Document:

CERTIFICATE OF DESIGNATION

                                       OF

                10% SENIOR REDEEMABLE CONVERTIBLE PREFERRED STOCK

                                       OF

                                DUNE ENERGY, INC.

             Pursuant to Section 151 of the General Corporation Law
                            of the State of Delaware

      DUNE ENERGY, INC., a Delaware corporation (the "COMPANY"), does hereby
certify that pursuant to the authority expressly granted to and vested in the
Board of Directors by the provisions of Article Fourth of the Amended and
Restated Certificate of Incorporation of the Company, as amended from time to
time (the "CERTIFICATE OF INCORPORATION"), and pursuant to Section 151 of the
General Corporation Law of the State of Delaware (the "DGCL"), the Board of
Directors (the "BOARD OF DIRECTORS") by resolution adopted on May 1, 2007, duly
approved and adopted the following resolution, which resolution remains in full
force and effect on the date hereof:

      RESOLVED, that pursuant to the authority vested in the Board of Directors
by the Certificate of Incorporation, the Board of Directors hereby creates a
series of preferred stock of the Company and hereby states that the powers,
designations, preferences and relative, participating, optional or other special
rights of which, and qualifications, limitations or restrictions thereof, shall
be as follows:

      (1)   Designation and Amount. There shall be created from the 1,000,000
            shares of preferred stock, par value $.001 per share, of the Company
            authorized to be issued pursuant to the Certificate of
            Incorporation, a series of preferred stock, designated as the "10%
            Senior Redeemable Convertible Preferred Stock," par value $.001 per
            share (the "REDEEMABLE CONVERTIBLE PREFERRED STOCK"), and the number
            of shares of such series shall be 750,000. Such number of shares may
            be decreased by resolution of the Board of Directors; provided that
            no decrease shall reduce the number of shares of Redeemable
            Convertible Preferred Stock to a number less than that of the shares
            of Redeemable Convertible Preferred Stock then outstanding plus the
            number of shares potentially issuable as dividend payments on the
            Redeemable Convertible Preferred Stock pursuant to Section 3 of this
            Certificate of Designations.

      (2)   Ranking. The Redeemable Convertible Preferred Stock will, with
            respect to both dividend rights and rights upon the liquidation,
            winding-up or dissolution of the Company rank (i) senior to all
            Junior Stock, (ii) on a parity with all Parity Stock and (iii)
            junior to all Senior Stock.

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      (3)   Dividends.

      (a)   The holders of shares of outstanding Redeemable Convertible
            Preferred Stock shall be entitled, when, as and if declared by the
            Board of Directors, to receive cumulative dividends at the rate per
            annum of 10% per share on the Liquidation Preference (equivalent to
            $100 per annum per share), subject to adjustment as provided herein,
            payable quarterly in arrears (the "DIVIDEND RATE"). Dividends
            payable for each full Dividend Period will be computed by dividing
            the Dividend Rate by four and shall be payable in arrears on each
            Dividend Payment Date for the Dividend Period ending immediately
            prior to such Dividend Payment Date, to the holders of record of
            Redeemable Convertible Preferred Stock at the close of business on
            the Record Date applicable to such Dividend Payment Date. Such
            dividends shall be cumulative from the most recent date as to which
            dividends shall have been paid or, if no dividends have been paid,
            from the Issue Date (whether or not in any Dividend Period or
            Periods there shall be funds of the Company legally available for
            the payment of such dividends) and shall accrue on a day-to-day
            basis, whether or not earned or declared, from and after the Issue
            Date. Dividends payable for any partial Dividend Period, including
            the initial Dividend Period ending immediately prior to September 1,
            2007, shall be computed on the basis of days elapsed over a 360-day
            year consisting of twelve 30-day months. Accumulations of dividends
            on shares of Redeemable Convertible Preferred Stock shall not bear
            interest. The initial dividend on the Redeemable Convertible
            Preferred Stock for the first Dividend Period, commencing on the
            Issue Date (assuming an Issue Date of May 15, 2007 and a
            then-applicable Dividend Rate of 10% per annum), will be $29.44 per
            share, subject to adjustment as provided for herein, and will be
            payable, when, as and if declared, on September 1, 2007. Each
            subsequent quarterly dividend on the Redeemable Convertible
            Preferred Stock, when, as and if declared, will be $25.00 per share,
            subject to adjustment as provided for herein.

      (b)   No dividend will be declared or paid upon, or any sum set apart for
            the payment of dividends upon, any outstanding share of the
            Redeemable Convertible Preferred Stock with respect to any Dividend
            Period unless all dividends for all preceding Dividend Periods have
            been declared and paid or declared and a sufficient sum or number of
            shares of Redeemable Convertible Preferred Stock or Common Stock, if
            permitted under Section 3A, has been set apart for the payment of
            such dividend upon all outstanding shares of Redeemable Convertible
            Preferred Stock.

      (c)   Holders of shares of Redeemable Convertible Preferred Stock shall
            not be entitled to any dividends on the Redeemable Convertible
            Preferred Stock, whether payable in cash, property or stock, in
            excess of full cumulative dividends. No interest, or sum of money in
            lieu of interest, shall be payable in respect of any dividend
            payment or payments on the Redeemable Convertible Preferred Stock
            which may be in arrears.

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      (3A)  Method of Payment of Dividends.

      (a)   Subject to the restrictions set forth herein, dividends on the
            Redeemable Convertible Preferred Stock may be paid, as determined in
            the Company's sole discretion:

            (i)   in cash;

            (ii)  by delivery of shares of Redeemable Convertible Preferred
                  Stock;

            (iii) by delivery of shares of Common Stock, provided that (A) the
                  Volume Weighted Average Price per share of Common Stock for
                  the 15 Trading Days immediately prior to the applicable
                  Dividend Payment Date equals or exceeds $2.50, or $1.75 in the
                  event the Conversion Price is reset in accordance with Section
                  15(d), or $1.40 in the event that the Conversion Price is
                  reset in accordance with Section 15(d) and the Company fails
                  to redeem shares of Redeemable Convertible Preferred Stock
                  resulting in a further adjustment to the Conversion Price in
                  accordance with Section 15(e), and (B) the Company provides
                  written notice to the Holders, either by mail, facsimile,
                  press release or other publication, 10 Trading Days prior to
                  the applicable Record Date, of its intention, subject to the
                  condition set form in clause (A) above, to pay the dividends
                  payable on such Dividend Payment Date in shares of Common
                  Stock; or

            (iv)  through any combination of cash, shares of our Redeemable
                  Convertible Preferred Stock and/or Common Stock (subject to
                  the satisfaction of the conditions set forth in Section
                  (3A)(a)(iii)).

      (b)   Shares of Redeemable Convertible Preferred Stock issued in payment
            or partial payment of a dividend shall be valued at the Liquidation
            Preference. Shares of Common Stock issued in payment or partial
            payment of a dividend shall be valued for such purpose at 97% of the
            Market Value at the time of such payment.

      (c)   Dividend payments on the Redeemable Convertible Preferred Stock
            shall be made in cash, except to the extent the Company elects to
            make all or any portion of such payment in shares of Redeemable
            Convertible Preferred Stock and/or shares of Common Stock by giving
            notice to Holders of such election and the portion of such payment
            that will be made in cash, the portion of such payment that will be
            made in Redeemable Convertible Preferred Stock and the portion of
            such payment that will be made in Common Stock, 10 Trading Days
            prior to the Record Date for such dividend.

      (d)   No fractional shares of Redeemable Preferred Stock or Common Stock
            will be delivered to Holders in payment or partial payment of a
            dividend. A cash adjustment will be paid to each Holder that would
            otherwise be entitled to a fraction of a share of Redeemable
            Convertible Preferred Stock or Common Stock. Any portion of any such
            payment that is declared and not paid through the delivery of
            Redeemable Convertible Preferred Stock or Common Stock will be paid

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            in cash based on the Liquidation Preference, in the case of a
            fractional share of Redeemable Convertible Preferred Stock, or the
            Closing Price on the Trading Day immediately preceding the Dividend
            Payment Date, in the case of a fractional share of Common Stock;
            provided, however, in the event that the Company is not permitted by
            the terms of any outstanding Indebtedness to pay the amount required
            under this Section (3A)(d) in cash, the Company will (i) in the case
            of dividends paid in shares of Common Stock, deliver one share of
            Common Stock in lieu of delivery of a fractional share of Common
            Stock; and (ii) in the case of dividends paid in shares of
            Redeemable Convertible Preferred Stock, deliver shares of Common
            Stock, valued at 97% of the Market Value at the time of such
            payment, in lieu of delivery of a fractional share of Redeemable
            Convertible Preferred Stock, and will deliver one share of Common
            Stock in lieu of delivery of any resulting fractional share of
            Common Stock.

      (e)   To the extent that the Company determines that a Shelf Registration
            Statement is required in connection with the issuance of, or for
            resales of, Common Stock or Redeemable Convertible Preferred Stock,
            or both, issued as payment of a dividend, including dividends paid
            in connection with a conversion of the Redeemable Convertible
            Preferred Stock, the Company will use its reasonable best efforts to
            file and maintain the effectiveness of such a Shelf Registration
            Statement until such time as all such shares of Common Stock and
            Redeemable Convertible Preferred Stock have been resold thereunder.

      (4)   Payment Restrictions.

            (a)   Unless all accrued, cumulated and unpaid dividends on the
                  Redeemable Convertible Preferred Stock for all prior Dividend
                  Periods shall have been paid in full, or shall have been
                  declared and a sum of cash or number of shares of Common Stock
                  or Redeemable Convertible Preferred Stock sufficient for the
                  payment thereof set aside, the Company may not:

                        (i) declare or pay any dividend or make any distribution
                            of assets on any Junior Stock, other than dividends
                            or distributions in the form of Junior Stock and
                            cash solely in lieu of fractional shares in
                            connection with any such dividend or distribution;

                        (ii) redeem, purchase or otherwise acquire any shares of
                             Junior Stock or pay or make any monies available
                             for a sinking fund for such shares of Junior
                             Stock, other than (A) upon conversion or exchange
                             for other Junior Stock or (B) the purchase for
                             cash of fractional interests in shares of any
                             Junior Stock pursuant to the conversion or
                             exchange provisions of such Junior Stock;

                        (iii) declare or pay any dividend or make any
                              distribution of assets on any shares of Parity
                              Stock, other than dividends or distributions in
                              the form of Parity Stock or Junior Stock and cash
                              solely in lieu of fractional shares in connection
                              with any such dividend or distribution; or

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                        (iv) redeem, purchase or otherwise acquire any shares of
                             Parity Stock, except upon conversion into or
                             exchange for other Parity Stock or Junior Stock
                             and cash solely in lieu of fractional shares in
                             connection with any such conversion or exchange;
                             provided, however, that in the case of a
                             redemption, purchase or other acquisition of
                             Parity Stock upon conversion into or exchange for
                             shares of other Parity Stock (A) the aggregate
                             amount of the Liquidation Preference of such other
                             Parity Stock does not exceed the aggregate amount
                             of the liquidation preference, plus accrued,
                             cumulated and unpaid dividends, of the shares of
                             Parity Stock that are converted into or exchanged
                             for such shares of other Parity Stock, (B) the
                             aggregate number of shares of Common Stock
                             issuable upon conversion, redemption or exchange
                             of such other Parity Stock does not exceed the
                             aggregate number of shares of Common Stock
                             issuable upon conversion, redemption or exchange
                             of the shares of Parity Stock that are converted
                             into or exchanged for such shares of other Parity
                             Stock and (C) such other shares of other Parity
                             Stock contain terms and conditions (including,
                             without limitation, with respect to the payment of
                             dividends, dividend rates, liquidation
                             preferences, voting and representation rights,
                             payment restrictions, anti-dilution rights, change
                             of control rights, covenants, remedies and
                             conversion and redemption rights) that are not in
                             the good faith judgment of the Board of Directors
                             materially less favorable, taken as a whole, to
                             the Company or the Holders than those contained in
                             the shares of Parity Stock that are converted or
                             exchanged for such shares of other Parity Stock.

      (5)   Voting Rights.

            (a)   The shares of Redeemable Convertible Preferred Stock shall
                  have no voting rights except as set forth below or as
                  otherwise required by Delaware law from time to time:

                  (i) If and whenever at any time or times a Voting Rights
                      Triggering Event occurs, then the holders of shares of
                      Redeemable Convertible Preferred Stock, voting as a single
                      class with any other Parity Stock having similar voting
                      rights (together, the "VOTING RIGHTS CLASS"), will be
                      entitled at the next regular or special meeting of
                      stockholders of the Company to elect two additional
                      directors of the Company. Upon the election of any such
                      additional directors, the number of directors that
                      comprise the Board of Directors shall be increased by such
                      number of additional directors.

                  (ii) Such voting rights may be exercised at a special meeting
                       of the holders of the shares of the Voting Rights Class,

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                       called as hereinafter provided, or at any annual meeting
                       of stockholders of the Company held for the purpose of
                       electing directors, and thereafter at each such annual
                       meeting until such time as all dividends in arrears on
                       any shares of the Voting Rights Class shall have been
                       paid in full, or the redemption price for shares of
                       Redeemable Convertible Preferred Stock required to be
                       redeemed pursuant to Section 9 or 12 hereof shall have
                       been paid in full (the "CONTROL PERIOD"), at which time
                       or times such voting rights and the term of the
                       directors elected pursuant to Section 5(a)(i) shall
                       terminate. During the Control Period, the Voting Rights
                       Class shall continue to have all rights to which they
                       are entitled as Holders, including but not limited to,
                       the payment of Dividends.

                  (iii) At any time when such voting rights shall have vested in
                        the holders of any shares of the Voting Rights Class, an
                        Officer of the Company may call, and, upon written
                        request of the record holders of shares of the Voting
                        Rights Class representing at least twenty- five percent
                        (25%) of the voting power of the then-outstanding shares
                        of the Voting Rights Class, addressed to the Secretary
                        of the Company, shall call, a special meeting of the
                        holders of shares of the Voting Rights Class. Such
                        meeting shall be held at the earliest practicable date
                        upon the notice required for annual meetings of
                        stockholders at the place for holding annual meetings of
                        stockholders of the Company, or, if none, at a place
                        designated by the Board of Directors. Notwithstanding
                        the provisions of this Section 5(a)(iii), no such
                        special meeting shall be called during a period within
                        the 60 days immediately preceding the date fixed for the
                        next annual meeting of stockholders of the Company, in
                        which such case the election of directors pursuant to
                        Section 5(a)(i) shall be held at such annual meeting of
                        stockholders.

                  (iv) At any meeting held for the purpose of electing directors
                       at which the holders of shares of the Voting Rights
                       Class shall have the right to elect directors as
                       provided herein, the presence in person or by proxy of
                       the holders of shares representing more than fifty
                       percent (50%) in voting power of the then outstanding
                       shares of the Voting Rights Class shall be required and
                       shall be sufficient to constitute a quorum of such class
                       for the election of directors by such class. The
                       affirmative vote of the holders of shares constituting a
                       majority of the shares of the Voting Rights Class
                       present at such meeting, in person or by proxy, shall be
                       sufficient to elect any such director.

                  (v) Any director elected pursuant to the voting rights created
                      under this Section 5(a) shall hold office until the next
                      annual meeting of stockholders (unless such term has
                      previously terminated pursuant to Section 5(a)(ii)) and

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                      any vacancy in respect of any such director shall be
                      filled only by vote of the remaining director so elected
                      by the holders of shares of the Voting Rights Class, or if
                      there be no such remaining director, by the then-holders
                      of shares of the Voting Rights Class at a special meeting
                      called in accordance with the procedures set form in this
                      Section 5, or, if no such special meeting is called, at
                      the next annual meeting of stockholders of the Company. If
                      all accrued, cumulated and unpaid dividends in default on
                      the Voting Rights Class have been paid in full, or the
                      redemption price for shares of Redeemable Convertible
                      Preferred Stock required to be redeemed pursuant to
                      Section 9 or 12 hereof shall have been paid in full, as
                      applicable, then the terms of office of the directors
                      elected pursuant to Section 5(a) by holders of the Voting
                      Rights Class shall forthwith expire, and the number of
                      directors constituting the Board of Directors shall,
                      without further action, be reduced by two.

                  (vi) So long as any shares of Redeemable Convertible Preferred
                       Stock remain outstanding, unless a greater percentage
                       shall then be required by law, the Company shall not,
                       without the affirmative vote or consent of the Holders
                       of at least 66-2/3% of the then-outstanding Redeemable
                       Convertible Preferred Stock, create, authorize or issue
                       any class or series of Senior Stock or Parity Stock (or
                       any security convertible into Senior Stock or Parity
                       Stock). So long as any shares of Redeemable Convertible
                       Preferred Stock remain outstanding, unless a greater
                       percentage shall then be required by law, the Company
                       shall not, without the affirmative vote or consent of
                       the Holders of at least 66-2/3% of the outstanding
                       Redeemable Convertible Preferred Stock, amend the
                       Certificate of Incorporation or me Certificate of
                       Designations, whether by merger, consolidation,
                       combination or otherwise, in a manner that would
                       adversely affect the rights of the Holders. Unless a
                       greater percentage shall then be required by law,
                       compliance by the Company with the covenants set forth
                       in Section 16, 17 or 19 may be waived by the affirmative
                       vote or consent of the Holders of at least 66-2/3% of
                       the then-outstanding Redeemable Convertible Preferred
                       Stock.

                  (vii) In exercising the voting rights set forth in this
                        Section 5(a), each share of Redeemable Convertible
                        Preferred Stock shall be entitled to one vote. In any
                        case where the Holders of the Redeemable Convertible
                        Preferred Stock are entitled to vote as members of a
                        Voting Rights Class with holders of shares of any other
                        Parity Stock having similar voting rights, each class or
                        series shall have a number of votes proportionate to the
                        aggregate Liquidation Preference of its outstanding
                        shares.

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            (b)   The Company may, without the consent of the holders of
                  Redeemable Convertible Preferred Stock, and in taking such
                  actions the Company shall not be deemed to have affected
                  adversely the rights, preferences, privileges or voting rights
                  of holders of shares of Redeemable Convertible Preferred
                  Stock, (i) authorize, increase the authorized amount of, or
                  issue any class or series of Junior Stock or (ii) amend, alter
                  or repeal any of the provisions of the Certificate of
                  Incorporation or this Certificate of Designations in
                  connection with any merger or consolidation of the Company of
                  the type described in Section 15(g)(i) hereof or any statutory
                  exchange of securities of the Company with another Person of
                  the type described in Section 15(g)(iv) hereof, provided,
                  however, that, subject to Section 12 hereof, in the event the
                  Company does not survive the transaction, the shares of the
                  Redeemable Convertible Preferred Stock will become shares of
                  the successor Person, having in respect of such successor
                  Person the same rights, preferences or voting powers of the
                  shares of the Redeemable Convertible Preferred Stock
                  immediately prior to the consummation of such merger,
                  consolidation, or statutory exchange except that they shall be
                  convertible into the kind and amount of net cash, securities
                  and other property as determined in accordance with Section
                  15(g) hereof; and provided further, however, that, following
                  any such merger, consolidation or statutory exchange, such
                  successor Person shall succeed to and be substituted for the
                  Company with respect to, and may exercise all of the rights
                  and powers of the Company under, this Certificate of
                  Designations and the Redeemable Convertible Preferred Stock.

      (6)   Liquidation, Dissolution or Winding Up.

            (a)   In the event of any liquidation, winding-up or dissolution of
                  the Company, whether voluntary or involuntary, subject to the
                  rights of holders of any outstanding Senior Stock or Parity
                  Stock, each Holder shall be entitled to receive and to be paid
                  out of the assets of the Company available for distribution to
                  its stockholders the Liquidation Preference (subject to
                  adjustment for stock splits, combinations or reclassifications
                  of the Redeemable Convertible Preferred Stock) plus all
                  accrued, cumulated and unpaid dividends thereon in preference
                  to the holders of, and before any payment or distribution is
                  made on, any Junior Stock, including, without limitation, on
                  any Common Stock.

            (b)   Neither the sale, conveyance, exchange or transfer (for cash,
                  shares of stock, securities or other consideration) of all or
                  substantially all the assets or business of the Company (other
                  than in connection with the liquidation, winding-up or
                  dissolution of its business) nor the merger or consolidation
                  of the Company into or with any other Person shall be deemed
                  to be a liquidation, winding-up or dissolution, voluntary or
                  involuntary, for the purposes of this Section 6.

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            (c)   After the payment to the Holders of the full preferential
                  amounts provided for in this Section 6, the Holders as such
                  shall have no right or claim to any of the remaining assets of
                  the Company.

            (d)   In the event the assets of the Company available for
                  distribution to the Holders upon any liquidation, winding-up
                  or dissolution of the Company, whether voluntary or
                  involuntary, shall be insufficient to pay in full all amounts
                  to which such holders are entitled pursuant to Section 6(a),
                  no such distribution shall be made on account of any shares of
                  Parity Stock upon such liquidation, dissolution or winding-up
                  unless proportionate distributable amounts shall be paid on
                  account of the shares of Redeemable Convertible Preferred
                  Stock, ratably, in proportion to the full distributable
                  amounts for which holders of all Redeemable Convertible
                  Preferred Stock and of any Parity Stock are entitled upon such
                  liquidation, winding-up or dissolution.

      (7)   Conversion at the Option of the Holder.

            (a)   Each Holder shall have the right, at any time, at its option,
                  on the day following the 21st day after the Company mails an
                  information statement to all holders of its Common Stock
                  notifying them that the holder of a majority of the Company's
                  Common Stock consented to the conversion of the Redeemable
                  Convertible Preferred Stock into Common Stock at the option of
                  the Holders into approximately 333.33 shares of the Company's
                  Common Stock based on the Conversion Price, subject to
                  adjustment as set forth herein to convert, subject to the
                  terms and provisions of this Section 7, any or all of such
                  Holder's shares of Redeemable Convertible Preferred Stock by
                  providing written notice to the Company and the Transfer Agent
                  as provided in this Section 7. In such case, the shares of
                  Redeemable Convertible Preferred Stock shall be converted into
                  such whole number of shares of Common Stock as is equal to the
                  product of the number of shares of Redeemable Convertible
                  Preferred Stock being so converted multiplied by the quotient
                  of (i) the Liquidation Preference divided by (ii) the
                  Conversion Price then in effect, with any resulting fractional
                  shares of Common Stock to be settled in accordance with
                  Section 14.

            (b)   Any written notice of conversion pursuant to this Section 7
                  shall be duly executed by the Holder, and specify:

                  (i) the number of shares of Redeemable Convertible Preferred
                      Stock to be converted;

                  (ii) the name(s) in which such Holder desires the shares of
                       Common Stock issuable upon conversion to be registered
                       and whether such shares of Common Stock are to be issued
                       in book entry or certificated form (subject to
                       compliance with the other provisions of this Certificate

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                       of Designations and the applicable rules of the Transfer
                       Agent and the Depositary and applicable legal
                       requirements if any of such shares are to be issued in a
                       name other than the name of the Holder); and

                  (iii) any other transfer forms, tax forms or other relevant
                        documentation required and specified by the Company or
                        the Transfer Agent, if necessary, to effect the
                        conversion.

            (c)   If specified by the Holder in the notice of conversion that
                  shares of Common Stock issuable upon conversion of the
                  Redeemable Convertible Preferred Stock shall be issued to a
                  Person other than the Holder surrendering the shares of
                  Redeemable Convertible Preferred Stock being converted, the
                  Holder shall pay or cause to be paid any transfer or similar
                  taxes payable in connection with the shares of Common Stock so
                  issued.

            (d)   Upon receipt by the Transfer Agent of a completed and duly
                  executed notice of conversion as set forth in Section 7(b),
                  compliance with Section 7(c), if applicable, and upon
                  surrender of a certificate representing share(s) of Redeemable
                  Convertible Preferred Stock to be converted (if held in
                  certificated form) and any payment required by Section 7(f),
                  the Company shall, within three Business Days or as soon as
                  possible thereafter, issue and shall instruct the Transfer
                  Agent to register, the number of shares of Common Stock to
                  which such Holder shall be entitled upon conversion in the
                  name(s) specified by such Holder in the notice of conversion.
                  If a Holder elects to hold its shares of Common Stock issuable
                  upon conversion of the Redeemable Convertible Preferred Stock
                  in certificated form (if such is permitted by the Certificate
                  of Designations and the applicable rules of the Transfer Agent
                  and the Depositary), the Company shall promptly send or cause
                  to be sent, by hand delivery (with receipt to be acknowledged)
                  or by first-class mail, postage prepaid, to such Holder, at
                  the address designated by such Holder in the written notice of
                  conversion, a certificate or certificates representing the
                  number of shares of Common Stock to which such Holder shall be
                  entitled upon conversion. In the event that there shall have
                  been surrendered a certificate or certificates representing
                  shares of Redeemable Convertible Preferred Stock, only part of
                  which are to be converted, the Company shall issue and deliver
                  to such Holder or such Holder's designee in the manner
                  provided in the immediately preceding sentence a new
                  certificate or certificates representing the number of shares
                  of Redeemable Convertible Preferred Stock that shall not have
                  been converted, or shall instruct the Transfer Agent to
                  register the number of such Holder's shares of Redeemable
                  Convertible Preferred Stock that shall not have been converted
                  in the name(s) specified by such Holder in the notice of
                  conversion.

            (e)   The issuance by the Company of shares of Common Stock upon a
                  conversion of shares of Redeemable Convertible Preferred Stock
                  in accordance with the terms hereof shall be deemed effective

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                  immediately prior to the close of business on the day (the
                  "OPTIONAL CONVERSION DATE") of receipt by the Transfer Agent
                  of the notice of conversion and other documents, if any, set
                  forth in Section 7(b) hereof, compliance with Section 7(c), if
                  applicable, and the surrender by such Holder or such Holder's
                  designee of the certificate or certificates representing the
                  shares of Redeemable Convertible Preferred Stock to be
                  converted (if held in certificated form), duly assigned or
                  endorsed for transfer to the Company (or accompanied by duly
                  executed stock powers relating thereto).

            (f)   A Holder at the close of business on a Record Date will be
                  entitled to receive the dividend payment on such shares of the
                  Redeemable Convertible Preferred Stock on the corresponding
                  Dividend Payment Date notwithstanding the conversion of such
                  shares following such date or the Company's default in payment
                  of the Dividend due on that Dividend Payment Date. Shares of
                  Redeemable Convertible Preferred Stock surrendered for
                  conversion during the period between the close of business on
                  any Record Date and the close of business on the Business Day
                  immediately preceding the applicable Dividend Payment Date
                  must be accompanied by payment of an amount equal to the
                  dividend payable on such shares on that Dividend Payment Date,
                  provided that if the Company has exercised set forth in
                  Section 10, no such payment is required. A Holder on a Record
                  Date who (or whose transferee) tenders any shares for
                  conversion on the corresponding Dividend Payment Date is
                  entitled to receive the dividend payable on the Redeemable
                  Convertible Preferred Stock on that date, and the converting
                  Holder need not include payment in the amount of such dividend
                  upon surrender of shares of Redeemable Convertible Preferred
                  Stock for conversion. Notwithstanding the foregoing, if a
                  Holder has surrendered its shares of the Redeemable
                  Convertible Preferred Stock for conversion during the period
                  between the close of business on any Record Date and the
                  opening of business on the corresponding Dividend Payment
                  Date, and the Company has exercised its redemption right
                  pursuant to Section 10 with respect to such shares of
                  Redeemable Convertible Preferred Stock during such period or
                  on such corresponding Dividend Payment Date, or if the Company
                  has specified a Change of Control Purchase Date during such
                  period or on such corresponding Dividend Payment Date pursuant
                  to Section 12, a Holder who tenders such shares for conversion
                  will receive the dividend payable on such Dividend Payment
                  Date and need not include payment of the amount of such
                  dividend upon surrender of such shares of Redeemable
                  Convertible Preferred Stock for conversion.

            (g)   Except as described in Section 7(f), upon any optional
                  conversion of the Redeemable Convertible Preferred Stock, the
                  Company will make no payment or allowance for unpaid
                  dividends, whether or not in arrears, on the Redeemable
                  Convertible Preferred Stock surrendered for conversion or for
                  dividends on the shares of Common Stock issued upon
                  conversion.

                                       11
<PAGE>

      (8)   Conversion prior to June 1, 2010

            (a)   In the event a Holder elects to convert Preferred Stock prior
                  to June 1, 2010, such Holder shall be entitled to receive a
                  make-whole premium. This amount will consist of the present
                  value of all required Dividends on the Preferred Stock as if
                  paid in cash from the date of such conversion through June 1,
                  2010 (including any accrued but unpaid dividends), computed
                  using a discount rate equal to the Reinvestment Yield
                  determined on the date of conversion (the "CONVERSION
                  MAKE-WHOLE AMOUNT"). The Company shall have 30 days from the
                  date of conversion to pay the Conversion Make-Whole Amount.

            (b)   Such payment shall be payable, at the Company's option, in
                  cash, shares of the Company's Common Stock, or a combination
                  of cash and shares. Any such shares of the Company's common
                  stock will be valued at the Volume Weighted Average Price for
                  the 10 consecutive trading days ending the last trading day
                  before the date upon which a Holder delivers a notice of such
                  conversion and the number of shares of the Company's Common
                  Stock to be delivered to Holders in satisfaction of such stock
                  payment election will be at a 10% discount to the stock price.

