Document:

Exhibit
10.2

EXECUTION COPY

REGISTRATION RIGHTS AGREEMENT

THIS REGISTRATION RIGHTS AGREEMENT is made as of
January 31, 2007, between Affordable Residential Communities Inc., a Maryland
corporation (the “Company”), and the Investors (the “Investors”)
listed on the Schedule of Investors attached hereto.

The parties to this Agreement are parties to a Stock
Purchase Agreement, dated October 6, 2006 (the “Purchase Agreement”).  In order to induce the Investors to enter
into the Purchase Agreement, the Company has agreed to provide the registration
rights set forth in this Agreement.  The
execution and delivery of this Agreement is a condition to the closing under
the Purchase Agreement.  Unless otherwise
provided in this Agreement, capitalized terms used herein shall have the
meanings set forth in Section 8 hereof.

The parties hereto agree as follows:

1.  Mandatory
and Demand Registrations.

(a)  Mandatory
Registration.  The Company shall use
its commercially reasonable efforts to file with the SEC a registration statement
on the applicable SEC form with respect to the resale, whether underwritten or
otherwise, of the Registrable Securities by the holders thereof within 60
calendar days, but in no event more than 90 calendar days, of the closing date
of purchase of Registrable Securities pursuant to the Purchase Agreement (the “Closing
Date”).  The Company shall use its
commercially reasonable efforts to respond to all SEC comments related to such
registration statement within 10 calendar days of the receipt thereof, and
shall use its commercially reasonable efforts to cause such registration
statement to be declared effective by the SEC within 150 days of the Closing
Date.  The Company shall use its
commercially reasonable efforts to maintain the effectiveness of the
registration effected pursuant to this Section 1(a) at all times, subject only
to the limitations on effectiveness set forth in Section 4 below.  The registration contemplated by this Section
1(a) is referred to herein as the “Mandatory Registration.”

(b)  Demand
Registration.  The holders of at
least a majority of the Registrable Securities then outstanding may request up
to two registrations under the Securities Act of all or any portion of their
Registrable Securities on Form S-1 or any similar long-form registration
as the Company may elect (“Long-Form Registrations”), and the
holders of at least 25% of the Registrable Securities then outstanding may
request an unlimited number of registrations under the Securities Act of all or
any portion of their Registrable Securities on Form S-3 or any similar
short-form registration as the Company may elect (“Short-Form
Registrations”), if available; provided that to the extent
the registration statement contemplated by Section 1(a) is available for use
with respect to the transaction contemplated by such registration request, the
Company may require the requesting holders to use such registration statement
in lieu of filing an additional registration statement pursuant to this Section
1(b), and provided further that the aggregate offering value of
the Registrable Securities requested to be registered in any registration under
this Section 1(b) must equal at least $10 million in any Long-Form

Registration and at least $5 million in any Short-Form
Registration.  Any registration
contemplated by this Section 1(b) is referred to herein as a “Demand
Registration.”

All requests for Demand Registrations shall be made by
giving written notice thereof to the Company (a “Demand Notice”).  Each Demand Notice shall specify the approximate
number of Registrable Securities requested to be registered.  Within ten business days after receipt of any
Demand Notice, the Company shall give written notice of such requested
registration to all other holders of Registrable Securities and, subject to the
terms of Section 1(f) hereof, shall include in such registration
(and in all related registrations and qualifications under state blue sky laws
or in compliance with other registration requirements and in any related
underwriting) all Registrable Securities with respect to which the Company has
received written requests for inclusion therein within 15 business days
after the delivery of the Company’s notice in accordance with Section 11(k)
hereof.

(c)  Short-Form
Registrations.  The Mandatory
Registration and any Demand Registrations shall be Short-Form Registrations
whenever the Company is permitted to use any applicable short form and, if
applicable, the managing underwriters agree to the use of a Short-Form
Registration, and the Company shall use its commercially reasonable efforts to
make Short-Form Registrations on Form S-3 available for the sale of
Registrable Securities.  The holders of
at least a majority of the Registrable Securities requested to be included in
the Mandatory Registration or any Demand Registration that is a Short-Form
Registration may require the Company to file such Short-Form Registration
with the SEC in accordance with and pursuant to Rule 415 promulgated under
the Securities Act (or any successor rule then in effect) (a “Shelf
Registration”).  The Mandatory
Registration shall be filed as a Shelf Registration.  So long as any such Shelf Registration is
effective as required herein and in compliance with the Securities Act and
usable for resale of Registrable Securities, the holders of at least 25% of the
Registrable Securities shall be entitled to demand any number of draw-downs
(including underwritten draw-downs, provided that the aggregate
offering value of the Registrable Securities requested to be included in such underwritten
draw-down must equal at least $2 million) from the shelf and, in connection
with any such draw-down, the Company shall take all customary and
reasonable actions that the Company would take in connection with an
underwritten Demand Registration pursuant to this Section 1
(including, without limitation, all actions referred to in Section 4
necessary to effectuate such sale in the manner determined by the holders of at
least a majority of the Registrable Securities to be included in such underwritten
draw-dawn) as any holder reasonably requests.  The Company shall use its reasonable efforts
to cause the registration statement or statements filed pursuant to a
Short-Form Registration to remain effective until such date as is the earlier
of (i) the date on which all Registrable Securities included in the
registration statement shall have been sold or shall have otherwise ceased to
be Registrable Securities and (ii) the date on which all remaining Registrable
Securities may be sold during any three month period without any restriction
pursuant to Rule 144(k) promulgated under the Securities Act after taking into
account any holders’ status as an affiliate of the Company as determined by the
counsel to the Company pursuant to a written opinion letter addressed to the
Company’s transfer agent to such effect.

(d)  Long-Form
Registrations.  A registration shall
not be deemed to have been effected for purposes of Section 1 and
shall not count as one of the Demand Registrations permitted as a Long-Form
Registration if the applicable registration statement has not been

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declared effective and kept effective until the
earlier of (i) six months following the date on which such registration
statement was declared effective and (ii) the sale pursuant to such
registration statement of all Registrable Securities covered thereby; provided
that in any event the Company shall pay all Registration Expenses in
connection with any registration initiated as a Demand Registration whether or
not it has become effective and whether or not such registration has counted as
one of the permitted Long-Form Registrations.  All Demand Registrations that are Long-Form
Registrations shall be underwritten registrations unless otherwise requested by
the holders of at least a majority of the Registrable Securities included in
the applicable Long-Form Registration. 
In the event the Mandatory Registration must be effected as a Long-Form
Registration, such registration shall nonetheless be filed a Shelf Registration
and the Company shall use its commercially reasonable efforts to keep such
registration current and effective, including by filing periodic post-effective
amendments to update the financial statements contained in such registration
statement in accordance with Regulation S-X promulgated under the Securities
Act until the date on which all Registrable Securities included in the
registration statement shall have been sold.

(e)  Expenses.  The Registration Expenses (as defined in Section 5(a)
hereof) in the Mandatory Registration and all Demand Registrations shall be
paid by the Company.

(f)  Priority.  The Company shall not include in the
Mandatory Registration or any Demand Registration any securities which are not
Registrable Securities without the prior written consent of the holders of at
least a majority of the Registrable Securities included in such
registration.  If a Demand Registration
is an underwritten offering and the managing underwriters advise the Company in
writing that in their opinion the number of Registrable Securities and, if
permitted hereunder, other securities requested to be included in such offering
exceeds the number of Registrable Securities and other securities, if any,
which can be sold in an orderly manner in such offering within a price range
acceptable to the holders of at least a majority of the Registrable Securities
requested to be included in such offering, the Company shall include in such
registration, prior to the inclusion of any securities which are not
Registrable Securities, the number of Registrable Securities requested to be
included which in the opinion of such underwriters can be sold in an orderly
manner within the price range of such offering, pro rata among the respective
holders thereof on the basis of the amount of Registrable Securities owned by
each such holder.

