaulted Interest or
shall make arrangements satisfactory to the Trustee for such deposit prior to
the date of the proposed payment, such money when deposited to be held in trust
for the benefit of the Persons entitled to such Defaulted Interest as in this
clause provided.  Thereupon the Trustee
shall fix a record date (the “Special Record Date”) for the payment of
such Defaulted Interest, which date shall be not more than 15 days and not less
than 10 days prior to the Special Interest Payment Date and not less than 10
days after the receipt by the Trustee of the notice of the proposed
payment.  The Trustee shall promptly
notify the Company of such Special Record Date, and in the name and at the
expense of the Company, shall cause notice of the proposed payment of such
Defaulted Interest and the Special Record Date and Special Interest Payment
Date therefor to be given in the manner provided for in Section 11.2,
not less than 10 days prior to such Special Record Date.  Notice of the proposed payment of such
Defaulted Interest and the Special Record Date and Special Interest Payment
Date therefor having been so given, such Defaulted Interest shall be paid on
the Special Interest Payment Date to the Persons in whose names the Securities
(or their respective predecessor Securities) are registered at the close of
business on such Special Record Date and shall no longer be payable pursuant to
the following clause (b).

 

(b)                                 The Company may make payment of
any Defaulted Interest in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Securities may be listed,
and upon such notice as may be required by such exchange, if, after notice
given by the Company to the Trustee of the proposed payment pursuant to this
clause, such manner of payment shall be deemed practicable by the Trustee.

 

Subject to the foregoing provisions of this Section
2.11, each Security delivered under this Indenture upon registration of,
transfer of or in exchange for or in lieu of any other Security shall carry the
rights to interest accrued and unpaid, and to accrue, which were carried by
such other Security.

 

51

 

SECTION 2.12.   Computation of Interest.  Interest on the Securities shall be computed
on the basis of a 360-day year of twelve 30-day months.

 

SECTION 2.13.   CUSIP Numbers.  The Company in issuing the Securities may use
“CUSIP” numbers (if then generally in use) and, if so, the Trustee shall use “CUSIP”
numbers in notices of redemption as a convenience to Holders; provided, however, that any such notice may state that no
representation is made as to the correctness of such numbers either as printed
on the Securities or as contained in any notice of a redemption and that
reliance may be placed only on the other identification numbers printed on the
Securities, and any such redemption shall not be affected by any defect in or
omission of such CUSIP numbers.

 

ARTICLE III

 

Covenants

 

SECTION 3.1.   Payment of
Securities.  The Company shall
promptly pay the principal of and interest on the Securities on the dates and
in the manner provided in the Securities and in this Indenture.  Principal and interest shall be considered
paid on the date due if on such date the Trustee or the Paying Agent holds in
accordance with this Indenture immediately available funds sufficient to pay
all principal and interest then due.

 

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

 

Notwithstanding anything to the contrary
contained in this Indenture, the Company may, to the extent it is required to
do so by law, deduct or withhold income or other similar taxes imposed by the
United States of America from principal or interest payments hereunder.

 

SECTION 3.2.  
Commission Reports. 
Whether or not the Company is subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act, the Company shall furnish to the Trustee and the
Holders of the Securities the business and financial information required in
the annual, quarterly and current reports specified in Sections 13 and 15(d) of
the Exchange Act which the Company would be required to file if the Company
were subject to the reporting requirements of Section 13 or 15(d) of the
Exchange Act.  The Company shall furnish such information to the
Trustee and the Holders of the Securities no later than 60 days after the date
on which the Company would have been required to file such reports with the
Commission if the Company were subject to the reporting requirements of Section
13 or 15(d) of the Exchange Act.

 

If the Company has designated any of its
Subsidiaries as Unrestricted Subsidiaries, then the quarterly and annual
financial information required by the preceding paragraph shall include a
reasonably detailed presentation, either on the face of the financial
statements or in the footnotes to the financial statements and in Management’s
Discussion and Analysis of Results of Operations and Financial Condition, of
the financial condition and results of operations of the Company and its
Restricted Subsidiaries.

 

52

 

In addition, the Company and the Subsidiary
Guarantors agree that they shall make available to the Holders and to prospective investors,
upon the request of such Holders, the information required to be delivered
pursuant to Rule 144A(d)(4) under the Securities Act so long as the Securities
are not freely transferable under the Securities Act.  For purposes of this Section 3.2, the
Company and the Subsidiary Guarantors will be deemed to have furnished the
reports to the Trustee and the Holders of the Securities as required by this Section
3.2 if it has filed such reports with the Commission via the EDGAR filing
system and such reports are publicly available.

 

SECTION 3.3.   Limitation on
Indebtedness.  The Company shall not,
and shall not permit any of its Restricted Subsidiaries to, Incur any
Indebtedness (including Acquired Indebtedness); provided, however, that the Company and the Subsidiary
Guarantors may Incur Indebtedness if on the date thereof:

 

(1)                                  the
Consolidated Coverage Ratio for the Company and its Restricted Subsidiaries is
at least 2.50 to 1.00; and

 

(2)                                  no
Default or Event of Default will have occurred and be continuing or would occur
as a consequence of Incurring the Indebtedness or transactions relating to such
Incurrence.

 

The first
paragraph of this Section 3.3 will not prohibit the Incurrence of the
following Indebtedness:

 

(1)                                  Indebtedness
of the Company or a Subsidiary Guarantor
Incurred pursuant to a Credit Facility in an aggregate principal amount at any
time outstanding not to exceed the greater of (a) $150.0 million and (b) 30% of
Adjusted Consolidated Net Tangible Assets;

 

(2)                                  Guarantees
by the Subsidiary Guarantors of Indebtedness Incurred in accordance with the
provisions of this Indenture; provided
that in the event such Indebtedness that is being Guaranteed is a Subordinated
Obligation or a Guarantor Subordinated Obligation, then the related Guarantee
shall be subordinated in right of payment to the Securities or the Subsidiary
Guarantee, as the case may be;

 

(3)                                  Indebtedness
of the Company owing to and held by any Restricted Subsidiary or Indebtedness
of a Restricted Subsidiary owing to and held by the Company or any Restricted
Subsidiary, provided, however;

 

(a)                                  if the Company is the obligor on
such Indebtedness, such Indebtedness is expressly subordinated to the prior
payment in full in cash of all obligations with respect to the Securities;

 

(b)                                 if a Subsidiary Guarantor is the
obligor on such Indebtedness and the Company or a Subsidiary Guarantor is not
the obligee, such Indebtedness is subordinated in right of payment to the
Subsidiary Guarantees of such Subsidiary Guarantor; and

 

53

 

(c)                                  (i)                                     any subsequent issuance or
transfer of Capital Stock or any other event which results in any such Indebtedness
being beneficially held by a Person other than the Company or a Restricted Subsidiary of the Company; and

 

(ii)                                  any
sale or other transfer of any such Indebtedness to a Person other than the
Company or a Restricted Subsidiary
of the Company,

 

shall be
deemed, in each case, to constitute an Incurrence of such Indebtedness by the
Company or such Subsidiary, as the case may be;

 

(4)                                  Indebtedness
represented by (a) the Securities issued on the Issue Date, the Subsidiary
Guarantees and the Exchange Securities and Exchange Guarantees issued in a
registered Exchange Offer pursuant to the Registration Rights Agreement, (b)
any Indebtedness (other than the Indebtedness described in clauses (1), (2),
(3), (6), (8), (9) and (10)) outstanding on the Issue Date and (c) any
Refinancing Indebtedness Incurred in respect of any Indebtedness described in
this clause (4), clause 5 or clause (11) or Incurred pursuant to the first
paragraph of this Section 3.3;

 

(5)                                  Indebtedness
of a Restricted Subsidiary Incurred and outstanding on the date on which such
Restricted Subsidiary was acquired by, or merged into, the Company or any
Restricted Subsidiary (other than Indebtedness Incurred (a) to provide all or
any portion of the funds utilized to consummate the transaction or series of
related transactions pursuant to which such Subsidiary Guarantor became a
Restricted Subsidiary or was otherwise acquired by the Company or (b) otherwise
in connection with, or in contemplation of, such acquisition); provided, however, that at the time such Restricted
Subsidiary is acquired by the Company, the Company would have been able to
Incur $1.00 of additional Indebtedness pursuant to the first paragraph of this Section
3.3 giving effect to the Incurrence of such Indebtedness pursuant to this
clause (5);

 

(6)                                  Indebtedness
under Hedging Obligations that are Incurred in the ordinary course of business
(and not for speculative purposes) (a) for the purpose of fixing or hedging
interest rate risk with respect to any Indebtedness Incurred without violation
of this Indenture; (b) for the
purpose of fixing or hedging currency exchange rate risk with respect to any
currency exchanges; or (c) for the purpose of fixing or hedging commodity price
risk with respect to any commodities;

 

(7)                                  the
Incurrence by the Company or any of its Subsidiary Guarantors of Indebtedness
represented by Capitalized Lease Obligations, mortgage financings or purchase
money obligations or other Indebtedness,
in each case Incurred for the purpose of financing all or any part of the purchase
price or cost of construction or improvements of property used in the

 

54

 

business of the Company or such Subsidiary Guarantor, and Attributable
Indebtedness, in an aggregate principal amount not to exceed $10.0 million at
any time outstanding;

 

(8)                                  Indebtedness
Incurred in respect of workers’ compensation claims, self-insurance
obligations, performance, surety and similar bonds and completion guarantees
provided by the Company or a Restricted Subsidiary in the ordinary course of
business;

 

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

 

(10)                            Indebtedness
arising from the honoring by a bank or other financial institution of a check,
draft or similar instrument (except in the case of daylight overdrafts) drawn
against insufficient funds in the ordinary course of business, provided, however, that
such Indebtedness is extinguished within five business days of Incurrence; and

 

(11)                            in
addition to the items referred to in clauses (1) through (10) above,
Indebtedness of the Company and its Subsidiary Guarantors in an aggregate
outstanding principal amount which, when taken together with the principal
amount of all other Indebtedness Incurred pursuant to this clause (11)
(including any Refinancing Indebtedness incurred under clause (4) above with
respect to such indebtedness) and then outstanding, will not exceed $25.0
million at any time outstanding.

 

The Company
will not Incur any Indebtedness pursuant to clause (11) above if the proceeds
thereof are used, directly or indirectly, to refinance any Subordinated
Obligations of the Company unless such Indebtedness will be subordinated to the
Securities to at least the same extent as such Subordinated Obligations.

 

No Subsidiary
Guarantor will Incur any indebtedness if the proceeds thereof are used,
directly or indirectly, to refinance any Guarantor Subordinated Obligations of
such Subsidiary Guarantor unless such Indebtedness will be subordinated to the
obligations of such Subsidiary Guarantor under its Subsidiary Guarantee to at
least the same extent as such Guarantor Subordinated Obligations. No Restricted
Subsidiary (other than a Subsidiary Guarantor) may Incur any Indebtedness if
the proceeds are used to refinance Indebtedness of the Company.

 

For purposes
of determining compliance with, and the outstanding principal amount of any
particular Indebtedness Incurred pursuant to and in compliance with, this Section
3.3:

 

55

 

(1)                                  in
the event that Indebtedness meets the criteria of more than one of the types of
Indebtedness described in the first and second paragraphs of this Section
3.3, the Company, in its sole discretion, will classify such item of
Indebtedness on the date of Incurrence and, subject to clause (2) below, may
later classify such item of Indebtedness in any manner that complies with this Section
3.3 and only be required to include the amount and type of such
Indebtedness in one of such clauses;

 

(2)                                  all
Indebtedness outstanding on the date of this Indenture under the Senior Secured
Credit Agreement shall be deemed initially Incurred on the Issue Date under
clause (1) of the second paragraph of this Section 3.3 and not the first paragraph or clause (4) of the
second paragraph of this Section 3.3;

 

(3)                                  Guarantees
of, or obligations in respect of letters of credit relating to, Indebtedness
which is otherwise included in the determination of a particular amount of
Indebtedness shall not be included;

 

(4)                                  if
obligations in respect of letters of credit are Incurred pursuant to a Credit
Facility and are being treated as Incurred pursuant to clause (1) of the second
paragraph above and the letters of credit relate to other Indebtedness, then
such other Indebtedness shall not be included;

 

(5)                                  the
principal amount of any Disqualified Stock of the Company or a Restricted
Subsidiary, or Preferred Stock of a Restricted Subsidiary that is not a
Subsidiary Guarantor, will be equal to the greater of the maximum mandatory
redemption or repurchase price (not including, in either case, any redemption or
repurchase premium) or the liquidation preference thereof;

 

(6)                                  Indebtedness
permitted by this Section 3.3 need not be permitted solely by reference
to one provision permitting such Indebtedness but may be permitted in part by
one such provision and in part by one or more other provisions of this Section
3.3 permitting such Indebtedness; and

 

(7)                                  the
amount of Indebtedness issued at a price that is less than the principal amount
thereof will be equal to the amount of the liability in respect thereof determined
in accordance with GAAP.

 

Accrual of
interest, accrual of dividends, the accretion of accreted value, the payment of
interest in the form of additional Indebtedness and the payment of dividends in
the form of additional shares of Preferred Stock or Disqualified Stock will not
be deemed to be an Incurrence of Indebtedness for purposes of this Section
3.3.

 

In addition,
the Company will not permit any of its Unrestricted Subsidiaries to Incur any
Indebtedness other than Non-Recourse Debt. 
If at any time an Unrestricted Subsidiary becomes a Restricted
Subsidiary, any Indebtedness of such Subsidiary shall be deemed to be Incurred
by a Restricted Subsidiary as of such date (and, if such Indebtedness is not
permitted to be

 

56

 

Incurred as of such date under
this Section 3.3, the Company shall be in Default of this Section 3.3).

 

For purposes
of determining compliance with any U.S. dollar-denominated restriction on the
Incurrence of Indebtedness, the U.S. dollar-equivalent principal amount of
Indebtedness denominated in a foreign currency shall be calculated based on the
relevant currency exchange rate in effect on the date such Indebtedness was
Incurred, in the case of term Indebtedness, or first committed, in the case of
revolving credit Indebtedness; provided
that if such Indebtedness is Incurred to refinance other Indebtedness
denominated in a foreign currency, and such refinancing would cause the
applicable U.S. dollar-denominated restriction to be exceeded if calculated at
the relevant currency exchange rate in effect on the date of such refinancing,
such U.S. dollar-denominated restriction shall be deemed not to have been
exceeded so long as the principal amount of such refinancing Indebtedness does
not exceed the principal amount of such Indebtedness being refinanced.  Notwithstanding any other provision of this Section
3.3, the maximum amount of Indebtedness that the Company may Incur pursuant
to this Section 3.3 shall not be deemed to be exceeded solely as a
result of fluctuations in the exchange rate of currencies.  The principal amount of any Indebtedness
Incurred to refinance other Indebtedness, if Incurred in a different currency
from the Indebtedness being refinanced, shall be calculated based on the currency
exchange rate applicable to the currencies in which such Refinancing
Indebtedness is denominated that is in effect on the date of such refinancing.

 

SECTION 3.4.   Limitation on Restricted Payments.  The Company shall not, and shall not permit
any of its Restricted Subsidiaries, directly or indirectly, to:

 

(1)                                  declare
or pay any dividend or make any distribution (whether made in cash, securities
or other property) on or in respect of its Capital Stock (including any payment
in connection with any merger or consolidation involving the Company or any of
its Restricted Subsidiaries) except:

 

(a)                                  dividends or distributions
payable in Capital Stock of the Company (other than Disqualified Stock) or in
options, warrants or other rights to purchase such Capital Stock of the
Company; and

 

(b)                                 dividends or distributions
payable to the Company or a Restricted Subsidiary (and if such Restricted
Subsidiary is not a Wholly-Owned Subsidiary, to its other holders of Capital
Stock on a pro rata basis);

 

(2)                                  purchase,
redeem, retire or otherwise acquire for value any Capital Stock of the Company
or any direct or indirect parent of the Company held by Persons other than the
Company or a Restricted Subsidiary (other than in exchange for Capital Stock of
the Company (other than Disqualified Stock));

 

(3)                                  purchase,
repurchase, redeem, defease or otherwise acquire or retire for value, prior to
scheduled maturity, scheduled repayment or scheduled sinking fund payment, any
Subordinated Obligations or Guarantor

 

57

 

Subordinated Obligations (other than (x) Indebtedness of the Company
owing to and held by any Restricted Subsidiary or Indebtedness of a Restricted
Subsidiary owing to and held by the Company or any other Restricted Subsidiary
permitted under clause (3) of the second paragraph of Section 3.3 or (y)
the purchase, repurchase, redemption, defeasance or other acquisition or
retirement of Subordinated Obligations or Guarantor Subordinated Obligations
purchased in anticipation of satisfying a sinking fund obligation, principal
installment or final maturity, in each case due within one year of the date of
purchase, repurchase, redemption, defeasance or other acquisition or
retirement); or

 

(4)                                  make
any Restricted Investment in any Person;

 

(any such dividend, distribution, purchase, redemption, repurchase,
defeasance, other acquisition, retirement or Restricted Investment referred to
in clauses (1) through (4) shall be referred to herein as a “Restricted
Payment”), if at the time the Company or such Restricted Subsidiary makes
such Restricted Payment:

 

(a)                                  a Default shall have occurred
and be continuing (or would result therefrom); or

 

(b)                                 the Company is not able to Incur
an additional $1.00 of Indebtedness pursuant to the first paragraph of Section
3.3 after giving effect, on a pro forma basis, to such Restricted Payment;
or

 

(c)                                  the aggregate amount of such
Restricted Payment and all other Restricted Payments declared or made
subsequent to the Issue Date would exceed the sum of:

 

(i)                                     50%
of Consolidated Net Income for the period (treated as one accounting period)
from the beginning of the fiscal quarter in which the Issue Date occurs to the
end of the most recent fiscal quarter ending prior to the date of such
Restricted Payment for which financial statements are in existence (or, in case
such Consolidated Net Income is a deficit, minus 100% of such deficit);

 

(ii)                                  100%
of the aggregate Net Cash Proceeds received by the Company from the issue or
sale of its Capital Stock (other than Disqualified Stock) or other capital
contributions subsequent to the Issue Date (other than Net Cash Proceeds
received from an issuance or sale of such Capital Stock to a Subsidiary of the
Company or an employee stock ownership plan, option plan or similar trust to
the extent such sale to an employee stock ownership plan or similar trust is
financed by loans from or Guaranteed by the Company or any

 

58

 

Restricted Subsidiary unless such loans have been repaid with cash on
or prior to the date of determination);

 

(iii)                               the
amount by which Indebtedness of the Company or its Restricted Subsidiaries is
reduced on the Company’s balance sheet upon the conversion or exchange (other
than by a Subsidiary of the Company) subsequent to the Issue Date of any
Indebtedness of the Company or its Restricted Subsidiaries convertible or
exchangeable for Capital Stock (other than Disqualified Stock) of the Company
(less the amount of any cash, or the fair market value of any other property,
distributed by the Company upon such conversion or exchange); and

 

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

 

(A)                              repurchases
or redemptions of such Restricted Investments by such Person, proceeds realized
upon the sale of such Restricted Investment to an unaffiliated purchaser,
repayments of loans or advances or other transfers of assets (including by way
of dividend or distribution) by such Person to the Company or any Restricted
Subsidiary; or

 

(B)                                the
redesignation of Unrestricted Subsidiaries as Restricted Subsidiaries (valued
in each case as provided in the definition of “Investment”) not to exceed, in
the case of any Unrestricted Subsidiary, the amount of Investments previously
made by the Company or any Restricted Subsidiary in such Unrestricted
Subsidiary,

 

which amount
in each case under this clause (iv) was included in the calculation of the
amount of Restricted Payments; provided, however,
that no amount will be included under this clause (iv) to the extent it is
already included in Consolidated Net Income.

 

The provisions
of the preceding paragraph will not prohibit:

 

(1)                                  any
purchase, repurchase, redemption, defeasance or other acquisition or retirement
of Capital Stock, Disqualified Stock or Subordinated Obligations of the Company
or Guarantor Subordinated Obligations of any Subsidiary Guarantor made by
exchange for, or out of the proceeds of the substantially concurrent sale of,
Capital Stock of the Company (other than

 

59

 

Disqualified Stock and other than Capital Stock issued or sold to a
Subsidiary or an employee stock ownership plan or similar trust to the extent
such sale to an employee stock ownership plan or similar trust is financed by
loans from or Guaranteed by the Company or any Restricted Subsidiary unless
such loans have been repaid with cash on or prior to the date of
determination); provided, however,
that (a) such purchase, repurchase, redemption, defeasance, acquisition or
retirement will be excluded in subsequent calculations of the amount of
Restricted Payments and (b) the Net Cash Proceeds from such sale of Capital
Stock will be excluded from clause (c)(ii) of the preceding paragraph;

 

(2)                                  any
purchase, repurchase, redemption, defeasance or other acquisition or retirement
of Subordinated Obligations of the Company or Guarantor Subordinated
Obligations of any Subsidiary Guarantor made by exchange for, or out of the
proceeds of the substantially concurrent sale of, Subordinated Obligations of
the Company or any purchase, repurchase, redemption, defeasance or other
acquisition or retirement of Guarantor Subordinated Obligations made by
exchange for or out of the proceeds of the substantially concurrent sale of
Guarantor Subordinated Obligations that, in each case, is permitted to be
Incurred pursuant to Section 3.3 and that in each case constitutes
Refinancing Indebtedness; provided, however,
that such purchase, repurchase, redemption, defeasance, acquisition or
retirement will be excluded in subsequent calculations of the amount of
Restricted Payments;

 

(3)                                  any
purchase, repurchase, redemption, defeasance or other acquisition or retirement
of Disqualified Stock of the Company or a Restricted Subsidiary made by
exchange for or out of the proceeds of the substantially concurrent sale of
Disqualified Stock of the Company or such Restricted Subsidiary, as the case
may be, that, in each case, is permitted to be Incurred pursuant to Section
3.3 and that in each case constitutes Refinancing Indebtedness; provided, however, that such purchase,
repurchase, redemption, defeasance, acquisition or retirement will be excluded
in subsequent calculations of the amount of Restricted Payments;

 

(4)                                  so
long as no Default or Event of Default has occurred and is continuing, any
purchase or redemption of Subordinated Obligations or Guarantor Subordinated
Obligations of a Subsidiary Guarantor from Net Available Cash to the extent
permitted under Section 3.7; provided,
however, that such purchase or redemption will be excluded in
subsequent calculations of the amount of Restricted Payments;

 

(5)                                  dividends
paid within 60 days after the date of declaration if at such date of
declaration such dividend would have complied with this provision; provided, however, that such dividends
will be included in subsequent calculations of the amount of Restricted
Payments;

 

60

 

(6)                                  so
long as no Default or Event of Default has occurred and is continuing,

 

(a)                                  the purchase, redemption or
other acquisition, cancellation or retirement for value of Capital Stock, or
options, warrants, equity appreciation rights or other rights to purchase or
acquire Capital Stock of the Company or any Restricted Subsidiary or any parent
of the Company held by any existing or former employees or
directors of the
Company or any Subsidiary of the Company or their assigns, estates or heirs, in
each case in connection with the repurchase provisions under employee stock
option or stock purchase agreements or other agreements to compensate employees
or directors; provided that such
purchase, redemption, acquisition, cancellation or retirement pursuant to this
clause will not exceed $2.0 million in the aggregate during any calendar year; provided, however, that the amount of any
such purchase, redemption, acquisition, cancellation or retirement will be
excluded from subsequent calculations of the amount of Restricted Payments; and

 

(b)                                 loans or advances to employees
or directors of the Company or any Subsidiary of the Company the proceeds of
which are used to purchase Capital Stock of the Company, in an aggregate amount
not in excess of $2.0 million at any one time outstanding; provided, however, that the Company and
its Subsidiaries shall comply in all material respects with all applicable
provisions of the Sarbanes-Oxley Act of 2002 and the rules and regulations
promulgated in connection therewith in connection with such loans or advances
as if the Company had filed a registration statement with the Commission; provided, further, that the amount of such
loans and advances will be included in subsequent calculations of the amount of
Restricted Payments;

 

(7)                                  so
long as no Default or Event of Default has occurred and is continuing, the
declaration and payment of dividends to holders of any class or series of
Disqualified Stock of the Company, or Preferred Stock of a Restricted
Subsidiary that is not a Subsidiary Guarantor, issued in accordance with the
terms of this Indenture to the extent such dividends are included in the
definition of “Consolidated Interest Expense”; provided
that the payment of such dividends will be excluded from the
calculation of Restricted Payments;

 

(8)                                  repurchases
of Capital Stock deemed to occur upon the exercise of stock options, warrants
or other convertible securities if such Capital Stock represents a portion of
the exercise price thereof; provided,
however, that such repurchases will be excluded from subsequent calculations
of the amount of Restricted Payments;

 

61

 

(9)                                  the
purchase, repurchase, redemption, defeasance or other acquisition or retirement
for value of any Subordinated Obligation (i) at a purchase price not greater
than 101% of the principal amount of such Subordinated Obligation in the event
of a Change of Control in accordance with provisions similar to those of Section
3.9 or (ii) at a purchase price not greater than 100% of the principal
amount thereof in accordance with provisions similar to those of Section 3.7;
provided, that, prior to or
simultaneously with such purchase, repurchase, redemption, defeasance or other
acquisition or retirement, the Company has made the Change of Control Offer or
Asset Disposition Offer, as applicable, as provided in Section 3.9 with
respect to the Securities and has completed the repurchase or redemption of all
Securities validly tendered for payment in connection with such Change of
Control Offer or Asset Disposition Offer; and provided,
further, that such repurchases will be excluded from subsequent
calculations of the amount of Restricted Payments;

 

(10)                            distributions
by Employee Partnerships or the SWR Partnerships to the limited partners
thereof; provided that such distributions
will be excluded from subsequent calculations of the amount of Restricted
Payments; and

 

(11)                            Restricted
Payments in an amount not to exceed $10.0 million; provided that the amount of such Restricted Payments will be
excluded from subsequent calculations of the amount of Restricted Payments.