      (9)   Mandatory Redemption

            (a)   On December 1, 2012 the "MANDATORY REDEMPTION DATE"), each
                  Holder of Redeemable Convertible Preferred Stock will have the
                  right to require the Company to redeem, in cash, from any
                  source of funds legally available therefor and subject to the
                  terms of any of the Company's Indebtedness, all or any of such
                  Holder's shares of Redeemable Convertible Preferred Stock, at
                  a cash price per share (the "MANDATORY REDEMPTION PRICE,")
                  equal to the sum of the Liquidation Preference plus an amount
                  equal to all accrued, cumulated and unpaid dividends on one
                  share of Redeemable Convertible Preferred Stock, whether or
                  not declared prior to that date, for the then-current Dividend
                  Period through the Mandatory Redemption Date and all prior
                  dividend periods (other than previously declared dividends on
                  shares of Redeemable Convertible Preferred Stock payable to
                  holders of record as of a prior date), provided that the
                  Company is legally permitted to pay such dividends at such
                  time. If the Company is not legally permitted to pay dividends
                  on the Mandatory Redemption Date, such Holders will have the
                  right to receive, in lieu of cash in payment of such
                  dividends, a number of whole shares of Common Stock equal to
                  the amount of dividends otherwise payable divided by the
                  average Closing Price of the Common Stock for the five Trading
                  Days ending on the Mandatory Redemption Date, with any
                  resulting fractional share of Common Stock to be settled in
                  accordance with Section 14.

                                       12
<PAGE>

            (b)   Each Holder desiring to exercise its right to require
                  redemption of all or any of its shares of Redeemable
                  Convertible Preferred Stock must deliver a written notice of
                  such election to the Company on or after October 1, 2012 but
                  in any event at least 10 Business Days prior to the Mandatory
                  Redemption Date. Any written notice of such Holder's election
                  to require redemption pursuant to this Section 9 shall be duly
                  executed by the Holder and specify the number of shares of
                  Redeemable Convertible Preferred Stock to be redeemed.

            (c)   The Company shall provide each Holder who has notified the
                  Company of its redemption election pursuant to Section 9(b)
                  with a written notice of the Holder's rights to require
                  redemption (addressed to each such Holder at its address as it
                  appears on the stock transfer books of the Company or its
                  Transfer Agent), not later than 5 Business Days prior to the
                  Mandatory Redemption Date. The Company's notice of redemption
                  shall specify (i) the Mandatory Redemption Price; (ii) that
                  the Holders who have elected to redeem their shares are to
                  surrender to the Company their shares of Redeemable
                  Convertible Preferred Stock in the manner and at the place or
                  places designated in the notice; and (iii) that the Holders
                  may obtain payment of the Mandatory Redemption Price upon
                  surrender of such certificates in the manner designated in the
                  notice. If funds are available on the Mandatory Redemption
                  Date, then whether or not shares are surrendered for payment
                  of the Mandatory Redemption Price, shares of Redeemable
                  Convertible Preferred Stock subject to redemption pursuant to
                  this Section 9 shall no longer be outstanding, dividends will
                  cease to accrue on such shares and the Holders thereof shall
                  cease to have any rights with respect to such shares of
                  Redeemable Convertible Preferred Stock on and after the
                  Mandatory Redemption Date, except for the right to receive the
                  Mandatory Redemption Price, without interest, upon the
                  surrender of such shares.

            (d)   The funds necessary for the payment of the Mandatory
                  Redemption Price shall be deposited with the Transfer Agent in
                  trust at least one Business Day prior to the Mandatory
                  Redemption Date, for the pro rata benefit of the Holders of
                  record as they appear on the stock register of the Company, so
                  as to be and continue to be available therefor. The deposit of
                  monies in trust with the Transfer Agent up to the amount
                  necessary for the payment of the aggregate Mandatory
                  Redemption Price shall be irrevocable except that the Company
                  shall be entitled to receive from the Transfer Agent the
                  interest earned on monies so deposited in trust, and the
                  Holders of the shares redeemed shall have no claim to such
                  interest or other earnings, and any balance of monies so
                  deposited by the Company and unclaimed by the Holders entitled
                  thereto at the expiration of two years from the Mandatory
                  Redemption Date shall be repaid, together with any interest or

                                       13
<PAGE>

                  other earnings thereon, to the Company, and after any such
                  repayment, the Holders of the shares entitled to the funds so
                  repaid to the Company shall look only to the Company for such
                  payment without interest On the Mandatory Redemption Date and
                  subject to the receipt by the Transfer Agent of a completed
                  and duly executed notice of redemption as set forth in Section
                  9(b), compliance with the instructions set forth in the notice
                  provided by the Company in Section 9(c), including surrender
                  of a certificate representing share(s) of Redeemable
                  Convertible Preferred Stock to be redeemed (if held in
                  certificated form), the Company shall instruct the Transfer
                  Agent to pay the Mandatory Redemption Price to each applicable
                  Holder for each share of Redeemable Convertible Preferred
                  Stock of such Holder subject to redemption under this Section
                  9.

      (10)  Optional Redemption.

            (a)   Subject to the conditions set forth below, the Company shall
                  have the right at any time, and from time to time, on and
                  after December 1, 2012, and at its sole option and election,
                  to redeem all or any portion of the outstanding Redeemable
                  Convertible Preferred Stock at the Optional Redemption Price.
                  At any time, the Company may only exercise this redemption
                  right if a registration statement filed with the SEC is
                  effective under which Holders of the Redeemable Convertible
                  Preferred Stock may sell shares of Redeemable Convertible
                  Preferred Stock and shares of Common Stock issuable upon the
                  conversion of the Redeemable Convertible Preferred Stock.

            (b)   If fewer than all the outstanding shares of Redeemable
                  Convertible Preferred Stock are to be redeemed pursuant to
                  Section 10(a), the shares of Redeemable Convertible Preferred
                  Stock to be so redeemed will be selected by the Company or its
                  Transfer Agent, in accordance with applicable law and any
                  governing agreements, on a pro rata basis, by lot or in such
                  manner that the Company or the Transfer Agent (as the case may
                  be) deem fair and appropriate, based on the ownership of the
                  shares of Redeemable Convertible Preferred Stock as of the
                  date the Company provides notice to the Holders pursuant to
                  Section 10(c) of the date ("OPTIONAL REDEMPTION NOTICE DATE")
                  on which the Company notifies the Holders (pursuant to Section
                  10(c) below) that it is exercising its option to cause the
                  redemption of the Redeemable Convertible Preferred Stock
                  pursuant to this Section 10.

            (c)   To exercise its redemption right under this Section 10, the
                  Company must issue a press release for publication (the
                  "OPTIONAL REDEMPTION NOTICE") announcing such redemption. The
                  Company shall also give notice by first class mail, postage
                  prepaid, to the Holders of record as they appear on the stock
                  register of the Company or its Transfer Agent (not more than
                  four Business Days after the date of the press release)
                  announcing such redemption. In addition to any information

                                       14
<PAGE>

                  required by applicable law or regulation, the Optional
                  Redemption Notice shall state, as appropriate: (i) the date on
                  which shares of Redeemable Convertible Preferred Stock shall
                  be redeemed (the "OPTIONAL REDEMPTION DATE"), which shall be
                  no more than 10 days following the Optional Redemption Notice
                  Date; (ii) the number of shares of Redeemable Convertible
                  Preferred Stock to be redeemed on the Optional Redemption
                  Date; (iii) the Optional Redemption Price to be paid on the
                  Optional Redemption Date; (iv) that on shares of Redeemable
                  Convertible Preferred Stock to be so redeemed will cease to
                  accrue on the Optional Redemption Date; and (v) instructions
                  for surrendering shares of Redeemable Convertible Preferred
                  Stock for redemption.

            (d)   The funds necessary for the payment of the Optional Redemption
                  Price shall be deposited with the Transfer Agent in trust at
                  least one Business Day prior to the Optional Redemption Date,
                  for the pro rata benefit of the Holders of record as they
                  appear on the stock register of the Company or its Transfer
                  Agent, so as to be and continue to be available therefor.

            (e)   From and after the Optional Redemption Date, and subject to
                  prior delivery by the Company of funds with the Transfer Agent
                  as described in Section 10(d) above, the Redeemable
                  Convertible Preferred Stock to be redeemed shall no longer be
                  deemed to be outstanding, dividends will cease to accrue on
                  such shares and all rights of the Holders thereof, including
                  the right to convert such shares into shares of Common Stock,
                  shall cease and terminate, except the right of the Holders,
                  upon surrender of such shares, to receive the amounts to be
                  paid hereunder.

            (f)   The deposit of monies in trust with the Transfer Agent up to
                  the amount necessary for the payment of the aggregate Optional
                  Redemption Price shall be irrevocable except that the Company
                  shall be entitled to receive from the Transfer Agent the
                  interest earned on monies so deposited in trust, and the
                  Holders of the shares redeemed shall have no claim to such
                  interest or other earnings, and any balance of monies so
                  deposited by the Company and unclaimed by the Holders entitled
                  thereto at the expiration of two years from the Optional
                  Redemption Date shall be repaid, together with any interest or
                  other earnings thereon, to the Company, and after any such
                  repayment, the Holders of the shares entitled to funds so
                  repaid to the Company shall look only to the Company for such
                  payment without interest.

      (11)  Fundamental Change.

            (a)   In the event of a Fundamental Change, the Company must give
                  notice of such Fundamental Change on a date (the "FUNDAMENTAL
                  CHANGE NOTICE DATE") that is within 10 Trading Days after the
                  effective date of the Fundamental Change (the "FUNDAMENTAL
                  CHANGE EFFECTIVE DATE"), by first class mail, postage prepaid
                  to each Holder at such Holder's address as the same appears on

                                       15
<PAGE>

                  the stock register of the Company or its Transfer Agent. Each
                  such notice shall state (i) that a Fundamental Change has
                  occurred; (ii) the last day on which the Additional Shares can
                  be received upon conversion (the "EXPIRATION DATE"), which
                  will be the 30th Trading Day immediately following the
                  Fundamental Change Effective Date, pursuant to the terms
                  hereof; and (iii) the name and address of the Transfer Agent

            (b)   Upon the occurrence of a Fundamental Change, if a Holder
                  converts its shares of Redeemable Convertible Preferred Stock
                  pursuant to Section 7 at any time during the period from and
                  after 9:00 a.m. New York City time on the Trading Day
                  immediately following the Fundamental Change Effective Date
                  and ending at 5:00 p.m. New York City time on the Expiration
                  Date, men such Holder will be entitled to receive, in addition
                  to a number of shares of Common Stock equal to the applicable
                  Conversion Rate, an additional number of shares of Common
                  Stock (the "ADDITIONAL SHARES") upon conversion as set forth
                  in Section 11(c) below.

            (c)   The number of Additional Shares shall be determined for the
                  Redeemable Convertible Preferred Stock by reference to the
                  table below, based on the Fundamental Change Effective Date
                  and the Share Price.

                  (i) The following table sets forth the Share Price,
                      Fundamental Change Effective Date and the increase in the
                      Conversion Rate, expressed as a number of additional
                      shares of Common Stock to be received for each share of
                      Redeemable Convertible Preferred Stock, upon a conversion
                      in connection with a Fundamental Change:

                        Additional Shares of Common Stock

<TABLE>
<CAPTION>
                                                                  Share Price
                                                                  -----------
Fundamental Change
Effective Date               $2.50    $2.75     $3.00    $3.25     $3.50     $3.75     $4.00    $4.25     $4.50     $4.75
--------------               -----    -----     -----    -----     -----     -----     -----    -----     -----     -----
<S>                          <C>      <C>       <C>      <C>       <C>       <C>       <C>      <C>       <C>       <C>
May 1, 2007                  89.719   67.557    50.694   36.824    26.453    17.609    11.561   6.511     3.171     1.065
May 1, 2008                  89.822   67.764    50.616   37.223    26.722    18.431    11.885   6.702     2.599     0.000
May 1, 2009                  91.475   68.882    51.417   37.849    27.266    18.949    12.423   7.278     3.216     0.000
May 1, 2010                  88.887   65.896    48.341   34.876    24.514    16.490    10.269   5.432     1.674     0.000
May 1, 2011                  82.489   58.848    41.307   28.266    18.558    11.316     5.898   1.835     0.000     0.000
</TABLE>

----------

                  (ii) The Share Price set forth in the table will be adjusted
                       as of any date on which the Conversion Price is
                       adjusted. The adjusted Share Prices will equal the Share
                       Prices applicable immediately prior to the adjustment
                       multiplied by a fraction, the numerator of which is the
                       Conversion Price as so adjusted and the denominator of
                       which is the Conversion Price immediately prior to the
                       adjustment to the Conversion Price. In addition, the
                       number of Additional Shares in the table will be subject
                       to adjustment in a manner corresponding to the
                       adjustments made in the Conversion Price;

                                       16
<PAGE>

                  (iii) The exact Share Price and Fundamental Change Effective
                        Date may not be set forth in the table above, in which
                        case:

                        (A) If the Share Price is between two Share Price
                            amounts in the table or the Fundamental Change
                            Effective Date is between two Fundamental Change
                            Effective Dates in the table, the number of
                            Additional Shares to be received for each share of
                            Redeemable Convertible Preferred Stock will be
                            determined by a straight-line interpolation between
                            the number of Additional Shares to be received for
                            each share of Redeemable Convertible Preferred Stock
                            set forth for the higher and lower Share Price
                            amounts and the two Fundamental Change Effective
                            Dates, as applicable, based on a 365-day year.

                        (B) If the Share Price is in excess of $4.75 per share
                            (subject to adjustment in the same manner as the
                            Share Prices in the table above), no Additional
                            Shares will be issued upon conversion of the
                            Redeemable Convertible Preferred Stock.

                        (C) If the Share Price is less than $2.50 per share
                            (subject to adjustment in the same manner as the
                            Share Prices in the table above), no Additional
                            Shares will be issued upon conversion of the
                            Redeemable Convertible Preferred Stock.

      (12)  Redemption Upon a Change of Control.

            (a)   Upon the occurrence of a Change of Control, each Holder shall
                  have the right to require the Company to redeem, in cash from
                  legally available funds and provided that the Company is
                  permitted to do so under the terms of any Indebtedness of the
                  Company or any of its Restricted Subsidiaries, all or any of
                  its shares of Redeemable Convertible Preferred Stock, on the
                  date that is 45 days after the date the Company provides
                  notice of a change of control pursuant to Section 12(b) (the
                  "CHANGE OF CONTROL PURCHASE DATE") at a cash price per share
                  equal to the Change of Control Redemption Price.

            (b)   In the event of a Change of Control, the Company must give
                  notice of such Change of Control on a date (the "CHANGE OF
                  CONTROL NOTICE DATE") that is within 10 Trading Days after the
                  effective date of the Change of Control (the "CHANGE OF
                  CONTROL EFFECTIVE DATE"), by first class mail, postage prepaid
                  to each Holder, at such Holder's address as the same appears
                  on the stock register of the Company or its Transfer Agent.
                  Each such notice shall state (i) that a Change of Control has

                                       17
<PAGE>

                  occurred and a description of the resulting redemption right;
                  (ii) the Change of Control Redemption Price; and (iii)
                  instructions each Holder must follow to exercise its
                  redemption right (including that each Holders shall state
                  among other things (x) if certificated shares of Preferred
                  Stock have been issued, the certificate numbers of the shares
                  to be delivered for redemption and (y) the number of shares of
                  Preferred Stock to be redeemed). If a Change of Control
                  constitutes a Fundamental Change, the notice required by this
                  Section 12(b) may be combined with the notice required by
                  Section 11(a).

            (c)   In order to exercise the redemption right upon a Change of
                  Control, a Holder must deliver, at least four Business Days
                  prior to the Change of Control Purchase Date, a notice to the
                  Transfer Agent in compliance with the instructions provided in
                  the Company's notice given pursuant to Section 12(b) above
                  (the "CHANGE OF CONTROL NOTICE").

            (d)   If funds are available on the Change of Control Purchase Date,
                  then whether or not shares are surrendered for payment of the
                  Change of Control Redemption Price, shares of Redeemable
                  Convertible Preferred Stock subject to redemption pursuant to
                  this Section 12 shall no longer be outstanding, dividends will
                  cease to accrue on such shares and the Holders thereof shall
                  cease to have any rights with respect to such shares of
                  Redeemable Convertible Preferred Stock on and after the Change
                  of Control Redemption Date except for the right to receive the
                  Change of Control Redemption Price, without interest, upon the
                  surrender of such shares.

            (e)   The funds necessary for the payment of the Change of Control
                  Redemption Price shall be deposited with the Transfer Agent in
                  trust at least one Business Day prior to the Change of Control
                  Purchase Date, for the pro rata benefit of the Holders of
                  record as they appear on the stock register of the Company or
                  its Transfer Agent, so as to be and continue to be available
                  therefor. The deposit of monies in trust with the Transfer
                  Agent up to the amount necessary for the payment of the
                  aggregate Change of Control Redemption Price shall be
                  irrevocable except that the Company shall be entitled to
                  receive from the Transfer Agent the interest earned on monies
                  so deposited in trust, and the Holders of the shares converted
                  shall have no claim to such interest or other earnings, and
                  any balance of monies so deposited by the Company and
                  unclaimed by the Holders entitled thereto at the expiration of
                  two years from the Change of Control Purchase Date shall be
                  repaid, together with any interest or other earnings thereon,
                  to the Company, and after any such repayment, the Holders of
                  the shares entitled to the funds so repaid to the Company
                  shall look only to the Company for such payment without
                  interest. On the Change of Control Purchase Date and subject
                  to the receipt by the Transfer Agent of a completed and duly
                  executed Change of Control Notice, compliance with the

                                       18
<PAGE>

                  instructions set forth in the notice provided by the Company
                  in Section 12(b), including surrender of certificates
                  representing share(s) of Redeemable Convertible Preferred
                  Stock to be redeemed (if held in certificated form), the
                  Company shall instruct the Transfer Agent to pay the Change of
                  Control Purchase Price to each applicable Holder for each
                  share of Redeemable Convertible Preferred Stock of such Holder
                  subject to redemption under this Section 12.

            (f)   A Holder may withdraw any Change of Control Notice by a
                  written notice of withdrawal delivered to the Transfer Agent
                  prior to the close of business on the business day prior to
                  the Change of Control Purchase Date. The notice of withdrawal
                  must state: (i) the number of shares that are being withdrawn;
                  (ii) if certificated shares have been issued, the certificate
                  numbers of the withdrawn shares; and (iii) the number of
                  shares, if any, which remain subject to the Change of Control
                  Notice.

      (13)  Reservation of Common Stock.

            (a)   The Company shall at all times reserve and keep available out
                  of its authorized and unissued Common Stock or shares held in
                  the treasury of the Company, solely for issuance upon the
                  conversion, or in payment of accrued and unpaid dividends upon
                  redemption pursuant to Section 9(a), of shares of Redeemable
                  Convertible Preferred Stock as herein provided, free from any
                  preemptive or other similar rights, such number of shares of
                  Common Stock as shall from time to time be issuable upon the
                  conversion, or in payment of accrued and unpaid dividends upon
                  redemption pursuant to Section 9(a), of all the shares of
                  Redeemable Convertible Preferred Stock then outstanding, or
                  potentially issuable as dividends through the Mandatory
                  Redemption Date assuming the Company is not eligible to pay
                  dividends in cash or shares of Common Stock. For purposes of
                  this Section 13(a), the number of shares of Common Stock that
                  shall be deliverable upon the conversion, or in payment of
                  accrued and unpaid dividends upon redemption pursuant to
                  Section 9(a), of all outstanding or potentially issuable
                  shares of Redeemable Convertible Preferred Stock shall be
                  computed as if at the time of computation all such outstanding
                  shares were held by a single Holder. The Company shall at all
                  times reserve and keep available out of its authorized and
                  unissued shares of Redeemable Convertible Preferred Stock or
                  shares held in the treasury of the Company, solely for
                  issuance as dividends on shares of Redeemable Convertible
                  Preferred Stock as herein provided, free from any preemptive
                  or other similar rights, such number of shares of Redeemable
                  Convertible Preferred Stock that are potentially issuable as
                  dividends through the Mandatory Redemption Date.

            (b)   Notwithstanding the foregoing, the Company shall be entitled
                  to deliver upon conversion, or in payment of accrued and
                  unpaid dividends upon redemption pursuant to Section 9(a), of
                  shares of Redeemable Convertible Preferred Stock, as herein
                  provided, shares of Common Stock reacquired and held in the

                                       19
<PAGE>

                  treasury of the Company (in lieu of the issuance of authorized
                  and unissued shares of Common Stock), so long as any such
                  treasury shares are free and clear of all Liens (other than
                  Liens created by the Holders).

            (c)   All shares of Common Stock delivered as payment of dividends
                  or upon conversion, or in payment of accrued and unpaid
                  dividends upon redemption pursuant to Section 9(a), of the
                  Redeemable Convertible Preferred Stock and all shares of
                  Redeemable Convertible Preferred Stock delivered as payment of
                  dividends shall be duly authorized, validly issued, fully paid
                  and non-assessable, free and clear of all Liens (other than
                  Liens created by the Holders).

            (d)   Prior to the delivery of any securities that the Company shall
                  be obligated to deliver upon conversion, or in payment of
                  accrued and unpaid dividends upon redemption pursuant to
                  Section 9(a), of the Redeemable Convertible Preferred Stock or
                  as payment of dividends, me Company shall use its reasonable
                  best efforts to comply with all federal and state laws and
                  regulations thereunder regarding the registration of such
                  securities with, or any approval of or consent to the delivery
                  thereof by, any governmental authority.

            (e)   The Company hereby covenants and agrees that, if at any time
                  the Common Stock shall be listed on the American Stock
                  Exchange or any other national securities exchange or
                  automated quotation system, the Company will, if permitted by
                  the rules of such exchange or automated quotation system, list
                  and keep listed, so long as the Common Stock shall be so
                  listed on such exchange or automated quotation system, all
                  Common Stock issuable upon conversion, or in payment of
                  accrued and unpaid dividends upon redemption pursuant to
                  Section 9(a), of the Redeemable Convertible Preferred Stock or
                  issued as dividends on the Redeemable Convertible Preferred
                  Stock; provided, however, that if the rules of such exchange
                  or automated quotation system permit the Company to defer the
                  listing of such Common Stock until the first conversion of
                  Redeemable Convertible Preferred Stock into Common Stock or
                  first issuance of Common Stock as dividends in accordance with
                  the provisions hereof, the Company covenants to list such
                  Common Stock issuable upon conversion of the Redeemable
                  Convertible Preferred Stock or issued as dividends on the
                  Redeemable Convertible Preferred Stock in accordance with the
                  requirements of such exchange or automated quotation system at
                  such time.

      (14)  Fractional Shares.

            (a)   No fractional shares of Common Stock will be issued as a
                  result of any conversion of shares of Redeemable Convertible
                  Preferred Stock or any payment of accrued and unpaid dividends
                  in shares of Common Stock in lieu of cash upon redemption

                                       20
<PAGE>

                  pursuant to Section 9(a) and, in lieu thereof, a cash
                  adjustment will be paid to each Holder that would otherwise be
                  entitled to a fraction of a share of Common Stock. Any portion
                  of any such payment that is declared and not paid through the
                  delivery of Common Stock will be paid in cash based on the
                  Closing Price of Common Stock on the Trading Day immediately
                  preceding the date of conversion or redemption (as the case
                  may be). Notwithstanding the foregoing, in the event that the
                  Company is not permitted by the terms of any outstanding
                  Indebtedness to pay the amount required under this Section
                  14(a) in cash, the Company will deliver one share of Common
                  Stock in lieu of a fractional share of Common Stock.

            (b)   If more than one share of the Redeemable Convertible Preferred
                  Stock is surrendered for conversion at one time by or for the
                  same Holder, the number of full shares of Common Stock
                  issuable upon conversion thereof shall be computed on the
                  basis of the aggregate number of shares of the Redeemable
                  Convertible Preferred Stock so surrendered.

      (15)  Adjustments to the Conversion Price and Dividend Rate.

            (a)   The Conversion Price shall be subject to the following
                  adjustments:

                  (i) Stock Dividends and Distributions. In case the Company
                      shall pay or make a dividend or other distribution on any
                      Capital Stock (other than the Redeemable Convertible
                      Preferred Stock) in shares of Common Stock, the Conversion
                      Price, as in effect at the opening of business on the day
                      following the date fixed for the determination of
                      stockholders entitled to receive such dividend or other
                      distribution, shall be decreased by multiplying such
                      Conversion Price by a fraction of which the numerator
                      shall be the number of shares of Common Stock outstanding
                      at the close of business on the date fixed for such
                      determination and the denominator shall be the sum of such
                      number of shares of Common Stock outstanding and the total
                      number of shares of Common Stock constituting such
                      dividend or other distribution, such increase to become
                      effective immediately after the opening of business on the
                      day following the date fixed for such determination. For
                      the purposes of this Section 15(a)(i), the number of
                      shares of Common Stock at the time outstanding shall not
                      include shares held in the treasury of the Company but
                      shall include any shares issuable in respect of any scrip
                      certificates issued in lieu of fractions of shares of
                      Common Stock. The Company will not pay any dividend or
                      make any distribution on shares of Common Stock held in
                      the treasury of the Company.

                  (ii) Dilutive Issuances. In case the Company issues or sells,
                       or is deemed to have issued or sold, any shares of its
                       Common Stock (other than Excluded Stock) for

                                       21
<PAGE>

                       consideration per share less than $2.50 (which price is
                       shall be adjusted from time to time in the manner set
                       forth in Sections 15(a)(i) and 15(a)(iv)) (as so
                       adjusted, the "THRESHOLD PRICE"), then immediately upon
                       such issue or sale, the Conversion Price shall be
                       reduced to the price determined by multiplying the
                       Conversion Price in effect immediately prior to such
                       time by a fraction:

                        (A) the numerator of which shall be (x) the number of
                            shares of Common Stock outstanding immediately prior
                            to such issue or sale (assuming the exercise of all
                            Options that are then vested or that would become
                            vested upon liquidation, dissolution or winding-up
                            of me Company at such time and the conversion of all
                            Convertible Securities that are then convertible)
                            multiplied by the Threshold Price, plus (y) the
                            total number of additional shares of Common Stock so
                            issued or sold multiplied by the price per share at
                            which such shares of Common Stock were so issued or
                            sold; and

                        (B) the denominator of which shall be the number of
                            shares of Common Stock outstanding immediately after
                            such issue or sale (assuming the exercise of all
                            Options that are then vested or that would become
                            vested upon liquidation, dissolution or winding-up
                            of the Company at such time and the conversion of
                            all Convertible Securities that are then
                            convertible) multiplied by the Threshold Price.

                        (C) For purposes of this Section 15(a)(ii), "EXCLUDED
                            STOCK" means shares of Common Stock (in each case as
                            adjusted for any stock splits, stock dividends,
                            recapitalizations, combinations or similar
                            transactions), Options and Convertible Securities
                            issued (i) pursuant to one or more Approved Plans,
                            (ii) upon conversion of the Redeemable Convertible
                            Preferred Stock, (iii) upon conversion, exercise or
                            exchange of any Options or Convertible Securities
                            outstanding as of the Issue Date pursuant to and in
                            accordance with the terms of such Options or
                            Convertible Securities as of such date, (iv) in
                            connection with any stock splits or stock dividends,
                            or any recapitalizations, reorganizations, mergers
                            or consolidations contemplated by Section 15(f) and
                            (v) the Consideration Shares.

            Notwithstanding the foregoing provisions, in no event will the
            Conversion Price be adjusted to less than $1.75 pursuant to this
            Section 15(a)(ii), which amount is shall be adjusted in the same
            manner as the Conversion Price pursuant to Sections 15(a)(i) and
            15(a)(iv).

                                       22
<PAGE>

                  (iii) Options and Convertible Securities. For purposes of
                        determining the adjusted Conversion Price under Section
                        15(a)(ii), the following shall be applicable (it being
                        acknowledged that the issuance of Excluded Stock shall
                        not be subject to the provisions of this Section
                        15(a)(iii)):

                        (A) If the Company in any manner issues or grants any
                            options, warrants, or similar rights ("OPTIONS") to
                            purchase or acquire Common Stock or Capital Stock
                            convertible or exchangeable, with or without
                            consideration, into or for Common Stock
                            ("CONVERTIBLE SECURITIES") and the price per share
                            for which Common Stock is issuable upon the exercise
                            of such Options or upon conversion or exchange of
                            such Convertible Securities is less than the
                            Threshold Price in effect immediately prior to the
                            time of the granting of such Options, then the total
                            maximum number of shares of Common Stock issuable
                            upon the exercise of such Options or upon conversion
                            or exchange of the total maximum amount of such
                            Convertible Securities issuable upon the exercise of
                            such Options shall be deemed to be outstanding and
                            to have been issued and sold by the Company for such
                            price per share on the date of such issuance or
                            grant. For purposes of this subparagraph, the "price
                            per share for which Common Stock is issuable" shall
                            be determined by dividing (a) the total amount, if
                            any, received or receivable by the Company as
                            consideration for the granting of such Options, plus
                            the minimum aggregate amount of additional
                            consideration payable to the Company upon exercise
                            of all such Options, plus, in the case of such
                            Options which relate to Convertible Securities, the
                            minimum aggregate amount of additional
                            consideration, if any, payable to the Company upon
                            the issuance or sale of such Convertible Securities
                            and the conversion or exchange of such Convertible
                            Securities, by (b) the total maximum number of
                            shares of Common Stock issuable upon the exercise of
                            such Options or upon the conversion or exchange of
                            all such Convertible Securities issuable upon the
                            exercise of such Options. No further adjustment of
                            the Conversion Price shall be made when Convertible
                            Securities are actually issued upon the exercise of
                            such Options or when Common Stock is actually issued
                            upon the exercise of such Options or the conversion
                            or exchange of such Convertible Securities.