(g)  Restrictions
on Demand Registrations.  The Company
shall not be obligated to effect any Demand Registration within 180 days
after the effective date of the Mandatory Registration or a previous Demand
Registration or a previous registration in which the holders of Registrable
Securities were given piggyback rights pursuant to Section 2.

Notwithstanding the foregoing, the Company may
postpone for up to 180 days the filing or the effectiveness of a
registration statement for a Demand Registration (but not, for the avoidance of
doubt, the Mandatory Registration) if the Company’s board of directors
determines in its reasonable good faith judgment that such Demand Registration
would reasonably be expected to have a material adverse effect on any proposal
or plan of the Company or any of its Subsidiaries to engage in any acquisition
of assets or any merger, consolidation, tender offer, reorganization or other
material transaction; provided that in such event, the holders of
Registrable Securities initially requesting such Demand Registration shall be
entitled to

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withdraw such request
and, if such request is withdrawn with respect to a Long-Form
Registration, such Demand Registration shall not count as one of the permitted
Long-Form Registrations hereunder and the Company shall pay all Registration
Expenses in connection with such registration. 
The Company may delay a Demand Registration hereunder only once in any
twelve-month period.

(h)  Selection
of Underwriters.  The holders of amajority of the Registrable Securities
included in any Demand Registration or any underwritten takedown off the
registration statement filed pursuant to the Mandatory Registration shall have
the right to select the investment banker(s) and manager(s) to administer the
offering; provided, however, that such banker(s) and manager(s)
must be reasonably acceptable to the Company (its acceptance not to be
unreasonably withheld or delayed).

2.  Piggyback
Registrations.

(a)  Right
to Piggyback.  Whenever the Company
proposes to register any of its securities under the Securities Act other than
pursuant to a Demand Registration and other than in connection with the
registration of equity securities issued or issuable pursuant to an employee
equity option, purchase, bonus or similar plan or pursuant to a merger,
exchange offer or transaction of the type specified in Rule 145(a) under the
Securities Act, and the registration form to be used may be used for the
registration of Registrable Securities (a “Piggyback Registration”), the
Company shall give prompt written notice to all holders of Registrable
Securities of its intention to effect such a registration and shall (subject to
Sections 2(c) and 2(d)) include in such registration
(and in all related registrations or qualifications under blue sky laws or in
compliance with other registration requirements and in any related
underwriting) all Registrable Securities with respect to which the Company has
received written requests for inclusion therein within 20 days after the
receipt of the Company’s notice.

(b)  Piggyback
Expenses.  The Registration Expenses
in all Piggyback Registrations shall be paid by the Company.

(c)  Priority
on Primary Registrations.  If a
Piggyback Registration is an underwritten primary registration on behalf of the
Company, and the managing underwriters advise the Company in writing that in
their opinion the number of securities requested to be included in such
registration exceeds the number which can be sold in an orderly manner in such
offering within a price range acceptable to the Company, the Company shall
include in such registration (i) first, the securities the Company
proposes to sell, (ii) second, the Registrable Securities requested to be
included in such registration, pro rata among the holders of such Registrable
Securities on the basis of the number of shares requested to be included
therein by each such holder, and (iii) the Other Securities requested to
be included in such registration.

(d)  Priority
on Secondary Registrations.  If a Piggyback
Registration is an underwritten secondary registration on behalf of holders of
the Company’s securities, and the managing underwriters advise the Company in
writing that in their opinion the number of securities requested to be included
in such registration exceeds the number which can be sold in

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an orderly manner in such offering within a price
range acceptable to the holders initially requesting such registration, the
Company shall include in such registration (i) first, the securities
requested to be included therein by the holders requesting such registration
and the Registrable Securities requested to be included in such registration,
pro rata among the holders of such securities on the basis of the number of
securities so requested to be included therein, and (ii) second, the Other
Securities requested to be included in such registration.

(e)  Selection
of Underwriters.  If any Piggyback
Registration is an underwritten offering, the selection of investment banker(s)
and manager(s) for the offering by the Company must be approved by the holders
of at least a majority of the Registrable Securities included in such Piggyback
Registration, which such approval shall not be unreasonably withheld or
delayed.

(f)  Other
Registrations.  If the Company has
previously filed a registration statement with respect to Registrable
Securities pursuant to Section 1 or pursuant to this Section 2,
and if such previous registration has not been withdrawn or abandoned, the
Company shall not file or cause to be effected any other registration of any of
its equity securities or securities convertible or exchangeable into or
exercisable for its equity securities under the Securities Act (except pursuant
to a registration on Form S-4, Form S-8 or any successor
form), whether on its own behalf or at the request of any holder or holders of
such securities, until a period of at least 90 days has elapsed from the
effective date of such previous registration.

3. Holdback
Agreements; Cooperation.

(a)  Each holder of Registrable Securities
shall not effect any public sale or distribution (including sales pursuant to
Rule 144 promulgated under the Securities Act) of equity securities of the
Company, or any securities convertible into or exchangeable or exercisable for
such securities, during (i) with respect to any underwritten Demand
Registration or any underwritten Piggyback Registration in which Registrable
Securities are included, the seven days prior to and the 90-day period
beginning on the effective date of such registration (or such shorter period as
agreed to by the managing underwriters), and (ii) upon notice from the
Company of the commencement of an underwritten distribution in connection with
any Shelf Registration, the seven days prior to and the 90-day period
beginning on the date of commencement of such distribution (or such shorter
period as agreed to by the managing underwriters), in each case except as part
of such underwritten registration and in each case unless the underwriters
managing the registered public offering otherwise agree.

(b)  The Company (i) shall not
effect any public sale or distribution of its equity securities, or any
securities convertible into or exchangeable or exercisable for such securities
(except pursuant to registration on Form S-4, Form S-8 or
any successor form), during (A) with respect to any underwritten Demand
Registration or any underwritten Piggyback Registration in which Registrable
Securities are included, the seven days prior to and the 90-day period
(or such shorter period as agreed to by the underwriters) beginning on the
effective date of such registration, and (B) upon notice from any
holder(s) of Registrable Securities subject to a Shelf Registration that such
holder(s) intend to effect an underwritten distribution of Registrable
Securities pursuant to such Shelf Registration (upon receipt of which, the
Company will promptly notify all other holders of Registrable Securities of the
date of commencement of such

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distribution), the seven days prior to and the 90-day period (or
such shorter period as agreed to by the underwriters) beginning on the date of
commencement of such distribution, and (ii) shall cause each holder or
group of affiliated holders who purchases from the Company at any time after
the date of this Agreement at least 10% of its Common Stock, or any securities
convertible into or exchangeable or exercisable for at least 10% of its Common
Stock, (other than purchases in a registered public offering or pursuant to an
underwritten offering under Rule 144A or pursuant to equity subscription
agreements, stock option agreements, stock appreciation rights, phantom stock
plans or similar rights or plans in effect on the date of this Agreement) (a “Private
Purchaser”) to agree not to effect any public sale or distribution (including
sales pursuant to Rule 144) of any such securities during such 90 day
periods (or such shorter or longer periods as provided below) so long as (x)
the holders of Registrable Securities continue to hold at least 50% of the
Registrable Securities held as of the date hereof (provided that a Private
Purchaser shall be subject to such periods only twice in any twelve-month
period) and (y) such Private Purchaser has entered into an agreement with the
Company limiting such Private Purchaser’s right or ability to effectuate a
public sale or distribution during an underwritten registered offering by the
Company (provided that such Private Purchaser shall be limited for the same
period of time that it is limited by with respect to an underwritten registered
offering by the Company (which may be greater or less than the 90 day period
set forth above), in each case except as part of such underwritten registration
and in each case unless the underwriters managing the registered public
offering otherwise agree.

