Document:

Exhibit 4.07

 

AMENDMENT NO. 1

TO THE

AMENDED AND RESTATED

LIMITED LIABILITY COMPANY AGREEMENT

OF

LEHMAN BROTHERS HOLDINGS E-CAPITAL LLC I

 

AMENDMENT No.
1, dated as of May 3, 2006 (this “Amendment”), to the Limited Liability
Company Agreement (the “LLC Agreement”) of Lehman Brothers Holdings
E-Capital LLC I,  a Delaware limited
liability company, dated as of August 19, 2005, among Lehman Brothers Holdings
Inc., a Delaware corporation, as managing member (the “Managing Member”),
and Lehman Brothers Holdings E-Capital Trust I, a Delaware statutory trust, as
non-managing member (the “Non-Managing Member”), and such other Persons
(as defined therein) who become non-managing members as provided therein. Capitalized
terms used herein and not otherwise defined shall have the meanings ascribed
thereto in the LLC Agreement.

 

W I T N E S S E T H:

 

WHEREAS, the Managing Member and the
Non-Managing Member are parties to the LLC Agreement;

 

WHEREAS, the Managing Member desires to amend
certain provisions of the LLC Agreement in the manner and as more fully set
forth herein; and

 

WHEREAS, pursuant to Section 17.2(a) thereof,
the LLC Agreement may, with certain exceptions, be amended by a written
instrument executed by the Managing Member.

 

NOW, THEREFORE, in consideration of the
premises the parties hereto agree as follows:

 

1.  Amendments to Section 1.1 of
the LLC Agreement. Section 1.1 of the LLC Agreement is hereby amended by:

 

(a)           Restating
the definition of “Common Accreted Amount” as follows:

 

“Common Accreted Amount” means an
amount equal to the initial capital contribution of the Managing Member (i)
increased by the Common Return and (ii) decreased by any distributions made to
the Managing Member, the amounts in clauses (i) and (ii) to be compounded on
the last day of each Distribution Period.

 

(b)           Adding
the phrase “the sum of the daily increases calculated at” after the words “equal
to” in the definition of “Common Return”, and replacing the phrase “, in each
case on a quarterly basis” in that definition with “compounded on the last day
of each Distribution Period.”

 

(c)           Adding
the following new definition in the proper alphabetical order:

 

 

“Distribution Period” means each period from
and including a Distribution Payment Date (or the Closing Date in the case of
the first Distribution Period) to but not including the next succeeding
Distribution Payment Date.

 

(d)           Adding
the following phrase at the end of the definition of “Net Profits”:  “on a daily accrual basis to the date as of
which the determination of Net Profits is being made.”

 

(e)           Adding
the phrase “the sum of the daily increases calculated at” after the words “equal
to” in the definition of “Preferred Return”, and replacing the phrase “, in
each case on a quarterly basis” in that definition with “compounded on the last
day of each Distribution Period.”

 

(f)            Restating
the definition of “Preferred Accreted Amount” as follows:

 

“Preferred Accreted Amount” means an
amount equal to the initial capital contribution of the Holders of Preferred
Securities (i) increased by the Preferred Return and (ii) decreased by any
distributions made to Holders of Preferred Securities, the amounts in clauses
(i) and (ii) to be compounded on the last day of each Distribution Period.

 

2.  Amendments
to Replace “Fiscal Period” with “Distribution Period.”  The term “Fiscal Period” is replaced with “Distribution
Period” in the definitions of “Preferred Non-Compounded Accrual Amount” and “Simple
Distribution” and in Sections 6.1(b)(i), Section 6.1(c) and Section 6.3.

 

3.  Amendments
to Section 6.2(c) of the LLC Agreement. Section 6.2(c) is hereby amended by
replacing the phrase “If the Company fails either of the tests set forth under
paragraph (b) of this Section 6.2 for any Calculation Date” with “If a
Mandatory Deferral Event occurs on any Calculation Date” and replacing the
phrase “until the Company is able to satisfy both tests set forth in paragraph
(b) of this Section 6.2 for a Calculation Date” with “until a Mandatory
Deferral Event does not occur on a Calculation Date.”

 

4.  Amendment
to Section 6.4 of the LLC Agreement. Section 6.4 is hereby amended by
replacing the term “Article XV” with “Article XVI.”

 

5.  Amendment
to Section 8.1(a) of the LLC Agreement. Section 8.1(a) is hereby amended by
replacing the term “Section 6.3” with “Section 6.4.”

 

6.  Amendments
to Section 16.2(b)(vii) of the LLC Agreement. Section 16.2(b)(vii) is
hereby amended by replacing the term “Section 6.3” with “Section 6.4” and
replacing the term “Special Representative” with “Property Trustee.”

 

7.  No
Other Amendments; Confirmation. Except as expressly amended hereby, the
provisions of the LLC Agreement are and shall continue to be in full force and
effect and are hereby in all respects ratified and confirmed.

 

8.  Effectiveness.
This Amendment shall be effective as of the date hereof.

 

2

 

9.  Execution
in Counterparts. This Amendment may be executed by one or more of the
parties hereto on any number of separate counterparts, and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.

 

10.  GOVERNING
LAW. THIS AGREEMENT AND THE RIGHTS OF THE PARTIES HEREUNDER SHALL BE
GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE LAW OF THE STATE OF DELAWARE
AND ALL RIGHTS AND REMEDIES SHALL BE GOVERNED BY SUCH LAWS WITHOUT REGARD TO
PRINCIPLES OF CONFLICT OF LAWS.

3

 

IN
WITNESS WHEREOF, the Managing Member hereto has executed this Amendment
effective as of the date first above written.

 

	
   

  	
  MANAGING MEMBER:

  
	
   

  	
   

  
	
   

  	
  Lehman
  Brothers Holdings Inc.,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Barrett S. DiPaolo

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Barrett S. DiPaolo

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
					

 

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EXHIBIT 4.1    
    

          

  

  

  

  

  

  

  

  

PINNACLE GAS RESOURCES, INC.  

 AMENDED AND RESTATED SECURITYHOLDERS AGREEMENT  

 Dated February 16, 2006  

           

  

  

  

  

  

  

  

  

  

  

   

   

   

 
 

TABLE OF CONTENTS    

	ARTICLE I DEFINITIONS	 	1
	 	Section 1.1	 	Certain Terms	 	1
	

ARTICLE II REPRESENTATIONS AND WARRANTIES	
 	

9
	 	Section 2.1	 	Representations and Warranties of Shareholders	 	9
	 	Section 2.2	 	Representations and Warranties of the Corporation	 	10
	

ARTICLE III MANAGEMENT OF THE CORPORATION	
 	

10
	 	Section 3.1	 	Management by Directors	 	10
	 	Section 3.2	 	Board of Directors	 	10
	 	Section 3.3	 	Substitute Directors	 	11
	 	Section 3.4	 	Quorum; Vote Required for Board Action	 	11
	 	Section 3.5	 	Removal	 	12
	 	Section 3.6	 	Compensation	 	12
	 	Section 3.7	 	Voting of Preferred Stock.	 	12
	 	Section 3.8	 	Cooperation by Holders	 	12
	 	Section 3.9	 	Governance of Subsidiaries	 	12
	 	Section 3.10	 	Financial Statements	 	12
	 	Section 3.11	 	Reserve Reports	 	13
	 	Section 3.12	 	Operating Reports	 	13
	 	Section 3.13	 	Certain Competing Activities by Director	 	13
	

ARTICLE IV CERTAIN PURCHASE RIGHTS	
 	

14
	 	Section 4.1	 	Preemptive Rights	 	14
	 	Section 4.2	 	Repurchase of Management Shares	 	15
	

ARTICLE V TRANSFER OF SECURITIES	
 	

16
	 	Section 5.1	 	General Rule	 	16
	 	Section 5.2	 	Permitted Transfers	 	17
	 	Section 5.3	 	Rights of First Refusal	 	17
	 	Section 5.4	 	Right of Participation	 	18
	 	Section 5.5	 	Drag Along Rights	 	19
	 	Section 5.6	 	Involuntary Transfers	 	22
	 	Section 5.7	 	Conditions to Transfers; Continued Applicability of Agreement	 	22
	 	Section 5.8	 	Certain Events Not Deemed Transfers	 	23
	 	Section 5.9	 	Transfer by Pledge	 	23
	 	Section 5.10	 	Change of Control of CCBM or Crested	 	23
	

ARTICLE VI REGISTRATION OF STOCK	
 	

24
	 	Section 6.1	 	Demand Registration.	 	24
	 	Section 6.2	 	Shelf Registration Statement	 	25
	 	Section 6.3	 	Priority on Demand Registrations.	 	25
	 	Section 6.4	 	Piggy-Back Registration.	 	26
	 	Section 6.5	 	Selection of Underwriters	 	26
	 	Section 6.6	 	Suspension and Blackout Period.	 	27
	 	Section 6.7	 	Registration Procedures	 	28
	 	Section 6.8	 	Selling Holder Obligations	 	30
	 	Section 6.9	 	Registration Expenses	 	31
	 	Section 6.10	 	Indemnification; Contribution.	 	31
	 	Section 6.11	 	Participation in Underwritten Registrations.	 	34
	 	Section 6.12	 	Limitation on Subsequent Registration Rights.	 	34
	

ARTICLE VII BOOKS AND RECORDS; INSPECTION RIGHTS; EXCHANGE OF INFORMATION	
 	

34
	 	 	 	 	 

 

	

ARTICLE VIII TERMINATION	
 	

35
	

ARTICLE IX MISCELLANEOUS	
 	

35
	 	Section 9.1	 	Amendment	 	35
	 	Section 9.2	 	Specific Performance	 	35
	 	Section 9.3	 	Assignment	 	36
	 	Section 9.4	 	Legends	 	36
	 	Section 9.5	 	Notices	 	36
	 	Section 9.6	 	Confidentiality	 	38
	 	Section 9.7	 	Counterparts	 	39
	 	Section 9.8	 	Section Headings	 	39
	 	Section 9.9	 	Choice of Law	 	39
	 	Section 9.10	 	Entire Agreement	 	39
	 	Section 9.11	 	Cumulative Rights	 	39
	 	Section 9.12	 	Severability	 	39
	 	Section 9.13	 	Binding Effect	 	39
	 	Section 9.14	 	Further Assurances	 	39
	 	Section 9.15	 	Spouses	 	39
	 	Section 9.16	 	Dispute Resolution	 	40
	 	Section 9.17	 	Acknowledgement	 	41

ii

 
 

AMENDED AND RESTATED SECURITYHOLDERS AGREEMENT    
    

        This AMENDED AND RESTATED SECURITYHOLDERS AGREEMENT, dated as of February 16, 2006, is by and among Pinnacle Gas Resources, Inc., a Delaware
corporation (the "Corporation"), CCBM, Inc., a Delaware corporation ("CCBM"), U.S. Energy
Corporation, a Wyoming corporation ("US Energy"), Crested Corp., a Colorado corporation ("Crested"),
each of the CSFB Parties (as defined herein), Peter G. Schoonmaker, a natural person ("Schoonmaker"), Gary Uhland, a natural person
("Uhland"), each Shareholder (as such terms are defined herein) who may hereafter execute in accordance with this Agreement a separate agreement to be
bound by the terms hereof and, for purposes of Section 5.10 only, Carrizo Oil & Gas, Inc., a Texas corporation
("Carrizo"). 

W I T N E S S E T H: 

        WHEREAS,
the Corporation, CCBM, Rocky Mountain Gas, Inc., a Wyoming corporation ("RMG"), and the CSFB Parties are parties to that
certain Contribution and Subscription Agreement dated June 23, 2003 (the "Contribution Agreement") pursuant to which, among other things, the
Corporation issued and sold to each of CCBM and RMG, shares of Common Stock and to the CSFB Parties, shares of Common Stock and Preferred Stock and Warrants; 

        WHEREAS,
subject to their execution of the Securityholders Agreement dated as of June 23, 2003 (the "Initial Agreement"), the
Corporation granted Schoonmaker and Uhland certain Common Stock Equivalents; 

        WHEREAS,
the Contribution Agreement provided that the execution and delivery of the Initial Agreement was a condition to the consummation of the capital contributions contemplated
thereby; 

        WHEREAS,
by assignment dated May 31, 2005, RMG transferred all its shares of common stock of the Corporation and all right, title, interest and obligations in and to the Initial
Agreement to US Energy and Crested, which transfers were permitted under the terms of the Initial Agreement; 

        WHEREAS,
in connection with the assignment by RMG of its interests in the Corporation to US Energy and Crested the parties entered into an Amendment to Securityholders Agreement dated as
of August 26, 2005 (the "Amendment"); and 

        WHEREAS,
the Parties desire to further amend and restate the Initial Agreement as amended by the Amendment; 

        NOW,
THEREFORE, in consideration of the mutual covenants and obligations hereinafter set forth, the parties hereto, intending to be legally bound, hereby agree as follows: 

 
 

ARTICLE I
  DEFINITIONS    
    

        Section 1.1    Certain Terms.    In addition to the terms defined elsewhere herein, when used herein the
following terms shall have the meanings indicated: 

        "2005 Subscription Agreement" means, collectively, any subscription agreements entered into by and among the Company and one or more of
its stockholders pursuant to the certain Notice to Stockholders, dated March 15, 2005, or the certain Notice to Stockholders, dated April 15, 2005, in each case as such agreements may be
amended, restated, supplement or otherwise modified from time to time. 

        "AAA" has the meaning set forth in Section 9.16(d). 

        "Accepting Holder" has the meaning set forth in Section 5.3(b). 

        "Accredited Investor" has the meaning set forth for such term in Regulation D promulgated by the SEC under the Securities Act. 

        "Action" has the meaning set forth in Section 6.10. 

 

        "Affiliate" means, with respect to any Person, any Person controlling, controlled by, or under common control with such Person. For the
purposes of this definition, "control" means the possession of the power to direct or cause the direction of management and policies of such Person, whether through the direct or indirect ownership of
Voting Stock, by contract or otherwise. 

        "Agreement" means this Securityholders Agreement, as amended and restated from time to time. 

        "Amendment" has the meaning given thereto in the recitals. 

        "AMI Agreement" means that certain Area of Mutual Interest Agreement, dated as of June 23, 2003, among the Corporation, RMG, U.S.
Energy, CCBM and Carrizo. 

        "Associate" of any Person, means any officer, director or employee of such Person and such officer's, director's or employee's spouse,
heirs, executors, administrators, testamentary trustees, legatees or beneficiaries. 

        "Board" has the meaning set forth in Section 3.1. 

        "Bona Fide Offer" means any bona fide offer to acquire shares of Preferred Stock, Common Stock or Common Stock Equivalents (whether in the
form of a purchase of shares of Common Stock or Common Stock Equivalents, merger, business combination, recapitalization or otherwise) made by a Person which has the demonstrable financial ability to
consummate such a transaction. 

        "Business Day" means any day other than a Saturday, a Sunday, or a holiday on which national banking associations in New York City, New
York, Houston, Texas, or Sheridan, Wyoming are authorized or obligated by law or executive order to close. 

        "Bylaws" means the bylaws of the Corporation, as amended or restated from time to time. 

        "Capital Stock" means any and all shares, interests, participations, or other equivalents (however designated) of capital stock of a
corporation, any and all equivalent ownership interests in a Person (other than a corporation), and any and all warrants, options, or other rights to purchase or acquire any of the foregoing,
including, without limitation, any Common Stock Equivalents. 

        "Carrizo" has the meaning given thereto in the preamble. 

        "Cause" means the termination of a Management Holder's employment with the Corporation for any of the following reasons: (i) such
Person's conviction of, or plea of nolo contendere to, a felony crime; (ii) a breach by such Person of a fiduciary duty owed to the Corporation; (iii) the engagement by such Person in
any Prohibited Activity; (iv) the breach by such Person of an obligation of confidentiality contained in any written agreement to which such Person is bound; (v) the willful and gross
neglect by such Person of his or her duties or, with respect to a Management Holder who is party to a written employment agreement with the Corporation, the willful or gross neglect by such Person of
the duties specifically and expressly required by such employment agreement; (v) such Person's continuing failure to substantially perform the duties and responsibilities required of such
Person or, with respect to a Management Holder is party to a written employment agreement with the Corporation, such Person's continuing failure to substantially perform the duties and
responsibilities required of such Person under such employment agreement (except, in either case, by reason of such Person's incapacity due to physical or mental illness or injury) for a period of
15 days after the Board, acting pursuant to a majority of its members, has delivered to such Person a written demand for substantial performance which specifically identifies the basis for the
Board's determination that such Person has not substantially performed his or her duties and responsibilities; or (iv) commission of any act or acts of moral turpitude in violation of the
Corporation's policy. 

        "CCBM" has the meaning given thereto in the recitals. 

2

 

        "Certificate of Incorporation" means the certificate of incorporation of the Corporation, as amended and restated from time to time. 

        "Change of Control" means, with respect to any Person, the occurrence of (i) the consummation of any transaction or series of
transactions, including without limitation, any tender or exchange offer, open market purchases, privately negotiated purchases, merger, consolidation or otherwise, which results in any Person(s)
becoming the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of more than 50% of the Voting Stock of such Person, measured by voting power rather than
number of shares or (ii) the direct or indirect sale, lease, exchange, transfer or other disposition of all or substantially all of the assets of such Person and its subsidiaries to any other
Person(s). 

        "Co-Sellers" has the meaning set forth in Section 5.5(a). 

        "Common Stock" means shares of the common stock, par value $.01 per share, of the Corporation. 

        "Common Stock Equivalents" means (without duplication with any other shares of Common Stock or Common Stock Equivalents) rights, warrants,
options, securities or indebtedness, or other rights, exercisable for or convertible or exchangeable into, directly or indirectly, shares of Common Stock (other than the Preferred Stock), whether at
the time of issuance or upon the passage of time or the occurrence of some future event. 

        "Contribution Agreement" has the meaning given thereto in the recitals. 

        "Corporation" has the meaning given thereto in the recitals. 

        "Crested" has the meaning given thereto in the recitals. 

        "CSFB Shares" has the meaning set forth in Section 5.5(a). 