                        (B) If the Company in any manner issues or sells any
                            Convertible Securities and the price per share for
                            which Common Stock is issuable upon such conversion
                            or exchange is less than the Threshold Price, then

                                       23
<PAGE>

                            the maximum number of shares of Common Stock
                            issuable upon conversion or exchange of such
                            Convertible Securities shall be deemed to be
                            outstanding and to have been issued and sold by the
                            Company for such price per share on the date of such
                            issuance or sale. For the purposes of this
                            subparagraph, the "price per share for which Common
                            Stock is issuable" shall be determined by dividing
                            (a) the total amount received or receivable by the
                            Company as consideration for the issue or sale of
                            such Convertible Securities, plus the minimum
                            aggregate amount of additional consideration, if
                            any, payable to the Company upon the conversion or
                            exchange of such Convertible Securities, by (b) the
                            total maximum number of shares of Common Stock
                            issuable upon the conversion or exchange of all such
                            Convertible Securities. No further adjustment of the
                            Conversion Price shall be made when Common Stock is
                            actually issued upon the conversion or exchange of
                            such Convertible Securities, and if any such issue
                            or sale of such Convertible Securities is made upon
                            exercise of any Options for which adjustments of the
                            Conversion Price had been or are to be made pursuant
                            to other provisions of this Section 15(a)(iii), no
                            further adjustment of the Conversion Price shall be
                            made by reason of such issue or sale.

                        (C) If the exercise price provided for in any Options,
                            the additional consideration, if any, payable upon
                            the conversion or exchange of any Convertible
                            Securities or the rate at which any Convertible
                            Securities are convertible into or exchangeable for
                            Common Stock changes at any time, the Conversion
                            Price in effect at the time of such change shall be
                            readjusted to the Conversion Price which would have
                            been in effect at such time had an adjustment been
                            made upon the issuance of such Options or
                            Convertible Securities still outstanding on the
                            basis of such changed exercise price, additional
                            consideration, or changed Conversion Price, as the
                            case may be, at the time initially granted, issued,
                            or sold.

                        (D) Upon the expiration of any Option or the termination
                            of any right to convert or exchange any Convertible
                            Security without the exercise of any such Option or
                            right, the Conversion Price then in effect shall be
                            adjusted to the Conversion Price which would have
                            been in effect at the time of such expiration or
                            termination had such Option or Convertible Security,
                            to the extent outstanding immediately prior to such
                            expiration or termination, never been issued.

                                       24
<PAGE>

                        (E) If any Common Stock, Option or Convertible Security
                            is issued or sold or deemed to have been issued or
                            sold for cash, the consideration received for such
                            Common Stock, Option or Convertible Security shall
                            be deemed to be the net amount received by the
                            Company for such Common Stock, Option or Convertible
                            Security. In case any Common Stock, or the fair
                            market value of such Options or Convertible
                            Securities are issued or sold for a consideration
                            other than cash, the amount of the consideration
                            other than cash received by the Company shall be the
                            Market Value of such Common Stock, Options, or
                            Convertible Securities as of the date of receipt as
                            determined by the Board of Directors. If any Common
                            Stock, Option or Convertible Security is issued in
                            connection with any merger in which the Company is
                            the surviving Person, the amount of consideration
                            for such Common Stock, Option, or Convertible
                            Security shall be deemed to be the fair market value
                            (as determined by the Board of Directors) of such
                            portion of the net assets and business of the
                            non-surviving Person as is attributable to such
                            Common Stock, Options or Convertible Securities, as
                            the case may be.

                        (F) In case any Option is issued in connection with the
                            issue or sale of other securities of the Company,
                            together comprising one integrated transaction in
                            which no specific consideration is allocated to such
                            Option by the parties to such transaction, the
                            Option shall be deemed to have been issued for a
                            consideration of $.001.

                        (G) The number of shares of Common Stock outstanding at
                            any given time does not include shares owned or held
                            by or for the account of the Company or any
                            Subsidiary, and the disposition of any shares so
                            owned or held shall be considered an issue or sale
                            of Common Stock.

                        (H) If the Company takes a record of the holders of
                            Common Stock for the purpose of entitling them (1)
                            to receive a dividend or other distribution payable
                            in Common Stock, Options, or Convertible Securities
                            or (2) to subscribe for or purchase Common Stock,
                            Options or Convertible Securities, then such record
                            date shall be deemed to be the date of the issue or
                            sale of the shares of Common Stock deemed to have
                            been issued or sold upon the payment of such
                            dividend or upon the making of such other
                            distribution or the date of the granting of such
                            right of subscription or purchase, as the case may
                            be.

                                       25
<PAGE>

                  (iv) Subdivisions, Splits and Combinations of the Common
                       Stock. In case outstanding shares of Common Stock shall
                       be subdivided or split into a greater number of shares
                       of Common Stock, the Conversion Price in effect at the
                       opening of business on the day following the day upon
                       which such subdivision or split becomes effective shall
                       be proportionately increased, and, conversely, in case
                       outstanding shares of Common Stock shall each be
                       combined into a smaller number of shares of Common
                       Stock, the Conversion Price in effect at the opening of
                       business on the day following the day upon which such
                       combination becomes effective shall be proportionately
                       reduced, such increase or reduction, as the case may be,
                       to become effective immediately after the opening of
                       business on the day following the day upon which such
                       subdivision, split or combination becomes effective.

                  (v) Distributions Pursuant to a Rights Plan. In case the
                      Company shall at any tune or from time to time pay a
                      dividend or make a distribution of Capital Stock to all
                      holders of shares of Common Stock pursuant to a
                      stockholder rights plan, "poison pill" or similar
                      arrangement and excluding dividends payable on the
                      Redeemable Convertible Preferred Stock, then the
                      Conversion Price in effect immediately prior to such
                      event shall be adjusted (and any other appropriate
                      actions shall be taken by the Company) so that the
                      holder of any share of Redeemable Convertible Preferred
                      Stock thereafter surrendered for conversion shall be
                      entitled to receive the number of shares of Capital
                      Stock that such holder would have owned or would have
                      been entitled to receive upon or by reason of such
                      dividend or distribution, had such share of Redeemable
                      Convertible Preferred Stock been converted into shares
                      of Common Stock immediately prior to such dividend or
                      distribution. An adjustment made pursuant to this
                      sub-section (v) shall become effective retroactively to
                      the day immediately following the close of business on
                      the record date for the determination of holders of
                      Common Stock entitled to receive such dividend or
                      distribution.

                  (vi) Cash Distributions. If the Company shall at any time make
                       a distribution, by dividend or otherwise, to all holders
                       of shares of its Common Stock consisting exclusively of
                       cash (excluding any cash portion of distributions
                       referred to in sub-section (v) above and cash
                       distributed upon a merger or consolidation to which
                       Section 15(f) applies) then the Conversion Price will be
                       adjusted by multiplying:

                        (A) the Conversion Price in effect immediately prior to
                            the close of business on the record date fixed for
                            the determination of holders of Common Stock
                            entitled to receive such distribution by

                                       26
<PAGE>

                        (B) a fraction, the numerator of which will be the
                            Market Value on the Trading Day prior to such record
                            date minus the amount of cash per share of Common
                            Stock so distributed and the denominator of which
                            will be the Market Value on the Trading Day prior to
                            such record date.

                        Such adjustment shall become effective immediately after
                        the record date for the determination of holders of
                        Common Stock entitled to receive the distribution giving
                        rise to an adjustment pursuant to this Section
                        15(a)(vi). Notwithstanding the foregoing provisions, in
                        no event with the Conversion Price be adjusted to less
                        than $1.75 pursuant to this Section 15(a)(vi), which
                        amount is shall be adjusted in the same manner as the
                        Conversion Price pursuant to Sections 15(a)(i) and
                        15(a)(iv).

                  (vii) Debt or Asset Distribution. If the Company shall at any
                        time or from time to time make a distribution to all
                        holders of its Common Stock consisting of evidences of
                        indebtedness, shares of its Capital Stock other than
                        Common Stock or assets (including securities, but
                        excluding those Options, Convertible Securities,
                        dividends, rights and distributions referred to in
                        sub-sections (iii) and (v) above), then, and in each
                        such case, the Conversion Price then in effect shall be
                        adjusted by multiplying the Conversion Price in effect
                        immediately prior to the date of such distribution or by
                        a fraction (A) the numerator of which shall be the
                        Market Value less the then fair market value (as
                        determined by the Board of Directors) of the portion of
                        the cash, evidences of indebtedness, securities or other
                        assets so distributed applicable to one share of Common
                        Stock (but such numerator shall not be less than one);
                        and (y) the denominator of which shall be the Market
                        Value; provided, however, that no adjustment shall be
                        made with respect to any distribution of rights to
                        purchase Capital Stock of the Company if the Holders
                        would otherwise be entitled to receive such rights upon
                        conversion at any time of shares of Redeemable
                        Convertible Preferred Stock into shares of Common Stock
                        unless such rights are subsequently redeemed by the
                        Company, in which case such redemption shall be treated
                        for purposes of this Section 15(a)(vii) as a dividend on
                        the Common Stock. Such adjustment shall be made whenever
                        any such distribution is made and shall become effective
                        retroactively to a date immediately following the close
                        of business on the record date for the determination of
                        stockholders entitled to receive such distribution.

            Notwithstanding the foregoing provisions, in no event with the
            Conversion Price be adjusted to less than $1.75 pursuant to this
            Section 15(a)(vii), which amount is shall be adjusted in the same
            manner as the Conversion Price pursuant to Sections 15(a)(i) and
            15(a)(iv).

                                       27
<PAGE>

            (b)   Adjustment for Tax Reasons. The Company reserves the right to
                  make such reductions in the Conversion Price in addition to
                  those required in the foregoing provisions as it considers
                  advisable in order that any event treated for Federal income
                  tax purposes as a dividend of stock or stock rights will not
                  be taxable to the recipients. In the event the Company elects
                  to make such a reduction in the Conversion Price, the Company
                  will comply with the requirements of Rule 14e-l under the
                  Exchange Act, and any other securities laws and regulations
                  thereunder if and to the extent that such laws and regulations
                  are applicable in connection with the reduction of the
                  Conversion Price.

            (c)   Calculation of Adjustments. Notwithstanding anything herein to
                  the contrary, no adjustment under this Section 15 need be made
                  to the Conversion Price unless such adjustment would require
                  an increase or decrease of at least 1% of the Conversion Price
                  then in effect. Any lesser adjustment shall be carried forward
                  and shall be made at the time of and together with the next
                  subsequent adjustment, if any, which, together with any
                  adjustment or adjustments so carried forward, shall amount to
                  an increase or decrease of at least 1% of such Conversion
                  Price; provided, however, that with respect to adjustments to
                  be made to the Conversion Price in connection with cash
                  dividends paid by the Company, the Company shall make such
                  adjustments, regardless of whether such aggregate adjustments
                  amount to 1% or more of the Conversion Price, no later than
                  November 15 of each calendar year.

            (d)   Special Adjustment. If the Volume Weighted Average Price for
                  the 30 Trading Days up to and including April 30, 2008 is less
                  than $2.50 (the "RESET THRESHOLD") then, effective as of May
                  1, 2008, the Conversion Price then in effect will decrease to
                  the higher of (A) $1.75 (the "INDICATED PRICE") or (B) the
                  Volume Weighted Average Price for the 30 Trading Days up to
                  and including April 30, 2008 plus 10%, provided that in the
                  event that the Conversion Price is decreased to the Indicated
                  Price, the rate at which cumulative Dividends accrue on the
                  Preferred Stock will increase by 200 basis points, all set
                  forth above is subject to adjustment pursuant to this Section
                  15. In the event that the Company does not meet the Reset
                  Threshold, it will notify Holders of such fact within 30 days
                  of May 1, 2008 and will include in such notice the adjusted
                  Dividend Rate and Conversion Price.

            (e)   Mandatory Redemption Adjustment. If the Company fails to
                  redeem the shares of the Redeemable Convertible Preferred
                  Stock in accordance with Section 9, effective as of the day
                  immediately following the Company's failure to redeem (A) the
                  Conversion Price then in effect will decrease to 80% of the
                  Conversion Price and (B) the Dividend Rate will increase by
                  200 basis points, subject to adjustment as provided in Section
                  15.

                                       28
<PAGE>

            (f)   Notice of Adjustment Whenever the Conversion Price is to be
                  adjusted, the Company shall: (i) compute such adjusted
                  Conversion Price and prepare and transmit to the Transfer
                  Agent an Officer's Certificate setting forth such adjusted
                  Conversion Price, the method of calculation thereof in
                  reasonable detail, and the facts requiring such adjustment and
                  upon which such adjustment is based; (ii) as soon as
                  practicable following the occurrence of an event that requires
                  an adjustment to the Conversion Price (or if the Company is
                  not aware of such occurrence, as soon as practicable after
                  becoming so aware), provide, or cause to be provided, a
                  written notice to the Holders of the occurrence of such event;
                  and (iii) as soon as practicable following the determination
                  of a revised Conversion Price a statement setting forth in
                  reasonable detail the method by which the adjustment to the
                  Conversion Price was determined and setting forth such revised
                  Conversion Price. Any notice required for an adjustment made
                  pursuant to Section 15(d) will also include the adjusted
                  Dividend Rate and will be made within 30 days of May 1, 2008.

            (g)   Reorganization Events. In the event of:

                  (i)   any consolidation or merger of the Company with or into
                        another Person (other than a merger or consolidation in
                        which the Company is the continuing Person and in which
                        the Common Stock outstanding immediately prior to the
                        merger or consolidation is not exchanged for cash,
                        securities or other property of the Company or another
                        Person);

                  (ii)  any sale, transfer, lease or conveyance to another
                        Person of all or substantially all of the property and
                        assets of the Company (computed on a consolidated
                        basis);

                  (iii) any reclassification of Common Stock into securities
                        including securities other than Common Stock; or

                  (iv)  any statutory exchange of securities of the Company with
                        another Person (other than in connection with a merger
                        or acquisition) (any such event specified in this
                        Section 15(g), a "REORGANIZATION EVENT");

      each share of Redeemable Convertible Preferred Stock then outstanding
      shall, without the consent of any holder of Redeemable Convertible
      Preferred Stock, become convertible at any time, at the option of the
      holder thereof, only into the kind and amount of securities (of the
      Company or another Person), cash and other property receivable upon such
      Reorganization Event by a holder of the number of shares of Common Stock
      into which such share of Redeemable Convertible Preferred Stock could have
      been converted immediately prior to such Reorganization Event, after
      giving effect to any adjustment event The provisions of this Section 15(g)
      and any equivalent thereof in any such securities similarly shall apply to
      successive Reorganization Events.

                                       29
<PAGE>

            The Company (or any successor) shall, within 20 days of the
      occurrence of any Reorganization Event, provide written notice to the
      Holders of such occurrence of such event and of the kind and amount of the
      cash, securities or other property that constitutes the assets into which
      the Redeemable Convertible Preferred Stock is then convertible. Failure to
      deliver such notice shall not affect the operation of this Section 15(g).

      (16)  Incurrence of Indebtedness.

            (a)   The Company will not, and will not permit any of its
                  Restricted Subsidiaries to, directly or indirectly, create,
                  incur, assume, guarantee, acquire, become liable, contingently
                  or otherwise, with respect to, or otherwise become responsible
                  for payment of (collectively, "incur") any Indebtedness (other
                  than Permitted Indebtedness); provided, however, the Company
                  or any of its Restricted Subsidiaries may incur Indebtedness
                  (including, without limitation, Acquired Indebtedness) if on
                  the date of the incurrence of such Indebtedness the
                  Consolidated Fixed Charge Coverage Ratio of the Company will
                  be, after giving effect to the incurrence thereof, greater
                  than 2.5 to 1.0.

            (b)   The Company will not, and will not permit any of its Domestic
                  Restricted Subsidiaries to, directly or indirectly, incur any
                  Indebtedness which by its terms (or by the terms of any
                  agreement governing such Indebtedness) is subordinated in
                  right of payment to any other Indebtedness of the Company or
                  such Domestic Restricted Subsidiary unless such Indebtedness
                  is also by its terms (or by the terms of any agreement
                  governing such Indebtedness) made expressly subordinate to the
                  Obligations of the Company or such Domestic Restricted
                  Subsidiary, in each case, to the same extent and in the same
                  manner as such Indebtedness is subordinated pursuant to
                  subordination provisions that are most favorable to the
                  holders of any other Indebtedness of the Company or such
                  Domestic Restricted Subsidiary.

      (17)  Restricted Payments.

            (a)   The Company will not, and will not cause or permit any of its
                  Restricted Subsidiaries to, directly or indirectly: (1)
                  declare or pay any dividend or make any distribution (other
                  than dividends or distributions payable in Qualified Capital
                  Stock of the Company and dividends and distributions payable
                  to the Company or another Restricted Subsidiary of the
                  Company) on or in respect of shares of Capital Stock of the
                  Company or its Restricted Subsidiaries to holders of such
                  Capital Stock; (2) purchase, redeem or otherwise acquire or
                  retire for value any Capital Stock of the Company or its
                  Restricted Subsidiaries (other than the Preferred Stock and
                  any such Capital Stock held by the Company or any Restricted
                  Subsidiary); (3) make any payment on, purchase, redeem,
                  prepay, decrease or otherwise acquire or retire for value any
                  Junior Stock or Parity Stock of the Company or any Restricted
                  Subsidiary; or (4) make any Investment

                                       30
<PAGE>

                  (other than Permitted Investments); (each of the foregoing
                  actions set forth in clauses (1), (2), (3) and (4) being
                  referred to as a "Restricted Payment"), if at the time of such
                  Restricted Payment or immediately after giving effect thereto:
                  (i) the Company is not able to incur at least $1.00 of
                  additional Indebtedness (other than Permitted Indebtedness) in
                  compliance with Section 16 or (ii) the aggregate amount of
                  Restricted Payments (including such proposed Restricted
                  Payment) made subsequent to the Issue Date (the amount
                  expended for such purposes, if other than in cash, being the
                  Fair Market Value of such property at the time of the making
                  thereof) shall exceed the sum of: (A) 50% of the cumulative
                  Consolidated Net Income (or if cumulative Consolidated Net
                  Income is a loss, minus 100% of such loss) of the Company
                  earned during the period beginning on the first day of the
                  first fiscal quarter after the Issue Date and ending on the
                  last day of the Company's most recent fiscal quarter ending
                  prior to the date the Restricted Payment occurs for which
                  financial statements are available (the "Reference Date")
                  (treating such period as a single accounting period); plus (B)
                  100% of the aggregate net cash proceeds received by the
                  Company from any Person (other than a Subsidiary of the
                  Company) from the issuance and sale subsequent to the Issue
                  Date and on or prior to the Reference Date of Qualified
                  Capital Stock of the Company; plus (C) without duplication of
                  any amounts included in clause (iii)(B) above, 100% of the
                  aggregate net cash proceeds of any equity contribution
                  received by the Company from holders of the Company's Capital
                  Stock subsequent to the Issue Date and on or prior to the
                  Reference Date; plus (D) 100% of the aggregate net cash
                  proceeds received from the issuance of Indebtedness or shares
                  of Disqualified Capital Stock of the Company that have been
                  converted into or exchanged for Qualified Capital Stock of the
                  Company subsequent to the Issue Date and on or prior to the
                  Reference Date; plus (E) an amount equal to the sum of (i) the
                  net reduction in the Investments (other than Permitted
                  Investments) made by the Company or any of its Restricted
                  Subsidiaries in any Person resulting from repurchases,
                  repayments or redemptions of such Investments by such Person,
                  proceeds realized on the sale of such Investment and proceeds
                  representing the return of capital (excluding dividends and
                  distributions otherwise included in Consolidated Net Income),
                  in each case received by the Company or any of its Restricted
                  Subsidiaries, and (ii) to the extent such Person is an
                  Unrestricted Subsidiary, the portion (proportionate to the
                  Company's equity interest in such Subsidiary) of the Fair
                  Market Value of the net assets of such Unrestricted Subsidiary
                  at the time such Unrestricted Subsidiary is designated a
                  Restricted Subsidiary; provided, however, that the foregoing
                  sum shall not exceed, in the case of any such Person or
                  Unrestricted Subsidiary, the amount of Investments (excluding
                  Permitted Investments) previously made (and treated as a
                  Restricted Payment) by the Company or any of its Restricted
                  Subsidiaries in such Person or Unrestricted Subsidiary.

                                       31
<PAGE>

            (b)   In the case of clauses (iii)(B) and (C) above, any net cash
                  proceeds from issuances and sales of Qualified Capital Stock
                  of the Company financed directly or indirectly using funds
                  borrowed from the Company or any Subsidiary of the Company,
                  shall be excluded until and to the extent such borrowing is
                  repaid.

            (c)   Notwithstanding the foregoing, the provisions set forth in
                  clause (a) do not prohibit: (1) the payment of any dividend or
                  other distribution or redemption within 60 days after the date
                  of declaration of such dividend or call for redemption if such
                  payment would have been permitted on the date of declaration
                  or call for redemption; (2) the acquisition of any shares of
                  Qualified Capital Stock of the Company, either (i) solely in
                  exchange for other shares of Qualified Capital Stock of the
                  Company or (ii) through the application of net proceeds of a
                  sale for cash (other than to a Subsidiary of the Company) of
                  shares of Qualified Capital Stock of the Company or a cash
                  capital contribution received by the Company from holders of
                  the Company's Capital Stock within 60 days after such
                  exchange, sale or receipt of such cash capital contribution;
                  (3) the acquisition of any Junior Stock or Priority Stock of
                  the Company either (i) solely in exchange for shares of
                  Qualified Capital Stock of the Company or (ii) through the
                  application of net proceeds of a sale for cash (other than to
                  a Subsidiary of the Company) of shares of Qualified Capital
                  Stock of the Company or a cash capital contribution received
                  by the Company from holders of the Company's Capital Stock
                  within 60 days after such sale or receipt of such cash capital
                  contribution; (4) an Investment either (i) solely in exchange
                  for shares of Qualified Capital Stock of the Company or (ii)
                  through the application of the net proceeds of a sale for cash
                  (other than to a Subsidiary of the Company) of shares of
                  Qualified Capital Stock of the Company or a cash capital
                  contribution received by the Company from holders of the
                  Company's Capital Stock within 60 days after such sale or
                  receipt of such cash capital contribution; (5) the repurchase
                  or other acquisition of shares of Capital Stock of the
                  Company, from employees, former employees, directors or former
                  directors of the Company or its Restricted Subsidiaries (or
                  permitted transferees of such employees, former employees,
                  directors or former directors), pursuant to the terms of the
                  agreements (including employment agreements) or plans (or
                  amendments thereto) or other arrangements approved by the
                  Board of Directors of the Company under which such shares were
                  granted, issued or sold or such other repurchases or
                  acquisitions as may be approved by the Board of Directors of
                  the Company; provided, however, that the aggregate amount of
                  such repurchases and other acquisitions in any calendar year
                  shall not exceed $600,000 plus up to $600,000 of any
                  unutilized amounts from the preceding calendar year; provided
                  further, however, that such amount in any calendar year may be
                  increased by an amount not to exceed the cash proceeds of key
                  man life insurance policies received by the Company (to the
                  extent contributed to the Company) and its Restricted
                  Subsidiaries

                                       32
<PAGE>

                  subsequent to the Issue Date; (6) repurchases of Capital Stock
                  deemed to occur upon exercise of stock options, warrants or
                  other similar rights if such Capital Stock represents a
                  portion of the exercise price of such options, warrants or
                  other similar rights; (7) payments or distributions to
                  dissenting stockholders of Capital Stock of the Company
                  pursuant to applicable law, pursuant to or in connection with
                  a consolidation, merger or transfer of assets that complies
                  with the provisions of the Preferred Stock applicable to
                  mergers, consolidations and transfers of all or substantially
                  all of the property and assets of the Company or any of its
                  Restricted Subsidiaries; (8) the application of the proceeds
                  from the issuance of the Notes or the Preferred Stock on or
                  about the Issue Date as described under the "Use of Proceeds"
                  section of the Offering Circular; and (9) other Restricted
                  Payments not to exceed $6.0 million in the aggregate since the
                  Issue Date.

            (d)   In determining the aggregate amount of Restricted Payments
                  made subsequent to the Issue Date in accordance with clause
                  (iii) of clause (a) of this Section 17, amounts expended
                  pursuant to clauses (c)(1), (c)(2)(ii), (c)(3)(ii)(a) and
                  (c)(4)(ii) shall be included in such calculation.

      (18)  Asset Sales.

            (a)   The Company will not, and will not permit any of its
                  Restricted Subsidiaries to, consummate an Asset Sale unless:
                  (1) the Company or the applicable Restricted Subsidiary, as
                  the case may be, receives consideration at the time of such
                  Asset Sale at least equal to the Fair Market Value of the
                  assets sold or otherwise disposed; (2) at least 75% of the
                  consideration received by the Company or the Restricted
                  Subsidiary, as the case may be, from such Asset Sale is in the
                  form of cash or Cash Equivalents or assets described in the
                  following clause (3)(b) and is received at the time of such
                  disposition; provided that the amount of any liabilities (as
                  shown on the most recent applicable balance sheet) of the
                  Company or such Restricted Subsidiary (other than liabilities
                  that are by their terms subordinated to the Preferred Stock)
                  that are assumed by the transferee of any such assets shall be
                  deemed to be cash for purposes of this provision so long as
                  the documents governing such liabilities provide that there is
                  no further recourse to the Company or any of its Subsidiaries
                  with respect to such liabilities; and (3) the Company shall
                  apply, or cause such Restricted Subsidiary to apply, the Net
                  Cash Proceeds relating to such Asset Sale within 360 days of
                  receipt thereof either: (a) to permanently repay Indebtedness
                  under the Credit Agreement and permanently reduce the
                  commitments thereunder; (b) to make an investment in property,
                  plant, equipment or other non-current assets that replace the
                  properties and assets that were the subject of such Asset Sale
                  or that will be used or useful in a Permitted Business
                  (including expenditures for maintenance, repair or improvement
                  of existing properties and assets) or the acquisition of all
                  of the Capital Stock of a Person engaged in a Permitted
                  Business; or (c) a combination of repayment and investment
                  permitted by the foregoing clauses (3)(a) and (3)(b).

                                       33
<PAGE>

            (b)   Pending the final application of Net Cash Proceeds, the
                  Company may temporarily reduce revolving credit borrowings or
                  invest such Net Cash Proceeds in Cash Equivalents. On the
                  361st day after an Asset Sale or such earlier date, if any, as
                  the Board of Directors of the Company or of such Restricted
                  Subsidiary determines not to apply the Net Cash Proceeds
                  relating to such Asset Sale as set forth in clauses (3)(a),
                  (3)(b) or (3)(c) of the preceding clause (a) (each, a "Net
                  Proceeds Offer Trigger Date"), such aggregate amount of Net
                  Cash Proceeds which have not been applied on or before such
                  Net Proceeds Offer Trigger Date as permitted in clauses
                  (3)(a), (3)(b) and (3)(c) of the preceding clause (a) (each a
                  "Net Proceeds Offer Amount") shall be applied by the Company
                  or such Restricted Subsidiary to make an offer to purchase
                  (the "Net Proceeds Offer") on a date (the "Net Proceeds Offer
                  Payment Date") not less than 30 nor more than 45 days
                  following the applicable Net Proceeds Offer Trigger Date, from
                  all Holders, the maximum outstanding Preferred Stock that may
                  be purchased with the Net Proceeds Offer Amount at a price
                  equal to 100% of the liquidation preference thereof plus,
                  without duplication, an amount in cash equal to all
                  accumulated and unpaid dividends thereon (including and amount
                  in cash equal to a prorated dividend for the period from the
                  immediately preceding dividend payment date to the Net
                  Proceeds Offer Payment Date); provided, however, that if at
                  any time any non-cash consideration received by the Company or
                  any Restricted Subsidiary of the Company, as the case may be,
                  in connection with any Asset Sale is converted into or sold or
                  otherwise disposed of for cash (other than interest received
                  with respect to any such non-cash consideration), then such
                  conversion or disposition shall be deemed to constitute an
                  Asset Sale hereunder on the date of such conversion or
                  disposition, as the case may be, and the Net Cash Proceeds
                  thereof shall be applied in accordance with this Section 18.

            (c)   The Company may defer any Net Proceeds Offer until there is an
                  aggregate unutilized Net Proceeds Offer Amount equal to or in
                  excess of $6.0 million resulting from one or more Asset Sales
                  in which case the accumulation of such amount shall constitute
                  a Net Proceeds Offer Trigger Date (at which time, the entire
                  unutilized Net Proceeds Offer Amount, and not just the amount
                  in excess of $6.0 million, shall be applied as required
                  pursuant to the immediately preceding clause (b)). Upon the
                  completion of each Net Proceeds Offer, the Net Proceeds Offer
                  Amount will be reset at zero.

            (d)   In the event of the transfer of substantially all (but not
                  all) of the property and assets of the Company and its
                  Restricted Subsidiaries as an entirety to a Person in a
                  transaction permitted under Section 21, which transaction does
                  not constitute a Change of

                                       34
<PAGE>

                  Control, the successor entity shall be deemed to have sold the
                  properties and assets of the Company and its Restricted
                  Subsidiaries not so transferred for purposes of this Section
                  18, and shall comply with the provisions of this Section 18
                  with respect to such deemed sale as if it constituted an Asset
                  Sale. In addition, the Fair Market Value of such properties
                  and assets of the Company or its Restricted Subsidiaries
                  deemed to be sold shall be deemed to be Net Cash Proceeds for
                  purposes of this Section 18. In addition, the Fair Market
                  Value of such properties and assets of the Company or its
                  Restricted Subsidiaries deemed to be sold shall be deemed to
                  be Net Cash Proceeds for purposes of this Section 18.