 

The amount of all Restricted Payments (other
than cash) shall be the fair market value on the date of such Restricted
Payment of the asset(s) or securities proposed to be paid, transferred or
issued by the Company or such Restricted Subsidiary, as the case may be,
pursuant to such Restricted Payment. The fair market value of any cash
Restricted Payment shall be its face amount and the fair market value of any
non-cash Restricted Payment shall be determined conclusively by the Board of
Directors of the Company acting in good faith whose resolution with respect
thereto shall be delivered to the Trustee, such determination to be based upon
an opinion or appraisal issued by an accounting, appraisal or investment
banking firm of recognized standing (as determined in good faith by the Board
of Directors of the Company) if such fair market value is estimated in good
faith by the Board of Directors of the Company to exceed $20.0 million. Not
later than the date of making any Restricted Payment pursuant to the first
paragraph of this
Section 3.4 or clause (11) above, the Company shall deliver to the
Trustee an Officers’ Certificate stating that such Restricted Payment is
permitted and setting forth the basis upon which the calculations required by this  Section 3.4 were computed,
together with a copy of any fairness opinion or appraisal required by this
Indenture.

 

SECTION 3.5.   Limitation on Liens.  The Company shall not, and shall not permit
any of its Restricted Subsidiaries to, directly or indirectly, create, Incur or
suffer to exist any Lien (other than Permitted Liens) upon any of its property
or assets (including Capital Stock of Restricted Subsidiaries), whether owned
on the date of this Indenture or acquired after that date, which Lien is
securing any Indebtedness, unless contemporaneously with the Incurrence of such
Liens effective provision is made to secure the Indebtedness due under this
Indenture and the

 

62

 

Securities or, in respect of
Liens on any Restricted Subsidiary’s property or assets, any Subsidiary
Guarantee of such Restricted Subsidiary, equally and ratably with (or senior in
priority to in the case of Liens with respect to Subordinated Obligations or
Guarantor Subordinated Obligations, as the case may be) the Indebtedness
secured by such Lien for so long as such Indebtedness is so secured.

 

SECTION 3.6.   Limitation on
Restrictions on Distributions from Restricted Subsidiaries.  The Company shall not, and shall not permit
any Restricted Subsidiary to, create or otherwise cause or permit to exist or
become effective any consensual encumbrance or consensual restriction on the
ability of any Restricted Subsidiary to:

 

(1)                                  pay
dividends or make any other distributions on its Capital Stock or pay any
Indebtedness or other obligations owed to the Company or any Restricted
Subsidiary (it being understood that the priority of any Preferred Stock in
receiving dividends or liquidating distributions prior to dividends or
liquidating distributions being paid on Common Stock shall not be deemed a
restriction on the ability to make distributions on Capital Stock);

 

(2)                                  make
any loans or advances to the Company or any Restricted Subsidiary (it being
understood that the subordination of loans or advances made to the Company or
any Restricted Subsidiary to other Indebtedness Incurred by the Company or any
Restricted Subsidiary shall not be deemed a restriction on the ability to make
loans or advances); or

 

(3)                                  transfer
any of its property or assets to the Company or any Restricted Subsidiary.

 

The preceding provisions will not prohibit:

 

(i)                                     any
encumbrance or restriction pursuant to an agreement in effect at or entered
into on the date of this Indenture, including, without limitation, this
Indenture, the Initial Securities, the Exchange Securities, the Subsidiary
Guarantees and the Senior Secured Credit Agreement (and related documentation)
in effect on such date;

 

(ii)                                  any
encumbrance or restriction with respect to a Restricted Subsidiary pursuant to
an agreement relating to any Capital Stock or Indebtedness Incurred by a
Restricted Subsidiary on or before the date on which such Restricted Subsidiary
was acquired by the Company (other than Capital Stock or Indebtedness Incurred
as consideration in, or to provide all or any portion of the funds utilized to
consummate, the transaction or series of related transactions pursuant to which
such Restricted Subsidiary became a Restricted Subsidiary or was acquired by
the Company or in contemplation of the transaction) and outstanding on such
date provided, that any such
encumbrance or restriction shall not extend to any assets or property of the
Company or any other Restricted Subsidiary other than the assets and property
so acquired;

 

63

 

(iii)                               any
encumbrance or restriction with respect to a Restricted Subsidiary pursuant to
an agreement effecting a refunding, replacement or refinancing of Indebtedness
Incurred pursuant to an agreement referred to in clause (i) or (ii) of this
paragraph or this clause (iii) or contained in any amendment, restatement,
modification, renewal, supplement, refunding, replacement or refinancing of an
agreement referred to in clause (i) or (ii) of this paragraph or this clause
(iii); provided, however, that the encumbrances and
restrictions with respect to such Restricted Subsidiary contained in any such
agreement are no less favorable in any material respect, taken as a whole, to
the Holders of the Securities, in the reasonable judgment of the Company’s
Board of Directors or senior management, than the encumbrances and restrictions
contained in such agreements referred to in clauses (i) or (ii) of this
paragraph on the Issue Date or the date such Restricted Subsidiary became a
Restricted Subsidiary or was merged into a Restricted Subsidiary, whichever is
applicable;

 

(iv)                              in
the case of clause (3) of the first paragraph of this Section 3.6, any
encumbrance or restriction:

 

(a)                                  that restricts in a customary
manner the subletting, assignment or transfer of any property or asset that is
subject to a lease,
license or similar contract, or the assignment or transfer of any such lease,
license or other contract;

 

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

 

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

 

(v)                                 (a)
purchase money obligations for property acquired in the ordinary course of
business and (b) Capitalized Lease Obligations permitted under this Indenture,
in each case, that impose encumbrances or restrictions of the nature described
in clause (3) of the first paragraph of this Section 3.6 on the property
so acquired;

 

(vi)                              any
restriction with respect to a Restricted Subsidiary (or any of its property or
assets) imposed pursuant to an agreement entered into for the direct or
indirect sale or disposition of all or substantially all the Capital Stock or
assets of such Restricted Subsidiary (or the property or assets that are
subject to such restriction) pending the closing of such sale or disposition;

 

64

 

(vii)                           any
customary encumbrances or restrictions imposed pursuant to any agreement
referred to in the definition of “Permitted Business Investment” or in Employee
Partnerships;

 

(viii)                        net
worth provisions in leases and other agreements entered into by the Company or
any Restricted Subsidiary in the ordinary course of business;

 

(ix)                                encumbrances
or restrictions arising or existing by reason
of applicable law or any applicable rule, regulation or order; and

 

(x)                                   encumbrances
or restrictions contained in indentures or debt instruments or other debt
arrangements Incurred by Subsidiary Guarantors in accordance with Section
3.3 that are not more restrictive, taken as a whole, than those applicable
to the Company in either this
Indenture or the Senior Secured Credit Agreement on the Issue Date (which
results in encumbrances or restrictions comparable to those applicable to the
Company at a Restricted Subsidiary level).

 

SECTION 3.7.   Limitation on
Sales of Assets and Subsidiary Stock. 
(a)  The Company shall not, and
shall not permit any of its Restricted Subsidiaries to, make any Asset
Disposition unless:

 

(1)                                  the
Company or such Restricted Subsidiary, as the case may be, receives
consideration at least equal to the fair market value (such fair market value
to be determined on the date of contractually agreeing to such Asset Disposition),
as determined in good faith by the Board of Directors (including as to the
value of all non-cash consideration), of the shares and assets subject to such
Asset Disposition;

 

(2)                                  at
least 75% of the consideration from such Asset Disposition received by the
Company or such Restricted Subsidiary, as the case may be, is in the form of
cash or Cash Equivalents; and

 

(3)                                  except
as provided in the next paragraph, an amount equal to 100% of the Net Available
Cash from such Asset Disposition is applied by the Company or such Restricted
Subsidiary, as the case may be:

 

(a)                                  first, to the extent the Company or
any Restricted Subsidiary, as the case may be, elects (or is required by the
terms of any Indebtedness), to prepay, repay or purchase Indebtedness of the
Company (other than any Disqualified Stock or Subordinated Obligations) or
Indebtedness of a Restricted Subsidiary (other than any Disqualified Stock or a
Guarantor Subordinated Obligation of a Subsidiary Guarantor) (in each case
other than Indebtedness owed to the Company or a Restricted Subsidiary) within
360 days from the later of the date of such Asset Disposition or the receipt of
such Net Available Cash; provided, however,
that, in connection with any

 

65

 

prepayment, repayment or purchase of
Indebtedness pursuant to this clause (a), the Company or such Restricted
Subsidiary will retire such Indebtedness and will cause the related commitment
(if any) to be permanently reduced in an amount equal to the principal amount
so prepaid, repaid or purchased; and

 

(b)                                 second, to the extent of the balance
of such Net Available Cash after application in accordance with clause (a), to
the extent the Company or such Restricted Subsidiary elects, to invest in
Additional Assets within 360 days from the later of the date of such Asset
Disposition or the receipt of such Net Available Cash;

 

provided that pending the final application of
any such Net Available Cash in accordance with clauses (a) or (b) above, the
Company and its Restricted Subsidiaries may temporarily reduce Indebtedness or
otherwise invest such Net Available Cash in any manner not prohibited by this
Indenture.

 

(b)                                 Any Net Available Cash from
Asset Dispositions that is not applied or invested as provided in the preceding
paragraph will be deemed to constitute “Excess Proceeds.”  Not later than the 361st day after
the later of the date of an Asset Disposition or the receipt of such Net
Available Cash, if the aggregate amount of Excess Proceeds exceeds $10.0
million, the Company will be required to make an offer (“Asset Disposition
Offer”) to all Holders of Securities and to the extent required by the
terms of other Pari Passu Indebtedness, to all holders of Securities and to the
extent required by the terms of other Pari Passu Indebtedness, to all holders
of other Pari Passu Indebtedness outstanding with similar provisions requiring
the Company to make an offer to purchase such Pari Passu Indebtedness with the
proceeds from any Asset Disposition (“Pari Passu Notes”), to purchase
the maximum principal amount of Securities and any such Pari Passu Notes to
which the Asset Disposition Offer applies that may be purchased out of the
Excess Proceeds, at an offer price in cash in an amount equal to 100% of the
principal amount of the Securities and Pari Passu Notes plus accrued and unpaid
interest to the date of purchase (subject to the right of holders of record on
the relevant record date to receive interest due on the relevant interest
payment date), in accordance with the procedures set forth in this Indenture or
the agreements governing the Pari Passu Notes, as applicable, in each case in
integral multiples of $1,000. To the extent that the aggregate amount of
Securities and Pari Passu Notes so validly tendered and not properly withdrawn
pursuant to an Asset Disposition Offer is less than the Excess Proceeds, the
Company may use any remaining Excess Proceeds for general corporate purposes,
subject to the other covenants contained in this Indenture.  If the aggregate principal amount of
Securities surrendered by Holders thereof and other Pari Passu Notes
surrendered by holders or lenders, collectively, exceeds the amount of Excess
Proceeds, the Company shall select the Securities and Pari Passu Notes to be purchased on a pro rata
basis on the basis of the aggregate principal amount of tendered Securities and
Pari Passu Notes.  Upon completion of
such Asset Disposition Offer, the amount of Excess Proceeds shall be reset at
zero.

 

(c)                                  (1)  The Asset Disposition Offer will remain open
for a period of 20 Business Days following its commencement, except to the
extent that a longer period is required by applicable law (the “Asset
Disposition Offer Period”). No later than five Business Days after

 

66

 

the termination of the Asset
Disposition Offer Period (the “Asset Disposition Purchase Date”), the
Company will purchase the principal amount of Securities and Pari Passu Notes
required to be purchased pursuant to this Section 3.7 (the “Asset
Disposition Offer Amount”) or, if less than the Asset Disposition Offer
Amount has been so validly tendered, all Securities and Pari Passu Notes
validly tendered in response to the Asset Disposition Offer.

 

(2)                                  If
the Asset Disposition Purchase Date is on or after an interest record date and
on or before the related interest payment date, any accrued and unpaid interest
will be paid to the Person in whose name a Security is registered at the close
of business on such record date, and no additional interest will be payable to
Holders of the Securities who tender Securities pursuant to the Asset
Disposition Offer.

 

(3)                                  On
or before the Asset Disposition Purchase Date, the Company will, to the extent
lawful, accept for payment, on a pro rata basis to the extent necessary, the
Asset Disposition Offer Amount of Securities and Pari Passu Notes or portions
of Securities and Pari Passu Notes so validly tendered and not properly
withdrawn pursuant to the Asset Disposition Offer, or if less than the Asset Disposition
Offer Amount has been validly tendered and not properly withdrawn, all
Securities and Pari Passu Notes so validly tendered and not properly withdrawn,
in each case in integral multiples of $1,000. 
The Company will deliver to the Trustee an Officers’ Certificate stating
that such Securities or portions thereof were accepted for payment by the
Company in accordance with the terms of this Section 3.7 and, in
addition, the Company will deliver all certificates and notes required, if any,
by the agreements governing the Pari Passu Notes.  The Company will promptly (but in any case
not later than five Business Days after the termination of the Asset
Disposition Offer Period) mail or deliver to each tendering Holder of
Securities or holder or lender of Pari Passu Notes, as the case may be, an
amount equal to the purchase price of the Securities or Pari Passu Notes so
validly tendered and not properly withdrawn by such holder or lender, as the
case may be, and accepted by the Company for purchase, and the Company will
promptly issue a new Security, and the Trustee, upon delivery of an Officers’
Certificate from the Company, will authenticate and mail or deliver such new
Security to such Holder, in a principal amount equal to any unpurchased portion
of the Security surrendered; provided
that each such new Security will be in a principal amount of $1,000 or an
integral multiple of $1,000.  In
addition, the Company will take any and all other actions required by the
agreements governing the Pari Passu Notes. 
Any Security not so accepted will be promptly mailed or delivered by the
Company to the Holder thereof.  The
Company will publicly announce the results of the Asset Disposition Offer on
the Asset Disposition Purchase Date.

 

For the
purposes of clause (a)(2) of this Section 3.7, the following will be
deemed to be cash:

 

67

 

(1)                                  the
assumption by the transferee of Indebtedness (other than Subordinated
Obligations or Disqualified Stock) of the Company or Indebtedness of a
Restricted Subsidiary (other than Guarantor Subordinated Obligations or
Disqualified Stock of any Wholly-Owned Subsidiary that is a Subsidiary
Guarantor) and the release of the Company or such Restricted Subsidiary from
all liability on such Indebtedness in connection with such Asset Disposition
(in which case the Company will, without further action, be deemed to have
applied such deemed cash to Indebtedness in accordance with clause (a)(3)(a) above); and

 

(2)                                  securities,
notes or other obligations received by the Company or any Restricted Subsidiary
from the transferee that are promptly converted by the Company or such
Restricted Subsidiary into cash.

 

The Company shall not, and shall not permit any Restricted Subsidiary to, engage in any Asset
Swaps, unless:

 

(1)                                  at
the time of entering into such Asset Swap and immediately after giving effect
to such Asset Swap, no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;

 

(2)                                  in
the event such Asset Swap involves the transfer by the Company or any
Restricted Subsidiary of assets having an aggregate fair market value, as
determined by the Board of Directors of the Company in good faith, in excess of
$5.0 million, the terms of such Asset Swap have been approved by a majority of
the members of the Board of Directors of the Company; and

 

(3)                                  in
the event such Asset Swap involves the transfer by the Company or any
Restricted Subsidiary of assets having an aggregate fair market value, as
determined by the Board of Directors of the Company in good faith, in excess of
$20.0 million, the Company has received a written opinion from an independent
investment banking firm of recognized standing (as determined in good faith by
the Board of Directors of the Company) that such Asset Swap is fair to the
Company or such Restricted Subsidiary, as the case may be, from a financial
point of view.

 

The Company
will comply, to the extent applicable, with the requirements of Section 14e-1
of the Exchange Act and any other securities laws or regulations in connection
with the repurchase of Securities pursuant to this Indenture. To the extent
that the provisions of any securities laws or regulations conflict with
provisions of this Section 3.7, the Company will comply with the applicable
securities laws and regulations and will not be deemed to have breached its
obligations under this Indenture by virtue of any conflict.

 

SECTION 3.8.   Limitation on
Affiliate Transactions.  The Company
shall not, and shall not permit any of its Restricted Subsidiaries to, directly
or indirectly, enter into or conduct any transaction (including the purchase,
sale, lease or exchange of any property or the rendering of any service) with
any Affiliate of the Company (an “Affiliate Transaction”) unless:

 

68

 

(1)                                  the
terms of such Affiliate Transaction are no less favorable to the Company or
such Restricted Subsidiary, as the case may be, than those that could be
obtained in a comparable transaction at the time of such transaction in arm’s-length
dealings with a Person who is not such an Affiliate;

 

(2)                                  in
the event such Affiliate Transaction involves an aggregate consideration in
excess of $5.0 million, the terms of such transaction have been approved by a
majority of the members of the Board of Directors of the Company and by a
majority of the members of such Board having no personal stake in such
transaction, if any (and such majority or majorities, as the case may be,
determines that such Affiliate Transaction satisfies the criteria in clause (1)
above); and

 

(3)                                  in
the event such Affiliate Transaction involves an aggregate consideration in
excess of $20.0 million, the Company has received a written opinion from an
independent investment banking, accounting or appraisal firm of recognized
standing (as determined in good faith by the Board of Directors of the Company)
that such Affiliate Transaction is not materially less favorable than those
that might reasonably have been obtained in a comparable transaction at such
time on an arm’s-length basis from a Person that is not an Affiliate.

 

The preceding
paragraph will not apply to:

 

(1)                                  any
Restricted Payment permitted to be made pursuant to Section 3.4;

 

(2)                                  any
issuance of securities, or other payments, awards or grants in cash, securities
or otherwise pursuant to, or the funding of, employment agreements and other
compensation arrangements, options to purchase Capital Stock of the Company,
restricted stock plans, long-term incentive plans, stock appreciation rights
plans, participation plans, Employee
Partnerships or similar employee benefits plans and/or indemnity
provided on behalf of officers and employees and approved by the Board of
Directors of the Company;

 

(3)                                  loans
or advances to employees, officers or directors in the ordinary course of
business of the Company or any of its Restricted Subsidiaries but in any event
not to exceed $2.0 million in the aggregate outstanding at any one time with
respect to all loans or advances made since the Issue Date, provided, however, that the Company and
its Subsidiaries will comply in all material respects with all applicable
provisions of the Sarbanes-Oxley Act of 2002 and the rules and regulations
promulgated in connection therewith that
would be applicable to an issuer with debt securities registered under the
Securities Act relating to such loans and advances;

 

69

 

(4)                                  any
transaction between the Company and a Restricted Subsidiary or between
Restricted Subsidiaries and Guarantees issued by the Company or a Restricted
Subsidiary for the benefit of the Company or a Restricted Subsidiary, as the
case may be, in accordance with Section 3.3;

 

(5)                                  the
payment of reasonable and customary fees paid to, and indemnity provided on
behalf of, directors of the Company or any Restricted Subsidiary;

 

(6)                                  the
existence of, and the performance of obligations of the Company or any of its
Restricted Subsidiaries under the terms of any agreement to which the Company
or any of its Restricted Subsidiaries is a party as of or on the Issue Date and identified on Schedule 3.8 to this
Indenture on the Issue Date, as these agreements may be amended,
modified, supplemented, extended or renewed from time to time; provided, however, that any future
amendment, modification, supplement, extension or renewal entered into after
the Issue Date will be permitted to the extent that its terms are not more
disadvantageous to the Holders of the Securities than the terms of the
agreements in effect on the Issue Date; and

 

(7)                                  transactions
in the ordinary course of the business of the Company and its Restricted
Subsidiaries; provided that such transactions are on terms that are no less
favorable to the Company or the relevant Restricted Subsidiary than those that
would have been obtained in a comparable transaction by the Company or such
Restricted Subsidiary with an unrelated Person; and

 

(8)                                  any
issuance or sale of Capital Stock (other than Disqualified Stock) for fair
consideration, in the reasonable judgment of the Board of Directors of the
Company, to Affiliates of the Company and the granting of registration and
other customary rights in connection therewith.

 

SECTION 3.9.   Change of
Control.  (a)  If a Change of Control occurs, unless the
Company has exercised its right to redeem all of the Securities as described
under Section 5.1, each Holder of Securities will have the right to
require the Company to repurchase all or any part (equal to $1,000 or an
integral multiple thereof) of such Holder’s Securities at a purchase price in
cash equal to 101% of the principal amount of the Securities plus accrued and
unpaid interest, if any, to the date of purchase (subject to the right of
Holders of record on the relevant record date to receive interest due on the relevant
interest payment date).

 

(b)                                 Within 30 days following any
Change of Control, unless the Company has exercised its right to redeem all of
the Securities as described under Section 5.1, the Company will mail a
notice (the “Change of Control Offer”) to each Holder, with a copy to
the Trustee, stating:

 

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

 

70

 

right of
Holders of record on a record date to receive interest on the relevant interest
payment date) (the “Change of Control Payment”);

 

(2)                                  the
repurchase date (which shall be no earlier than 30 days nor later than 60 days
from the date such notice is mailed) (the “Change of Control Payment Date”);
and

 

(3)                                  the
procedures determined by the Company, consistent with this Indenture, that a
Holder must follow in order to have its Securities repurchased.

 

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

 

(1)                                  accept
for payment all Securities or portions of Securities (in integral multiples of
$1,000) properly tendered pursuant to the Change of Control Offer;

 

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

 

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

 

(d)                                 The Paying Agent will promptly
mail to each Holder of Securities so tendered the Change of Control Payment for
such Securities, and the Trustee will promptly authenticate and mail (or cause
to be transferred by book entry) to each Holder a new Security equal in
principal amount to any unpurchased portion of the Securities surrendered, if
any; provided that each such new
Security will be in a principal amount of $1,000 or an integral multiple
thereof.

 

(e)                                  If the Change of Control Payment
Date is on or after an interest record date and on or before the related
interest payment date, any accrued and unpaid interest, if
any, will be paid
to the Person in whose name a Security is registered at the close of business
on such record date, and no additional interest will be payable to Holders who
tender pursuant to the Change of Control Offer.

 

(f)                                    Prior to mailing a Change of
Control Offer, and as a condition to such mailing (i) the requisite holders of
each issue of Indebtedness issued under an indenture or other agreement that
may be violated by such payment shall have consented to such Change of Control
Offer being made and waived the Event of Default, if any, caused by the Change
of Control or (ii) the Company will repay all outstanding Indebtedness issued
under an indenture or other agreement that may be violated by a payment to the
Holders of Securities under a Change of Control Offer or (iii) the Company must
offer to repay all such Indebtedness, and make payments to the holders of such
Indebtedness that accept such offer, and obtain waivers of any Event of Default
from the

 

71

 

remaining Holders of such
Indebtedness.  The Company covenants to
effect such repayment or obtain such consent within 30 days following any
Change of Control.

 

(g)                                 The Company will not be required
to make a Change of Control Offer upon a Change of Control if a third party
makes the Change of Control Offer in the manner, at the times and otherwise in
compliance with the requirements set forth in this Indenture applicable to a Change
of Control Offer made by the Company and purchases all Securities validly
tendered and not withdrawn under such Change of Control Offer.

 

(h)                                 The Company will comply, to the
extent applicable, with the requirements of Rule 14e-1 of the Exchange Act and any other securities laws or
regulations in connection with the repurchase of Securities pursuant to this Section
3.9. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Indenture, the Company will comply
with the applicable securities laws and regulations and will not be deemed to
have breached its obligations described in this Indenture by virtue of the
conflict.

 

SECTION 3.10.   Limitation on
Sale of Capital Stock of Restricted Subsidiaries.  The Company shall not, and shall not permit
any Restricted Subsidiary to, transfer, convey, sell, lease or otherwise
dispose of any Voting Stock of any Restricted Subsidiary or to issue any of the
Voting Stock of a Restricted Subsidiary (other than, if necessary, shares of
its Voting Stock constituting directors’ qualifying shares) to any Person
except:

 

(1)                                  to
the Company or a Wholly-Owned Restricted Subsidiary; or

 

(2)                                  in
compliance with Section 3.7 and immediately after giving effect to such
issuance or sale, such Restricted Subsidiary would continue to be a Restricted
Subsidiary.