(c)  Each holder of Registrable
Securities agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing hereunder of any
registration statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto.

4.  Registration
Procedures.  In the Mandatory
Registration and whenever the holders of Registrable Securities have requested
that any Registrable Securities be registered pursuant to this Agreement, the
Company shall use its reasonable efforts to effect the registration and the
sale of such Registrable Securities in accordance with the intended method of
disposition thereof, and pursuant thereto the Company shall as expeditiously as
practicable:

(a)  subject to
Section 1(a) in the case of the Mandatory Registration, prepare and file with
the SEC a registration statement, and all amendments and supplements thereto
and related prospectuses as may be necessary to comply with applicable
securities laws, with respect to such Registrable Securities and use its best
efforts to cause such registration statement to become effective (provided
that before filing a registration statement or prospectus or any
amendments or supplements thereto, the Company shall furnish to the counsel selected
by the holders of a majority of the Registrable Securities covered by such
registration statement copies of all such documents proposed to be filed, and
the Company shall in good faith consider any comments of such counsel);

(b)  notify each holder
of Registrable Securities of the effectiveness of each registration statement
filed hereunder and 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 for a period of not less than 180 days (or, in the case of a
Shelf Registration, a period ending on such date as is the earlier of

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(i) the date on which all Registrable
Securities included in the registration statement shall have been sold or shall
have otherwise ceased to be Registrable Securities and (ii) the date on which
all remaining Registrable Securities may be sold during any three month period
without any restriction pursuant to Rule 144(k) promulgated under the
Securities Act after taking into account any holders’ status as an affiliate of
the Company as determined by the counsel to the Company pursuant to a written
opinion letter addressed to the Company’s transfer agent to such effect) 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
sellers thereof set forth in such registration statement;

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

(d)  use its best
efforts to register or qualify such Registrable Securities under such other
securities or blue sky laws of such jurisdictions as any seller reasonably
requests and do any and all other acts and things which may be reasonably
necessary or advisable to enable such seller to consummate the disposition in
such jurisdictions of the Registrable Securities owned by such seller (provided
that the Company shall 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 subparagraph, (ii) subject itself to taxation in any
such jurisdiction or (iii) consent to general service of process in any
such jurisdiction);

(e)  notify each
seller of such Registrable Securities, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, of the happening
of any event as a result of which the prospectus included in such registration
statement contains an untrue statement of a material fact or omits any fact
necessary to make the statements therein not misleading, and, at the request of
any such seller, the Company shall prepare a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus shall not contain an untrue statement
of a material fact or omit to state any fact necessary to make the statements
therein not misleading;

(f)  cause all such
Registrable Securities to be listed on each securities exchange on which
similar securities issued by the Company are then listed and, if not so listed,
to be listed on the NASD automated quotation system and, if listed on the NASD
automated quotation system, use its reasonable efforts to secure designation of
all such Registrable Securities covered by such registration statement as a
Nasdaq “national market system security” within the meaning of Rule 11Aa2-1
of the SEC or, failing that, to secure Nasdaq authorization for such
Registrable Securities and, without limiting the generality of the foregoing,
use its reasonable efforts to arrange for at least two market makers to
register as such with respect to such Registrable Securities with the NASD;

(g)  provide a
transfer agent and registrar for all such Registrable Securities not later than
the effective date of such registration statement;

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(h)  enter into such
customary agreements (including underwriting agreements in customary form) and
take all such other actions as the holders of a majority of the Registrable
Securities being sold or the underwriters, if any, reasonably request in order
to expedite or facilitate the disposition of such Registrable Securities
(including preparing for and participating in such number of “road shows” as
the underwriters managing such offering may reasonably request);

(i)  make available
for inspection by any seller of Registrable Securities, any underwriter participating
in any disposition pursuant to such registration statement and any attorney,
accountant or other agent retained by any such seller or underwriter, all
financial and other records, pertinent corporate documents and properties of
the Company, and cause the Company’s officers, directors, employees and
independent accountants to supply all information reasonably requested by any
such seller, underwriter, attorney, accountant or agent in connection with such
registration statement (unless the Company can demonstrate that such Person
already possesses the requested information);

(j)  otherwise use
its best 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 the period of at least twelve
months beginning with the first day of the Company’s first full calendar
quarter after the effective date of the registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the Securities
Act and Rule 158 thereunder;

(k)  permit any
holder of Registrable Securities which holder, in its sole and exclusive
judgment, might be deemed to be an underwriter or a controlling person of the
Company, to participate in the preparation of such registration or comparable
statement and to require the insertion therein of material, furnished to the
Company in writing in a timely manner, which in the reasonable judgment of such
holder and its counsel should be included;

(l)  in the event of
the issuance of any stop order suspending the effectiveness of a registration
statement, or of any order suspending or preventing the use of any related
prospectus or suspending the qualification of any common stock included in such
registration statement for sale in any jurisdiction, the Company shall use its
reasonable efforts promptly to obtain the withdrawal of such order;

(m)  use its
reasonable efforts to cause such Registrable Securities covered by such
registration statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the sellers
thereof to consummate the disposition of such Registrable Securities; and

(n)  in the case of
an underwritten offering, use reasonable efforts to obtain a cold comfort
letter from the Company’s independent public accountants in customary form and
covering such matters of the type customarily covered by cold comfort letters
as the holders of at least a majority of the Registrable Securities being sold
reasonably request.

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5.  Registration
Expenses.

(a)  All expenses
incident to the Company’s performance of or compliance with this Agreement,
including without limitation all registration and filing fees, fees and
expenses of compliance with securities or blue sky laws, printing expenses,
messenger and delivery expenses, fees and disbursements of custodians, and fees
and disbursements of counsel for the Company and, to the extent provided in Section 5(b),
fees and disbursements of counsel for any holder of Registrable Securities and
all independent certified public accountants, underwriters (excluding discounts
and commissions) and other Persons retained by the Company (all such expenses
being herein called “Registration Expenses”), shall be borne by the
Company as provided in this Agreement, except that the Company shall, in any
event, pay its internal expenses (including, without limitation, all salaries
and expenses of its officers and employees performing legal or accounting
duties), the expense of any annual audit or quarterly review, the expense of
any liability insurance which the Company has agreed to obtain in its
reasonable discretion and the expenses and fees for listing the securities to
be registered on each securities exchange on which similar securities issued by
the Company are then listed or on the NASD automated quotation system.

(b)  In connection
with each Demand Registration and each Piggyback Registration, the Company
shall reimburse the holders of Registrable Securities included in such
registration for the reasonable fees and disbursements of one counsel chosen by
the holders of a majority of the Registrable Securities included in such
registration for work customarily performed by counsel for selling
shareholders.

(c)  To the extent
any expenses relating to a registration hereunder are not required to be paid
by the Company, each holder of securities included in any registration
hereunder shall pay those expenses allocable to the registration of such holder’s
securities so included, and any expenses not so allocable shall be borne by all
sellers of securities included in such registration in proportion to the
aggregate selling price of the securities to be so registered.

(d)  Any obligation
to pay Registration Expenses or other expenses provided for in this Agreement
shall survive the termination of this Agreement.