            (e)   Each notice of a Net Proceeds Offer shall be mailed first
                  class, postage prepaid, to the record Holders as shown on the
                  register of Holders within 20 days following the Net Proceeds
                  Offer Trigger Date and shall comply with the procedures set
                  forth in the Preferred Stock. Upon receiving notice of the Net
                  Proceeds Offer, Holders may elect to tender their Preferred
                  Stock in whole or in part in integral multiples of $1,000 in
                  exchange for cash. To the extent Holders properly tender
                  Preferred Stock in an amount exceeding the Net Proceeds Offer
                  Amount, Preferred Stock of tendering Holders will be purchased
                  on a pro rata basis (based on amounts tendered). A Net
                  Proceeds Offer shall remain open for a period of 20 business
                  days or such longer period as may be required by law.

            (f)   The Company will comply with the requirements of Rule 14e-1
                  under the Exchange Act and any other securities laws and
                  regulations thereunder to the extent such laws and regulations
                  are applicable in connection with the repurchase of Preferred
                  Stock pursuant to a Net Proceeds Offer. To the extent that the
                  provisions of any securities laws or regulations conflict with
                  Section 18, the Company shall comply with the applicable
                  securities laws and regulations and shall not be deemed to
                  have breached its obligations under Section 18 by virtue of
                  such compliance.

      (19)  Dividend and Other Payment Restrictions Affecting Restricted
            Subsidiaries. The Company will not, and will not cause or permit any
            of its Restricted Subsidiaries to, directly or indirectly, create or
            otherwise cause or permit to exist or become effective any
            encumbrance or restriction on the ability of any Restricted
            Subsidiary of the Company to: (1) pay dividends or make any other
            distributions on or in respect of its Capital Stock; (2) make loans
            or advances or to pay any Indebtedness or other obligation owed to
            the Company or any other Restricted Subsidiary of the Company; or
            (3) transfer any of its property or assets to the Company or any
            other Restricted Subsidiary of the Company, except for such
            encumbrances or restrictions existing under or by reason of: (a)
            applicable law, rule or regulation; (b) the Preferred Stock; (c)
            customary non-assignment provisions of any lease of any Restricted
            Subsidiary of the Company to the extent such provisions restrict the
            transfer of the lease or the property leased thereunder; (d) any
            instrument governing Acquired Indebtedness, which encumbrance or
            restriction is not applicable to any Person, or the

                                       35
<PAGE>

            properties or assets of any Person, other than the Person or the
            properties or assets of the Person so acquired; (e) agreements
            existing on the Issue Date (including the Credit Agreement) to the
            extent and in the manner such agreements are in effect on the Issue
            Date; (f) restrictions imposed by any agreement to sell assets or
            Capital Stock permitted under the Preferred Stock to any Person
            pending the closing of such sale; (g) provisions in joint venture
            agreements and other similar agreements (in each case relating
            solely to the respective joint venture or similar entity or the
            equity interests therein) entered into in the ordinary course of
            business; (h) restrictions contained in the terms of the Purchase
            Money Indebtedness or Capitalized Lease Obligations not incurred in
            violation of the Preferred Stock; provided, that such restrictions
            relate only to the assets financed with such Indebtedness; (i)
            restrictions in other Indebtedness incurred in compliance with
            Section 16 (including Permitted Indebtedness); provided that such
            restrictions, taken as a whole, are, in the good faith judgment of
            Board of Directors of the Company, no more materially restrictive
            with respect to such encumbrances and restrictions than those
            customary in comparable financings (as reasonably determined by the
            Company) and the Company determines that any such encumbrance or
            restriction will not materially affect the Company's ability to make
            payments on the Preferred Stock; or (j) an agreement governing
            Indebtedness incurred to Refinance the Indebtedness issued, assumed
            or incurred pursuant to an agreement referred to in clause (b), (d)
            or (e) above; provided, however, that the provisions relating to
            such encumbrance or restriction contained in any such Indebtedness
            are no less favorable to the Company in any material respect as
            determined by the Board of Directors of the Company in their
            reasonable and good faith judgment than the provisions relating to
            such encumbrance or restriction contained in agreements referred to
            in such clause (b), (d) or (e).

      (20)  Limitation on Issuances and Sales of Capital Stock of Subsidiaries.
            The Company will not permit or cause any of its Restricted
            Subsidiaries to issue or sell any Capital Stock (other than to the
            Company or to a Wholly-Owned Restricted Subsidiary of the Company)
            or permit any Person (other than the Company or a Wholly-Owned
            Restricted Subsidiary of the Company) to own or hold any Capital
            Stock of any Restricted Subsidiary of the Company (other than as
            required by applicable law); provided, however, that this provision
            shall not prohibit (1) any issuance or sale if, immediately after
            giving effect thereto, such Restricted Subsidiary would no longer
            constitute a Restricted Subsidiary and any Investment in such Person
            remaining after giving effect to such issuance or sale would have
            been permitted to be made under Section 17 if made on the date of
            such issuance or sale or (2) the sale of all of the Capital Stock of
            a Restricted Subsidiary in compliance with the provisions of Section
            18.

      (21)  Merger, Consolidation and Sale of Assets.

            (a)   The Company will not, in a single transaction or series of
                  related transactions, consolidate or merge with or into any
                  Person, or sell, assign, transfer, lease, convey or otherwise
                  dispose of (or cause or permit any Restricted Subsidiary of
                  the Company to sell, assign,

                                       36
<PAGE>

                  transfer, lease, convey or otherwise dispose of) all or
                  substantially all of the Company's assets (determined on a
                  consolidated basis for the Company and the Company's
                  Restricted Subsidiaries) whether as an entirety or
                  substantially as an entirety to any Person unless: (1) either:
                  (a) the Company shall be the surviving or continuing
                  corporation; or (b) the Person (if other than the Company)
                  formed by such consolidation or into which the Company is
                  merged or the Person which acquires by sale, assignment,
                  transfer, lease, conveyance or other disposition the
                  properties and assets of the Company and of the Company's
                  Restricted Subsidiaries substantially as an entirety (the
                  "Surviving Entity"): (x) shall be a corporation or limited
                  liability company organized and validly existing under the
                  laws of the United States or any State thereof or the District
                  of Columbia; and (y) shall expressly assume all obligations
                  under the Preferred Stock, the Certificate of Designations and
                  the Registration Rights Agreement on the part of the Company
                  to be performed or observed thereunder; (2) immediately after
                  giving effect to such transaction and the assumption
                  contemplated by clause (1)(b)(y) above in this clause (a)
                  (including giving effect to any Indebtedness and Acquired
                  Indebtedness incurred or anticipated to be incurred in
                  connection with or in respect of such transaction), the
                  Company or such Surviving Entity, as the case may be, (a)
                  shall have a Consolidated Net Worth at least equal to the
                  Consolidated Net Worth of the Company immediately prior to
                  such transaction and (b) shall be able to incur at least $1.00
                  of additional Indebtedness (other than Permitted Indebtedness)
                  in compliance with Section 16; and (3) immediately after
                  giving effect to such transaction and the assumption
                  contemplated by clause (1)(b)(y) above in this clause (a)
                  (including, without limitation, giving effect to any
                  Indebtedness and Acquired Indebtedness incurred or anticipated
                  to be incurred and any Lien granted in connection with or in
                  respect of the transaction).

            (b)   For purposes of the foregoing, the transfer (by lease,
                  assignment, sale or otherwise, in a single transaction or
                  series of transactions) of all or substantially all of the
                  properties or assets of one or more Restricted Subsidiaries of
                  the Company the Capital Stock of which constitutes all or
                  substantially all of the properties and assets of the Company,
                  shall be deemed to be the transfer of all or substantially all
                  of the properties and assets of the Company.

      (22)  Limitation on Transactions with Affiliates.

            (a)   The Company will not, and will not permit any of its
                  Restricted Subsidiaries to, directly or indirectly, enter into
                  or permit to exist any transaction or series of related
                  transactions (including, without limitation, the purchase,
                  sale, lease or exchange of any property or the rendering of
                  any service) with, or for the benefit of, any of its
                  Affiliates (each an "Affiliate Transaction"), other than (x)
                  Affiliate Transactions permitted under paragraph (b) below,

                                       37
<PAGE>

                  and (y) Affiliate Transactions on terms that are no 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 of the Company or
                  such Restricted Subsidiary. All Affiliate Transactions (and
                  each series of related Affiliate Transactions which are
                  similar or part of a common plan) involving aggregate payments
                  or other property with a Fair Market Value in excess of $3.0
                  million shall be approved by a majority of the members of the
                  Board of Directors of the Company (including a majority of the
                  disinterested members thereof), as the case may be, such
                  approval to be evidenced by a Board Resolution stating that
                  such Board of Directors has determined that such transaction
                  complies with the foregoing provisions. If the Company or any
                  Restricted Subsidiary of the Company enters into an Affiliate
                  Transaction (or a series of related Affiliate Transactions
                  related to a common plan) that involves an aggregate Fair
                  Market Value of more than $6.0 million, the Company shall,
                  prior to the consummation thereof, obtain a favorable opinion
                  as to the fairness of the financial terms of such transaction
                  or series of related transactions to the Company or the
                  relevant Restricted Subsidiary, as the case may be, from an
                  Independent Financial Advisor.

            (b)   The restrictions set forth in paragraph (a) of this Section 22
                  shall not apply to: (1) reasonable fees and compensation paid
                  to and indemnity provided on behalf of, officers, directors,
                  employees or consultants of the Company or any Restricted
                  Subsidiary of the Company as determined in good faith by the
                  Company's Board of Directors or senior management; (2)
                  transactions exclusively between or among the Company and any
                  of its Restricted Subsidiaries or exclusively between or among
                  such Restricted Subsidiaries, provided such transactions are
                  not otherwise prohibited by the Preferred Stock; (3) any
                  agreement as in effect as of the Issue Date or any transaction
                  contemplated thereby and any amendment thereto or any
                  replacement agreement thereto so long as any such amendment or
                  replacement agreement is not more disadvantageous to the
                  Holders in any material respect than the original agreement as
                  in effect on the Issue Date; (4) Restricted Payments permitted
                  by the Preferred Stock and Permitted Investments of the type
                  described in clauses (9) and (11) of the definition thereof;
                  (5) any merger or other transaction with an Affiliate solely
                  for the purpose of reincorporating or reorganizing the Company
                  in another jurisdiction or creating a holding company of the
                  Company; (6) any employment, stock option, stock repurchase,
                  employee benefit compensation, business expense reimbursement,
                  severance, termination or other employment-related agreements,
                  arrangements or plans entered into by the Company or any of
                  its Restricted Subsidiaries in the ordinary course of
                  business; (7) transactions to effect the Transactions and the
                  payment of all fees and expenses related to the Transactions;
                  and (8) the issuance of Qualified Capital Stock of the
                  Company.

                                       38
<PAGE>

      (23)  Conduct of Business. The Company will not, and will not permit any
            of its Restricted Subsidiaries to, engage in any businesses other
            than Permitted Businesses.

      (24)  Reports to Holders.

            (a)   Whether or not required by the rules and regulations of the
                  SEC, so long as any shares of Preferred Stock are outstanding,
                  the Company will furnish to the Holder and, upon request, to
                  the Holders: (1) all quarterly and annual financial
                  information that would be required to be contained in a filing
                  with the SEC on Forms 10-Q and 10-K if the Company were
                  required to file such forms, including a "Management's
                  Discussion and Analysis of Financial Condition and Results of
                  Operations" that describes the financial condition and results
                  of operations of the Company and its consolidated Subsidiaries
                  (showing in reasonable detail, either on the face of the
                  financial statements or in the footnotes thereto and in
                  Management's Discussion and Analysis of Financial Condition
                  and Results of Operations, the financial condition and results
                  of operations of the Company and its Restricted Subsidiaries
                  separate from the financial condition and results of
                  operations of the Unrestricted Subsidiaries of the Company, if
                  any) and, with respect to the annual information only, a
                  report thereon by the Company's certified independent
                  accountants; and (2) all current reports that would be
                  required to be filed with the SEC on Form 8-K if the Company
                  were required to file such reports, in each case within the
                  time periods specified in the SEC's rules and regulations,
                  provided that any breach of this Section 24 shall be cured
                  upon the furnishing of such late report within 20 days of the
                  date on which such report was required to be furnished.

            (b)   Notwithstanding the foregoing, the Company may satisfy such
                  requirements prior to the effectiveness of the registration
                  statement contemplated by the Registration Rights Agreement by
                  filing with the SEC such registration statement within the
                  time period required for such filing as specified in the
                  Registration Rights Agreement, to the extent that any such
                  registration statement contains substantially the same
                  information as would be required to be filed by the Company if
                  it were subject to the reporting requirements of Section 13 or
                  15(d) of the Exchange Act, and by providing the Holders with
                  such Registration Statement (and any amendments thereto)
                  promptly following the filing thereof.

            (c)   In addition, following the consummation of the Exchange Offer,
                  whether or not required by the rules and regulations of the
                  SEC, the Company will file a copy of all such information and
                  reports with the SEC for public availability within the time
                  periods specified in the SEC's rules and regulations (unless
                  the SEC will not accept such a filing). In addition, the
                  Company has agreed that, prior to the consummation of the

                                       39
<PAGE>

                  Exchange Offer, for so long as any shares of Preferred Stock
                  remain outstanding, it will furnish to the Holders upon their
                  request, the information required to be delivered pursuant to
                  Rule 144(A)(d)(4) under the Securities Act.

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

      (26)  Replacement Stock Certificates. If physical certificates are issued,
            and any of the Redeemable Convertible Preferred Stock certificates
            shall be mutilated, lost, stolen or destroyed, the Company shall, at
            the expense of the Holder, issue, in exchange and in substitution
            for and upon cancellation of the mutilated Redeemable Convertible
            Preferred Stock certificate, or in lieu of and substitution for the
            Redeemable Convertible Preferred Stock certificate lost, stolen or
            destroyed, a new Redeemable Convertible Preferred Stock certificate
            of like tenor and representing an equivalent amount of shares of
            Redeemable Convertible Preferred Stock, but only upon receipt of
            evidence of such loss, theft or destruction of such Redeemable
            Convertible Preferred Stock certificate and indemnity, if requested,
            satisfactory to the Company and the Transfer Agent.

      (27)  Transfer Agent Registrar and Paving Agent. The duly appointed
            Transfer Agent, Registrar and Paying Agent for the Redeemable
            Convertible Preferred Stock shall be The Bank of New York. The
            Company may, in its sole discretion, remove the Transfer Agent in
            accordance with the agreement between the Company and the Transfer
            Agent; provided, however, that the Company shall appoint a successor
            transfer agent who shall accept such appointment prior to the
            effectiveness of such removal. Upon any such removal or appointment,
            the Company shall send notice thereof by first class mail, postage
            prepaid, to the Holders.

      (28)  Form.

            (a)   The Redeemable Convertible Preferred Stock may be issued in
                  the form of one or more permanent global shares of Redeemable
                  Convertible Preferred Stock in definitive, fully registered
                  form with the global legend (the "GLOBAL SHARES LEGEND"), as
                  set forth on the form of Redeemable Convertible Preferred
                  Stock certificate attached hereto as Exhibit A (each, a
                  "GLOBAL PREFERRED SHARE"), which is hereby incorporated in and
                  expressly made a part of this Certificate of Designations. The
                  Global Preferred Share may have notations, legends or
                  endorsements required by law, stock exchange rules, agreements
                  to which the Company is subject, if any, or usage (provided
                  that any such notation, legend or endorsement is in a form
                  acceptable to the Company). The Global Preferred Share shall
                  be deposited on behalf of the holders of the Redeemable

                                       40
<PAGE>

                  Convertible Preferred Stock represented thereby with the
                  Registrar, at its New York office, as custodian for DTC or a
                  Depositary, and registered in the name of the Depositary or a
                  nominee of the Depositary, duly executed by the Company and
                  countersigned and registered by the Registrar as hereinafter
                  provided. The aggregate number of shares represented by each
                  Global Preferred Share may from time to time be increased or
                  decreased by adjustments made on the records of the Registrar
                  and the Depositary or its nominee as hereinafter provided.
                  This Section 28(a) shall apply only to a Global Preferred
                  Share deposited with or on behalf of the Depositary. The
                  Company may execute and the Registrar shall, in accordance
                  with this Section 28, countersign and deliver initially one or
                  more Global Preferred Shares that (i) shall be registered in
                  the name of Cede & Co. or other nominee of the Depositary and
                  (ii) shall be delivered by the Registrar to Cede & Co. or
                  pursuant to instructions received from Cede & Co. or held by
                  the Registrar as custodian for the Depositary pursuant to an
                  agreement between the Depositary and the Registrar. Members
                  of, or participants in, the Depositary ("AGENT MEMBERS") shall
                  have no rights under this Certificate with respect to any
                  Global Preferred Share held on their behalf by the Depositary
                  or by the Registrar as the custodian of the Depositary or
                  under such Global Preferred Share, and the Depositary may be
                  treated by the Company, the Registrar and any agent of the
                  Company or the Registrar as the absolute owner of such Global
                  Preferred Share for all purposes whatsoever. Notwithstanding
                  the foregoing, nothing herein shall prevent the Company, the
                  Registrar or any agent of the Company or the Registrar from
                  giving effect to any written certification, proxy or other
                  authorization furnished by the Depositary or impair, as
                  between the Depositary and its Agent Members, the operation of
                  customary practices of the Depositary governing the exercise
                  of the rights of a holder of a beneficial interest in any
                  Global Preferred Share. Holders may grant proxies or otherwise
                  authorize any Person to take any action that a Holder is
                  entitled to take pursuant to the Redeemable Convertible
                  Preferred Stock, this Certificate of Designations or the
                  Certificate of Incorporation. Owners of beneficial interests
                  in any Global Preferred Shares shall not be entitled to
                  receive physical delivery of certificated shares of Redeemable
                  Convertible Preferred Stock, unless (x) the Depositary is
                  unwilling or unable to continue as Depositary for the Global
                  Preferred Share and the Company does not appoint a qualified
                  replacement for the Depositary within 90 days, (y) the
                  Depositary ceases to be a "clearing agency" registered under
                  the Exchange Act and the Company does not appoint a qualified
                  replacement for the Depositary within 90 days or (z) the
                  Company decides to discontinue the use of book-entry transfer
                  through the Depositary. In any such case, any and all Global
                  Preferred Shares shall be exchanged in whole for definitive
                  shares of Redeemable Convertible Preferred Stock in registered
                  form, with the same terms and of an equal aggregate
                  Liquidation Preference. Definitive shares of Redeemable
                  Convertible Preferred Stock shall be registered in the name or
                  names of the Person or Person specified by the Depositary in a
                  written instrument to the Registrar.

                                       41
<PAGE>

            (b)   (i) An Officer shall sign any and all Global Preferred Shares
                  for the Company, in accordance with the Company's bylaws and
                  applicable law, by manual or facsimile signature.

                  (ii) If an Officer whose signature is on a Global Preferred
                       Share no longer holds that office at the time the
                       Transfer Agent countersigned the Global Preferred Share,
                       the Global Preferred Share shall be valid nevertheless.

                  (iii) A Global Preferred Share shall not be valid until an
                        authorized signatory of the Transfer Agent manually
                        countersigns Global Preferred Share. Each Global
                        Preferred Share shall be dated the date of its
                        countersignature.

      (29)  Miscellaneous.

            (a)   The Redeemable Convertible Preferred Stock shall be subject to
                  those provisions set forth in the Certificate of Incorporation
                  that are applicable to all classes and series of Preferred
                  Stock of the Company.

            (b)   All notices referred to herein shall be in writing, and,
                  unless otherwise specified herein, all notices hereunder shall
                  be deemed to have been given upon the earlier of receipt
                  thereof or three Business Days after the mailing thereof if
                  sent by registered or certified mail (unless first class mail
                  shall be specifically permitted for such notice under the
                  terms of this Certificate of Designations) with postage
                  prepaid, addressed: (i) if to the Company, to its office at
                  3050 Post Oak Boulevard, Suite 695, Houston, Texas 77056, or
                  to the Transfer Agent at its Corporate Trust Office, or other
                  agent of the Company designated as permitted by this
                  Certificate of Designation, or (ii) if to any Holder, to such
                  Holder at the address of such Holder as listed in the stock
                  record books of the Company (which may include the records of
                  the Transfer Agent) or (iii) to such other address as the
                  Company or any such Holder, as the case may be, shall have
                  designated by notice similarly given.

            (c)   The Company shall pay any and all stock transfer and
                  documentary stamp taxes that may be payable in respect of any
                  issuance or delivery of shares of Redeemable Convertible
                  Preferred Stock or shares of Common Stock or other Capital
                  Stock issued on account of Redeemable Convertible Preferred
                  Stock pursuant hereto or certificates representing such
                  shares. The Company shall not, however, be required to pay any
                  such tax that may be payable in respect of any transfer
                  involved in the issuance or delivery of shares of Redeemable
                  Convertible Preferred Stock or Common Stock or other Capital
                  Stock in a name other than that in which the shares of

                                       42
<PAGE>

                  Redeemable Convertible Preferred Stock with respect to which
                  such shares are issued or delivered were registered, or in
                  respect of any payment to any Person other than a payment to
                  the registered holder thereof, and shall not be required to
                  make any such issuance, delivery or payment unless and until
                  the Person otherwise entitled to such issuance, delivery or
                  payment has paid to the Company the amount of any such tax or
                  has established, to the satisfaction of the Company, that such
                  tax has been paid or is not payable.

            (d)   The Liquidation Preference and the annual Dividend Rate set
                  forth herein each shall be subject to equitable adjustment
                  whenever there shall occur a stock split, combination or
                  classification of the Redeemable Convertible Preferred Stock.
                  Such adjustments shall be determined in good faith by the
                  Board of Directors and submitted by the Board of Directors to
                  the Transfer Agent.

      (30)  Definitions. Unless otherwise defined herein, capitalized terms used
            in this Certificate of Designations shall have the following
            meanings:

      "ACQUIRED INDEBTEDNESS" means Indebtedness of a Person or any of its
Subsidiaries (a) existing at the time such Person becomes a Restricted
Subsidiary of the Company or at the time it merges or consolidates with or into
the Company or any of its Restricted Subsidiaries or (b) assumed in connection
with the acquisition of assets from such Person and in each case not incurred by
such Person in connection with, or in anticipation or contemplation of, such
Person becoming a Restricted Subsidiary of the Company or such acquisition,
merger or consolidation and which Indebtedness is without recourse to the
Company or any of its Subsidiaries or to any of their respective properties or
assets other than the Person or the assets to which such Indebtedness related
prior to the time such Person became a Restricted Subsidiary of the Company or
the time of such acquisition, merger or consolidation.

      "ADMINISTRATIVE AGENT" has the meaning set forth in the definition of the
term "Credit Agreement."

      "AFFILIATE" means, with respect to any specified Person, any other Person
who directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise; provided,
that Beneficial Ownership of 10% or more of the Voting Stock of the Person shall
be deemed to be control. The terms "controlling" and "controlled" have meanings
correlative of the foregoing.

      "APPROVED PLAN" means any written stock option, stock purchase, stock
incentive or stock appreciation plan or arrangement that is approved by the
Board of Directors and the Company's stockholders, to the extent required by law
or other regulation.

                                       43
<PAGE>

      "ASSET ACQUISITION" means:

      (1) an Investment by the Company or any Restricted Subsidiary of the
Company in any other Person pursuant to which such Person shall become a
Restricted Subsidiary of the Company or any Restricted Subsidiary of the
Company, or shall be merged with or into the Company or any Restricted
Subsidiary of the Company, or

      (2) the acquisition by the Company or any Restricted Subsidiary of the
Company of the assets of any Person (other than a Restricted Subsidiary of the
Company) which constitute all or substantially all of the assets of such Person
or comprise any division or line of business of such Person or any other
properties or assets of such Person other than in the ordinary course of
business.

      "ASSET SALE" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary course
of business), assignment or other transfer for value by the Company or any of
its Restricted Subsidiaries to any Person other than the Company or a Restricted
Subsidiary of:

      (1) any Capital Stock of any Restricted Subsidiary of the Company; or

      (2) any other property or assets of the Company or any Restricted
Subsidiary of the Company other than in the ordinary course of business;
provided, however, that Asset Sales shall not include:

            (a) a transaction or series of related transactions for which the
      Company or its Restricted Subsidiaries receive aggregate consideration of
      less than $1.5 million;

            (b) the sale, lease, conveyance, disposition or other transfer of
      all or substantially all of the assets of the Company as permitted under
      Section 21;

            (c) any Restricted Payment permitted under Section 17 including a
      Permitted Investment;

            (d) the sale of Cash Equivalents;

            (e) the sale or other disposition of used, worn out, obsolete or
      surplus equipment; and

            (f) the abandonment, assignment, lease, sub-lease or farmout of oil
      and gas properties or, the forfeiture or other disposition of such
      properties, pursuant to operating agreements or other instruments or
      agreements that, in each case, are entered into in a manner that is
      customary in the Oil and Gas Business (but not sales of dollar denominated
      or volumetric production payments, which shall be considered Asset Sales).

      "BENEFICIAL OWNER" has the meaning assigned to such term in Rule 13d-3 and
Rule 13d-5 under the Exchange Act, except that in calculating the beneficial
ownership of any particular "person" (as that term is used in Section 13(d)(3)
of the Exchange Act), such "person" will be deemed to have beneficial ownership

                                       44
<PAGE>

of all securities that such "person" has the right to acquire by conversion or
exercise of other securities, whether such right is currently exercisable or is
exercisable only upon the occurrence of a subsequent condition. The terms
"Beneficial Ownership," "Beneficially Owns" and "Beneficially Owned" have
meanings correlative to the foregoing.

      "BOARD OF DIRECTORS" means, as to any Person, the board of directors or
similar governing body of such Person or any duly authorized committee thereof.

      "BOARD RESOLUTION" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification.

      "BUSINESS DAY" means any day other than a Saturday or Sunday or any other
day on which commercial banks in the City of New York are authorized or required
by law or executive order to close.

      "CAPITAL STOCK" means:

      (1) with respect to any Person that is a corporation, any and all shares,
interests, participations or other equivalents (however designated and whether
or not voting) of corporate stock, including each class of common stock and
Other Preferred Stock (including the Preferred Stock) of such Person;

      (2) with respect to any Person that is not a corporation, any and all
partnership, membership or other equity interests of such Person; and

      (3) any warrants, rights or options to purchase any of the instruments or
interests referred to in clause (1) or (2) above.

      "CAPITALIZED LEASE OBLIGATION" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date shall be the capitalized amount of
such obligations at such date, determined in accordance with GAAP.

      "CASH EQUIVALENTS" means:

      (1) marketable direct obligations issued by, or unconditionally guaranteed
by, the United States Government or issued by any agency thereof and backed by
the full faith and credit of the United States, in each case maturing within one
year from the date of acquisition thereof;

      (2) marketable direct 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
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Ratings Group ("S&P") or Moody's
Investors Service, Inc. ("MOODY'S");

                                       45
<PAGE>

      (3) commercial paper maturing no more than one year from the date of
creation thereof and, at the time of acquisition, having a rating of at least
A-1 from S&P or at least P-1 from Moody's;

      (4) certificates of deposit or bankers' acceptances maturing within one
year from the date of acquisition thereof issued by any bank organized under the
laws of the United States of America or any state thereof or the District of
Columbia or any U.S. branch of a foreign bank having at the date of acquisition
thereof combined net capital and surplus of not less than $250.0 million;

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

      (6) investments in money market funds which invest substantially all their
assets in securities of the types described in clauses (1) through (5) above.

      "CERTIFICATE OF INCORPORATION" shall have the meaning set forth in the
recitals.

      "CHANGE OF CONTROL" means the occurrence of any event or transaction that
would constitute a Fundamental Change and any Qualifying Transaction.

      "CHANGE OF CONTROL REDEMPTION PRICE" means a price per share of Redeemable
Convertible Preferred Stock equal to the sum of (1) the Liquidation Preference,
plus (2) all accrued, cumulated and unpaid dividends on one share of Redeemable
Convertible Preferred Stock, whether or not declared prior to the Change of
Control Purchase Date, for the then-current Dividend Period to, but excluding,
the Change of Control Purchase Date and all prior Dividend Periods (other than
previously declared dividends on the Redeemable Convertible Preferred Stock
payable to Holders of record as of a prior date).

      "CLOSING PRICE" means, as of any date of determination, the closing sale
price per share (or if no closing sale price is reported, the average of the
closing bid and ask prices or, if more than one in either case, the average of
the average closing bid and the average closing ask prices) on such date as
reported on the principal United States national or regional securities exchange
on which the Common Stock is then traded or, if the Common Stock is not listed
on a United States national or regional securities exchange, by Pink Sheets LLC
(formerly the National Quotation Bureau, Inc.).

      "COMMON STOCK" means the Company's Common Stock, par value $.001 per
share, as the same exists at the date of filing of this Certificate of
Designations relating to the Redeemable Convertible Preferred Stock, or any
other class of stock resulting from successive changes or rectifications of such
Common Stock consisting solely of changes in par value, or from par value to no
par value, or from no par value to par value. However, subject to the provisions
of Section 15(f), shares of Common Stock issuable on conversion of shares of
Redeemable Convertible Preferred Stock shall include only shares of the class
designated as Common Stock of the Company at the date of the filing of this
Certificate of Designation with the Secretary of State of the State of Delaware

                                       46
<PAGE>

or shares of any class or classes resulting from any rectification or
rectifications thereof and which have no preference in respect of dividends or
of amounts payable in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Company and which are not subject to redemption
by the Company except as provided in the Certificate of Incorporation; provided,
however, that if at any time there shall be more than one such resulting class,
the shares of each such class then so issuable shall be substantially in the
proportion which the total number of shares of such class resulting from all
such reclassifications bears to the total number of shares of all classes
resulting from all such reclassifications.