        "CSFB Parties" means, collectively, DLJ MB Partners III GmbH & Co. KG, a limited company organized under the laws of Germany, DLJ
Offshore Partners III, C.V., a partnership organized under the laws of the Netherland Antilles, DLJ Offshore Partners III-1, C.V., a partnership organized under the laws of the Netherland
Antilles, DLJ Offshore Partners III-2, C.V., a partnership organized under the laws of the Netherland Antilles, Millennium Partners II, L.P., a Delaware limited partnership, DLJ Merchant
Banking Partners III, L.P., a Delaware limited partnership, and MBP III Plan Investors, L.P., a Delaware limited partnership. 

        "Demand Period" has the meaning set forth in Section 6.1(a). 

        "Demand Registration" has the meaning set forth in Section 6.1(a). 

        "Demand Request" has the meaning set forth in Section 6.1(a). 

        "Diluted Common Stock" means, at any time, the then outstanding shares of Common Stock (except for any shares held by Management Holders
or shares issued upon the exercise of Common Stock Equivalents held by Management Holders) plus (without duplication) all shares of Common Stock issuable upon the exercise of all
then-outstanding Warrants. 

        "Director" means a natural person appointed to the Board in accordance with the terms of this Agreement, which person need not be a
stockholder of the Corporation or a resident of the State of Delaware. 

        "Disability" means, with respect to any Management Holder, the absence of such Person from his or her duties with the Corporation on a
full-time basis for either (i) 60 consecutive business days or (ii) in any two-year period 120 nonconsecutive business days as a result of incapacity due to
mental or physical illness which is determined to be total and permanent by a physician selected by the Corporation or its insurers and acceptable to such Person or his or her legal representative
(such agreement as to acceptability not to be withheld unreasonably.) 

3

 

        "Dispute" has the meaning set forth in Section 9.16(a). 

        "Dispute Notice" has the meaning set forth in Section 9.16(b). 

        "Employment Agreements" means those certain employment agreements executed by the Company with each of Gary W. Uhland and
Peter G. Schoonmaker. 

        "Equity Incentive Plan" means any stock option, issuance, appreciation rights, restricted stock, phantom stock, stock purchase plan or
other equity incentive plan for the directors, officers and employees of, and consultants to, the Corporation and its subsidiaries. 

        "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, and the rules and regulations promulgated by the
SEC thereunder. 

        "Fair Market Value" means, in respect of any share of Common Stock or any Common Stock Equivalents, (i) if the Corporation is not
publicly traded at such time, the fair saleable value of such
Common Stock and/or Common Stock Equivalents (determined without giving effect to any discount for minority interest or any lack of liquidity of the Common Stock, or for the fact that the Corporation
may have no class of equity registered under the Exchange Act) based on the equity value of the Corporation as determined, in good faith, by the Corporation and the Management Holder whose Common
Stock and/or Common Stock Equivalents are being repurchased pursuant to Section 4.2 or, in the event such parties cannot agree, by an investment
banking or valuation firm of nationally recognized standing mutually agreed upon by the Corporation and such Management Holder and (ii) if Corporation is publicly traded at such time, the
average of the daily market prices for 20 consecutive Business Days commencing 30 days before such date. For purposes of this definition, (i) the value of Common Stock Equivalents shall
be equal to the aggregate of Fair Market Value of the shares of Common Stock issuable upon conversion or exercise thereof less the aggregate exercise price thereof and (ii) the "daily market
price" for each such Business Day shall be (A) the last sale price on such day on the principal stock exchange or NASDAQ Stock Market ("NASDAQ")
on which such Common Stock is then listed or admitted to trading, (B) if no sale takes place on such day on any such exchange or NASDAQ, the average of the last reported closing bid and asked
prices on such day as officially quoted on any such exchange or NASDAQ, (C) if the Common Stock is not then listed or admitted to trading on any stock exchange or NASDAQ, the average of the
last reported closing bid and asked prices on such day in the over the counter market, as furnished by the National Association of Securities Dealers Automatic Quotation System or the National
Quotation Bureau, Inc., (D) if neither such corporation at the time is engaged in the business of reporting such prices, as furnished by any similar firm then engaged in such business or
(E) if there is no such firm, as furnished by any member of the National Association of Securities Dealers (the "NASD") selected mutually by the
Management Holder whose Common Stock and/or Common Stock Equivalents are being repurchased pursuant to Section 4.2 and the Corporation or, if
they cannot agree upon such selection, as selected by two such members of the NASD, one of which shall be selected by the such Management Holder and one of which shall be selected by Corporation. 

        "Fully Diluted Common Stock" means, at any time, the then outstanding shares of Common Stock plus (without duplication) all shares of
Common Stock issuable, whether at such time or upon the passage of time or the occurrence of future events, upon the exercise, conversion or exchange of all then-outstanding Common Stock
Equivalents. 

        "GAAP" means United States generally accepted accounting principles as in effect from time to time. 

        "Good Reason" means (i) with respect to any Management Holder party to a written employment agreement with the Corporation,
(A) the assignment by the Corporation to such Person any duties materially inconsistent with such Person's duties as contemplated in such employment agreement or any other action by the
Corporation which results in a material diminution in such position, excluding for 

4

 

this
purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Corporation promptly after receipt of notice thereof given by such Person;
(B) any material failure by the Corporation to comply with any of the provisions of any written employment agreement with the Corporation to which such Person is a party, other than an
isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Corporation promptly after receipt of notice thereof given by such Person; (C) any
purported termination by the Corporation of such Person's employment otherwise than as expressly permitted by such Person's employment agreement; or (iv) any failure by the Corporation to
require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Corporation to assume expressly and
agree to perform the terms of such Person's employment agreement with the Corporation in the same manner and to the same extent that the Corporation would be required to perform such terms pursuant
thereto if no such succession had taken place and (ii) with respect to any Management Holder not party to a written employment agreement with the Corporation, any action by the Corporation
which results in a material diminution in such Person's position, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the
Corporation promptly after receipt of notice thereof given by such Person. 

        "Holder" means each Initial Holder and each other Person that may become a party to this Agreement pursuant to  Section 5.7, but shall not include
(i) the Corporation, (ii) any Management Holder or (iii) any Person who executes this
Agreement or a separate agreement to be bound by the terms hereof solely in his or her capacity as a spouse of a Holder; provided,  however, that if any
Holder ceases to own any Common Stock or Common Stock Equivalents, then such Holder shall cease to be a Holder hereunder and shall
not thereafter be subject to this Agreement (other than Section 9.6) even if such former Holder thereafter acquires any securities of the
Corporation, unless such former Holder thereafter acquires any securities of the Corporation in a transaction in which it becomes a Holder again pursuant to  Section 5.7. 

        "Indemnified Holder" has the meaning set forth in Section 6.10(d). 

        "Indemnifying Holder" has the meaning set forth in Section 6.10(d). 

        "Initial Agreement" has the meaning given thereto in the recitals. 

        "Initial Holders" means CCBM, US Energy and Crested and each CSFB Party. 

        "Initial Public Offering" means the earlier to occur of either (i) the first consummated public offering of Common Stock which is
underwritten on a firm commitment basis by one or more Underwriters or (ii) the date the registration statement filed pursuant to registration rights granted in connection with a Proposed
Private Offering is declared effective by the SEC. 

        "Inspectors" has the meaning set forth in Section 6.7(j). 

        "Involuntary Transfer" means a Transfer resulting from the death of a Person or another involuntary Transfer occurring by operation of law
(including, but not limited to, transfers resulting from death of such Person, the initiation and continuation for 60 days of bankruptcy proceedings against such Person, the execution of either
a judgment or a foreclosure by a court of law against such Person or any other event that forces such Person to Transfer any of its Common Stock or Common Stock Equivalents to a third party). 

        "Involuntary Transfer Notice" has the meaning set forth in Section 5.6. 

        "Loss or Losses" has the meaning set forth in  Section 6.10. 

        "Management Holder" means any employee of the Corporation who beneficially owns any Common Stock or Common Stock Equivalents and each
employee of the Corporation who hereafter executes an 

5

 

agreement
to be bound by the terms of this Agreement as a "Management Holder" (other than any Person who executes this Agreement or a separate agreement to be bound by the terms hereof solely in his
or her capacity as a spouse of a Management Holder); provided, however, that if any Management Holder
ceases to own any Common Stock or Common Stock Equivalents, then such Management Holder shall cease to be a Management Holder hereunder and shall not thereafter be subject to this Agreement (other
than Section 9.6) even if such former Management Holder thereafter acquires any securities of the Corporation, unless such former Management
Holder thereafter acquires any securities of the Corporation in a transaction in which it becomes a Management Holder again pursuant to  Section 5.7. 

        "Material Adverse Effect" has the meaning set forth in Section 6.3. 

        "Minimum Purchase Amount" has the meaning set forth in Section 5.5(d)(i)(B). 

        "NASD" means the National Association of Securities Dealers, Inc. 

        "New Securities" has the meaning set forth in Section 4.1(b). 

        "Notice" has the meaning set forth in Section 9.5. 

        "Notice Date" has the meaning set forth in Section 5.5(b). 

        "Participating Amount" has the meaning set forth in Section 5.4(a). 

        "Participation Offer" has the meaning set forth in Section 5.3(b). 

        "Payable Note" means a promissory note subordinated to all other financial obligations of the Corporation and bearing interest at 6% per
annum (which interest may be payable by delivery of notes of like tenor in principal amount equal to the interest then due) with a maturity one year beyond the maturity of the Corporation's most
subordinated debt outstanding at the time of issuance of such note. 

        "Permitted Transferee" means, (a) with respect to any CSFB Party, (i) any Affiliate of any CSFB Party, (ii) any
managing director, director, managing general partner, associate general partner, advisory general partner, general partner or limited partner of any CSFB Party, (iii) any Associate of any CSFB
Party and (iv) any trust, the beneficiaries of which, or any corporation, limited liability company or partnership, the shareholders, members or general or limited partners of which, include
only one or more CSFB Parties, or any of their respective Associates, (b) with respect to CCBM, (i) Carrizo or any other Affiliate of CCBM (other than any Person deemed an Affiliate of
CCBM through control of Carrizo or any other publicly traded parent, direct or indirect, of CCBM), (ii) any Associate of CCBM and (iii) any trust, the beneficiaries of which, or any
corporation, limited liability company or partnership, the shareholders, members or general or limited partners of which, include only CCBM or any of its Associates, (c) with respect to US
Energy and Crested, (i) US Energy and Crested or any other Affiliate of US Energy and Crested (other than any Person deemed an Affiliate of US Energy and Crested through control of US Energy or
any other publicly traded parent, direct or indirect, of US Energy and Crested), (ii) any Associate of US Energy and Crested, and (iii) any trust, the beneficiaries of which, or any
corporation, limited liability company or partnership, the shareholders, members or general or limited partners of which, include only US Energy and Crested or any of their Associates and
(d) with respect to any Management Holder, (i) any trust established for the benefit of such Management Holder, the spouse and/or one or more of the lineal descendants of such Management
Holder which is controlled by such Management Holder and (ii) the spouse, parent, and/or one or more of the lineal descendants of such Management Holder;  provided, however, that any transferee from any CSFB Party, CCBM, US Energy and Crested or any
Management Holder pursuant to clauses (a), (b), (c) or (d) above will act through DLJ Merchant Banking Partners III, L.P., CCBM, US Energy and Crested and such Management Holder,
respectively. 

6

 

        "Person" means any natural person, corporation, limited partnership, general partnership, joint stock company, joint venture, association,
company, limited liability company, trust, bank trust company, land trust, business trust, or other organization, whether or not a legal entity, and any government or agency or political subdivision
thereof. 

        "Piggyback Registration" has the meaning set forth in Section 6.4(a). 

        "Piggyback Securities" has the meaning set forth in Section 6.4(b). 

        "Preemptive Right Holder" has the meaning set forth in Section 4.1(a). 

        "Preferred Stock" means shares of the Series A Redeemable Preferred Stock, par value $.01 per share, of the Corporation. 

        "Preferred Stock Certificate" means the Certificate of Designations, Preferences and Rights of Series A Redeemable Preferred Stock
of the Corporation filed with the Secretary of State in the State of Delaware on June 23, 2003. 

        "Prohibited Activity": a Person engages in a "Prohibited Activity" if during such Person's employment with the Corporation and
(i) for a period of one year after the date of such Person's termination of employment, within the Area of Mutual Interest (as defined in the AMI Agreement) such Person (A) accepts
employment with, advises, assists or renders service in any way, directly or indirectly, to any Person that is engaged in a business directly competitive with the business then engaged in by the
Corporation or any of its affiliated companies or (B) enters into or takes part in or lends his or her name, counsel or assistance to any business, either as proprietor, principal, investor,
partner, director, officer, executive, consultant, advisor, agent, independent contractor, or in any other capacity whatsoever, for any purpose that would be competitive with the business of the
Corporation or any of its affiliated companies and (ii) for a period of two years after the date of termination of such Person's employment with the Corporation, such Person, on his own behalf
or on behalf of any other Person, directly or indirectly, solicits or offers employment to any Person who has been employed by the Corporation or any subsidiary thereof at any time during the
one-year period immediately preceding such solicitation. 

        "Proportional Share" has the meaning set forth in Section 5.3(b). 

        "Proposed Disposition" has the meaning set forth in Section 5.3(a). 

        "Proposed Private Offering" has the meaning set forth in Section 3.1. 

        "Proposed Transferee" has the meaning set forth in Section 5.3(a). 

        "Public Offering" means the consummation of a public offering pursuant to a registration statement under the Securities Act. 

        "Public Sale" means (i) any unregistered sale in "brokers' transactions" pursuant to Rule 144 under the Securities Act or
(ii) a spin-off exempt from registration (pursuant to SEC Staff Legal Bulletin No. 4 or otherwise). 

        "Registrable Securities" means all shares of Common Stock and Common Stock issuable upon conversion or exercise of Common Stock
Equivalents and any other securities issued or issuable with respect to Common Stock by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger,
consolidation or reorganization; provided, however, that any Registrable Security will cease to be a Registrable Security when (i) a registration
statement covering such Registrable Security has been declared effective by the SEC and it has been disposed of pursuant to such effective registration statement, (ii) it is sold under
circumstances in which all of the applicable conditions of Rule 144 (or any similar provisions then in force) promulgated by the SEC under the Securities Act are met, or
(iii) (A) it has been otherwise transferred, (B) the Corporation has delivered 

7

 

a
new certificate or other evidence of ownership for it not bearing any legend similar to that required pursuant to Section 9.4 of this Agreement
and (C) it may be resold without subsequent registration or other restriction under the Securities Act. 

        "Registration Expenses" has the meaning set forth in Section 6.9. 

        "Requesting Holder" has the meaning set forth in Section 6.1(a). 

        "Required Filing Date" has the meaning set forth in Section 6.1(b). 

        "Required Sale" has the meaning set forth in Section 5.5(a). 

        "Required Sale Date" has the meaning set forth in Section 5.5(b). 

        "Required Sale Notice" has the meaning set forth in Section 5.5(b). 

        "Response" has the meaning set forth in Section 9.16(b). 

        "Restriction" has the meaning set forth in Section 9.4(b). 

        "RMG" has the meaning given thereto in the recitals. 

        "ROFR Acceptance Deadline" has the meaning set forth in Section 5.3(b). 

        "ROFR Acceptance Notice" has the meaning set forth in Section 5.3(b). 

        "ROFR/Participation Notice" has the meaning set forth in Section 5.3(g). 

        "Sale Notice" has the meaning set forth in Section 5.3(a). 

        "Sale Shares" has the meaning set forth in Section 5.3(a). 

        "SEC" means the Securities and Exchange Commission or any successor governmental agency. 

        "Securities Act" means the Securities Act of 1933, as amended from time to time. 

        "Seller" has the meaning set forth in Section 5.5(a). 

        "Selling Holder" means a Holder who is selling Registrable Securities pursuant to a registration statement under the Securities Act. 

        "Senior Manager" has the meaning set forth in Section 9.16(b). 

        "Share" has the meaning set forth in Section 5.1. 

        "Shareholder" means, collectively, Holders and Management Holders. 

        "Shelf Request" has the meaning set forth in Section 6.2. 

        "Shelf Registration Statement" has the meaning set forth in Section 6.2. 

        "Spouse" has the meaning set forth in Section 9.15. 

        "Substitute Director" has the meaning set forth in Section 3.2(d). 

        "Suspension Period" has the meaning set forth in Section 6.6(c). 

        "Tranche A Shares" has the meaning given thereto in the Contribution Agreement. 

        "Tranche B Shares" has the meaning given thereto in the Contribution Agreement. 

        "Transfer," including the correlative terms "Transferring" or
"Transferred", means any direct or indirect transfer, assignment, sale, gift or other encumbrance, or any other disposition (whether voluntary or
involuntary or by operation of law) of Common Stock and/or any Common Stock Equivalents (or any interest (pecuniary or otherwise) therein or right thereto), including without 

8

 

limitation
derivative or similar transactions or arrangements whereby a portion or all of the economic interest in, or risk of loss or opportunity for gain with respect to, Common Stock and/or any
Common Stock Equivalents is transferred or shifted to another Person (but not any pledge or hypothecation thereof, placement of a lien thereon or grant of a security interest therein or other
encumbrance thereon until the execution and foreclosure with respect to the foregoing); provided,  however, that an exchange, merger, recapitalization,
consolidation or reorganization involving the Corporation in which shares of the Common Stock
and/or Common Stock Equivalents of the Corporation are converted or exchanged shall not be deemed a Transfer. 

        "Transferring Holder" has the meaning set forth in Section 5.3(a). 

        "Underwriter" means a nationally-recognized securities dealer which purchases any Registrable Securities as principal and not as part of
such dealer's market-making activities. 

        "US Energy" has the meaning given thereto in the recitals. 

        "Voting Stock" of any Person as of any date means the Capital Stock of such person that is at the time entitled to vote in the election of
the Board of Directors of such Person. 

        "Warrants" means all warrants exercisable for the purchase of Common Stock granted by the Corporation to any Initial Holder or its
Permitted Transferee. 