6.  Indemnification.

(a)  The Company
agrees to indemnify, to the extent permitted by law, each holder of Registrable
Securities, its officers, directors, employees, agents, Affiliates and each
Person who controls such holder (within the meaning of the Securities Act and
the Securities Exchange Act) against all losses, claims, actions, damages,
liabilities and expenses caused by (i) any untrue or alleged untrue
statement of material fact contained in any registration statement, prospectus
or preliminary prospectus or any amendment thereof or supplement thereto or any
omission or alleged omission of a material fact required to be stated therein
or necessary to make the statements therein not misleading or (ii) any
violation by the Company of any rule or regulation promulgated under the
Securities Act applicable to the Company and relating to action or inaction
required of the Company in connection with any such registration, qualification
or compliance, and to pay to each holder of Registrable Securities, its
officers and directors and each Person who controls such holder (within the
meaning of the Securities Act), as incurred, any legal and any other expenses reasonably
incurred in connection with investigating, preparing or defending any such
claim, loss, damage, liability or action, except insofar as the same are

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caused by or contained in any information
furnished in writing to the Company by such holder expressly for use therein or
by such holder’s failure to deliver a copy of the registration statement or
prospectus or any amendments or supplements thereto after the Company has
furnished such holder with such number of copies of the same as was previously
requested by such holder.  In connection
with an underwritten offering, the Company shall indemnify such underwriters,
their officers, directors, employees, agents and each Person who controls such
underwriters (within the meaning of the Securities Act and the Securities
Exchange Act) to the same extent as provided above with respect to the
indemnification of the holders of Registrable Securities, but the provisions of
the underwriting agreement with such underwriters, if different, shall govern.

(b)  In connection
with any registration statement in which a holder of Registrable Securities is
participating, each such holder shall furnish to the Company in writing such
information and affidavits as the Company reasonably requests for use in
connection with any such registration statement or prospectus and, to the
extent permitted by law, shall indemnify the Company, its directors, officers,
employees, agents, Affiliates and each Person who controls the Company (within
the meaning of the Securities Act and the Securities Exchange Act) against any
losses, claims, damages, liabilities and expenses resulting from any untrue or
alleged untrue statement of material fact contained in the registration
statement, prospectus or preliminary prospectus or any amendment thereof or
supplement thereto or any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading, but only to the extent that such untrue statement or omission is
contained in any information or affidavit so furnished in writing by such
holder; provided that the obligation to indemnify shall be individual and
ratable, not joint and several, for each holder and shall be limited to the net
amount of proceeds received by such holder from the sale of Registrable
Securities pursuant to such registration statement.

(c)  Any Person
entitled to indemnification hereunder shall (i) give prompt written notice
to the indemnifying party of any claim with respect to which it seeks
indemnification (provided that the failure to give prompt notice shall not
impair any Person’s right to indemnification hereunder to the extent such
failure has not prejudiced the indemnifying party) and (ii) unless in such
indemnified party’s reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party.  If such defense is assumed, the indemnifying
party shall not be subject to any liability for any settlement made by the
indemnified party without its consent (but such consent shall not be
unreasonably withheld).  An indemnifying
party who is not entitled to, or elects not to, assume the defense of a claim
shall not be obligated to pay the fees and expenses of more than one counsel
for all parties indemnified by such indemnifying party with respect to such
claim, unless in the reasonable judgment of any indemnified party a conflict of
interest may exist between such indemnified party and any other of such
indemnified parties with respect to such claim. 
In such instance, the conflicting indemnified parties shall have a right
to retain one separate counsel, chosen by the holders of a majority of the
Registrable Securities included in the registration, at the expense of the
indemnifying party.  No indemnifying
party, in the defense of such claim or litigation, shall, except with the
consent of each indemnified party, consent to the entry of any judgment or
enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party of a
release from all liability in respect to such claim or litigation.

 10
 

(d)  The indemnification
provided for under this Agreement shall remain in full force and effect
regardless of any investigation made by or on behalf of the indemnified party
or any officer, director, employee, agent, Affiliate or controlling Person of
such indemnified party and shall survive the transfer of securities and the
termination of this Agreement.  The
Company also agrees to make such provisions, as are reasonably requested by any
indemnified party, for contribution to such party in the event the Company’s indemnification
is unavailable for any reason.

7.  Participation
in Underwritten Registrations.  No
Person may participate in any registration hereunder that is underwritten
unless such Person (i) agrees to sell such Person’s securities on the
basis provided in any underwriting arrangements approved by the Person or
Persons entitled hereunder to approve such arrangements and (ii) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents required under the terms of such underwriting
arrangements in a timely manner; provided that no holder of
Registrable Securities included in any underwritten registration shall be
required to make any representations or warranties to the Company or the
underwriters (other than representations and warranties regarding such holder,
such holder’s title to the securities and such holder’s intended method of
distribution) or to undertake any indemnification obligations to the Company or
the underwriters with respect thereto, except as otherwise provided in Section 6
hereof.

8.  Definitions.

“Affiliate” of any particular Person means (i)
any other Person controlling, controlled by or under common control with such
particular Person, where “control” means the possession, directly or
indirectly, of the power to direct the management and policies of a Person
whether through the ownership of voting securities, contract or otherwise and
(ii) if such Person is a partnership or limited liability company, any partner
or member thereof.

“Company” has the meaning given to such term in
the recitals.

“Demand Notice” has the meaning given to such
term in Section 1(b).

“Demand Registration” has the meaning given to
such term in Section 1(b).

“Governmental Entity” means a domestic (federal,
state, municipal or local) or foreign government or governmental, regulatory or
administrative subdivision, department, authority, agency, commission, board,
bureau, court of instrumentality or arbitrator of any kind.

“Investors” has the meaning given to such term
in the recitals.

“Long-Form Registrations” has the meaning given
to such term in Section 1(b).

“Other Securities” means any securities (other
than Registrable Securities) as to which the Company has granted contractual
registration rights.

 11
 

“Person” means an individual, a partnership, a
corporation, a limited liability company, an association, a joint stock
company, a trust, a joint venture, an unincorporated organization or a
Governmental Entity.

“Piggyback Registration” has the meaning given
to such term in Section 2(a).

“Private Purchaser” has the meaning given to
such term in Section 3(b).

“Purchase Agreement” has the meaning given to
such term in the recitals.

“Registration Expenses” has the meaning given
to such term in Section 5(a).

“Registrable Securities” means (i) any
Common Stock issued pursuant to the Purchase Agreement and (ii) any Common
Stock issued or issuable with respect to any Registrable Securities by way of a
stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization.  As to any particular Registrable Securities,
such securities shall cease to be Registrable Securities when they have been
distributed to the public pursuant to an offering registered under the
Securities Act, sold to the public through a broker, dealer or market maker in
compliance with Rule 144 under the Securities Act (or any similar rule
then in force) or repurchased by the Company or any Subsidiary.  For purposes of this Agreement, including
exercising any rights or meeting any threshold tests hereunder, a Person shall
be deemed to hold any Registrable Securities and such Registrable Securities
shall be deemed to be in existence, whenever such Person has the right to
acquire directly or indirectly such Registrable Securities (upon conversion or
exercise in connection with a transfer of securities or otherwise, but
disregarding any restrictions or limitations upon the exercise of such right),
whether or not such acquisition has actually been effected, and such Person
shall be entitled to exercise the rights of a holder of Registrable Securities
hereunder.

“Securities Act” means the Securities Act of
1933, as amended, or any similar federal law then in force.

“SEC” includes any governmental body or agency
succeeding to the functions thereof.

“Securities Exchange Act” means the Securities
Exchange Act of 1934, as amended, or any similar federal law then in force.

“Shelf Registration” has the meaning given to
such term in Section 1(c).

“Short-Form Registrations” has the meaning
given to such term in Section 1(b).