      "COMPANY" shall have the meaning set forth in the recitals.

      "CONSIDERATION SHARES" means the 10,055,866 shares of Common Stock,
representing shares having a value of $18,000,000 based on the closing price for
Common Stock on the American Stock Exchange on April 13, 2007 issued in
connection with the Goldking Acquisition.

      "CONSOLIDATED EBITDA" means, with respect to any Person, for any period,
the sum (without duplication) of:

      (1) Consolidated Net Income; and

      (2) to the extent Consolidated Net Income has been reduced thereby:

            (a) all income taxes of such Person and its Restricted Subsidiaries
      paid or accrued in accordance with GAAP for such period;

            (b) Consolidated Interest Expense;

            (c) Consolidated Non-cash Charges less any non-cash items increasing
      Consolidated Net Income for such period; and

            (d) restructuring costs (including employee relocations costs) and
      integration expenses and charges that are identified at the time of
      closing of any acquisition as resulting from such acquisition (including,
      without limitation, cash severance payments and facility closures);

      all as determined on a consolidated basis for such Person and its
Restricted Subsidiaries in accordance with GAAP.

      "CONSOLIDATED FIXED CHARGE COVERAGE RATIO" means, with respect to any
Person, the ratio of Consolidated EBITDA of such Person during the four
consecutive full fiscal quarters (the "FOUR QUARTER PERIOD") most recently
ending on or prior to the date of the transaction or event giving rise to the
need to calculate the Consolidated Fixed Charge Coverage Ratio for which
financial statements are available (the "TRANSACTION DATE") to Consolidated
Fixed Charges of such Person for the Four Quarter Period.

                                       47
<PAGE>

      In addition to and without limitation of the foregoing, for purposes of
this definition, "Consolidated EBITDA" and "Consolidated Fixed Charges" shall be
calculated after giving effect on a pro forma basis for the period of such
calculation to:

      (1) the incurrence or repayment of any Indebtedness of such Person or any
of its Restricted Subsidiaries (and the application of the proceeds thereof)
giving rise to the need to make such calculation and any incurrence or repayment
of other Indebtedness (and the application of the proceeds thereof), other than
the incurrence or repayment of Indebtedness in the ordinary course of business
for working capital purposes pursuant to working capital facilities, occurring
during the Four Quarter Period or at any time subsequent to the last day of the
Four Quarter Period and on or prior to the Transaction Date, as if such
incurrence or repayment, as the case may be (and the application of the proceeds
thereof), occurred on the first day of the Four Quarter Period; and

      (2) any Asset Sale or other disposition or Asset Acquisition (including,
without limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of such Person or one of its Restricted Subsidiaries
(including any Person who becomes a Restricted Subsidiary as a result of any
such Asset Acquisition) incurring, assuming or otherwise being liable for
Acquired Indebtedness during the Four Quarter Period or at any time subsequent
to the last day of the Four Quarter Period and on or prior to the Transaction
Date), as if such Asset Sale or other disposition or Asset Acquisition
(including the incurrence, assumption or liability for any such Indebtedness or
Acquired Indebtedness and also including any Consolidated EBITDA associated with
such Asset Acquisition) occurred on the first day of the Four Quarter Period
provided that the Consolidated EBITDA of any Person acquired shall be included
only to the extent includible pursuant to the definition of "Consolidated Net
Income." If such Person or any of its Restricted Subsidiaries directly or
indirectly guarantees Indebtedness of a third Person, the preceding sentence
shall give effect to the incurrence of such guaranteed Indebtedness as if such
Person or any Restricted Subsidiary of such Person had directly incurred or
otherwise assumed such guaranteed Indebtedness.

      Furthermore, in calculating "Consolidated Fixed Charges" for purposes of
determining the denominator (but not the numerator) of this "Consolidated Fixed
Charge Coverage Ratio":

      (1) interest on outstanding Indebtedness determined on a fluctuating basis
as of the Transaction Date (including Indebtedness actually incurred on the
Transaction Date) and which will continue to be so determined thereafter shall
be deemed to have accrued at a fixed rate per annum equal to the rate of
interest on such Indebtedness in effect on the Transaction Date; and

      (2) notwithstanding clause (1) above, interest on Indebtedness determined
on a fluctuating basis, to the extent such interest is covered by agreements
relating to Hedging Obligations, shall be deemed to accrue at the rate per annum
resulting after giving effect to the operation of such agreements.

      "CONSOLIDATED FIXED CHARGES" means, with respect to any Person for any
period, the sum, without duplication, of:

      (1) Consolidated Interest Expense; plus

                                       48
<PAGE>

      (2) the product of (x) the amount of all dividend payments on any series
of Other Preferred Stock (including the Preferred Stock) of such Person (other
than dividends paid in Qualified Capital Stock) paid, accrued or scheduled to be
paid or accrued during such period times (y) a fraction, the numerator of which
is one and the denominator of which is one minus the then current effective
consolidated federal, state and local tax rate of such Person, expressed as a
decimal.

      "CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person for any
period, the aggregate of the interest expense of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, as determined in
accordance with GAAP, and including, without duplication, (a) all amortization
or accretion of original issue discount; (b) the interest component of
Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or
accrued by such Person and its Restricted Subsidiaries during such period; and
(c) net cash costs under all Interest Swap Obligations (including amortization
of fees); but excluding the amortization or write-off during such period of
capitalized financing or debt issuance costs.

      "CONSOLIDATED NET INCOME" means, with respect to any Person, for any
period, the aggregate net income (or loss) of such Person and its Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided, however, that there shall be excluded therefrom:

      (1) after-tax gains and losses from Asset Sales or abandonments or
reserves relating thereto;

      (2) after-tax items classified as extraordinary gains or losses;

      (3) the net income (but not loss) of any Restricted Subsidiary of the
referent Person to the extent that the declaration of dividends or similar
distributions by that Restricted Subsidiary of that income is restricted by a
contract, operation of law or otherwise;

      (4) the net income of any Person, other than the referent Person or a
Restricted Subsidiary of the referent Person, except to the extent of cash
dividends or distributions paid to the referent Person or to a Wholly-Owned
Restricted Subsidiary of the referent Person by such Person;

      (5) any restoration to income of any material contingency reserve, except
to the extent that provision for such reserve was made out of Consolidated Net
Income accrued at any time following the Issue Date;

      (6) income or loss attributable to discontinued operations (including,
without limitation, operations disposed of during such period whether or not
such operations were classified as discontinued);

      (7) all gains and losses realized on or because of the purchase or other
acquisition by such Person or any of its Restricted Subsidiaries of any
securities of such Person or any of its Restricted Subsidiaries;

      (8) the cumulative effect of a change in accounting principles;

                                       49
<PAGE>

      (9) interest expense attributable to dividends on Qualified Capital Stock
pursuant to Statement of Financial Accounting Standards No. 150, "Accounting for
Certain Financial Instruments with Characteristics of both Liabilities and
Equity;"

      (10) non-cash charges resulting from the impairment of intangible assets;

      (11) in the case of a successor to the referent Person by consolidation or
merger or as a transferee of the referent Person's assets, any earnings of the
successor corporation prior to such consolidation, merger or transfer of assets;
and

      (12) non-cash compensation charges or other non-cash expenses or charges
arising from the grant of or issuance or repricing of stock, stock options or
other equity-based awards or any amendment, modification, substitution or change
of any such stock, stock options or other equity-based awards.

      "CONSOLIDATED NET WORTH" of any Person means the consolidated
stockholders' equity of the Person, determined on a consolidated basis in
accordance with GAAP, less (without duplication) amounts attributable to
Disqualified Capital Stock of such Person.

      "CONSOLIDATED NON-CASH CHARGES" means, with respect to any Person, for any
period, the aggregate depreciation, amortization and other non-cash items and
expenses of such Person and its Restricted Subsidiaries to the extent they
reduce Consolidated Net Income of such Person and its Restricted Subsidiaries
for such period, determined on a consolidated basis in accordance with GAAP
(excluding any such charges constituting an extraordinary item or loss or any
such charge which requires an accrual of or a reserve for cash charges for any
future period).

      "CONVERSION PRICE" means $3.00, subject to adjustment as set forth in
Section 15.

      "CONVERSION RATE" on any date of determination means the number of shares
of Common Stock into which one share of Redeemable Convertible Preferred Stock
is convertible as of such date.

      "CORPORATE TRUST OFFICE" means the principal corporate trust office of the
Transfer Agent at which, at any particular time, its corporate trust business
shall be administered.

      "CREDIT AGREEMENT" means the Credit Agreement, between the Company and the
lenders party thereto (together with their successors and assigns, the
"LENDERS") and the administrative agent named therein (in such capacity,
together with its successors and assigns, the "ADMINISTRATIVE AGENT"), setting
forth the terms and conditions of the senior revolving credit facility, together
with the related documents thereto (including, without limitation, any guarantee
agreements and security documents), in each case as such agreements may be
amended, supplemented or otherwise modified from time to time, including any
agreement extending the maturity of, refinancing, replacing or otherwise
restructuring (including increasing the amount of available borrowings
thereunder (provided that such increase in borrowings is permitted under clause
(2) or (15) of the definition of the term "Permitted Indebtedness") or adding
Subsidiaries of the Company as additional borrowers or guarantors thereunder)
all or any portion of the Indebtedness under such agreement or any successor or
replacement agreement and whether by the same or any other agent, lender or
group of lenders.

                                       50
<PAGE>

      "DEPOSITARY" means DTC or its nominee or any successor appointed by the
Company.

      "DISQUALIFIED CAPITAL STOCK" means that portion of any Capital Stock
which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable at the option of the holder
thereof), or upon the happening of any event (other than an event that would
constitute a Change of Control), matures or is mandatorily redeemable, pursuant
to a sinking fund obligation or otherwise, or is redeemable at the option of the
holder thereof (except in each case, upon the occurrence of a Change of Control)
on or prior to the first anniversary of the final maturity date of the Notes for
cash or is convertible into or exchangeable for debt securities of the Company
or its Subsidiaries at any time prior to such anniversary.

      "DIVIDEND PAYMENT DATE" means the 1st calendar day of March, June,
September and December of each year, or the following Business Day if such day
is not a Business Day, commencing September, 2007.

      "DIVIDEND PERIOD" means the period ending on the day before a Dividend
Payment Date and beginning on the preceding Dividend Payment Date or, if there
is no preceding Dividend Payment Date, on the Issue Date of the Redeemable
Convertible Preferred Stock.

      "DOMESTIC RESTRICTED SUBSIDIARY" means, with respect to any Person, a
Domestic Subsidiary of such Person that is a Restricted Subsidiary of such
Person. "DOMESTIC SUBSIDIARY" means, with respect to any Person, a Subsidiary of
such Person that is not a Foreign Subsidiary of such Person.

      "DTC" means The Depository Trust Company.

      "EQUITY INTERESTS" means Capital Stock and all Options to acquire Capital
Stock (but excluding any debt security that is convertible into, or exchangeable
for, Capital Stock).

      "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, or
any successor statute or statutes thereto.

      "EXCHANGE OFFER" means an exchange offer that may be made by the Company,
pursuant to the Registration Rights Agreement, to exchange for any and all the
Preferred Stock a like amount of Preferred Stock having substantially identical
terms to the Preferred Stock registered under the Securities Act.

      "FAIR MARKET VALUE" means, with respect to any asset or property, the
price which could be negotiated in an arm's length, free market transaction, for
cash, between a willing seller and a willing and able buyer, neither of whom is
under undue pressure or compulsion to complete the transaction. Fair Market
Value shall be determined by the Board of Directors of the Company acting in
good faith; provided, however, that with respect to any price less than $3.0
million only the good faith determination by the Company's senior management
shall be required.

                                       51
<PAGE>

      "FOREIGN SUBSIDIARY" means, with respect to any Person, any Subsidiary of
such Person that is organized under the laws of any jurisdiction other than the
United States of America, any state thereof or the District of Columbia.

      "FUNDAMENTAL CHANGE" will be deemed to occur upon the occurrence of any of
the following events:

            (i) the Company consolidates with, amalgamates or merges with or
      into, another Person, or any Person consolidates with, or amalgamates or
      merges with or into the Company, other than pursuant to a transaction in
      which the Persons that "beneficially owned" (as defined in Rule 13d-3
      under the Exchange Act) directly or indirectly, the Company's Voting Stock
      immediately prior to such transaction beneficially own, directly or
      indirectly, the Company's Voting Stock representing a majority of the
      total voting power of all outstanding classes of Voting Stock of the
      continuing or surviving Person in substantially the same proportion among
      themselves as such ownership immediately prior to such transaction;

            (ii) the sale, lease or transfer, in one or a series of related
      transactions, of all or substantially all of the assets of the Company
      (determined on a consolidated basis) to any person or group (as such term
      is used in Section 13(d)(3) of the Exchange Act) other than pursuant to a
      transaction in which persons that "beneficially owned" (as defined in Rule
      13d-3 under the Exchange Act) directly or indirectly, the Company's Voting
      Stock immediately prior to such transaction beneficially own, directly or
      indirectly, such Voting Stock representing a majority of the total voting
      power of such person or group;

            (iii) the adoption of a plan me consummation of which would result
      in the Company's liquidation or dissolution;

            (iv) the acquisition, directly or indirectly, by any person or group
      (as such term is used in Section 13(d)(3) of the Exchange Act), of
      beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) of
      more than 50% of the aggregate voting power of the Company's Voting Stock;
      or

            (v) during any period of two consecutive years, individuals who at
      the beginning of such period comprised the Board of Directors (together
      with any new directors whose appointment by such Board of Directors or
      whose nomination for election by the Company's stockholders was approved
      by a vote of a majority of the Board of Directors then still in office who
      were either directors at the beginning of such period or whose election or
      nomination for election was previously so approved) cease for any reason
      to constitute a majority of the Board of Directors then in office;

provided, however, that a Fundamental Change will not be deemed to have occurred
if it is a Qualifying Transaction.

                                       52
<PAGE>

      "GAAP" means accounting principles generally accepted in the United States
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 may be approved by a significant segment of
the accounting profession of the United States, which are in effect as of the
Issue Date.

      "GOLDKING ACQUISITION" means the acquisition by the Company of all of the
issued and outstanding Capital Stock of Goldking pursuant to the Goldking
Acquisition Agreement.

      "GOLDKING ACQUISITION AGREEMENT" means the stock purchase and sale
agreement, dated as of April 13, 2007, among the Company, Goldking, and Goldking
Energy Holdings, L.P.

      "HEDGING OBLIGATIONS" means the obligations of the Company or any of its
Restricted Subsidiaries pursuant to agreements (1) designed to protect the
Company or any of its Restricted Subsidiaries against (a) fluctuations in
interest rates in respect of Indebtedness of the Company or such Restricted
Subsidiary or (b) fluctuations in currency exchange rates or commodity prices
and (2) entered into in the ordinary course of business and not for purposes of
speculation.

      "HOLDER" means the Person in whose name a Preferred Stock is registered on
stock books of the Company.

      "INDEBTEDNESS" means with respect to any Person, without duplication:

      (1) all Obligations of such Person for borrowed money;

      (2) all Obligations of such Person evidenced by bonds, debentures, notes
or other similar instruments;

      (3) all Capitalized Lease Obligations of such Person;

      (4) all Obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations and all Obligations
under any title retention agreement (but excluding trade accounts payable and
other accrued liabilities arising in the ordinary course of business that are
not overdue by 90 days or more or are being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted and any
deferred purchase price represented by earn outs);

      (5) all Obligations for the reimbursement of any obligor on any letter of
credit, banker's acceptance or similar credit transaction, whether or not then
due;

      (6) guarantees and other contingent obligations in respect of Indebtedness
referred to in clauses (1) through (5) above and clause (8) below;

                                       53
<PAGE>

      (7) all Obligations of any other Person of the type referred to in clauses
(1) through (6) which are secured by any Lien on any property or asset of such
Person, the amount of any such Obligation being deemed to be the lesser of the
Fair Market Value of the property or asset securing such Obligation or the
amount of such Obligation;

      (8) all Hedging Obligations; and

      (9) all Disqualified Capital Stock issued by such Person with the amount
of Indebtedness represented by such Disqualified Capital Stock being equal to
the greater of its voluntary or involuntary liquidation preference and its
maximum fixed repurchase price, but excluding accrued dividends, if any.

      Notwithstanding the foregoing, Indebtedness shall not include any
Qualified Capital Stock. For purposes hereof, the "maximum fixed repurchase
price" of any Disqualified Capital Stock which does not have a fixed repurchase
price shall be calculated in accordance with the terms of such Disqualified
Capital Stock as if such Disqualified Capital Stock were purchased on any date
on which Indebtedness shall be required to be determined pursuant to the
Certificate of Designations, and if such price is based upon, or measured by,
the Fair Market Value of such Disqualified Capital Stock, such Fair Market Value
shall be determined reasonably and in good faith by the Board of Directors of
the issuer of such Disqualified Capital Stock.

      "INDENTURE" means the indenture relating to the Notes to be dated as of
the Issue Date among the Company, The Bank of New York and the guarantors named
therein.

      "INDEPENDENT FINANCIAL ADVISOR" means a nationally-recognized accounting,
appraisal or investment banking firm: (1) that does not, and whose directors,
officers and employees or Affiliates do not, have a direct or indirect financial
interest in the Company; and (2) that, in the judgment of the Board of Directors
of the Company, is otherwise independent and qualified to perform the task for
which it is to be engaged.

      "INTEREST SWAP OBLIGATIONS" means the obligations of any Person pursuant
to any arrangement with any other Person, whereby, directly or indirectly, such
Person is entitled to receive from time to time periodic payments calculated by
applying either a floating or a fixed rate of interest on a stated notional
amount in exchange for periodic payments made by such other Person calculated by
applying a fixed or a floating rate of interest on the same notional amount and
shall include, without limitation, interest rate swaps, caps, floors, collars
and similar agreements.

      "INVESTMENTS" in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of the lender) or other
extensions of credit (including by way of guarantee or similar arrangement) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition for value of Capital Stock, Indebtedness
or other similar instruments issued by such Person. If the Company or any
Restricted Subsidiary issues, sells or otherwise disposes of any Capital Stock
of a Person that is a Restricted Subsidiary such that, after giving effect
thereto, such Person is no longer a Restricted Subsidiary, any Investment by the

                                       54
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Company or any Restricted Subsidiary in such Person remaining after giving
effect thereto will be deemed to be a new Investment at such time. The
acquisition by the Company or any Restricted Subsidiary of a Person that holds
an Investment in a third Person will be deemed to be an Investment by the
Company or such Restricted Subsidiary in such third Person at such time. Except
as otherwise provided for herein, the amount of an Investment shall be its Fair
Market Value at the time the Investment is made and without giving effect to
subsequent changes in value.

      For purposes of the definition of "Unrestricted Subsidiary," the
definition of "Restricted Payment" and Section 17:

      (i) "Investment" shall include the portion (proportionate to the Company's
equity interest in such Subsidiary) of the Fair Market Value of the net assets
of any Subsidiary of the Company at the time that such Subsidiary is designated
an Unrestricted Subsidiary; provided, however, that upon a redesignation of such
Subsidiary as a Restricted Subsidiary, the Company shall be deemed to continue
to have a permanent "Investment" in an Unrestricted Subsidiary equal to an
amount (if positive) equal to (A) the Company's "Investment" in such Subsidiary
at the time of such redesignation less (B) the portion (proportionate to the
Company's equity interest in such Subsidiary) of the Fair Market Value of the
net assets of such Subsidiary at the time of such redesignation; and

      (ii) any property transferred to or from an Unrestricted Subsidiary shall
be valued at its Fair Market Value at the time of such transfer, in each case as
determined in good faith by the Board of Directors of the Company.

      "ISSUE DATE" means May 15, 2007, the date of original issuance of the
Redeemable Convertible Preferred Stock.

      "JUNIOR STOCK" means all classes of Common Stock of the Company and the
Series A Cumulative Convertible Preferred Stock and each other class of Capital
Stock or series of preferred stock established after the Issue Date, by the
Board of Directors, the terms of which do not expressly provide that such class
or series ranks senior to or on parity with the Redeemable Convertible Preferred
Stock as to dividend rights or rights upon the liquidation, winding-up or
dissolution of the Company.

      "LENDERS" has the meaning set forth in the definition of the term "Credit
Agreement."

      "LIEN" means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof and any agreement to give
any security interest).

      "LIQUIDATION PREFERENCE" means, as to the Redeemable Convertible Preferred
Stock, $1000.00 per share.

      "MARKET VALUE" means the average Closing Price of the Common Stock for a
10 consecutive Trading Day period on the American Stock Exchange (or such other
national securities exchange or automated quotation system on which the Common
Stock is then listed or authorized for quotation or, if not so listed or
authorized for quotation, an amount determined in good faith by the Board of
Directors to be the fair value of the Common Stock) ending immediately prior to
the date of determination.

                                       55
<PAGE>

      "NET CASH PROCEEDS" means, with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents (other
than the portion of any such deferred payment constituting interest) received by
the Company or any of its Restricted Subsidiaries from such Asset Sale net of:

      (1) reasonable out-of-pocket expenses and fees relating to such Asset Sale
(including, without limitation, legal, accounting and investment banking fees
and sales commissions);

      (2) all taxes and other costs and expenses actually paid or estimated by
the Company (in good faith) to be payable in cash in connection with such Asset
Sale;

      (3) repayment of Indebtedness that is secured by the property or assets
that are the subject of such Asset Sale and is required to be repaid in
connection with such Asset Sale; and

      (4) appropriate amounts to be provided by the Company or any Restricted
Subsidiary, as the case may be, as a reserve, in accordance with GAAP, against
any liabilities associated with such Asset Sale and retained by the Company or
any Restricted Subsidiary, as the case may be, after such Asset Sale, including,
without limitation, pension and other post-employment benefit liabilities,
liabilities related to environmental matters and liabilities under any
indemnification obligations associated with such Asset Sale.

      provided, however, that if, after the payment of all taxes with respect to
such Asset Sale, the amount of estimated taxes, if any, pursuant to clause (2)
above exceeded the tax amount actually paid in cash in respect of such Asset
Sale, the aggregate amount of such excess shall, at such time, constitute Net
Cash Proceeds.

      "OBLIGATIONS" means all obligations for principal, premium, interest,
Additional Interest (as defined in the Indenture), (including, without
limitation, interest occurring after an insolvency, bankruptcy or similar
proceeding, whether or not such interest is an allowed claim in any such
proceeding), penalties, fees, indemnifications, reimbursements, damages and
other liabilities payable under the documentation governing any Indebtedness.

      "OFFERING" means the offering of the Preferred Stock hereunder.

      "OFFERING CIRCULAR" means the offering circular relating to the Preferred
Stock dated May 1, 2007.

      "OFFICER" means the Chief Executive Officer, the President, the Chief
Financial Officer or any Vice President of the Company.

      "OFFICERS' CERTIFICATE" means a certificate signed by two Officers of the
Company, at least one of whom shall be the principal financial officer of the
Company, and delivered to the Holders.

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<PAGE>

      "OIL AND GAS BUSINESS" means the business of exploiting, exploring for,
developing, acquiring, operating, producing, processing, gathering, marketing,
storing, selling, hedging, treating, swapping, refining and transporting
hydrocarbons and other related energy businesses.

      "OPINION OF COUNSEL" means a written opinion of counsel.

      "OPTIONAL REDEMPTION PRICE" means an amount in cash per share of
Redeemable Convertible Preferred Stock equal to the sum of (1) the Liquidation
Preference, plus (2) all accrued, cumulated and unpaid dividends on one share of
Redeemable Convertible Preferred Stock, whether or not declared prior to the
Optional Redemption Date, for the then- current Dividend Period until the
Optional Redemption Date and all prior Dividend Periods (other than previously
declared dividends on the Redeemable Convertible Preferred Stock payable to
Holders of record as of a prior date).

      "OTHER PREFERRED STOCK" of any Person means any Capital Stock of such
Person that has preferential rights to any other Capital Stock of such Person
with respect to dividends or redemptions or upon liquidation.

      "PARITY STOCK" means any class of Capital Stock established after the
Issue Date by the Board of Directors, the terms of which expressly provide that
such class or series will rank on parity with the Redeemable Convertible
Preferred Stock as to dividend rights or rights upon the liquidation, winding-up
or dissolution of the Company.

      "PERMITTED BUSINESS" means any business that is the same as or similar,
reasonably related, complementary or incidental to the business in which the
Company and its Restricted Subsidiaries are engaged on the Issue Date.

      "PERMITTED INDEBTEDNESS" means, without duplication, each of the
following:

      (1) Indebtedness under the Notes and the Guarantees including any Exchange
Notes and Exchange Guarantees (as defined in the Indenture);

      (2) Indebtedness incurred pursuant to the Credit Agreement (i) pursuant to
credit extensions for general corporate purposes in an aggregate principal
amount at any time outstanding not to exceed $20.0 million (the "PERMITTED
AMOUNT") and (ii) in connection with the collateralization of Hedging
Obligations (including, without limitation, borrowing funds that are used to
provide cash or cash equivalents pledged to secure Hedging Obligations or to
obtaining letters of credit that are used to provide support for Hedging
Obligations) in an aggregate principal amount at any time outstanding not to
exceed $20.0 million, less the sum of (a) the aggregate principal amount of
repayments and prepayments of any term loans or advances thereunder and (b) the
aggregate amount of reductions to the revolving commitments thereunder, in each
case, contemplated by clause (3)(a) under Section 18 provided, however, that if
the Company's Reserve Report as of December 31, 2007 shows total proved reserves
of the Company and its Restricted Subsidiaries ("TPR") in an amount greater than
141.8 Bcfe ("2007 TPR") then the Permitted Amount shall be increased by an
additional amount equal to the product of (A) $1.0 million and (B) the aggregate
amount of Bcfe by which 2007 TPR exceeded 141.8 Bcfe; provided, further,
however, that if the Company's Reserve Report as of any six-month anniversary of

                                       57
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December 31, 2007 (each such date, a "TEST DATE") shows TPR (the amount of such
TPR, the "CURRENT TPR AMOUNT") in an amount greater than (i) the TPR shown in
the Company's Reserve Report most recently prepared as of a date at least six
months prior to such Test Date (the amount of such TPR, the "PRIOR TPR AMOUNT"),
(ii) the TPR shown in each of the Company's Reserve Reports as of any date prior
to the Test Date and subsequent to the Issue Date and (iii) 141.8 Bcfe, then the
Permitted Amount shall be increased by an additional amount equal to the product
of (A) $1.0 million and (B) the aggregate amount of Bcfe by which the Current
TPR Amount exceeded the Prior TPR Amount; provided further, that the aggregate
principal amount of the Permitted Amount shall not exceed $50.0 million after
giving effect to all increases permitted by this clause (2);

      (3) other Indebtedness of the Company and its Restricted Subsidiaries
outstanding on the Issue Date;

      (4) Hedging Obligations of the Company or any of its Restricted
Subsidiaries;

      (5) Intercompany Indebtedness of the Company or a Restricted Subsidiary
for so long as such Indebtedness is held by the Company or a Restricted
Subsidiary; provided that if as of any date any Person other than the Company or
a Restricted Subsidiary owns or holds any such Indebtedness or holds a Lien in
respect of such Indebtedness such date shall be deemed the incurrence of
Indebtedness not constituting Permitted Indebtedness under this clause (5) by
the issuer of such Indebtedness;

      (6) Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument inadvertently (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 three business days after the Company obtains knowledge thereof of
incurrence;

      (7) Indebtedness of the Company or any of its Restricted Subsidiaries
represented by letters of credit for the account of the Company or such
Restricted Subsidiary, as the case may be, in order to provide security for
workers' compensation claims, payment obligations in connection with
self-insurance, bonds and completion guarantees described in the following
clause or similar requirements in the ordinary course of business;

      (8) obligations in respect of plugging and abandonment, performance, bid
and surety bonds and completion guarantees provided by the Company or any
Restricted Subsidiary in the ordinary course of business;

      (9) Indebtedness represented by Capitalized Lease Obligations and Purchase
Money Indebtedness of the Company and its Restricted Subsidiaries incurred in
the ordinary course of business (including Refinancings thereof that do not
result in an increase in the aggregate principal amount of Indebtedness of such
Person as of the date of such proposed Refinancing (plus the amount of any
premium required to be paid under the terms of the instrument governing such
Indebtedness and plus the amount of reasonable expenses incurred by the Company
in connection with such Refinancing)) not to exceed $12.0 million at any time
outstanding;

      (10) Refinancing Indebtedness;

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<PAGE>

      (11) Indebtedness represented by guarantees by the Company or a Restricted
Subsidiary of Indebtedness incurred by the Company or a Restricted Subsidiary so
long as the incurrence of such Indebtedness by the Company or any such
Restricted Subsidiary is otherwise permitted by the terms of the Certificate of
Designations;

      (12) Indebtedness arising from agreements of the Company or a Subsidiary
providing for indemnification, adjustment of purchase price or similar
obligations, in each case, incurred in connection with the disposition of any
business, assets or Subsidiary, other than guarantees of Indebtedness incurred
by any Person acquiring all or any portion of such business, assets or
Subsidiary for the purpose of financing such acquisition; 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 the Subsidiary in
connection with such disposition;

      (13) Indebtedness of the Company or any of its Restricted Subsidiaries to
the extent the net proceeds thereof are promptly used to redeem the Preferred
Stock in full in accordance with the Certificate of Designations;

      (14) Indebtedness solely represented by premium financing or similar
payment obligations incurred with respect to insurance policies purchased in the
ordinary course of business and consistent with past practices; and

      (15) additional Indebtedness of the Company and its Restricted
Subsidiaries in an aggregate principal amount not to exceed $6.0 million at any
time outstanding.