        "Withdrawing Director" has the meaning set forth in Section 3.2(b). 

 
 

ARTICLE II
  REPRESENTATIONS AND WARRANTIES    
    

        Section 2.1    Representations and Warranties of Shareholders.    Each Shareholder represents and warrants to
the Corporation and the other Shareholders that: 

        (a)   with
respect to a Shareholder that is not a natural person, such Person is duly organized, validly existing, and in good standing under the laws of its jurisdiction of
incorporation or organization, as the case may be, with full corporate and/or other entity power and authority under its certificate of incorporation and/or other organizational document(s) to
execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby, and the execution, delivery and performance by it of this Agreement and the consummation by it of
the transactions contemplated hereby have been duly authorized by all necessary action; 

        (b)   with
respect to a Shareholder that is a natural person, such Person has full power and authority to execute, deliver, and perform this Agreement and to consummate the
transactions contemplated hereby, and the execution, delivery, and performance by such Person of this Agreement and the consummation by such Person of the transactions contemplated hereby have been
duly authorized by all necessary action; 

        (c)   this
Agreement has been duly and validly executed and delivered by such Person and constitutes the legal, valid and binding obligation of such Person, and except as may
be affected (i) by applicable bankruptcy, insolvency, moratorium, reorganization and other similar laws and judicial decisions affecting the rights of creditors generally and (ii) by
general principles of equity and public policy
(regardless of whether considered at law or in equity), are enforceable against such Person in accordance with their respective terms; and 

        (d)   the
execution, delivery, and performance by such Person of this Agreement and the consummation by such Person of the transactions contemplated hereby will not, with or
without the giving of notice or the lapse of time, or both, (i) violate any provision of law, statute, rule, or regulation to which such Person is subject, (ii) violate any order,
judgment, or decree applicable to such Person, or (iii) conflict with, or result in a breach or default under, any term or condition of 

9

 

its
certificate of incorporation or bylaws, or partnership or other organizational document, as applicable, or any agreement or other instrument to which such Person is a party or by which such Person
is bound. 

        Section 2.2    Representations and Warranties of the Corporation.    The Corporation hereby represents and
warrants to each Shareholder that: 

        (a)   it
is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware; it has full corporate power and authority under its
Certificate of Incorporation to execute, deliver, and perform this Agreement and to consummate the transactions contemplated hereby; and the execution, delivery, and performance by it of this
Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary action; 

        (b)   this
Agreement has been duly and validly executed and delivered by the Corporation and constitutes the legal, valid and binding obligation thereof, and except as may be
affected (i) by applicable bankruptcy, insolvency, moratorium, reorganization and other similar laws and judicial decisions affecting the rights of creditors generally and (ii) by
general principles of equity and public policy (regardless of whether considered at law or in equity), are enforceable against such Person in accordance with their respective terms; and 

        (c)   the
execution, delivery, and performance by the Corporation of this Agreement and the consummation by the Corporation of the transactions contemplated hereby will not,
with or without the giving of notice or the lapse of time, or both, (i) violate any provision of law, statute, rule, or regulation to which the Corporation is subject, (ii) violate any
order, judgment, or decree applicable to the Corporation or (iii) conflict with, or result in a breach or default under, any term or condition of its Certificate of Incorporation or Bylaws or
any agreement or other instrument to which the Corporation is a party or by which it is bound. 

 
 

ARTICLE III
  MANAGEMENT OF THE CORPORATION    
    

        Section 3.1    Management by Directors.    The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors (the "Board") and, subject to the restrictions imposed by law, by the Certificate of Incorporation and
Bylaws and by this Agreement, the Board may exercise all powers of the Corporation. The provisions and rights set forth in Sections 3.2, 3.3, 3.5, 3.8,  3.9
and 3.13 shall terminate and be of no further force or effect, effective as of the consummation of a
private placement of the Corporation's Common Stock to "qualified institutional buyers" pursuant to Rule 144A and to "accredited investors" pursuant to Regulation D with net proceeds to
the Corporation of not less than $100.0 million, with a portion of the net proceeds used to redeem all of the outstanding Preferred Stock (the "Proposed Private
Offering"). 

        Section 3.2    Board of Directors.    Each Shareholder and, to the fullest extent allowed by law, the
Corporation, shall take all action within its power, including, but not limited to, the voting of shares of Capital Stock of the Corporation, required to cause: 

        (a)   [Reserved.]

        (b)   in
the event the CSFB Parties and their respective Permitted Transferees beneficially own an aggregate number of Shares equal to, 

        (i)    not
less than 35% of the Diluted Common Stock of the Corporation, the nomination and election or appointment of (A) one Director designated by DLJ Merchant
Banking Partners III, L.P., and (B) three Directors designated by all other CSFB Parties; and 

10

 

        (ii)   less
than 35% but not less than 25% of the Diluted Common Stock of the Corporation, the nomination and election or appointment of (A) one Director designated by
DLJ Merchant Banking Partners III, L.P., and (B) two Directors designated by all other CSFB Parties; 

        (iii)  less
than 25% but not less than 13% of the Diluted Common Stock of the Corporation, the nomination and election or appointment of (A) one Director designated by
DLJ Merchant Banking Partners III, L.P., and (B) one Director designated by all other CSFB Parties; and 

        (iv)  less
than 13% but not less than 5% prior to the date of the Initial Public Offering or 10% at any time thereafter, of the Diluted Common Stock of the Corporation, the
nomination and election or appointment of one Director designated by DLJ Merchant Banking Partners III, L.P. 

        (c)   in
the event CCBM and its Permitted Transferees beneficially own an aggregate number of Shares equal to, 

        (i)    not
less than 13% of the Diluted Common Stock of the Corporation, the nomination and election or appointment of two Directors designated by CCBM; and 

        (ii)   less
than 13% but not less than 5% prior to the date of the Initial Public Offering or 10% at any time thereafter, of the Diluted Common Stock of the Corporation, the
nomination and election or appointment of one Director designated by CCBM; and 

        (d)   in
the event US Energy and Crested and its Permitted Transferees beneficially own an aggregate number of Shares equal to, 

        (i)    not
less than 13% of the Diluted Common Stock of the Corporation, the nomination and election or appointment of two Directors designated by US Energy and Crested; and 

        (ii)   less
than 13% but not less than 5% prior to the date of the Initial Public Offering or 10% at any time thereafter, of the Diluted Common Stock of the Corporation, the
nomination and election or appointment of one Director designated by US Energy. 

        Section 3.3    Substitute Directors.    In the event that any Director (a "Withdrawing
Director") designated in the manner set forth in Section 3.2 is unable to serve, or once having commenced to serve, is
removed or withdraws from the Board, such Withdrawing Director's replacement on the Board (the "Substitute Director") shall be designated in accordance
with this Section 3.3 by the Holder that designated such Withdrawing Director. Each Shareholder agrees to take all action within its power,
including, but not limited to, (i) the voting of Capital Stock of the Corporation to cause the nomination and election or appointment of such Substitute Director as soon as practicable
following his designation and (ii) instructing the Directors it had previously designated to serve as members of the Board, as the first order of business at the first meeting thereof after
such Substitute Director has been so designated, to vote to seat such designated Substitute Director as a Director in place of the Withdrawing Director. In
the event any Holder entitled to designate a Director or Directors pursuant to this Agreement fails to designate a Director or Directors, such directorship or directorships shall remain vacant unless
such vacancy results in fewer than the minimum number of Directors required by law, in which case such vacancy shall be filled by an individual elected by a majority of the Directors then serving. 

        Section 3.4    Quorum; Vote Required for Board Action.    Unless otherwise required by law, each Director shall
have one vote. A quorum for the transaction of business at a meeting of the Board shall exist when a majority of the Directors are present, and the approval of a majority of the Directors shall be
required to approve any action by the Board. 

11

  

        Section 3.5    Removal.    A Holder entitled to designate Directors of the Corporation pursuant to 
Section 3.2 may at any time request that any one or all of the Directors designated by such Holder be removed from the Board (with our without
cause) by written notice thereof to the other Holders. Upon receipt of any such notice, each of the Shareholder hereby agrees to vote all shares of Capital Stock of the Corporation beneficially owned
or held of record by such Shareholder to effect such removal upon any such request. No Director designated by a Holder shall otherwise be involuntarily removed as a Director (or as a member of any
committee thereof) except for cause for as long as such Holder is entitled to designate that Director as a member of the Board pursuant to this Agreement. 

        Section 3.6    Compensation.    Members of the Board who are non-employees and are not Affiliates
of any of the Holders shall receive compensation for their services as Directors as determined by the Board. In addition, all Directors shall be entitled to be reimbursed by the Corporation for their
respective reasonable out-of-pocket costs and expenses incurred in connection with the meetings of the Board and any committees thereof. 

        Section 3.7    Voting of Preferred Stock.    The CSFB Parties agree that at such time as there shall be
outstanding only one share of Preferred Stock, in any vote of the stockholders of the Corporation in which the shares of Preferred Stock are required by law to vote as a separate class, the CSFB
Parties shall cause the voting rights of such share to be cast in a manner proportionate to the manner in which the votes of the outstanding Common Stock are cast in such vote. 

        Section 3.8    Cooperation by Holders.    Each Shareholder agrees to take such action, or refrain from taking
such action, as is within its reasonable control to effect the provisions of Section 3.2, 3.3,
and 3.5 including, without limitation, using its best efforts to cause any Director nominated thereby to take or refrain from taking action for the
foregoing purpose. 

        Section 3.9    Governance of Subsidiaries.    It being the intention of the Shareholders that any subsidiary of
the Corporation be managed in a manner consistent with that of the Corporation, the Corporation hereby agrees that it shall at all times, and each Shareholder agrees to use reasonable efforts at all
times to, cause: (i) each board of directors of the Corporation's subsidiaries to consist of the same individuals who serve on the Board; and (ii) the officers of each subsidiary are to
be those persons so identified by the Board. 

        Section 3.10    Financial Statements.    Following an Initial Public Offering, all of the provisions and
obligations set forth in Section 3.10 may be deemed satisfied by the Corporation by its filing of annual and quarterly financial statements with
the SEC reasonably in advance of the date by which any Initial Holder is
required to include such information in any annual or quarterly report filed with the SEC pursuant to the Exchange Act. In the event the Corporation provides any information to an Initial Holder
pursuant to Section 3.10 following an Initial Public Offering and such information constitutes nonpublic information, as long as such information
remains nonpublic information, the Initial Holder agrees that the Initial Holder shall (1) comply with all applicable securities laws regarding trading on the basis of material nonpublic
information and (2) disclose only such information that is required to be disclosed in any applicable filing with the SEC. In addition, following an Initial Public Offering, the following
provisions and obligations of the Corporation set forth in Section 3.10 shall not apply with respect to any Initial Holder who is not required to
include such information in any reports filed with the SEC pursuant to the Exchange Act and shall cease to apply to an Initial Holder for so long as the Initial Holder is not required to include such
information in any reports filed with the SEC pursuant to the Exchange Act. 

        (a)   As
soon as practicable following the end of each fiscal year of the Corporation, and in any event reasonably in advance of the date by which any Initial Holder is
required to include such information in any annual report filed with the SEC pursuant to the Exchange Act, the Corporation shall cause its independent accountant to prepare and deliver to each of the
Initial Holders an audited consolidated balance sheet of the Corporation as of the end of such fiscal year 

12

 

and
the related audited consolidated statement of operations, changes in stockholders' equity and cash flows of the Corporation for such fiscal year (or similar statements if such statements change as
the result of changes in GAAP), together with the notes related thereto. Such financial statements shall be accompanied by a report of the Corporation's independent accountants to the effect that such
financial statements have been prepared in conformity with GAAP applied on a basis consistent with prior years (except as otherwise specified in such report) and that the audit of such financial
statements has been performed in accordance with GAAP. 

        (b)   As
soon as practicable following the end of the each fiscal quarter of the Corporation, including the final fiscal quarter, and in any event reasonably in advance of the
date by which any Initial Holder is required to include such information in any quarterly report filed with the SEC pursuant to the Exchange Act, the Corporation shall prepare and deliver to each of
the Initial Holders an unaudited consolidated balance sheet of the Corporation as of the end of such fiscal quarter and the related unaudited consolidated statement of operations, changes in
stockholders' equity and cash flows of the Corporation for such fiscal quarter and for the fiscal year to date (or similar statements if such statements change as the result of changes in GAAP), in
each case setting forth in comparative form the figures for corresponding periods in the prior fiscal year. 

        Section 3.11    Reserve Reports.    Following an Initial Public Offering, all of the provisions and obligations
set forth in Section 3.11 shall be deemed satisfied by the Corporation by its filing of reserve information with the SEC and the Corporation
shall be under no obligation to provide any non-public reserve information to any of the parties hereto. (i) On or before February 15 of each calendar year, the Corporation
will furnish to each Initial Holder a reserve report, prepared as of the preceding December 31 by independent petroleum engineers of recognized national standing approved by the Board,
evaluating all oil and gas reserves (which shall include proved and probable
reserves) and interests owned by the Corporation and (ii) the Corporation will promptly furnish to each Initial Holder copies of such additional reserve reports with respect to the
Corporation's oil and gas properties and interests as may be prepared from time to time by or on behalf of the Corporation. 

        Section 3.12    Operating Reports.    Following an Initial Public Offering, all of the provisions and
obligations set forth in Section 3.12 shall be deemed satisfied by the Corporation by its filing of annual and quarterly financial statements
with the SEC and the Corporation shall be under no obligation to provide any non-public interim operating information to any of the parties hereto. The Corporation will furnish to each
Initial Holder (i) within 30 days after the end of each month, a report describing (A) the gross and net volume of production and sales of production from or attributable to the
Corporation's oil and gas properties and interests during the preceding period, (B) estimated revenues and estimated severance taxes, other taxes, leasehold operating expenses and capital costs
attributable to such properties and interests and incurred during the preceding period, (C) variances from the expenses and capital costs for such properties and interests included in the
Corporation's budget for such period and (D) such other information (in any form, electronic or otherwise), as any Initial Holder may reasonably request from time to time, and
(ii) within 30 days after the end of each fiscal quarter, a reconciliation of previous estimates of severances, taxes, expenses and costs to such actual revenues, taxes, expenses and
costs for the applicable period, to the extent such actual information is then available to the Corporation. 

        Section 3.13    Certain Competing Activities by Director.    

        (a)   No
director of the Corporation shall serve as an officer, director or employee of, or consultant to, or own an equity interest in, provide financial advisory services
to, or assist in providing, underwriting or arranging debt or equity financing to any entity a majority (as measured in book value) of the assets of which are within the AMI (as defined in the AMI
Agreement), other than serving in any of the aforementioned capacities with respect to CCBM, Carrizo, or US Energy and Crested. Notwithstanding the foregoing, no director shall be restricted by the 

13

 

preceding
sentence to the extent such activities relate to an Acquired Interest (as defined in the AMI Agreement) which the Corporation has elected not to acquire or as to which the Corporation fails
to timely respond to an Offer Notice (as defined in the AMI Agreement) under Section 2.6 of the AMI Agreement. The restrictions in this paragraph shall continue as to a director until the
earliest of (i) one year following the date such person resigns as a director of the Company, (ii) the time of the termination of the AMI Agreement pursuant to Section 2.7
thereof, and (iii) in the case of a director and who is a director officer, employee or consultant of an Affiliate of a CSFB Party and who is designated under Section 3.2(b) above, the
date such director ceases to be either a director, officer, employee or consultant of a CSFB Party. 

        (b)   The
foregoing restriction shall not apply to any director of the Corporation solely because of such status as a director prior to December 31, 2003 if such
director resigns his directorship with the Corporation prior to and is not serving as a director of the Corporation on December 31, 2003. 

        (c)   Each
party shall be responsible for the performance by and liability for any breach of this Section 3.13 with
respect to a director of the Corporation that has been designated by that party. 

 
 

ARTICLE IV
  CERTAIN PURCHASE RIGHTS    
    

        Section 4.1    Preemptive Rights.    In accordance with  Article VIII, all of the preemptive rights set forth in
Section 4.1 shall terminate and be
of no further force or effect, effective immediately prior to the consummation of the Proposed Private Offering. 

        (a)   If
the Corporation proposes to sell any of its Capital Stock to any Person in one transaction or a series of related transactions, other than (i) Preferred Stock
issued or to be issued pursuant to the Contribution Agreement, or as an in-kind dividend on such Preferred Stock; (ii) Warrants issued or to be issued pursuant to the Contribution
Agreement or a 2005 Subscription Agreement or distributed as an in-kind dividend on Preferred Stock; (iii) Common Stock or Common Stock Equivalents issued or to be issued pursuant
to the Contribution Agreement or a 2005 Subscription Agreement or upon the exercise of any Warrants; (iv) securities issued or granted to eligible officers, employees or directors of, or
consultants to, the Corporation and its subsidiaries pursuant to an Equity Incentive Plan approved by the Board; (v) securities issued by the Corporation as consideration in a merger, business
combination or acquisition of property or assets; (vi) securities issued in a distribution from the Corporation, stock split, reverse stock split, subdivision, stock dividend, reclassification,
combination or capital reorganization; or (vii) securities issued or to be issued in a firm commitment underwritten offering registered under the Securities Act, then each Holder which is an
Accredited Investor (a "Preemptive Right Holder") shall have the right to purchase, at the same price per share and upon substantially similar terms and
conditions, up to a number of shares of such Capital Stock sufficient for it to maintain the same percentage ownership of Fully Diluted Common Stock as it owned immediately prior to such issuance;  provided, however,
if the proposed sale involves a new class or series of Capital Stock, each Preemptive Right Holder may purchase that percentage of the
new shares proposed to be issued which equals such Holder's percentage ownership of the Fully Diluted Common Stock at the time. 