“Subsidiary” means, with respect to any Person,
any corporation, limited liability company, partnership, association or other
business entity of which (i) if a corporation, a majority of the total
voting power of shares of stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by that
Person or one or more of the other Subsidiaries of that Person or a combination
thereof, or (ii) if a limited liability company,

 12
 

partnership, association
or other business entity, a majority of the partnership or other similar
ownership interest thereof is at the time owned or controlled, directly or
indirectly, by that Person or one or more Subsidiaries of that Person or a
combination thereof.  Notwithstanding the
foregoing, “Subsidiary” also shall include each “significant subsidiary” of the
Company, as such term is defined in Rule 1-02 of Regulation S-X.  For purposes hereof, a Person or Persons
shall be deemed to have a majority ownership interest in a limited liability
company, partnership, association or other business entity if such Person or
Persons shall be allocated a majority of limited liability company,
partnership, association or other business entity gains or losses or shall be
or control any managing director or general partner of such limited liability
company, partnership, association or other business entity.  For purposes of this Agreement, if the
context does not otherwise specify in respect of which Person the term “Subsidiary”
is used, the term “Subsidiary” shall refer to a Subsidiary of the Company.

Unless otherwise stated, other capitalized terms
contained herein have the meanings set forth in the Purchase Agreement.

9.  Termination.  Except as otherwise provided herein, this
Agreement shall terminate at such time as no holder of Registrable Securities
has any rights hereunder.

10.  Miscellaneous.

(a)  Aggregation.  For purposes of this Agreement, all holdings
of Registrable Securities by Persons who are Affiliates of each other shall be
aggregated for purposes of meeting any threshold tests under this Agreement.  For purposes of this Section 10(a),
an “Affiliate” shall include any Persons which have received distributions of
securities from a partnership or limited liability company holding such
securities.

(b)                                 No Inconsistent
Agreements.  The Company shall not
hereafter enter into any agreement with respect to its securities which is
inconsistent with or violates the rights granted to the holders of Registrable
Securities in this Agreement.

(c)                                  Current Public
Information.  The Company shall file
all reports required to be filed by it under the Securities Act and the
Securities Exchange Act and the rules and regulations adopted by the SEC
thereunder and shall take such further action as any holder or holders of
Registrable Securities may reasonably request, all to the extent required to enable
such holders to sell Registrable Securities pursuant to Rule 144 adopted
by the SEC under the Securities Act (as such rule may be amended from time to
time) or any similar rule or regulation hereafter adopted by the SEC.  Upon request, the Company shall deliver to
any holder of Registrable Securities a written statement as to whether it has
complied with such requirements.  The
Company shall at all times use its best efforts to cause the Common Stock to be
listed on one or more of the New York Stock Exchange, the American Stock
Exchange or the Nasdaq National Market System.

(d)                                 Adjustments
Affecting Registrable Securities. 
The Company shall not take any action, or permit any change to occur,
with respect to its securities which would adversely affect the ability of the
holders of Registrable Securities to include such Registrable Securities in a
registration undertaken pursuant to this Agreement or which would adversely

 13
 

affect the marketability of such Registrable Securities in any such
registration (including, without limitation, effecting a stock split or a
combination of shares).

(e)                                  Remedies.  Any Person having rights under any provision
of this Agreement shall be entitled to enforce such rights specifically
(without posting a bond or other security), to recover damages caused by reason
of any breach of any provision of this Agreement and to exercise all other
rights granted by law.  The parties
hereto agree and acknowledge that money damages may not be an adequate remedy
for any breach of the provisions of this Agreement and that, in addition to any
other rights and remedies existing in its favor, any party shall be entitled to
specific performance and/or other injunctive relief from any court of law or
equity of competent jurisdiction (without posting any bond or other security)
in order to enforce or prevent violation of the provisions of this Agreement.

(f)                                    Consent to
Amendments.  Except as otherwise
expressly provided herein, the provisions of this Agreement may be amended or
modified and the Company may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, only if the Company has
obtained the written consent of the holders of a majority of the Registrable
Securities outstanding at the time the amendment or waiver becomes effective; provided
that if any such amendment, modification or waiver is to a provision in
this Agreement that requires a specific vote to take an action thereunder or to
take an action with respect to the matters described therein, such amendment,
modification or waiver shall not be effective unless such vote is obtained with
respect to such amendment, modification or waiver.  No other course of dealing between the
Company and the holder of any Registrable Securities or any delay in exercising
any rights hereunder shall operate as a waiver of any rights of any such
holders.  For purposes of this Agreement,
Registrable Securities held by the Company or any Subsidiaries shall not be
deemed to be outstanding.

(g)                                 Successors and Assigns.  All covenants and agreements in this
Agreement by or on behalf of any of the parties hereto shall bind and inure to
the benefit of the respective successors and assigns of the parties hereto
whether so expressed or not.  In
addition, whether or not any express assignment has been made, the provisions
of this Agreement which are for the benefit of purchasers or holders of
Registrable Securities are also for the benefit of, and enforceable by, any
subsequent holder of Registrable Securities.

(h)                                 Severability.  Whenever possible, each provision of this
Agreement shall 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 by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.

(i)                                     Counterparts.  This Agreement may be executed simultaneously
in two or more counterparts (including by means of telecopied signature pages),
any one of which need not contain the signatures of more than one party, but
all such counterparts taken together shall constitute one and the same
Agreement.

(j)                                     Descriptive
Headings.  The descriptive headings
of this Agreement are inserted for convenience only and do not constitute a
substantive part of this Agreement.

 14
 

Whenever required by the context, any pronoun used in this Agreement
shall include the corresponding masculine, feminine or neuter forms, and the
singular forms of nouns, pronouns, and verbs shall include the plural and vice
versa.  Reference to any agreement,
document, certificate, or instrument means such agreement, document,
certificate or instrument as the same is amended, waived or otherwise modified
from time to time in accordance with the terms thereof and, if applicable,
hereof.  Except as otherwise provided in
this Agreement, words such as “herein,” “hereunder,” “hereof” and the like
shall be deemed to refer to this Agreement as a whole and not to any particular
document or article, Section, paragraph or other portion of a document.  The use of the words “include” or “including”
in this Agreement shall be by way of example rather than by limitation.  The use of the words “or,” “either” or “any”
shall not be exclusive.

(k)                                  Governing Law.  All issues and questions concerning the
construction, validity, interpretation and enforcement of this Agreement and
the exhibits and schedules hereto shall be governed by, and construed in
accordance with, the laws of the State of Illinois, without giving effect to
any choice of law or conflict of law rules or provisions (whether of the State
of Illinois or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Illinois.

(l)                                     Notices.  All notices, demands or other communications
to be given or delivered under or by reason of the provisions of this Agreement
shall be in writing and shall be deemed to have been given when delivered
personally to the recipient, telecopied to the recipient (with hard copy sent
by overnight courier in the manner provided hereunder) if sent prior to 4:00
p.m. Chicago time on a business day (and otherwise, on the immediately
succeeding business day), one business day after being sent to the recipient by
reputable overnight courier service (charges prepaid) or three business days
after being mailed to the recipient by certified or registered mail, return
receipt requested and postage prepaid. 
Such notices, demands and other communications shall be sent to each
Investor at the address indicated on the Schedule of Investors and to
the Company at the address indicated below:

	
   

  	
  Affordable Residential
  Communities, Inc.

  7887 East Belleview Avenue, Suite 200

  Englewood, CO 80111

  Attn:  Larry D. Willard

  Telecopy No.: (303) 749-3118

  
	
   

  	
   

  
	
   

  	
  with a copy to:

  
	
   

  	
   

  
	
   

  	
  Scott L. Gesell

  ARC - 7887 East Belleview Avenue, Suite 200

  Englewood, CO  80111
Telecopy No.: (303) 749-2073

  

 

or to such other address or to the attention of such
other person as the recipient party has specified by prior written notice to
the sending party.