      For purposes of determining compliance with Section 16, (a) the
outstanding principal amount of any item of Indebtedness shall be counted only
once and (b) in the event that an item of Indebtedness meets the criteria of
more than one of the categories of Permitted Indebtedness described in clauses
(1) through (15) above or is entitled to be incurred pursuant to the
Consolidated Fixed Charge Coverage Ratio provisions of Section 16, the Company
shall, in its sole discretion, classify (or later reclassify) such item of
Indebtedness in any manner that complies with Section 16. Indebtedness of the
type described in clause (2) above that is outstanding on the Issue Date will
initially be deemed to have been incurred on such date in reliance on the
exception provided by such clause (and for the avoidance of doubt, not clause
(3) above). Accrual of interest, accretion or amortization of original issue
discount, the payment of interest on any Indebtedness in the form of additional
Indebtedness with the same terms, and the payment of dividends on Disqualified
Capital Stock in the form of additional shares of the same class of Disqualified
Capital Stock will not be deemed to be an incurrence of Indebtedness or an
issuance of Disqualified Capital Stock for purposes of Section 16.

      "PERMITTED INVESTMENTS" means:

      (1) Investments by the Company or any Restricted Subsidiary of the Company
in any Person that is or will become immediately after such Investment a
Restricted Subsidiary or that will merge or consolidate with or into the Company
or a Restricted Subsidiary, or that transfers or conveys all or substantially
all of its assets to the Company or a Restricted Subsidiary;

                                       59
<PAGE>

      (2) Investments in the Company by any Restricted Subsidiary of the
Company; provided that any Indebtedness evidencing such Investment is unsecured
and subordinated, pursuant to a written agreement, to the Company's then
existing Indebtedness;

      (3) Investments in cash and Cash Equivalents;

      (4) Hedging Obligations in compliance with Section 16;

      (5) Investments in the Preferred Stock;

      (6) Investments in securities of trade creditors or customers received
pursuant to any plan of reorganization or similar arrangement upon the
bankruptcy or insolvency of such trade creditors or customers in exchange for
claims against such trade creditors or customers;

      (7) Investments made by the Company or its Restricted Subsidiaries as a
result of consideration received in connection with an Asset Sale made in
compliance with Section 18;

      (8) Investments in existence on the Issue Date;

      (9) loans and advances, including advances for travel and moving expenses,
to employees, officers and directors of the Company and its Restricted
Subsidiaries in the ordinary course of business for bona fide business purposes
not in excess of $1.5 million at any one time outstanding;

      (10) advances to suppliers and customers in the ordinary course of
business; and

      (11) additional Investments in an aggregate amount not to exceed $6.0
million at any time outstanding.

      "PERSON" means an individual, partnership, corporation, limited liability
company, unincorporated organization, trust or joint venture, or a governmental
agency or political subdivision thereof.

      "PURCHASE MONEY INDEBTEDNESS" means Indebtedness of the Company and its
Restricted Subsidiaries incurred for the purpose of financing all or any part of
the purchase price, or the cost of installation, construction or improvement, of
property or equipment, provided, that the aggregate principal amount of such
Indebtedness does not exceed the lesser of the Fair Market Value of such
property or such purchase price or cost.

      "QUALIFIED CAPITAL STOCK" means any Capital Stock that is not Disqualified
Capital Stock.

      "QUALIFYING TRANSACTION" means a merger, consolidation or amalgamation of
the Company, if at least 90% of the consideration (excluding cash payments for
fractional shares and cash payments pursuant to dissenters' appraisal rights) in
the merger, consolidation or amalgamation consists of common stock of a Person
incorporated or organized under the laws of me United States or any political
subdivision thereof, any full member state of the European Union, Canada, or any
political subdivision thereof, Australia or Switzerland and traded on a national
securities exchange or on an over-the-counter market in the United States (or
which will be so traded or quoted when issued or exchanged in connection with
such transaction).

                                       60
<PAGE>

      "RECORD DATE" means February 15, May 15, August 15 or November 15, as the
case may be, or the date that may be fixed by the Board of Directors that is not
more than 60 days nor less than 10 days preceding the applicable Dividend
Payment Date.

      "REFINANCE" means, in respect of any security or Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "Refinanced" and "Refinancing"
shall have correlative meanings.

      "REFINANCING INDEBTEDNESS" means any Refinancing by the Company or any
Restricted Subsidiary of the Company of Indebtedness incurred in accordance with
Section 16 (other than pursuant to Permitted Indebtedness) or clause (1), (3) or
(10) of the definition of Permitted Indebtedness, in each case that does not:

      (1) have an aggregate principal amount (or, if such Indebtedness is issued
with original issue discount, an aggregate offering price) greater than the sum
of (x) the aggregate principal amount of the Indebtedness being Refinanced (or,
if such Indebtedness being Refinanced is issued with original issue discount,
the aggregate accreted value) as of the date of such proposed Refinancing plus
(y) the amount of fees, expenses, premium, defeasance costs and accrued but
unpaid interest relating to the Refinancing of such Indebtedness being
Refinanced;

      (2) create Indebtedness with: (a) a Weighted Average Life to Maturity that
is less than the Weighted Average Life to Maturity of the Indebtedness being
Refinanced; or (b) a final maturity earlier than the final maturity of the
Indebtedness being Refinanced; or

      (3) affect the security, if any, for such Refinancing Indebtedness (except
to the extent that less security is granted to holders of such Refinancing
Indebtedness).

      "REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement,
dated as of the Issue Date, between the Company and the Initial Purchaser, as
the same may be amended or modified from time to time in accordance with the
terms thereof.

      "REINVESTMENT YIELD" means a discount rate equal to 1.0% over the yield
(i) reported as of 10:00 a.m. (New York City time) on the date of conversion, on
the display designated as "Page PX1" (or such other display as may replace Page
PX1 on Bloomberg Financial Markets or, if Page PX1 (or its successor screen on
Bloomberg Financial Markets) is unavailable, the Telerate Access Service screen
which corresponds most closely to Page PX1 for the most recently issued actively
traded U.S. Treasury securities having a maturity closest to June 1, 2010 or
(ii) if such yields are not reported as of such time or the yields reported as
of such time are not ascertainable (including by way of interpolation), the
Treasury Constant Maturity Series Yields reported, for the latest day for which
such yields have been so reported as of the date of the conversion, in Federal
Reserve Statistical Release H.15 (519) (or any comparable successor publication)
for actively traded U.S. Treasury securities having a maturity closest to June
1, 2010. Such yield will be determined, if necessary, by (a) converting U.S.
Treasury bill quotations to bond equivalent yields in accordance with accepted

                                       61
<PAGE>

financial practice and (b) interpolating linearly between (1) the actively
traded U.S. Treasury security with the maturity closest to and later than the
period from the date of such conversion June 1, 2010 and (2) the actively traded
U.S. Treasury security with the maturity closest to and earlier than June 1,
2010. The Reinvestment Yield shall be rounded to the number of decimal places as
appears in the dividend of the applicable share of Preferred Stock.

      "RESERVE REPORT" means the report relating to the estimates of the
Company's proved reserves prepared by independent petroleum engineers.

      "RESTRICTED SUBSIDIARY" of any Person means any Subsidiary of such Person
which at the time of determination is not an Unrestricted Subsidiary.

      "SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.

      "SENIOR STOCK" means each class of Capital Stock or series of preferred
stock established after the Issue Date by the Board of Directors, the terms of
which expressly provide that such class or series will rank senior to the
Redeemable Convertible Preferred Stock as to dividend rights or rights upon the
liquidation, winding-up or dissolution of the Company.

      "SHARE PRICE" means the Market Value on the Fundamental Change Effective
Date; provided, however, that if in a transaction constituting a Fundamental
Change the holders of the Common Stock receive only cash as consideration,
"Share Price" shall mean the cash amount paid per share of Common Stock in such
transaction.

      "SHELF REGISTRATION STATEMENT" means a shelf registration statement filed
with the SEC to cover resales of Transfer Restricted Securities by holders
thereof, as required by the Registration Rights Agreement or issuances or
resales of Common Stock or Redeemable Convertible Preferred Stock as required by
Section 3(e).

      "SUBSIDIARY" with respect to any Person, means:

      (1) any corporation of which the outstanding Capital Stock having at least
a majority of the votes entitled to be cast in the election of directors under
ordinary circumstances shall at the time be owned, directly or indirectly, by
such Person; or

      (2) any other Person of which at least a majority of the voting interest
under ordinary circumstances is at the time, directly or indirectly, owned by
such Person.

      "TRADING DAY" means a day during which trading in securities generally
occurs on the American Stock Exchange or, if the Common Stock is not then listed
on the American Stock Exchange, on the principal other national or regional
securities exchange on which the Common Stock is then listed or, if the Common
Stock is not listed on a United States national or regional securities exchange,
on the principal other market on which the Common Stock is men traded.

      "TRANSFER AGENT" means The Bank of New York, the Company's duly appointed
transfer agent, registrar and conversion and dividend disbursing agent for the
Redeemable Convertible Preferred Stock.

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<PAGE>

      "TRANSFER RESTRICTED SECURITIES" shall mean each share of Redeemable
Convertible Preferred Stock (or the shares of Common Stock into which such share
of Redeemable Convertible Preferred Stock is convertible) and each share of
Redeemable Convertible Preferred Stock or Common Stock issued as a dividend on
the Redeemable Convertible Preferred Stock or into which such share of
Redeemable Convertible Preferred Stock is convertible) until (1) the date on
which such security or its predecessor has been effectively registered under the
Securities Act and disposed of in accordance with the Shelf Registration
Statement or (2) the date on which such security or its predecessor is
distributed to the public pursuant to Rule 144 under the Securities Act or is
saleable pursuant to Rule 144(k) under the Securities Act.

      "UNRESTRICTED SUBSIDIARY" of any Person means:

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

      (2) any Subsidiary of an Unrestricted Subsidiary.

      The Board of Directors of the Company may designate any Subsidiary
(including any newly acquired or newly formed Subsidiary) to be an Unrestricted
Subsidiary unless such Subsidiary owns any Capital Stock of, or owns or holds
any Lien on any property of, the Company or any other Subsidiary of the Company
that is not a Subsidiary of the Subsidiary to be so designated, provided that:

      (1) the Company certifies to the Holders that such designation complies
with Section 17; and

      (2) each Subsidiary to be so designated and each of its Subsidiaries has
not at the time of designation, and does not thereafter, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable with respect
to any Indebtedness pursuant to which the lender has recourse to any of the
assets of the Company or any of its Restricted Subsidiaries.

      The Board of Directors of the Company may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary only if immediately after giving effect
to such designation, the Company is able to incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with Section 16.

      Any such designation by the Board of Directors shall be evidenced to the
Holders by promptly providing to the Holders a copy of the Board Resolution
giving effect to such designation and an Officers' Certificate certifying that
such designation complied with the foregoing provisions.

      "VOLUME WEIGHTED AVERAGE PRICE" means for a share of Common Stock as of
any date, the dollar volume-weighted average price for such Common Stock on the
American Stock Exchange during the period beginning at 9:30:01 a.m., New York
City time (or such other time as the American Stock Exchange publicly announces
is the official open of trading), and ending at 4:00:00 p.m., New York City time
(or such other time as the American Stock Exchange publicly announces is the

                                       63
<PAGE>

official close of trading) as reported by Bloomberg through its "Volume at
Price" functions, or, if the foregoing does not apply, the dollar
volume/weighted average price of such Common Stock in the over-the-counter
market on the electronic bulletin board for such Common Stock during the period
beginning at 9:30:01 a.m., New York City time (or such other time as the
American Stock Exchange publicly announces is the official open of trading), and
ending at 4:00:00 p.m., New York City time (or such other time as the American
Stock Exchange publicly announces is the official close of trading) as reported
by Bloomberg, or, if no dollar/volume weighted average price is reported for the
Common Stock by Bloomberg for such hours, the average of the highest closing bid
price and the lowest closing ask price of any of the market makers for such
Common Stock as reported in the "pink sheets" by Pink Sheets LLC (formerly the
National Quotation Bureau, Inc.). All such determinations are to be
appropriately adjusted for any stock dividend, stock split, stock combination or
other similar transaction during the applicable calculation period.

      "VOTING RIGHTS TRIGGERING EVENT" means (1) if dividends on or any shares
of the Voting Rights Class are in arrears and unpaid for two or more calendar
years or (b) the failure of the Company to redeem any shares of Redeemable
Convertible Preferred Stock pursuant to Sections 9 or 12 hereof.

      "VOTING STOCK" means, with respect to any Person, securities of any class
or classes of Capital Stock of such Person entitling the holders thereof
(whether at all times or only so long as no senior class of stock has voting
power by reason of any contingency) to vote in the election of members of the
Board of Directors (or equivalent governing body) of such Person.

      "WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (1) the then
outstanding aggregate principal amount of such Indebtedness into (2) the sum of
the total of the products obtained by multiplying:

      (a) the amount of each then remaining installment, sinking fund, serial
maturity or other required payment of principal, including payment at final
maturity, in respect thereof, by

      (b) the number of years (calculated to the nearest one-twelfth) which will
elapse between such date and the making of such payment.

      "WHOLLY-OWNED RESTRICTED SUBSIDIARY" of any Person means any Restricted
Subsidiary of such Person of which all the outstanding Capital Stock (other than
in the case of a Foreign Subsidiary, directors' qualifying shares or an
immaterial amount of shares required to be owned by other Persons pursuant to
applicable law) are owned by such Person or any Wholly-Owned Restricted
Subsidiary of such Person.

                                       64
<PAGE>

      IN WITNESS WHEREOF, the undersigned, being a duly authorized officer of
the Company, docs file this Certificate of Designation hereby declaring and
certifying that the facts stated herein are true and accordingly has hereunto
set this hand this 11th day of May, 2007.

                                            DUNE ENERGY, INC.

                                            By: /s/ James A. Watt
                                                --------------------------------
                                            Name: James A. Watt
                                            Title: President and CEOEXECUTION COPY

                                  $300,000,000

                                DUNE ENERGY, INC.

                      10 1/2% Senior Secured Notes due 2012

                          REGISTRATION RIGHTS AGREEMENT

                                                                    May 15, 2007
JEFFERIES & COMPANY, INC.
520 Madison Avenue
12th Floor
New York, New York 10022

Ladies and Gentlemen:

      Dune Energy, Inc., a Delaware corporation (the "Company"), is issuing and
selling to Jefferies & Company, Inc. (the "Initial Purchaser"), upon the terms
set forth in the Purchase Agreement, dated May 1, 2007, by and among the
Company, the Initial Purchaser and the guarantors named therein (the "Purchase
Agreement"), $300,000,000 aggregate principal amount of 10 1/2% Senior Secured
Notes due 2012 issued by the Company (each, together with the related
guarantees, a "Note" and collectively, the "Notes"). As an inducement to the
Initial Purchaser to enter into the Purchase Agreement, the Company and the
Guarantors (as defined below) agree with the Initial Purchaser, for the benefit
of the Holders (as defined below) of the Notes (including, without limitation,
the Initial Purchaser), as follows:

1.    Definitions

      Capitalized terms that are used herein without definition and are defined
in the Purchase Agreement shall have the respective meanings ascribed to them in
the Purchase Agreement. As used in this Agreement, the following terms shall
have the following meanings:

      Additional Interest: See Section 4(a).

      Advice: See Section 6(v).

      Agreement: This Registration Rights Agreement, dated as of the Closing
Date, among the Company, the Guarantors party hereto and the Initial Purchaser.

      Applicable Period: See Section 2(e).

      Blackout Period: See Section 3(e).

      Business Day: A day that is not a Saturday, a Sunday or a day on which
banking institutions in the City of New York are authorized or required by law
or executive order to be closed.

      Closing Date: May 15, 2007.

<PAGE>

      Company: See the introductory paragraph to this Agreement.

      Effectiveness Date: The 180th day after the Issue Date.

      Effectiveness Period: See Section 3(a).

      Event Date: See Section 4(b).

      Exchange Act: The Securities Exchange Act of 1934, as amended, and the
rules and regulations of the SEC promulgated thereunder.

      Exchange Notes: Senior Secured Notes due 2012 of the Company registered
under the Securities Act, identical in all material respects to the Notes,
including the guarantees endorsed thereon, except for restrictive legends and
additional interest provisions.

      Exchange Offer: See Section 2(a).

      Exchange Offer Registration Statement: See Section 2(a).

      Filing Date: The 90th day after the Issue Date.

      Guarantors: Each subsidiary of the Company that guarantees the obligations
of the Company under the Notes and the Indenture.

      Holder: Any registered holder of Registrable Notes.

      Indemnified Party: See Section 8(c).

      Indemnifying Party: See Section 8(c).

      Indenture: The Indenture, dated as of the Closing Date, among the Company,
the Guarantors and The Bank of New York, as trustee, pursuant to which the Notes
are being issued, as amended or supplemented from time to time in accordance
with the terms hereof.

      Initial Purchaser: See the introductory paragraph to this Agreement.

      Initial Shelf Registration Statement: See Section 3(a).

      Inspectors: See Section 6(o).

      Issue Date: May 1, 2007.

      Lien: Has the meaning set forth in the Indenture.

      Losses: See Section 8(a).

      Maximum Contribution Amount: See Section 8(d).

      NASD: National Association of Securities Dealers, Inc.

                                       2
<PAGE>

      Notes: See the introductory paragraph to this Agreement.

      Participating Broker-Dealer: See Section 2(e).

      Person: An individual, trustee, corporation, partnership, limited
liability company, joint stock company, trust, unincorporated association,
union, business association, firm, government or agency or political subdivision
thereof, or other legal entity.

      Private Exchange: See Section 2(f).

      Private Exchange Notes: See Section 2(f).

      Prospectus: The prospectus included in any Registration Statement
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Notes covered by such
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.

      Purchase Agreement: See the introductory paragraph to this Agreement.

      Records: See Section 6(o).

      Registrable Notes: Notes, Private Exchange Notes and Exchange Notes
received in the Exchange Offer, in each case, that may not be sold or
transferred (i) without restriction under federal or state securities laws or
(ii) pursuant to paragraph (k) of Rule 144.

      Registration Statement: Any registration statement of the Company and the
Guarantors filed with the SEC under the Securities Act (including, but not
limited to, the Exchange Offer Registration Statement, the Shelf Registration
Statement and any Subsequent Shelf Registration Statement) that covers any of
the Registrable Notes pursuant to the provisions of this Agreement, including
the Prospectus, amendments and supplements to such registration statement,
including post-effective amendments, all exhibits and all material incorporated
by reference or deemed to be incorporated by reference in such registration
statement.

      Rule 144: Rule 144 promulgated under the Securities Act, as such Rule may
be amended from time to time, or any similar rule (other than Rule 144A) or
regulation hereafter adopted by the SEC providing for offers and sales of
securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer or such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.

      Rule 144A: Rule 144A promulgated under the Securities Act, as such Rule
may be amended from time to time, or any similar rule (other than Rule 144) or
regulation hereafter adopted by the SEC.

                                       3
<PAGE>

      Rule 415: Rule 415 promulgated under the Securities Act, as such Rule may
be amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC.

      Rule 430A: Rule 430A promulgated under the Securities Act, as such Rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC.

      SEC: The Securities and Exchange Commission.

      Securities: The Notes, the Exchange Notes and the Private Exchange Notes.

      Securities Act: The Securities Act of 1933, as amended, and the rules and
regulations of the SEC promulgated thereunder.

      Shelf Notice: See Section 2(i).

      Shelf Registration Statement: See Section 3(b).

      Subsequent Shelf Registration Statement: See Section 3(b).

      TIA: The Trust Indenture Act of 1939, as amended.

      Trustee: The trustee under the Indenture and, if existent, the trustee
under any indenture governing the Exchange Notes and Private Exchange Notes (if
any).

      Underwritten Registration or Underwritten Offering: A registration in
which securities of the Company are sold to an underwriter for reoffering to the
public.

2.    Exchange Offer

      (a)   Unless the Exchange Offer would not be permitted by applicable laws
            or a policy of the SEC, the Company shall (and shall cause each
            Guarantor to) (i) prepare and file with the SEC promptly after the
            date hereof, but in no event later than the Filing Date, a
            registration statement (the "Exchange Offer Registration Statement")
            on an appropriate form under the Securities Act with respect to an
            offer (the "Exchange Offer") exchange the Notes for Exchange Notes
            guaranteed by the Guarantors which shall have terms substantially
            identical in all material respects to the Notes, (ii) use its best
            efforts to cause the Exchange Offer Registration Statement to become
            effective as promptly as practicable after the filing thereof, but
            in no event later than the Effectiveness Date, (iii) use its best
            efforts to keep the Exchange Offer Registration Statement effective
            until the consummation of the Exchange Offer in accordance with its
            terms, and (iv) commence the Exchange Offer and use its reasonable
            best efforts to issue on or prior to 30 days after the Effectiveness
            Date, Exchange Notes in exchange for all Notes tendered prior
            thereto in the Exchange Offer. The Exchange Offer shall not be
            subject to any conditions, other than that the Exchange Offer does
            not violate applicable law or any applicable interpretation of the
            staff of the SEC.

                                       4
<PAGE>

      (b)   The Exchange Notes and the Private Exchange Notes shall be issued
            under, and entitled to the benefits of the Indenture or a trust
            indenture that is identical to the Indenture (other than such
            changes as are necessary to comply with any requirements of the SEC
            to effect or maintain the qualifications thereof under the TIA)
            which in either case will provide that (i) the Exchange Notes will
            not be subject to the transfer restrictions or additional interest
            provisions set forth in the Indenture, (ii) the Private Exchange
            Notes will be subject to the transfer restrictions set forth in the
            Indenture and (iii) the Exchange Notes, the Private Exchange Notes
            and the Notes, if any, will be deemed one class of security (subject
            to the provisions of the Indenture) and entitled to participate in
            all the security granted by the Company pursuant to the Collateral
            Agreements and in any Guarantee (as such terms are defined in the
            Indenture) on an equal and ratable basis.

      (c)   Interest on the Exchange Notes and Private Exchange Notes will
            accrue from (i) the later of (x) the last interest payment date on
            which interest was paid on the Notes surrendered in exchange
            therefor or (y) if the Note is surrendered for exchange on a date in
            a period which includes the record date for an interest payment date
            to occur on or after the date of such exchange and as to which
            interest will be paid, the date of such interest payment date or
            (ii) if no interest has been paid on the Notes, from Issue Date.
            Each Exchange Note and Private Exchange Note shall bear interest at
            the rate set forth thereon; provided, that interest with respect to
            the period prior to the issuance thereof shall accrue at the rate or
            rates borne by the Notes from time to time during such period.

      (d)   The Company may require each Holder as a condition to participation
            in the Exchange Offer to represent to the Company that at the time
            of the consummation of the Exchange Offer, (i) any Exchange Notes
            received by such Holder will be acquired in the ordinary course of
            its business, (ii) at the time of commencement and consummation of
            the Exchange Offer such Holder has not entered into any arrangement
            or understanding with any Person to participate in the distribution
            (within the meaning of the Securities Act) of the Exchange Notes in
            violation of the provisions of the Securities Act, (iii) such Holder
            is not an "affiliate" (as defined in Rule 405 of the Securities Act)
            of the Company or if such Holder is an affiliate such Holder will
            comply with the registration and prospectus delivery requirements of
            the Securities Act to the extent applicable, (iv) if such Holder is
            not a broker-dealer, that it is not engaged in, and does not intend
            to engage in, the distribution of the Exchange Notes and (v) if such
            Holder is a Participating Broker-Dealer that will receive Exchange
            Notes for its own account in exchange for Notes that were acquired
            as a result of market-making or other trading activities, that it
            will deliver a Prospectus in connection with any resale of the
            Exchange Notes.

      (e)   The Company shall (and shall cause each Guarantor to) include within
            the Prospectus contained in the Exchange Offer Registration
            Statement a section entitled "Plan of Distribution" reasonably
            acceptable to the Initial Purchaser which shall contain all of the
            information that the SEC may require with respect to the potential

                                       5
<PAGE>

            "underwriter" status of any broker-dealer that is the beneficial
            owner (as defined in Rule 13d-3 under the Exchange Act) of Exchange
            Notes received by such broker-dealer in the Exchange Offer for its
            own account in exchange for Notes that were acquired by it as a
            result of market-making activities or other trading activities (a
            "Participating Broker-Dealer"), whether such positions or policies
            have been publicly disseminated by the staff of the SEC or such
            positions or policies, in the judgment of the Initial Purchaser,
            represent the prevailing views of the staff of the SEC. Such "Plan
            of Distribution" section shall also allow, to the extent permitted
            by applicable policies and regulations of the SEC, the use of the
            Prospectus by all Persons subject to the prospectus delivery
            requirements of the Securities Act, including, to the extent so
            permitted, all Participating Broker-Dealers, and include a statement
            describing the manner in which Participating Broker-Dealers may
            resell the Exchange Notes. The Company shall use its reasonable best
            efforts to keep the Exchange Offer Registration Statement effective
            and to amend and supplement the Prospectus contained therein, in
            order to permit such Prospectus to be lawfully delivered by all
            Persons subject to the prospectus delivery requirements of the
            Securities Act for such period of time as such Persons must comply
            with such requirements in order to resell the Exchange Notes (the
            "Applicable Period").

      (f)   If, upon consummation of the Exchange Offer, the Initial Purchaser
            holds any Notes acquired by it and having the status of an unsold
            allotment in the initial distribution, the Company (upon the written
            request from the Initial Purchaser) shall, simultaneously with the
            delivery of the Exchange Notes pursuant to the Exchange Offer, issue
            and deliver to the Initial Purchaser in exchange (the "Private
            Exchange") for the Notes held by the Initial Purchaser, a like
            principal amount at maturity of debt securities of the Company,
            including guarantees endorsed thereon (issued under the same
            Indenture as the Exchange Notes) that are identical in all material
            respects to the Exchange Notes except for the existence of
            restrictions on transfer thereof under the Securities Act and
            securities laws of the several states of the United States (the
            "Private Exchange Notes"). The Private Exchange Notes shall bear the
            same CUSIP number as the Exchange Notes.

      (g)   In connection with the Exchange Offer, the Company shall (and shall
            cause each Guarantor to):

            (i)   mail to each Holder a copy of the Prospectus forming part of
                  the Exchange Offer Registration Statement, together with an
                  appropriate letter of transmittal (substantially in the form
                  attached as an exhibit to the Exchange Offer Registration
                  Statement) and any related documents;

            (ii)  keep the Exchange Offer open for not less than 20 Business
                  Days (or longer if required by applicable law) after the date
                  notice thereof is mailed to the Holders;

                                       6
<PAGE>

            (iii) utilize the services of a depository for the Exchange Offer
                  with an address in the Borough of Manhattan, The City of New
                  York, which may be the Trustee or an affiliate thereof;

            (iv)  permit Holders to withdraw tendered Registrable Notes at any
                  time prior to the close of business, New York time, on the
                  last Business Day on which the Exchange Offer shall remain
                  open; and

            (v)   otherwise comply with all applicable laws.

      (h)   As soon as practicable after the close of the Exchange Offer or the
            Private Exchange, as the case may be, the Company shall (and shall
            cause each Guarantor to):

            (i)   accept for exchange all Registrable Notes validly tendered and
                  not withdrawn pursuant to the Exchange Offer or the Private
                  Exchange, as the case may be;

            (ii)  deliver to the Trustee for cancellation all Registrable Notes
                  so accepted for exchange; and

            (iii) cause the Trustee to authenticate and deliver promptly to each
                  Holder tendering such Registrable Notes, Exchange Notes or
                  Private Exchange Notes, as the case may be, equal in principal
                  amount at maturity to the Notes of such Holder so accepted for
                  exchange.

      (i)   If, (i) any change in law or in applicable interpretations thereof
            by the staff of the SEC would not permit the consummation of the
            Exchange Offer, (ii) the Exchange Offer is not consummated within 30
            Business Days after the Effectiveness Date, (iii) the Initial
            Purchaser so requests with respect to the Notes (or the Private
            Exchange Notes) not eligible to be exchanged for Exchange Notes in
            the Exchange Offer and held by it following consummation of the
            Exchange Offer, or (iv) in the case of (A) any Holder not permitted
            to participate in the Exchange Offer, (B) any Holder participating
            in the Exchange Offer that receives Exchange Notes that may not be
            sold or transferred without restriction under state and federal
            securities laws (other than due solely to the status of such Holder
            as an affiliate of the Company within the meaning of the Securities
            Act) or (C) any Participating Broker Dealer holds Notes acquired
            directly from the Company or one of its affiliates, then in each
            case the Company shall promptly deliver to the Holders and the
            Trustee notice thereof (the "Shelf Notice") and shall as promptly as
            practicable and at its sole expense file an Initial Shelf
            Registration Statement pursuant to Section 3.

3.    Shelf Registration

      If a Shelf Notice is delivered pursuant to Section 2(i), then this Section
3 shall apply to all Registrable Notes. Otherwise, upon consummation of the
Exchange Offer in accordance with Section 2, the provisions of this Section 3
shall apply solely with respect to (i) Notes held by any Holder thereof not

                                       7
<PAGE>

permitted to participate in the Exchange Offer, (ii) Private Exchange Notes, and
(iii) Exchange Notes that are not freely tradeable as contemplated by Section
2(i)(iv) hereof, provided in each case that the relevant Holder has duly
notified the Company within six months of the Exchange Offer as required by
Section 2(i)(iv).