        (b)   In
the event of a proposed transaction or transactions, as the case may be, that would give rise to preemptive rights under  Section 4.1(a), the Corporation shall give each Preemptive Right Holder
written notice not later than 20 Business Days prior to the expected
consummation of the proposed transaction or transactions, describing the type of Capital Stock of the Corporation to be issued and sold (the "New
Securities"), and the price and the general terms upon which the Corporation proposes to issue the same. Without limiting the generality of any other provision hereof, the
description of the price and terms in the Corporation's notice to Preemptive 

14

 

Rights
Holders may be in the form of a term sheet agreed upon by the Corporation and the Person to whom the Corporation proposes to sell its Capital Stock;  provided, that the Company shall give each Preemptive
Right Holder an additional written notice of any change in the price or other material change in
the terms upon which the Corporation proposes to issue such New Securities. Each Preemptive Right Holder shall have 15 Business Days after any such written notice (including any additional notice of a
change in terms) is deemed delivered to agree to purchase up to such Preemptive Right Holder's pro rata share of such New Securities as determined
pursuant to Section 4.1(a) for the price and upon the terms specified in the notice by giving a binding and irrevocable written notice to the
Corporation and stating the exact number of New Securities such Preemptive Right Holder desires to purchase. Each Preemptive Right Holder shall also have a right of over-allotment such
that if any Preemptive Right Holder fails to exercise its rights hereunder to purchase any part of its pro rata share, the other Preemptive Right
Holders may purchase such unexercised portion on a pro rata basis (based upon the ratio of New Securities subscribed for by each to the New Securities
subscribed for by all other Holders exercising over-allotment purchase rights) or such other basis as such Preemptive Right Holders shall agree. Any Preemptive Right Holder desiring to
exercise an over-allotment right shall indicate in its initial response to the Corporation the number of additional New Securities up to which it will purchase. 

        (c)   With
respect to that portion, if any, of the New Securities for which the Preemptive Right Holders fail to exercise their right to purchase within such 15 Business Day
period, subject to approval by the Board, the Corporation shall have 90 days thereafter to sell any or all of such portion of the New Securities, at a price and upon terms that are in all
material respects no more favorable to the purchasers thereof than specified in the Corporation's notice to Preemptive Right Holders pursuant to  Section 4.1(b). If the Corporation has not sold the
New Securities in accordance with the foregoing within such 90-day period, the
Corporation shall not thereafter issue or sell any New Securities without first again offering such securities to the Preemptive Right Holders in the manner provided above. 

        Section 4.2    Repurchase of Management Shares.    In accordance with  Article VIII, the provisions of Section 4.2 shall terminate and be of no further force or
effect, effective as of the consummation of an Initial Public Offering. 

        (a)   In
the event that any Management Holder voluntarily resigns from the Corporation without Good Reason, the Corporation shall have the option, exercisable for a period of
12 months following such resignation, to acquire any or all Common Stock and any or all Common Stock Equivalents beneficially owned by such Management Holder and such Management Holder's
Permitted Transferees. If the
Corporation elects to exercise such option, it shall pay such resigning Management Holder a price for such Common Stock or Common Stock Equivalents equal to the lesser of (i) the price
originally paid by such Person to acquire such Common Stock or Common Stock Equivalents and (ii) the Fair Market Value thereof as of the date of such resignation. The Corporation shall pay such
purchase price in the form of three equal annual installments on the first, second and third anniversaries of the effective date of the Management Holder's resignation with interest thereon until paid
at the minimum rate necessary to avoid the imputation of interest or original issue discount under the U.S. Internal Revenue Code of 1986, as amended, or similar provision in any other applicable
jurisdiction. 

        (b)   In
the event that at any time the Corporation dismisses or terminates the employment of any Management Holder for Cause, the Corporation shall have the option,
exercisable for a period of 12 months following such dismissal or termination, to acquire any or all Common Stock and any or all Common Stock Equivalents beneficially owned by such Management
Holder and such Management Holder's Permitted Transferees at a price per share for such Common Stock or Common Stock Equivalents equal to the lesser of (i) the price originally paid by such
Person to 

15

 

acquire
such Common Stock or Common Stock Equivalents and (ii) the Fair Market Value thereof as of the effective date of such dismissal or termination, which purchase price shall be payable by
delivery of a Payable Note. 

        (c)   In
the event that the Corporation dismisses or terminates the employment of any Management Holder without Cause, or any Management Holder voluntarily resigns with Good
Reason, the Corporation shall have the option, exercisable for a period of 12 months following dismissal, termination or resignation, to acquire any or all Common Stock and any or all Common
Stock Equivalents beneficially owned by such Management Holder and such Management Holder's Permitted Transferees at a price per share for such Common Stock or Common Stock Equivalents equal to the
Fair Market Value thereof. 

        (d)   In
the event that any Management Holder's employment by the Corporation is terminated due to the death or Disability of such Management Holder (i) the Corporation
shall have the option, exercisable for a period of 12 months after such death or Disability occurs, to acquire any or all Common Stock and any or all Common Stock Equivalents beneficially owned
by such Management Holder and such Management Holder's Permitted Transferees at a price per share for such Common Stock or Common Stock Equivalents equal to the Fair Market Value thereof. 

        (e)   Notwithstanding
anything to the contrary in this Section 4.2, in the event that any Management Holder voluntarily
resigns from the Corporation and thereafter engages in a Prohibited Activity, then the Corporation shall have the option to acquire any or all Common Stock and any or all Common Stock Equivalents
beneficially owned by such Management Holder and such Management Holder's Permitted Transferees at a price per share for such Common Stock or Common Stock Equivalents equal to the lesser of
(i) the price originally paid by such Person to acquire such Common Stock or Common Stock Equivalents and (ii) the Fair Market Value thereof, which purchase price shall be
payable by delivery of a Payable Note. If such Common Shares and Common Stock Equivalents have previously been purchased by the Corporation pursuant to any other provision of this  Section 4.2, then
such Management Holder and such Management Holder's Permitted Transferees shall immediately return to the Corporation any
excess amounts received by such Management Holder or such Management Holder's Permitted Transferees, respectively, pursuant to such provisions as compared to the amount receivable under this  Section 4.2(e). 

        (f)    In
the event that the Corporation elects to exercise any option granted pursuant to this Section 4.2 to acquire
any Common Stock or any Common Stock Equivalents beneficially owned by one or more Management Holders or Permitted Transferees, the Corporation shall pay the purchase price for such Common Stock or
Common Stock Equivalents (less any amounts owed by the Management Holder to the Corporation) in cash (except as otherwise set forth in  Section 4.2(b) or Section 4.2(e))
, up to an aggregate maximum purchase price for all such
cash purchases of $500,000. If the aggregate amount paid to all Management Holders and their respective Permitted Transferees pursuant to this  Section 4.2 equals or exceeds $500,000 in any year,
then the Corporation may make any additional payments required under this  Section 4.2 by delivery of a Payable Note. 

 
 

ARTICLE V
  TRANSFER OF SECURITIES    
    

        Section 5.1    General Rule.    The provisions and rights set forth in Sections
5.1, 5.2, 5.3, 5.4,  5.6, 5.7(d) and (e),  5.8, 5.9 and 5.10 shall terminate and be of no further
force or effect, effective as of the consummation of an Initial Public Offering. No Shareholder or any Permitted Transferee may Transfer any shares of Preferred Stock, Common Stock or Common Stock
Equivalents of the Corporation 

16

 

(collectively,
"Shares") except (i) pursuant to Section 4.2, in the case of any Management
Holder, (ii) as otherwise contemplated by this Article V, (iii) pursuant to a Public Offering or (iv) after an Initial
Public Offering, pursuant to a Public Sale (all of which Transfers shall be exempt from this Article V). Any attempted Transfer of Shares, other
than in accordance with the terms of this Agreement shall be, and is hereby declared, null and void ab initio. 

        Section 5.2    Permitted Transfers.    Notwithstanding anything in this Agreement to the contrary (other than  Section 5.7), any Shareholder or any Permitted Transferee may, without the consent of the Corporation or any of the Holders and without
compliance with Section 5.3, 5.4 or 5.5, but
subject to Section 5.7, at any time Transfer any or all of its Shares to any CSFB Party, CCBM, US Energy and Crested and/or to any of such
Shareholder's Permitted Transferees, provided that the Transfer to such Person is in compliance with the transfer provisions of the Contribution
Agreement or a 2005 Subscription
Agreement, as the case may be, and not in violation of applicable U.S. federal or state securities laws, or other similar laws. 

        Section 5.3    Rights of First Refusal.    

        (a)   Should
one or more Shareholders propose to Transfer (other than an Involuntary Transfer, a Transfer in a Public Offering, a Public Sale after an Initial Public Offering
or a Transfer governed by Section 5.4, but including a Transfer by the CSFB Parties pursuant to  Section 5.5) (such Shareholder(s), the
"Transferring Holder") any of its Shares, pursuant to a
Bona Fide Offer from another Person (a "Proposed Disposition"), not less than 20 Business Days prior to such Proposed Disposition the Transferring
Holder shall give notice thereof (a "Sale Notice") to the Corporation and all of the other Holders. The Sale Notice shall contain (i) the name
and address of the prospective acquiror (the "Proposed Transferee"), (ii) the number and type of Shares that the Transferring Holder intends to
Transfer (the "Sale Shares"), (iii) the purchase price, including a description of any non-cash consideration, and the encumbrances,
if any, to which such Shares Transferred will be subject, and (iv) an irrevocable offer to sell the Sale Shares to the other Holders upon the same terms and subject to the same conditions as
those contemplated by the Proposed Disposition, and such notice shall be accompanied by a true and correct copy of the agreement, if any, embodying the terms and conditions of the Proposed Disposition
or a written summary thereof if there is no agreement. 

        (b)   Each
of the other Holders shall have an optional preferential right, exercisable by giving written notice stating that such notice is binding and irrevocable to the
Transferring Holder at any time prior to the 15th Business Day after its receipt of the Sale Notice (the "ROFR Acceptance Deadline"), to acquire a
portion of the Shares to be Transferred as described in the Sale Notice. Each Holder that delivers a ROFR/Participation Notice (an "Accepting Holder")
to the Transferring Holder before the ROFR Acceptance Deadline (the "ROFR Acceptance Notice") shall have the right to purchase, for a cash purchase
price equal to the purchase price set forth in the Sale Notice (with the value of any non-cash consideration contained therein being the current market value thereof as determined in good
faith by the Board using a generally accepted method of valuation (which shall require that no Board member who is nominated by or affiliated with an Accepting Holder take part in such determination)
by a method deemed acceptable to it, which shall be conclusive), the number of Sale Shares as may be unanimously agreed upon by all of the Accepting Holders or, in the absence of any such agreement
(which shall be deemed to be absent if a written agreement signed by all of the Accepting Holders is not delivered to the Transferring Holder on or before the fifth Business Day following the
expiration of said 15-Business Day period), the lesser of (i) the number of Sale Shares equal to such Accepting Holder's pro rata
ownership of all Diluted Common Stock (such number a "Proportionate Share"), and (ii) the maximum number of Sale Shares that such Accepting
Holder is willing to purchase as set forth in its ROFR/Participation Notice. In the event that any Accepting Holder being offered Sale Shares does not elect to purchase its full  pro rata Proportionate
Share of the Sale Shares, the Accepting Holders 

17

 

shall,
to the extent the Holders have so elected in their ROFR/Participation Notice, be given the option to purchase up to their Proportionate Share of any remaining Sale Shares that no Holder has
therefore elected to purchase until the Accepting Holders have elected to purchase all of the Sale Shares (it being understood that this provisions shall not extend the time period during which the
Holders may exercise their rights hereunder). 

        (c)   Notwithstanding
anything to the contrary in this Section 5.3, unless the Accepting Holders purchase all of the
Sale Shares in accordance with the terms hereof, the Transferring Holder shall not be required to sell any Sale Shares to any Accepting Holders and may instead at its option sell the Sale Shares in
accordance with Section 5.3(f). 

        (d)   Subject
to Section 5.3(f), the closing of the purchase and sale of the Sale Shares to Accepting Holders pursuant
to this Section 5.3 shall be at 9:00 a.m. on the 15th Business Day following the ROFR Acceptance Deadline at the Corporation's principal
office unless the Transferring Holder and all of the Accepting Holders otherwise agree. At the closing each Accepting Holder's pro rata share of the
consideration to be paid in immediately available funds in accordance with Section 5.3(b) shall be delivered by each Accepting Holder to the
Transferring Holder, and the Transferring Holder shall deliver to each Accepting Holder such certificates representing the Sale Shares so purchased, accompanied by duly executed stock transfer powers,
free and clear of all liens, encumbrances and adverse claims with respect thereto (other than such liens, encumbrances and/or clauses described in the Sale Notice) and such other matters as are deemed
reasonably necessary by the Corporation for the proper transfer on the books of the Corporation to the Accepting Holders of such Sale Shares so purchased. If the Closing does not occur within the time
specified above (other than as a result of the Transferring Holders' willful failure to comply with its obligations under this Agreement), then the Transferring Holder may instead at its option sell
the Sale Shares in accordance with Section 5.3(f). 

        (e)   The
Corporation, the Transferring Holder and each Accepting Holder shall cooperate in good faith in obtaining all necessary governmental and other third party approvals,
waivers and consents required for the closing. 

        (f)    Subject
to compliance with the provisions of Sections 5.4 and 5.7 of this
Agreement, if the Holders fail to elect to purchase all of the Sale Shares, the Transferring Holder may Transfer all (but not less than all) of the Sale Shares to the Proposed Transferee under the
Proposed Disposition on terms that are in all material respects no more favorable to such transferee than those set forth in the ROFR Notice and offered to the Accepting Holders. Notwithstanding the
foregoing, without complying again with the provisions of this Section 5.3, the Transferring Holder may not Transfer any Sale Shares if the sale
of such shares to the Proposed Transferee is not consummated within 75 days after the ROFR Acceptance Deadline. 

        (g)   For
purposes hereof, a "ROFR/Participation Notice" means a notice delivered by a Holder in accordance with this  Section 5.3 pursuant to which such
Holder notifies a Transferring Holder (i) of its election to exercise its preferential purchase rights,
and in such event, the maximum number of Sale Shares which such Holder is electing to purchase (which shall not be less than such Holder's Proportionate Share) and/or (ii) in the event the
Accepting Holders fail to elect to purchase all of the Sale Shares, if such Holder is electing to exercise its right to require the Transferring Holder to include such Holder's Participation Amount in
the Proposed Transfer pursuant to Section 5.4. 

        Section 5.4    Right of Participation.    

        (a)   In
the event (i) a Proposed Disposition constitutes a Transfer in one transaction or a series of related transactions of shares of Diluted Common Stock equal to
10% or more of the Diluted Common Stock other than (a) a Transfer in a Public Offering or Public Sale after an 

18

 

Initial
Public Offering, (b) any Transfer in which all of the Holders agree to participate and (ii) Accepting Holders have failed to elect to purchase all of the Sale Shares pursuant to  Section 5.3, then such Transferring Holder shall include in the Proposed Disposition the number of shares of Common Stock, designated by each
Holder in its ROFR/Participation Notice, not to exceed, in respect of any such Holder, such Holder's Participation Amount. For purposes hereof, "Participation
Amount" means a number of shares of Common Stock, designated by each Holder, not to exceed, in respect of any such Holder, that number of shares of Common Stock equal to the
product (rounded to the nearest whole share) of (A) the aggregate number of shares of Common Stock to be sold by the Transferring Holder (and, in the case of any Proposed Disposition involving
Warrants, the number of shares of Common Stock issuable upon conversion of such Warrants) to the Proposed Transferee and (B) a fraction, the numerator of which is equal to the amount of Diluted
Common Stock owned by such Holder and the denominator of which is equal to the amount of Diluted Common Stock owned by all Holders. 

        (b)   The
election of a Holder to include Common Stock in the Proposed Disposition by delivery to the Transferring Holder of a ROFR/Participation Notice shall be binding and
irrevocable. The right of any Holder to include shares of Common Stock in a Proposed Disposition shall be conditioned upon the Transferring Holder's Transfer of Common Stock pursuant to the
transactions contemplated in the Sale Notice, including consummation of the transaction within the timeframe contemplated by the Sale Notice. If any Holder has elected to participate in a Proposed
Disposition, the Transferring Holder shall reduce to the extent necessary the number of shares of Common Stock it otherwise would have sold in the Proposed Disposition so as to permit such Holder to
sell the number of shares of Common Stock that they are entitled to sell under this Section 5.4, and the Transferring Holder and each such Holder
shall sell their respective shares of Common Stock to the Proposed Transferee in accordance with the terms of such sale set forth in the Sale Notice. 

        (c)   For
purposes of this Section 5.4, the number of shares of Common Stock shall be deemed to include the shares of
Common Stock represented by Common Stock Equivalents. Notwithstanding the foregoing, no Common Stock Equivalents shall receive the benefits of this  Section 5.4 prior to the time such Common Stock
Equivalents are exercisable for or convertible or exchangeable into shares of Common Stock and,
in order to obtain the benefits of this Section 5.4, any such Common Stock Equivalents in the form of options, warrants or other securities
convertible or exchangeable into or exercisable for shares of Common Stock must be exercised or canceled prior to or simultaneously with the consummation of the sale pursuant to this  Section 5.4.

        Section 5.5    Drag Along Rights.    In accordance with  Article VIII, all of the provisions of Section 5.5 shall terminate and be of no further
force or effect, effective as of the consummation of an Initial Public Offering. 

        (a)   Notwithstanding
any other provision in this Article V, if the CSFB Parties and their Permitted Transferees (such
parties being referred to in this Section 5.5 as the "Seller") propose to sell all of the Shares
held by such parties at such time (the "CSFB Shares") to a third party or parties that are not Permitted Transferees of the Seller (collectively, a
"Third Party") pursuant to a Bona Fide Offer, then the Seller shall have the right to require all other Shareholders (collectively, the
"Co-Sellers") to include in such sale (a "Required Sale") all of such
Co-Seller's Shares; provided, however, 

        (i)    at
any time prior to the fifth anniversary of the date of this Agreement, (A) the Shares held by the CSFB Parties shall constitute not less than 50% of the
Diluted Common Stock and (B) if CCBM or Carrizo and US Energy or Crested each own Shares and each of CCBM or Carrizo and US Energy or Crested then shall be entitled to nominate and have elected
at least one Director pursuant to Section 3.2, then at least one of CCBM or Carrizo, 

19

 

as
the case may be, and US Energy or Crested shall have consented in writing to such Required Sale, and 

        (ii)   on
or at any after the fifth anniversary but prior to the seventh anniversary of this Agreement, the Shares held by the CSFB Parties shall constitute not less than 50%
of the Diluted Common Stock. 