 15
 

(m)                               Business Days.  If any time period for giving notice or
taking action hereunder expires on a day which is a Saturday, Sunday or legal
holiday in the State of Illinois or the jurisdiction in which the Company’s
principal office is located, the time period shall automatically be extended to
the business day immediately following such Saturday, Sunday or legal holiday.

(n)                                 Delivery
by Facsimile.  This Agreement, the
agreements referred to herein and each other agreement or instrument entered
into in connection herewith or therewith or contemplated hereby or thereby, and
any amendments hereto or thereto, to the extent signed and delivered by means
of a facsimile machine, shall be treated in all manner and respects as an
original agreement or instrument and shall be considered to have the same
binding legal effect as if it were the original signed version thereof
delivered in person.  At the request of
any party hereto or to any such agreement or instrument, each other party
hereto or thereto shall reexecute originals forms thereof and deliver them to
all other parties.  No party hereto or to
any such agreement or instrument shall raise the use of a facsimile machine to
deliver a signature or the fact that any signature or agreement or instrument
was transmitted or communicated through the use of a facsimile machine as a
defense to the formation or enforceability of a contract and each such party
forever waives any such defense.

*     *     *    
*    *

 16

IN WITNESS WHEREOF, the parties have executed this
Registration Rights Agreement as of the date first written above.

	
  

  	
  AFFORDABLE RESIDENTIAL COMMUNITIES INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Scott L. Gesell

  	
   

  
	
   

  	
  Its:

  	
  Executive Vice President

  	
   

  
	
   

  	
   

  
	
   

  	
  FLEXPOINT FUND, L.P.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Flexpoint Management, L.P

  
	
   

  	
  Its:

  	
  General Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Donald J. Edwards

  	
   

  

 

SCHEDULE
OF INVESTORS

Flexpoint Fund, L.P.

c/o Flexpoint Partners, LLC

676 North Michigan Avenue

Suite 3300

Chicago, Illinois 60611

Attention:  Donald J. Edwards

Telephone No.:  (312) 327-4520

Facsimile
No.:  (312) 327-4525

with a copy to:

Kirkland & Ellis LLP

200 East Randolph Drive

Chicago, IL  60601

Attention:  Sanford E. Perl, P.C.

Telephone No.:  (312) 861-2000

Facsimile No.:  (312) 861-2200Exhibit 4.1
  CLASS
C AMENDMENT
  AMENDMENT
NO. 2 TO SECOND AMENDED AND RESTATED

LIMITED LIABILITY COMPANY AGREEMENT OF

LINN ENERGY, LLC
  THIS AMENDMENT NO.
2 TO SECOND AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF LINN
ENERGY, LLC (this “Amendment”), dated as of February 1, 2007, is entered
into and effectuated by the Board of Directors (the “Board”) of Linn
Energy, LLC, a Delaware limited liability company (the “Company”),
pursuant to authority granted to it in Sections 5.5 and 11.1 of the Second
Amended and Restated Limited Liability Company Agreement of the Company, dated
as of January 19, 2006 (the “Limited Liability Company Agreement”).  Capitalized terms used but not defined herein
are used as defined in the Limited Liability Company Agreement.
  WHEREAS, Section
5.5(a) of the Limited Liability Company Agreement provides that the Company may
issue additional Company Securities for any Company purpose at any time and
from time to time for such consideration and on such terms and conditions as
the Board shall determine, all without the approval of any Members;
  WHEREAS, Section
5.5(b) of the Limited Liability Company Agreement provides that the Company
Securities authorized to be issued by the Company pursuant to Section 5.5(a) of
the Limited Liability Company Agreement may be issued in one or more classes,
or one or more series of any such classes, with such designations, preferences,
rights, powers and duties (which may be senior to existing classes and series
of Company Securities) as shall be fixed by the Board;
  WHEREAS, Section
11.1(c)(vii) of the Limited Liability Company Agreement provides that the
Board, without the approval of any Member (subject to the provisions of Section
5.6 of the Limited Liability Company Agreement), may amend any provision of the
Limited Liability Company Agreement that the Board determines to be necessary
or appropriate in connection with the authorization of issuance of any class or
series of Company Securities pursuant to Section 5.5 of the Limited Liability
Company Agreement, and the Board has determined that the amendments
contemplated hereby are necessary or appropriate in connection therewith;
  WHEREAS, the Board
has determined that the issuance of the Class C Units provided for in this
Amendment is permitted by Section 5.6 of the Limited Liability Company
Agreement;
  WHEREAS, Section
11.1(c)(iv) of the Limited Liability Company Agreement provides that the Board,
without the approval of any Member, may amend any provision of the Limited
Liability Company Agreement to reflect a change that the Board determines does
not adversely affect the Members (including any particular class of Interests
as compared to other classes of Interests) in any material respect, and the
Board has determined that such amendments contemplated hereby do not adversely
affect the Members in any material respect; and
  WHEREAS, the Board
deems it in the best interest of the Company to effect this Amendment to
provide for (i) the issuance of the Class C Units, (ii) the conversion of the
Class 

    C Units
into Units in accordance with the terms described herein and (iii) such other
matters as are provided herein.
  NOW, THEREFORE, it
is hereby agreed as follows:
  A.            Amendment .  The Limited Liability Company Agreement is
hereby amended as follows:
  1.             Section 1.1 of the Limited
Liability Company Agreement is hereby amended to add or amend and restate the
following definitions in the appropriate alphabetical order:
  “Capital
Account True-Up Election” has the meaning set forth in Section
6.1(d)(xii)(C).
  “Class C Unit” means a Company Security
representing a fractional part of the Interests of all Members, and having the
rights and obligations specified with respect to the Class C Units in this
Agreement.  A “Class C Unit” shall not
constitute a Unit until such time as such Class C Unit is converted into a Unit
pursuant to Section 5.10.
  “Issue Price” means the price at which a Unit or Class C Unit
is purchased from the Company, net of any sales commissions or underwriting
discount charged to the Company; for the avoidance of doubt, in the case of the
Class C Units, the Issue Price shall be deemed to be $25.06 per Class C Unit
and, in the case of the Privately Placed Units, $26.00 per Privately Placed
Unit.
  “Percentage Interest” means, as of any date of determination
(a) as to any Unitholder or holder of Class C Units holding Units or Class C
Units, the product obtained by multiplying (i) 100% less the percentage
established pursuant to clause (b) below by (ii) the quotient obtained by
dividing (A) the number of Units and Class C Units held by such Unitholder or
holder of Class C Units by (B) the total number of all Outstanding Units or
Outstanding Class C Units and (b) as to the holders of other Company Securities
issued by the Company in accordance with Section 5.5, the percentage
established as part of such issuance.
  “Per Unit Capital Amount” means, as of
any date of determination, the Capital Account, stated on a per Unit, Class C
Unit or Privately Placed Unit basis, as the case may be, underlying any Unit,
Class C Unit or Privately Placed Unit, as the case may be, held by a Person.
  “Private Placement Value” means with
respect to the Class C Units $33.12 per Class C Unit and the Privately Placed
Units $33.12 per Privately Placed Unit.