 

Notwithstanding the preceding paragraph, the
Company or any Restricted Subsidiary may sell all the Voting Stock of a
Restricted Subsidiary as long as the Company complies with the terms of Section
3.7.

 

SECTION 3.11.   Future Subsidiary Guarantors.  The Company will cause each Restricted
Subsidiary (other than an Employee Partnership or a Foreign Subsidiary) created
or acquired by the Company or one or more of its Restricted Subsidiaries after
the Issue Date to execute and deliver to the Trustee a Subsidiary Guarantee,
substantially in the form of Exhibit E, pursuant to which such Subsidiary
Guarantor will unconditionally Guarantee, on a joint and several basis, the
full and prompt payment of the principal of, premium, if any and interest on
the Securities on a senior basis; provided, however,
that Restricted Subsidiaries (other than Foreign Subsidiaries, Employee
Partnerships or SWR Partnerships) that, in the aggregate, own less than five
percent of the Company’s Total Assets and account for less than five percent of
the Company’s Consolidated EBITDAX (in each case, determined on a quarterly
basis) shall not be required to execute and deliver a Subsidiary
Guarantee.  Notwithstanding the foregoing,
the Employee Partnerships and SWR Partnerships shall not be required to execute
and deliver a Subsidiary Guarantee.  Any
such Subsidiary Guarantee will be governed by Article X.

 

72

 

Each Subsidiary Guarantee shall be released
in accordance with the provisions of this Indenture described under Section
10.2.

 

SECTION 3.12.   Limitation on Lines of Business.  The Company shall not, and shall not permit
any Restricted Subsidiary to, engage in any business other than the Oil and Gas
Business.

 

SECTION 3.13.   Maintenance of Office or Agency.  The Company will maintain an office or agency
where the Securities may be presented or surrendered for payment, where, if
applicable, the Securities may be surrendered for registration of transfer or
exchange and where notices and demands to or upon the Company in respect of the
Securities and this Indenture may be served. 
The Company will give prompt written notice to the Trustee of any change
in the location of any such office or agency. 
If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at
the trustee’s principal corporate trust office (the “Corporate Trust Office”),
and the Company hereby appoints the Trustee as its agent to receive all such
presentations, surrenders, notices and demands.

 

The Company may also from time to time
designate one or more other offices or agencies where the Securities may be
presented or surrendered for any or all such purposes and may from time to time
rescind any such designation.  The
Company will give prompt written notice to the Trustee of any such designation
or rescission and any change in the location of any such other office or
agency.

 

SECTION 3.14.   Corporate Existence.  Subject to Article IV and Section
10.2, the Company and each of the Subsidiary Guarantors will do or cause to
be done all things necessary to preserve and keep in full force and effect its
corporate existence and that of each Restricted Subsidiary and the corporate
rights (charter and statutory) licenses and franchises of the Company and each
Restricted Subsidiary; provided, however,
that the Company shall not be required to preserve any such existence (except
the Company), right, license or franchise if the Board of Directors of the
Company shall determine that the preservation thereof is no longer desirable in
the conduct of the business of the Company and each of its Restricted
Subsidiaries, taken as a whole, and that the loss thereof would not have a
material adverse effect on the ability of the Company to perform its
obligations under the Securities or this Indenture, provided, further, the
Company may engage in transactions in accordance with Sections 4.1 and 10.2.

 

SECTION 3.15.   Payment of Taxes and Other Claims.  The Company shall pay or discharge or cause to be
paid or discharged, before the same shall become delinquent, all material taxes,
assessments and governmental charges levied or imposed upon the Company or any
Subsidiary or upon the income, profits or property of the Company or any
Subsidiary, provided, however, that the Company
shall not be required to pay or discharge or cause to be paid or discharged any
such tax, assessment, charge or claim whose amount, applicability or validity
is being contested in good faith by appropriate proceedings and for which
appropriate reserves, if necessary (in the good faith judgment of management of
the Company), are being maintained in accordance with GAAP or where the failure
to effect such payment will not be
disadvantageous to the Holders.

 

73

 

SECTION 3.16.   Payments for Consent.  Neither the Company nor any of its Restricted
Subsidiaries shall,
directly or indirectly, pay or cause to be paid any consideration, whether by
way of interest, fees or otherwise, to any Holder of any Securities for or as
an inducement to any consent, waiver or amendment of any of the terms or
provisions of this Indenture or the Securities unless such consideration is
offered to be paid or is paid to all Holders of the Securities that consent,
waive or agree to amend in the time frame set forth in the solicitation
documents relating to such consent, waiver or amendment.

 

SECTION 3.17.   Compliance Certificate.  The Company shall deliver to the Trustee
within 120 days after the end of each fiscal year of the Company an Officers’
Certificate stating that in the course of the performance by the signers of
their duties as Officers of the Company, they would normally have knowledge of
any Default or Event of Default and whether or not the signers know of any
Default or Event of Default that occurred during such period.  If they do, the certificate shall describe
the Default or Event of Default, its status and what action the Company is
taking or proposes to take with respect thereto.  The Company and the Subsidiary Guarantors
also shall comply with TIA § 314(a)(4).

 

SECTION 3.18.   Further Instruments and Acts.  Upon the request of the Trustee, the Company
will execute and deliver such further instruments and do such further acts as
may be reasonably necessary or proper to carry out more effectively the purpose
of this Indenture.

 

SECTION 3.19.   Statement by Officers as to Default.  The Company shall deliver to the Trustee, as
soon as possible and in any event within 30 days after the Company becomes aware of the occurrence of any
Event of Default or an event which, with notice or the lapse of time or both,
would constitute an Event of Default, an Officers’ Certificate setting forth
the details of such Event of Default or Default
and the action which the Company is taking or proposing to take with respect
thereto.

 

ARTICLE IV

 

Successor Company 

 

SECTION 4.1.   Merger and Consolidation.  The Company will not consolidate with or
merge with or into, or convey, transfer or lease all or substantially all its
assets to, any Person, unless:

 

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

 

74

 

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

 

(3)                                  immediately
after giving effect to such transaction, the Successor Company would be able to
Incur at least an additional $1.00 of Indebtedness pursuant to the first
paragraph of Section 3.3;

 

(4)                                  each
Subsidiary Guarantor (unless it is the other party to the transactions above,
in which case clause (1) shall apply) shall have by supplemental indenture
confirmed that its Subsidiary Guarantee shall apply to such Person’s
obligations in respect of this Indenture and the Securities and its obligations
under the Registration Rights Agreement shall continue to be in effect; and

 

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

 

For purposes of this Section 4.1, the
sale, lease, conveyance, assignment, transfer, or other disposition of all or
substantially all of the properties and assets of one or more Subsidiaries of
the Company, which properties and assets, if held by the Company instead of
such Subsidiaries, would constitute all or substantially all of the properties
and assets of the Company on a consolidated basis, shall be deemed to be the
transfer of all or substantially all of the properties and assets of the
Company.

 

The predecessor Company will be released from its
obligations under this Indenture, and the Successor Company will succeed
to, and be substituted for, and may exercise every right and power of, the
Company under this Indenture, but, in the case of a lease of all or substantially
all its assets, the predecessor Company will not be released from the
obligation to pay the principal of and interest on the Securities.

 

Notwithstanding the preceding clause (3), (x)
any Restricted Subsidiary may consolidate or merge with, merge into or transfer
all or part of its properties and assets to the Company and (y) the Company may
merge with an Affiliate incorporated solely for the purpose of reincorporating
the Company in another jurisdiction to realize tax benefits; provided that, in the case of a Restricted
Subsidiary that merges into the Company, the Company will not be required to
comply with the preceding clause (5).

 

In addition,
the Company will not permit any Subsidiary Guarantor to consolidate with or
merge with or into any person (other than another Subsidiary Guarantor) and
will not permit the conveyance, transfer or lease of substantially all of the assets of any
Subsidiary Guarantor unless:

 

75

 

(1)                                  (a) the resulting,
surviving or transferee Person will be a corporation, partnership, trust or
limited liability company organized and existing under the laws of the United
States of America, any State of the United States or the District of Columbia
and such Person (if not such Subsidiary Guarantor) will expressly assume, by
supplemental indenture, executed and delivered to the Trustee, all the
obligations of such Subsidiary Guarantor under its Subsidiary Guarantee; (b)
immediately after giving effect to such transaction (and treating any
Indebtedness that becomes an obligation of the resulting, surviving or
transferee Person or any Restricted Subsidiary as a result of such transaction
as having been Incurred by such Person or such Restricted Subsidiary at the
time of such transaction), no Default of Event of Default shall have occurred
and be continuing; and (c) the Company will have delivered to the Trustee an
Officers’ Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if any)
comply with this Indenture; or

 

(2)                                  the transaction is
made in compliance with the provisions described under Section 3.7,  Section 3.10 and this Section 4.1.

 

ARTICLE V

 

Redemption of Securities

 

SECTION 5.1.   Optional
Redemption.  Except as set forth
below, the Securities are not redeemable until August 1, 2009.  On and after August 1, 2009, the Company may redeem all or, from time to time, a
part of the Securities upon not less than 30 nor more than 60 days’ notice, at
the following redemption prices (expressed as a percentage of principal amount)
plus accrued and unpaid interest on the Securities, if any, to the applicable
date of redemption (any such date, a “Redemption Date”) (subject to the
right of Holders of record on the
relevant record date to receive interest due on the relevant interest payment
date), if redeemed during the twelve-month period beginning on August 1 of the years indicated below:

 

	
  Year

  	
   

  	
  Percentage

  	
   

  
	
  2009

  	
   

  	
  103.875

  	
  %

  
	
  2010

  	
   

  	
  101.938

  	
  %

  
	
  2011 and thereafter

  	
   

  	
  100.000

  	
  %

  

 

Prior to August 1, 2008, the Company may on any
one or more occasions redeem up to 35% of the original principal amount of the
Securities with the Net Cash Proceeds of one or more Equity Offerings at a
redemption price of 107.750% of
the principal amount thereof, plus accrued and unpaid interest, if any, to the
Redemption Date (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date); provided that

 

76

 

(1)                                  at
least 65% of the original principal amount of the Securities remains
outstanding after each such redemption; and

 

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

 

In addition, before August 1, 2009, the Company may redeem
all or, from time to time, a part of the Securities upon not less than 30 nor
more than 60 days’ notice, at a redemption price equal to 100% of the principal
amount thereof plus the Applicable Premium plus accrued and unpaid interest, if
any, to the redemption date (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant interest payment
date).

 

If the optional Redemption Date is on or
after an interest record date and on or before the related interest payment
date, the accrued and unpaid interest, if any, will be paid to the Person in
whose name the Security is registered at the close of business, on such record date, and no additional
interest will be payable to Holders
whose Securities will be subject to redemption by the Company.

 

SECTION 5.2.   Applicability of Article.  Redemption of Securities at the election of
the Company or otherwise, as permitted or required by any provision of this
Indenture, shall be made in accordance with such provision and this Article.

 

SECTION 5.3.   Election to Redeem; Notice to Trustee.  The election of the Company to redeem any
Securities pursuant to Section 5.1 shall be evidenced by a resolution of
the Board of Directors.  In case of any
redemption at the election of the Company, the Company shall, upon not later
than the earlier of the date that is 45 days prior to the Redemption Date fixed
by the Company or the date on which notice is given to the Holders (except as
provided in Section 5.5 or unless a shorter notice shall be satisfactory
to the Trustee), notify the Trustee of such Redemption Date and of the
principal amount of Securities to be redeemed and shall deliver to the Trustee
such documentation and records as shall enable the Trustee to select the
Securities to be redeemed pursuant to Section 5.4.

 

SECTION 5.4.   Selection by Trustee of Securities to Be
Redeemed.  In the case of any partial
redemption, selection of the Securities for redemption will be made, subject to
the procedures of DTC, by the Trustee in compliance with the requirements of
the principal national securities exchange, if any, on which the Securities are
listed or, if the Securities are not listed, then on a pro rata basis, by lot
or by such other method as the Trustee in its sole discretion will deem to be
fair and appropriate, although no Security of $1,000 in original principal
amount or less will be redeemed in part. 
If any Security is to be redeemed in part only, the notice of redemption
relating to such Security will state the portion of the principal amount
thereof to be redeemed.  A new Security
in principal amount equal to the unredeemed portion thereof will be issued in
the name of the holder thereof upon cancellation of the original Security.

 

For all purposes of this Indenture, unless
the context otherwise requires, all provisions relating to redemption of
Securities shall relate, in the case of any Security redeemed or to be redeemed
only in part, to the portion of the principal amount of such Security which has
been or is to be redeemed.

 

77

 

SECTION 5.5.   Notice of Redemption.  Notice of redemption shall be given by the
Company not less than 30 nor more than 60 days prior to the Redemption Date, to
each Holder of Securities to be redeemed. 
The Company may request the Trustee to give notice of redemption in the
Company’s name and at the Company’s expense; provided,
however, that the Company shall deliver to the Trustee, at least 45
days prior to the Redemption Date (unless a shorter notice shall be
satisfactory to the Trustee), an Officers’ Certificate requesting that the
Trustee give such notice at the Company’s expense and setting forth the
information to be stated in such notice as provided in the following items.

 

All notices of redemption shall state:

 

(1)                                  the
Redemption Date,

 

(2)                                  the
redemption price and the amount of accrued interest to the Redemption Date
payable as provided in Section 5.7, if any,

 

(3)                                  if
less than all outstanding Securities are to be redeemed, the identification of
the particular Securities (or portion thereof) to be redeemed, as well as the
aggregate principal amount of Securities to be redeemed and the aggregate
principal amount of Securities to be outstanding after such partial redemption,

 

(4)                                  in
case any Security is to be redeemed in part only, the notice which relates to
such Security shall state that on and after the Redemption Date, upon surrender
of such Security, the Holder will receive, without charge, a new Security or
Securities of authorized denominations for the principal amount thereof
remaining unredeemed,

 

(5)                                  that
on the Redemption Date the redemption price (and accrued interest, if any, to
the Redemption Date payable as provided in Section 5.7) will become
due and payable upon each such Security, or the portion thereof, to be
redeemed, and, unless the Company defaults in making the redemption payment,
that interest on Securities called for redemption (or the portion thereof) will
cease to accrue on and after said date,

 

(6)                                  the
place or places where such Securities are to be surrendered for payment of the
redemption price and accrued interest, if any,

 

(7)                                  the
name and address of the Paying Agent,

 

(8)                                  that
Securities called for redemption must be surrendered to the Paying Agent to
collect the redemption price,

 

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

 

78

 

(10)                            the
paragraph of the Indenture pursuant to which the Securities are to be redeemed.

 

SECTION 5.6.   Deposit of Redemption Price.  Prior to 10:00 a.m. New York City time, on
any Redemption Date, the Company shall deposit with the Trustee or with a
Paying Agent (or, if the Company is acting as its own Paying Agent, segregate
and hold in trust as provided in Section 2.4) an amount of money
sufficient to pay the redemption price of, and accrued interest on, all the
Securities which are to be redeemed on that date.

 

SECTION 5.7.   Securities Payable on Redemption Date.  Notice of redemption having been given as
aforesaid, the Securities so to be redeemed shall, on the Redemption Date,
become due and payable at the redemption price therein specified (together with
accrued interest, if any, to the Redemption Date), and from and after such date
(unless the Company shall default in the payment of the redemption price and
accrued interest) such Securities shall cease to bear interest.  Upon surrender of any such Security for
redemption in accordance with said notice, such Security shall be paid by the
Company at the redemption price, together with accrued interest, if any, to the
Redemption Date (subject to the rights of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date).

 

If any Security called for redemption shall
not be so paid upon surrender thereof for redemption, the principal (and
premium, if any) shall, until paid, bear interest from the Redemption Date at
the rate borne by the Securities.

 

SECTION 5.8.   Securities Redeemed in Part.  Any
Security which is to be redeemed only in part (pursuant to the provisions of
this Article) shall be surrendered at the office or agency of the Company
maintained for such purpose pursuant to Section 3.13 (with, if the Company or the
Trustee so require, due endorsement by, or a written instrument of transfer in
form satisfactory to the Company duly executed by, the Holder thereof or such
Holder’s attorney duly authorized in writing), and the Company shall execute,
and the Trustee shall authenticate and make available for delivery to the
Holder of such Security at the expense of the Company, a new Security or
Securities, of any authorized denomination as requested by such Holder, in an
aggregate principal amount equal to and in exchange for the unredeemed portion
of the principal of the Security so surrendered, provided, that each such new Security will be in a principal
amount of $1,000 or integral multiple thereof.

 

ARTICLE VI

 

Defaults and Remedies

 

SECTION 6.1.   Events of
Default.  Each of the following is an
“Event of Default”:

 

(1)                                  default in any
payment of interest or additional interest (as required by the Registration
Rights Agreement) on any Security when due, continued for 30 days;

 

79

 

(2)                                  default in the
payment of principal of or premium, if any, on any Security when due at its
Stated Maturity, upon optional redemption, upon required repurchase, upon
declaration or otherwise;

 

(3)                                  failure by the
Company or any Subsidiary Guarantor to comply with its obligations under Article
IV;

 

(4)                                  failure by the
Company to comply for 30 days after notice with any of its obligations under Sections
3.2 through 3.12, inclusive, and 3.16 (in each case, other than a failure to
purchase Securities which will constitute an Event of Default under clause (2)
above and other than a failure to comply with Article IV which is
covered by clause (3));

 

(5)                                  failure by the
Company to comply for 60 days after notice with its other agreements contained
in this Indenture;

 

(6)                                  default under any
mortgage, indenture or instrument under which there may be issued or by which
there may be secured or evidenced any Indebtedness for money borrowed by the
Company or any of its Restricted Subsidiaries (or the payment of which is
guaranteed by the Company or any of its Restricted Subsidiaries), other than
Indebtedness owed to the Company or a Restricted Subsidiary, whether such
Indebtedness or guarantee now exists, or is created after the date of this
Indenture, which default:

 

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

 

(b)                                 results in the acceleration of
such Indebtedness prior to its maturity (the “cross acceleration provision”);

 

and, in each
case, the principal amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness under which there has been a
payment default or the maturity of which has been so accelerated, aggregates
$10.0 million or more;

 

(7)                                  (a) the Company
or a Significant Subsidiary or group of Restricted Subsidiaries that, taken together
(as of the latest audited consolidated financial statements for the Company and
its Restricted Subsidiaries), would constitute a Significant Subsidiary
pursuant to or within the meaning of any Bankruptcy Law:

 

(i)                                     commences
a voluntary case or proceeding;

 

(ii)                                  consents
to the entry of judgment, decree or order for relief against it in an
involuntary case or proceeding;

 

80

 

(iii)                               consents
to the appointment of a Custodian of it or for any substantial part of its
property;

 

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

 

(v)                                 consents
to or acquiesces in the institution of a bankruptcy or an insolvency proceeding
against it; or

 

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

 

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

 

(i)                                     is
for relief in an involuntary case against the Company or a Significant
Subsidiary or group of Restricted Subsidiaries that, taken together (as of the
latest audited consolidated financial statements for the Company and its
Restricted Subsidiaries), would constitute a Significant Subsidiary pursuant to
or within the meaning of any Bankruptcy Law;

 

(ii)                                  appoints
a Custodian for all or substantially all of the property of the Company or a
Significant Subsidiary or group of Restricted Subsidiaries that, taken together
(as of the latest audited consolidated financial statements for the Company and
its Restricted Subsidiaries), would constitute a Significant Subsidiary
pursuant to or within the meaning of any Bankruptcy Law; or

 

(iii)                               orders
the winding up or liquidation of the Company or a Significant Subsidiary or
group of Restricted Subsidiaries that, taken together (as of the latest audited
consolidated financial statements for the Company and its Restricted
Subsidiaries), would constitute a Significant Subsidiary pursuant to or within
the meaning of any Bankruptcy Law; and

 

(iv)                              in
each case the order, decree or relief remains unstayed and in effect for 60
days;

 

(8)                                  failure by the
Company or any Significant Subsidiary or group of Restricted Subsidiaries that,
taken together (as of the latest audited consolidated financial statements for
the Company and its Restricted Subsidiaries), would constitute a Significant
Subsidiary to pay final judgments aggregating in excess of $10.0 million (net
of any amounts that a reputable and creditworthy insurance company has
acknowledged liability for in writing), which judgments are not paid, discharged
or stayed for a period of 60 days (the “judgment default provision”); or

 

81

 

(9)                                  any Subsidiary
Guarantee of any Significant Subsidiary or group of Restricted Subsidiaries
that taken together as of the latest
audited consolidated financial statements for the Company and its Restricted
Subsidiaries would constitute a
Significant Subsidiary shall cease to be in full force and effect (except as contemplated by the terms of this
Indenture) or is declared to be null
and void in a judicial proceeding; or any Subsidiary Guarantor that is a
Significant Subsidiary or group of Subsidiary Guarantors that taken together as
of the latest audited consolidated financial statements for the Company and its
Restricted Subsidiaries would constitute a Significant Subsidiary denies or disaffirms its obligations
under this Indenture or its Subsidiary Guarantee.

 

However, a
Default under clauses (4) and (5) of this Section 6.1 will not
constitute an Event of Default until the Trustee or the Holders of 25% in
principal amount of the outstanding Securities notify the Company of the Default and the Company does not cure
such Default within the time specified in clauses (4) and (5) of this Section
6.1 after receipt of such notice.

 

SECTION 6.2.   Acceleration.  If an Event of Default (other than an Event
of Default described in clause (7) of Section 6.1) occurs and is
continuing, the Trustee by notice to the Company, or the Holders of at least
25% in principal amount of the outstanding Securities by notice to the Company
and the Trustee, may, and the Trustee at the request of such Holders shall,
declare the principal of, premium, if any, and accrued and unpaid interest, if
any, on all the Securities to be due and payable. Upon such a declaration, such
principal, premium and accrued and unpaid interest will be due and payable
immediately.  In the event of a
declaration of acceleration of the Securities because an Event of Default
described in clause (6) of Section 6.1 has occurred and is continuing,
the declaration of acceleration of the Securities shall be automatically
annulled if the Event of Default or payment default triggering such Event of
Default pursuant to clause (6) of Section 6.1 shall be remedied or cured
by the Company or a Restricted Subsidiary or waived by the holders of the
relevant Indebtedness within 20 days after the declaration of acceleration with
respect thereto and if (1) the annulment of the acceleration of the Securities
would not conflict with any judgment or decree of a court of competent
jurisdiction and (2) all existing Events of Default, except nonpayment of
principal, premium or interest on the Securities that became due solely because
of the acceleration of the Securities, have been cured or waived.  If an Event of Default described in clause
(7) of Section 6.1 above occurs and is continuing, the principal of,
premium, if any, and accrued and unpaid interest on all the Securities will
become and be immediately due and payable without any declaration or other act
on the part of the Trustee or any Holders. 
The Holders of a majority in principal amount of the outstanding
Securities may waive any or all past defaults (except with respect to
nonpayment of principal, premium or interest) and rescind any such acceleration
with respect to the Securities and its consequences if (1) rescission would not
conflict with any judgment or decree of a court of competent jurisdiction and
(2) all existing Events of Default, other than the nonpayment of the principal
of, premium, if any, and interest on the Securities that have become due solely
by such declaration of acceleration, have been cured or waived.

 

SECTION 6.3.   Other Remedies.  If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy to collect the payment
of principal of (or premium, if

 

82

 

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

 

The Trustee may maintain a proceeding even if
it does not possess any of the Securities or does not produce any of them in
the proceeding.  A delay or omission by
the Trustee or any Securityholder in exercising any right or remedy accruing
upon an Event of Default shall not impair the right or remedy or constitute a
waiver of or acquiescence in the Event of Default.  No remedy is exclusive of any other
remedy.  All available remedies are
cumulative.

 

SECTION 6.4.   Waiver of Past Defaults.  Subject to Section 6.2, the Holders of
a majority in principal amount of the outstanding Securities by notice to the
Trustee may (a) waive, by their consent (including, without limitation consents
obtained in connection with a purchase of, or tender offer or exchange offer
for, Securities), an existing Default or Event of Default and its consequences
except (i) a Default or Event of Default in the payment of the principal of, or
premium, if any, or interest on a Security or (ii) a Default or Event of
Default in respect of a provision that under Section 9.2 cannot be
amended without the consent of each Securityholder affected and (b) rescind any
such acceleration with respect to the Securities and its consequences if
rescission would not conflict with any judgment or decree of a court of
competent jurisdiction.  When a Default
or Event of Default is waived, it is deemed cured, but no such waiver shall
extend to any subsequent or other Default or Event of Default or impair any
consequent right.

 

SECTION 6.5.   Control by Majority.  The Holders of a majority in principal amount
of the outstanding Securities may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee.  However, the Trustee may refuse to follow any
direction that conflicts with law or this Indenture or, subject to Sections
7.1 and 7.2, that the Trustee determines is unduly prejudicial to
the rights of other Securityholders or would involve the Trustee in personal
liability; provided, however, that the Trustee may
take any other action deemed proper by the Trustee that is not inconsistent
with such direction.  Prior to taking any
action hereunder, the Trustee shall be entitled to indemnification satisfactory
to it in its sole discretion against all losses and expenses caused by taking
or not taking such action.