        For
the avoidance of doubt, on or at any time after the seventh anniversary of this Agreement, the Seller's right to require all other Co-Sellers to include all of such
Co-Sellers' Shares in a Required Sale shall be conditioned only on the provisions set forth in Section 5.5(e) and the inclusion of
all of the Seller's Shares in such Required Sale. 

        (b)   Each
of the other Holders shall have an optional preferential right, exercisable by giving written notice stating that such notice is binding and irrevocable to the
Seller at any time prior to the 15th Business Day after its receipt of the Required Sale Notice (as defined below), to acquire a portion of the CSFB Shares to be Transferred in accordance with the
procedures set forth in Section 5.3. Notwithstanding anything to the contrary contained herein, if after completion of the procedures set forth
in Section 5.3, the Holders fail to elect to purchase all of the CSFB Shares, the Seller may exercise its right to effect a Required Sale. To
exercise its right to effect a Required Sale, the Seller shall deliver a notice (the "Required Sale Notice") to each Holder setting forth:
(i) the date of such notice (the "Notice Date"), (ii) the name and address of the Third Party, (iii) the proposed amount and type
of consideration to be paid per share for the CSFB Shares, and a description in reasonable detail of the terms and conditions of payment offered by the Third Party, together with written proposals or
agreements, if any, with respect thereto, (iv) confirmation that Seller is selling all of its Shares and that such Shares represent not less than 50% or more of the aggregate number of Diluted
Common Stock and (vi) the proposed date of the Required Sale (the "Required Sale Date"), which shall be not less than 60 nor more than
120 days after the Notice Date. 

        (c)   The
Co-Sellers shall cooperate in good faith with the Seller in order to consummate the Required Sale (including, without limitation, the giving of consents
and the voting of Capital Stock held by the Co-Sellers to approve such Required Sale). On the Required Sale Date, each of the Seller and the Co-Sellers shall deliver, free and
clear of all liens, claims or encumbrances (other than customary permitted liens), a certificate or certificates and/or other instrument or instruments for all of its Shares, duly endorsed and in
proper form for transfer, with the signature guaranteed, to such Third Party in the manner and at the address indicated in the Required Sale Notice and Seller shall cause each Co-Seller's
share of the purchase price to be paid to such Co-Seller. 

        (d)   Each
of the Shareholders, on behalf of itself and its respective Permitted Transferees, expressly agrees that: 

        (i)    any
and all consideration received in connection with any Required Sale shall be applied in the following order of priority: 

        (A)  first to the payment of all reasonable out-of-pocket fees and expenses incurred in connection
with such sale (to the extent such fees and expenses are incurred for the benefit of all Holders and are not otherwise paid by the Corporation or the acquiring party; fees and expenses incurred by or
on behalf of a Holder for its sole benefit will not be considered fees and expenses of the transaction hereunder), and once all such fees and expenses have been paid, then 

        (B)  second to the holders of shares of Preferred Stock, on a pro rata basis,
and when all holders of shares of Preferred Stock have received an amount for each share of Preferred Stock equal to the Liquidation Amount, plus the accrued and unpaid dividends thereon through such
date (the "Minimum Purchase Amount"), then 

20

 

        (C)  third to the holders of shares of Common Stock and Common Stock Equivalents (with the Common Stock Equivalents receiving
the amount specified by Section 5.5(e)(i), on a pro rata basis, and 

        (ii)   in
the event the aggregate consideration payable in connection with a Required Sale consists of cash and property, the cash portion of such consideration shall be
applied first to the purchase of Preferred Stock until such time as each holder thereof shall have received the Minimum Purchase Amount whereupon the remaining cash and other property payable in
connection with such Required Sale shall be applied to the purchase of Common Stock and Common Stock Equivalents. 

        (e)   The
obligations of the Shareholders pursuant to this Section 5.5 are subject to the satisfaction of the following
conditions: 

        (i)    all
Shareholders holding then-currently exercisable Common Stock Equivalents will be given an opportunity to either (A) exercise such rights prior to
the consummation of the Required Sale (but only to the extent such share equivalents are then vested or will become vested as a result of the Required Sale) and participate in such transaction as
stockholders, or (b) upon the consummation of
the Required Sale, receive in exchange for such share equivalents consideration equal to the amount determined by multiplying (x) the same amount of consideration per share (of the same class
as that for which the share equivalent is exercisable) received by holders of such class of share in connection with the Required Sale less the exercise price per share equivalent by (y) the
number of share equivalents (but only to the extent such share equivalents are then vested); 

        (ii)   in
the event that Shareholders are required to provide any representations or indemnities in connection with the Required Sale (other than representations and
indemnities concerning each Shareholder's valid ownership of its shares, free of all liens and encumbrances (other than those that are released or satisfied at the closing of the Required Sale arising
under applicable securities laws), and each Shareholder's authority, power, and right to enter into and consummate such Required Sale without violating any other agreement), then each Shareholder
shall not be liable for more than its pro rata share (based upon the per share consideration received) of any liability for misrepresentation or
indemnity and such liability shall not exceed the total purchase price received by such Shareholder for its Shares (including the exercise price of any Common Stock Equivalents). Any representations
and warranties contemplated by this Section 5.5(e) may include any exceptions to the extent appropriate to make such representations and
warranties true; 

        (iii)  the
Required Sale may not be a transaction with an Affiliate of any Holder unless such Required Sale is approved by Holders holding a majority of the Voting Stock of
the Corporation, measured by voting power rather than number of shares, held by non-Affiliates of that Holder; and 

        (iv)  no
Shareholder shall, by such Shareholder's execution of this Agreement, by voting or consenting to any Required Sale or by taking any other action required under this  Section 5.5 waive any claim
(other than for the exercise of dissenter's rights) against the Corporation, any officer, director or stockholder
thereof or any other Person and nothing herein is intended to relieve any Person of any duty it would owe to a Holder Shareholder in the absence of such Shareholder entering into this Agreement or
taking any action required hereunder. All Shareholder agree that they will not take, and to the extent possible will cause their employees and Affiliates to not take, any position contrary to or
inconsistent with that set forth in this Section 5.5(e)(iv). 

21

  

        Section 5.6    Involuntary Transfers.    

        (a)   In
the event of an Involuntary Transfer of any Shares by a Shareholder, such Shareholder shall give written notice (an "Involuntary Transfer
Notice") to the Corporation promptly after the occurrence of the event which caused such Involuntary Transfer. After receipt of an Involuntary Transfer Notice, the Corporation
shall have the option for 60 days from the date of receipt of the Involuntary Transfer Notice to elect to purchase such Shareholder's Shares within such 60-day period at their fair
market value. As used herein, "fair market value" means such reasonable and fair value as determined in good faith by the Board using a generally accepted method of valuation (which shall require that
no Board member who is nominated by or affiliated with the Shareholder whose Shares are subject to such Involuntary Transfer take part in such determination). 

        (b)   The
closing of any purchase pursuant to Section 5.6 shall be on the Business Day specified by the Corporation,  provided that the Transferring Holder is
given 20 days' advance notice of such closing; provided
further, however, that any such closing shall be delayed, to the extent required, until two Business Days following the
obtaining of all governmental approvals reasonably deemed necessary by the Shareholder participating in a Transfer pursuant to this Section 5.6.
Each Shareholder who participates in a Transfer pursuant to this Section 5.6 shall promptly perform, whether before or after any such closing,
such additional acts (including, without limitation, executing and delivering additional reasonably requested documents, but specifically excluding the need for any Shareholder to obtain the release
of any liens, claims or encumbrances is such release would require the Shareholder to pay consideration or give up value therefor) as are reasonably required to effect more fully the transactions
contemplated by this Section 5.6. 

        Section 5.7    Conditions to Transfers; Continued Applicability of Agreement.    

        (a)   Except
as otherwise required by this Agreement, prior to any Transfer of Shares (other than a Transfer pursuant to a Public Offering or, after an Initial Public
Offering, pursuant to a Public Sale) the Shareholder proposing to make such Transfer shall give five Business Days prior written notice to the Corporation of such Shareholder's intention to effect a
Transfer. Each such notice shall describe the manner and circumstances of the proposed Transfer. 

        (b)   In
connection with any Transfer (other than a Transfer to an existing Holder, an Involuntary Transfer, a Transfer pursuant to a Public Offering or, after an Initial
Public Offering, pursuant to a Public Sale), if requested by the Board within five Business Days after receipt of notice of such Transfer, the Shareholder delivering such notice shall deliver a
written opinion, addressed to the
Corporation, of counsel for such Shareholder, stating that in the opinion of such counsel (which opinion must be reasonably satisfactory to the Corporation) such proposed Transfer does not involve a
transaction requiring registration of such Shares under the Securities Act. In the event the Corporation requests such an opinion, upon receipt of such opinion, and provided such proposed transfer
otherwise complies with the terms of this Agreement, such Shareholder shall be entitled to transfer the Shares in accordance with the terms of the notice delivered to the Corporation. 

        (c)   Each
certificate or other instrument evidencing the securities issued upon the Transfer of any Shares (and each certificate or other instrument evidencing any
untransferred balance of such Shares) shall bear the legend set forth in Section 9.4(a) unless such requirement is otherwise waived pursuant to  Section 9.4(b)
. 

        (d)   Except
as otherwise provided herein, as a condition to any Transfer of Shares permitted under this Agreement, any transferee of Shares (other than any transferee that is
then a Shareholder) shall become a party to this Agreement by executing (together with such Person's spouse, if applicable) an Adoption Agreement in substantially the form of  Annex A to this Agreement.
Except as otherwise provided herein, if any Person acquires Shares from a Person in a 

22

 

Transfer,
notwithstanding such Person's failure to execute an Adoption Agreement in accordance with the preceding sentence (whether such Transfer resulted by operation of law or otherwise), such
Person and such Shares shall be subject to this Agreement. 

        (e)   Except
as otherwise provided herein, as a condition to any Transfer of Shares permitted under this Agreement, any transferee of Shares (other than any transferee that is
then a party to the AMI Agreement) shall become, and such transferee shall require each of its Affiliates to become, parties to the AMI Agreement by execution of such documents as may be reasonably
requested by the Company. Except as otherwise provided herein, if any Person acquires Shares from a Person in a Transfer, notwithstanding such Person's failure or the failure of any of such Person's
Affiliates to become parties to the AMI Agreement in accordance with the preceding sentence (whether such Transfer resulted by operation of law or otherwise), such Person and such Person's Affiliates
shall be subject to the AMI Agreement. 

        Section 5.8    Certain Events Not Deemed Transfers.    Except as contemplated by  Section 5.5, in no event shall any of
the following constitute a transfer of shares of Capital Stock for purposes of  Section 5.1, Section 5.3 or  Section 5.4 or be subject to the terms hereof: (i) an exchange, reclassification or other conversion of shares of Capital Stock into any
cash, securities or other property pursuant to a merger, consolidation or recapitalization of the Corporation or any of its subsidiary with, or a sale or transfer by the Corporation or any Subsidiary
of all or substantially all its assets to, any Person; or (ii) an exercise or conversion of any securities exercisable for or exchangeable or convertible into, indirectly or indirectly, shares
of Capital Stock in accordance with the terms thereof. 

        Section 5.9    Transfer by Pledge.    No Shares shall be pledged, hypothecated or otherwise voluntarily
encumbered (other than pursuant to the Pledge Agreement) unless the following procedures are followed: 

        (a)   The
Corporation shall receive notice at least three Business days prior to any pledge or encumbrance of Shares specifying the person to whom the Shares will be pledged
or otherwise encumbered and the location at which the certificates representing the Shares will be held; 

        (b)   The
Corporation shall be provided, promptly upon execution by the pledging Shareholder, with copies of all security agreements relating to the pledged Shares and a
summary of any oral agreements affecting the Shares, all as amended from time to time; 

        (c)   The
pledging Shareholder and the secured party under the pledge or encumbrance (including any trustees or agents for the secured party) shall execute and deliver an
agreement in form and substance reasonably satisfactory to the nonpledging Shareholder and the Corporation to the effect that (i) those Persons agree to be bound by the terms of this Agreement,
(ii) the secured party shall notify the Corporation and nonpledging Shareholder of the date, time and location of any foreclosure upon pledged or encumbered Shares at least 60 days prior
to the foreclosure, (iii) that any notice of foreclosure shall be deemed to be an Involuntary Transfer subject to Section 5.6, and
(iv) if the Corporation elects to purchase the pledged Shares pursuant to Section 5.6, the foreclosure shall not be held and the pledged
Shares shall be sold and delivered by the pledging Shareholder and the secured party to the Persons entitled to purchase such Shares under  Section 5.6 in accordance with Section 5.6. If for any reason the pledged Shares are
foreclosed upon, the foreclosure shall be considered an Involuntary Transfer and the provisions of Section 5.6 shall govern. 

        Section 5.10    Change of Control of CCBM or Crested.    Each of CCBM, US Energy, Crested and Carrizo agree
that without the prior written consent of the Holders of a majority of the Voting Stock of the Corporation, none of such parties may consummate any transaction or series of related transactions, that
would result in a Change of Control of CCBM or Crested, as the case may be, other than a Change of Control of CCBM or Crested at such time as CCBM or Crested, as the case may be, 

23

 

no
longer holds of record or beneficially owns any Shares or other securities issued by the Company or any subsidiary thereof; provided, however, no prior written consent shall be required if any such
transaction or series of related transactions would result from a Change of Control of Carrizo or US Energy, respectively; provided, further, that a foreclosure or execution of a valid security
interest in the Voting Stock of CCBM or Crested under a bona fide pledge and in compliance with Section 5.9 hereof shall not be deemed a Change
of Control. 

 
 

ARTICLE VI
  REGISTRATION OF STOCK    
    

        Section 6.1    Demand Registration.    

        (a)   At
any time after a date that is the earlier to occur of (i) the date that is one year after the date of this Agreement and (ii) any date after an Initial
Public Offering, the CSFB Parties, their respective Affiliates and Permitted Transferees shall have the collective right, on up to three occasions, to make a written request of the Corporation (a
"Demand Request") for registration under the Securities Act (a "Demand Registration") of Registrable
Securities held by such Holders and their respective Permitted Transferees. At any time after an Initial Public Offering, each of (i) CCBM (for itself or any of its Permitted Transferees) and
(ii) US Energy (for itself, Crested or any of their Permitted Transferees) shall have the separate right on one occasion to make a Demand Request for a Demand Registration of the Registrable
Securities held by such Holder and its Permitted Transferees; provided that (x) CCBM and its Permitted Transferees or (y) US Energy
together with Crested and their Permitted Transferees, as the case may be, shall hold of record as of the date of such Demand Request, not less than 10% of the Fully Diluted Common Stock. No Demand
Registration shall be effected by the Corporation unless the Registrable Securities included in such Demand Registration (including the Registrable Securities of the Corporation, any Shareholder or
any other Person including shares in the registration) shall have an aggregate proposed price to the public that equals or exceeds $25,000,000. Such Holder(s) exercising a Demand Request are referred
to herein as the "Requesting Holder(s)." 

        (b)   Subject
to the provisions of this Agreement, as soon as is reasonably practicable, but in any event within 75 days after receipt of a Demand Request with respect
to an Initial Public Offering and 45 days after receipt of any other Demand Request (in either such case, the "Required Filing Date"), the
Corporation shall file a registration statement on such appropriate form under the Securities Act as shall be determined by the Corporation and reasonably acceptable to the Requesting Holders
for the offer and sale of such Registrable Securities as may be requested in any such Demand Request. The Corporation shall use all commercially reasonable best efforts to cause any such registration
statement to be declared effective by the SEC (i) as promptly as practicable after such filing and (ii) in any event not later than 120 days following the date of the applicable
Demand Request; provided, however, that, at the request of the Requesting Holders, and without the consent of any other Holder, the Corporation may
delay or abandon the proposed offering or cease the filing (or obtaining or maintaining the effectiveness) of or withdraw the related registration statement or other governmental approvals,
registrations or qualifications. Unless the Requesting Holders otherwise elect, all Demand Registrations will be underwritten offerings. 

        (c)   A
registration will not count as a Demand Registration until it has become effective unless (i) prior to such effective time the Requesting Holders withdraw all
their Registrable Securities or withdraw a sufficient number of Registrable Securities such that the minimum proceeds requirement of  Section 6.1(a) is not met, for any reason other than
(A) the inability or unreasonable delay of the Corporation in having such
registration statement become effective or (B) the disclosure of material adverse information regarding the Corporation that was not known by such Requesting Holders at the time the request for
such Demand Registration was made 

24

 

(which
information is the cause of the Requesting Holders' decision to withdraw their Registrable Securities) (provided that a request by the Requesting
Holders for a delay in the filing of a registration statement for a period of up to six months after the date of any Demand Request shall not constitute a withdrawal of Registrable Securities) and
(ii) the Requesting Holders elect not to pay all the Corporation's out-of-pocket Registration Expenses in connection with such withdrawn registration. If, after such
registration has become effective but prior to the sale of all Registrable Securities covered thereby, an offering of Registrable Securities pursuant to a registration is prevented by any stop order,
injunction or other order of the SEC or other governmental agency or court, such registration will not be deemed a Demand Registration for purposes of this Agreement. Notwithstanding the foregoing if
the Requesting Holders shall have made a Demand Request in good faith and more than 25% of the Registrable Securities requested to be registered by Requesting Holders are excluded from such Demand
Registration as a result of the application of Section 6.3, the Requesting Holders shall have the right to one additional Demand Registration. 