 2
 

     
  “Privately
Placed Units” means the Units issued pursuant to the Unit Purchase
Agreement.
  “Pro Rata” means (a) when modifying
Units, Class C Units, Privately Placed Units or any class of any thereof,
apportioned equally among all designated Units, Class C Units or Privately
Placed Units, as the case may be, in accordance with their relative Percentage
Interests, and (b) when modifying Members, apportioned among all designated
Members in accordance with their relative Percentage Interest.
  “Remaining Net Positive Adjustments” means,
as of the end of any taxable period, with respect to the holders of Units,
Privately Placed Units or Class C Units, the excess of (i) the Net Positive
Adjustments of the holders of Units, Privately Placed Units or Class C Units as
of the end of such period over (ii) the sum of those Members’ Share of
Additional Book Basis Derivative Items for each prior taxable period.
  “Share of Additional Book Basis Derivative Items”
means, in connection with any allocation of Additional Book Basis Derivative
Items for any taxable period, with respect to the holders of Units, Privately
Placed Units or Class C Units, the amount that bears the same ratio to such
Additional Book Basis Derivative Items as the holders’ Remaining Net Positive
Adjustments as of the end of such period bears to the Aggregate Remaining Net
Positive Adjustments as of that time.
  “Unit” means a Company Security
representing a fractional part of the Interests of all Members, and having the
rights and obligations specified with respect to Units in this Agreement, which
includes Privately Placed Units.  The
term “Unit” does not refer to a Class C Unit prior to its conversion into a
Unit pursuant to the terms hereof.
  “Unit Majority” means a majority of the
Outstanding Units.
  “Unit
Purchase Agreement” means the Class C Unit and Unit Purchase
Agreement dated as of December 13, 2006 between the Company and the purchasers
named therein.
  2.             Article IV of the Limited Liability
Company Agreement is hereby amended to add a new Section 4.6(c) as follows:
  (c)           The transfer of a Class C Unit or a
Privately Placed Unit shall be subject to the restrictions imposed by Section
6.5.

 3
 

     
  3.             Section 5.4(a) of the Limited
Liability Company Agreement is hereby amended to add the following at the end
of such section:
  The initial
Capital Account balance in respect of each Class C Unit shall be the Private
Placement Value for such Class C Unit, and the initial Capital Account balance
of each holder of Class C Units in respect of all Class C Units held shall be
the product of such initial balance for a Class C Unit multiplied by the number
of Class C Units held thereby.  The
initial Capital Account balance in respect of each Privately Placed Unit shall
be the Private Placement Value for such Privately Placed Unit, and the initial
Capital Account balance of each holder of Privately Placed Units in respect of
all Privately Placed Units held shall be the product of such initial balance
for a Privately Placed Unit multiplied by the number of Privately Placed Units
held thereby.  Immediately following the
creation of a Capital Account balance in respect of each Class C Unit, each
holder acquiring a Class C Unit at original issuance shall be deemed to have
received a cash distribution in respect of such Class C Units in an amount
equal to the product of (x) the total number of Class C Units so acquired by
such holder multiplied by (y) the difference between the Private Placement
Value and the Issue Price of a Class C Unit. 
Immediately following the creation of a Capital Account balance in
respect of each Privately Placed Unit, each Unitholder acquiring a Privately
Placed Unit at original issuance shall be deemed to have received a cash
distribution in respect of such Privately Placed Units in an amount equal to
the product of (x) the total number of Privately Placed Units so acquired by
such Unitholder multiplied by (y) the difference between the Private Placement
Value and the Issue Price of a Privately Placed Unit.  The purpose of the four preceding sentences
is to provide the initial purchasers of Class C Units and Privately Placed
Units with a net Capital Account in the Class C Units and Privately Placed
Units on the date of purchase equal to the Issue Price paid by those purchasers
for the Class C Units and Privately Placed Units.
  4.             Section 5.4(c)(i) of the Limited
Liability Company Agreement is hereby amended to add the following at the end
of such section:
  Any adjustments
that are made under this paragraph in connection with the issuance of the Class
C Units or the Privately Placed Units shall be based on the Private Placement
Value of the Class C Units and the Privately Placed Units.
  5.             Article V of the Limited Liability
Company Agreement is hereby amended to add a new Section 5.10 creating a new
series of Company Securities as follows:
  Section 5.10  Establishment of Class C Units.
  (a)           General.  The
Board hereby designates and creates a series of Company Securities to be designated as “Class C Units” and
consisting of a total of 7,465,946 Class C Units, and fixes the designations,
preferences and relative, participating, optional or 

 4
 

    other special rights,
powers and duties of holders of the Class C Units as set forth in this Section
5.10.
  (b)           Allocations.  Except as otherwise provided in this
Agreement, including Section 6.1(d)(iii), all items of Company income, gain,
loss, deduction and credit shall be allocated to the Class C Units to the same
extent as such items would be so allocated if such Class C Units were Units
(other than Privately Placed Units) that were then Outstanding.
  (c)           Distributions.  Each Class C Unit shall have the right to
share in Company distributions on a Pro Rata basis with the Units, with the
amount of distributions on each such Class C Unit being equal to 115% of the
quarterly cash distribution amount payable on each Unit.
  (d)           Vote of
Unitholders.  Except as
provided in this Section 5.10, the Class C Units are not convertible into
Units.  The Board shall, as promptly as
practicable following the issuance of the Class C Units, but in any event not
later than June 30, 2007, take such
actions as may be necessary or appropriate to submit to a vote or consent of
the holders of the Units the approval of a change in the terms of the Class C
Units to provide that each Class C Unit will automatically convert into one
Unit (subject to appropriate adjustment in the event of any split-up,
combination or similar event affecting the Units that occurs prior to the
conversion of the Class C Units) effective immediately upon such approval by
the Unitholders of the issuance of additional Units upon such automatic
conversion without any further action by the holders thereof.  The vote or consent required for such
approval will be the requisite vote required under this Agreement and under the
rules or staff interpretations of the National Securities Exchange on which the
Units are listed or admitted to trading for the listing or admission to trading
of the Units that would be issued upon any such conversion.  Upon receipt of such approval and compliance
with Section 5.10(f), the terms of the Class C Units will be changed,
automatically and without further action, so that each Class C Unit is
converted into one Unit and, immediately thereafter, none of the Class C Units
shall be Outstanding.
  (e)           Change in
Rules of National Securities Exchange.  If at any time (i) the rules of the National
Securities Exchange on which the Units are listed or admitted to trading or the
staff interpretations of such rules are changed or (ii) facts or circumstances
arise so that no vote or consent of Unitholders is required as a condition to
the listing or admission to trading of the Units that would be issued upon any
conversion of any Class C 

 5
 

    Units into Units as provided in Section 5.10(d), the
terms of such Class C Units will be changed so that each Class C Unit is converted
(without further action or any vote of any Unitholders other than compliance
with Section 5.10(f)) into one Unit (subject to appropriate adjustment in the
event of any split-up, combination or similar event affecting the Units that
occurs prior to the conversion of the Class C Units) and, immediately
thereafter, none of the Class C Units shall be Outstanding.
  (f)            Surrender
of Certificates.  Upon receipt
of the approval of the holders of the Units to
convert the Class C Units into Units in accordance with Section 5.10(d) or a
change in rules of the National Securities Exchange or a change in facts and
circumstances as described in Section 5.10(e), the Board shall give the holders
of the Class C Units prompt notice of such approval or change and, subject to
Section 6.5, each holder of Class C Units shall promptly surrender the Class C
Unit Certificates therefor, duly endorsed, at the office of the Company or of
any transfer agent for the Class C Units. 
In the case of any such conversion, the Company shall, as soon as
practicable thereafter, issue and deliver at such office to such holder of
Class C Units one or more Unit Certificates, registered in the name of such
holder, for the number of Units to which such holder shall be entitled as
aforesaid.  Such conversion shall be
deemed to have been made as of the date of the event specified in Section
5.10(d) or Section 5.10(e), as the case may be, and the Person entitled to
receive the Units issuable upon such conversion shall be treated for all
purposes as the record holder of such Units on said date.
  (g)           Voting
Rights.  The Class C Units are
non-voting, except that the Class C Units shall be entitled to vote as a
separate class on any matter that adversely affects the rights or preferences
of the Class C Units in relation to other classes of Interests (including as a
result of a merger or consolidation) or as required by law.  The approval of a majority of the Class C
Units shall be required to approve any matter for which the holders of the
Class C Units are entitled to vote.
  6.             Section 6.1(c) of the Limited
Liability Company Agreement is hereby amended to restate Section 6.1(c)(i)(B)
as follows:
  (B)           Second, 100% to all Unitholders and
holders of Class C Units in accordance with their respective Percentage Interests.
  7.             Section 6.1(c) of the Limited
Liability Company Agreement is hereby amended to add a new Section
6.1(c)(ii)(A) as follows:

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  (A)          First, to the holders of Class C
Units, Pro Rata, until the Capital Account in respect to each Class C Unit then
Outstanding has been reduced to zero; and
  8.             Section 6.1(c)(ii)(A) of the
Limited Liability Company Agreement is hereby redesignated as Section
6.1(c)(ii)(B), and Section 6.1(c)(ii)(B) of the Limited Liability Company
Agreement is hereby redesignated as Section 6.1(c)(ii)(C).
  9.             Article VI of the Limited Liability
Company Agreement is hereby amended to add a new Section 6.1(d)(iii) as
follows:
  (iii)          Priority Allocations.  If the amount of cash or the Net Agreed Value
of any property distributed (except cash or property distributed or deemed
distributed pursuant to Section 5.4(a) of this Agreement with respect to Class
C Units or Privately Placed Units, or Section 10.3 of this Agreement) to any
holder of Class C Units with respect to its Class C Units for a taxable year is
greater (on a per Class C Unit basis) than the amount of cash or the Net Agreed
Value of property distributed to the Unitholders with respect to their Units
(on a per Unit basis), then each holder of Class C Units receiving such greater
cash or property distribution shall be allocated gross income in an amount
equal to the product of (a) the amount by which the distribution (on a per
Class C Unit basis) to such holder of Class C Units exceeds the distribution
(on a per Unit basis) to the Unitholders and (b) the number of Class C Units
owned by the holder of Class C Units.
  10.           Article VI of the Limited Liability
Company Agreement is hereby amended to add a new Section 6.1(d)(xii) as
follows:
  (xii)          Allocations for Class C Units and Privately Placed
Units.
  (A)          With respect to any taxable period of
the Company ending upon, or after, a Book-Up Event, a Book-Down Event or a sale
of all or substantially all of the assets of the Company occurring after the
date of issuance of the Class C Units and the Privately Placed Units, Company
items of income or gain for such taxable period shall be allocated 100% (1) to
the Members holding Class C Units or converted Class C Units that are
Outstanding as of the time of such event in proportion to the number of Class C
Units or converted Class C Units held by such Members, until each such Member
has been allocated the amount that increases the Capital Account of such Class
C Unit or converted Class C Unit to the Per Unit Capital 

 7
 

    Amount for a then outstanding Unit (other than a
converted Class C Unit or a Privately Placed Unit) and (2) to the Members
holding Privately Placed Units that are Outstanding as of the time of such
event in proportion to the number of Privately Placed Units held by such
Members, until each such Member has been allocated the amount that increases
the Capital Account of such Privately Placed Unit to the Per Unit Capital
Amount for a then outstanding Unit (other than a Privately Placed Unit or a
Class C Unit).
  (B)           With respect to any taxable period of
the Company ending upon, or after, the transfer of converted Class C Units or
Privately Placed Units to a Person that is not an Affiliate of the holder,
Company items of income or gain for such taxable period shall be allocated 100%
(1) to the Members transferring such converted Class C Units in proportion to
the number of converted Class C Units transferred by such Members, until each
such Member has been allocated the amount that increases the Capital Account of
such converted Class C Unit to the Per Unit Capital Amount for a then
outstanding Unit (other than a converted Class C Unit or a Privately Placed
Unit) and (2) to the Members transferring such Privately Placed Units in
proportion to the number of Privately Placed Units transferred by such Members,
until each such Member has been allocated the amount that increases the Capital
Account of such Privately Placed Unit to the Per Unit Capital Amount for a then
outstanding Unit (other than a Privately Placed Unit or a converted Class C
Unit).
  (C)           With respect to the first taxable
period of the Company ending upon, or after, the date of issuance of the Class
C Units or the Privately Placed Units, at the election of a Member holding
Class C Units or Privately Placed Units (the “Capital Account True-Up Election”),
items of income or gain for such taxable period shall be allocated 100% to the
Members making such Capital Account True-Up Election with respect to Class C
Units or Privately Placed Units that are Outstanding as of the time of such
Capital Account True-Up Election in proportion to the number of Class C Units
or Privately Placed Units held by such Members, until each such Member has been
allocated the amount that increases the Capital Account of such Class C Unit or
Privately Placed Unit to the Per Unit Capital Amount for a then outstanding
Unit (other than a Class C Unit or a Privately Placed Unit).
  11.           Section 6.1(d)(xi)(A) of the Limited Liability Company Agreement is
hereby amended to replace the phrase “this Amended and Restated Limited Liability
Company Agreement” in the two places that it appears to “this Agreement”.
  12.           Section 6.4 of the
Limited Liability Company Agreement is hereby amended to replace the reference
to “Section 5.6(b)” with “Section 5.5(b)”.
  13.           Article VI is hereby amended to add a
new Section 6.5 as follows:
  Section 6.5             Special Provisions
Relating to Holders of Class C Units and Privately Placed Units.  A holder of (1) a Privately Placed Unit or
(2) a Class C Unit that has converted into a Unit pursuant to Section 5.10 shall
be required to provide notice to the Board of the number of Privately Placed
Units or converted Class C Units transferred by such holder no later than the
last Business Day of the calendar year during which such 

 8
 

    transfer occurred, unless
(x) the transfer is to an Affiliate of the holder or (y) by virtue of the
application of Section 6.1(d)(xii)(B) to a prior transfer of the Unit or the
application of Section 6.1(d)(xii)(A) or Section 6.1(d)(xii)(C), the Board has
previously determined, based on advice of counsel, that the Privately Placed
Unit or converted Class C Unit should have, as a substantive matter, like
intrinsic economic and federal income tax characteristics of an Initial Unit;
provided, that such holder may cure any failure to provide such notice by
providing such notice within 20 days of the last Business Day of such calendar
year.  The sole and exclusive remedy for
any holder’s failure to provide any such notice shall be the enforcement of the
remedy of specific performance against such holder and there will be no
monetary damages.  In connection with the
condition imposed by this Section 6.5, the Board shall take whatever steps are
required to provide economic uniformity to the Privately Placed Units and
converted Class C Units in preparation for a transfer thereof, including the
application of Section 6.1(d)(xii)(B); provided, however,
that no such steps may be taken that would have a material adverse effect on
the Unitholders holding Units represented by Unit Certificates.
  B.            Agreement
in Effect.  Except as hereby amended,
the Limited Liability Company Agreement shall remain in full force and effect.
  C.            Applicable
Law.  This Amendment shall be
construed in accordance with and governed by the laws of the State of Delaware,
without regard to principles of conflicts of laws.
  D.            Invalidity
of Provisions.  If any provision of
this Amendment is or becomes invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions contained
herein shall not be affected thereby.
   

 9

IN WITNESS WHEREOF, this
Amendment has been executed as of the date first written above.

	
  

  	
  LINN ENERGY, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Kolja Rockov

  
	
   

  	
   

  	
  Kolja Rockov

  
	
   

  	
   

  	
  Executive Vice President and Chief

  
	
   

  	
   

  	
  Financial Officer

  

 

 

 

[Signature Page to Form of Class C Amendment]

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