 

SECTION 6.6.   Limitation on Suits.  Subject to the provisions of this Indenture relating to
the duties of the Trustee, if an Event of Default occurs and is continuing, the
Trustee will be under no obligation to exercise any of the rights or powers
under the Indenture at the request or direction of any of the Holders unless
such Holders have offered to the Trustee reasonable indemnity or security
against any loss, liability or expense. Except to enforce the right to receive
payment of principal, premium, if any, or interest when due, no Holder may
pursue any remedy with respect to this Indenture or the Securities unless:

 

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

 

(2)                                  Holders
of at least 25% in principal amount of the outstanding Securities have
requested that the Trustee pursue the remedy;

 

83

 

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

 

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

 

(5)                                  the
Holders of a majority in principal amount of the outstanding Securities have
not given the Trustee a direction that, in the opinion of the Trustee, is
inconsistent with such request within such 60-day period.

 

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

 

SECTION 6.7.   Rights of Holders to Receive Payment.  Notwithstanding any other provision of this
Indenture (including, without limitation, Section 6.6), the right of any
Holder to receive payment of principal of, premium (if any) or interest on the
Securities held by such Holder, on or after the respective due dates expressed
in the Securities shall not be impaired or affected without the consent of such
Holder.

 

SECTION 6.8.   Collection Suit by Trustee.  If an Event of Default specified in clauses
(1) or (2) of Section 6.1 occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company for the whole amount then due and owing (together with interest on any
unpaid interest to the extent lawful) and the amounts provided for in Section
7.7.

 

SECTION 6.9.   Trustee May File Proofs of Claim.  The Trustee may file such proofs of claim and
other papers or documents as may be necessary or advisable in order to have the
claims of the Trustee and the Securityholders allowed in any judicial
proceedings relative to the Company, its Subsidiaries or its or their
respective creditors or properties and, unless prohibited by law or applicable
regulations, may vote on behalf of the Holders in any election of a trustee in
bankruptcy or other Person performing similar functions, and any Custodian in
any such judicial proceeding is hereby authorized by each Holder to make
payments to the Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and its counsel, and any other amounts due
the Trustee under Section 7.7.

 

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

 

FIRST:  to the Trustee for amounts due under Section
7.7;

 

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

 

84

 

THIRD:  to the Company or the Subsidiary Guarantors.

 

The Trustee may fix a record date and payment
date for any payment to Securityholders pursuant to this Section 6.10.  At least 15 days before such record date, the
Company shall mail to each Securityholder and the Trustee a notice that states
the record date, the payment date and amount to be paid.

 

SECTION 6.11.   Undertaking for Costs.  In any suit for the enforcement of any right
or remedy under this Indenture or in any suit against the Trustee for any
action taken or omitted by it as Trustee, a court in its discretion may require
the filing by any party litigant in the suit of an undertaking to pay the costs
of the suit, and the court in its discretion may assess reasonable costs,
including reasonable attorneys’ fees, against any party litigant in the suit,
having due regard to the merits and good faith of the claims or defenses made
by the party litigant.  This Section
6.11 does not apply to a suit by the Trustee, a suit by the Company, a suit
by a Holder pursuant to Section 6.7 or a suit by Holders of more than
10% in outstanding principal amount of the Securities.

 

SECTION 6.12.   Additional Payments.  In the case of any Event of Default occurring
by reason of any willful action (or inaction) taken (or not taken) by or on
behalf of the Company with the intention of avoiding payment of the premium
that the Company would have had to pay if the Company then had elected to
redeem the Securities pursuant to the optional redemption provisions of this
Indenture or was required to repurchase the Securities, an equivalent premium
shall also become and be immediately due and payable to the extent permitted by
law upon the acceleration of the Securities. 
If an Event of Default occurs prior to August 1, 2009 by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding the prohibition on redemption of the Securities prior
to August 1, 2009, the premium
specified in this Indenture shall
also become immediately due and payable to the extent permitted by law upon the
acceleration of the Securities.

 

SECTION 6.13.   Waiver of Stay.   Each of the Company and the Subsidiary
Guarantors covenant (to the extent permitted by applicable law) that it will
not at any time insist upon, plead or in any manner whatsoever claim or take
the benefit or advantage of, any stay, extension or usury law or other law
wherever enacted, now or at any time hereafter in force, which would prohibit
or forgive the Company or any Subsidiary Guarantor from paying all of any
portion of the principal of (premium, if any, on) or interest on the Securities
as contemplated herein, or which may affect the covenants or the performance of
this Indenture; and (to the extent that it may lawfully do so) each of the
Company and the Subsidiary Guarantors hereby expressly waive all benefit or
advantage of any such law, and covenants that they will not hinder, delay or
impede the execution of any power herein granted to the Trustee, but will
suffer and permit the execution of every such power as though no such law had
been enacted.

 

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ARTICLE VII

 

Trustee

 

SECTION 7.1.   Duties of Trustee.  (a)  If
an Event of Default has occurred and is continuing, the Trustee shall exercise
the rights and powers vested in it by this Indenture and use the same degree of
care and skill in their exercise as a prudent Person would exercise or use
under the circumstances in the conduct of such Person’s own affairs; provided that if an Event of Default
occurs and is continuing, the Trustee will be under no obligation to
exercise the rights or powers under this Indenture at the request or direction
of any of the holders unless such holders have offered to the Trustee
reasonable indemnity or security against loss, liability or expense.

 

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

 

(1)                                  the
Trustee undertakes to perform such duties and only such duties as are
specifically set forth in this Indenture and no implied covenants or
obligations shall be read into this Indenture against the Trustee; and

 

(2)                                  in
the absence of bad faith on its part, the Trustee may conclusively rely, as to
the truth of the statements and the correctness of the opinions expressed
therein, upon certificates, opinions or orders furnished to the Trustee and
conforming to the requirements of this Indenture.  However, in the case of any such certificates
or opinions which by any provisions hereof are specifically required to be
furnished to the Trustee, the Trustee shall examine such certificates and
opinions to determine whether or not they conform on their face to the
requirements of this Indenture (but need not confirm or investigate the
accuracy of mathematical calculations or other facts stated therein).

 

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

 

(1)                                  this
paragraph does not limit the effect of paragraph (b) of this Section 7.1;

 

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

 

(3)                                  the
Trustee shall not be liable with respect to any action it takes or omits to
take in good faith in accordance with a direction received by it pursuant to Section
6.5.

 

(d)           Every
provision of this Indenture that in any way relates to the Trustee is subject
to paragraphs (a), (b) and (c) of this Section 7.1.

 

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

 

86

 

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

 

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

 

(h)           Every
provision of this Indenture relating to the conduct or affecting the liability
of or affording protection to the Trustee shall be subject to the provisions of
this Section 7.1 and to the provisions of the TIA.

 

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

 

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

 

SECTION 7.2.   Rights of Trustee.  Subject to Section 7.1:

 

(a)           The
Trustee may conclusively rely on any document (whether in its original or
facsimile form) reasonably believed by it to be genuine and to have been signed
or presented by the proper person.  The
Trustee need not investigate any fact or matter stated in the document.

 

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

 

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

 

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

 

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

 

87

 

(f)            The
Trustee shall not be charged with knowledge of any Default or Event of Default
with respect to the Securities, unless either (1) a Trust Officer shall have
actual knowledge of such Default or Event of Default or (2) written notice of
such Default or Event of Default shall have been given to the Trustee by the
Company or by any Holder of the Securities and such notice references this
Indenture and the Securities; and

 

(g)           The
permissive rights of the Trustee enumerated herein shall not be construed as
duties.

 

SECTION 7.3.   Individual Rights of Trustee.  The Trustee in its individual or any other
capacity may become the owner or pledgee of Securities and may otherwise deal
with the Company or its Affiliates with the same rights it would have if it
were not Trustee.  Any Paying Agent,
Registrar, co-registrar or co-paying agent may do the same with like
rights.  However, the Trustee must comply
with Sections 7.10 and 7.11.

 

SECTION 7.4.   Trustee’s Disclaimer.  The Trustee shall not be responsible for and
makes no representation as to the validity or adequacy of this Indenture or the
Securities, it shall not be accountable for the Company’s use of the proceeds
from the Securities, and it shall not be responsible for any statement of the
Company in this Indenture or in any document issued in connection with the sale
of the Securities or in the Securities other than the Trustee’s certificate of
authentication.

 

SECTION 7.5.   Notice of Defaults.  If a Default or Event of Default occurs and
is continuing, the
Trustee shall mail to each Securityholder notice of the Default or Event of
Default within 90 days after it occurs and becomes known to the Trustee.  Except in the case of a Default or Event of
Default in payment of principal of, premium, if any, or interest on any
Security (including payments pursuant to the optional redemption or required
repurchase provisions of such Security, if any), the Trustee may withhold
notice if and so long as a committee of its Trust Officers in good faith
determines that withholding notice is in the interests of Securityholders.

 

SECTION 7.6.   Reports by Trustee to Holders.  As promptly as practicable after each July 15 beginning with the July 15 following the date of this Indenture,
and in any event prior to September 15 in each year for so long as the
Securities remain outstanding, the Trustee shall mail to each Securityholder a
brief report dated as of such July 15
that complies with TIA § 313(a). 
The Trustee also shall comply with TIA § 313(b).  The Trustee shall also transmit by mail all
reports required by TIA § 313(c).

 

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

 

SECTION 7.7.   Compensation and Indemnity.  The Company shall pay to the Trustee from
time to time reasonable compensation for its acceptance of this Indenture and
services hereunder as the Company and the Trustee shall from time to time agree
in writing.  The Trustee’s compensation
shall not be limited by any law on compensation of a trustee of an express
trust.  The Company shall reimburse the
Trustee upon request for all reasonable out-of-pocket

 

88

 

expenses incurred or made by
it, including costs of collection, costs of preparing and reviewing reports,
certificates and other documents, costs of preparation and mailing of notices
to Securityholders, in addition to the compensation for its services.  Such expenses shall include the reasonable
compensation and expenses, disbursements and advances of the Trustee’s agents,
counsel, accountants and experts.  The
Company shall indemnify the Trustee against any and all loss, liability,
damages, claims or expense (including reasonable attorneys’ fees and expenses)
incurred by it without negligence, willful misconduct or bad faith on its part
in connection with the administration of this trust and the performance of its
duties hereunder, including the costs and expenses of enforcing this Indenture
(including this Section 7.7) and of defending itself against any claims
(whether asserted by any Securityholder, the Company or otherwise).  The Trustee shall notify the Company promptly
of any claim for which it may seek indemnity. 
Failure by the Trustee to so notify the Company shall not relieve the
Company of its obligations hereunder. 
The Company shall defend the claim and the Trustee shall provide
reasonable cooperation at the Company’s expense in the defense.  The Trustee may have separate counsel and the
Company shall pay the fees and expenses of such counsel provided that the Company shall not be
required to pay such fees and expenses if it assumes the Trustee’s defense,
and, in the reasonable judgment of outside counsel to the Trustee, there is no
conflict of interest between the Company and the Trustee in connection with
such defense.  The Company shall not be
under any obligation to pay for any written settlement without its consent,
which consent shall not be unreasonably delayed, conditioned or withheld.  The Company need not reimburse any expense or
indemnify against any loss, liability or expense incurred by the Trustee
through the Trustee’s own willful misconduct, negligence or bad faith.

 

To secure the Company’s payment obligations
in this Section 7.7, the Trustee shall have a lien prior to the Securities
on all money or property held or collected by the Trustee other than money or
property held in trust to pay principal of and interest on particular
Securities.

 

The Company’s payment obligations pursuant to
this Section 7.7 shall survive the discharge of this Indenture.  When the Trustee incurs expenses after the
occurrence of a Default specified in clause (7) of Section 6.1 with
respect to the Company, the expenses are intended to constitute expenses of
administration under any Bankruptcy Law. 
The obligations of the Company under this Section 7.7 shall
survive the resignation or removal of the Trustee and the termination,
satisfaction or discharge of this Indenture.

 

SECTION 7.8.   Replacement of Trustee.  The Trustee may resign at any time by so
notifying the Company.  The Holders of a
majority in principal amount of the then outstanding Securities may remove the
Trustee by so notifying the Trustee and may appoint a successor Trustee.  The Company shall remove the Trustee if:

 

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

 

(2)                                  the
Trustee is adjudged bankrupt or insolvent;

 

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

 

(4)                                  the
Trustee otherwise becomes incapable of acting.

 

89

 

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

 

A successor Trustee shall deliver a written
acceptance of its appointment to the retiring Trustee and to the Company.  Thereupon the resignation or removal of the
retiring Trustee shall become effective, and the successor Trustee shall have
all the rights, powers and duties of the Trustee under this Indenture.  The successor Trustee shall mail a notice of
its succession to Securityholders.  The
retiring Trustee shall promptly transfer all property held by it as Trustee to
the successor Trustee, subject to the lien provided for in Section 7.7.

 

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

 

If the Trustee fails to comply with Section
7.10, unless the Trustee’s duty to resign is stayed as provided in TIA
§ 310(b), any Securityholder who has been a bona fide Holder of a Security
for at least six months may petition any court of competent jurisdiction for
the removal of the Trustee and the appointment of a successor Trustee.

 

Notwithstanding the replacement of the
Trustee pursuant to this Section 7.8, the Company’s obligations under Section
7.7 shall continue for the benefit of the retiring Trustee.

 

SECTION 7.9.   Successor Trustee by Merger.  If the Trustee consolidates with, merges or
converts into, or transfers all or substantially all its corporate trust
business or assets to, another corporation or banking association, the
resulting, surviving or transferee corporation without any further act shall be
the successor Trustee.

 

In case at the time such successor or
successors by merger, conversion or consolidation to the Trustee shall succeed
to the trusts created by this Indenture, any of the Securities shall have been
authenticated but not delivered, any such successor to the Trustee may adopt
the certificate of authentication of any predecessor trustee, and deliver such
Securities so authenticated; and in case at that time any of the Securities
shall not have been authenticated, any successor to the Trustee may
authenticate such Securities either in the name of any predecessor hereunder or
in the name of the successor to the Trustee; and in all such cases such
certificates shall have the full force which it is anywhere in the Securities
or in this Indenture.

 

SECTION 7.10.   Eligibility; Disqualification.  The Trustee shall at all times satisfy the
requirements of TIA § 310(a).  The
Trustee shall have a combined capital and surplus of at least $100 million as
set forth in its most recently published annual report of condition.  The Trustee shall comply with TIA
§ 310(b); provided, however, that there
shall be excluded from the operation of TIA § 310(b)(1) any indenture or indentures
under which other securities or certificates of interest or participation in
other securities of the Company are outstanding if the requirements for such
exclusion set forth in TIA § 310(b)(1) are met.

 

90

 

SECTION 7.11.   Preferential Collection of Claims Against
Company.  The Trustee shall comply
with TIA § 311(a), excluding any creditor relationship listed in TIA
§ 311(b).  A Trustee who has
resigned or been removed shall be subject to TIA § 311(a) to the extent
indicated.

 

ARTICLE VIII

 

Discharge of Indenture; Defeasance

 

SECTION 8.1.   Discharge of Liability on Securities;
Defeasance.  (a)  Subject to Section 8.1(c), when (i)(x)
the Company delivers to the Trustee all outstanding Securities (other than
Securities replaced pursuant to Section 2.7) for cancellation or (y) all
outstanding Securities not theretofore delivered for cancellation have become
due and payable or
will become due and payable at their Stated Maturity within one year or are to be
called for redemption within one year under arrangements satisfactory to the
Trustee for the giving of notice of redemption pursuant to Article V
hereof and the Company or any Subsidiary Guarantor irrevocably deposits or
causes to be deposited with the Trustee as trust funds in trust solely for the
benefit of the Holders cash in
U.S. dollars, U.S. Government Obligations, or a combination thereof, in such
amounts as will be sufficient without consideration of any reinvestment of
interest to pay and discharge the entire indebtedness on such Securities not
theretofore delivered to the Trustee for cancellation for principal, premium,
if any, and accrued interest to the date of maturity or redemption; (ii) no
Default or Event of Default shall have occurred and be continuing on the date
of such deposit or shall occur as a result of such deposit and such deposit
will not result in a breach or violation of, or constitute a default under, any
other material instrument to which the Company is a party or by which the
Company or any Subsidiary Guarantor is bound (in each case, other than any
breach of a covenant related to the Incurrence of Indebtedness used to fund the
discharge of this Indenture); (iii) the Company or any Subsidiary Guarantor has
paid or caused to be paid all sums payable under this Indenture and the
Securities; and (iv) the Company has delivered irrevocable instructions to the
Trustee under this Indenture to apply the deposited money toward the payment of
such Securities at maturity or the Redemption Date, as the case may be, then
the Trustee shall acknowledge satisfaction and discharge of this Indenture on
demand of the Company (accompanied by an Officers’ Certificate and an Opinion
of Counsel stating that all conditions precedent specified herein relating to
the satisfaction and discharge of this Indenture have been complied with) and
at the cost and expense of the Company.

 

(b)           Subject
to Sections 8.1(c) and 8.2, the Company at any time may terminate
(i) all its obligations under the Securities and this Indenture and all
obligations of the Subsidiary Guarantors under the Subsidiary Guarantees and
this Indenture (“legal defeasance option”), and after giving effect to
such legal defeasance, any omission to comply with such obligations shall no
longer constitute a Default or Event of Default or (ii) its obligations under Sections
3.2 through 3.12,
inclusive, Section 3.16 and Section 4.1(3) and the Company may omit to
comply with and shall have no liability in respect of any term, condition or
limitation set forth in any such covenant, whether directly or indirectly, by
reason of any reference elsewhere herein to any such covenant or by reason of
any reference in any such covenant to any other provision herein or in any
other

 

91

 

document and such omission to
comply with such covenants shall no longer constitute a Default or an Event of
Default under Section 6.1(4) and 6.1(5) and the operation of
Sections 6.1(6), 6.1(7) (but only with respect to Significant Subsidiaries),
6.1(8) and 6.1(9), and the events specified in such Sections
shall no longer constitute an Event of Default (clause (ii) being referred to
as the “covenant defeasance option”), but except as specified above, the
remainder of this Indenture and the Securities shall be unaffected
thereby.  The Company may exercise its
legal defeasance option notwithstanding its prior exercise of its covenant
defeasance option.

 

If the Company exercises its legal defeasance
option, payment of the Securities may not be accelerated because of an Event of
Default with respect to the Securities, and the Subsidiary Guarantees in effect
at such time shall terminate.  If the
Company exercises its covenant defeasance option, payment of the Securities may
not be accelerated because of an Event of Default specified in Section  6.1(4),
6.1(5), 6.1(6), 6.1(7) (but only with respect to
Significant Subsidiaries), 6.1(8) or 6.1(9) or because of the failure of the
Company to comply with Section 4.1(3).

 

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

 

(c)           Notwithstanding
the provisions of Sections 8.1(a) and (b), the Company’s
obligations in Sections 2.2, 2.3, 2.4, 2.5, 2.6,
2.7, 2.8, 2.9, 3.13, 3.14, 6.7, 7.7,
7.8 and in this Article VIII shall survive until the Securities
have been paid in full.  Thereafter, the
Company’s obligations in Sections 7.7, 8.4 and 8.5 shall
survive.

 

SECTION 8.2.   Conditions to Defeasance.  The Company may exercise its legal defeasance
option or its covenant defeasance option only if:

 

(1)                                  the
Company irrevocably deposits in trust with the Trustee for the benefit of the
Holders money in U.S. dollars or U.S. Government Obligations or a combination
thereof for the payment of principal, premium, if any, and interest on the
Securities to maturity or redemption, as the case may be;

 

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

 

(3)                                  no
Default or Event of Default shall have occurred and be continuing on the date
of such deposit or, with respect to the Company under Section 6.1(7), on
the 123rd day after such date of deposit (except as a result of any breach of
covenants in connection with Incurring Indebtedness to fund such defeasance);

 

92

 

(4)                                  such
legal defeasance or covenant defeasance shall not result in a breach or
violation of, or constitute a Default under, this Indenture or any other
material agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound;

 

(5)                                  the
Company shall have delivered to the Trustee an Opinion of Counsel (subject to
customary assumptions and exclusions) to the effect that (A) the
Securities and (B) assuming no intervening bankruptcy of the Company
between the date of deposit and the 123rd day following the deposit and that no
Holder of the Securities is an insider of the Company within the meaning of the
Bankruptcy Law, after the 123rd day following the deposit, the trust funds will
not be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors’ right generally;

 

(6)                                  in
the case of the legal defeasance option, the Company shall have delivered to
the Trustee an Opinion of Counsel (subject to customary assumptions and
exclusions) in the United States stating that (i) the Company has received
from, or there has been published by, the Internal Revenue Service a ruling, or
(ii) since the date of this Indenture there has been a change in the applicable
Federal income tax law, in either case to the effect that, and based thereon
such Opinion of Counsel shall confirm that, the Securityholders will not
recognize income, gain or loss for Federal income tax purposes as a result of
such defeasance and will be subject to Federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if such
legal defeasance had not occurred;

 

(7)                                  in
the case of the covenant defeasance option, the Company shall have delivered to
the Trustee an Opinion of Counsel (subject to customary assumptions and
exclusions) in the United States to the effect that the Securityholders will
not recognize income, gain or loss for Federal income tax purposes as a result
of such deposit and covenant defeasance and will be subject to Federal income
tax on the same amount, in the same manner and at the same times as would have
been the case if such deposit and covenant defeasance had not occurred; and

 

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

 

SECTION 8.3.   Application of Trust Money.  The Trustee shall hold in trust money or U.S.
Government Obligations deposited with it pursuant to this Article VIII.  It shall apply the deposited money and the
money from U.S. Government Obligations through the Paying Agent and in
accordance with this Indenture to the payment of principal of and interest on
the Securities.

 

93

 

SECTION 8.4.   Repayment to Company.  The Trustee and the Paying Agent shall
promptly turn over to the Company upon request any excess money, U.S.
Government Obligations or securities held by them upon payment of all the
obligations under this Indenture.

 

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

 

SECTION 8.5.   Indemnity for U.S. Government Obligations.  The Company shall pay and shall indemnify the
Trustee against any tax, fee or other charge imposed on or assessed against
deposited U.S. Government Obligations or the principal and interest received on
such U.S. Government Obligations.

 

SECTION 8.6.   Reinstatement.  If the Trustee or Paying Agent is unable to
apply any money or U.S. Government Obligations in accordance with this Article
VIII by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the obligations of the Company and the
Subsidiary Guarantors under this Indenture and the Securities shall be revived
and reinstated as though no deposit had occurred pursuant to this Article
VIII until such time as the Trustee or Paying Agent is permitted to apply
all such money or U.S. Government Obligations in accordance with this Article
VIII; provided, however, that, if the Company
has made any payment of interest on or principal of any Securities because of
the reinstatement of its obligations, the Company shall be subrogated to the
rights of the Holders of such Securities to receive such payment from the money
or U.S. Government Obligations held by the Trustee or Paying Agent.

 

ARTICLE IX

 

Amendments

 

SECTION 9.1.   Without Consent
of Holders.  The Company, the
Subsidiary Guarantors and the Trustee may amend this Indenture and the Securities without consent of
any Securityholder:

 

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

 

(2)                                  to
provide for the assumption by a Successor Company of an obligation of the
Company or any Subsidiary Guarantor under this Indenture;

 

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

 

94

 

(4)                                  to
add Guarantees with respect to the Securities or release a Subsidiary Guarantor
upon its designation as an Unrestricted Subsidiary; provided, however, that the designation is in accordance
with the terms of this Indenture;

 

(5)                                  to
secure the Securities;

 

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

 

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

 

(8)                                  to
comply with any requirement of the Commission in connection with the qualification of this Indenture,
under the Trust Indenture Act; or

 

(9)                                  to
provide for the issuance of Exchange Securities which shall have terms
substantially identical in all respects to the Securities (except that the
transfer restrictions contained in the Securities shall be modified or
eliminated as appropriate) and which shall be treated, together with any
outstanding Securities, as a single class of securities;

 

(10)                            to
release a Subsidiary Guarantor from its obligations under its Subsidiary
Guarantee or this Indenture in accordance with the applicable provisions of
this Indenture; or

 

(11)                            to
provide for the appointment of a successor trustee; provided
that the successor trustee is otherwise qualified and eligible to act as such under the terms of this Indenture.

 

After an amendment under this Section 9.1
becomes effective, the Company shall mail to Securityholders a notice briefly
describing such amendment.  The failure
to give such notice to all Securityholders, or any defect therein, shall not
impair or affect the validity of an amendment under this Section 9.1.