      (a)   Initial Shelf Registration. The Company shall (and shall cause each
            Guarantor to), use its reasonable best efforts to, as promptly as
            practicable file with the SEC a Registration Statement for an
            offering to be made on a continuous basis pursuant to Rule 415
            covering all of the Registrable Notes (the "Initial Shelf
            Registration Statement") within 30 days of the delivery of the Shelf
            Notice and shall (and shall cause each Guarantor to) use its
            reasonable best efforts to cause such Initial Shelf Registration
            Statement to be declared effective under the Securities Act as
            promptly as practicable thereafter (but in no event more than 90
            days after delivery of the Shelf Notice); provided, however, that if
            the Company (and each Guarantor) has not yet filed an Exchange Offer
            Registration Statement, the Company shall use its reasonable best
            efforts to file (and shall cause each Guarantor to file) with the
            SEC the Initial Shelf Registration Statement on or prior to the
            Filing Date and shall use its reasonable best efforts to cause such
            Initial Shelf Registration Statement to be declared effective under
            the Securities Act on or prior to the Effectiveness Date. The
            Initial Shelf Registration Statement shall be on Form S-1 or another
            appropriate form permitting registration of such Registrable Notes
            for resale by Holders in the manner or manners reasonably designated
            by them (including, without limitation, one or more underwritten
            offerings). The Company and Guarantors shall not permit any
            securities other than the Registrable Notes to be included in any
            Shelf Registration Statement. The Company shall (and shall cause
            each Guarantor to) use its reasonable best efforts to keep the
            Initial Shelf Registration Statement continuously effective under
            the Securities Act until the date which is two years from the
            Closing Date (the "Effectiveness Period"), or such shorter period
            ending when (i) all Registrable Notes covered by the Initial Shelf
            Registration Statement have been sold in the manner set forth and as
            contemplated in the Initial Shelf Registration Statement, (ii) a
            Subsequent Shelf Registration Statement (as defined below) covering
            all of the Registrable Notes covered by and not sold under the
            Initial Shelf Registration Statement or an earlier Subsequent Shelf
            Registration Statement has been declared effective under the
            Securities Act or (iii) there cease to be any outstanding
            Registrable Notes.

      (b)   Subsequent Shelf Registrations. If the Initial Shelf Registration
            Statement or any Subsequent Shelf Registration Statement ceases to
            be effective for any reason at any time during the Effectiveness
            Period (other than during a because of the sale of all of the
            securities registered thereunder), the Company shall (and shall
            cause each Guarantor to) use its reasonable best efforts to obtain
            the prompt withdrawal of any order suspending the effectiveness
            thereof, and in any event shall within 30 days of such cessation of
            effectiveness amend such Shelf Registration Statement in a manner
            designed to obtain the withdrawal of the order suspending the
            effectiveness thereof, or file (and cause each Guarantor to file) an
            additional "shelf" registration statement pursuant to Rule 415
            covering all of the Registrable Notes covered by and not sold under

                                       8
<PAGE>

            the Initial Registration Statement or any earlier Registration
            Statement (a "Subsequent Shelf Registration Statement"). If a
            Subsequent Shelf Registration Statement is filed, the Company shall
            (and shall cause each Guarantor to) use its reasonable best efforts
            to cause the Subsequent Shelf Registration Statement to be declared
            effective as soon as practicable after such filing and to keep such
            Subsequent Shelf Registration Statement continuously effective for a
            period equal to the number of days in the Effectiveness Period less
            the aggregate number of days during which the Initial Shelf
            Registration Statement or any Subsequent Shelf Registration
            Statement was previously continuously effective. As used herein the
            term "Shelf Registration Statement" means the Initial Shelf
            Registration Statement and any Subsequent Shelf Registration
            Statements.

      (c)   Supplements and Amendments. The Company shall promptly amend any
            Shelf Registration Statement and/or amend or supplement the
            Prospectus constituting a part thereof if required by the rules,
            regulations or instructions applicable to the registration form used
            for such Shelf Registration Statement, if required by the Securities
            Act, or if reasonably requested in writing by the Holders of a
            majority in aggregate principal amount of the Registrable Notes
            covered by such Shelf Registration Statement or by any underwriter
            of such Registrable Notes.

      (d)   Provision of Information. No Holder shall be entitled to include any
            of its Registrable Notes in any Shelf Registration Statement
            pursuant to this Agreement unless such Holder furnishes to the
            Company and the Trustee in writing, within 20 days after receipt of
            a written request therefor, such information as the Company and the
            Trustee, after conferring with counsel with regard to information
            relating to Holders that would be required by the SEC to be included
            in such Shelf Registration Statement or Prospectus included therein,
            may reasonably request for inclusion in any Shelf Registration
            Statement or Prospectus included therein, and no such Holder shall
            be entitled to Additional Interest pursuant to Section 4 hereof
            unless and until such Holder shall have provided such information.

      (e)   Blackout Periods. Notwithstanding anything to the contrary contained
            in this Agreement, upon notice to Holders, the Company may suspend
            use of the Prospectus included in any Shelf Registration Statement
            in the event that and for a period of time (a "Blackout Period") not
            to exceed an aggregate of 60 days in any 12-month period if the
            board of directors of the Company determines in good faith that (1)
            the disclosure of an event, occurrence or other item at such time
            could reasonably be expected to have a material adverse effect on
            the business, operations or prospects of the Company and the
            Guarantors, taken as a whole, or (2) the disclosure otherwise
            relates to a material business transaction which has not been
            publicly disclosed and that any such disclosure would jeopardize the
            success of the transaction or that disclosure of the transaction is
            prohibited pursuant to the terms thereof.

                                       9
<PAGE>

4.    Additional Interest

      (a)   The Company and each Guarantor acknowledges and agrees that the
            Holders of Registrable Notes will suffer damages if the Company or
            any Guarantor fails to fulfill its material obligations under
            Section 2 or Section 3 hereof and that it would not be feasible to
            ascertain the extent of such damages with precision. Accordingly,
            the Company and the Guarantors agree to pay additional cash interest
            on the Notes ("Additional Interest") under the circumstances and to
            the extent set forth below (each of which shall be given independent
            effect):

            (i)   if (A) neither the Exchange Offer Registration Statement nor
                  the Initial Shelf Registration Statement has been filed with
                  the SEC on or prior to the Filing Date or (B) notwithstanding
                  that the Company has consummated or will consummate an
                  Exchange Offer, the Company is required to file a Shelf
                  Registration Statement and such Shelf Registration Statement
                  is not filed on or prior to the date required by this
                  Agreement, then, commencing on the day after either such
                  required filing date, Additional Interest shall accrue on the
                  Notes over and above any stated interest at a rate of 0.25%
                  per annum of the principal amount at maturity of such Notes
                  for the first 90 days immediately following such filing date,
                  such Additional Interest rate increasing by an additional
                  0.25% per annum at the beginning of each subsequent 90-day
                  period, subject to the provisos in the last sentence of this
                  paragraph;

            (ii)  if (A) neither the Exchange Offer Registration Statement nor
                  the Initial Shelf Registration Statement is declared effective
                  by the SEC on or prior to the Effectiveness Date, (B)
                  notwithstanding that the Company has consummated or will
                  consummate an Exchange Offer, the Company is required to file
                  a Shelf Registration Statement and such Shelf Registration
                  Statement is not declared effective by the SEC on or prior to
                  the 90th day following the date such Shelf Registration
                  Statement was filed, then, commencing on the day after either
                  such required effective date, Additional Interest shall accrue
                  on the Notes over and above any stated interest at a rate of
                  0.25% per annum of the principal amount at maturity of such
                  Notes for the first 90 days immediately following such
                  effective date, such Additional Interest rate increasing by an
                  additional 0.25% per annum at the beginning of each subsequent
                  90-day period, subject to the provisos in the last sentence of
                  this paragraph;

            (iii) if (A) the Company (and any Guarantor) has not exchanged
                  Exchange Notes for all Notes validly tendered in accordance
                  with the terms of the Exchange Offer on or prior to 30 days
                  after the Effectiveness Date, (B) the Exchange Offer
                  Registration Statement ceases to be effective any time prior
                  to the consummation of the Exchange Offer, (C) if applicable,
                  a Shelf Registration Statement has been declared effective and
                  such Shelf Registration Statement ceases to be effective at
                  any time prior to the second anniversary of the Issue Date
                  (other than during a Blackout Period or after such time as all

                                       10
<PAGE>

                  Notes have been disposed of thereunder), or (D) the Company
                  issues a valid notice to suspend the use of the Prospectus
                  included in any Shelf Registration Statement and such
                  suspension, when taken together with all other suspensions, if
                  any (but solely to the extent not concurrent), during any 12
                  month period exceeds 60 days, then, in each case, Additional
                  Interest shall accrue on the Notes over and above any stated
                  interest at a rate of 0.25% per annum of the principal amount
                  of such Notes for the first 90 days commencing on (x) the 31st
                  Business Day after the Effectiveness Date, in the case of
                  clause (A) above, (y) the day such Exchange Offer Registration
                  Statement or a Shelf Registration Statement ceases to be
                  effective or useable, in the case of clause (B) or (C) above,
                  as applicable or (z) the day the Prospectus in any Shelf
                  Registration Statement ceases to be useable, (in the case of
                  clause (D) above, such Additional Interest rate increasing by
                  an additional 0.25% per annum at the beginning of each
                  subsequent 90-day period, subject to the provisos in the last
                  sentence of this paragraph;

            provided, however, that Additional Interest will not accrue under
            more than one of the foregoing clauses (i) through (iii) at any one
            time; providsed further, however, that the amount of Additional
            Interest accruing on the Notes shall not exceed at any one time in
            the aggregate 1.0% per annum; and provided further, however, that
            (1) upon the filing of the Exchange Offer Registration Statement or
            Initial Shelf Registration Statement (in the case of clause (i)
            above), (2) upon the effectiveness of the Exchange Offer
            Registration Statement or Shelf Registration Statement (in the case
            of clause (ii) above), (3) upon the exchange of Exchange Notes for
            all Notes tendered (in the case of clause (iii)(A) above), (4) upon
            the effectiveness of the Exchange Offer Registration Statement or a
            Shelf Registration Statement, as the case may be, which had ceased
            to remain effective (in the case of clauses (iii)(B) or (iii)(C)
            above), or (5) upon the day the Prospectus in any Shelf Registration
            Statement the use of which was previously suspended may be used
            again (in the case of clause (iii)(C) above), Additional Interest on
            the Notes as a result of such clause (or the relevant subclause
            thereof), as the case may be, shall cease to accrue.

      (b)   The Company shall notify the Trustee within 3 Business Days after
            each and every date on which an event occurs in respect of which
            Additional Interest is required to be paid (an "Event Date"). Any
            amounts of Additional Interest due pursuant to clause (a)(i),
            (a)(ii) or (a)(iii) of this Section 4 will be payable in cash, on
            the dates and in the manner provided in the Indenture for interest
            payments on the Notes and whether or not any cash interest would
            then be payable on such date, commencing with the first such
            semi-annual date occurring after any such Additional Interest
            commences to accrue. The amount of Additional Interest will be
            determined by multiplying the applicable Additional Interest rate by
            the principal amount of the Notes, multiplied by a fraction, the
            numerator of which is the number of days such Additional Interest
            rate was applicable during such period (determined on the basis of a
            360-day year comprised of twelve 30-day months and, in the case of a
            partial month, the actual number of days elapsed), and the
            denominator of which is 360.

                                       11
<PAGE>

5.    Intentionally Omitted

6.    Registration Procedures

      In connection with the filing of any Registration Statement pursuant to
Sections 2 or 3 hereof, the Company shall (and shall cause each Guarantor to)
effect such registrations to permit the sale of such securities covered thereby
in accordance with the intended method or methods of disposition thereof, and
pursuant thereto and in connection with any Registration Statement filed by the
Company hereunder, the Company shall (and shall cause each Guarantor to):

      (a)   Prepare and file with the SEC as soon as practicable after the date
            hereof but in any event on or prior to the Filing Date, the Exchange
            Offer Registration Statement or if the Exchange Offer Registration
            Statement is not filed because of the circumstances contemplated by
            Section 2(i), a Shelf Registration Statement as prescribed by
            Section 3, and use its best efforts to cause each such Registration
            Statement to become effective and remain effective as provided
            herein; provided that, if (1) a Shelf Registration Statement is
            filed pursuant to Section 3 or (2) a Prospectus contained in an
            Exchange Offer Registration Statement filed pursuant to Section 2 is
            required to be delivered under the Securities Act by any
            Participating Broker-Dealer who seeks to sell Exchange Notes during
            the Applicable Period, before filing any Registration Statement or
            Prospectus or any amendments or supplements thereto the Company
            shall (and shall cause each Guarantor to), if requested, furnish at
            no charge to the Holders of the Registrable Notes to be registered
            pursuant to such Shelf Registration Statement, each Participating
            Broker-Dealer, the managing underwriters, if any, and each of their
            respective counsel, a reasonable opportunity to review copies of all
            such documents (including copies of any documents to be incorporated
            by reference therein and all exhibits thereto) proposed to be filed
            (in each case at least five Business Days prior to such filing). The
            Company and each Guarantor shall not file (and shall not allow any
            of the other Guarantors to) any such Registration Statement or
            Prospectus or any amendments or supplements thereto in respect of
            which the Holders must provide information for the inclusion therein
            without the Holders being afforded an opportunity to review such
            documentation if the holders of a majority in aggregate principal
            amount of the Registrable Notes covered by such Registration
            Statement, or any such Participating Broker-Dealer, as the case may
            be, or the managing underwriters, if any, or any of their respective
            counsel shall reasonably object in writing on a timely basis. A
            Holder shall be deemed to have reasonably objected to such filing if
            such Registration Statement, amendment, Prospectus or supplement, as
            applicable, as proposed to be filed, contains an untrue statement of
            a material fact or omits to state any material fact necessary to
            make the statements therein not misleading or fails to comply with
            the applicable requirements of the Securities Act.

                                       12
<PAGE>

      (b)   Provide an indenture trustee for the Registrable Notes, the Exchange
            Notes or the Private Exchange Notes, as the case may be, and cause
            the Indenture (or other indenture relating to the Registrable Notes)
            to be qualified under the TIA not later than the effective date of
            the first Registration Statement; and in connection therewith, to
            effect such changes to such indenture as may be required for such
            indenture to be so qualified in accordance with the terms of the
            TIA; and execute, and use its reasonable best efforts to cause such
            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 such indenture to be so qualified in a timely
            manner.

      (c)   Prepare and file with the SEC such pre-effective amendments and
            post-effective amendments to each Shelf Registration Statement or
            Exchange Offer Registration Statement, as the case may be, as may be
            necessary to keep such Registration Statement continuously effective
            for the Effectiveness Period or the Applicable Period, as the case
            may be; cause the related Prospectus to be supplemented by any
            Prospectus supplement required by applicable law, and as so
            supplemented to be filed pursuant to Rule 424 (or any similar
            provisions then in force) promulgated under the Securities Act; and
            comply with the provisions of the Securities Act and the Exchange
            Act applicable to them with respect to the disposition of all
            securities covered by such Registration Statement as so amended or
            in such Prospectus as so supplemented and with respect to the
            subsequent resale of any securities being sold by a Participating
            Broker-Dealer covered by any such Prospectus. The Company and each
            Guarantor shall not (and shall not allow any other Guarantor to),
            during the Applicable Period, voluntarily take any action that would
            result in selling Holders of the Registrable Notes covered by a
            Registration Statement or Participating Broker-Dealers seeking to
            sell Exchange Notes not being able to sell such Registrable Notes or
            such Exchange Notes during that period, unless such action is
            required by applicable law, rule or regulation or permitted by this
            Agreement.

      (d)   Furnish to such selling Holders and Participating Broker-Dealers who
            so request in writing (i) upon the Company's receipt, a copy of the
            order of the SEC declaring such Registration Statement and any post
            effective amendment thereto effective, (ii) such reasonable number
            of copies of such Registration Statement and of each amendment and
            supplement thereto (in each case including any documents
            incorporated therein by reference and all exhibits), (iii) such
            reasonable number of copies of the Prospectus included in such
            Registration Statement (including each preliminary Prospectus) and
            each amendment and supplement thereto, and such reasonable number of
            copies of the final Prospectus as filed by the Company and each
            Guarantor pursuant to Rule 424(b) under the Securities Act, in
            conformity with the requirements of the Securities Act and each
            amendment and supplement thereto, and (iv) such other documents
            (including any amendments required to be filed pursuant to clause
            (c) of this Section 6), as any such Person may reasonably request in
            writing. The Company and the Guarantors hereby consent to the use of
            the Prospectus by each of the selling Holders of Registrable Notes
            or each such Participating Broker-Dealer, as the case may be, and

                                       13
<PAGE>

            the underwriters or agents, if any, and dealers, if any, in
            connection with the offering and sale of the Registrable Notes
            covered by, or the sale by Participating Broker-Dealers of the
            Exchange Notes pursuant to, such Prospectus and any amendment or
            supplement thereto.

      (e)   If (1) a Shelf Registration Statement is filed pursuant to Section
            3, or (2) a Prospectus contained in an Exchange Offer Registration
            Statement filed pursuant to Section 2 is required to be delivered
            under the Securities Act by any Participating Broker-Dealer who
            seeks to sell Exchange Notes during the Applicable Period relating
            thereto, the Company shall notify in writing the selling Holders of
            Registrable Notes, or each such Participating Broker-Dealer, as the
            case may be, and the managing underwriters, if any, and each of
            their respective counsel promptly (but in any event within two
            Business Days) (i) when a Prospectus or any Prospectus supplement or
            post-effective amendment has been filed, and, with respect to a
            Registration Statement or any post-effective amendment, when the
            same has become effective (including in such notice a written
            statement that any Holder may, upon request, obtain, without charge,
            one conformed copy of such Registration Statement or post-effective
            amendment including financial statements and schedules, documents
            incorporated or deemed to be incorporated by reference and
            exhibits), (ii) of the issuance by the SEC of any stop order
            suspending the effectiveness of a Registration Statement or of any
            order preventing or suspending the use of any Prospectus or the
            initiation of any proceedings for that purpose, (iii) if at any time
            when a Prospectus is required by the Securities Act to be delivered
            in connection with sales of the Registrable Notes the
            representations and warranties of the Company and any Guarantor
            contained in any agreement (including any underwriting agreement
            contemplated by Section 6(n)) hereof cease to be true and correct,
            (iv) of the receipt by the Company or any Guarantor of any
            notification with respect to the suspension of the qualification or
            exemption from qualification of a Registration Statement or any of
            the Registrable Notes or the Exchange Notes to be sold by any
            Participating Broker-Dealer for offer or sale in any jurisdiction,
            or the initiation or threatening of any proceeding for such purpose,
            (v) of the happening of any event, the existence of any condition of
            any information becoming known that makes any statement made in such
            Registration Statement or related Prospectus or any document
            incorporated or deemed to be incorporated therein by reference
            untrue in any material respect or that requires the making of any
            changes in, or amendments or supplements to, such Registration
            Statement, Prospectus or documents so that, in the case of the
            Registration Statement and the Prospectus, it will not contain any
            untrue statement of a material fact or omit to state any material
            fact required to be stated therein or necessary to make the
            statements therein, in light of the circumstances under which they
            were made, not misleading, (vi) of any reasonable determination by
            the Company or any Guarantor that a post-effective amendment to a
            Registration Statement would be appropriate and (vii) of any request
            by the SEC for amendments to the Registration Statement or
            supplements to the Prospectus or for additional information relating
            thereto.

                                       14
<PAGE>

      (f)   Use its best efforts to prevent the issuance of any order suspending
            the effectiveness of a Registration Statement or of any order
            preventing or suspending the use of a Prospectus or suspending the
            qualification (or exemption from qualification) of any of the
            Registrable Notes or the Exchange Notes to be sold by any
            Participating Broker-Dealer, for sale in any jurisdiction, and, if
            any such order is issued, to use its best efforts to obtain the
            withdrawal of any such order at the earliest possible date.

      (g)   If (A) a Shelf Registration Statement is filed pursuant to Section
            3, (B) a Prospectus contained in an Exchange Offer Registration
            Statement filed pursuant to Section 2 is required to be delivered
            under the Securities Act by any Participating Broker-Dealer who
            seeks to sell Exchange Notes during the Applicable Period or (C)
            reasonably requested in writing by the managing underwriters, if
            any, or the Holders of a majority in aggregate principal amount of
            the Registrable Notes being sold in connection with an underwritten
            offering, (i) promptly incorporate in a Prospectus supplement or
            post-effective amendment such information or revisions to
            information therein relating to such underwriters or selling Holders
            as the managing underwriters, if any, or such Holders or any of
            their respective counsel reasonably request in writing to be
            included or made therein and (ii) make all required filings of such
            Prospectus supplement or such post-effective amendment as soon as
            practicable after the Company has received notification of the
            matters to be incorporated in such Prospectus supplements or
            post-effective amendment.

      (h)   Prior to any public offering of Registrable Notes or any delivery of
            a Prospectus contained in the Exchange Offer Registration Statement
            by any Participating Broker-Dealer who seeks to sell Exchange Notes
            during the Applicable Period, use its reasonable best efforts to
            register or qualify, and cooperate with the selling Holders of
            Registrable Notes or each such Participating Broker-Dealer, as the
            case may be, the underwriters, if any, and their respective counsel
            in connection with the registration or qualification (or exemption
            from such registration or qualification) of such Registrable Notes
            or Exchange Notes, as the case may be, for offer and sale under the
            securities or Blue Sky laws of such jurisdictions within the United
            States as any selling Holder, Participating Broker-Dealer or any
            managing underwriter or underwriters, if any, reasonably request in
            writing; and, if Exchange Notes held by Participating Broker-Dealers
            or Registrable Notes are offered other than through an underwritten
            offering, the Company and each Guarantor shall cause its counsel to
            perform Blue Sky investigations and use its reasonable best efforts
            to file any registrations and qualifications required to be filed
            pursuant to this Section 6(h), use its reasonable best efforts to
            keep each such registration or qualification (or exemption
            therefrom) effective during the period such Registration Statement
            is required to be kept effective and use its reasonable best efforts
            to do any and all other acts or things reasonably necessary or
            advisable to enable the disposition in such jurisdictions of the
            Exchange Notes held by Participating Broker-Dealers or the
            Registrable Notes covered by the applicable Registration Statement;
            provided that neither the Company nor any Guarantor shall be
            required to (A) qualify generally to do business in any jurisdiction

                                       15
<PAGE>

            where it is not then so qualified, (B) take any action that would
            subject it to general service of process in any such jurisdiction
            where it is not then so subject or (C) subject itself to taxation in
            any such jurisdiction where it is not then so subject.

      (i)   If (A) a Shelf Registration Statement is filed pursuant to Section 3
            or (B) a Prospectus contained in an Exchange Offer Registration
            Statement filed pursuant to Section 2 is requested to be delivered
            under the Securities Act by any Participating Broker-Dealer who
            seeks to sell Exchange Notes during the Applicable Period, cooperate
            with the selling Holders of Registrable Notes and the managing
            underwriter or underwriters, if any, to facilitate the timely
            preparation and delivery of certificates representing Registrable
            Notes to be sold, which certificates shall not bear any restrictive
            legends and shall be in a form eligible for deposit with The
            Depository Trust Company, and enable such Registrable Notes to be in
            such denominations and registered in such names as the managing
            underwriter or underwriters, if any, or Holders may reasonably
            request in writing.

      (j)   Use its reasonable best efforts to cause the Registrable Notes
            covered by any Registration Statement to be registered with or
            approved by such United States governmental agencies or authorities
            as may be necessary to enable the seller or sellers thereof or the
            underwriter, if any, to consummate the disposition of such
            Registrable Notes, except as may be required solely as a consequence
            of the nature of such selling Holder's business, in which case the
            Company shall (and shall cause each Guarantor to) cooperate in all
            reasonable respects with the filing of such Registration Statement
            and the granting of such approvals; provided that neither the
            Company nor any Guarantor shall be required to (A) qualify generally
            to do business in any jurisdiction where it is not then so
            qualified, (B) take any action that would subject it to general
            service of process in any jurisdiction where it is not then so
            subject or (C) subject itself to taxation in any such jurisdiction
            where it is not then so subject.

      (k)   If (1) a Shelf Registration Statement is filed pursuant to Section
            3, or (2) a Prospectus contained in an Exchange Offer Registration
            Statement filed pursuant to Section 2 is required to be delivered
            under the Securities Act by any Participating Broker-Dealer who
            seeks to sell Exchange Notes during the Applicable Period, upon the
            occurrence of any event contemplated by Section 6(e)(v) or 6(e)(vi)
            hereof, as promptly as practicable, prepare and file with the SEC,
            at the expense of the Company and the Guarantors, a supplement or
            post-effective amendment to the Registration Statement or a
            supplement to the related Prospectus or any document incorporated or
            deemed to be incorporated therein by reference, or file any other
            required document so that, as thereafter delivered to the purchasers
            of the Registrable Notes being sold thereunder or to the purchasers
            of the Exchange Notes to whom such Prospectus will be delivered by a
            Participating Broker-Dealer, such Prospectus will not contain an
            untrue statement of a material fact or omit to state a material fact
            required to be stated therein or necessary to make the statements
            therein, in light of the circumstances under which they were made,
            not misleading, and, if SEC review is required, use its best efforts
            to cause such post-effective amendment to be declared effective as
            soon as possible.

                                       16
<PAGE>

      (l)   Use its reasonable best efforts to cause the Registrable Notes
            covered by a Registration Statement to be rated with such
            appropriate rating agencies, if so requested in writing by the
            Holders of a majority in aggregate principal amount of the
            Registrable Notes covered by such Registration Statement or the
            managing underwriter or underwriters, if any.

      (m)   Prior to the initial issuance of the Exchange Notes, (i) provide the
            Trustee with one or more certificates for the Registrable Notes in a
            form eligible for deposit with The Depository Trust Company and (ii)
            provide a CUSIP number for the Exchange Notes.

      (n)   If a Shelf Registration Statement is filed pursuant to Section 3,
            enter into such agreements (including an underwriting agreement in
            form, scope and substance as is customary in underwritten offerings
            of debt securities similar to the Notes, as may be appropriate in
            the circumstances) and take all such other actions in connection
            therewith (including those reasonably requested in writing by the
            managing underwriters, if any, or the Holders of a majority in
            aggregate principal amount of the Registrable Notes being sold) in
            order to expedite or facilitate the registration or the disposition
            of such Registrable Notes, and in such connection, whether or not an
            underwriting agreement is entered into and whether or not the
            registration is an Underwritten Registration, (i) make such
            representations and warranties to the Holders and the underwriters,
            if any, with respect to the business of the Company and its
            subsidiaries as then conducted, and the Registration Statement,
            Prospectus and documents, if any, incorporated or deemed to be
            incorporated by reference therein, in each case, in form, substance
            and scope as are customarily made by issuers to underwriters in
            underwritten offerings of debt securities similar to the Notes, as
            may be appropriate in the circumstances, and confirm the same if and
            when reasonably required; (ii) use reasonable best efforts to obtain
            an opinion of counsel to the Company and the Guarantors and updates
            thereof (which counsel and opinions (in form, scope and substance)
            shall be reasonably satisfactory to the managing underwriters, if
            any, and the Holders of a majority in aggregate principal amount of
            the Registrable Notes being sold), addressed to each selling Holder
            and each of the underwriters, if any, covering the matters
            customarily covered in opinions of counsel to the Company and the
            Guarantors requested in underwritten offerings of debt securities
            similar to the Notes, as may be appropriate in the circumstances;
            (iii) use reasonable best efforts to obtain "cold comfort" letters
            and updates thereof (which letters and updates (in form, scope and
            substance) shall be reasonably satisfactory to the managing
            underwriters) from the independent certified public accountants of
            the Company and the Guarantors (and, if necessary, any other
            independent certified public accountants of any subsidiary of the
            Company or of any business acquired by the Company for which
            financial statements and financial data are, or are required to be,
            included in the Registration Statement), addressed to each of the

                                       17
<PAGE>

            underwriters, such letters to be in customary form and covering
            matters of the type customarily covered in "cold comfort" letters in
            connection with underwritten offerings of debt securities similar to
            the Notes, as may be appropriate in the circumstances, and such
            other matters as reasonably requested in writing by the
            underwriters; and (iv) deliver such documents and certificates as
            may be reasonably requested in writing by the Holders of a majority
            in aggregate principal amount of the Registrable Notes being sold
            and the managing underwriters, if any, to evidence the continued
            validity of the representations and warranties of the Company and
            its subsidiaries made pursuant to clause (i) above and to evidence
            compliance with any conditions contained in the underwriting
            agreement or other similar agreement entered into by the Company or
            any Guarantor.