        Section 6.2    Shelf Registration Statement.    At such time as the Corporation shall be eligible to use
Form S-3 for secondary offerings, a Requesting Holder at any time may utilize its right to make a Demand Request (without the need to satisfy any requirement for a minimum proposed
offering price to the public) by delivery to the Corporation of a written request (a "Shelf Request") to the Corporation to file a registration
statement with the SEC seeking to register the offer and sale of the Registrable Securities by the Holders thereof from time to time pursuant to Rule 415 under the Securities Act (a
"Shelf Registration Statement"). Subject to the provisions of this Agreement, within 45 days after receipt of any such Shelf Request, the
Corporation shall file a Shelf Registration Statement and shall use all commercially reasonable efforts to cause such Shelf Registration Statement to be declared effective under the Securities
Act as promptly as practicable and in any event on or before 90 days after the date of filing. If the SEC notifies the Corporation that the Shelf Registration Statement will receive no action
or review from the SEC, the Corporation will request that the Shelf Registration Statement become effective within five Business Days after receipt of such SEC notification. Upon the effectiveness
under the Securities Act of the Shelf Registration Statement, the Corporation will use all commercially reasonable efforts to cause the Shelf Registration Statement to remain effective, and
supplemented and amended as required by throughout period ending on the date which is the earliest to occur of (A) the date that all Registrable Securities registered under such Registration
Statement may be sold in a three-month period under Rule 144 under the Securities Act, (B) the date all Registrable Securities registered under such Registration Statement have been sold
and (C) three years after the date on which such Shelf Registration Statement becomes effective with respect to the offer and sale of Registrable Securities plus the aggregate number of days in
all applicable Suspension Periods. 

        Section 6.3    Priority on Demand Registrations.    No securities to be sold for the account of any Person
(including the Corporation) other than the Requesting Holders shall be included in a Demand Registration if the managing Underwriter or Underwriters shall advise the Requesting Holders that, in its or
their judgment, the inclusion of such securities may adversely affect the price or success of the offering in any significant or material respect (a "Material Adverse
Effect"). Furthermore, in the event the managing Underwriter or Underwriters shall advise the Requesting Holders that even after exclusion of all securities of other Persons
pursuant to the immediately preceding sentence, the amount of Registrable Securities proposed to be included in such Demand Registration is sufficiently large to cause a Material Adverse Effect, the
Registrable Securities of such Requesting Holders to be included in such Demand Registration shall be allocated pro rata among such Requesting Holders
on the basis of the number of Registrable Securities requested to be included in such registration by each such Requesting Holder. Subject to the foregoing, it is explicitly understood that the
Corporation may include its own securities in any Demand Registration; provided, however, that any such securities included in a Demand Registration
shall be treated as securities registered pursuant to Section 6.4(a). 

25

 

        Section 6.4    Piggy-Back Registration.    

        (a)   If
the Corporation at any time proposes to file a registration statement under the Securities Act, including a Demand Registration, with respect to an offering of
any Common Stock by the Corporation for its own account or for the account of any of its equity holders (other than a registration statement on Form S-4 or S-8 or any
substitute form that may be adopted by the SEC or any registration statement filed in connection with an exchange offer or offering of securities solely to the Corporation's existing securityholders),
then the Corporation shall give written notice of such proposed filing to the Shareholders holding Registrable Securities as soon as practicable (but in no event less than 10 days before the
anticipated initial filing date of such registration statement), and such notice shall offer the Shareholders holding Registrable Securities the opportunity to register such number of Registrable
Securities as each Shareholder may request (a "Piggyback Registration"). Subject to  Section 6.4(b) hereof, the Corporation will use its best
efforts to cause the offer and sale of all Registrable Securities requested by a
Shareholder in writing within five days after receipt of the Corporation's notice to be included in the registration for such offering; provided,  however,
that the Corporation may at any time delay or abandon the proposed offering or cease the filing (or obtaining and maintaining the
effectiveness) of or withdraw the related registration statement or other governmental approvals, registrations or qualifications in which event the Corporation shall be relieved of its obligation to
register any Registrable Securities in connection with such Piggyback Registration Notice. Each Shareholder shall be permitted to withdraw all or part of such Shareholder's Registrable Securities from
a Piggyback Registration at any time prior to the effective date thereof. 

        (b)   The
Corporation shall use all commercially reasonable efforts to cause the managing Underwriter or Underwriters of a proposed underwritten offering to permit the
Registrable Securities requested to be included in the registration statement for such offering under Section 6.4(a) or pursuant to other
piggyback registration rights granted by the Corporation not in contravention of Section 6.12 hereof and that are on a parity with the
registration rights granted hereunder ("Piggyback Securities"), to be included on the same terms and conditions as any similar securities included
therein. Notwithstanding
the foregoing, the Corporation shall not be required to include any Shareholder's Piggyback Securities in such offering unless such Shareholder accepts the terms of the underwriting agreement between
the Corporation and the managing Underwriter or Underwriters and otherwise complies with the provisions of Section 6.11 below. If the managing
Underwriter or Underwriters of such offering advise the Corporation that in their opinion the total amount of securities, including the Piggyback Securities, to be included in such offering is
sufficiently large to cause a Material Adverse Effect, then in such event the securities to be included in such offering shall be allocated first to the Corporation and then, to the extent that any
additional securities can, in the opinion of such Managing Underwriter or Underwriters, be sold without any such Material Adverse Effect, pro rata among
the holders of Piggyback Securities on the basis of the number of Registrable Securities requested to be included in such registration by each such holder. If such offering is a Demand Registration
pursuant to Section 6.1 and the managing Underwriter or Underwriters of such offering advise the Requesting Holders that in their opinion the
total amount of securities, including Piggyback Securities, to be included in such offering is sufficiently large to cause a Material Adverse Effect, then in such event the securities to be included
in such offering shall be allocated first to the Requesting Holders, and then, to the extent that any additional securities can, in the opinion of such managing Underwriter or Underwriters, be sold
without any such Material Adverse Effect, pro rata among the holders of Piggyback Securities on the basis of the number of Registrable Securities
requested to be included in such registration by each such holder. 

        Section 6.5    Selection of Underwriters.    The Requesting Holder shall select the book-running
managing Underwriter and such additional Underwriters to be used in connection with an offering 

26

 

pursuant
to a Demand Request; provided, that such Underwriters are reasonably satisfactory to the Corporation (it being hereby expressly agreed that
Credit Suisse First Boston is an acceptable Underwriter to the Corporation). The Corporation shall (together with all Shareholders and other holders proposing to distribute their securities through
the offering) enter into an underwriting agreement in customary form with the book-running managing Underwriter so selected. 

        Section 6.6    Suspension and Blackout Period.    

        (a)   Without
the prior written consent of the Corporation, each Shareholder holding Registrable Securities (whether or not such Registrable Securities are included in a
registration statement pursuant hereto) agrees not to effect any public sale or distribution of the issue being registered or of any securities convertible into or exchangeable or exercisable for such
securities, including a sale pursuant to Rule 144 under the Securities Act, during the 14 days prior to, and through the period beginning on the commencement of the public distribution
of such securities and ending (i) in the case of an Initial Public Offering, on the 180th day after such commencement, and (ii) in the case of any other underwritten
offering, on the 90th day in each case except as part of such registration and if and to the extent requested by the managing Underwriter or Underwriters in the case of an underwritten
public offering; provided, the Corporation shall consent to any applicable shorter lockup period to the extent any other stockholders included in a registration statement for an Initial Public
Offering or any other underwritten offering are subject to a shorter lockup period than the periods set forth above. 

        (b)   The
Corporation agrees not to effect any public sale or distribution of any securities (other than (i) a registration relating solely to employee benefit plans or
(ii) a registration relating solely to a transaction contemplated by Rule 145 of the Commission) similar to those being registered, or any securities convertible into or exchangeable or
exercisable for such securities, during the 14 days prior to, and (A) in the case of an Initial Public Offering in which Shareholders have also sold securities, during a period of up to
180 days, and (B) in the case of any other underwritten offering in which Shareholders have also sold securities, during a period of up to 90 days, in each case if and to the
extent requested and not waived by the managing Underwriters, and beginning on the date of the final prospectus with respect to such offering (unless such sale or distribution is included in such
registration). 

        (c)   The
Corporation may, by written notice to each Shareholder holding Registrable Securities, (i) defer any action to effect a registration statement (but not the
preparation of a registration statement) required by Section 6.1 until a date not later than 30 days after the Required Filing Date or
(ii) require the Shareholders holding Registrable Securities to suspend use of any resale prospectus included in a Shelf Registration Statement for any period determined in good faith by the
Corporation not to exceed 45 days (a "Suspension Period") if (A) at the time the Corporation receives the Demand Request, the Corporation
or its subsidiaries are engaged in confidential negotiations or other confidential business activities, disclosure of which would be required in such registration statement (but would not be required
if such registration statement were not filed), and the Board determines in good faith that such disclosure would be materially detrimental to the Corporation and its stockholders, (B) prior to
receiving the Demand Request, the Board had determined to effect a registered underwritten public offering of the Corporation's equity securities for the Corporation's account and the Corporation is
proceeding with reasonable diligence to effect such offering or (C) the date the Corporation receives the Demand Request is less than 60 days after the effective date of a registration
statement filed pursuant to Section 6.6(a) (in which case the Corporation may only defer the filing until the end of such 60-day
period). A deferral of the filing of a registration statement pursuant to this Section 6.6(c) shall be lifted, and the requested registration
statement shall be filed forthwith, if, in the case of a deferral pursuant to clause (A) of the preceding sentence, the negotiations or other activities are disclosed by the Corporation or
terminated, or, in the case of a deferral pursuant to clause (B) of the preceding 

27

 

sentence,
the proposed registration for the Corporation's account is abandoned. In order to defer the filing of a registration statement pursuant to this  Section 6.6(c), the Corporation shall promptly, upon
determining to seek such deferral, notify each Requesting Holder that the Corporation is
deferring such filing pursuant to this Section 6.6(c). Within 20 days after receiving such notice, the Requesting Holders may withdraw
such request by giving notice to the Corporation; if withdrawn, the Demand Request shall be deemed not to have been made for purposes of this Agreement. The Corporation may defer the filing of a
particular registration statement or require any Holders to suspend use of any resale prospectus pursuant to this Section 6.6(c) not more than
twice during any 12-month period. 

        Section 6.7    Registration Procedures.    Except as otherwise provided herein, whenever the Requesting Holders
have requested that any Registrable Securities be registered pursuant to Section 6.1 hereof, the Corporation will, at its expense, use its
commercially reasonable efforts to effect as expeditiously as practicable the registration and the sale of such Registrable Securities under the Securities Act in
accordance with the intended method of disposition thereof, and in connection with any such request, the Corporation will as expeditiously as practicable: 

        (a)   prepare
and file with the SEC a registration statement on any form for which the Corporation then qualifies or which counsel for the Corporation shall deem appropriate
and which form shall be available for the sale of the Registrable Securities to be registered thereunder in accordance with the intended method of distribution thereof, and use all commercially
reasonable efforts and proceed diligently and in good faith to cause such filed registration statement to become effective under the Securities Act;  provided that before filing a registration statement
or prospectus or any amendments or supplements thereto, the Corporation will furnish to all Selling
Holders and to their counsel copies of all such documents proposed to be filed, which documents will be subject to the reasonable review of such counsel; 

        (b)   prepare
and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep
such registration statement effective pursuant to Section 6.1 for a period of not less than 270 consecutive days, or, if shorter, the period
terminating when all Registrable Securities covered by such registration statement have been sold (but not before the expiration of the applicable period referred to in Section 4(3) of the
Securities Act and Rule 174 thereunder, if applicable) and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration
statement during such period in accordance with the intended methods of disposition by the Selling Holders thereof set forth in such registration statement; 

        (c)   furnish
to each such Selling Holder such number of copies of such registration statement, each amendment and supplement thereto (including access for review of all
exhibits thereto), the prospectus included in such registration statement (including each preliminary prospectus) and such other documents as such Selling Holder may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by such Selling Holder; 

        (d)   notify
the Selling Holders promptly and (if requested by any such Person) confirm such notice in writing (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 under the Securities
Act, (ii) of any request by the SEC or any other federal governmental authority for amendments or supplements to a registration statement or related prospectus or for additional information,
(iii) of the issuance by the SEC of any stop order suspending the effectiveness of a registration statement or the initiation of any proceedings for that purpose, (iv) if at any time the
representations or warranties of the Corporation or any subsidiary contained in any agreement (including any underwriting agreement) contemplated by  Section 6.7(i) below cease to be true and
correct in any material respect, (v) of the receipt by the 

28

 

Corporation
of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction or the initiation
or threatening of any proceeding for such purpose, (vi) of the happening of any event which 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 such registration statement, prospectus or documents so
that, in the case of the registration statement, 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 not misleading, and that in the case of 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 and (vii) of the Corporation's reasonable determination that a
post-effective amendment to a registration statement would be appropriate; 

        (e)   use
all commercially reasonable efforts to obtain the withdrawal of any order suspending the effectiveness of a registration statement, or the lifting of any suspension
of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, at the earliest practicable moment; 

        (f)    cooperate
with the Selling Holders and the managing Underwriter or Underwriters to facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold, which certificates shall not bear any restrictive legends and shall be in a form eligible for deposit with The Depositary Trust Corporation; and enable such
Registrable Securities to be registered in such names as the managing Underwriter or Underwriters may request prior to any sale of Registrable Securities; 

        (g)   use
all commercially reasonable efforts to register or qualify such Registrable Securities as promptly as practicable under such other securities or blue sky laws of
such United States jurisdictions as any Selling Holder or managing Underwriter reasonably (in light of the intended plan of distribution) requests and do any and all other acts and things which may be
reasonably necessary or advisable to enable such Selling Holder or managing Underwriter to consummate the disposition in such jurisdictions of the Registrable Securities owned by such Selling Holder;
provided that the Corporation will not be required to (i) qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 6.7(g), (ii) subject itself to taxation in any such jurisdiction or
(iii) consent to general service of process in any such jurisdiction; 

        (h)   use
commercially reasonable efforts to cooperate and assist in any filing required to be made with the NASD and in the performance of any due diligence investigation by
any Underwriter, including any "qualified independent underwriter"; 

        (i)    enter
into customary agreements (including an underwriting agreement in customary form) and take such other actions as are reasonably required in order to expedite or
facilitate the disposition of such Registrable Securities; 

        (j)    make
available for inspection by any Selling Holder of such Registrable Securities, any Underwriter participating in any disposition pursuant to such registration
statement and any attorney, accountant or other professional retained by any such Selling Holder or Underwriter (collectively, the "Inspectors"), all
financial and other records, pertinent corporate documents and properties of the Corporation as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause
the Corporation's officers, directors and employees to supply all information reasonably requested by any such Inspectors in connection with such registration statement. As a condition to providing
any such information, each Selling Holder of such Registrable Securities and each such Inspector shall agree that information obtained by it as a 

29

 

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 Corporation unless and until such information is
made generally available to the public; 

        (k)   use
all commercially reasonable efforts to obtain a comfort letter or comfort letters from the Corporation's independent public accountants in customary form and
covering such matters of the type customarily covered by comfort letters as the Selling Holders of a majority of the shares of Registrable Securities being sold or the managing Underwriter or
Underwriters reasonably requests; 

        (l)    otherwise
use all commercially reasonable efforts to comply with all applicable rules and regulations of the SEC, and make available to its security holders, as soon as
reasonably practicable, an earnings statement covering a period of twelve months, beginning within three months after the effective date of the registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act; 

        (m)  use
all commercially reasonable efforts to cause all such Registrable Securities to be listed on each securities exchange on which similar securities issued by the
Corporation are then listed or quoted on
any inter-dealer quotation system on which similar securities issued by the Corporation are then quoted; and 

        (n)   if
any event contemplated by Section 6.7(d)(vi) shall occur, as promptly as practicable prepare a supplement or
amendment or post-effective amendment to such registration statement or the related prospectus or any document incorporated therein by reference or promptly file any other required
document so that, as thereafter delivered to the purchasers of the Registrable Securities, the prospectus will not contain an 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, subject in all instances to the blackout and
suspension provisions hereof. 

        Section 6.8    Selling Holder Obligations.    

        (a)   The
Corporation may require each Selling Holder to promptly furnish in writing to the Corporation such information regarding the distribution of the Registrable
Securities as it may from time to time reasonably request and such other information as may be legally required in connection with such registration. Notwithstanding anything herein to the contrary,
the Corporation shall have the right to exclude from any offering the Registrable Securities of any Selling Holder who does not comply with the provisions of the immediately preceding sentence. 

        (b)   Each
Selling Holder agrees that, upon receipt of any notice from the Corporation of the happening of any event of the kind described in  Section 6.7(d)(vi), such Selling Holder will forthwith discontinue
disposition of Registrable Securities pursuant to the registration statement
covering such Registrable Securities until such Selling Holder's receipt of the copies of the supplemented or amended prospectus contemplated by  Section 6.7(n), and, if so directed by the
Corporation, such Selling Holder will deliver to the Corporation all copies, other than permanent file
copies, then in such Selling Holder's possession, of the most recent prospectus covering such Registrable Securities at the time of receipt of such notice. In the event the Corporation shall give such
notice, the Corporation shall extend the period during which such registration statement shall be maintained effective (including the period referred to in  Section 6.7(b)) by the number of days
during the period from and including the date of the giving of notice pursuant to  Section 6.7(d)(vi) to the date when the Corporation shall make available to the Selling Holders of Registrable
Securities covered by such
registration statement a prospectus supplemented or amended to conform with the requirements of Section 6.7(n). 