 

SECTION 9.2.   With Consent of Holders.  Except as provided below, this Indenture and
the Securities may be amended or supplemented with the consent of the Holders
of a majority in principal amount of the Securities then outstanding (including
without limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, Securities) and, except as provided below,
any past default or compliance with any provisions may be waived with the
consent of the Holders of a majority in principal amount of the Securities then
outstanding (including, without limitation, consents obtained in connection
with a purchase of, or tender offer or exchange offer for, Securities).  However, without the consent of each Holder
of an outstanding Security affected, no amendment, supplement or waiver may, among
other things:

 

(1)                                  reduce
the principal amount of Securities whose Holders must consent to an amendment;

 

95

 

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

 

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

 

(4)                                  reduce
the premium payable upon the redemption or repurchase of any Security or change
the time at which any Security may be redeemed or repurchased as described
under Article V, Section 3.7 or Section 3.9 with respect
to a Change of Control or Asset Disposition, as the case may be, that
has occurred, in each case whether
through an amendment or waiver of provisions in the covenants, definitions or
otherwise;

 

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

 

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

 

(7)                                  make
any change in the amendment or waiver provisions which require each Holder’s
consent; or

 

(8)                                  modify
the Subsidiary Guarantees in any manner adverse to the Holders of the
Securities.

 

It shall not be necessary for the consent of
the Holders under this Section 9.2 to approve the particular form of any
proposed amendment, but it shall be sufficient if such consent approves the
substance thereof.  A consent to any
amendment or waiver under this Indenture by any Holder of the Securities given
in connection with a tender of such Holder’s Securities will not be rendered
invalid by such tender.

 

After an amendment under this Section 9.2
becomes effective, the Company shall mail to Securityholders a notice briefly
describing such amendment.  The failure
to give such notice to all Securityholders, or any defect therein, shall not
impair or affect the validity of an amendment under this Section 9.2.

 

SECTION 9.3.   Compliance with Trust Indenture Act.  Every amendment or supplement to this
Indenture or the Securities shall comply with the TIA as then in effect.

 

SECTION 9.4.   Revocation and Effect of Consents and
Waivers.  A consent to an amendment
or a waiver by a Holder of a Security shall bind the Holder and every
subsequent Holder of that Security or portion of the Security that evidences
the same debt as the consenting Holder’s Security, even if notation of the
consent or waiver is not made on the Security. 
However, any such Holder or subsequent Holder may revoke the consent or
waiver as to such Holder’s Security or portion of the Security if the Trustee
receives the notice of revocation before the date the amendment or waiver
becomes effective.  After an amendment or
waiver becomes effective, it

 

96

 

shall bind every
Securityholder.  An amendment or waiver
shall become effective upon receipt by the Trustee of the requisite number of
written consents under Section 9.1 or 9.2 as applicable.

 

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

 

SECTION 9.5.   Notation on or Exchange of Securities.  If an amendment changes the terms of a
Security, the Trustee may require the Holder of the Security to deliver it to
the Trustee.  The Trustee may place an
appropriate notation on the Security regarding the changed terms and return it
to the Holder.  Alternatively, if the
Company or the Trustee so determines, the Company in exchange for the Security
shall issue and the Trustee shall authenticate a new Security that reflects the
changed terms.  Failure to make the
appropriate notation or to issue a new Security shall not affect the validity
of such amendment.

 

SECTION 9.6.   Trustee To Sign Amendments.  The Trustee shall sign any amendment
authorized pursuant to this Article IX if the amendment does not
adversely affect the rights, duties, liabilities or immunities of the
Trustee.  If it does, the Trustee may but
need not sign it.  In signing such
amendment the Trustee shall be entitled to receive indemnity reasonably
satisfactory to it and to receive, in addition to the documents required by Section
11.4, and (subject to Sections 7.1 and 7.2) shall be fully
protected in relying upon an Officers’ Certificate and an Opinion of Counsel
stating that such amendment is authorized or permitted by this Indenture.

 

ARTICLE X

 

Subsidiary Guarantee

 

SECTION 10.1.   Subsidiary Guarantee.  Each Subsidiary Guarantor hereby fully and
unconditionally guarantees, as primary obligor and not merely as surety,
jointly and severally with each other Subsidiary Guarantor, to each Holder of
the Securities and the Trustee the full and punctual payment when due, whether
at maturity, by acceleration, by redemption or otherwise, of the principal of,
premium, if any, and interest on the Securities and all other obligations and liabilities of the Company under
this Indenture (all the foregoing being hereinafter collectively called the “Obligations”).  Each Subsidiary Guarantor further agrees (to
the extent permitted by law) that the Obligations may be extended or renewed,
in whole or in part, without notice or further assent from it, and that it will
remain bound under this Article X notwithstanding any extension or
renewal of any Obligation.

 

Each Subsidiary Guarantor waives presentation
to, demand of payment from and protest to the Company of any of the Obligations
and also waives notice of protest for

 

97

 

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

 

Each Subsidiary Guarantor further agrees that
its Subsidiary Guarantee herein constitutes a Guarantee of payment when due
(and not a Guarantee of collection) and waives any right to require that any
resort be had by any Holder to any security held for payment of the
Obligations.

 

Except as expressly set forth in Sections
8.1(b) and 10.2, the obligations of each Subsidiary Guarantor
hereunder shall not be subject to any reduction, limitation, impairment or
termination for any reason (other than payment of the Obligations in full),
including any claim of waiver, release, surrender, alteration or compromise,
and shall not be subject to any defense of setoff, counterclaim, recoupment or
termination whatsoever or by reason of the invalidity, illegality or
unenforceability of the Obligations or otherwise.  Without limiting the generality of the
foregoing, the obligations of each Subsidiary Guarantor herein shall not be
discharged or impaired or otherwise affected by the failure of any Holder to
assert any claim or demand or to enforce any remedy under this Indenture, the
Securities or any other agreement, by any waiver or modification of any
thereof, by any default, failure or delay, willful or otherwise, in the
performance of the Obligations, or by any other act or thing or omission or
delay to do any other act or thing which may or might in any manner or to any
extent vary the risk of any Subsidiary Guarantor or would otherwise operate as
a discharge of such Subsidiary Guarantor as a matter of law or equity.

 

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

 

In furtherance of the foregoing and not in
limitation of any other right which any Holder has at law or in equity against
any Subsidiary Guarantor by virtue hereof, upon the failure of the Company to
pay any of the Obligations when and as the same shall become due, whether at
maturity, by acceleration, by redemption or otherwise, each Subsidiary
Guarantor hereby promises to and will, upon receipt of written demand by the
Trustee, forthwith pay, or cause to be paid, in cash, to the Holders an amount
equal to the sum of (i) the unpaid amount of such Obligations then due and
owing and (ii) accrued and unpaid interest on such Obligations then due and
owing (but only to the extent not prohibited by law) and except as provided in Section
10.2.

 

Each Subsidiary Guarantor further agrees
that, as between such Subsidiary Guarantor, on the one hand, and the Holders,
on the other hand, (x) the maturity of the Obligations guaranteed hereby may be
accelerated as provided in this Indenture for the purposes of its

 

98

 

Subsidiary Guarantee herein,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the Obligations guaranteed hereby and (y) in the event
of any such declaration of acceleration of such Obligations, such Obligations
(whether or not due and payable) shall forthwith become due and payable by the
Subsidiary Guarantor for the purposes of this Subsidiary Guarantee.

 

SECTION 10.2.   Limitation on Liability; Termination,
Release and Discharge.

 

(a)           The
obligations of each Subsidiary Guarantor hereunder will be limited as set forth
in Section 10.3.

 

(b)           Subject
to Section 3.7 and Article IV, each Subsidiary Guarantor may
consolidate with or merge into or sell all or substantially all of its property
and assets to the Company or another Subsidiary Guarantor without
limitation.  Upon the sale or disposition
of a Subsidiary Guarantor (by merger, consolidation, the sale of its Capital
Stock or the sale of all or substantially all of its properties and assets
(other than by lease)), whether or not the Subsidiary Guarantor is the
surviving corporation in such transaction, to a Person (whether or not an
Affiliate of the Subsidiary Guarantor) which is not the Company or a Restricted
Subsidiary of the Company, which sale or disposition is otherwise in compliance
with this Indenture (including, without limitation, Sections 3.7., 3.10
and Article IV), such Subsidiary Guarantor will be deemed released from
its Subsidiary Guarantee and its obligations under this Indenture and the
Registration Rights Agreement; provided, however,
that any such termination will occur only to the extent that all obligations of
such Subsidiary Guarantor under the Senior Secured Credit Agreement and any
other agreements relating to any other Indebtedness of the Company or its
Restricted Subsidiaries will also terminate upon such release, sale or
transfer.

 

(c)           A
Subsidiary Guarantor will be deemed released and relieved of its obligations
under this Indenture, its Subsidiary Guarantee and the Registration Rights
Agreement without any further action required on the part of the Company or
such Subsidiary Guarantor (i) upon the designation of such Subsidiary Guarantor
as an Unrestricted Subsidiary in accordance with the terms of this Indenture,
(ii) if the Subsidiary Guarantor is dissolved or liquidated in accordance with Section
3.14 or (iii) in connection with a legal defeasance in accordance with Article
VIII.

 

SECTION 10.3.   Limitation of
Subsidiary Guarantors’ Liability. Each Subsidiary Guarantor, and by its
acceptance hereof each Holder, hereby confirm that it is the intention of all
such parties that the guarantee by such Subsidiary Guarantor pursuant to its
Subsidiary Guarantee not constitute a fraudulent transfer or conveyance for
purposes of the Federal Bankruptcy Code, the Uniform Fraudulent Conveyance Act,
the Uniform Fraudulent Transfer Act or any similar Federal or state law. To
effectuate the foregoing intention, the Holders and each Subsidiary Guarantor
hereby irrevocably agree that the obligations of such Subsidiary Guarantor
under its Subsidiary Guarantee will be limited to the maximum amount as will,
after giving effect to all other contingent and fixed liabilities (including,
but not limited to, Guarantor Senior Indebtedness) of such Subsidiary Guarantor
and after giving effect to any collections from or payments made by or on
behalf of any other Subsidiary Guarantor in respect of the obligations of such
other Subsidiary Guarantor under its Subsidiary Guarantee or pursuant to Section
10.4 hereof, result in the obligations of such Subsidiary Guarantor under
its Subsidiary Guarantee not constituting such

 

99

 

a fraudulent conveyance or
fraudulent transfer. This Section 10.3 is for the benefit of the
creditors of each Subsidiary Guarantor.

 

SECTION 10.4.   Contribution.  Each Subsidiary Guarantor hereby agrees that
to the extent that any Subsidiary Guarantor shall have paid more than its
proportionate share of any payment made on the obligations under the Subsidiary
Guarantees, such Subsidiary Guarantor shall be entitled to seek and receive
contribution from and against the Company or any other Subsidiary Guarantor who
has not paid its proportionate share of such payment.  Each Subsidiary Guarantor’s right of
contribution shall be subject to the terms and conditions of Section 3.6.  The provisions of this Section 10.4
shall in no respect limit the obligations and liabilities of each Subsidiary
Guarantor to the Trustee and the Holders, and each Subsidiary Guarantor shall
remain liable to the Trustee and the Holders for the full amount guaranteed by
such Subsidiary Guarantor hereunder.

 

ARTICLE XI

 

Miscellaneous

 

SECTION 11.1.   Trust Indenture Act Controls.  If any provision of this Indenture limits,
qualifies or conflicts with another provision which is required to be included
in this Indenture by the TIA, the provision required by the TIA shall control.  Each Subsidiary Guarantor, in addition to
performing its obligations under its Subsidiary Guarantee, shall perform such
other obligations as may be imposed upon it with respect to this Indenture
under the TIA.

 

SECTION 11.2.   Notices.  Any notice or communication shall be in
writing and delivered in person or mailed by first-class mail addressed as
follows:

 

if to the Company or any Subsidiary Guarantor:

Clayton Williams Energy, Inc.

Claydesta Center

Six Desta Drive, Suite 6500

Midland, Texas 79705

	
  Attention: 

  	
  Chief Financial Officer and Treasurer

  

 

if to the Trustee:

Wells Fargo Bank, National Association

Sixth Street and Marquette Avenue

Minneapolis, Minnesota 55479

	
  Attention: 

  	
  Corporate Trust Services

  
	
   

  	
  Clayton Williams Energy
  Administrator

  

 

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

 

100

 

Any notice or communication mailed to a
registered Securityholder may be mailed to the Securityholder at the
Securityholder’s address as it appears on the registration books of the
Registrar and shall be sufficiently given if so mailed within the time
prescribed.  Any notice or communication
shall also be mailed to any Person described in TIA § 313(c), to the extent
required by the TIA.

 

Failure to mail a notice or communication to
a Securityholder or any defect in it shall not affect its sufficiency with
respect to other Securityholders.  If a
notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.

 

SECTION 11.3.   Communication by Holders with other
Holders.  Securityholders may
communicate pursuant to TIA § 312(b) with other Securityholders with
respect to their rights under this Indenture or the Securities.  The Company, the Trustee, the Registrar and
anyone else shall have the protection of TIA § 312(c).

 

SECTION 11.4.   Certificate and Opinion as to Conditions
Precedent.  Upon any request or
application by the Company to the Trustee to take or refrain from taking any
action under this Indenture, the Company shall furnish to the Trustee:

 

(1)                                  an
Officers’ Certificate in form and substance reasonably satisfactory to the
Trustee stating that, in the opinion of the signers, all conditions precedent,
if any, provided for in this Indenture relating to the proposed action have
been complied with; and

 

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

 

SECTION 11.5.   Statements Required in Certificate or
Opinion.  Each certificate or opinion
with respect to compliance with a covenant or condition provided for in this
Indenture shall include:

 

(1)                                  a
statement that the individual making such certificate or opinion has read such
covenant or condition;

 

(2)                                  a
brief statement as to the nature and scope of the examination or investigation
upon which the statements or opinions contained in such certificate or opinion
are based;

 

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

 

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

 

101

 

In giving such Opinion of Counsel, counsel
may rely as to factual matters on an Officers’ Certificate or on certificates
of public officials.

 

SECTION 11.6.   When Securities Disregarded.  In determining whether the Holders of the
required principal amount of Securities have concurred in any direction, waiver
or consent, Securities owned by the Company or by any Affiliate of the Company
shall be disregarded and deemed not to be outstanding, except that, for the
purpose of determining whether a Trust Officer of the Trustee shall be
protected in relying on any such direction, waiver or consent, only Securities
which the Trustee knows are so owned shall be so disregarded.  Also, subject to the foregoing, only
Securities outstanding at the time shall be considered in any such
determination.

 

SECTION 11.7.   Rules by Trustee, Paying Agent and Registrar.  The Trustee may make reasonable rules for
action by, or a meeting of, Securityholders. 
The Registrar and the Paying Agent may make reasonable rules for their
functions.

 

SECTION 11.8.   Legal Holidays.  A “Legal Holiday” is a Saturday, a
Sunday or other day on which commercial banking institutions are authorized or
required to be closed in New York City. 
If a payment date is a Legal Holiday, payment shall be made on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue for
the intervening period.  If a regular
record date is a Legal Holiday, the record date shall not be affected.

 

SECTION 11.9.   GOVERNING LAW.  THIS INDENTURE AND THE SECURITIES SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.

 

SECTION
11.10.   No Recourse Against Others.  An incorporator, director, officer, employee,
stockholder or controlling person, as such, of the Company or any Subsidiary
Guarantor shall not have any liability for any obligations of the Company or
any Subsidiary Guarantor under the Securities, this Indenture or the Subsidiary
Guarantees or for any claim based on, in respect of or by reason of such
obligations or their creation.  By
accepting a Security, each Securityholder shall waive and release all such
liability.  The waiver and release shall
be part of the consideration for the issue of the Securities.

 

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

 

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

 

SECTION
11.13.   Qualification of Indenture.  The Company shall qualify this Indenture
under the TIA in accordance with the terms and conditions of the Registration
Rights Agreement and shall pay all reasonable costs and expenses (including
attorneys’ fees and expenses for the Company, the Trustee and the Holders)
incurred in connection therewith, including, but not limited to, costs and
expenses of qualification of this Indenture and the Securities and printing
this

 

102

 

Indenture and the
Securities.  The Trustee shall be
entitled to receive from the Company any such Officers’ Certificates or other
documentation as it may reasonably request in connection with any such
qualification of this Indenture under the TIA.

 

SECTION
11.14.   Severability.  In case any provision of this Indenture or in
the Securities shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.

 

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

 

103

 

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

 

	
   

  	
  Very truly
  yours,

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  CLAYTON
  WILLIAMS ENERGY, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/ L. Paul Latham

  	
   

  
	
   

  	
   

  	
   Name:

  	
  L. Paul
  Latham

  
	
   

  	
   

  	
   Title:

  	
  Vice
  President and COO

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  WARRIOR GAS
  CO.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/ L. Paul Latham

  	
   

  
	
   

  	
   

  	
   Name:

  	
  L. Paul
  Latham

  
	
   

  	
   

  	
   Title:

  	
  Vice
  President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  CWEI
  ACQUISITIONS INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/ L. Paul Latham

  	
   

  
	
   

  	
   

  	
   Name:

  	
  L. Paul
  Latham

  
	
   

  	
   

  	
   Title:

  	
  President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  CWEI ROMERE
  PASS ACQUISITION CORP.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/ L. Paul Latham

  	
   

  
	
   

  	
   

  	
   Name:

  	
  L. Paul
  Latham

  
	
   

  	
   

  	
   Title:

  	
  President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SOUTHWEST
  ROYALTIES, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/ L. Paul Latham

  	
   

  
	
   

  	
   

  	
   Name:

  	
  L. Paul
  Latham

  
	
   

  	
   

  	
   Title:

  	
  President

  
					

 

 

	
   

  	
  ROMERE PASS
  ACQUISITION, L.L.C.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/ L. Paul Latham

  	
   

  
	
   

  	
   

  	
   Name:

  	
  L. Paul
  Latham

  
	
   

  	
   

  	
   Title:

  	
  President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  BLUE HEEL
  COMPANY

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/ L. Paul Latham

  	
   

  
	
   

  	
   

  	
   Name:

  	
  L. Paul
  Latham

  
	
   

  	
   

  	
   Title:

  	
  President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  TEX-HAL
  PARTNERS, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/ L. Paul Latham

  	
   

  
	
   

  	
   

  	
   Name:

  	
  L. Paul
  Latham

  
	
   

  	
   

  	
   Title:

  	
  President

  
					

 

 

	
   

  	
  WELLS FARGO
  BANK, NATIONAL

  ASSOCIATION, as Trustee

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Timothy P. Mowdy

  	
   

  
	
   

  	
   

  	
   Name:

  	
  Timothy P.
  Mowdy

  
	
   

  	
   

  	
   Title:

  	
  Vice President

  
					

 

 

EXHIBIT A

 

[FORM OF FACE
OF UNREGISTERED NOTE]

 

[Applicable
Restricted Securities Legend]

[Depository Legend, if applicable]

 

	
  No. [      ]

  	
   

  	
  Principal Amount
  $[                      ]

  CUSIP NO. [                ]

  

 

CLAYTON
WILLIAMS ENERGY, INC.

 

73⁄4% Senior Notes due 2013

 

CLAYTON WILLIAMS ENERGY, INC., a Delaware
corporation, promises to pay to [                    ],
or registered assigns, the principal sum of [                              ]
Dollars, on August 1, 2013.

 

Interest
Payment Dates:  February 1 and August 1

Record Dates: January 15 and July 15

 

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

 

 

A-1

 

Date:  [            ]

 

	
   

  	
  CLAYTON WILLIAMS ENERGY, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
  TRUSTEE’S CERTIFICATE OF

  AUTHENTICATION

  	
   

  
	
   

  	
   

  
	
  WELLS FARGO
  BANK, NATIONAL ASSOCIATION

  	
   

  
	
  as Trustee,
  certifies

  	
   

  
	
  that this is
  one of

  	
   

  
	
  the
  Securities referred

  	
   

  
	
  to in the
  Indenture.

  	
   

  
	
   

  	
   

  
	
  By

  	
   

  	
   

  	
   

  
	
  Authorized Officer

  	
   

  
						

 

A-2

 

[FORM OF
REVERSE SIDE OF UNREGISTERED NOTE]

 

73⁄4% Senior Notes due 2013

 

1.   Interest

 

CLAYTON WILLIAMS ENERGY, INC., a Delaware
corporation (such corporation, and its successors and assigns under the
Indenture hereinafter referred to, being herein called the “Company”),
promises to pay interest on the principal amount of this Security at the rate
per annum shown above.

 

The Company will pay interest semiannually on
February 1 and August 1 of each year commencing February 1, 2006.  Interest on the Securities will accrue from
the most recent date to which interest has been paid on the Securities or, if
no interest has been paid, from July 20, 2005. 
The Company shall pay interest on overdue principal or premium, if any
(plus interest on such interest to the extent lawful), at the rate borne by the
Securities to the extent lawful. 
Interest will be computed on the basis of a 360-day year of twelve
30-day months.

 

2.   Method
of Payment

 

By no later than 10:00 a.m. (New York City
time) on the date on which any principal of or interest on any Security is due
and payable, the Company shall irrevocably deposit with the Trustee or the
Paying Agent money sufficient to pay such principal, premium, if any, and/or
interest.  The Company will pay interest
(except Defaulted Interest) to the Persons who are registered Holders of
Securities at the close of business on the January 15 or July 15 next preceding
the interest payment date even if Securities are cancelled, repurchased or
redeemed after the record date and on or before the interest payment date.  Holders must surrender Securities to a Paying
Agent to collect principal payments.  The
Company will pay principal and interest in money of the United States that at
the time of payment is legal tender for payment of public and private debts.
Payments in respect of Securities represented by a Global Security (including
principal, premium, if any, and interest) will be made by the transfer of
immediately available funds to the accounts specified by The Depository Trust
Company. The Company shall make all payments in respect of a Definitive
Security (including principal, premium, if any, and interest) at the office or
agency of the Company maintained for such purpose; provided, however, that, at the option of the Company, each
installment of interest may be paid by (i) check mailed to addresses of the
Persons entitled thereto as such addresses shall appear on the Note Register or
(ii) wire transfer to an account located in the United States maintained by the
payee.

 

3.   Paying
Agent and Registrar

 

Initially, WELLS FARGO BANK NATIONAL
ASSOCIATION (the “Trustee”) will act as Trustee, Paying Agent and
Registrar.  The Company may appoint and
change any Paying Agent, Registrar or co-registrar without notice to any
Securityholder.  The Company or any of
its Subsidiaries may act as Paying Agent, Registrar or co-registrar.

 

A-3

 

4.   Indenture

 

The Company issued the Securities under an
Indenture dated as of July 20, 2005 (as it may be amended or supplemented from time to time in
accordance with the terms thereof, the “Indenture”), among the Company,
the Subsidiary Guarantors and the Trustee. 
The terms of the Securities include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of
1939 (15 U.S.C. §§ 77aaa-77bbbb) as in effect on the date of the
Indenture (the “Trust Indenture Act”; provided,
however, that in the event the Trust Indenture Act is amended after
such date, “Trust Indenture Act” shall mean, to the extent required by any such
amendment, the Trust Indenture Act of 1939 as so amended).  Capitalized terms used herein and not defined
herein have the meanings ascribed thereto in the Indenture.  The Securities are subject to all such terms,
and Securityholders are referred to the Indenture and the Trust Indenture Act
for a statement of those terms.

 

The Securities are general unsecured senior
obligations of the Company.  The
aggregate principal amount of securities that may be authenticated and
delivered under the Indenture is unlimited. 
This Security is one of the 73⁄4% Senior Notes due 2013 referred to in the Indenture.  The Securities include (i) $225,000,000
aggregate principal amount of the Company’s 73⁄4% Senior Notes due 2013 issued under the Indenture on July 20, 2005 (herein called “Initial
Securities”), (ii) if and when issued, additional 73⁄4% Senior Notes due 2013 of the Company that may be issued from
time to time under the Indenture subsequent to July 20, 2005 (herein called “Additional
Securities”) and (iii) if and when issued, the Company’s 73⁄4% Senior Notes due 2013 that may be
issued from time to time under the Indenture in exchange for Initial Securities
or Additional Securities in an offer registered under the Securities Act as
provided in the Registration Rights Agreement. 
The Initial Securities, Additional Securities and Exchange Securities
are treated as a single class of securities under the Indenture.

 

To guarantee the due and punctual payment of
the principal, premium, if any, and interest on the Securities and all other
amounts payable by the Company under the Indenture and the Securities when and
as the same shall be due and payable, whether at maturity, by acceleration or
otherwise, according to the terms of the Securities and the Indenture, the
Subsidiary Guarantors have unconditionally guaranteed (and future Subsidiary
Guarantors, together with the Subsidiary Guarantors, will unconditionally
guarantee), jointly and severally, such obligations on a unsecured senior basis
pursuant to the terms of the Indenture.

 

5.   Redemption

 

The Securities are redeemable as provided for
in Article V of the Indenture.

 

6.   Repurchase
Provisions

 

(a)           Upon a Change of Control, the Company
will be required to offer to repurchase all or any part (equal to $1,000 or an
integral multiple thereof) of the Securities at a purchase price in cash equal
to 101% of the principal amount thereof, plus accrued and unpaid interest, if
any, to the date of repurchase (subject to the right of Holders of record on
the relevant record date to receive interest due on the relevant interest
payment date) as provided in, and subject to the terms of, the Indenture.