      (o)   If (1) a Shelf Registration Statement is filed pursuant to Section
            3, or (2) a Prospectus contained in an Exchange Offer Registration
            Statement filed pursuant to Section 2 is required to be delivered
            under the Securities Act by any Participating Broker-Dealer who
            seeks to sell Exchange Notes during the Applicable Period, make
            available for inspection by any selling Holder of such Registrable
            Notes being sold, or each such Participating Broker-Dealer, as the
            case may be, any underwriter participating in any such disposition
            of Registrable Notes, if any, and any attorney, accountant or other
            agent retained by any such selling Holder or each such Participating
            Broker-Dealer, as the case may be, or underwriter (collectively, the
            "Inspectors"), at the offices where normally kept, during reasonable
            business hours, all financial and other records and pertinent
            corporate documents of the Company and its subsidiaries
            (collectively, the "Records") as shall be reasonably necessary to
            enable them to exercise any applicable due diligence
            responsibilities, and cause the officers, directors and employees of
            the Company and its subsidiaries to supply all information
            reasonably requested in writing by any such Inspector in connection
            with such Registration Statement. Each Inspector shall agree in
            writing that it will keep the Records confidential and not disclose
            any of the Records unless (i) the disclosure of such Records is
            necessary to avoid or correct a misstatement or omission in such
            Registration Statement, (ii) the release of such Records is ordered
            pursuant to a subpoena or other order from a court of competent
            jurisdiction, (iii) the information in such Records is public or has
            been made generally available to the public other than as a result
            of a disclosure or failure to safeguard by such Inspector or (iv)
            disclosure of such information is, in the reasonable written opinion
            of counsel for any Inspector, necessary or advisable in connection
            with any action, claim, suit or proceeding, directly or indirectly,
            involving or potentially involving such Inspector and arising out
            of, based upon, related to, or involving this Agreement, or any
            transaction contemplated hereby or arising hereunder. Each selling
            Holder of such Registrable Notes and each such Participating
            Broker-Dealer will be required to agree that information obtained by
            it as a result of such inspections shall be deemed confidential and
            shall not be used by it as the basis for any market transactions in
            the securities of the Company unless and until such information is
            made generally available to the public. Each Inspector, each selling
            Holder of such Registrable Notes and each such Participating
            Broker-Dealer will be required to further agree that it will, upon

                                       18
<PAGE>

            learning that disclosure of such Records is sought in a court of
            competent jurisdiction, give notice to the Company and, to the
            extent practicable, use its best efforts to allow the Company, at
            its expense, to undertake appropriate action to prevent disclosure
            of the Records deemed confidential at its expense.

      (p)   Comply with all applicable rules and regulations of the SEC and make
            generally available to the security holders of the Company with
            regard to any applicable Registration Statement earning statements
            satisfying the provisions of section 11(a) of the Securities Act and
            Rule 158 thereunder (or any similar rule promulgated under the
            Securities Act) no later than 45 days after the end of any 12-month
            period (or 90 days after the end of any 12-month period if such
            period is a fiscal year) (i) commencing at the end of any fiscal
            quarter in which Registrable Notes are sold to underwriters in a
            firm commitment or best efforts underwritten offering and (ii) if
            not sold to underwriters in such an offering, commencing on the
            first day of the first fiscal quarter of the Company after the
            effective date of a Registration Statement, which statements shall
            cover said 12-month periods.

      (q)   Upon consummation of an Exchange Offer or Private Exchange, use
            reasonable best efforts to obtain an opinion of counsel to the
            Company and the Guarantors (in form, scope and substance reasonably
            satisfactory to the Initial Purchaser), addressed to the Trustee for
            the benefit of all Holders participating in the Exchange Offer or
            Private Exchange, as the case may be, to the effect that (i) the
            Company and the Guarantors have duly authorized, executed and
            delivered the Exchange Notes or the Private Exchange Notes, as the
            case may be, and the Indenture, (ii) the Exchange Notes or the
            Private Exchange Notes, as the case may be, and the Indenture
            constitute legal, valid and binding obligations of the Company and
            the Guarantors, enforceable against the Company and the Guarantors
            in accordance with their respective terms, except as such
            enforcement may be subject to customary United States and foreign
            exceptions and (iii) all obligations of the Company and the
            Guarantors under the Exchange Notes or the Private Exchange Notes,
            as the case may be, and the Indenture are secured by Liens (as
            defined in the Indenture) on the assets securing the obligations of
            the Company and the Guarantors under the Notes, the Indenture and
            the Collateral Agreements to the extent and as discussed in the
            Registration Statement.

      (r)   If the Exchange Offer or a Private Exchange is to be consummated,
            upon delivery of the Registrable Notes by the Holders to the Company
            and the Guarantors (or to such other Person as directed by the
            Company and the Guarantors) in exchange for the Exchange Notes or
            the Private Exchange Notes, as the case may be, the Company and the
            Guarantors shall mark, or cause to be marked, on such Registrable
            Notes that the Exchange Notes or the Private Exchange Notes, as the
            case may be, are being issued as substitute evidence of the
            indebtedness originally evidenced by the Registrable Notes; provided
            that in no event shall such Registrable Notes be marked as paid or
            otherwise satisfied.

                                       19
<PAGE>

      (s)   Cooperate with each seller of Registrable Notes covered by any
            Registration Statement and each underwriter, if any, participating
            in the disposition of such Registrable Notes and their respective
            counsel in connection with any filings required to be made with the
            NASD.

      (t)   Use its reasonable best efforts to take all other steps reasonably
            necessary to effect the registration of the Registrable Notes
            covered by a Registration Statement contemplated hereby.

      (u)   The Company may require each seller of Registrable Notes or
            Participating Broker-Dealer as to which any registration is being
            effected to furnish to the Company such information regarding such
            seller or Participating Broker-Dealer and the distribution of such
            Registrable Notes as the Company may, from time to time, reasonably
            request in writing. The Company may exclude from such registration
            the Registrable Notes of any seller who fails to furnish such
            information within a reasonable time (which time in no event shall
            exceed 30 days) after receiving such request. Each seller of
            Registrable Notes or Participating Broker-Dealer as to which any
            registration is being effected agrees to furnish promptly to the
            Company all information required to be disclosed in order to make
            the information previously furnished by such seller not materially
            misleading.

      Each Holder of Registrable Notes and each Participating Broker-Dealer
agrees by acquisition of such Registrable Notes or Exchange Notes to be sold by
such Participating Broker-Dealer, as the case may be, that, upon receipt of any
notice from the Company of the happening of any event of the kind described in
Section 6(e)(ii), 6(e)(iv), 6(e)(v), or 6(e)(vi), such Holder will forthwith
discontinue disposition of such Registrable Notes covered by a Registration
Statement and such Participating Broker-Dealer will forthwith discontinue
disposition of such Exchange Notes pursuant to any Prospectus and, in each case,
forthwith discontinue dissemination of such Prospectus until such Holder's or
Participating Broker-Dealer's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 6(k), or until it is advised in
writing (the "Advice") by the Company and the Guarantors that the use of the
applicable Prospectus may be resumed, and has received copies of any amendments
or supplements thereto and, if so directed by the Company and the Guarantors,
such Holder or Participating Broker-Dealer, as the case may be, will deliver to
the Company all copies, other than permanent file copies, then in such Holder's
or Participating Broker-Dealer's possession, of the Prospectus covering such
Registrable Notes current at the time of the receipt of such notice. In the
event the Company and the Guarantors shall give any such notice, the Applicable
Period shall be extended by the number of days during such periods from and
including the date of the giving of such notice to and including the date when
each Participating Broker-Dealer shall have received (x) the copies of the
supplemented or amended Prospectus contemplated by Section 6(k) or (y) the
Advice.

7.    Registration Expenses

      (a)   All fees and expenses incident to the performance of or compliance
            with this Agreement by the Company and the Guarantors shall be borne
            by the Company and the Guarantors, whether or not the Exchange Offer

                                       20
<PAGE>

            or a Shelf Registration Statement is filed or becomes effective,
            including, without limitation, (i) all registration and filing fees,
            including, without limitation, (A) fees with respect to filings
            required to be made with the NASD in connection with any
            underwritten offering and (B) fees and expenses of compliance with
            state securities or Blue Sky laws as provided in Section 6(h) hereof
            (including, without limitation, reasonable fees and disbursements of
            counsel in connection with Blue Sky qualifications of the
            Registrable Notes or Exchange Notes and determination of the
            eligibility of the Registrable Notes or Exchange Notes for
            investment under the laws of such jurisdictions (x) where the
            Holders are located, in the case of the Exchange Notes, or (y) as
            provided in Section 6(h), in the case of Registrable Notes or
            Exchange Notes to be sold by a Participating Broker-Dealer during
            the Applicable Period), (ii) printing expenses, including, without
            limitation, expenses of printing Prospectuses if the printing of
            Prospectuses is requested by the managing underwriter or
            underwriters, if any, or by the Holders of a majority in aggregate
            principal amount of the Registrable Notes included in any
            Registration Statement or by any Participating Broker-Dealer during
            the Applicable Period, as the case may be, (iii) messenger,
            telephone and delivery expenses incurred in connection with the
            performance of their obligations hereunder, (iv) fees and
            disbursements of counsel for the Company, the Guarantors and,
            subject to Section 7(b), the Holders, (v) fees and disbursements of
            all independent certified public accountants referred to in Section
            6 (including, without limitation, the expenses of any special audit
            and "cold comfort" letters required by or incident to such
            performance), (vi) rating agency fees and the fees and expenses
            incurred in connection with the listing of the Securities to be
            registered on any securities exchange, (vii) Securities Act
            liability insurance, if the Company and the Guarantors desire such
            insurance, (viii) fees and expenses of all other Persons retained by
            the Company and the Guarantors, (ix) fees and expenses of any
            "qualified independent underwriter" or other independent appraiser
            participating in an offering pursuant to Section 3 of Schedule E to
            the bylaws of the NASD, but only where the need for such a
            "qualified independent underwriter" arises due to a relationship
            with the Company and the Guarantors, (x) internal expenses of the
            Company and the Guarantors (including, without limitation, all
            salaries and expenses of officers and employees of the Company or
            the Guarantors performing legal or accounting duties), (xi) the
            expense of any annual audit, (xii) the fees and expenses of the
            Trustee and the Exchange Agent and (xiii) the expenses relating to
            printing, word processing and distributing all Registration
            Statements, underwriting agreements, securities sales agreements,
            indentures and any other documents necessary in order to comply with
            this Agreement.

      (b)   The Company and the Guarantors shall reimburse the Holders for the
            reasonable fees and disbursements of not more than one counsel
            chosen by the Holders of a majority in aggregate principal amount of
            the Registrable Notes to be included in any Registration Statement.
            The Company and the Guarantors shall pay all documentary, stamp,
            transfer or other transactional taxes attributable to the issuance
            or delivery of the Exchange Notes or Private Exchange Notes in
            exchange for the Notes; provided that the Company shall not be

                                       21
<PAGE>

            required to pay taxes payable in respect of any transfer involved in
            the issuance or delivery of any Exchange Note or Private Exchange
            Note in a name other than that of the Holder of the Note in respect
            of which such Exchange Note or Private Exchange Note is being
            issued. The Company and the Guarantors shall reimburse the Holders
            for fees and expenses (including reasonable fees and expenses of
            counsel to the Holders) relating to any enforcement of any rights of
            the Holders under this Agreement.

8.    Indemnification

      (a)   Indemnification by the Company and the Guarantors. The Company and
            the Guarantors jointly and severally agree to indemnify and hold
            harmless each Holder of Registrable Notes, Exchange Notes or Private
            Exchange Notes and each Participating Broker-Dealer selling Exchange
            Notes during the Applicable Period, each Person, if any, who
            controls each such Holder (within the meaning of Section 15 of the
            Securities Act or Section 20(a) of the Exchange Act) and the
            officers, directors and partners of each such Holder, Participating
            Broker-Dealer and controlling person, to the fullest extent lawful,
            from and against any and all losses, claims, damages, liabilities,
            costs (including, without limitation, reasonable costs of
            preparation and reasonable attorneys' fees as provided in this
            Section 8) and expenses (including, without limitation, reasonable
            costs and expenses incurred in connection with investigating,
            preparing, pursuing or defending against any of the foregoing)
            (collectively, "Losses"), as incurred, directly or indirectly caused
            by, related to, based upon, arising out of or in connection with any
            untrue statement or alleged untrue statement of a material fact
            contained in any Registration Statement, Prospectus or form of
            prospectus, or in any amendment or supplement thereto, or in any
            preliminary prospectus, or any omission or alleged omission to state
            therein a material fact required to be stated therein or necessary
            to make the statements therein, in light of the circumstances under
            which they were made, not misleading, except insofar as such Losses
            are based upon information relating to such Holder or Participating
            Broker-Dealer and furnished in writing to the Company and the
            Guarantors (or reviewed and approved in writing) by such Holder or
            Participating Broker-Dealer or their counsel expressly for use
            therein; provided, however, that the Company and the Guarantors will
            not be liable to any Indemnified Party (as defined below) under this
            Section 8 to the extent Losses were caused by an untrue statement or
            omission or alleged untrue statement or omission that was contained
            or made in any preliminary prospectus and corrected in the
            Prospectus or any amendment or supplement thereto if (i) the
            Prospectus does not contain any other untrue statement or omission
            or alleged untrue statement or omission of a material fact that was
            the subject matter of the related proceedings, (ii) any such Losses
            resulted from an action, claim or suit by any Person who purchased
            Registrable Notes or Exchange Notes which are the subject thereof
            from such Indemnified Party and (iii) it is established in the
            related proceeding that such Indemnified Party failed to deliver or
            provide a copy of the Prospectus (as amended or supplemented) to
            such Person with or prior to the confirmation of the sale of such
            Registrable Notes or Exchange Notes sold to such Person if required
            by applicable law, unless such failure to deliver or provide a copy

                                       22
<PAGE>

            of the Prospectus (as amended or supplemented) was a result of
            noncompliance by the Company with Section 6 of this Agreement. The
            Company and the Guarantors also agree to indemnify underwriters,
            selling brokers, dealer managers and similar securities industry
            professionals participating in the distribution, their officers,
            directors, agents and employees and each Person who controls such
            Persons (within the meaning of Section 15 of the Securities Act or
            Section 20(a) of the Exchange Act) to the same extent as provided
            above with respect to the indemnification of the Holders or the
            Participating Broker-Dealer.

      (b)   Indemnification by Holder. In connection with any Registration
            Statement, Prospectus or form of prospectus, any amendment or
            supplement thereto, or any preliminary prospectus in which a Holder
            is participating, such Holder shall furnish to the Company and the
            Guarantors in writing such information as the Company and the
            Guarantors reasonably request for use in connection with any
            Registration Statement, Prospectus or form of prospectus, any
            amendment or supplement thereto, or any preliminary prospectus and
            shall indemnify and hold harmless the Company, the Guarantors, their
            respective directors and each Person, if any, who controls the
            Company and the Guarantors (within the meaning of Section 15 of the
            Securities Act and Section 20(a) of the Exchange Act), and the
            directors, officers and partners of such controlling persons, to the
            fullest extent lawful, from and against all Losses arising out of or
            based upon any untrue statement or alleged untrue statement of a
            material fact contained in any Registration Statement, Prospectus or
            form of prospectus or in any amendment or supplement thereto or in
            any preliminary prospectus, or any omission or alleged omission to
            state therein a material fact required to be stated therein or
            necessary to make the statements therein, in the light of the
            circumstances under which they were made, not misleading to the
            extent, but only to the extent, that such losses are finally
            judicially determined by a court of competent jurisdiction in a
            final, unappealable order to have resulted from an untrue statement
            or alleged untrue statement of a material fact or omission or
            alleged omission of a material fact contained in or omitted from any
            information so furnished in writing by such Holder to the Company
            and the Guarantors expressly for use therein. Notwithstanding the
            foregoing, in no event shall the liability of any selling Holder be
            greater in amount than such Holder's Maximum Contribution Amount (as
            defined below).

      (c)   Conduct of Indemnification Proceedings. If any proceeding shall be
            brought or asserted against any Person entitled to indemnity
            hereunder (an "Indemnified Party"), such Indemnified Party shall
            promptly notify the party or parties from which such indemnity is
            sought (the "Indemnifying Party" or "Indemnifying Parties", as
            applicable) in writing; provided, that the failure to so notify the
            Indemnifying Parties shall not relieve the Indemnifying Parties from
            any obligation or liability except to the extent (but only to the
            extent) that it shall be finally determined by a court of competent
            jurisdiction (which determination is not subject to appeal) that the
            Indemnifying Parties have been prejudiced materially by such
            failure.

                                       23
<PAGE>

      The Indemnifying Party shall have the right, exercisable by giving written
notice to an Indemnified Party, within 20 Business Days after receipt of written
notice from such Indemnified Party of such proceeding, to assume, at its
expense, the defense of any such proceeding, provided, that an Indemnified Party
shall have the right to employ separate counsel in any such proceeding and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Party or parties unless: (1) the
Indemnifying Party has agreed to pay such fees and expenses; or (2) the
Indemnifying Party shall have failed promptly to assume the defense of such
proceeding or shall have failed to employ counsel reasonably satisfactory to
such Indemnified Party; or (3) the named parties to any such proceeding
(including any impleaded parties) include both such Indemnified Party and the
Indemnifying Party or any of its affiliates or controlling persons, and such
Indemnified Party shall have been advised by counsel that there may be one or
more defenses available to such Indemnified Party that are in addition to, or in
conflict with, those defenses available to the Indemnifying Party or such
affiliate or controlling person (in which case, if such Indemnified Party
notifies the Indemnifying Parties in writing that it elects to employ separate
counsel at the expense of the Indemnifying Parties, the Indemnifying Parties
shall not have the right to assume the defense and the reasonable fees and
expenses of such counsel shall be at the expense of the Indemnifying Party; it
being understood, however, that, the Indemnifying Party shall not, in connection
with any one such proceeding or separate but substantially similar or related
proceedings in the same jurisdiction, arising out of the same general
allegations or circumstances, be liable for the fees and expenses of more than
one separate firm of attorneys (together with appropriate local counsel) at any
time for such Indemnified Party).

      No Indemnifying Party shall be liable for any settlement of any such
proceeding effected without its written consent, which shall not be unreasonably
withheld, but if settled with its written consent, or if there be a final
judgment for the plaintiff in any such proceeding, each Indemnifying Party
jointly and severally agrees, subject to the exceptions and limitations set
forth above, to indemnify and hold harmless each Indemnified Party from and
against any and all Losses by reason of such settlement or judgment. The
Indemnifying Party shall not consent to the entry of any judgment or enter into
any settlement that does not include as an unconditional term thereof the giving
by the claimant or plaintiff to each Indemnified Party of a release, in form and
substance reasonably satisfactory to the Indemnified Party, from all liability
in respect of such proceeding for which such Indemnified Party would be entitled
to indemnification hereunder (whether or not any Indemnified Party is a party
thereto).

      (d)   Contribution. If the indemnification provided for in this Section 8
            is unavailable to an Indemnified Party or is insufficient to hold
            such Indemnified Party harmless for any Losses in respect of which
            this Section 8 would otherwise apply by its terms (other than by
            reason of exceptions provided in this Section 8), then each
            applicable Indemnifying Party, in lieu of indemnifying such
            Indemnified Party, shall have a joint and several obligation to
            contribute to the amount paid or payable by such Indemnified Party
            as a result of such Losses, in such proportion as is appropriate to
            reflect the relative fault of the Indemnifying Party, on the one
            hand, and such Indemnified Party, on the other hand, in connection
            with the actions, statements or omissions that resulted in such
            Losses as well as any other relevant equitable considerations. The
            relative fault of such Indemnifying Party, on the one hand, and
            Indemnified Party, on the other hand, shall be determined by

                                       24
<PAGE>

            reference to, among other things, whether any untrue or alleged
            untrue statement of a material fact or omission or alleged omission
            to state a material fact relates to information supplied by such
            Indemnifying Party or Indemnified Party, and the parties' relative
            intent, knowledge, access to information and opportunity to correct
            or prevent any such statement or omission. The amount paid or
            payable by an Indemnified Party as a result of any Losses shall be
            deemed to include any legal or other fees or expenses incurred by
            such party in connection with any proceeding, to the extent such
            party would have been indemnified for such fees or expenses if the
            indemnification provided for in Section 8(a) or 8(b) was available
            to such party. The parties hereto agree that it would not be just
            and equitable if contribution pursuant to this Section 8(d) were
            determined by pro rata allocation or by another method of allocation
            that does not take account of the equitable considerations referred
            to in the immediately preceding paragraph. Notwithstanding the
            provisions of this Section 8(d), a selling Holder shall not be
            required to contribute, in the aggregate, any amount in excess of
            such Holder's Maximum Contribution Amount. A selling Holder's
            "Maximum Contribution Amount" shall equal the excess of (i) the
            aggregate proceeds received by such Holder pursuant to the sale of
            such Registrable Notes or Exchange Notes over (ii) the aggregate
            amount of 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. The
            Holders' obligations to contribute pursuant to this Section 8(d) are
            several in proportion to the respective principal amount of the
            Registrable Securities held by each Holder hereunder and not joint.
            The Company's and Guarantors' obligations to contribute pursuant to
            this Section 8(d) are joint and several.

      The indemnity and contribution agreements contained in this Section 8 are
in addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.

9.    Rules 144 and 144A

      The Company covenants that it shall (a) file the reports required to be
filed by it (if so required) under the Securities Act and the Exchange Act in a
timely manner and, if at any time the Company is not required to file such
reports, it will, upon the written request of any Holder of Registrable Notes,
make publicly available other information necessary to permit sales pursuant to
Rule 144 and 144A and (b) take such further action as any Holder may reasonably
request in writing, all to the extent required from time to time to enable such
Holder to sell Registrable Notes without registration under the Securities Act
pursuant to the exemptions provided by Rule 144 and Rule 144A. Upon the request
of any Holder, the Company shall deliver to such Holder a written statement as
to whether it has complied with such information and requirements.

10.   Underwritten Registrations of Registrable Notes

      If any of the Registrable Notes covered by any Shelf Registration
Statement are to be sold in an underwritten offering, the investment banker or
investment bankers and manager or managers that will manage the offering will be

                                       25
<PAGE>

selected by the Holders of a majority in aggregate principal amount of such
Registrable Notes to be included in such offering; provided, however, that such
investment banker or investment bankers and manager or managers must be
reasonably acceptable to the Company.

      No Holder of Registrable Notes may participate in any underwritten
registration hereunder unless such Holder (a) agrees to sell such Holder's
Registrable Notes on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements.

11.   Miscellaneous

      (a)   Remedies. In the event of a breach by either the Company or any of
            the Guarantors of any of their respective obligations under this
            Agreement, each Holder, in addition to being entitled to exercise
            all rights provided herein, in the Indenture or, in the case of the
            Initial Purchaser, in the Purchase Agreement, or granted by law,
            including recovery of damages, will be entitled to specific
            performance of its rights under this Agreement. The Company and the
            Guarantors agree that monetary damages would not be adequate
            compensation for any loss incurred by reason of a breach by either
            the Company or any of the Guarantors of any of the provisions of
            this Agreement and hereby further agree that, in the event of any
            action for specific performance in respect of such breach, the
            Company shall (and shall cause each Guarantor to) waive the defense
            that a remedy at law would be adequate.

      (b)   No Inconsistent Agreements. The Company and each of the Guarantors
            have not entered, as of the date hereof, and the Company and each of
            the Guarantors shall not enter, after the date of this Agreement,
            into any agreement with respect to any of its securities that is
            inconsistent with the rights granted to the Holders of Securities in
            this Agreement or otherwise conflicts with the provisions hereof.
            The Company and each of the Guarantors have not entered and will not
            enter into any agreement with respect to any of its securities that
            will grant to any Person piggy-back rights with respect to a
            Registration Statement.

      (c)   Adjustments Affecting Registrable Notes. The Company shall not,
            directly or indirectly, take any action with respect to the
            Registrable Notes as a class that would adversely affect the ability
            of the Holders to include such Registrable Notes in a registration
            undertaken pursuant to this Agreement.

      (d)   Amendments and Waivers. The provisions of this Agreement may not be
            amended, modified or supplemented, and waivers or consents to or
            departures from the provisions hereof may not be given, other than
            with the prior written consent of the Holders of not less than a
            majority in aggregate principal amount of the then outstanding
            Registrable Notes in circumstances that would adversely affect any
            Holders of Registrable Notes; provided, however, that Section 8 and

                                       26
<PAGE>

            this Section 11(d) may not be amended, modified or supplemented
            without the prior written consent of each Holder. Notwithstanding
            the foregoing, a waiver or consent to depart from the provisions
            hereof with respect to a matter that relates exclusively to the
            rights of Holders of Registrable Notes whose securities are being
            tendered pursuant to the Exchange Offer or sold pursuant to a Notes
            Registration Statement and that does not directly or indirectly
            affect, impair, limit or compromise the rights of other Holders of
            Registrable Notes may be given by Holders of at least a majority in
            aggregate principal amount of the Registrable Notes being tendered
            or being sold by such Holders pursuant to such Notes Registration
            Statement.

      (e)   Notices. All notices and other communications provided for or
            permitted hereunder shall be made in writing by hand delivery,
            registered first-class mail, next-day air courier or telecopier:

            (i)   if to a Holder of Securities or to any Participating
                  Broker-Dealer, at the most current address of such Holder or
                  Participating Broker-Dealer, as the case may be, set forth on
                  the records of the registrar of the Notes, with a copy in like
                  manner to the Initial Purchaser as follows:

                          Jefferies & Company, Inc.
                          520 Madison Avenue
                          12th Floor
                          New York, New York  10022
                          Facsimile No.: (212) 284-2280
                          Attention: Ashley Geller, Esq.

            (ii)  if to the Initial Purchaser, at the address specified in
                  Section 11(e)(i);

            (iii) if to the Company or any Guarantor, as follows:

                          Dune Energy, Inc.
                          3050 Post Oak Boulevard
                          Suite 695
                          Houston, Texas 77056

                  with a copy to:

                          Eaton & Van Winkle LLP
                          3 Park Avenue
                          New York, New York 10016
                          Attention: Matthew S. Cohen, Esq.

      All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five Business Days after
being deposited in the United States mail, postage prepaid, if mailed; one
Business Day after being timely delivered to a next-day air courier guaranteeing
overnight delivery; and when receipt is acknowledged by the addressee, if
telecopied.

                                       27
<PAGE>

      Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee under the
Indenture at the address specified in such Indenture.

      (f)   Successors and Assigns. This Agreement shall inure to the benefit of
            and be binding upon the successors and assigns of each of the
            parties hereto, including, without limitation and without the need
            for an express assignment, subsequent Holders of Securities.

      (g)   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.

      (h)   Headings. The headings in this Agreement are for convenience of
            reference only and shall not limit or otherwise affect the meaning
            hereof.

      (i)   Governing Law; Submission to Jurisdiction; Waiver of Jury Trial.
            THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
            THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF
            CONFLICT OF LAW. EACH OF THE COMPANY AND THE GUARANTORS HEREBY
            IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE COURT
            SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR ANY
            FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW
            YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR
            RELATING TO THIS AGREEMENT, AND IRREVOCABLY ACCEPTS FOR ITS AND IN
            RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION
            OF THE AFORESAID COURTS. EACH OF THE COMPANY AND THE GUARANTORS
            IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO
            UNDER APPLICABLE LAW, TRIAL BY JURY AND ANY OBJECTION THAT IT MAY
            NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT,
            ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT
            ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS
            BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH OF THE COMPANY AND THE
            GUARANTORS IRREVOCABLY CONSENTS, TO THE FULLEST EXTENT IT MAY
            EFFECTIVELY DO SO UNDER APPLICABLE LAW, TO THE SERVICE OF PROCESS OF
            ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY
            THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
            POSTAGE PREPAID, TO THE COMPANY AND THE GUARANTORS AT THEIR SAID
            ADDRESS, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH

                                       28
<PAGE>

            MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY HOLDER TO
            SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE
            LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY OR THE
            GUARANTORS IN ANY OTHER JURISDICTION.

      (j)   Severability. If any term, provision, covenant or restriction of
            this Agreement is held by a court of competent jurisdiction to be
            invalid, illegal, void or unenforceable, the remainder of the terms,
            provisions, covenants and restrictions set forth herein shall remain
            in full force and effect and shall in no way be affected, impaired
            or invalidated, and the parties hereto shall use their best efforts
            to find and employ an alternative means to achieve the same or
            substantially the same result as that contemplated by such term,
            provision, covenant or restriction. It is hereby stipulated and
            declared to be the intention of the parties that they would have
            executed the remaining terms, provisions, covenants and restrictions
            without including any of such that may be hereafter declared
            invalid, illegal, void or unenforceable.

      (k)   Securities Held by the Company or Its Affiliates. Whenever the
            consent or approval of Holders of a specified percentage of
            Securities is required hereunder, Securities held by the Company or
            its affiliates (as such term is defined in 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.

      (l)   Third Party Beneficiaries. Holders and Participating Broker-Dealers
            are intended third party beneficiaries of this Agreement and this
            Agreement may be enforced by such Persons.

      (m)   Entire Agreement. This Agreement, together with the Purchase
            Agreement, the Indenture and the Collateral Agreements, is intended
            by the parties as a final and exclusive statement of the agreement
            and understanding of the parties hereto in respect of the subject
            matter contained herein and therein and any and all prior oral or
            written agreements, representations, or warranties, contracts,
            understanding, correspondence, conversations and memoranda between
            the Initial Purchaser on the one hand and the Company and the
            Guarantors on the other, or between or among any agents,
            representatives, parents, subsidiaries, affiliates, predecessors in
            interest or successors in interest with respect to the subject
            matter hereof and thereof are merged herein and replaced hereby.

                  [Remainder of page intentionally left blank.]

                                       29
<PAGE>

      If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
among the Initial Purchaser, the Guarantors and the Company in accordance with
its terms.

                                DUNE ENERGY, INC.

                                By: /s/ James A. Watt
                                    --------------------------------------------
                                    Name: James A. Watt
                                    Title: President and Chief Executive Officer

                                VAQUERO PARTNERS LLC

                                DUNE OPERATING COMPANY

                                By: /s/ Amiel Davie
                                    --------------------------------------------
                                    Name: Amiel David
                                    Title: President

                                       30
<PAGE>

Accepted and Agreed to:

JEFFERIES & COMPANY, INC.

By: /s/ Richard A. Goldenberg
    -------------------------------
Name: Richard A. Goldenberg
Title: Managing Director

                                       31

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