30

 

        Section 6.9    Registration Expenses.    The Corporation shall pay all Registration Expenses (as defined below)
with respect to any Demand Registration and any Piggyback Registration. For purposes hereof, "Registration Expenses" means: (a) all registration
and filing fees (including, without limitation, with respect to filings to be made with the NASD); (b) fees and expenses in connection with the registration
or qualification of the Registrable Securities for offering and sale under the state securities and "blue sky laws" (including reasonable fees and disbursements of counsel in connection with such
registrations or qualifications); (c) all expenses relating to the preparation, printing, distribution and reproduction of the registration statement required to be filed hereunder, each
prospectus included therein or prepared for distribution pursuant hereto, each amendment or supplement to the foregoing, the expenses of preparing the Registrable Securities for delivery and the
expenses of printing or producing any underwriting agreement(s), agreement(s) among underwriters and "blue sky" or legal investment memoranda, any selling agreements and all other documents in
connection with the offering, sale or delivery of Registrable Securities to be disposed of (including certificates representing the Registrable Securities); (d) the Corporation's messenger,
telephone and delivery expenses; (e) fees and expenses of any transfer agent and registrar with respect to the Registrable Securities and any escrow agent, custodian, administrative agent or
security agent; (f) internal expenses (including, without limitation, all salaries and expenses of the Corporation's officers and employees performing legal or accounting duties);
(g) reasonable fees, disbursements and expenses of counsel and independent certified public accountants of the Corporation (including the expenses of any opinions or "comfort" letters required
by or incident to such performance and compliance); (h) reasonable fees, disbursements and expenses of any "qualified independent underwriter" required by the Rules of the Association set forth
in the NASD Manual in connection with any underwriting arrangements; (i) reasonable fees, disbursements and expenses of one counsel for the Shareholders holding Registrable Securities retained
in connection with such registration, as selected by the Requesting Holders and reasonably acceptable to the Corporation; (j) reasonable fees, expenses and disbursements of any other persons,
including special experts, retained by the Corporation in connection with such registration; (k) all fees and expenses incurred in connection with the qualification of the Registrable
Securities for quotation on The Nasdaq National Market, or the listing of such shares on any securities exchange and (l) all expenses of the Corporation (but not of any underwriter) reasonably
incurred in connection with the marketing support or "road show" in connection with any underwritten offering. To the extent that any Registration Expenses are incurred, assumed or paid by any
Shareholders holding Registrable Securities or any underwriter thereof, the Corporation shall reimburse such person for the full amount of the Registration Expenses so incurred, assumed or paid
promptly after receipt of a request therefor accompanying reasonable documentary proof. Notwithstanding the foregoing, the Selling Holders shall pay all agency fees and commissions and underwriting
discounts and commissions attributable to the sale of their Registrable Securities, transfer or stamp taxes and the fees and disbursements of any counsel or other advisors or experts retained by such
Selling Holders (severally or jointly), other than the counsel and experts specifically referred to above. 

        Section 6.10    Indemnification; Contribution.    

        (a)   Subject
to the terms and conditions of this Section 6.10, the Corporation shall indemnify and hold harmless
(i) each Selling Holder, its Affiliates and any Permitted Transferee, including their respective directors, officers, employees, advisers, agents, administrators and successors and assigns with
respect to any registration statement filed pursuant to this Agreement, (ii) any underwriter or selling agent selected by the Requesting Holders or other securities professional, if any, which
facilitates the disposition of the Registrable Securities with respect to such Registrable Securities and (iii) each person who controls the Selling Holders or Affiliates thereof or such
underwriter, selling agent or securities professional, including their respective directors, officers, employees, advisers, agents, administrators and successors and assigns, and any underwriter or
selling agent, within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act, against any losses, claims, damages, liabilities or expenses (each a
"Loss" and 

31

 

collectively
"Losses"), joint or several, to which the Selling Holders or any such persons may become subject under the Securities Act or otherwise, to
the extent that such Losses (or related actions or proceedings) arise out of or are based upon (A) any untrue statement or alleged untrue statement of a material fact contained in a
registration statement, offering circular or other document or any amendments or supplements thereto, in which such Registrable Securities are to be or were included for registration under the
Securities Act, or any omission or alleged omission to state a material fact required to be stated or necessary to make the statements in such registration statement, offering circular or other
document, as amended or supplemented, not misleading (B) any untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus if used prior to the
effective date of the registration statement, any final prospectus (as supplemented, if the Corporation shall have filed with the SEC any supplement thereto) if used during the period in which the
Corporation is required to keep the registration statement to which such prospectus relates current and otherwise in compliance with Section 10(a) of the Securities Act, or any omission or
alleged omission to state a material fact required to be stated or necessary to the make statements in such preliminary prospectus or final prospectus, in the light of the circumstances under which
such statements were made, not misleading or (C) any material violation or alleged material violation of the Securities Act, the Exchange Act, the rules and regulations as promulgated of the
Securities Act and the Exchange Act, and state securities laws; provided, however, that the Corporation shall not be liable to any Person and shall have
no obligation to provide any indemnification hereunder to the extent any such Losses (or actions or proceedings in respect thereof) arise out of or are based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such registration statement, offering circular or other document prospectus, as the case may be, in reliance upon and in conformity with written
information furnished to the Corporation by a Person seeking such indemnification or on such Person's behalf specifically for inclusion in such document. The indemnity provided in this  Section 6.10
shall remain in full force and effect regardless of any investigation made by or on behalf of the Selling Holders or any such other
persons and shall survive the transfer of the Registrable Securities by the Selling Holders or any such other persons. Notwithstanding anything provided herein to the contrary, (i) the
Corporation shall not be liable in any such case to the extent that any such losses, claims, damages, liabilities or expenses arise out of or are based upon an untrue statement or omission made in any
preliminary prospectus if (x) such Selling Holder or underwriter failed to send or deliver a copy of the prospectus with or prior to the delivery of written confirmation of the sale of
Registrable Securities, (y) the prospectus would have completely corrected such untrue statement or omission and (z) the Corporation delivered a copy of such prospectus to such Selling
Holder or underwriter prior to such written confirmation of sale; and (ii) the Corporation shall not be liable in any such case to the extent that any such losses, claims, damages, liabilities
or expenses arise out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission in the prospectus, if such untrue statement, omission or alleged omission is
completely corrected in an amendment or supplement to the prospectus and if, having previously been furnished by or on behalf of the
Corporation with copies of the prospectus as so amended or supplemented, such Selling Holder or underwriter thereafter sells Registrable Securities pursuant to the Registration Statement and fails to
deliver such prospectus as so amended or supplemented, prior to or concurrently with the sale of a Registrable Security to the Person asserting such damages who purchased such Registrable Security
from such Selling Holder or underwriter after such Selling Holder's or underwriter's receipt of such prospectus as so amended or supplemented by or on behalf of the Corporation. 

        (b)   Each
Selling Holder shall severally, and not jointly, indemnify and hold harmless (in the same manner and to the same extent as set forth in  Section 6.10 hereof) the Corporation, each director, officer
and employee of the Corporation and each other person, if any, who controls the 

32

 

Corporation
within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, the Corporation's investment advisers and agents, and each of their respective
heirs, executors, administrators and successors and assigns, against any Losses to which such Person may become subject under the Securities Act or otherwise, to the extent that such Losses (or
related actions or proceedings) arise out of or are based upon any untrue statement or alleged untrue statement in or omission or alleged omission from any registration statement filed by the
Corporation pursuant to this Agreement, any prospectus included in such registration statement, any offering circular or other document or any amendment or supplement to such registration statement,
prospectus, offering circular or other document, as the case may be, of a material fact if such statement or alleged statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Corporation or any of its representatives by such Selling Holder or such other Persons, if any, who control the Selling Holder within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act, or on the Selling Holder's behalf, specifically for inclusion in such registration statement, prospectus, offering
circular or other document, as the case may be; provided, such Selling Holder's aggregate liability under this Agreement shall be limited to an amount
equal to the net proceeds (after deducting the underwriters' discount and the expenses incurred in connection with the applicable offering) received by the Selling Holder from its sale of securities
effected pursuant to such registration. 

        (c)   Promptly
after receipt by an indemnified party of notice of the commencement of any action or proceeding (an "Action")
involving a claim referred to in Section 6.10(a) and 6.10(b), such indemnified party shall, if
indemnification is sought against an indemnifying party, give written notice to the indemnifying party of the commencement of such Action; provided,
however, that the failure of any indemnified party to give said notice shall not relieve the indemnifying party of its obligations under  Section 6.10(a) and 6.10(b), as the case may be, except to the extent that the indemnifying party
is actually and materially prejudiced by such failure. In case an Action is brought against any indemnified party, and such indemnified party notifies an indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate therein and, to the extent it may elect by written notice delivered to the indemnified party promptly after receiving the aforesaid
notice, to assume the defense thereof with counsel reasonably satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying
party). Notwithstanding the foregoing, the indemnified party shall have the right to employ its own counsel in any such case, but the fees and expenses of such counsel shall be at the expense of such
indemnified party, unless (i) the employment of such counsel shall have been authorized in writing by the indemnifying party, (ii) the indemnifying party shall not have employed counsel
(reasonably satisfactory to the indemnified party) to take charge of the defense of such Action, within a reasonable time after notice of the commencement thereof or (iii) such indemnified
party reasonably shall have concluded that there may be defenses available to it which are different from or additional to those available to the indemnifying party or that a conflict of interest
exists between the indemnified party and the indemnifying party. If any of the events specified in clauses (i), (ii) or (iii) of the preceding sentence shall have occurred or otherwise
shall be applicable, then the fees and expenses of one counsel (or firm of counsel) for the indemnified party shall be borne by the indemnifying party. Anything in this  Section 6.10(c) to the
contrary notwithstanding, an indemnifying party shall not be liable for the settlement of any action effected without its
prior written consent (which consent shall not unreasonably be withheld or delayed), but if settled with the prior written consent of the indemnifying party, or if there be a final judgment adverse to
the indemnified party, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. No indemnifying party shall,
without the prior consent of the indemnified party, consent to entry of any judgment or enter into any settlement which does not include as a term thereof the 

33

 

unconditional
release of the indemnified party from all liability in respect of such claim or litigation. Each indemnified party shall furnish such information regarding itself or the claims in
question as the indemnifying party may reasonably request in writing and as shall be required in connection with the defense of such claim and litigation resulting therefrom. 

        (d)   If
the indemnification provided for in this Section 6.10 is unavailable or insufficient to hold harmless an
indemnified party in respect of any Losses, then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a
result of such Losses which amount shall include, without limitation, the legal fees and other expenses incurred by such indemnified party in connection with the investigation and defense in such
proportion as appropriate to reflect the relative fault of the Corporation, on the one hand, and the indemnified parties to be indemnified pursuant to this  Section 6.10, on the other hand, and the
parties' relative intent, knowledge, access to information and opportunity to correct or mitigate the
damage in respect of or prevent any untrue statement or omission or alleged untrue statement or omission giving rise to such indemnification obligation. The Corporation and the Holders agree that it
would not be just and equitable if contributions pursuant to this Section 6.10 were determined by pro
rata allocation or by any other method of allocation which did not take account of the equitable considerations
referred to above. 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 is not
guilty of such fraudulent misrepresentation. 

        (e)   Periodic
payments of amounts required to be paid pursuant to this Section 6.10 shall be made during the course of
the investigation or defense, as and when reasonably itemized bills therefor are delivered to the indemnifying party in respect of any particular Loss as incurred. 

        (f)    The
remedies provided in this Section 6.10 are not exclusive and should not limit any right or remedies that may
otherwise be available to an indemnified party at law or in equity. 

        Section 6.11    Participation in Underwritten Registrations.    No Shareholder may participate in any
underwritten registration hereunder unless such Shareholder (a) agrees to sell such Shareholder's Registrable Securities on the basis provided in any underwriting arrangements approved by the
Person entitled hereunder to approve such arrangements, and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents
reasonably required under the terms of such underwriting arrangements and this Agreement. 

        Section 6.12    Limitation on Subsequent Registration Rights.    After the date of this Agreement, the
Corporation will not enter into any agreement with any Person that would grant such Person any registration rights with respect to any securities of the Corporation without the prior written consent
of the Holders of a majority of the then outstanding Registrable Securities. 

 
 

ARTICLE VII
  BOOKS AND RECORDS; INSPECTION RIGHTS;
  EXCHANGE OF INFORMATION    
    

        In accordance with Article VIII, the provisions of  Article VII shall terminate
and be of no further force or effect, effective as of the consummation of an Initial Public Offering. The Corporation
will keep, and will cause each of its subsidiaries to keep, proper books of record and accounts in which full, true and correct entries in conformity with GAAP shall be made of all dealings and
transactions in relation to its business and activities. The Corporation covenants that through contacts with the Corporation's chief executive officer or a process approved by the chief executive
officer, the Corporation will permit representatives of each Holder, so long as such Holder owns a number of Shares equal to at least 5% of the Diluted Common Stock, to visit and inspect the
properties of the Corporation and its subsidiaries, to examine the corporate, financial, operating and other internal 

34

 

management
records of the Corporation and its subsidiaries and make copies thereof or extracts therefrom and to discuss the affairs, finances and accounts of such corporations with the Directors,
officers and independent accountants of the Corporation and its subsidiaries, all at such reasonable times as such Holders may reasonably request. The Corporation will also provide, or cause to be
provided, to the Investors as soon as reasonably practicable after written request therefor, any information in its possession or under its control that the Investors reasonably need (i) to
comply with reporting, disclosure, filing or other requirements imposed on the requesting party (including under applicable securities laws or (ii) for use in any judicial proceeding or other
proceeding or in order to satisfy audit, accounting, claims, regulatory, litigation or other similar requirements; provided, however, that in the event
that the Corporation determines that any such provision of information is reasonably likely to be commercially detrimental, violate any law or agreement, or waive any attorney-client privilege, the
Corporation shall take all reasonable measures to permit the compliance with such obligations in a manner that avoids any such harm or consequence. The provisions of this  Article VII shall not be
in limitation of any rights which any Holder may have with respect to the books and Records of the Corporation and its
subsidiaries, if any, or to inspect their properties or discuss their affairs, finances and accounts, under the laws of the jurisdictions in which they are incorporated. The information disclosed
hereby will be kept confidential by the Holder pursuant to the terms of Section 9.6. This  Article VII shall not require the disclosure of any
information to the extent it would jeopardize the attorney-client privilege or would violate
any agreement. 

 
 

ARTICLE VIII
  TERMINATION    
    

        The provisions of Article III, Article IV,  Article V, Article VI (other than  Section 6.10), and Article VII of this Agreement shall terminate in respect of all
Shareholders upon the first to occur of (a) written consent of all of the Holders, (b) the dissolution, liquidation, or winding-up of the Corporation or
(c) consummation of a transaction contemplated by Section 5.5 in which all outstanding Shares held
by all Holders are transferred. A Person who ceases to own any Shares shall cease to be a Shareholder and shall have no further rights under this Agreement, but shall remain subject to  Section 9.6
and Section 9.16 hereof and shall not be released from any liability incurred
hereunder prior to the date it ceases to own any Shares. The provisions of Article IV,  Section 5.5 and Article VII shall terminate upon the consummation of an Initial Public
Offering to the extent not previously terminated. 

 
 

ARTICLE IX
  MISCELLANEOUS    
    

        Section 9.1    Amendment.    This Agreement may only be altered, supplemented, amended or waived by the written
consent of all Holders; provided, however, that in no event shall any amendment impose any additional
material obligation on any Shareholder without such Shareholder's written consent; provided further,  however, (i) any Shareholder may (without the
consent of any other Person) waive, in writing, any obligation owed to it hereunder by any other
Shareholder or the Corporation, and (ii) any Shareholder may (without the consent of any other Person) waive, in writing, any right it has hereunder; provided
further, however, that DLJ Merchant Banking Partners III L.P. may consent, or waive, or approve any amendment to this Agreement
on behalf of any other of the CSFB Parties and any amendment, consent or waiver approved by holders of majority of the outstanding shares of Preferred Stock shall be binding upon holders of all other
shares of Preferred Stock whether or not such other holders have agreed to such amendment, waiver or consent. 

        Section 9.2    Specific Performance.    The Shareholders and the Corporation recognize that the obligations
imposed on them in this Agreement are special, unique, and of extraordinary character, and that in the event of breach by any party, damages will be an insufficient remedy; consequently, it is 

35

 

agreed
that the Shareholders and the Corporation may have specific performance and injunctive relief (in addition to damages) as a remedy for the enforcement hereof, without proving damages. 

        Section 9.3    Assignment.    Except as otherwise expressly provided herein, the terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the Shareholders and the Corporation. No such assignment shall relieve the assignor from any
liability hereunder. No assignment of any rights under this Agreement shall be permitted except in connection with, and proportional to, a concurrent Transfer of Shares to the same Person. Any
purported assignment made in violation of this Section 9.3 shall be void and of no force and effect. 

        Section 9.4    Legends.    

        (a)   Each
certificate for Common Stock or Common Stock Equivalents shall include a legend in substantially the following form: 

"THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND THE OFFER AND SALE OF SUCH SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES OR BLUE SKY LAWS. THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT OR APPLICABLE STATE SECURITIES OR BLUE SKY
LAWS. ADDITIONALLY, THE TRANSFER OF THESE SECURITIES IS SUBJECT TO THE CONDITIONS SPECIFIED IN THE CONTRIBUTION AND SUBSCRIPTION AGREEMENT, DATED AS OF JUNE 23, 2003, AS MAY BE AMENDED AND/OR RESTATED
FROM TIME TO TIME, AMONG THE ISSUER HEREOF AND CERTAIN OTHER PARTIES THERETO AND THE AMENDED AND RESTATED SECURITYHOLDERS AGREEMENT, DATED AS OF FEBRUARY 16, 2006, AS MAY BE FURTHER AMENDED AND/OR
RESTATED FROM TIME TO TIME, AMONG THE ISSUER HEREOF AND CERTAIN OTHER PARTIES THERETO, AND NO TRANSFER OF THESE SECURITIES SHALL BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED. COPIES
OF SUCH AGREEMENTS MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE ISSUER HEREOF." 

        (b)   A
restriction on transfer of shares set forth in such legends (a "Restriction") shall cease and terminate as to any
particular shares when, in the opinion of the Corporation and, if requested, the opinion of counsel reasonably acceptable to it, such Restriction is no longer required. Whenever such Restriction shall
cease and terminate as to any shares, the holder thereof shall be entitled to receive from the Corporation, without expense to such holder, new certificate(s) not bearing a legend stating such
Restriction. 

        Section 9.5    Notices.    Any and all notices, designations, consents, offers, acceptances, or other
communications provided for herein (each a "Notice") shall be given in writing by registered or certified mail, personal delivery, overnight courier or
facsimile, which shall be addressed, or sent, to the respective addresses as follows (or such other address as the Corporation or any Shareholder may specify to the Corporation and all other
Shareholders by Notice): 

If
to the Corporation, addressed to: 

Pinnacle
Gas Resources, Inc.