 

A-4

 

(b)           In the event of an Asset Disposition
that requires the purchase of Securities pursuant to Section 3.7(b) of
the Indenture, the Company will be required to apply such Excess Proceeds to
the offer to purchase of the Securities and any Pari Passu Notes in accordance
with the procedures set forth in Section 3.7 of the Indenture.

 

7.   Denominations;
Transfer; Exchange

 

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

 

8.   Persons
Deemed Owners

 

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

 

9.   Unclaimed
Money

 

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

 

10.   Defeasance

 

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

 

11.   Amendment,
Waiver, Defaults and Remedies

 

The Indenture may be amended as provided in
Article IX of the Indenture.

 

Securityholders may not enforce the Indenture
or the Securities except as provided in the Indenture.  The Trustee may refuse to enforce the
Indenture or the Securities unless it receives reasonable indemnity or
security.  Subject to certain
limitations, Holders of a majority in principal amount of the Securities may
direct the Trustee in its exercise of any trust or power.  The Trustee may withhold from Securityholders
notice of any continuing Default or Event of Default (except a Default or Event
of Default in payment of principal or interest) if it determines that
withholding notice is in their interest.

 

A-5

 

12.   Trustee
Dealings with the Company

 

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

 

13.   No
Recourse Against Others

 

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

 

14.   Authentication

 

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

 

15.   Abbreviations

 

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

 

16.   CUSIP
Numbers

 

Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Securities and has directed the
Trustee to use CUSIP numbers in notices of redemption as a convenience to
Securityholders.  No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.

 

17.   Governing
Law

 

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

 

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

 

A-6

 

CLAYTON
WILLIAMS ENERGY, INC.

Claydesta Center

Six Desta Drive, Suite 6500

Midland, Texas 79705

Attention:  Chief Financial Officer and
Treasurer

 

A-7

 

ASSIGNMENT
FORM

 

To assign this Security, fill in the form
below:

 

I or we assign and transfer this Security to

	
   

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

  
	
   

  	
   

  	
   

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

  

 

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

 

 

	
  Date:

  	
   

  	
   

  	
  Your
  Signature:

  	
   

  
	
   

  	
   

  
	
  Signature
  Guarantee:

  	
   

  
	
   

  	
  (Signature must be guaranteed)

  
	
   

  
	
   

  
	
  Sign exactly
  as your name appears on the other side of this Security.

  
						

 

The
signature(s) should 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 S.E.C. Rule
17Ad-15.

 

In connection
with any transfer or exchange of any of the Securities evidenced by this
certificate occurring prior to the date that is two years after the later of
the date of original issuance of such Securities and the last date, if any, on
which such Securities were owned by the Company or any Affiliate of the
Company, the undersigned confirms that such Securities are being:

 

CHECK ONE BOX
BELOW:

 

1o                             acquired
for the undersigned’s own account, without transfer; or

 

2o                             transferred
to the Company; or

 

3o                             transferred
pursuant to and in compliance with Rule 144A under the Securities Act of 1933,
as amended (the “Securities Act”); or

 

4o                             transferred
pursuant to an effective registration statement under the Securities Act; or

 

5o                             transferred
pursuant to and in compliance with Regulation S under the Securities Act; or

 

A-8

 

6o                             transferred
to an institutional “accredited investor” (as defined in Rule 501(a)(1), (2),
(3) or (7) under the Securities Act), that has furnished to the Trustee a
signed letter containing certain representations and agreements (the form of
which letter appears as Exhibit C of the Indenture); or

 

7o                             transferred
pursuant to another available exemption from the registration requirements of
the Securities Act of 1933.

 

Unless one of
the boxes is checked, the Trustee will refuse to register any of the Securities
evidenced by this certificate in the name of any person other than the
registered Holder thereof; provided, however,
that if box (5), (6) or (7) is checked, the Trustee or the Company may require,
prior to registering any such transfer of the Securities, in their sole
discretion, such legal opinions, certifications and other information as the
Trustee or the Company may reasonably request to confirm that such transfer is
being made pursuant to an exemption from, or in a transaction not subject to,
the registration requirements of the Securities Act of 1933, such as the
exemption provided by Rule 144 under such Act.

 

	
   

  	
   

  	
   

  
	
   

  	
  Signature

  	
   

  
	
  Signature
  Guarantee:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (Signature must be guaranteed)

  	
  Signature

  	
   

  
				

 

The
signature(s) should 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 S.E.C. Rule
17Ad-15.

 

TO BE
COMPLETED BY PURCHASER IF (1) OR (3) ABOVE IS CHECKED.

 

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

 

	
   

  	
   

  
	
  Dated:

  

 

A-9

 

[TO BE
ATTACHED TO GLOBAL SECURITIES]

 

SCHEDULE OF
INCREASES OR DECREASES IN GLOBAL SECURITY

 

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

 

	
  Date of

  Exchange

  	
   

  	
  Amount of decrease in Principal

  Amount of this Global Security

  	
   

  	
  Amount of increase in Principal

  Amount of this Global Security

  	
   

  	
  Principal Amount of this Global

  Security following such

  decrease or increase

  	
   

  	
  Signature of authorized

  signatory of Trustee or

  Securities Custodian

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

A-10

 

OPTION OF
HOLDER TO ELECT PURCHASE

 

If you want to elect to have this Security
purchased by the Company pursuant to Section 3.7 or 3.9 of the
Indenture, check either box:

 

	
  o

  	
   

  	
  o

  
	
  3.7

  	
   

  	
  3.9

  

 

If you want to elect to have only part of
this Security purchased by the Company pursuant to Section 3.7 or 3.9
of the Indenture, state the amount in principal amount (must be integral
multiple of $1,000):  $                                            

 

	
  Date:

  	
   

  	
   Your
  Signature

  	
   

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

  
	
   

  
	
   

  
	
  Signature
  Guarantee:

  	
   

  
	
   

  	
  (Signature
  must be guaranteed)

  
					

 

The signature(s)
should 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 S.E.C. Rule 17Ad-15.

 

A-11

 

EXHIBIT B

 

[FORM OF FACE
OF REGISTERED NOTE]

 

[Depository
Legend, if applicable]

 

	
  No. [      ]

  	
   

  	
  Principal Amount
  $[                      ]

  CUSIP NO. [                ]

  

 

CLAYTON
WILLIAMS ENERGY, INC.

 

 

73⁄4% Senior Notes due 2013

 

CLAYTON WILLIAMS ENERGY, INC., a Delaware
corporation, promises to pay to [                    ],
or registered assigns, the principal sum of [                              ]
Dollars, on August 1, 2013.

 

Interest
Payment Dates: February 1 and August 1

Record Dates: January 15 and July 15

 

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

 

B-1

 

Date: [              ]

 

	
   

  	
  CLAYTON WILLIAMS ENERGY, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
  TRUSTEE’S CERTIFICATE OF

  AUTHENTICATION

  	
   

  
	
   

  	
   

  
	
  WELLS FARGO
  BANK, NATIONAL ASSOCIATION

  	
   

  
	
  as Trustee,
  certifies

  	
   

  
	
  that this is
  one of

  	
   

  
	
  the
  Securities referred

  	
   

  
	
  to in the
  Indenture.

  	
   

  
	
   

  	
   

  
	
  By

  	
   

  	
   

  	
   

  
	
  Authorized Officer

  	
   

  
						

 

B-2

 

[FORM OF
REVERSE SIDE OF REGISTERED NOTE]

 

73⁄4% Senior Notes due 2013

 

1.   Interest

 

CLAYTON WILLIAMS ENERGY, INC., a Delaware
corporation (such corporation, and its successors and assigns under the
Indenture hereinafter referred to, being herein called the “Company”),
promises to pay interest on the principal amount of this Security at the rate
per annum shown above.

 

The Company will pay interest semiannually on
February 1 and August 1 of each year commencing February 1, 2006.  Interest on the Securities will accrue from
the most recent date to which interest has been paid on the Securities or, if
no interest has been paid, from July 20, 2005. 
The Company shall pay interest on overdue principal or premium, if any
(plus interest on such interest to the extent lawful), at the rate borne by the
Securities to the extent lawful. 
Interest will be computed on the basis of a 360-day year of twelve
30-day months.

 

2.   Method
of Payment

 

By no later than 10:00 a.m. (New York City
time) on the date on which any principal of or interest on any Security is due
and payable, the Company shall irrevocably deposit with the Trustee or the
Paying Agent money sufficient to pay such principal, premium, if any, and/or
interest.  The Company will pay interest
(except Defaulted Interest) to the Persons who are registered Holders of
Securities at the close of business on the January 15 or July 15 next preceding
the interest payment date even if Securities are cancelled, repurchased or
redeemed after the record date and on or before the interest payment date.  Holders must surrender Securities to a Paying
Agent to collect principal payments.  The
Company will pay principal and interest in money of the United States that at
the time of payment is legal tender for payment of public and private debts.
Payments in respect of Securities represented by a Global Security (including
principal, premium, if any, and interest) will be made by the transfer of
immediately available funds to the accounts specified by The Depository Trust
Company. The Company shall make all payments in respect of a Definitive
Security (including principal, premium, if any, and interest) at the office or
agency of the Company maintained for such purpose; provided, however, that, at the option of the Company, each
installment of interest may be paid by (i) check mailed to addresses of the
Persons entitled thereto as such addresses shall appear on the Note Register or
(ii) wire transfer to an account located in the United States maintained by the
payee.

 

3.   Paying
Agent and Registrar

 

Initially, WELLS FARGO BANK NATIONAL
ASSOCIATION (the “Trustee”) will act as Trustee, Paying Agent and
Registrar.  The Company may appoint and
change any Paying Agent, Registrar or co-registrar without notice to any
Securityholder.  The Company or any of
its Subsidiaries may act as Paying Agent, Registrar or co-registrar.

 

B-3

 

4.   Indenture

 

The Company issued the Securities under an
Indenture dated as of July 20, 2005 (as it may be amended or supplemented from time to time in
accordance with the terms thereof, the “Indenture”), among the Company,
the Subsidiary Guarantors and the Trustee. 
The terms of the Securities include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of
1939 (15 U.S.C. §§ 77aaa-77bbbb) as in effect on the date of the
Indenture (the “Trust Indenture Act”; provided,
however, that in the event the Trust Indenture Act is amended after
such date, “Trust Indenture Act” shall mean, to the extent required by any such
amendment, the Trust Indenture Act of 1939 as so amended).  Capitalized terms used herein and not defined
herein have the meanings ascribed thereto in the Indenture.  The Securities are subject to all such terms,
and Securityholders are referred to the Indenture and the Trust Indenture Act
for a statement of those terms.

 

The Securities are general unsecured senior
obligations of the Company.  The
aggregate principal amount of securities that may be authenticated and
delivered under the Indenture is unlimited. 
This Security is one of the 73⁄4% Senior Notes due 2013 referred to in the Indenture.  The Securities include (i) $225,000,000
aggregate principal amount of the Company’s 73⁄4% Senior Notes due 2013 issued under the Indenture on July 20, 2005 (herein called “Initial
Securities”), (ii) if and when issued, additional 73⁄4% Senior Notes due 2013 of the Company that may be issued from
time to time under the Indenture subsequent to July 20, 2005 (herein called “Additional
Securities”) and (iii) if and when issued, the Company’s 73⁄4% Senior Notes due 2013 that may be
issued from time to time under the Indenture in exchange for Initial Securities
or Additional Securities in an offer registered under the Securities Act as
provided in the Registration Rights Agreement. 
The Initial Securities, Additional Securities and Exchange Securities
are treated as a single class of securities under the Indenture.

 

To guarantee the due and punctual payment of the
principal, premium, if any, and interest on the Securities and all other
amounts payable by the Company under the Indenture and the Securities when and
as the same shall be due and payable, whether at maturity, by acceleration or
otherwise, according to the terms of the Securities and the Indenture, the
Subsidiary Guarantors have unconditionally guaranteed (and future Subsidiary
Guarantors, together with the Subsidiary Guarantors, will unconditionally
guarantee), jointly and severally, such obligations on a unsecured senior basis
pursuant to the terms of the Indenture.

 

5.   Redemption

 

The Securities are redeemable as provided for
in Article V of the Indenture.

 

6.   Repurchase
Provisions

 

(a)           Upon a Change of Control, the Company
will be required to offer to repurchase all or any part (equal to $1,000 or an
integral multiple thereof) of the Securities at a purchase price in cash equal
to 101% of the principal amount thereof, plus accrued and unpaid interest, if
any, to the date of repurchase (subject to the right of Holders of record on
the relevant record date to receive interest due on the relevant interest
payment date) as provided in, and subject to the terms of, the Indenture.

 

B-4

 

(b)           In the event of an Asset Disposition
that requires the purchase of Securities pursuant to Section 3.7(b) of
the Indenture, the Company will be required to apply such Excess Proceeds to
the offer to purchase of the Securities and any Pari Passu Notes in accordance
with the procedures set forth in Section 3.7 of the Indenture.

 

7.   Denominations;
Transfer; Exchange

 

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

 

8.   Persons
Deemed Owners

 

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

 

9.   Unclaimed
Money

 

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

 

10.   Defeasance

 

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

 

11.   Amendment,
Waiver, Defaults and Remedies

 

The Indenture may be amended as provided in
Article IX of the Indenture.

 

Securityholders may not enforce the Indenture
or the Securities except as provided in the Indenture.  The Trustee may refuse to enforce the
Indenture or the Securities unless it receives reasonable indemnity or
security.  Subject to certain
limitations, Holders of a majority in principal amount of the Securities may
direct the Trustee in its exercise of any trust or power.  The Trustee may withhold from Securityholders
notice of any continuing Default or Event of Default (except a Default or Event
of Default in payment of principal or interest) if it determines that
withholding notice is in their interest.

 

B-5

 

12.   Trustee
Dealings with the Company

 

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

 

13.   No
Recourse Against Others

 

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

 

14.   Authentication

 

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

 

15.   Abbreviations

 

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

 

16.   CUSIP
Numbers

 

Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Securities and has directed the
Trustee to use CUSIP numbers in notices of redemption as a convenience to
Securityholders.  No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.

 

17.   Governing
Law

 

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

 

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

 

B-6

 

CLAYTON
WILLIAMS ENERGY, INC.

Claydesta Center

Six Desta Drive, Suite 6500

Midland, Texas 79705

Attention:  Chief Financial Officer and
Treasurer

 

B-7

 

ASSIGNMENT
FORM

 

To assign this Security, fill in the form
below:

 

I or we assign and transfer this Security to

	
   

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

  
	
   

  	
   

  	
   

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

  

 

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

 

	
  Date:

  	
   

  	
   

  	
  Your
  Signature:

  	
   

  
	
   

  	
   

  
	
  Signature
  Guarantee:

  	
   

  
	
   

  	
  (Signature must be guaranteed)

  
	
   

  	
   

  
	
   

  
	
  Sign exactly
  as your name appears on the other side of this Security.

  
						

 

The
signature(s) should 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 S.E.C. Rule
17Ad-15.

 

	
   

  	
   

  	
   

  	
   

  
	
  (Signature must be guaranteed)

  	
  Signature

  	
   

  

 

The signature(s)
should 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 S.E.C. Rule 17Ad-15.

 

B-8

 

[TO BE
ATTACHED TO GLOBAL SECURITIES]

 

SCHEDULE OF
INCREASES OR DECREASES IN GLOBAL SECURITY

 

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

 

	
  Date of

  Exchange

  	
   

  	
  Amount of decrease in Principal

  Amount of this Global Security

  	
   

  	
  Amount of increase in Principal

  Amount of this Global Security

  	
   

  	
  Principal Amount of this Global

  Security following such

  decrease or increase

  	
   

  	
  Signature of authorized

  signatory of Trustee or

  Securities Custodian

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

B-9

 

OPTION OF
HOLDER TO ELECT PURCHASE

 

If you want to elect to have this Security
purchased by the Company pursuant to Section 3.7 or 3.9 of the
Indenture, check either box:

 

 

	
  o

  	
   

  	
  o

  
	
  3.7

  	
   

  	
  3.9

  

 

If you want to elect to have only part of
this Security purchased by the Company pursuant to Section 3.7 or 3.9
of the Indenture, state the amount in principal amount (must be integral
multiple of $1,000):  $                                            

 

	
  Date:

  	
   

  	
   Your
  Signature

  	
   

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

  
	
   

  
	
   

  
	
  Signature
  Guarantee:

  	
   

  
	
   

  	
  (Signature
  must be guaranteed)

  
					

 

The
signature(s) should 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 S.E.C. Rule
17Ad-15.

 

B-10

 

EXHIBIT C

 

[FORM OF
CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS TO

INSTITUTIONAL ACCREDITED INVESTORS].

 

[Date]

 

CLAYTON WILLIAMS ENERGY, INC.

c/o WELLS
FARGO BANK, NATIONAL ASSOCIATION

Sixth Street and Marquette Avenue

Minneapolis, Minnesota 55479

 

Ladies and
Gentlemen:

 

This certificate is delivered to request a
transfer of $                  
principal amount of the 73⁄4% Senior Notes due 2013 (the “Securities”) of CLAYTON
WILLIAMS ENERGY, INC. (the “Company”).

 

Upon transfer, the Securities would be
registered in the name of the new beneficial owner as follows:

 

	
  Name:

  	
   

  
	
   

  
	
  Address:

  	
   

  
	
   

  
	
  Taxpayer ID
  Number:

  	
   

  
				

 

The undersigned represents and warrants to
you that:

 

1.             We
are an institutional “accredited investor” (as defined in Rule 501(a)(1), (2),
(3) or (7) under the Securities Act of 1933, as amended (the “Securities Act”))
purchasing for our own account or for the account of such an institutional “accredited
investor” at least $250,000 principal amount of the Securities, and we are
acquiring the Securities not with a view to, or for offer or sale in connection
with, any distribution in violation of the Securities Act.  We have such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risk of our investment in the Securities and we invest in or purchase
securities similar to the Securities in the normal course of our business.  We and any accounts for which we are acting
are each able to bear the economic risk of our or its investment.

 

2.             We
understand that the Securities have not been registered under the Securities
Act and, unless so registered, may not be sold except as permitted in the
following sentence.  We agree on our own
behalf and on behalf of any investor account for which we are purchasing
Securities to offer, sell or otherwise transfer such Securities prior to the
date that is two years after the later of the date of original issue and the
last date on which the Company or any affiliate of the Company was the owner of
such Securities (or any predecessor thereto) (the “Resale Restriction
Termination Date”) only (a) to the Company, (b) pursuant to a registration
statement which has been declared effective under the Securities Act, (c) in a
transaction complying with the requirements of Rule 144A under the Securities
Act, to a person we reasonably

 

C-1

 

believe is a qualified
institutional buyer under Rule 144A (a “QIB”) that purchases for its own
account or for the account of a QIB and to whom notice is given that the transfer
is being made in reliance on Rule 144A, (d) pursuant to offers and sales that
occur outside the United States within the meaning of Regulation S under the
Securities Act, (e) to an institutional “accredited investor” within the
meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act that is
purchasing for its own account or for the account of such an institutional “accredited
investor,” in each case in a minimum principal amount of Securities of $250,000
or (f) pursuant to any other available exemption from the registration
requirements of the Securities Act, subject in each of the foregoing cases to
any requirement of law that the disposition of our property or the property of
such investor account or accounts be at all times within our or their control
and in compliance with any applicable state securities laws.  The foregoing restrictions on resale will not
apply subsequent to the Resale Restriction Termination Date.  If any resale or other transfer of the
Securities is proposed to be made pursuant to clause (e) above prior to the
Resale Restriction Termination Date, the transferor shall deliver a letter from
the transferee substantially in the form of this letter to the Company and the
Trustee, which shall provide, among other things, that the transferee is an
institutional “accredited investor” (within the meaning of Rule 501(a)(1), (2),
(3) or (7) under the Securities Act) and that it is acquiring such Securities
for investment purposes and not for distribution in violation of the Securities
Act.  Each purchaser acknowledges that
the Company and the Trustee reserve the right prior to any offer, sale or other
transfer prior to the Resale Restriction Termination Date of the Securities
pursuant to clauses (d), (e) or (f) above to require the delivery of an opinion
of counsel, certifications and/or other information satisfactory to the Company
and the Trustee.

 

	
   

  	
  TRANSFEREE:

  	
   

  	
   

  
	
   

  	
  BY:

  	
   

  	
   

  
					

 

C-2

 

EXHIBIT D

 

[FORM OF
CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS

PURSUANT TO REGULATION S]

 

[Date]

 

CLAYTON
WILLIAMS ENERGY, INC.

c/o WELLS FARGO BANK, NATIONAL ASSOCIATION

Sixth Street and Marquette Avenue

Minneapolis, Minnesota 55479

 

	
  Re:

  	
  CLAYTON WILLIAMS ENERGY, INC.

    73⁄4%
  Senior Notes due 2013 (the “Securities”)

  

 

Ladies and
Gentlemen:

 

In connection with our proposed sale of $                
aggregate principal amount of the Securities, we confirm that such sale has
been effected pursuant to and in accordance with Regulation S under the
United States Securities Act of 1933, as amended (the “Securities Act”),
and, accordingly, we represent that:

 

(a)           the offer of the Securities was not
made to a person in the United States;

 

(b)           either (i) at the time the buy
order was originated, the transferee was outside the United States or we and
any person acting on our behalf reasonably believed that the transferee was
outside the United States or (ii) the transaction was executed in, on or
through the facilities of a designated off-shore securities market and neither
we nor any person acting on our behalf knows that the transaction has been
pre-arranged with a buyer in the United States;

 

(c)           no directed selling efforts have been
made in the United States in contravention of the requirements of
Rule 903(b) or Rule 904(b) of Regulation S, as applicable; and

 

(d)           the transaction is not part of a plan
or scheme to evade the registration requirements of the Securities Act.

 

In addition, if the sale is made during a
restricted period and the provisions of Rule 903(c)(3) or
Rule 904(c)(1) of Regulation S are applicable thereto, we confirm
that such sale has been made in accordance with the applicable provisions of
Rule 903(c)(3) or Rule 904(c)(1), as the case may be.

 

You and the Company are entitled to rely upon
this letter and are irrevocably authorized to produce this letter or a copy
hereof to any interested party in any administrative or legal proceedings or
official inquiry with respect to the matters covered hereby.  Terms used in this certificate have the meanings
set forth in Regulation S.

 

D-1

 

	
  Very truly
  yours,

  
	
   

  
	
  [Name of
  Transferor]

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  
	
   

  	
   

  
	
  Authorized Signature

  	
   

  

 

D-2

 

EXHIBIT E

 

FORM OF SUBSIDIARY GUARANTEE

 

This Supplemental Indenture, dated as of                             
(this “Supplemental Indenture” or “Guarantee”), among [name of
future Subsidiary Guarantor] (the “Guarantor”), Clayton Williams Energy,
Inc. (together with its successors and assigns, the “Company”), each
other then existing Subsidiary Guarantor under the Indenture referred to below,
and Wells Fargo Bank, National Association, as Trustee under the Indenture
referred to below.

 

W I T N E S S
E T H:

 

WHEREAS, the Company, the Subsidiary
Guarantors and the Trustee have heretofore executed and delivered an Indenture,
dated as of July 20,
2005 (as amended, supplemented, waived or otherwise modified, the “Indenture”),
providing for the issuance of 73⁄4%
Senior Notes due 2013 of the Company (the “Securities”);

 

WHEREAS, Section 3.11 of the Indenture
provides that the Company is required to cause certain Restricted Subsidiaries
created or acquired by the Company, to execute and deliver to the Trustee a
Subsidiary Guarantee in the form contemplated by the Indenture; and

 

WHEREAS, pursuant to Section 9.1 of
the Indenture, the Company, the Subsidiary Guarantors and the Trustee are
authorized to execute and deliver this Supplemental Indenture to amend the
Indenture, without the consent of any Securityholder;

 

NOW, THEREFORE, in consideration of the
foregoing and for other good and valuable consideration, the receipt of which
is hereby acknowledged, the Guarantor, the Company, the other Subsidiary
Guarantors and the Trustee mutually covenant and agree for the equal and
ratable benefit of the Holders of the Securities as follows:

 

E-1

 

ARTICLE
I

 

Definitions

 

SECTION
1.1  Defined Terms.  As used
in this Subsidiary Guarantee, terms defined in the Indenture or in the preamble
or recital hereto are used herein as therein defined.  The words “herein,” “hereof” and “hereby” and
other words of similar import used in this Supplemental Indenture refer to this
Supplemental Indenture as a whole and not to any particular section hereof.

 

ARTICLE
II

 

Agreement to be Bound; Guarantee

 

SECTION
2.1   Agreement to be Bound.  The Guarantor hereby becomes a party to the
Indenture, as a Subsidiary Guarantor and as such will have all of the rights
and be subject to all of the obligations and agreements of a Subsidiary
Guarantor under the Indenture.  The
Guarantor agrees to be bound by all of the provisions of the Indenture
applicable to a Subsidiary Guarantor and to perform all of the obligations and
agreements of a Subsidiary Guarantor under the Indenture.