1 E. Alger, Suite 206

Sheridan, Wyoming 82801

Attention: Peter G. Schoonmaker

Facsimile: (307) 673-9711 

36

 

If
to the CSFB Parties, addressed to: 

Credit
Suisse First Boston Private Equity

c/o Avista Capital Partners, L.P.

1000 Louisiana Street, Suite 1975

Houston, Texas 77002

Attention: Steven A. Webster

                  Robert L. Cabes, Jr.

Facsimile: (713) 328-1097 

with
a copy to (which does not constitute Notice): 

Credit
Suisse First Boston Private Equity

Eleven Madison Avenue, 16th Floor

New York, New York 10010

Attention: Christina Gross

Facsimile: (212) 325-8256 

with
a copy to (which does not constitute Notice): 

Akin
Gump Strauss Hauer & Feld LLP

1111 Louisiana Street, 44th Floor

Houston, Texas 77002

Attention: J. Michael Chambers

Facsimile: (713) 236-0822 

If
to CCBM, addressed to: 

CCBM, Inc.

1000 Louisiana Street, Suite 1500

Houston, Texas 77002

Attention: S. P. Johnson IV

Facsimile: (713) 328-1049 

If
to US Energy, addressed to: 

U.S.
Energy Corp.

877 North West 8th St.

Riverton, Wyoming 82501

Attention: Keith G. Larsen

Facsimile: (307) 857-3050 

If
to Crested, addressed to: 

Crested
Corp.

877 North West 8th St.

Riverton, Wyoming 82501

Attention: Keith G. Larsen

Facsimile: (307) 857-3050 

If
to Schoonmaker, addressed to: 

Peter
G. Schoonmaker

12 Woodland Park Road

Sheridan, Wyoming 82801 

37

 

If
to Uhland, addressed to: 

Gary
W. Uhland

2403 Vintage Circle

Richmond, Texas 77469 

Each
such communication shall for all purposes of this Agreement be treated as effective or having been given when delivered if delivered personally, or, if sent by courier, on the next business day
following the day of dispatch or, if sent by facsimile transmission, on the date of such transmission if confirmation of such transmission is received or if sent by registered or certified mail shall
be deemed to have been received on the fifth Business Day after the date of such mailing. Until consummation of an Initial Public Offering, in order to effectuate the purposes of this Agreement, the
Corporation agrees that (i) it will maintain a record of the names and addresses of the Shareholders and the number of shares of Common Stock and Common Stock Equivalents owned by the
Shareholders, (ii) at the request of any Holder, it will provide such Holder with a copy of the record, (iii) it will promptly notify the Holders in the event the Corporation receives
notice that any shares of Common Stock or Common Stock Equivalents have been (or have purported to be) Transferred by or to any Holder (including the name of the transferor and transferee or purported
transferor or transferee and the number of shares transferred or purported to be transferred), (iv) it will not register, in the name of any Person, any shares subject to this Agreement unless
the transferor and transferee have complied with the terms of this Agreement and (v) it will not issue to any Person any stock certificate representing shares subject to this Agreement unless
the legend referred to in Section 9.4 is set forth thereon. 

        Section 9.6    Confidentiality.    The Shareholders shall, and shall cause their respective officers,
directors, employees, and agents and the subsidiaries of the Shareholders and their respective officers, directors, employees, and agents to, hold confidential and not use in any manner detrimental to
the Corporation or any of its subsidiaries all information they may have or obtain concerning the Corporation or any of its subsidiaries and their respective assets, business, operations, financial
performance or prospects or the arrangements among the Shareholders and the Corporation; provided,  however, that the foregoing obligation to hold such
information confidential shall not apply to (a) information that is or becomes generally
available to the public other than as a result of a disclosure by a Shareholder or any of its employees, agents, accountants, legal counsel, or other representatives, (b) information that is or
becomes available to a Shareholder or any of its employees, agents, accountants, legal counsel, or other representatives on a non-confidential basis prior to its disclosure by the
Corporation or its employees, agents, accountants, legal counsel, or other representatives, and (c) information that is required to be disclosed by a Shareholder or any of its employees,
agents, accountants, legal counsel, or other representatives as a result of any applicable law (including public reporting requirements under federal and state securities laws);  provided further,
however, that in the event information is required to be disclosed pursuant to
clause (c), the Shareholder proposing such disclosure shall provide the Board an opportunity, reasonably in advance of any such disclosure, to review and comment on the form and content of such
proposed disclosure. The foregoing to the contrary notwithstanding, the obligations of confidentiality contained herein, as they relate to the transactions contemplated by this Agreement, shall not
apply to the tax structure or tax treatment of such transactions, and each party hereto (and any of their respective employees, representatives, or agents) may disclose to any and all Persons, without
limitation of any kind, the tax structure and tax treatment of the transactions contemplated by this Agreement and all materials of any kind (including opinions or other tax analysis) that are
provided to such Person relating to the tax treatment and tax structure of such transactions (provided that such disclosure shall not include the name (or other identifying information not relevant to
the tax structure or tax treatment) of any Person and shall not include information for which nondisclosure is reasonably necessary in order to comply with applicable securities laws). 

38

 

        Section 9.7    Counterparts.    This Agreement may be executed in one or more counterparts and each counterpart
shall be deemed to be an original and which counterparts together shall constitute one and the same agreement of the parties hereto. 

        Section 9.8    Section Headings.    Headings contained in this Agreement are inserted only as a matter of
convenience and in no way define, limit, or extend the scope or intent of this Agreement or any provisions hereof. 

        Section 9.9    Choice of Law.    This Agreement, including, without limitation, the interpretation,
construction, validity and enforceability thereof, shall be governed by the laws of the State of Delaware. 

        Section 9.10    Entire Agreement.    This Agreement, and the agreements referred to herein, contain the entire
understanding of the parties hereto respecting the subject matter hereof and supersedes all prior agreements, discussions and understandings with respect thereto. 

        Section 9.11    Cumulative Rights.    The rights of the Shareholders and the Corporation under this Agreement
are cumulative and in addition to all similar and other rights of the parties under other agreements. 

        Section 9.12    Severability.    Whenever possible, each provision of this Agreement will be interpreted in
such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited or unenforceable in any jurisdiction, such provision shall, as to such
jurisdiction, be ineffective only to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 

        Section 9.13    Binding Effect.    Subject to the restrictions on Transfers set forth in this Agreement, this
Agreement is binding on and inures to the benefit of the Shareholders and their respective heirs, legal representatives, successors, and assigns. 

        Section 9.14    Further Assurances.    In connection with this Agreement and the transactions contemplated
hereby, each Shareholder shall execute and deliver any additional documents and instruments and perform any additional acts that may be necessary or appropriate to effectuate and perform the
provisions of this Agreement and those transactions. 

        Section 9.15    Spouses.    Each reference herein to the Shares owned by a Shareholder includes the community
property interest of such Shareholder's spouse (if any) (each, a "Spouse") in such Shares. The obligation of a Shareholder to vote such Shares in the
manner set forth herein includes an obligation on the part of such Shareholder's Spouse to vote such Spouse's community property interest in such stock in the same manner. Each Spouse is fully aware
of, understands and fully consents and agrees to the provisions of this Agreement and its binding effect upon any community property interest such Spouse may now or hereafter own. Each Spouse agrees
that the termination of his or her marital relationship with a Shareholder for any reason shall not have the effect of removing any Shares of the Corporation otherwise subject to this Agreement from
its coverage. Each Spouse's awareness, understanding, consent and agreement arc evidenced by the execution of this Agreement by such Spouse. In addition, each Spouse hereby acknowledges that the
Corporation and the Shareholders may desire to amend this Agreement from time to time, and such Spouse hereby appoints his or her spouse as his or her true and lawful proxy and attorney, with full
power of substitution to enter into any such amendment to this Agreement. Such proxy is irrevocable and will survive the death, incompetency, and disability of such Spouse,  provided that upon
termination of this Agreement pursuant to Article VIII or otherwise, the above
authorized proxy shall become null and void. Each such Spouse agrees, for such Spouse and such Spouse's heirs, executors, administrators, guardians and other personal representatives, to offer for
sale all Shares now owned or hereafter acquired by such Spouse upon the happening of the events and on the terms and conditions set forth in this Agreement. 

39

 

        Section 9.16    Dispute Resolution.    

        (a)   Any
controversy, dispute or claim arising out of or relating to this Agreement or the transactions contemplated hereby (a
"Dispute") shall be resolved in accordance with this Section 9.16. 

        (b)   Any
party may give the other party written notice (a "Dispute Notice") of any Dispute which has not been resolved in the
normal course of business. Within 15 Business Days after delivery of the Dispute Notice, the receiving party shall submit to the other party a written response (the
"Response"). The Dispute Notice and the Response shall each include (i) a statement setting forth the position of the party giving such notice, a
summary of the arguments supporting such position and, if applicable, the relief sought and (ii) the name and title of a senior manager of such party who has authority to settle the Dispute and
will be responsible for the negotiations related to the settlement of the Dispute (the "Senior Manager"). 

        (c)   Within
10 days after delivery of the Response provided for in Section 9.16(b), the Senior Managers of both
parties shall meet or communicate by telephone at a mutually acceptable time and place, and thereafter as often as they reasonably deem necessary, and shall negotiate in good faith to attempt to
resolve the Dispute that is the subject of such Dispute Notice. If such Dispute has not been resolved within 30 days after delivery of the Dispute Notice, then the parties shall attempt to
settle the Dispute pursuant to Section 9.16(d). 

        (d)   In
the event the Dispute has not been resolved within 30 days after the delivery of the Dispute Notice, the Dispute shall be resolved by arbitration administered
by the American Arbitration Association (the "AAA") in accordance with the terms of this  Section 9.16(d), the Commercial Arbitration Rules of
the AAA, and, to the maximum extent applicable, the United States Arbitration Act. Judgment
on any matter rendered by arbitrators may be entered in any court having jurisdiction. Any arbitration shall be conducted before three arbitrators. The arbitrators shall be individuals knowledgeable
in the subject matter of the Dispute. Each party shall select one arbitrator and the two arbitrators so selected shall select the third arbitrator. If the third arbitrator is not selected within 30
Business Days after the request for an arbitration, then any party may request the AAA to select the third arbitrator. The arbitrators may engage engineers, accountants or other consultants they deem
necessary to render a conclusion in the arbitration proceeding. To the maximum extent practicable, an arbitration proceeding hereunder shall be concluded within 90 Business Days of filing a Dispute
with the AAA. Arbitration proceedings shall be conducted in Houston, Texas. Arbitrators shall be empowered to impose sanctions and to take such other actions as the arbitrators deem necessary to the
same extent a judge could impose sanctions or take such other actions pursuant to the Federal Rules of Civil Procedure and applicable Law. At the conclusion of any arbitration proceeding, the
arbitrators shall make specific written findings of fact and conclusions of law. The arbitrators shall have the power to award recovery of all costs and fees to the prevailing party. All fees of the
arbitrators and any engineer, accountant or other consultant engaged by the arbitrators, shall be shared equally unless otherwise awarded by the arbitrators. Notwithstanding the foregoing, if the
amount in controversy is less than $1,000,000, then, instead of selecting three arbitrators by the process described above, one arbitrator shall be selected in accordance with the rules of AAA. In
this event the arbitration proceeding shall be conducted for all purposes as set forth in this Section 9.16(d), except that the proceeding shall
be conducted by the one arbitrator, instead of the three. 

        (e)   All
negotiations between the Senior Managers pursuant to this Section 9.16 shall be treated as compromise and
settlement negotiations. Noting said or disclosed, nor any document produced, in the course of such negotiations that is not otherwise independently discoverable shall 

40

 

be
offered or received as evidence or used for impeachment or for any other purpose in any current or future arbitration or litigation. 

        Section 9.17    Acknowledgement.    For the avoidance of doubt, each of the parties hereto acknowledge that the
assignment by RMG to US Energy and Crested of all of its Capital Stock in the Corporation and all of its rights, title and interest under the Contribution Agreement and the Initial Agreement
constituted transfers to Permitted Transferees permitted by the terms of the Contribution Agreement and the Initial Agreement, and that such assignments were effected in accordance with the terms
thereof. 

[Signature
Pages to Follow] 

41

        IN WITNESS WHEREOF, the Corporation and each of the Shareholders have executed this Agreement as of the date first above written. 

	 	 	PINNACLE GAS RESOURCES, INC.
	

 	
 	

By:	

/s/  PETER G. SCHOONMAKER      
 Name: Peter G. Schoonmaker

Title: Chief Executive Officer and President
	

 	
 	
CCBM, INC.
	

 	
 	

By:	

/s/  S.P. JOHNSON      
 Name: S.P. Johnson

Title: President
	

 	
 	
U.S. ENERGY CORPORATION
	

 	
 	

By:	

/s/  KEITH G. LARSEN      
 Name: Keith G. Larsen

Title: Chief Executive Officer
	

 	
 	
CRESTED CORP.
	

 	
 	

By:	

/s/  KEITH G. LARSEN      
 Name: Keith G. Larsen

Title: Co-Chairman
	

 	
 	
DLJ MERCHANT BANKING PARTNERS III, L.P.
	

 	
 	

By:	

DLJ Merchant Banking III, Inc.,

as Managing General Partner
	

 	
 	

By:	

/s/  GEORGE R. HORNING      
 Name: George R. Horning

Title: Managing Director

	 	 	DLJ MERCHANT BANKING III, INC., as Advisory General Partner on behalf of DLJ Offshore Partners III, C.V.
	

 	
 	

By:	

/s/  GEORGE R. HORNING      
 Name: George R. Horning

Title: Managing Director
	

 	
 	
DLJ MERCHANT BANKING III, INC., as Advisory General Partner on behalf of DLJ Offshore Partners III-1, C.V. and as attorney-in-fact for DLJ Merchant Banking III, L.P., as Associate General
Partner of DLJ Offshore Partners III-1, C.V.
	

 	
 	

By:	

/s/  GEORGE R. HORNING      
 Name: George R. Horning

Title: Managing Director
	

 	
 	
DLJ MERCHANT BANKING III, INC., as Advisory General Partner on behalf of DLJ Offshore Partners III-2, C.V. and as attorney-in-fact for DLJ Merchant Banking III, L.P., as Associate General
Partner of DLJ Offshore Partners III-2, C.V.
	

 	
 	

By:	

/s/  GEORGE R. HORNING      
 Name: George R. Horning

Title: Managing Director
	

 	
 	
MILLENNIUM PARTNERS II, L.P.
	

 	
 	

By:	

DLJ Merchant Banking III, Inc.,

as Managing General Partner
	

 	
 	

By:	

/s/  GEORGE R. HORNING      
 Name: George R. Horning

Title: Managing Director

	 	 	DLJ MB PARTNERS III GMBH & CO. KG
	

 	
 	

By:	

DLJ Merchant Banking III, L.P.,

as Managing Limited Partner
	

 	
 	

 	

By:	

DLJ Merchant Banking III, LLC,

as General Partner
	

 	
 	

 	

 	

By:	

DLJ Merchant Banking III, Inc., as

Managing Member
	

 	
 	

By:	

/s/  GEORGE R. HORNING      
 Name: George R. Horning

Title: Managing Director

	 	 	MBP III PLAN INVESTORS, L.P.
	

 	
 	

By:	

DLJ Merchant Banking III, Inc.,

as Managing General Partner
	

 	
 	

By:	

/s/  GEORGE R. HORNING      
 Name: George R. Horning

Title: Managing Director
	

 	
 	

/s/  PETER G. SCHOONMAKER      
Peter G. Schoonmaker
	

 	
 	

/s/  JANICE SCHOONMAKER      
 (Spouse)
	

 	
 	

    
Gary W. Uhland
	

 	
 	

    
 (Spouse)

        For
purposes of Section 5.10 only, and intending to be legally bound by the terms and provisions thereof, the following parties
have executed this Agreement as of the date first written above. 

	 	 	CARRIZO OIL & GAS, INC.
	

 	
 	

By:	

/s/  S.P. JOHNSON      
 Name: S.P. Johnson

Title: President

 
 

Annex A    
    
    Form of Adoption Agreement    
    

                 , 200  

Pinnacle
Gas Resources, Inc.

1 E. Alger, Suite 206

Sheridan, Wyoming 82801

Attention: President 

	Re:
	Amended
and Restated Securityholders Agreement, dated as of February 16, 2006 (the "Securityholders Agreement"), by and among, inter
alia, Pinnacle Gas Resources, Inc. (the "Corporation") and the other shareholders named therein 

Ladies
and Gentlemen: 

        By
execution of this letter agreement, the undersigned agrees and acknowledges to be bound by the terms and provisions of the Securityholders Agreement as if  [he][she][it] were a  [Holder][Shareholder] (as such term is defined in the Securityholders Agreement). 

        Additionally,
the undersigned agrees and acknowledges that the address provided on the signature page hereto shall be included as part of Section 9.5 of the Securityholders
Agreement as if originally provided therein. 

        IN
WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first written above. 

	 	 	[Name of Transferee]
	

 	
 	

By:	

    

	    	 	 	 
	 	 	    Address:	    

	 	 	 	    

	 	 	 	    

	 	 	    Facsimile No.:	    

QuickLinks

EXHIBIT 4.1

TABLE OF CONTENTS

AMENDED AND RESTATED SECURITYHOLDERS AGREEMENT

ARTICLE I DEFINITIONS

ARTICLE II REPRESENTATIONS AND WARRANTIES

ARTICLE III MANAGEMENT OF THE CORPORATION

ARTICLE IV CERTAIN PURCHASE RIGHTS

ARTICLE V TRANSFER OF SECURITIES

ARTICLE VI REGISTRATION OF STOCK

ARTICLE VII BOOKS AND RECORDS; INSPECTION RIGHTS; EXCHANGE OF INFORMATION

ARTICLE VIII TERMINATION

ARTICLE IX MISCELLANEOUS

Annex A Form of Adoption Agreement

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