 

SECTION
2.2   Guarantee.  The Guarantor hereby fully, unconditionally
and irrevocably guarantees, as primary obligor and not merely as surety,
jointly and severally with each other Subsidiary Guarantor, to each Holder of
the Securities and the Trustee, the full and punctual payment when due, whether
at maturity, by acceleration, by redemption or otherwise, of the Obligations,
subject to and in accordance with Article X of the Indenture.

 

ARTICLE
III

 

Miscellaneous

 

SECTION
3.1   Notices.  All notices and other communications to the
Guarantor shall be given as provided in the Indenture for notices to the
Company.

 

SECTION
3.2   Parties.  Nothing expressed or mentioned herein is
intended or shall be construed to give any Person, firm or corporation, other
than the Holders and the Trustee, any legal or equitable right, remedy or claim
under or in respect of this Supplemental Indenture or the Indenture or any
provision herein or therein contained.

 

SECTION
3.3   Governing Law.  This Supplemental Indenture shall be governed
by, and construed in accordance with, the laws of the State of New York.

 

SECTION
3.4   Severability Clause.  In case any provision in this Supplemental
Indenture shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the

 

E-2

 

remaining provisions shall not
in any way be affected or impaired thereby and such provision shall be
ineffective only to the extent of such invalidity, illegality or
unenforceability.

 

SECTION
3.5   Ratification of Indenture;
Supplemental Indentures Part of Indenture. 
Except as expressly amended hereby, the Indenture is in all respects
ratified and confirmed and all the terms, conditions and provisions thereof
shall remain in full force and effect. 
This Supplemental Indenture shall form a part of the Indenture for all
purposes, and every Holder of Securities heretofore or hereafter authenticated
and delivered shall be bound hereby.  The
Trustee makes no representation or warranty as to the validity or sufficiency
of this Supplemental Indenture.

 

SECTION
3.6   Counterparts.  The parties hereto may sign one or more
copies of this Supplemental Indenture in counterparts, all of which together
shall constitute one and the same agreement.

 

SECTION
3.7   Headings.  The headings of the Articles and the sections
in this Guarantee are for convenience of reference only and shall not be deemed
to alter or affect the meaning or interpretation of any provisions hereof.

 

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

 

	
   

  	
  [SUBSIDIARY GUARANTOR],

  as a Subsidiary Guarantor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CLAYTON WILLIAMS ENERGY, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  WARRIOR GAS CO.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
					

 

E-3

 

	
   

  	
  CWEI ACQUISITIONS INC.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CWEI ROMERE PASS ACQUISITION CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SOUTHWEST ROYALTIES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ROMERE PASS ACQUISITION, L.L.C.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BLUE HEEL COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  TEX-HAL PARTNERS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

E-4

 

	
   

  	
  WELLS FARGO BANK, NATIONAL

  ASSOCIATION, as Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

E-5Exhibit 4.2

 

REGISTRATION RIGHTS
AGREEMENT

 

This REGISTRATION RIGHTS
AGREEMENT dated July 20, 2005 (the “Agreement”) is entered into by and
among Clayton Williams Energy, Inc., a Delaware corporation (the “Company”),
the guarantors listed in Schedule 1 hereto
(the “Guarantors”), and J.P. Morgan Securities Inc. (“JPMorgan” or the “Initial
Purchaser”).

 

The Company, the
Guarantors and the Initial Purchaser are parties to the Purchase Agreement
dated July 14, 2005 (the “Purchase Agreement”), which provides for the
sale by the Company to the Initial Purchaser of $225,000,000 aggregate
principal amount of the Company’s 73⁄4% Senior Notes due 2013 (the “Securities”)
which will be guaranteed on an unsecured senior basis by each of the
Guarantors.  As an inducement to the
Initial Purchaser to enter into the Purchase Agreement, the Company and the
Guarantors have agreed to provide to the Initial Purchaser and its direct and
indirect transferees the registration rights set forth in this Agreement.  The execution and delivery of this Agreement
is a condition to the closing under the Purchase Agreement.

 

In consideration of the
foregoing, the parties hereto agree as follows:

 

1.             Definitions.  As used in this Agreement, the following
terms shall have the following meanings:

 

“Business
Day” shall mean any day that is not a Saturday, Sunday or other day on which
commercial banks in New York City are authorized or required by law to remain
closed.

 

“Closing Date” shall mean
the Closing Date as defined in the Purchase Agreement.

 

“Company” shall have the
meaning set forth in the preamble and shall also include the Company’s
successors.

 

“Exchange Act” shall mean
the Securities Exchange Act of 1934, as amended from time to time.

 

“Exchange Dates” shall
have the meaning set forth in Section 2(a)(ii) hereof.

 

“Exchange
Offer” shall mean the exchange offer by the Company and the Guarantors of
Exchange Securities for Registrable Securities pursuant to Section 2(a) hereof.

 

“Exchange Offer
Registration” shall mean a registration under the Securities Act effected
pursuant to Section 2(a) hereof.

 

 

“Exchange Offer
Registration Statement” shall mean an exchange offer registration statement on Form S-4
(or, if applicable, on another appropriate form) and all amendments and
supplements to such registration statement, in each case including the
Prospectus contained therein, all exhibits thereto and any document
incorporated by reference therein.

 

“Exchange Securities”
shall mean senior notes issued by the Company and guaranteed by the Guarantors
under the Indenture containing terms identical to the Securities (except that
the Exchange Securities will not be subject to restrictions on transfer or to
any increase in annual interest rate for failure to comply with this Agreement)
and to be offered to Holders of Securities in exchange for Securities pursuant
to the Exchange Offer.

 

“Guarantors” shall have
the meaning set forth in the preamble and shall also include any Guarantor’s
successors.

 

“Holders” shall mean the
Initial Purchaser, for so long as it owns any Registrable Securities, and each
of its successors, assigns and direct and indirect transferees who become
owners of Registrable Securities under the Indenture; provided that for
purposes of Sections 4 and 5 of this Agreement, the term “Holders” shall
include Participating Broker-Dealers.

 

“Indenture” shall mean
the Indenture relating to the Securities dated as of July 20, 2005 among
the Company, the Guarantors and Wells Fargo Bank, N.A., as trustee, and as the
same may be amended from time to time in accordance with the terms thereof.

 

“Initial Purchaser” shall
have the meaning set forth in the preamble.

 

“Inspector” shall have
the meaning set forth in Section 3(a)(xiii) hereof.

 

“JPMorgan” shall have the
meaning set forth in the preamble.

 

“Majority Holders” shall
mean the Holders of a majority of the aggregate principal amount of the
outstanding Registrable Securities; provided that whenever the consent or
approval of Holders of a specified percentage of Registrable Securities is
required hereunder, any Registrable Securities owned directly or indirectly by
the Company or any of its affiliates (within the meaning of Rule 405 under
the Securities Act) shall not be counted in determining whether such consent or
approval was given by the Holders of such required percentage or amount; and
provided, further, that if the Company shall issue any additional Securities
under the Indenture prior to consummation of the Exchange Offer or, if
applicable, the effectiveness of any Shelf Registration Statement, such
additional Securities and the Registrable Securities to which this Agreement
relates shall be treated together as one class for purposes of determining
whether the consent or 

 

2

 

approval of Holders of a specified percentage of Registrable Securities
has been obtained.

 

“Participating
Broker-Dealers” shall have the meaning set forth in Section 4(a) hereof.

 

“Person” shall mean an
individual, partnership, limited liability company, corporation, trust or
unincorporated organization, or a government or agency or political subdivision
thereof.

 

“Prospectus” shall mean
the prospectus included in a Registration Statement, including any preliminary
prospectus, and any such prospectus as amended or supplemented by any
prospectus supplement, including a prospectus supplement with respect to the
terms of the offering of any portion of the Registrable Securities covered by a
Shelf Registration Statement, and by all other amendments and supplements to
such prospectus, and in each case including any document incorporated by
reference therein.

 

“Purchase Agreement”
shall have the meaning set forth in the preamble.

 

“Registrable Securities”
shall mean the Securities; provided that the Securities shall cease to be Registrable
Securities (i) when a Registration Statement with respect to such
Securities has been declared effective under the Securities Act and such
Securities have been exchanged or disposed of pursuant to such Registration
Statement, (ii) when such Securities are eligible to be sold pursuant to Rule 144(k)
(or any similar provision then in force, but not Rule 144A) under the
Securities Act or (iii) when such Securities cease to be outstanding.

 

“Registration Expenses”
shall mean any and all expenses incident to performance of or compliance by the
Company and the Guarantors with this Agreement, including without limitation: (i) all
SEC, stock exchange or National Association of Securities Dealers, Inc.
registration and filing fees, (ii) all fees and expenses incurred in
connection with compliance with state securities or blue sky laws (including
reasonable fees and disbursements of counsel for any Underwriters or Holders in
connection with blue sky qualification of any Exchange Securities or
Registrable Securities), (iii) all expenses of any Persons in preparing or
assisting in preparing, word processing, printing and distributing any
Registration Statement, any Prospectus and any amendments or supplements
thereto, any underwriting agreements, securities sales agreements or other
similar agreements and any other documents relating to the performance of and
compliance with this Agreement, (iv) all rating agency fees, (v) all
fees and disbursements relating to the qualification of the Indenture under
applicable securities laws, (vi) the fees and disbursements of the Trustee
and its counsel, (vii) the fees and disbursements of counsel for the
Company and the Guarantors and, in the case of a Shelf Registration Statement,
the fees and disbursements of one counsel for the Holders (which counsel shall
be selected by the Majority

 

3

 

Holders and which counsel may also be counsel for the Initial
Purchaser) and (viii) the fees and disbursements of the independent public
accountants of the Company and the Guarantors, including the expenses of any
special audits or “comfort” letters required by or incident to the performance
of and compliance with this Agreement, but excluding fees and expenses of
counsel to the Underwriters (other than fees and expenses set forth in clause (ii) above)
or the Holders (other than fees and expenses set forth in clause (vii) above)
and underwriting discounts and commissions, brokerage commissions and transfer
taxes, if any, relating to the sale or disposition of Registrable Securities by
a Holder.

 

“Registration Statement”
shall mean any registration statement of the Company and the Guarantors that
covers any of the Exchange Securities or Registrable Securities pursuant to the
provisions of this Agreement and all amendments and supplements to any such
registration statement, including post-effective amendments, in each case
including the Prospectus contained therein, all exhibits thereto and any
document incorporated by reference therein.

 

“SEC” shall mean the
United States Securities and Exchange Commission.

 

“Securities” shall have
the meaning set forth in the preamble.

 

“Securities Act” shall
mean the Securities Act of 1933, as amended from time to time.

 

“Shelf Effectiveness
Period” shall have the meaning set forth in Section 2(b) hereof.

 

“Shelf Registration”
shall mean a registration effected pursuant to Section 2(b) hereof.

 

“Shelf Registration
Statement” shall mean a “shelf” registration statement of the Company and the
Guarantors that covers all or a portion of the Registrable Securities (but no
other securities unless approved by the Holders whose Registrable Securities
are to be covered by such Shelf Registration Statement) on an appropriate form
under Rule 415 under the Securities Act, or any similar rule that may
be adopted by the SEC, and all amendments and supplements to such registration
statement, including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto and any document incorporated
by reference therein.

 

“Staff” shall mean the
staff of the SEC.

 

“Trust Indenture Act”
shall mean the Trust Indenture Act of 1939, as amended from time to time.

 

4

 

“Trustee” shall mean the
trustee with respect to the Securities under the Indenture.

 

“Underwriter” shall have
the meaning set forth in Section 3(e) hereof.

 

“Underwritten Offering”
shall mean an offering in which Registrable Securities are sold to an
Underwriter for reoffering to the public.

 

2.             Registration
Under the Securities Act.  (a) 
To the extent not prohibited by any applicable law or applicable
interpretations of the Staff, the Company and the Guarantors shall use their
reasonable best efforts to (i) cause to be filed an Exchange Offer Registration
Statement covering an offer to the Holders to exchange all the Registrable
Securities for Exchange Securities and (ii) have such Registration
Statement remain effective until 180 days after the closing of the Exchange
Offer.  The Company and the Guarantors
shall commence the Exchange Offer promptly after the Exchange Offer
Registration Statement is declared effective by the SEC and use their
reasonable best efforts to complete the Exchange Offer not later than 60 days
after such effective date.

 

The Company and the
Guarantors shall commence the Exchange Offer by mailing the related Prospectus,
appropriate letters of transmittal and other accompanying documents to each
Holder stating, in addition to such other disclosures as are required by applicable
law, substantially the following:

 

(i)            that
the Exchange Offer is being made pursuant to this Agreement and that all
Registrable Securities validly tendered and not properly withdrawn will be
accepted for exchange;

 

(ii)           the
dates of acceptance for exchange (which shall be a period of at least 20
Business Days from the date such notice is mailed) (the “Exchange Dates”);

 

(iii)          that
any Registrable Security not tendered will remain outstanding and continue to
accrue interest but will not retain any rights under this Agreement;

 

(iv)          that
any Holder electing to have a Registrable Security exchanged pursuant to the
Exchange Offer will be required to surrender such Registrable Security,
together with the appropriate letters of transmittal, to the institution and at
the address (located in the Borough of Manhattan, The City of New York) and in
the manner specified in the notice, prior to the close of business on the last
Exchange Date; and

 

(v)           that
any Holder will be entitled to withdraw its election, not later than the close
of business on the last Exchange Date, by sending to the institution

 

5

 

and at the address
(located in the Borough of Manhattan, The City of New York) specified in the
notice, a telegram, telex, facsimile transmission or letter setting forth the
name of such Holder, the principal amount of Registrable Securities delivered
for exchange and a statement that such Holder is withdrawing its election to
have such Securities exchanged.

 

As a condition to participating in the Exchange Offer, a
Holder will be required to represent to the Company and the Guarantors that (i) any
Exchange Securities to be received by it will be acquired in the ordinary
course of its business, (ii) at the time of the commencement of the
Exchange Offer it has no arrangement or understanding with any Person to
participate in the distribution (within the meaning of the Securities Act) of
the Exchange Securities in violation of the provisions of the Securities Act, (iii) it
is not an “affiliate” (within the meaning of Rule 405 under the Securities
Act) of the Company or any Guarantor and (iv) if such Holder is a
broker-dealer that will receive Exchange Securities for its own account in
exchange for Registrable Securities that were acquired as a result of
market-making or other trading activities, then such Holder will deliver a
Prospectus in connection with any resale of such Exchange Securities.

 

As soon as practicable
after the last Exchange Date, the Company and the Guarantors shall:

 

(i)            accept
for exchange Registrable Securities or portions thereof validly tendered and
not properly withdrawn pursuant to the Exchange Offer; and

 

(ii)           deliver,
or cause to be delivered, to the Trustee for cancellation all Registrable
Securities or portions thereof so accepted for exchange by the Company and
issue, and cause the Trustee to promptly authenticate and deliver to each
Holder, Exchange Securities equal in principal amount to the principal amount
of the Registrable Securities surrendered by such Holder.

 

The Company and the
Guarantors shall use their reasonable best efforts to complete the Exchange
Offer as provided above and shall comply with the applicable requirements of
the Securities Act, the Exchange Act and other applicable laws and regulations
in connection with the Exchange Offer. 
The Exchange Offer shall not be subject to any conditions, other than
that the Exchange Offer does not violate any applicable law or applicable
interpretations of the Staff.

 

(b)           In
the event that (i) the Company and the Guarantors determine that the
Exchange Offer Registration provided for in Section 2(a) above is not
available or may not be completed as soon as practicable after the last
Exchange Date because it would violate any applicable law or applicable
interpretations of the Staff, (ii) the Exchange Offer is not for any other
reason completed within 210 days after the date hereof or (iii) any
Initial Purchaser shall so request, no later

 

6

 

than the 90th day after the completion of the Exchange
Offer, in connection with any offer or sale of Registrable Securities, the
Company and the Guarantors shall use their reasonable best efforts to cause to
be filed as soon as practicable after such determination, date or request, as
the case may be, a Shelf Registration Statement providing for the sale of all
the Registrable Securities by the Holders thereof and to have such Shelf
Registration Statement declared effective by the SEC.

 

In the event that the Company
and the Guarantors are required to file a Shelf Registration Statement pursuant
to clause (iii) of the preceding sentence, the Company and the Guarantors
shall use their reasonable best efforts to file and have declared effective by
the SEC both an Exchange Offer Registration Statement pursuant to Section 2(a) with
respect to all Registrable Securities and a Shelf Registration Statement (which
may be a combined Registration Statement with the Exchange Offer Registration
Statement) with respect to offers and sales of Registrable Securities held by
the Initial Purchaser after completion of the Exchange Offer.

 

The Company and the
Guarantors agree to use their reasonable best efforts to keep the Shelf
Registration Statement continuously effective until the expiration of the
period referred to in Rule 144(k) (or any similar rule then in force,
but not Rule 144A) under the Securities Act with respect to the
Registrable Securities or such shorter period that will terminate when all the
Registrable Securities covered by the Shelf Registration Statement have been
sold pursuant to the Shelf Registration Statement (the “Shelf Effectiveness
Period”).  The Company and the Guarantors
further agree to supplement or amend the Shelf Registration Statement and the
related Prospectus if required by the rules, regulations or instructions
applicable to the registration form used by the Company for such Shelf
Registration Statement or by the Securities Act or by any other rules and
regulations thereunder for shelf registration or if reasonably requested by a
Holder of Registrable Securities with respect to information relating to such
Holder, and to use their reasonable best efforts to cause any such amendment to
become effective and such Shelf Registration Statement and Prospectus to become
usable as soon as thereafter practicable. 
The Company and the Guarantors agree to furnish to the Holders of
Registrable Securities copies of any such supplement or amendment promptly
after its being used or filed with the SEC.

 

(c)           The
Company and the Guarantors shall pay all Registration Expenses in connection
with any registration pursuant to Section 2(a) or Section 2(b) hereof.  Each Holder shall pay all underwriting
discounts and commissions, brokerage commissions and transfer taxes, if any,
relating to the sale or disposition of such Holder’s Registrable Securities
pursuant to the Shelf Registration Statement.

 

7

 

(d)           An
Exchange Offer Registration Statement pursuant to Section 2(a) hereof
or a Shelf Registration Statement pursuant to Section 2(b) hereof
will not be deemed to have become effective unless it has been declared
effective by the SEC.

 

In the event that either
the Exchange Offer is not completed within 210 days after the date hereof or
the Shelf Registration Statement, if required hereby, is not declared effective
within 60 days after such Shelf Registration Statement is required to be filed
pursuant to Section 2(b) hereof, the interest rate on the Registrable
Securities will be increased by (i) 0.25% per annum for the first 90-day
period that such condition is not satisfied and (ii) an additional 0.25%
per annum with respect to each successive 90-day period during which the
condition is not satisfied, up to a maximum additional interest of 1.0% per
annum of additional interest, in each case until the Exchange Offer is
completed or the Shelf Registration Statement, if required hereby, is declared
effective by the SEC or the Securities become freely tradable under the
Securities Act.

 

If the Shelf Registration
Statement, if required hereby, has been declared effective and thereafter
either ceases to be effective or the Prospectus contained therein ceases to be
usable at any time during the Shelf Effectiveness Period, and such failure to
remain effective or usable exists for more than 30 days (whether or not
consecutive) in any 12-month period, then the interest rate on the Registrable
Securities will be increased by (i) 0.25% per annum for the first 90-day
period that such condition is not satisfied and (ii) an additional 0.25%
per annum with respect to each successive 90-day period during which the
condition is not satisfied, up to a maximum additional interest of 1.0% per
annum of additional interest, commencing on the 31st day in such 12-month
period and ending on such date that the Shelf Registration Statement has again
been declared effective or the Prospectus again becomes usable, or the date on
which the Securities become freely tradable under the Securities Act.  For the purpose of clarification, any
additional interest payable pursuant to this Section 2(d) shall be
payable at the same time as interest on the Securities.

 

(e)           Without
limiting the remedies available to the Initial Purchaser and the Holders, the
Company and the Guarantors acknowledge that any failure by the Company or the
Guarantors to comply with their obligations under Section 2(a) and Section 2(b) hereof
may result in material irreparable injury to the Initial Purchaser or the
Holders for which there is no adequate remedy at law, that it will not be
possible to measure damages for such injuries precisely and that, in the event
of any such failure, the Initial Purchaser or any Holder may obtain such relief
as may be required to specifically enforce the Company’s and the Guarantors’
obligations under Section 2(a) and Section 2(b) hereof.

 

3.             Registration
Procedures.  (a) In connection
with their obligations pursuant to Section 2(a) and Section 2(b) hereof,
the Company and the Guarantors shall as expeditiously as possible:

 

8

 

(i)            prepare
and file with the SEC a Registration Statement on the appropriate form under
the Securities Act, which form (x) shall be selected by the Company and the
Guarantors, (y) shall, in the case of a Shelf Registration, be available for
the sale of the Registrable Securities by the Holders thereof and (z) shall
comply as to form in all material respects with the requirements of the
applicable form and include all financial statements required by the SEC to be
filed therewith; and use their reasonable best efforts to cause such
Registration Statement to become effective and remain effective for the
applicable period in accordance with Section 2 hereof;

 

(ii)           prepare
and file with the SEC such amendments and post-effective amendments to each
Registration Statement as may be necessary to keep such Registration Statement
effective for the applicable period in accordance with Section 2 hereof
and cause each Prospectus to be supplemented by any required prospectus
supplement and, as so supplemented, to be filed pursuant to Rule 424 under
the Securities Act; and keep each Prospectus current during the period
described in Section 4(3) of and Rule 174 under the Securities
Act that is applicable to transactions by brokers or dealers with respect to
the Registrable Securities or Exchange Securities;

 

(iii)          in
the case of a Shelf Registration, furnish to each Holder of Registrable
Securities, to counsel for the Initial Purchaser, to counsel for such Holders
and to each Underwriter of an Underwritten Offering of Registrable Securities,
if any, without charge, as many copies of each Prospectus, including each
preliminary Prospectus, and any amendment or supplement thereto, in order to
facilitate the sale or other disposition of the Registrable Securities
thereunder; and the Company and the Guarantors consent to the use of such
Prospectus and any amendment or supplement thereto in accordance with
applicable law by each of the Holders of Registrable Securities and any such
Underwriters in connection with the offering and sale of the Registrable
Securities covered by and in the manner described in such Prospectus or any
amendment or supplement thereto in accordance with applicable law;

 

(iv)          use
their reasonable best efforts to register or qualify the Registrable Securities
under all applicable state securities or blue sky laws of such jurisdictions as
any Holder of Registrable Securities covered by a Registration Statement shall
reasonably request in writing by the time the applicable Registration Statement
is declared effective by the SEC; cooperate with such Holders in connection
with any filings required to be made with the National Association of
Securities Dealers, Inc.; and do any and all other acts and things that
may be reasonably necessary or advisable to enable each Holder to complete the
disposition in each such jurisdiction of the Registrable Securities owned by
such Holder; provided that neither the Company nor any Guarantor shall
be required to (1) qualify as a foreign corporation or other entity or as
a dealer in securities in any such jurisdiction where it would not otherwise be

 

9

 

required to so qualify, (2) file any general consent to service of
process in any such jurisdiction or (3) subject itself to taxation in any
such jurisdiction if it is not so subject;

 

(v)           notify
counsel for the Initial Purchaser and, in the case of a Shelf Registration,
notify each Holder of Registrable Securities and counsel for such Holders
promptly and, if requested by any such Holder or counsel, confirm such advice
in writing (1) when a Registration Statement has become effective and when
any post-effective amendment thereto has been filed and becomes effective, (2) of
any request by the SEC or any state securities authority for amendments and
supplements to a Registration Statement and Prospectus or for additional
information after the Registration Statement has become effective, (3) of
the issuance by the SEC or any state securities authority of any stop order
suspending the effectiveness of a Registration Statement or the initiation of
any proceedings for that purpose, (4) if, between the effective date of a
Shelf Registration Statement and the closing of any sale of Registrable
Securities covered thereby, the representations and warranties of the Company
or any Guarantor contained in any underwriting agreement, securities sales
agreement or other similar agreement, if any, relating to an offering of such
Registrable Securities cease to be true and correct in all material respects or
if the Company or any Guarantor receives any notification with respect to the
suspension of the qualification of the Registrable Securities for sale in any
jurisdiction or the initiation of any proceeding for such purpose, (5) of
the happening of any event during the period a Shelf Registration Statement is
effective that makes any statement made in such Shelf Registration Statement or
the related Prospectus untrue in any material respect or that requires the
making of any changes in such Shelf Registration Statement or Prospectus in
order to make the statements therein not misleading and (6) of any
determination by the Company or any Guarantor that a post-effective amendment
to a Registration Statement would be appropriate;

 

(vi)          use
their reasonable best efforts to obtain the withdrawal of any order suspending
the effectiveness of a Registration Statement at the earliest possible moment
and provide immediate notice to each Holder of the withdrawal of any such
order;

 

(vii)         in
the case of a Shelf Registration, furnish to each Holder of Registrable
Securities, without charge, at least one conformed copy of each Registration
Statement and any post-effective amendment thereto (without any documents
incorporated therein by reference or exhibits thereto, unless requested);

 

(viii)        in
the case of a Shelf Registration, cooperate with the Holders of Registrable
Securities to facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold and not bearing any restrictive
legends and enable such Registrable Securities to be issued in such

 

10

 

denominations and registered in such names (consistent with the
provisions of the Indenture) as such Holders may reasonably request at least
one Business Day prior to the closing of any sale of Registrable Securities;

 

(ix)           in
the case of a Shelf Registration, upon the occurrence of any event contemplated
by Section 3(a)(v)(5) hereof, use their reasonable best efforts to
prepare and file with the SEC a supplement or post-effective amendment to such
Shelf Registration Statement or the related Prospectus or any document
incorporated therein by reference or file any other required document so that,
as thereafter delivered to purchasers of the Registrable Securities, such
Prospectus will not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading; and the Company
and the Guarantors shall notify the Holders of Registrable Securities to
suspend use of the Prospectus as promptly as practicable after the occurrence
of such an event, and such Holders hereby agree to suspend use of the
Prospectus until the Company and the Guarantors have amended or supplemented
the Prospectus to correct such misstatement or omission;

 

(x)            a
reasonable time prior to the filing of any Registration Statement, any
Prospectus, any amendment to a Registration Statement or amendment or
supplement to a Prospectus or of any document that is to be incorporated by
reference into a Registration Statement or a Prospectus after initial filing of
a Registration Statement, provide copies of such document to the Initial
Purchaser and their counsel (and, in the case of a Shelf Registration
Statement, to the Holders of Registrable Securities and their counsel) and make
such of the representatives of the Company and the Guarantors as shall be reasonably
requested by the Initial Purchaser or their counsel (and, in the case of a
Shelf Registration Statement, the Holders of Registrable Securities or their
counsel) available for discussion of such document; and the Company and the
Guarantors shall not, at any time after initial filing of a Registration
Statement, file any Prospectus or any amendment of or supplement to a
Registration Statement or a Prospectus of which the Initial Purchaser and their
counsel (and, in the case of a Shelf Registration Statement, the Holders of
Registrable Securities and their counsel) shall not have previously been
advised and furnished a copy or to which the Initial Purchaser or their counsel
(and, in the case of a Shelf Registration Statement, the Holders of Registrable
Securities or their counsel) shall object;

 

(xi)           obtain
a CUSIP number for all Exchange Securities or Registrable Securities, as the
case may be, not later than the effective date of a Registration Statement;

 

(xii)          cause
the Indenture to be qualified under the Trust Indenture Act in connection with
the registration of the Exchange Securities or Registrable Securities, as the
case may be; cooperate with the Trustee and the Holders to effect such changes
to the Indenture as may be required for the Indenture to be 

 

11

 

so qualified in accordance with the terms of the Trust Indenture Act;
and execute, and use their reasonable best efforts to cause the Trustee to
execute, all documents as may be required to effect such changes and all other
forms and documents required to be filed with the SEC to enable the Indenture
to be so qualified in a timely manner;

 

(xiii)         in
the case of a Shelf Registration, make available for inspection by a
representative of the Holders of the Registrable Securities (an “Inspector”),
any Underwriter participating in any disposition pursuant to such Shelf
Registration Statement, any attorneys and accountants designated by the Holders
of Registrable Securities and any attorneys and accountants designated by such
Underwriter, at reasonable times and in a reasonable manner, all pertinent
financial and other records, documents and properties of the Company and the
Guarantors, and cause the respective officers, directors and employees of the Company
and the Guarantors to supply all information reasonably requested by any such
Inspector, Underwriter, attorney or accountant in connection with a Shelf
Registration Statement; provided that if any such information is identified by
the Company or any Guarantor as being confidential or proprietary, each Person
receiving such information shall take such actions as are reasonably necessary
to protect the confidentiality of such information to the extent such action is
otherwise not inconsistent with, an impairment of or in derogation of the
rights and interests of any Inspector, Holder or Underwriter);

 

(xiv)        in
the case of a Shelf Registration, use their reasonable best efforts to cause
all Registrable Securities to be listed on any securities exchange or any
automated quotation system on which similar securities issued or guaranteed by
the Company or any Guarantor are then listed if requested by the Majority
Holders, to the extent such Registrable Securities satisfy applicable listing
requirements;

 

(xv)         if
reasonably requested by any Holder of Registrable Securities covered by a Shelf
Registration Statement, promptly include in a Prospectus supplement or
post-effective amendment such information with respect to such Holder as such
Holder reasonably requests to be included therein and make all required filings
of such Prospectus supplement or such post-effective amendment as soon as the
Company has received notification of the matters to be so included in such
filing; and

 

(xvi)        in
the case of a Shelf Registration, enter into such customary agreements and take
all such other actions in connection therewith (including those requested by
the Holders of a majority in principal amount of the Registrable Securities
being sold) in order to expedite or facilitate the disposition of such
Registrable Securities including, but not limited to, an Underwritten Offering
and in such connection, (1) to the extent possible, make such
representations and warranties to the Holders and any Underwriters of such
Registrable Securities with respect to the business of the Company and its

 

12

 

subsidiaries and the Registration Statement, Prospectus and documents
incorporated by reference or deemed incorporated by reference, if any, in each
case, in form, substance and scope as are customarily made by issuers to
underwriters in underwritten offerings of similar securities and confirm the
same if and when requested, (2) obtain opinions of counsel to the Company
and the Guarantors (which counsel and opinions, in form, scope and substance,
shall be reasonably satisfactory to the Holders and such Underwriters and their
respective counsel) addressed to each selling Holder and Underwriter of
Registrable Securities, covering the matters customarily covered in opinions
requested in underwritten offerings of similar securities, (3) obtain “comfort”
letters from the independent certified public accountants of the Company and
the Guarantors (and, if necessary, any other certified public accountant of any
subsidiary of the Company or any Guarantor, or of any business acquired by the
Company or any Guarantor for which financial statements and financial data are
or are required to be included in the Registration Statement) addressed to each
selling Holder and Underwriter of Registrable Securities, such letters to be in
customary form and covering matters of the type customarily covered in “comfort”
letters in connection with underwritten offerings of similar securities and (4) deliver
such documents and certificates as may be reasonably requested by the Holders
of a majority in principal amount of the Registrable Securities being sold or
the Underwriters, and which are customarily delivered in underwritten
offerings, to evidence the continued validity of the representations and
warranties of the Company and the Guarantors made pursuant to clause (1) above
and to evidence compliance with any customary conditions contained in an
underwriting agreement.

 

(b)           In
the case of a Shelf Registration Statement, the Company may require each Holder
of Registrable Securities to furnish to the Company such information regarding
such Holder and the proposed disposition by such Holder of such Registrable
Securities as the Company and the Guarantors may from time to time reasonably
request in writing.

 

(c)           In
the case of a Shelf Registration Statement, each Holder of Registrable
Securities agrees that, upon receipt of any notice from the Company and the
Guarantors of the happening of any event of the kind described in Section 3(a)(v)(3) or
3(a)(v)(5) hereof, such Holder will forthwith discontinue disposition of
Registrable Securities pursuant to the Shelf Registration Statement until such
Holder’s receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 3(a)(ix) hereof and, if so directed by the
Company and the Guarantors, such Holder will deliver to the Company and the
Guarantors all copies in its possession, other than permanent file copies then
in such Holder’s possession, of the Prospectus covering such Registrable
Securities that is current at the time of receipt of such notice.

 

(d)           If
the Company and the Guarantors shall give any notice pursuant to Section 3(c) hereof
to suspend the disposition of Registrable Securities 

 

13

 

pursuant to a Shelf Registration Statement, the Company and the
Guarantors shall extend the period during which such Shelf Registration
Statement shall be maintained effective pursuant to this Agreement by the
number of days during the period from and including the date of the giving of
such notice to and including the date when the Holders of such Registrable
Securities shall have received copies of the supplemented or amended Prospectus
necessary to resume such dispositions. The Company and the Guarantors may give
any such notice only twice during any 365-day period and any such suspensions
shall not exceed 30 days for each suspension and there shall not be more than
two suspensions in effect during any 365-day period.

 

(e)           The
Holders of Registrable Securities covered by a Shelf Registration Statement who
desire to do so may sell such Registrable Securities in an Underwritten
Offering.  In any such Underwritten
Offering, the investment bank or investment banks and manager or managers (each
an “Underwriter”) that will administer the offering will be selected by the
Holders of a majority in principal amount of the Registrable Securities
included in such offering.

 

4.             Participation
of Broker-Dealers in Exchange Offer. 
(a)  The Staff has taken the position that any broker-dealer that
receives Exchange Securities for its own account in the Exchange Offer in
exchange for Securities that were acquired by such broker-dealer as a result of
market-making or other trading activities (a “Participating Broker-Dealer”) may
be deemed to be an “underwriter” within the meaning of the Securities Act and
must deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Securities.

 

The Company and the
Guarantors understand that it is the Staff’s position that if the Prospectus
contained in the Exchange Offer Registration Statement includes a plan of
distribution containing a statement to the above effect and the means by which
Participating Broker-Dealers may resell the Exchange Securities, without naming
the Participating Broker-Dealers or specifying the amount of Exchange
Securities owned by them, such Prospectus may be delivered by Participating
Broker-Dealers to satisfy their prospectus delivery obligation under the
Securities Act in connection with resales of Exchange Securities for their own
accounts, so long as the Prospectus otherwise meets the requirements of the
Securities Act.

 

(b)           In
light of the above, and notwithstanding the other provisions of this Agreement,
the Company and the Guarantors agree to amend or supplement the Prospectus
contained in the Exchange Offer Registration Statement for a period of up to
180 days after the last Exchange Date (as such period may be extended pursuant
to Section 3(d) of this Agreement), if requested by the Initial
Purchaser or by one or more Participating Broker-Dealers, in order to expedite
or facilitate the disposition of any Exchange Securities by Participating
Broker-Dealers consistent with the positions of the Staff recited in

 

14

 

Section 4(a) above. 
The Company and the Guarantors further agree that Participating
Broker-Dealers shall be authorized to deliver such Prospectus during such
period in connection with the resales contemplated by this Section 4.

 

(c)           The
Initial Purchaser shall have no liability to the Company, any Guarantor or any
Holder with respect to any request that it may make pursuant to Section 4(b) above.

 

5.             Indemnification
and Contribution.  (a)  The
Company and each Guarantor, jointly and severally, agree to indemnify and hold
harmless each Initial Purchaser and each Holder, their respective affiliates,
directors and officers and each Person, if any, who controls any Initial Purchaser
or any Holder within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act, from and against any and all losses, claims, damages and
liabilities (including, without limitation, legal fees and other expenses
incurred in connection with any suit, action or proceeding or any claim
asserted, as such fees and expenses are incurred), that arise out of, or are
based upon, any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement or any Prospectus or any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except insofar as
such losses, claims, damages or liabilities arise out of, or are based upon,
any untrue statement or omission or alleged untrue statement or omission made
in reliance upon and in conformity with any information relating to any Initial
Purchaser or information relating to any Holder furnished to the Company in
writing through JPMorgan or any selling Holder expressly for use therein.  In connection with any Underwritten Offering
permitted by Section 3, the Company and the Guarantors, jointly and severally,
will also indemnify the Underwriters, if any, selling brokers, dealers and
similar securities industry professionals participating in the distribution,
their respective affiliates and each Person who controls such Persons (within
the meaning of the Securities Act and the Exchange Act) to the same extent as
provided above with respect to the indemnification of the Holders, if requested
in connection with any Registration Statement.

 

(b)           Each
Holder agrees, severally and not jointly, to indemnify and hold harmless the
Company, the Guarantors, the Initial Purchaser and the other selling Holders,
the directors of the Company and the Guarantors, each officer of the Company
and the Guarantors who signed the Registration Statement and each Person, if
any, who controls the Company, the Guarantors, any Initial Purchaser and any
other selling Holder within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act to the same extent as the indemnity
set forth in paragraph (a) above, but only with respect to any losses,
claims, damages or liabilities that arise out of, or are based upon, any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with any information relating to such Holder furnished
to

 

15

 

the Company in writing by such Holder expressly for use in any
Registration Statement and any Prospectus.

 

(c)           If
any suit, action, proceeding (including any governmental or regulatory investigation),
claim or demand shall be brought or asserted against any Person in respect of
which indemnification may be sought pursuant to either paragraph (a) or (b) above,
such Person (the “Indemnified Person”) shall promptly notify the Person against
whom such indemnification may be sought (the “Indemnifying Person”) in writing;
provided that the failure to notify the Indemnifying Person shall not
relieve it from any liability that it may have under this Section 5 except
to the extent that it has been materially prejudiced (through the forfeiture of
substantive rights or defenses) by such failure; and provided, further,
that the failure to notify the Indemnifying Person shall not relieve it from
any liability that it may have to an Indemnified Person otherwise than under
this Section 5.  If any such
proceeding shall be brought or asserted against an Indemnified Person and it
shall have notified the Indemnifying Person thereof, the Indemnifying Person
shall retain counsel reasonably satisfactory to the Indemnified Person to
represent the Indemnified Person and any others entitled to indemnification
pursuant to this Section 5 that the Indemnifying Person may designate in
such proceeding and shall pay the fees and expenses of such counsel related to
such proceeding, as incurred.  In any
such proceeding, any Indemnified Person shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Person unless (i) the Indemnifying Person and the Indemnified
Person shall have mutually agreed to the contrary; (ii) the Indemnifying
Person has failed within a reasonable time to retain counsel reasonably
satisfactory to the Indemnified Person; (iii) the Indemnified Person shall
have reasonably concluded that there may be legal defenses available to it that
are different from or in addition to those available to the Indemnifying
Person; or (iv) the named parties in any such proceeding (including any
impleaded parties) include both the Indemnifying Person and the Indemnified
Person and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them.  It is understood and agreed that the
Indemnifying Person shall not, in connection with any proceeding or related
proceeding in the same jurisdiction, be liable for the fees and expenses of
more than one separate firm (in addition to any local counsel) for all
Indemnified Persons, and that all such fees and expenses shall be reimbursed as
they are incurred.  Any such separate
firm (x) for any Initial Purchaser, its affiliates, directors and officers and
any control Persons of such Initial Purchaser shall be designated in writing by
JPMorgan, (y) for any Holder, its directors and officers and any control
Persons of such Holder shall be designated in writing by the Majority Holders
and (z) in all other cases shall be designated in writing by the Company.  The Indemnifying Person shall not be liable
for any settlement of any proceeding effected without its written consent, but
if settled with such consent or if there be a final judgment for the plaintiff,
the Indemnifying Person agrees to indemnify each Indemnified Person from and
against any loss or liability by reason of such settlement or judgment.

 

16

 

Notwithstanding the foregoing sentence, if at any time an Indemnified
Person shall have requested that an Indemnifying Person reimburse the
Indemnified Person for fees and expenses of counsel as contemplated by this
paragraph, the Indemnifying Person shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 30 days after receipt by the Indemnifying Person of such
request and (ii) the Indemnifying Person shall not have reimbursed the
Indemnified Person in accordance with such request prior to the date of such
settlement.  No Indemnifying Person
shall, without the written consent of the Indemnified Person, effect any
settlement of any pending or threatened proceeding in respect of which any
Indemnified Person is or could have been a party and indemnification could have
been sought hereunder by such Indemnified Person, unless such settlement (A) includes
an unconditional release of such Indemnified Person, in form and substance
reasonably satisfactory to such Indemnified Person, from all liability on
claims that are the subject matter of such proceeding and (B) does not
include any statement as to or any admission of fault, culpability or a failure
to act by or on behalf of any Indemnified Person.

 

(d)           If
the indemnification provided for in paragraphs (a) and (b) above is
unavailable to an Indemnified Person or insufficient in respect of any losses,
claims, damages or liabilities referred to therein, then each Indemnifying
Person under such paragraph, in lieu of indemnifying such Indemnified Person
thereunder, shall contribute to the amount paid or payable by such Indemnified
Person as a result of such losses, claims, damages or liabilities (i) in
such proportion as is appropriate to reflect the relative benefits received by
the Company and the Guarantors from the offering of the Securities and the
Exchange Securities, on the one hand, and by the Holders from receiving
Securities or Exchange Securities registered under the Securities Act, on the
other hand, or (ii) if the allocation provided by clause (i) is not
permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) but also the
relative fault of the Company and the Guarantors on the one hand and the
Holders on the other in connection with the statements or omissions that
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations.  The
relative fault of the Company and the Guarantors on the one hand and the
Holders on the other shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the omission
or alleged omission to state a material fact relates to information supplied by
the Company and the Guarantors or by the Holders and the parties’ relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.

 

(e)           The
Company, the Guarantors and the Holders agree that it would not be just and
equitable if contribution pursuant to this Section 5 were determined by pro
rata allocation (even if the Holders were treated as one entity for such
purpose) or by any other method of allocation that does not take account

 

17

 

of the equitable considerations referred to in paragraph (d) above.  The amount paid or payable by an Indemnified
Person as a result of the losses, claims, damages and liabilities referred to
in paragraph (d) above shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses incurred by such
Indemnified Person in connection with any such action or claim.  Notwithstanding the provisions of this Section 5,
in no event shall a Holder be required to contribute any amount in excess of
the amount by which the total price at which the Securities or Exchange
Securities sold by such Holder exceeds the amount of any damages that such
Holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission.  No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.

 

(f)            The
remedies provided for in this Section 5 are not exclusive and shall not
limit any rights or remedies that may otherwise be available to any Indemnified
Person at law or in equity.

 

(g)           The
indemnity and contribution provisions contained in this Section 5 shall
remain operative and in full force and effect regardless of (i) any
termination of this Agreement, (ii) any investigation made by or on behalf
of the Initial Purchaser or any Holder or any Person controlling any Initial
Purchaser or any Holder, or by or on behalf of the Company or the Guarantors or
the officers or directors of or any Person controlling the Company or the
Guarantors, (iii) acceptance of any of the Exchange Securities and (iv) any
sale of Registrable Securities pursuant to a Shelf Registration Statement.

 

6.             General.

 

(a)           No Inconsistent Agreements.   The Company and the Guarantors represent,
warrant and agree that (i) the rights granted to the Holders hereunder do
not in any way conflict with and are not inconsistent with the rights granted
to the holders of any other outstanding securities issued or guaranteed by the
Company or any Guarantor under any other agreement and (ii) neither the
Company nor any Guarantor has entered into, or on or after the date of this
Agreement will enter into, any agreement that is inconsistent with the rights
granted to the Holders of Registrable Securities in this Agreement or otherwise
conflicts with the provisions hereof.

 

(b)           Amendments and Waivers.   The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given unless the Company and the Guarantors have obtained the written consent
of Holders of at least a majority in aggregate principal amount of the
outstanding Registrable Securities affected by such amendment, modification,
supplement, waiver or consent; provided that no amendment, 

 

18

 

modification, supplement, waiver or consent to any departure from the
provisions of Section 5 hereof shall be effective as against any Holder of
Registrable Securities unless consented to in writing by such Holder.  Any amendments, modifications, supplements,
waivers or consents pursuant to this Section 6(b) shall be by a
writing executed by each of the parties hereto.

 

(c)           Notices.  All notices
and other communications provided for or permitted hereunder shall be made in
writing by hand-delivery, registered first-class mail, telex, telecopier, or
any courier guaranteeing overnight delivery (i) if to a Holder, at the
most current address given by such Holder to the Company by means of a notice
given in accordance with the provisions of this Section 6(c), which
address initially is, with respect to the Initial Purchaser, the address set
forth in the Purchase Agreement; (ii) if to the Company and the
Guarantors, initially at the Company’s address set forth in the Purchase
Agreement and thereafter at such other address, notice of which is given in
accordance with the provisions of this Section 6(c); and (iii) to
such other persons at their respective addresses as provided in the Purchase
Agreement and thereafter at such other address, notice of which is given in
accordance with the provisions of this Section 6(c).  All such notices and communications shall be
deemed to have been duly given: at the time delivered by hand, if personally
delivered; five Business Days after being deposited in the mail, postage
prepaid, if mailed; when answered back, if telexed; when receipt is
acknowledged, if telecopied; and on the next Business Day if timely delivered
to an air courier guaranteeing overnight delivery.  Copies of all such notices, demands or other
communications shall be concurrently delivered by the Person giving the same to
the Trustee, at the address specified in the Indenture.

 

(d)           Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors, assigns and transferees of each
of the parties, including, without limitation and without the need for an
express assignment, subsequent Holders; provided that nothing herein
shall be deemed to permit any assignment, transfer or other disposition of
Registrable Securities in violation of the terms of the Purchase Agreement or
the Indenture.  If any transferee of any
Holder shall acquire Registrable Securities in any manner, whether by operation
of law or otherwise, such Registrable Securities shall be held subject to all
the terms of this Agreement, and by taking and holding such Registrable
Securities such Person shall be conclusively deemed to have agreed to be bound
by and to perform all of the terms and provisions of this Agreement and such
Person shall be entitled to receive the benefits hereof.  The Initial Purchaser (in its capacity as
Initial Purchaser) shall have no liability or obligation to the Company or the
Guarantors with respect to any failure by a Holder to comply with, or any
breach by any Holder of, any of the obligations of such Holder under this
Agreement.

 

(e)           Third Party Beneficiaries. 
Each Holder shall be a third party beneficiary to the agreements made
hereunder between the Company and the

 

19

 

Guarantors, on the one hand, and the Initial Purchaser, on the other
hand, and shall have the right to enforce such agreements directly to the
extent it deems such enforcement necessary or advisable to protect its rights
or the rights of other Holders hereunder.

 

(f)            Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.

 

(g)           Headings.  The
headings in this Agreement are for convenience of reference only, are not a
part of this Agreement and shall not limit or otherwise affect the meaning
hereof.

 

(h)           Governing Law.  This
Agreement shall be governed by and construed in accordance with the laws of the
State of New York.

 

(j)            Miscellaneous.  This Agreement contains the entire agreement
between the parties relating to the subject matter hereof and supersedes all
oral statements and prior writings with respect thereto.  If any term, provision, covenant or
restriction contained in this Agreement is held by a court of competent
jurisdiction to be invalid, void or unenforceable or against public policy, the
remainder of the terms, provisions, covenants and restrictions contained herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated.  The Company, the Guarantors
and the Initial Purchaser shall endeavor in good faith negotiations to replace
the invalid, void or unenforceable provisions with valid provisions the
economic effect of which comes as close as possible to that of the invalid,
void or unenforceable provisions.

 

20

 

IN WITNESS WHEREOF, the
parties have executed this Agreement as of the date first written above.

 

	
   

  	
  CLAYTON WILLIAMS ENERGY, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ L. Paul Latham

  	
   

  
	
   

  	
  Name: L. Paul Latham

  
	
   

  	
  Title: Vice President and COO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  WARRIOR GAS CO.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ L. Paul Latham

  	
   

  
	
   

  	
  Name: L. Paul Latham

  
	
   

  	
  Title: Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CWEI ACQUISITIONS INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ L. Paul Latham

  	
   

  
	
   

  	
  Name: L. Paul Latham

  
	
   

  	
  Title: President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CWEI ROMERE PASS ACQUISITION

  
	
   

  	
  CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ L. Paul Latham

  	
   

  
	
   

  	
  Name: L. Paul Latham

  
	
   

  	
  Title: President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SOUTHWEST ROYALTIES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ L. Paul Latham

  	
   

  
	
   

  	
  Name: L. Paul Latham

  
	
   

  	
  Title: President

  

 

21

 

	
   

  	
  ROMERE PASS ACQUISITION, L.L.C.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ L. Paul Latham

  	
   

  
	
   

  	
  Name: L. Paul Latham

  
	
   

  	
  Title: President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BLUE HEEL COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ L. Paul Latham

  	
   

  
	
   

  	
  Name: L. Paul Latham

  
	
   

  	
  Title: President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  TEX-HAL PARTNERS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ L. Paul
  Latham

  	
   

  
	
   

  	
  Name: L. Paul Latham

  
	
   

  	
  Title: President

  

 

22

 

Confirmed and accepted as
of the date first above written:

 

	
  J.P. MORGAN SECURITIES INC.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By

  	
  /s/ Adam Bernard

  	
   

  	
   

  
	
   

  	
  Authorized Signatory

  	
   

  	
   

  

 

23

 

Schedule 1

 

	
  Guarantors

  	
   

  	
  State
  of 

  Incorporation or 

  Organization

  
	
   

  	
   

  	
   

  
	
  Warrior Gas Co.

  	
   

  	
  Texas

  
	
   

  	
   

  	
   

  
	
  CWEI
  Acquisitions Inc.

  	
   

  	
  Delaware

  
	
   

  	
   

  	
   

  
	
  CWEI Romere Pass
  Acquisition Corp.

  	
   

  	
  Delaware

  
	
   

  	
   

  	
   

  
	
  Southwest
  Royalties, Inc.

  	
   

  	
  Delaware

  
	
   

  	
   

  	
   

  
	
  Romere Pass Acquisition,
  L.L.C.

  	
   

  	
  Delaware

  
	
   

  	
   

  	
   

  
	
  Blue Heel
  Company

  	
   

  	
  Delaware

  
	
   

  	
   

  	
   

  
	
  Tex-Hal
  Partners, Inc.

  	
   

  	
  Delaware

  

 

24

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